National Insurance Contributions (Reduction in Rates) (No.2) Bill

Nigel Huddleston Excerpts

2nd reading
Wednesday 13th March 2024 Commons Chamber

[The Financial Secretary to the Treasury (Nigel Huddleston)]

I thank all right hon. and hon. Members for their contributions. I think it would be fair to say that a range of perspectives have been presented, but most of us—certainly on the Government Benches—agree that this is an important piece of legislation. It will deliver tax cuts that make the tax system fairer, while rewarding and incentivising work, and growing the economy in a sustainable way. The national insurance cuts are an important part of that, and they are policy.

I want to respond to the confusion of the hon. Member for Hampstead and Kilburn (Tulip Siddiq), which is understandable given that we have heard promises, policies, aspirations and ambitions from the Labour party in relation to the £28 billion. Let me be clear: it is my party’s ambition to eliminate national insurance. I know that Labour Members do not understand what the word “ambition” means and that it is difficult, but it is an ambition. That is the difference.

I will briefly reiterate the Bill’s main measures and what they seek to achieve. First, the Bill builds on the cuts to national insurance announced in the autumn statement by reducing the main rate of class 1 employee NICs from 10% to 8%. That change will come into effect from 6 April 2024, with employees benefiting from April onwards as employers make the changes to their payroll systems. Secondly, the Bill reduces the self-employed class 4 main rate of NICs from 8% to 6% from 6 April. That follows on from the one percentage point reduction to the main rate of class 4 NICs from 9% to 8% announced in the autumn statement 2023.

Now that inflation is falling and the economy is improving, as we saw in this morning’s figures, which I am sure the Opposition welcome, we can responsibly return some money to taxpayers, but it is important to do so in a way that supports work and grows a sustainable economy for the future. A UK employee can already earn more money before paying income tax and social security contributions than an employee in any other G7 country, and thanks to the NICs cuts in the autumn statement and the spring Budget and above-inflation increases to thresholds since 2010, an average worker on £35,400 in 2024-25 will pay over £1,500 less in personal taxes than they would have done if the thresholds had just increased in line with inflation. As my hon. Friend the Member for St Austell and Newquay (Steve Double) pointed out very well, in contrast to the comments of the hon. Member for Hampstead and Kilburn, we have reduced the amount of tax paid by increasing the threshold from £6,500 to more than £12,500 over the period in which we have been in office. Labour opposed many of those threshold increases.

My hon. Friend the Member for St Austell and Newquay also made the important point that the measures we have taken in recent fiscal events have been focused on helping 29 million workers. Some 27 million employees will benefit from an average £900 saving in national insurance, but of course, we also care deeply about pensioners. Those on the full basic pension will receive an extra £700 in April and those on the full new state pension will receive an extra £900, so 12 million pensioners will also benefit from the significant increases that we will provide through the triple lock. Of course, it is perfectly fair that workers also get some advantage—they will be receiving the benefits I have outlined. The Government are cutting taxes in a responsible way, and have taken difficult but responsible decisions to restore the public finances in the wake of global crises.

[Drew Hendry]

The Minister has used the word “responsible” a number of times. As has been pointed out by many organisations, not least the Institute for Fiscal Studies and the OBR, there will be substantial cuts to public services. With many English councils already in special measures—effective bankruptcy—where does the Minister see those cuts falling? How will they filter through to the public, and what will be the effect on public sector jobs?

[Nigel Huddleston]

As the hon. Member will be aware and as the Chancellor outlined, based on current spending assumptions, total departmental spending will still be £86 billion higher in real terms by 2028-29 than at the start of this Parliament. If he was listening to the debates earlier this week, he will be aware that we will increase spending in real terms by 1% during the forecast period.

The hon. Member and others have raised points about fairness and making sure that we look after the most vulnerable in society, which is of course something we are committed to. Distributional analysis published alongside the spring Budget shows that the typical household at any income decile will see a net benefit in 2024-25 as a result of Government decisions made in the autumn statement—and, indeed, from the autumn statement 2022 onwards—and that low-income households will see the largest benefit as a percentage of income.

We have mentioned many times our commitment to the national living wage. It will soon increase by 9.8% to £11.44, which is expected to benefit around 2.7 million workers. It is important to stress that from April, a full-time national living wage worker’s take-home pay will be 35% greater in real terms than it was in 2010, due to successive increases in the national living wage and changes to personal tax rates and thresholds.

To respond to a few other comments made by right hon. and hon. Members, my right hon. Friends the Members for Witham (Priti Patel) and for Wokingham (John Redwood) both gave excellent speeches, in which they not only championed workers—including the self-employed—but highlighted the fact that we have to operate in a particular context. As has been mentioned many times today, we are in a difficult financial situation because of a global pandemic that hit the global economy, which was followed by the invasion of Ukraine and the significant impact it had on inflation around the world.

The question, as my right hon. Friend the Member for Wokingham pointed out, is how much higher taxes would be if Labour had been in charge. Throughout the pandemic, the Government received a lot of support from Members on both sides of the Chamber. That was completely right, but many Members were calling for even greater intervention and even longer lockdowns, which would potentially have done immense damage to the economy.

Some hon. Members raised the contributory principle. In our ambition for further reductions in national insurance, we will make sure that the future tax system has the right mechanism for establishing entitlement to contributory benefits, including the state pension. My right hon. Friend also mentioned the rise in the VAT threshold, which is really important. It will go from £85,000 to £90,000, which means that 28,000 fewer small businesses will be registered for VAT. My hon. Friend the Member for Ruislip, Northwood and Pinner (David Simmonds) highlighted this Government’s record on jobs in creating 800 jobs a day and in significantly reducing youth unemployment, of which we can all be proud.

My hon. Friend the Member for Aberconwy (Robin Millar), who raised many important points in his speech, pointed out the rather irresponsible scaremongering we have heard today from those on the Labour Front Bench relating to spending on pensions and the NHS. The Opposition should be well aware, especially if they wish to form a Government, that the money raised by NICs does not determine the amount going to the NHS and state pensions. We have announced increasing funding to the NHS and we are uprating state pensions by 8.5% this year, as I have mentioned. We on these Benches can tolerate a decent debate—we are fairly robust— but we will not tolerate irresponsible scaremongering, especially when targeted at the most vulnerable in society, purely to try to take political advantage from making up policies that do not exist. I hope that at some point the Opposition will either get some economic competence or apologise for that.

This really important Bill delivers tax cuts for over 29 million working people. A yearly saving of over £450 for the average worker will result from this Bill alone. Taken together with the cuts to NICs at the autumn statement, it will be worth over £900 per year for the average worker. This will benefit households throughout the United Kingdom and in every single constituency represented in this place. However, here we are again, and in nearly three hours of debate, we have heard nothing but doom and gloom from the Opposition. How disappointed they must have been this morning to hear that the economy has grown. While I am not pretending for one minute that everything is perfect—as I have said, our constituents and the country have been through a very challenging time—it is important to recognise, welcome and applaud success, especially if a party wants to lead a country, champion trade abroad and attract investment. What a terrible advert for the UK we have heard from the Opposition today, who are completely lacking in confidence and ambition for our economy and our workers.

The national insurance cuts we are debating reward work and will provide a further boost to the economy. We are turning a corner, and the plan is working. While we want to put more money back into people’s pockets, the Opposition want to take more out, and while we take every opportunity to talk the country up, they take every opportunity to talk Britain down. The choice is very clear: a plan for growth and a brighter future with the Conservatives, or no hope, no clue and no plan with the Opposition. I commend the Bill to the House.

[Mr Deputy Speaker (Mr Nigel Evans)]

Should there be a vote on the amendment, 10 minutes will be allowed, and if there is then a vote on Second Reading, eight minutes will be allowed.

Question put, That the amendment be made.