Health and Social Care Levy Bill

Debate between Nigel Mills and John Redwood

Committee stage & 3rd reading
Tuesday 14th September 2021 Commons Chamber

[Nigel Mills]

Perhaps the Minister was building in some optimism bias, as the Treasury normally does to other people’s forecasts, and going for £50 million to £60 million to make sure. I do not know whether that is the cost of building the systems to enable the returns to be made, or to enable the systems to collect or chase the money, or whether there is going to be some ongoing annual cost; I assume that there will be some ongoing annual cost in trying to chase compliance too. However, we do not have an estimate for how much we are going to be imposing on business to pay this tax.

I imagine that this will be a separate tax that is not collected in the same way—the same box—as national insurance. I assume that there will have to be different parts of the payroll returning different calculations, which will require every software provider to change all their software coding to cope with it and to add in the new amount that is being paid by people over retirement age who do not normally pay national insurance. All that will cost time and money and need testing and compliance, and then we will have to check whether employers are following it and chase them for the money.

I suspect that there will be quite a large up-front cost for all that work to be done, and then a reasonable annual cost to ensure compliance, so there is a first-order question whether we are raising more by quite rightly taxing people over retirement age on their earned income—this 1.25%—than we are having spent on obtaining that. From the Minister’s remarks, I am not convinced that the answer will be positive, so in actual fact, we are creating a whole new tax to raise less money than it costs to collect it, for no real advantage other than a presentational one.

[John Redwood]

My hon. Friend is such an expert on this. Has he probed or got anywhere with finding out how much consequential tax loss there might be from the national insurance rise, or the care tax rise, itself? Presumably, there are some losses that will have to be offset, so gross will not necessarily be net.

[Nigel Mills]

I assume that my right hon. Friend is right that, if we reduce the number of people in work or reduce their pay rises, that will work its way through the system. The Minister may be better placed than I am to work out an answer to that question.

The nub of my argument, and the reason for amendment 8 and new clause 10, is that we have 18 months before the new levy comes into force—we accept that we cannot bring it into force in six months’ time, presumably because it is so hard to get the systems in place, and that we have to raise national insurance for the first year and move to the levy after that—so perhaps if we had all the information in front of us in the next six months or year, we could make a choice whether to go ahead with the new levy for the small amount of extra income, or whether to stick with the national insurance rise and find other ways to explain to people what they are paying their taxes for.

I think the Minister accepted that HMRC will publish its estimate, and I am sure we could find a way of getting an accurate estimate of the cost to business of complying with the levy. We could then take an informed decision before we finally introduced the levy. I think that would be a positive step in tax policy. However, if we really believe that we want a separate levy to show what people are paying directly for health and social care, I think that we should move the existing 2% of national insurance that goes directly to the health service into the levy, so there is one hypothecated payroll tax that goes to the NHS on people’s payslips, rather than it being hidden in a part of national insurance. I cannot see any reason why, if we go down the line of introducing a new health and social care tax, we would not want to have all the hypothecated payroll taxes going into the NHS or social care to get any of the advantages of that.

I will not be pressing my two new clauses to a Division, but I urge the Minister to give some serious consideration—I suspect he did not know about this new levy until around about last weekend, when it was probably dreamt up in No. 10 as a way of selling a tax rise—to using the 18 months he has before the levy comes in to try to work out whether the costs of collecting it are worth the small change. If he really does think there is a compelling argument for charging people over retirement age national insurance if they stay in work and are earning, let us charge them the full rate, rather than 1.25%. I cannot see how we can justify that they do not pay the existing 2% that goes to the NHS but they do pay the 1.25%. There seems to be no logic in that at all to me, so perhaps we should think properly and coherently about the tax system. Let us have the full rate in that situation.

Let us have a decision when we get around to the Budget in 2022. Is going ahead with this levy going to raise more money than it costs? If it is not, let us just leave it on national insurance where it will be sat at that point. That would be a more coherent way of running our taxes.

Finance (No.2) Bill

Debate between Nigel Mills and John Redwood

Tuesday 8th April 2014 Commons Chamber

[Nigel Mills (Amber Valley) (Con)]

It is a pleasure to speak in the debate. If there is one attraction to the amendment, it is that it allows a broad-ranging debate on any tax measure one can think of. Perhaps I could talk about the impact that a carrier bag tax would have on small businesses, especially a tax on bags that would allow the biodegradable element to get into the recycling stream, which damages recycling businesses in the plastics industry. That would perhaps stretch the debate a little too far away from the main rate of corporation tax, even though hon. Members might agree on such a measure.

We are going in exactly the right direction in trying to get the main rate of corporation tax down to 20%. That has been the direction of travel for this Parliament and it is the right place to be. I suspect that, if we get it to 20%, that will be the end of the journey, for the very good reason that having a corporation tax rate lower than the basic rate of income tax creates lots of interesting tax planning opportunities, as the previous Government found out when they had a small companies rate of 10%. Lots of strange people incorporated themselves as businesses—they looked a lot like one-man bands who ought to have been self-employed and made interesting tax deferrals or savings when pretending to be companies.

If we get to 20%, that is the end. I suspect that that is why we can no longer have a small companies rate of corporation tax that is lower than the large companies rate. If we lower one rate, we encourage behaviour that we do not want to encourage. It is right that we get both rates down to 20% and to have one rate of corporation tax. We can then scrap the hugely complex marginal relief calculation and everyone will know what rate of tax they pay on their profits. That has to be the right situation. A small growing business, whose profit increases during the year and suddenly hits more than a quarter of a million pounds, will wonder what tax rate it will pay in that year, so losing that whole calculation completely is a huge advantage.

[Mr Redwood]

Does my hon. Friend agree that the review could very usefully come up with a 20% capital gains tax rate, too? I would settle for 20% capital gains tax, 20% corporation tax and 20% income tax. There would then be fewer tricks.

[Nigel Mills]

A symmetry of tax rates would make perfect sense. Whatever form of income one had, one would know what rate one was paying.