National Insurance Contributions Bill

John Baron Excerpts

Tuesday 23rd November 2010 Commons Chamber

[Mr Gauke]

No. We agree with the view of Tony Blair and, apparently, the previous Chancellor of the Exchequer that VAT is the right tax to raise if one wants to get a substantial sum of money. The hon. Gentleman will find that most economists take the view that in terms of the impact on jobs, increasing employers’ national insurance contributions is far more damaging than any increase in VAT.

As a result of the package of measures that we are putting in place, employees earning under £35,000 a year will pay less in income tax and national insurance contributions overall, and employers will pay less national insurance on employees earning under £20,000 a year. As well as the 880,000 low earners taken out of income tax, almost 1 million low earners will no longer pay national insurance contributions, while the number of low earners for whom employers pay no national insurance contributions will rise by about 650,000. It is also worth mentioning that people who will now be exempt from paying national insurance will retain the same entitlement to contributory benefits. However, tackling the deficit remains the priority, and the benefits to low earners could be achieved only through the increase in national insurance contribution rates included in the Bill. This decision is fair and progressive, and it will help to support the poorest and most vulnerable in society.

Let me turn to part 2 of the Bill. In the June Budget, my right hon. Friend the Chancellor announced an employer national insurance contribution holiday for new businesses in countries and regions with a high dependency on the public sector. This holiday will apply across Wales, Scotland and Northern Ireland and many regions of England—the north-east, the north-west, Yorkshire and the Humber, the west midlands and east midlands, and the south-west. Those areas have a higher proportion of jobs in the public sector than the rest of the country, and as we take the much-needed steps to rebalance our economy, it is vital that they benefit from additional support.

[Mr John Baron (Basildon and Billericay) (Con)]

There is no doubt that one welcomes this package of measures, which will help the lower paid in particular. However, will my hon. Friend revisit the Government’s decision to exclude businesses in the south-east from the national insurance holiday? Otherwise, it could be seen to discriminate against local entrepreneurs there and hit the areas that need higher employment.

[Mr Gauke]

I understand my hon. Friend’s point, but the fact is that we have limited resources and have inherited a legacy in which the private sector is relatively strong in some areas, such as his constituency and mine, but much weaker in others. At a time when we cannot rely on massive public spending, and when the public sector will have to find economies, it is perfectly reasonable that we have adopted the approach of focusing on areas where there is high dependence on the public sector.