National Insurance Contributions Bill

Lord Davies of Brixton Excerpts

2nd reading
Wednesday 1st December 2021 Lords Chamber

[Lord Davies of Brixton (Lab)]

My Lords, I thank the Minister, the noble Viscount, Lord Younger of Leckie, for his clear and—given the time—concise exposition of the Bill. I hope that if, in my remarks, I express less than total support, he will not take that personally.

There are many aspects of this Bill that cause me some concern. Maybe there are not many of us left, but I believe in the National Insurance Fund, going back to the National Insurance Acts of the post-war Labour Government—a fund that you pay into while you are at work and that pays you benefits when you are sick, unemployed or retired; a fund that is guaranteed by the Government. Regrettably, it has come to be treated by successive Governments as a catch-all source of short-term political fixes that are nothing to do with a logical system of national insurance. Today’s Bill is a prime example.

One point that I particularly regret is the almost complete absence of any sort of financial information on how the Bill will affect the financial state of the National Insurance Fund. To me it is axiomatic that when changes are made to the contributions paid into or the benefits paid from the fund, Parliament should be presented with a report from the Government Actuary. Instead, we have a few figures in the Explanatory Memorandum and a few more—somewhat tardily—in the budget report from the Office for Budget Responsibility. Notably, the OBR spends some time explaining how uncertain the figures are.

None of the figures can be taken seriously, because this is what can be described as “performative legislation”. It is not being put before us because there is any sound logical or evidential basis, or even a clear idea of the effect of the legislation. It is just a performance, with the only idea behind it being the political benefit—its source in manifesto commitments gives that game away. It is here only because the Government want to say, “Look, here’s what we are doing: we are supporting veterans—who can object? We are promoting economic development—who can object?” But there is no evidence that it will have any sort of material impact, least of all on the stated objectives.

It is worth reading out the views of the OBR on the freeports issue. It said that

“given historical and international evidence, we have assumed that the main effect of the freeports will be to alter the location rather than the volume of economic activity, so the costs have been estimated on the basis of activity being displaced from elsewhere. To the extent that activity is genuinely additional, it will be revealed in GDP and receipts data over time, though given the small scale relative to the whole economy, such effects would probably be difficult to discern even in retrospect.”

So the promise to have a review of the policy is nonsense. We will not have any idea whether it achieves what the Government say it will. This is no surprise. Anyone who knows anything about the history of government efforts to promote local economic development knows that the same mistakes will be made time and again. There are a host of factors that we know lead to additional growth—connectivity is the big one—but relatively trivial tax incentives are way down the list.

I also draw the House’s attention to the evidence on the freeport provisions presented to us by the Chartered Institute of Taxation. It raises several technical issues that we will come to in Committee, but there are some more general points which I will paraphrase—these are my words, not the institute’s, but my comments are based on its evidence. Its questions are as follows. What evidence do the Government have for believing that these proposals will achieve their intended benefits? What about the risk that economic activity will be diverted from other, fully taxed areas, rather than increased overall? Will the impact not be felt through a rise in commercial property prices in the areas concerned, rather than fully in increased activity? These are serious questions; perhaps the Minister can start to enlighten us on these points.

The truth is that the Government’s policy of levelling up, of which freeports are a part, is a slogan in search of policies. However facile the proposal, it is the press coverage that counts, rather than the impact on the ground. The same general point applies to the national insurance relief for veterans. Again, there are technical difficulties that we will have to deal with in Committee but, to put it bluntly, the idea itself is bogus.

Of course, this is no attack on veterans, who deserve our support, but does anyone honestly believe that this policy will make any material difference to their employment prospects? If the Government are serious about the employment prospects of our veterans when they leave service, they should undertake a comprehensive review of the difficulties they face. Education and training opportunities are obviously the key, with direct financial support where necessary—resettlement grants and so on. I have little doubt that a comprehensive review would find that this money would be better spent in ramping up support for the existing services available for veterans. Again, this is all about presentation rather than substance.

Finally, I want to ask a question on Clause 11, about the disclosure of contributions avoidance arrangements. We will of course want to oppose avoidance arrangements for national insurance contributions, just as we are against avoidance arrangements for income tax, and it seems entirely reasonable that the two should be brought in line. But it would be helpful if we knew a bit more about what the Government have in mind here. Are there examples of national insurance contributions avoidance where action has proved difficult or impossible under existing arrangements? More specifically, what about the example of salary sacrifice? These are arrangements that are established specifically to permit employees and employers to pay less in national insurance contributions.

We are in the odd position that some of these arrangements—for example, pensions—get HMRC’s blessing, but others do not. It is difficult to see how all the arrangements do not fall, in everyday language, under the heading of avoidance. We need some certainty here. Will the Minister provide us with a clear explanation of what impact Clause 11 is intended to have?

--- Later in debate ---

[Viscount Younger of Leckie (Con)]

I asked about that, so I will say yes; we want to get a response as soon as we can. I do not yet have the dates for Committee but I should press to say that we want to get this as soon as possible, and certainly well before Committee.

I will conclude by talking about a point that was raised by the noble Lord, Lord Bilimoria, about investment in the UK, which is a bigger issue that he raised. There are very many reasons to be positive about the UK economy. We have been talking about free ports and NICs relief, but both the OECD and the IMF are forecasting that the UK will have the highest annual growth in the G7 this year. Decisions this Government have taken have provided around £400 billion of direct support to the economy during this year and last year, and the Bill helps towards that.

I thank all noble Lords for their comments. As the noble Baroness, Lady Kramer, said, this was a short debate but it has been quite intense and extremely helpful. I greatly look forward—

[Lord Davies of Brixton (Lab)]

Before the Minister concludes, does he have a reply on the salary sacrifice point? I will be happy to take a letter.

[Viscount Younger of Leckie (Con)]

Absolutely; I will look at Hansard to check on all the questions raised. I suspect that there were one or two that I have not responded to, and I will certainly write as soon as I can to respond to them. With that, I commend the Bill to the House.