Homes for Ukraine Scheme: Tax Exemptions for Sponsorship Payments

Lucy Frazer Excerpts

Thursday 31st March 2022 Written Statements

[The Financial Secretary to the Treasury (Lucy Frazer)]

The Government have already announced that sponsorship payments under the Homes for Ukraine scheme will be tax-free and are today setting out more information on how we will legislate to ensure this is the case.

The Government intend to legislate within Finance Bill 2022-23 to ensure that the Homes for Ukraine sponsorship payment, made by Local Authorities to sponsors under the Homes for Ukraine Scheme, will be exempt from income tax and corporation tax. The legislation will be retrospective with effect from the date the first payments to sponsors will be made. The payment will not be chargeable to national insurance contributions.

The Government have also introduced legislation to disregard payments made under the Homes for Ukraine Scheme when calculating income for the purposes of tax credits.

HM Revenue and Customs will not collect any tax that may have been due on payments made from the date the first payments to sponsors will be made to the date the legislation takes overriding effect.

As the payments will be treated as non-taxable income, any expenses that could otherwise have been offset against taxable income will not be allowable as a tax deduction (e.g. expenses incurred by landlords in relation to the property).

Application of the annual tax on enveloped dwellings and 15% rate of stamp duty land tax for sponsors under the Homes for Ukraine Scheme

The Government intend to legislate within Finance Bill 2022-23 so that those companies that currently qualify for the existing reliefs available from the annual tax on enveloped dwellings (ATED) and the 15% rate of stamp duty land tax (SDLT) for dwellings used in a property development or property trading business or let on a commercial basis will continue to be able to claim the relief while the dwellings are being used under the Homes for Ukraine Scheme.

Where a company purchases a property for a purpose that would otherwise be relievable from the 15% rate of SDLT, relief will continue to be available if the property is to be temporarily used under the Homes for Ukraine Scheme.

Where a dwelling does not currently qualify for relief from ATED, before the property is included in the Homes for Ukraine Scheme, ATED relief will be available from the point of occupation where the entire dwelling is used under the Homes for Ukraine Scheme.

The legislation will have effect from 1 April 2022 for ATED and from the date of this statement for the 15% rate of SDLT. From those dates and to the date the legislation takes overriding effect, HM Revenue and Customs will not collect any ATED or SDLT that may have been due following a change in the use of the dwelling to be part of the Homes for Ukraine Scheme.

[HCWS760]

Draft Social Security (Contributions) (Amendment No. 2) Regulations 2022

Lucy Frazer Excerpts

Monday 28th March 2022 General Committees

[The Financial Secretary to the Treasury (Lucy Frazer)]

I beg to move,

That the Committee has considered the draft Social Security (Contributions) (Amendment No. 2) Regulations 2022.

I will explain why we are bringing this draft statutory instrument before the Committee. As Members are aware, from April the new health and social care levy will increase class 1 and class 4 national insurance contributions rates by 1.25 percentage points. That will secure a long-term dedicated source of funding for our national health service and for those who require care. The instrument will apply the 1.25-percentage point increase to those paying the married women’s reduced rate of national insurance in the 2022-23 tax year. As the result of a drafting oversight, that group are excluded from paying the levy. If the legislation were not enacted, the result would be an unfairness, as not everyone would be in the same position and therefore not everyone would be treated equally.

This draft SI will increase the married women’s reduced rate from 5.85% to a temporary rate of 7.1%. The reduced rate is a lower form of NICs, currently paid by fewer than 1,000 women. Originally, it was introduced to allow women to use their husband’s NI contributions to qualify for a state pension at a time when fewer women worked. However, the scheme has been closed to new entrants since 1977. In fact, today, the circumstances in which a woman might pay the reduced rate are relatively unusual: a woman must have joined the scheme before May 1977, she must have been married at the time and have not divorced since, and she must still be under the state pension age and have not had a break of two years or more in her employment history.

[Nick Smith (Blaenau Gwent) (Lab)]

Will the Minister let us know the average age of the women affected by the new draft regulations?

[Lucy Frazer]

They will, obviously, be at the older end of the spectrum, as the scheme has been closed to new entrants since 1977, although some will still be in work. Very few people are in the scheme—we think fewer than 1,000.

This is new legislation, but the change it will implement has been anticipated for some time. We have already communicated the 2022-23 NICs rate on the gov.uk website. Employers, and software and payroll providers are expecting the change and have updated their systems. Legislation is already in place to ensure that, from April 2023, those paying the married women’s reduced rate will be subject to the health and social care levy. There has never been a suggestion that that category of women ought to be excluded.

[Nick Smith]

The Minister was unable to answer my question about the average age of the women affected by the draft regulations. Will she go back to the Department to get an assessment of the question and please write to the Committee?

[Lucy Frazer]

I am happy to do that. As I mentioned, those women will be of an older generation, of an older age, but I am happy to get the specifics, if the hon. Gentleman wishes me to do so.

[Steve McCabe (Birmingham, Selly Oak) (Lab)]

Will the Minister tell me how many of the women who will see the increase are also women we might describe as WASPI—Women Against State Pension Inequality Campaign—women?

[Lucy Frazer]

The hon. Gentleman is right to point that out. It is a point that I have considered with my team. He is right that there will be an impact on some WASPI women. He knows that the decision on those women was a decision to equalise the state pension age. It dates back to 1995. That was the decision taken at that time on fairness, and fairness is the point that I am moving to now.

We need to ensure that the draft measure is fair across the board. Women who pay the reduced rate will benefit from the record investment in our NHS and social care system brought about by the new levy. Therefore, to exempt those paying the married women’s reduced rate from the health and social care levy would give them an unfair advantage compared with others.

I will briefly touch on the timeframe for introducing this draft instrument. I appreciate that the introduction of the measure is slightly delayed, such that we have had to accelerate our consideration of it. I reassure Members that we have written to both the Joint Committee on Statutory Instruments and the Secondary Legislation Scrutiny Committee to explain the reasons for the delay. The reason is that Her Majesty’s Revenue and Customs had previously identified a different legislative vehicle for this draft measure, but it turned out not to be a viable option.

[Sarah Champion (Rotherham) (Lab)]

I appreciate the Minister giving way and her accepting all the questions. Has she written to the women who will be impacted? One of the biggest problems with WASPI was the lack of awareness until the changes actually hit those women.

[Lucy Frazer]

The hon. Lady makes an important point about notification. One of the reasons for the draft measure is that we have already stated on gov.uk and through payroll systems that this will be brought in. If we were not to pass the SI, we would not be doing what we had already stated that we will do. That is the reason for today’s SI.

HMRC has quickly moved to prepare the relevant legislation. I am sure that Members across the House will appreciate that it is critical for the health and social care levy to be applied fairly across the population. As a result, the draft regulations must come into force before the levy’s introduction on 6 April.

[Nick Smith]

I thank the Minister for giving way again. She is being generous with her time and her efforts, but she did not answer the question of my colleague, my hon. Friend the Member for Rotherham: will the Government write to the women affected by this issue? She mentioned that it had been on the Government website, but given that WASPI women and others have complained that they were not properly informed of changes to their pensions and other financial arrangements of the Government through time, will she assure us categorically that she will write to those affected, please?

[Lucy Frazer]

I thank the hon. Gentleman for his question, but I reiterate: there is no need to notify the women, because everyone knows that the social care levy is coming in. It has been widely publicised. The current position is that everyone who is eligible to pay that tax will pay it, so there is no need to tell a group of women who through an oversight were not included in the levy that they will now be included, because at the moment they will not think that they are not.

[Brendan O'Hara (Argyll and Bute) (SNP)]

Will the Minister give way on that point?

[Lucy Frazer]

I will conclude my remarks, because I have now answered that question twice.

[Mr Richard Bacon (South Norfolk) (Con)]

I am delighted that my right hon. and learned Friend has given way. It is a pleasure to serve under your chairmanship, Mr Hosie. I have listened with attention to hon. Members’ interesting questions—although so far only from the Opposition Benches, so I thought we should hear from Conservative Members as well. The Minister mentioned that there are only about 1,000 of these people and that they are a cohort who do not think that they will be excluded, therefore there is no need to write to them. Is not the reverse at least as likely to be the case: that they did think that they were excluded? Indeed, MWRR stands for married women’s reduced rate, and that group of people were eligible for it in a way that others were not, so if they were to think anything, if they were to get up in the morning and think, “Does this thing that I have just heard about on Radio 5 affect me or not?”, their first reaction would surely be that it did not, because they know that they are in an exempt class. However, that is not my question—although the Minister is welcome to comment. Given that there are only 1,000 of them, does she know who they all are? Does she have the names and addresses of the women?

[Lucy Frazer]

I thank my hon. Friend for his question. Those women are not excluded; they just pay a lower rate, so they are included in the NICs scheme. I do not think that they would think that they are excluded. There is nothing to suggest that they were excluded, or that a particular category of women, men or anybody were excluded, so I do not think they will believe they were excluded. Payroll systems are set to include them, and the Government have said on gov.uk that the system is coming in, so the expectation is that they will be included.

As for who the women are, they will be identifiable through various payroll systems, and payroll operators will have to ensure they pay the right amount. If we did not bring in the draft measure, it would be difficult, because we would then have to instruct payroll operators to change their systems, because they are now set up to include that category of women, so it would be more administratively difficult to take them out than to include them.

I should also highlight that this measure is for only a year, because they will be automatically included next year in any event, when the levy appears on people’s payroll.

All that we are doing with this measure is ensuring that this group of women, who were excluded through an inadvertent error, are now included, as we had always intended.

[Liz Twist (Blaydon) (Lab)]

Will the Minister give way?

[Lucy Frazer]

I will now conclude.

It is vital that our NHS recovers from the pandemic and that our social care system benefits from much-needed reform as soon as possible. This measure contributes to that end and I commend it to the Committee.

--- Later in debate ---

[Lucy Frazer]

I thank hon. Members for their important contributions. I assure the Committee that my officials and I considered the matter carefully before we laid the draft SI before the House, for many of the reasons raised. The reason for the measure is simply that there was never an intention not to include that category of women. They were only not included because of an oversight. That having happened, it seemed more appropriate to correct the oversight, which was never intended, recognising the fact that only a small number of people are affected and that, if we ask people to pay the levy, it should be fair that we ask across the board. A particular category of people should not benefit just because of an oversight that we made.

[Brendan O'Hara]

rose—

[Lucy Frazer]

I hope to answer the points made, but if I do not, I am happy to come back to the hon. Member.

To answer some factual points, in general the age of the people affected is between 61 and 66. For example, if someone is earning up to the threshold of £12,570 per annum, they will still be paying £13 less a month in NICs once the changes have come in—that is £160 per annum. If they are earning £1,500, they will still be paying £130 less per annum, taking into account the changes that we have made.

On notification, the Chartered Institute of Payroll Professionals, for example, published the details of the changes in relation to this rate on its website. I understand the point that people are making in relation to the increase, but the 1.25-percentage point increase is the same across the board. I appreciate the points that people are making, but at the end of the day the reason why we are doing this is so that it is fair across the board.

[Brendan O'Hara]

Can I just ask a couple of questions? Has a calculation been done on how much will be raised in the year from these 1,000 women, set against a calculation of how much it will cost to administer?

[Lucy Frazer]

These regulations are not being made on the basis of what revenue we will raise; they are being made on the basis of being fair to everybody. On the hon. Gentleman’s point, as I have already said, the process is already in place, and if we were to stop the process happening, that would be a cost for payroll providers, because they would have to reverse what they are already doing. However, I am not standing here today and saying that we are going to raise millions of pounds through a measure that I have already highlighted will affect only a small number of individuals.

[Sarah Champion]

Minister, I ask one favour. It is £1,000 to write to these women—I will stuff the envelopes if need be. To give them some notice that this is coming would enable them to manage their budgets a little bit better. Will the Minister please commit to doing that?

[Lucy Frazer]

The hon. Member asks very nicely and politely, and while I will take that suggestion away, I am not promising her that we will do it. As I have said repeatedly to various Members across the Committee, we do not believe that these individuals do not believe that this is coming. This is not a situation in which we are making a change, but I will take away the hon. Member’s suggestion and think about it further with my officials.

Question put.

National Insurance Contributions (Increase of Thresholds) Bill

Lucy Frazer Excerpts

Committee stage
Thursday 24th March 2022 Commons Chamber

As I have made clear, we will support the measures in the Bill because we recognise that the raising of the thresholds has benefits and we welcome any help for people who face the Chancellor’s national insurance tax hike in April. However, I have set out important points of detail—particularly in respect of the timing of the changes we are asked to agree today—that will have a real impact on people’s pockets. I would be grateful if the Minister addressed them directly in her reply.

[Lucy Frazer]

I wish first to address amendment 1, which was tabled by the hon. Member for Bath (Wera Hobhouse) and would bring forward to 6 April the increase to the primary threshold that is introduced in clause 1. Of course the Government want to help people with the cost of living as quickly as possible, which is why the Chancellor introduced a number of measures immediately, including the cutting of fuel duty, which came into force at 6 pm last night. However, it was not possible to deliver the increase to the primary threshold from 6 April, which is in less than two weeks’ time.

The Government are implementing the change as early as possible, from 6 July. It is not possible for the majority of software and payroll providers to deliver the measure for April. Its delivery to an April timeline would see millions of individuals paying the incorrect amount of NICs at the start of the tax year, in just two weeks’ time. There would then be an additional administrative burden on employers, who would have to manually re-run the payroll once the software was ready. As my hon. Friend the Member for Wrexham (Sarah Atherton) said, the earliest that we can deliver the policy and it can be implemented by all software developers is July. That will avoid millions of taxpayers having to make manual claims for refunds.

Overall, the delivery timetable strikes the important balance between ensuring that individuals see the benefits of the increase as early as possible and allowing employers and payroll-software providers sufficient time to update and test their systems so that the change is delivered smoothly and individuals can enjoy the benefits at the same time. I hope the hon. Member for Bath will withdraw her amendment for the reasons I have outlined.

Let me turn to the new clauses in combination, because they address similar matters. On the points that Members made about poverty, if we look back at the past 10 years, we see that around 1.3 million fewer people are living in poverty, half a million fewer children are growing up in workless households and hundreds of thousands fewer children are living in poverty.

[John McDonnell]

I do not want the Minister to miss the point of new clause 1. I understand why she is setting out the statistics as she understands them, but they are contested. Nevertheless, the point I was trying to make with my new clause is that the Government should always publish a full report on their assessment of the implications of their legislation for both low pay and poverty, and that that report should include their assessment of the other options available to them that they could have taken. It is a simple measure that I hope would apply to all Governments of whatever political colour.

[Lucy Frazer]

I was going to come to the distributional analysis of the spring statement. The analysis in the document “Impact on households: distributional analysis to accompany Spring Statement 2022” shows that

“government policy continues to be highly redistributive; in 2024-25, on average, households in the lowest income decile will receive over £4 in public spending for every £1 they pay in tax”.

It also shows that

“in 2024-25, the poorest 60% of households will receive more in public spending than they contribute in tax”

and that

“on average, the combined impact of personal tax and welfare decisions made since SR19 is progressive, placing the largest burden on higher-income households as a proportion of income.”

[John McDonnell]

I do not want to labour the point. I have read the analysis of the impact on households; it is always very helpful, but it does not address the issue of low pay and poverty, or other policy options that could be considered. I make the point for the future. I know it is impossible to address now, but I think such a report should be published automatically. If the Government do not publish it, maybe a report should be published by the OBR or some other body that we establish to enable that to happen.

[Lucy Frazer]

I recognise the point made by the right hon. Member and I will of course consider it for the future. Considering a variety of hypothetical scenarios is time-consuming, which is why that is not traditionally done, but I will take his point away and consider it further.

I reiterate some of the points we discussed on Second Reading only a moment ago about the impact of the measures on those in lower pay and on universal credit. As hon. Members know, there was an autumn Budget not very long ago, followed now by this spring statement. In the autumn Budget, the Chancellor started the journey of helping to support those on lower pay through the tax system. He announced the first tax cut on his journey to cut taxation—the cutting of the taper rate, which will put £1,000 into the pockets of those on universal credit.

Hon. Members will already know about the increase in the national living wage. They will have seen the £1 billion household support fund, which is helping people in all our constituencies, building on other measures that were announced at the autumn Budget. More recently, we have provided £9 billion in energy support. There is the increasing generosity of the local housing allowance for housing benefit and the holiday activities and food programme. The Chancellor’s plan for jobs—the Conservative plan—whether through the kickstart scheme, the restart scheme, work coaches or boot camps, is to ensure that, where people can get into work, they get into work, and they are upskilled so that they earn more for themselves.

On new clause 4, the increase to the primary threshold and the lower profits limit is a tax cut on earned income that will benefit almost 30 million working people.

[Clive Efford]

Will the Minister give way?

[Lucy Frazer]

I will just finish this point; I will come back to the hon. Gentleman. We are introducing a tax cut for a typical employee that is worth more than £330 in the year from July 2022. The impact of the provisions in the Bill have already been published in a tax impact information note published on gov.uk, and the impact of the income tax basic rate cut will be published ahead of implementation in 2024.

The hon. Member for Bath raised a question about landlords. We have taken steps over several years to ensure that landlords pay a fair tax contribution.

In April 2016, we introduced a higher rate of stamp duty land tax for those purchasing additional properties, recognising that, although the private sector plays an important role in our housing market and people should be free to invest in buy-to-let properties, the purchase of additional properties can affect the ability of other people to get on to the property ladder. We also restricted finance cost relief so landlords no longer get relief at their marginal rate if they are a higher or additional rate taxpayer. Finally, we maintained the 8% higher rate of capital gains tax for landlords compared with the rate for other taxable gains.

[Wera Hobhouse]

Will the Minister give way?

[Lucy Frazer]

I am going to give way to the hon. Member for Eltham (Clive Efford) first. He is probably going to ask about the previous point.

[Clive Efford]

I am wondering whether the Minister missed new clause 2, because she did not address the problem. Yes, increases were introduced in the autumn Budget last year, but this year, people are getting less than they were anticipating due to the increase in the threshold of national insurance. People were being told yesterday that they should get an extra £330, but they will actually get less than half of that. What is the Government going to do about that? The Treasury is clawing back several hundred million pounds from some of the poorest workers in the country.

[Lucy Frazer]

I do not know whether the hon. Member was in the Chamber when the right hon. Member for East Ham (Stephen Timms) raised this point and I addressed it. He is right to point out that an individual may be affected by the taper, but overall they will be better off as a result of this change. If those people are earning below the work allowance, they will get the full benefit. I reiterate that the changes that we have already made mean that those who are on universal credit will benefit by £1,000 from the cut to the taper rate.

[Wera Hobhouse]

I accept that the Government might have done all sorts of other things to put restrictions on landlords, but would it not be interesting to know the difference between earned and unearned income in relation to the measure introduced by the Chancellor yesterday?

[Lucy Frazer]

As the hon. Member knows, the threshold increase will largely affect those who are working, because it is a tax that relates to working people, and the income tax cut that we have announced will, obviously, affect those who pay income tax.

The hon. Member for Ealing North (James Murray) made a number of points. He asked when the Chancellor decided that he would implement this change to the threshold. In considering a tax policy, it is not decided that something will be implemented on a particular day. A whole process needs to be followed, including ensuring that the relevant documents are put before the House. The hon. Member will be aware that that involves a Bill, an explanatory memorandum and a TIIN. He will know, because he will have heard the Chancellor and other Treasury Front Benchers say so on many occasions in the House, that the Chancellor has been considering for some time how he can help those who might be impacted by the cost of living issues that we currently face. It is appropriate, where measures are taken in relation to tax, that they are broadly taken at fiscal events.

The hon. Member also made a slightly contradictory point. He asked why we had not introduced the measure sooner, in March perhaps, and then suggested that it was being introduced too late because we were delaying it until July. He seemed to be criticising us both for not bringing it in earlier and for not giving him sufficient time to consider it, but I have mentioned all the things we need to do before introducing it in July.

The reason that the measures will be brought in through regulations is that we need to consult, including those who will be doing the payroll. The need to consult was one of the points made by the Low Incomes Tax Reform Group.

We have come to the end of what has been a useful Committee sitting that examined the detailed provisions of the Bill. The Bill seeks to align the threshold at which employees and the self-employed start paying NICs with the personal allowance for income tax. As well as simplifying the tax and NICs system, the measure ensures that hard-working families keep more of what they earn.

I thank hon. Members for their constructive contributions. I will, of course, look carefully at the record of the Committee debate and take forward any outstanding points.

[Wera Hobhouse]

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 1 ordered to stand part of the Bill.

Clauses 2 to 6 ordered to stand part of the Bill.

The Deputy Speaker resumed the Chair.

Bill reported, without amendment.

Bill read the Third time and passed.

National Insurance Contributions (Increase of Thresholds) Bill

Lucy Frazer Excerpts

2nd reading
Thursday 24th March 2022 Commons Chamber

[The Financial Secretary to the Treasury (Lucy Frazer)]

It is a privilege to close this debate on behalf of the Government. We have heard many excellent speeches from both sides of the House today and I thank all hon. Members for their contributions. Before I address their points, I will remind the House of the Bill’s purpose.

The Bill does three things: it cuts taxes to ensure that people have immediate help with the cost of living; it creates better conditions to enable businesses to invest and grow; and it ensures that people keep more of what they earn for years to come. The Bill makes changes to the national insurance contributions system, which will make it easier for households to manage their finances at this difficult time by putting billions of pounds back into their pockets.

As we have heard, the Bill has two main measures. First, it will increase the NICs primary threshold and the NICs lower profits limit to £12,750 from July. As my hon. Friend the Member for South Leicestershire (Alberto Costa) said, it is the largest single personal tax cut in a decade. It represents a £6 billion personal tax cut for 30 million people across the UK. In addition, almost 2 million people will be taken out of paying class 1 NICs, class 4 NICs, and the health and social care levy entirely.

Some hon. Members might be asking why we cannot introduce these measures sooner. The simple answer is that we feel that the July implementation date strikes the right balance and allows employers and payroll software firms to adapt to significant changes. My hon. Friend the Member for West Bromwich West (Shaun Bailey) highlighted the importance of updating HMRC’s guidance.

Secondly, the Bill seeks to alleviate some of the pressures caused by the rising cost of living on those who earn low amounts and who work for themselves. This measure will benefit half a million self-employed people by saving them up to £165 a year. As the Chief Secretary to the Treasury has already outlined, removing class 2 NICs from this group of low-earning self-employed workers will not prevent them from building their eligibility to the state pension and other contributory benefits.

I will now turn to some of the points raised during the debate by right hon. and hon. Members. The hon. Member for Ealing North (James Murray) made a few points and highlighted the tax burden. It is important to remember, however, the context in which the legislation is being brought forward and the context in which previous choices were made. He will remember that the Chancellor saved many livelihoods with the £400 billion of support that he provided during the covid pandemic. He also asked how we compare with other countries and what other countries are doing at this time. I inform him that the new tax to GDP ratio will still mean that we are in the middle of the pack internationally and lower than Germany, France and Italy.

The hon. Gentleman and the hon. Member for Warwick and Leamington (Matt Western) asked why we have not brought in a windfall tax on oil and gas companies. Many Conservative Members pointed out the answers to that. First, it is a short-term measure and we are bringing in long-term measures that will withstand the future. Secondly, we need those companies to invest in the future to ensure that we have energy security and that we transition to more renewable energy sources. They also pay more taxes already—40p in the pound not 19p in the pound as other companies do—and they have already invested, by way of taxation, £375 billion in production taxes.

[Matt Western]

I understand the point, and none of us really wants to see short-term measures, but in difficult times such as those we are in they are sometimes needed. The windfall tax is short term, of course, but is not the 5p fuel duty cut also short term?

--- Later in debate ---

[Lucy Frazer]

As we know, there is energy price volatility in that the price of oil and gas will be going up and down, which is why the Chancellor has put in the measure for a 12-month period, but I should point out that that builds on the 12th consecutive year of fuel duty freezes.

[Gareth Davies]

Will the Minister give way?

[Lucy Frazer]

I am going to carry on, because there are a lot of points to which I would like to respond and I have limited time.

My hon. Friend the Member for South Dorset (Richard Drax) made a very powerful speech about freedom, recognising the impact of global challenges. He mentioned the armed forces, and I would like to reassure him that last year’s integrated review was accompanied by the largest cash increase in the defence budget since the cold war, with an additional £24 billion.

The hon. Member for Gordon (Richard Thomson) asked why the Chancellor is not using his £30 billion headroom. I would like to point out that the OBR has said that there is “unusually high uncertainty” in relation to the outlook, and the OBR has also said that the headroom the Chancellor has kept is the same as, or indeed less, than that of previous Chancellors. That is important because, if there is a 1.3% increase in interest rates, that will totally wipe out the headroom the Chancellor has given himself. We are already looking at £83 billion being paid in interest next year. Those of us on the Government Benches think we need to be fiscally responsible in the way we deal with our taxpayers’ money.

The hon. Member also said that to increase the national insurance contributions threshold as we are doing was not the right way to go. I would like to point out that Martin Lewis has said on Twitter:

“This is the big one. Increasing the National Insurance threshold so it now matches Income tax from July.”

He said various other things, and then he said, “Good call”.

My hon. Friend the Member for Redcar (Jacob Young) recognised that there are no easy choices. He reminded us of Labour’s record on the economy, which reminded me that the shadow Chancellor had put forward a total of £170 billion of uncosted spending proposals just by September last year, and she has refused to rule out hiking up income taxes.

[Stephen Timms]

The Minister mentioned Martin Lewis, and I wonder if she could provide the information that the Chief Secretary said she might be able to give in winding up this debate about the effect of this national insurance measure on people claiming universal credit. Martin Lewis has made the point that they will lose 55% of the £330 a year benefit. Will she confirm if that is correct?

[Lucy Frazer]

I was going to come back to that point, but I am very happy to deal with it now. My right hon. Friend the Chief Secretary is right that an individual may be affected by the taper, but will be better off overall as a result of the change. If they are earning below the work allowance, they will get the full benefit. It is important to point out the changes we have already made for those on universal credit. As a result of those changes, 1.7 million households will benefit from the taper rate change, which is £1,000 of additional income for them.

The hon. Member for St Helens South and Whiston (Ms Rimmer) talked about the energy crisis. She will know the measures we have already put in, including the £9 billion of further support, with the £350 that people will get over the course of this year. She mentioned businesses in her constituency, and I hope they will welcome the increase to the employment allowance that we have announced.

I am very pleased to hear how my hon. Friend the Member for Peterborough (Paul Bristow), my almost constituency neighbour, is engaging with his constituents, and that the Oxcart pub welcomes our business rate cuts.

The hon. Member for North East Fife (Wendy Chamberlain) talked about poverty. I am very proud that, if we look at the past 10 years of this Government, there have been about 1.3 million fewer people in poverty. She also talked about pensioners, and this the Conservative Government have consistently supported pensioners. Through the triple lock, we have seen an increase in state pension of 25%—that would be £2,050—since 2011.

My hon. Friend the Member for Rother Valley (Alexander Stafford) made a very passionate speech, rightly recognising the global macroeconomic position. He is absolutely right to talk about the importance of getting people into work, a point that was also made by other hon. Members. I am very pleased that he has held his first Rother Valley jobs fair, and we are getting people into work through the plan for jobs that the Chancellor has set out—whether through restart and kickstart or with the benefit of work coaches.

The hon. Member for Luton South (Rachel Hopkins) talked about low growth and low pay, but I wonder if she is aware that ours was the fastest growing economy in the G7 last year, according to the IMF. I wonder whether she heard the Chancellor’s statement in which he set out a tax plan that focuses on growth. It focuses on what we will do to support businesses in the way of capital, people and ideas. He has already highlighted that he is looking forward to cutting tax rates on businesses, so that they can further invest, in his autumn Budget.

A number of Members talked about how the OBR has said that the package only reverses

“around a sixth of the net tax rises”

that the Chancellor has announced overall. I just want to inform them that the tax plan comes on top of the almost £46 billion in tax cuts that the Government have introduced for this year and next. That includes the super deduction worth £25 billion across two years, business rates and VAT support worth £14.5 billion across two years, and fuel and alcohol duty freezes worth £4.5 billion across two years. These important tax cuts were not included in the OBR’s analysis, which just focuses on the final year of the forecast period.

My hon. Friend the Member for Bury North (James Daly) was right to say that this is not the end of the journey for the Chancellor, a point also made by my hon. Friend the Member for West Bromwich West (Shaun Bailey), who mentioned that this is part of a broader package. The Chancellor has a plan to help families with the cost of living, creating the conditions for private sector-led growth and sharing the proceeds of growth fairly.

The right hon. Member for Hayes and Harlington (John McDonnell) talked about the importance of helping those on low incomes. I absolutely agree with him that that is important, but we are doing it—whether through the universal credit taper rate, raising the national living wage, the 70% cut in taxes that we announced yesterday and are legislating for today, the £9 billion of energy support or increasing the generosity of the local housing allowance. All those measures will support people on low incomes. He made an interesting point about public sector pay, which I noted conflicted with a point the shadow Chancellor, the hon. Member for Leeds West (Rachel Reeves), made on the radio this morning when she recognised that negotiations for public sector pay were independent decisions made by pay review boards.

The measures in the Bill will ensure that our national insurance system plays its part in relieving some of the challenges facing families right now as a result of the cost of living crisis. Of course, we have not introduced them lightly. We are conscious that in the next financial year we are forecast to spend £83 billion in debt interest, the highest figure on record. In addition, while the Bill represents an important part of the Chancellor’s tax plan, it is just one element of it.

Yesterday, the Chancellor also announced steps to create the right conditions to enable our businesses to grow, highlighting some potential tax-cutting options for businesses, investment and innovation. He announced action to help to ensure workers see more of their hard-earned cash and a pledge to reduce the basic rate of income from 20p in the pound to 19p in the pound before the end of the Parliament, representing the first such cut in 16 years. Furthermore, the Chancellor announced help for motorists through the biggest cut to fuel duty rates ever, while for the next five years homeowners in Great Britain who have materials such as solar panels, heat pumps or insulation installed will pay zero VAT. He doubled the household support fund, which allows local authorities to distribute financial help to the vulnerable, so it stands at £1 billion.

Help with the cost of living, extra support for the vulnerable, delivering on our pledge to reform the tax system and measures to make sure work really pays all comes on top of the £400 billion of support we provided to individuals and businesses during the pandemic and the £20 billion we have already pledged to help with the cost of living. Let no one say that this Government do not stand by the people of this country. The Bill is yet more clear evidence of how we are making good on our promise to support our citizens through challenging times. That is why I commend it to the House.

UK Suspension of Exchange of Tax Information with Russia and Belarus

Lucy Frazer Excerpts

Thursday 17th March 2022 Written Statements

[The Financial Secretary to the Treasury (Lucy Frazer)]

Today I am announcing that the UK is freezing tax co-operation with Russia and Belarus by suspending all exchange of tax information with them, as part of the UK’s wider response to the Russian invasion of Ukraine. The UK exchanges tax information with Russia under the convention on mutual administrative assistance in tax matters, and Russia and Belarus under bilateral double tax agreements. Tax information is exchanged as part of collaboration to address tax compliance risks.

Suspending exchange of tax information means that Russia will not receive information under any of the UK’s exchange of information agreements: exchange of information on request (EoIR), common reporting standard (CRS) or country-by-country reporting (CBCR). Belarus is not signed up to the CRS or CBCR, so only EoIR information is being suspended.

It is not appropriate that the UK undertake co-operation that would lead to the economic benefit of Russia, or Belarus, which has aided and abetted Russia. The suspension of tax information exchange will ensure the UK is not supplying Russia and Belarus with information that could lead to an increased tax benefit or yield for them. This action is not expected to materially impact the UK’s ability to address tax non-compliance as we continue to exchange tax information with our extensive treaty network.

[HCWS697]

Bank Branch Closures

Lucy Frazer Excerpts

Wednesday 16th March 2022 Commons Chamber

[The Financial Secretary to the Treasury (Lucy Frazer)]

It is a privilege to respond to this debate on behalf of the Government. I congratulate the hon. Member for Airdrie and Shotts (Ms Qaisar) on securing her first Adjournment debate on an issue on which she has been vocal and campaigned hard. My hon. Friend the Economic Secretary to the Treasury takes the issue of bank closures very seriously, and he would have represented the Government’s position here today were he not on ministerial business abroad.

The hon. Member for Airdrie and Shotts talked about the importance of people going into banks. The reality is that the way that consumers engage and interact with their banks is changing, with increasing numbers using digital services to manage their affairs. It was interesting to hear her talk about her own experience and that of her generation in terms of how people are now accessing their money.

[Martin Docherty-Hughes]

The reality is that the experience of those states that have moved to a digital framework, such as Estonia, highlights the fact that this transition needs to recognise those who find it most difficult. Therefore, we need to be in a position where people who still use cash are able to do so whenever they need to.

[Lucy Frazer]

The hon. Member makes an important point. I will come on to the ways in which we are ensuring that those who need to access a physical location are indeed able to do so.

According to UK Finance, as of 2019, half of adults in this country used mobile banking. In the 12 months to February 2020, half of adults with a day-to-day bank account carried out their banking activities face to face in-branch, down from almost two thirds— 63%—just three years earlier. The Government want to ensure that people have appropriate access to banking services, and the transition towards digital banking brings many opportunities for individuals and businesses. It is our view that the Government cannot and should not seek to reverse the changes we are seeing in the market and in customer behaviour. Nor should the Government determine firms’ commercial strategies in response to these changes. Having the flexibility to respond to changes in the market is part of what made the UK’s financial services sector one of the most competitive in the world, and the Government want to protect that success.

[Stewart Hosie (Dundee East) (SNP)]

While Governments should not be setting commercial objectives for the banks, I was told by a representative of a bank which had shut both a branch and removed the automated teller machine that it cost as much to keep an ATM as to run a branch, so I think we need to say to the banks—while not imposing any commercial criteria on them—that they should at least be honest about the reasons why branches are shutting.

[Lucy Frazer]

I am confident that banks will be carefully looking at how much it costs to run an ATM versus a people-staffed bank and will make those decisions accordingly, but we recognise the impact of branch closures on people and their communities, and the hon. Member for East Renfrewshire (Kirsten Oswald) talked about the importance of engagement with communities. Since 2017, the UK’s largest banks and building societies have been signed up to the access to banking standard, which commits them to ensuring that they inform customers about any branch closures, that they explain the reasons for the closure, and that they clearly outline customers’ options for continued access to banking services.

[Peter Grant (Glenrothes) (SNP)]

Will the Minister give way?

[Lucy Frazer]

I am going to carry on because the hon. Member for Airdrie and Shotts, who secured the debate, made many points and I want to respond to them.

The Financial Conduct Authority has also set out its expectations of firms when deciding whether to reduce the number of their physical branches or the number of free-to-use ATMs. FCA guidance states that firms are expected to carefully consider the impact of a planned closure on their customers’ everyday banking and cash needs.

The hon. Members for Strangford (Jim Shannon) and for Reading East (Matt Rodda) talked about the importance of going into a physical location for those such as the elderly and the disabled. As well as the innovations around mobile and online banking, there are alternative options to access everyday banking services via telephone banking and also, importantly, via the Post Office. The Post Office plays a significant role in servicing people’s everyday banking needs across the UK. The Post Office banking framework allows 99% of personal banking and 95% of business customers to deposit cheques, check their balance, and withdraw and deposit cash at the 11,500 Post Office branches right across the UK. As the hon. Member for Airdrie and Shotts pointed out, it is important that there is somewhere to take that cash, which is why the Post Office provides such an important service.

[Marion Fellows]

Will the Minister give way?

[Lucy Frazer]

I am going to come on now to the point the hon. Lady made about access to cash. Access to cash is one of the services that bank branches and post offices help to deliver, but the Government understand the importance of cash to the daily lives of millions of people across the UK, particularly vulnerable people, which is exactly why we have committed to legislate to protect access to cash.

Last year, the Government consulted on further proposals for new laws to make sure people need to travel only a reasonable distance to pay in or take out cash. The Government’s proposals are intended to support the continued use of cash in people’s daily lives and help enable local businesses to continue accepting cash by protecting deposit facilities. We are carefully considering the responses to the consultation as we develop legislation and will set out next steps in due course. Encouragingly, following the Government’s commitment to legislate, firms are working together through the Access to Cash Action Group to develop new initiatives to provide shared services.

I wish to touch on another way for people to access the banking system in person. The hon. Member for Reading East mentioned banking hubs. The introduction of shared banking hubs is an exciting development. Last year saw the successful pilot of the initiative, with two bank hubs offering counter services run by the Post Office and dedicated spaces for customers to see community bankers from their own bank. The findings of the pilot revealed that, as of October 2021, £4.65 million of cash had been deposited at the two pilot sites. Almost a quarter of local businesses said the pilots meant they no longer needed to close their shop to get or deposit cash. As a result, the two bank hubs have been extended until at least the spring of 2023.

Building on the experience gained in the pilots, last December the industry announced its intention to introduce five more Post Office bank hubs in Acton, Brixham, Angus, Knaresborough and Syston. The bank hubs are a commercial initiative, meaning it is for industry to play a key role in the provision of appropriate facilities for customers.

At the beginning of her speech, the hon. Member for Airdrie and Shotts talked about HSBC’s announcement of the closure of some banks. I reassure her that all the branches that are to close have a post office within 1.5 miles for everyday banking transactions.

[Marion Fellows]

Will the Minister give way?

[Lucy Frazer]

I am going to conclude because I fear I am running out of time.

The Government understand what is at stake here and are working hard to do right by communities up and down the country. Banking is changing in ways to which industry can and should respond but, as I have said, it is also right that the impact of branch closures on people and communities is understood, considered and, where possible, mitigated, so that everyone, whoever they are and wherever they live, continues to have access to the services they need.

Question put and agreed to.

Oral Answers to Questions

Lucy Frazer Excerpts

Tuesday 15th March 2022 Commons Chamber

[Stephen Farry (North Down) (Alliance)]

5. What discussions he has had with Cabinet colleagues on the potential merits of reviewing the inflationary uplift in universal credit in response to the increase in the cost of living.

[The Financial Secretary to the Treasury (Lucy Frazer)]

Details of ministerial discussions are not normally disclosed. Treasury Ministers have meetings with a wide variety of organisations in the public and private sectors as part of the process of policy development. From April, universal credit and many other benefits will be uprated by 3.1%, the rate of the consumer prices index in September 2021. In addition, the Government are providing support worth over £20 billion across this financial year and next to help families with the cost of living.

[Stephen Farry]

Millions of families across the UK, both in and out of work, depend on universal credit and other benefits. As the Minister knows, the 3.1% uprate was set in September. We are now seeing inflation of over 7%. The Joseph Rowntree Foundation, the Trussell Trust and many other organisations highlight the real jeopardy that families are now facing. They have no plan B. Indeed, families are facing cuts in real terms of over £500 over the course of the year. Surely that decision has to be reassessed in the light of changing circumstances.

[Lucy Frazer]

CPI has been the default inflation measure for the Government’s statutory annual review of benefits since 2011, as the hon. Gentleman knows, but we are fully aware of the impact on households of the cost of living. That is why we are providing £20 billion of support, whether that is through £9 billion of support to help with rising energy bills or through universal credit. As he also knows, we have cut the taper rate so that families can keep an additional £1,000 annually in their pockets.

[Nigel Mills (Amber Valley) (Con)]

Does the Minister think that the uplift coming next month will be enough to get people all the way through next winter? If she recognises that there is a problem, will the Government consider bringing forward next April’s increase to this autumn, to give people a bit more money to help with their heating and food bills next winter?

[Lucy Frazer]

As my hon. Friend knows, we have introduced a range of measures to support families, both working and not working. The price of energy is now set until the autumn, and a significant amount of money is going in now and in the autumn.

[Bill Esterson (Sefton Central) (Lab)]

7. What recent steps he has taken to help reduce economic inequality.

[The Financial Secretary to the Treasury (Lucy Frazer)]

Work is the best route out of poverty. We are investing more than £6 billion in labour market support over the next three years to help people to move into and progress in work. In addition, analysis published at the last autumn Budget shows that in 2024-25, tax, welfare and spending decision since the 2019 spending review will have benefited the poorest households the most as a percentage of income.

[Bill Esterson]

But real wages are falling by the largest amount since 2014, inflation is set to hit 8% and the energy price cap is going up. In the cause of fairness and sound economics, when will the Financial Secretary and her colleagues admit that it makes sense to use the record profits of North sea oil and gas to help ordinary people, who face a cost of living crisis?

[Lucy Frazer]

The hon. Gentleman knows from the statistics announced this morning that wages are up in real terms compared with pre-pandemic levels. In fact, unemployment is now almost back to pre-pandemic levels, and is lower than in Canada, France, Italy, Spain and Australia. On his specific question, the North sea oil industry already contributes additional taxes through a 40% rate, which is double the amount that other corporations pay.

[Virginia Crosbie (Ynys Môn) (Con)]

My constituency has one of the lowest rates of gross value added in the UK and is desperately in need of jobs and investment. The island is known as “energy island” because we have wind, waves, solar, tidal and—hopefully—nuclear. I was delighted to hear the Chancellor mention nuclear and the fact that he has committed to the £120 million future nuclear enabling fund, but will he also commit to publishing the criteria and bidding process, so we can move at pace in this vital sector?

[Lucy Frazer]

It is great to see the good work going on in my hon. Friend’s constituency. Of course, her question is for our right hon. Friend the Secretary of State for Business, Energy and Industrial Strategy, who I am sure is considering it carefully.

[Nia Griffith (Llanelli) (Lab)]

8. What recent steps he has taken to help ensure value for money in public spending.

--- Later in debate ---

[Andrew Bridgen (North West Leicestershire) (Con)]

T5. Further to our recent meeting, has the Minister had an opportunity to consider my proposals for a traffic light system to inform the public of the tax approval status of investment schemes?

[The Financial Secretary to the Treasury (Lucy Frazer)]

It was very interesting to meet my hon. Friend, together with his colleagues from the all-party parliamentary group on investment fraud, and to hear his idea. As we discussed, Her Majesty’s Revenue and Customs is very keen to make clear which schemes do not work. That is why, in the Finance Act 2022, the Government legislated to allow HMRC to name promoters and the schemes they promote at the earliest possible stage, to warn taxpayers of the risk of entering into those schemes, and to help those already involved to exit avoidance.

[Vicky Foxcroft (Lewisham, Deptford) (Lab)]

T2. Research by Scope showed that one third of disabled households were already living in poverty last year. NatCen’s recent report on health and disability benefits, which was commissioned by the Government, further illustrates the devastating impact of insufficient financial support. What do Ministers have to say to disabled people who are already struggling and are now living in fear of worse to come?

[John Penrose (Weston-super-Mare) (Con)]

T6. In his last Budget, the Chancellor slashed universal credit withdrawal rates, delivering an 8% tax cut for the least well off, but as I explained in “Poverty Trapped”, the combined deductions from income tax and benefits withdrawals often still top 70% for the lowest-paid. If tax rates above 45% destroy work incentives for high earners, why should it be any different for low earners? How much more opportunity, energy and ambition could we unleash if these regressively high and unfair rates were cut even further?

[Lucy Frazer]

My hon. Friend is right to highlight the effect of a high effective tax rate on incentives to work. That is why the Government reduced the universal credit taper rate from 63% to 55% and increased the universal credit work allowance by £500 per year, which is essentially a tax cut for the lowest-paid, worth more than £2 billion in 2022-23, and means that 1.9 million households will keep an extra £1,000 per year on average.

[Bill Esterson (Sefton Central) (Lab)]

T4.   Waste recycling businesses face an increase in tax on red diesel of thousands of pounds per month from April. I take it that the Chancellor agrees that waste recycling has important economic as well as environmental benefits, so what plans has he to address the sudden rise in costs for businesses that process and reuse waste materials?

--- Later in debate ---

[Lucy Frazer]

I am happy to answer that question. I understand completely the concerns of people in Northern Ireland about the impact of the protocol; the right hon. Member will know how seriously the Government take those concerns and how we are negotiating with the EU to ensure that we get the right arrangement for Northern Ireland. I can give him assurances here and now about what the statutory instrument was doing: it was making very minor technical changes in a number of areas, for example in relation to the provision of information that might have to be given but that was never previously enforced. It was actually easing up the requirements for those who operate trade between Northern Ireland and Great Britain. These were technical changes, and I am very—

[Mr Speaker]

Order.

Customs (Amendment) (EU Exit) Regulations 2022

Lucy Frazer Excerpts

Monday 14th March 2022 General Committees

[The Financial Secretary to the Treasury (Lucy Frazer)]

I beg to move,

That the Committee has considered the Customs (Amendment) (EU Exit) Regulations 2022 (S.I. 2022, No. 109).

It is a pleasure to serve under your chairmanship, Mr Sharma.

The regulations consist of two measures that are being introduced following a review of customs enforcement rules. The measures make minor changes to legislation that will not have significant implications for traders or place additional burdens on them. None the less, the regulations will help to ensure that trade between Northern Ireland and Great Britain can continue smoothly and that traders in GB have appropriate safeguards where customs enforcement rules are applied by Her Majesty’s Revenue and Customs.

The first measure makes a number of changes relating to vehicles and goods travelling between Great Britain and Northern Ireland. First, it will ensure that HMRC can collect information about goods—for example, alcohol or tobacco—that are imported to the UK on Royal Navy ships from Northern Ireland. That rule already applies to vessels more broadly. The measure makes no change to the way in which the Royal Navy supplies that information to HMRC.

Secondly, that measure will give HMRC new powers to prevent fraudsters from exploiting the rules, for example, by putting goods shipped into Great Britain via Northern Ireland into the British market without paying the right duty. Thirdly, the measure will remove an unused and outdated requirement for information about goods being transported by ship from Great Britain to Northern Ireland. Again, let me stress that those are all minor changes that will place no extra burden on traders.

The second measure is also made up of several parts. The first relates to HMRC’s right to request a security as a condition of releasing imported goods from customs control. That might happen where a customs declaration form cannot be verified immediately, for example, in cases of suspected undervaluation fraud. Our customs officials rightly take a rigorous approach to their work. That means that, in some circumstances, the verification process might take a significant amount of time which, in turn, might mean that goods become commercially worthless to traders and cause storage problems for HMRC. As a result, it is in both parties’ interest to allow the goods to be released from customs control, as long as a trader can provide a security to cover any additional duty owed.

When the UK was in the European Union, traders who disagreed with HMRC’s decision to require a financial security could request a review or appeal to an independent tribunal. Those rights were also supported in domestic legislation. Since the end of the transition period, HMRC has the right to continue to require financial security from importers under the Customs and Excise Management Act 1979. That legislation, however, is not currently linked to statutory rights to request a review or to appeal to an independent tribunal. The regulations will therefore reinstate those rights and give businesses the same right of appeal as under EU legislation.

The final parts of the measure update the 1979 Act so that it reflects terminology used elsewhere in domestic customs legislation. The measure also omits previous amendments to the Act that have not yet come into force and that would have removed HMRC’s ability to require traders to provide a security.

[Mr John Baron (Basildon and Billericay) (Con)]

I would like my right hon. and learned Friend’s assessment of whether the arrangements are proceeding as per the spirit of the EU protocol, given that when the trade arrangements were being negotiated, the feeling was that if there were no disruption to trade elsewhere in the EU, there would be a light-touch approach to the trading relationship between Northern Ireland and the mainland. In effect, however, that has not taken place. What is her assessment of that?

[Lucy Frazer]

My hon. Friend and many Members of the House—on both the Government and Opposition Benches—are very concerned about the implications of the Northern Ireland protocol. For that reason, through the Foreign Secretary, who is leading the negotiations, we are trying to change the arrangements for Northern Ireland. It is important that we do so, because they are having an effect on trade and on societal difficulties in Northern Ireland. As my hon. Friend knows, we have a number of easements on Northern Ireland that ease the requirements that were first put into the protocol. We support them, because they ease trade.

Let me be clear that the regulations do not in any way make it harder for traders to trade between Northern Ireland and the rest of the UK. In fact, they take away redundant provisions, tidy up the legislation and provide an easier and simpler route by way of the provision of a security. I understand the overall concern of my hon. Friend the Member for Basildon and Billericay and I share the concern that we need to get the right approach in Northern Ireland, but I do not think that the statutory instrument should aggravate or concern him unduly as regards Northern Ireland.

Income Tax Exemptions

Lucy Frazer Excerpts

Thursday 10th March 2022 Written Statements

[The Financial Secretary to the Treasury (Lucy Frazer)]

New social security payment in Scotland

The Government will legislate in spring 2022 to ensure that the new adult disability payment made by the Scottish Government will be exempt from income tax (as agreed in the 2016 fiscal framework agreement). The legislation will be retrospective from 1 March 2022.

HM Revenue and Customs will not collect any tax that may have been due on payments made from 1 March 2022 to the date the legislation takes effect.

This is being announced outside of the normal fiscal event process in order to ensure that those making the payments and the recipients know that they do not have to pay any tax on the payments.

Discretionary fund payments

The Government will legislate in spring 2022 to clarify that payments made through the discretionary fund (and the equivalent in the devolved Administrations) will be exempt from income tax. The discretionary fund is a £144 million fund that forms part of the package of support to help households with rising energy bills. Local authorities will use the fund to help households who are not eligible for a council tax rebate. Council tax rebates are not subject to income tax.

HM Revenue and Customs will not collect any tax that may have been due on payments made from 1 April 2022 to the date the legislation takes effect.

This is being announced outside of the normal fiscal event process in order to ensure that those making the payments and the recipients understand income tax is not due on the payments.

[HCWS669]

National Insurance Contributions Increase

Lucy Frazer Excerpts

Tuesday 8th March 2022 Commons Chamber

[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.