National Insurance Contributions (Reduction in Rates) (No.2) Bill

Drew Hendry Excerpts

2nd reading
Wednesday 13th March 2024 Commons Chamber

[Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)]

I have to follow the comments made by the hon. Member for Aberconwy (Robin Millar). I was listening carefully and trying to pick out something useful from his speech, and I did find a line: someone is going to have to pay. SNP Members know that public services are going to have to pay for this measure, which is why we tabled our reasoned amendment; there is going to be a crushing effect on them.

The hon. Gentleman also talked about debt levels, but, unfortunately, like the Labour and Tory parties, he did not talk about debt levels accruing in households because of the cost of living crisis. They never mention people in their houses who are struggling through the situation they are faced with at the moment. That is for something else, but those are the effects on people in real life while we are just talking around the subject. I think I heard the Labour Front Bencher say that in this Budget for every £5 people get back, they will lose £10. [Interruption.] That is not being disagreed with, so I believe it is correct, and yet Labour will still back this Bill; Labour Members will not vote against it today. This is another measure on that journey to take money out of people’s pockets.

It was good to hear the hon. Member for Norwich South (Clive Lewis) speaking about the issues, including the reasons why we have brought forward our reasoned amendment. He talked about the long “economic creed” of this type of Bill that privatises public services. I enjoyed his speech and agreed with it. I hope he will persuade his colleagues and try to change their minds, so that they come back and vote against the Bill. I hope he will join us in the Lobby as well—it is a shame he is not in his place to hear that just now.

This is a Parliament of flatlining growth and falling living standards. The Labour party keeps asking where the money is coming from, yet it is afraid to ask that question about the measures set out in this Bill because it does not want to tackle the subject. When the Institute for Fiscal Studies calls out both the Government and the Labour party for “a conspiracy of silence” over the effects of the Chancellor’s Budget, including these measures, it is not hard to drill down to see why the Bill should be opposed.

[Robin Millar]

On that point, will the hon. Gentleman give way?

[Drew Hendry]

Go on. The hon. Gentleman has had 20 minutes, but I will give him another go.

[Robin Millar]

The hon. Gentleman is being generous; I appreciate that he has a speech to give. The fact is that somebody on the national living wage, or the minimum wage as it was in 2010, is now, in 2024, 35% better off in real terms. That is not a trajectory of decline: somebody on the bottom rung of society, in terms of earnings, is better off.

[Drew Hendry]

I thought the hon. Gentleman had got through all that stuff in his speech. I will let him know just now that, because of this measure, anybody earning up to £19,000 per annum will still be worse off, or at least no better off, because of frozen thresholds under the control of his Government. The biggest gainers are those earning over £50,000 per annum. As a result of the changes and frozen thresholds, someone working full time and earning the minimum wage will see a net tax increase of more than £200, according to the Institute for Fiscal Studies. The Resolution Foundation said that there will be a 0.9% fall in real terms in household disposable income between 2019 and 2025.

The Office for Budget Responsibility pointed out again this week that the Government make their own fiscal rules. They decide what they are going to do and make decisions that they take forward. There is not some magic envelope that they have to work within, where they have no flexibility and are unable to move outside that envelope or do anything different. They can make choices, but the choices they are making are bad ones. Austerity is a choice that this Government have made time and again, with the same outcome: 2010, 2015, 2017 and 2019—failure, failure, failure and failure. If that is not enough, throw a disastrous Brexit and a toxic mini-Budget into the mix and see what happens.

The measures in the Bill are a grubby election gimmick that makes things much worse for everyone. People are struggling. They are struggling with food prices, which have been boosted by Brexit to over 25% more than they were a couple of years ago. Millions of people are paying hundreds of pounds more on mortgages. Opening letters, emails and apps shows the sharp interest they are paying for energy costs. The measures, along with the lack of investment in public services, leaves public service cuts beyond reasonable imagination.

It is not just me saying that. The Institute for Government has said:

“The reality is that these spending plans will be impossible to deliver”,

as have other institutes. The Resolution Foundation says they are “fiscal fiction”. Let us think about the impact of that. Where is the Labour party on that subject? Where is the so-called “party of labour” on the subject? Missing in action when its Members should be here. What is the point?

[Gavin Newlands (Paisley and Renfrewshire North) (SNP)]

The Labour party in Scotland has made the point that change is coming, but can my hon. Friend explain to me, other than changing the colour of the rosette over No. 10 Downing Street, what that change actually is? Given that Labour Members are not voting against this Budget and they have agreed with the Government on Gaza and on multiple other policy areas, what is the point of Labour?

[Drew Hendry]

My hon. Friend makes a good point. That was underlined the other day when the Labour leader was interviewed by Sophy Ridge, and he was not willing to say what Labour would do differently. It was also underlined by the campaign co-ordinator, the right hon. Member for Wolverhampton South East (Mr McFadden), who would not disagree with any part of the Tories’ horrible Budget. What is the point of Labour?

What is the point in this Government continuing along this disastrous path that they have put in place? They say that they want to increase productivity in the UK, but their productivity aims are destined to be fatally undermined by inevitable public sector industrial action, which workers will be right to take. They will also then have to face the policy panics that will follow. No, sorry, the Conservatives will not be in Government. It will be Labour that will have to face those policy panics and the U-turns that will inevitably have to be made.

This Bill has been designed by losers. It will mean that many more people will be losing what they value: decent public services. It is not only, as the Chancellor said, Scottish oil and gas that are losing out. Other losers include: action on climate change, the just transition and, yes, let us not forget Labour abandoning its £28 billion a year promise to invest in the green economy. That has turned to dust as well.

What we needed in the Budget were measures to help people with food, with mortgages, with rent and with energy costs. We needed public services protected, and proper investment in the NHS. This is a desperately shoddy Bill that plunges our public sector into a desperate and dark future that helps few and hurts many. The nations of the UK needed better, and Scotland deserves to be out of this Westminster austerity nightmare.

--- Later in debate ---

[The Financial Secretary to the Treasury (Nigel Huddleston)]

I thank all right hon. and hon. Members for their contributions. I think it would be fair to say that a range of perspectives have been presented, but most of us—certainly on the Government Benches—agree that this is an important piece of legislation. It will deliver tax cuts that make the tax system fairer, while rewarding and incentivising work, and growing the economy in a sustainable way. The national insurance cuts are an important part of that, and they are policy.

I want to respond to the confusion of the hon. Member for Hampstead and Kilburn (Tulip Siddiq), which is understandable given that we have heard promises, policies, aspirations and ambitions from the Labour party in relation to the £28 billion. Let me be clear: it is my party’s ambition to eliminate national insurance. I know that Labour Members do not understand what the word “ambition” means and that it is difficult, but it is an ambition. That is the difference.

I will briefly reiterate the Bill’s main measures and what they seek to achieve. First, the Bill builds on the cuts to national insurance announced in the autumn statement by reducing the main rate of class 1 employee NICs from 10% to 8%. That change will come into effect from 6 April 2024, with employees benefiting from April onwards as employers make the changes to their payroll systems. Secondly, the Bill reduces the self-employed class 4 main rate of NICs from 8% to 6% from 6 April. That follows on from the one percentage point reduction to the main rate of class 4 NICs from 9% to 8% announced in the autumn statement 2023.

Now that inflation is falling and the economy is improving, as we saw in this morning’s figures, which I am sure the Opposition welcome, we can responsibly return some money to taxpayers, but it is important to do so in a way that supports work and grows a sustainable economy for the future. A UK employee can already earn more money before paying income tax and social security contributions than an employee in any other G7 country, and thanks to the NICs cuts in the autumn statement and the spring Budget and above-inflation increases to thresholds since 2010, an average worker on £35,400 in 2024-25 will pay over £1,500 less in personal taxes than they would have done if the thresholds had just increased in line with inflation. As my hon. Friend the Member for St Austell and Newquay (Steve Double) pointed out very well, in contrast to the comments of the hon. Member for Hampstead and Kilburn, we have reduced the amount of tax paid by increasing the threshold from £6,500 to more than £12,500 over the period in which we have been in office. Labour opposed many of those threshold increases.

My hon. Friend the Member for St Austell and Newquay also made the important point that the measures we have taken in recent fiscal events have been focused on helping 29 million workers. Some 27 million employees will benefit from an average £900 saving in national insurance, but of course, we also care deeply about pensioners. Those on the full basic pension will receive an extra £700 in April and those on the full new state pension will receive an extra £900, so 12 million pensioners will also benefit from the significant increases that we will provide through the triple lock. Of course, it is perfectly fair that workers also get some advantage—they will be receiving the benefits I have outlined. The Government are cutting taxes in a responsible way, and have taken difficult but responsible decisions to restore the public finances in the wake of global crises.

[Drew Hendry]

The Minister has used the word “responsible” a number of times. As has been pointed out by many organisations, not least the Institute for Fiscal Studies and the OBR, there will be substantial cuts to public services. With many English councils already in special measures—effective bankruptcy—where does the Minister see those cuts falling? How will they filter through to the public, and what will be the effect on public sector jobs?

[Nigel Huddleston]

As the hon. Member will be aware and as the Chancellor outlined, based on current spending assumptions, total departmental spending will still be £86 billion higher in real terms by 2028-29 than at the start of this Parliament. If he was listening to the debates earlier this week, he will be aware that we will increase spending in real terms by 1% during the forecast period.

The hon. Member and others have raised points about fairness and making sure that we look after the most vulnerable in society, which is of course something we are committed to. Distributional analysis published alongside the spring Budget shows that the typical household at any income decile will see a net benefit in 2024-25 as a result of Government decisions made in the autumn statement—and, indeed, from the autumn statement 2022 onwards—and that low-income households will see the largest benefit as a percentage of income.

We have mentioned many times our commitment to the national living wage. It will soon increase by 9.8% to £11.44, which is expected to benefit around 2.7 million workers. It is important to stress that from April, a full-time national living wage worker’s take-home pay will be 35% greater in real terms than it was in 2010, due to successive increases in the national living wage and changes to personal tax rates and thresholds.

To respond to a few other comments made by right hon. and hon. Members, my right hon. Friends the Members for Witham (Priti Patel) and for Wokingham (John Redwood) both gave excellent speeches, in which they not only championed workers—including the self-employed—but highlighted the fact that we have to operate in a particular context. As has been mentioned many times today, we are in a difficult financial situation because of a global pandemic that hit the global economy, which was followed by the invasion of Ukraine and the significant impact it had on inflation around the world.

The question, as my right hon. Friend the Member for Wokingham pointed out, is how much higher taxes would be if Labour had been in charge. Throughout the pandemic, the Government received a lot of support from Members on both sides of the Chamber. That was completely right, but many Members were calling for even greater intervention and even longer lockdowns, which would potentially have done immense damage to the economy.

Some hon. Members raised the contributory principle. In our ambition for further reductions in national insurance, we will make sure that the future tax system has the right mechanism for establishing entitlement to contributory benefits, including the state pension. My right hon. Friend also mentioned the rise in the VAT threshold, which is really important. It will go from £85,000 to £90,000, which means that 28,000 fewer small businesses will be registered for VAT. My hon. Friend the Member for Ruislip, Northwood and Pinner (David Simmonds) highlighted this Government’s record on jobs in creating 800 jobs a day and in significantly reducing youth unemployment, of which we can all be proud.

My hon. Friend the Member for Aberconwy (Robin Millar), who raised many important points in his speech, pointed out the rather irresponsible scaremongering we have heard today from those on the Labour Front Bench relating to spending on pensions and the NHS. The Opposition should be well aware, especially if they wish to form a Government, that the money raised by NICs does not determine the amount going to the NHS and state pensions. We have announced increasing funding to the NHS and we are uprating state pensions by 8.5% this year, as I have mentioned. We on these Benches can tolerate a decent debate—we are fairly robust— but we will not tolerate irresponsible scaremongering, especially when targeted at the most vulnerable in society, purely to try to take political advantage from making up policies that do not exist. I hope that at some point the Opposition will either get some economic competence or apologise for that.

This really important Bill delivers tax cuts for over 29 million working people. A yearly saving of over £450 for the average worker will result from this Bill alone. Taken together with the cuts to NICs at the autumn statement, it will be worth over £900 per year for the average worker. This will benefit households throughout the United Kingdom and in every single constituency represented in this place. However, here we are again, and in nearly three hours of debate, we have heard nothing but doom and gloom from the Opposition. How disappointed they must have been this morning to hear that the economy has grown. While I am not pretending for one minute that everything is perfect—as I have said, our constituents and the country have been through a very challenging time—it is important to recognise, welcome and applaud success, especially if a party wants to lead a country, champion trade abroad and attract investment. What a terrible advert for the UK we have heard from the Opposition today, who are completely lacking in confidence and ambition for our economy and our workers.

The national insurance cuts we are debating reward work and will provide a further boost to the economy. We are turning a corner, and the plan is working. While we want to put more money back into people’s pockets, the Opposition want to take more out, and while we take every opportunity to talk the country up, they take every opportunity to talk Britain down. The choice is very clear: a plan for growth and a brighter future with the Conservatives, or no hope, no clue and no plan with the Opposition. I commend the Bill to the House.