Employer National Insurance Contributions

Debate between James Murray and Paul Holmes

Wednesday 4th December 2024 Commons Chamber

[The Exchequer Secretary to the Treasury (James Murray)]

I thank all right hon. and hon. Members for their contributions during the course of the debate.

This Government were elected with an immediate and critical need to draw a line under the fiscal irresponsibility and economic mismanagement of the Conservatives. Since day one in office, we have been determined to deliver economic stability, and we have done so by fixing the public finances, introducing tough new fiscal rules, and getting the NHS and other public services back on their feet.

It is on those foundations that we will boost investment and drive long-term economic growth to make people better off. This is not an easy task, as the Chancellor has said, but fixing those foundations is what underpins all the difficult but necessary decisions we have taken. It is the goal of fixing the foundations of our public finances and the NHS that has driven our decision to make the changes to employer national insurance contributions that we have been discussing today.

In taking the difficult decisions at the Budget, the Chancellor has been determined to protect working people. That is why our Budget made no changes to income tax, rates of VAT or the amount of national insurance that working people pay. As a result of our Budget, people will not see a penny more on their payslips. However, a £22 billion black hole in the public finances cannot be fixed without taking any difficult decisions at all. The Conservatives in government hid their heads in the sand and ignored the fiscal realities. Now, both they and other Opposition parties are desperate to have it both ways. They say that they support extra money for the NHS, but they refuse to back the measures to fund it.

[Paul Holmes]

On that point, will the Minister give way?

[James Murray]

I have been very generous over the past 48 hours in giving way in this Chamber, but I will not. My time is very limited, although I would like to hear more about the plane the hon. Gentleman spoke about earlier.

We have made the tough but necessary choices that this set of circumstances requires, which is why we have decided to raise employer national insurance contributions. The changes broadly return national insurance revenues as a proportion of GDP to the levels they were at before the previous Government’s cuts to employee and self-employed NICs, but they do so in a way that does not result in higher taxes in people’s payslips.

They also do so in a way that increases protection for small businesses and charities, because we have decided to more than double the employment allowance to £10,500 and remove the business size threshold. That means that from April 2025, all eligible organisations will be able to employ up to four people on the national living wage without paying a penny of employer’s national insurance. Over half of all employers will pay the same or less national insurance than they did before, but we acknowledge that the decision will have an impact for other employers. Employers will have a choice about how they respond to the changes, and some of those choices will be hard.

I do not have enough time to respond to all the points raised by hon. Members directly, but I will briefly respond to the right hon. Member for Beverley and Holderness (Graham Stuart)—he has been intervening all afternoon but he is no longer in his place. He asked about table 3.2 in the OBR report. I am sorry to disappoint him, but my answer is nowhere near as interesting as I suspect he thought it might be; the table was simply published in error and has now been corrected. The Government provide support for Departments and other public sector employees with the additional employer national insurance contributions liability, and separately we have provided an additional 3.2% increase to local government spending power, including £600 million of new grant funding for social care.

I thank all the other hon. Members who made contributions: my hon. Friends the Members for Makerfield (Josh Simons), for Stevenage (Kevin Bonavia), for North East Derbyshire (Louise Jones), for Uxbridge and South Ruislip (Danny Beales) and for Rother Valley (Jake Richards), and the hon. Members for Hamble Valley (Paul Holmes), for Hazel Grove (Lisa Smart), for Rutland and Stamford (Alicia Kearns), for Wokingham (Clive Jones) and for Hornchurch and Upminster (Julia Lopez).

I want to briefly respond to the point of order made earlier by the hon. Member for South Shropshire (Stuart Anderson) because I welcome the chance to repeat the fact that the OBR said in October that its March forecast would have been “materially different” had it known what the previous Government did not share with it at the time of the March forecast. I am confident that the Hansard record is correct. It specifically includes “materially different” in quotations and not the rest of my statement.

I am grateful to have had the chance to respond on behalf of the Government to the questions that have been raised today. The decision to make changes to employer national insurance was not taken lightly. It was a tough decision for us to take. I recognise that while half of businesses and organisations will pay the same or less than before, others will face difficult decisions of their own. We have asked employers to make a greater contribution, and while we do not expect those affected to welcome that, I hope the majority will understand why we have done it.

The simple fact of the matter is that our country needed a Government prepared to fix the public finances, get public services back on their feet and restore economic stability. It is only through an ambitious and fiscally responsible approach that we can boost investment in growth, laying the path towards the brighter days ahead. The previous Government had completely lost sight of that.

My office in the Treasury building used to be that of Nigel Lawson. He once said:

“To govern is to choose. To appear to be unable to choose is to appear to be unable to govern.”

That very neatly reflects where the Conservative party has ended up now. Before, as the Government, the Conservatives had given up on effective governing, and since then they have given up on effective opposition. This vote today comes down to a choice: between irresponsibility on the Opposition Benches and a Government prepared to do what is needed to build a better future. It is this Labour party in government that is taking the tough but necessary decisions, with a once-in-a-generation Budget to wipe the slate clean and put our country on a better path. It is this Government that have restored economic stability, fixed the public finances and hardwired fiscal responsibility into the Budget-making process. It is this Government that are putting the NHS back on its feet, raising the national living wage and protecting people’s payslips, and it is this Government that will invest in our country, create wealth in every nation and region and make people across Britain better off. That is the choice today and that is why we reject the Opposition’s motion.

Question put.

Finance Bill

Debate between James Murray and Paul Holmes

2nd reading
Wednesday 27th November 2024 Commons Chamber

[James Murray]

Every business knows that we can make investment decisions only on the basis of secure public finances and economic stability, which is why this Government’s first priority has been to wipe the slate clean of the mess we inherited from the Conservative party, to deliver economic stability and to provide the environment for businesses to make the investments on which we will grow the economy. That remains our No. 1 mission.

[Paul Holmes (Hamble Valley) (Con)]

Will the Minister give way?

[James Murray]

I will make some progress.

As the Chancellor set out in the Budget, we believe that before making any changes to the tax rates that people pay, it is vital that we do everything we can to close the tax gap. That is why, in the Budget, the Chancellor announced a step change in our ambition to do so, with a package raising £6.5 billion of additional tax revenue by 2029-30. This package will ensure that more of the tax that is owed is paid, and that taxpayers are supported to pay the right tax first time. Our plan involves boosting the capacity of His Majesty’s Revenue and Customs to ensure compliance and reduce debt, alongside changes to legislation, some of which this Finance Bill delivers, to remove loopholes used to reduce tax liabilities.

That is why this Bill includes measures such as introducing capital gains on the liquidation of a limited liability partnership, closing a route increasingly used to avoid paying tax. The Bill reforms rules for overseas pension transfers, closing a gap that allows individuals to transfer significant pension savings overseas tax-free. And the Bill implements the cryptoasset reporting framework, tackling complex compliance cases where a significant proportion of offshore risk sits.

In our manifesto, we said that we would take on the tax gap, and that is what we are doing in government.

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[James Murray]

My hon. Friend is right that every parent aspires to a high-quality education for their children, and that is exactly what this Government will achieve through the already announced £2.3 billion increase to the core schools budget for the financial year 2025-26, increasing per pupil funding in real terms. That includes £1 billion of additional funding for the special educational needs and disabilities system.

[Paul Holmes]

The Minister is dedicated to extolling the virtues of his manifesto. When he sat down to write the Budget with his right hon. Friend the Chancellor, did he recall whether the manifesto put to the country at the general election stated that growth forecasts under this Government would be lower than they were under the previous Government? Was the taxing of small family farms for a total revenue of £590 million in his manifesto? He is very keen on the manifesto, but did it outline that growth would be lower under this Government?

[James Murray]

I am keen on our manifesto, which delivered this Labour majority and this Labour Government. If the hon. Gentleman looks at the manifesto that we went into the election with, he will see the three words that open our pledges: “deliver economic stability”. After the mess that the previous Government made of the public finances, and the damage they did to our public services and our economy, that is crucial. Delivering economic stability, fixing the public finances and putting our public services back on a firm footing are essential to getting the investment and growth that our country badly needs.

Let me be clear about the VAT policy on private school fees: charging the standard rate of 20% does not mean that schools must increase their fees by 20%, because schools can reclaim VAT paid on inputs and reduce the cost to minimise the extent to which they need to increase fees. Many schools have already publicly committed to cap increases at 5%, or to absorb the full VAT costs themselves.

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[James Murray]

Let me put these decisions into context for the hon. Gentleman. The increase equates to £1 more for people taking domestic flights in economy class and £2 more for those flying to short-haul destinations in economy class. None of the decisions are easy, but we have to take them to fix the public finances and to get our economy back on a stable footing.

[Paul Holmes]

Will the Minister give way?

[James Murray]

I will make some progress. That is the impact the changes have on domestic flights and short-haul destinations in economy class. However, in addition to the broad changes in air passenger duty rates, the higher rates for larger private jets will also increase by a further 50% to ensure they contribute fairly to the public finances.

The Bill also renews the tobacco duty escalator and enables His Majesty’s Revenue and Customs to prepare for the introduction of a new duty on vaping products. The Bill increases the soft drink industry levy over the next five years to reflect the 27% increase in consumer prices index inflation between 2018 and 2024, as well as increasing the rate in line with CPI each year from 1 April 2025. Finally, while the Bill increases alcohol duty for non-draught products, in line with retail prices index inflation, duty on qualifying draught products will be cut by 1.7% in cash terms to support pubs, and we will increase the duty discount on products that qualify for small producer relief from 1 February 2025.

The Chancellor has been clear that the Budget was a once-in-a-generation event, at which the Government took difficult but necessary decisions. By taking those tough decisions, the Budget delivers economic stability, sound public finances and stronger public services. On those foundations, we will work day in, day out across the rest of this Parliament to boost investment and growth.

Many of the measures to boost investment are being delivered outside of the Finance Bill, from the planning reform that we got under way within days of taking office to the creation of mega-funds for pension investments, which the Chancellor announced at Mansion House. The Bill introduces additional reliefs for our creative industries, for visual effects within film and high-end TV, which will play a key role in strengthening the UK as a global hub for film and TV. Likewise, the Bill introduces measures to support the transition to electric vehicles, through higher vehicle excise duty first-year rates for hybrid and internal combustion engine vehicles, which boosts the incentive for EVs, and by an extension of first-year allowances for electric cars and charge points until 2025-26.

Above and beyond any individual measures, the impact of the Bill and the Budget that it follows is to lay the foundation for greater investment and growth, through fiscal responsibility, stronger public services and economic stability. We have laid the foundations for creating wealth, jobs and opportunity in every part of this country, enabling people to meet their aspirations for themselves and their families, and making people across Britain better off.

Winter Fuel Payment

Debate between James Murray and Paul Holmes

Tuesday 10th September 2024 Commons Chamber

[James Murray]

Thank you, Madam Deputy Speaker. The hon. Member who just intervened, and indeed everyone on that side of the House, might like to reflect on what the legacy of the last Government truly was. It was one of irresponsible overspending, of uncosted commitment after uncosted commitment, and of Ministers running away from taking difficult decisions. As a direct consequence, when we came to power we were faced with a £22 billion black hole in the public finances for this year alone.

[Paul Holmes (Hamble Valley) (Con)]

I am genuinely grateful to the Minister for giving way. He is a Minister at the Treasury, so I am hoping he will be able to outline some of the facts and answer my question. He will outline today that the saving made by cutting the winter fuel payment is £1.1 billion. If everybody accepted the means-testing that he is proposing, it would cost £3.3 billion, so can he outline to the House, despite the bluster that he has just made about saving money for the great British people, how it will save money when it will cost more under his proposals?

[James Murray]

I thank the hon. Gentleman for his intervention. The announced savings include an assumption of an increased take-up of pension credit, which is in line with the highest levels ever achieved. Frankly, if more people are taking up pension credit when they are eligible for it, we should welcome it because it means that support is being targeted at those in greatest need.