Employee perks will be 'taxed by stealth'

Changes to national insurance contributions amount to a "stealth tax" on office Christmas parties and rape alarms supplied by employers, the Tories claimed yesterday.

Proposed changes to employers' NI contributions on benefits in kind were aimed at covertly raising £225m of extra revenue, David Willetts, the Conservatives' social security spokesman, said.

Speaking during a report stage debate on the Child Support, Pensions and Social Security Bill, Mr Willetts said employer-funded health and childcare provisions should be exempted from NI contributions. But Jeff Rooker, a Social Security minister, rejected the demands and said that the Conservatives' stealth tax claims were "destroying the English language on an unparalleled scale". The plans had been widely publicised, he said, and would affect only Christmas parties costing the employer more than £75 a head.

Mr Willetts replied: "The Bill imposes employers' national insurance contributions on a range of benefits in kind from Christmas parties to rape alarms. The purpose of this is quite simply to raise £225m of extra revenue without the Government being caught out by anybody."

The principle of benefits in kind being exempted from NI contributions but not tax had been accepted by Gordon Brown in his Budget statement where it covered childcare provision, Mr Willetts said.

"We want to hear from Mr Rooker why he thinks that somehow employers providing medical care, in whatever form, for their employees, should be taxed more heavily - should bear an extra 12 per cent employers' NI contribution - than for child care? We regard them as equally desirable. and we do not see any basis for trying to exempt one from NI contributions and not the other."