National Insurance Contributions (Rate Ceilings) Bill

George Kerevan Excerpts

Tuesday 3rd November 2015 Commons Chamber

[Mr Gauke]

With the leave of the House, Madam Deputy Speaker, I want to respond to the points raised by right hon. and hon. Members in this short debate. Before I do so, may I reiterate the main purpose of the Bill? It introduces the final aspect of the five-year tax lock, which is further proof of the Government’s commitment to provide certainty on tax rates for the duration of this Parliament and the commitment to low levels of taxation made in the Conservative manifesto for the general election in May, which resulted in a Conservative majority in that election. The commitment was that the rates of income tax, VAT and NICs would not increase. The Finance Bill introduced legislation to deliver that commitment for income tax and VAT, whereas this Bill delivers on the commitment for NICs. The benefits are that it provides certainty for employers and employees that for the duration of the Parliament NICs will not rise and the upper earnings limit will not exceed the higher rate threshold for income tax.

We have heard the argument that it is not necessary to legislate in this regard, but I remind the House that it was a Conservative manifesto commitment to legislate and we are fulfilling that commitment. Concerns were also raised that the measure might restrict flexibility for future Governments, and the comment made by my right hon. Friend the Member for Wokingham (John Redwood) about the circumstances that might apply in such cases was very good. I do not think that anybody would advocate in the teeth of a recession that we should put these rates up. Fiscal credibility is very important, of course, and our determination in that regard will be demonstrated at the spending review on 25 November. It is important that we bring borrowing down, but we do not believe we should do that by putting up national insurance contribution rates, which is what the Bill prevents us from doing.

Future funding for contributory benefits, should NIC receipts prove insufficient, is a matter for the Chancellor and a decision to be made at the relevant fiscal event based on the latest projections available at the time and taking into account the NIC rate ceilings that we are introducing. The Government Actuary recommends a working balance of one sixth of benefit expenditure for the national insurance fund and there is provision to top up the national insurance fund from the Consolidated Fund to maintain the balance at that level. For the 2015-16 tax year a top-up of £9.6 billion has been provided for in legislation.

Let me point out, though, first, that this Government are committed to meeting our commitments in terms of the state pension and spending on the NHS. Secondly, the hon. Member for Dundee East (Stewart Hosie) raises concerns that the projections might not be accurate. These projections in relation to national insurance contribution rates are made by the Office for Budget Responsibility, an independent body. I can understand why the hon. Gentleman might have concerns in general about projections for tax revenues, given that he fought a referendum not that long ago assuming that the tax revenues from North sea oil would be very much more substantial than they have turned out to be. In those circumstances, I can understand his sensitivity to the fact that receipts might not be what had been anticipated. However, this is based upon an independent assessment and, in the round, is nothing like the fiscal risk that the Scottish National party was offering the Scottish people just over a year ago.

[George Kerevan (East Lothian) (SNP)]

Has the Treasury Minister forgotten that the North sea oil revenues go to HM Treasury and that the recent fall in income from the North sea proves the point to the Treasury that its forecasts can be wrong?

[Mr Gauke]

The proposition of the independence movement was much more optimistic about receipts than the OBR at the time of the referendum. Most important of all, the United Kingdom is more easily able to absorb a volatile oil price than an independent Scotland would be—a point that I would have thought anyone looking at this fairly had to accept.