National Insurance Contributions (Increase of Thresholds) Bill

Abena Oppong-Asare Excerpts

2nd reading
Thursday 24th March 2022 Commons Chamber

[Abena Oppong-Asare (Erith and Thamesmead) (Lab)]

It is a pleasure to respond to this Second Reading debate on behalf of the official Opposition. I thank all hon. Members for their contributions to the debate.

My hon. Friend the Member for St Helens South and Whiston (Ms Rimmer) spoke passionately about the impact of energy price increases on energy-intensive businesses in her area, making clear the very real risk to jobs. A windfall tax on energy producers could be used to fund support for these businesses. My hon. Friend the Member for Luton South (Rachel Hopkins) was exactly right to say that the Government’s approach is low investment, low pay and low growth. The Government are putting up tax because they have failed to grow the economy. My right hon. Friend the Member for Hayes and Harlington (John McDonnell) spoke of his concerns about the impact that this will have on pensioners, reminding us that we must never forget the most vulnerable in society. The Government must do more on this. My hon. Friend the Member for Warwick and Leamington (Matt Western) spoke about how families are trying to make ends meet.

I also listened closely to the speeches of the hon. Members for South Dorset (Richard Drax), for Redcar (Jacob Young), for Peterborough (Paul Bristow), for Rother Valley (Alexander Stafford), for Bury North (James Daly) and for West Bromwich West (Shaun Bailey), as well as those of the hon. Members for Gordon (Richard Thomson) and for North East Fife (Wendy Chamberlain). The hon. Member for Peterborough spoke about the concerns of his constituents about the cost of energy. I would just say to him: does he really think the Government are doing enough, or does he think the Chancellor will have to come back to this House with more support?

This Bill, as we have heard, increases the annual national insurance thresholds for employees and for the self-employed from July 2022. As my hon. Friend the Member for Ealing North (James Murray) said, we will not oppose the Bill, as any help for people facing the national insurance rise in just a few weeks is welcome. It is rare that we debate tax legislation so soon after a Budget or spring statement, but the Bill stems directly from the spring statement that the Chancellor made yesterday.

I am sorry to say that the spring statement failed to match the scale of the challenge that our country and our economy face. Yesterday, the Office for Budget Responsibility said that we are facing

“the biggest fall in living standards”

since records began in the 1950s. It forecast that living wages will fall by 2.1% this year and 1.2% the year after. It also confirmed that living standards will not return to pre-pandemic levels until 2024-25. Millions of families around the country are feeling that already with high food, energy and fuel bills. They are looking at the bills that they must pay in the coming weeks and at their wages, which are failing to keep up with inflation, and they are simply wondering how they will make ends meet.

Yesterday, we hoped for a statement from the Chancellor that recognised the scale of the challenge and took real action to reduce energy bills, such as by leveraging a windfall tax on the record profits of the oil and gas producers, as the Opposition have proposed, or by finally scrapping his tax on jobs and on workers—his national insurance increase. We were disappointed on both fronts. He did not take the opportunity to tax the oil and gas giants for whom the crisis has been, in their own words, a “cash machine”, nor did he have the courage to drop his national insurance increase in full.

Instead, in the Bill, we are left with a half measure from a Chancellor who gives with one hand and takes with the other. Let us be clear: he is no tax-cutting Chancellor; he is a tax-raising Chancellor who is increasing the tax burden to the highest level since 1949. The burden is higher after yesterday’s spring statement than it was before. The OBR confirmed yesterday that £24 billion of additional tax rises are about to hit this year. As it made clear, the Chancellor has reversed only about a sixth of the tax rises that he has announced since he took the job, which means that he will still take £6 in tax for every £1 he is giving back.

As the IFS said, even after the changes announced yesterday, almost all workers will be paying more tax on their earnings in 2025 than they would have been without the Chancellor’s increases. Let us be clear: the national insurance increase is a tax on people who work. He is raising taxes on millions in the middle, but where is the increased tax contribution from the wealthiest in society? A landlord with a large number of properties will not be paying more in taxes, but their tenants will; someone with significant income from buying and selling stocks and shares will not pay any more tax; and the national insurance rise is also going ahead in full for more than 1 million employers who do not benefit from the employment allowance. It is a tax hike on jobs, which will ultimately be passed on to workers through lower wages and higher prices.

When the Chancellor first announced the national insurance increase, he said that it would pay for social care. As is typical of him, however, all was not what it seemed, because the Government then said that the money would go to tackling the NHS backlog instead. Six months later, there is still no plan to fix the social care system or tackle growing NHS waiting lists. After a decade of Tory mismanagement, the NHS went into the pandemic with record waiting lists and staff shortages of 100,000. After yesterday, however, we can be less confident than ever that the tax rise will ever make it into our health and care system. If the tax was really for the NHS, yesterday’s announcement would mean that it now faces a £6 billion cut; I assume that that is what the Government plan. Perhaps it would have been spent on making up the £11.8 billion of hard-working people’s money that has been lost to fraud and error under the Chancellor, which is close to the amount that he originally hoped to raise with the national insurance rise.

As I said in September, this is tax rise without a plan. Politics is about choices and Labour would not have made that choice. Yesterday was the Chancellor’s last chance to stop the national insurance increase before it comes into effect in two weeks. He did not take that chance. He is pressing ahead with a tax rise on workers and businesses, even as the cost of living crisis spirals out of control, prices increase and real wages fall, and the Government still refuse to take proper action to help people with soaring energy bills. This Bill cannot face that reality.

The Chancellor wants the British people not to notice that he is putting up their taxes at the worst possible moment, but they are smarter than that. They will see through the smoke and mirrors—his cynical attempt to give the impression of a tax cut just before the next election. He is still increasing their taxes and leaving families and businesses to fend for themselves in the middle of a cost of living crisis. That is the reality of the spring statement and the reality of the Bill.