National Insurance Contributions (Rate Ceilings) Bill

Baroness Kramer Excerpts

Tuesday 10th November 2015 Lords Chamber

[Baroness Kramer (LD)]

My Lords, I shall be very brief, because the debate on this Bill flows, in effect, into the Finance Bill debate which will follow shortly on its heels. My party is pleased that there will be an increase in the national insurance employment allowance —a policy we fought hard for, and eventually achieved. It will now go up to £3,000; that is welcome news. We are also pleased that national insurance contributions applicable to young apprentices will be removed.

We have no problem with the Government’s policy that in the next Parliament they do not intend to increase national insurance contributions. What, frankly, we find silly, is the requirement that that be put into legislation. Surely a Government can control themselves well enough to enforce their own policy without putting up a legislative hurdle.

I shall speak more extensively on the Finance Bill, but I have to say now that the translation into legislation is far less serious with national insurance contributions, because they are rarely the tool that needs to be used in a crisis to cope with the unexpected and deal with events that can turn unfortunate for the economy. When we debate the Finance Bill we shall be talking about the related charter for fiscal responsibility, whereby the Government are putting handcuffs on themselves to make themselves impotent in the face of an oncoming crisis. That is one of the silliest and most arrogant measures that I have seen a Government introduce recently. However, there is very little concern about the Bill before us and its contents.

--- Later in debate ---

[Lord Tunnicliffe]

My Lords, I did not say that we support the Bill. I merely said we would not oppose it.

[Baroness Kramer]

If I might just confirm, we have no problems with the policy decision, but the decision that this needs to be encapsulated in binding legislation is a very troubling precedent.

[Baroness Altmann]

Then I thank the noble Lord and the noble Baroness for their support for the policy of this Bill, and also for supporting the £3,000 employment allowance and the abolition of national insurance contributions for apprentices.

Before I address the specific points raised by the noble Lords, it is important to put the Bill within the context of the significant action that the Government have already taken to reduce the burden of class 1 national insurance contributions on earnings and employment. These measures have all been strongly welcomed by business and have contributed to the current record levels of employment. I also emphasise that from April next year the Government will abolish employer class 1 national insurance contributions for apprentices under the age of 25, as I have said. Apprenticeships are at the heart of the Government’s drive to equip people of all ages with the skills most valued by employers. This is a very important move. It will help employers who provide apprenticeships to young people and provide a significant boost to youth employment rates more generally.

The Bill before us today introduces the final aspect of the Government’s five-year tax lock. This is further testament to the Government’s commitment to provide certainty on tax rates for the duration of this Parliament, and it delivers on the commitment to lower levels of taxation that was made in the Conservative manifesto.

On the question from the noble Lord, Lord Tunnicliffe, as to whether the taxes announced in the summer Budget have breached this lock, that is not the case. The Government have been clear that the tax lock will not prevent future changes to the tax system to make it fairer or to deal with avoidance—those were the measures in the Budget. Furthermore, the Government remain committed to lowering taxes and supporting hard-working people through increases in the personal allowance.

The noble Lord also asked about an update on the measures being considered by the Office of Tax Simplification. The Government are committed to simplifying tax and to transparency. The overall aim of the project is to build on earlier work undertaken in this area, to understand the steps that would be needed to achieve closer alignment of the taxes and the costs, benefits and impact of each step. The terms of reference were published on 21 July, and the Office of Tax Simplification will publish a final report ahead of Budget 2016.

As regards whether this Bill is a gimmick, I do not believe that it is. This was a Conservative manifesto pledge and, as I have said, there is the ability in secondary legislation to increase national insurance rates by 0.25% each year on class 1. This will give an added element of certainly to businesses and employees as to the maximum rates of national insurance that they might face.

The noble Baroness and the noble Lord are right that there could be circumstances in which tax revenues fall short and some contingency planning is required. However, future funding of contributory benefits, should national insurance contribution receipts prove insufficient, is a matter for the Chancellor, and that decision would need to be made at the relevant fiscal event based on the latest projections available at the time and taking into account the National Insurance Contributions (Rate Ceilings) Bill that we are introducing. Indeed, as the noble Baroness indicated, if there were an economic emergency, it would not normally be the economic policy of choice to increase national insurance contribution rates. The aim of this Government is to continue to drive growth and to create 2 million more jobs during this Parliament.