(2 years, 1 month ago)
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Rachel Reeves (Leeds West) (Lab)
I beg to move,
That this House calls on the Government to cancel its planned 1.25 percentage point rise in National Insurance Contributions that will cost families an average of £500 per year from April 2022.
Six months ago today in this Chamber, I set out Labour’s opposition to the Conservatives’ national insurance tax hike. It was clear to us then that this was going to be a heavy burden on working people and businesses who could ill afford it. Since that time, the situation has worsened, but the Conservative party has not altered its wrong course. Filling up the car with petrol is more expensive, energy bills are soaring, and the cost of the weekly food shop is rising. It all adds up. Inflation is now 5.5%, the highest level since 1992, and is forecast to reach a massive 8% next month, outpacing people’s pay rises—if they get one at all. Growth is expected to slow further. The stark reality is that over the past 12 years, the Tories have become the party of high taxes because they are now the party of low growth.
This morning’s report by the Resolution Foundation finds that the average household will experience a £1,000 hit from tax rises and energy price increases this year under the Conservative Government. The Treasury Committee rightly highlighted the Office for Budget Responsibility’s forecast, which stated that
“the policy mix chosen by the Chancellor”
at the last Budget
“will act as a boost to inflation”.
Just focus on that for a moment: the Chancellor’s own policy choices are boosting inflation. The Government should have acted when the cost of living crisis started growing last September and well before it spiralled out of control in December, with costs soaring and inflation heating up.
The Russian invasion of Ukraine is devastating lives and livelihoods, and we must do all we can to stop Putin’s aggression. What is happening in Ukraine will have a cost of living effect here at home, too. When the facts change, so should the Government’s policies; people cannot afford Ministers carrying on regardless of worsening circumstances. The Chancellor must show some understanding of the real-world consequences of his policies for working people and businesses.
The spring Budget will take place two weeks tomorrow, on 23 March. If the Government cannot commit to halting the national insurance rise today, they must do so then, two weeks before it comes in on 6 April and hits working people and employers hard. Today is an opportunity for the Conservatives to show that they get it, and do not want to make the cost of living crisis even worse than it already is.
Tim Farron (Westmorland and Lonsdale) (LD)
The hon. Lady is making an important speech. She is right that the national insurance rise will cripple families who are already struggling to get by, but does she agree that what makes it worse is that not a penny of the money raised will go into the hands of hard-working carers who desperately need it? In a community such as mine that is above the national average age, with a need for more carers, that means people without care or with inadequate care.
Rachel Reeves
The hon. Gentleman is absolutely right. That is the great deceit at the heart of this national insurance tax rise. I will address some of those details in a moment.
Jonathan Edwards (Carmarthen East and Dinefwr) (Ind)
I fully support what the hon. Lady is saying. Does she agree that some of the measures we have seen for dealing with the cost of living crisis—for instance, the energy rebate—might now make matters worse? That rebate works on the basis that it will be repaid over subsequent years, and will only really work if energy prices normalise or fall, but all projections now indicate that energy prices will rise and rise, so the Government’s interventions are going to be inflationary and add to the problems people are facing.
Rachel Reeves
I fully agree with the hon. Gentleman. A buy now, pay later scheme for energy prices, based on the premise that prices are going to fall, does not bear any relation to the facts. That is why I say, when the facts change, so should the Government’s policies. They should not just carry on steering the boat in the wrong direction, towards the storm.
It is fair to say that the Prime Minister’s word has recently been deeply discredited, but let me remind the Chamber what he previously said about tax:
“Read my lips: we will not be raising taxes on income, or VAT, or national insurance.”
This is not just another of the long list of broken vows from a leader who has a fleeting relationship with truth and accuracy. This manifesto breach now belongs to the entire Conservative Government and especially the Chancellor, who seems not to want to take responsibility for his own tax rises. Let us not forget that last March, a year into the pandemic, the Chancellor said,
“We’re not going to raise the rates of income tax, national insurance, or VAT.”
This is not just the wrong thing to do; it is a broken promise. It is a clear and flagrant breach of the Conservative party’s own manifesto. They promised the public that they would not do this, and now they are going back on their word.
The Chancellor is not here to defend his new tax on jobs—I do not know why—but it is becoming increasingly clear that rather than help people now when they really need it, the Chancellor is telling his colleagues and briefing newspapers that he will make people wait until an election, when he wants to make a new set of promises to win people’s votes. People need help now and the Government should act now, not play games with people’s living standards. Voters are smarter and savvier than the Chancellor assumes. They have already seen through his buy now, pay later loan scheme, meant to help with energy bills. It is not too late for the Government to look again at Labour’s proposal for a one-off windfall tax on oil and gas producers in order to cut household energy bills by up to £600 this year. The case for our proposal gets stronger by the day, and the Chancellor should adopt it, but instead of easing the cost of living crisis, the Conservatives are the cost of living crisis.
Christine Jardine (Edinburgh West) (LD)
The hon. Lady is making a very powerful speech and some excellent points with which I agree. Does she agree that the Government are gambling with taxpayers’ money, rather than investing it? They are gambling that the price will go down, when we all know it will go up, and they are not looking to those people who have made a massive profit over the past two years, both from the energy crisis and in the pandemic, to try to relieve the burden on those who have been hardest hit.
Rachel Reeves
Politics is about choices; the hon. Lady makes an important point. This Government are making the choice to increase taxes on ordinary working people and those who employ them, while on the Opposition Benches, we say that those who have benefited from the high energy prices should pay a bit more in tax to relieve the pressure on ordinary working people. We have a Conservative Minister who goes on the TV and radio and says that energy companies and the North sea oil and gas companies are struggling right now. Tell that to my constituents, the hon. Lady’s constituents and all our constituents who are struggling to pay the bills, while the profits keep coming in for the big oil and gas producers.
Sir Oliver Heald (North East Hertfordshire) (Con)
Does the hon. Lady not agree that what she is saying is all smoke and mirrors? If a tax is put in for one year, that will not pay for the continuing costs over future years. What she is doing is simply misleading the public.
Rachel Reeves
If we raised those taxes now on North sea oil and gas companies, we could bring in money that could be used to relieve pressure now. I think that the right hon. and learned Gentleman’s constituents in North East Hertfordshire would be pretty pleased to have money off their bills this year, rather than the buy now, pay later scheme that we get from this Chancellor.
Why is the Chancellor not listening? The Conservatives’ rise in national insurance will hit almost 30 million working people. The TUC rightly argues that it is wrong to hit young and low-paid workers while “leaving the wealthy untouched”. The British Chambers of Commerce describes the Government’s policy as
“a drag anchor on jobs growth”.
The CBI put it bluntly and said that it will
“hurt a business’s ability to hire staff”.
On Sunday, the Federation of Small Businesses warned:
“Slamming small firms with a jobs tax hike will put the brakes on investment, upskilling and growth within communities most affected by the pandemic.”
The Chancellor must know what business organisations and trade unions are saying. We can only conclude that he is consciously disregarding their experience and views. We know from research by the National Institute of Economic and Social Research that job-intensive sectors will be disproportionately hit hard. The Conservatives have deliberately designed a tax hike that will hit people working in hotels, restaurants, transport, retail and wholesale especially hard.
Rachel Reeves
I will give way to the hon. Lady, and then to the hon. Gentleman.
Dr Johnson
I wonder if the hon. Lady can help me, because I am slightly confused. She has talked about a windfall tax on the energy companies, but she is then conflating that with the NI rise. The NI rise is not to pay for energy bills, as I understand it, but to pay for health and social care. Last week, she wanted to use that windfall tax to spend on reducing energy prices, as she has said today. She cannot use one tax to do two things. What will she use the tax for, were she to bring it in? In particular, if she were to cancel the NI rise—I do not want to increase taxes; I am a Conservative, so of course I do not want to do that—how would she pay for the care and healthcare of those vulnerable constituents who we know need it so badly?
Rachel Reeves
The average household in the hon. Lady’s constituency will be £1,200 worse off because of the tax increases and the price rises happening as a result of her Government’s policies. As she well knows, we would use the windfall tax to relieve pressure on household gas and electricity bills. The hon. Lady might oppose that, but I suggest she puts that on her leaflets and puts that to the voters in her constituency at the next election.
Several hon. Members rose—
Rachel Reeves
Sorry, I said I would give way to the hon. Member for Strangford (Jim Shannon). I will do that and then I will make a little more progress.
Jim Shannon
I thank the hon. Lady for putting forward her point of view. My party and I supported her party on a previous Opposition day in relation to a tax on oil and gas. Today the hon. Lady is, on behalf of the Opposition, putting forward something that is equally important. In my constituency of Strangford, fuel prices are up 50% and grocery prices are up between 25% and 30%. Does she agree that while for some the national insurance contributions increase will be a weightless straw, it could well be the straw that breaks the camel’s back?
Rachel Reeves
The hon. Gentleman speaks powerfully on behalf of his constituents, who are struggling with the double whammy of prices increasing, particularly gas and electricity bills, at the same time as this Government are piling on pressure after pressure with higher taxes on the same people who are paying those higher bills. He is absolutely right that people can only take so much, and the national insurance contribution tax hike is, as he says, potentially the straw that breaks the camel’s back.
Politics is about priorities, and it is about choices. So who has the Chancellor chosen to protect—not to tax more? Those who earn huge incomes from a large portfolio of buy-to-let properties or those making large sums from selling stocks and shares will not pay a penny more tax on that income. The super-rich will not be paying more. Roman Abramovich and billionaire oligarchs are not being made to pay more tax. In fact, some of those trying to relinquish their assets now appear to be using offshore vehicles to avoid paying tax. Lubov Chernukhin, wife of Putin’s former finance Minister, and mega-donor to the Tory party, has reportedly lobbied Ministers against higher taxes for the wealthy. As luck would have it, she will not be paying any more tax, unlike people across Britain who work for a living and keep our economy going.
Mr Clive Betts (Sheffield South East) (Lab)
My hon. Friend has mentioned not taxing buy-to-let landlords who have a number of properties. I do not think she is aware that the permanent secretary for the Department for Levelling Up, Housing and Communities came to the Select Committee yesterday and confirmed that, where properties are let with council tax and rents being paid in the same bill, the council tax rebate of £150 will go not to the tenant, but the landlord. If the landlord owns multiple properties, as long as they are not owned by a corporate entity, they will get multiple amounts of £150. Some of the landlords are going to be extremely well off, and tenants will have to go and apply to the discretionary fund to get any help at all.
Rachel Reeves
I thank my hon. Friend for bringing that to the House’s attention. It is exactly why Labour said that the warm home discount should be expanded to ensure that the money goes to the people who need it, not the landlords.
At the same time as the Government are asking hard-working British people to pay more in tax, they are writing off billions of pounds in fraud. Ordinary people are paying for this Government’s waste. The Chancellor repeatedly ignored warnings about the holes in his covid business support schemes, resulting in £4.3 billion of public money being written off. That does not even include the amounts lost to bounce back loan fraud, including taxpayer cash handed out to drug dealers and organised criminals. That fraud currently stands at £4.7 billion, so that is £9 billion and counting handed to fraudsters. Then there is the colossal Government waste during the pandemic, with £8.7 billion lost on unusable personal protective equipment, all paid for by the taxpayer. Billions has been spent on crony contracts that have not delivered, and every single cheque has been signed by the Chancellor.
Rachel Reeves
Let me just finish this point. Yesterday, we saw a whole new meaning to burning through money. After wasting billions on unusable PPE, the Government are literally burning it to get rid of it—putting taxpayers’ money through the furnace. The Conservatives’ promise to get value for money for taxpayers has gone up in flames. Taxpayers do not want to keep picking up the price of these dodgy contracts, fraud and waste. I will be very interested to hear the hon. Gentleman’s views on that.
Richard Graham
I am grateful to the hon. Lady. The difficulty is that this is a debate about the national insurance contributions increase; it is not a debate about her wide range of thoughts on all sorts of other aspects of the economy. The problem with this particular debate is that this additional tax, which is hypothecated exclusively for health and care, will make a huge difference to millions of people across the country, including in Leeds, who have been waiting for elective surgery, want to see social care resolved and need the extra funds for it to happen. In addition, it is progressive, because the top 14% of taxpayers will pay half of the revenue raised. Surely she would approve of that.
Rachel Reeves
The hon. Gentleman knows that the average household in Gloucester will be £1,299 worse off because of the double whammy of tax increases and price increases. I think they would be pretty concerned about the amount of taxpayers’ money that is being written off in fraud and waste—money that is being burned by the Government.
Despite waste and fraud costing more than this year’s national insurance contribution rise will raise, the Prime Minister says that the tax rise is necessary. That is the great deceit. On the steps of Downing Street in 2019, he claimed to have a plan for social care. Yet almost three years on, we know that the Government’s approach to social care will not stop people selling their home to pay for care, it will not deliver a penny more to improve care today, and it will not add a single minute of care and support for those who need it. Even then, NHS waiting lists are set to rise even further for the next two years. The Government will not fix the problems with our social care sector or our NHS. Never before have taxpayers been asked to pay so much and got so little in return.
It is time for the Chancellor to urgently change direction. The national insurance tax rise was wrong in September and it is even worse in March. It is the wrong tax at the wrong time: the cost of living is higher, inflation is out of control, wages are not keeping up, energy bills are going through the roof and family finances are stretched, yet the Chancellor refuses to back our windfall tax plans to help.
The Chancellor has not turned up today, but my message to the Minister is that he must turn up to the spring Budget with a plan to make a difference to the cost of living. The Chancellor’s tax rise should not go ahead. MPs can send the strongest signal today by backing our calls to cancel the national insurance tax increase next month. They know full well that our country believes that it is time to change course.
The Conservative Government are not doing enough to cushion the blows. In fact, when it comes to the tax rise, they are piling on the pressure and making matters worse. They must think again and back Labour’s motion today.
The Chief Secretary to the Treasury (Mr Simon Clarke)
The world has been appalled by Russia’s unprovoked, unjustified and illegal invasion of Ukraine. Every one of us has been shocked by the scenes of sheer horror that have unfolded over recent days and moved by the bravery of ordinary men and women defending their country against a merciless enemy. As the Prime Minister wrote at the weekend, the Ukrainians’ valour has helped to unite the international community.
We cannot let down that brave nation in its hour of need, which is why we are calling on the world to join forces and maximise our economic pressure on Putin’s regime. That means going further than the unprecedented sanctions that are already in place, including by working with our allies to further isolate Russia from the international financial system and by expelling more Russian banks from the SWIFT network. The cost of inaction against Putin’s war machine would be too great to contemplate; we have seen the price of appeasement before.
We must brace ourselves, however, for the fact that a robust united global opposition to Russia’s unprovoked aggression will have costs of its own. I am acutely aware that the conflict has economic repercussions that largely stem from a higher global energy price that, over time, may spill over into other commodities including wheat. Those repercussions are being felt across the world, including here at home.
That is why, this financial year and next, we will provide over £20 billion to help the public with the cost of living. That includes over £9 billion of direct support with higher energy costs for about 28 million households, with £200 for every household in Great Britain through the energy bill support scheme and a further £150 for every household in council tax bands A to D in England. In total, that means that about 80% of households will receive £350 of support. That builds on our further support for heating bills including increasing the warm home discount, the winter fuel payment and the cold weather payment, which together provided £2.5 billion to households last winter. The £500 million household support fund has been helping the most vulnerable with the cost of essentials over the past months.
More broadly, we are taking further steps to support people’s finances. We have cut the universal credit taper rate by 8p from 63p to 55p and we have increased the work allowance by £500 a year, which will ensure that nearly 2 million people keep more of what they earn and will put an extra £1,000 a year into their pockets.
Christine Jardine
Does the Minister appreciate that, for Opposition Members and our constituents, and possibly for many of his constituents, that now seems too little, too late and inappropriate for the situation in which the country finds itself?
Mr Clarke
I do not demur; we are faced with a serious challenge on the cost of living. The Government entirely accept that and are working to address it, but we must address it in a smart and financially sustainable way. A £20 billion package is a major commitment to support families across the UK. Of course, we continue to keep all our options under review to ensure that we can act in a way that is commensurate with the severity of the situation.
From next month, we will increase the national living wage by 6.6% to £9.50 an hour for those aged 23 and over, which will benefit more than 2 million workers across the UK by £1,000 a year. We have also frozen fuel duty for the 12th year in a row. That is on top of the help that we are already providing to those on low incomes with their housing costs and council tax bills.
Justin Madders (Ellesmere Port and Neston) (Lab)
On freezing the fuel duty, if the Minister has been to forecourts recently, he will know that the cost of petrol and diesel has gone up tremendously in the last few weeks. What has been the impact on the Treasury’s coffers from VAT receipts as a result?
Mr Clarke
We have forgone a tremendous amount of revenue through the freeze on fuel duty. On VAT, we obviously continue to look closely at the revenue situation. It is sometimes a misapprehension about the way that the VAT scheme works to the Treasury’s benefit. There is often a focus on domestic fuel and the impact that it is having on our income. To that point, the more that people spend of their discretionary income on domestic fuel costs, which are VAT chargeable at 5% as opposed to the full rate of 20%, the less that the Treasury recoups. In that regard, we have to be careful about some of the arguments around that.
Now that I have set out some of the context of the Government’s response, I will return to the specifics of the debate—the need for the health and social care levy and the rationale behind its operation. Last month, my right hon. Friend the Secretary of State for Health and Social Care explained to the House that there is now a significant backlog of elective care as a result of the pandemic, which my hon. Friend the Member for Gloucester (Richard Graham) alluded to. More than 6 million people are waiting for elective care in England and more than 300,000 people are waiting longer than a year. The Government have set out a clear plan to tackle the backlog, but we must deal with that most pressing of issues and the levy will allow us to do that.
Duncan Baker (North Norfolk) (Con)
Many things have happened in the last few weeks, but we must reflect on the fact that, for the last two years, we have been in the worst global health crisis for years during which the Government spent £450 billion to support people’s livelihoods. Any Government would need to look at themselves and recognise the enormous issues that that has created. It is simply unsustainable to continue to pay for services without looking at how we can gain more revenue for the Treasury. That is a sensible financial decision that any Government would have to make in the circumstances in which we find ourselves.
Mr Clarke
I agree with my hon. Friend. The hon. Member for Leeds West (Rachel Reeves) said that when the facts change, we should change our policy, but the point is that the facts have not changed. The covid backlog has not changed and the damage that it has done to our ability to deliver the healthcare that people need has not gone away. Governments have recognised the importance of tackling our social care issues for a long time, but there is no record of action. This time, things are different. We believe that it is only right that in an advanced and wealthy country such as the United Kingdom, people should know that their loved ones will have dignity and financial certainty if they require care. The new levy will allow us to achieve both our health and social care aims.
Dr Caroline Johnson
The hon. Member for Leeds West (Rachel Reeves) talked about politics meaning choices. I have listened carefully to both Front-Bench speeches and I heard that the Opposition want to remove the health and social care levy but not how they will pay for social care instead. Perhaps the Minister heard something I did not. Could he enlighten me?
Mr Clarke
I heard a lot of warm and fairly vague phrases, but I did not hear a concerted plan, and that of course goes to the heart of this question. The hon. Member for Leeds West said in her speech that the voters are smart and savvy, and I agree with her, but they know an Opposition playing politics when they see it.
The £12 billion average annual investment, which is of course a recurring investment—that is the crucial point—to meet a recurring need, will tackle the elective NHS backlog, while ensuring that the health service has the resources it needs over the coming years. It will strengthen our adult social care system, allowing us to invest at least £500 million to give our army of extraordinary social care workers new skills, and it will enable the Government to roll out the long-awaited reforms to funding for families through a cap on adult social care costs.
This is a transformative policy that will tackle serious and long-standing issues, but to fund such a significant increase in permanent spending we have had to make the tough but responsible choice to increase taxes. Only a broad-based tax such as income tax, VAT or national insurance can raise the sums needed for such significant investment. Using NICs as the base has several advantages. First, it means the levy will be paid for by employers, employees and the self-employed, including, from April next year, by workers over state pension age.
Secondly, this is a progressive way to raise funds because those who earn more will pay more: the top 15% of taxpayers will pay half the revenue. A basic rate taxpayer will pay about £3.49 per week, while 6.2 million—6.2 million—of the lowest earners will be exempt entirely from the levy and most small businesses will not be affected at all.
Mr Betts
The Minister talks about health and social care, but will he confirm that there is not a single penny in this extra funding to enable local authorities to cover their social care costs in their budget, which they are struggling with, or to improve the level of the social care they are offering? This crisis has now been going on for years and years, and the Government have promised to fix it. Given that this is a permanent increase in funding, will he also confirm that we are not going to see a tax cut in the next couple of years, just before the election—up today, down tomorrow?
Mr Clarke
On the hon. Gentleman’s point about our support for local authorities, we are giving £1.6 billion extra in each year of the spending review we announced in October to support local authorities with the challenges they face. Of course, the levy will fund £5.4 billion of investment in social care over the next three years, so it is a serious response to a serious challenge.
To return to the advantages of the way we have structured the levy, the third design advantage that stands out is that we have also announced an equivalent increase in dividend tax rates. There is therefore fairness across the spectrum in how this is being paid for.
I know there are some who ask why we need to raise tax at all, and instead say that we should borrow to fund permanent increases in spending. Throughout this speech I have outlined all that the Government have done to protect people’s finances as we recover from the pandemic and deal with the rising cost of living, and those actions mean our economy has made a strong recovery from covid-19. Our GDP has rebounded, and over the past months job vacancies have hit record highs, while the unemployment rate has fallen sharply. However, it is easy to forget that all those steps come at a huge cost. Covid casts a long shadow across our economy. Indeed, our debt is at its highest since the early 1960s. As I have reminded the House on many occasions, that high level of borrowing leaves us susceptible to shocks, including changes in interest rates and inflation.
Dr Caroline Johnson
My right hon. Friend is making some excellent points about the importance of balance in our finances. One thing my constituents will want to know as we spend all this money from the health and social care levy is that it is being well spent and used very efficiently. What can my right hon. Friend tell me about how he will ensure that the money is spent efficiently and with the best possible productivity?
Mr Clarke
Making sure that we spend taxpayers’ money wisely is the central duty of any Government. It is something that, as Chief Secretary, I work very hard on with officials and Departments to make sure that we scrutinise spending in the way that delivers best value.
Some fairly spurious points have been raised about our record on issues such as PPE procurement, and we need to remember what I think could best be described as the brass neck of the Opposition in calling us out on this issue, when I think the hon. Member for Leeds West suggested at one point that we should procure our PPE from historical theatre re-enactment companies or fancy dress companies. Procuring PPE at pace brought with it some inevitable challenges, and it is vital that we had the resources to deal with the situation we faced at the time.
Richard Graham
The debate this afternoon is fascinating in a number of ways. The first one is that the hon. Member for Leeds West (Rachel Reeves) rightly pointed out that Government is about choice. I remember vividly coming into this place in 2010, when the maximum someone could earn before paying tax was £6,000. It is now £12,500, which means £1,000 more in take-home pay for millions of our constituents. My right hon. Friend has confirmed that more than 6 million taxpayers will not be paying anything at all towards the 1.5% increase in national insurance, which will pay for their families’ and their parents’ hospital care and social care.
Mr Clarke
I entirely agree with what my hon. Friend has said, and it is a reflection of the fact that we have taken sensible measured steps against what has been a recurring series of unprecedented challenges—the financial crisis, our exit from the European Union, covid, and now the backdrop of conflict in Ukraine. All these things have had a major impact on the world around us, but our focus has consistently been on supporting people to do the right thing and to protect their finances.
Sir Oliver Heald
Does my right hon. Friend agree that the rise in the national living wage should not be ignored and is important in helping people at the bottom of the income spectrum? It is right to take such measures, but the Opposition’s asking for more money the whole time but not being prepared to put in any resource is a ridiculous smoke and mirrors job.
Mr Clarke
It is, and my right hon. and learned Friend is precisely right because, in the end, it is poorest who will lose out the most if we lose control either of our public spending or of inflation. To illustrate, a 1 percentage point rise in both inflation and interest rates would increase spending on debt interest by nearly £23 billion a year, and that threat is not a notional one. In January 2021 we spent £1.6 billion on servicing our debt, but in January this year we spent £6.1 billion. We cannot fund increases in spending on our health service and social care by increasing borrowing. Members will surely agree that to leave ourselves vulnerable at this time by further increasing our debt burden would be highly irresponsible. These are not always easy choices, but we will be the ones to reconcile the need to reduce our debt burden with the growing pressures on the state, and that means responsible choices about taxation.
Mr Clarke
I have given way many times, and I am afraid that I must make progress.
The Opposition claim that they would instead grow the economy to finance their choices. With all due respect to the hon. Member for Leeds West, that is not a credible solution to an immediate problem. I remind the House that this is the same Opposition who want to place a windfall tax on our vital North sea oil and gas producers—companies that already pay a headline tax rate on their profits of more than double the rate of corporation tax. With investment in the sector hitting an all-time low in 2020-21, such a tax on oil and gas would not be an appropriate solution. It would only create uncertainty, deter investment and displace the investment that we need in clean, renewable technologies.
As the Chancellor has recently set out, we firmly believe in lower taxes. The pounds generated by our country are better spent by individuals and businesses than by Government. However, cutting tax sustainably requires hard work and prioritisation, especially when demands on the state are growing. We must reach our goals in a responsible way that addresses our challenges, too. This levy is the best and most equitable way to raise the funds needed to protect health and social care across the United Kingdom, and I await any credible explanation from the Opposition of how they plan to cover these costs in a responsible way.
I will end by saying that this Government recognise the difficulties that people across this country are facing right now. We know times are hard, and we are working hard to alleviate that pressure, but as a responsible Government we must not shy away from difficult decisions. It is only by meeting such challenges head-on that we will succeed in building a health and social care system that is fit for the future and that truly supports our citizens at every stage in their lives.
Several hon. Members rose—
Mr Deputy Speaker (Mr Nigel Evans)
Order. Before I call Richard Thomson, let me say that there is clearly a lot of interest in this debate. As Members know, exceptionally, we are suspending the House at 4.45 pm to take the President of Ukraine’s speech, and we will then move on to the second Opposition day debate. May I therefore ask Back Benchers to focus on the length of their contributions so that we can get in as many people as possible?
Richard Thomson (Gordon) (SNP)
That we are currently experiencing the gravest cost of living crisis in memory should not be in the least bit a controversial thing to say. It has been caused by inflation from a number of fronts: the shortage of labour caused by Brexit and the ending of free movement; the increased trade frictions as a direct consequence of Brexit; covid-19 and all that has befallen us over the last two years; and, most recently, the rapidly increasing costs of energy. Amidst all this it is absolutely extraordinary that any sentient, competent Government would seek to pile on the agony by increasing national insurance contributions for employers, employees and the self-employed.
Anthony Browne (South Cambridgeshire) (Con)
Will the hon. Gentleman give way?
Richard Thomson
I will give way shortly but first want to make some progress, because this represents a shattering of the Conservatives’ manifesto promises—and I am sure the hon. Member will want to be fully cognisant of this before he takes to his feet to chide me. On page 2—the inside page—of the Conservative party’s 2019 manifesto, entitled “Get Brexit Done: Unleash Britain’s Potential”, we had an introduction from no lesser a personage than the Prime Minister himself, rather grandiosely titled “My Guarantee”, which said:
“We will not raise the rate of income tax, VAT or national insurance”.
That was signed off with the Prime Minister’s signature, and it was a statement quite literally not worth the paper it was written on.
Several hon. Members rose—
Richard Thomson
I am spoiled for choice; I give way to the hon. Member for South Cambridgeshire (Anthony Browne).
Anthony Browne
The hon. Member makes some very valid points about the rise in the cost of living in the UK, which we absolutely accept is a real challenge, but he puts many of the reasons for it down at the feet of the British Government; does he not accept that this is a global phenomenon? Does he not accept that the increase in energy prices is a global phenomenon affecting all countries around the world, that the crunch in the supply chains resulting from the global pandemic is a global phenomenon, and that inflation is higher in America and Germany than in the UK—and in the latest figures UK inflation is below the OECD average?
Richard Thomson
For a moment there, I was going to ask the hon. Member if he would give way to me. Yes, I do accept most of those things but, as I also set out very clearly, there are those aspects that are exogenous and global and there are those, such as through Brexit and from the poor response to covid in many respects, that are entirely self-inflicted. I am happy to draw a distinction and I hope that, on reflection, the hon. Member might do so, too.
Let us not be in any doubt about the enormity of the crisis facing us. The National Institute of Economic and Social Research has warned that the number of UK households classed as destitute could rise by nearly a third to more than 1 million this spring after the Government bring in their national insurance increase. Ofgem recently announced that millions of householders will see their energy bills rise by £693 as a result of the increase in the energy cap from April. The Joseph Rowntree Foundation warns that the energy price cap rise will have a harsher impact on the poorest families, who will spend on average 18% of their income after housing costs on energy bills after April. Energy UK recently warned that household energy bills could rise by another £1,000 by October as wholesale gas prices continue to soar, with households facing the prospect of bills between £2,500 and £3,000 this year. Consumer prices, as measured by the consumer prices index, were 5.5% higher in December 2021 than a year before, the highest inflation rate recorded since 1992. And of course we must not forget that the Bank of England increased interest rates from 0.25% to 0.5% and forecasts that real household disposable incomes are set to fall by 2%.
The UK Government’s “Health and Social Care Levy” police paper claims:
“This levy provides a UK-wide approach which enables us to pool and share risks and resources across the UK”.
In accepting that, we should be absolutely clear about whom the risks are being pooled among. We must be in no doubt whatsoever that the upcoming national insurance hike is a tax on jobs as well as on individuals, when people are already suffering. The increase will not touch property income, pensions or income from savings, but will fall squarely on the shoulders of those who are salaried or whose income is drawn from profits.
We have heard about figures showing that the top proportion are paying higher amounts, but we would expect that. What I am interested in is the marginal rate of tax, because that is the true measure of fairness—how much of someone’s income they are having to give over as a result of a taxation measure. Let us look at one group in particular: our students. This national insurance hike will mean that, if student loan repayments are included, graduates earning just over £27,000 will pay a marginal tax rate in excess of 42%. We have heard that government is about choices and it is clear from the choices this Government are making that the combined effect of their policies will hit the lowest earners, the youngest earners and those with the least economic assets the hardest.
Jerome Mayhew (Broadland) (Con)
The hon. Gentleman is asserting that the poorest will be worst hit by this, but Treasury analysis of the impact of tax and spending decisions on households in ’22-23 in cash terms clearly shows that the bottom eight deciles—80% of households—will be better off as a result of the Government’s combined tax and spend decisions, including on national insurance. What does the hon. Gentleman say to that?
Richard Thomson
I say that I very much doubt that, and there is analysis by the Institute for Fiscal Studies that suggests very differently, but again this comes back to the marginal rate of tax and there is no doubt that this is going to have a greater impact on the marginal rate of low earners than that of higher earners.
Richard Graham
On a point of order, Mr Deputy Speaker. The hon. Member has made some very good points but I do believe he has inadvertently misled the House by claiming that those who are least well-paid will be paying the most on the tax when we have just heard from the Chief Secretary that over 6 million earners will not be contributing a penny towards the cost of the national increase rise. Mr Deputy Speaker, may I give the hon. Member, through your offices, the opportunity to withdraw his earlier remark?
Mr Deputy Speaker (Mr Nigel Evans)
That sounds like a debating point as opposed to a point for the Chair.
Richard Thomson
Again, I refer the hon. Member for Gloucester (Richard Graham) to the concept of the marginal rate of tax and ask him to look at the totality of the impact—if he had been patient I would have happily given way; he had no need to resort to such devices.
On raising additional resources for health and social care, as we are invited to believe this levy is supposed to do, it is surely much fairer as a general principle to spread the burden by increasing income taxes across the board on both earned and unearned income, as well as to look again at areas such as inheritance taxes and capital gains, so that the totality of the wealth of the nation can be taken into consideration in sharing the burden. There is a real danger in my view, particularly as a result of localised property price inflation, that this policy will further widen economic, social, generational and geographical divides, baking that unfairness into the social and economic settlement for decades to come. We have a Government who like to talk the language of levelling up while doing the exact opposite on personal and business taxation. We will be paying the costs of that in reduced growth and lower incomes for many years to come.
That is the problem from a social justice perspective, but it is almost every bit as bad from a policy making perspective. Apart from moneys going to the NHS in England and an unspecified amount eventually trickling through to social care in England, we still have only the sketchiest idea of what this resource will be invested in. There are significant whole-system problems in health and social care in England which predate covid. That is not to say things are great everywhere else, but I get absolutely no sense that the UK Government have started to embrace the systemic issues that cause the blockages and poorer outcomes that are there and that money will only go so far to solve, including the high levels of unmet need, staff shortages and poor workforce pay and conditions, as well as the fragile provider market. In that sense, the Government are doing what they routinely like to criticise others for and focusing on inputs rather than outcomes, and surely outcomes for people in health and social care should be driving the reform that is needed.
It is not in doubt that there was a pre-covid pandemic crisis in health and social care, let alone the post-covid one, but that will not be remediated either by this policy or by the Prime Minister’s utterly bogus repeated claims about building 40 hospitals. Reform requires thought as well as resource, but surely fairness demands that the resource for that reform comes primarily from those with the broadest shoulders and an economy that is able to and is growing sustainably and productively.
I support Scottish independence and want full tax powers for Scotland, and I have no doubt in my mind that an independent Scottish Government would not be using the equivalent of national insurance in such a way for this purpose. Until that changes, we are stuck with and reliant on the Conservatives—out of all character—prioritising the interests of those on lower and middle incomes over the most wealthy.
Anthony Browne
The hon. Member stresses the importance of a sustainably growing economy. Would he like to congratulate the Government on their economic response to covid, which means that we had the fastest growing economy in the G7 last year and are predicted to do so this year? Groups from the International Monetary Fund to the OECD have congratulated them on their response.
Richard Thomson
I do not think that is true, but, even if it was, those economies that fall the furthest rebound the fastest.
We seem to be reliant on the better nature of the Conservative Government—one that sadly is often lacking—with them somehow going against all their instincts to protect the interests of lower and middle-income earners over those of the highest. I shall not be holding my breath on that front.
Several hon. Members rose—
Mr Deputy Speaker (Mr Nigel Evans)
Order. As I said earlier, about 15 people want to speak, so Members should be looking towards five to six minutes and not going over that mark.
Jerome Mayhew (Broadland) (Con)
When we discuss whether we should have the national insurance contribution rise, we ought to look at what we intend to use the money for, because, after all, as my hon. Friend the Member for Gloucester (Richard Graham) mentioned, it is a hypothecated tax. The Government are looking to address two crucial elements to improve to our society, which are the covid backlog—currently more than 6 million people are waiting for treatment, of whom 310,000 are waiting for more than a year—and adult social care, where there is a desire widely held by constituents of hon. Members across the House to cap care costs. Such reforms would assist 150,000 people with their care costs at their time of greatest need. There is a degree of consensus that they are good proposals and must happen—we need to spend the money—so the real question is not whether we spend the money but how we pay for them.
Mr Betts
The hon. Member mentioned the 150,000 people who will benefit from the cap on care costs, and they are disproportionately people in more expensive homes. Where in that funding is the help for the 1.5 million people that Age Concern has assessed should be entitled to social care but have now been excluded from the provisions?
Jerome Mayhew
The hon. Member made a number of interventions on the Minister, and I refer him to the full responses that were given.
The question that I take from that is: how we will pay for the proposals? It seems to me that there can be only three answers. We can take money from other priorities in Government, we can borrow, or we can increase taxation. So far, I have heard no suggestions of other areas of Government spending that should be reduced. The Opposition typically move to defence spending as a simple way of extracting money for other commitments, but that is unlikely to be an area of future reductions in today’s environment; in fact, I submit that it will be the opposite.
Grahame Morris (Easington) (Lab)
The hon. Member is seeking suggestions. What does he think about the £8.7 billion of personal protective equipment that has been incinerated and gone up in flames? Surely nobody in their right mind would suggest that that is a good use of public money. Is it not possible to claw back some of those costs from the suppliers, if indeed the supplies were defective?
Jerome Mayhew
I am grateful to the hon. Member for his intervention. I suggest that a very good use of public money was emergency funding for PPE when we most desperately needed it in a national lockdown. It was inevitable that there would be a trade-off between speed—everyone in the House was cheering the Government on at the time—and maximising the effectiveness of every single contract. I hope that the Government make no apology for the speed with which they dealt with the crisis. They should be commended for that.
It has also been suggested that we should crack down on fraud. The hon. Member for Leeds West (Rachel Reeves) referenced a £4.7 billion headline in covid-related fraud, but she failed to give the Government credit for the actions that they have taken to address that. We have the Taxpayer Protection Taskforce, which has recruited 1,265 staff. We also have the work done on powers for the Insolvency Service and Companies House to link company directors directly to their bounce back loans, which has been used on 61,758 companies, catching loans worth £2.1 billion. The combination of those two factors means that the new estimate, which she did not find time to refer to, is not £4.7 billion but £3.3 billion. Fraud is therefore reduced to an estimated 7.5% of contracts, which is at least within spitting distance of the average for Government programmes of, I am sorry to say, as much as 5%.
Anthony Browne
My hon. Friend makes a valid point about the need to increase spending to pay for social care and has raised the different ways of doing that. Does he agree that if we are to increase spending sustainably, we need a sustainable source of money and that a one-off windfall that occurs in just one year cannot fund long-term commitments? Cutting back on fraud in one particular year cannot fund long-term commitments.
Jerome Mayhew
My hon. Friend is absolutely right. Even if we recovered all of that £3.3 billion, that would be for a single year only. The great mistake that the Opposition have made is to conflate single events—a windfall tax is another example—with ongoing revenue needs.
The next option is to borrow money. Of course, that is the easy response, and that really is the Opposition’s position, even if they cannot bring themselves to admit it from the Dispatch Box. However, that is not free money, because we have to service the debt and, eventually, we have to repay it. So we are passing the responsibility on to our children and our grandchildren for tax cuts now, which is essentially what the Labour party is arguing for. Our servicing of debt already cost an estimated £64 billion last year, which is £955 for every single member of the population. Because of inflation, which is a global phenomenon, and the likely rise in interest rates, that is forecast to rise to £75 billion for this financial year. The hon. Member for Leeds West says that the Government have a policy of buy now, pay later, but what could be a better description of Labour’s response to this pressing need? We want to improve social care, and we need to have a covid fightback, and we have got to pay for it.
There is the option to borrow, but, as I said, it is our children and grandchildren who will pay that price. I therefore believe that the Government are quite right to balance the increased social spending that we want to achieve with the tax necessary to pay for it. If we look at the total measures that the Government have brought in, we see that they are deeply progressive. Treasury analysis shows that they are net positive for 80% of households, whereas Labour’s plan to remove the national insurance contribution would actually help the top 10% the most—by more than £1,000. Surely that is not Labour’s policy.
No Conservative Government want to raise tax, but it is our duty before cheap popularity to be responsible custodians of national finances. That is a lesson that Labour has never learned.
Several hon. Members rose—
Madam Deputy Speaker (Dame Rosie Winterton)
Order. I am afraid that I will have to put a time limit on speeches of six minutes; otherwise, it will not be fair on others.
Gerald Jones (Merthyr Tydfil and Rhymney) (Lab)
I rise to support the motion from my right hon. and hon. Friends. We all remember too well that during the 2019 general election campaign, just over two years ago, the Prime Minister said to voters:
“Read my lips, we will not be raising taxes on income or VAT or national insurance.”
The Chancellor of the Exchequer was also keen to point out that his plan was to cut taxes for the lowest paid through cutting national insurance. It is clear that the Government have blatantly broken their promises to the country on national insurance, as they have on international development and the pension triple lock.
As my hon. Friend the Member for Leeds West (Rachel Reeves), the shadow Chancellor, mentioned, things have changed in the six months since the national insurance contributions increase was announced back in September. It is clear to many Opposition Members that the Government need to rethink the planned rise in national insurance contributions. In these extraordinarily difficult times, if the rise goes ahead, it will see people’s incomes squeezed even more. People are finding it more and more difficult just to survive and that is before we see the increase in national insurance contributions and the huge increase in energy bills that will have a heavy impact from April.
In my constituency and across the country, we are all hearing stories of huge sacrifice. Families are facing a real cost of living crisis, with energy bills set to rise again in April—
Gerald Jones
No, I will not. Given that oil and gas producers in the North sea have posted huge profits during the pandemic, why do the Government not halt their unfair tax rise, back a windfall tax to help to fund a cut in VAT on home energy bills and ease the burden on working people?
Government Members have also called on the Government not to go ahead with the rise. They have urged Ministers to make tackling the cost of living their No. 1 priority and noted that this year will be exceptionally hard for families, so why are the Government still not listening?
The Government claim that this situation is down to the pandemic, but in March last year—a year into the pandemic—the Chancellor promised that national insurance would not go up, saying:
“We’re not going to raise the rates of income tax, national insurance, or VAT.”
He added:
“Nobody’s take home pay will be less than it is now”—
another broken promise.
Analysis from the New Economics Foundation shows that 2.5 million working households will be hit by the Tory double whammy of cuts to universal credit and the increase in national insurance, losing out on as much as £1,170 next year. That is all at a time when we know that the price of food, the price of petrol and the cost of rent are going up and families are genuinely fearful about making ends meet.
There are other ways to raise that money, but the Chancellor wants the country to believe that this is the only way to do it. Half of Britons say that they could not afford an additional £50 a month on their cost of living. The Government should halt the national insurance rise so that people see their cost of living concerns ease. Surely the Minister recognises that stopping the rise would provide immediate support and help families at this really difficult time.
We know that citizens advice bureaux have seen a huge increase in debt advice services and that is before we reach April, when there will be the national insurance rise and the increase in energy costs. Labour has long called for the national insurance rise to be halted so that it does not make the cost of living crisis worse.
Gerald Jones
No, I will not. The Federation of Small Businesses warned that
“this increase will stifle recruitment, investment and efforts to upskill and improve productivity in the years ahead.”
The trade unions have joined the FSB in that regard. The FSB stated:
“The Government’s regressive jobs tax hike will put jobs at risk, stifle start-ups and prevent new jobs from being created…It could mean 50,000 more people out of work after it takes effect in April. That means 50,000 livelihoods harmed—50,000 people who would otherwise be at work in our economy.”
The TUC also says that it is wrong to hit young and low-paid workers while “leaving the wealthy untouched”.
Surely the Government must recognise that we are in a totally different situation from when the rise was announced six months ago. The economic outlook for thousands of families across the country is much bleaker, so I urge the Government to change course, support today’s Opposition motion and help to ease the pressure on families in Merthyr Tydfil and Rhymney and right across the country.
Anthony Browne (South Cambridgeshire) (Con)
The Opposition are right that the rise in the cost of living is a crisis causing pain for many households across the country, particularly those on low incomes. As I said in an intervention, this is a global issue. The inflation afflicting the UK afflicts almost every country around the world. The energy price rises and the rise in food costs are as a result of global phenomena that are affecting countries such as US and Germany, where inflation is far higher than it is in the UK. In fact, if we look on an international basis, we see that inflation here is pretty middle of the road, although it is very concerning.
I will tell the House what else is very serious, as well as the cost of living crisis: the waiting list crisis that we have after the pandemic, with 6 million people waiting for elective surgery. There is also the social care crisis, which has bedevilled Governments for decades. They have always put it in on the “too difficult to do” pile and not done anything about it. We need to tackle those really serious issues and they require a serious, sustained increase in funding. The question is: how do we do that? How do we get that amount of money?
The national insurance increase will raise about £12 billion a year, when we do all the sums and cut out the costs. We can raise that amount of money only from three sorts of taxes: national insurance, VAT or income tax. If we put this on VAT, there would be an increase in the cost of living. That would go straight through to inflation.
The windfall tax that the Opposition propose would raise £6 billion or so, which is half the amount and would just be for one year. That cannot pay for a sustained increase in social care funding and the waiting list backlog. The question that I was going to ask if I had been allowed to intervene earlier, including on the shadow Chancellor, the hon. Member for Leeds West (Rachel Reeves)—I notice that she has disappeared from her own debate, which is interesting—[Interruption.] It is the Opposition’s debate, not ours. I was going to ask how the Opposition would sustainably raise £12 billion a year to pay for the NHS. As I understand it, the Labour party has no solution to or proposal for that. Labour’s proposal to cut national insurance therefore basically amounts to a tax cut to starve the NHS of much-needed funding. I am astonished that the Labour party, of all parties, which likes to see itself as the party of the NHS, is proposing to do that.
We could ask, “Why choose national insurance rather than income tax?” There are various reasons for that. One of the most powerful is that it would be half paid for by businesses—there would be 1.25% for employees and 1.25% for businesses—whereas income tax is paid directly by earners.
National insurance is also progressive. I find it alarming when Labour Members keep saying that it is not. I wonder what understanding of economics they have. A progressive tax means that those on higher incomes pay more. That is clearly the case with national insurance. The top 14% will pay 50% of the whole tax. It is a tax that Labour increased in 2003 to pay for healthcare.
There are problems with national insurance. It does not normally go on dividends or on pensions, but this increase will, and it addresses a lot of the inequities of normal national insurance. Unlike income tax, national insurance can also be—and indeed, is—ringfenced legally and operationally for the NHS, so that we can be sure that this money is going towards the systemic problem of healthcare and social care that I mentioned earlier.
It is clearly important to tackle the cost of living. I completely understand Opposition Members’ concerns about raising taxes. I see myself as a low-tax Conservative, and I do not vote for tax rises with any joy in my heart, but what the Government have done is give support on household bills directly through the £200 energy bill support scheme—the rebate—and the £150 off council tax for houses in bands A to D. Eighty per cent. of houses will benefit from that, and the total package is about £9 billion a year. That goes directly to people’s pockets from April onwards. They will notice it straight away, and people want immediate support, not long-term aspiration.
I find this whole debate quite beguiling. I have spent my adult life watching the Labour party argue for higher taxes to fund the NHS. Today, in this debate, Labour Members are arguing for lower taxes in order to starve the NHS of money. This whole debate is about not the opportunities for the NHS but political opportunism, and I do not think it brings any credit on the Labour party to be so flagrantly opportunistic and economically illiterate as it is being today.
Justin Madders (Ellesmere Port and Neston) (Lab)
I place on record my dismay that the Government have chosen to hit working people and businesses with a national insurance rise at the worst possible time—when one in six working households cannot make ends meet, according to the Institute for Public Policy Research; when the number of jobs that pay below the national minimum wage and the living wage is still more than two and a half times higher than at pre-pandemic levels; when inflation is forecast to reach 7.25% next month, the highest level since August 1991.
We already have the highest level of inflation for three decades, but I am afraid that everything we know about the implications of Ukraine tells us that it will only get higher in the next few months. Everywhere we turn, prices are going up far faster than anyone can keep up with—at the supermarket checkout, at the petrol pump, in gas and electricity bills. Adding in mortgage rises, rent rises and council tax rises, we face a perfect storm of inflationary pressures that we have not seen for an entire generation.
I do not think that anyone has really levelled with the public about what the implications of a protracted war in Ukraine will be for prices. Things are going to get a lot more difficult before the pressure eases off. Just look at how the mere suggestion of a boycott of Russian gas and oil has pushed trading prices sky-high. That resulted from comments from the US Secretary of State, Antony Blinken, that conversations about a boycott were taking place—one can only imagine what would happen if people moved beyond conversations and a boycott actually took place.
It is not clear to what extent the price spikes are being exacerbated by speculators who are seeking to take advantage of the situation. Nor do we know whether a real effort by OPEC countries to increase production would mitigate it, or what impact the conflict will have on food prices over the medium term. The reality is that western Europe, trapped by its reliance on Russian energy, is forced to buy fuel that pays for the war that pushes up the price of energy further still. I fear that until more home truths are spoken about what it will take to break the cycle, we will continue to see prices rise and the war continue.
I recognise that addressing the issue is not solely within the Government’s gift. Grasping the nettle will be a continent-wide effort, but we must look at what the Government can control. There is an opportunity today to act on the national insurance increases. It beggars belief that we are looking at tax rises at the same time as prices are rising and bills are skyrocketing at levels not seen for a generation. This is the wrong tax at the wrong time.
Justin Madders
I am sorry, but the hon. Member has just spoken. If he did not get his point in then, he has missed his opportunity.
The tax rise was wrong back in September when it was first proposed, and even more wrong now. That is not just the view of Opposition Members; the cross-party Treasury Committee has highlighted that the increase in national insurance contributions for employers will lead to higher costs being passed on to consumers. If we speak to anyone in social care, they tell us that that is pushing them into unviability.
Data from the Institute of Directors in January demonstrated that more than a third of businesses would respond to the increase by raising prices and passing on the burden to customers, yet again increasing inflationary pressures. The same report also said that nearly a fifth of businesses would consider employing fewer staff as a result of these rises. Almost three quarters of companies in manufacturing say that they are also very likely to pass on the costs to customers, so it is no surprise that Make UK has said that the proposal is “illogical” and “ill-timed”.
We know that some areas will be worse hit than others. Analysis shows that the north-east and the midlands—areas that rely on wages rather than income from investment and properties—will be hardest hit. That is not levelling up, is it? Trapping the country in a low-growth, high-tax cycle and hitting working people with tax rise after tax rise is the opposite of levelling up.
Within four years, the average household will be paying £3,000 a year more in tax than when the Prime Minister first came to power. There is nothing to give families the security that they would get from the fully funded measures that the Opposition have proposed to keep energy bills down, which would be paid for by a windfall tax on North sea oil and gas producer profits. In my constituency alone, 12,500 families would be £400 better off as a result of the tax, and our plan would mean almost all households making savings on their bills. Nor would an extra £40 charge be hidden away and come out of people’s bills in a few years’ time, regardless of whether they had benefited from the scheme in the first place.
We see the effects of the current crisis playing out every day. One example in my constituency relates to housing affordability. Housing is a basic right, but with affordable and council housing in short supply, reliance upon the private rented sector has increased. However, a recent search of properties available in Ellesmere Port showed that of the 13 properties available—a minuscule number to start with—only two came within a rental liability level that would be covered by the local housing allowance, while the rest ranged from £30 to £225 over the rates. In Neston, the results of a search are even worse: all the properties were well over the LHA. In fact, it is now incredibly rare to see any properties offered at a rental value equivalent to the LHA. How on earth can we expect people to put a roof over their head in that situation, let alone pay for energy bills, food or council tax bills?
This will be an ongoing crisis, and there is no solution from the Government. Everywhere we turn, from housing to heating to eating, prices are going up. People face some really tough times ahead unless something is done now. Let us not add to that impossible burden. Let us scrap this national insurance increase right now.
Duncan Baker (North Norfolk) (Con)
I have said many times in this place that I represent the oldest demographic in the entire country. Hon. Members might expect me to say that North Norfolk is beautiful; it is my home and it is where I grew up. People come to live there all their lives, retire there or come back for years and years. If I knock on a door, there are two things that my constituents say they care about. They care about their health, and they recognise that with the dreadful situation we are in, the conflict we are seeing and the shifting of geopolitical plates, we have to have a competent Government looking after the economy. In pretty much any polling across the country, the most important factors that people care about are their health and the economy.
As I said in my intervention on the Chief Secretary, we have spent £450 billion, an eye-watering amount, on safeguarding the jobs and livelihoods of millions and millions of people—working-class, everyday people whose jobs have been saved. As a consequence, we are now in £2.2 trillion or so of debt. I find it staggering that the Opposition think that we can just amble out the other side of a global pandemic and everything will be normal. It simply cannot be, and we must and should be honest about it.
The health and social care levy is needed. We have heard all the statistics that show why: to repair the backlog in elective surgery and repair the social care system that we need in this country. According to reports, as my hon. Friend the Member for South Cambridgeshire (Anthony Browne) said, £12 billion a year is needed—a colossal amount of money. We cannot raise £12 billion a year by making savings or cuts to other services that have been ravaged throughout the pandemic that we have just come through.
Social care is a subject that I have spoken about many times in this Chamber—obviously I would, with the demographic I represent. We should not underestimate the herculean efforts of our carers. It is completely right that we hail our nurses through the pandemic. Imagine the care and patience someone needs to be a dementia nurse or a palliative carer. It is about time we fixed that—it is about time we grabbed the nettle and did it. This is a Government who are finally gutsy enough not to be derailed, no matter how difficult the situation. They will not be pushed off track; they will deal with it.
Before I came to the House I was a finance director, and I remember that when automatic enrolment came in, the situation was very similar. The initial levy was 1%, and what was being said then was what is being said now—people would be desperately worried about the cost, they would not pay for it, and they would opt out. What happened? Ninety per cent. of people stayed in the scheme, because they saw the value of what it was doing in the context of the marginal extra amount that they were paying.
The same will happen in this case. No one wants to see tax rises—we all agree on that—but the proof of the pudding will be in the eating. If we end up funding services properly and taking care of our elderly people properly—and we have the opportunity now to reform the social care sector and fund the NHS in this way—the 1.25% about which Members are so concerned today will dissipate, and for that reason we have to be entirely sensible.
Anthony Browne
My hon. Friend is making a powerful case for the need to increase spending on health and social care in the long run. Does he share my concern about the fact that, while proposing a cut in national insurance, Labour Members have no answer to the question of how they would fund ongoing health and social care services, and the fact that cutting national insurance would inevitably lead to their cutting those as well?
Duncan Baker
This is the great problem in the House: we are constantly being told that what we are doing is wrong, but there are never many opportunities to ask, “What would you do?”, and that is the case again today. Yes, we have heard about the one-off windfall tax on the energy companies, but that has been dismissed for very good reasons. If anyone is able to come up with a sustainable way in which we can generate £12 billion to improve the situation that we are discussing today, I should very much like to sit here for the rest of the afternoon in order to hear it.
Kirsty Blackman (Aberdeen North) (SNP)
I want to speak about quite a few matters, but first I want to focus in the plight of younger people—and by “younger people”, I mean people under 40, not just people in their 20s. I am talking about everyone in that younger slice of the population.
We have talked about the last massive increase in inflation, which, in 1992, reached the same levels of increase that it has reached in recent times. I am 35; in 1992 I was six, and I did not know what the rate of inflation was because it did not really matter to me. For a significant period I have been living in a property that does not belong to my parents, and I have a 10-year-old and an eight-year-old. There are many, many people like me out there, people who have been living their lives and paying their bills and have never seen an inflation rate like this, have never seen the increases that are coming down the line, and have never felt the massive squeeze that we are feeling now.
This is a cost of living crisis, one that is unprecedented for members of my generation who are having to face these massive costs, and it is compounded by the UK Government’s terribly poor decisions. It is compounded by the fact that people in Scotland must pay massive fees for attending university in England. It is compounded by the fact that people will be paying off student loans throughout their lives; indeed, they will never be able to pay them off. It is compounded by the fact that we do not have a real living wage, and that is even worse for people who are younger than 23 or 25, because the UK Government refuse to provide a single living wage. The “national living wage” is a pretendy living wage, because people cannot actually live on it. The Government refuse to provide a single set rate, apparently believing that somehow a 20-year-old can survive on less food or less electricity than someone older.
It is ridiculous that the Government are doing this. People my age and younger do not have savings on which to rely. As I said in the House some years ago, the average household has less than £100 in savings—and that was pre-covid, before the period during which people’s incomes have been so massively squeezed. People my age—younger people, people under 40—cannot just dip into their savings in order to fund the massive increase in energy bills that is coming, and the massive increase that is coming as a result of the national insurance hike. This is the least sensible time to be introducing a national insurance hike. People will be paying a massive amount more purely because of the choices of this Government—purely because the Government are choosing to fund health and social care in this way.
We in Scotland went into the 2019 election spending more per head of population on our NHS than the UK Government was. We went into that election calling for the UK to up its spending on the NHS. In Scotland, we are making different choices. We are making better choices. We are already funding the NHS at a higher level per head of population than England is, and we are already increasing the Scottish child payment to make sure that the number of children in poverty is decreasing. The Resolution Foundation says that the UK Parliament
“is on track to be the worst parliament on record for income growth”.
I do not want to see a world being created by this Tory Government where my children’s generation will be poorer than my generation and where my generation are poorer than my parent’s generation, but the UK Government continue to bake that in.
If the UK Government want to make money and reduce public sector net debt, a great way to do that is through immigration. In 2016-17, migrants reduced public sector borrowing by £4.4 billion. We would get to £450 billion pretty quickly if we added up the amount of positive benefits we can get from migration. If we made better choices—if we chose to not spend money on weapons of mass destruction, for example—we could have more money to spend on the NHS. We should be making better choices that reflect and assist the wellbeing of the population. This is a political choice. The Government have been asking people at the bottom of the pile for more than a decade to just pay a little bit more and cope a little bit more with austerity for a little bit longer, and now they are in the midst of a cost of living crisis where families’ energy bills are going to be shooting through the roof next month, with a £639 increase a year for every household.
In that time, the UK Government are ploughing ahead with this increase on national insurance. This is going to compound the increases that are being put in place. The increase will be nowhere near covered by the Government’s increase to the national living wage or by the universal credit taper rate. None of that will cover the cost that my constituents are being asked to pay to fund something that could be funded from somewhere else. The UK Government are choosing to balance the books on the backs of the poorest constituents that we have, and they need to change track now.
Mr Clive Betts (Sheffield South East) (Lab)
The idea of trying to raise a specific allocated funding source for social care came from a report in 2018 jointly done by then Housing, Communities and Local Government Committee—it has changed his name so many times, I have to think what it was called at the time—and the Health and Social Care Committee. We raised the idea of a national insurance increase but we were very specific about the caveats. We said that no one under 40 should pay it, because young people have been disproportionately hit by the impact of the banking crisis, the austerity measures and then covid. That is exactly the same way the Japanese raise their funding for social care. We said that the threshold at which people start paying national insurance should be higher, which this proposal does not do, and that the ceiling should be raised, which I think the Government now accept should be done. We also said that people on a high private pension should pay, but there is no proposal from the Government for that.
The Government are saying that when the levy comes in formally next year, people of pensionable age who are working will pay, but for this next year, 2022-23, those of pensionable age will not pay anything at all for the national insurance rise, which seems particularly strange as the money that will be spent will disproportionately help older people. We also said that people who are getting unearned income should pay. The self-employed pay national insurance based on their profits but not on a whole range of self-employed income, which would be a very different tax—a very different premium indeed. The changes to the cap will disproportionately benefit people in the most expensive homes, who will pay less of their asset when they die than people with lower value homes. We said that, rather than deal with this convoluted arrangement with the cap, everyone above a certain threshold of home value should pay a percentage of that asset towards the social care premium on their death. That again would be a much fairer way to raise money.
What we have here is a regressive form of taxation. I accept that people at the lower end—the people at the very bottom—on a £10,000 income will not pay, but beyond that, the hit to family incomes is going to be much greater for a family earning £30,000 than for a family earning £130,000. And at the end of the day, this does not deliver more money for social care. It should not be called a social care premium. It delivers the money through the disproportionate raising of the cap, which I have explained. It does not give any extra money for councils to fund the gap in social care funding, which has grown wider over the last 10 years. As social care funding has gone up and council budgets have shrunk, the amount for other services has shrunk with cuts of up to 50%—the National Audit Office has done an excellent report on this—whether it be planning services, environmental services, bus services, libraries or road repairs. We are looking for a funding stream that will stop that happening. There is no more money for local authorities to provide social care to the 1.5 million people that Age UK believes would have been entitled to social care 15 years ago and do not get it now.
At the same time, we will see a disproportionate rise in national insurance premiums hitting some of the poorest families hardest. What else will the Government do to fund local councils? They will make sure that councils have to put up council tax by around 3%. Council tax is a disproportionately unfair tax for poorer families. Look at the relationship between the value of homes and the amount of council tax people pay. The Resolution Foundation did a very interesting analysis five years ago showing that the level of council tax paid by those at the top end was 3.3 times higher than those at the bottom end, but the value of homes was, on average, 6.8 times higher at the top end, and that gap has grown larger as the value of houses has grown over the years and there has not been a council tax revaluation since 1991.
We have a double whammy. On top of the increases in food and fuel prices, which are disproportionately hitting poorer families, we have a disproportionate national insurance rise and disproportionate council tax increases, too. The Government should stand back and consider how we fund social care properly and fairly on a long-term basis, while at the same time addressing the problems of unfairness in council tax through revaluation and reconsidering the bands so that people in lower-value homes do not pay a disproportionate amount of council tax compared with people in higher-value properties. That would be fair. Let us see some fairness from the Government in addressing our future funding needs. They should not continue with the national insurance rise and the council tax increase this year, as they disproportionately hit the poorest families hardest.
Ben Lake (Ceredigion) (PC)
It is a pleasure to follow the hon. Member for Sheffield South East (Mr Betts), who spoke powerfully about a number of the challenges facing households across the country. I particularly support his comments about the inadequacy of the council tax regime. I very much hope that the work of the Welsh Government and Plaid Cymru will bring about a more progressive system, at least as it relates to Wales.
I urge the Government to cancel the planned national insurance increase. If they cannot bring themselves to do so, they should at least postpone its implementation. It has been said a number of times in this debate, but it is worth repeating, that now is not the time to place a further cost on families and businesses. The hon. Member for Leeds West (Rachel Reeves) mentioned in her opening remarks that when the facts change, so should our policies. It is worth repeating that the situation in which we find ourselves is drastically different from last week, let alone last year. It is important that the Government consider that fact.
The cost of living crisis has been well discussed this afternoon. Inflation is surging and could exceed 8% in the coming months, if some estimates are correct, as energy, food and other essentials become even more expensive. The situation is especially acute in rural areas like mine in Ceredigion, where rising fuel and energy prices are inflicting a heavy toll on household finances. Nearly a fifth of households in Wales are not connected to the gas grid, and in rural areas like Ceredigion the figure can be as high as 80%, meaning they are completely unprotected from spikes in energy prices. Indeed, constituents of mine have seen the price of heating oil treble since September, and many have been informed this week that delivery to our area is currently unavailable. With rural fuel poverty already at some 14%, I fear for my constituents if the situation continues. I support the Bill proposed by the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry), which would at least bring off-grid homes into some sort of regulatory arrangement that would mitigate them in respect of some of the more volatile differences in the energy market. Rising energy costs are matched by rising fuel costs, and in rural areas the lack of public transport infrastructure forces many to be dependent on private car use. Some 80% of commuters depend on the car, so it is a real concern when pump prices increase by some 10p a litre in a matter of days. I have been told that some stations in my constituency have seen increases of 15% or even 20% in the past week or so.
That is why the proposed national insurance hike, which will increase tax on average earnings in Wales by more than £250, is so mistimed. Wales already has the highest poverty and child poverty rate among the four nations of the UK, with almost one in four people, and 31% of our children, living in poverty. As we face potentially the worst drop in living standards in more than half a century or, as the hon. Member for Aberdeen North (Kirsty Blackman) said so clearly and eloquently, in a generation, households can ill-afford this tax hike and neither can our businesses. From Brexit to covid, with all the corresponding supply chain disruption, loss of business and inflationary pressures, there is growing evidence that businesses just cannot withstand further pressure. Indeed, there is a risk that by increasing national insurance contributions, the Chancellor will increase the cost of employment, which will be reflected either in job losses or in even higher prices to the consumer down the line. We need targeted relief, perhaps through a reformed rural fuel duty relief scheme, to help with costs for the motorists in my area, who do not have the luxury of public transport infrastructure to use just to go to the shop or to attend work every day. This would help hard-pressed communities weather this crisis, rather than what the Government propose to do, which is to increase the tax on them.
The decision to increase national insurance contributions is a choice, and we have heard a lot about that this afternoon; politics is always about making difficult choices. People across Ceredigion have told me loudly and clearly that this is the wrong choice for the situation in which we find ourselves.
Rebecca Long Bailey (Salford and Eccles) (Lab)
The Institute for Fiscal Studies and the Resolution Foundation have both said that the NI rise is disproportionately loaded on to younger and lower-paid workers compared with a rise in income tax. In addition, inflation is expected to hit at least 7.25% in April, council tax is going up in most places and energy prices are expected to rise by a whopping 50%. Of course the Government will say that they have offered support in the form of a £200 energy “discount” that consumers must pay back over the next five years, but that is, in essence, loading even more debt onto cash-strapped households. Labour’s analysis shows that, combined with the £444 increase in energy bills expected next financial year for a household that gets the Chancellor’s loan and council tax scheme, most households will still be more than £1,000 worse off in 2022-23. I must impress on the Minister that it is not just households who will be devastated by this NICs rise; businesses are also warning of the effects it will have on them and on the overall economy. For example, Make UK says:
“The cost burden on business is continuing to escalate and, while some of these increases are due to global events, Government must avoid shooting business in the foot with an entirely self-imposed decision.”
The Federation of Small Businesses says that the Government must reverse this decision and go further, removing all employer contributions for apprentices, which it says will result in more workplace opportunities for young people.
So today’s motion is right: the Government must cancel their planned NICs rise, because it is clear that these reforms are illogical and unfair. On unfairness, for those paid a wage above the NICs threshold, which is due to be £9,880 from April, the Government will ask for an extra 2.5% of wages towards the costs of social care, because the 1.25 percentage point increase to both employee and employer NICs will each come out of workers’ take-home pay in the end. Those who are self-employed and paid in dividends have been asked to contribute an extra 1.25 percentage points from their wages, but if a person’s income is derived from interest payments, rents, capital gains or pension annuity, they will not see any increase at all. Happy days for them.
It is clear that our social care system needs urgent reform and investment, but raising national insurance contributions at just the time when our communities and businesses need to be shielded from the cost of living crisis they face is not the answer. At the very least, the Government must cut the rate of VAT for household energy bills as soon as possible and must levy a long-overdue windfall tax on oil and gas companies to generate an income stream. They must expand and increase the warm home discount, prevent the cost of supplier failure from going on to bills and significantly increase universal credit to offset soaring inflation. They must also increase public sector pay and the living wage.
The Government must address the long-term structural failures that the privatisation of our energy market has caused by recognising that public ownership is central to addressing the costs and energy security crisis that our energy system faces and would also create a revenue stream, just like the revenue streams created by countries such as France with their own publicly owned energy companies.
We are long overdue a frank discussion and examination of fairness in the tax and social security system. We must look at taxing income from wealth—such as interest, rent and capital gains—on a basis comparable with that for earnings from work. As the New Economics Foundation has suggested, the Government should examine the idea of a living income, which would link social security payments to a decent minimum income guarantee.
This is the time for the Government to wrap their arms around households and businesses, not to hit them with an illogical tax hike. Only when households and businesses are supported will they be able to emerge from this cost of living crisis stronger and more buoyant than they were before.
Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)
In an intervention earlier, the hon. Member for Strangford (Jim Shannon), who is no longer in his place, talked about the 1.25 percentage point increase having the potential to break the back of families—being the last straw, as it were—and he was right. I often look across at Government Members and wonder whether they have any capacity for understanding the pressures that families face. Under a previous leader they used to talk about the just about managing, but those who were just about managing—the JAM—are toast under the circumstances that people currently face. On International Women’s Day, we should spare a thought for those mothers who are already struggling—now, before the increase comes in—to feed their children and heat their homes.
The Office for National Statistics says that those who earn below the average wage will pay up to £255 a year. That is a significant amount of money for people who do not have it. If someone’s household budget is already blown, £255 a year is devastating. My hon. Friend the Member for Aberdeen North (Kirsty Blackman) pointed out the disproportionate effect of the national insurance increase on young people and the lowest-paid, and that is the case, but it will also hit business. The Federation of Small Businesses has pointed out that the increase will affect businesses by, on average, around £3,000 per year. It says that will put the brakes on investment, upskilling, apprenticeships and, of course, community growth.
Government Members like to say that Brexit has nothing to do with the crisis we are currently in but the ONS points out that since Brexit—incidentally, a Brexit that Scotland did not vote for and roundly rejected—the cost of producing goods has gone up by 13%. That is forcing up prices, increasing inflation and sucking the oxygen out of exports. Some 4,300 fewer businesses are exporting now than were exporting in 2019. That is a shocking figure. These are UK companies that are no longer exporting. Their exports to the EU are down £20 billion. All of this means less money in the economy and less money getting through to our communities—especially in Scotland and especially in places such as the highlands and the north of Scotland where we rely on Europe for fishing, seafood, fruit and veg and clothing. Many small and medium-sized enterprises are losing market and money. It is no wonder that the FSB has described this act as “chilling”.
This national insurance increase, which will stall planned wage increases, comes on top of household pressures gradually crushing ordinary households across the nations of the UK. As the hon. Member for Ceredigion (Ben Lake) pointed out, rural constituencies are disproportionately affected. The Institute for Fiscal Studies has pointed out that we are seeing inflation of 8%, but for basic foodstuffs it is even higher. Things such as margarine are up 45%. Rice, one of the cheapest foods, has seen an increase of 344%. These are real effects on real people in real households, and they will be facing these pressures every day.
In the colder climate in rural areas, the costs are higher for fuel and for transport. For those in off-gas grid areas, it is not only about the £800 increase—as it was. It will now be more. It may cost £2,000 a year for the average household, but it could be £4,300 a year for energy costs. That is an astonishingly hard bill to pay for people who do not have a lot of money. This is another straw that will hurt them. An often used phrase is that people have to choose between heating or eating. Many of my constituents do not have that choice any more. They cannot choose the heating because there is just no money for it in the budget. People are being pushed into extreme fuel poverty and actual poverty, and they no longer have a choice.
The Government should scrap the national insurance hike. The Chancellor’s payday loan will not help, as it has to be repaid and, as we have just heard, that just exacerbates the problem. Council tax help is not enough. People need an emergency package. The Government should turn that £200 payday loan back into a grant that is paid to people directly. The £1,040 universal credit cut should be reversed. The Government should adopt the Scottish child payment across the nations of the UK and bring in a real living wage, not the “pretendy” one, as it was called earlier. They should scrap the bedroom tax; Scotland is having to mitigate that at the moment, but it should not be there. Let us scrap it.
I call on Members to support my ten-minute rule Bill to regulate off-grid gas supplies. The Government should make the changes: scrap the benefit cap; take away the hideous rape clause; and remove the barriers so that people are able to afford their very existence.
There is a lot more that we could cover today. This subject affects people’s income, affects their livelihood, affects the development and the growth of their children and affects their families into the future, but there is no time to cover it all. The one thing that this Government could do today, because they know that it is unpopular with their own Back Benchers, is to scrap this national insurance hike.
Grahame Morris (Easington) (Lab)
Thank you, Madam Deputy Speaker, for calling me to speak in this important debate.
Like the constituents of all Members of this House, my constituents are experiencing a cost of living crisis, but for many in Easington, this is not a new or a temporary crisis. We need only look at food poverty and the normalisation of the use of food banks, many of which have been overwhelmed after a decade of Tory policies. In 2010, the Trussell Trust distributed around 40,000 emergency food parcels; last year, more than 2.5 million parcels were delivered. Shocking though those figures are, they do not even count independent food banks, such as those that operate in my constituency, including the much-valued service run by the East Durham Trust and the Dawdon Community Centre. Those figures, which show the exponential increase in food bank usage, are a sign of economic failure. People should be angry at a growing, Government-imposed cost of living crisis in which millions of families are experiencing hardship, as some of them have for more than a decade now.
There is no doubt about it: the Conservative party is making life harder for ordinary families. As many Opposition Members have said, poverty and policies that lead to increased poverty and inequality are a political choice—a political choice that the Government party has made in this case. Prices are rising: food, energy, fuel, diesel, petrol and housing costs are rising. Government Members were all elected on a promise not to increase taxes, and that includes national insurance contributions, which I understand the Prime Minister himself personally signed off.
We know that the Prime Minister’s political promises, whether made at the Dispatch Box or in an election manifesto, are ephemeral. An average worker’s income will be cut by more than £250 a year due to this national insurance hike. It will wipe out the council tax rebate that Ministers have referred to, as well as half of the Government’s mandatory energy loan.
The majority of my constituents will not see the benefit of capping social care costs because of the relatively low value of their properties. The Government’s policies make the poorest pay to protect the assets of the wealthy and the inheritance of the richest in society; I will come back to that in a moment. They will entrench poverty and economic inequality for generations to come.
This is a bad policy and a bad tax for the communities I represent, who face a social care tax double whammy next month. My constituents suffer not only from the policies of the national Conservative Government, but locally from the Tory-led coalition and alliance on Durham County Council. I quote the Tory leader of the Conservative group, who holds the finance portfolio on the council:
“There is no crisis in adult social care in County Durham. Members must take their information from our council reports and not from primary school level BBC National news reports.”
We have all been put firmly in our places.
Councillor Bell, I am sad to say, is being supported and facilitated by the Liberal Democrats, the Green party and the independents. They will be raising the council tax adult social care precept by 3% in Durham, despite having been elected on a manifesto promise that there would be zero increase in council tax. My constituents are being hit by two Tory taxes to pay for the cost of social care. Of the national insurance contribution we are discussing, I am not sure any of it will go to social care, but we shall see.
I will pick up on a point made by my hon. Friend the Member for Sheffield South East (Mr Betts) about the inherent unfairness of council tax. That tax disproportionately hits the poorest living in low-value properties. In my Easington constituency, of more than 40,000 hereditaments or properties, 75% are in band A. A home in band A in Easington, valued at £80,000, is paying around £29.75 a week in council tax. In contrast, a Russian oligarch’s band H home in Kensington, valued at £125 million, pays just £50.52 a week in council tax. It is a disgrace.
The Government have the wrong priorities, and last night’s votes on the Economic Crime (Transparency and Enforcement) Bill showed that. We do not need more tax—we need fairer tax. They should scrap the national insurance tax hike, work with me and others and with the Fairer Share campaign to scrap council tax, and support a proportional property tax to counter the cost of living crisis.
Florence Eshalomi (Vauxhall) (Lab/Co-op)
Having listened to the debate this afternoon, I want to draw the few Members on the Conservative Benches back to what our motion is actually seeking. It is very clear: it is asking the Government to cancel the planned 1.2% rise in national insurance contributions that will cost families, on average, £500 per year from this April. The issues around funding for health and social care, as my hon. Friend the Member for Sheffield South East (Mr Betts) outlined, are long-standing. This did not start during covid, and it has not been addressed by this Government for successive years. When 50% of Britons are saying that they cannot afford this additional increase in the cost of living, we are asking the Government to address this and cancel this rise now to support families.
Across my constituency of Vauxhall, the reality of a cost of living crisis is nothing new for many residents. They have been trying to make the pennies last for many years. The ill effects of the universal credit system, the erosion of workers’ rights and an utter failure to tackle the housing crisis have left so many Vauxhall residents—
Matt Rodda (Reading East) (Lab)
My hon. Friend is making an excellent speech. I would like to ask her about the housing crisis. In my constituency, in Reading and Woodley, many residents suffer, as she says, from the rising cost of living, but they suffer particularly because of the great increases in mortgage and rental costs. Will she focus on that matter, and will the Minister also look into it?
Florence Eshalomi
My hon. Friend makes a really valid point. In London, the big issue of the cost of living is being pushed up by the cost of our housing crisis, and this is experienced right across the country. Household costs continue to go through the roof, including for many people in insecure tenancies and people in the private rented sector who are also hit hard.
The rise in national insurance will do nothing to alleviate the suffering felt by my constituents but will simply combine with booming fuel prices to push more and more of them into poverty. The effect of this cannot be overstated. More than 8,000 people in Vauxhall already live in fuel poverty. That means that they cannot afford to keep their home warm without dropping into poverty. How have we got to a state where thousands of people in the centre of one of the richest cities in the world, in one of the richest countries in the world, are having to make the impossible choice between living in poverty or living in a cold home? That is the reality for many of my constituents.
The Government can point as much as they want to extenuating circumstances, but they cannot hide from the failures on their own doorstep that have made the events of the past couple of years unnecessarily hard. Neither can it be said that the solutions they offer are sufficient, or progressive enough, in alleviating the costs of households. While the Government have proclaimed to be living with covid, the reality for many people in Vauxhall is that they are still reeling from insufficient support during the pandemic, and local industries face a long tail of this crisis. These include self-employed people who were unfairly excluded from Government support. Many of the people who have contacted me built up personal debt during the pandemic to stay afloat, only to be hit now with the double whammy of the national insurance and energy cost hikes.
In the lead-up to the 2015 general election, the then leader of the Conservative party talked about fixing the roof when the sun is shining. At the same time, the Conservative and Liberal Democrat coalition took a wrecking ball to the effective schemes introduced by Labour that were fixing a million roofs every year. The result is that, with the heavy rain of the fuel price crisis on the horizon, our housing stock still suffers from inefficiencies that will mean that more and more households face impossible choices in the next couple of months.
On this International Women’s Day, I pay tribute to the women across Vauxhall who are working around the clock behind the scenes to make ends meet: the women who are juggling insecure zero-hours contract jobs to pay their bills; the women who are forced to return to work early because of the crippling costs of childcare; the women who are at the forefront of working with our young people caught up in violence, running to the scene and reassuring the community when there has been a tragic incident; and the women who will continue to go without just to ensure that their extended family members or the people they are caring for are supported. They are the very same women who will be hit by this national insurance crisis.
The tangibility of many households in Vauxhall’s ability to cope is close to a tipping point. While there are things that the Government cannot control, they must use all the levers they have available to ensure that households stay afloat. Refusing to impose a national insurance rise now is one of those levers, and it is one that the Government must use if they have the interests of households up and down the country at heart. I ask Conservative Members to reassess their commitment to supporting working families and cancel this rise.
Madam Deputy Speaker (Dame Rosie Winterton)
We will now have a five-minute time limit so I can get everybody in.
Beth Winter (Cynon Valley) (Lab)
Having listened to contributions from across the House this afternoon, as well as extensively reading around this subject, it is indisputable that we are facing the worst cost of living crisis in 30 years. As other Members have said, it is—as always—the poorest in our communities who are going to pay the highest proportion of their income to meet essential needs. In the current climate, the Government should seek to increase people’s income, not add extra financial burdens on those who can least afford them. That is what the Welsh Government are trying to do within their financial limitations because, in the words of the Welsh Minister for Social Justice, Jane Hutt:
“We are determined to do all we can to support our people with the bills they are facing”.
The solutions, though—as the Bevan Foundation, a well-respected think-tank in Wales, points out—lie with this UK Government, so let us look briefly at some of the facts and figures. Median pay is now at its lowest rate, and real pay is falling. It is not me saying that; the Governor of the Bank of England and the Bank’s Monetary Policy Committee have also said so. Real pay is falling, as the Trades Union Congress has said, and social security payments are falling, as the Chancellor has said; indeed, he said so last October when he took £20 in universal credit from those on the lowest incomes in society. The 3.1% ceiling on uprating social security imposed a few weeks ago now looks like a 5% cut, if the Resolution Foundation’s inflation predictions are correct.
At the same time, costs are going up. Worst of all, the energy price cap has increased by 54%—almost £700 over the next six months. Food bills are going up, rail fares went up last week, and as others have said, council tax bills are going up. On top of this, next month, the national insurance contributions of both employers and employees are going to increase. As the Resolution Foundation said in October:
“The average combined impact of the freeze to income tax thresholds and the 1.25 per cent increase in personal National Insurance contributions is £600 per household”,
and the expected rise in taxes and energy bills will lead to an average £1,200 per year increase in costs for households from April. The Tory Government and the Chancellor are taking money away from working people and small businesses who can least afford it. Others have already eloquently evidenced this, and it is demonstrated by organisations such as the National Institute of Economic and Social Research, which estimates an increase in destitution, and the Office for Budget Responsibility’s own data.
I have heard a lot from Government Members about, “Well, what can we do?” This Labour party will keep challenging the Government here in Parliament, but we will also continue to work with our trade union colleagues. I will continue to stand with trade unions, taking action to defend those on low and middle incomes who are cast aside by this Government. The Chancellor needs to increase Government spending in the Budget to boost investment and allow public services to cope with higher inflation—that is necessary, but not through increases in the cost of living for those on low and middle incomes. We need to shift the burden to those who can afford it, which requires major interventions in the economy at the spring statement.
We have heard calls for a major additional benefit uprating, with which I fully agree. We also need to hear proposals for significantly increasing the national minimum wage—I support a £15 minimum wage—and for taxing wealth. There are lots of ways of doing that, such as a windfall tax on North sea oil and gas; a one-off wealth tax, as advocated by the Wealth Tax Commission; an increase in capital gains tax, as proposed by the Trades Union Congress; progressive national insurance contribution changes—which this one is certainly not; it is regressive—or an increase in dividend taxation, as the Institute for Public Policy Research and others have advocated. There are far more progressive ways to fund social care and the NHS. This increase is not progressive, and I urge the Government to withdraw it immediately. Diolch yn fawr.
Mick Whitley (Birkenhead) (Lab)
I thank the Leader of the Opposition, my right hon. and learned Friend the Member for Holborn and St Pancras (Keir Starmer), and the shadow Chancellor, my hon. Friend the Member for Leeds West (Rachel Reeves), for selecting this extraordinarily important debate. A long and bitter winter is at last coming to an end, but while my constituents look to Westminster for a helping hand to see them through the enormously difficult months ahead, this Government are instead planning to deal millions of hard-working people and small businesses a cataclysmic tax hike at the very worst time. Even before Putin commenced his barbaric onslaught on the independence and sovereignty of Ukraine and sent shockwaves across the global economy, thousands of my constituents were grappling with spiralling inflation, rising food costs and soaring energy prices.
Time and time again, I have warned this House about the devastation being inflicted upon constituencies like mine in Birkenhead, with parents going hungry so that their children can eat, old-age pensioners who have worked all their lives freezing in their homes because they cannot afford to put the meter on, and kids without even a mattress to sleep on. That is the grim reality confronting our country today. Now, Britain’s billionaire Chancellor is threatening to shove millions of hard-working families off the precipice and into the deepest depths of destitution with this senseless hike in national insurance contributions.
While Ministers are asking my constituents, some of the poorest in the country, to dig deep to pay for the mess that the Conservatives have made in health and social care, the Chancellor and Prime Minister have been quick to assure their friends in the City—those with the broadest shoulders of all—that they will not be called upon to play their part. There should be absolutely no doubt about whose side this Government are on. Let us be clear about exactly what this tax hike will mean for the people I represent. A single-parent family earning minimum wage in my constituency will be forced to hand hundreds of pounds more over to the taxman each year, while the landlord who charges them extortionate rents for damp and draughty houses will pay exactly zero pence more.
For 12 long years, Government Members have turned their eyes away from the immense human suffering that austerity has inflicted upon my constituents in Birkenhead and on communities across the UK, but they can plead ignorance no longer. This historic cost of living crisis will spare no corner of our country, and however they vote later today, they will do so in the full knowledge of what this catastrophic tax hike will mean for the people who elected them to this place. The country will not soon forget the fact that when they were given the opportunity to stand up for working people in the midst of the worst cost of living crisis in recent memory, Tory MPs shrugged their shoulders and slinked away.
Kim Johnson (Liverpool, Riverside) (Lab)
Listening to Members on the Government Benches this afternoon makes me believe that they are living in an alternative universe, because during this pandemic, the number of billionaires has increased and the richest 1% have increased their wealth exponentially, while more are suffering in-work poverty and are increasingly reliant on food banks. We are the fifth richest country in the world, and that should not be happening.
A recent report from Oxfam found that an annual wealth tax on billionaires and multimillionaires in the UK could pay the salaries of £50,000 new nurses, permanently increase universal credit by £20 a week and build 35,000 new affordable homes. It also said that the revenue could cover the cost of the health and social care levy twice over every year, completely eliminating the need to raise national insurance and place the financial burden on those least likely to afford it. What have the Tories actually done? They have chosen to hit the lowest paid and the youngest the hardest. The very key workers who kept our country going throughout the pandemic are now struggling to put food on the table. Research by the Bakers, Food and Allied Workers Union showed that 40% of its members were eating less because of a lack of cash, and nearly 10% had run out of food altogether because of a lack of money.
The choices that this Government have made are driving working people into food poverty, so does the Minister agree that their record of giving bankers a billion-pound tax break while voting to raise taxes on working people and cut social security and pensions in real terms is an absolute disgrace? Inflation is predicted to rise above 8%, but benefits are increasing by only 3%. This is the worst time to increase national insurance contributions, as it will hit working people hardest and mean that they will have to decide whether to eat or heat.
My constituency has some of the highest child poverty rates in the country, rocketing to 29.3% compared with the national average of 19.1%. One quarter of children in my constituency live in absolute poverty, although more than half of those families have at least one parent in work. Our NHS and social care systems are on their knees after a decade of Tory cuts. They should be funded by a wealth tax on the super-rich, not by a tax rise on the poor, who are already being hit hardest by the crushing cost of living crisis that is expected to worsen after April with a 54% increase in the cost of energy, food and fuel.
Instead of supporting and resourcing local government to provide gold standard in-house social care services with decent pay and conditions for workers, the Tories have systematically defunded councils for 12 years. They have cut £450 million in Liverpool alone, with a further £34 million of cuts in the pipeline. No matter how the Government try to dress it up, the perfect storm of low pay, insecure work and tax hikes on working people means that the finances of millions of families across the country are on the brink of catastrophe.
We cannot allow the Government to continue to turn a blind eye to the skyrocketing levels of poverty that they are presiding over. We must take urgent action to reverse the cuts to public services and local government, implement a £15 an hour minimum wage to boost the income of the lowest earners, reverse the cuts to social security and pension payments, and scrap the national insurance contributions hike. The worst of the cost of living crisis is yet to come. Enough is enough: it is time to make the wealthy pay their fair share and alleviate the burden on the working classes.
Rachel Hopkins (Luton South) (Lab)
I rise to speak in support of the motion calling for the Government to cancel their planned 1.25% rise in national insurance contributions, which will cost families an average of £500 a year from April 2022. Many of my constituents have been telling me that they are struggling with the increase in the cost of living. I spoke to a mother of a disabled child living in Dallow, who was scared about whether she could afford to pay her rising gas bill as she needed to keep the heating on for her disabled child’s condition. Similarly, in Farley, an older couple with serious health conditions who live on a fixed income are struggling with increased food prices and energy bills.
Many of my constituents have also been in touch about petrol price increases and have pointed out that the Tory cost of living crisis is being further exploited by sharp and often inconsistent rises at different petrol stations. People are driving to different areas in desperation to find the cheapest one to save a few pounds so that they can get to work. Will the Minister set out what action the Government are taking to tackle the large increases in petrol prices and any apparent profiteering that is taking place?
The reality is that people are really worried about their future and in just a few weeks, there will still be a devastating set of tax hikes. According to the Resolution Foundation, the average combined impact of the freeze in income tax thresholds and the 1.25% increase in personal national insurance contributions is about £600 per household. Combined with the £444 increase in energy bills expected in the next financial year for a household that gets the Chancellor’s loan and council tax reduction, that means that most households will still be more than £1,000 worse off in 2022-23.
It is clear that the Conservative Government are choosing to increase national insurance on working people and businesses at the worst possible time. The increase is deeply unfair because it will hit 27 million workers directly in their pay packets while leaving other forms of income, such as from buying and selling property, owning multiple buy-to-lets and dealing in stocks and shares, untouched. Many of my constituents do not have such wealth and assets, which is why it is unfair and why Labour has long called for the national insurance rise to be halted, so that it does not make the cost of living crisis worse.
In response to points made by Conservative Members—I am sad that the hon. Member for South Cambridgeshire (Anthony Browne) is no longer in his place—I say that the tax increase is regressive. Figures from the income tax calculator published in The Guardian a few weeks ago show that earners of £100,000 a year could end up paying proportionately less in national insurance than those on middle incomes if the increase goes through. They will pay just 7% of their overall salary, which is the same proportion as someone on £20,000 a year. The Treasury’s claim that this is progressive is not borne out when those earning between £30,000 and £50,000 will be the hardest hit by far. Someone on £50,000 a year will pay national insurance contributions of about 10% of their gross salary after April, and those on £30,000 will pay about 9% of their gross salary. From April, it will be about 13.25% on most earnings up to £50,000, but just 3.25% on any income above that threshold. We in the Labour party know that people need help now, and that is why the Government should act now.
Madam Deputy Speaker (Dame Rosie Winterton)
I call the shadow Minister, James Murray, and I do hope that hon. and right hon. Members will listen to the wind-ups. I realise that a lot of people have come in for the next business, but we have had a long debate and we want to hear from the shadow Minister and the Minister.
James Murray (Ealing North) (Lab/Co-op)
Today, we have heard from hon. Members representing people across the country about why it is so important that the Government cancel their national insurance hike on working people and their jobs. My hon. Friends the Members for Merthyr Tydfil and Rhymney (Gerald Jones), for Easington (Grahame Morris), for Vauxhall (Florence Eshalomi), for Ellesmere Port and Neston (Justin Madders), for Cynon Valley (Beth Winter), for Birkenhead (Mick Whitley) and for Liverpool, Riverside (Kim Johnson) all spoke powerfully about how so many of their constituents are struggling with the costs of living and how those pressures have been rising rapidly in recent months. My hon. Friends the Members for Sheffield South East (Mr Betts), for Salford and Eccles (Rebecca Long Bailey) and for Luton South (Rachel Hopkins) spoke about the fundamental unfairness of the Government’s approach with their national insurance hike.
In September last year, the Government pushed their national insurance hike through Parliament in a day. From the very start, it was clear that this was a deeply unfair tax hike that would hit working people and their jobs. We urged the Government to think again and reverse course, but they refused do so, and they have kept refusing to reverse course, despite people facing mounting difficulties in making ends meet. Inflation, already at its highest rate in decades, is forecast to hit 8% in April. Energy bills that have been rising rapidly are set to soar next month, and now the crisis in Ukraine will bring even greater pressure on the cost of energy, petrol and food. Yet in four weeks’ time, the Government’s tax rise will kick in, costing the average family £500 a year. It is the worst possible tax rise at the worst possible time.
Back in September when the Government pushed this tax rise through Parliament, we immediately knew how unfair it would be. The Government’s own published assessment of this tax rise made that clear. Their tax information and impact note, which Ministers had to approve, set out what effect this tax rise would have. The note looked at this tax rise from a number of angles, including how it performed against the Government’s so-called family test. As hon. Members may remember, the family test was introduced by David Cameron in 2014. When the then Prime Minister announced this new test, he said he wanted to
“strengthen and support family life in Britain”.
His plan to do so was to make sure that
“every single domestic policy that government comes up with will be examined for its impact on the family.”
That test was applied to the national insurance increase last September, and the outcome of that test was to warn of
“an impact on family formation, stability or breakdown as individuals, who are currently just about managing financially, will see their disposable income reduce.”
That warning alone should have given Conservative MPs reason to stop in their tracks and think again. They should have stopped and listened to the Institute for Fiscal Studies warning of this tax rise involving
“a large, unjustified and problematic bias against employment and labour incomes”.
They should have listened to the TUC general secretary, Frances O’Grady, warning of the hit faced by young and low-paid workers with this tax rise. They could have listened to any of the many voices against their plans, as the impact of this tax rise on people’s ability to make ends meet was clear back in September.
The impact on jobs and businesses was clear then, too. Again, the Government’s own assessment made that clear. It admitted the tax rise would impact on business decisions on wage bills and recruitment. The Federation of Small Businesses described the tax rise as
“devastating for small businesses and the local communities they serve.”
The British Chambers of Commerce described it as a
“hammer blow to jobs growth”.
Despite all those warnings, the Prime Minister and the Chancellor refused to think again. The Conservatives refused to listen to our calls for those with the broadest shoulders to contribute more. Their response to the low-growth, high-tax economic cycle they have created was to make working people foot the bill.
Even if some Conservative Members managed to hold their noses and vote with the Prime Minister and the Chancellor last September, it is astonishing that they still feel able to do so after all that has happened since then. Energy bills have been rising fast and now are set to soar. We know that energy bills will rise by an average of more than £600 this April. Inflation is already—[Interruption.]
Madam Deputy Speaker (Dame Rosie Winterton)
Order. I said this a few minutes ago but as I have a larger audience I think it is worth repeating. We have been having a debate, the shadow Minister and the Minister are responding to that debate, and hon. and right hon. Members want to hear what they have to say. I hope those present will do them the courtesy of being quiet, so we can listen to the shadow Minister first and then the Minister.
James Murray
Thank you, Madam Deputy Speaker. As I said, if Conservative Members managed to hold their noses last September to vote with the Prime Minister and the Chancellor, it is truly astonishing that they still feel able to do so now after all that has happened. Energy bills have been rising fast and are set to rise by more than £600 in April. Inflation is at its highest rate in decades and is set to rocket to 8% next month.
What is more, the Government’s arguments that they need this money for social care have been left in tatters. Not only have they failed to produce a plan to fix social care, but we know that Ministers looked the other way as billions of pounds of public money were handed out to fraudsters and written off. They ignored the warnings on fraud, they were careless with waste and they are now expecting working people to foot the bill for their mistakes.
If that was not bad enough, it is now clear that private sector workers will be asked to pay twice. As our new analysis shows, private sector workers will face a double whammy as almost all the rise in their employers’ contributions is set to be passed on to workers through lower wages.
Ministers, and indeed some of their Back Benchers, often try to pretend that the cost of living crisis is entirely the result of global factors, but that argument simply does not hold true. Most damagingly, it ignores the fact that the Government could, and should, be doing far more to help people to make ends meet. The truth is that decisions by this Government over many years have left us uniquely exposed to rising gas prices. From cutting gas storage, to leaving our homes poorly insulated and failing to invest in renewables and nuclear, this Government’s approach means that rising energy costs hit people in the UK much harder than they should.
The truth is that the Government have failed to step up and offer people the help they need with energy bills now. Labour’s plan is to give everyone £200 and those in greatest need £600 to help to meet energy costs. That would be funded with a one-off windfall tax on North sea oil and gas producers’ profits. The alternative from the Chancellor is to land everyone with a buy now, pay later loan and to announce a council tax rebate that some of those in the greatest need will never even see.
The truth is that, when it comes to the tax rise we are debating today—an unfair tax rise on working people, a tax rise of £500 for the average family, a tax rise on businesses and jobs—the responsibility begins and ends here. Conservative MPs voted six months ago for that tax rise. Last week, the Minister admitted to me that the Government recognise the impact the tax rise will have on working people. Today, they have a chance to change course.
Today, we are asking all Members to join us in asking the Government to think again. When the Government first introduced this tax rise on working people and their jobs, it was blindingly unfair. Far from asking those with the broadest shoulders to contribute more, the Tories showed their true colours and went straight for a tax rise on 27 million working people. Since then, the case against the tax rise has got stronger and stronger. With energy bills rising and about to soar and with inflation set to hit 8%, the struggle for millions of people to make ends meet is getting harder by the day. Now is the time to change course and help people to face the tough months ahead. Now is the time to send a message to the Chancellor ahead of his Budget on 23 March. Now is finally the time to do the right thing and cancel this unfair tax rise.
The Financial Secretary to the Treasury (Lucy Frazer)
It is a privilege to close the debate on behalf of the Government and I echo the words of my right hon. Friend the Chief Secretary to the Treasury about the situation in Ukraine. Our thoughts are, of course, with the men, women and children struggling to comprehend and respond to the day-to-day realities of the Russian invasion.
I turn to the specifics of the motion and the health and social care levy. We must—and we will—press ahead. In fact, as the hon. Member for Ealing North (James Murray) recognised, legislation has already been debated and enacted. Introducing the levy was a tough but responsible choice, which is what good government is all about.
My hon. Friend the Member for Broadland (Jerome Mayhew) said that these are good proposals and that we need to spend the money on health and social care. The levy is a means to tackle a number of crucial ends: tackling the backlog in our national health service and aiding its recovery from the challenges of covid, while finally enacting long-term reform of social care, an issue that too many Governments have ducked for too long. As my hon. Friend the Member for South Cambridgeshire (Anthony Browne) said, other Governments have simply put it on the “too difficult to do” pile. As he recognised, it needs serious and sustained funding. A record £13 billion a year on average will now be invested in the NHS and social care by way of a new UK-wide 1.25% ringfenced levy based on national insurance contributions and an equivalent increase in dividend tax rates.
Many Opposition Members, including the hon. Members for Merthyr Tydfil and Rhymney (Gerald Jones), for Ellesmere Port and Neston (Justin Madders)—[Interruption.]
Madam Deputy Speaker (Dame Rosie Winterton)
Order. It is getting very noisy again. Please respect the Minister, who is winding up the debate. Let us listen to what she has to say.
Lucy Frazer
Thank you, Madam Deputy Speaker. I was just highlighting the number of Opposition Members, including the hon. Members for Easington (Grahame Morris) and for Liverpool, Riverside (Kim Johnson), who challenged the Government, as others have, on their approach to the cost of living. But the plain truth is that we recognise the pressure that people face. We have done what we can to ease that pressure and will continue to explore other measures.
Frankly, our actions speak for themselves. During the pandemic, we provided more than £400 billion of direct support to the economy, protecting millions of jobs and livelihoods. The hon. Member for Cynon Valley (Beth Winter) said that we should invest more, but we are spending more than £600 billion on gross public sector investment over the course of the Parliament.
The hon. Member for Leeds West (Rachel Reeves) said that we should have acted on the cost of living in September. But we did. The Government are providing support worth more than £20 billion across this financial year and next that will help families with the cost of living. We provided that funding not just in September; we have consistently tried to support those on the lowest incomes. As the hon. Member for Vauxhall (Florence Eshalomi) mentioned, it is important that we support those who need it most and, since 2010, Conservative Governments have kept lower-paid people out of tax. The income tax personal allowance threshold has increased by over 90%, meaning that a typical basic rate taxpayer now pays £1,200 less a year than they would have done without our changes.
A number of Members have discussed whether the system we are introducing is progressive. The hon. Member for Luton South (Rachel Hopkins) and the hon. Member for Cynon Valley challenged that, but it obviously is when 14% of taxpayers are paying 50% of the tax and the highest 2% of taxpayers are paying 20% of the tax. As well as that, the levy will ensure that those on the lowest income get the most support. In our reformed system, total social care spend on the least wealthy 20% of older adults will be £4.24 billion in 2021-22 in a steady state compared with £0.51 billion on the wealthiest 20% of older adults. That shows that the lowest wealth quintile continues to receive the most state support.
The hon. Member for Salford and Eccles (Rebecca Long Bailey) and the hon. Member for Luton South said that we should cancel this tax because it was unfair, and they both quoted the IFS. When we introduced this levy, Paul Johnson, the director of the IFS, said that this was an “overall much needed” reform to social care and that
“unavoidable pressures on the NHS are being funded through a broad based and broadly progressive tax increase”.
I turn to the very important topic of fiscal responsibility. As my hon. Friends the Members for South Cambridgeshire and for Broadland commented, if we do not bring in this tax rise, the alternative is more borrowing. We cannot and should not abdicate our fiscal responsibilities. As my hon. Friend the Member for North Norfolk (Duncan Baker) said, we spent £400 billion during the course of covid. We are in debt and we need to be honest about the situation. Our level of debt means that we are vulnerable to shocks, including changes in interest rates and inflation. The public finances are stronger as a result of our early, bold action to support the economy during the pandemic and because we did not shy away from tough choices.
Our new fiscal rules demonstrate fiscal responsibility and will keep the public finances on track in the years to come. [Interruption.] The hon. Members for Gordon (Richard Thomson) and for Aberdeen North (Kirsty Blackman) talked about young people, but if we do not bring in these taxes—[Interruption.]
Madam Deputy Speaker (Dame Rosie Winterton)
Order. I do not think the Minister will speak for that much longer, so please will hon. Members keep the noise down and hear what she has to say?
Lucy Frazer
If we do not bring in this taxation, we will have future generations left paying bills in our stead.
In conclusion, this has been an important and constructive debate concerning issues that matter deeply and on which we as a Government will not compromise. Being in Government is about making the best possible decisions on behalf of the British people. The health and social care levy is emblematic of that responsibility. It is the right policy at the right time for the right reasons.
Question put and agreed to.
Resolved,
That this House calls on the Government to cancel its planned 1.25 percentage point rise in National Insurance Contributions that will cost families an average of £500 per year from April 2022.
Madam Deputy Speaker (Dame Rosie Winterton)
I will now suspend the sitting. The Division bells will ring two minutes before we resume informally to hear President Zelensky’s address.
Mr Speaker
I will take points of order from the leaders of the main parties before we return to the Opposition day debate.
The Prime Minister (Boris Johnson)
On a point of order, Mr Speaker. Never before in all our centuries of parliamentary democracy has the House listened to such an address. In a great European capital, now within range of Russian guns, President Volodymyr Zelensky is standing firm for democracy and for freedom. In his righteous defiance, I believe he has moved the hearts of everybody in this House.
At this moment, ordinary Ukrainians are defending their homes and their families against a brutal assault. They are, by their actions, inspiring millions with their courage and their devotion. Today, one of the proudest boasts in the free world is, “Ya Ukrainets”—I am a Ukrainian.
This is a moment for us to put our political differences aside. I know I speak for the whole House when I say that Britain and our allies are determined to press on—to press on with supplying our Ukrainian friends with the weapons they need to defend their homeland, as they deserve, and to press on with tightening the economic vice around Vladimir Putin. We will stop importing Russian oil, and my right hon. Friend the Business Secretary will update the House on that tomorrow. We will employ every method that we can—diplomatic, humanitarian and economic—until Vladimir Putin has failed in this disastrous venture and Ukraine is free once more.
Keir Starmer (Holborn and St Pancras) (Lab)
On a point of order, Mr Speaker. Every one of us has been moved by the bravery, the resolve and the leadership of President Zelensky. Invading troops marched through his streets, shells rained down on his people and assassins seek his life. No one would have blamed him for fleeing, but instead he has stayed in Kyiv to lead the Ukrainian people and to fight. He has reminded us that our freedom and our democracy are invaluable. He has prompted the world into action where, too often, we have let Putin have his way. He has inspired the Ukrainian people to resist and he has frustrated the Russian war machine. He has shown his strength, and we must show him and the Ukrainian people our commitment and our support.
Labour stands for the unity at home and abroad that will isolate the Putin regime. Labour stands for the toughest sanctions that will cripple the Russian state. Labour stands for providing Ukraine with the arms it needs to fight off its invaders. Labour stands with President Zelensky, with Ukraine, with democracy. Slava Ukraini.
Ian Blackford (Ross, Skye and Lochaber) (SNP)
On a point of order, Mr Speaker. President Zelensky, we salute you. We stand with the people of Ukraine on the basis of the act of aggression—of the act of war—of Putin. We must do all that we can to send support to Ukraine and to send the weapons that they need to defend themselves, and to make sure that we sanction the regime in Moscow, that we deliver the clearest message to President Putin that this will end in failure for him, and that he will face justice at the International Criminal Court. We must stand in this House, throughout these islands, throughout the western world, in defence of democracy, in defence of sovereignty. Peace, justice and the sovereignty of Ukraine must prevail. Let us make sure that we stand with our friends and that we stand with those who have been bombed. We must make sure that those who need our support, who need our sanctuary, will find a welcoming hand in these islands. Mr President, we thank you. We salute you. Slava Ukraini.
Ed Davey (Kingston and Surbiton) (LD)
On a point of order, Mr Speaker. Hearing the words of President Zelensky should embolden us all. They serve as a reminder of all that we stand for and of all that so many Ukrainians are so bravely fighting for—a bravery exemplified by President Zelensky himself. We should never take for granted our values of democracy, of freedom and of our security. Though we in this House may disagree on many things, we stand together for those values, and we stand together with the Ukrainian people.
It is right that we strengthen our support for Ukraine with military aid and with the toughest of sanctions. It is in that support that we should also recognise the people of Ukraine and, indeed, President Zelensky. I am sure the whole House would agree that President Zelensky should be granted one of our nation’s highest honours—an honorary knighthood. I look forward to the day when we welcome back to this House President Zelensky in person.
Sir Jeffrey M. Donaldson (Lagan Valley) (DUP)
On a point of order, Mr Speaker. We commend President Zelensky and the people of Ukraine and we stand with them in this their time of strife, but our response will not be judged by the volume or strength of our applause for President Zelensky. It will be judged by the volume and strength of our response to his request for help—for practical military support and for humanitarian assistance for the people of Ukraine. We pray for their success. We dare not let them down.
Mr Speaker
I also thank the staff and the contractors for making this happen. When you leave the Chamber, please hand in your headsets on the way out to whoever you got them from.