National Insurance Contributions (Rate Ceilings) Bill

David Gauke Excerpts

Tuesday 15th September 2015 Commons Chamber

[Helen Goodman]

As I have said, I would not have made a commitment on the upper earnings limit. That is just not my view. Fortunately, in the House of Commons we are free to speak as we find things. We are having this debate and I am making my contribution. I am telling the House that that is not a terribly sensible commitment to make.

The hon. Member for North West Hampshire made some good points about the certainty that small and micro-businesses need, but I ask hon. Members to consider for themselves how many small and micro-businesses are employing people on £150,000 a year. I suggest that not many are doing so. I know that Hampshire is better off than County Durham, but it is not so much better off that every farmer and small shopkeeper is paying themselves and their staff £150,000 a year.

[The Financial Secretary to the Treasury (Mr David Gauke)]

May I seek some clarity? The hon. Lady said that she would not make a commitment on the upper earnings limit. Is she therefore suggesting that the 12% rate of national insurance contributions should also apply to higher rate income tax payers?

[Helen Goodman]

I am saying that it would be perfectly reasonable to consider that, rather than pre-committing in the way that the Bill is doing. That seems to be common sense.

It is surprising that the Treasury thinks that it can simply continue to switch off policy levers and that that is an intelligent way of carrying on. As my hon. Friend the Member for Worsley and Eccles South has said, commentators including the Financial Times and PricewaterhouseCoopers have pointed out that this measure will force the Government into a more difficult and tricky situation. The position will become more constrained, and it will be more difficult to take sensible decisions on raising money. The Bill will put more pressure on the Government to cut public spending.

--- Later in debate ---

[The Financial Secretary to the Treasury (Mr David Gauke)]

It is a great pleasure to respond to a lively debate. I thank all those who have contributed, not least the hon. Member for Worsley and Eccles South (Barbara Keeley), who contributed twice. She carries a heavy burden on behalf of her party and I hope that it is noted by the powers that be. I welcome the shadow Chancellor to the Chamber. No doubt he will have noticed the effort that she has put in.

I thank Government Back Benchers for their contributions. My hon. Friend the Member for North West Hampshire (Kit Malthouse) began his speech with the sensible point that, ultimately, it is not companies that pay tax. It is always families and individuals who bear the tax bill, regardless of who writes the cheque. Like a number of hon. Friends, he went on to speak about the importance of providing stability and certainty in the tax system both for individuals and for companies. The tax lock will provide much greater certainty and stability.

That point was also well made by my hon. and learned Friend the Member for South East Cambridgeshire (Lucy Frazer), who highlighted the importance of low taxes to businesses in her constituency and to employees. She made the point that a number of those businesses compete with businesses in silicon valley, and that they need the certainty that the Bill and the Government’s other policies provide.

My hon. Friend the Member for Bexhill and Battle (Huw Merriman) made a similar point about the need for economic policy to support business. It is through the success of our businesses that we will see the economy grow and tax receipts come in, which will enable us to pay for high-quality public services. We must not forget the importance of an enterprising economy. It may well be that that point becomes more important in the debate in this country over the next few years, as the consensus appears to be breaking down.

My hon. Friend the Member for Spelthorne (Kwasi Kwarteng) rightly criticised the characterisation of the Bill as a gimmick. I will turn to that in a moment, but he was right to say that this is an important measure.

My hon. Friend the Member for Milton Keynes South (Iain Stewart) highlighted the fact that in 2001, a Labour Government were elected with a promise that they would not put up income tax, but shortly afterwards they put up national insurance contributions. We must not forget that national insurance contributions are paid by people in much the same way as a tax. It should not be open to Governments to use national insurance contributions as a stealth tax. That is why, as well as introducing legislation to provide a tax lock for income tax, it is important to have legislation on national insurance contributions. Given that national insurance contributions cannot be dealt with in a Finance Bill, such a measure is contained in this Bill.

[Barbara Keeley]

I am astonished that the Minister can talk about things that happened in the past and not reflect on the more recent pledge made and broken by his Government not to raise VAT. How can he stand there and talk about any issue when that is in recent memory? How hard did that hit many millions of families in this country? I think he would be better leaving that topic alone.

[Mr Gauke]

For those of us who were debating such matters at the time, the state of the public finances, and the deterioration identified by the Office for Budget Responsibility in the summer Budget of 2010, revealed that we needed to take steps to put the public finances back on track. We took those measures, and I remind the hon. Lady that the Labour party abstained on the increase in VAT. Labour Members did not oppose it at the time, presumably because they recognised that it was necessary. That was, I suppose, a time when the Labour party was flirting with fiscal responsibility. I am sure it would never repeat that now.

[Barbara Keeley]

My points are about the way the public feel about broken pledges. This gimmick of a tax lock means nothing if, whatever the circumstances, the Government are prepared to change their mind on things. I read the Minister a long list of pledges that his Prime Minister and Government have broken, and every time such things happen, the public get sick of it.

[Mr Gauke]

We are underlining our commitment not to increase the rate of class 1 NICs by introducing this Bill. The hon. Lady asks why we are legislating rather than making a pledge. She could apply exactly the same argument to the legislative commitment to spend 0.7% of gross national income on overseas aid, yet that was actively supported by the Labour party. If she feels that this Bill is a meaningless gimmick, why does she not oppose it today?

Let me finish thanking my hon. Friends. My hon. Friend the Member for Northampton North (Michael Ellis) described this as a short but important Bill, and may I say that he delivered a short but important speech? My hon. Friend the Member for Tamworth (Christopher Pincher) highlighted the need for greater certainty in the tax system and welcomed the Bill, as did my hon. Friend the Member for North Dorset (Simon Hoare), who also highlighted the importance of stability in the tax system. My hon. Friend the Member for Blackpool North and Cleveleys (Paul Maynard) supported that argument and suggested that the Bill would provide greater confidence to businesses in his constituency.

The hon. Member for Dundee East (Stewart Hosie) raised a number of questions and asked about the potential for integration between income tax and national insurance contributions, and the work being undertaken by the Office of Tax Simplification. As he said, it was announced in the summer Budget that the OTS will undertake a review of the closer alignment of income tax and national insurance. The overall aim of the project is to build on earlier work undertaken in that area, and to understand the steps needed to achieve closer alignment of the taxes, as well as the costs, benefits and impact of each step. The terms of reference were published on 21 July, and the OTS will publish a final report ahead of the 2016 Budget.

On the one hand we heard from the hon. Member for Worsley and Eccles South that this measure is a gimmick and unnecessary. On the other hand, I was also struck by the contribution from the hon. Member for Bishop Auckland (Helen Goodman), who made the argument that we—I do not know whether she was talking about the Government or the Labour party—should consider abolishing the upper earnings limit. In other words, the 12% rate of national insurance contributions should apply also to higher rate taxpayers. That policy was supported by the hon. Member for Luton North (Kelvin Hopkins).

Let us be clear about what is being proposed. It would mean an increase in the tax rate for higher rate taxpayers of 10%, from a combined rate of 42% to a combined rate of 52%. That is not the policy of the Opposition, as the hon. Member for Worsley and Eccles South made clear, but three days into the leadership of the right hon. Member for Islington North (Jeremy Corbyn) the Labour Front Bench appears to be being attacked from the left, something that I had not anticipated. I do not know whether the hon. Members for Bishop Auckland and for Luton North are making a late bid for inclusion in the shadow Cabinet, although I was surprised that neither was there in the first place. I am sure that the shadow Chancellor, who is in his place, will have listened carefully to that proposal, which would clobber a large chunk of middle earners.

The hon. Member for Worsley and Eccles South upbraided hon. Members for quoting remarks made by the right hon. Member for Islington North before he became leader of the party and said that she would not respond. That is a novel approach, although I have some sympathy with her and really cannot blame her.

[Barbara Keeley]

The Minister seems to forget that I read out to him a list of various pledges on policy that the Prime Minister made before he became Prime Minister. Will he now defend every one of those? Will he defend what the Prime Minister said about Sure Start, EMA and other things that have been changed or abolished? It appears that the Minister thinks it is all right for the Prime Minister to say what he said when he was Leader of the Opposition. The Minister cannot have his cake and eat it, but that is what he appears to be trying to do.

[Mr Gauke]

I understand why the shadow Minister does not want to defend the position of the current leader of the Labour party, but let me make this point clear. The Prime Minister came into office in 2010 with a mission to turn around the UK economy. He succeeded and was re-elected with a majority in 2015.

The hon. Member for Luton North always makes entertaining and thoughtful speeches. I noted that he praised the tax system of Denmark, but I would point out that its VAT rate is 25% and it does not have any lower rates. I can assure him that we will not follow Denmark’s example and put VAT up to 25%.

[Kelvin Hopkins]

I would be happy if the Danes lowered their VAT rate, but can the Minister tell us what Danish income tax rates are?

[Mr Gauke]

I do not have all the numbers in front of me, but I take it from the hon. Gentleman’s remarks that he would like to put income tax rates up, not down—[Interruption.] Well, I know he is very close to the Labour leadership and I suspect that he may prove to be an influential figure in deciding policy.

I am delighted that we do not appear to be divided on this measure, even though we heard some doubts about it from Labour Back Benchers. I am grateful to hon. Members for their contributions. This is an important part of the Government’s long-term economic plan, providing certainty and stability to the taxpayers of this country. I am pleased that we are making progress on providing that certainty and stability, as well as protecting the British people from tax increases, at least for the course of this Parliament and—we hope—future years as well.

Question put and agreed to.

Bill accordingly read a Second time.

NATIONAL INSURANCE CONTRIBUTIONS (RATE CEILINGS) BILL (PROGRAMME)

Motion made, and Question put forthwith (Standing Order No. 83A(7)),

That the following provisions shall apply to the National Insurance Contributions (Rate Ceilings) Bill:

Committal

(1) The Bill shall be committed to a Public Bill Committee.

Proceedings in Public Bill Committee

(2) Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Tuesday 27 October 2015.

(3) The Public Bill Committee shall have leave to sit twice on the first day on which it meets.

Consideration and Third Reading

(4) Proceedings on Consideration shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which those proceedings are commenced.

(5) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.

(6) Standing Order No. 83B (Programming committees) shall not apply to proceedings on Consideration and Third Reading.

Other proceedings

(7) Any other proceedings on the Bill (including any proceedings on consideration of Lords Amendments or on any further messages from the Lords) may be programmed.—(Charlie Elphicke.)

Question agreed to.