Class 4 National Insurance Contributions

Andrew Murrison Excerpts

Wednesday 15th March 2017 Commons Chamber

[Mr Hammond]

I set out the basis on which we made the difficult decision to proceed with changes to class 4 national insurance, packaged with the abolition of class 2 national insurance, to try to make the system a little bit fairer. We listened to our hon. Friends and decided to withdraw the proposals, conduct a wide-ranging review and set out to Parliament later in the year how we intend to proceed.

[Dr Andrew Murrison (South West Wiltshire) (Con)]

I congratulate my right hon. Friend on his statement, and warmly thank him for listening to colleagues and their constituents. Notwithstanding his comments to my hon. Friend the Member for Bath (Ben Howlett), may I invite him to look afresh at the possibility of hypothecating national insurance contributions, so that contributors to NICs, employers and the public can see a clearer link between their contributions and the services they receive?

[Mr Hammond]

There is a soft hypothecation around national insurance contributions: 20% of the fund goes to the national health service. They fund the state pension to which self-employed people now have full access for the first time—an extraordinary enhancement in the entitlement. I am told that, for a 45-year-old man, the enhanced pension in retirement, £1,800 or more a year, would cost about £50,000 as a capital sum to purchase an annuity in the marketplace. That is an extraordinary expansion of the entitlement offered to the self-employed.