National Insurance Contributions (Secondary Class 1 Contributions) Bill

Desmond Swayne Excerpts

2nd reading
Tuesday 3rd December 2024 Commons Chamber

[James Murray]

I will make a bit of progress; I have been generous in giving way.

The choice that we have taken is difficult; it is not one that we have taken lightly. As I have fully acknowledged in the Chamber, the impacts of this measure will be felt beyond businesses, as the Office for Budget Responsibility has acknowledged. Let me put the decision in context and say what we could have done instead. We could have reversed the previous Government’s cuts to employee national insurance. Those cuts were simply not honest because they were based on a forecast that the OBR said would have been “materially different” if the true extent of the last Government’s cover-up had been known. We made a commitment to not increase the taxes that working people pay, and we have delivered on that promise and made a different choice.

[Sir Desmond Swayne (New Forest West) (Con)]

rose—

[James Murray]

I will give way; I am being too generous I think.

[Sir Desmond Swayne]

The manifesto said that Labour would not increase rates of national insurance contributions. The Minister is perfectly entitled to use the argument, “We never realised that it was this bad, so we have had to change what we said we would do”, but to pretend that Labour has not resiled on its manifesto promise is pure sophistry.

[James Murray]

In fact, it is both things: it is true that we have kept to our manifesto pledge of protecting working people by not increasing income tax, the national insurance that working people pay or VAT; at the same time, the situation is far worse than we thought it would be when we won the general election, with the £22 billion black hole and the fact that the OBR said that its forecast would have been “materially different” in March, had it known the true extent of the previous Government’s cover-up. Those are facts that the OBR put out there and from which we cannot hide.

--- Later in debate ---

[Richard Fuller]

The hon. Gentleman talks about the Conservative record. Shall I talk to him about our record on national insurance? In 2010, when Labour was last in office, it broke the economy and left a note saying that there was no money left. We did have to increase national insurance rates—but not by as much as is proposed today. Thereafter, we increased national insurance thresholds with inflation; these proposals do not do that. We introduced the employment allowance, which admittedly the Government are increasing. We then introduced national insurance reliefs for young workers. We increased national insurance income thresholds in 2022, 2023 and 2024. That is the Conservative record. We do not believe in the jobs tax: we do not think it helps growth, and we do not think that it will increase taxation.

[Sir Desmond Swayne]

rose—

[Richard Fuller]

I will make a bit more progress and then give way to my right hon. Friend.

If the Minister does not like the Resolution Foundation’s judgment on this tax, he should just listen to the Institute for Fiscal Studies, which said:

“Simple economic theory suggests that the incidence of employer NICs and employee NICs should be the same, at least in the long run. It is likely that the long-run incidence of both employer and employee NICs is predominantly on employees”.

The measures in the Bill represent by far the largest part of the tax grab in the October Budget. The Treasury Red Book assesses that these measures will raise £23.7 billion in the next financial year, rising to £25.7 billion, but the Minister knows that behavioural changes means that they will actually raise substantially less; the IFS estimates about £16 billion.

I note that in the Red Book there were three opportunities for this jobs tax to be referred to as “Delivering on our Promises”. There is:

“Delivering on our Promises—New Policy to Close the Tax Gap”,

“Delivering on our Promises—Collecting Tax That is Due”

and even the catch-all:

“Delivering on our Promises—Other Manifesto Tax Commitments”,

but the increase in national insurance contributions cannot be included in any of those, because Labour politicians hid their intentions from the British voters at the election.