National Insurance Contributions (Increase of Thresholds) Bill

[Mr Nigel Evans in the Chair]

Clause 1

Increase of primary threshold for primary Class 1 contributions

I beg to move amendment 1, page 1, line 8, leave out “July” and insert “April”.

With this it will be convenient to discuss the following:

Clause stand part.

Clauses 2 to 6 stand part.

New clause 1—Impact of Act on low pay and poverty—

“(1) The provisions of this Act may come into force only if the Government has first laid before the House of Commons and published a report in accordance with this section.

(2) The report must assess the expected impact of the provisions of this Act on—

(a) low pay, and

(b) poverty.

(3) The report must also assess the merits of the provisions of the Act against other ways of reducing low pay and poverty.”

New clause 2—Report on effects on Universal Credit claimants—

“(1) The Treasury must prepare a report on the forecast effects of the provisions of this Act on—

(a) the net incomes of, and

(b) the Universal Credit payments made to

in-work Universal Credit claimants who pay National Insurance.

(2) The report must forecast the estimated change in expenditure on Universal Credit as a result of the provisions of this Act.

(3) The Chancellor of the Exchequer must lay the report before Parliament before the end of the period of 30 days beginning with the day on which this Act is passed.”

New clause 3—Report on effects of provisions of Act—

I rise to speak to amendment 1, tabled in my name and that of my hon. Friend the Member for North East Fife (Wendy Chamberlain).

The increase in the national insurance thresholds for employees contained in the Bill will come into effect only in July this year, but the national insurance rise will commence in April—three months when employees will be facing the 1.25% increase in national insurance contribution payments without any protection through a higher tax-free allowance, and three months in which families will feel the full force of the Chancellor’s tax hike without any cushioning from the rising of the national insurance threshold.

Just to correct the hon. Lady slightly, I believe the threshold will still rise by £300 in April, as was the Government’s original plan. The further increase will come in July.

I thank the hon. Gentleman for those comments, but there is still a gap and the amendment seeks to close it.

The three-month delay will cost working families £2.1 billion and add to their distress right in the middle of the biggest cost of living crisis since the 1950s. Let us remember that the rise in national insurance contributions will hit all working families. A nurse or a midwife on an average salary will see their tax bill rise by £310 next year. A care home worker will pay around £140 more and ambulance staff will see a £420 increase.

Households are facing the biggest drop in living standards for 70 years through a combination of soaring energy costs and Conservative Government tax hikes. The typical family will see a hit of £1,100 next year, according to the Resolution Foundation. Absolute poverty is set to rise by 1.3 million people, including 500,000 children. Never before has Britain seen such a rise outside a recession. The cost of living crisis is biting right now and hitting families today. That is why the Chancellor should implement the changes in the Bill not from July, but from April, as that would save working families £2.1 billion in tax payments.

New clause 3 is tabled in my name and that of my hon. Friend the Member for North East Fife. It would require the Government to produce a report to look at the impact of the 1.25% increase in national insurance contributions on disposable incomes. It would give a true picture of what working families are facing. The statement yesterday hid the true facts. The Resolution Foundation has stated:

“Considering all income tax changes to thresholds and rates announced…Of the 31 million people in work, around 27 million (seven in eight workers) will pay more in income tax and NI in 2024-25.”

Instead, the Government could have cut VAT by 2.75%. That is what the Liberal Democrats would do. Such a measure would help everyone and shield our constituents from the worst of the increased costs. It would put money back into their pockets and genuinely shield those on middle and lower incomes the most. With a floundering economy we need people to spend money on our high streets, which would boost our local economies. A cut to VAT would give an immediate boost to every household, and also help us in the long term.

Before I call Sarah Atherton, while I am sitting here I am acting as Chair of the Committee, rather than as Deputy Speaker. It is only a technicality, but we should get it right.

Thank you, Chair. I wish to speak against amendment 1, in the name of the hon. Member for North East Fife (Wendy Chamberlain), and against new clause 1, in the name of the right hon. Member for Hayes and Harlington (John McDonnell). Amendment 1 is simply impractical. Employers, HMRC and payroll systems do not have time to bring these measures into effect by April. Our own pay body, IPSA, could not make these changes in time, let alone small and medium-sized enterprises and bigger companies. July is the earliest that can be done, and the Government should be commended on the pace with which the change will be universally introduced, bearing in mind that we will be midway through the financial year. The Government understand the needs of constituents. The cost of living challenge is hitting now, post-covid, and the Government are acting with haste.

My opposition to new clause 1 is similar: timing. We should not postpone this measure by undertaking impact reports that would cause unnecessary delays for families who need support with the cost of living as soon as possible. Wrexham has more than the Welsh and UK average of lower income households, and under the Welsh Labour Administration, for the past 22 years those numbers have been increasing, with more child poverty and more struggling households. We all accept that the situation has not been helped by the global pandemic, which none of us foresaw. Nor did we foresee the war on the fringes of Europe.

This is not strictly within the remit of the Bill, but I concur with my hon. Friend the Member for South Dorset (Richard Drax) in his call to increase defence spending.

To go back to the Bill, the national insurance threshold increase will save those struggling families in my constituency of Wrexham hundreds of pounds a year, in addition to the help that the Government have already provided through the 6.6% increase in the national living wage. As my hon. Friend the Member for Peterborough (Paul Bristow) mentioned on Second Reading, there is also the change in the universal credit taper rate.

I find it perplexing that Labour would challenge this Bill, which benefits my constituents and 2.2 million people across the country. In Wrexham, there are two areas that the Welsh Labour Government have declared to be among the most deprived in Wales. This Bill will directly help them. Why is Labour opposing it—does it not want people living in those areas to benefit financially?

The Chancellor has an excellent and responsible fiscal policy based on fairness and understanding of need; I should briefly mention the health and social care levy in this context. The importance of ringfencing that revenue must not be underestimated. The No.1 challenge facing my constituency is access to quality healthcare, which, as a former nurse and social worker, I understand acutely. There are issues with accessing a GP, years and years are spent on waiting lists, ambulance wait times are an issue and some people have no choice but to take out loans to pay for care privately in Labour-run Wales. That is unacceptable. People are having to move over the border to England, and that is also unacceptable. I urge the Opposition to understand the needs of their constituents and the fact that people want good public services and low taxation.

Lastly, let us not forget that the Welsh Labour Government will benefit from this levy through the Barnett formula. The Government are fiscally responsible, and committed to spending where needed. For my constituents in Wrexham, this is the deed to match the words “levelling up”.

I want to speak to new clause 2. Yesterday, I was shocked by the Chancellor’s response to people’s entreaties of him to do something more for those on low incomes. As I pointed out to him in an intervention, there is an anomaly—I hope it is one—that the Government will want to put right: when those on universal credit who pay national insurance have their threshold raised to £12,500, the £330 that they gain as a consequence will be subject to the 55% taper. That means that they will not get the full saving. Money is being clawed back by the Government from some of the poorest workers in the country. That cannot be right.

Last year, the Chancellor of the Exchequer announced the reduction in the taper, which was very welcome. He announced a number of measures that increased the incomes of the poor, although we should remember that he took away the £20 a week uprating of universal credit. Those people are still going to be better off as a result of the changes yesterday, but the ones on universal credit who I have just referred to will be less well off than they were anticipating ahead of yesterday’s statement. How can that be? The poorest workers in the country number 2.3 million; I suspect that what the Government claw back from them will mean hundreds of millions going back to the Treasury. That cannot be fair and it cannot be right. By my calculation—I will stand corrected if I am wrong—such people will gain £330, of which they will lose £171, so the actual gain will be in the region of £159. That cannot be right.

My new clause 2 would require the Government to confirm in a report whether my fears and estimates are right that people on universal credit who pay national insurance will lose roughly half the money that they gain. Subsection (2) aims to find out how much the Government will gain from some of the poorest workers in the country because of the changes. If we highlight how much that is, I hope that they will attempt to do something about it and compensate such people for their loss. As we have heard all too often in this Chamber, people on low incomes in this country—families, in particular—have to make choices between feeding their children, clothing their children and switching on the heating, and about what food they buy. When people are living on the margins of, or in, extreme poverty, sums of money that may sound small are extremely significant. How did we manage to have a statement yesterday that clawed money back from such people?