National Insurance Contributions Increase

Debate between Simon Clarke and Justin Madders

Tuesday 8th March 2022 Commons Chamber

[Mr Clarke]

I do not demur; we are faced with a serious challenge on the cost of living. The Government entirely accept that and are working to address it, but we must address it in a smart and financially sustainable way. A £20 billion package is a major commitment to support families across the UK. Of course, we continue to keep all our options under review to ensure that we can act in a way that is commensurate with the severity of the situation.

From next month, we will increase the national living wage by 6.6% to £9.50 an hour for those aged 23 and over, which will benefit more than 2 million workers across the UK by £1,000 a year. We have also frozen fuel duty for the 12th year in a row. That is on top of the help that we are already providing to those on low incomes with their housing costs and council tax bills.

[Justin Madders (Ellesmere Port and Neston) (Lab)]

On freezing the fuel duty, if the Minister has been to forecourts recently, he will know that the cost of petrol and diesel has gone up tremendously in the last few weeks. What has been the impact on the Treasury’s coffers from VAT receipts as a result?

[Mr Clarke]

We have forgone a tremendous amount of revenue through the freeze on fuel duty. On VAT, we obviously continue to look closely at the revenue situation. It is sometimes a misapprehension about the way that the VAT scheme works to the Treasury’s benefit. There is often a focus on domestic fuel and the impact that it is having on our income. To that point, the more that people spend of their discretionary income on domestic fuel costs, which are VAT chargeable at 5% as opposed to the full rate of 20%, the less that the Treasury recoups. In that regard, we have to be careful about some of the arguments around that.

Now that I have set out some of the context of the Government’s response, I will return to the specifics of the debate—the need for the health and social care levy and the rationale behind its operation. Last month, my right hon. Friend the Secretary of State for Health and Social Care explained to the House that there is now a significant backlog of elective care as a result of the pandemic, which my hon. Friend the Member for Gloucester (Richard Graham) alluded to. More than 6 million people are waiting for elective care in England and more than 300,000 people are waiting longer than a year. The Government have set out a clear plan to tackle the backlog, but we must deal with that most pressing of issues and the levy will allow us to do that.