Draft Social Security (Contributions) (Amendment No. 2) Regulations 2022

Lucy Frazer Excerpts

Monday 28th March 2022 General Committees

[The Financial Secretary to the Treasury (Lucy Frazer)]

I beg to move,

That the Committee has considered the draft Social Security (Contributions) (Amendment No. 2) Regulations 2022.

I will explain why we are bringing this draft statutory instrument before the Committee. As Members are aware, from April the new health and social care levy will increase class 1 and class 4 national insurance contributions rates by 1.25 percentage points. That will secure a long-term dedicated source of funding for our national health service and for those who require care. The instrument will apply the 1.25-percentage point increase to those paying the married women’s reduced rate of national insurance in the 2022-23 tax year. As the result of a drafting oversight, that group are excluded from paying the levy. If the legislation were not enacted, the result would be an unfairness, as not everyone would be in the same position and therefore not everyone would be treated equally.

This draft SI will increase the married women’s reduced rate from 5.85% to a temporary rate of 7.1%. The reduced rate is a lower form of NICs, currently paid by fewer than 1,000 women. Originally, it was introduced to allow women to use their husband’s NI contributions to qualify for a state pension at a time when fewer women worked. However, the scheme has been closed to new entrants since 1977. In fact, today, the circumstances in which a woman might pay the reduced rate are relatively unusual: a woman must have joined the scheme before May 1977, she must have been married at the time and have not divorced since, and she must still be under the state pension age and have not had a break of two years or more in her employment history.

[Nick Smith (Blaenau Gwent) (Lab)]

Will the Minister let us know the average age of the women affected by the new draft regulations?

[Lucy Frazer]

They will, obviously, be at the older end of the spectrum, as the scheme has been closed to new entrants since 1977, although some will still be in work. Very few people are in the scheme—we think fewer than 1,000.

This is new legislation, but the change it will implement has been anticipated for some time. We have already communicated the 2022-23 NICs rate on the gov.uk website. Employers, and software and payroll providers are expecting the change and have updated their systems. Legislation is already in place to ensure that, from April 2023, those paying the married women’s reduced rate will be subject to the health and social care levy. There has never been a suggestion that that category of women ought to be excluded.

[Nick Smith]

The Minister was unable to answer my question about the average age of the women affected by the draft regulations. Will she go back to the Department to get an assessment of the question and please write to the Committee?

[Lucy Frazer]

I am happy to do that. As I mentioned, those women will be of an older generation, of an older age, but I am happy to get the specifics, if the hon. Gentleman wishes me to do so.

[Steve McCabe (Birmingham, Selly Oak) (Lab)]

Will the Minister tell me how many of the women who will see the increase are also women we might describe as WASPI—Women Against State Pension Inequality Campaign—women?

[Lucy Frazer]

The hon. Gentleman is right to point that out. It is a point that I have considered with my team. He is right that there will be an impact on some WASPI women. He knows that the decision on those women was a decision to equalise the state pension age. It dates back to 1995. That was the decision taken at that time on fairness, and fairness is the point that I am moving to now.

We need to ensure that the draft measure is fair across the board. Women who pay the reduced rate will benefit from the record investment in our NHS and social care system brought about by the new levy. Therefore, to exempt those paying the married women’s reduced rate from the health and social care levy would give them an unfair advantage compared with others.

I will briefly touch on the timeframe for introducing this draft instrument. I appreciate that the introduction of the measure is slightly delayed, such that we have had to accelerate our consideration of it. I reassure Members that we have written to both the Joint Committee on Statutory Instruments and the Secondary Legislation Scrutiny Committee to explain the reasons for the delay. The reason is that Her Majesty’s Revenue and Customs had previously identified a different legislative vehicle for this draft measure, but it turned out not to be a viable option.

[Sarah Champion (Rotherham) (Lab)]

I appreciate the Minister giving way and her accepting all the questions. Has she written to the women who will be impacted? One of the biggest problems with WASPI was the lack of awareness until the changes actually hit those women.

[Lucy Frazer]

The hon. Lady makes an important point about notification. One of the reasons for the draft measure is that we have already stated on gov.uk and through payroll systems that this will be brought in. If we were not to pass the SI, we would not be doing what we had already stated that we will do. That is the reason for today’s SI.

HMRC has quickly moved to prepare the relevant legislation. I am sure that Members across the House will appreciate that it is critical for the health and social care levy to be applied fairly across the population. As a result, the draft regulations must come into force before the levy’s introduction on 6 April.

[Nick Smith]

I thank the Minister for giving way again. She is being generous with her time and her efforts, but she did not answer the question of my colleague, my hon. Friend the Member for Rotherham: will the Government write to the women affected by this issue? She mentioned that it had been on the Government website, but given that WASPI women and others have complained that they were not properly informed of changes to their pensions and other financial arrangements of the Government through time, will she assure us categorically that she will write to those affected, please?

[Lucy Frazer]

I thank the hon. Gentleman for his question, but I reiterate: there is no need to notify the women, because everyone knows that the social care levy is coming in. It has been widely publicised. The current position is that everyone who is eligible to pay that tax will pay it, so there is no need to tell a group of women who through an oversight were not included in the levy that they will now be included, because at the moment they will not think that they are not.

[Brendan O'Hara (Argyll and Bute) (SNP)]

Will the Minister give way on that point?

[Lucy Frazer]

I will conclude my remarks, because I have now answered that question twice.

[Mr Richard Bacon (South Norfolk) (Con)]

I am delighted that my right hon. and learned Friend has given way. It is a pleasure to serve under your chairmanship, Mr Hosie. I have listened with attention to hon. Members’ interesting questions—although so far only from the Opposition Benches, so I thought we should hear from Conservative Members as well. The Minister mentioned that there are only about 1,000 of these people and that they are a cohort who do not think that they will be excluded, therefore there is no need to write to them. Is not the reverse at least as likely to be the case: that they did think that they were excluded? Indeed, MWRR stands for married women’s reduced rate, and that group of people were eligible for it in a way that others were not, so if they were to think anything, if they were to get up in the morning and think, “Does this thing that I have just heard about on Radio 5 affect me or not?”, their first reaction would surely be that it did not, because they know that they are in an exempt class. However, that is not my question—although the Minister is welcome to comment. Given that there are only 1,000 of them, does she know who they all are? Does she have the names and addresses of the women?

[Lucy Frazer]

I thank my hon. Friend for his question. Those women are not excluded; they just pay a lower rate, so they are included in the NICs scheme. I do not think that they would think that they are excluded. There is nothing to suggest that they were excluded, or that a particular category of women, men or anybody were excluded, so I do not think they will believe they were excluded. Payroll systems are set to include them, and the Government have said on gov.uk that the system is coming in, so the expectation is that they will be included.

As for who the women are, they will be identifiable through various payroll systems, and payroll operators will have to ensure they pay the right amount. If we did not bring in the draft measure, it would be difficult, because we would then have to instruct payroll operators to change their systems, because they are now set up to include that category of women, so it would be more administratively difficult to take them out than to include them.

I should also highlight that this measure is for only a year, because they will be automatically included next year in any event, when the levy appears on people’s payroll.

All that we are doing with this measure is ensuring that this group of women, who were excluded through an inadvertent error, are now included, as we had always intended.

[Liz Twist (Blaydon) (Lab)]

Will the Minister give way?

[Lucy Frazer]

I will now conclude.

It is vital that our NHS recovers from the pandemic and that our social care system benefits from much-needed reform as soon as possible. This measure contributes to that end and I commend it to the Committee.

--- Later in debate ---

[Lucy Frazer]

I thank hon. Members for their important contributions. I assure the Committee that my officials and I considered the matter carefully before we laid the draft SI before the House, for many of the reasons raised. The reason for the measure is simply that there was never an intention not to include that category of women. They were only not included because of an oversight. That having happened, it seemed more appropriate to correct the oversight, which was never intended, recognising the fact that only a small number of people are affected and that, if we ask people to pay the levy, it should be fair that we ask across the board. A particular category of people should not benefit just because of an oversight that we made.

[Brendan O'Hara]

rose—

[Lucy Frazer]

I hope to answer the points made, but if I do not, I am happy to come back to the hon. Member.

To answer some factual points, in general the age of the people affected is between 61 and 66. For example, if someone is earning up to the threshold of £12,570 per annum, they will still be paying £13 less a month in NICs once the changes have come in—that is £160 per annum. If they are earning £1,500, they will still be paying £130 less per annum, taking into account the changes that we have made.

On notification, the Chartered Institute of Payroll Professionals, for example, published the details of the changes in relation to this rate on its website. I understand the point that people are making in relation to the increase, but the 1.25-percentage point increase is the same across the board. I appreciate the points that people are making, but at the end of the day the reason why we are doing this is so that it is fair across the board.

[Brendan O'Hara]

Can I just ask a couple of questions? Has a calculation been done on how much will be raised in the year from these 1,000 women, set against a calculation of how much it will cost to administer?

[Lucy Frazer]

These regulations are not being made on the basis of what revenue we will raise; they are being made on the basis of being fair to everybody. On the hon. Gentleman’s point, as I have already said, the process is already in place, and if we were to stop the process happening, that would be a cost for payroll providers, because they would have to reverse what they are already doing. However, I am not standing here today and saying that we are going to raise millions of pounds through a measure that I have already highlighted will affect only a small number of individuals.

[Sarah Champion]

Minister, I ask one favour. It is £1,000 to write to these women—I will stuff the envelopes if need be. To give them some notice that this is coming would enable them to manage their budgets a little bit better. Will the Minister please commit to doing that?

[Lucy Frazer]

The hon. Member asks very nicely and politely, and while I will take that suggestion away, I am not promising her that we will do it. As I have said repeatedly to various Members across the Committee, we do not believe that these individuals do not believe that this is coming. This is not a situation in which we are making a change, but I will take away the hon. Member’s suggestion and think about it further with my officials.

Question put.