National Insurance Contributions Increase

Jerome Mayhew Excerpts

Tuesday 8th March 2022 Commons Chamber

[Jerome Mayhew (Broadland) (Con)]

The hon. Gentleman is asserting that the poorest will be worst hit by this, but Treasury analysis of the impact of tax and spending decisions on households in ’22-23 in cash terms clearly shows that the bottom eight deciles—80% of households—will be better off as a result of the Government’s combined tax and spend decisions, including on national insurance. What does the hon. Gentleman say to that?

[Richard Thomson]

I say that I very much doubt that, and there is analysis by the Institute for Fiscal Studies that suggests very differently, but again this comes back to the marginal rate of tax and there is no doubt that this is going to have a greater impact on the marginal rate of low earners than that of higher earners.

--- Later in debate ---

[Jerome Mayhew (Broadland) (Con)]

When we discuss whether we should have the national insurance contribution rise, we ought to look at what we intend to use the money for, because, after all, as my hon. Friend the Member for Gloucester (Richard Graham) mentioned, it is a hypothecated tax. The Government are looking to address two crucial elements to improve to our society, which are the covid backlog—currently more than 6 million people are waiting for treatment, of whom 310,000 are waiting for more than a year—and adult social care, where there is a desire widely held by constituents of hon. Members across the House to cap care costs. Such reforms would assist 150,000 people with their care costs at their time of greatest need. There is a degree of consensus that they are good proposals and must happen—we need to spend the money—so the real question is not whether we spend the money but how we pay for them.

[Mr Betts]

The hon. Member mentioned the 150,000 people who will benefit from the cap on care costs, and they are disproportionately people in more expensive homes. Where in that funding is the help for the 1.5 million people that Age Concern has assessed should be entitled to social care but have now been excluded from the provisions?

[Jerome Mayhew]

The hon. Member made a number of interventions on the Minister, and I refer him to the full responses that were given.

The question that I take from that is: how we will pay for the proposals? It seems to me that there can be only three answers. We can take money from other priorities in Government, we can borrow, or we can increase taxation. So far, I have heard no suggestions of other areas of Government spending that should be reduced. The Opposition typically move to defence spending as a simple way of extracting money for other commitments, but that is unlikely to be an area of future reductions in today’s environment; in fact, I submit that it will be the opposite.

[Grahame Morris (Easington) (Lab)]

The hon. Member is seeking suggestions. What does he think about the £8.7 billion of personal protective equipment that has been incinerated and gone up in flames? Surely nobody in their right mind would suggest that that is a good use of public money. Is it not possible to claw back some of those costs from the suppliers, if indeed the supplies were defective?

[Jerome Mayhew]

I am grateful to the hon. Member for his intervention. I suggest that a very good use of public money was emergency funding for PPE when we most desperately needed it in a national lockdown. It was inevitable that there would be a trade-off between speed—everyone in the House was cheering the Government on at the time—and maximising the effectiveness of every single contract. I hope that the Government make no apology for the speed with which they dealt with the crisis. They should be commended for that.

It has also been suggested that we should crack down on fraud. The hon. Member for Leeds West (Rachel Reeves) referenced a £4.7 billion headline in covid-related fraud, but she failed to give the Government credit for the actions that they have taken to address that. We have the Taxpayer Protection Taskforce, which has recruited 1,265 staff. We also have the work done on powers for the Insolvency Service and Companies House to link company directors directly to their bounce back loans, which has been used on 61,758 companies, catching loans worth £2.1 billion. The combination of those two factors means that the new estimate, which she did not find time to refer to, is not £4.7 billion but £3.3 billion. Fraud is therefore reduced to an estimated 7.5% of contracts, which is at least within spitting distance of the average for Government programmes of, I am sorry to say, as much as 5%.

[Anthony Browne]

My hon. Friend makes a valid point about the need to increase spending to pay for social care and has raised the different ways of doing that. Does he agree that if we are to increase spending sustainably, we need a sustainable source of money and that a one-off windfall that occurs in just one year cannot fund long-term commitments? Cutting back on fraud in one particular year cannot fund long-term commitments.

[Jerome Mayhew]

My hon. Friend is absolutely right. Even if we recovered all of that £3.3 billion, that would be for a single year only. The great mistake that the Opposition have made is to conflate single events—a windfall tax is another example—with ongoing revenue needs.

The next option is to borrow money. Of course, that is the easy response, and that really is the Opposition’s position, even if they cannot bring themselves to admit it from the Dispatch Box. However, that is not free money, because we have to service the debt and, eventually, we have to repay it. So we are passing the responsibility on to our children and our grandchildren for tax cuts now, which is essentially what the Labour party is arguing for. Our servicing of debt already cost an estimated £64 billion last year, which is £955 for every single member of the population. Because of inflation, which is a global phenomenon, and the likely rise in interest rates, that is forecast to rise to £75 billion for this financial year. The hon. Member for Leeds West says that the Government have a policy of buy now, pay later, but what could be a better description of Labour’s response to this pressing need? We want to improve social care, and we need to have a covid fightback, and we have got to pay for it.

There is the option to borrow, but, as I said, it is our children and grandchildren who will pay that price. I therefore believe that the Government are quite right to balance the increased social spending that we want to achieve with the tax necessary to pay for it. If we look at the total measures that the Government have brought in, we see that they are deeply progressive. Treasury analysis shows that they are net positive for 80% of households, whereas Labour’s plan to remove the national insurance contribution would actually help the top 10% the most—by more than £1,000. Surely that is not Labour’s policy.

No Conservative Government want to raise tax, but it is our duty before cheap popularity to be responsible custodians of national finances. That is a lesson that Labour has never learned.

[Several hon. Members rose—]