I beg to move, That the Bill be now read a Second time.
Yesterday, the Chancellor announced in his spring statement a series of extraordinary measures that will harness the tax system’s power to build a stronger and more secure economy for the United Kingdom. At an incredibly difficult time, when the whole world is reeling from the twin blows of a terrible coronavirus pandemic and Putin’s appalling attack on Ukraine, our three-part plan will help hard-working people with the cost of living by putting billions of pounds back in their pockets, most immediately through the changes to the national insurance contributions system that we will debate today, the detail of which I will set out shortly.
Our plan will create the higher growth that will drive the economy in the coming decades by creating a new culture of enterprise, including tax-cutting options on business investment and innovation. It will also allow workers to keep more of the proceeds of their hard work, by cutting the basic rate of income tax from 20p in the pound to 19p before the end of this Parliament—the first such cut in 16 years. In short, our tax plan is sensible, affordable and well targeted. People and businesses will benefit, the economy will be strengthened and, in turn, our country’s place as a safe haven for freedom, democracy, peace and prosperity will be cemented.
While our tax plan will unleash real and immediate benefits, in drawing it up we have recognised that it must be underpinned by fiscal responsibility. This Government are determined to protect our nation’s finances, so we have ensured that we have maintained space against our fiscal rules, we have continued to be disciplined and we have carefully considered the macroeconomic outlook. Let me remind the House that in the next financial year we will spend £83 billion on debt interest, the highest amount on record and almost four times what we spent last year.
My right hon. Friend makes an important point. One of the most telling stats revealed yesterday was that £83 billion figure. Can he perhaps help by putting it into context and comparing it with other budgets the Government must meet, such as the schools budget or the Defence budget? We have had two supposedly once-in-a-century events just 12 years apart—the ’08 financial crash with all its deferred implications and the coronavirus pandemic with its implications—and now we have a war in Europe. Does he agree that we are dealing with the most adverse set of circumstances any Chancellor has faced for a considerable period?
My hon. Friend is absolutely right. The sum of £83 billion dwarfs most Departments: it is the equivalent of adding Education, Transport and Justice together. We need to take this incredibly seriously. It is the context in which all our decisions in this statement had to be considered, and in which our actions in future years will be possible. We should be clear: it is the most vulnerable and the poorest who lose out the most if the Government lose control of the public finances. That is the central message that the Chancellor would want to emphasise.
The Minister said that the poorest and most vulnerable lose out, but under the Government’s proposals it is precisely the people on benefits who are not being uprated to keep in line with inflation who are going to lose out the most. What has he got to say to that?
I would say two things. First, there is a raft of measures in place in the package announced yesterday precisely determined to help people on the lowest incomes, including, notably, the doubling of the household support fund to £1 billion, the action that we have already taken in cutting the universal credit taper rate, and the biggest cut that we have ever made to fuel duty. These are all things we have done, on top of the energy price package announced in February, that are designed to help people on the lowest incomes. Secondly, I hold the office of Chief Secretary, and I remember the Labour predecessor who left the note saying that there is no money left. I do not want to be in a position where I hand over a note to any successor of mine saying that there is an equivalent situation.
It has been reported overnight that people on universal credit will see only about half of the gain from the measure that the Minister is bringing forward compared with those who are not on universal credit because the portion of people’s income that will not now be subject to 12% national insurance will instead be subject to the universal credit taper at 55%. Is that assessment correct?
We are determined to help people on universal credit to keep more of what they earn. I have not seen the assessment to which the right hon. Gentleman alludes, but I will look at it. It is certainly our ambition to keep bringing down the taper rate so that people get to keep more of what they earn. In that regard, I will certainly look at the analysis to which he directs me.
I thank my hon. Friend for her question. There is no doubt at all that we have targeted the action that we have taken at the people who need it the most. That is why this Bill is so important, as I will explain, but it is also why we have taken the action on fuel duty, universal credit, the household support fund and TV licences—all things that are designed to help people whose incomes are most stretched at what is a difficult time for families up and down the country.
I thank the Minister for the answers that he is giving. While I absolutely welcome the increase in the threshold for national insurance contributions to help those on the periphery, I say to him gently: does he not see that this should equally apply to child benefit and universal credit, and since it makes perfect sense for one, it must make perfect sense for all working families so as to take them away from the absolute poverty I have spoken about in the Chamber before that is so close to so many hard-working families?
The hon. Gentleman is a fantastic contributor to this place and he takes a keen interest in looking after people, including the most vulnerable people, in his constituency. I absolutely recognise that we want to make sure that families right across the income spectrum are supported. That is why, as I say, we have put in place a package of measures that has at its heart a desire to make sure that we have a strong safety net in place. We have to consider all the decisions we take in the round. To put it in some context, the United Kingdom spends £243 billion a year on our wider welfare spend, including pensions. This is a country where we do a huge amount to make sure that everyone is supported. We have to consider all our decisions in the context of both wider affordability and how the system operates. The welfare system always operates on the basis of an uprating in September for changes in the ensuing April. If there is high inflation during the course of 2022, as is forecast, that will be reflected in the uprating figures for April 2023, and the triple lock will be in place to protect families.
The Minister has talked about one side of the budget. The other side of the budget is spending. Local authorities provide incredibly important services that are of particular benefit to the poorest in society. Local authorities have suffered more than any other part of the public sector from the austerity period. The Government claimed that local authorities would get an increase in their spending power this year, but will he now confirm that, with the predicted level of inflation, they face a significant real-terms cut to their spending that will affect all the services that they provide?
As a former local government Minister, I hope the hon. Gentleman knows that I do value the impact that good local government can have on people’s lives, which is why we apportioned £4.8 billion extra at last autumn’s spending review to support local authorities in delivering vital services. It is of course the case that all the budgets that we announced at the spending review are affected by inflation, but the Chancellor is rightly clear that we cannot keep on simply mechanically adjusting the spending review decisions in the light of inflation, because that option would not be affordable within our headroom and would obviously not be open to family budgets either.
All Departments—national and local—will have to play their full part in managing the impact of inflation. There is much that can be done in this space through improved innovation and driving down costs. That is why a new Cabinet committee has been established in the last week that will squarely address how we can drive efficiency, including, for example, by doubling NHS efficiency targets so that we can deliver better value for money for the taxpayer. These are difficult times, but we have to ensure that we live within our means.
I am wondering how the Minister would suggest that a local authority such as mine in Gateshead innovates on that conundrum. When I ceased to be the deputy leader of the council in 2010, its net revenue budget was just over £300 million. This year, that budget is just over £200 million. It will take some innovating to balance that conundrum.
I am grateful to the hon. Gentleman for alluding to his experience in local government. I would simply say that there is a lot that good local authorities can do and have done already to ensure that they focus on value for money, but of course there is more that can be done. We need only look at the enormous potential for digitisation, property disposals and addressing back-office costs and sharing them with other local authorities. There is lots of innovation that can and should be done and there are good local authorities up and down the country that are doing that.
I will resume where I left off by addressing the fact that the Government cannot and must not shy away from difficult decisions, which is why the health and social care levy that we announced last year will remain in place, because it is only right to safeguard a dedicated source of funding for our NHS and for those who need care throughout their lives. As the Chancellor pointed out yesterday, a long-term funding solution for the NHS and social care is not incompatible with reducing the tax burden on working families, which brings me to the specifics of the Bill—an integral part of the Chancellor’s tax plan.
We are here to discuss the national insurance contributions increase. The national insurance personal threshold will rise from £9,500 to £12,570 from July. Can my right hon. Friend confirm that that is the largest increase in a starting personal tax threshold in British history? As the largest single personal tax cut in a decade, is that not the evidence that the Opposition need that the Government really want to help workers across the whole United Kingdom?
I can give my hon. Friend that confirmation. I will expand on that later, because it is a major signal of intent at a time when our fiscal headroom is limited that we are determined that, where it is possible to help people, we will do so as effectively and dramatically as possible. The Bill is certainly a major step on that journey.
The Bill legislates for the two employee and self-employed NIC measures that the Chancellor set out yesterday. I will begin by giving some context behind those changes. It has long been the Government’s ambition to promote tax cuts for working people and to simplify the overarching system, which is why, since 2010, a series of Conservative Governments have taken millions of people out of income tax by raising the personal allowance from £6,500 to its new level of £12,570.
As the Chancellor explained yesterday, however, the equivalent NI threshold remained about £3,000 lower. As a result, at the last general election, the Prime Minister pledged to increase the national insurance threshold, and that is why, in 2020, we took a major step forward by increasing it to £9,500. This is a Conservative Government who are cutting taxes and delivering on our pledges to the British people.
My hon. Friend is absolutely right, and we cannot emphasise that enough. We are determined to address the underlying challenges we face not only with the public finances, but crucially with the backlog of care. Let us not forget that 6 million people are on NHS waiting lists as a direct result of the covid pandemic. While we do that, we will always focus on supporting families and, crucially, on making sure that, when we do have to increase taxes, the burden is borne by those with the broadest shoulders. That is what the combination of this measure with the levy will deliver.
The Bill’s first measure will increase the NIC primary threshold and the NIC lower profits limit to £12,570 from 6 July. By way of explanation, these are the thresholds at which the employed and the self-employed, respectively, start to pay NICs. The increases in these thresholds of about £3,000 will equalise the NIC and income tax thresholds, and in so doing create a fairer and simpler tax system, something to which we ought all to aspire. That means that people will be able to earn £12,570 without paying a single penny of income tax or national insurance.
As we heard a moment ago, that is the largest increase in a starting threshold ever, it is the largest single personal tax cut in a decade, and it reduces the tax burden by £6 billion for 30 million people across the United Kingdom. On an individual level, a typical employee will see their tax bill reduced by £330 in the year from July, while the equivalent saving for a self-employed worker will be worth over £250.
Does my right hon. Friend recognise the calculation by the Institute for Fiscal Studies that it is people who earn £35,000 or less who will benefit from this tax cut, and does that not show that our measures are targeted at those who need our support most?
Mike Brewer, who used to be with the Institute for Fiscal Studies, has said this morning about the value of the £330 figure to the average employee:
“If you are getting UC, then you lose 55% of that to a reduced UC award.”
I think that is a major issue for the House in evaluating the measure that the Chief Secretary is bringing forward. Could he please urgently clarify for us whether that is indeed the case?
As I said in response to the right hon. Gentleman’s earlier remark, I will of course look at what he is saying. I recognise fully that we want to make sure that we allow people to keep as much as possible of what they earn, and it is our ambition to keep reducing the tax burden on the lowest earners, including through action on the taper rate.
My right hon. Friend is making a powerful and informative speech. I welcome this Bill, as will my constituents in Bexleyheath and Crayford, because it is helping those on lower incomes. Increasing the national insurance threshold to be the same as the personal allowance is sensible and logical, and it will help the simplification and understanding of the system. I very much hope that he and the Government will in future look at more simplification of the system.
My right hon. Friend is absolutely right in saying that we want a simpler tax system, and we want to make sure that the burden of tax is lower. In the end, the tax system should be an incentive that rewards work, and that is what our measures today continue to support. On the point raised by my hon. Friend the Member for Rushcliffe (Ruth Edwards), 70% of all workers will have their NICs cut by more than the amount they will pay through the new health and social care levy.
My right hon. Friend will know that my beautiful constituency of Hastings and Rye has residents with some of the worst levels of deprivation in the country, and I obviously welcome this Bill on their behalf. Will he confirm for the residents of Hastings and Rye that this Government’s interventions have helped the poorest households the most through measures such as cutting the universal credit taper rate last year, increasing the national insurance thresholds, permanently increasing the local housing allowance for housing benefit and increasing the national living wage? Can he confirm that this will benefit my residents in Hastings and Rye?
I thank my hon. Friend for her question. She is a fantastic champion for Hastings and Rye, which I recognise is a part of the south-east that perfectly demonstrates that communities face very significant challenges in all parts of the United Kingdom. Sometimes the levelling up question is seen as the north and the midlands against the south, but her constituency is a very good demonstration of why communities in the south-east also need support. She is absolutely right in what she says. This is a Government with a strong track record of delivering for people who need the most help. It is worth noting in that regard that, as a result of the Bill, over 2 million people will be taken out of paying class 1 and class 4 NICs and the health and social care levy altogether, including, of course, in Hastings and Rye.
I should make some further progress, I think.
The Government recognise that implementing the Bill is a big change for many employers and payroll software providers, so I want to add a few words about the timeline for when we are implementing the changes. We believe that the date in early July strikes the appropriate balance between ensuring—this speaks to the point made by my hon. Friend the Member for Hastings and Rye (Sally-Ann Hart)—that people benefit from the increase as soon as possible, while giving employers and payroll software providers time to update and test their systems so that the change can be delivered safely. That will avoid millions of taxpayers having to make manual claims for refunds at the end of the tax year and employers from having to make major payroll corrections. Clearly, that is a situation we want to avoid.
The Government are also acutely aware of the huge pressures faced by those working for themselves but earning low amounts as a result of the rising cost of living. To support that group, the Bill gives the Treasury a power to lay an affirmative statutory instrument. It will mean that from April those with profits between £6,725 and £11,908 will not pay class 2 NICs. That will rise to £12,570 from April 2023. The measure will benefit half a million self-employed people, saving them up to £165 a year. As I just mentioned, that group will still be able to receive NIC credits, just as they have done in the past.
I am grateful to my right hon. Friend; he is being incredibly generous with his time. May I just make a plea to him on operational delivery? This measure is really welcome news, but will he, through his good offices, work with Her Majesty’s Revenue and Customs in particular to ensure that there is clear guidance? Operational delivery will be key to ensuring that the measures he is announcing are as successful as they should be. I know that if he could provide that reassurance my constituents would appreciate it.
My hon. Friend is absolutely right to raise this issue. The Financial Secretary to the Treasury will be replying to the later stages of the Bill’s passage and will be able to provide direct confirmation that HMRC is focused on that issue. It is critical that HMRC plays its full role in delivering the measures as seamlessly as possible, and I know that it will.
I am grateful to the right hon. Gentleman and I apologise for intervening once again. He has made it clear that he is not able to answer the question about the effect of this measure on people claiming universal credit. Can he commit the Financial Secretary to the Treasury to giving us an answer on that point before the end of the debate? It is an important issue for the House to take into account when determining its decision on this measure.
I thank the right hon. Gentleman for that point. My right hon. and learned Friend the Financial Secretary will do her best to provide an answer based on the information that our officials can provide. It is important, obviously, that we answer questions correctly. It is worth noting that the universal credit taper rate has been reduced from 63% to 55% and the universal credit work allowance has been increased by £500 a year to help make work pay. That is a tax cut for the lowest paid in society worth around £1.9 billion in the financial year that is just about to begin. It means that 1.7 million households will on average keep around an extra £1,000. We will do our best to respond to the specific question that the right hon. Gentleman raises.
The effect on an individual’s ability to access contributory benefits and to build up state pension entitlement will be unaffected as a result of the changes to class 2 NICs. Taken together with the increase in the primary threshold and the lower profits limit, we will meet in full our commitment to ensure that the first £12,500 an individual earns is free of tax, clearly illustrating that this is a Government who make good on their promises to the people of this country.
I thank the Chief Secretary to the Treasury for giving way and for his reassurance to people contributing towards the state pension. The Chancellor did not actually mention the word “pensioners” yesterday. Does he recognise the enormous pressure on many pensioners who are struggling to get by on very modest incomes at a time of significant inflation? Is it not time that the Government looked again at their support for pensioners, in particular on heating bills?
I thank the hon. Gentleman for his question and I recognise the sincere spirit in which he asks it. We are, of course, determined to deliver for our pensioners. That is why the Government have done so much to help to make sure that pensioners’ standard of living was not affected during the very difficult years we have just gone through, including spending £111 billion a year on the state pension, which is more generous that it has ever been. Many of the measures we are undertaking, for example our energy package, will benefit pensioners hugely. People will be getting £150 off their energy bill next month as a rebate on council tax if they live in bands A to D, with councils having a further £144 million available for discretionary payments to people who live in higher council tax bands who need further support. As I set out earlier, if the forecasts of very high inflation for this year do indeed come to pass, that will be captured in the uprating figures that will be delivered this autumn for the 2023 benefit uprating.
I want to draw to a conclusion on some broader points that this issue alerts us to. Every day in my role as an MP representing one of the poorest towns in this country, I hear from families and individuals who are struggling with the rising cost of living. I am fully respectful of the fact that this is a genuinely difficult time for the people of this country. I want to issue the reassurance that just as the Government stood by people during the covid crisis by providing a £400 billion package of support, so we will stand behind the people of this country as they face these new challenges, too. It is important to do so in a spirit of total candour. No Government anywhere in the world directly has the ability to offset the impact of first the pandemic and then a reckless and illegal war on our continent, but we will do our utmost with the tools we have, within our overarching aim of making sure that the public finances are protected.
This financial year and next, we will provide over £20 billion to help people with the cost of living. That includes over £9 billion of direct support with high energy costs for around 28 million households. That is why yesterday we announced our wider package, including this Bill along with a range of other measures, to ease the pressure on hard-working families and secure long-term economic growth.
The Minister will know that Bracknell is blessed with one of the lowest rates of unemployment in the country. Does he agree that the increased thresholds will absolutely reward hard work and be of benefit to working families right across the Bracknell constituency and beyond?
I thank my hon. Friend for his question. It is a fantastic success that Bracknell enjoys very low unemployment. It is actually the case that every region of our country now has lower unemployment than it did before the coronavirus pandemic hit, which is a huge Conservative policy success and a tribute to the hard work and enterprise of the British people.
As the Chancellor said yesterday—I will conclude with this—cutting taxes is not easy. It requires hard work, prioritisation and the willingness to take often unpopular decisions elsewhere, but it is precisely because we have made those tough decisions in the past that we have been able to reduce taxes in a responsible and sustainable way today. Our Government will always act swiftly and decisively to safeguard the best interests of our people. The Bill includes the largest cut to personal tax in a decade. It rewards hard work and supports the lowest earners. Its measures, while sweeping in scope and ambition, will make a real tangible difference to the lives of millions of people. That is why I commend it to the House.
As we debate the Bill, I cannot help but notice it is becoming a bad habit of this Chancellor to rush national insurance legislation through Parliament in a day. A little over six months ago, I stood here setting out the view of the Opposition on the Government’s Health and Social Care Levy Bill, which was similarly rushed through all its stages in just one day. As we know well, that Bill introduced a new levy that would be preceded by an equivalent increase in national insurance contributions for employees and employers of 1.25%. Since that national insurance increase was agreed, it has become ever clearer that it will be the worst possible tax rise at the worst possible time.
The Opposition will support today’s Bill, as any help for people facing the Chancellor’s national insurance tax hike in April is something we welcome. There are benefits to raising the threshold at which people begin to pay national insurance, but we should be conscious that the Bill has more to do with the Chancellor’s increasingly desperate desire to paint himself as a tax cutter than it does with a well-thought-through package of measures to help people with the struggles they face. Even after the Bill passes, the tax burden in our country will still be at its highest in 70 years, and we are still the only G7 country to be raising taxes on working people this year. The Chancellor is making sleights of hand his speciality. As the Office for Budget Responsibility has pointed out, for every £6 he has taken in tax since he took on that role, yesterday he gave back just £1.
The Chancellor has realised that his national insurance hike in April is wrong. Labour could have told him that six months ago. In fact, that is exactly what I told the Minister in September last year when we debated the Health and Social Care Levy Bill. We set out clearly our decision to vote against that Bill on Second Reading. We set out how it broke the Government’s promise not to increase national insurance, and instead raised taxes on employment that would disproportionately hit working families, young people, those on lower and middle incomes, and businesses trying to create more jobs in the wider economy, while leaving income from other sources untouched. We were not alone in criticising that tax rise. The British Chamber of Commerce warned:
“A rise in National Insurance Contributions would represent a hammer blow to jobs growth at this crucial point in the UK’s economic recovery.”
At the same time the TUC general secretary, Frances O’Grady, criticised the Prime Minister for
“raiding the pockets of low-paid workers, while leaving the wealthy barely touched.”
As the hon. Gentleman knows, we have debated the increase in national insurance at length, and today we are debating the package of measures that the Chancellor brought forward. Overnight analysis by the Resolution Foundation, which he would do well to consult, recognises that seven in eight workers will pay more in tax and national insurance in 2024-25, as a result of decisions taken by this Chancellor and this Government.
At the outset of his speech, the hon. Gentleman criticised the Chancellor for being a tax cutter, yet he is now critical because the tax burden has increased. He has not yet answered the question from my hon. Friend the Member for Grantham and Stamford (Gareth Davies), so perhaps he can have a second go.
As the hon. Gentleman knows, we are critical of the Chancellor for his desperate attempts to appear to be a tax cutter, despite the fact that the tax burden in this country is now at its highest in 70 years. [Interruption.] Let me make some progress. It is clear that the increase in national insurance proposed by the Health and Social Care Levy Bill last year was wrong, not only because we said it was, but because the Government’s own analysis concluded it was wrong. I am sure that at the time Ministers read their own tax information and impact note, which was signed off personally by the Financial Secretary to the Treasury. That note applied the so-called family test to this levy, and concluded:
“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.”
As the current Financial Secretary to the Treasury will know, I have tabled several written questions, asking the Government to publish the complete family test assessment prepared for the levy. Her most recent response stated:
“Family Test assessments are not routinely published. Decisions on whether and how to publish complete Family Test assessments fall within the responsibility of each Government Department. HMRC have no further plans to publish a Family Test assessment on the Health and Social Care Levy.”
When she responds, I would be grateful if the Minister confirmed that she will now instruct HMRC to publish that family test assessment. If she refuses to do so, I would be grateful if she explained why she is blocking its publication.
I am grateful for the work that my hon. Friend is carrying out on this important matter, because it seems fundamental to look at the impact on families. In my constituency of Reading East there is enormous pressure on families, many of whom are in work and on modest incomes, but are struggling to get by because of increased prices, so I thank my hon. Friend for his work.
Let me take the hon. Gentleman back a few moments. He said that he was not debating the national insurance levy, and then he continued to debate the national insurance levy. On the subject of the national insurance levy, what would Labour do instead to fund the national health service? I have yet to see any sort of plan from the Opposition.
I do not recall whether the hon. Gentleman was present in the debate on the health and social care levy, but if he was, he would have heard us set out that any increase in taxation should fall on those with the broadest shoulders, not directly on working people. This Government are laying the worst possible tax rise at the worst possible time on the shoulders of working people. In the long run, the way to fund public services sustainably is through growth, but this Government have become a low-growth Government, and therefore a high-tax Government. That is the truth of their economic model, and that is what we would seek to change.
Since September, when the Health and Social Care Levy Bill was pushed through Parliament, our arguments against April’s national insurance hike have only got stronger. The difficulties that people face in making ends meet have been mounting by the day. Inflation jumped again yesterday from 5.5% to 6.2%, with the OBR now forecasting it to hit 7.4% this year—the highest rate in 30 years. Energy bills that have been rising rapidly are set to soar next month, and the crisis in Ukraine will put even greater pressure on the cost of energy, petrol, and food. The pressure on the Chancellor to change course has been rapidly growing, yet he has backed himself into a corner. He has nailed his colours to the mast, stubbornly refusing to reconsider his deeply unfair national insurance hike, and that seems to be how we have ended up where we are today.
We have a Chancellor who has found himself politically unable to cancel his national insurance hike, yet also unable to ignore the fact that this is the worst possible tax rise at the worst possible time. That is why he has tried to respond by making these changes to national insurance thresholds, with promises of further tax cuts at some point in the future. Whatever the merits of the individual measures, that approach is driven not by what may be the right thing to help people now, but by the Chancellor’s desperate ambition to portray himself as a tax cutter, despite all evidence to the contrary.
In light of the hon. Gentleman’s commitment to reducing the tax burden on hard-working people, will he join me in calling for the scrapping of Andy Burnham’s clean air zone tax in Greater Manchester. That is a tax on business and jobs, so does he agree that it needs to be scrapped now?
We have had a number of comments about what is within the scope of this debate, and I suspect that issue is rather out of scope. I will focus on national insurance and the Chancellor’s spring statement yesterday, and matters related directly to that.
Following the spring statement and the package announced by the Chancellor yesterday, Torsten Bell, chief executive of the Resolution Foundation, stated:
“This package only makes sense if:
- your only test for policy choices was can you prove you’re a tax cutter
- you’ve already announced a rise in National Insurance.”
Overnight analysis by the Resolution Foundation has set out the stark truth that considering all income tax changes to thresholds and rates announced by the Chancellor, seven in eight workers will pay more in income tax and national insurance in 2024-25.
We have made it very clear that we believe in a fair taxation system. The key point for us in the Chancellor’s package is that he is raising taxes for working people, while ruling out measures such as our one-off windfall tax on the profits of North sea oil and gas producers. That is not a fair taxation system.
The inescapable truth is that whatever the Chancellor puts on his Instagram account, he has left Britain facing the highest tax burden in 70 years. As Paul Johnson, director of the Institute for Fiscal Studies said yesterday:
“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 NICs, despite the tax cutting measures announced today.”
The Institute for Fiscal Studies has calculated that median earners on around £27,500 can expect, even after the increase in national insurance thresholds, to be £400 worse off in the coming financial year. The Office for Budget Responsibility has confirmed that this year will see the biggest hit to incomes on record. That will be the true legacy of this Chancellor, not the phoney tax-cutting image that he has been so desperate to cultivate.
Although today we are debating national insurance thresholds, and the impact that will have on people’s lives, there is much more that the Chancellor simply failed to address in his spring statement. We have been repeatedly pushing the Chancellor to levy a one-off windfall tax on North sea oil and gas producers’ profits, to help fund a one-off cut to people’s energy bills. Our plans would cut everyone’s bill by £200 and would do so by £600 for the 9 million households facing the toughest squeeze.
My hon. Friend is making a powerful speech. It is worth putting that last point in context. The chief executive of BP made it clear that there absolutely was a windfall: the company had become a “cash machine” because of the massive rise in revenues resulting from the significant increase in the price of a barrel of oil. There is a huge opportunity to take a windfall tax now. Does my hon. Friend agree that the Government should also have looked at the supermarkets during the pandemic?
I thank the hon. Gentleman. I am interested in what the Opposition are saying about not raising taxes. Will he explain why the Welsh Labour Government have not ruled out tax rises? It is in their discretion to do so, but they are not considering doing that until after the May elections.
I repeat a principle I mentioned earlier to the hon. Member for Bury North (James Daly): the remit of the Bill is national insurance and related matters, such as the spring statement yesterday. I will continue to focus my remarks on those.
The windfall tax that we have been pushing the Chancellor to adopt would fund support for people who need help with their energy bills now. As we have long said, alongside that immediate help we urgently need more investment in alternative sources of energy and insulation for our homes. That investment would help to cut energy bills in the longer run, as well as improving our energy independence and security. Yet on that front, the Chancellor has been all but silent, too.
Yesterday, the Chancellor announced a cut in VAT for energy-saving materials, but I do not think anyone believes that that is anywhere near enough to help the majority of families upgrade their homes. Our pledge, by contrast, is to invest £6 billion each year for 10 years to upgrade 19 million homes. That would cut energy bills by up to £400 a year while cutting gas imports by 15% too. That is the kind of transformational programme that our country needs.
On that point, the Labour Government were the first to put in place the Climate Change Act 2008—that is, the first globally to introduce legislation that would address the need to switch to a more renewable energy sector. I remind Government Members that the Labour Government put in place the zero carbon homes legislation, which was torn up by the coalition Government. If that had still been in place in 2016 to 2021, 1 million new zero carbon new homes would have been built, which would have reduced our energy need.
I thank my hon. Friend for making an important point about the last Labour Government and drawing attention to the lack of action from this Government in pursuing investment in renewable energy sources, which would cut energy bills and give us greater energy security and independence.
We need a Chancellor who is prepared to levy a one-off windfall tax to help cut people’s energy bills now and invest what is needed to cut bills in the long run. Instead, yesterday, we saw neither.
I am going to make some progress.
Perhaps the most desperate part of the Chancellor’s pitch yesterday was his claim that “the work starts today”. The Conservatives have been in power for 12 years: 12 years of incomes being squeezed under Conservative Governments, 12 years of failure on energy efficiency and 12 years of low growth. The truth is that, even now, when he is apparently “starting work”, the man who lost £11.8 billion of public money to fraud has once again proved that he is not up to the task.
This week, the Chancellor failed to scrap the tax rise on working people. He failed to introduce a windfall tax, and he failed to set out a plan to support British businesses. People deserve better. People need a Government who are on their side.
Madam Deputy Speaker, I am not used to being called first—this must be the first time. I am grateful to you, and it is a pleasure to take part in the debate. First, I refer hon. Members to my entry in the Register of Members’ Financial Interests.
I now have a chance to expand on the question that I raised with those on the Treasury Benches yesterday. When some years ago my right hon. Friend the Member for Wokingham (John Redwood) was asked at a meeting what conservatism stood for, he paused for about one second and said, “Freedom”. That is freedom for the individual, freedom from the state, freedom to spend one’s own money—or more of it—and freedom from high taxes.
As I said yesterday, I applaud the Chancellor for going as far as he did. But many of my constituents in South Dorset are impoverished already; we have deep pockets of deprivation and poverty. I fear that the generous moves by the Chancellor and the tinkering that he has done have not gone far enough.
I sympathise with the Chancellor and the Government: we have had a pandemic and now there is a war in Europe. Both have been out of the Government’s control and have clearly had devastating consequences on how we run our economy.
Obviously, my hon. Friend will recognise that the inflation statistics paint a stark economic picture for this country, but does he also recognise that in the US inflation is double what it looks to be here? The eurozone’s inflation statistics are similar to ours. That demonstrates that this is a global problem, not one that only we are facing in the UK.
I entirely concur. Yes, inflation is now spiralling to 7%, I think, and more across the rest of the world. Inflation has a very negative effect on the economy, on what we can afford to buy and on the value of our money. It has to be countered.
Given that the cost of living is spiralling and that taxes are the highest for 70 years, I urge the Government to go further. As they know full well, lower taxes generate more cash. That point is proven, and we Conservatives have fervently followed it for as long as I recall. Why? Again, as Treasury Benchers know, low taxes are a force for good—both for the individual, who is far better placed to decide where to spend their money, and for the private sector, which can better invest in their businesses, employ more staff and sustain a profit—an ugly word for Labour Members. Let us not forget that it is the tax from those profits that pays for the public sector.
I agree to the extent that I do not like any tax. However, if there is a note saying that “there is no money” left, that puts a Government in a slightly difficult position, because they need some money to run the country and the public sector, which we all hold so dear.
If the hon. Member does not like any tax, and given that we have heard that VAT has been raised to high levels, does he support the Liberal Democrats’ call to cut VAT by 2.5% to 17.5%? That would make a big difference to people’s disposable income. They would spend it in the high streets and it would do exactly what he proposes.
In an ideal world, I would like to scrap VAT—[Interruption.] I would love to scrap it altogether. It is extraordinary that we ask someone to do something, creating all this work and getting the economy going, and people are taxed to do it. But there again, as I have explained, the Government are in a predicament because of the pandemic and a war—situations that are way out of their control—and I know that they are trying to do their best with the very difficult cards in their hand.
In the Chancellor’s statement yesterday, I did not hear the good Conservative word “savings”—that is what I call it, but the Opposition call it “cuts”. We appear to acquiesce to every demand for more money. This is taxpayers’ money and it is surely time to review the big spenders, such as the NHS and welfare. They are, of course, both needed, but it is time to review both to make sure that we are getting value for money.
The national insurance rise, which I disagree with, will see billions of pounds disappearing into a black hole, followed soon afterwards by demands for more. For the sake of the public finances, I do not believe that this can go on. I welcome the Chancellor’s talk of more tax cuts to come, but in my humble opinion, and certainly for my constituents, for the reasons that I have stated, those cuts will come too late.
The Opposition are already drooling with pleasure as they watch us behave like the big spender that they would so love to be. That puts our raison d’être at risk. Capitalism is always challenged by socialism, which, as far as I know, has never succeeded wherever it has been adopted, but that does not stop them from trying it on. Today, in tough times, we need to fight for and explain far better our economic philosophy, for if we do not, there is a real risk of a high-spending, high-taxing Conservative Government handing over the country to those who would bring it to its knees, ruthlessly raiding the accounts of those who aspire, work hard and already pay their fair share.
I would be neglectful if I did not mention money for our armed forces. I know that that is not directly linked to national insurance, but it was raised in the statement yesterday. As a former soldier, I urge those on the Front Bench to spend more of our money on our armed forces. If the awful behaviour by Russia has not alerted us to that, I do not know what will. This is all about priorities; that is what we as a Government have to decide. As I hinted, I think there should be far more study and review to ensure that the money is better spent in various areas. Let us face it: the defence of our country and all those who depend on her is the Government’s top priority.
Let me end where I started, with freedom. High taxes are not the accepted norm for the Conservative party. For us, it is all about freedom—freedom from the state, freedom from high taxes and freedom for the people to choose how their money is best spent.
May I say what a pleasure it is to follow the hon. Member for South Dorset (Richard Drax), whose speech I very much enjoyed? I hear the paeans to the Conservatives being the party of freedom and low taxes, so it will no doubt come as a shock to him that the Office for Budget Responsibility wrote yesterday that taxes will rise to their highest level as a share of national income
“since the late 1940s under Clement Attlee’s post-war Government.”
I know that the Conservatives love to compare themselves with previous Labour Governments, but I was not aware that they intended to compare themselves with that one. The big difference is that under Clement Attlee’s post-war Government, nobody could be in any doubt about the intention to raise living standards for all and to share the burden equitably. [Interruption.] I hear the comment, “The big difference was a pandemic”, but there was a big difference because of world war two as well, hence the “post-war” bit. However, I will gladly take an intervention once I have made a bit of progress.
The Scottish National party welcomes the Bill insofar as it goes. We are clearly in the midst of the worst cost of living crisis in living memory. Inflation is spiralling and is set to hit 8.7% later this year. Some of that is common to industrialised economies around the world, but let us be perfectly frank that other elements of it are entirely self-inflicted because of the Government’s choices. That resonates through people’s pocket books, with the OBR forecasting the sharpest fall in real earnings since the 1970s and the biggest hit to real household disposable income since records began in the 1950s. That is certainly not a record to be proud of.
The Chancellor had a golden opportunity yesterday to do something to ease the pressure on hard-working individuals and families, to help those on benefits and to give much-needed respite to businesses trying to trade their way back to health and prosperity. The circumstances were as auspicious as they ever could be. The Chancellor had headroom of approximately £30 billion that he could have worked within, as a consequence of increased tax revenues through fiscal drag and because of borrowing undershooting the forecast levels. There was the potential to make a significant difference for those who were feeling the pinch the greatest.
And what did we get? In the face of a 30p-a-litre rise in costs at the petrol and diesel pumps, there was a 5p cut in fuel duty, which barely takes the cost at the forecourts back to where the prices were last week. That offers no respite to the motorist or consumer or, indeed, to all of us, given that we are all affected by the price of goods that are transported on lorries or vans to the shops. Despite an admission that research and development funding was not having the effect that it ought to in driving growth, we had a promise just to spread that ever more thinly rather than focusing on where it could have the greatest effect.
On energy costs, we had a VAT cut on energy efficiency products, although, frankly, the mind boggles at how someone who is struggling to pay their existing utility bills will somehow find the money—VAT or not—to install solar panels, heat pumps or anything else that might be covered. We had the frankly paltry increase in the household support fund from £500 million to £1 billion. That is just one fifth of the impact of the 5p cut in fuel duty.
The blunt reality is that anyone who woke up yesterday morning worrying about how they would pay their energy bills will have woken up this morning confronted by exactly the same set of worries.
The SNP has been in uninterrupted governance of Scotland since 2007. During those 15 very long years, that nationalist Government have had many levers at their disposal relating to taxation regime relief and grants and other funds. Why have they not used those levers to assist people in Scotland, and why are SNP Members such as him instead complaining in this House about the UK Government’s moves?
I presume that the hon. Member is a supporter of the present constitutional set-up. I know that he sought election in Scotland before finding his present constituency, and in view of that he ought to be aware that only some powers are devolved, and the Scottish Government have limited fiscal powers. Those powers that they do have, however, they have used effectively. They have reduced taxes for about 54% of workers, and have also introduced benefits such as the Scottish child payment, which is doubling. They have used the limited powers at their disposal judiciously. If the hon. Member is patient, I may accept a further intervention from him when I come to other aspects of the deficiencies in that fiscal settlement.
The hon. Gentleman has made some points about the record of the Scottish National party Government. I hope he will correct me if I am wrong, but according to the Scottish Parliament Information Centre, over the three years up to 2021 Scots paid £900 million more in taxes than those in the rest of the UK, and would have paid exactly the same as those in the rest of the UK had their rates mirrored those of the UK. As a result of decisions by the Scottish Government over the last three years, Scots have been clobbered with £900 million worth of extra taxes. Is that correct?
As I have said, 54% of Scots are paying lower rates of tax than they would be paying if they lived elsewhere in the UK. Overall, the tax system has been reshaped to make it more progressive and, I would argue, more equitable. According to the Resolution Foundation, about 1.3 million people across the UK will be pushed into absolute poverty as a result of tax decisions made by this Government. I have to say that it is a bit rich to argue, as some Conservative Members wish to do, that the Scottish Government, on a budget that is determined in great part by political decisions taken in this place, should be dipping into the revenues that it has earmarked for essential public services in order to mitigate the impacts of poor choices made here.
The Scottish National party has been sharply critical of the national insurance rise since it was first announced, for straightforward reasons. We believed that it was a regressive tax. It hit the lowest earners the hardest. It was a tax on jobs, and therefore a tax on growth. It was rebranded as a “health and social care levy”, although the Government had no clear idea of how the money was to be spent within the NHS, and could not clarify the question of how any of it would be passported through to social care services in England. Moreover, as a result of its impact on people’s incomes, it would bake in inequality—both generational and geographical—for decades, mitigating social care costs for some but not for all.
The Bill removes some lower earners from the liability that the Chancellor has created, and we welcome that partial retreat. Realigning national insurance and income tax thresholds is broadly sensible, but I believe—I am happy to be corrected on this point—that it only takes us back to the status quo ante of 2010, when the Conservative Government first came to office. Paul Johnson, the director of the Institute for Fiscal Studies, posed an important question in The Times this morning:
“Why promise to spend billions cutting the basic rate of income tax whilst going ahead with an increase in NI rates? That will make the tax system both less equitable and less efficient. It will increase the wedge between higher taxes on earnings and lower taxes on pensions and unearned incomes. And wouldn’t that money have been better spent sooner helping those most in need?”
I certainly cannot quibble with that.
Let us not be fooled: even though the thresholds are moving, this is still a tax increase. There has been no shortage of informed opinion telling the Chancellor that this was the wrong thing to do, but from a political point of view I am bound to say that he has made mugs of his Conservative colleagues—not just those who had to swallow the indignity of betraying a manifesto pledge at the last election, but those who have gone all out to stoutly defend the policy over the last few months.
The manner in which the Bill has come before us exposes the nonsense that this tax rise was ever in any way “hypothecated”. If the right way to fund the health and social care levy was through a hike in national insurance—and I do not believe it was—it cannot also be right to backtrack on the extent of that rise. It is also impossible to argue that it is hypothecated when we see no corresponding increase in the health budget in England.
The hon. Member has described this as a tax increase, and obviously it will raise revenue, but does he accept that raising both the threshold and the rate of national insurance means that it is actually a tax cut for people earning less than about £40,000 a year and that only people earning more than that amount will be paying more tax? Overall, is that not the sort of outcome that we would want?
Raising the threshold will certainly take some people out of the scope of the measure that was previously announced, but overall, for those who are not in that category, this still represents a higher level of tax that they are paying to the state than would have been the case had it not gone ahead.
As with yesterday’s other announcements, notwith-standing the Chancellor’s conceit about being an instinctive tax-cutter, these measures are being paid for largely through fiscal drag. The other invidious element is the fact that state benefits are failing to keep pace with inflation. As the hon. Member for Ealing North (James Murray) said earlier, only one in eight workers will see their tax bills fall by 2025 as a result of these measures, and as I said in my opening remarks, this will be the highest tax burden since Clement Attlee was Prime Minister.
Let me now turn to the Barnett formula. I think that the Bill exposes the fragilities and frailties of that funding settlement. The Scottish Parliament has limited tax and benefit powers, but much of its funding is contingent on policy decisions being taken first of all in this place, for England, before any corresponding resources are released for devolved Governments. We see the foibles and the fragility of that in the Bill, but we also saw it during the pandemic, when decisions had to be taken here before those corresponding resources were released. That, in my view, is not a good way of trying to run the country. We should be trying as far as possible to align policy with resources so that there is clear accountability in terms of decisions made and outcomes delivered, and the funding structures of the devolution settlement are not conducive to that.
In his statement, the Chancellor seemed to me to cut the figure of the pickpocket who expects some credit for returning half an hour later to hand back someone’s wallet after abstracting the cash and cards that were inside it. It is amazing that he should expect any gratitude for what he is doing. I do not believe that any responsible Government seeking to tackle some of the crises facing public services post pandemic would reach for national insurance as the best way to do it. If, as I fervently hope, a Scottish Government will one day have full powers over their finances, I do not believe that they will reach for that lever either.
We support this Bill, but it is very much an indictment of the Government’s priorities that we are here to discuss it at all.
It is a pleasure to follow the hon. Member for Gordon (Richard Thomson).
The increasingly unstable world in which we live brings many challenges to people at home, not least the many concerns of people across the country about the cost of living and the potential impact that rises in that cost can have on family living standards. Yesterday marked two years since the start of the first lockdown, the reckoning point of the first pandemic of its kind in over 100 years. Flash forward two years and we already face a new crisis, the war in Ukraine—the first full-scale war on European soil since world war two. As we heard from the hon. Member for Gordon, the fact that the tax burden is at its highest since that point shows the scale of the economic hit that we took from the coronavirus. It is in that context that we must view the Chancellor’s statement yesterday. There are no easy choices—the outlook right now is bleak, and our focus has to be on steadying the ship, on supporting the most vulnerable and on rebuilding. We are able to do this only because of the tough decisions we took preceding this crisis, and it is not worth thinking about the situation this country would be in had the Opposition won in 2019.
This Bill is an example of how we rebuild, by setting the course for lower taxes, starting with a tax cut in July for everyone earning less than £35,000—a tax cut for 70% of workers. By raising the threshold at which we all start paying national insurance from £9,500 to £12,500 in July, we are supporting over 30 million working people with a tax cut amounting to an increase in income of about £330 for the average family. That means that no individual will pay any tax at all until they earn at least £12,500—the largest increase in the starting tax threshold in British history. It means that workers up and down the country can earn £1,000 a month without having to give a single penny to the Government. This is the first step on our journey to lower taxes, in stark contrast to the Labour Opposition, who have absolutely no tax cutting plan, or any plan at all, for that matter. The shadow Chancellor recently proposed over £170 billion in uncosted spending increases as she pandered to the hard left of her party, with absolutely no plan to pay for it and absolutely no plan for how to get more money back into the pockets of hard-working people.
As my hon. Friend the Member for South Dorset (Richard Drax) pointed out, we on the Government side of the House believe that cutting taxes is in everyone’s interest, but it is only sound fiscal management that enables us to cut taxes this year, next year and beyond. This strong economy meant that last year the UK was the fastest growing nation in the G7, and unemployment levels are now back to their pre-pandemic lows, which is a remarkable achievement considering that we have just emerged from a once-in-a-century global pandemic.
Turning briefly to some of the throwaway suggestions from the Opposition, they ask why we do not just cancel the health and care levy, but they have no alternative proposals for how to fund the NHS and social care as we begin to see longer and longer waiting lists caused by the pandemic. They talk about an oil and gas windfall tax, but with no acknowledgement that it is the oil and gas sector that is delivering the future energy security we need through investment in carbon capture and storage and in hydrogen production in places such as Teesside. They talk about increasing defence spending, but with no recognition of the fact that most of them spent the period from 2015 to 2019 propping up a hard left leadership who wanted to scrap the nuclear deterrent while last year we delivered the largest ever cash increase to the defence budget since the cold war. Labour has no plans for the NHS, no plans for energy independence and no plans for defence. It has no plan at all. We on this side of the House will keep on delivering on the people’s priorities and taking the tough decisions to ensure that our economy does not just recover but becomes more resilient to the challenges we face in an uncertain world.
It has been interesting to listen to the speech from the hon. Member for Redcar (Jacob Young), but I do not think we read the same books or share the same philosophy. This country is set to have the biggest fall in living standards since records began. Households up and down the country are struggling to pay their energy bills. This is a crisis that requires big solutions. At the start of the pandemic, the Chancellor looked at big solutions to big problems, but I am afraid he did not do that yesterday. The energy crisis was already here before Russia invaded Ukraine, and it is now set to get worse. We do not know how long the war will last. The British people understand that we must have some hardship here to help the heroes in Ukraine, and they understand that the war is about standing up for freedom and democracy. What people do not understand is why the Government are not doing everything in their power to help us get through this energy crisis.
People at home are struggling, business are struggling and the Chancellor must do more to ease this struggle. Raising the national insurance cap is welcome, but it is a drop in an ocean compared with the measures that are needed. Critical manufacturing industries such as glass are on their knees. Yesterday, I, along with the CBI, British Glass, Glass Futures and manufacturers and sellers of glass celebrated the International Year of Glass, but the businesses are on their knees. One told of a rise in energy costs this year of £250 million; another of a £48 million rise. This has had no acknowledgement from the Government. Once these businesses go, they are gone for good. They provide good, high-paying jobs that we cannot afford to lose. Other Governments are stepping up to support their industries and ours must do the same.
The energy companies have made huge profits and will continue to do so. They are massive corporations, and energy is always going to be in demand. The Chancellor needs to be on the side of the British people and put a one-off windfall tax on the energy companies. They are not investing; their profits are going into shareholders’ dividends. The energy companies will still be around when this crisis is over. The Government need to ensure that the livelihoods of the British people are still here as well. We cannot afford to have thousands of people in crippling debt, going to moneylenders, as millions are.
The hon. Member makes the case against the rise in national insurance and for a one-off windfall tax on the energy industry, but that would obviously be just a one-off for one year. The costs of Government spending will continue year after year. Which taxes would she raise to pay for public spending in the years following the windfall tax?
I do not accept what the Member says.
The tax burden is at its highest in 70 years, and it is estimated that the Government have an additional £50 billion to operate with because of taxes that have come through. This begs the question of why the Chancellor is not using that £50 billion to help British people. We are already in a time of crisis. First it was covid, then it was energy and now it is Ukraine. The Chancellor must adopt big solutions to the big problems our country faces.
Like my hon. Friend’s mother-in-law. I went to a “politics and a pint” pub surgery in the Oxcart pub in Bretton in my constituency to talk to my residents. I wrote to a large number of people living around the area and told them that I would be there between 6 and 8 o’clock and that I wanted to listen to what they felt about the spring statement, and any other issues that they wanted to talk to their MP about. The single most popular measure in the spring statement that came up was the rise in the national insurance threshold.
Peterborough is a city of hard-working people and hard-working families and they want to see work rewarded. That is what this measure does. It will mean that if they work those extra hours and have the dignity of a job, they will keep more of their own money, pay less tax to the Government and be able to spend it on what they perceive to be best for them and their family. That is the Conservative way, and that is why I welcome these measures. I think they will go a significant way towards relieving pressure on families in my constituency. One lady I spoke to told me exactly what this extra money might mean for her. For her and her family, it would mean help with school uniform costs and help with the weekly food shopping bill, and of course it would also mean help with rising energy prices.
That was not the only thing raised with me last night, and it would seem partisan if I did not mention that constituents raised elements of concern. One constituent told me that, although the spring statement will go some way towards addressing energy prices, people need the heating on during the winter, and they asked whether there will be more measures later down the line. I also spoke to pensioners, who raised a concern about what this might mean for people on a fixed income.
The landlord of the pub pulled me aside to explain that, typically, he was paying about £1,200 a month for energy but, due to the rising costs, some of the deals on offer are almost £4,000 a month, which is an eye-watering amount for a local community pub like the Oxcart. However, he told me how pleased he is with the continued cut in business rates.
Far be it from me, as a new MP elected in 2019, to say this to longer-serving colleagues, but a “politics and a pint” pub surgery is an excellent thing to do because it supports local businesses. If we do not use pubs, unfortunately we will lose them. A “politics and a pint” surgery is a fantastic way to meet our constituents.
Returning to my central point, the rise in the national insurance threshold will reward work. As my hon. Friend the Member for Redcar (Jacob Young) outlined, people who earn less than £12,500 a year will not pay any tax at all, which means more money in their back pocket to support themselves and their family.
A large number of people in my constituency are on universal credit while in work. One of the most popular things this Government have done in recent times is to alter the universal credit taper rate from 63p in the pound to 55p in the pound. That is an extra £1,000 in the back pocket of hard-working families in my constituency, which makes an incredible difference.
I praise the raising of the national insurance threshold because it simplifies the tax system. It was an anomaly that people did not pay income tax until they earned £12,500 but they were still paying national insurance. This measure creates a simpler and clearer tax system, which is in everyone’s best interest. We do not want tax to be confusing, lacking sense or difficult to understand. People pay their tax, so it should be as easy as possible for them to understand, which is what this measure does.
Finally, I want to talk about what the rise in the national insurance threshold will mean for particular people in my constituency. As I said earlier, work is plentiful in my constituency. We have lots of vacancies in Peterborough—in fact, there are more vacancies than people on universal credit—and this rise sends a message that the Government are putting their arm around everyone in this country, and particularly hard-working families. If people want to go out and find a job, work hard and make a contribution, they should be rewarded. There are plenty of those people in Peterborough and across the country.
My hon. Friend and constituency neighbour is a great champion of everyone in Peterborough, and I pay tribute to him for all the work he has done since his election in 2019. How do his hard-working constituents feel about the 6.6% increase in the national living wage, which makes sure that having a job is a way out of poverty?
My hon. Friend and constituency neighbour makes an important point, and it is another example of how this Government are rewarding those in employment who work hard and make a contribution. That is what this Government are all about, and it is what any Government should be all about. This Bill is another example of rewarding people who make the right decisions.
No one opposes this Bill, but it gives us an opportunity to reflect on yesterday’s spring statement, as a package of support to help families who are being pushed into poverty.
The hon. Member for Peterborough (Paul Bristow) talks about engaging with his constituents. It is not as easy for me to go up to North East Fife for politics and a pint on a Wednesday night, but my constituents want to know whether this is it. The spring statement has, frankly, let down the country as it faces a cost of living crisis, and the House does not have to take my word for it—after all, it is my job as an Opposition Member to oppose the Government. Other Members mentioned the Institute for Fiscal Studies, which says the Chancellor’s measures
“will make the tax system both less equitable and less efficient.”
That does not make for a stronger or more secure economy. Instead, the belief is that the Chancellor is setting us up for a return of absolute poverty where people have to choose between heating and eating or, even more devastating, neither. That is not strong or secure.
Conservative Members need to look at today’s front pages and YouGov’s snap poll, which says that 69% of those polled believe the Government have not gone far enough to support them, and that 66% do not feel the spring statement helps people like them. The Chancellor told us yesterday that his changes are significant, but saying that does not make it so. We have heard statistics from both sides of the House showing people’s reflections on the Bill, and I tabled an amendment with my hon. Friend the Member for Bath (Wera Hobhouse), which she will address in Committee, that would require the Government to report on the effect on disposable incomes.
Cutting fuel duty by 5p a litre only helps people who drive and, even then, it brings down fuel prices only to the level at which they were last week. I represent a rural Scottish constituency that has much higher fuel prices than in other parts of the UK.
I accept the measure helps other people, but the reality is that we have seen an increase, on average, of 40p a litre. As other hon. Members have said, there has been a 5p a litre increase in the last week. A 5p reduction is helpful, but it does not go far enough to support those who really need it.
Frankly, lowering the basic rate of income tax is the biggest wheeze of all. Paul Johnson of the IFS said in The Times this morning that we are experiencing “fiscal drag.” The freezing of income tax, which the Chancellor previously announced, means that, even as people’s wages increase, they will pay more tax, and the reduction is not happening yet. All the Chancellor has said is that he will do it at an unspecified time before the next election.
The reduction will help those on low incomes the least. It is a tiny reduction and, overall, the tax cuts announced yesterday are worth only a quarter of what is being increased. Arguably, it is not workers who benefit from the cut but people, such as landlords, with unearned income from investments. People who are wealthy enough to get their income from savings and property will pay less tax, while the least well off continue to pay more and more. This is driving another wedge between unearned and earned incomes. I tabled a further amendment with my hon. Friend the Member for Bath to require reporting on the impact.
The Chancellor repeatedly spoke about hard-working families—that was his catchphrase of choice—but those hard-working families are not being helped. They are seeing their energy bills go up and the price of food to feed their children skyrocket, and working parents are being pushed into higher tax brackets by the choice to freeze the thresholds. They pay ever more tax. My final amendment addresses unearned income.
This spring statement is a huge missed opportunity. I would have liked to see a packed Chamber debating legislation that actually makes a difference to people, but I think we would all accept that this is not that Chamber and not that Bill. There are so many steps the Government could have taken today but did not. We had an Opposition day debate at the start of this week on pensioner poverty, which we know is increasing year on year. The Minister in that debate said he was sure the Chancellor would have been listening to Opposition Members calling for more support for pensioners and suggesting some of the ways in which that could be done—you were in the Chair at the time, Madam Deputy Speaker. Clearly, the Chancellor was not listening, because pensioners were not mentioned at all yesterday. There was very little for pensioners who do not drive or own their house—or for those who do own their house but are not planning any energy-efficient home improvements.
I thank the hon. Gentleman for putting that on the record, but we are looking at 1.3 million additional people, some of whom I am sure will be pensioners, going into absolute poverty in the next year. Our state pension is set to have a real-terms cut. Inflation is at 6.2% and is expected to go up to 8% in April, yet pensions are going up by only 3.1%. That was what the triple lock was designed to deal with; it was there to keep pensions in line with and up to the cost of living. As I have said many times in this Chamber, the state pension is not just about pensioners now; it is about ensuring that people in the longer term know that they have a state pension that they can look forward to, and that matters for younger generations, too.
This Government say that they oppose loneliness, but, as always, actions speak louder than words and the measures are leaving older people on their own, in the dark and the cold. There are very good reasons why some people cannot work. There is nothing at all for those receiving social security, who are also suffering the real-terms cut to incomes and are also struggling to pay their rent, because of the freeze to housing allowance—even the National Residential Landlords Association has called that out as being catastrophic. Frankly, it is more expensive to be poor. People on benefits are being unfairly punished by a system that is set up to make them fail. They are worrying about money, making ends meet and debts, and living in unsuitable housing that costs more to heat. These are not the conditions that set someone up to apply for jobs, to succeed in interviews or to move on to a better place in their lives. We know, as we have heard the evidence, that the benefits system can cause serious harm, damaging people’s mental health, sometimes to the extent that they take their own lives. This is not a system that helps people—often it harms them. We know that our economy is stronger when those who are able to work do so, but our system does not help people do that and it must be more compassionate. It must also receive sufficient funding so that those receiving benefits are not pushed further and further towards the edge.
Do the Government want this country to be one where destitution becomes normal? As I have said, the estimate is that 1.3 million people will move into absolute poverty as a result of the current cost of living crisis. The only support offered yesterday for those on the lowest incomes was the boost to the household support fund, via local authorities. That is no substitution for having a proper support system that stops people falling into poverty in the first place. As happens with pension credit, people do not always come forward for the support they need, so I echo the suggestion that anyone facing hardship contacts their local authority so that they can get support that may be available to them.
The Government could have cut VAT to 17.25%, which is what my party would propose to do. That measure would help everyone. Cutting VAT will shield our constituents from the worst of the increased costs, put money back in their pocket, and help those on middle and low incomes the most. With an economy that is struggling, because of a variety of factors, we need people to be out in our economy; we need people on our high streets, buying things that are made in our factories and marketed on our streets. A cut to VAT would give an immediate boost to every household, but it also helps us in the long term. That is what a meaningful policy would look like.
The purpose of the VAT cut is to increase the economy and increase productivity, and therefore see increased tax receipts, which would cover it.
Instead of raising taxes on working people, the Government could implement a windfall tax on the super-profits of oil and gas companies. I say “super-profits” because this is about the additional profits that those companies are making as a result of the increase in energy prices, and it is not the same as the policy proposed by Labour. However, this Government are allowing those companies to make and keep those massive gains. That is true to form; we have seen them give banks a £7 billion tax cut and we know about the high levels of wastage that we have seen, for example, in relation to personal protective equipment. A measure such as this would help support our most vulnerable families.
Does my hon. Friend agree that the proposed changes to the national insurance thresholds are disappointing, because they just do not go far enough to help people cope with the shocking scale of this cost of living crisis? A disabled family in my constituency do not pay national insurance so they do not get any benefit from the proposed cut; one member is too ill to work and his wife has to stay at home to care for him, so they get nothing from this, but they are struggling to heat their house and pay their food bills. This does not do anything for them. For those who are in work, the NI rate is still increasing by 10% and so they will not benefit enough to be able to heat their homes. Does she also agree that those who live off-grid and heat their homes with heating oil are not protected by anything that happened yesterday?
Thank you, Madam Deputy Speaker. I also thank my hon. Friend for her intervention. We know that the price cap does not support those who are off-grid. That was a point Members made in Monday’s Opposition day debate in relation to pensioners, and in other places. I hope that the Government will consider that and if they do not do something about it now, I hope they will do so in future.
Yesterday’s statement was all smoke and mirrors. It increases the disparities between unearned and earned income.
I was intrigued by the hon. Lady’s comments that a VAT cut would increase economic activity, leading to more tax receipts and therefore it would pay for itself. I very much welcome the idea that tax cuts help to promote economic activity, but if she believes that VAT cuts pay for themselves, does she believe we should always have VAT cuts? How low would she bring VAT? I have to say that that analysis is not shared by Treasury economists.
I find it interesting, given the criticism always given to those on this side in relation to the European Union and VAT, and what we could not and could not do, that I am experiencing criticism from Conservative Members about proposing cutting VAT. I am proposing a temporary measure to help boost the economy in the short term, and I am happy to have a further discussion with the hon. Gentleman about what levels of VAT might look like.
We are seeing an increase in the disparity between unearned and earned income. We are ignoring those who are being pushed into poverty, and we are not addressing the cost of living, which the Chancellor’s statement was supposed to deal with yesterday. Today’s Bill does too little, too late. The measures announced in it will come into effect only in July this year. Payments at the higher rates will remain in place for the next three months. The NI hike will cost employees £2.1 billion in that time. The cost of living crisis is biting right now, today, and the Chancellor must look to implement the changes earlier than outlined. I am not fooled by this Government, and neither is the country. If this is the best the Chancellor can do, they know, as I do, that they deserve another Chancellor.
It is an honour to follow the hon. Member for North East Fife (Wendy Chamberlain). Watching today’s debate, I am struck by a sort of parallel universe; on the Opposition side, people are arguing for more and more tax cuts. As a good, red-blooded Conservative, I am always in favour of good tax cuts, but they are arguing this without any recognition of the macroeconomic situation—the £400 billion this Government have spent propping up the economy, saving jobs and lives during the pandemic; and the war in Ukraine, where Putin’s tanks are crushing my ancestral homeland and murdering thousands. Opposition Members do not seem to recognise that.
When I looked at the amendment paper, which was passed to me during this debate, I became very concerned, because it contains no amendment tabled by Opposition Front Benchers. It is almost as though they do not want to engage with the Bill and make any improvements, so they stand here with their rhetoric about how they are against the Bill and what it is doing, but without seeking to improve it, make any changes or add anything to the debate. Even the Liberal Democrats added a certain je ne sais quoi to this debate, but the Opposition do not and that concerns me. We have a debate where they talk about how awful this is but without any recommendations for improvements.
I very much welcome the fact that my hon. Friend mentioned the fiscal background, which is that we have just spent £400 billion on the pandemic and we now have national debt that is the same size as the GDP. One thing concerns me when I listen to the contributions from those on the Opposition Benches; does he agree that Governments always have to live within their means and, like individuals, they cannot carry on living on the never-never and ultimately will have to try to balance the books?
Of course, we all have to live within our means: we cannot just keep on spending money. It was right for us to spend £400 billion to save jobs, save lives, prop up our economy and make sure that people have jobs, but we need to pay that back, so unfortunately we cannot have huge, sweeping tax cuts, however much we might like to. The Government need to make and are making the tough but responsible choices.
I also feel we are in a parallel universe when I hear Opposition Members talking about being on the side of working people and saying that they would do more if they were in our shoes. My local council, Labour-run Rotherham Metropolitan Borough Council, is not only increasing council tax for hard-working people but doing so with the ninth-largest increase, in cash terms, in the entire country. That is despite the council having £58 million in reserve for rainy days. If this is not a rainy day, I do not know what is. Instead of increasing council tax by so much, the council should spend the money it has in reserves and lower council tax for hard-working people.
Let me turn to an even more ridiculous example. Last year, the Labour police and crime commissioner for South Yorkshire underspent his budget by £2 million. That is a big saving. What would a fiscally prudent person do? They could spend it on reopening the police stations on Maltby High Street or in Dinnington, as I advocate, or perhaps freeze or even cut the precept. But no: the precept for the South Yorkshire police and crime commissioner is increasing, despite that budget underspend. It is a parallel universe.
The Government are introducing tax cuts for hard-working people. We should emphasise that it is about the working people, because we want to put more money into people’s pockets. The Bill is a good, strong and stable measure, because it will look after people and put pounds in their pockets, where they matter. It is my fundamental belief, shared by my colleagues on the Conservative Benches, that if someone works hard, they will get the fruits of their labour—they will get out what they put in. Under this Bill, the more someone works, the more money they will get in their pocket, and more money in their pocket is better for them and their family, community and society. That is what the Bill does: it looks after people by putting more money in their pockets, because the individual knows best. That has been what goes on since time immemorial.
According to the IFS, median earners on around £27,500 can expect to be around £400 worse off in 2022-23 than in this financial year, even after the increase to the national insurance floor. Are they getting back all that they put in? How do the hon. Gentleman’s comments square with the lived experience that people on median earnings will have in the forthcoming financial year?
I thank the hon. Gentleman for that interesting point, but it is clear that 70% of working people are going to have a tax cut. In fact, not only is there a tax cut in the Bill, but we know that there will be an income tax cut in 2023-24. I hope the Scottish Government also reduce income tax, so that they too are on the side of hard-working people.
Does my hon. Friend recognise, as the Chief Secretary to the Treasury did earlier, that the IFS figures show that, taking into account the health and social care levy, people who earn £35,000 or less will still see a tax cut because of the measures in the Bill?
I completely agree with my hon. Friend’s point. This is a Bill that really helps people because it will reduce the amount of taxation and put more money in people’s pockets.
We need to make sure that work pays. That is vital. I mentioned the £400 billion that the Government have spent; they have kept jobs going throughout the pandemic. That is vital. It is why unemployment in Rother Valley is only 3.6%, which is below the national average. Of course, that still means that 2,000 people in my seat are actively looking for jobs, which is why last Friday I held the first ever Rother Valley jobs fair. It was a great success: there were more than 30 employers and hundreds of people turned up, and I am told that dozens of people have already got jobs out of it. That is the Conservative view on the ground in a constituency, helping with jobs, and the Government are doing that nationally.
I was not aware of that exact point, but it does not surprise me because that is generally what happens under Conservative Governments: we try to promote people and work.
The measures on national insurance that we are discussing will encourage more people into work, but we must also look at the wider context. It is not just about working people; the Government recently changed the universal credit tax taper, thereby helping people on universal credit. The simplification of that system will not only make a huge difference to everyday lives but, hopefully, reduce some of the accounting costs and make it easier for business. That will be a double help for business.
Fundamentally, I believe this is a great measure, in the sense that it will put more money into people’s pockets but also pay for the important health and social care levy. We all need that great NHS that protected us throughout the pandemic. This will fund the NHS, put more tax in people’s pockets and clearly shows the way for us to lower taxes in the years to come.
The Chancellor’s spring statement left households and businesses across Luton South to fend for themselves in the middle of a cost of living crisis, as we are set to see this year the biggest drop in incomes on record. The Office for Budget Responsibility confirmed that real household disposable income will fall over the next two years, leading to
“the biggest fall in living standards in any single financial year since ONS records began in 1956-57”.
Britain is facing the highest tax burden in 70 years, with the Chancellor confirming £24 billion in tax rises this year. For every £6 the Chancellor has taken in tax since he became Chancellor, he is giving back just £1 today. This situation cuts to the heart of the Conservatives’ mismanagement of the economy, structured on low investment, low pay and low growth. It also shows their total disregard for the hardship that my constituents in Luton South are facing. Whether it is that people cannot afford the soaring heating bills, the petrol at the pump or the rising food prices, it is our communities that are suffering right now.
The Bill represents just one aspect of the Chancellor’s sleight-of-hand approach to the management of public finances, which is based more on feathering the nest of his own popularity—or, dare I say, his Instagram account—than it is on building an economy based on high growth, high productivity and higher redistribution. Although increasing the national insurance contributions threshold will provide some respite, it will deliver twice as much benefit to the top 50%—the top half of earners—as it will to those in the lower half. And it cannot be considered in isolation. The Chancellor announced in the 2021 autumn Budget that national insurance contributions rates would rise from 12% to 13.25%. Overall, that tax increase is regressive: those earning more than £100,000 a year could end up paying proportionately less. Notwithstanding the threshold change, the rate will be around 13.25% on most earnings up to £50,000 but just 3.25% on any income above that threshold. For all the references earlier in the debate about everyone paying their fair share, I am not sure that is the case.
The hon. Lady mentioned the health and social care levy; does she recognise the point made earlier by my hon. Friend the Member for Grantham and Stamford (Gareth Davies)? The top 14% of earners will pay 50% of the levy. Surely that demonstrates that the levy is more progressive.
There are many ways to cut a cake. The people in my constituency know what fairness is and they know that they are paying disproportionately more in their everyday lives.
Could the Chancellor point to any other major economy that is putting up taxes on working people this April? The policies in the spring statement are poorly targeted and not grounded in fairness. According to the response from the Institute for Public Policy Research, they will help the wealthiest households four times more than they will help the poorest. Alongside the lack of support in the spring statement, wages are forecast to fall in value by 2% this year, which is equivalent to a real-terms cut of £552.
We have heard much about a parallel universe, but it is clear whose side the Conservative Government are on. They are certainly not on the side of the pensioners, families on universal credit and children living in poverty in Luton South, who face the choice of heating or eating. I wish the hon. Member for South Dorset (Richard Drax) was still in the Chamber. I listened intently to his comments about freedom; if someone cannot afford to heat their home or feed their kids, they do not have much freedom. For those on the very lowest incomes, there is nothing. There is nothing for those unable to work or those who are unemployed.
The reform places a greater level of tax on almost all workers. The Government’s negligence will lead to increased fuel poverty. Government Members may try to point, again, to the household support fund. A colleague told me earlier that for those under the income threshold, the increase would be equivalent to 6p a day.
We are talking about the second tranche of the household support fund. The first tranche of £500 million was announced last year. Luton got £1.83 million from that fund, which I am sure was helpful to her constituents. They will get a further share from the second tranche. Does the hon. Lady welcome that?
I am really pleased that the hon. Member is able to remember that figure; I hope he is also able to remind the House of the more than £100 million that has been taken away from Luton council over a decade of Tory austerity, which is why so many of the families in my constituency are living in poverty and are in fuel poverty.
I am going to make some progress.
The household support fund is simply a short-term solution. I declare an interest as a vice president of the Local Government Association, which warns that we need an “effective long-term solution” to support the most vulnerable. The Chair of the Select Committee on Levelling Up, Housing and Communities, my hon. Friend the Member for Sheffield South East (Mr Betts), raised a number of points on that issue earlier; I add that 60p in every £1 has been taken away from local authorities over 10 years of Tory austerity. We need to see much more stability and certainty for local authorities before we will see an impact.
Ultimately, Luton South deserves a Government that will help them through the cost of living crisis, with a plan to drive growth and living standards. That is not what the Conservative party’s spring statement offers, but it is what a Labour Government will.
It is a pleasure to follow the hon. Member for Luton South (Rachel Hopkins), who made a passionate speech. This has been an incredibly important debate, but the framing of the debate by the Opposition Front Bench was somewhat curious. The hon. Member for Ealing North (James Murray) did not want to answer any questions from Members, including myself, on taxation issues that impact the cost of living for my constituents. Thankfully, the debate has been wide-ranging. If we are to discuss the impact of tax, we must look at it in every part of the country.
I listened to the hon. Member for Gordon (Richard Thomson). I often have to restrain myself from intervening on Members of the SNP, but today, I had to listen to the spokesperson for a party who has actually found a way of taxing the people of Scotland, their own citizens, to the sum of £900 million in extra taxes over the last three years for a net benefit of £170 million.
Absolutely not. The SNP has found a way of raising taxes that penalises their own citizens and raises less income.
I come back to Greater Manchester. I am proud to be the MP for Bury North. My constituents face a wide range of taxation issues. They will support the Government position and the policy announced yesterday on the increase in the national insurance threshold. Every single person in this debate has supported it. Indeed, the hon. Member for Gordon said, very curiously, that it was an indictment but he was going to support it. It is a good policy that will put more money in people’s pockets. It is a tax cut, especially for those on the lowest incomes, which is to be welcomed.
I want to consider this policy in the context of the largest self-employed sector in my constituency—taxi drivers. Taxi drivers will be hit completely by the taxes proposed for Andy Burnham’s clean air charging zone—at 493 square miles, it will be the world’s largest such zone. That tax—£10 for small vans and £60 for lorries—will hit all those who rely on certain types of motor transport to earn their living. How can that be right? I stand up here on a regular basis and ask Opposition Members to support me in asking for that charge—a cost that hard-working taxi drivers and others in my constituency face—to be removed, but there is silence. We have to look at the whole of the country, and at the policies put in place by politicians at different levels.
My hon. Friend the Member for Rother Valley (Alexander Stafford) talked about his experience of a local Labour authority. In Greater Manchester, we have council tax rises linked to incompetence. We have precepts that the Greater Manchester Mayor is levying on taxpayers in my area, even though he, as police and crime commissioner for Greater Manchester, has wasted millions on millions of pounds on a failed computer system. The decisions of politicians impact my constituents every day. I hope at some point Opposition politicians will join Conservatives in Greater Manchester in calling for the reduction of taxes on our constituents, for the benefit of those constituents.
We see a contrast. The Government are investing in my constituents and in hard-working people.
I completely agree with my hon. Friend’s point about clean air. Does he agree that there will be the same impact in the nearest big city to my constituency, Sheffield, where at the end of this year heavy goods vehicle drivers will be charged up to £50 a day? With the huge increases in petrol costs, there is a double whammy for hauliers; the charges should be scrapped.
I completely agree. We should be looking at ways to support our hauliers and others who are reliant on motor transport for their businesses and livelihoods.
The contrast is with a high-tax Labour and the SNP policies I have touched on. We have a Conservative Government who, through the pandemic, have invested £400 billion in supporting people and businesses. In my area, more than £100 million has supported businesses through the pandemic. As a result, in the last quarter of last year, as has already been mentioned, employment levels were back to pre-pandemic levels and there is a record number of vacancies—1.25 million—in the market. That is what we must also consider when looking at how the Government are performing. We have a Government who are creating well-paid, highly skilled jobs in all parts of the country as part of the levelling-up agenda. That is to be welcomed. The policy we are debating today is that of a tax-cutting Government; the national insurance policy is a tax cut of £6 billion. Such policies must be welcomed.
We have a Government who invest in their people, in training, in supporting the most vulnerable, and in supporting hard-working, self-employed people in my constituency, and who look at every possible way to link policy to economic growth and employment growth. We have a Government who see that the best way to address the many challenges our constituents face is to make sure that the financial and other support is in place while ensuring that they have the tools and the training to get a well-paid and well-supported job in their local area. That is what this Government are about —the creation of jobs, tax cuts and actions for the many and not the few.
The debate is not just about this place and one policy. In the real world, people are creating wealth. The debate is about how people can use the tools that the Government are giving them to create jobs and opportunities. That is what is happening. I welcome the measure, which clearly has support across the House.
Pensioners were mentioned and they face challenges with the rising cost of living, as do many others. Since 2011, when the triple lock was put in place, the state pension has increased by 35% or £2,050 and is now at the highest level relative to earnings in 34 years.
I am absolutely certain—knowing my right hon. Friends the Chancellor and the Financial Secretary to the Treasury—that this measure is not the end of our fiscal policies and our tools to ensure that people will continue to have job opportunities and to be able to take advantage of the economic conditions that have been created.
This is the right policy at the right time, and I congratulate the Government for it. The Government know that all our citizens face challenges, but the route out of the difficulty is good, skilled, high-wage, high-quality employment in all parts of the country and I welcome the Government’s commitment to that.
Thank you, Madam Deputy Speaker. I remind my hon. Friend the Member for Luton South (Rachel Hopkins) that she has just made a brilliant speech, but if she wants to repeat it she is perfectly welcome to do so!
The hon. Member for Rother Valley (Alexander Stafford), who has just left the Chamber, made a valid point about the nature of today’s debate. We as a House need to look again at how we deal with financial statements. It is all well and good having a statement followed by questions, but these statements are becoming increasingly significant—they are, in effect, mini-Budgets—and we need to look again at how we try to cram a debate about the whole statement into just one piece of the legislative proposals stemming from it. In future it would be better, just as we do with the Budget, to timetable specific debates on the statement and then we would have the legislative flow from that.
I put on the record my apologies to the Pendle constituency Labour party. I was meant to be doing the Sydney Silverman annual lecture this evening, but I have postponed it. I apologise to the CLP for any inconvenience caused. The annual lecture is a significant event, because Sydney Silverman was the man who abolished capital punishment and he had a fantastic record as a Labour MP up there. They have been very good about it and we will choose another date. I have postponed it because, as I raised with the Chancellor yesterday, there is nothing in this spring statement—and for me this is the most significant thing about it—for the poorest in our society, including those forced to live on benefits and pensioners, and I am really worried about what will happen to them over the next six months. My reason for being here is to say that we need to have a proper debate in these coming weeks and months about the nature of poverty in our society, the nature of low incomes, and the options available to us to tackle those issues. I have tabled an amendment, but it looks as though the whole debate is going to run into one.
Last Friday I met a group of unpaid carers who are looking after family relatives. I remind Members that the carers allowance is £67.60. I just do not know how people can live off that. In fact, they cannot live off it. They now face the energy price increases that we have discussed today, and they are being hit by the inflation rate going up. The fact is that, although both benefits and pensions are to increase by 3.1%, the predictions for the increase in the rate of inflation are anything between 7% and 10%. That is a startling cut in people’s living standards, and I do not know how they are going to cope.
I want to wage a cross-party campaign to get the Chancellor to come back sooner, with more measures to assist the poorest in our society. As I said yesterday, I predict that when we get to November there will be large numbers of pensioners and others sitting in their homes freezing. We have gone through a period where, year after year, we have highlighted the number of excess deaths in this country, particularly of older people during winter, and I think that that number will increase again.
Much has been said about the Government’s record on pensions, but I have to remind them that the reason the triple lock had to be introduced is that Mrs Thatcher broke the link between pensions and earnings, and the pension became undermined. When the Government proposed the triple lock, I wholeheartedly supported it. That is why all our manifestos at the last election committed to supporting and abiding by the triple lock, so I found it truly shocking when the Government tore that up and suspended it last year. I thought that we had embedded it into the political thinking of this country that, whatever happens, pensioners should share in the wealth growth of this country, including wage growth, or at least be protected against an inflation hit, but we seem to be going backwards. I know that the Government have said that it has been suspended possibly for only a year, but I fear that it might become the norm. That is why Members from across the House should try to secure from the Chancellor a commitment that something should be done to inflation-proof at least the benefits and pensions of the poorest in our society.
Another issue that I think is going to come at us rapidly in these coming months—I think it will become an important part of the political debate and we should wake up to it now—is that of wages. Unless we inflation-proof wages, I predict that we will see a flaring up of industrial strife in our country. I will give the example of what has happened to council workers in the latest pay settlement. With inflation possibly between 8% and 10% by the end of the year, their wage settlement is 1.75%. That means, in effect, a wage cut of up to 8%. I invite the Government to consider the issue of wages in the public sector, because they obviously set the terms of those in the private sector as well. Unless we inflation-proof wage settlements, our lowest-paid workers will be hit hard by the erosion of their wages as a result of inflation. I think that the Government should be saying to the pay review bodies that, in negotiations, they should start with inflation-proofing settlements.
We also have to recognise that we have to play a role with regard to prices overall. The Government have accepted that there needs to be a continuation of some form of cap on energy prices. I think there should be a cap on profits. The Common Wealth think-tank published its analysis of the energy company profit rates, which were between 42% and 45%. That is absolutely staggering. If that is not profiteering, I do not know what is. We have to come back to this House within the next couple of months. We cannot leave it beyond the recess. Before the recess, we need to know the assessment of the Government, the OBR and others of what the energy price situation is going to be like in three months’ time, and we need measures in place to protect people. We know that the price of oil and so on will fluctuate, but we have to make predictions on the best information we have, before the recess at the end of July, so that we can start to protect people.
We also need to consider other measures on prices. Last week the Mayor of London Sadiq Khan proposed a 12-month rent freeze in London. I proposed a rent freeze last October because it was clear from talking to ACORN, the London Renters Union and others just what rent increases were coming through post covid. Unless we start protecting people with rent controls, particularly in high-rent city areas, a rush of evictions will start again, leading to an increase in homelessness and to those homeless families unfortunately having to rely on cash-strapped councils to support them.
Finally, in addition to the need to provide more support for the hardest hit, including those living in poverty and pensioners, and the need to control the implications of increased prices in both energy and rents, we need—and I hope this is coming next week—clear plans from the Government on where we go from here in tackling the energy crisis. I welcome the lifting yesterday of VAT on solar panels and so on, but, to be honest, that was a fairly small step in terms of what is needed. One of the most effective ways in which we can help people in this coming period is through investment in home insulation. A few years ago, we put forward a plan to insulate 27 million homes, the independent assessment of which was that it would create about 450,000 jobs and reduce energy bills significantly. What we can do now is make sure not only that we insulate people’s homes and bring down their energy bills, but that we create good jobs. We need the Government to come forward immediately with a programme that prioritises that action. Of course we need to go for green growth and investment in wave, wind and solar power, but the quickest gains can be made through home insulation. In that way, we might give some hope to people who, at the moment, are viewing the coming winter as a pretty bleak period.
I have listened to this debate from the start, and I have listened to all those who are quoting the IFS, the Resolution Foundation and so on, but what sticks in my mind is the fact that there are 2 million pensioners and 4 million children living in poverty. We can argue about the Government’s record over the past 10 years, but that is the stark reality of it. The Resolution Foundation analysis that 1.3 million more people will be forced into poverty is shocking and it should shock us all. We should treat it as an emergency that we need to address very quickly. That is why I say that this cannot be the last debate on it between now and the summer recess. We need to have the chance to consider clear proposals about how we deal with the plight of the poorest in our society, how we tackle the way that they are being hit by prices rises and rent increases, and how we can insulate their homes for the future.
I will finish on the point that I made yesterday. A 3.1% increase for those forced to live on benefits and for pensioners, with inflation at anything between 8% and 10%, will push so many people over the edge into real poverty, real stress and mental health problems, and unfortunately for some it will further existing distress. That is what we should be talking about today. We need to be considering measures to address the whole issue, otherwise we will be failing in our duty.
One final point. We are all on good wages and salaries and we do not suffer anything like the hardship of many of our constituents, so it behoves us to try to take into far greater account the most deprived people in our society. So far in these discussions, with all the point scoring and so on, I do not think that we have properly done so. In the coming months, how we tackle this matter must be the nature of our debate.
The right hon. Gentleman is making a very thoughtful speech. Among his proposals is a cap on profits. I wonder whether he could expand on that. In my constituency, for example, we have many small businesses; we do not have multinationals or anything such as that. Does he advocate that all private sector businesses, whatever their size, should have a cap on profit?
I do not think the hon. Gentleman heard me properly. I was referring to the energy companies, specifically in regard to the profits that they have made. If he looks at the report of Common Wealth, the think-tank, he will see that it was looking at 42% to 45% rises for a number of those energy companies. That is where we need to cap profits. That would then give us the opportunity to redistribute some of that into supporting families and so on. It is about trying to be as targeted as possible so that we get the maximum benefit for the maximum number of people in our country. In his speech the hon. Gentleman used the slogan, “For the many, not the few”. It just shows what a good slogan it is when the opposing side starts stealing it.
It is, actually, a pleasure to follow the considered and well thought out speech of the right hon. Member for Hayes and Harlington (John McDonnell). I agreed with some of the principal points that he made, particularly the need for this to be an ongoing discussion. We cannot allow what has been suggested today to be the full stop at the end of the sentence; we must allow the debate to carry on so that we can have those broad discussions. I share his concerns, which are also articulated in my own communities, about the plight and the difficulties that pensioners face. People on limited incomes make up a large proportion of my constituents, and also of the communities that I live in and have been brought up in.
Coming in at this point of a debate means that we have already had intensive discussion of the facts and the figures and what the OBR and the IFS have said, and I do not wish to regurgitate all the things that hon. and right hon. Members have said. None the less, we are facing an unprecedented situation. Broadly speaking, the interventions made by my right hon. Friend the Chancellor yesterday were welcome. As we have discussed, the balancing of the national insurance personal thresholds will enable, to a degree, a tax cut for hard-working people in this country. The levelling up—for want of a better expression—of those rates forms part of a broader package.
The hon. Member for Ealing North (James Murray), who is back in his place, talked about a one-off windfall tax. He strikes me as someone who will go very far on the Labour Front Bench, so I do not want to stunt his political career by agreeing with what he said. None the less, he does make an interesting point about a windfall tax. I have listened intently to the debate about this. My concern about a windfall tax, which might perhaps improve or be slightly better than what is being proposed today, is the broader unintended consequences that it might bring, such as that tax being passed on to consumers. Many many hon. and right hon. Members throughout the Chamber have picked up on that point today. We are dealing with multinational corporations, many of which have complex tax structures and people who are paid very well to avoid and to dodge tax, often using international laws. The one-off nature of what is being proposed, therefore, makes it very difficult to build a legislative framework that would operate in a way that would enable us to derive the benefit.
I do not disagree with Opposition Members about energy companies making exorbitant profits, because we see the figures. The point I come back to, though, is allowing any measure actually to be deliverable. That was a point I made when I intervened on my right hon. Friend the Chief Secretary to the Treasury at the start of the debate. It is about operational delivery—it is not just a slogan; it is about reality. It is about ensuring that people on the ground, who either derive the benefit or face the impact of what we decide in this place, can actually see that. My concern with what Labour is proposing is that, while on paper there are some interesting proposals, in reality, I question whether some of it can be delivered. My concern is the unintended consequence of my constituents bearing the brunt of increased prices as a result of those proposals.
One of the oil and gas companies whose name is batted around the Chamber is BP. BP is investing millions of pounds in Teesside in its new carbon, capture and storage facility, Net Zero Teesside, alongside Hydrogen Teesside, which is a hydrogen production facility. Does my hon. Friend acknowledge that these are energy sources of the future, and that the investment we are seeing right now is important in building our future energy security? If we were to go down the route that Labour is proposing, it is feasible that many energy companies would pull out of their investment in green technologies of the future, which we are so desperate to see.
My hon. Friend has been endowed with some form of clairvoyance today; it is almost as if has seen the second part of the point that I was about to make. He is absolutely right. We have to take a two-pronged approach. The fact is that these companies are investing, particularly in areas such as his. They are vital stakeholders in the future sustainability of energy in this country, so we cannot just take a pull-the-rug approach, or treat them completely as the bad guys. Yes, of course, exorbitant profits are being made. I acknowledged that in the first part of my speech; I am not denying that. The focus of what the Government and my right hon. Friend the Chancellor has done is to try to put the burden on those the broader shoulders, and that is the point that I am trying to drive home. My hon. Friend is right, though, that we must ensure that we encourage these organisations to continue to invest not only in the sustainability of our energy market, but in ensuring that we get the jobs and skills we need for people to realise the ambitions that we put forward in the spring statement yesterday. He is, of course, absolutely right in his intervention, and I thank him for it.
I was very pleased yesterday to see the letter sent by my right hon. Friends the Chancellor and the Business Secretary to the petroleum companies, saying that the cost benefits as a result of the fuel duty reduction—I am sure there will be chunterings and arguments that it was not enough—should be reflected on the forecourt. That was the right thing to do.
As my right hon. and learned Friend the Financial Secretary is on the Front Bench, may I also say that I welcome the Chancellor’s commitment to a value for money committee, which is being set up? I know she will respond more broadly on HMRC’s implementation of some of these NI measures, but it is vital that we ensure value for money and delivery on the ground for constituents —never more so than with the Bill we are debating today.
I should say that I am a member of the Public Accounts Committee, and value for money is our raison d’être. I am concerned that we often put things in place without thinking about how they are reflected on the ground and what value for money actually means there. For my constituents, particularly the most vulnerable, this is about ensuring, as right hon. and hon. Members have said, that they can buy their school uniform and meet the additional costs they will face as a result of where we are now.
When we talk about the changes in the NI threshold rates, I think particularly of the many sole traders and small businesspeople in my constituency who will have to navigate this change, building systems and putting them in place. It is therefore right that the Government have sought, rather than bringing in this change straight away, to delay it to July to allow that process to be embedded. I make a plea to my right hon. and learned Friend the Financial Secretary to ensure that HMRC has the systems to do that, because there have been times when I have not been impressed with HMRC and the way it has implemented such things. It is vital that the Treasury get a grip on that, to ensure that we can unleash the full benefit of what this measure is intended to do. In my very short time here, compared with many others in this place, I have learned that, whatever our political objectives and political will on particular measures, delivery on the ground can be very different and can sometimes mar them. The plea I hope she takes away from my comments is to ensure that this measure can be realised and benefit our constituents more broadly.
As I said at the start of my contribution, this is about a broader range of packages. Touching on what the right hon. Member for Hayes and Harlington said, this Bill cannot be the end of the conversation; it must be the beginning.
Yesterday, the Chancellor published his tax plan, which sets a course for the first income tax cut in many, many years—I am not sure how many—for working people across the country. Does my hon. Friend welcome those steps, which give tax certainty to both constituents and employers?
My hon. Friend is absolutely right; it is the certainty in that plan that allows us to move forward. That is the point I want to drill down on, and he has articulated it much more eruditely than me—it is obviously the fantastic focus he has, being a Teessider. Publishing a plan that sets a clear roadmap, as our right hon. Friend the Chancellor did yesterday, is vital so that we know where we are going and the fiscal interventions we will have to make to help people. That is what people are looking for.
One of the measures our right hon. Friend the Chancellor announced yesterday was an increase in the household support fund to £1 billion. How does my hon. Friend feel that councils such as his in Sandwell—I note his previous comments on that—will be able to deal with the bespoke needs of his constituents?
My hon. Friend makes a strong point. It goes without saying that the funding is vital for my constituents in Sandwell. I know, from the interactions I have, how much impact that has on people on the ground. I cannot even articulate how important what our right hon. Friend the Chancellor did yesterday will be and how it will improve people’s lives. My hon. Friend refers to my contribution in the House earlier today, which brings me back to the running theme of my speech: delivery on the ground. Unfortunately, we now have commissioners in Sandwell because the Labour administration could not run the authority for 50 years.
We must ensure that that funding gets through to the people who really need it. That is key. Once again, it is absolutely right that we have put the funding in place, but we must ensure that there are robust systems in place to ensure that it gets through. We have learned throughout the past two years that, whether it is what we are doing today on national insurance or the unprecedented package of support this Government provided to keep businesses and the economy going, keep wages paid and keep people in employment and support, we must have the on-the-ground delivery.
I know, from my own experiences in my local area, that at times that delivery failed, and that meant businesses closing down and people not able to get the support they needed. My hon. Friend is absolutely right that that funding will change lives in my constituency—but, if it is to do so, those people who are delivering it must be able to deliver, and it is incumbent on central Government to step in where they need to and provide the guidance necessary to support delivery of those vital funds.
We are in unprecedented times, as we have heard today. We have just gone through a period of unprecedented spending—£400 billion to keep our economy afloat—and we did that to protect jobs and keep people employed. From my constituency and the communities I live in with my friends, neighbours and family, I know the impact that has had, by keeping people earning, and keeping small businesses and people’s dreams and aspirations going.
People will say that this is not the perfect solution. The difficulty with fiscal interventions is that there is never a panacea; there will never be one magic bullet that sorts the whole problem out. This Bill is part of a broader package, and the intervention from my hon. Friend the Member for Redcar (Jacob Young) helped to draw that point out. The Bill we are discussing forms an important part of a broader package, enabling us to address an anomaly that we have had for so long and leading to a tax cut for people, but it must come with additional measures and packages such as those announced by my right hon. Friend the Chancellor yesterday.
The one thing it is incumbent on those on the Treasury Benches to do is ensure that this money gets to real people. That means ensuring that we have processes in place that work. As I said at the start, I know my right hon. Friend the Chancellor is committed to doing that. He has set up his committee on value for money—my right hon. and learned Friend the Financial Secretary has heard me bang on about that four times in this speech now—to ensure that that delivery happens. However, we must ensure that the money gets through, because that is how we will benefit normal people such as those in the communities I represent, in Wednesbury, Oldbury and the heart of the Black Country, the great town of Tipton.
It is a pleasure to speak today, having been unable to get in yesterday.
Clearly, as we have heard from across the Chamber, a lot of people are hurting right now. Some might suggest that Warwick and Leamington would be deemed a relatively prosperous community, but there is real deprivation in all our communities. It is those who are on the lowest incomes, the pensioners and those on welfare, who will be—who are being—hit hardest.
While I can see the Chancellor is an ambitious individual, what was most disappointing about his statement yesterday was that, with the exception of the removal of VAT on solar panels and renewable heat systems and the 5p reduction in fuel duty, there was very little in it. That is particularly disappointing because we are in the middle of a cost of living crisis, and he could have been seen to be more obviously looking to support others. It must be difficult, being a relatively wealthy individual, to be able to see what is going on in the households of ordinary working people and the hardship that they are currently facing.
I was really surprised about the windfall tax because, to me, it seems like an open goal—an obvious thing to do. I have heard the comments of Conservative Members about the windfall tax and the need for large oil and gas companies to reinvest profits—of course, and those businesses will be doing that. Their profit forecasts were looking fairly good this past 12 months anyway, but they have risen significantly because of the dramatic rise in the international price of a barrel of oil. That is terrific for the businesses in that sector. It is fortunate for them to be there at this time, but it has significant consequences for the households of our constituents— our hard-working families who are trying to make ends meet.
We have heard the comments about those businesses having to reinvest profits, and of course they would be doing that. I sincerely want them to look at new hydrogen facilities and electric vehicle charging infrastructure, and they are, but we need to rapidly upgrade those plans, and I am sure the Government will be looking at that and talking about it in the coming days. That needs to be done, and I hope the companies and the Government will be much more ambitious than they have been to date. The upsurge in profits from the increase in the price of oil has essentially equated, as the chief exec of BP said, to a cash machine for those businesses that they have then used to increase dividends, understandably, but also to go on to a very aggressive plan of share buy-backs. That is what a lot of corporates do—I get that—but, as my Front Benchers and I have been saying, that money could have been put back in and used to alleviate the very real, very immediate pressures on households up and down the country.
The IFS says that yesterday’s announcements were really like the Chancellor giving with one hand yet taking away with the other. Paul Johnson said that the decision to raise national insurance contributions and cut income tax drives a
“further wedge between taxation of unearned income and earned income.”
That relates to my point about the dividend increases that we have seen in other parts of the economy.
I assume that the hon. Gentleman is supporting the Bill; I think his Front Benchers have indicated that they are. He talked about lowering income tax driving a wedge and so on. Does that mean that when it comes to lowering income tax, which my right hon. Friend the Chancellor has said he wants to do in a couple of years’ time, Labour will oppose that?
Of course Chancellors want to do all sorts of things. The prospect of this Chancellor actually being able to do anything in six months, 12 months or two years is entirely down to the economic winds of that period. Let us recall that the Chancellor said just a year ago that he would allow an increase in nurses’ pay of 1%. At that time he would have been getting very regular briefings from the Bank of England forecasters, with its economists looking at what was going to happen to the economy and the rate of inflation. It was pretty clear then that inflation was already ticking up way beyond 1%, so even at the time of the announcement nurses would be getting a real-terms cut, and he then increased it to 3% in the autumn. I understand the hon. Gentleman’s point, but who knows what the economic situation will be like in two years’ time, given that the UK had the biggest hit of all G20 countries in the pandemic? These things would not have been forecasted at the end of 2019, so quite where the Chancellor will be in two years’ time, goodness only knows.
The Resolution Foundation has said that one third of the cost of living crisis has come from the increase in taxes. That is a really telling statistic. Torsten Bell said that
“it makes no sense to raise National Insurance while cutting Income Tax”.
He is quite right. There seems to be no logic to doing that. As has been said elsewhere, the increase in national insurance contributions is viewed by businesses as a tax on jobs. The Government’s determination to pursue this increase in national insurance contributions will hit hard those businesses that are already hurting as a result of the pandemic and now the war in Ukraine, as well as the consequences of the Brexit changes in certain sectors.
We have a Chancellor who has, to use the analogy of a supermarket, put up prices by six quid one month and then offered a promotion of £1 off this month—for now. I am afraid the public will see through that, particularly the poorest and most deprived in our society, including pensioners. My right hon. Friend the Member for Hayes and Harlington (John McDonnell) mentioned the removal of the triple lock, regardless of whether that will be permanent. There was nothing for the poorest and the pensioners in our society. When I went to a food bank in north Leamington a couple of weeks ago, I came across two women in their 60s—WASPI women who were queuing up, for the first time ever in their lives, to get food from a food bank. That is the reality of what is happening out there in our society.
I am afraid that there was a paucity of ambition in the measures that the Chancellor announced yesterday. He could have gone much further and done so much more for those who are hurting in our society. Sadly, I fear that that is the measure of this Chancellor.
It is a pleasure to respond to this Second Reading debate on behalf of the official Opposition. I thank all hon. Members for their contributions to the debate.
My hon. Friend the Member for St Helens South and Whiston (Ms Rimmer) spoke passionately about the impact of energy price increases on energy-intensive businesses in her area, making clear the very real risk to jobs. A windfall tax on energy producers could be used to fund support for these businesses. My hon. Friend the Member for Luton South (Rachel Hopkins) was exactly right to say that the Government’s approach is low investment, low pay and low growth. The Government are putting up tax because they have failed to grow the economy. My right hon. Friend the Member for Hayes and Harlington (John McDonnell) spoke of his concerns about the impact that this will have on pensioners, reminding us that we must never forget the most vulnerable in society. The Government must do more on this. My hon. Friend the Member for Warwick and Leamington (Matt Western) spoke about how families are trying to make ends meet.
I also listened closely to the speeches of the hon. Members for South Dorset (Richard Drax), for Redcar (Jacob Young), for Peterborough (Paul Bristow), for Rother Valley (Alexander Stafford), for Bury North (James Daly) and for West Bromwich West (Shaun Bailey), as well as those of the hon. Members for Gordon (Richard Thomson) and for North East Fife (Wendy Chamberlain). The hon. Member for Peterborough spoke about the concerns of his constituents about the cost of energy. I would just say to him: does he really think the Government are doing enough, or does he think the Chancellor will have to come back to this House with more support?
This Bill, as we have heard, increases the annual national insurance thresholds for employees and for the self-employed from July 2022. As my hon. Friend the Member for Ealing North (James Murray) said, we will not oppose the Bill, as any help for people facing the national insurance rise in just a few weeks is welcome. It is rare that we debate tax legislation so soon after a Budget or spring statement, but the Bill stems directly from the spring statement that the Chancellor made yesterday.
I am sorry to say that the spring statement failed to match the scale of the challenge that our country and our economy face. Yesterday, the Office for Budget Responsibility said that we are facing
“the biggest fall in living standards”
since records began in the 1950s. It forecast that living wages will fall by 2.1% this year and 1.2% the year after. It also confirmed that living standards will not return to pre-pandemic levels until 2024-25. Millions of families around the country are feeling that already with high food, energy and fuel bills. They are looking at the bills that they must pay in the coming weeks and at their wages, which are failing to keep up with inflation, and they are simply wondering how they will make ends meet.
Yesterday, we hoped for a statement from the Chancellor that recognised the scale of the challenge and took real action to reduce energy bills, such as by leveraging a windfall tax on the record profits of the oil and gas producers, as the Opposition have proposed, or by finally scrapping his tax on jobs and on workers—his national insurance increase. We were disappointed on both fronts. He did not take the opportunity to tax the oil and gas giants for whom the crisis has been, in their own words, a “cash machine”, nor did he have the courage to drop his national insurance increase in full.
Instead, in the Bill, we are left with a half measure from a Chancellor who gives with one hand and takes with the other. Let us be clear: he is no tax-cutting Chancellor; he is a tax-raising Chancellor who is increasing the tax burden to the highest level since 1949. The burden is higher after yesterday’s spring statement than it was before. The OBR confirmed yesterday that £24 billion of additional tax rises are about to hit this year. As it made clear, the Chancellor has reversed only about a sixth of the tax rises that he has announced since he took the job, which means that he will still take £6 in tax for every £1 he is giving back.
As the IFS said, even after the changes announced yesterday, almost all workers will be paying more tax on their earnings in 2025 than they would have been without the Chancellor’s increases. Let us be clear: the national insurance increase is a tax on people who work. He is raising taxes on millions in the middle, but where is the increased tax contribution from the wealthiest in society? A landlord with a large number of properties will not be paying more in taxes, but their tenants will; someone with significant income from buying and selling stocks and shares will not pay any more tax; and the national insurance rise is also going ahead in full for more than 1 million employers who do not benefit from the employment allowance. It is a tax hike on jobs, which will ultimately be passed on to workers through lower wages and higher prices.
When the Chancellor first announced the national insurance increase, he said that it would pay for social care. As is typical of him, however, all was not what it seemed, because the Government then said that the money would go to tackling the NHS backlog instead. Six months later, there is still no plan to fix the social care system or tackle growing NHS waiting lists. After a decade of Tory mismanagement, the NHS went into the pandemic with record waiting lists and staff shortages of 100,000. After yesterday, however, we can be less confident than ever that the tax rise will ever make it into our health and care system. If the tax was really for the NHS, yesterday’s announcement would mean that it now faces a £6 billion cut; I assume that that is what the Government plan. Perhaps it would have been spent on making up the £11.8 billion of hard-working people’s money that has been lost to fraud and error under the Chancellor, which is close to the amount that he originally hoped to raise with the national insurance rise.
As I said in September, this is tax rise without a plan. Politics is about choices and Labour would not have made that choice. Yesterday was the Chancellor’s last chance to stop the national insurance increase before it comes into effect in two weeks. He did not take that chance. He is pressing ahead with a tax rise on workers and businesses, even as the cost of living crisis spirals out of control, prices increase and real wages fall, and the Government still refuse to take proper action to help people with soaring energy bills. This Bill cannot face that reality.
The Chancellor wants the British people not to notice that he is putting up their taxes at the worst possible moment, but they are smarter than that. They will see through the smoke and mirrors—his cynical attempt to give the impression of a tax cut just before the next election. He is still increasing their taxes and leaving families and businesses to fend for themselves in the middle of a cost of living crisis. That is the reality of the spring statement and the reality of the Bill.
It is a privilege to close this debate on behalf of the Government. We have heard many excellent speeches from both sides of the House today and I thank all hon. Members for their contributions. Before I address their points, I will remind the House of the Bill’s purpose.
The Bill does three things: it cuts taxes to ensure that people have immediate help with the cost of living; it creates better conditions to enable businesses to invest and grow; and it ensures that people keep more of what they earn for years to come. The Bill makes changes to the national insurance contributions system, which will make it easier for households to manage their finances at this difficult time by putting billions of pounds back into their pockets.
As we have heard, the Bill has two main measures. First, it will increase the NICs primary threshold and the NICs lower profits limit to £12,750 from July. As my hon. Friend the Member for South Leicestershire (Alberto Costa) said, it is the largest single personal tax cut in a decade. It represents a £6 billion personal tax cut for 30 million people across the UK. In addition, almost 2 million people will be taken out of paying class 1 NICs, class 4 NICs, and the health and social care levy entirely.
Some hon. Members might be asking why we cannot introduce these measures sooner. The simple answer is that we feel that the July implementation date strikes the right balance and allows employers and payroll software firms to adapt to significant changes. My hon. Friend the Member for West Bromwich West (Shaun Bailey) highlighted the importance of updating HMRC’s guidance.
Secondly, the Bill seeks to alleviate some of the pressures caused by the rising cost of living on those who earn low amounts and who work for themselves. This measure will benefit half a million self-employed people by saving them up to £165 a year. As the Chief Secretary to the Treasury has already outlined, removing class 2 NICs from this group of low-earning self-employed workers will not prevent them from building their eligibility to the state pension and other contributory benefits.
I will now turn to some of the points raised during the debate by right hon. and hon. Members. The hon. Member for Ealing North (James Murray) made a few points and highlighted the tax burden. It is important to remember, however, the context in which the legislation is being brought forward and the context in which previous choices were made. He will remember that the Chancellor saved many livelihoods with the £400 billion of support that he provided during the covid pandemic. He also asked how we compare with other countries and what other countries are doing at this time. I inform him that the new tax to GDP ratio will still mean that we are in the middle of the pack internationally and lower than Germany, France and Italy.
The hon. Gentleman and the hon. Member for Warwick and Leamington (Matt Western) asked why we have not brought in a windfall tax on oil and gas companies. Many Conservative Members pointed out the answers to that. First, it is a short-term measure and we are bringing in long-term measures that will withstand the future. Secondly, we need those companies to invest in the future to ensure that we have energy security and that we transition to more renewable energy sources. They also pay more taxes already—40p in the pound not 19p in the pound as other companies do—and they have already invested, by way of taxation, £375 billion in production taxes.
As we know, there is energy price volatility in that the price of oil and gas will be going up and down, which is why the Chancellor has put in the measure for a 12-month period, but I should point out that that builds on the 12th consecutive year of fuel duty freezes.
I am going to carry on, because there are a lot of points to which I would like to respond and I have limited time.
My hon. Friend the Member for South Dorset (Richard Drax) made a very powerful speech about freedom, recognising the impact of global challenges. He mentioned the armed forces, and I would like to reassure him that last year’s integrated review was accompanied by the largest cash increase in the defence budget since the cold war, with an additional £24 billion.
The hon. Member for Gordon (Richard Thomson) asked why the Chancellor is not using his £30 billion headroom. I would like to point out that the OBR has said that there is “unusually high uncertainty” in relation to the outlook, and the OBR has also said that the headroom the Chancellor has kept is the same as, or indeed less, than that of previous Chancellors. That is important because, if there is a 1.3% increase in interest rates, that will totally wipe out the headroom the Chancellor has given himself. We are already looking at £83 billion being paid in interest next year. Those of us on the Government Benches think we need to be fiscally responsible in the way we deal with our taxpayers’ money.
The hon. Member also said that to increase the national insurance contributions threshold as we are doing was not the right way to go. I would like to point out that Martin Lewis has said on Twitter:
“This is the big one. Increasing the National Insurance threshold so it now matches Income tax from July.”
He said various other things, and then he said, “Good call”.
My hon. Friend the Member for Redcar (Jacob Young) recognised that there are no easy choices. He reminded us of Labour’s record on the economy, which reminded me that the shadow Chancellor had put forward a total of £170 billion of uncosted spending proposals just by September last year, and she has refused to rule out hiking up income taxes.
The Minister mentioned Martin Lewis, and I wonder if she could provide the information that the Chief Secretary said she might be able to give in winding up this debate about the effect of this national insurance measure on people claiming universal credit. Martin Lewis has made the point that they will lose 55% of the £330 a year benefit. Will she confirm if that is correct?
I was going to come back to that point, but I am very happy to deal with it now. The right hon. Gentleman is right that an individual may be affected by the taper, but they will be better off overall as a result of the change. If they are earning below the work allowance, they will get the full benefit.[Official Report, 19 April 2022, Vol. 712, c. 1MC.] It is important to point out the changes we have already made for those on universal credit. As a result of those changes, 1.7 million households will benefit from the taper rate change, which is £1,000 of additional income for them.
The hon. Member for St Helens South and Whiston (Ms Rimmer) talked about the energy crisis. She will know the measures we have already put in, including the £9 billion of further support, with the £350 that people will get over the course of this year. She mentioned businesses in her constituency, and I hope they will welcome the increase to the employment allowance that we have announced.
I am very pleased to hear how my hon. Friend the Member for Peterborough (Paul Bristow), my almost constituency neighbour, is engaging with his constituents, and that the Oxcart pub welcomes our business rate cuts.
The hon. Member for North East Fife (Wendy Chamberlain) talked about poverty. I am very proud that, if we look at the past 10 years of this Government, there have been about 1.3 million fewer people in poverty. She also talked about pensioners, and this the Conservative Government have consistently supported pensioners. Through the triple lock, we have seen an increase in state pension of 25%—that would be £2,050—since 2011.
My hon. Friend the Member for Rother Valley (Alexander Stafford) made a very passionate speech, rightly recognising the global macroeconomic position. He is absolutely right to talk about the importance of getting people into work, a point that was also made by other hon. Members. I am very pleased that he has held his first Rother Valley jobs fair, and we are getting people into work through the plan for jobs that the Chancellor has set out—whether through restart and kickstart or with the benefit of work coaches.
The hon. Member for Luton South (Rachel Hopkins) talked about low growth and low pay, but I wonder if she is aware that ours was the fastest growing economy in the G7 last year, according to the IMF. I wonder whether she heard the Chancellor’s statement in which he set out a tax plan that focuses on growth. It focuses on what we will do to support businesses in the way of capital, people and ideas. He has already highlighted that he is looking forward to cutting tax rates on businesses, so that they can further invest, in his autumn Budget.
A number of Members talked about how the OBR has said that the package only reverses
“around a sixth of the net tax rises”
that the Chancellor has announced overall. I just want to inform them that the tax plan comes on top of the almost £46 billion in tax cuts that the Government have introduced for this year and next. That includes the super deduction worth £25 billion across two years, business rates and VAT support worth £14.5 billion across two years, and fuel and alcohol duty freezes worth £4.5 billion across two years. These important tax cuts were not included in the OBR’s analysis, which just focuses on the final year of the forecast period.
My hon. Friend the Member for Bury North (James Daly) was right to say that this is not the end of the journey for the Chancellor, a point also made by my hon. Friend the Member for West Bromwich West (Shaun Bailey), who mentioned that this is part of a broader package. The Chancellor has a plan to help families with the cost of living, creating the conditions for private sector-led growth and sharing the proceeds of growth fairly.
The right hon. Member for Hayes and Harlington (John McDonnell) talked about the importance of helping those on low incomes. I absolutely agree with him that that is important, but we are doing it—whether through the universal credit taper rate, raising the national living wage, the 70% cut in taxes that we announced yesterday and are legislating for today, the £9 billion of energy support or increasing the generosity of the local housing allowance. All those measures will support people on low incomes. He made an interesting point about public sector pay, which I noted conflicted with a point the shadow Chancellor, the hon. Member for Leeds West (Rachel Reeves), made on the radio this morning when she recognised that negotiations for public sector pay were independent decisions made by pay review boards.
The measures in the Bill will ensure that our national insurance system plays its part in relieving some of the challenges facing families right now as a result of the cost of living crisis. Of course, we have not introduced them lightly. We are conscious that in the next financial year we are forecast to spend £83 billion in debt interest, the highest figure on record. In addition, while the Bill represents an important part of the Chancellor’s tax plan, it is just one element of it.
Yesterday, the Chancellor also announced steps to create the right conditions to enable our businesses to grow, highlighting some potential tax-cutting options for businesses, investment and innovation. He announced action to help to ensure workers see more of their hard-earned cash and a pledge to reduce the basic rate of income from 20p in the pound to 19p in the pound before the end of the Parliament, representing the first such cut in 16 years. Furthermore, the Chancellor announced help for motorists through the biggest cut to fuel duty rates ever, while for the next five years homeowners in Great Britain who have materials such as solar panels, heat pumps or insulation installed will pay zero VAT. He doubled the household support fund, which allows local authorities to distribute financial help to the vulnerable, so it stands at £1 billion.
Help with the cost of living, extra support for the vulnerable, delivering on our pledge to reform the tax system and measures to make sure work really pays all comes on top of the £400 billion of support we provided to individuals and businesses during the pandemic and the £20 billion we have already pledged to help with the cost of living. Let no one say that this Government do not stand by the people of this country. The Bill is yet more clear evidence of how we are making good on our promise to support our citizens through challenging times. That is why I commend it to the House.
Three hours having elapsed since the commencement of proceedings on the allocation of time motion, the Deputy Speaker put the Question (Order, this day).
Question agreed to.
Bill accordingly read a Second time; to stand committed to a Committee of the whole House (Order, this day).
Further proceedings on the Bill stood postponed (Order, this day).
NATIONAL INSURANCE CONTRIBUTIONS (INCREASE OF THRESHOLDS) BILL: MONEY
Queen’s recommendation signified.
Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),
That, for the purposes of any Act resulting from the National Insurance Contributions (Increase of Thresholds) Bill, it is expedient to authorise the payment out of money provided by Parliament of any increase in the sums payable under any other Act out of money so provided that is attributable to increasing the thresholds at which primary Class 1 contributions, Class 2 contributions and Class 4 contributions become payable to an amount not exceeding £12,570 for a tax year (or its weekly or monthly equivalent).—(Miss Dines.)
Question agreed to.