National Insurance Contributions Increase

Caroline Johnson Excerpts

Tuesday 8th March 2022 Commons Chamber

[Rachel Reeves]

If we raised those taxes now on North sea oil and gas companies, we could bring in money that could be used to relieve pressure now. I think that the right hon. and learned Gentleman’s constituents in North East Hertfordshire would be pretty pleased to have money off their bills this year, rather than the buy now, pay later scheme that we get from this Chancellor.

Why is the Chancellor not listening? The Conservatives’ rise in national insurance will hit almost 30 million working people. The TUC rightly argues that it is wrong to hit young and low-paid workers while “leaving the wealthy untouched”. The British Chambers of Commerce describes the Government’s policy as

“a drag anchor on jobs growth”.

The CBI put it bluntly and said that it will

“hurt a business’s ability to hire staff”.

On Sunday, the Federation of Small Businesses warned:

“Slamming small firms with a jobs tax hike will put the brakes on investment, upskilling and growth within communities most affected by the pandemic.”

The Chancellor must know what business organisations and trade unions are saying. We can only conclude that he is consciously disregarding their experience and views. We know from research by the National Institute of Economic and Social Research that job-intensive sectors will be disproportionately hit hard. The Conservatives have deliberately designed a tax hike that will hit people working in hotels, restaurants, transport, retail and wholesale especially hard.

[Dr Caroline Johnson (Sleaford and North Hykeham) (Con)]

rose—

[Jim Shannon (Strangford) (DUP)]

rose—

[Rachel Reeves]

I will give way to the hon. Lady, and then to the hon. Gentleman.

[Dr Johnson]

I wonder if the hon. Lady can help me, because I am slightly confused. She has talked about a windfall tax on the energy companies, but she is then conflating that with the NI rise. The NI rise is not to pay for energy bills, as I understand it, but to pay for health and social care. Last week, she wanted to use that windfall tax to spend on reducing energy prices, as she has said today. She cannot use one tax to do two things. What will she use the tax for, were she to bring it in? In particular, if she were to cancel the NI rise—I do not want to increase taxes; I am a Conservative, so of course I do not want to do that—how would she pay for the care and healthcare of those vulnerable constituents who we know need it so badly?

[Rachel Reeves]

The average household in the hon. Lady’s constituency will be £1,200 worse off because of the tax increases and the price rises happening as a result of her Government’s policies. As she well knows, we would use the windfall tax to relieve pressure on household gas and electricity bills. The hon. Lady might oppose that, but I suggest she puts that on her leaflets and puts that to the voters in her constituency at the next election.

--- Later in debate ---

[Mr Clarke]

I agree with my hon. Friend. The hon. Member for Leeds West (Rachel Reeves) said that when the facts change, we should change our policy, but the point is that the facts have not changed. The covid backlog has not changed and the damage that it has done to our ability to deliver the healthcare that people need has not gone away. Governments have recognised the importance of tackling our social care issues for a long time, but there is no record of action. This time, things are different. We believe that it is only right that in an advanced and wealthy country such as the United Kingdom, people should know that their loved ones will have dignity and financial certainty if they require care. The new levy will allow us to achieve both our health and social care aims.

[Dr Caroline Johnson]

Will the Minister give way?

[Mr Betts]

Will the Minister give way?

--- Later in debate ---

[Dr Caroline Johnson]

The hon. Member for Leeds West (Rachel Reeves) talked about politics meaning choices. I have listened carefully to both Front-Bench speeches and I heard that the Opposition want to remove the health and social care levy but not how they will pay for social care instead. Perhaps the Minister heard something I did not. Could he enlighten me?

[Mr Clarke]

I heard a lot of warm and fairly vague phrases, but I did not hear a concerted plan, and that of course goes to the heart of this question. The hon. Member for Leeds West said in her speech that the voters are smart and savvy, and I agree with her, but they know an Opposition playing politics when they see it.

The £12 billion average annual investment, which is of course a recurring investment—that is the crucial point—to meet a recurring need, will tackle the elective NHS backlog, while ensuring that the health service has the resources it needs over the coming years. It will strengthen our adult social care system, allowing us to invest at least £500 million to give our army of extraordinary social care workers new skills, and it will enable the Government to roll out the long-awaited reforms to funding for families through a cap on adult social care costs.

This is a transformative policy that will tackle serious and long-standing issues, but to fund such a significant increase in permanent spending we have had to make the tough but responsible choice to increase taxes. Only a broad-based tax such as income tax, VAT or national insurance can raise the sums needed for such significant investment. Using NICs as the base has several advantages. First, it means the levy will be paid for by employers, employees and the self-employed, including, from April next year, by workers over state pension age.

Secondly, this is a progressive way to raise funds because those who earn more will pay more: the top 15% of taxpayers will pay half the revenue. A basic rate taxpayer will pay about £3.49 per week, while 6.2 million—6.2 million—of the lowest earners will be exempt entirely from the levy and most small businesses will not be affected at all.

--- Later in debate ---

[Mr Clarke]

On the hon. Gentleman’s point about our support for local authorities, we are giving £1.6 billion extra in each year of the spending review we announced in October to support local authorities with the challenges they face. Of course, the levy will fund £5.4 billion of investment in social care over the next three years, so it is a serious response to a serious challenge.

To return to the advantages of the way we have structured the levy, the third design advantage that stands out is that we have also announced an equivalent increase in dividend tax rates. There is therefore fairness across the spectrum in how this is being paid for.

I know there are some who ask why we need to raise tax at all, and instead say that we should borrow to fund permanent increases in spending. Throughout this speech I have outlined all that the Government have done to protect people’s finances as we recover from the pandemic and deal with the rising cost of living, and those actions mean our economy has made a strong recovery from covid-19. Our GDP has rebounded, and over the past months job vacancies have hit record highs, while the unemployment rate has fallen sharply. However, it is easy to forget that all those steps come at a huge cost. Covid casts a long shadow across our economy. Indeed, our debt is at its highest since the early 1960s. As I have reminded the House on many occasions, that high level of borrowing leaves us susceptible to shocks, including changes in interest rates and inflation.

[Dr Caroline Johnson]

My right hon. Friend is making some excellent points about the importance of balance in our finances. One thing my constituents will want to know as we spend all this money from the health and social care levy is that it is being well spent and used very efficiently. What can my right hon. Friend tell me about how he will ensure that the money is spent efficiently and with the best possible productivity?

[Mr Clarke]

Making sure that we spend taxpayers’ money wisely is the central duty of any Government. It is something that, as Chief Secretary, I work very hard on with officials and Departments to make sure that we scrutinise spending in the way that delivers best value.

Some fairly spurious points have been raised about our record on issues such as PPE procurement, and we need to remember what I think could best be described as the brass neck of the Opposition in calling us out on this issue, when I think the hon. Member for Leeds West suggested at one point that we should procure our PPE from historical theatre re-enactment companies or fancy dress companies. Procuring PPE at pace brought with it some inevitable challenges, and it is vital that we had the resources to deal with the situation we faced at the time.