[Sir Michael Lord in the Chair] — Clause 1 — Primary Class 1 contributions

Orders of the Day — National Insurance Contributions Bill – in the House of Commons at 4:41 pm on 10th June 2002.

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Photo of Evan Harris Evan Harris Liberal Democrat, Oxford West and Abingdon 4:41 pm, 10th June 2002

I beg to move amendment No. 1, in clause 1, page 2, line 4, leave out—

'the current upper earnings limit' and insert "£100,000".

Photo of Michael Lord Michael Lord Second Deputy Chairman of Ways and Means

With this it will be convenient to discuss the following amendments: No. 2, in clause 1, page 2, line 8, leave out "1 per cent." and insert—

'10 per cent. on earnings over £100,000'.

No. 4, in clause 1, page 2, line 30, leave out—

'the current upper earnings limit' and insert "£100,000".

No. 5, in clause 1, page 2, line 34, leave out "1 per cent." and insert—

'10 per cent. on earnings over £100,000'.

Photo of Evan Harris Evan Harris Liberal Democrat, Oxford West and Abingdon

These amendments were tabled by myself and my hon. Friend Matthew Taylor, whom I am pleased to see in his place. I had imagined that we might be joined at some point in our proceedings by the Chief Secretary to the Treasury, Mr. Boateng, who deserves to be congratulated on his new position. Indeed, I hope that he will join us in today's debates.

It needs to be said at the outset of this debate that the Liberal Democrats welcome the resources for the national health service that will be provided under the Bill. However, we have four very clear concerns. First, the resources have come five years too late. Secondly, in the sense that they were not advertised at the last election, they have been introduced by stealth. Thirdly, we do not believe that the Bill represents the fairest way to act. Fourthly, we believe that significant difficulties will be created for business—in particular, but not only, manufacturing business. These amendments represent an attempt to resolve the last of those problems.

Significant difficulties will be created for those who run and work in businesses by the Government's decision to use a rise in employers' contributions to fund the health service. For that reason, we propose in the amendments a 10 per cent. national insurance contribution rate above the current upper earnings limit—indeed, above earnings of £100,000 a year. That is as close as we can get, using the vehicle of this Bill, to a selectable amendment that reproduces our policy to fund public services in the fairest possible way and to do so progressively and by avoiding placing extra burdens on business.

Taken together, these amendments—especially if considered with amendment No. 3, which has not been selected for debate—would provide an alternative approach to funding the health service, instead of raising employers' contributions. There may be disagreements between those on the Treasury Bench and ourselves; they may consider that our proposal would be too fair and too good for business because they want to penalise business. I hope that they will accept, at least, that it is a statement of our position. When we say that we want improvements in the health service, it is right that we are asked how we will pay for them, just as the Government have said how they will pay for them. We have set out the ways in which we shall do so, as I am doing now. In contrast, Conservative Front-Bench Members are on much more difficult ground, as I suspect, for reasons that we may share, that they will express their concerns about the impact on business of the rise in the employers' national insurance contribution. They will have to answer—Mr. Bercow is perhaps eager to address this now—how they would pay for improvements in the health service if they are not going to support some of the measures in the Bill.

Photo of John Bercow John Bercow Shadow Chief Secretary to the Treasury 4:45 pm, 10th June 2002

The hon. Gentleman will not be surprised to know that I await the explanation of his arguments with eager anticipation, bated breath and beads of sweat on my brow. Given that he has just referred to an amendment whose purpose and effect would be to limit the size of national insurance contributions paid by employers, will he confirm whether an amendment that has been tabled by Liberal Democrats will confine the limit on national insurance contributions by employers to those in Great Britain? The Liberals appear to have neglected to consider the situation in Northern Ireland.

Photo of Evan Harris Evan Harris Liberal Democrat, Oxford West and Abingdon

If that is the best that the hon. Gentleman can do on this key issue—I believe that the amendment to which he refers has not even been selected in this group—it shows the weakness of his position. The Chairman of Ways and Means has made his selection, and my intention is to make the general point that the funding of the health service should be progressive. For preference, that should be done without putting extra burdens on business, but, in the end, the health service needs to be funded.

I had hoped that the hon. Gentleman would answer the point that I put to him, and I hope that he will do so. If he opposes some of the resources of this Bill—I share some of the concerns that he may express later about some measures—he must state which parts of the health service he wants to cut, which parts he will not allow to grow, or what other taxes he would increase. That is important. However imperfect the drafting of our amendments, they are a genuine attempt to explore why the Government have chosen to go down this path.

Our approach to raising the resources that are needed for the health service is progressive. We made it clear in our alternative Budget that we wanted a 50 per cent. rate of income tax for those earning more than £100,000—the very well-off and those best able to afford such a rise—to pay for this vital public service. Clearly, it is not possible to frame amendments to propose such a rise in income tax. As the next best thing—given that the Government have sold the pass on the upper earnings limit—we would have liked a much better method than this tax on jobs, which is a much more second-rate option.

The Government must say why they are opposed to the proposal set out in these amendments. They must have considered it, given that the upper earnings limit is no longer sacrosanct. Given the 1 per cent. increase in the upper earnings limit, the Government have conceded that it is not absolute, regardless of what they failed to say about it before the election. The drawbacks must therefore be addressed. It does not appear that it is unfair, because we would be asking high earners to pay more. It does not appear that it is the sort of tax that can easily be avoided—clearly, that will be an issue in relation to taxing high earners. Given all the evidence that a 50 per cent. rate on incomes over £100,000 is about the going rate worldwide, it is difficult to envisage how people will move their earnings abroad, especially when, in this context, we are talking about a payroll tax that is much more difficult to avoid. In New York, for example, when taken together with local taxes, the tax on salaries equivalent to £100,000 is about equivalent to the rate under our proposal.

Are the Government concerned that our proposals are not explicit enough? I do not see how one could be more explicit than saying before the election that we wanted to ask the better-off to pay more tax in a fair way for the health service. We restated that proposal in our alternative Budget and we are seeking to make that case in Committee today.

The Government cannot argue that our proposals are not a transparent way of raising money. The complexities that the Government have already introduced into the national insurance contributions system do not give them strong grounds on which to attack the transparency of our approach.

There are strong reasons for seeking to make the changes proposed by the amendments. They would raise approximately the same amount of resources as the Government intend to raise from their tax on employers that will result from the Bill's proposals for employers' national insurance contributions. We weighed up whether we would prefer the money to be raised via our approach or from employers' national insurance contributions. Because of the significant drawbacks on business that will result from the tax that the Government propose, we believe that our approach is preferable.

It is peculiar that the Government should seek to raise so much of the money for the health service from a tax on business. In previous debates such as that on the 1999 measures to deal with pollution, the Government have said that they did not want to tax jobs. They said that that would be bad and that employers' national insurance contributions would be reduced when other taxes on pollution went up. However, the bad tax that the Government have previously opposed is now being used as a vehicle.

We believe that the top priority is extra money for the health service, but we do not believe that the Government's approach, as set out in the detail of the Bill, is the right one. Raising the employers' contribution will cause problems for employers, manufacturing and the businesses facing difficulties in exporting because of the strong pound. In addition, public service employers, including those within the health service, will lose money as they gain. It is not clear that the Government have taken that point into account.

It is clear that the amendments would be fairer and would not have such a severe impact on business. Our proposals are transparent and it would not be possible to avoid them. Those are strong reasons for supporting the amendments, and I ask, Sir Michael, that we be allowed to vote on amendment No. 2, which expresses the bulk of what we are trying to say. The Conservatives must also explain where they would get the money from if not from a tax on business.

Photo of Mark Hendrick Mark Hendrick Labour/Co-operative, Preston

Will the hon. Gentleman tell us why, when the Government's proposal was introduced in the Budget, the Liberal Democrat Front-Bench spokesman described the 1 per cent. increase on employees' national insurance contributions as not being a tax? In fact, he asserted that income tax should have been raised by 1 per cent. However, when it comes to employers, the Liberal Democrats describe the increase as a tax. Why is it a tax on employers when it is not a tax on employees?

Photo of Evan Harris Evan Harris Liberal Democrat, Oxford West and Abingdon

I regret that the hon. Gentleman was not able to provide me with the direct quotation, but I shall set out again the position of those on the Liberal Democrat Front Bench. We recognise that national insurance contributions are a form of payroll taxation. Our position is clear in that we believe that income tax is a preferable way of raising money for the health service, and we said that to the electorate at the last election. We were clear about introducing a top rate of 50 per cent. on income of more than £100,000, and that would cover unearned income and wealthy pensioners. The Government's proposal excludes the wealthiest third of pensioners from contributing to the extra money that the health service needs.

We must now decide how we want the money for the health service to be raised. Five years ago, we would have supported such a measure and we still want money to go into the health service. However, because the Government will put extra burdens on business through the national insurance contributions paid by employers, the amendments reflect our disappointment that the Government did not take the alternative open to them and apply a top rate equivalent to income tax through national insurance contributions on incomes of more than £100,000.

Photo of Evan Harris Evan Harris Liberal Democrat, Oxford West and Abingdon

I thought that I had answered the hon. Gentleman's question.

Photo of Mark Hendrick Mark Hendrick Labour/Co-operative, Preston

Is the hon. Gentleman saying that the Liberal Democrats would much rather that pensioners paid income tax at an extra 1 per cent. than businesses paid 1 per cent. towards the health costs of their employees?

Photo of Evan Harris Evan Harris Liberal Democrat, Oxford West and Abingdon

We have been clear that wealthy pensioners who can afford it—

Photo of Evan Harris Evan Harris Liberal Democrat, Oxford West and Abingdon

Not only Rupert Murdoch, but other newspaper magnates, should, when they become pensioners, contribute to vital public services according to their ability to pay. I have answered the hon. Gentleman's question. He is saying that people such as Baroness Thatcher and Rupert Murdoch should not pay for the health service. Given that one of them was partly responsible for reducing it to its present state, that is charitable of him.

Photo of Matthew Taylor Matthew Taylor Liberal Democrat, Truro and St Austell

My hon. Friend may want to go a little further and point out that the Labour party's policy is not only that Rupert Murdoch and Baroness Thatcher should not contribute extra tax to the NHS, but that low-paid employees on as little as a few thousand pounds a year should pay extra. So those on very high incomes do not pay extra, but those on very low incomes do. That is an odd policy for the Labour party to pursue.

Photo of Evan Harris Evan Harris Liberal Democrat, Oxford West and Abingdon

I direct Mr. Hendrick to page 46 of the Library research paper on the Bill, which shows the curve of the percentage of income paid in national insurance contributions according to gross income. Under the Government's plans, those earning £600 a week will pay 9 per cent. and those on £2,000 will pay around half that. That is no one's definition of progressive. People on around that earnings limit should make a significantly increased contribution to public services.

Labour Members may be embarrassed that they do not have as progressive a policy as they might and will end up supporting a tax on businesses in their communities in preference to asking the better-off to pay more. That is hard to defend. We have clearly stated our position. A progressive form of taxation through asking the better-off to contribute is far preferable to asking business to do it, as are the Government.

Photo of Christopher Chope Christopher Chope Shadow Spokesperson (Transport)

I say at the outset that we shall oppose the amendments. They position the Liberal Democrats to the left of Labour, and if they want to establish those credentials there are better ways of doing it than by tabling such amendments.

I am confused about how the amendments fit in with the Liberal Democrats' alternative Budget. When that was published on 8 April, they pledged to increase the rate of income tax by 1 per cent. for all income up to £100,000. As I understand it, the amendments would not increase by 1 per cent. national insurance contributions for employees in the range of earnings between £35,000 and £100,000, but increase to 50 per cent. the burden on employees earning more than £100,000.

Photo of Matthew Taylor Matthew Taylor Liberal Democrat, Truro and St Austell

I do not know if the hon. Gentleman did his own research or got someone else to do it, but it was pretty poor. We proposed 1p on the basic rate plus a new 50 per cent. rate—a 10 per cent. increase—on earnings of more than £100,000. Combined with the Government's 1p national insurance rise, the amendment would replicate that, and that is its purpose.

Photo of Christopher Chope Christopher Chope Shadow Spokesperson (Transport)

I am grateful to the hon. Gentleman for explaining that. The Paymaster General and I were under the impression that the alternative Budget was expressed in terms that would cause a lot of confusion.

The idea of imposing a 50 per cent. marginal rate of tax on individuals earning in excess of £100,000 is obscene these days. Political parties on the continent—most recently in France—are campaigning to reduce the burden of taxation. They realise that it directly affects the willingness of individuals to participate in the economy and, in particular, their ability to attract the most able employees. It will be very damaging for our economy if we burden employees with penal tax rates of 50 per cent. for those earning more than £100,000.

Many anomalies flow from the proposal. For example, if two married people each earn £60,000, they would pay tax at the 40 per cent. rate, but if one of them is at home looking after the children while the other earns £120,000, £20,000 of their earnings would be subject to the 50 per cent. marginal rate of tax. That would not be fair.

Photo of Matthew Taylor Matthew Taylor Liberal Democrat, Truro and St Austell 5:00 pm, 10th June 2002

As the hon. Gentleman is questioning the Liberal Democrat position, will he clarify whether he intends to oppose the employers' national insurance rise? If that is the case, and as he does not agree with an alternative way to raise the money, does he accept that the NHS will not get the extra money? Are the Conservatives now opposing extra money for the health service?

Photo of Christopher Chope Christopher Chope Shadow Spokesperson (Transport)

I thought that the hon. Gentleman was here for Second Reading when we alone among the Opposition parties firmly declared that the Bill was bad and voted against it, unlike his party which supported it. We are against the Bill. The NHS is already wasting a great deal of money, as the figures suggest. It is worth repeating what I said on Second Reading. Stuart Emslie, a senior civil servant, has said that the NHS in England alone is estimated to be wasting between £7 billion and £10 billion from a budget of £54 billion as a result of, for instance, fraud. We want to see the reforms. The Government continue to say that they will invest more money in the health service and that that will be accompanied by reform, but we have seen no sign of that and yet they still inflict the higher imposts.

Photo of Matthew Taylor Matthew Taylor Liberal Democrat, Truro and St Austell

So that we are absolutely clear on this: the Conservatives are against extra money for the health service, reformed or otherwise.

Photo of Christopher Chope Christopher Chope Shadow Spokesperson (Transport)

That is a travesty of what I said. The hon. Gentleman might disagree, but people can make their own judgment by reading the Official Report. It is obvious that I did not say what he claims because otherwise he would not have felt the need to intervene again to put words in my mouth. I have given way three times to him and it is clear that he realises that he is on the losing end of the argument.

I agree with the Liberal Democrats that the burden on employers will damage the economy. I am not prepared to accept, however, that the solution is to impose a high burden of extra taxation on those who earn more than £100,000 a year, which is not so unusual in London and the south-east. It will damage our economy if we send out a signal to the ablest and the best entrepreneurs in the world that we are no longer an entrepreneurial society and wish to penalise people by imposing higher rates of tax. One of the best things achieved by Margaret Thatcher's Government was the reduction of the penal high rates of personal taxation.

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

This is already developing into an interesting debate as we watch the fisticuffs between the Liberal Democrats and the Conservatives about some of the finer points of deciding how funding for the national health service should be raised. In the case of the Conservatives—this is not such a fine point—the argument is about whether that funding should be raised in the first place.

I say to Dr. Harris that he is wrong on every count, and I should like to explain briefly to him the reasons why. He started by saying that the Liberal Democrats were against the measure because it was imposed by stealth. He also said that it was not good for business, even though the amendments are only about employees, and that it does not raise money in the fairest way. He went on to argue that there was a more progressive approach for raising money for the national health service.

In this Committee of the whole House, the Government lay before hon. Members a judgment. First, the national health service needs more resources after sustained underinvestment for a long period, and those resources have to be considerable and guaranteed for a period. Secondly, the approach to how that money is raised must be taken on the fairest basis that can be achieved. Thirdly, the Government pinned their decisions on the basis of the Beveridge principle. I have to say to the hon. Member for Oxford, West and Abingdon that his amendments are neither progressive nor fair, which indicates the folly of trying to tinker with a little bit of the system, rather than looking at the whole system and how it is to be managed. Indeed, it could be argued that his amendments would introduce taxation by stealth. What he said that he was seeking to achieve is not what his amendments would deliver.

First, the amendments would mean that people who earn less than the upper earnings limit would still pay the extra 1 per cent. on all their earnings. Secondly, those whose earnings are between the upper earnings limit and £100,000 a year would pay the extra 1 per cent. only on a part of their income. I assume that a drafting error was made in relation to the amendments' implied reference to people who earn £100,000 a week: I assume that they were intended to refer to people who earn £100,000 a year. I will be generous to the Committee and assume that that was the intention.

The amendments would also ensure that those who earn £100,000 pay 11 per cent. on their first slice of income up to the upper earnings limit, but nothing at all between the upper earnings limit and £100,000. People would then pay 10 per cent. on £100,000 and more. I do not know what definition of the word "progressive" the hon. Member for Oxford, West and Abingdon is using, but that is not a progressive system.

Photo of John Bercow John Bercow Shadow Chief Secretary to the Treasury

There are very few occasions on which the Paymaster General and I agree, but we do so at least in part today. She is guilty of a characteristic understatement in her critique of the Liberal Democrats, whose amendments are, frankly, hare-brained and madcap in equal measure—and there is nothing unusual about that. I say to the Committee and the hon. Lady that there is one thing of which we are not accusing the Government in relation to the Bill's tax increases, as distinct from a number of their predecessors: we are not suggesting that they are stealth taxes in any sense—far from it. The Liberal Democrats are hopelessly behind the times and have got it wrong. These tax increases are brazen, brutal and a triumph of hope over reality.

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

The hon. Gentleman has never knowingly understated anything in this House, and he rises to the challenge now.

I was trying to make the point that when the Opposition advance a principle in debate on the Floor of the House, it is their responsibility to ensure that their amendments would deliver on that principle. Perhaps the amendments have indicated to the hon. Member for Oxford, West and Abingdon how difficult it is to combine in practice the whole cascade of principles—progressiveness, fairness, certainty and delivery of necessary resources—that he articulates so readily. That is probably one of the many reasons why we are the Government and the Liberal Democrats are not.

The hon. Gentleman cannot even get his figures right. He went on to say that the amendments set out a much fairer method—that his party is committed to raising the money for the national health service, but in a different way. I have news for him: the amendments would raise less, not more, for the NHS. That is true even before taking into account the fact that, as experience has shown, the tax system has to be sensitive in understanding that people, especially those whose pay is in the higher earnings range, sometimes engage in finding ways not to pay tax. Benefits in kind, whereby people find other ways to have their salary paid, are a classic example.

Photo of Evan Harris Evan Harris Liberal Democrat, Oxford West and Abingdon

The Conservative spokesman described a 50 per cent. rate of tax on earnings of more than £100,000 as "obscene". Does the Paymaster General think it is obscene? If so, is that why she opposes it, or is she just frightened of the possibility of avoidance or evasion? This morning we heard that the Government are to clamp down on benefits scroungers—the poorest people who cheat the system. Why are they not equally committed to dealing with the best-off people who cheat the system through evasion?

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

That is a very poor intervention; I am disappointed in the hon. Gentleman. This is not a sixth-form debating society, but the House of Commons. I have explained patiently and carefully why the Liberal Democrat amendments would not deliver more resources for the health service and why they are not progressive. In fact, they have all the characteristics of stealth, in that the hon. Gentleman claims he is trying to advance one principle but his amendments relate to another. He claims, in his party's name, that what he proposes is fairer.

Fortunately, I do not have to account for the views of the shadow Chief Secretary to the Treasury, and I am sure that he is eternally grateful for that. He will advance his party's views. Equally, I can say without fear of contradiction that I have never flinched from advancing the views that I believe to be right, either in the House or anywhere else.

The principles of the Bill represent the fairest way to build on the Beveridge principles and to guarantee the extra resources that are necessary for the NHS. I look forward to the next group of amendments and to debating the reasons why it is right and proper that employers should make their contribution. I ask my hon. Friends to reject these amendments because they are incompetent, they would cut money from the health service, they are unfair and they reveal the Liberals undertaking a stealth tax.

Photo of Matthew Taylor Matthew Taylor Liberal Democrat, Truro and St Austell

I shall respond briefly to the key points made in the debate.

Once again, we have heard the Conservatives advance the argument for not imposing tax increases while they remain unprepared to defend the logical consequence of that argument, which is that they believe the NHS should get less resources than the Government plan. That would mean patients not getting the doctors and nurses they desperately need. In that respect, there is nothing between us and the Government: we both believe that the NHS desperately needs that money. We have been arguing so for many years and we at least explained at the general election that we would raise taxes accordingly as we could see no other way of achieving that end. It is a pity that Labour did not do the same, but we are glad that it has now accepted that argument. People outside the House must understand that the Conservatives are hiding a stealth cut that would deny the NHS the doctors and nurses that it desperately needs to treat patients.

We thank the Minister for her response, but let us be clear about the proposal. First, the contributions are a stealth tax because Labour did not present a case for them at the general election. We regret that, not simply because they should have been debated properly and democratically, but because there is public cynicism about politicians' promises—and that affects all political parties, not just the Labour party. The proposal has simply reinforced people's belief that they cannot trust politicians when it comes to getting votes at the ballot box, as what they do afterwards bears little relation to what they say in their manifesto.

Photo of Kevan Jones Kevan Jones Labour, North Durham 5:15 pm, 10th June 2002

First, I am not quite sure how one hides a stealth tax. Secondly, the Liberal Democrats have set out plans for tax increases for those earning more than £100,000, and taxation for pensioners. Will "Focus" go through people's letterboxes in the next few weeks saying that the Liberals will put up taxes for those people?

Photo of Matthew Taylor Matthew Taylor Liberal Democrat, Truro and St Austell

The hon. Gentleman asked how an increase in national insurance can be hidden. The answer is that one does not tell people about it before the election, which is how the Labour party behaved; that is what was stealthy. Everyone can see that now, but they do not have a chance to vote on it.

As for whether we would campaign on the tax rises, we did campaign on them at the last general election. We issued leaflets saying that taxes would have to rise and that ordinary taxpayers would have to pay an extra penny on their income tax, which is more than Labour Members did. However, they have effectively replicated our plans in their proposals for national insurance. We also spelled out the need for an extra increase for people on high earnings. Although some people agreed, others attacked our proposals, but at least there was a chance for them to do so, which is not what happened with the Labour party's hidden policies.

Photo of Kevan Jones Kevan Jones Labour, North Durham

So, "Focus" will go out in the leafy suburbs of constituencies in the south-east, saying that there will be an increase in income tax for pensioners.

Photo of Matthew Taylor Matthew Taylor Liberal Democrat, Truro and St Austell

We told people that before they voted, not after. The hon. Gentleman has no grounds on which to criticise us. Our strategy may have been foolhardy and risky and may even have lost us some votes, but we made sure that people knew where we stood before the election, which is more than the hon. Gentleman's party did.

The Minister said that our proposal would not raise as much money as the Government's, which is true. We made it clear before tabling our amendments that we would use the income tax route, which is broader based than national insurance and does not suffer from the problem of evasion that she raised. The only reason that the amendments did not include that proposal is that it would not be in order in our debate. To be honest, any Front Bencher will always criticise details of their opponents' proposals, which may even include a drafting error. However, we have made clear the principle of our amendments—there cannot be a Member in the Committee who misunderstands it—and we hope that it will be accepted.

Photo of Michael Weir Michael Weir Scottish National Party, Angus

By and large, we are inclined to support the income tax route rather than the national insurance one. However, will the hon. Gentleman comment on the Government's point that there is a gap in the upper earnings limit of £100,000, which would mean that people earning substantial sums, like ourselves, would not pay increased national insurance, which is hardly fair?

Photo of Matthew Taylor Matthew Taylor Liberal Democrat, Truro and St Austell

That is not right, because the hon. Gentleman would pay extra national insurance, as would everyone else. However, it is true that we would not extend the limit on national insurance from £40,000 to £100,000. That replicates our policy at the last election and, I think, the Conservative party's policy. We argued for an increase in the basic rate, which is roughly what the national insurance increase, as is, replicates. We argued also for an extra tax rate on those earning more than £100,000.

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

I remind the hon. Gentleman of what his amendments would do. Those who earn £100,000 would pay 11 per cent. on the first slice of their income—that is, up to the upper earnings limit. They would pay nothing on the second slice of their income up to £100,000. They would then pay 10 per cent. on everything above £100,000. A zero rate would be interposed. I am sure that the hon. Gentleman is fully aware of what his amendments would do. Perhaps he will explain why that is progressive.

Photo of Matthew Taylor Matthew Taylor Liberal Democrat, Truro and St Austell

The hon. Lady will find that that is the present position. The difference is that we are asking people on more than £100,000 to pay more. We believe that at that level people can afford to pay more. If she believes that people can afford to pay more at a lower level than that, she is welcome to argue accordingly.

That is our view, and it was our view at the general election. We believe that very wealthy people can afford to pay substantially more as a contribution towards the NHS. Crucially, that is a better route than that of imposing an increase in tax on employers.

We know that manufacturing industry particularly, and other industries in internationally exposed sectors—farming is another good example—are suffering hugely because of the exchange rate. Industries such as car manufacturing are withdrawing from the United Kingdom: Ford cars are no longer produced in the UK; there has been a major closure of a Vauxhall plant; and BMW is pulling out of Rover, for example. These moves will all be made worse by the Government's decision to choose to increase employers' contributions. That is the tax on jobs, the very tax that the Government argued should be cut on the basis of their pollution taxes. They said, "Let's cut the tax on jobs and tax pollution instead." Now they are to increase the tax on jobs as if the previous arguments never existed. It is the Liberal Democrats who are following through on the argument against the tax on jobs.

Photo of Mark Francois Mark Francois Opposition Whip (Commons)

The hon. Gentleman mentioned public cynicism. Does he recall the campaigning leaflet—in fact, it was a guide—that the Liberal Democrats produced a few months ago, which was leaked? On these types of issue, it said, "Be shameless. You don't have the responsibility of administration. You do not have to worry about how things actually work. Agitate; cause trouble." Are not the Liberal Democrats' amendments a classic example of a lack of responsibility?

Photo of Matthew Taylor Matthew Taylor Liberal Democrat, Truro and St Austell

Only the Conservatives have been shameless. They say that they want more money for health services, but they always vote against extra spending. The direct result of the policies that the hon. Gentleman supports would be fewer doctors and nurses treating patients. That would mean ever longer waiting lists under the Tories, and we know why—it is because Conservatives do not believe in the NHS. They want to get rid of it.

No doubt the hon. Gentleman will support amendments introduced by those on the Opposition Front Bench that would subsidise by tax breaks those who take up and can afford private insurance at the expense of investment in the NHS for the great majority.

Photo of Matthew Taylor Matthew Taylor Liberal Democrat, Truro and St Austell

I shall be happy to give way to the hon. Gentleman and to debate his point. If the Conservative party is opposed to increases in employers' national insurance but is in favour of extra money for health services, how would it raise the extra money?

Photo of John Bercow John Bercow Shadow Chief Secretary to the Treasury

I wish that the hon. Gentleman would follow the logic of the argument and—[Interruption.] It is no good Liberal Democrat Members chuntering from a sedentary position, in evident ignorance of the progression of the amendments to which my hon. Friends and I will shortly be speaking. The hon. Gentleman should be aware that the late Harold Macmillan famously and wisely said that the Liberals had some good ideas and some original ideas. He added that unfortunately their good ideas were not original and their original ideas were not any good. Today, they have produced ideas that are neither good nor original. They really have surpassed themselves.

Photo of Matthew Taylor Matthew Taylor Liberal Democrat, Truro and St Austell

The difference is that the Conservative Front Bench has no answers at all and no ideas. It was, after all, Harold Macmillan who criticised the Conservative party in the 1980s for selling the family silver, and part of that sale was the rundown of investment in the health service to pay for tax cuts. This debate is, in part, about how we can raise money to rectify a decades-long underinvestment that has left patients suffering, and doctors and nurses struggling to cope in under-equipped and worn-out wards.

The hon. Gentleman must recognise this. It is perfectly legitimate for him to say that he does not want investment in the national health service—that he does not even want the national health service, and would not spend money on it but would cut taxes instead. It is not legitimate for him to argue against a way of funding NHS improvements, while pretending that the Conservatives nevertheless support those improvements. The improvements cannot be made unless the money is found.

The Conservatives' position is wholly illegitimate. They try to pander to those who want tax cuts—and of course we all want tax cuts if we can get them—without admitting that the cuts will be made at the expense of the national health service. That is the effect of the amendments for which the hon. Gentleman will presumably attempt to argue later, although so far he has presented no arguments, just a bit of bile. That is the stock in trade of the Conservative Front Bench at present, because it has no arguments.

I hope that the Committee will divide on the principle, but I think we would best do that by voting on amendment No. 2.

Photo of Evan Harris Evan Harris Liberal Democrat, Oxford West and Abingdon

I endorse what has been said by my hon. Friend Matthew Taylor. I said at the outset that we would try to press amendment No. 2 to a Division. I therefore beg to ask leave to withdraw amendment No. 1.

Amendment, by leave, withdrawn.

Amendment proposed: No. 2, in clause 1, page 2, line 8, leave out "1 per cent." and insert—

'10 per cent. on earnings over £100,000'.—[Dr. Evan Harris.]

Question put, That the amendment be made:—

The Committee proceeded to a Division.

The Second Deputy Chairman:

Will the Serjeant at Arms investigate the delay in the No Lobby?

The Committee having divided: Ayes 43, Noes 384.

Division number 254

See full list of votes (From The Public Whip)

Question accordingly negatived.

Photo of Nicholas Winterton Nicholas Winterton Conservative, Macclesfield

On a point of order, Sir Michael. You will be aware that great difficulties were encountered by many hon. Members from both sides of the House in getting into the No Lobby. In fact, many hon. Members who were here in time to vote could not do so because of the numbers voting. Happily, the numbers were great because the Government and Her Majesty's Opposition were voting together, which shows that this House can occasionally work together. This matter should be looked into. The numbers coming in from behind the Speaker's Chair into the Lobby were so great that many Members who would normally have had their names registered as voting will not have their names registered. Sadly, they were unable to get in to the Division Lobby in time to vote. Would you look into this matter?

Photo of Gerald Kaufman Gerald Kaufman Chair, Culture, Media and Sport Committee

Further to that point of order, Sir Michael. Mr. Winterton has drawn your attention to one problem and I wish to draw it to another. The Division bell did not ring on my corridor and I did not know that the Division was on until I happened to look up at the Annunciator. I am sorry to say—and I confess to the Whips accordingly—that I could not vote, and I would therefore be grateful if you could have the functioning of the bells investigated.

The Second Deputy Chairman:

I have heard both points of order. They will be recorded in the Official Report and I am sure that they will both be investigated.

Question proposed, That the clause stand part of the Bill.

Photo of Christopher Chope Christopher Chope Shadow Spokesperson (Transport) 5:45 pm, 10th June 2002

Clause 1 goes to the heart of the Bill. We are against the Bill and against clause 1 in particular because it will effectively raise the rate of income tax on everybody, even those with very modest incomes. People on just £4,615 a year will have a marginal rate of tax next year of 21 per cent., instead of 20 per cent. The clause is in breach of the Government's promises made before the general election. It will provide more money for the health service but without the reforms that we see as an essential part of any extra funding.

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

Clause 1 provides the changes to the class 1 primary contributions paid by employees and lays out the increase to 11 per cent. up to the upper earnings limit and then the 1 per cent. beyond. The people of Britain have clearly stated that they wish the health service in the UK to be the best in the world. They also recognise that to have the best health service in the world, the resources need to be made available. They have also stated loudly and clearly that they believe that they should pay to ensure that that first-class health service is delivered fairly, based on the Beveridge principles. That funding will ensure that we can correct the underinvestment over which the Conservatives presided in their terms of office. It will ensure that the NHS is available comprehensively and on the basis of need, not ability to pay. I commend clause 1 to the Committee.

Photo of Evan Harris Evan Harris Liberal Democrat, Oxford West and Abingdon

I rise briefly to express my astonishment that the Conservatives can oppose a clause standing part without saying what they would put in its place. Clause 1 will provide significant additional funding for health services, and the Conservatives oppose the raising of those resources. However, they are unwilling to state which hospitals they would close, which health service staff they would not employ, which drugs would not be provided or what other taxes they would raise. That is not responsible opposition and it is certainly not effective opposition. Because we need the resources for the health service, the Liberal Democrats will support clause 1 standing part of the Bill.

Photo of John Mann John Mann Labour, Bassetlaw

The Sunday Telegraph, which is known as a reputable newspaper that takes a wonderful array of polls—doubtless with extreme accuracy—managed to come up with a figure of 76 per cent. of the public approving of the 1 per cent. increase in national increase contributions to fund the health service. That is certainly mirrored in my postbag.

I recall challenging Mr. Lidington to put a question about national insurance contributions on his excellent website, alongside those on immigration and asylum. Indeed, I offered the services of my webmaster to assist with framing such a question. Unfortunately, my kind offer was rebuffed, so we still do not have the definitive view from Aylesbury. However, the view from Bassetlaw, as I know from visiting the Bassetlaw district general hospital and talking to patients and staff, has been unanimous. A cross-section of 60 staff held a unanimous view. Indeed, not one was interested in talking about the 1 per cent. increase coming out of their salary.

Patients were also unanimous in their view. My hon. Friend the Under-Secretary of State for Health kindly accompanied me on the visit. Every patient whom she and I saw in a visit lasting two and a half hours was asked his or her view, and it was unanimous. I do not expect the unanimity felt in Bassetlaw, which has an excellent hospital and a tradition of good NHS provision, to be mirrored 100 per cent. in every corner of the United Kingdom. However, a figure of 76 per cent. across the country is reasonable.

Photo of John Bercow John Bercow Shadow Chief Secretary to the Treasury

I am grateful to the hon. Gentleman. We first jousted in 1986 and carried on doing so on Lambeth council until 1990. As I told him then, I thought that he was a peculiar individual, and nothing in the intervening 16 years has caused me to revise that opinion. Does he accept that people are likely to be anxious about a tax when they pay it and not before? Does he appreciate that, faced with the prospect of giving modest and gentle assent to his arguments or being embroiled in a lengthy and anorakish exchange in the middle of a hospital, some of his constituents might have decided that it was easier and less painful to ignore him?

Photo of John Mann John Mann Labour, Bassetlaw

The pain is greatly reduced by the fact that we were celebrating the first anniversary of the day care centre at Bassetlaw district general hospital, which, as my hon. Friend the Minister said, is the best facility that she has ever seen anywhere in the national health service.

The hon. Gentleman refers back to May 1986, when he and I were both elected to Lambeth council. That was just when the Conservative increases in employers' national insurance contributions kicked in. I do not recall him hiding away in horror because of that during our successful campaign to get elected, or, indeed, the electorate raising the issue at all, let alone with any great ferocity. The issue throughout our campaign was the health service and how to fund it.

Finally, there is obviously a great air of anticipation about the World cup. I commend Radio 5 Live for its superb coverage; I have listened to it at every opportunity when travelling in my constituency over the past two weeks. On 31 May, two hours before the World cup was about to kick off, it took its road show to Ashford in Kent, where it had a large screen. It asked French business people why they were doing business in Ashford. One after the other, they stated that France was a high-tax economy in which to do business while Britain was at the moment a low-tax economy, and that that was why they had relocated from France to Britain, under this Government. I rest my case.

Question put, That the clause stand part of the Bill:—

The Committee divided: Ayes 315, Noes 125.

Division number 255

See full list of votes (From The Public Whip)

Question accordingly agreed to.