Class 4 National Insurance Contributions - Statement

Part of the debate – in the House of Lords at 4:08 pm on 15th March 2017.

Alert me about debates like this

Photo of Lord Davies of Oldham Lord Davies of Oldham Shadow Spokesperson (Treasury) 4:08 pm, 15th March 2017

My Lords, I am fairly sure that the House will not be taking the Statement in quite the positive way in which the Minister clearly hopes. Conservative Party Budgets and U-turns seem to come hand in hand these days, but this is one of the outstanding ones. Scrapping the centrepiece of the Budget in less than a week is going some, even by Conservative Chancellors’ standards. When Chancellors make really egregious mistakes they are always compared with Hugh Dalton, who was fired almost immediately on the spot for the leak to the lobby correspondents as he walked in to deliver his Budget. When I think about other errors that Chancellors have made, this one comes pretty close to that. As the Chancellor has obviously been in close contact with the Prime Minister, I imagine that his hair has stood on end these last few days—brushed well though it normally is.

The changes announced today amount to a £325 million revenue loss in 2018-19 and a further loss of £645 million in 2019-20. They raise a number of questions, not only about the obvious gaping hole left in our country’s finances but also about the critical relationship between the Prime Minister and the Treasury. After all, we all know there is a connecting route between Nos. 10 and 11; they are adjacent properties. It therefore seems that the Prime Minister is bound to have been consulted on the Budget.

What we need to know is this. In his letter to Conservative Back-Benchers, Philip Hammond said:

“The cost of the changes I am announcing today will be funded by measures to be announced in the Autumn Budget”.

That is not good enough. At a time of already considerable uncertainty over our future relationship with the EU and the terms that we will obtain, the impacts that that will have on trade and the whole issue of business confidence in this period, this is just about the last thing we need—a mess-up on a Budget.

If past Budgets or Autumn Statements are anything to go by, waiting for months only to hear that welfare spending or local council funding has been cut even further is not acceptable, yet we know both of those have been in the Government’s firing line in recent months. Furthermore, can the Minister assure this House and the public that the £2 billion announced for social care will be safeguarded? Informed opinion thought the emergency needs of social care were £2 billion a year, so we were already critical enough about the Chancellor’s decision to award it £2 billion over three years—that is, about one-third of what is necessary. The House will want an assurance today that that money at least is to be safeguarded.

The Prime Minister has said it was the Government’s decision to U-turn on national insurance contributions, but whose decision was it to put it in the Budget in the first place? In the consultation, were people not aware of the manifesto commitment? Surely the Government are not seriously saying that the Chancellor spoke to no one except officials before the Budget was produced. What about these other significant figures, his Treasury Ministers, who line up with their boxes in photographs and take pride in the Budget? No one among them appears to have recognised the manifesto commitment, leaving the public suspecting that it was the Prime Minister who put the Chancellor right. There will probably be consultations over a number of issues in the future and if they are at the informed and perceptive level of the construction of this Budget then we are all in for a rather bumpy ride.

This after all was one of the Chancellor’s major announcements in his first Budget. Surely he must have consulted people. We and indeed the country are at a loss as to why no one recognised what is now regarded as an important block—namely, that at the last general election the Conservative Party made a series of promises, not all of which have been fulfilled, though the ones that have been fulfilled are the ones that we on this side of the House find most onerous. It turns out that as far as this Budget was concerned this promise was the critical one, yet the Chancellor went blissfully on to deliver the Budget.

As the IFS has made clear with regard to self-employed people on low incomes, the NICs uprating was only ever small in comparison with the more significant changes that the Government are making to universal credit, yet this is the one that has shaken the Chancellor. I hope the Minister recognises that the self-employed will remain worried about what they will be taking home at the end of the month following this fracas. On the abolition of NICs 2, which the Chancellor has today confirmed will go ahead, how will the rights of those previously obtained by class 2 contributions be ensured?

There is now a gaping hole in the Budget and the Chancellor needs to reassure the nation that he will cope with the financial problem represented by this blunder. Finally, if no action on NICs 4 is to be taken in this Parliament, what on earth is the purpose of Matthew Taylor’s work? If there is such a block on action on this one crucial area—the Government have after all emphasised how crucial it is in terms of changing patterns of work—until after the next general election, we are all left to wonder just what will be the purpose of that work.