National Insurance Contributions Bill

Part of the debate – in the House of Lords at 3:45 pm on 2nd July 2008.

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Photo of Lord Forsyth of Drumlean Lord Forsyth of Drumlean Conservative 3:45 pm, 2nd July 2008

My Lords, I did not have an opportunity to contribute to this debate at an earlier stage but I support my noble friend's amendments. I agree with everything that she said and almost everything that the noble Lord, Lord Newby, said, which is comparatively unusual, wise though he is.

The Government are in a great fiscal hole and the temptation to use the increase in the national insurance threshold is going to be almost irresistible for the Chancellor. I suppose that this measure borders rather closely to protecting the people against further burdens of taxation. I have no concerns about supporting the amendment for that reason.

National insurance contributions are one of the great frauds perpetrated on the people of this country. They are called national insurance contributions but they are in fact a tax by any other name, and their impact is as a tax. It is commendable that the Government have gone down the road of simplification. The reduction in the basic rate of income tax to 20p and the abolition of the 10p band was a great step forward in terms of simplification. It all went wrong, of course, because they did not raise the threshold to the level of the 10p band and as a result the Government are in their current difficulties, including those that arise because of the lack of cash. I would be prepared to wager quite a lot that two things will happen between now and the end of the year: first, we will have a new Chancellor of the Exchequer and, secondly, his successor will increase the national insurance threshold in order to get the cash to achieve that purpose. The Government's declared policy, which they abandoned, was to align the rates of national insurance and income tax; that was a good simplification measure in that it made life easier for employers and those responsible for calculating what used to be called stoppages from people's pay.

It is, however, a bit of a halfway house. The real prize is to integrate national insurance and tax and have a universal taxation system. There are great problems with that because of the impact on pensioners. I can also see that that would present great political difficulties for any Government. However, with the best will in the world, the Government's credentials as committed simplifiers are getting a little worn, not least because the Chancellor's predecessor, the Prime Minister, seemed reluctant to stick to a policy and pursue it with a degree of confidence and predictability which would make life easier for the business community. All the arguments that the Minister made against this at an earlier stage of the Bill, to which my noble friend referred, particularly those about national insurance being paid weekly and so on, are for integration in the long term.

I support my noble friend. These amendments are an important protection. I cannot for the life of me imagine why any Government would wish to resist them unless there is a hidden agenda to raise the burden of taxation, which, at the moment, would be catastrophic for the many families up and down the land who are already struggling to pay their bills.