National Insurance Contributions Increase

Beth Winter Excerpts

Tuesday 8th March 2022 Commons Chamber

[Beth Winter (Cynon Valley) (Lab)]

Having listened to contributions from across the House this afternoon, as well as extensively reading around this subject, it is indisputable that we are facing the worst cost of living crisis in 30 years. As other Members have said, it is—as always—the poorest in our communities who are going to pay the highest proportion of their income to meet essential needs. In the current climate, the Government should seek to increase people’s income, not add extra financial burdens on those who can least afford them. That is what the Welsh Government are trying to do within their financial limitations because, in the words of the Welsh Minister for Social Justice, Jane Hutt:

“We are determined to do all we can to support our people with the bills they are facing”.

The solutions, though—as the Bevan Foundation, a well-respected think-tank in Wales, points out—lie with this UK Government, so let us look briefly at some of the facts and figures. Median pay is now at its lowest rate, and real pay is falling. It is not me saying that; the Governor of the Bank of England and the Bank’s Monetary Policy Committee have also said so. Real pay is falling, as the Trades Union Congress has said, and social security payments are falling, as the Chancellor has said; indeed, he said so last October when he took £20 in universal credit from those on the lowest incomes in society. The 3.1% ceiling on uprating social security imposed a few weeks ago now looks like a 5% cut, if the Resolution Foundation’s inflation predictions are correct.

At the same time, costs are going up. Worst of all, the energy price cap has increased by 54%—almost £700 over the next six months. Food bills are going up, rail fares went up last week, and as others have said, council tax bills are going up. On top of this, next month, the national insurance contributions of both employers and employees are going to increase. As the Resolution Foundation said in October:

“The average combined impact of the freeze to income tax thresholds and the 1.25 per cent increase in personal National Insurance contributions is £600 per household”,

and the expected rise in taxes and energy bills will lead to an average £1,200 per year increase in costs for households from April. The Tory Government and the Chancellor are taking money away from working people and small businesses who can least afford it. Others have already eloquently evidenced this, and it is demonstrated by organisations such as the National Institute of Economic and Social Research, which estimates an increase in destitution, and the Office for Budget Responsibility’s own data.

I have heard a lot from Government Members about, “Well, what can we do?” This Labour party will keep challenging the Government here in Parliament, but we will also continue to work with our trade union colleagues. I will continue to stand with trade unions, taking action to defend those on low and middle incomes who are cast aside by this Government. The Chancellor needs to increase Government spending in the Budget to boost investment and allow public services to cope with higher inflation—that is necessary, but not through increases in the cost of living for those on low and middle incomes. We need to shift the burden to those who can afford it, which requires major interventions in the economy at the spring statement.

We have heard calls for a major additional benefit uprating, with which I fully agree. We also need to hear proposals for significantly increasing the national minimum wage—I support a £15 minimum wage—and for taxing wealth. There are lots of ways of doing that, such as a windfall tax on North sea oil and gas; a one-off wealth tax, as advocated by the Wealth Tax Commission; an increase in capital gains tax, as proposed by the Trades Union Congress; progressive national insurance contribution changes—which this one is certainly not; it is regressive—or an increase in dividend taxation, as the Institute for Public Policy Research and others have advocated. There are far more progressive ways to fund social care and the NHS. This increase is not progressive, and I urge the Government to withdraw it immediately. Diolch yn fawr.