National Insurance Contributions (Increase of Thresholds) Bill

Baroness Kramer Excerpts

3rd reading & Committee stage
Wednesday 30th March 2022 Lords Chamber

Moved by

[Baroness Kramer]

1: Clause 1, page 1, line 8, leave out “July” and insert “April”
Member’s explanatory statement
This amendment would bring forward the date of implementation of the increase in thresholds from 6th July 2022 to 6th April 2022.

[Baroness Kramer (LD)]

My Lords, all the amendments tabled today are in my name and in a single group, so I am not going to take up too much of this House’s time, and I should also make it clear that I do not intend to divide on any of these amendments. However, I thought there were a few issues which needed some additional focus and emphasis. These amendments were tabled by my colleagues in the other place, but I am not sure that we got terribly good answers to any of them. It is always worth having a second go, and many of these points are ones that I would like to leave with other Members of your Lordships’ House for future discussions around these various topics.

The first amendment, Amendment 1 in Clause 1, has the effect of bringing forward the date of implementation of the increase in thresholds from 6 July 2022 to 6 April 2022. There were two reasons why I thought it was important to table this amendment for a second time, and I am going to quote from the Resolution Foundation:

“If we consider just the changes to Income Tax and NI due in 2022-23 and reflect that the NI threshold will not fall until July, earners on less than £25,000 will gain, and those above will lose from all the measures being introduced in the next fiscal year (if the NI threshold had fallen in April, this cut-off point would have risen to £32,000).”


That is the difference between people who benefit from the threshold change being brought in in April and those who will benefit by it being brought in in July. I am going to estimate—maybe the Minister will have the number—that there an awful lot of people whose annual earnings fall between £25,000 and £32,000. In fact, I am going to go beyond that and suggest that is very often a family income. It is not a starting income, or the income of someone who has risen rapidly up the promotion ladder. It has got to be a very common income for a large part of our working population. I do not know what those numbers are, but I am sure that the Minister could tell us, so I am quite concerned about a policy that, at a time of huge pressure on the cost of living, is denying a benefit to people who fall between that £25,000 and £32,000 salary or earned income group.

My second reason for tabling this amendment was the words of the Financial Secretary to the Treasury in the other place when dealing with issue. She said:

“Of course the Government want to help people with the cost of living as quickly as possible, which is why the Chancellor introduced a number of measures immediately … However, it was not possible to deliver the increase to the primary threshold from 6 April, which is in less than two weeks’ time. The Government are implementing the change as early as possible, from 6 July. It is not possible for the majority of software and payroll providers to deliver the measure for April.”—[Official Report, Commons, 24/3/22; col. 522.]


I just thought, “This one is a classic”: the assumption that the only way to deliver the benefit is through making a change to the software associated with the universal credit scheme.

When the Government of the United States sought to give people a helping hand with Covid, they simply cut a cheque and sent it to everybody who was a registered taxpayer. It seems to me that getting an appropriate list of the people who would qualify—with a starting date of 6 April to fill in and plug the two months—would not be much of a challenge for this Government. They do not have to go and change the whole universal credit system or require every employer to make a change; they could simply access the data and then find a way to make a rebate.

We often have this kind of siloed thinking. Here is a Minister who is in a sense saying, “I only wish I could find a way to do it”. So I wonder whether the Minister can go back and say to her department, “Of course we can find a way to do it; we just need to start thinking outside the box and not simply assume that what we have to do is some complicated and extensive programming problem. We simply need to find a way to send a rebate”. I suspect that most people would not mind a cheque—frankly, I suspect that most people would not mind if they had to wait a little time for it to come, provided it came. This ought to make the Financial Secretary to the Treasury exceedingly happy. These two issues highlight the impact of the delay and the fact that there are many ways in which that problem could be remedied. It just takes some lateral thinking.

The amendments in my second set are much more similar and come after Clause 3. Essentially, they concern reporting requirements. The concerns around transparency were well described at Second Reading. The noble Lord, Lord Macpherson, used the phrase “sleight of hand” in his speech; I used it slightly differently in mine. There is a great deal that is opaque, particularly in the way we relate income tax and national insurance contributions. As the noble Lord stressed, for many years, Governments have chosen to reduce income tax and shift the burden on to national insurance contributions because they are less visible and because, frankly, the public are under the impression that they are saving for their own pensions. Now, they are going to be under the impression that they are making an extra effort to help the NHS and social care; they will therefore accept an increase, whereas they would not have done had it been made to income tax. It has become very clear, however, that the whole thing is completely fungible; this notion that national insurance contributions are an entirely separate, protected, segregated, hypothecated pot is merely an accounting fallacy. It is all just smoke and mirrors.

The first of my two amendments would require the Secretary of State, within six months, to lay before Parliament a report on the impact of the Act’s provisions on disposable incomes. That is to try to tease out some of the arguments that the Minister made—which did not seem to have many numbers attached to them—that, overall, this would be extremely beneficial to a huge range of people. We would also like to see that same calculation done if combined with a reduction in the national insurance rate of 1.25%. It seems to me that this would provide a level of transparency that the public could understand and we in this House could argue about, having full possession of the facts and without the confusion of various different pots interacting with each other. It is probably because I come from a business background that I think that what you always need to look at is what happens at the bottom line. You must not get completely lost in the hedgerows, the highways and the woods—and I am afraid that that is where a lot of the discussion about what is happening in terms of support for the economy has found itself.

The second of my amendments would again require the Secretary of State, within six months of the Act being passed, to lay before Parliament a report considering the impact of the Act’s provisions on the levels of taxation on earned and unearned income. Again, that goes directly to the heart of the issue that the noble Lord, Lord Macpherson, raised: the switch, virtually unrecognised by the general public, from income tax, which covers all income, to a system of taxation that in effect falls primarily on workers. This is an important philosophical issue that needs to be highly transparent, and I do not believe that at the moment it is.

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With those comments, I hope I have addressed the points raised by this small group of amendments. I hope that the noble Baroness, although I know I will have disappointed her with some of my answers, has heard sufficient to withdraw her amendments.

[Baroness Kramer (LD)]

I beg leave to withdraw the amendment.

Amendment 1 withdrawn.

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[Lord Tunnicliffe (Lab)]

I thank the Minister for her courtesy and for making herself available to discuss the Bill.

[Baroness Kramer (LD)]

I join in those words from the noble Lord, Lord Tunnicliffe. We did not need to meet the Minister because, at this point, everything was looking very straightforward, but she made a very kind offer and it was appreciated.