National Insurance Contributions Increase

Justin Madders Excerpts

Tuesday 8th March 2022 Commons Chamber

[Mr Clarke]

I do not demur; we are faced with a serious challenge on the cost of living. The Government entirely accept that and are working to address it, but we must address it in a smart and financially sustainable way. A £20 billion package is a major commitment to support families across the UK. Of course, we continue to keep all our options under review to ensure that we can act in a way that is commensurate with the severity of the situation.

From next month, we will increase the national living wage by 6.6% to £9.50 an hour for those aged 23 and over, which will benefit more than 2 million workers across the UK by £1,000 a year. We have also frozen fuel duty for the 12th year in a row. That is on top of the help that we are already providing to those on low incomes with their housing costs and council tax bills.

[Justin Madders (Ellesmere Port and Neston) (Lab)]

On freezing the fuel duty, if the Minister has been to forecourts recently, he will know that the cost of petrol and diesel has gone up tremendously in the last few weeks. What has been the impact on the Treasury’s coffers from VAT receipts as a result?

[Mr Clarke]

We have forgone a tremendous amount of revenue through the freeze on fuel duty. On VAT, we obviously continue to look closely at the revenue situation. It is sometimes a misapprehension about the way that the VAT scheme works to the Treasury’s benefit. There is often a focus on domestic fuel and the impact that it is having on our income. To that point, the more that people spend of their discretionary income on domestic fuel costs, which are VAT chargeable at 5% as opposed to the full rate of 20%, the less that the Treasury recoups. In that regard, we have to be careful about some of the arguments around that.

Now that I have set out some of the context of the Government’s response, I will return to the specifics of the debate—the need for the health and social care levy and the rationale behind its operation. Last month, my right hon. Friend the Secretary of State for Health and Social Care explained to the House that there is now a significant backlog of elective care as a result of the pandemic, which my hon. Friend the Member for Gloucester (Richard Graham) alluded to. More than 6 million people are waiting for elective care in England and more than 300,000 people are waiting longer than a year. The Government have set out a clear plan to tackle the backlog, but we must deal with that most pressing of issues and the levy will allow us to do that.

--- Later in debate ---

[Justin Madders (Ellesmere Port and Neston) (Lab)]

I place on record my dismay that the Government have chosen to hit working people and businesses with a national insurance rise at the worst possible time—when one in six working households cannot make ends meet, according to the Institute for Public Policy Research; when the number of jobs that pay below the national minimum wage and the living wage is still more than two and a half times higher than at pre-pandemic levels; when inflation is forecast to reach 7.25% next month, the highest level since August 1991.

We already have the highest level of inflation for three decades, but I am afraid that everything we know about the implications of Ukraine tells us that it will only get higher in the next few months. Everywhere we turn, prices are going up far faster than anyone can keep up with—at the supermarket checkout, at the petrol pump, in gas and electricity bills. Adding in mortgage rises, rent rises and council tax rises, we face a perfect storm of inflationary pressures that we have not seen for an entire generation.

I do not think that anyone has really levelled with the public about what the implications of a protracted war in Ukraine will be for prices. Things are going to get a lot more difficult before the pressure eases off. Just look at how the mere suggestion of a boycott of Russian gas and oil has pushed trading prices sky-high. That resulted from comments from the US Secretary of State, Antony Blinken, that conversations about a boycott were taking place—one can only imagine what would happen if people moved beyond conversations and a boycott actually took place.

It is not clear to what extent the price spikes are being exacerbated by speculators who are seeking to take advantage of the situation. Nor do we know whether a real effort by OPEC countries to increase production would mitigate it, or what impact the conflict will have on food prices over the medium term. The reality is that western Europe, trapped by its reliance on Russian energy, is forced to buy fuel that pays for the war that pushes up the price of energy further still. I fear that until more home truths are spoken about what it will take to break the cycle, we will continue to see prices rise and the war continue.

I recognise that addressing the issue is not solely within the Government’s gift. Grasping the nettle will be a continent-wide effort, but we must look at what the Government can control. There is an opportunity today to act on the national insurance increases. It beggars belief that we are looking at tax rises at the same time as prices are rising and bills are skyrocketing at levels not seen for a generation. This is the wrong tax at the wrong time.

[Anthony Browne]

Will the hon. Member give way?

[Justin Madders]

I am sorry, but the hon. Member has just spoken. If he did not get his point in then, he has missed his opportunity.

The tax rise was wrong back in September when it was first proposed, and even more wrong now. That is not just the view of Opposition Members; the cross-party Treasury Committee has highlighted that the increase in national insurance contributions for employers will lead to higher costs being passed on to consumers. If we speak to anyone in social care, they tell us that that is pushing them into unviability.

Data from the Institute of Directors in January demonstrated that more than a third of businesses would respond to the increase by raising prices and passing on the burden to customers, yet again increasing inflationary pressures. The same report also said that nearly a fifth of businesses would consider employing fewer staff as a result of these rises. Almost three quarters of companies in manufacturing say that they are also very likely to pass on the costs to customers, so it is no surprise that Make UK has said that the proposal is “illogical” and “ill-timed”.

We know that some areas will be worse hit than others. Analysis shows that the north-east and the midlands—areas that rely on wages rather than income from investment and properties—will be hardest hit. That is not levelling up, is it? Trapping the country in a low-growth, high-tax cycle and hitting working people with tax rise after tax rise is the opposite of levelling up.

Within four years, the average household will be paying £3,000 a year more in tax than when the Prime Minister first came to power. There is nothing to give families the security that they would get from the fully funded measures that the Opposition have proposed to keep energy bills down, which would be paid for by a windfall tax on North sea oil and gas producer profits. In my constituency alone, 12,500 families would be £400 better off as a result of the tax, and our plan would mean almost all households making savings on their bills. Nor would an extra £40 charge be hidden away and come out of people’s bills in a few years’ time, regardless of whether they had benefited from the scheme in the first place.

We see the effects of the current crisis playing out every day. One example in my constituency relates to housing affordability. Housing is a basic right, but with affordable and council housing in short supply, reliance upon the private rented sector has increased. However, a recent search of properties available in Ellesmere Port showed that of the 13 properties available—a minuscule number to start with—only two came within a rental liability level that would be covered by the local housing allowance, while the rest ranged from £30 to £225 over the rates. In Neston, the results of a search are even worse: all the properties were well over the LHA. In fact, it is now incredibly rare to see any properties offered at a rental value equivalent to the LHA. How on earth can we expect people to put a roof over their head in that situation, let alone pay for energy bills, food or council tax bills?

This will be an ongoing crisis, and there is no solution from the Government. Everywhere we turn, from housing to heating to eating, prices are going up. People face some really tough times ahead unless something is done now. Let us not add to that impossible burden. Let us scrap this national insurance increase right now.