Draft Social Security (Contributions) (Limits and Thresholds, National Insurance Funds Payments and Extension of Veterans Relief) Regulations 2024 Draft Tax Credits, Child Benefit and Guardian's Allowance Up-rating Regulations 2024

James Murray Excerpts

Wednesday 7th February 2024 General Committees

[James Murray (Ealing North) (Lab/Co-op)]

It is a pleasure to serve on the Committee with you, Sir Charles. I welcome the opportunity to address, on behalf of the Opposition, the measures laid out in the two statutory instruments.

First, as we heard from the Minister, the draft Social Security (Contributions) (Limits and Thresholds, National Insurance Funds Payments and Extension of Veterans Relief) Regulations 2024 give effect to the annual re-rating of national insurance contributions limits and thresholds for the purposes of calculating class 1 NICs liability for the coming tax year. As we also heard, the regulations allow for payments of a Treasury grant not exceeding 5% of the estimated benefit expenditure for 2024-25 to be made into the national insurance fund, while also making provision for Northern Ireland. Finally, the regulations extend the availability of the zero-rate relief on secondary class 1 contributions for employers of veterans for the tax year 2024-25.

Members will recall that at the autumn statement 2022 the Chancellor announced, as the Minister said, that national insurance contribution thresholds that are in line with income tax will be fixed at their 2023-24 levels until 2027-28. As the Office for Budget Responsibility pointed out at the time, the freeze to national insurance thresholds and limits meant that

“all the main personal tax thresholds are now frozen in cash terms across our entire forecast period”

through to 2027-28.

The freezes to allowances, limits and thresholds provide the context for why the Chancellor’s boasting about the cut in the rate of national insurance at the autumn statement 2023 rings so hollow. As Paul Johnson from the Institute for Fiscal Studies said, the changes made at the statement

“won’t be enough to prevent this from being the biggest tax-raising parliament in modern times.”

The truth is that after 25 tax rises in this Parliament alone, the tax burden remains on course to be at its highest since the second world war.

One of the central reasons for that is the freeze to income tax and national insurance thresholds through to 2027-28. That fiscal drag means that, on average, personal taxes will go up by £1,200 per household even after the 2% cut to national insurance in January. The Government are, in effect, giving with one hand while taking with the other. Indeed, after the autumn statement the IFS noted that tax reductions announced in November would give back

“less than £1 of every £4 that is being taken away”.

I have heard the Minister say several times in previous debates that Members should compare our December and January pay slips; frankly, I am more concerned about the post-tax income for low and middle earners than I am for MPs. The truth is that even people in this place on very good salaries will see their tax burden rise as a result of the Government’s freezes to thresholds, but the impact on low and middle earners is stark. Does the Minister agree with consumer finance expert Martin Lewis on this? Mr Lewis recently said that even with the reduction in national insurance, people on incomes of between £12,500 to £26,000 will be worse off, looking at this year in isolation, as a result of threshold freezes and fiscal drag. Does the Minister agree with that or does he think Mr Lewis is mistaken?

On a point of clarification, I understand that last year, through the Social Security (Contributions) (Rates, Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations 2023, the Government made provisions for classes 2, 3 and 4 national insurance contributions. Will the Minister explain the procedural reasoning for why such provision has been omitted from this year’s regulations?

Secondly, the draft Tax Credits, Child Benefit and Guardian’s Allowance Up-rating Regulations 2024 set the annual rates of working tax credit and child tax credit and the weekly rates of child benefit and guardian’s allowance for the coming financial year. Amid a damaging cost of living crisis, we support the increases, as any help for people who are struggling in the face of persistently high energy, food and housing costs is particularly needed at this time. We know that 8 million households received their final means-tested cost of living payment this week. That support has been critical for millions across this country, including many children. I know from my constituency that many people continue to struggle to provide for themselves and their families. I would therefore be grateful if the Minister could share with us his assessment of the impact of the end of the cost of living payment on levels of child poverty.