Clause 1

Part of National Insurance Contributions Bill – in a Public Bill Committee at 10:30 am on 7 December 2010.

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Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury) 10:30, 7 December 2010

I am corrected on that fact. Perhaps a function of the national insurance fund changed after the second world war, but the hon. Gentleman makes an interesting point that echoes the issue that I was about to raise. As I understand it, the income from the national insurance fund comprises the contributions from employees, employers and the self-employed, plus interest on its own investments. Each year, those amounts are paid into those funds. As I understand it, there is currently a surplus on the fund—in other words, more money is being paid into the national insurance fund than is being paid out of it.

Will the Minister update the Committee on the current state of the national insurance fund? Over the years, various Government Actuary predictions have suggested that the fund is growing in surplus at an exponential rate, but I am not sure whether the recent credit crunch and recession changed that profile of expectations. Is the Minister able to set out how the fund stands? I think that is relevant, because my understanding is that the surplus on the fund is loaned to the Government—to the Debt Management Office, which includes the Commissioners for the Reduction of the National Debt—and interest on those invested moneys is paid back to the national insurance fund, which is quite a substantial amount of money in itself. The previous Administration had what was colloquially known as the golden rule; any borrowed moneys, including a surplus from the national insurance fund, were not to be used to finance current expenditure but were only to be used for investment, in particular capital investment such as infrastructure.

My second question to the Minister, if he can bear with me and give us a general update on the national insurance fund, is to ask him what the Government’s policy is on the use of the surplus. Given that much of the background to the debate on the changes to national insurance in clauses 1 and 2 has been a discussion about deficit reduction, it might be expected that it could count as part of current expenditure. As I understand it, however, the rules and conventions of the Treasury mean that that is not the case.

If we are embarking on legislation that changes national insurance rates and brings in revenue, yet there are constraints on how that revenue can be used, it is important that we know about them. If it is a continuation of the previous Administration’s policy that that money is for investment, so be it, and that is fine, but it slightly changes the prism through which we see many of the changes. I should be grateful if the Minister would set out the state of the fund and the position regarding the use of the surpluses.