National Insurance Contributions Bill

Part of Orders of the Day – in the House of Commons at 6:03 pm on 17 December 2007.

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Photo of David Gauke David Gauke Shadow Minister (Treasury) 6:03, 17 December 2007

We believe in addressing poverty.

Let me address the issue that we face. The distinction between the two elements and the breaking up of the package are a consequence, it would appear, of an enormous oversight that goes back to the Government's changes to national insurance contributions announced in the March Budget. The Government's position is that as a consequence it is necessary to change S2P as proposed in the Bill in order to address the matters mentioned by the Financial Secretary.

That prompts the question why the proposals were not identified in March 2007. The Pensions Policy Institute identified the issue in its briefing published shortly afterwards, as well as the concern that the approach appeared to be inconsistent with what the Government were attempting to do. My hon. Friend the shadow Chief Secretary to the Treasury raised the matter some months ago, long before October, in a number of parliamentary questions.

The apparent oversight and the fact that the Treasury did not spot the problem is striking because of the fact that when the revenue impact of the Budget announcements was calculated, which the Treasury would have had to do as part of the process of producing the Red Book, it presumably should have taken into account the additional liability for additional earnings-related benefits and, in particular, the additional rebates for those who have opted out. I assume that that was done.

If I am wrong, I hope that Ministers will correct me in the course of the debate. If it was not done, the figures in the Red Book are clearly inaccurate. We have had no indication from the Government that that is the case, so I assume that the figures in the Red Book are accurate, and that they took into account the fact that additional rebates would have to be paid over the years ahead. However, once it was spotted somewhere in the Treasury that that was an issue, it would appear that nothing was done about it.

Why was no announcement made in March? As is so often the case with the Government, we are left to ask whether there was some kind of concealment or whether the problem was incompetence. I do not take the cynical view—certainly not in this case. However, some hold the view that the then Chancellor was on the brink of becoming Prime Minister and did not want any further tax increases, particularly in connection with pensions, where his reputation was perhaps not all that it might have been; he therefore glossed over the issue and left it for his successor. I do not hold that view. I think that the problem was just not spotted. Perhaps Ministers could confirm that it was not spotted.

I believe that the problem was not spotted, particularly because of the suspicion that there was a breakdown of communication between the Treasury and the Department for Work and Pensions at the time. Even at the best of times, the then Chancellor—now Prime Minister—has not been renowned for his openness with other Departments. He is not necessarily the easiest person to work with. After all, the then Secretary of State for Work and Pensions, who is now the Secretary of State for Business, Enterprise and Regulatory Reform, was the Cabinet member who was widely believed to have said that the then Chancellor would make an "awful Prime Minister"—I spare the House the other adjective used.