(4 days, 7 hours ago)
Commons ChamberRead Hansard Text Read Debate Ministerial Extracts
The Exchequer Secretary to the Treasury (Dan Tomlinson)
I beg to move,
That the draft Child Benefit and Guardian’s Allowance Up-rating Order 2026, which was laid before this House on 12 January, be approved.
Madam Deputy Speaker (Judith Cummins)
With this it will be convenient to discuss the following motion:
That the draft Social Security (Contributions) (Rates, Limits and Thresholds Amendments, National Insurance Funds Payments and Extension of Veteran’s Relief) Regulations 2026, which were laid before this House on 12 January, be approved.
Dan Tomlinson
The draft Child Benefit and Guardian’s Allowance Up-rating Order sets the rates for both child benefit and guardian’s allowance, and will ensure that those benefits, for which Treasury Ministers are responsible and which are delivered by His Majesty’s Revenue and Customs, are uprated by inflation in April 2026. The draft Social Security (Contributions) (Rates, Limits and Thresholds Amendments, National Insurance Funds Payments and Extension of Veteran’s Relief) Regulations 2026 set the rates of certain national insurance contributions classes, and the level of certain thresholds, for the 2026-27 tax year. The regulations also make provision for a Treasury grant to be paid into the national insurance fund if required for the same tax year, through a transfer of wider Government funds to the NIF, and extend the veterans employer national insurance relief for two years, until April 2028.
Jim Shannon (Strangford) (DUP)
I welcome what the Minister is saying, which is positive. This is a good step for guardians, carers and veterans. Sometimes people come to me and ask me questions. They say that they cannot get any help with the changes that have come in and how they are affected. When they are given more money, sometimes they fall into a higher tax bracket. Is help available for those who receive an increase in their guardian’s allowance, carer’s allowance or veteran’s allowance? We need to make sure that somebody can help them through the process. It is almost like walking through a muddy field: they just do not know where to go next.
Dan Tomlinson
The hon. Member is right: a range of reliefs in the national insurance system help particular groups, including young people and those who have served in our military. It is right that those reliefs are there, and I am glad that the Government took the decision to extend them by two years. The Government publish guidance on the way that the reliefs can be used. We aim to ensure that the guidance supports those who seek to employ young people and people who have served in the military, so that they are able to make employment decisions. Through the tax system, we want to support particular groups to be able to be employed. I thank the hon. Member for his question.
I turn to the detail of the Child Benefit and Guardian’s Allowance Up-rating Order 2026. As hon. Members will know, the Government are committed to delivering a welfare system that is fair for taxpayers while providing support for those who need it. These regulations ensure that the benefits for which Treasury Ministers are responsible, and which HMRC delivers, are uprated by inflation in April 2026. Child benefit and guardian’s allowance will increase by 3.8%, in line with the consumer prices index in the year to September 2025. Tax credits awards ended on 5 April 2025, so no changes to rates will be required.
I turn to the second set of regulations before us today. As announced at the Budget, the primary threshold and the lower profits limit threshold will be maintained at their current levels until April 2031. These regulations set the level for the 2026-27 tax year. Employees’ entitlement to contributory benefits, such as the state pension, is determined by their earnings being at or above the lower earnings limit. Self-employed people’s entitlement is determined by their earnings being at or above the small profits threshold.
These regulations uprate the LEL and the SPT. This is the usual process and maintains the real level of income where someone gains entitlement to contributory benefits. The upper earnings limit for employee NICs and the upper profits limit for self-employed NICs—the points at which the main rate falls to 2%—are aligned with the higher rate threshold for income tax. The thresholds will be maintained at their current levels, and these regulations set the levels for the 2026-27 tax year. As announced at the Budget last year, employer national insurance thresholds, including the secondary threshold, will also be maintained at their current levels.
We have already had a brief discussion about the employer NICs reliefs, including for under-21s, under-25 apprentices, veterans, and new employees in freeport and investment zones. The regulations that we are debating today keep the thresholds for those reliefs at their current levels. The regulations also make provision for the NICs relief for employers of veterans to be extended for two years until April 2028, during which time the Government will continue to consider the most effective way to support veterans into employment as part of the next spending review settlement.
Without these regulations, child benefit and guardian’s allowance would fall in real terms, and HMRC would be unable to collect NICs receipts. I hope that colleagues will join me in supporting them today.
Mark Garnier (Wyre Forest) (Con)
It is a great pleasure to debate these two statutory instruments with the Exchequer Secretary. As he stated, they are made each year, and the precedent is for them to be debated on the Floor of the House. I am glad to see that that practice continues, and I hope that the Government will keep this going for the remainder of the current premiership, however long that may last. I want to make it clear that we will not be voting against the measures before us when the debate concludes. However, I would like to comment on each SI and the wider political discourse around them.
First, the social security regulations set the rates of certain national insurance contribution classes and the level of certain thresholds for the 2026-27 tax year. Specifically, they uprate the lower earnings limit, the small profit threshold and the rates of class 2 and class 3 national insurance contributions. The increase will be 3.8%, which is the consumer prices index figure from September 2025. All other limits and thresholds that these regulations cover will remain frozen at their current level.
This highlights that the increase last year was 1.7% compared with 3.8% this year. Both these percentages represent the rate of inflation that our constituents are suffering, but the 1.7% is of course what we left the Government when they came to power, and 3.8% is the level of inflation they are now delivering for consumers. When we left office, inflation was at 2%. We had managed to get it down following a once-in-a-generation pandemic and Russia’s illegal invasion of Ukraine and the subsequent energy crisis.
Since Labour has come in, inflation has risen almost every month and is now stuck at about 3.6%. Why is that? It is because the Government are relentlessly pursuing policies instead of making practical solutions—for example, the drive towards net zero. We of course want net zero and to get to the point where we clean up our carbon footprints, but by going too far they have managed to put up energy bills by £300 since they were elected. Is it any wonder that inflation is so high and shows little sign of coming down any time soon? I do not want to press the Minister on too many questions, but could he in due course let us know when the Government expect inflation to return to the target rate of 2%, which everybody agrees is where it should be?
The other point that I want to make about the statutory instrument is that it extends the employer national insurance contributions relief for veterans to 2028, which means businesses will continue to pay no employer NICs on salaries up to the veterans upper secondary threshold of £50,000 or £270 for the first year of their employment, which is a very good thing, as I think the Minister will agree. We introduced this relief in 2022, as we wanted to encourage as many employers as possible to help our veterans. These people have done a huge amount to protect our country, and it is important that we show our gratitude to them.
Mark Garnier
The Minister is nodding, and I am sure he agrees with us on this point. Therefore, we welcome the fact that the Government have committed to extending this relief for the next two years.
However, I point out that the Government said in the Budget document:
“The government will extend the employer NICs relief for employers hiring veterans in their first civilian role to April 2028, from which point support for veterans into employment will be covered through spending review settlements rather than through this tax relief.”
The Government have committed to consult on which way would be best to do that, which is positive, and I hope the Minister is open to considering continuing this relief as an option if a suitable alternative cannot be found. In due course, it would be great if he or the Government could let us know what is being planned and on what timeframe, so we may understand what will be happening for veterans.
The child benefit and guardian’s order will uprate the allowances in line with CPI for the 2026-27 tax year. Again, we welcome the increases as these benefits are an important part of our welfare system. Guardian’s allowance is designed to provide further support to people who care for someone else’s child—for example, if the child’s parents have died. When these people step as guardians, they are incredibly important in the upbringing of young children, and we have a duty to support them so that they can ensure that the children they care for have the best start in life.
Although these state benefits are important, the Government are abandoning their responsibilities to tackle the wider benefits bill. In this debate last year, the former Exchequer Secretary, who is now the Chief Secretary to the Treasury, said:
“the Government are committed to delivering a welfare system that is fair for taxpayers while providing support to those who need it.”—[Official Report, 4 February 2025; Vol. 761, c. 716.]
When it came down to it, however, this Government did not take the opportunity to make those savings. Instead, it appears that they caved in to their Back Benchers, and we are now in a position where the benefits bill continues to balloon. According to The Times, even the Prime Minister has vetoed plans to reform the welfare system, simply to avoid the embarrassment of yet another U-turn. That is not fair to taxpayers, or to those who need support the most. In due course, I hope the Minister will set out when the needed benefit reforms will be brought forward and what steps he is taking to ensure that taxpayers’ money goes to those who need it most.
The Conservatives will not stand in the way of any of the statutory instruments before us today, but we look forward to hearing what the Minister has to say—not necessarily this afternoon, I stress—on the points I have raised.
Madam Deputy Speaker (Judith Cummins)
I call the Liberal Democrat spokesperson.
Steve Darling (Torbay) (LD)
I welcome the proposals on child benefit and guardian’s allowance. When I visit schools in Torbay, it is disturbing to hear how many children are only too alive to the cost of living crisis. They are worried about mum or dad not having enough money to put petrol in the car, and they are concerned about covering the bills. These are not big amounts of money, but we know that it all adds up and that it is helpful to the youngsters in our communities.
However, the continuation of the national insurance hikes is the most significant mis-step the Government have undertaken in this Parliament. They are effectively shooting the goose that lays the golden egg of economic growth. From my conversations with businesses across Torbay and the west of England, whether Paignton Zoo or Splashdown Waterpark, I know that limiting the threshold at which national insurance contributions are paid to £5,000 is crippling lots of seasonal businesses. The seasonality of the work means that they have to trim the opportunities for youngsters to take on summer jobs. I spoke to the owner of Splashdown only a couple of weeks ago. She talks about the people who come back in later years who are now solicitors, airline pilots or doctors, and how they learnt the trade of getting into work on time by working in the waterpark and so on.
I also want to reflect on how the national insurance hikes are hitting the hospitality industry across the west of England. Businesses have already seen massive increases in the cost of fuel. What I hear from them is their uncertainty about the Employment Rights Act 2025. I call on the Minister and the Government to ensure that, as it is rolled out, they reflect on limiting its impact. They must ensure a soft introduction, so it does not have a further devastating impact on employment. Most of all, I reflect on the impact of the national insurance hike. I ask the Minister to reflect on that, too.
Question put and agreed to.
Social Security
Resolved,
That the draft Social Security (Contributions) (Rates, Limits and Thresholds Amendments, National Insurance Funds Payments and Extension of Veteran’s Relief) Regulations 2026, which were laid before this House on 12 January, be approved.—(Dan Tomlinson.)
Standing Orders (Consideration of Estimates)
Ordered,
That Standing Order No. 54 (Consideration of Estimates) shall apply for the remainder of this Session as if, for the word ‘Three’ in line 1, there were substituted the word ‘Four’.—(Gen Kitchen.)