National Insurance Contributions (Rate Ceilings) Bill

Andrew Gwynne Excerpts

Tuesday 15th September 2015 Commons Chamber

[Harriett Baldwin]

I certainly agree that the Government are keen to take steps to back an economy that continues to grow and to create jobs so that everyone can have the dignity of taking home a pay cheque or starting their own business. We have taken other steps in the Finance Bill to raise the amount that people can make before having to pay income tax, and that is what this Government stand for.

[Andrew Gwynne (Denton and Reddish) (Lab)]

Surely the Minister has not forgotten that in the lifetime of the previous Parliament—from 2010 to 2015—no fewer than 24 tax increases were put on working people by her Government. The latest Budget also includes the tax increase on insurance premiums.

[Harriett Baldwin]

That is an extraordinary line of attack. The Government have nearly doubled the personal allowance—the amount that people can make before they pay income tax—from the £6,475 that the hon. Gentleman thought was appropriate at the end of the 2010 Parliament. That is what this Government stand for.

--- Later in debate ---

[Barbara Keeley]

No, I will not.

The tax lock restricts the Government’s ability to respond to unexpected economic events. That is why this Bill is seen, both outside and inside this place, as a gimmick. If we have learned anything in the last decade, it is that such flexibility is absolutely essential. Indeed, it was this flexibility at the time the Labour Government left office in 2010 that meant we had an economy recovering and growing once again. Above all, this tax lock provides no protection to millions of hard-working families, who, if the statutory instrument on tax credits is voted through by Conservative Members later today—

[Andrew Gwynne]

Is it not indicative of the level of trust in politics and politicians generally, but specifically in this Government and their record on tax, that they need to come to the House of Commons to legislate not to increase a specific tax, rather than allow people to accept their pledges at elections at face value?

[Barbara Keeley]

Indeed. I agree with my hon. Friend and I thank him for raising that point. I think that Ministers have got to think about what they are doing to public trust if they have to introduce gimmicks such as this Bill—it is a gimmick, and was seen as a gimmick by a host of commentators outside this place.

--- Later in debate ---

[Helen Goodman]

I am afraid that I do not accept that. This is purely weak willed on the part of the Chancellor. I thought that the Economic Secretary to the Treasury did not give us nearly as good a defence of the Bill as the hon. Member for North West Hampshire (Kit Malthouse). He managed to situate it within the needs of the business community and give some rationale for it. The more the Minister spoke, the clearer it became that this is indeed a gimmick. I find that odd, because I thought that the Chancellor of the Exchequer wanted to be the Chancellor of the Exchequer and to take decisions, but clearly he does not. He just wants to tie his hands behind his back at every verse end.

I think it would be a good idea to vote against the Bill, and I am slightly disappointed that we are not opposing it. [Hon. Members: “Ah!”] It is not for me to say what the official Front-Bench position is, unfortunately. I want to point out to Conservative Members that we live in a world where the Chancellor has a desire to bring the deficit down very quickly. That is a difficult thing to do, as we saw when he failed comprehensively to achieve his target during the last Parliament. He is now having to go through some very choppy waters to get this done. He made a promise to introduce this legislation to fix VAT, income tax and national insurance because he thought that that would make him a low-tax Chancellor in the eyes of the British public. The fact is, however, that since then he has increased VAT to 20%, increased vehicle excise duty and increased the insurance premium tax, as my hon. Friend the Member for Worsley and Eccles South (Barbara Keeley) pointed out. He is not a low-tax Chancellor.

[Andrew Gwynne]

Does my hon. Friend agree that there is another reason to believe that this is purely a gimmick from the Government? The Chancellor can give the impression that he will not increase national insurance rate ceilings, but fiscal drag could still have an impact, through the back door, on the amount of national insurance that people pay.

[Helen Goodman]

My hon. Friend makes an astute point. That is one of the things that is going on here.

The Chancellor is also shifting more and more from direct taxation on income to indirect taxation on spending. In doing so, he is pushing the burden of tax from those on middle incomes to those on lower incomes. They are the true target of this Government, as we shall see in the debate on tax credits later this afternoon.

The hon. and learned Member for South East Cambridgeshire (Lucy Frazer) claimed that this measure was about low tax, but I would ask her to reconsider that. For whom is it about low tax? For all the reasons given by the hon. Member for North West Hampshire, including the fact that not raising the basic rate of national insurance is a good thing to do, it is clear that this is a tax on labour. At a time when we want more people to have more good jobs, that seems rather perverse.

The most perverse thing about national insurance is the upper earnings limit, and including that in the legislation is a highly political act. We shall have a debate on tax credits in a little while. Let us look at the marginal rate that the Chancellor is giving to people, taking account of the tax and benefits system. After the Budget, the effective marginal tax rate faced by second earners in couples on very low incomes with two children will be 75%. However, for those earning more than £150,000 a year, the normal marginal tax rate of less than 50% will apply. Even when universal credit is introduced, the marginal rate for people earning around £10,000 a year will be 65%, but the withdrawal rate for people earning more than £150,000 will be 48p in the pound. That is not about low tax or certainty. It is clearly about protecting the Tory party’s rich friends and rich donors.