National Insurance Contributions (Increase of Thresholds) Bill

Baroness Bennett of Manor Castle Excerpts

2nd reading
Wednesday 30th March 2022 Lords Chamber

[Baroness Bennett of Manor Castle (GP)]

My Lords, it is a great pleasure to follow the noble Baroness, Lady Ritchie of Downpatrick, and to echo her concerns about poverty—in Northern Ireland, which is hit particularly hard, and all around these islands.

It is tempting to use this speech to tackle the utter inadequacy of the Spring Statement in dealing with that sheer level of poverty and suffering in our society, with so many people struggling to put food on the table and keep a roof over their heads. I will try to focus on the Bill and the details of it, but we must look at the context. The common phrase and hashtag on Twitter is “cost of living crisis”, and “crisis” tends to imply that this is something that has happened as a result of Covid and the dreadful Russian aggression in Ukraine that the Minister referred to in her introduction, but this is a result of very long-term trends in which we have seen food banks become a fast-growing part of our society, as so many people simply do not earn enough money to meet the basics of feeding themselves and their households. This is not a one-off crisis. It is part of a long-term trend which has seen multinational companies not paying their taxes, rich people becoming richer and richer, and general society having a smaller and smaller share of the pie and, for many people, fewer and fewer of the crumbs.

I want to pick up on one of the points that the Minister made in her introduction, referring to £83 billion of debt interest payments. It is worth highlighting, since I do not think it is well understood, that the majority of extra spending during the Covid crisis has been paid for by us borrowing from ourselves, borrowing from the Bank of England. Two-fifths of total government debt that we owe to ourselves is government borrowing from government, and four-fifths of government debt is owed to people and institutions within the UK. Therefore, when we pay interest, we are putting money into the economy. That is important because we heard, in the words of the Minister, and we are hearing very broadly from most sections of the Government, though perhaps not all, that this is the excuse for a new kind of austerity and cutbacks in government spending, when we already have government that has been sliced to the bone, unable to meet the basic needs of delivery, as we see all too often in your Lordships’ House, as promised reports, promised progress, promised Bills and promised regulations are later and later. The Government are hopelessly overstretched, when we must now be investing in the transition which we must make to the low-carbon economy, the kind of just transition in our economy that requires significant amounts of government investment. Let us think about investment rather than labelling it all as spending.

However, if we are going to talk about debt, it is worth noting that the level of private sector debt in the UK is two to three times that of government debt. Our finance sector remains the most exposed to crisis of that of any G7 nation. So why do we—indeed, why do the Government—not talk more about the size of our financial sector and the risk it presents to the security of us all, rather than focusing on their own borrowing as the debt issue?

In introducing the debate, the Minister talked about a fairer, simpler tax system. Of course, rather like our constitution, what we have is an incredibly complicated tax code. You had better be feeling strong if you want to pick it up. As in our constitution, with the accretion of many centuries of historical accident—an expedient fix here, a gesture to a vested interest there—we have accumulated this complication in our tax code. The change we are bringing in is a small one in this incredibly complex system.

An alternative to what we are doing today would be to take away one of the complications instead of lifting the tax threshold. We could set a single rate of national insurance. Rather than earnings above £50,000 being charged at only 2%, their rate of national insurance could be raised to 12%. On its own, that would raise £11 billion. This would simplify everything and mean that we do not have the regressive system of national insurance that we do now.

However, the Green Party has a proposal for a much greater simplification; I do not expect an answer from the Minister on it today but I think I should draw it to the Government’s attention. Why not have a single, unified income tax? Leaving things at the same level they are at now, this could raise £24 billion; this could be used as a huge, immediate injection into social care, for example. It would mean that, whatever the source, everyone’s income would be paid at the same rate of tax. It would neither penalise workers nor favour the generally well-off in society, whose wealth and income come from property and other investments. Why not take the money fairly from across society and across all incomes? That is my modest proposal for the Minister.

I finish with a direct question that was asked in the Commons but not answered; I hope that the Minister may be able to answer it now. Calculations suggest that people who are in receipt of universal credit will not benefit from this change as much as those who are not on universal credit will because of the 55% taper rate. I hope that the Minister can answer that today.