Draft Social Security (Contributions) (Rates, Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations 2023 Draft Tax Credits, Child Benefit and Guardian’s Allowance Up-rating Regulations 2023

Abena Oppong-Asare Excerpts

Monday 6th February 2023 General Committees

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

It is a pleasure to serve under your chairship, Mrs Cummins, and to consider these regulations in Committee.

I thank the Minister for her comments. As we have heard, the draft Social Security (Contributions) (Rates, Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations 2023 give effect to the annual rerating of a range of national insurance contribution rates, limits and thresholds, for the purpose of calculating liabilities for the tax year beginning in April. This process, as the Minister mentioned, occurs annually and is primarily designed to take into account the rate of inflation, which is at a record high, causing much concern and hardship across the country.

The Chancellor announced at the autumn statement that most national insurance rates, limits and thresholds would be fixed at their 2022-23 levels for the coming tax year. The only rates that will increase in line with inflation, measured at 10.1% for the year to September 2022, is the flat cash rate of class 2 and class 3 contributions. This change is expected to bring 55,000 individuals into paying national insurance by the tax year 2027-28. Given the pressures facing households across the country, this rise will be alarming for many, as I am already seeing in my constituency cases. The explanatory memorandum to the instrument states:

“Increasing the rates of Class 2 and 3 NICs will be a small tax increase in cash terms for individuals.”

Will the Minister take this opportunity to let us know the exact figure or estimate that the Treasury has produced for the rise?

The instrument also allows for payments of a Treasury grant to be made into the national insurance fund. Could the Minister set out why this year’s figure, which must not exceed 5% of the estimated benefit expenditure for the tax year, has significantly decreased from last year’s figure of 17%? What is the significance of that difference?

The second instrument sets out the annual rates of working tax and child tax credit, and the weekly rates of child benefit and guardian’s allowance for the coming tax year, which I note is also an annual process. This instrument looks more promising, as the rates have been increased in line with CPI. Labour welcomes the increase and will support the instrument; we welcome any help for people struggling in the face of soaring energy bills and inflation.

I have one question for the Minister, on which I hope she can shed some light. Published alongside the instrument was a review of tax credit monetary amounts, as required by section 41 of the Tax Credits Act 2002. It sets out each element of the various tax credits discussed today, listing the 2022 rates and 2023 rates and making it clear whether they have been adjusted in line with inflation. Almost all the rates are rising by CPI, or 10.1%.

However, the family element of child tax credits and the income disregard element of tax credits do not appear to be rising with inflation, with the proposed 2023 rates unchanged from those in 2022. The report states that if inflation is taken into account, the former should be set to £600, but instead it will be £545, and that the latter should be set at £2,755, but instead it will be £2,500. Will the Minister inform us why these rates are not being adjusted for inflation?

[Victoria Atkins]

I thank the hon. Member for Erith and Thamesmead for her thorough examination of the regulations. It is a pleasure to respond to her; this is not usually her portfolio, but it is very nice to be appearing with her.

The hon. Lady asked a number of questions. I hope she will forgive me, but it is taking a little time to get the technical answers to those. In particular, she asked for the exact figure for the class 2 and class 3 increases. I am told that for class 2, it is 30p a week per person. For class 3, it is £1.60 a week per person. I hope that helps her.

The hon. Lady also asked why we are paying less into the fund this year. The Committee may recall that the Government Actuary’s Department predicts that we will not have to use the fund; none the less, as part of prudent housekeeping, we will set some money aside. The Government Actuary’s Department forecasts that a Treasury grant will not be needed for the relevant tax year, as I said, and the 17% figure was set due to the uncertainty around the impact of the pandemic on the economy.

We know how successful Government interventions were in supporting more than 11 million jobs in our economy and keeping millions of businesses afloat in each of our constituencies, but, of course, that comes at a price, which is one of the factors that we in the Treasury must grapple with as we plan for the future. This year, we do not believe that such a high rate is required, because of some of the steps that we have taken to set the economy back on the right track, so 5% has been set on a contingent basis. As I said, however, we do not expect to have to use it.

The hon. Lady asked about a review of tax credit monitoring. She rightly asked why the family element of child tax credit is not rising. The family element is an additional amount paid on top of an individual child element. It has never been uprated in the same way, and it is more sustainable, we say, to handle it in this way. None the less, I know that we all welcome that element as part of our efforts to support families with their finances—at any time, but particularly with the cost of living crisis.

[Abena Oppong-Asare]

rose—

[Nick Smith (Blaenau Gwent) (Lab)]

rose—

--- Later in debate ---

[Abena Oppong-Asare]

I thank the Minister for clarifying those points; it is helpful to find out why the family element is not increasing. Could the Minister clarify whether the case is the same for the income disregard element?

[Victoria Atkins]

I know that the answer will come to me quickly, because we in the Treasury pride ourselves on reacting and responding quickly to the circumstances. The hon. Member for Blaenau Gwent was also trying to catch my eye, so now may be an appropriate time for him to intervene, then I can try to answer both questions at the same time.