National Insurance Contributions (Reduction in Rates) Bill

Richard Graham Excerpts

2nd reading
Thursday 30th November 2023 Commons Chamber

[James Murray]

The context in which the autumn statement was made was 13 years of Conservative economic failure. There have been 25 tax rises in this Parliament alone and the tax burden is set to rise to its highest since the second world war. That is the context that the British people are facing, and that is the context in which the autumn statement was made.

The impact on people across Britain is brutal. As a result of the Conservatives’ decisions on personal taxation, households will be left facing an average tax rise of £1,200 from the Government. Looking across all taxes, we know that, by the end of the decade, taxes in the UK will have risen by the astonishing equivalent of £4,300 for every household in the country. That is the context in which we are debating the Bill’s Second Reading.

Let me make it clear for the benefit of the Chief Secretary to the Treasury that Labour welcomes the cut in national insurance that the Bill includes. We believe that taxes on working people are too high, and we have long said that we want to see them come down when they can be cut in an economically and fiscally responsible way. We will support the Bill, but we believe that the Government need to be honest with people. The Conservatives need to be honest and admit that they are responsible for the biggest hit to living standards on record, and that this has been the biggest tax-raising Parliament that our country has ever seen.

This is not the first time we have debated national insurance rates in this Parliament. Just over two years ago, I stood here, opposite the Financial Secretary’s predecessor —more accurately, his predecessor’s predecessor’s predecessor’s predecessor—to debate Second Reading of the Health and Social Care Levy Bill. That Bill introduced, in 2022-23, a 1.25 percentage point increase in national insurance contributions for employees and employers—an increase that we rightly described at the time as

“a new tax on working people and their jobs.”—[Official Report, 14 September 2021; Vol. 700, c. 845.]

Hon. Members may recall that when the Government published that legislation, their own tax information and impact note on that tax rise confirmed:

“There may be an impact on family formation, stability or breakdown as individuals, who are currently just about managing financially, will see their disposable income reduce.”

We opposed that legislation, and it was clear to a wide coalition, including the Federation of Small Businesses, the British Chambers of Commerce, the CBI and the TUC, that it was the worst possible tax rise at the worst possible time.

As time went on, the then Chancellor—now the Prime Minister—realised that he had made a mistake. He tried to make a partial U-turn in last year’s spring statement by increasing national insurance thresholds, yet the Institute for Fiscal Studies quickly pointed out that that move would not undo damage already done. Its director, Paul Johnson, confirmed:

“Almost all workers will be paying more tax on their earnings in 2025 than they would have been paying without this parliament’s reforms to income tax and national insurance contributions, despite the tax-cutting measures announced today.”

Later last year, the 1.25 percentage point national insurance rise was finally reversed, yet, as we know only too well, any benefits that many families may have hoped to gain from that U-turn were rapidly eclipsed by the Tory mortgage penalty, following the Conservatives’ catastrophic mishandling of the economy. The impact of that recklessness is still with us today, as mortgage holders across the country face a hit of £220 a month when their current deals end.

The truth is that whatever the Conservatives do, they keep making working people worse off. That has been true over the 13 years that they have been in power, it has been true over the past two years of changes to national insurance, and it will be true after the Bill becomes law.

The Chief Secretary to the Treasury has been trying desperately to paint today’s national insurance cuts as the answer to the cost of living crisis. Last week, she claimed that

“taxes for the average worker have gone down by £1,000”.—[Official Report, 22 November 2023; Vol. 741, c. 360.]

I believe she repeated that claim today, yet analysis by the House of Commons Library makes it clear that national insurance and income tax on the median earner will rise from £6,112 in 2010-11 to £7,364 in 2024-25. Will she confirm—or will the Financial Secretary confirm on her behalf—whether she stands by her earlier remarks and explain exactly how those figures were calculated? The experience of people across Britain is very different from the picture that she is trying to paint.

[Richard Graham (Gloucester) (Con)]

Perhaps the answer to the question of the shadow Chief Secretary to the Treasury is that the income tax starting point has doubled from around £6,000 to more than £12,000. That provides the extra £1,000 take-home pay every year that he is puzzled about.

[James Murray]

The hon. Gentleman promoted me inadvertently, as I am the shadow Financial Secretary to the Treasury, but I thank him for his vote of confidence. Our point is that today’s tax cut, which we support, must be seen in the context of 13 years of the Conservatives in power: 13 years of economic failure, with 25 tax rises in this Parliament alone and the tax burden on course to be the highest since the second world war. Whatever the Chief Secretary to the Treasury might say, people across Britain are experiencing life very differently from how she paints it.

However welcome the measures in the Bill may be, they come after 25 tax rises in this Parliament alone. The British people will not be fooled. No matter what statistics the Government contrive or the gloss they try to put on their record, people across Britain need ask themselves just one question: do they and their families feel better off now than they did 13 years ago? The answer is a resounding no. At last week’s autumn statement, we learned not only that the tax burden is still on track to be the highest since the war and that inflation has been revised upward across the entire forecast period, but that growth rates have been cut for next year, the year after, and the year after that.

It took some gall for the Chancellor to say that he was delivering an “autumn statement for growth”—comments repeated today by the Chief Secretary to the Treasury—since the Office for Budget Responsibility reports that next year’s growth rate has been cut by more than half. Low growth has dogged our country for the past 13 years. The autumn statement makes it clear that the Conservatives still have no plan to get our economy growing as it should. Since 2010, under the Conservatives, GDP growth has been stuck at an average of 1.5% a year, down from 2% in the Labour years before. If the economy had continued to grow for the past 13 years at the rate it grew under Labour, it would be £150 billion larger—the equivalent of £5,000 per household every year.

As we all know, because of that low growth, the Conservatives have had to keep putting up taxes on working people. Low growth and high taxes have made people across Britain worse off. That is the reality of the past 13 years of the Conservatives in power. The Bill’s tax cuts cannot even remotely compensate for the damage they have done to our economy and the living standards of people across Britain.

Although we support today’s tax cut, we know that our country needs economic growth to make working people better off and to get our public services off the floor. That is the plan from Labour. We are the party of fiscal responsibility and of business, with a plan to make working people better off. Come the next election—it cannot come soon enough—people across Britain will look at the Conservatives’ record and the bleak achievements they will claim. In this Parliament, real disposable household incomes will have fallen the furthest, following 20 years of pay stagnation. Real average earnings are not forecast to return to their 2008 peak until 2028. Four million people have been dragged into paying tax, with 3 million more in the higher rate—the biggest hit to income on record. Next year, real-terms income will be 3.5% lower than it was before the pandemic. This the biggest tax-raising Parliament Britain has ever seen.

Whatever the Conservatives say or do, and whichever way they try to twist and turn, reality has caught up with them. We have been here before. We remember the Conservatives promising to cut income tax ahead of the 1997 election. Back then, people decided that it was too little, too late, coming as it did after 22 tax rises in that Parliament. As this Parliament approaches its end, today’s Conservative party is showing itself to be even more divided and desperate than in the late ’90s. As the next election draws nearer and the Conservatives try to cling on to power, the risk grows that they will get more desperate with their promises and more reckless with taxpayers’ money. Britain needs a plan to get the economy growing and make working people better off. That is what Labour is offering and why a general election cannot come soon enough.

--- Later in debate ---

[Richard Graham (Gloucester) (Con)]

It is a pleasure to join this debate, albeit one attended by literally zero Back Benchers of His Majesty’s loyal Opposition.

This debate and the changes to national insurance raise narrow issues of the amount of tax being paid by our constituents, wider issues relating to the question posed by the shadow Minister, the hon. Member for Ealing North (James Murray)—“Are you better off today than you were in 2010?”—and broader still questions about the value and purpose of life and what matters most to our constituents. I shall touch on all three in turn.

On the narrow issue, the national insurance payments mooted in the Bill, there is widespread agreement that they are good news for our constituents, because they mean lower tax. It is recognised that there is social justice in the measures, because they are not applicable to those earning more than £50,000 a year. We already know that no party in this House will oppose them. On the narrow issue, therefore, the Chancellor, the Treasury and those involved in creating the Bill have clearly got it right.

As my hon. Friend the Member for West Worcestershire (Harriett Baldwin) pointed out, this can easily be seen to be one of the measures by which we judge a turning point in the wider economy. After all, only a few months ago there were widespread expectations that the economy would be in recession, unemployment would be rising, taxes would be increasing, and there was very little wiggle room for the public finances to be seen to improve. All those things have been turned around. None of us can say with certainty that we are in full summer, but the green shoots are evident and things are changing.

On the broader issue of what we measure to answer the question, “Are our constituents better off today than in 2010?” there are different aspects. I suspect the shadow Minister had most clearly in mind a simple calculation of whether salaries net of inflation were higher or lower, and if we take that on its own, it will be a challenge for many Government Members to demonstrate that the answer is yes. For my constituents in Gloucester, average take-home pay has risen from £25,000 to £31,000, but their salaries have not kept up with increases in inflation. That is only part of the equation though; we need to take into account all the different forms of taxation, which include council tax. It is a cliché but true that council tax rises faster and is higher in Labour-run councils, whereas the Conservative-run council in Gloucester has done a good job of keeping it as low as possible over the last 14 years. Then, there is the question of take-home pay. As I pointed out to the shadow Minister, because income tax now applies only at £12,500, rather than at just over £6,000, the take-home pay element has increased by £1,000.

Other than that relatively straightforward financial calculation, there are many measures on which I hope all of us would want to answer “Yes” to the question, “Are you better off today than you were in 2010? I shall pick out a few of these crucial indicators, because they are relevant to the wider context of the Bill.

The Centre for Cities report is an excellent source of data for those who live in cities, so let me highlight a few elements of what its latest report said about Gloucester. We are one of the 10 lowest cities for economic inactivity. In effect, we have low unemployment and high employment —in fact, ours is the third highest employment rate, having risen last year from 76% to 84%, a 7.5% increase. The regional average is 79%, so we are way ahead of the south-west’s average. That means that many more people have purpose in their lives—they have occupations they can thrive in; they are bread-earners at home and useful role models for their children—and the city as a whole has a strong sense of purpose.

It is often forgotten, but many people remember vividly that their jobs were kept by the £400 billion spent during by the pandemic. The furlough scheme ensured that during the pandemic people could shelter at home, confident that their job would still be there, and those who had their own business know that the vast majority of those businesses would undoubtedly have gone bankrupt during the pandemic. The small businessmen and women, the self-employed, the entrepreneurs, all came through that period intact, whereas under a different scheme that would have cost taxpayers’ less, they would have struggled. The question, “Are you better off today than in 2010?” needs to encapsulate other questions: “Was your business able to survive? Was your job kept? Were you still able to be self-employed during a period when so many people around the world were struggling horribly?”

We in Gloucester are extraordinary in that our city has one of the very lowest percentages of population with no formal qualifications. In fact, extraordinarily, Gloucester has fewer people with no formal qualifications than Cambridge, and we are only 1% behind Oxford. The skills of my constituents are different from many of those in Oxford or Cambridge. A large number of our people are highly skilled with higher apprenticeships working in industries like aerospace, nuclear and high-level engineering. Those occupations, apprenticeships and higher apprenticeships have increased hugely over the last 13 or 14 years and are seriously threatened by the prospect—any prospect—of a Labour Government.

Let me illustrate that statistically. Since 2010, there have been almost 15,000 new apprenticeship starts in Gloucester—15,000 in a population of about 100,000. The run rate of apprenticeships nationally—5.5 million new apprenticeships since 2010—would have been almost halved under the Labour run rate between 2005 and 2010. Were Labour’s current proposals on apprenticeship spending to go through, it has been suggested that 140,000 apprenticeships would no longer exist. Therefore, the skills that my constituents have, which are being valuably used in leading sectors that are being supported by the Treasury and this Government, would be at serious risk under a new Government who did not value apprenticeships so highly.

The question, “Are you better off today than you were in 2010?” could also be rephrased, “What will happen to your skills, your purpose, your job and your future earnings under the changes proposed by the Labour party, which is so sadly absent here today?”

There are different issues that we need to consider in answering the question, “Are you better off today?” Education is vital for all of us, and everyone in the country needs to be more aware that our PISA rankings have risen from 25th to fourth in reading and from 27th to 16th in mathematics. I might be one off on both, but it is a significant leap forward. Those skills are vital to all our young constituents getting the opportunities they deserve.

Within infrastructure, there is the whole question of public transport. Gloucester has additional train services to Bristol, Worcester and down to London. There is a wider range of services, sports, culture and leisure, and cultural regeneration and the role of heritage are incredibly important to any city. Gloucester’s more than 40 wins from the National Lottery Heritage Fund have brought alive our old buildings and rebuilt pride in the city. These things are all part of answering, “Are you better off today than you were in 2010? Is where you live a better place today than it was in 2010?”

National insurance contributions are coming down sharply, which will mean an average saving of around £350 to each of my constituents and £450 for those on salaries over £35,000. All of that will be appreciated, but it is about the wider context in which it happens: the gradual recovery and the sense of green shoots coming through after a difficult year. That is important, and then there is the wider context of what has been achieved over the last 13 to 14 years. We must all take that into careful consideration.