National Insurance

Oral Answers to Questions — Treasury – in the House of Commons at 12:00 am on 25th June 1998.

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Photo of Joan Ryan Joan Ryan Labour, Enfield North 12:00 am, 25th June 1998

If he will make a statement on the representations he has received on his plans to reform employees' national insurance contributions. [46148]

Photo of Shona McIsaac Shona McIsaac Labour, Cleethorpes

If he will make a statement on the representations he has received on his plans to reform employees' national insurance contributions. [46152]

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

The reforms to employees' national insurance contributions announced in the Budget, together with the introduction of the working families tax credit, have been welcomed by a wide range of individuals and organisations. They will increase the return from working and the incentive to move from welfare to work.

Photo of Joan Ryan Joan Ryan Labour, Enfield North

I welcome my right hon. Friend's Budget measures on national insurance contributions. Will he outline how he expects them to help my 2,500 constituents in Enfield, North who are, by any definition, low paid, and the 2,375 adults who are registered as unemployed? That is some 5,000 people in my constituency alone who seek assistance from our Government and who got none from the previous one. [Interruption.]

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

I am grateful to my hon. Friend. When the Opposition groan as if they did not support what she said, let us remember that we are reducing national insurance for employees. If the Conservative party is going to oppose that as well, it is an additional problem that it will have with the electorate at the next general election.

Our strategy to help people to move from welfare to work, especially my hon. Friend's constituents, is based first of all on the national minimum wage, which we are introducing from next year. It is supplemented by the working families tax credit, which means that no one working full-time, with a family, will earn less than £180 a week, and they will not pay tax until £220 a week. That is complemented by the rise in child benefit for families, the improvement of child care with the new child care tax credit and the reduction of national insurance that we have achieved. This Government take seriously our contribution to the working poor, and we are doing our determined best to reduce poverty among working families. It is about time the Opposition started supporting us on these things.

Photo of Shona McIsaac Shona McIsaac Labour, Cleethorpes

Will my right hon. Friend confirm that, if we take the changes to national insurance, the working families tax credit and the national minimum wage, for certain people—for example, a lone parent with one child working 16 hours a week—the effective hourly rate of the national minimum wage will be about £11 per hour? Are my sums correct?

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

Yes, it is possible for a single parent going to work to earn decent wages, and a return from her work that will enable her to bring up her family. That is an important development. [Laughter.] Again, the Conservative party laughs when we are trying to help single parents get back into work. The Conservatives should support measures to deal with unemployment. We can build on these measures by making it possible for more and more people to find opportunities for work.

Through the national child care strategy, there will be child care to back that up. The child care credit means that people above the average wage will be able to claim help with child care so that they do not have to choose between their children and the work that they have to do. They can get proper help with child care. We are the first Government to introduce a national child care strategy, which is to the benefit of thousands of mothers and fathers.

Photo of Geoffrey Clifton-Brown Geoffrey Clifton-Brown Conservative, Cotswold

Can the Chancellor clear up a muddle? In his Budget statement, he said that no employee learning less than £81 a week would have to pay national insurance, yet when the Social Security Bill passed through the House, we found that the figure was £64 a week, in line with that in the Red Book. That dashed the hopes of many low-paid people that they would have their national insurance payments cut. They were under a false impression. Can the Chancellor clear this up once and for all?

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

The hon. Gentleman accuses us of falsehoods about national insurance. We have cut national insurance in a way that the previous Government did not: £1.26 a week for every employee. We also said that future reforms of national insurance will mean that no one will pay national insurance or income tax before £81 a week. When we announced the figures, we published them in the Red Book. The hon. Gentleman rightly attributes to the Red Book the correct information, which was also the information in the Budget speech. Again, the Conservative party should support cuts in national insurance, as they should support what we have done on child benefit and the working families tax credit, but it is impossible to get sense out of the Conservative Opposition.

Photo of John Whittingdale John Whittingdale Shadow Spokesperson (Treasury)

The published projections of the Chancellor in the Red Book take no account of the effect of the future cut in national insurance contributions for employees earning less than £81 a week. The Chancellor has now told the Treasury Select Committee that that is simply an aspiration. I repeat the question of my hon. Friend the Member for Cotswold (Mr. Clifton-Brown): when do the Government intend to make the cut, or is that pledge as worthless as Labour's other pledges?

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

I welcome the hon. Gentleman to the Front Bench, a move that was part of the changes in the Conservative Front-Bench team, but he should get his figures accurate. We have cut national insurance from next April, and any impression that the Conservative party tries to give to the contrary is utterly wrong. We are the party that has made it possible for people in work to have a lower tax rate through a cut in national insurance. Conservative Members should welcome it. As for what the hon. Gentleman says about the intentions of the Government, I refer him to my Budget speech, which is entirely accurate. The information on that is reflected in the Red Book. Instead of griping, the Conservative party should start welcoming the good things that we are doing.

Photo of Mr Bill O'Brien Mr Bill O'Brien Labour, Normanton

May I thank my right hon. Friend for the support that he is giving to the constituents of Normanton in the form of help for the low-paid, and people who are in work and still living in poverty? It is commendable. May I put it to him that many of my constituents who rely on the state pension realise that national insurance contributions are for their benefit? What protection is he giving to people who rely on the state pension for their livelihood and quality of life? That is important to many people. Any contribution that my right hon. Friend could make would be most helpful.

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

I am grateful for what my hon. Friend says about his constituency and about the pension. He, like me, represents a constituency that had thousands of jobs in the mining industry and which has looked to the Government to sort out a policy for the coal industry. I am pleased that many hon. Members from mining areas are in the House of Commons today. Our obligations to pensioners are set out in our manifesto, and we shall uphold them.

We started by cutting VAT on fuel to 5 per cent. That helped every pensioner in the country. We abolished the gas levy to cut fuel bills. At the same time, we introduced direct help for winter fuel bills of £20 for every pensioner household in the country and £50 for households on income support. By those measures, taken with the changes in regulation, we have reduced the average pensioner household's fuel bill by about £100. The Government take seriously their obligations to the elderly, and we shall continue to meet all the commitments that we made in our manifesto.