Paul Waugh debates involving HM Treasury during the 2024 Parliament

Employer National Insurance Contributions

Paul Waugh Excerpts
Wednesday 4th December 2024

(2 weeks, 4 days ago)

Commons Chamber
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Mel Stride Portrait Mel Stride
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That is an amusing intervention, but it is thoroughly inaccurate, I am afraid. The OBR did indeed look into the suggestion that there was a black hole of £22 billion, and what did it conclude? It concluded that the fiscal pressure in that year was less than half that amount. The OBR readily accepted that had it had discussions with Treasury officials about that at the time, it may well have reduced the amount still further. Members from across the House know that it is not unusual for the Treasury to manage down in-year fiscal pressures as a matter of course, so the argument has been debunked. It is the dead parrot. It is pushing up the daisies. It is no more.

The hon. Gentleman’s point is indicative of what this Government have done: they have talked down the UK economy. In turn, business confidence has slumped in a way seldom seen in our history, with purchasing managers index surveys falling through the floor. We have seen the Institute of Directors’ optimism tracker scoring minus 60 in November—one would have to go back to April 2020 to find a lower score than that. We also know that at the centre of the Budget is the biggest broken promise of all: the increase in employer’s national insurance contributions. That is weighing on growth.

And what of jobs? Labour’s fantastical manifesto talks about job creation, which is mentioned several times, but the Government are destroying jobs by breaking a manifesto commitment. It was there in black and white in their manifesto that they would not raise national insurance. Do not take my word that they breached their manifesto; take that of Paul Johnson of the Institute for Fiscal Studies, who says precisely the same.

Paul Waugh Portrait Paul Waugh (Rochdale) (Lab/Co-op)
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The right hon. Member refers to broken manifesto pledges. The Conservatives’ 2019 manifesto said they would not raise national insurance, yet three years later he and all his colleagues voted to raise national insurance—not just on employees, but on employers. Can he help us with that process of logic?

Mel Stride Portrait Mel Stride
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I think the hon. Gentleman might just be overlooking a little something called covid, which shrank the UK economy by over 10% overnight.

What this Government have done is take us right back to the 1970s when it comes to the jaw-dropping level of tax increases and spending splurges. The impact on jobs is stark, and it is clear. The OBR says there will be 50,000 fewer full-time equivalent jobs as a result of the measures in the Budget. Bloomberg says that 130,000 jobs will be destroyed. The Confederation of British Industry, in a survey of its membership, says that 50% of businesses report that they will cut employment as a consequence of the Budget, and two thirds say that they will row back on the recruitment plans that they previously had.

It is not just about the headline rate; the threshold is so pertinent and important here. It is bearing down on sectors where wages are lower, and on cohorts in the labour market who earn the least, because of the disproportionate impact of lowering the threshold. They include hospitality, leisure, retail and women. Some of the youngest people in our country will now see their jobs taken away from them as a consequence of what this Government are doing. We know that the Labour party has form when it comes to youth unemployment. Under the last Labour Government, youth unemployment increased by over 40%. Under the last Conservative Government, it reduced by over 40%.

Labour said in this fantastical document that it would keep inflation as low as possible. It said the same of mortgages, and yet what has happened? This fiscal splurge, this £70 billion each year that the Government are now going to be spending, will mean higher inflation in every single year of the forecast, compared with the forecast back in the spring. What is that doing to people’s living standards? It is destroying them, and I will come to that momentarily. Part of the inflationary pressure is the national insurance increase itself, because while we know that, according to the Office for Budget Responsibility, about 80% of it will be transferred into lower employment rates and depressed wages, about 20% of it will go into higher prices.

And what of living standards? This fantastical Lewis Carroll document said that Labour would be making everybody, not just the few, better off. However, the Joseph Rowntree Foundation—hardly a right-wing thinktank—says that by October 2029, the average family will be £770 worse off in real terms than they are today.

National Insurance Contributions (Secondary Class 1 Contributions) Bill

Paul Waugh Excerpts
Richard Fuller Portrait Richard Fuller
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I will make a bit more progress and then give way to my right hon. Friend.

If the Minister does not like the Resolution Foundation’s judgment on this tax, he should just listen to the Institute for Fiscal Studies, which said:

“Simple economic theory suggests that the incidence of employer NICs and employee NICs should be the same, at least in the long run. It is likely that the long-run incidence of both employer and employee NICs is predominantly on employees”.

The measures in the Bill represent by far the largest part of the tax grab in the October Budget. The Treasury Red Book assesses that these measures will raise £23.7 billion in the next financial year, rising to £25.7 billion, but the Minister knows that behavioural changes means that they will actually raise substantially less; the IFS estimates about £16 billion.

I note that in the Red Book there were three opportunities for this jobs tax to be referred to as “Delivering on our Promises”. There is:

“Delivering on our Promises—New Policy to Close the Tax Gap”,

“Delivering on our Promises—Collecting Tax That is Due”

and even the catch-all:

“Delivering on our Promises—Other Manifesto Tax Commitments”,

but the increase in national insurance contributions cannot be included in any of those, because Labour politicians hid their intentions from the British voters at the election.

Paul Waugh Portrait Paul Waugh (Rochdale) (Lab/Co-op)
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The hon. Gentleman refers to the history of the Tory party on national insurance. Can he tell us why he and his party voted for the health and social care levy, which put up national insurance for employees not so long ago?

Richard Fuller Portrait Richard Fuller
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That is a very odd question when the Minister himself has said that the objective today is to provide more money for the health service. I guess I will think about what the hon. Gentleman has asked.

--- Later in debate ---
Paul Waugh Portrait Paul Waugh (Rochdale) (Lab/Co-op)
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My hon. Friend the Exchequer Secretary rightly said that this Bill was about tough decisions. The Conservative party used to be about taking tough decisions. We may not have liked them, but we respected them because we thought that they were doing things in a pragmatic and consistent way. Earlier this year—in my former life as a journalist—I interviewed the former Chancellor, Ken Clarke. He said this about tax:

“I didn’t have a fixation on taxation. Taxes sometimes have to go up. Taxes sometimes have to go down. It depends on the needs of the macroeconomy and the public need…And, yes, I raised taxes quite frequently and I cut some taxes…I made my mind up on what was necessary.”

Sadly, that Tory party is long gone, replaced by the libertarian ideological collaborators of chaos whom we see on the Opposition Benches. Worst of all, their sums simply do not add up, and, as a result, it has been left to Labour to clean up the mess they left behind.

The economic situation that we inherited in the summer was much worse than anyone anticipated, so much so that Richard Hughes of the Office for Budget Responsibility said that Treasury Ministers “failed their statutory duties”. He told the Treasury Committee that there was about

“£9.5 billion worth of net”—

spending—

“pressure…which they did not disclose to us…which under the law, and under the Act they should have done.”

That is what he said to the Treasury Committee. If the hon. Member for Grantham and Bourne (Gareth Davies) wishes to dispute his words, will he please get up and say so?

I remember that Liz Truss and her Cabinet, some of whom are now in the shadow Cabinet, were in favour of fracking. Well, her mini-Budget certainly fracked our economy. It was a high pressure injection of debt-fuelled tax cuts made in the hope of extracting hidden growth. Instead, it created an earthquake on the money markets and led to rocketing mortgage bills that many are still feeling the aftershocks of today.

One thing that struck me most about that “Kami-Kwasi” Budget—yes, I do claim copyright on that phrase—was that the alleged tax cutters on that day were actually increasing the tax burden for millions through fiscal drag. Yes, buried away in that growth plan was the continuation of the previous Government’s plans to freeze tax thresholds, and they all backed that massive increase in the tax burden. I am pleased to say that this Government will end that fiscal drag act in 2028, uprating personal thresholds in line with inflation once again.

The chaos did not end with the Truss-Kwarteng double act, who drove themselves and the economy off a cliff like the Tory “Thelma & Louise”. Sadly, even the normally sensible right hon. Member for Godalming and Ash (Jeremy Hunt) put his own last desperate tax cuts before public services. His spending plans were incredible in that they lacked credibility.

Graham Stuart Portrait Graham Stuart
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On a point of order, Madam Deputy Speaker. I would never dare to tread on your toes, but perhaps something is wrong with the electronic equipment because the screen says that this is a national insurance debate, rather than some generalised debate. I sympathise, though, with the hon. Gentleman and other Labour Members for not wanting to talk about their own policies—they would rather slag us off.

Caroline Nokes Portrait Madam Deputy Speaker (Caroline Nokes)
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The right hon. Gentleman will be aware that that was not really a point of order. I am sure the hon. Member for Rochdale (Paul Waugh) is getting to the point on the Second Reading of the National Insurance Contributions (Secondary Class 1 Contributions) Bill.

Paul Waugh Portrait Paul Waugh
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I am, indeed, coming to exactly that point, because this is set in the context of what the Tories left behind. The clear trajectory of their last Budget was to squeeze day-to-day public spending to just 1% above inflation every year until 2029. That carried dire implications for every unprotected Department—up to £20 billion of cuts a year. The Resolution Foundation calculated that that would be the equivalent of three quarters of the cuts of the austerity years—austerity 2.0.

Sadly, there is no evidence that the former Chief Secretary to the Treasury, the right hon. Member for Sevenoaks (Laura Trott), left her own note for her successor. If she had, it surely would have read, “I’m afraid to tell you there is no money for public services.” If the Conservatives had won the last election, what would that have meant in practice? My right hon. Friend the Health Secretary revealed that when he took office, he was told that the NHS was facing such large deficits it would have to cut 20,000 appointments and operations a week. Thanks in part to the national insurance rises in the Bill, he can now deliver on our manifesto commitment to provide 40,000 extra appointments every week, with our investment in mental health services treating an extra 380,000 patients.

Luke Evans Portrait Dr Luke Evans
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Is the hon. Member aware that the Royal College of General Practitioners said that it will cost 2.2 million appointments just to service the NIC payments that must be made? How does that resolve our service provision in primary care?

Paul Waugh Portrait Paul Waugh
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The Heath Secretary said that he will address that in due course, and I am sure that he will before April, as my hon. Friend the Member for Ealing North (James Murray) set out. The hon. Member for Hinckley and Bosworth (Dr Evans) may want to answer the question I put to the Conservative Front Bench. If they are so opposed in principle to national insurance rises, why did they support the health and social care levy in 2021? The hon. Member voted for it, as did the hon. Member for South Shropshire (Stuart Anderson) and the right hon. Member for Beverley and Holderness (Graham Stuart)—why? They cannot tell me why because they know they are being inconsistent.

Luke Evans Portrait Dr Evans
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Will the hon. Member give way on that point?

Paul Waugh Portrait Paul Waugh
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If he would like to explain why he voted for it, yes.

Luke Evans Portrait Dr Evans
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Absolutely. Does the hon. Member realise that we had to deal with that because the amount that we had to borrow in 2010 was £158 billion? For the pandemic, it was £400 billion. That is the kind of thing that the Conservatives have had to deal with that led to the difficult decisions. We were on track to have the fastest growing economy, which has now been trashed by decisions taken by Labour.

Paul Waugh Portrait Paul Waugh
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In the process, you left us with a massive structural deficit.

Caroline Nokes Portrait Madam Deputy Speaker
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Order. That is the second time the hon. Gentleman has done it: I have left nothing.

Paul Waugh Portrait Paul Waugh
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Forgive me, Madam Deputy Speaker. Labour is the party taking tough decisions today and refusing to duck the issues that the Conservatives were so timid to grasp, from planning reform to energy security, from welfare reform to removing tax breaks for the richest.

In the past four weeks, the Conservatives have made £6.7 billion of commitments to cut taxes, but they have not said which public services they would cut to fund them. But the most damning indictment of their low-pay, low-growth, low-investment, low-productivity economics was the model that totally failed. In 1964, the outgoing Tory Chancellor Reggie Maudling bumped into James Callaghan and said,

“Good luck, old cock. Sorry to leave it in such a mess.”

It is a shame that the current Tory party cannot earn up to their own failures with a similar sense of regret or humility.

VAT: Independent Schools

Paul Waugh Excerpts
Tuesday 8th October 2024

(2 months, 2 weeks ago)

Commons Chamber
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Paul Waugh Portrait Paul Waugh (Rochdale) (Lab/Co-op)
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I congratulate the Conservative party on calling this debate today, for the simple reason that it confirms what many of us already know: that the Tories are much more focused on the 7% of pupils in private school than they are on the 93% in state education. Given that the Tory leadership contest is approaching its exciting climax, it is worth pointing out that state education has got barely a mention in that contest so far—I know it is a minority sport, but we expect better. In the last Tory leadership contest, Liz Truss spent her time either criticising her own state school or criticising the right hon. Member for Richmond and Northallerton (Rishi Sunak) for his time at the £45,000-a-year Winchester college. At one point, one of her team said that

“she will take no lectures in educational standards from an LA-based, Goldman Sachs banker who went to a school for the uber-elite.”

Meow, as my immediate predecessor in Rochdale might say.

David Cameron famously went to Eton; indeed, it was Michael Gove who attacked the “preposterous” number of his fellow Cabinet Ministers who had been to Eton. I am delighted to say that there are more Labour MPs who went to my own state school, Oulder Hill community school in Rochdale, than went to Eton—my hon. Friend the Member for Whitehaven and Workington (Josh MacAlister) and I are both proud of that school tie. Sadly, recent Prime Ministers and even Education Secretaries decided that the state sector for which they were responsible was not good enough for them. During partygate, we got used to the Tory party thinking the covid rules were for other people.

Claire Coutinho Portrait Claire Coutinho
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Will the hon. Member give way?

Paul Waugh Portrait Paul Waugh
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I am sorry, but I will not give way. I do not have much time.

“One rule for them, another for the rest of us,” was the Tory party’s approach back then. Now, their approach is, “One school for them, another for the rest of us”—that is just as toxic a charge. The real problem is money. There was a 9% fall in spending per pupil between 2010 and 2020. Worst of all, we have had 14 years of no overall growth in spending per pupil in our schools, a squeeze that the IFS said was

“without precedent in post-war UK history”.

Turning back to the Tory leadership contest, most of the contenders for that poisoned chalice have claimed that if elected, they will restore private school tax breaks. The fact that the Tories plan to make another £1.3 billion-worth of cuts to state schools on top of their own record of austerity proves that they have not learned a thing from their catastrophic defeat at the last election. If they all put into state schools an ounce of the passion, the emotion and—yes—the hard cash they put into private schools, the public might start to listen to them again.