National Insurance Contributions (Increase of Thresholds) Bill
Thursday 24th March 2022
(2 years, 8 months ago)
Commons ChamberRead Full debate National Insurance Contributions (Increase of Thresholds) Act 2022 Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: Committee of the whole House Amendments as at 24 March 2022 - (24 Mar 2022)
The Chief Secretary to the Treasury (Mr Simon Clarke)
I beg to move, That the Bill be now read a Second time.
Yesterday, the Chancellor announced in his spring statement a series of extraordinary measures that will harness the tax system’s power to build a stronger and more secure economy for the United Kingdom. At an incredibly difficult time, when the whole world is reeling from the twin blows of a terrible coronavirus pandemic and Putin’s appalling attack on Ukraine, our three-part plan will help hard-working people with the cost of living by putting billions of pounds back in their pockets, most immediately through the changes to the national insurance contributions system that we will debate today, the detail of which I will set out shortly.
Our plan will create the higher growth that will drive the economy in the coming decades by creating a new culture of enterprise, including tax-cutting options on business investment and innovation. It will also allow workers to keep more of the proceeds of their hard work, by cutting the basic rate of income tax from 20p in the pound to 19p before the end of this Parliament—the first such cut in 16 years. In short, our tax plan is sensible, affordable and well targeted. People and businesses will benefit, the economy will be strengthened and, in turn, our country’s place as a safe haven for freedom, democracy, peace and prosperity will be cemented.
While our tax plan will unleash real and immediate benefits, in drawing it up we have recognised that it must be underpinned by fiscal responsibility. This Government are determined to protect our nation’s finances, so we have ensured that we have maintained space against our fiscal rules, we have continued to be disciplined and we have carefully considered the macroeconomic outlook. Let me remind the House that in the next financial year we will spend £83 billion on debt interest, the highest amount on record and almost four times what we spent last year.
Andrew Jones (Harrogate and Knaresborough) (Con)
My right hon. Friend makes an important point. One of the most telling stats revealed yesterday was that £83 billion figure. Can he perhaps help by putting it into context and comparing it with other budgets the Government must meet, such as the schools budget or the Defence budget? We have had two supposedly once-in-a-century events just 12 years apart—the ’08 financial crash with all its deferred implications and the coronavirus pandemic with its implications—and now we have a war in Europe. Does he agree that we are dealing with the most adverse set of circumstances any Chancellor has faced for a considerable period?
Mr Clarke
My hon. Friend is absolutely right. The sum of £83 billion dwarfs most Departments: it is the equivalent of adding Education, Transport and Justice together. We need to take this incredibly seriously. It is the context in which all our decisions in this statement had to be considered, and in which our actions in future years will be possible. We should be clear: it is the most vulnerable and the poorest who lose out the most if the Government lose control of the public finances. That is the central message that the Chancellor would want to emphasise.
Dame Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)
The Minister said that the poorest and most vulnerable lose out, but under the Government’s proposals it is precisely the people on benefits who are not being uprated to keep in line with inflation who are going to lose out the most. What has he got to say to that?
Mr Clarke
I would say two things. First, there is a raft of measures in place in the package announced yesterday precisely determined to help people on the lowest incomes, including, notably, the doubling of the household support fund to £1 billion, the action that we have already taken in cutting the universal credit taper rate, and the biggest cut that we have ever made to fuel duty. These are all things we have done, on top of the energy price package announced in February, that are designed to help people on the lowest incomes. Secondly, I hold the office of Chief Secretary, and I remember the Labour predecessor who left the note saying that there is no money left. I do not want to be in a position where I hand over a note to any successor of mine saying that there is an equivalent situation.
Stephen Timms
It has been reported overnight that people on universal credit will see only about half of the gain from the measure that the Minister is bringing forward compared with those who are not on universal credit because the portion of people’s income that will not now be subject to 12% national insurance will instead be subject to the universal credit taper at 55%. Is that assessment correct?
Mr Clarke
We are determined to help people on universal credit to keep more of what they earn. I have not seen the assessment to which the right hon. Gentleman alludes, but I will look at it. It is certainly our ambition to keep bringing down the taper rate so that people get to keep more of what they earn. In that regard, I will certainly look at the analysis to which he directs me.
Ruth Edwards (Rushcliffe) (Con)
Can the Minister confirm what the Institute for Fiscal Studies has said—that, contrary to claims from Opposition Members, the poorest 10% of households have benefited most from this Government’s tax and spend decisions since 2019?
Mr Clarke
I thank my hon. Friend for her question. There is no doubt at all that we have targeted the action that we have taken at the people who need it the most. That is why this Bill is so important, as I will explain, but it is also why we have taken the action on fuel duty, universal credit, the household support fund and TV licences—all things that are designed to help people whose incomes are most stretched at what is a difficult time for families up and down the country.
Jim Shannon (Strangford) (DUP)
I thank the Minister for the answers that he is giving. While I absolutely welcome the increase in the threshold for national insurance contributions to help those on the periphery, I say to him gently: does he not see that this should equally apply to child benefit and universal credit, and since it makes perfect sense for one, it must make perfect sense for all working families so as to take them away from the absolute poverty I have spoken about in the Chamber before that is so close to so many hard-working families?
Mr Clarke
The hon. Gentleman is a fantastic contributor to this place and he takes a keen interest in looking after people, including the most vulnerable people, in his constituency. I absolutely recognise that we want to make sure that families right across the income spectrum are supported. That is why, as I say, we have put in place a package of measures that has at its heart a desire to make sure that we have a strong safety net in place. We have to consider all the decisions we take in the round. To put it in some context, the United Kingdom spends £243 billion a year on our wider welfare spend, including pensions. This is a country where we do a huge amount to make sure that everyone is supported. We have to consider all our decisions in the context of both wider affordability and how the system operates. The welfare system always operates on the basis of an uprating in September for changes in the ensuing April. If there is high inflation during the course of 2022, as is forecast, that will be reflected in the uprating figures for April 2023, and the triple lock will be in place to protect families.
Mr Clive Betts (Sheffield South East) (Lab)
The Minister has talked about one side of the budget. The other side of the budget is spending. Local authorities provide incredibly important services that are of particular benefit to the poorest in society. Local authorities have suffered more than any other part of the public sector from the austerity period. The Government claimed that local authorities would get an increase in their spending power this year, but will he now confirm that, with the predicted level of inflation, they face a significant real-terms cut to their spending that will affect all the services that they provide?
Mr Clarke
As a former local government Minister, I hope the hon. Gentleman knows that I do value the impact that good local government can have on people’s lives, which is why we apportioned £4.8 billion extra at last autumn’s spending review to support local authorities in delivering vital services. It is of course the case that all the budgets that we announced at the spending review are affected by inflation, but the Chancellor is rightly clear that we cannot keep on simply mechanically adjusting the spending review decisions in the light of inflation, because that option would not be affordable within our headroom and would obviously not be open to family budgets either.
All Departments—national and local—will have to play their full part in managing the impact of inflation. There is much that can be done in this space through improved innovation and driving down costs. That is why a new Cabinet committee has been established in the last week that will squarely address how we can drive efficiency, including, for example, by doubling NHS efficiency targets so that we can deliver better value for money for the taxpayer. These are difficult times, but we have to ensure that we live within our means.
Ian Mearns (Gateshead) (Lab)
I am wondering how the Minister would suggest that a local authority such as mine in Gateshead innovates on that conundrum. When I ceased to be the deputy leader of the council in 2010, its net revenue budget was just over £300 million. This year, that budget is just over £200 million. It will take some innovating to balance that conundrum.
Mr Clarke
I am grateful to the hon. Gentleman for alluding to his experience in local government. I would simply say that there is a lot that good local authorities can do and have done already to ensure that they focus on value for money, but of course there is more that can be done. We need only look at the enormous potential for digitisation, property disposals and addressing back-office costs and sharing them with other local authorities. There is lots of innovation that can and should be done and there are good local authorities up and down the country that are doing that.
I will resume where I left off by addressing the fact that the Government cannot and must not shy away from difficult decisions, which is why the health and social care levy that we announced last year will remain in place, because it is only right to safeguard a dedicated source of funding for our NHS and for those who need care throughout their lives. As the Chancellor pointed out yesterday, a long-term funding solution for the NHS and social care is not incompatible with reducing the tax burden on working families, which brings me to the specifics of the Bill—an integral part of the Chancellor’s tax plan.
Alberto Costa (South Leicestershire) (Con)
We are here to discuss the national insurance contributions increase. The national insurance personal threshold will rise from £9,500 to £12,570 from July. Can my right hon. Friend confirm that that is the largest increase in a starting personal tax threshold in British history? As the largest single personal tax cut in a decade, is that not the evidence that the Opposition need that the Government really want to help workers across the whole United Kingdom?
Mr Clarke
I can give my hon. Friend that confirmation. I will expand on that later, because it is a major signal of intent at a time when our fiscal headroom is limited that we are determined that, where it is possible to help people, we will do so as effectively and dramatically as possible. The Bill is certainly a major step on that journey.
The Bill legislates for the two employee and self-employed NIC measures that the Chancellor set out yesterday. I will begin by giving some context behind those changes. It has long been the Government’s ambition to promote tax cuts for working people and to simplify the overarching system, which is why, since 2010, a series of Conservative Governments have taken millions of people out of income tax by raising the personal allowance from £6,500 to its new level of £12,570.
As the Chancellor explained yesterday, however, the equivalent NI threshold remained about £3,000 lower. As a result, at the last general election, the Prime Minister pledged to increase the national insurance threshold, and that is why, in 2020, we took a major step forward by increasing it to £9,500. This is a Conservative Government who are cutting taxes and delivering on our pledges to the British people.
Ruth Edwards
Can the Minister confirm that, as a result of the changes we are making today, 70% of workers will have their taxes cut by more than they will pay through the levy?
Mr Clarke
My hon. Friend is absolutely right, and we cannot emphasise that enough. We are determined to address the underlying challenges we face not only with the public finances, but crucially with the backlog of care. Let us not forget that 6 million people are on NHS waiting lists as a direct result of the covid pandemic. While we do that, we will always focus on supporting families and, crucially, on making sure that, when we do have to increase taxes, the burden is borne by those with the broadest shoulders. That is what the combination of this measure with the levy will deliver.
The Bill’s first measure will increase the NIC primary threshold and the NIC lower profits limit to £12,570 from 6 July. By way of explanation, these are the thresholds at which the employed and the self-employed, respectively, start to pay NICs. The increases in these thresholds of about £3,000 will equalise the NIC and income tax thresholds, and in so doing create a fairer and simpler tax system, something to which we ought all to aspire. That means that people will be able to earn £12,570 without paying a single penny of income tax or national insurance.
As we heard a moment ago, that is the largest increase in a starting threshold ever, it is the largest single personal tax cut in a decade, and it reduces the tax burden by £6 billion for 30 million people across the United Kingdom. On an individual level, a typical employee will see their tax bill reduced by £330 in the year from July, while the equivalent saving for a self-employed worker will be worth over £250.
Jacob Young (Redcar) (Con)
Does my right hon. Friend recognise the calculation by the Institute for Fiscal Studies that it is people who earn £35,000 or less who will benefit from this tax cut, and does that not show that our measures are targeted at those who need our support most?
Stephen Timms
Mike Brewer, who used to be with the Institute for Fiscal Studies, has said this morning about the value of the £330 figure to the average employee:
“If you are getting UC, then you lose 55% of that to a reduced UC award.”
I think that is a major issue for the House in evaluating the measure that the Chief Secretary is bringing forward. Could he please urgently clarify for us whether that is indeed the case?
Mr Clarke
As I said in response to the right hon. Gentleman’s earlier remark, I will of course look at what he is saying. I recognise fully that we want to make sure that we allow people to keep as much as possible of what they earn, and it is our ambition to keep reducing the tax burden on the lowest earners, including through action on the taper rate.
Sir David Evennett (Bexleyheath and Crayford) (Con)
My right hon. Friend is making a powerful and informative speech. I welcome this Bill, as will my constituents in Bexleyheath and Crayford, because it is helping those on lower incomes. Increasing the national insurance threshold to be the same as the personal allowance is sensible and logical, and it will help the simplification and understanding of the system. I very much hope that he and the Government will in future look at more simplification of the system.
Mr Clarke
My right hon. Friend is absolutely right in saying that we want a simpler tax system, and we want to make sure that the burden of tax is lower. In the end, the tax system should be an incentive that rewards work, and that is what our measures today continue to support. On the point raised by my hon. Friend the Member for Rushcliffe (Ruth Edwards), 70% of all workers will have their NICs cut by more than the amount they will pay through the new health and social care levy.
Sally-Ann Hart (Hastings and Rye) (Con)
My right hon. Friend will know that my beautiful constituency of Hastings and Rye has residents with some of the worst levels of deprivation in the country, and I obviously welcome this Bill on their behalf. Will he confirm for the residents of Hastings and Rye that this Government’s interventions have helped the poorest households the most through measures such as cutting the universal credit taper rate last year, increasing the national insurance thresholds, permanently increasing the local housing allowance for housing benefit and increasing the national living wage? Can he confirm that this will benefit my residents in Hastings and Rye?
Mr Clarke
I thank my hon. Friend for her question. She is a fantastic champion for Hastings and Rye, which I recognise is a part of the south-east that perfectly demonstrates that communities face very significant challenges in all parts of the United Kingdom. Sometimes the levelling up question is seen as the north and the midlands against the south, but her constituency is a very good demonstration of why communities in the south-east also need support. She is absolutely right in what she says. This is a Government with a strong track record of delivering for people who need the most help. It is worth noting in that regard that, as a result of the Bill, over 2 million people will be taken out of paying class 1 and class 4 NICs and the health and social care levy altogether, including, of course, in Hastings and Rye.
Mr Clarke
I should make some further progress, I think.
The Government recognise that implementing the Bill is a big change for many employers and payroll software providers, so I want to add a few words about the timeline for when we are implementing the changes. We believe that the date in early July strikes the appropriate balance between ensuring—this speaks to the point made by my hon. Friend the Member for Hastings and Rye (Sally-Ann Hart)—that people benefit from the increase as soon as possible, while giving employers and payroll software providers time to update and test their systems so that the change can be delivered safely. That will avoid millions of taxpayers having to make manual claims for refunds at the end of the tax year and employers from having to make major payroll corrections. Clearly, that is a situation we want to avoid.
The Government are also acutely aware of the huge pressures faced by those working for themselves but earning low amounts as a result of the rising cost of living. To support that group, the Bill gives the Treasury a power to lay an affirmative statutory instrument. It will mean that from April those with profits between £6,725 and £11,908 will not pay class 2 NICs. That will rise to £12,570 from April 2023. The measure will benefit half a million self-employed people, saving them up to £165 a year. As I just mentioned, that group will still be able to receive NIC credits, just as they have done in the past.
Shaun Bailey (West Bromwich West) (Con)
I am grateful to my right hon. Friend; he is being incredibly generous with his time. May I just make a plea to him on operational delivery? This measure is really welcome news, but will he, through his good offices, work with Her Majesty’s Revenue and Customs in particular to ensure that there is clear guidance? Operational delivery will be key to ensuring that the measures he is announcing are as successful as they should be. I know that if he could provide that reassurance my constituents would appreciate it.
Mr Clarke
My hon. Friend is absolutely right to raise this issue. The Financial Secretary to the Treasury will be replying to the later stages of the Bill’s passage and will be able to provide direct confirmation that HMRC is focused on that issue. It is critical that HMRC plays its full role in delivering the measures as seamlessly as possible, and I know that it will.
Stephen Timms
I am grateful to the right hon. Gentleman and I apologise for intervening once again. He has made it clear that he is not able to answer the question about the effect of this measure on people claiming universal credit. Can he commit the Financial Secretary to the Treasury to giving us an answer on that point before the end of the debate? It is an important issue for the House to take into account when determining its decision on this measure.
Mr Clarke
I thank the right hon. Gentleman for that point. My right hon. and learned Friend the Financial Secretary will do her best to provide an answer based on the information that our officials can provide. It is important, obviously, that we answer questions correctly. It is worth noting that the universal credit taper rate has been reduced from 63% to 55% and the universal credit work allowance has been increased by £500 a year to help make work pay. That is a tax cut for the lowest paid in society worth around £1.9 billion in the financial year that is just about to begin. It means that 1.7 million households will on average keep around an extra £1,000. We will do our best to respond to the specific question that the right hon. Gentleman raises.
The effect on an individual’s ability to access contributory benefits and to build up state pension entitlement will be unaffected as a result of the changes to class 2 NICs. Taken together with the increase in the primary threshold and the lower profits limit, we will meet in full our commitment to ensure that the first £12,500 an individual earns is free of tax, clearly illustrating that this is a Government who make good on their promises to the people of this country.
Matt Rodda (Reading East) (Lab)
I thank the Chief Secretary to the Treasury for giving way and for his reassurance to people contributing towards the state pension. The Chancellor did not actually mention the word “pensioners” yesterday. Does he recognise the enormous pressure on many pensioners who are struggling to get by on very modest incomes at a time of significant inflation? Is it not time that the Government looked again at their support for pensioners, in particular on heating bills?
Mr Clarke
I thank the hon. Gentleman for his question and I recognise the sincere spirit in which he asks it. We are, of course, determined to deliver for our pensioners. That is why the Government have done so much to help to make sure that pensioners’ standard of living was not affected during the very difficult years we have just gone through, including spending £111 billion a year on the state pension, which is more generous that it has ever been. Many of the measures we are undertaking, for example our energy package, will benefit pensioners hugely. People will be getting £150 off their energy bill next month as a rebate on council tax if they live in bands A to D, with councils having a further £144 million available for discretionary payments to people who live in higher council tax bands who need further support. As I set out earlier, if the forecasts of very high inflation for this year do indeed come to pass, that will be captured in the uprating figures that will be delivered this autumn for the 2023 benefit uprating.
I want to draw to a conclusion on some broader points that this issue alerts us to. Every day in my role as an MP representing one of the poorest towns in this country, I hear from families and individuals who are struggling with the rising cost of living. I am fully respectful of the fact that this is a genuinely difficult time for the people of this country. I want to issue the reassurance that just as the Government stood by people during the covid crisis by providing a £400 billion package of support, so we will stand behind the people of this country as they face these new challenges, too. It is important to do so in a spirit of total candour. No Government anywhere in the world directly has the ability to offset the impact of first the pandemic and then a reckless and illegal war on our continent, but we will do our utmost with the tools we have, within our overarching aim of making sure that the public finances are protected.
This financial year and next, we will provide over £20 billion to help people with the cost of living. That includes over £9 billion of direct support with high energy costs for around 28 million households. That is why yesterday we announced our wider package, including this Bill along with a range of other measures, to ease the pressure on hard-working families and secure long-term economic growth.
James Sunderland (Bracknell) (Con)
The Minister will know that Bracknell is blessed with one of the lowest rates of unemployment in the country. Does he agree that the increased thresholds will absolutely reward hard work and be of benefit to working families right across the Bracknell constituency and beyond?
Mr Clarke
I thank my hon. Friend for his question. It is a fantastic success that Bracknell enjoys very low unemployment. It is actually the case that every region of our country now has lower unemployment than it did before the coronavirus pandemic hit, which is a huge Conservative policy success and a tribute to the hard work and enterprise of the British people.
As the Chancellor said yesterday—I will conclude with this—cutting taxes is not easy. It requires hard work, prioritisation and the willingness to take often unpopular decisions elsewhere, but it is precisely because we have made those tough decisions in the past that we have been able to reduce taxes in a responsible and sustainable way today. Our Government will always act swiftly and decisively to safeguard the best interests of our people. The Bill includes the largest cut to personal tax in a decade. It rewards hard work and supports the lowest earners. Its measures, while sweeping in scope and ambition, will make a real tangible difference to the lives of millions of people. That is why I commend it to the House.
James Murray (Ealing North) (Lab/Co-op)
As we debate the Bill, I cannot help but notice it is becoming a bad habit of this Chancellor to rush national insurance legislation through Parliament in a day. A little over six months ago, I stood here setting out the view of the Opposition on the Government’s Health and Social Care Levy Bill, which was similarly rushed through all its stages in just one day. As we know well, that Bill introduced a new levy that would be preceded by an equivalent increase in national insurance contributions for employees and employers of 1.25%. Since that national insurance increase was agreed, it has become ever clearer that it will be the worst possible tax rise at the worst possible time.
The Opposition will support today’s Bill, as any help for people facing the Chancellor’s national insurance tax hike in April is something we welcome. There are benefits to raising the threshold at which people begin to pay national insurance, but we should be conscious that the Bill has more to do with the Chancellor’s increasingly desperate desire to paint himself as a tax cutter than it does with a well-thought-through package of measures to help people with the struggles they face. Even after the Bill passes, the tax burden in our country will still be at its highest in 70 years, and we are still the only G7 country to be raising taxes on working people this year. The Chancellor is making sleights of hand his speciality. As the Office for Budget Responsibility has pointed out, for every £6 he has taken in tax since he took on that role, yesterday he gave back just £1.
The Chancellor has realised that his national insurance hike in April is wrong. Labour could have told him that six months ago. In fact, that is exactly what I told the Minister in September last year when we debated the Health and Social Care Levy Bill. We set out clearly our decision to vote against that Bill on Second Reading. We set out how it broke the Government’s promise not to increase national insurance, and instead raised taxes on employment that would disproportionately hit working families, young people, those on lower and middle incomes, and businesses trying to create more jobs in the wider economy, while leaving income from other sources untouched. We were not alone in criticising that tax rise. The British Chamber of Commerce warned:
“A rise in National Insurance Contributions would represent a hammer blow to jobs growth at this crucial point in the UK’s economic recovery.”
At the same time the TUC general secretary, Frances O’Grady, criticised the Prime Minister for
“raiding the pockets of low-paid workers, while leaving the wealthy barely touched.”
Gareth Davies (Grantham and Stamford) (Con)
Does the hon. Gentleman acknowledge that 14% of the highest earners in this country will pay 50% of the levy?
James Murray
As the hon. Gentleman knows, we have debated the increase in national insurance at length, and today we are debating the package of measures that the Chancellor brought forward. Overnight analysis by the Resolution Foundation, which he would do well to consult, recognises that seven in eight workers will pay more in tax and national insurance in 2024-25, as a result of decisions taken by this Chancellor and this Government.
Alberto Costa
At the outset of his speech, the hon. Gentleman criticised the Chancellor for being a tax cutter, yet he is now critical because the tax burden has increased. He has not yet answered the question from my hon. Friend the Member for Grantham and Stamford (Gareth Davies), so perhaps he can have a second go.
James Murray
As the hon. Gentleman knows, we are critical of the Chancellor for his desperate attempts to appear to be a tax cutter, despite the fact that the tax burden in this country is now at its highest in 70 years. [Interruption.] Let me make some progress. It is clear that the increase in national insurance proposed by the Health and Social Care Levy Bill last year was wrong, not only because we said it was, but because the Government’s own analysis concluded it was wrong. I am sure that at the time Ministers read their own tax information and impact note, which was signed off personally by the Financial Secretary to the Treasury. That note applied the so-called family test to this levy, and concluded:
“There may be an impact on family formation, stability or breakdown as individuals, who are currently just about managing financially, will see their disposable income reduce.”
As the current Financial Secretary to the Treasury will know, I have tabled several written questions, asking the Government to publish the complete family test assessment prepared for the levy. Her most recent response stated:
“Family Test assessments are not routinely published. Decisions on whether and how to publish complete Family Test assessments fall within the responsibility of each Government Department. HMRC have no further plans to publish a Family Test assessment on the Health and Social Care Levy.”
When she responds, I would be grateful if the Minister confirmed that she will now instruct HMRC to publish that family test assessment. If she refuses to do so, I would be grateful if she explained why she is blocking its publication.
Matt Rodda
I am grateful for the work that my hon. Friend is carrying out on this important matter, because it seems fundamental to look at the impact on families. In my constituency of Reading East there is enormous pressure on families, many of whom are in work and on modest incomes, but are struggling to get by because of increased prices, so I thank my hon. Friend for his work.
James Murray
I know that my hon. Friend is a champion for his constituents, and in challenging the Government about the harm that their decisions will do to the people he represents.
Jacob Young
Let me take the hon. Gentleman back a few moments. He said that he was not debating the national insurance levy, and then he continued to debate the national insurance levy. On the subject of the national insurance levy, what would Labour do instead to fund the national health service? I have yet to see any sort of plan from the Opposition.
James Murray
I do not recall whether the hon. Gentleman was present in the debate on the health and social care levy, but if he was, he would have heard us set out that any increase in taxation should fall on those with the broadest shoulders, not directly on working people. This Government are laying the worst possible tax rise at the worst possible time on the shoulders of working people. In the long run, the way to fund public services sustainably is through growth, but this Government have become a low-growth Government, and therefore a high-tax Government. That is the truth of their economic model, and that is what we would seek to change.
Since September, when the Health and Social Care Levy Bill was pushed through Parliament, our arguments against April’s national insurance hike have only got stronger. The difficulties that people face in making ends meet have been mounting by the day. Inflation jumped again yesterday from 5.5% to 6.2%, with the OBR now forecasting it to hit 7.4% this year—the highest rate in 30 years. Energy bills that have been rising rapidly are set to soar next month, and the crisis in Ukraine will put even greater pressure on the cost of energy, petrol, and food. The pressure on the Chancellor to change course has been rapidly growing, yet he has backed himself into a corner. He has nailed his colours to the mast, stubbornly refusing to reconsider his deeply unfair national insurance hike, and that seems to be how we have ended up where we are today.
We have a Chancellor who has found himself politically unable to cancel his national insurance hike, yet also unable to ignore the fact that this is the worst possible tax rise at the worst possible time. That is why he has tried to respond by making these changes to national insurance thresholds, with promises of further tax cuts at some point in the future. Whatever the merits of the individual measures, that approach is driven not by what may be the right thing to help people now, but by the Chancellor’s desperate ambition to portray himself as a tax cutter, despite all evidence to the contrary.
James Daly (Bury North) (Con)
In light of the hon. Gentleman’s commitment to reducing the tax burden on hard-working people, will he join me in calling for the scrapping of Andy Burnham’s clean air zone tax in Greater Manchester. That is a tax on business and jobs, so does he agree that it needs to be scrapped now?
James Murray
We have had a number of comments about what is within the scope of this debate, and I suspect that issue is rather out of scope. I will focus on national insurance and the Chancellor’s spring statement yesterday, and matters related directly to that.
Following the spring statement and the package announced by the Chancellor yesterday, Torsten Bell, chief executive of the Resolution Foundation, stated:
“This package only makes sense if:
- your only test for policy choices was can you prove you’re a tax cutter
- you’ve already announced a rise in National Insurance.”
Overnight analysis by the Resolution Foundation has set out the stark truth that considering all income tax changes to thresholds and rates announced by the Chancellor, seven in eight workers will pay more in income tax and national insurance in 2024-25.
Sally-Ann Hart
If the Opposition had to plan for a spring statement, would they rule out raising income tax?
James Murray
We have made it very clear that we believe in a fair taxation system. The key point for us in the Chancellor’s package is that he is raising taxes for working people, while ruling out measures such as our one-off windfall tax on the profits of North sea oil and gas producers. That is not a fair taxation system.
The inescapable truth is that whatever the Chancellor puts on his Instagram account, he has left Britain facing the highest tax burden in 70 years. As Paul Johnson, director of the Institute for Fiscal Studies said yesterday:
“almost all workers will be paying more tax on their earnings in 2025 than they would have been paying without this Parliament’s reforms to income tax and NICs, despite the tax cutting measures announced today.”
The Institute for Fiscal Studies has calculated that median earners on around £27,500 can expect, even after the increase in national insurance thresholds, to be £400 worse off in the coming financial year. The Office for Budget Responsibility has confirmed that this year will see the biggest hit to incomes on record. That will be the true legacy of this Chancellor, not the phoney tax-cutting image that he has been so desperate to cultivate.
Although today we are debating national insurance thresholds, and the impact that will have on people’s lives, there is much more that the Chancellor simply failed to address in his spring statement. We have been repeatedly pushing the Chancellor to levy a one-off windfall tax on North sea oil and gas producers’ profits, to help fund a one-off cut to people’s energy bills. Our plans would cut everyone’s bill by £200 and would do so by £600 for the 9 million households facing the toughest squeeze.
Matt Western (Warwick and Leamington) (Lab)
My hon. Friend is making a powerful speech. It is worth putting that last point in context. The chief executive of BP made it clear that there absolutely was a windfall: the company had become a “cash machine” because of the massive rise in revenues resulting from the significant increase in the price of a barrel of oil. There is a huge opportunity to take a windfall tax now. Does my hon. Friend agree that the Government should also have looked at the supermarkets during the pandemic?
James Murray
My hon. Friend is absolutely right that there is a huge opportunity to levy a one-off windfall tax on North sea oil and gas producers’ profits. Yet there was no mention of such a tax in yesterday’s statement.
James Murray
I am going to make some progress. The record shows that the Chancellor likes putting up taxes. He has been busily defending his tax rise on working people, but when it comes to oil and gas profits he is suddenly nowhere to be seen.
James Murray
I give way to the hon. Lady; the hon. Gentleman has already made several comments.
Sarah Atherton
I thank the hon. Gentleman. I am interested in what the Opposition are saying about not raising taxes. Will he explain why the Welsh Labour Government have not ruled out tax rises? It is in their discretion to do so, but they are not considering doing that until after the May elections.
James Murray
I repeat a principle I mentioned earlier to the hon. Member for Bury North (James Daly): the remit of the Bill is national insurance and related matters, such as the spring statement yesterday. I will continue to focus my remarks on those.
The windfall tax that we have been pushing the Chancellor to adopt would fund support for people who need help with their energy bills now. As we have long said, alongside that immediate help we urgently need more investment in alternative sources of energy and insulation for our homes. That investment would help to cut energy bills in the longer run, as well as improving our energy independence and security. Yet on that front, the Chancellor has been all but silent, too.
Yesterday, the Chancellor announced a cut in VAT for energy-saving materials, but I do not think anyone believes that that is anywhere near enough to help the majority of families upgrade their homes. Our pledge, by contrast, is to invest £6 billion each year for 10 years to upgrade 19 million homes. That would cut energy bills by up to £400 a year while cutting gas imports by 15% too. That is the kind of transformational programme that our country needs.
Alberto Costa
Would it not have been better for the Labour Administration to have approved new nuclear power stations? We would not be in this mess today had it not been for Labour’s failures in the past.
James Murray
As the hon. Gentleman knows, his party has been in power for the past 12 years. We have set out clearly that we would end the delay in new nuclear power alongside introducing greater onshore and offshore wind power and solar energy.
Matt Western
On that point, the Labour Government were the first to put in place the Climate Change Act 2008—that is, the first globally to introduce legislation that would address the need to switch to a more renewable energy sector. I remind Government Members that the Labour Government put in place the zero carbon homes legislation, which was torn up by the coalition Government. If that had still been in place in 2016 to 2021, 1 million new zero carbon new homes would have been built, which would have reduced our energy need.
James Murray
I thank my hon. Friend for making an important point about the last Labour Government and drawing attention to the lack of action from this Government in pursuing investment in renewable energy sources, which would cut energy bills and give us greater energy security and independence.
We need a Chancellor who is prepared to levy a one-off windfall tax to help cut people’s energy bills now and invest what is needed to cut bills in the long run. Instead, yesterday, we saw neither.
James Murray
I am going to make some progress.
Perhaps the most desperate part of the Chancellor’s pitch yesterday was his claim that “the work starts today”. The Conservatives have been in power for 12 years: 12 years of incomes being squeezed under Conservative Governments, 12 years of failure on energy efficiency and 12 years of low growth. The truth is that, even now, when he is apparently “starting work”, the man who lost £11.8 billion of public money to fraud has once again proved that he is not up to the task.
This week, the Chancellor failed to scrap the tax rise on working people. He failed to introduce a windfall tax, and he failed to set out a plan to support British businesses. People deserve better. People need a Government who are on their side.
Richard Drax (South Dorset) (Con)
Madam Deputy Speaker, I am not used to being called first—this must be the first time. I am grateful to you, and it is a pleasure to take part in the debate. First, I refer hon. Members to my entry in the Register of Members’ Financial Interests.
I now have a chance to expand on the question that I raised with those on the Treasury Benches yesterday. When some years ago my right hon. Friend the Member for Wokingham (John Redwood) was asked at a meeting what conservatism stood for, he paused for about one second and said, “Freedom”. That is freedom for the individual, freedom from the state, freedom to spend one’s own money—or more of it—and freedom from high taxes.
As I said yesterday, I applaud the Chancellor for going as far as he did. But many of my constituents in South Dorset are impoverished already; we have deep pockets of deprivation and poverty. I fear that the generous moves by the Chancellor and the tinkering that he has done have not gone far enough.
I sympathise with the Chancellor and the Government: we have had a pandemic and now there is a war in Europe. Both have been out of the Government’s control and have clearly had devastating consequences on how we run our economy.
Jacob Young
Obviously, my hon. Friend will recognise that the inflation statistics paint a stark economic picture for this country, but does he also recognise that in the US inflation is double what it looks to be here? The eurozone’s inflation statistics are similar to ours. That demonstrates that this is a global problem, not one that only we are facing in the UK.
Richard Drax
I entirely concur. Yes, inflation is now spiralling to 7%, I think, and more across the rest of the world. Inflation has a very negative effect on the economy, on what we can afford to buy and on the value of our money. It has to be countered.
Given that the cost of living is spiralling and that taxes are the highest for 70 years, I urge the Government to go further. As they know full well, lower taxes generate more cash. That point is proven, and we Conservatives have fervently followed it for as long as I recall. Why? Again, as Treasury Benchers know, low taxes are a force for good—both for the individual, who is far better placed to decide where to spend their money, and for the private sector, which can better invest in their businesses, employ more staff and sustain a profit—an ugly word for Labour Members. Let us not forget that it is the tax from those profits that pays for the public sector.
Sally-Ann Hart
Will my hon. Friend confirm that every single Labour Government have raised taxes rather than lowered them and have left this country in such a situation that every single Conservative Government have had to get the economy back on track?
Richard Drax
I totally concur with that comment. Regrettably, Labour will do it again and again and again —that is what socialism is all about.
Matt Western
That is not entirely true. As far as I can recall, back in 2010, VAT was 15%. It was increased by 33% by the Conservative Government to 20%. That is the most regressive tax of all, hitting everyone, particularly those on very low incomes.
Richard Drax
I agree to the extent that I do not like any tax. However, if there is a note saying that “there is no money” left, that puts a Government in a slightly difficult position, because they need some money to run the country and the public sector, which we all hold so dear.
Wera Hobhouse (Bath) (LD)
If the hon. Member does not like any tax, and given that we have heard that VAT has been raised to high levels, does he support the Liberal Democrats’ call to cut VAT by 2.5% to 17.5%? That would make a big difference to people’s disposable income. They would spend it in the high streets and it would do exactly what he proposes.
Richard Drax
In an ideal world, I would like to scrap VAT—[Interruption.] I would love to scrap it altogether. It is extraordinary that we ask someone to do something, creating all this work and getting the economy going, and people are taxed to do it. But there again, as I have explained, the Government are in a predicament because of the pandemic and a war—situations that are way out of their control—and I know that they are trying to do their best with the very difficult cards in their hand.
In the Chancellor’s statement yesterday, I did not hear the good Conservative word “savings”—that is what I call it, but the Opposition call it “cuts”. We appear to acquiesce to every demand for more money. This is taxpayers’ money and it is surely time to review the big spenders, such as the NHS and welfare. They are, of course, both needed, but it is time to review both to make sure that we are getting value for money.
The national insurance rise, which I disagree with, will see billions of pounds disappearing into a black hole, followed soon afterwards by demands for more. For the sake of the public finances, I do not believe that this can go on. I welcome the Chancellor’s talk of more tax cuts to come, but in my humble opinion, and certainly for my constituents, for the reasons that I have stated, those cuts will come too late.
The Opposition are already drooling with pleasure as they watch us behave like the big spender that they would so love to be. That puts our raison d’être at risk. Capitalism is always challenged by socialism, which, as far as I know, has never succeeded wherever it has been adopted, but that does not stop them from trying it on. Today, in tough times, we need to fight for and explain far better our economic philosophy, for if we do not, there is a real risk of a high-spending, high-taxing Conservative Government handing over the country to those who would bring it to its knees, ruthlessly raiding the accounts of those who aspire, work hard and already pay their fair share.
I would be neglectful if I did not mention money for our armed forces. I know that that is not directly linked to national insurance, but it was raised in the statement yesterday. As a former soldier, I urge those on the Front Bench to spend more of our money on our armed forces. If the awful behaviour by Russia has not alerted us to that, I do not know what will. This is all about priorities; that is what we as a Government have to decide. As I hinted, I think there should be far more study and review to ensure that the money is better spent in various areas. Let us face it: the defence of our country and all those who depend on her is the Government’s top priority.
Let me end where I started, with freedom. High taxes are not the accepted norm for the Conservative party. For us, it is all about freedom—freedom from the state, freedom from high taxes and freedom for the people to choose how their money is best spent.
Madam Deputy Speaker (Dame Rosie Winterton)
I call the Scottish National party spokesperson, Richard Thomson.
Richard Thomson (Gordon) (SNP)
May I say what a pleasure it is to follow the hon. Member for South Dorset (Richard Drax), whose speech I very much enjoyed? I hear the paeans to the Conservatives being the party of freedom and low taxes, so it will no doubt come as a shock to him that the Office for Budget Responsibility wrote yesterday that taxes will rise to their highest level as a share of national income
“since the late 1940s under Clement Attlee’s post-war Government.”
I know that the Conservatives love to compare themselves with previous Labour Governments, but I was not aware that they intended to compare themselves with that one. The big difference is that under Clement Attlee’s post-war Government, nobody could be in any doubt about the intention to raise living standards for all and to share the burden equitably. [Interruption.] I hear the comment, “The big difference was a pandemic”, but there was a big difference because of world war two as well, hence the “post-war” bit. However, I will gladly take an intervention once I have made a bit of progress.
The Scottish National party welcomes the Bill insofar as it goes. We are clearly in the midst of the worst cost of living crisis in living memory. Inflation is spiralling and is set to hit 8.7% later this year. Some of that is common to industrialised economies around the world, but let us be perfectly frank that other elements of it are entirely self-inflicted because of the Government’s choices. That resonates through people’s pocket books, with the OBR forecasting the sharpest fall in real earnings since the 1970s and the biggest hit to real household disposable income since records began in the 1950s. That is certainly not a record to be proud of.
The Chancellor had a golden opportunity yesterday to do something to ease the pressure on hard-working individuals and families, to help those on benefits and to give much-needed respite to businesses trying to trade their way back to health and prosperity. The circumstances were as auspicious as they ever could be. The Chancellor had headroom of approximately £30 billion that he could have worked within, as a consequence of increased tax revenues through fiscal drag and because of borrowing undershooting the forecast levels. There was the potential to make a significant difference for those who were feeling the pinch the greatest.
And what did we get? In the face of a 30p-a-litre rise in costs at the petrol and diesel pumps, there was a 5p cut in fuel duty, which barely takes the cost at the forecourts back to where the prices were last week. That offers no respite to the motorist or consumer or, indeed, to all of us, given that we are all affected by the price of goods that are transported on lorries or vans to the shops. Despite an admission that research and development funding was not having the effect that it ought to in driving growth, we had a promise just to spread that ever more thinly rather than focusing on where it could have the greatest effect.
On energy costs, we had a VAT cut on energy efficiency products, although, frankly, the mind boggles at how someone who is struggling to pay their existing utility bills will somehow find the money—VAT or not—to install solar panels, heat pumps or anything else that might be covered. We had the frankly paltry increase in the household support fund from £500 million to £1 billion. That is just one fifth of the impact of the 5p cut in fuel duty.
The blunt reality is that anyone who woke up yesterday morning worrying about how they would pay their energy bills will have woken up this morning confronted by exactly the same set of worries.
Alberto Costa
The SNP has been in uninterrupted governance of Scotland since 2007. During those 15 very long years, that nationalist Government have had many levers at their disposal relating to taxation regime relief and grants and other funds. Why have they not used those levers to assist people in Scotland, and why are SNP Members such as him instead complaining in this House about the UK Government’s moves?
Richard Thomson
I presume that the hon. Member is a supporter of the present constitutional set-up. I know that he sought election in Scotland before finding his present constituency, and in view of that he ought to be aware that only some powers are devolved, and the Scottish Government have limited fiscal powers. Those powers that they do have, however, they have used effectively. They have reduced taxes for about 54% of workers, and have also introduced benefits such as the Scottish child payment, which is doubling. They have used the limited powers at their disposal judiciously. If the hon. Member is patient, I may accept a further intervention from him when I come to other aspects of the deficiencies in that fiscal settlement.
James Daly
The hon. Gentleman has made some points about the record of the Scottish National party Government. I hope he will correct me if I am wrong, but according to the Scottish Parliament Information Centre, over the three years up to 2021 Scots paid £900 million more in taxes than those in the rest of the UK, and would have paid exactly the same as those in the rest of the UK had their rates mirrored those of the UK. As a result of decisions by the Scottish Government over the last three years, Scots have been clobbered with £900 million worth of extra taxes. Is that correct?
Richard Thomson
As I have said, 54% of Scots are paying lower rates of tax than they would be paying if they lived elsewhere in the UK. Overall, the tax system has been reshaped to make it more progressive and, I would argue, more equitable. According to the Resolution Foundation, about 1.3 million people across the UK will be pushed into absolute poverty as a result of tax decisions made by this Government. I have to say that it is a bit rich to argue, as some Conservative Members wish to do, that the Scottish Government, on a budget that is determined in great part by political decisions taken in this place, should be dipping into the revenues that it has earmarked for essential public services in order to mitigate the impacts of poor choices made here.
The Scottish National party has been sharply critical of the national insurance rise since it was first announced, for straightforward reasons. We believed that it was a regressive tax. It hit the lowest earners the hardest. It was a tax on jobs, and therefore a tax on growth. It was rebranded as a “health and social care levy”, although the Government had no clear idea of how the money was to be spent within the NHS, and could not clarify the question of how any of it would be passported through to social care services in England. Moreover, as a result of its impact on people’s incomes, it would bake in inequality—both generational and geographical—for decades, mitigating social care costs for some but not for all.
The Bill removes some lower earners from the liability that the Chancellor has created, and we welcome that partial retreat. Realigning national insurance and income tax thresholds is broadly sensible, but I believe—I am happy to be corrected on this point—that it only takes us back to the status quo ante of 2010, when the Conservative Government first came to office. Paul Johnson, the director of the Institute for Fiscal Studies, posed an important question in The Times this morning:
“Why promise to spend billions cutting the basic rate of income tax whilst going ahead with an increase in NI rates? That will make the tax system both less equitable and less efficient. It will increase the wedge between higher taxes on earnings and lower taxes on pensions and unearned incomes. And wouldn’t that money have been better spent sooner helping those most in need?”
I certainly cannot quibble with that.
Let us not be fooled: even though the thresholds are moving, this is still a tax increase. There has been no shortage of informed opinion telling the Chancellor that this was the wrong thing to do, but from a political point of view I am bound to say that he has made mugs of his Conservative colleagues—not just those who had to swallow the indignity of betraying a manifesto pledge at the last election, but those who have gone all out to stoutly defend the policy over the last few months.
The manner in which the Bill has come before us exposes the nonsense that this tax rise was ever in any way “hypothecated”. If the right way to fund the health and social care levy was through a hike in national insurance—and I do not believe it was—it cannot also be right to backtrack on the extent of that rise. It is also impossible to argue that it is hypothecated when we see no corresponding increase in the health budget in England.
Anthony Browne (South Cambridgeshire) (Con)
The hon. Member has described this as a tax increase, and obviously it will raise revenue, but does he accept that raising both the threshold and the rate of national insurance means that it is actually a tax cut for people earning less than about £40,000 a year and that only people earning more than that amount will be paying more tax? Overall, is that not the sort of outcome that we would want?
Richard Thomson
Raising the threshold will certainly take some people out of the scope of the measure that was previously announced, but overall, for those who are not in that category, this still represents a higher level of tax that they are paying to the state than would have been the case had it not gone ahead.
As with yesterday’s other announcements, notwith-standing the Chancellor’s conceit about being an instinctive tax-cutter, these measures are being paid for largely through fiscal drag. The other invidious element is the fact that state benefits are failing to keep pace with inflation. As the hon. Member for Ealing North (James Murray) said earlier, only one in eight workers will see their tax bills fall by 2025 as a result of these measures, and as I said in my opening remarks, this will be the highest tax burden since Clement Attlee was Prime Minister.
Let me now turn to the Barnett formula. I think that the Bill exposes the fragilities and frailties of that funding settlement. The Scottish Parliament has limited tax and benefit powers, but much of its funding is contingent on policy decisions being taken first of all in this place, for England, before any corresponding resources are released for devolved Governments. We see the foibles and the fragility of that in the Bill, but we also saw it during the pandemic, when decisions had to be taken here before those corresponding resources were released. That, in my view, is not a good way of trying to run the country. We should be trying as far as possible to align policy with resources so that there is clear accountability in terms of decisions made and outcomes delivered, and the funding structures of the devolution settlement are not conducive to that.
In his statement, the Chancellor seemed to me to cut the figure of the pickpocket who expects some credit for returning half an hour later to hand back someone’s wallet after abstracting the cash and cards that were inside it. It is amazing that he should expect any gratitude for what he is doing. I do not believe that any responsible Government seeking to tackle some of the crises facing public services post pandemic would reach for national insurance as the best way to do it. If, as I fervently hope, a Scottish Government will one day have full powers over their finances, I do not believe that they will reach for that lever either.
We support this Bill, but it is very much an indictment of the Government’s priorities that we are here to discuss it at all.
Jacob Young (Redcar) (Con)
It is a pleasure to follow the hon. Member for Gordon (Richard Thomson).
The increasingly unstable world in which we live brings many challenges to people at home, not least the many concerns of people across the country about the cost of living and the potential impact that rises in that cost can have on family living standards. Yesterday marked two years since the start of the first lockdown, the reckoning point of the first pandemic of its kind in over 100 years. Flash forward two years and we already face a new crisis, the war in Ukraine—the first full-scale war on European soil since world war two. As we heard from the hon. Member for Gordon, the fact that the tax burden is at its highest since that point shows the scale of the economic hit that we took from the coronavirus. It is in that context that we must view the Chancellor’s statement yesterday. There are no easy choices—the outlook right now is bleak, and our focus has to be on steadying the ship, on supporting the most vulnerable and on rebuilding. We are able to do this only because of the tough decisions we took preceding this crisis, and it is not worth thinking about the situation this country would be in had the Opposition won in 2019.
This Bill is an example of how we rebuild, by setting the course for lower taxes, starting with a tax cut in July for everyone earning less than £35,000—a tax cut for 70% of workers. By raising the threshold at which we all start paying national insurance from £9,500 to £12,500 in July, we are supporting over 30 million working people with a tax cut amounting to an increase in income of about £330 for the average family. That means that no individual will pay any tax at all until they earn at least £12,500—the largest increase in the starting tax threshold in British history. It means that workers up and down the country can earn £1,000 a month without having to give a single penny to the Government. This is the first step on our journey to lower taxes, in stark contrast to the Labour Opposition, who have absolutely no tax cutting plan, or any plan at all, for that matter. The shadow Chancellor recently proposed over £170 billion in uncosted spending increases as she pandered to the hard left of her party, with absolutely no plan to pay for it and absolutely no plan for how to get more money back into the pockets of hard-working people.
As my hon. Friend the Member for South Dorset (Richard Drax) pointed out, we on the Government side of the House believe that cutting taxes is in everyone’s interest, but it is only sound fiscal management that enables us to cut taxes this year, next year and beyond. This strong economy meant that last year the UK was the fastest growing nation in the G7, and unemployment levels are now back to their pre-pandemic lows, which is a remarkable achievement considering that we have just emerged from a once-in-a-century global pandemic.
Turning briefly to some of the throwaway suggestions from the Opposition, they ask why we do not just cancel the health and care levy, but they have no alternative proposals for how to fund the NHS and social care as we begin to see longer and longer waiting lists caused by the pandemic. They talk about an oil and gas windfall tax, but with no acknowledgement that it is the oil and gas sector that is delivering the future energy security we need through investment in carbon capture and storage and in hydrogen production in places such as Teesside. They talk about increasing defence spending, but with no recognition of the fact that most of them spent the period from 2015 to 2019 propping up a hard left leadership who wanted to scrap the nuclear deterrent while last year we delivered the largest ever cash increase to the defence budget since the cold war. Labour has no plans for the NHS, no plans for energy independence and no plans for defence. It has no plan at all. We on this side of the House will keep on delivering on the people’s priorities and taking the tough decisions to ensure that our economy does not just recover but becomes more resilient to the challenges we face in an uncertain world.
Ms Marie Rimmer (St Helens South and Whiston) (Lab)
It has been interesting to listen to the speech from the hon. Member for Redcar (Jacob Young), but I do not think we read the same books or share the same philosophy. This country is set to have the biggest fall in living standards since records began. Households up and down the country are struggling to pay their energy bills. This is a crisis that requires big solutions. At the start of the pandemic, the Chancellor looked at big solutions to big problems, but I am afraid he did not do that yesterday. The energy crisis was already here before Russia invaded Ukraine, and it is now set to get worse. We do not know how long the war will last. The British people understand that we must have some hardship here to help the heroes in Ukraine, and they understand that the war is about standing up for freedom and democracy. What people do not understand is why the Government are not doing everything in their power to help us get through this energy crisis.
People at home are struggling, business are struggling and the Chancellor must do more to ease this struggle. Raising the national insurance cap is welcome, but it is a drop in an ocean compared with the measures that are needed. Critical manufacturing industries such as glass are on their knees. Yesterday, I, along with the CBI, British Glass, Glass Futures and manufacturers and sellers of glass celebrated the International Year of Glass, but the businesses are on their knees. One told of a rise in energy costs this year of £250 million; another of a £48 million rise. This has had no acknowledgement from the Government. Once these businesses go, they are gone for good. They provide good, high-paying jobs that we cannot afford to lose. Other Governments are stepping up to support their industries and ours must do the same.
The energy companies have made huge profits and will continue to do so. They are massive corporations, and energy is always going to be in demand. The Chancellor needs to be on the side of the British people and put a one-off windfall tax on the energy companies. They are not investing; their profits are going into shareholders’ dividends. The energy companies will still be around when this crisis is over. The Government need to ensure that the livelihoods of the British people are still here as well. We cannot afford to have thousands of people in crippling debt, going to moneylenders, as millions are.
Anthony Browne
The hon. Member makes the case against the rise in national insurance and for a one-off windfall tax on the energy industry, but that would obviously be just a one-off for one year. The costs of Government spending will continue year after year. Which taxes would she raise to pay for public spending in the years following the windfall tax?
Ms Rimmer
I do not accept what the Member says.
The tax burden is at its highest in 70 years, and it is estimated that the Government have an additional £50 billion to operate with because of taxes that have come through. This begs the question of why the Chancellor is not using that £50 billion to help British people. We are already in a time of crisis. First it was covid, then it was energy and now it is Ukraine. The Chancellor must adopt big solutions to the big problems our country faces.
Paul Bristow (Peterborough) (Con)
When it comes to challenging rising costs and what measures the Government can put in place to address them, I always turn to what I consider to be some of the wisest people in this country—the people of Peterborough.
Alexander Stafford (Rother Valley) (Con)
Like my mother-in-law.
Paul Bristow
Like my hon. Friend’s mother-in-law. I went to a “politics and a pint” pub surgery in the Oxcart pub in Bretton in my constituency to talk to my residents. I wrote to a large number of people living around the area and told them that I would be there between 6 and 8 o’clock and that I wanted to listen to what they felt about the spring statement, and any other issues that they wanted to talk to their MP about. The single most popular measure in the spring statement that came up was the rise in the national insurance threshold.
Peterborough is a city of hard-working people and hard-working families and they want to see work rewarded. That is what this measure does. It will mean that if they work those extra hours and have the dignity of a job, they will keep more of their own money, pay less tax to the Government and be able to spend it on what they perceive to be best for them and their family. That is the Conservative way, and that is why I welcome these measures. I think they will go a significant way towards relieving pressure on families in my constituency. One lady I spoke to told me exactly what this extra money might mean for her. For her and her family, it would mean help with school uniform costs and help with the weekly food shopping bill, and of course it would also mean help with rising energy prices.
That was not the only thing raised with me last night, and it would seem partisan if I did not mention that constituents raised elements of concern. One constituent told me that, although the spring statement will go some way towards addressing energy prices, people need the heating on during the winter, and they asked whether there will be more measures later down the line. I also spoke to pensioners, who raised a concern about what this might mean for people on a fixed income.
The landlord of the pub pulled me aside to explain that, typically, he was paying about £1,200 a month for energy but, due to the rising costs, some of the deals on offer are almost £4,000 a month, which is an eye-watering amount for a local community pub like the Oxcart. However, he told me how pleased he is with the continued cut in business rates.
Far be it from me, as a new MP elected in 2019, to say this to longer-serving colleagues, but a “politics and a pint” pub surgery is an excellent thing to do because it supports local businesses. If we do not use pubs, unfortunately we will lose them. A “politics and a pint” surgery is a fantastic way to meet our constituents.
Returning to my central point, the rise in the national insurance threshold will reward work. As my hon. Friend the Member for Redcar (Jacob Young) outlined, people who earn less than £12,500 a year will not pay any tax at all, which means more money in their back pocket to support themselves and their family.
A large number of people in my constituency are on universal credit while in work. One of the most popular things this Government have done in recent times is to alter the universal credit taper rate from 63p in the pound to 55p in the pound. That is an extra £1,000 in the back pocket of hard-working families in my constituency, which makes an incredible difference.
I praise the raising of the national insurance threshold because it simplifies the tax system. It was an anomaly that people did not pay income tax until they earned £12,500 but they were still paying national insurance. This measure creates a simpler and clearer tax system, which is in everyone’s best interest. We do not want tax to be confusing, lacking sense or difficult to understand. People pay their tax, so it should be as easy as possible for them to understand, which is what this measure does.
Finally, I want to talk about what the rise in the national insurance threshold will mean for particular people in my constituency. As I said earlier, work is plentiful in my constituency. We have lots of vacancies in Peterborough—in fact, there are more vacancies than people on universal credit—and this rise sends a message that the Government are putting their arm around everyone in this country, and particularly hard-working families. If people want to go out and find a job, work hard and make a contribution, they should be rewarded. There are plenty of those people in Peterborough and across the country.
Gareth Davies
My hon. Friend and constituency neighbour is a great champion of everyone in Peterborough, and I pay tribute to him for all the work he has done since his election in 2019. How do his hard-working constituents feel about the 6.6% increase in the national living wage, which makes sure that having a job is a way out of poverty?
Paul Bristow
My hon. Friend and constituency neighbour makes an important point, and it is another example of how this Government are rewarding those in employment who work hard and make a contribution. That is what this Government are all about, and it is what any Government should be all about. This Bill is another example of rewarding people who make the right decisions.
Wendy Chamberlain (North East Fife) (LD)
No one opposes this Bill, but it gives us an opportunity to reflect on yesterday’s spring statement, as a package of support to help families who are being pushed into poverty.
The hon. Member for Peterborough (Paul Bristow) talks about engaging with his constituents. It is not as easy for me to go up to North East Fife for politics and a pint on a Wednesday night, but my constituents want to know whether this is it. The spring statement has, frankly, let down the country as it faces a cost of living crisis, and the House does not have to take my word for it—after all, it is my job as an Opposition Member to oppose the Government. Other Members mentioned the Institute for Fiscal Studies, which says the Chancellor’s measures
“will make the tax system both less equitable and less efficient.”
That does not make for a stronger or more secure economy. Instead, the belief is that the Chancellor is setting us up for a return of absolute poverty where people have to choose between heating and eating or, even more devastating, neither. That is not strong or secure.
Conservative Members need to look at today’s front pages and YouGov’s snap poll, which says that 69% of those polled believe the Government have not gone far enough to support them, and that 66% do not feel the spring statement helps people like them. The Chancellor told us yesterday that his changes are significant, but saying that does not make it so. We have heard statistics from both sides of the House showing people’s reflections on the Bill, and I tabled an amendment with my hon. Friend the Member for Bath (Wera Hobhouse), which she will address in Committee, that would require the Government to report on the effect on disposable incomes.
Cutting fuel duty by 5p a litre only helps people who drive and, even then, it brings down fuel prices only to the level at which they were last week. I represent a rural Scottish constituency that has much higher fuel prices than in other parts of the UK.
Jacob Young
Does the hon. Lady accept this measure helps not only people who drive but hauliers, who move important products across the country, which obviously has an impact on food prices? This measure will help not only our constituents but the wider economy.
Wendy Chamberlain
I accept the measure helps other people, but the reality is that we have seen an increase, on average, of 40p a litre. As other hon. Members have said, there has been a 5p a litre increase in the last week. A 5p reduction is helpful, but it does not go far enough to support those who really need it.
Frankly, lowering the basic rate of income tax is the biggest wheeze of all. Paul Johnson of the IFS said in The Times this morning that we are experiencing “fiscal drag.” The freezing of income tax, which the Chancellor previously announced, means that, even as people’s wages increase, they will pay more tax, and the reduction is not happening yet. All the Chancellor has said is that he will do it at an unspecified time before the next election.
The reduction will help those on low incomes the least. It is a tiny reduction and, overall, the tax cuts announced yesterday are worth only a quarter of what is being increased. Arguably, it is not workers who benefit from the cut but people, such as landlords, with unearned income from investments. People who are wealthy enough to get their income from savings and property will pay less tax, while the least well off continue to pay more and more. This is driving another wedge between unearned and earned incomes. I tabled a further amendment with my hon. Friend the Member for Bath to require reporting on the impact.
The Chancellor repeatedly spoke about hard-working families—that was his catchphrase of choice—but those hard-working families are not being helped. They are seeing their energy bills go up and the price of food to feed their children skyrocket, and working parents are being pushed into higher tax brackets by the choice to freeze the thresholds. They pay ever more tax. My final amendment addresses unearned income.
This spring statement is a huge missed opportunity. I would have liked to see a packed Chamber debating legislation that actually makes a difference to people, but I think we would all accept that this is not that Chamber and not that Bill. There are so many steps the Government could have taken today but did not. We had an Opposition day debate at the start of this week on pensioner poverty, which we know is increasing year on year. The Minister in that debate said he was sure the Chancellor would have been listening to Opposition Members calling for more support for pensioners and suggesting some of the ways in which that could be done—you were in the Chair at the time, Madam Deputy Speaker. Clearly, the Chancellor was not listening, because pensioners were not mentioned at all yesterday. There was very little for pensioners who do not drive or own their house—or for those who do own their house but are not planning any energy-efficient home improvements.
Gareth Davies
I point out to the hon. Lady that 200,000 fewer pensioners are in absolute poverty now than were in 2010. I just put that on the record.
Wendy Chamberlain
I thank the hon. Gentleman for putting that on the record, but we are looking at 1.3 million additional people, some of whom I am sure will be pensioners, going into absolute poverty in the next year. Our state pension is set to have a real-terms cut. Inflation is at 6.2% and is expected to go up to 8% in April, yet pensions are going up by only 3.1%. That was what the triple lock was designed to deal with; it was there to keep pensions in line with and up to the cost of living. As I have said many times in this Chamber, the state pension is not just about pensioners now; it is about ensuring that people in the longer term know that they have a state pension that they can look forward to, and that matters for younger generations, too.
This Government say that they oppose loneliness, but, as always, actions speak louder than words and the measures are leaving older people on their own, in the dark and the cold. There are very good reasons why some people cannot work. There is nothing at all for those receiving social security, who are also suffering the real-terms cut to incomes and are also struggling to pay their rent, because of the freeze to housing allowance—even the National Residential Landlords Association has called that out as being catastrophic. Frankly, it is more expensive to be poor. People on benefits are being unfairly punished by a system that is set up to make them fail. They are worrying about money, making ends meet and debts, and living in unsuitable housing that costs more to heat. These are not the conditions that set someone up to apply for jobs, to succeed in interviews or to move on to a better place in their lives. We know, as we have heard the evidence, that the benefits system can cause serious harm, damaging people’s mental health, sometimes to the extent that they take their own lives. This is not a system that helps people—often it harms them. We know that our economy is stronger when those who are able to work do so, but our system does not help people do that and it must be more compassionate. It must also receive sufficient funding so that those receiving benefits are not pushed further and further towards the edge.
Do the Government want this country to be one where destitution becomes normal? As I have said, the estimate is that 1.3 million people will move into absolute poverty as a result of the current cost of living crisis. The only support offered yesterday for those on the lowest incomes was the boost to the household support fund, via local authorities. That is no substitution for having a proper support system that stops people falling into poverty in the first place. As happens with pension credit, people do not always come forward for the support they need, so I echo the suggestion that anyone facing hardship contacts their local authority so that they can get support that may be available to them.
The Government could have cut VAT to 17.25%, which is what my party would propose to do. That measure would help everyone. Cutting VAT will shield our constituents from the worst of the increased costs, put money back in their pocket, and help those on middle and low incomes the most. With an economy that is struggling, because of a variety of factors, we need people to be out in our economy; we need people on our high streets, buying things that are made in our factories and marketed on our streets. A cut to VAT would give an immediate boost to every household, but it also helps us in the long term. That is what a meaningful policy would look like.
Jacob Young
I am very interested in the hon. Lady’s arguments on a VAT cut, which is something I would consider, as it is sensible. However, how would the Liberal Democrats propose paying for such a cut?
Wendy Chamberlain
The purpose of the VAT cut is to increase the economy and increase productivity, and therefore see increased tax receipts, which would cover it.
Instead of raising taxes on working people, the Government could implement a windfall tax on the super-profits of oil and gas companies. I say “super-profits” because this is about the additional profits that those companies are making as a result of the increase in energy prices, and it is not the same as the policy proposed by Labour. However, this Government are allowing those companies to make and keep those massive gains. That is true to form; we have seen them give banks a £7 billion tax cut and we know about the high levels of wastage that we have seen, for example, in relation to personal protective equipment. A measure such as this would help support our most vulnerable families.
Helen Morgan (North Shropshire) (LD)
Does my hon. Friend agree that the proposed changes to the national insurance thresholds are disappointing, because they just do not go far enough to help people cope with the shocking scale of this cost of living crisis? A disabled family in my constituency do not pay national insurance so they do not get any benefit from the proposed cut; one member is too ill to work and his wife has to stay at home to care for him, so they get nothing from this, but they are struggling to heat their house and pay their food bills. This does not do anything for them. For those who are in work, the NI rate is still increasing by 10% and so they will not benefit enough to be able to heat their homes. Does she also agree that those who live off-grid and heat their homes with heating oil are not protected by anything that happened yesterday?
Madam Deputy Speaker (Dame Rosie Winterton)
Order. Interventions have to be quite short.
Wendy Chamberlain
Thank you, Madam Deputy Speaker. I also thank my hon. Friend for her intervention. We know that the price cap does not support those who are off-grid. That was a point Members made in Monday’s Opposition day debate in relation to pensioners, and in other places. I hope that the Government will consider that and if they do not do something about it now, I hope they will do so in future.
Yesterday’s statement was all smoke and mirrors. It increases the disparities between unearned and earned income.
Anthony Browne
I was intrigued by the hon. Lady’s comments that a VAT cut would increase economic activity, leading to more tax receipts and therefore it would pay for itself. I very much welcome the idea that tax cuts help to promote economic activity, but if she believes that VAT cuts pay for themselves, does she believe we should always have VAT cuts? How low would she bring VAT? I have to say that that analysis is not shared by Treasury economists.
Wendy Chamberlain
I find it interesting, given the criticism always given to those on this side in relation to the European Union and VAT, and what we could not and could not do, that I am experiencing criticism from Conservative Members about proposing cutting VAT. I am proposing a temporary measure to help boost the economy in the short term, and I am happy to have a further discussion with the hon. Gentleman about what levels of VAT might look like.
We are seeing an increase in the disparity between unearned and earned income. We are ignoring those who are being pushed into poverty, and we are not addressing the cost of living, which the Chancellor’s statement was supposed to deal with yesterday. Today’s Bill does too little, too late. The measures announced in it will come into effect only in July this year. Payments at the higher rates will remain in place for the next three months. The NI hike will cost employees £2.1 billion in that time. The cost of living crisis is biting right now, today, and the Chancellor must look to implement the changes earlier than outlined. I am not fooled by this Government, and neither is the country. If this is the best the Chancellor can do, they know, as I do, that they deserve another Chancellor.
Alexander Stafford (Rother Valley) (Con)
It is an honour to follow the hon. Member for North East Fife (Wendy Chamberlain). Watching today’s debate, I am struck by a sort of parallel universe; on the Opposition side, people are arguing for more and more tax cuts. As a good, red-blooded Conservative, I am always in favour of good tax cuts, but they are arguing this without any recognition of the macroeconomic situation—the £400 billion this Government have spent propping up the economy, saving jobs and lives during the pandemic; and the war in Ukraine, where Putin’s tanks are crushing my ancestral homeland and murdering thousands. Opposition Members do not seem to recognise that.
When I looked at the amendment paper, which was passed to me during this debate, I became very concerned, because it contains no amendment tabled by Opposition Front Benchers. It is almost as though they do not want to engage with the Bill and make any improvements, so they stand here with their rhetoric about how they are against the Bill and what it is doing, but without seeking to improve it, make any changes or add anything to the debate. Even the Liberal Democrats added a certain je ne sais quoi to this debate, but the Opposition do not and that concerns me. We have a debate where they talk about how awful this is but without any recommendations for improvements.
Anthony Browne
I very much welcome the fact that my hon. Friend mentioned the fiscal background, which is that we have just spent £400 billion on the pandemic and we now have national debt that is the same size as the GDP. One thing concerns me when I listen to the contributions from those on the Opposition Benches; does he agree that Governments always have to live within their means and, like individuals, they cannot carry on living on the never-never and ultimately will have to try to balance the books?
Alexander Stafford
Of course, we all have to live within our means: we cannot just keep on spending money. It was right for us to spend £400 billion to save jobs, save lives, prop up our economy and make sure that people have jobs, but we need to pay that back, so unfortunately we cannot have huge, sweeping tax cuts, however much we might like to. The Government need to make and are making the tough but responsible choices.
I also feel we are in a parallel universe when I hear Opposition Members talking about being on the side of working people and saying that they would do more if they were in our shoes. My local council, Labour-run Rotherham Metropolitan Borough Council, is not only increasing council tax for hard-working people but doing so with the ninth-largest increase, in cash terms, in the entire country. That is despite the council having £58 million in reserve for rainy days. If this is not a rainy day, I do not know what is. Instead of increasing council tax by so much, the council should spend the money it has in reserves and lower council tax for hard-working people.
Let me turn to an even more ridiculous example. Last year, the Labour police and crime commissioner for South Yorkshire underspent his budget by £2 million. That is a big saving. What would a fiscally prudent person do? They could spend it on reopening the police stations on Maltby High Street or in Dinnington, as I advocate, or perhaps freeze or even cut the precept. But no: the precept for the South Yorkshire police and crime commissioner is increasing, despite that budget underspend. It is a parallel universe.
The Government are introducing tax cuts for hard-working people. We should emphasise that it is about the working people, because we want to put more money into people’s pockets. The Bill is a good, strong and stable measure, because it will look after people and put pounds in their pockets, where they matter. It is my fundamental belief, shared by my colleagues on the Conservative Benches, that if someone works hard, they will get the fruits of their labour—they will get out what they put in. Under this Bill, the more someone works, the more money they will get in their pocket, and more money in their pocket is better for them and their family, community and society. That is what the Bill does: it looks after people by putting more money in their pockets, because the individual knows best. That has been what goes on since time immemorial.
Richard Thomson
According to the IFS, median earners on around £27,500 can expect to be around £400 worse off in 2022-23 than in this financial year, even after the increase to the national insurance floor. Are they getting back all that they put in? How do the hon. Gentleman’s comments square with the lived experience that people on median earnings will have in the forthcoming financial year?
Alexander Stafford
I thank the hon. Gentleman for that interesting point, but it is clear that 70% of working people are going to have a tax cut. In fact, not only is there a tax cut in the Bill, but we know that there will be an income tax cut in 2023-24. I hope the Scottish Government also reduce income tax, so that they too are on the side of hard-working people.
Jacob Young
Does my hon. Friend recognise, as the Chief Secretary to the Treasury did earlier, that the IFS figures show that, taking into account the health and social care levy, people who earn £35,000 or less will still see a tax cut because of the measures in the Bill?
Alexander Stafford
I completely agree with my hon. Friend’s point. This is a Bill that really helps people because it will reduce the amount of taxation and put more money in people’s pockets.
We need to make sure that work pays. That is vital. I mentioned the £400 billion that the Government have spent; they have kept jobs going throughout the pandemic. That is vital. It is why unemployment in Rother Valley is only 3.6%, which is below the national average. Of course, that still means that 2,000 people in my seat are actively looking for jobs, which is why last Friday I held the first ever Rother Valley jobs fair. It was a great success: there were more than 30 employers and hundreds of people turned up, and I am told that dozens of people have already got jobs out of it. That is the Conservative view on the ground in a constituency, helping with jobs, and the Government are doing that nationally.
Gareth Davies
My hon. Friend is making a fantastic and eloquent speech. Is he aware that last year unemployment fell every single month, thanks to the Chancellor’s plan for jobs?
Alexander Stafford
I was not aware of that exact point, but it does not surprise me because that is generally what happens under Conservative Governments: we try to promote people and work.
The measures on national insurance that we are discussing will encourage more people into work, but we must also look at the wider context. It is not just about working people; the Government recently changed the universal credit tax taper, thereby helping people on universal credit. The simplification of that system will not only make a huge difference to everyday lives but, hopefully, reduce some of the accounting costs and make it easier for business. That will be a double help for business.
Fundamentally, I believe this is a great measure, in the sense that it will put more money into people’s pockets but also pay for the important health and social care levy. We all need that great NHS that protected us throughout the pandemic. This will fund the NHS, put more tax in people’s pockets and clearly shows the way for us to lower taxes in the years to come.
Rachel Hopkins (Luton South) (Lab)
The Chancellor’s spring statement left households and businesses across Luton South to fend for themselves in the middle of a cost of living crisis, as we are set to see this year the biggest drop in incomes on record. The Office for Budget Responsibility confirmed that real household disposable income will fall over the next two years, leading to
“the biggest fall in living standards in any single financial year since ONS records began in 1956-57”.
Britain is facing the highest tax burden in 70 years, with the Chancellor confirming £24 billion in tax rises this year. For every £6 the Chancellor has taken in tax since he became Chancellor, he is giving back just £1 today. This situation cuts to the heart of the Conservatives’ mismanagement of the economy, structured on low investment, low pay and low growth. It also shows their total disregard for the hardship that my constituents in Luton South are facing. Whether it is that people cannot afford the soaring heating bills, the petrol at the pump or the rising food prices, it is our communities that are suffering right now.
The Bill represents just one aspect of the Chancellor’s sleight-of-hand approach to the management of public finances, which is based more on feathering the nest of his own popularity—or, dare I say, his Instagram account—than it is on building an economy based on high growth, high productivity and higher redistribution. Although increasing the national insurance contributions threshold will provide some respite, it will deliver twice as much benefit to the top 50%—the top half of earners—as it will to those in the lower half. And it cannot be considered in isolation. The Chancellor announced in the 2021 autumn Budget that national insurance contributions rates would rise from 12% to 13.25%. Overall, that tax increase is regressive: those earning more than £100,000 a year could end up paying proportionately less. Notwithstanding the threshold change, the rate will be around 13.25% on most earnings up to £50,000 but just 3.25% on any income above that threshold. For all the references earlier in the debate about everyone paying their fair share, I am not sure that is the case.
Jacob Young
The hon. Lady mentioned the health and social care levy; does she recognise the point made earlier by my hon. Friend the Member for Grantham and Stamford (Gareth Davies)? The top 14% of earners will pay 50% of the levy. Surely that demonstrates that the levy is more progressive.
Rachel Hopkins
There are many ways to cut a cake. The people in my constituency know what fairness is and they know that they are paying disproportionately more in their everyday lives.
Could the Chancellor point to any other major economy that is putting up taxes on working people this April? The policies in the spring statement are poorly targeted and not grounded in fairness. According to the response from the Institute for Public Policy Research, they will help the wealthiest households four times more than they will help the poorest. Alongside the lack of support in the spring statement, wages are forecast to fall in value by 2% this year, which is equivalent to a real-terms cut of £552.
We have heard much about a parallel universe, but it is clear whose side the Conservative Government are on. They are certainly not on the side of the pensioners, families on universal credit and children living in poverty in Luton South, who face the choice of heating or eating. I wish the hon. Member for South Dorset (Richard Drax) was still in the Chamber. I listened intently to his comments about freedom; if someone cannot afford to heat their home or feed their kids, they do not have much freedom. For those on the very lowest incomes, there is nothing. There is nothing for those unable to work or those who are unemployed.
The reform places a greater level of tax on almost all workers. The Government’s negligence will lead to increased fuel poverty. Government Members may try to point, again, to the household support fund. A colleague told me earlier that for those under the income threshold, the increase would be equivalent to 6p a day.
Jacob Young
We are talking about the second tranche of the household support fund. The first tranche of £500 million was announced last year. Luton got £1.83 million from that fund, which I am sure was helpful to her constituents. They will get a further share from the second tranche. Does the hon. Lady welcome that?
Rachel Hopkins
I am really pleased that the hon. Member is able to remember that figure; I hope he is also able to remind the House of the more than £100 million that has been taken away from Luton council over a decade of Tory austerity, which is why so many of the families in my constituency are living in poverty and are in fuel poverty.
Rachel Hopkins
I am going to make some progress.
The household support fund is simply a short-term solution. I declare an interest as a vice president of the Local Government Association, which warns that we need an “effective long-term solution” to support the most vulnerable. The Chair of the Select Committee on Levelling Up, Housing and Communities, my hon. Friend the Member for Sheffield South East (Mr Betts), raised a number of points on that issue earlier; I add that 60p in every £1 has been taken away from local authorities over 10 years of Tory austerity. We need to see much more stability and certainty for local authorities before we will see an impact.
Ultimately, Luton South deserves a Government that will help them through the cost of living crisis, with a plan to drive growth and living standards. That is not what the Conservative party’s spring statement offers, but it is what a Labour Government will.
James Daly (Bury North) (Con)
It is a pleasure to follow the hon. Member for Luton South (Rachel Hopkins), who made a passionate speech. This has been an incredibly important debate, but the framing of the debate by the Opposition Front Bench was somewhat curious. The hon. Member for Ealing North (James Murray) did not want to answer any questions from Members, including myself, on taxation issues that impact the cost of living for my constituents. Thankfully, the debate has been wide-ranging. If we are to discuss the impact of tax, we must look at it in every part of the country.
I listened to the hon. Member for Gordon (Richard Thomson). I often have to restrain myself from intervening on Members of the SNP, but today, I had to listen to the spokesperson for a party who has actually found a way of taxing the people of Scotland, their own citizens, to the sum of £900 million in extra taxes over the last three years for a net benefit of £170 million.
Richard Thomson
I think the hon. Gentleman is confusing cause and effect with the complicated system for forecasting tax revenues and then balancing payments between the Treasury and the Scottish Government. Would he like to add that clarification to his remarks?
James Daly
Absolutely not. The SNP has found a way of raising taxes that penalises their own citizens and raises less income.
I come back to Greater Manchester. I am proud to be the MP for Bury North. My constituents face a wide range of taxation issues. They will support the Government position and the policy announced yesterday on the increase in the national insurance threshold. Every single person in this debate has supported it. Indeed, the hon. Member for Gordon said, very curiously, that it was an indictment but he was going to support it. It is a good policy that will put more money in people’s pockets. It is a tax cut, especially for those on the lowest incomes, which is to be welcomed.
I want to consider this policy in the context of the largest self-employed sector in my constituency—taxi drivers. Taxi drivers will be hit completely by the taxes proposed for Andy Burnham’s clean air charging zone—at 493 square miles, it will be the world’s largest such zone. That tax—£10 for small vans and £60 for lorries—will hit all those who rely on certain types of motor transport to earn their living. How can that be right? I stand up here on a regular basis and ask Opposition Members to support me in asking for that charge—a cost that hard-working taxi drivers and others in my constituency face—to be removed, but there is silence. We have to look at the whole of the country, and at the policies put in place by politicians at different levels.
My hon. Friend the Member for Rother Valley (Alexander Stafford) talked about his experience of a local Labour authority. In Greater Manchester, we have council tax rises linked to incompetence. We have precepts that the Greater Manchester Mayor is levying on taxpayers in my area, even though he, as police and crime commissioner for Greater Manchester, has wasted millions on millions of pounds on a failed computer system. The decisions of politicians impact my constituents every day. I hope at some point Opposition politicians will join Conservatives in Greater Manchester in calling for the reduction of taxes on our constituents, for the benefit of those constituents.
We see a contrast. The Government are investing in my constituents and in hard-working people.
Alexander Stafford
I completely agree with my hon. Friend’s point about clean air. Does he agree that there will be the same impact in the nearest big city to my constituency, Sheffield, where at the end of this year heavy goods vehicle drivers will be charged up to £50 a day? With the huge increases in petrol costs, there is a double whammy for hauliers; the charges should be scrapped.
James Daly
I completely agree. We should be looking at ways to support our hauliers and others who are reliant on motor transport for their businesses and livelihoods.
The contrast is with a high-tax Labour and the SNP policies I have touched on. We have a Conservative Government who, through the pandemic, have invested £400 billion in supporting people and businesses. In my area, more than £100 million has supported businesses through the pandemic. As a result, in the last quarter of last year, as has already been mentioned, employment levels were back to pre-pandemic levels and there is a record number of vacancies—1.25 million—in the market. That is what we must also consider when looking at how the Government are performing. We have a Government who are creating well-paid, highly skilled jobs in all parts of the country as part of the levelling-up agenda. That is to be welcomed. The policy we are debating today is that of a tax-cutting Government; the national insurance policy is a tax cut of £6 billion. Such policies must be welcomed.
We have a Government who invest in their people, in training, in supporting the most vulnerable, and in supporting hard-working, self-employed people in my constituency, and who look at every possible way to link policy to economic growth and employment growth. We have a Government who see that the best way to address the many challenges our constituents face is to make sure that the financial and other support is in place while ensuring that they have the tools and the training to get a well-paid and well-supported job in their local area. That is what this Government are about —the creation of jobs, tax cuts and actions for the many and not the few.
The debate is not just about this place and one policy. In the real world, people are creating wealth. The debate is about how people can use the tools that the Government are giving them to create jobs and opportunities. That is what is happening. I welcome the measure, which clearly has support across the House.
Pensioners were mentioned and they face challenges with the rising cost of living, as do many others. Since 2011, when the triple lock was put in place, the state pension has increased by 35% or £2,050 and is now at the highest level relative to earnings in 34 years.
I am absolutely certain—knowing my right hon. Friends the Chancellor and the Financial Secretary to the Treasury—that this measure is not the end of our fiscal policies and our tools to ensure that people will continue to have job opportunities and to be able to take advantage of the economic conditions that have been created.
This is the right policy at the right time, and I congratulate the Government for it. The Government know that all our citizens face challenges, but the route out of the difficulty is good, skilled, high-wage, high-quality employment in all parts of the country and I welcome the Government’s commitment to that.
Several hon. Members rose—
John McDonnell (Hayes and Harlington) (Lab)
Thank you, Madam Deputy Speaker. I remind my hon. Friend the Member for Luton South (Rachel Hopkins) that she has just made a brilliant speech, but if she wants to repeat it she is perfectly welcome to do so!
The hon. Member for Rother Valley (Alexander Stafford), who has just left the Chamber, made a valid point about the nature of today’s debate. We as a House need to look again at how we deal with financial statements. It is all well and good having a statement followed by questions, but these statements are becoming increasingly significant—they are, in effect, mini-Budgets—and we need to look again at how we try to cram a debate about the whole statement into just one piece of the legislative proposals stemming from it. In future it would be better, just as we do with the Budget, to timetable specific debates on the statement and then we would have the legislative flow from that.
I put on the record my apologies to the Pendle constituency Labour party. I was meant to be doing the Sydney Silverman annual lecture this evening, but I have postponed it. I apologise to the CLP for any inconvenience caused. The annual lecture is a significant event, because Sydney Silverman was the man who abolished capital punishment and he had a fantastic record as a Labour MP up there. They have been very good about it and we will choose another date. I have postponed it because, as I raised with the Chancellor yesterday, there is nothing in this spring statement—and for me this is the most significant thing about it—for the poorest in our society, including those forced to live on benefits and pensioners, and I am really worried about what will happen to them over the next six months. My reason for being here is to say that we need to have a proper debate in these coming weeks and months about the nature of poverty in our society, the nature of low incomes, and the options available to us to tackle those issues. I have tabled an amendment, but it looks as though the whole debate is going to run into one.
Last Friday I met a group of unpaid carers who are looking after family relatives. I remind Members that the carers allowance is £67.60. I just do not know how people can live off that. In fact, they cannot live off it. They now face the energy price increases that we have discussed today, and they are being hit by the inflation rate going up. The fact is that, although both benefits and pensions are to increase by 3.1%, the predictions for the increase in the rate of inflation are anything between 7% and 10%. That is a startling cut in people’s living standards, and I do not know how they are going to cope.
I want to wage a cross-party campaign to get the Chancellor to come back sooner, with more measures to assist the poorest in our society. As I said yesterday, I predict that when we get to November there will be large numbers of pensioners and others sitting in their homes freezing. We have gone through a period where, year after year, we have highlighted the number of excess deaths in this country, particularly of older people during winter, and I think that that number will increase again.
Much has been said about the Government’s record on pensions, but I have to remind them that the reason the triple lock had to be introduced is that Mrs Thatcher broke the link between pensions and earnings, and the pension became undermined. When the Government proposed the triple lock, I wholeheartedly supported it. That is why all our manifestos at the last election committed to supporting and abiding by the triple lock, so I found it truly shocking when the Government tore that up and suspended it last year. I thought that we had embedded it into the political thinking of this country that, whatever happens, pensioners should share in the wealth growth of this country, including wage growth, or at least be protected against an inflation hit, but we seem to be going backwards. I know that the Government have said that it has been suspended possibly for only a year, but I fear that it might become the norm. That is why Members from across the House should try to secure from the Chancellor a commitment that something should be done to inflation-proof at least the benefits and pensions of the poorest in our society.
Another issue that I think is going to come at us rapidly in these coming months—I think it will become an important part of the political debate and we should wake up to it now—is that of wages. Unless we inflation-proof wages, I predict that we will see a flaring up of industrial strife in our country. I will give the example of what has happened to council workers in the latest pay settlement. With inflation possibly between 8% and 10% by the end of the year, their wage settlement is 1.75%. That means, in effect, a wage cut of up to 8%. I invite the Government to consider the issue of wages in the public sector, because they obviously set the terms of those in the private sector as well. Unless we inflation-proof wage settlements, our lowest-paid workers will be hit hard by the erosion of their wages as a result of inflation. I think that the Government should be saying to the pay review bodies that, in negotiations, they should start with inflation-proofing settlements.
We also have to recognise that we have to play a role with regard to prices overall. The Government have accepted that there needs to be a continuation of some form of cap on energy prices. I think there should be a cap on profits. The Common Wealth think-tank published its analysis of the energy company profit rates, which were between 42% and 45%. That is absolutely staggering. If that is not profiteering, I do not know what is. We have to come back to this House within the next couple of months. We cannot leave it beyond the recess. Before the recess, we need to know the assessment of the Government, the OBR and others of what the energy price situation is going to be like in three months’ time, and we need measures in place to protect people. We know that the price of oil and so on will fluctuate, but we have to make predictions on the best information we have, before the recess at the end of July, so that we can start to protect people.
We also need to consider other measures on prices. Last week the Mayor of London Sadiq Khan proposed a 12-month rent freeze in London. I proposed a rent freeze last October because it was clear from talking to ACORN, the London Renters Union and others just what rent increases were coming through post covid. Unless we start protecting people with rent controls, particularly in high-rent city areas, a rush of evictions will start again, leading to an increase in homelessness and to those homeless families unfortunately having to rely on cash-strapped councils to support them.
Finally, in addition to the need to provide more support for the hardest hit, including those living in poverty and pensioners, and the need to control the implications of increased prices in both energy and rents, we need—and I hope this is coming next week—clear plans from the Government on where we go from here in tackling the energy crisis. I welcome the lifting yesterday of VAT on solar panels and so on, but, to be honest, that was a fairly small step in terms of what is needed. One of the most effective ways in which we can help people in this coming period is through investment in home insulation. A few years ago, we put forward a plan to insulate 27 million homes, the independent assessment of which was that it would create about 450,000 jobs and reduce energy bills significantly. What we can do now is make sure not only that we insulate people’s homes and bring down their energy bills, but that we create good jobs. We need the Government to come forward immediately with a programme that prioritises that action. Of course we need to go for green growth and investment in wave, wind and solar power, but the quickest gains can be made through home insulation. In that way, we might give some hope to people who, at the moment, are viewing the coming winter as a pretty bleak period.
I have listened to this debate from the start, and I have listened to all those who are quoting the IFS, the Resolution Foundation and so on, but what sticks in my mind is the fact that there are 2 million pensioners and 4 million children living in poverty. We can argue about the Government’s record over the past 10 years, but that is the stark reality of it. The Resolution Foundation analysis that 1.3 million more people will be forced into poverty is shocking and it should shock us all. We should treat it as an emergency that we need to address very quickly. That is why I say that this cannot be the last debate on it between now and the summer recess. We need to have the chance to consider clear proposals about how we deal with the plight of the poorest in our society, how we tackle the way that they are being hit by prices rises and rent increases, and how we can insulate their homes for the future.
I will finish on the point that I made yesterday. A 3.1% increase for those forced to live on benefits and for pensioners, with inflation at anything between 8% and 10%, will push so many people over the edge into real poverty, real stress and mental health problems, and unfortunately for some it will further existing distress. That is what we should be talking about today. We need to be considering measures to address the whole issue, otherwise we will be failing in our duty.
One final point. We are all on good wages and salaries and we do not suffer anything like the hardship of many of our constituents, so it behoves us to try to take into far greater account the most deprived people in our society. So far in these discussions, with all the point scoring and so on, I do not think that we have properly done so. In the coming months, how we tackle this matter must be the nature of our debate.
James Daly
The right hon. Gentleman is making a very thoughtful speech. Among his proposals is a cap on profits. I wonder whether he could expand on that. In my constituency, for example, we have many small businesses; we do not have multinationals or anything such as that. Does he advocate that all private sector businesses, whatever their size, should have a cap on profit?
John McDonnell
I do not think the hon. Gentleman heard me properly. I was referring to the energy companies, specifically in regard to the profits that they have made. If he looks at the report of Common Wealth, the think-tank, he will see that it was looking at 42% to 45% rises for a number of those energy companies. That is where we need to cap profits. That would then give us the opportunity to redistribute some of that into supporting families and so on. It is about trying to be as targeted as possible so that we get the maximum benefit for the maximum number of people in our country. In his speech the hon. Gentleman used the slogan, “For the many, not the few”. It just shows what a good slogan it is when the opposing side starts stealing it.
Shaun Bailey (West Bromwich West) (Con)
It is, actually, a pleasure to follow the considered and well thought out speech of the right hon. Member for Hayes and Harlington (John McDonnell). I agreed with some of the principal points that he made, particularly the need for this to be an ongoing discussion. We cannot allow what has been suggested today to be the full stop at the end of the sentence; we must allow the debate to carry on so that we can have those broad discussions. I share his concerns, which are also articulated in my own communities, about the plight and the difficulties that pensioners face. People on limited incomes make up a large proportion of my constituents, and also of the communities that I live in and have been brought up in.
Coming in at this point of a debate means that we have already had intensive discussion of the facts and the figures and what the OBR and the IFS have said, and I do not wish to regurgitate all the things that hon. and right hon. Members have said. None the less, we are facing an unprecedented situation. Broadly speaking, the interventions made by my right hon. Friend the Chancellor yesterday were welcome. As we have discussed, the balancing of the national insurance personal thresholds will enable, to a degree, a tax cut for hard-working people in this country. The levelling up—for want of a better expression—of those rates forms part of a broader package.
The hon. Member for Ealing North (James Murray), who is back in his place, talked about a one-off windfall tax. He strikes me as someone who will go very far on the Labour Front Bench, so I do not want to stunt his political career by agreeing with what he said. None the less, he does make an interesting point about a windfall tax. I have listened intently to the debate about this. My concern about a windfall tax, which might perhaps improve or be slightly better than what is being proposed today, is the broader unintended consequences that it might bring, such as that tax being passed on to consumers. Many many hon. and right hon. Members throughout the Chamber have picked up on that point today. We are dealing with multinational corporations, many of which have complex tax structures and people who are paid very well to avoid and to dodge tax, often using international laws. The one-off nature of what is being proposed, therefore, makes it very difficult to build a legislative framework that would operate in a way that would enable us to derive the benefit.
I do not disagree with Opposition Members about energy companies making exorbitant profits, because we see the figures. The point I come back to, though, is allowing any measure actually to be deliverable. That was a point I made when I intervened on my right hon. Friend the Chief Secretary to the Treasury at the start of the debate. It is about operational delivery—it is not just a slogan; it is about reality. It is about ensuring that people on the ground, who either derive the benefit or face the impact of what we decide in this place, can actually see that. My concern with what Labour is proposing is that, while on paper there are some interesting proposals, in reality, I question whether some of it can be delivered. My concern is the unintended consequence of my constituents bearing the brunt of increased prices as a result of those proposals.
Jacob Young
One of the oil and gas companies whose name is batted around the Chamber is BP. BP is investing millions of pounds in Teesside in its new carbon, capture and storage facility, Net Zero Teesside, alongside Hydrogen Teesside, which is a hydrogen production facility. Does my hon. Friend acknowledge that these are energy sources of the future, and that the investment we are seeing right now is important in building our future energy security? If we were to go down the route that Labour is proposing, it is feasible that many energy companies would pull out of their investment in green technologies of the future, which we are so desperate to see.
Shaun Bailey
My hon. Friend has been endowed with some form of clairvoyance today; it is almost as if has seen the second part of the point that I was about to make. He is absolutely right. We have to take a two-pronged approach. The fact is that these companies are investing, particularly in areas such as his. They are vital stakeholders in the future sustainability of energy in this country, so we cannot just take a pull-the-rug approach, or treat them completely as the bad guys. Yes, of course, exorbitant profits are being made. I acknowledged that in the first part of my speech; I am not denying that. The focus of what the Government and my right hon. Friend the Chancellor has done is to try to put the burden on those the broader shoulders, and that is the point that I am trying to drive home. My hon. Friend is right, though, that we must ensure that we encourage these organisations to continue to invest not only in the sustainability of our energy market, but in ensuring that we get the jobs and skills we need for people to realise the ambitions that we put forward in the spring statement yesterday. He is, of course, absolutely right in his intervention, and I thank him for it.
I was very pleased yesterday to see the letter sent by my right hon. Friends the Chancellor and the Business Secretary to the petroleum companies, saying that the cost benefits as a result of the fuel duty reduction—I am sure there will be chunterings and arguments that it was not enough—should be reflected on the forecourt. That was the right thing to do.
As my right hon. and learned Friend the Financial Secretary is on the Front Bench, may I also say that I welcome the Chancellor’s commitment to a value for money committee, which is being set up? I know she will respond more broadly on HMRC’s implementation of some of these NI measures, but it is vital that we ensure value for money and delivery on the ground for constituents —never more so than with the Bill we are debating today.
I should say that I am a member of the Public Accounts Committee, and value for money is our raison d’être. I am concerned that we often put things in place without thinking about how they are reflected on the ground and what value for money actually means there. For my constituents, particularly the most vulnerable, this is about ensuring, as right hon. and hon. Members have said, that they can buy their school uniform and meet the additional costs they will face as a result of where we are now.
When we talk about the changes in the NI threshold rates, I think particularly of the many sole traders and small businesspeople in my constituency who will have to navigate this change, building systems and putting them in place. It is therefore right that the Government have sought, rather than bringing in this change straight away, to delay it to July to allow that process to be embedded. I make a plea to my right hon. and learned Friend the Financial Secretary to ensure that HMRC has the systems to do that, because there have been times when I have not been impressed with HMRC and the way it has implemented such things. It is vital that the Treasury get a grip on that, to ensure that we can unleash the full benefit of what this measure is intended to do. In my very short time here, compared with many others in this place, I have learned that, whatever our political objectives and political will on particular measures, delivery on the ground can be very different and can sometimes mar them. The plea I hope she takes away from my comments is to ensure that this measure can be realised and benefit our constituents more broadly.
As I said at the start of my contribution, this is about a broader range of packages. Touching on what the right hon. Member for Hayes and Harlington said, this Bill cannot be the end of the conversation; it must be the beginning.
Jacob Young
Yesterday, the Chancellor published his tax plan, which sets a course for the first income tax cut in many, many years—I am not sure how many—for working people across the country. Does my hon. Friend welcome those steps, which give tax certainty to both constituents and employers?
Shaun Bailey
My hon. Friend is absolutely right; it is the certainty in that plan that allows us to move forward. That is the point I want to drill down on, and he has articulated it much more eruditely than me—it is obviously the fantastic focus he has, being a Teessider. Publishing a plan that sets a clear roadmap, as our right hon. Friend the Chancellor did yesterday, is vital so that we know where we are going and the fiscal interventions we will have to make to help people. That is what people are looking for.
James Daly
One of the measures our right hon. Friend the Chancellor announced yesterday was an increase in the household support fund to £1 billion. How does my hon. Friend feel that councils such as his in Sandwell—I note his previous comments on that—will be able to deal with the bespoke needs of his constituents?
Shaun Bailey
My hon. Friend makes a strong point. It goes without saying that the funding is vital for my constituents in Sandwell. I know, from the interactions I have, how much impact that has on people on the ground. I cannot even articulate how important what our right hon. Friend the Chancellor did yesterday will be and how it will improve people’s lives. My hon. Friend refers to my contribution in the House earlier today, which brings me back to the running theme of my speech: delivery on the ground. Unfortunately, we now have commissioners in Sandwell because the Labour administration could not run the authority for 50 years.
We must ensure that that funding gets through to the people who really need it. That is key. Once again, it is absolutely right that we have put the funding in place, but we must ensure that there are robust systems in place to ensure that it gets through. We have learned throughout the past two years that, whether it is what we are doing today on national insurance or the unprecedented package of support this Government provided to keep businesses and the economy going, keep wages paid and keep people in employment and support, we must have the on-the-ground delivery.
I know, from my own experiences in my local area, that at times that delivery failed, and that meant businesses closing down and people not able to get the support they needed. My hon. Friend is absolutely right that that funding will change lives in my constituency—but, if it is to do so, those people who are delivering it must be able to deliver, and it is incumbent on central Government to step in where they need to and provide the guidance necessary to support delivery of those vital funds.
We are in unprecedented times, as we have heard today. We have just gone through a period of unprecedented spending—£400 billion to keep our economy afloat—and we did that to protect jobs and keep people employed. From my constituency and the communities I live in with my friends, neighbours and family, I know the impact that has had, by keeping people earning, and keeping small businesses and people’s dreams and aspirations going.
People will say that this is not the perfect solution. The difficulty with fiscal interventions is that there is never a panacea; there will never be one magic bullet that sorts the whole problem out. This Bill is part of a broader package, and the intervention from my hon. Friend the Member for Redcar (Jacob Young) helped to draw that point out. The Bill we are discussing forms an important part of a broader package, enabling us to address an anomaly that we have had for so long and leading to a tax cut for people, but it must come with additional measures and packages such as those announced by my right hon. Friend the Chancellor yesterday.
The one thing it is incumbent on those on the Treasury Benches to do is ensure that this money gets to real people. That means ensuring that we have processes in place that work. As I said at the start, I know my right hon. Friend the Chancellor is committed to doing that. He has set up his committee on value for money—my right hon. and learned Friend the Financial Secretary has heard me bang on about that four times in this speech now—to ensure that that delivery happens. However, we must ensure that the money gets through, because that is how we will benefit normal people such as those in the communities I represent, in Wednesbury, Oldbury and the heart of the Black Country, the great town of Tipton.
Matt Western (Warwick and Leamington) (Lab)
It is a pleasure to speak today, having been unable to get in yesterday.
Clearly, as we have heard from across the Chamber, a lot of people are hurting right now. Some might suggest that Warwick and Leamington would be deemed a relatively prosperous community, but there is real deprivation in all our communities. It is those who are on the lowest incomes, the pensioners and those on welfare, who will be—who are being—hit hardest.
While I can see the Chancellor is an ambitious individual, what was most disappointing about his statement yesterday was that, with the exception of the removal of VAT on solar panels and renewable heat systems and the 5p reduction in fuel duty, there was very little in it. That is particularly disappointing because we are in the middle of a cost of living crisis, and he could have been seen to be more obviously looking to support others. It must be difficult, being a relatively wealthy individual, to be able to see what is going on in the households of ordinary working people and the hardship that they are currently facing.
I was really surprised about the windfall tax because, to me, it seems like an open goal—an obvious thing to do. I have heard the comments of Conservative Members about the windfall tax and the need for large oil and gas companies to reinvest profits—of course, and those businesses will be doing that. Their profit forecasts were looking fairly good this past 12 months anyway, but they have risen significantly because of the dramatic rise in the international price of a barrel of oil. That is terrific for the businesses in that sector. It is fortunate for them to be there at this time, but it has significant consequences for the households of our constituents— our hard-working families who are trying to make ends meet.
We have heard the comments about those businesses having to reinvest profits, and of course they would be doing that. I sincerely want them to look at new hydrogen facilities and electric vehicle charging infrastructure, and they are, but we need to rapidly upgrade those plans, and I am sure the Government will be looking at that and talking about it in the coming days. That needs to be done, and I hope the companies and the Government will be much more ambitious than they have been to date. The upsurge in profits from the increase in the price of oil has essentially equated, as the chief exec of BP said, to a cash machine for those businesses that they have then used to increase dividends, understandably, but also to go on to a very aggressive plan of share buy-backs. That is what a lot of corporates do—I get that—but, as my Front Benchers and I have been saying, that money could have been put back in and used to alleviate the very real, very immediate pressures on households up and down the country.
The IFS says that yesterday’s announcements were really like the Chancellor giving with one hand yet taking away with the other. Paul Johnson said that the decision to raise national insurance contributions and cut income tax drives a
“further wedge between taxation of unearned income and earned income.”
That relates to my point about the dividend increases that we have seen in other parts of the economy.
Jacob Young
I assume that the hon. Gentleman is supporting the Bill; I think his Front Benchers have indicated that they are. He talked about lowering income tax driving a wedge and so on. Does that mean that when it comes to lowering income tax, which my right hon. Friend the Chancellor has said he wants to do in a couple of years’ time, Labour will oppose that?
Matt Western
Of course Chancellors want to do all sorts of things. The prospect of this Chancellor actually being able to do anything in six months, 12 months or two years is entirely down to the economic winds of that period. Let us recall that the Chancellor said just a year ago that he would allow an increase in nurses’ pay of 1%. At that time he would have been getting very regular briefings from the Bank of England forecasters, with its economists looking at what was going to happen to the economy and the rate of inflation. It was pretty clear then that inflation was already ticking up way beyond 1%, so even at the time of the announcement nurses would be getting a real-terms cut, and he then increased it to 3% in the autumn. I understand the hon. Gentleman’s point, but who knows what the economic situation will be like in two years’ time, given that the UK had the biggest hit of all G20 countries in the pandemic? These things would not have been forecasted at the end of 2019, so quite where the Chancellor will be in two years’ time, goodness only knows.
The Resolution Foundation has said that one third of the cost of living crisis has come from the increase in taxes. That is a really telling statistic. Torsten Bell said that
“it makes no sense to raise National Insurance while cutting Income Tax”.
He is quite right. There seems to be no logic to doing that. As has been said elsewhere, the increase in national insurance contributions is viewed by businesses as a tax on jobs. The Government’s determination to pursue this increase in national insurance contributions will hit hard those businesses that are already hurting as a result of the pandemic and now the war in Ukraine, as well as the consequences of the Brexit changes in certain sectors.
We have a Chancellor who has, to use the analogy of a supermarket, put up prices by six quid one month and then offered a promotion of £1 off this month—for now. I am afraid the public will see through that, particularly the poorest and most deprived in our society, including pensioners. My right hon. Friend the Member for Hayes and Harlington (John McDonnell) mentioned the removal of the triple lock, regardless of whether that will be permanent. There was nothing for the poorest and the pensioners in our society. When I went to a food bank in north Leamington a couple of weeks ago, I came across two women in their 60s—WASPI women who were queuing up, for the first time ever in their lives, to get food from a food bank. That is the reality of what is happening out there in our society.
I am afraid that there was a paucity of ambition in the measures that the Chancellor announced yesterday. He could have gone much further and done so much more for those who are hurting in our society. Sadly, I fear that that is the measure of this Chancellor.
Mr Deputy Speaker (Mr Nigel Evans)
That leaves, by my reckoning, just under 12 minutes each for the Front Benchers, starting with Abena Oppong-Asare.
Abena Oppong-Asare (Erith and Thamesmead) (Lab)
It is a pleasure to respond to this Second Reading debate on behalf of the official Opposition. I thank all hon. Members for their contributions to the debate.
My hon. Friend the Member for St Helens South and Whiston (Ms Rimmer) spoke passionately about the impact of energy price increases on energy-intensive businesses in her area, making clear the very real risk to jobs. A windfall tax on energy producers could be used to fund support for these businesses. My hon. Friend the Member for Luton South (Rachel Hopkins) was exactly right to say that the Government’s approach is low investment, low pay and low growth. The Government are putting up tax because they have failed to grow the economy. My right hon. Friend the Member for Hayes and Harlington (John McDonnell) spoke of his concerns about the impact that this will have on pensioners, reminding us that we must never forget the most vulnerable in society. The Government must do more on this. My hon. Friend the Member for Warwick and Leamington (Matt Western) spoke about how families are trying to make ends meet.
I also listened closely to the speeches of the hon. Members for South Dorset (Richard Drax), for Redcar (Jacob Young), for Peterborough (Paul Bristow), for Rother Valley (Alexander Stafford), for Bury North (James Daly) and for West Bromwich West (Shaun Bailey), as well as those of the hon. Members for Gordon (Richard Thomson) and for North East Fife (Wendy Chamberlain). The hon. Member for Peterborough spoke about the concerns of his constituents about the cost of energy. I would just say to him: does he really think the Government are doing enough, or does he think the Chancellor will have to come back to this House with more support?
This Bill, as we have heard, increases the annual national insurance thresholds for employees and for the self-employed from July 2022. As my hon. Friend the Member for Ealing North (James Murray) said, we will not oppose the Bill, as any help for people facing the national insurance rise in just a few weeks is welcome. It is rare that we debate tax legislation so soon after a Budget or spring statement, but the Bill stems directly from the spring statement that the Chancellor made yesterday.
I am sorry to say that the spring statement failed to match the scale of the challenge that our country and our economy face. Yesterday, the Office for Budget Responsibility said that we are facing
“the biggest fall in living standards”
since records began in the 1950s. It forecast that living wages will fall by 2.1% this year and 1.2% the year after. It also confirmed that living standards will not return to pre-pandemic levels until 2024-25. Millions of families around the country are feeling that already with high food, energy and fuel bills. They are looking at the bills that they must pay in the coming weeks and at their wages, which are failing to keep up with inflation, and they are simply wondering how they will make ends meet.
Yesterday, we hoped for a statement from the Chancellor that recognised the scale of the challenge and took real action to reduce energy bills, such as by leveraging a windfall tax on the record profits of the oil and gas producers, as the Opposition have proposed, or by finally scrapping his tax on jobs and on workers—his national insurance increase. We were disappointed on both fronts. He did not take the opportunity to tax the oil and gas giants for whom the crisis has been, in their own words, a “cash machine”, nor did he have the courage to drop his national insurance increase in full.
Instead, in the Bill, we are left with a half measure from a Chancellor who gives with one hand and takes with the other. Let us be clear: he is no tax-cutting Chancellor; he is a tax-raising Chancellor who is increasing the tax burden to the highest level since 1949. The burden is higher after yesterday’s spring statement than it was before. The OBR confirmed yesterday that £24 billion of additional tax rises are about to hit this year. As it made clear, the Chancellor has reversed only about a sixth of the tax rises that he has announced since he took the job, which means that he will still take £6 in tax for every £1 he is giving back.
As the IFS said, even after the changes announced yesterday, almost all workers will be paying more tax on their earnings in 2025 than they would have been without the Chancellor’s increases. Let us be clear: the national insurance increase is a tax on people who work. He is raising taxes on millions in the middle, but where is the increased tax contribution from the wealthiest in society? A landlord with a large number of properties will not be paying more in taxes, but their tenants will; someone with significant income from buying and selling stocks and shares will not pay any more tax; and the national insurance rise is also going ahead in full for more than 1 million employers who do not benefit from the employment allowance. It is a tax hike on jobs, which will ultimately be passed on to workers through lower wages and higher prices.
When the Chancellor first announced the national insurance increase, he said that it would pay for social care. As is typical of him, however, all was not what it seemed, because the Government then said that the money would go to tackling the NHS backlog instead. Six months later, there is still no plan to fix the social care system or tackle growing NHS waiting lists. After a decade of Tory mismanagement, the NHS went into the pandemic with record waiting lists and staff shortages of 100,000. After yesterday, however, we can be less confident than ever that the tax rise will ever make it into our health and care system. If the tax was really for the NHS, yesterday’s announcement would mean that it now faces a £6 billion cut; I assume that that is what the Government plan. Perhaps it would have been spent on making up the £11.8 billion of hard-working people’s money that has been lost to fraud and error under the Chancellor, which is close to the amount that he originally hoped to raise with the national insurance rise.
As I said in September, this is tax rise without a plan. Politics is about choices and Labour would not have made that choice. Yesterday was the Chancellor’s last chance to stop the national insurance increase before it comes into effect in two weeks. He did not take that chance. He is pressing ahead with a tax rise on workers and businesses, even as the cost of living crisis spirals out of control, prices increase and real wages fall, and the Government still refuse to take proper action to help people with soaring energy bills. This Bill cannot face that reality.
The Chancellor wants the British people not to notice that he is putting up their taxes at the worst possible moment, but they are smarter than that. They will see through the smoke and mirrors—his cynical attempt to give the impression of a tax cut just before the next election. He is still increasing their taxes and leaving families and businesses to fend for themselves in the middle of a cost of living crisis. That is the reality of the spring statement and the reality of the Bill.
The Financial Secretary to the Treasury (Lucy Frazer)
It is a privilege to close this debate on behalf of the Government. We have heard many excellent speeches from both sides of the House today and I thank all hon. Members for their contributions. Before I address their points, I will remind the House of the Bill’s purpose.
The Bill does three things: it cuts taxes to ensure that people have immediate help with the cost of living; it creates better conditions to enable businesses to invest and grow; and it ensures that people keep more of what they earn for years to come. The Bill makes changes to the national insurance contributions system, which will make it easier for households to manage their finances at this difficult time by putting billions of pounds back into their pockets.
As we have heard, the Bill has two main measures. First, it will increase the NICs primary threshold and the NICs lower profits limit to £12,750 from July. As my hon. Friend the Member for South Leicestershire (Alberto Costa) said, it is the largest single personal tax cut in a decade. It represents a £6 billion personal tax cut for 30 million people across the UK. In addition, almost 2 million people will be taken out of paying class 1 NICs, class 4 NICs, and the health and social care levy entirely.
Some hon. Members might be asking why we cannot introduce these measures sooner. The simple answer is that we feel that the July implementation date strikes the right balance and allows employers and payroll software firms to adapt to significant changes. My hon. Friend the Member for West Bromwich West (Shaun Bailey) highlighted the importance of updating HMRC’s guidance.
Secondly, the Bill seeks to alleviate some of the pressures caused by the rising cost of living on those who earn low amounts and who work for themselves. This measure will benefit half a million self-employed people by saving them up to £165 a year. As the Chief Secretary to the Treasury has already outlined, removing class 2 NICs from this group of low-earning self-employed workers will not prevent them from building their eligibility to the state pension and other contributory benefits.
I will now turn to some of the points raised during the debate by right hon. and hon. Members. The hon. Member for Ealing North (James Murray) made a few points and highlighted the tax burden. It is important to remember, however, the context in which the legislation is being brought forward and the context in which previous choices were made. He will remember that the Chancellor saved many livelihoods with the £400 billion of support that he provided during the covid pandemic. He also asked how we compare with other countries and what other countries are doing at this time. I inform him that the new tax to GDP ratio will still mean that we are in the middle of the pack internationally and lower than Germany, France and Italy.
The hon. Gentleman and the hon. Member for Warwick and Leamington (Matt Western) asked why we have not brought in a windfall tax on oil and gas companies. Many Conservative Members pointed out the answers to that. First, it is a short-term measure and we are bringing in long-term measures that will withstand the future. Secondly, we need those companies to invest in the future to ensure that we have energy security and that we transition to more renewable energy sources. They also pay more taxes already—40p in the pound not 19p in the pound as other companies do—and they have already invested, by way of taxation, £375 billion in production taxes.
Matt Western
I understand the point, and none of us really wants to see short-term measures, but in difficult times such as those we are in they are sometimes needed. The windfall tax is short term, of course, but is not the 5p fuel duty cut also short term?
Lucy Frazer
As we know, there is energy price volatility in that the price of oil and gas will be going up and down, which is why the Chancellor has put in the measure for a 12-month period, but I should point out that that builds on the 12th consecutive year of fuel duty freezes.
Lucy Frazer
I am going to carry on, because there are a lot of points to which I would like to respond and I have limited time.
My hon. Friend the Member for South Dorset (Richard Drax) made a very powerful speech about freedom, recognising the impact of global challenges. He mentioned the armed forces, and I would like to reassure him that last year’s integrated review was accompanied by the largest cash increase in the defence budget since the cold war, with an additional £24 billion.
The hon. Member for Gordon (Richard Thomson) asked why the Chancellor is not using his £30 billion headroom. I would like to point out that the OBR has said that there is “unusually high uncertainty” in relation to the outlook, and the OBR has also said that the headroom the Chancellor has kept is the same as, or indeed less, than that of previous Chancellors. That is important because, if there is a 1.3% increase in interest rates, that will totally wipe out the headroom the Chancellor has given himself. We are already looking at £83 billion being paid in interest next year. Those of us on the Government Benches think we need to be fiscally responsible in the way we deal with our taxpayers’ money.
The hon. Member also said that to increase the national insurance contributions threshold as we are doing was not the right way to go. I would like to point out that Martin Lewis has said on Twitter:
“This is the big one. Increasing the National Insurance threshold so it now matches Income tax from July.”
He said various other things, and then he said, “Good call”.
My hon. Friend the Member for Redcar (Jacob Young) recognised that there are no easy choices. He reminded us of Labour’s record on the economy, which reminded me that the shadow Chancellor had put forward a total of £170 billion of uncosted spending proposals just by September last year, and she has refused to rule out hiking up income taxes.
Stephen Timms
The Minister mentioned Martin Lewis, and I wonder if she could provide the information that the Chief Secretary said she might be able to give in winding up this debate about the effect of this national insurance measure on people claiming universal credit. Martin Lewis has made the point that they will lose 55% of the £330 a year benefit. Will she confirm if that is correct?
Lucy Frazer
I was going to come back to that point, but I am very happy to deal with it now. My right hon. Friend the Chief Secretary is right that an individual may be affected by the taper, but will be better off overall as a result of the change. If they are earning below the work allowance, they will get the full benefit. It is important to point out the changes we have already made for those on universal credit. As a result of those changes, 1.7 million households will benefit from the taper rate change, which is £1,000 of additional income for them.
The hon. Member for St Helens South and Whiston (Ms Rimmer) talked about the energy crisis. She will know the measures we have already put in, including the £9 billion of further support, with the £350 that people will get over the course of this year. She mentioned businesses in her constituency, and I hope they will welcome the increase to the employment allowance that we have announced.
I am very pleased to hear how my hon. Friend the Member for Peterborough (Paul Bristow), my almost constituency neighbour, is engaging with his constituents, and that the Oxcart pub welcomes our business rate cuts.
The hon. Member for North East Fife (Wendy Chamberlain) talked about poverty. I am very proud that, if we look at the past 10 years of this Government, there have been about 1.3 million fewer people in poverty. She also talked about pensioners, and this the Conservative Government have consistently supported pensioners. Through the triple lock, we have seen an increase in state pension of 25%—that would be £2,050—since 2011.
My hon. Friend the Member for Rother Valley (Alexander Stafford) made a very passionate speech, rightly recognising the global macroeconomic position. He is absolutely right to talk about the importance of getting people into work, a point that was also made by other hon. Members. I am very pleased that he has held his first Rother Valley jobs fair, and we are getting people into work through the plan for jobs that the Chancellor has set out—whether through restart and kickstart or with the benefit of work coaches.
The hon. Member for Luton South (Rachel Hopkins) talked about low growth and low pay, but I wonder if she is aware that ours was the fastest growing economy in the G7 last year, according to the IMF. I wonder whether she heard the Chancellor’s statement in which he set out a tax plan that focuses on growth. It focuses on what we will do to support businesses in the way of capital, people and ideas. He has already highlighted that he is looking forward to cutting tax rates on businesses, so that they can further invest, in his autumn Budget.
A number of Members talked about how the OBR has said that the package only reverses
“around a sixth of the net tax rises”
that the Chancellor has announced overall. I just want to inform them that the tax plan comes on top of the almost £46 billion in tax cuts that the Government have introduced for this year and next. That includes the super deduction worth £25 billion across two years, business rates and VAT support worth £14.5 billion across two years, and fuel and alcohol duty freezes worth £4.5 billion across two years. These important tax cuts were not included in the OBR’s analysis, which just focuses on the final year of the forecast period.
My hon. Friend the Member for Bury North (James Daly) was right to say that this is not the end of the journey for the Chancellor, a point also made by my hon. Friend the Member for West Bromwich West (Shaun Bailey), who mentioned that this is part of a broader package. The Chancellor has a plan to help families with the cost of living, creating the conditions for private sector-led growth and sharing the proceeds of growth fairly.
The right hon. Member for Hayes and Harlington (John McDonnell) talked about the importance of helping those on low incomes. I absolutely agree with him that that is important, but we are doing it—whether through the universal credit taper rate, raising the national living wage, the 70% cut in taxes that we announced yesterday and are legislating for today, the £9 billion of energy support or increasing the generosity of the local housing allowance. All those measures will support people on low incomes. He made an interesting point about public sector pay, which I noted conflicted with a point the shadow Chancellor, the hon. Member for Leeds West (Rachel Reeves), made on the radio this morning when she recognised that negotiations for public sector pay were independent decisions made by pay review boards.
The measures in the Bill will ensure that our national insurance system plays its part in relieving some of the challenges facing families right now as a result of the cost of living crisis. Of course, we have not introduced them lightly. We are conscious that in the next financial year we are forecast to spend £83 billion in debt interest, the highest figure on record. In addition, while the Bill represents an important part of the Chancellor’s tax plan, it is just one element of it.
Yesterday, the Chancellor also announced steps to create the right conditions to enable our businesses to grow, highlighting some potential tax-cutting options for businesses, investment and innovation. He announced action to help to ensure workers see more of their hard-earned cash and a pledge to reduce the basic rate of income from 20p in the pound to 19p in the pound before the end of the Parliament, representing the first such cut in 16 years. Furthermore, the Chancellor announced help for motorists through the biggest cut to fuel duty rates ever, while for the next five years homeowners in Great Britain who have materials such as solar panels, heat pumps or insulation installed will pay zero VAT. He doubled the household support fund, which allows local authorities to distribute financial help to the vulnerable, so it stands at £1 billion.
Help with the cost of living, extra support for the vulnerable, delivering on our pledge to reform the tax system and measures to make sure work really pays all comes on top of the £400 billion of support we provided to individuals and businesses during the pandemic and the £20 billion we have already pledged to help with the cost of living. Let no one say that this Government do not stand by the people of this country. The Bill is yet more clear evidence of how we are making good on our promise to support our citizens through challenging times. That is why I commend it to the House.
National Insurance Contributions (Increase of Thresholds) Bill
Thursday 24th March 2022
(2 years, 8 months ago)
Commons ChamberRead Full debate National Insurance Contributions (Increase of Thresholds) Act 2022 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Committee of the whole House Amendments as at 24 March 2022 - (24 Mar 2022)
Wera Hobhouse
I beg to move amendment 1, page 1, line 8, leave out “July” and insert “April”.
This amendment would bring forward the date of implementation of the increase in thresholds from 6th July 2022 to 6th April 2022.
The Second Deputy Chairman of Ways and Means (Mr Nigel Evans)
With this it will be convenient to discuss the following:
Clause stand part.
Clauses 2 to 6 stand part.
New clause 1—Impact of Act on low pay and poverty—
“(1) The provisions of this Act may come into force only if the Government has first laid before the House of Commons and published a report in accordance with this section.
(2) The report must assess the expected impact of the provisions of this Act on—
(a) low pay, and
(b) poverty.
(3) The report must also assess the merits of the provisions of the Act against other ways of reducing low pay and poverty.”
New clause 2—Report on effects on Universal Credit claimants—
“(1) The Treasury must prepare a report on the forecast effects of the provisions of this Act on—
(a) the net incomes of, and
(b) the Universal Credit payments made to
in-work Universal Credit claimants who pay National Insurance.
(2) The report must forecast the estimated change in expenditure on Universal Credit as a result of the provisions of this Act.
(3) The Chancellor of the Exchequer must lay the report before Parliament before the end of the period of 30 days beginning with the day on which this Act is passed.”
This new clause would require the Treasury to publish forecasts of the effects of changes to National Insurance thresholds on Universal Credit recipients and total Universal Credit expenditure.
New clause 3—Report on effects of provisions of Act—
“(1) The Treasury must within six months of Royal Assent lay a report before Parliament on the impact of the provisions of this Act on disposable incomes.
(2) The report made under subsection (1) must also include an assessment of the effect on disposable incomes of the provisions of the Act if combined with a reduction in National Insurance rates of 1.25%.”
This new clause would require the publication of a report within 6 months of the Act receiving Royal Assent assessing the effect on disposable incomes.
New clause 4—Report on effects of provisions of Act (No. 2)—
“(1) The Treasury must within six months of Royal Assent lay a report before Parliament considering the impact of the provisions of this Act on the levels of taxation of—
(a) earned and
(b) unearned income.
(2) The report made under subsection (1) must also include an assessment of the effect on the levels of taxation of—
(a) earned and
(b) unearned income of the provisions of the Act if combined with a reduction in the basic rate of income tax from 20% to 19%.”
This new clause would require the publication of a report within 6 months of the Act receiving Royal Assent assessing the effect on earned and unearned income.
Wera Hobhouse
I rise to speak to amendment 1, tabled in my name and that of my hon. Friend the Member for North East Fife (Wendy Chamberlain).
The increase in the national insurance thresholds for employees contained in the Bill will come into effect only in July this year, but the national insurance rise will commence in April—three months when employees will be facing the 1.25% increase in national insurance contribution payments without any protection through a higher tax-free allowance, and three months in which families will feel the full force of the Chancellor’s tax hike without any cushioning from the rising of the national insurance threshold.
Jacob Young
Just to correct the hon. Lady slightly, I believe the threshold will still rise by £300 in April, as was the Government’s original plan. The further increase will come in July.
Wera Hobhouse
I thank the hon. Gentleman for those comments, but there is still a gap and the amendment seeks to close it.
The three-month delay will cost working families £2.1 billion and add to their distress right in the middle of the biggest cost of living crisis since the 1950s. Let us remember that the rise in national insurance contributions will hit all working families. A nurse or a midwife on an average salary will see their tax bill rise by £310 next year. A care home worker will pay around £140 more and ambulance staff will see a £420 increase.
Households are facing the biggest drop in living standards for 70 years through a combination of soaring energy costs and Conservative Government tax hikes. The typical family will see a hit of £1,100 next year, according to the Resolution Foundation. Absolute poverty is set to rise by 1.3 million people, including 500,000 children. Never before has Britain seen such a rise outside a recession. The cost of living crisis is biting right now and hitting families today. That is why the Chancellor should implement the changes in the Bill not from July, but from April, as that would save working families £2.1 billion in tax payments.
New clause 3 is tabled in my name and that of my hon. Friend the Member for North East Fife. It would require the Government to produce a report to look at the impact of the 1.25% increase in national insurance contributions on disposable incomes. It would give a true picture of what working families are facing. The statement yesterday hid the true facts. The Resolution Foundation has stated:
“Considering all income tax changes to thresholds and rates announced…Of the 31 million people in work, around 27 million (seven in eight workers) will pay more in income tax and NI in 2024-25.”
Instead, the Government could have cut VAT by 2.75%. That is what the Liberal Democrats would do. Such a measure would help everyone and shield our constituents from the worst of the increased costs. It would put money back into their pockets and genuinely shield those on middle and lower incomes the most. With a floundering economy we need people to spend money on our high streets, which would boost our local economies. A cut to VAT would give an immediate boost to every household, and also help us in the long term.
Mr Deputy Speaker, new clause 4 would require the Government to produce a report on taxation on earned income versus unearned income. The income tax change that will come into effect in 2024 does not benefit people equally. Workers will not benefit from that cut, which instead will benefit those with unearned income from investments, such as landlords. If someone is wealthy enough to get their income from savings and properties they will pay less tax, while the least well-off continue to pay more and more. In response to yesterday’s Budget, the Institute for Fiscal Studies stated:
“What is the possible justification for cutting income tax rate while raising NI rate?...Drives further wedge between taxation of unearned income and earned income.”
It benefits
“those living off rents at the expense of workers.”
Let us look at what the Government have announced and at the inequalities that creates. I hope all Members of the House will support my amendments, to see off the worst from the Chancellor’s disappointing statement yesterday.
The Second Deputy Chairman of Ways and Means (Mr Nigel Evans)
Before I call Sarah Atherton, while I am sitting here I am acting as Chair of the Committee, rather than as Deputy Speaker. It is only a technicality, but we should get it right.
Sarah Atherton
Thank you, Chair. I wish to speak against amendment 1, in the name of the hon. Member for North East Fife (Wendy Chamberlain), and against new clause 1, in the name of the right hon. Member for Hayes and Harlington (John McDonnell). Amendment 1 is simply impractical. Employers, HMRC and payroll systems do not have time to bring these measures into effect by April. Our own pay body, IPSA, could not make these changes in time, let alone small and medium-sized enterprises and bigger companies. July is the earliest that can be done, and the Government should be commended on the pace with which the change will be universally introduced, bearing in mind that we will be midway through the financial year. The Government understand the needs of constituents. The cost of living challenge is hitting now, post-covid, and the Government are acting with haste.
My opposition to new clause 1 is similar: timing. We should not postpone this measure by undertaking impact reports that would cause unnecessary delays for families who need support with the cost of living as soon as possible. Wrexham has more than the Welsh and UK average of lower income households, and under the Welsh Labour Administration, for the past 22 years those numbers have been increasing, with more child poverty and more struggling households. We all accept that the situation has not been helped by the global pandemic, which none of us foresaw. Nor did we foresee the war on the fringes of Europe.
This is not strictly within the remit of the Bill, but I concur with my hon. Friend the Member for South Dorset (Richard Drax) in his call to increase defence spending.
Clive Efford (Eltham) (Lab)
I want to speak to new clause 2. Yesterday, I was shocked by the Chancellor’s response to people’s entreaties of him to do something more for those on low incomes. As I pointed out to him in an intervention, there is an anomaly—I hope it is one—that the Government will want to put right: when those on universal credit who pay national insurance have their threshold raised to £12,500, the £330 that they gain as a consequence will be subject to the 55% taper. That means that they will not get the full saving. Money is being clawed back by the Government from some of the poorest workers in the country. That cannot be right.
Last year, the Chancellor of the Exchequer announced the reduction in the taper, which was very welcome. He announced a number of measures that increased the incomes of the poor, although we should remember that he took away the £20 a week uprating of universal credit. Those people are still going to be better off as a result of the changes yesterday, but the ones on universal credit who I have just referred to will be less well off than they were anticipating ahead of yesterday’s statement. How can that be? The poorest workers in the country number 2.3 million; I suspect that what the Government claw back from them will mean hundreds of millions going back to the Treasury. That cannot be fair and it cannot be right. By my calculation—I will stand corrected if I am wrong—such people will gain £330, of which they will lose £171, so the actual gain will be in the region of £159. That cannot be right.
My new clause 2 would require the Government to confirm in a report whether my fears and estimates are right that people on universal credit who pay national insurance will lose roughly half the money that they gain. Subsection (2) aims to find out how much the Government will gain from some of the poorest workers in the country because of the changes. If we highlight how much that is, I hope that they will attempt to do something about it and compensate such people for their loss. As we have heard all too often in this Chamber, people on low incomes in this country—families, in particular—have to make choices between feeding their children, clothing their children and switching on the heating, and about what food they buy. When people are living on the margins of, or in, extreme poverty, sums of money that may sound small are extremely significant. How did we manage to have a statement yesterday that clawed money back from such people?
Subsection (3) calls on the Chancellor to deliver that report to Parliament in 30 days. It cannot be right that such people are missing out in this way. It must be an oversight by the Government. It would be an extremely callous move if they actually knew that, as a consequence of the national insurance threshold being lifted, people would miss out in this way. I would be interested to hear from the Government, without delay, exactly who misses out, if they do at all, and how much the Government will benefit from it, if they do.
John McDonnell
I tabled new clause 1 because, from now on, I do not think that the House should discuss any legislation that has financial consequences without it understanding or at least having information about the effect on poverty and low pay. I would have liked that information for this Bill, although I can understand why we do not have it today. However, in future, the Government should lay a report before the House that explains the expected impact on low pay and poverty of any piece of legislation and assesses the effectiveness of its provisions.
The nature of this debate so far has demonstrated a lack of appreciation or understanding—and certainly a lack of agreement—about the objective realities of what is happening. Many have quoted the comments of the Institute for Fiscal Studies and the Resolution Foundation, but some of this is about hard facts, so let me put on record again the situation that we face. At the moment, 4.3 million children and 2 million pensioners in the UK live in poverty. Overall, 14 million people live in poverty, and that was before the cost of living crisis hit us. A report from a UN rapporteur described people living not just in severe poverty, but in “destitution”. According to analysis today from the Resolution Foundation, 1.3 million more people will be living in poverty.
One reason I am asking for such a report is so that we can ask simple questions of the Treasury. What forecast have Her Majesty’s Treasury and the Department for Work and Pensions, or the OBR, made of how many children, pensioners and people in the UK will be in poverty by the end of 2022-23?
Yesterday the shadow Chancellor asked the Chancellor how many pensioners and children would be pushed into poverty by the failure to uprate benefits and pensions in line with inflation, and the Chancellor failed to give any answer. It would be useful to have an answer today. Child poverty is already up by more than 500,000 since 2010, and it is interesting to note that most of those children—more than 60%—live in households in which one adult works. That, too, calls into question the levels of pay in this country.
The Joseph Rowntree Foundation estimates that the uprating of just 3.1% will drag more than 400,000 more people into poverty, and as we have pointed out time and again during the debate, inflation is forecast to rise over the year to between 7% and 10%. Has the Treasury analysis come up with the same figure as the foundation, or a different one? If the figure is different, we would like to know why, and on what basis.
The other issue raised in the new clause is low pay. A total of 4.8 million workers earn less than the UK real living wage of £9.90 an hour, or £11.05 in London. The rise in the minimum wage this year—a 6% rise to £9.50 —still falls short of the Living Wage Foundation’s real living wage, and, given that forecast of an inflation rate between 7% and 10%, it is a real-terms pay cut. According to the Office for Budget Responsibility:
“Real incomes have been stagnant since the start of 2019 and this is now expected to continue over the next few years”.
The OBR went on to say that we were about to see the largest fall in incomes on record:
“With inflation outpacing growth in nominal earnings and net taxes due to rise in April, real livings standards are set to fall by 2.2 per cent in 2022-23—their largest financial year fall on record”.
A presentation of analysis by the Institute for Fiscal Studies took place this morning. According to the IFS, public sector pay has fallen by 3% in real terms in the last year, and is 2% lower in real terms than it was 12 years ago. The Department for Education’s average pay offer to teachers is 4%, and the fact that inflation is so much higher has obviously hit their wage levels. There is a group among the workforce who are being hit particularly hard by the Government’s changed arrangements relating to loans for tuition fees that they incurred while they were studying, and who will again be impacted severely by what is almost, in effect, an additional income tax.
Paul Johnson of the Institute for Fiscal Studies expressed incredulity—as have many of us—that the Government had done nothing for those on benefits or for pensioners. He pointed out that, according to the OBR, we are seeing the biggest fall in incomes since 1956, and that the inflation rate experienced by poorer households is even higher than the average. He said that it was “hard to understand” the Government’s “lack of action” on benefits. That lack of understanding of the Government’s approach is the reason for my new clause. I think that in future when we are debating issues such as this—Government measures involving public finances, benefits and wage levels—we will at least need to have a detailed report before us which explains the consequences of measures relating to low pay and poverty.
In the new clause, I have also asked the Government to assess alternative measures that they could take, and to provide an analysis of why those measures were not taken or why they might be brought to bear in the future if not immediately. All I am pleading for is a rational debate based on the widest possible information being provided to this House when we consider measures like this, so that we know whether the decisions we are taking will improve or undermine the standing of our constituents when it comes to low pay and poverty.
Matt Rodda
I am grateful for the opportunity to speak in this important debate this afternoon. I would also like to thank my right hon. Friend the Member for Hayes and Harlington (John McDonnell) and my hon. Friend the Member for Eltham (Clive Efford) for their new clauses, which I will speak to. I want to take this opportunity to talk about two groups of people, both of which are under real pressure due to the cost of living crisis. Those two groups are families in work, many of whom are on universal credit, and pensioners, many of whom have partners on universal credit.
First, I would like to give a bit of context. It is clear that we now face an unprecedented cost of living crisis due to soaring food and energy prices. Working families and pensioners are about to be confronted with the frightening prospect of the kind of cut to their standard of living not seen since the 1970s. Recent events in Ukraine have been shocking. However, the cost of living crisis predates Putin’s awful war and his vicious attack on the Ukrainian people. It was clear in the autumn that food and fuel prices were starting to rise steeply, but the Government have actually made matters worse despite those warning signs.
The Prime Minister and the Chancellor have made a series of choices that have made things worse. They decided to increase national insurance. They also decided to break the triple lock and failed to increase the state pension in line with inflation. To make matters even worse, they decided not to introduce a windfall tax, even when it was clear that such an approach would have provided cash to ease bills for families and pensioners. However, they did not have to take this damaging approach. They made a choice. They took the decision to act in this way, knowing full well the impact their policies would have. I contrast this with the approach set out by the shadow Chancellor, my hon. Friend the Member for Leeds West (Rachel Reeves), whose windfall tax proposals would have helped those struggling to get by with a payment of up to £600 per household. Sadly, people across the country will now pay the price for the choices made by the Government.
I suggest to those on the Treasury Bench that it is worth looking at what is being said about the spring statement in the media and by commentators. For example, the chief executive of the Resolution Foundation said that it was hard to make sense of the spring statement. With just a hint of irony, he said:
“This package only makes sense if your only test for policy choices was can you prove you’re a tax cutter and you’ve already announced a rise in national insurance”.
The FT was somewhat less diplomatic. It described the spring statement with these words:
“Chancellor builds war chest for 2024 but offers minimal help for families reeling from increasing household bills”.
These choices will all have a huge impact on local communities up and down the country. I have been thinking about many of my own residents in Reading and Woodley, such as people running small businesses, teaching assistants, nurses, IT consultants, residents who work in retail and manufacturing, and parents who are under real pressure to pay for the weekly shop. The Government’s policies will also hit those who are a little bit older, such as pensioners who are struggling with the high cost of heating in an area with many terraced houses that are difficult to insulate.
Even at this late stage, I ask the Chancellor and those on the Treasury Bench to reconsider their approach. There is no doubt that this country faces a real cost of living crisis. That has been clear since the autumn. The Chancellor and the Prime Minister had the opportunity to look at a number of policies, including a windfall tax on the energy companies, which would have offered up to £600 of much-needed help. Sadly, they chose to impose extra costs on families and pensioners at the worst possible time.
Richard Thomson
The SNP is generally supportive of all the amendments that have been tabled, and I echo the comments of the right hon. Member for Hayes and Harlington (John McDonnell), who made a number of points about the importance of understanding the intended purpose and impact of legislation before it takes effect. I made that point ad nauseam during the passage of two Finance Bills, but I keep returning to it because it is important that we understand what we are doing and that we avoid, as far as possible, the law of unintended consequences.
Quite apart from the evidence base they would provide for legislative scrutiny, the amendments might provide a corrective to the poor policy choices that Ministers have made in recent times.
James Murray
As I said on Second Reading, we will support the Bill, but I thank my right hon. Friend the Member for Hayes and Harlington (John McDonnell) and my hon. Friends the Members for Reading East (Matt Rodda) and for Eltham (Clive Efford) for their important points about the impact the Bill will have. We recognise that raising the thresholds for national insurance contributions has benefits, and we welcome any help for people facing the Chancellor’s national insurance hike in April.
The explanatory notes explain that the increase to the primary thresholds for class 1 national insurance contributions and the lower profits limit for class 4 contributions will require changes to the systems of employers and HMRC, including those designed to facilitate pay-as-you-earn. The explanatory notes also explain that the Bill is being fast-tracked to give employers and HMRC as much time as possible to implement the changes, helping to make sure people are not overtaxed, and they confirm that the speed with which the Bill is going through Parliament means, unsurprisingly, there has been no consultation.
Although it is, of course, right to give employers and HMRC as much time as possible, the explanatory notes underline that the changes are being made very late in the day. Indeed, as we will come to later, the decision to implement this change from 6 July rather than 6 April reflects the last-minute nature of the Chancellor’s proposals. This approach to legislation does not inspire confidence that he is in control and has a well thought-through package to help people who are struggling to make ends meet. Indeed, it gives the impression of a Chancellor who has made the wrong choices and is now scrabbling at the eleventh hour to limit the damage.
Of course, according to the Chancellor, he only started work yesterday. He seemed proud to claim ahead of the spring statement that “the work starts today,” but the truth is that his choices have been hitting working people for far longer, and the Conservatives’ choices have been hitting our country for 12 years.
Clause 1 amends the Social Security (Contributions) Regulations 2001 to align the primary threshold for class 1 national insurance contributions with the income tax personal allowance. As I said, we support this measure as we recognise that raising the thresholds for national insurance contributions has benefits, and we welcome any help for people facing the Chancellor’s national insurance hike in April. However, this clause draws attention to the fact that the change to the primary threshold will not come into force until 6 July 2022. Indeed, subsection (4) explicitly states that the changes made to the primary threshold
“do not affect any liability to primary Class 1 contributions for any tax week commencing before that date”.
There will therefore be three months during which the Chancellor’s hike in national insurance will be in place, and hitting people’s pockets, and the changes to the primary threshold will not yet have taken effect. As I said a few moments ago, people looking at this will conclude that we have a Chancellor who knows he has made the wrong choices and is now scrambling around at the eleventh hour to limit the damage. So I wish to press the Minister on a few points about how and when the decision was taken to implement the threshold increase from July.
First, I have a simple question: when was a decision taken by the Chancellor to raise the threshold? Did he wake up on 23 March, the day he says was his first day of work, and make the decision then? Or had a policy decision been taken by the Treasury earlier, meaning that it could have been implemented earlier too? I realise the Minister may respond by trying to claim that announcements about changes to tax levels are made only at fiscal events, but that is not the case; the national insurance increase coming in April was announced by way of an unscheduled statement by the Prime Minister in September last year, and the arising legislation was pushed through Parliament in a day one week later.
If the Chancellor had decided to raise thresholds earlier this month, or even earlier this year, could his decision not have been announced and legislated for sooner? If that had been the case, these new thresholds could be in place from April, or at some point sooner than July, providing at least some extra help for people in the critical three months ahead when NI is being hiked and energy bills are set to soar. There are only two explanations possible for what has happened: either the Chancellor made the decision about thresholds only on the morning of 23 March, or he made it earlier, yet sat on it, when he could have acted to help people sooner. I would like the Minister to tell me which account is true. Given that the Bill introduces the threshold increase from 6 July, I would also be grateful if the Minister explained what consideration was given to backdating the increase to April. Is that an option that the Chancellor considered? If so, why was it discounted, and if it was not considered, why not?
Clause 2 raises the lower profits limit for class 4 contributions and ultimately aligns it with the income tax personal allowance. As before, we support this measure as we recognise that raising the thresholds for national insurance contributions has benefits, and we welcome any help for people facing the Chancellor’s NI tax hike in April. I note that the changes to the threshold for self-employed people’s class 4 contributions take effect in two stages. First, the lower profits limit is raised from £9,880 to £11,908 from April 2022, and then it is raised again to £12,570 in April 2023. The figure of £11,908 represents, as far as I can tell, a blended average for 2022-23 of the lower profits limit continuing at the level previously intended until July, and then being raised to £12,570 for the remaining months of the year. As with class 1 contributions, we will therefore have three months during which the Chancellor’s NI hike will be in place and hitting people’s pockets, yet the changes to the threshold will not yet have taken effect. I therefore ask the Minister again: are people missing out because the Chancellor made the decision about thresholds only on the morning of 23 March, or did he make that decision earlier, yet sat on it, when he could have acted to help people sooner?
Clause 3 gives the Treasury the power to make regulations to align the threshold for paying class 2 NICs with the lower profits limit. This clause also enables the Treasury to make sure that self-employed people with profits between the small profit threshold and the lower profits limit will continue to be able to build up NI credits but will not pay any class 2 national insurance contributions. As with the other changes in this Bill, we support this measure as we recognise the benefits of raising the thresholds. I would like, however, to press the Minister on two technical points that arise from clause 3. First, why are the changes to class 2 contributions to be made by way of regulations, rather than being implemented through this Bill? I note that clause 5(3) seems to make it clear that regulations arising from clause 3 will, as they would amend Acts of Parliament, have to be laid before and approved by a resolution of each House. Will the Minister explain why the detail on clause 3 will therefore be decided a later stage, and not with the class 1 and class 4 changes today? Secondly, clause 3(2)(b) makes it clear that the changes to class 2 contributions may be made to have retrospective provision from 6 April 2022. So why is it possible to backdate changes to class 2 contributions to April 2022, yet changes to class 1 and class 4 contributions can take effect only from July?
The remaining clauses include clause 4, which makes transitional and consequential provisions that are reasonable in the context of the Bill; clause 5, on which I have touched, relating to the making of regulations; and clause 6, on the short title. Before I close my speech, I should point out that nothing in those clauses addresses the secondary threshold for employers. We have warned since the national insurance hike was introduced that it would be a tax on working people and their jobs, yet none of the Bill’s clauses address the level at which employers will have to pay the raised rate of national insurance. We know from the Office of Budget Responsibility that this is not just an issue for employers who want to create jobs; the rise in employers’ national insurance contributions will also hit workers through a double whammy, as the increase is passed on by way of lower wages and higher prices.
Lucy Frazer
I wish first to address amendment 1, which was tabled by the hon. Member for Bath (Wera Hobhouse) and would bring forward to 6 April the increase to the primary threshold that is introduced in clause 1. Of course the Government want to help people with the cost of living as quickly as possible, which is why the Chancellor introduced a number of measures immediately, including the cutting of fuel duty, which came into force at 6 pm last night. However, it was not possible to deliver the increase to the primary threshold from 6 April, which is in less than two weeks’ time.
The Government are implementing the change as early as possible, from 6 July. It is not possible for the majority of software and payroll providers to deliver the measure for April. Its delivery to an April timeline would see millions of individuals paying the incorrect amount of NICs at the start of the tax year, in just two weeks’ time. There would then be an additional administrative burden on employers, who would have to manually re-run the payroll once the software was ready. As my hon. Friend the Member for Wrexham (Sarah Atherton) said, the earliest that we can deliver the policy and it can be implemented by all software developers is July. That will avoid millions of taxpayers having to make manual claims for refunds.
Overall, the delivery timetable strikes the important balance between ensuring that individuals see the benefits of the increase as early as possible and allowing employers and payroll-software providers sufficient time to update and test their systems so that the change is delivered smoothly and individuals can enjoy the benefits at the same time. I hope the hon. Member for Bath will withdraw her amendment for the reasons I have outlined.
Let me turn to the new clauses in combination, because they address similar matters. On the points that Members made about poverty, if we look back at the past 10 years, we see that around 1.3 million fewer people are living in poverty, half a million fewer children are growing up in workless households and hundreds of thousands fewer children are living in poverty.
John McDonnell
I do not want the Minister to miss the point of new clause 1. I understand why she is setting out the statistics as she understands them, but they are contested. Nevertheless, the point I was trying to make with my new clause is that the Government should always publish a full report on their assessment of the implications of their legislation for both low pay and poverty, and that that report should include their assessment of the other options available to them that they could have taken. It is a simple measure that I hope would apply to all Governments of whatever political colour.
Lucy Frazer
I was going to come to the distributional analysis of the spring statement. The analysis in the document “Impact on households: distributional analysis to accompany Spring Statement 2022” shows that
“government policy continues to be highly redistributive; in 2024-25, on average, households in the lowest income decile will receive over £4 in public spending for every £1 they pay in tax”.
It also shows that
“in 2024-25, the poorest 60% of households will receive more in public spending than they contribute in tax”
and that
“on average, the combined impact of personal tax and welfare decisions made since SR19 is progressive, placing the largest burden on higher-income households as a proportion of income.”
John McDonnell
I do not want to labour the point. I have read the analysis of the impact on households; it is always very helpful, but it does not address the issue of low pay and poverty, or other policy options that could be considered. I make the point for the future. I know it is impossible to address now, but I think such a report should be published automatically. If the Government do not publish it, maybe a report should be published by the OBR or some other body that we establish to enable that to happen.
Lucy Frazer
I recognise the point made by the right hon. Member and I will of course consider it for the future. Considering a variety of hypothetical scenarios is time-consuming, which is why that is not traditionally done, but I will take his point away and consider it further.
I reiterate some of the points we discussed on Second Reading only a moment ago about the impact of the measures on those in lower pay and on universal credit. As hon. Members know, there was an autumn Budget not very long ago, followed now by this spring statement. In the autumn Budget, the Chancellor started the journey of helping to support those on lower pay through the tax system. He announced the first tax cut on his journey to cut taxation—the cutting of the taper rate, which will put £1,000 into the pockets of those on universal credit.
Hon. Members will already know about the increase in the national living wage. They will have seen the £1 billion household support fund, which is helping people in all our constituencies, building on other measures that were announced at the autumn Budget. More recently, we have provided £9 billion in energy support. There is the increasing generosity of the local housing allowance for housing benefit and the holiday activities and food programme. The Chancellor’s plan for jobs—the Conservative plan—whether through the kickstart scheme, the restart scheme, work coaches or boot camps, is to ensure that, where people can get into work, they get into work, and they are upskilled so that they earn more for themselves.
On new clause 4, the increase to the primary threshold and the lower profits limit is a tax cut on earned income that will benefit almost 30 million working people.
Lucy Frazer
I will just finish this point; I will come back to the hon. Gentleman. We are introducing a tax cut for a typical employee that is worth more than £330 in the year from July 2022. The impact of the provisions in the Bill have already been published in a tax impact information note published on gov.uk, and the impact of the income tax basic rate cut will be published ahead of implementation in 2024.
The hon. Member for Bath raised a question about landlords. We have taken steps over several years to ensure that landlords pay a fair tax contribution.
In April 2016, we introduced a higher rate of stamp duty land tax for those purchasing additional properties, recognising that, although the private sector plays an important role in our housing market and people should be free to invest in buy-to-let properties, the purchase of additional properties can affect the ability of other people to get on to the property ladder. We also restricted finance cost relief so landlords no longer get relief at their marginal rate if they are a higher or additional rate taxpayer. Finally, we maintained the 8% higher rate of capital gains tax for landlords compared with the rate for other taxable gains.
Lucy Frazer
I am going to give way to the hon. Member for Eltham (Clive Efford) first. He is probably going to ask about the previous point.
Clive Efford
I am wondering whether the Minister missed new clause 2, because she did not address the problem. Yes, increases were introduced in the autumn Budget last year, but this year, people are getting less than they were anticipating due to the increase in the threshold of national insurance. People were being told yesterday that they should get an extra £330, but they will actually get less than half of that. What is the Government going to do about that? The Treasury is clawing back several hundred million pounds from some of the poorest workers in the country.
Lucy Frazer
I do not know whether the hon. Member was in the Chamber when the right hon. Member for East Ham (Stephen Timms) raised this point and I addressed it. He is right to point out that an individual may be affected by the taper, but overall they will be better off as a result of this change. If those people are earning below the work allowance, they will get the full benefit. I reiterate that the changes that we have already made mean that those who are on universal credit will benefit by £1,000 from the cut to the taper rate.
Wera Hobhouse
I accept that the Government might have done all sorts of other things to put restrictions on landlords, but would it not be interesting to know the difference between earned and unearned income in relation to the measure introduced by the Chancellor yesterday?
Lucy Frazer
As the hon. Member knows, the threshold increase will largely affect those who are working, because it is a tax that relates to working people, and the income tax cut that we have announced will, obviously, affect those who pay income tax.
The hon. Member for Ealing North (James Murray) made a number of points. He asked when the Chancellor decided that he would implement this change to the threshold. In considering a tax policy, it is not decided that something will be implemented on a particular day. A whole process needs to be followed, including ensuring that the relevant documents are put before the House. The hon. Member will be aware that that involves a Bill, an explanatory memorandum and a TIIN. He will know, because he will have heard the Chancellor and other Treasury Front Benchers say so on many occasions in the House, that the Chancellor has been considering for some time how he can help those who might be impacted by the cost of living issues that we currently face. It is appropriate, where measures are taken in relation to tax, that they are broadly taken at fiscal events.
The hon. Member also made a slightly contradictory point. He asked why we had not introduced the measure sooner, in March perhaps, and then suggested that it was being introduced too late because we were delaying it until July. He seemed to be criticising us both for not bringing it in earlier and for not giving him sufficient time to consider it, but I have mentioned all the things we need to do before introducing it in July.
The reason that the measures will be brought in through regulations is that we need to consult, including those who will be doing the payroll. The need to consult was one of the points made by the Low Incomes Tax Reform Group.
We have come to the end of what has been a useful Committee sitting that examined the detailed provisions of the Bill. The Bill seeks to align the threshold at which employees and the self-employed start paying NICs with the personal allowance for income tax. As well as simplifying the tax and NICs system, the measure ensures that hard-working families keep more of what they earn.
I thank hon. Members for their constructive contributions. I will, of course, look carefully at the record of the Committee debate and take forward any outstanding points.
Wera Hobhouse
I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 1 ordered to stand part of the Bill.
Clauses 2 to 6 ordered to stand part of the Bill.
The Deputy Speaker resumed the Chair.
Bill reported, without amendment.
Bill read the Third time and passed.
National Insurance Contributions (Increase of Thresholds) Bill
Friday 25th March 2022
(2 years, 8 months ago)
Lords ChamberRead Full debate National Insurance Contributions (Increase of Thresholds) Act 2022 Read Hansard Text Amendment Paper: HL Bill 140(a) Amendments for Committee - (25 Mar 2022)
National Insurance Contributions (Increase of Thresholds) Bill
Wednesday 30th March 2022
(2 years, 7 months ago)
Lords ChamberRead Full debate National Insurance Contributions (Increase of Thresholds) Act 2022 Read Hansard Text Amendment Paper: HL Bill 140-I Marshalled list for Committee - (30 Mar 2022)
Baroness Penn (Con)
My Lords, I beg to move that the Bill be now read a second time. At a time when the UK faces the twin challenges of recovering from the Covid pandemic and responding to Putin’s appalling attack on Ukraine, my right honourable friend the Chancellor’s Spring Statement set out how we will build a resilient and growing economy that will allow us to respond to such crises at home and help our friends abroad in times of need. At the heart of that Statement was a three-part plan to support families with the cost of living, support growth in the economy and ensure that the proceeds of that growth are shared fairly.
While our tax plan will deliver significant benefits to both people and the economy, it is also underpinned by the principle of fiscal responsibility. We have ensured that we maintain space against our fiscal rules, we have continued to be disciplined and we have carefully considered the macroeconomic outlook. It is particularly important that the Government take this prudent approach because, in the next financial year, we are forecast to spend £83 billion on debt interest, the highest amount on record and almost four times the amount we spent last year.
These figures underline why the Government cannot shy away from some tough decisions. That is why the health and social care levy announced last year will remain in place. We need to safeguard a source of funding for our NHS and for those who need care throughout their lives. However, as the Chancellor pointed out, a long-term funding solution for the NHS and social care is not incompatible with reducing the tax burden on working families. This brings me on to the specifics of this national insurance contributions Bill, which is a key element of the Chancellor’s tax plan.
The Bill legislates for the two employee and self-employed NICs measures set out by the Chancellor in his Spring Statement. Noble Lords will be aware that it has long been the Government’s ambition to promote tax cuts for working people and to simplify the tax system. That is why since 2010 we have taken millions of people out of income tax by raising the personal allowance from £6,500 to its new level of £12,570. However, as my right honourable friend the Chancellor explained, the equivalent national insurance thresholds remain at around £3,000 lower. As a result, at the last general election the Prime Minister pledged to increase NIC thresholds, and in 2020 the Government took a significant step forward to this by increasing the threshold to £9,500.
The Bill’s first measure will increase the NIC primary threshold and the NIC lower profit limit to £12,570 from 6 July. These are the thresholds at which employed and self-employed respectively start to pay NICs. The increase in these thresholds of around £3,000 will equalise the NICs and income tax thresholds and in doing so create a fairer and simpler tax system. As the Chancellor has explained, this means that people will be able to earn £12,570 a year without paying a single penny of income tax or national insurance. This is the largest increase in a starting threshold ever and the largest single personal tax cut in a decade, reducing the tax burden by £6 billion for 30 million people across the United Kingdom.
On an individual level, a typical employee will see their tax bill reduce by £330 in the year from July, while the equivalent saving for a self-employed worker would be worth over £250. In addition, around 70% of all workers will have their NICs cut by more than the amount that they will pay through the new health and social care levy. Further, over 2 million people will be taken out of paying class 1 and class 4 NICs and the health and social care levy altogether, so many people will feel the benefits of this tax cut very soon.
However, the Government recognise that this is a big change for many employers and payroll software providers. We believe that the July implementation date strikes the right balance between ensuring that individuals benefit from the increase as soon as possible, while giving employers and payroll software providers time to update and test their systems. This avoids millions of taxpayers having to make manual claims for refunds at the end of the tax year and employers having to make payroll corrections.
The Government are also aware of the huge pressures faced by those working for themselves but earning low amounts due to the rising cost of living. To support this group, the Bill gives the Treasury the power to lay an affirmative statutory instrument. This will mean that, from April, those with profits between £6,725 and £11,908 will not pay class 2 NICs, and this will rise to £12,570 from April 2023. This measure will benefit half a million self-employed people, saving them up to £165 a year. This group will still be able to receive NIC credits just as they have done in the past. As a result, their ability to access the contributory benefits and build up state pension entitlement will be unaffected. Taken together with the increase to the primary threshold and the lower profits limit, the Government will meet in full their commitment to ensure that the first £12,500 that an individual earns is free of tax.
The Bill represents the largest cut to personal tax in a decade. It rewards workers while supporting those lowest earners and, ultimately, the Government believe that the Bill will make a real difference to people’s lives at this challenging time. I commend it to the House and beg to move.
Baroness Ritchie of Downpatrick (Lab)
My Lords, I thank the noble Baroness, Lady Penn, for presenting this technical Bill to the House today as a consequence of the Chancellor’s Spring Statement in the other place on Wednesday last week. I recognise that there are benefits to raising the threshold at which people pay national insurance—there are also requirements on employers—but we must remember that this Bill has more to do with the Chancellor’s increasingly desperate desire to paint himself as a tax-cutter than with a well thought-out package of measures to help people as they continue to face the cost of living increases. The Chancellor’s Spring Statement did not fundamentally deal with the rising cost of living or provide adequate mitigation measures.
Obviously, there are benefits to raising the threshold at which people pay national insurance but, set against that, we have the problem that people are facing astronomical increases in energy, inflation and food prices, and more people will be forced into food and fuel poverty and reliance on food banks.
I shall consider this from the point of view of the cost of living impact in Northern Ireland and the measures that the Government can provide to mitigate such impacts running alongside the NIC Bill. Although the purpose of the Bill is welcome, I would like more to be done by the Government to mitigate the rising cost of food, energy and other commodities as a result of Brexit, the war in Ukraine and the Covid-19 recovery.
In Northern Ireland, income levels remain lower than those in the UK as a whole: £506 per week compared to £547 per week in other regions of the UK. The after-housing cost figures are £473 for Northern Ireland and £476 for other regions of the UK. I am grateful for a recent report on poverty in Northern Ireland from the Joseph Rowntree Foundation, published just this month, which states:
“As Northern Ireland entered the pandemic, nearly one-in-five people in Northern Ireland lived in poverty, including over 100,000 children. With 1 in 14 households in food insecurity, the recent spike in energy prices, and wider inflation, as well as certain areas of Northern Ireland and groups such as people in workless families, disabled people, carers and people in ethnic minority households having much higher poverty rates, people across Northern Ireland need”
the Treasury, the Government here in Whitehall, working with a new Northern Ireland Executive, to go further—and we must be mindful of the fact that there might not be a Northern Ireland Executive in the post-election scenario. That must be taken on board.
We need a focus on the adequacy of the social security system: the need to reverse or partly mitigate the impact of the £20 per week cut to basic rates of universal credit and to match benefit uprating to the cost of living. Failing to do so will push 10,000 more families in Northern Ireland into poverty. In the longer term, we need to reform the welfare social security system to focus on people’s needs. A targeted payment could reduce child poverty. The role that the old DLA/PIP can have in helping disabled people into the labour market should be considered, including considering how the administration of the payments could be redesigned with dignity and poverty reduction at their heart.
We also need investment in the housing market, building more energy-efficient social housing to shorten waiting lists and provide good-quality affordable homes. We need to take action to provide targeted employability support to people struggling most to secure well-paid jobs, not least disabled people and single parents. We need to work with employers and the education and skills system to ensure that people are able to secure the skills that they need for the jobs of the future, not least the significant potential for jobs in transition to a low-carbon economy.
The Northern Ireland Executive fell some weeks ago, and it is important that the Government work with a potential new Northern Ireland Executive to build on the provisions in the Bill to mitigate the worst impacts of the cost of living increase in Northern Ireland. We must remember that due to there being no Executive, £300 million could not be released to the various government departments, which would have assisted those in poverty and most in need.
A colleague of mine in the Northern Ireland Assembly got cross-party support for a Private Member’s Bill to release this money, but the Bill was refused debate by the Speaker of the Assembly, which is totally unacceptable. In these circumstances, can the Minister tell us what additional legislative and other measures, running alongside this Bill, which I do not have a particular problem with, the Government will bring forward in forthcoming Budgets and in the Queen’s Speech to mitigate the impact of the rising cost of living, whether by inflation, price increases—in terms of food and other commodities—and energy prices? Energy prices are spiralling out of control and impacting the lives of people throughout Northern Ireland and probably the rest of the UK, and bringing new people into the poverty sector who, while hitherto poor, have not experienced such levels of deprivation.
Baroness Bennett of Manor Castle (GP)
My Lords, it is a great pleasure to follow the noble Baroness, Lady Ritchie of Downpatrick, and to echo her concerns about poverty—in Northern Ireland, which is hit particularly hard, and all around these islands.
It is tempting to use this speech to tackle the utter inadequacy of the Spring Statement in dealing with that sheer level of poverty and suffering in our society, with so many people struggling to put food on the table and keep a roof over their heads. I will try to focus on the Bill and the details of it, but we must look at the context. The common phrase and hashtag on Twitter is “cost of living crisis”, and “crisis” tends to imply that this is something that has happened as a result of Covid and the dreadful Russian aggression in Ukraine that the Minister referred to in her introduction, but this is a result of very long-term trends in which we have seen food banks become a fast-growing part of our society, as so many people simply do not earn enough money to meet the basics of feeding themselves and their households. This is not a one-off crisis. It is part of a long-term trend which has seen multinational companies not paying their taxes, rich people becoming richer and richer, and general society having a smaller and smaller share of the pie and, for many people, fewer and fewer of the crumbs.
I want to pick up on one of the points that the Minister made in her introduction, referring to £83 billion of debt interest payments. It is worth highlighting, since I do not think it is well understood, that the majority of extra spending during the Covid crisis has been paid for by us borrowing from ourselves, borrowing from the Bank of England. Two-fifths of total government debt that we owe to ourselves is government borrowing from government, and four-fifths of government debt is owed to people and institutions within the UK. Therefore, when we pay interest, we are putting money into the economy. That is important because we heard, in the words of the Minister, and we are hearing very broadly from most sections of the Government, though perhaps not all, that this is the excuse for a new kind of austerity and cutbacks in government spending, when we already have government that has been sliced to the bone, unable to meet the basic needs of delivery, as we see all too often in your Lordships’ House, as promised reports, promised progress, promised Bills and promised regulations are later and later. The Government are hopelessly overstretched, when we must now be investing in the transition which we must make to the low-carbon economy, the kind of just transition in our economy that requires significant amounts of government investment. Let us think about investment rather than labelling it all as spending.
However, if we are going to talk about debt, it is worth noting that the level of private sector debt in the UK is two to three times that of government debt. Our finance sector remains the most exposed to crisis of that of any G7 nation. So why do we—indeed, why do the Government—not talk more about the size of our financial sector and the risk it presents to the security of us all, rather than focusing on their own borrowing as the debt issue?
In introducing the debate, the Minister talked about a fairer, simpler tax system. Of course, rather like our constitution, what we have is an incredibly complicated tax code. You had better be feeling strong if you want to pick it up. As in our constitution, with the accretion of many centuries of historical accident—an expedient fix here, a gesture to a vested interest there—we have accumulated this complication in our tax code. The change we are bringing in is a small one in this incredibly complex system.
An alternative to what we are doing today would be to take away one of the complications instead of lifting the tax threshold. We could set a single rate of national insurance. Rather than earnings above £50,000 being charged at only 2%, their rate of national insurance could be raised to 12%. On its own, that would raise £11 billion. This would simplify everything and mean that we do not have the regressive system of national insurance that we do now.
However, the Green Party has a proposal for a much greater simplification; I do not expect an answer from the Minister on it today but I think I should draw it to the Government’s attention. Why not have a single, unified income tax? Leaving things at the same level they are at now, this could raise £24 billion; this could be used as a huge, immediate injection into social care, for example. It would mean that, whatever the source, everyone’s income would be paid at the same rate of tax. It would neither penalise workers nor favour the generally well-off in society, whose wealth and income come from property and other investments. Why not take the money fairly from across society and across all incomes? That is my modest proposal for the Minister.
I finish with a direct question that was asked in the Commons but not answered; I hope that the Minister may be able to answer it now. Calculations suggest that people who are in receipt of universal credit will not benefit from this change as much as those who are not on universal credit will because of the 55% taper rate. I hope that the Minister can answer that today.
Lord Davies of Brixton (Lab)
My Lords, this Government are collectively incapable of shame. I hope that, even if she cannot admit it, the Minister understands the shame that is inherent in the overall package coming from the Spring Statement. We will discuss the package in general tomorrow; I hope to intervene in that debate.
Coupled with the changes in personal taxation in the Spring Statement, this Bill is a deceit on the National Insurance Fund. I am a strong supporter of a fair and effective national insurance scheme with adequate benefits in retirement as well as in sickness and unemployment, funded by national insurance contributions paid while at work, coupled with a necessary Treasury supplement. This concept still has widespread support, even if we have strayed some way from its achievement in practice. The fact that we still use the term “national insurance” after more than 70 years is testimony to the strength of the idea. The Government’s proposals here and in the Statement ride roughshod over this concept and treat the idea of national insurance with contempt, making changes to national insurance contributions as a short-term political fix.
The impact of the Bill’s proposals on personal taxation must be judged in the context of the overall package. As such, they constitute a total travesty by being a paradigm of incoherent and unfair taxation policy. In effect, we have a promise of a cut in the standard rate of income tax some time in the future that is effectively being funded by an increase in national insurance contributions. In other words, a cut in progressive taxation is being funded by an increase in a more regressive form of tax.
National insurance contributions are regressive because of the upper threshold, above which the contribution rate is much lower. Such a ceiling originally made some sense in the context of flat-rate benefits and flat-rate contributions, but we have moved on from that era and there is no justification for relieving higher earners of their share of the contribution towards paying for our national insurance benefits.
National insurance is also regressive in the sense that it applies only to earned income, whereas in the past it applied to what was then referred to as unearned income, leaving massive opportunities for taxation arbitrage. This is something indulged in by people with higher incomes: they pretend that their earned income is what used to be termed unearned income, as I said. You can go to fancy accountants and they will sort it for you so that you end up receiving income that it is not subject to national insurance. Regrettably, it is a regressive tax. Those issues need to be addressed, but the Government have used regressive taxation to fund a cut in progressive taxation. This is nonsense and they should be ashamed of it.
It would appear that the Bill is necessary only because the Government suddenly realised that the increase in the levy would impact on people with lower incomes, so by increasing the lower threshold they relieved the pressure on a band of lower-income recipients, but it does absolutely nothing for those below the lower earnings limit. There is no benefit for them at all, and they are the people in the greatest need. It is all very well for the Minister to claim that this is helping people on lower pay, but it is not helping those on the lowest levels of pay. That is, if not a crime, a deceit on the public.
Let us discuss the Spring Statement in full tomorrow, but we have to see the Bill for what it is. It is a deceit on the National Insurance Fund, using the resources available to national insurance to achieve a short-term political fix because the Government stumbled into a situation where they were worried about the impact on the lower paid.
Lord Macpherson of Earl’s Court (CB)
My Lords, back in 1986, in my second job in Her Majesty’s Treasury, I was in charge of advising on national insurance and the National Insurance Fund. Here I am, 36 years later, speaking in this debate.
I will confine my observations to two points. First, my working life has seen this extraordinary transfer of revenue raising from income tax to national insurance. As other speakers have observed, national insurance is chargeable only on earnings, not on rental income or dividends. The relevant facts are that, when I became an adult, the national insurance rate was 5.75%; it is now 13.25%, so it has more than doubled. Over the same period, the basic rate of income tax has been cut from 34% to 20%, and it is now planned to reduce it to 19%. This is an extraordinary shift and one that both Conservative and Labour Governments have been prepared to implement, presumably because they regard taxpayers as more willing to pay national insurance than income tax and, sadly, opinion surveys bear that out. The fact is that both are taxes, and this is classic sleight of hand and smoke and mirrors which, as a former Treasury official, I should admire but I find it difficult so to do.
I will make my second observation briefly. I am actually in favour of the proposals in this Bill. I am in favour of lifting people out of national insurance. Of course, it is a new policy to seek to align the starting rate for national insurance with that of income tax. I remember Gordon Brown—in fact, I was advising him on that Budget—announcing it in 1999 and implementing it in 2001. Year after year throughout the 2000s, their starting points were aligned.
That was brought to a sorry end by Brown’s decision—again rightly, in my view, but unfortunately it had difficult consequences—to abolish the 10p rate of tax. As that resulted in losers, Mr Darling had to raise the personal allowance in mid-year and it was too expensive to raise the national insurance allowance. The two have ceased to be aligned ever since.
There is a more serious point to make. This Government have chosen, sensibly, to align the starting points of employee and self-employed national insurance with the personal allowance. When Gordon Brown was Chancellor he went one step further, which had a certain logic, which was to raise the employer allowance, which I believe is called the secondary threshold. In economic terms, whether you charge national insurance on employees or employers, the net effect is the same, because wages adjust. I am just slightly disappointed that the Government have, in a sense, sold the pass on employers, because this is also a burden on employment. When the Minister responds, I would be interested if she could explain why they have chosen to load the tax cut on employees. I recognise that employees vote and employers hardly do, or at least in fewer numbers, but it is a disappointing turn of events.
Baroness Kramer (LD)
My Lords, I am obviously not opposed to the lifting of thresholds in today’s Bill, as it takes some of the lowest paid out of the burden of national insurance contributions. I fully recognise the point made by the noble Lord, Lord Davies, and again by the noble Lord, Lord Macpherson, which is that the lowest paid get no help from this at all because they fall below the existing lower threshold. I suspect that tomorrow, we will discuss extensively how the group on the lowest incomes have been helped least by anything that has come out of the Spring Statement, so I will leave some of that for then.
The Government should have not just raised the threshold but scrapped the whole increase. They had a £26 billion bonus of unexpected tax revenues available—we will probably talk tomorrow about how that happened through fiscal drag—and they could have easily imposed a windfall tax on the super-profits of the oil and gas companies. Again, I suspect we will talk about that more. Those kinds of actions would have genuinely helped people to face a cost of living crisis.
I am afraid that I see the whole package as reflecting the fact that the Government have very little empathy for the pressures and choices that people are facing. They will not just hear this from us. The Minister is being very self-congratulatory about all of the steps that have been taken, but she will hear from the public, because they feel the pain, face a squeeze on their budgets and incomes, and are forced to make choices and changes in their lifestyle. For some it is whether to heat or eat, and for many others there will still be extraordinary pressure, even if they are not trying to work out how they survive falling into destitution. The Minister will hear a great deal from them, so I warn against this constant self-congratulation of having done so much. The public will be able to tell people, in pounds, shillings and pence, how little has happened to get them through this particular crisis. I agree with the noble Baroness, Lady Bennett, on this issue.
When the Chancellor made the Spring Statement, it became clear why he had earlier decided to increase NICs by 1.25%. He did so—here I agree with the noble Lord, Lord Davies—knowing that it would fund a very large share of a cut in income tax in 2024, just ahead of a general election. In fact, with the raising of the threshold, the numbers look extraordinarily matched. It is an optical illusion—why increase a tax in order to cut a tax? I do not think that it fooled anyone; it was simply a cunning plan to make the Chancellor look like a tax-cutter. Frankly, it was completely rumbled by the Institute for Fiscal Studies, which pointed out that the tax giveaway in 2024 would simply be giving back one-sixth of the increase in taxes that the Chancellor has made. He remains a high-tax Chancellor and they remain a high-tax Government.
I agree with others, such as the noble Lord, Lord Macpherson, that NICs and the health and social care levy that will follow do not fall on exactly the same group of taxpayers as income tax. The NICs increase and the future levies fall on employers, employees, the self-employed and dividend recipients. Indeed, as the noble Lord, Lord Macpherson, said, employers have been given no relief at all; they do not experience any benefit from the rise in the threshold and will still pay as before. Income tax ranges far more broadly, falling on all those who receive income, including rental income and income from trading assets, and a wide range of pension holders.
I hope that the Minister will explain this arbitrage to us today. No one understands arbitrage better than the Chancellor, and we are owed some clarity on who the winners and losers are in this tax arbitrage arrangement. I suspect that a shift from income tax to NICs is a very poor outcome for those who work and a very good outcome for those who get income from sources that are not tied to work. But we need to see the numbers, and I hope that the Minister will explain that logic. I am very grateful to the noble Lord, Lord Macpherson, for putting this in the longer-term context of a continuing move to a shift from progressive income tax to a far more regressive NICs system.
The Minister will undoubtedly say that the increase in NICs and the future levy are hypothecated to the NHS and then social care. I personally agree with those who think that very little of this money will actually reach social care, but let us set that aside for today and instead look at hypothecation, which really is a figment of accounting. The National Insurance Fund was created to fund the state pension but it is increasingly just a piggy bank. In that context, will the Minister today make clear what the impact on the fund will be from the drop in expected income arising from the increase in the threshold? This is not to criticise the increase, but I would like to understand how this will impact the fund and even more understand the consequences for funding the NHS and social care. After all, if this were truly a hypothecated levy, there ought to be a drastic impact on the money flowing to the NHS and social care. Is that what is going to happen? I did not read it when I looked at the OBR numbers—perhaps it did not fully understand the input of the Government’s arguments that the NICs increase was wholly and solely related to funding the NHS and social care. That number would then have come down, if it was describing accurately.
It seems to me that the Bill also brings into the spotlight the whole issue of thresholds. The Chancellor is freezing tax thresholds in order to raise additional tax through fiscal drag. The original estimate last October was that fiscal drag would increase tax revenues by £8 billion. With sharply rising prices, that estimate is now £21 billion—these are OBR numbers. It is a huge tax rise, obscured by optical illusion. I am deeply concerned that the public’s mistrust of politics will get yet deeper and more cynical with these constant attempts at a sleight of hand. I attempted to draft an amendment to the Bill to require that at least the NICs threshold would in future rise annually with CPI, but that was apparently out of scope. It is a very live issue, and the Minister needs to explain why these thresholds will not increase with CPI in the future.
Finally, I have a more specific question for the Minister—and this is an issue which was raised by the noble Baroness, Lady Bennett. Like most of this House, I am very concerned that the Spring Statement did so little for the least well-off, especially those who rely on universal credit. Can the Minister tell me how the increase in the NICs threshold will apply to those who are in work but also on universal credit? Will she confirm what emerged from debate in the other House that the threshold change, or at least about half of it, is clawed back through the universal credit taper? The IFS has come to that same conclusion. How many people are impacted by the clawback which is the effect of the taper? I ask particularly because the Minister’s colleagues in the Government were completely flummoxed by this and only eventually accepted its accuracy.
The Resolution Foundation has estimated that 1.3 million people, including half a million children, will fall into absolute poverty—I stress “absolute poverty”, which is below 60% of real median income in 2010—so it is quite a shocker that people on low incomes and benefits are facing. Those not in work, including people with disabilities, will see a fall in income this year of 8%. The Minister will surely tell us that the Government have done a great deal to help these folk but, frankly, the numbers do not lie. There are rumours in the press that the Government are becoming frightened and that they will provide more help in the future. However, we are here today and this is an opportunity for the Minister to tell us what future changes are going to be made to benefit those who have been essentially left out, or barely helped, by the changes that we heard from the Chancellor last week.
Lord Tunnicliffe (Lab)
My Lords, I thank the Minister for presenting this Bill. I also particularly thank noble Lords who have spoken; they all seem to have set up considerable hors d’oeuvres for tomorrow’s debate, which I expect to be rather wide-ranging.
This is the second fast-tracked Bill this Session which makes significant changes to the national insurance system. The first implemented a 1.25% increase to national insurance for 2022-23. In essence, it created the very problem that the Chancellor is attempting to solve with this legislation. When the Health and Social Care Levy Bill was considered by the Commons in a single day, on 14 September, MPs in all political camps expressed concern about the lack of time given for debate and scrutiny. The Prime Minister’s surprise announcement felt more like a distraction or political relaunch than a genuine attempt at tackling the problems faced by the NHS and social care.
The money raised by the levy is unlikely to deliver the results promised by the Government. There is no coherent plan for clearing the NHS backlog or making the care system function more effectively. Both sectors are desperately short of staff and the workforce is exhausted. Capacity, not cost, is the limiting factor. There is no good time to break a manifesto commitment not to raise national insurance. However well-intentioned the decision may have been, September 2021 was a particularly bad time to make it. Inflation was beginning to rise and expectations for the economy were being downgraded. It was already becoming clear that a long, hard winter lay ahead for many.
Your Lordships’ House also considered the Bill in a single day, in October of last year. With costs continuing to rise, concerns were again voiced that the new levy was a tax on jobs, as well as the wrong tonic for the NHS’s problems. In the intervening months, Back-Bench Conservative MPs have grown somewhat restless. With their postbags bulging, they have come to realise that the Labour Party and others had a point: this is the wrong tax increase at the wrong time.
Since the Health and Social Care Levy Bill passed, inflation has climbed rapidly to its highest level for 30 years—or, to put it another way, since the last Tory inflation crisis. According to the OBR’s updated economic forecast, the 2% inflation target will not be met until late 2023 or early 2024. Due to this, it is warning of the biggest drop in living standards since records began in the 1950s. Energy prices are at a record high, the medium to long-term outlook remains uncertain and the price cap will shortly increase by hundreds of pounds, further increasing the pressure on household budgets. Despite the Government’s attempts to paint the cost of living crisis as a consequence of the war in Ukraine, the writing has been on the wall for months. The energy price cap announcement, for example, was trailed for some time. The decision was taken and made public before Vladimir Putin launched his illegal invasion.
In light of events, the Chancellor has been pushed hard to abandon his planned tax increase on workers. Conservative MPs express disquiet both privately and publicly. There have been media reports of heated disagreements among Cabinet colleagues. Even the “Money Saving Expert” begged Mr Sunak for an intervention, warning that the scale of the problem is so great that his tips can no longer make any meaningful difference to people’s day-to-day finances.
Fiscal events rarely capture the public imagination but, with so many feeling the effects of current circumstances, all eyes were on last Wednesday’s Spring Budget—sorry, Spring Statement, but really it was a Budget. The omens were good. As is becoming the norm, newspapers had been briefed in some detail about a substantial package to ease the burden on family finances. More than two years after his appointment, the Chancellor even confirmed on Twitter that his work to provide
“economic security for our people”
would finally begin. Unfortunately, the package announced did not live up to expectations. Despite the Prime Minister doing his best to leave the option open during weeks of media interviews, the Chancellor decided not to perform the much-desired U-turn. Instead, he opted to offset some of the 1.25% national insurance increase by equalising NICs and income tax thresholds.
We therefore come to the second piece of fast-tracked NICs legislation this Session, with, once again, a day’s debate in another place followed by Second Reading in your Lordships’ House. We support any measure to help households through this unprecedented cost of living crisis. We will therefore support the passage of this Bill today. However, while we are passing it in March, as others have observed, its effects will be felt only from July. We understand the reasons why, but that delay could have been avoided had the Chancellor been more proactive in his response to the mounting crisis.
Let us not kid ourselves: despite this Bill, taxes are still going up for most households in one week’s time. Mr Sunak wants to be seen as a tax-cutting Chancellor, but the facts speak for themselves. The overall tax burden will still be higher, irrespective of changes to the NICs thresholds. Once we are past the worst, the freezing of tax thresholds will reverse the Government’s previous good work in removing people from tax. Many low earners will find themselves paying income tax and national insurance once more. Under current plans, the benefit derived from the promised pre-election income tax cut in 2024 will have been offset by other increases across the tax system.
The Spring Statement and, by extension, this Bill, do not represent a particular, fair approach to the challenges faced by so many across the country. When appearing before the Commons Treasury Select Committee on Monday, the Chancellor failed in his attempt to label this plan as progressive. No plan that knowingly and willingly pushes over 1 million people into absolute poverty can be described in that manner. However, we will have other occasions, including the Spring Statement debate tomorrow, to cover some of those broader issues. For now, it is for us to get this fast-tracked legislation through, to ensure that these changes can take effect in July. It may be a sub-optimal solution but, regrettably, it is the only one this Government are willing to offer at the current time.
Baroness Penn (Con)
My Lords, I start by thanking all noble Lords for their thoughtful contributions to this debate. I shall do my best to address as many of the points raised as I can. Before I do so, it is worth returning to the purpose of the Bill before us. It will make major changes to the NICs system that will put billions of pounds back into people’s pockets at a difficult time. In addition, the Bill underlines the Government’s ambition to promote tax cuts for working people and to simplify the tax system as a whole.
This ambition is delivered in the Bill by two main measures. The first is the increase to the NICs primary threshold and the NICs lower profits limit to £12,750 from 6 July—an increase that will equalise the NICs and income tax thresholds. On an individual level, this will mean that a typical employee will see their tax bill reduced by £330 in the year from July; for self-employed workers, that will be an equivalent saving of £250. It will also mean that around 70% of workers will have their NICs cut by more than the amount that they paid through the new health and social care levy. That is an important point to bear in mind when weighing the relative benefits of increasing the NICs thresholds versus not proceeding with the levy altogether. Those left with higher NICs bills will be, for the most part, higher and additional rate taxpayers. In addition, almost 2 million people will be taken out of paying class 1 and class 4 NICs and the health and social care levy entirely.
The Bill’s second measure seeks to alleviate some of the pressures caused by the rising cost of living on those who earn low amounts and who work for themselves, so that from April those with profits between £6,725 and £11,908 will not pay class 2 NICs. This will rise to £12,570 from April 2023. This measure will benefit 500,000 self-employed people, saving them up to £165 a year. These measures, taken together, will allow the Government to fulfil their commitment that the first £12,500 that an individual earns is free of tax. As I outlined earlier, importantly, removing class 2 NICs from the group of low-earning self-employed workers will not prevent them from building their eligibility to the state pension, and other contributory benefits.
The noble Baroness, Lady Ritchie, and many others set the context for the debate as the cost of living crisis that people face in this country. The Government completely acknowledge that. We also acknowledge that we cannot completely protect people from some of the difficult times they will face, but we will stand by the British people, as we did throughout the pandemic. I take it back to this specific Bill: the IFS has said that raising the NIC threshold is the best way to help low and middle earners through the tax system at this time.
I know noble Lords will be aware of the measures the Government are taking to support people. I will have to disappoint the noble Baronesses, Lady Ritchie and Lady Kramer, that I cannot look forward to future Queen’s Speeches or Budgets, but it is worth emphasising some of the support that is out there for families, which is worth over £22 billion in 2022-23. It includes providing millions of households with up to £350 to help with rising energy bills and helping people to keep more of what they earn. We have cut the universal credit taper rate and frozen alcohol duty, as well as announcing a further rise in the national living wage to £9.50 an hour from April 2022. Other measures, such as the increase to the local housing allowance rates introduced during the pandemic, the cuts to fuel duty and the increase to the household support fund, will also provide important support to people.
The noble Baroness, Lady Ritchie, made some important points about providing more dedicated support to people to move into work, whether those facing health conditions, the disabled, or single parents. The Government are absolutely committed to that agenda. That is why we have so many more work coaches in place to help people make that move into work, because in the longer term that is the way to help people to deal with the growing cost of living, but also, importantly, when they are in work to move into better and higher-paid work. That is why action on the national living wage, which is rising by 6.6% this April, as I said, is important. That will be an increase of over £1,000 to the annual earnings of a full-time worker on the national living wage. That is also why we have the new in-work progression offer for people who are among the lowest-paid workers on universal credit to access personalised work-coach support to help them increase their earnings. Importantly, we have also matched that with significant investment in our skills system for this Parliament— £3.8 billion in skills in England by 2024-25. That funding is absolutely targeted at helping people improve their earnings prospects and support their success in the labour market.
The noble Baroness, Lady Bennett, made a number of points that we might return to in the debate tomorrow, but there are a couple I want to pick up on. She talked about a new excuse for austerity. I am afraid that just does not match the figures. Total departmental spending will grow in real terms at 3.7% a year on average this Parliament. Total managed expenditure as a share of the economy is expected to increase across the Parliament to 41.3% in 2024-25. That compares to 39.3% in 2007-08, for example, so public spending is increasing during the course of this Parliament.
The noble Baroness, and indeed the noble Baroness, Lady Kramer, also asked about the universal credit taper rate and the impact it has on the threshold rise. Noble Lords are absolutely right that the UC taper rate could impact on the benefit felt by those on universal credit by the increase in the threshold. It is important to note that these individuals will be better off overall thanks to the change in the threshold.
That is a really important point about the taper rates in universal credit. It reflects the importance of the Government’s decision to reduce that taper rate from 63% to 55%. In the design of universal credit overall, compared to tax credits and the other benefits that it replaced, we are bringing down the really high marginal effective tax rates that people who were on benefits or receiving tax credits could face when they sought to take on more hours and progress in work.
The noble Baroness, Lady Kramer, and the noble Lord, Lord Macpherson, asked about increasing the secondary threshold for employers. The threshold will increase in line with CPI, but will not match the increases to those for employees and the self-employed. The Government are committed to supporting businesses and incentivising investment to support growth. We are increasing the employment allowance to help small businesses fulfil their potential and boost employment. Over 1 million employers are benefiting from the employer allowance and reducing their annual employer NIC bills. From April 2022, 670,000 of these businesses will not pay NICs and the health and social care levy, due to the employment allowance. This includes 50,000 businesses which will be taken out of NICs and the levy by this increase. Due to the employment allowance, 41% of businesses will not be affected at all by the health and social care levy, while the next 40% will pay £500, 1% of their annual wage bill.
The noble Baroness, Lady Kramer, asked about the impact on the National Insurance Fund, the NIF. The Government Actuary’s Department is not required to produce a report alongside this Bill on the measures’ impact on the NIF. It will continue to provide a report alongside the annual uprating legislation, so the impact of these measures will be included in future uprating reports.
The noble Baroness also asked about the impact on health spending. She will know that the health and social care budgets for the next three years were set at the spending review and, as is standard, we will not reopen a multi-year settlement on the basis of changing forecast receipts. Forecasts can go up as well as down and the stability and certainty of funding is important for departments and the devolved Administrations.
Baroness Kramer (LD)
Is the Minister confirming that, after the announced period, the effect will be that the anticipated additional funding for social care will be reduced by the impact of the rise in the threshold?
Baroness Penn (Con)
No, that is not what I am confirming. I am confirming that the budgets set out at the spending review still stand and that every penny from receipts of the health and social care levy will go to bodies responsible for health and social care. That is the way in which the levy is hypothecated. It does not determine the overall budgets for the health and social care systems. The noble Baroness will know that their budgets are far bigger than the receipts from the levy. The hypothecation is that all the receipts from that levy go towards spending on those areas.
Baroness Kramer (LD)
The Minister has left me thoroughly confused. Perhaps she could write to us to explain why, if this is hypothecated money and it is now less than was forecast, the amount of hypothecated money is apparently identical when it reaches the NHS or social care. It does not make any sense. It is either one or the other: if it is hypothecated, the amount would go down; if it is not a hypothecated amount, then we are dealing with a grander fiction, and it would be helpful to know that. Perhaps she could write to us on that.
Baroness Penn (Con)
I will give it one more try and will then write if I have not managed to make myself clear. The amounts raised through the levy will all go to health and social care spending. They are not the only things that determine the overall amount of health and social care spending and therefore responsible bodies’ budgets. It is also my understanding that, in the forecasts produced by the OBR alongside the Spring Statement, even with the increase to the thresholds, the amounts forecast to be raised through the levy are more than previously anticipated when the levy was announced. I will undertake to write to the noble Baroness because I do not think my second or third attempt has satisfied her.
Lord Tunnicliffe (Lab)
I confess to being as confused as the noble Baroness, Lady Kramer. Please could the Minister write to all noble Lords who have participated in the debate.
Baroness Penn (Con)
I will do so and place a copy in the Library so that all noble Lords can access it. I believe I have addressed most of the points raised in this debate, but if I have not, perhaps I could address any outstanding points in my letter.
I reiterate my thanks to noble Lords for their contributions to this debate and for considering this Bill so quickly. In short, the Bill is a fundamental part of the Government’s plans to use the tax system to support households with the cost of living, boost the economy through support to businesses and help workers enjoy more of the proceeds of growth. I commend it to the House, and I beg to move.
National Insurance Contributions (Increase of Thresholds) Bill
Wednesday 30th March 2022
(2 years, 7 months ago)
Lords ChamberRead Full debate National Insurance Contributions (Increase of Thresholds) Act 2022 Read Hansard Text Amendment Paper: HL Bill 140-I Marshalled list for Committee - (30 Mar 2022)
Baroness Kramer
Member’s explanatory statement
This amendment would bring forward the date of implementation of the increase in thresholds from 6th July 2022 to 6th April 2022.
Baroness Kramer (LD)
My Lords, all the amendments tabled today are in my name and in a single group, so I am not going to take up too much of this House’s time, and I should also make it clear that I do not intend to divide on any of these amendments. However, I thought there were a few issues which needed some additional focus and emphasis. These amendments were tabled by my colleagues in the other place, but I am not sure that we got terribly good answers to any of them. It is always worth having a second go, and many of these points are ones that I would like to leave with other Members of your Lordships’ House for future discussions around these various topics.
The first amendment, Amendment 1 in Clause 1, has the effect of bringing forward the date of implementation of the increase in thresholds from 6 July 2022 to 6 April 2022. There were two reasons why I thought it was important to table this amendment for a second time, and I am going to quote from the Resolution Foundation:
“If we consider just the changes to Income Tax and NI due in 2022-23 and reflect that the NI threshold will not fall until July, earners on less than £25,000 will gain, and those above will lose from all the measures being introduced in the next fiscal year (if the NI threshold had fallen in April, this cut-off point would have risen to £32,000).”
That is the difference between people who benefit from the threshold change being brought in in April and those who will benefit by it being brought in in July. I am going to estimate—maybe the Minister will have the number—that there an awful lot of people whose annual earnings fall between £25,000 and £32,000. In fact, I am going to go beyond that and suggest that is very often a family income. It is not a starting income, or the income of someone who has risen rapidly up the promotion ladder. It has got to be a very common income for a large part of our working population. I do not know what those numbers are, but I am sure that the Minister could tell us, so I am quite concerned about a policy that, at a time of huge pressure on the cost of living, is denying a benefit to people who fall between that £25,000 and £32,000 salary or earned income group.
My second reason for tabling this amendment was the words of the Financial Secretary to the Treasury in the other place when dealing with issue. She said:
“Of course the Government want to help people with the cost of living as quickly as possible, which is why the Chancellor introduced a number of measures immediately … However, it was not possible to deliver the increase to the primary threshold from 6 April, which is in less than two weeks’ time. The Government are implementing the change as early as possible, from 6 July. It is not possible for the majority of software and payroll providers to deliver the measure for April.”—[Official Report, Commons, 24/3/22; col. 522.]
I just thought, “This one is a classic”: the assumption that the only way to deliver the benefit is through making a change to the software associated with the universal credit scheme.
When the Government of the United States sought to give people a helping hand with Covid, they simply cut a cheque and sent it to everybody who was a registered taxpayer. It seems to me that getting an appropriate list of the people who would qualify—with a starting date of 6 April to fill in and plug the two months—would not be much of a challenge for this Government. They do not have to go and change the whole universal credit system or require every employer to make a change; they could simply access the data and then find a way to make a rebate.
We often have this kind of siloed thinking. Here is a Minister who is in a sense saying, “I only wish I could find a way to do it”. So I wonder whether the Minister can go back and say to her department, “Of course we can find a way to do it; we just need to start thinking outside the box and not simply assume that what we have to do is some complicated and extensive programming problem. We simply need to find a way to send a rebate”. I suspect that most people would not mind a cheque—frankly, I suspect that most people would not mind if they had to wait a little time for it to come, provided it came. This ought to make the Financial Secretary to the Treasury exceedingly happy. These two issues highlight the impact of the delay and the fact that there are many ways in which that problem could be remedied. It just takes some lateral thinking.
The amendments in my second set are much more similar and come after Clause 3. Essentially, they concern reporting requirements. The concerns around transparency were well described at Second Reading. The noble Lord, Lord Macpherson, used the phrase “sleight of hand” in his speech; I used it slightly differently in mine. There is a great deal that is opaque, particularly in the way we relate income tax and national insurance contributions. As the noble Lord stressed, for many years, Governments have chosen to reduce income tax and shift the burden on to national insurance contributions because they are less visible and because, frankly, the public are under the impression that they are saving for their own pensions. Now, they are going to be under the impression that they are making an extra effort to help the NHS and social care; they will therefore accept an increase, whereas they would not have done had it been made to income tax. It has become very clear, however, that the whole thing is completely fungible; this notion that national insurance contributions are an entirely separate, protected, segregated, hypothecated pot is merely an accounting fallacy. It is all just smoke and mirrors.
The first of my two amendments would require the Secretary of State, within six months, to lay before Parliament a report on the impact of the Act’s provisions on disposable incomes. That is to try to tease out some of the arguments that the Minister made—which did not seem to have many numbers attached to them—that, overall, this would be extremely beneficial to a huge range of people. We would also like to see that same calculation done if combined with a reduction in the national insurance rate of 1.25%. It seems to me that this would provide a level of transparency that the public could understand and we in this House could argue about, having full possession of the facts and without the confusion of various different pots interacting with each other. It is probably because I come from a business background that I think that what you always need to look at is what happens at the bottom line. You must not get completely lost in the hedgerows, the highways and the woods—and I am afraid that that is where a lot of the discussion about what is happening in terms of support for the economy has found itself.
The second of my amendments would again require the Secretary of State, within six months of the Act being passed, to lay before Parliament a report considering the impact of the Act’s provisions on the levels of taxation on earned and unearned income. Again, that goes directly to the heart of the issue that the noble Lord, Lord Macpherson, raised: the switch, virtually unrecognised by the general public, from income tax, which covers all income, to a system of taxation that in effect falls primarily on workers. This is an important philosophical issue that needs to be highly transparent, and I do not believe that at the moment it is.
Lord Davies of Brixton (Lab)
My Lords, I am a bit unclear about quite how this process works, but given the limited number, I will not worry too much about that. I will not repeat my Second Reading speech but will actually make a Committee point—in theory, it is really a Clause 2 stand part point, but we might as well take everything together.
It is clear that a casual reader of the Explanatory Notes and the legislation would be totally fazed by what on earth class 2 and class 4 contributions are—let alone what primary and secondary contributions are. The whole system could be designed to confuse, although it is really like this because it has been altered over the years and has moved away from what was originally quite a logical structure.
My question for the Minister is in relation to classes 2 and 4. Contributions by the self-employed have become a mess and need to be sorted out because, first, they are confusing and, secondly, they create the opportunity for arbitrage—to use that word for the second time today —between employment status and self-employment. Effectively, the self-employed have an advantage in terms of their national insurance contributions, and, because of the way the lower threshold is being changed, that advantage is being increased. Is this an issue that the Treasury has considered, and does it think that it is time for a more thoroughgoing reassessment of how the self-employed pay national insurance contributions?
I thank the noble Baroness, Lady Kramer, for her use of the word “fungible”, which is always to be welcomed, and for getting the term “unearned income” through the Table Office. I have to presume that, because it is unqualified and unexplained in the amendment, it is a term that is still defined in legislation. It was used widely many years ago but clearly created problems, and it is now no longer used in general parlance, but it is obviously still there in the legislation. Could the Minister explain how this fits into the present taxation structure?
Lord Tunnicliffe (Lab)
My Lords, I am grateful to the noble Baroness, Lady Kramer, for tabling these amendments and facilitating a short Committee debate. Had we been afforded more time to look at the Bill, and had its scope been different, we would no doubt have seen far more amendments tabled and therefore had a number of very interesting debates. However, the Government know that they are behind the curve when it comes to the cost of living, and we must therefore deal with their piecemeal proposals at pace as they come forward.
Amendment 1 would accelerate the timescale for raising the NICs threshold for class 1 contributions. Although it was acknowledged during the Spring Statement that this change would take place only from July, many will have missed that important detail. The Minister will shortly tell us that this time is needed for payroll systems to be updated, and so on. As somebody who believes in due process, I am somewhat persuaded by that argument, but does she agree that, had the Chancellor acted quicker to deal with people’s genuine financial concerns, systems could have been fully operational by next week?
The rising cost of living has been making headlines for several months; it is not a new phenomenon, and I would be surprised if this has not been under active consideration for many months. There was certainly no need to wait until late March to make the announcement and publish the relevant legislation. After all, the health and social care levy was announced, seemingly at random, outside the usual cycle of fiscal events. Can the Minister confirm my understanding that higher class 1 contributions between April and July will stand, rather than the excess being given back throughout the tax year, or at its end, as a rebate? In that case, does that not raise the question: when is a tax cut not a tax cut?
We know that for many, the benefits derived from threshold equalisation will not be sufficient to offset the 1.25% increase in contributions. For them, it will not feel like a tax cut. The decision to cover only three-quarters of the tax year will inflict additional pain on many in the coming weeks and months. The energy price cap is going up on Friday, but the Chancellor’s somewhat lackadaisical cavalry will arrive only in July. It is little wonder that people across the land are frustrated.
Turning to Amendments 2 and 3, I can certainly see the appeal of forcing the Chancellor to face up to the reality of his decisions. Amendment 2 focuses on disposable incomes. We know from analysis carried out by the Institute for Fiscal Studies, the Resolution Foundation, the Joseph Rowntree Foundation and others that April’s full suite of tax changes will leave people across much of the income distribution with less. The Treasury continues to insist that its proposals are progressive, but the fact remains that a real-terms cut to social security payments will leave many at the lower end of the income scale facing genuine financial difficulties. The Government say they want people to turn away from high-cost credit and use low or no-cost credit responsibly. The best way to encourage such behaviour is not to push people into poverty and debt in the first place.
Amendment 3 relates to the tax burden attached to earned and unearned income. The Government are increasingly fond of increasing taxes on workers. Given the announcement about income tax, it seems it is in order to fund giveaways which benefit other groups, such as landlords and investors. I have no issue with the people who benefit from unearned income, but that should not necessarily be given preferential treatment over wages in the tax system.
I look forward to the Minister’s response, as the amendments raise important issues. Ultimately, however, it is not for us to amend a Bill of this nature, given that it passed through the elected House without issue. We may not agree with the Government’s approach, but they must have their Bill and own any fallout that comes from it.
Baroness Penn (Con)
My Lords, on the first amendment tabled by the noble Baroness, Lady Kramer, which is on the timing of the threshold change, I am afraid I will have to disappoint her. The answer to the amendment and the point she raises has not changed in the last six days. The Government brought in immediate changes to help with the cost of living last Wednesday, such as the cut to fuel duty. However, for the threshold change, we are now just a week away from the start of the next tax year and more time is needed for employers, software developers and payroll providers to deliver this measure.
The noble Lord, Lord Tunnicliffe, asked why the Chancellor had not acted more quickly, given that we could see the pressures on the cost of living building, and the noble Baroness, Lady Kramer, referred to universal credit. The Chancellor took action on universal credit in the Autumn Budget, cutting the taper rate and increasing the work allowance. Therefore, those measures can come in from April.
The noble Lord also mentioned that people would need to wait until July for support with their energy bills. Of course, the Chancellor announced a £9 billion package of support for energy bills not in the Spring Statement but at the time of the announcement of the change in the energy price cap. People will begin to see the benefit of that through the council tax rebates we are offering everyone in bands A to D of £150, and the £200 off bills now to be paid back over the coming years.
July is the earliest that this policy can be implemented by all software developers. It avoids millions of taxpayers having to make manual claims for refunds at the end of the tax year and employers having to make payroll corrections. Overall, the delivery timetable strikes the important balance between ensuring that individuals see the benefits of the increase as early as possible and allowing employers and payroll software providers sufficient time to update and test their systems so that the change is delivered smoothly, and for individuals to enjoy the benefits at the same time.
The second amendment asks the Government to lay a report considering the impact of the Act on disposable incomes, including if they are combined with a reduction in the national insurance rates of 1.25%. Her Majesty’s Treasury publishes regular distributional analysis of the impact of tax, welfare and spending decisions on households. The analysis published at the Spring Statement shows that, in 2024-25, the tax, welfare and spending decisions made since the 2019 spending round will have benefited the poorest households the most as a percentage of their income. The impact of government policy since spending round 2019 on the bottom four deciles is expected to be worth more than £1,000 a year, while there will have been a net benefit on average for the poorest 80% of households.
The aim of the Government’s regular distributional analysis is to present a comprehensive picture of the net effect of tax or welfare changes on household incomes in the round. As each policy decision will have a different effect on households, presenting the total impact over a relatively long period provides a more robust and stable approach than looking at every policy individually. Fiscal events are the appropriate time at which to publish comprehensive analysis of this sort because they allow the full range of government policy to be analysed together, in combination with the most up-to-date forecasts from the OBR.
The final amendment from the noble Baroness, Lady Kramer, concerns the Government laying a report to consider the impact of the Act on earned and unearned income, including an assessment of the impact of the future reductions in income tax. She touched on the history of national insurance and why it is not charged on unearned income. National insurance contributions are part of our social security system, which is based on the long-standing contributory principle, centred on paid employment and self-employment, with employers, employees and the self-employed paying towards the protection of those who have been in the labour market. Payment of NICs builds an individual’s entitlement to claim contributory benefits, which then replace earnings in certain circumstances, for example if someone is unable to work or is retired. Unearned income is generally excluded from a liability to NICs as it is not derived from paid employment.
Baroness Penn (Con)
My Lords, it has been a brief Bill, so my comments will match that. As ever, I am grateful to all noble Lords for their interest in and contributions to the Bill. I am grateful to the House authorities and parliamentary staff for their hard work behind the scenes in turning this Bill around at short notice and on a single day.
I want to acknowledge the officials who have worked so hard on this Bill at pace: the Bill team, the policy teams at HMRC and Her Majesty’s Treasury, the lawyers in both departments, the Office of the Parliamentary Counsel and the clerks in this place. I also thank the noble Lord, Lord Tunnicliffe, the noble Baroness, Lady Kramer, and their researchers for being so adaptable and contributing to the Bill in their normal detailed and constructive way, also at short notice but with welcome brevity.
I could remind noble Lords of the benefits of the Bill a further time but, given that we have taken all stages in one day, I will refrain from putting them forward again. The Bill delivers a significant tax cut to many working people at a time when they really need it. I therefore commend it to the House and beg to move.
Lord Tunnicliffe (Lab)
I thank the Minister for her courtesy and for making herself available to discuss the Bill.
Baroness Kramer (LD)
I join in those words from the noble Lord, Lord Tunnicliffe. We did not need to meet the Minister because, at this point, everything was looking very straightforward, but she made a very kind offer and it was appreciated.
Royal Assent
Thursday 31st March 2022
(2 years, 7 months ago)
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