Asked by
To ask Her Majesty’s Government what assessment they have made of
the impact of the planned increase in the rate of national
insurance contributions on the poorest sections of society.
(Con)
My Lords, the Government have published several assessments of
the health and social care levy’s impacts, including
distributional analysis of the tax and spending announcements’
combined impact, a technical annexe in our plan for health and
social care, and a tax information and impact note. Some 6.1
million individuals earning less than the primary threshold,
equivalent to £9,980 in 2022-23, will not pay the levy; the
highest-earning 15% will pay over half the levy’s revenues.
(Lab)
My Lords, from next month, workers with earned annual income
above £9,880 will pay national insurance at a rate of 13.25%. At
the same time, 265,000 recipients of at least £65.8 billion of
chargeable capital gains will not pay a penny, even though they
use the national health service and social care. Does the
Minister agree that this is outrageous and that this injustice
should end as soon as possible?
(Con)
My Lords, we have introduced the levy through the national
insurance system—that is the system that we have used previously
to fund improvements to the healthcare system and, in this case,
the social care system. We have ensured that the levy also
applies to dividend income, so that it reaches a wider number of
people who will benefit from it.
(LD)
My Lords, last Friday, disgracefully, to my mind, Shell bought
750,000 barrels of Russian crude at a record discount price of
£28.50 to lock in a minimum of £20 million in additional profits.
Brent crude has soared to £139 a barrel, cascading yet greater
profits to the oil and gas companies. Can the Minister think of a
single excuse not to cancel the rise in NICs and replace it with
a windfall tax on those companies?
(Con)
My Lords, we have discussed a windfall tax before and, in
addition to the reasons that I gave then, the increase in
NICs—the health and social care levy—funds an ongoing increase in
health and social care funding in this country. A windfall tax
would be a one-off tax; it would not provide the sustainable
basis that we need to fund our health and social care system.
(Lab)
My Lords, the Minister will be aware that, even before the
pandemic, the poorest 10% of households paid 47.6% of their
income in direct and indirect taxes. That compares with 33.5% by
the richest 10% of households. So the national insurance hike
will just worsen the hit on the poorest. Can the Minister explain
what the latest hike in national insurance will do to the tax
burden on the poorest, and when the Government will begin to
reverse that trend?
(Con)
My Lords, as I explained in my original Answer, the 6.1 million
individuals earning less than the primary threshold will not pay
the levy at all. In addition, in the analysis that I mentioned
earlier, if you take the package together, both the levy and the
spending that is ring-fenced for the health and social care
system, lower-income households will be the largest net
beneficiaries from this package, with the poorest households
gaining the most.
(Con)
My Lords, does my noble friend the Minister agree with me that
those who call for a windfall on the oil companies would in fact
be penalising the shareholders? And who are the shareholders?
They are the pensioners of this country—they are the one who hold
most of the shares in these oil companies.
(Con)
My Lords, we have strayed more on to a windfall tax than I
expected, but I say to my noble friend that he makes a good
point. The issue of energy security is at the top of people’s
minds at the moment. The Government see gas, for example, as part
of our transition towards net zero. We want to allow people to
invest in our North Sea oil and gas fields as part of that, so a
windfall tax could also have a negative impact on that.
(Lab)
My Lords, there is no doubt at all that at the lowest level this
tax will be a detrimental pay cut for most workers in our
country—there is no doubt at all about that. It will be felt most
harshly by them, while they are at the same time caught up in the
cost of living crisis that we have. They are being squeezed dry,
as we know, by soaring inflation—and that is before next month’s
massive hike. Can the Minister possibly justify this attack on
the lowest-paid workers in our country and, if so, how can
she?
(Con)
My Lords, the Government have been very clear in their
justification for the health and social care levy. The Government
are committed to the responsible management of the public
finances, which is why we have had to take tough but responsible
decisions to increase taxes in order to fund a significant
increase in permanent spending on the NHS and social care. On the
cost of living challenge, that is why, this year and next, the
Government will provide £20 billion of support to help those
people who are struggling to meet their household bills.
(Con)
My Lords, if the Government were persuaded to go down the
windfall tax route, would they be further persuaded to go down
the windfall rebate route in the years that oil companies make a
loss, such as last year?
(Con)
My Lords, my noble friend is correct that, as well as seeing
record highs in prices recently, we have in recent years also
seen record lows. With that came record lows of investment; that
is why the Government are very careful before considering
questions such as a windfall tax.
(PC)
My Lords, would it not be more socially equitable if the upper
cap on national insurance were removed, so that those on high
incomes pay the same marginal rate as those who are earning
modest incomes? Would that not be a far fairer way of doing
it?
(Con)
I say to the noble Lord that it is important to take the impact
of national insurance and income tax together. When you do that,
the combined tax rate for those earning in the lower bracket is
32% and, in the upper bracket, it is 42%. So, overall, we still
have a progressive system.
(Lab)
My Lords, there is no doubt that the social care and health
sectors need money from the taxpayer, but why can it not be from
those people who are the richest—the large companies that pay no
tax? When will the Government get round to them, rather than
oppressing ordinary working families?
(Con)
My Lords, an important aspect of the health and social care levy
is that it is paid by employers as well as employees—because they
benefit from having a healthy, supported workforce. Of course, we
have also announced increases in corporation tax, because the
Government did an awful lot to support businesses during the
pandemic and everyone needs to contribute now to getting us back
on to a path of sustainable finances.
(Con)
My Lords, I declare an interest as I am of pensionable age and
therefore will not have to pay national insurance until next
year. Given the extra money the Government will receive as a
result of taxes on fuel, is there not a case for considering
deferring the increase in national insurance until next year, so
that everyone is in the same boat, as it were? People are going
to be faced with immense costs for fuel, as well as the impact of
inflation on the standard of living.
(Con)
My Lords, the additional spending from the levy kicks in from
this year onwards, so we matched the introduction of the levy
with the introduction of the new spending, which cannot wait; we
need to address the significant backlogs we have in our
healthcare system. But my noble friend is correct that we have
designed the new levy to apply also to people over pensionable
age, as they will benefit in no small degree from the increased
spending.
(Lab)
My Lords, the decision to increase national insurance this April
and introduce a longer-term health and social care levy was taken
in a certain economic context. Things have changed substantially
since. Inflation is high and will rise further. The Bank is
likely to hike interest rates as a result. The Russians’ illegal
invasion of Ukraine will bring its own economic consequence. A
U-turn is supported by the public, businesses, Conservative Back
Benchers and even some in the Cabinet. Will the Chancellor
finally take note and act immediately to ease the cost of living
crisis?
(Con)
My Lords, I acknowledge that the circumstances have changed—that
is why the Government have also changed our approach by, for
example, announcing £9 billion of support to help people with
their increased energy costs. The things that have not changed
are the pressure on our healthcare system, the pressure on our
social care system and the long waiting lists we see as a result
of Covid. We need to start dealing with those now; they need
proper funding and that has to come from within the levy.
(LD)
My Lords, the Minister is right to point out the pressure on the
health and social care sectors. Assuming the Government do carry
on with their plan, does she agree that it is unlikely that
social care is going to see very much of this money and, even if
it sees all of it, it is completely not enough to solve the
problem in our social care service?
(Con)
My Lords, the noble Lord is correct that in the early years it
will go further towards the NHS to help deal with the backlogs;
the spending on social care is aligned with the introduction of
our social care reforms. But that is not the only funding that is
going into the social care system; in recent years, additional
funding has gone in to support the social care system.
