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National Insurance

Volume 175: debated on Monday 2 July 1990

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To ask the Secretary of State for Social Security how many standard rate tax payers would be affected by the removal of upper earnings limit for national insurance contributions.

If the upper earnings limit for employees' national insurance contributions were removed it is estimated that about 3·3 million people would pay more contributions, of whom about 2·1 million would be standard rate taxpayers. If the corresponding upper profits limit for self-employed people were also removed, it is estimated that about another half a million people would pay more contributions, of whom about 200,000 would be standard rate taxpayers.

I thank my right hon. Friend for that illuminating reply and I hope that it will be well covered by the media, because these are the Labour party's policies. As we have taken a great deal of time and trouble to remove Labour's tax on jobs—the national insurance surcharge—will we also look at the employers' national insurance contribution, which is running at roughly double the amount that it was in the days of the Government led by my right hon. Friend the Member for Old Bexley and Sidcup (Mr. Heath)?

My hon. Friend is quite right to draw attention to the figures that I have given. I note what he suggested about the employers' contribution, but there is no upper earnings limit on it, and because of the way in which the national insurance system works and the direct relationship between the contribution paid by employees and the benefits subsequently received, I am not sure that the arguments are on all fours.

When an individual pays both national insurance contributions and tax, to ensure that when he becomes unemployed or sick, the state gives him assistance, how can there be any justification for reducing or taking away unemployment benefit? There is speculation about that in the press. Will it also be mentioned in the Tory manifesto, because the people want to know the truth? If unemployment benefit is to be taken away, how long will it be before pensions are undermined and perhaps taken away by the Government?

I am grateful that the hon. Gentleman used the word "speculation". As far as I can see, the press reports to which he referred rest on one pamphlet from one body, the Adam Smith Institute. That is not a Government plan and there is no basis for the hon. Gentleman's suggestion.

Is not it true that, since the Conservative party came to power, most people who pay national insurance have saved over £3 a week on it, but under the Opposition's glorious plan, the people whom the Opposition laud as those whom they want to encourage—those earning between £15,000 and £20,000 a year—will pay £9 a week more? They would not pay that in national insurance; the fraud is that they would pay it in increased taxes. How does that encourage people to work?

The answer is that that does not encourage people to work and that it runs exactly contrary to what we have sought to do in reducing national insurance contributions for many, with the aim of encouraging employers to provide jobs and encouraging people to do them.

If the Secretary of State is so concerned about the extra tax on higher rate taxpayers, how does he explain why the Government have increased, for instance, national insurance contributions, which are a tax, by no less than 14 per cent. for those on average or low incomes?

In view of his earlier answer, is the Secretary of State—or is it only the Prime Minister—in favour of the latest crackpot, right-wing daftness of privatising the dole, but still making people pay national insurance contributions so that they are forced to pay twice for the same benefit? If people have paid national insurance contributions, are not they contractually entitled to benefit? If something in the private sector that had been fully paid for were taken away, would not he, or even the Prime Minister, call that stealing?

It is perhaps understandable, in view of the events of recent weeks, that the hon. Gentleman should go to such lengths to divert attention from the main point. He referred to higher rate taxpayers. The point is that Labour's plans, as is clear, and is clearer still from my answer, involve higher contributions from many basic rate taxpayers. That is the point that the Opposition have been seeking to disguise because they do not want to let on how many people will have to pay much more to finance the hon. Gentleman's ambition.