Health and Social Care Levy

Mel Stride Excerpts

1st reading
Wednesday 8th September 2021 Commons Chamber

[Mel Stride (Central Devon) (Con)]

I rise to welcome, broadly, the motion. It seems to me that social care is one of those issues that parties of both colours have grappled with for many years, yet now we are at last at the point where a Government have the courage and are sensible enough to actually come forward with some realistic proposals. As to the breaking of manifesto commitments, no party ever wishes to do that, but listening to the Opposition it seems to me as if the global pandemic never occurred, as if the economy never shrank by the greatest level since 1709 during the great frost of that year, as if millions of jobs were never imperilled, and as if this Government never had to step in fiscally in a way that probably no Government outside wartime have ever had to do, and with such positive effects.

When it comes to the honesty or otherwise of what the Government have done, I think they have been upfront, very clear and very honest in making it clear that they have broken that commitment, unlike, I have to say, the less straightforward way in which, repeatedly in this debate, the Opposition and the shadow Chancellor have ducked the fundamental question: what is the Opposition’s alternative plan? In response to an intervention by my hon. Friend the Member for Sevenoaks (Laura Trott), the shadow Chancellor, when asked why Labour had supported an increase in national insurance in 2003, said, “Well, we had a plan.” I humbly remind her that that was 18 years ago. What we need to see now is a plan from the Opposition, as well as the criticism.

[Chris Bryant]

The right hon. Gentleman and I have known each other for a very long time. I just hope that he could explain to my constituents why it is right that practically everybody in the Rhondda would have to sell their home to meet the £86,000 cost, whereas next to nobody would have to do so in his constituency.

[Mel Stride]

First, the hon. Gentleman’s knowledge of my constituency is obviously rather deficient, because I expect that mine shares many characteristics in common with his. I do not dispute the fact that any major fiscal move, such as putting up national insurance and bringing in this levy in this manner, will have associated complexities and difficulties. My pledge to the House is that the Treasury Committee will, I am sure, after private discussion, decide that we wish to look more closely at a number of the issues that are being raised in this debate, including the one that he mentioned.

Let us be honest about the options that were available to the Treasury. How could we have squared the circle and funded £10 billion-plus a year? The first thing that the Treasury could have done is to seek to cut expenditure in other areas, yet I have no doubt that if it came forward with any proposals of that nature, the Opposition would have fiercely resisted that as austerity all over again. We have to understand that on the current projections, there are many unfunded commitments, including, for example, keeping our railways going, going for net zero, additional funding that will be needed for school catch-up and so on.

[Peter Grant (Glenrothes) (SNP)]

Given the right hon. Gentleman’s experience on the Treasury Committee, does he not agree that a tax hike of this scale could—if it was necessary—be much more fairly and equitably carried out if the tax burden was spread across a number of different taxes, rather than 100% of the burden being landed on one single, narrowly based tax?

[Mel Stride]

I will come back to the hon. Gentleman’s point, but let me just stick with the options. The second option was to lean into growth, to assume that we could grow our way out of this problem. We have just had a huge contraction of the economy. We are not yet back up to the pre-pandemic level, although the Bank of England thinks that we may arrive at that point some time towards the end of the year, and we have many headwinds to growth ahead of us, not least the bottlenecks in supply chains, the labour shortages that we have witnessed in certain areas, and many other issues.

The third thing that the Treasury could have done is to borrow more money, and that is probably what the Opposition would have done in this situation. Despite the fact that the Bank of England now seems to feel that there is more money—I suspect that the Office for Budget Responsibility will confirm that around the time of the Budget— because the economy is doing a bit better than we expected, probably to the tune of about £25 billion, it would be a very brave Chancellor who started to borrow yet more and more, knowing that one day it is possible that the markets might turn around and look at the United Kingdom and decide that they no longer have confidence to lend to us. That would be a very dark day.

[John Redwood]

Will my right hon. Friend give way?

[Mel Stride]

I will not, actually, because I am very low on time.

That is the sword of Damocles that hangs regularly over the head of our Chancellor, so that leads us to taxation. If we look at taxation and the amounts involved here, there are only three taxes that we could consider. About two thirds of all tax is raised through income tax, national insurance and VAT. We then ask ourselves, “What criteria are we going to apply to the tax measures to test whether they are the right ones or not?” There are at least two. One is that we should look after the least advantaged in our society—the lowest-paid—and the second is that we should look after those who are the youngest, who have borne the greatest brunt of the economic consequences of the pandemic.

[Matt Rodda (Reading East) (Lab)]

Will the right hon. Gentleman give way?

[Mel Stride]

I will not—I am very short on time. We are looking to the younger generations, to some significant degree, to fund predominantly the needs of elderly people and social care. If we look at those taxes, income tax rises would have been very progressive—there is no doubt about that. We would have had to have about twice the level of increase that we are looking at with national insurance to have raised the same amount of money. I think we need—the Minister made this point—a UK-wide solution to this, not one based on income tax, where, of course, elements of income tax are devolved to other nations across the United Kingdom.

If we put up VAT, that would be hugely regressive, particularly at the level of income received rather than expenditure. That would therefore have been wrong. We are also up at 20%, I think—near the upper limit of where VAT should be, given the distortionary consequences of going further.

That inevitably leads us to national insurance, just what Labour was led to in 2003. The original proposal, it seems to me, failed both of my tests. If we just put up national insurance, it would have been regressive. It would have hit the poorest hardest, but what is right about the Chancellor’s approach is that he has extended it to those beyond the state retirement age and those receiving income by way of dividends. That critical move makes this, in general, the right approach.

There are many issues that the Committee will no doubt look at. One of them is that a regrettable consequence of the increase in the employer’s national insurance rate is that it will exacerbate the so-called “three people problem”, whereby the different tax treatment of the employed, the self-employed and those receiving income through their own company will be widened, with consequences for IR35. I am out of time, but I support this motion today.