Clause 1 - Main and additional primary percentages

National Insurance Contributions (Rate Ceilings) Bill – in a Public Bill Committee at 2:00 pm on 27 October 2015.

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

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

It is a very great pleasure to serve under your chairmanship, Mr Bailey. I welcome all hon. Members to their places. Progress was brisk and efficient at our evidence session this morning and if it were up to me, that momentum would continue, but of course it is not up to me.

Clause 1 specifies that the class 1 contributions payable by employees at the main primary percentage shall not exceed 12%. Class 1 contributions are payable at 12% on earnings between £155 and £815 a week. For earnings above £815 a week, the additional primary percentage shall not exceed 2%. The provisions in clause 1 will apply to any tax year that begins after the day on which the Bill comes into force before the next election.

Photo of Rob Marris Rob Marris Shadow Minister (Treasury)

It is a pleasure to serve under your chairmanship again, Mr Bailey. You commented on the weather. Of course, you and I know that that the weather in West Bromwich and in Wolverhampton is always lovely, especially at this time of year.

Through clause 1 the Government are limiting their room for manoeuvre. I am aware, as are all hon. Members, that there was a commitment by the Conservative party in the general election not to freeze but to put a cap on national insurance contributions at both rates. That was also the policy of my party, so I think that we will have a fairly brisk afternoon.

However, the Bill, as primary legislation, puts restrictions on Government, which, as I suggested to the Minister in the evidence session this morning, creates a measure of uncertainty. When some things are restricted, like this and other tax measures, such as the 1,300 tax reliefs, of which the Audit Commission says that only about 200 are tracked properly, it can create uncertainly by a kind of ripple effect—if one is being certain in one  sphere but saying nothing about this other sphere, whatever it may be in terms of the tax regime, perhaps one has plans to change that.

Do the Government currently have any plans to change, in any way, the regime for national insurance contributions, whether in terms of the upper earnings limit or the percentage rates at which it is levied? There are different rates, of course, depending on the different classes, including class 3A, which runs out at the end of next March. Are there any proposed changes to the regime?

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

I am grateful for the hon. Gentleman’s comments and I am encouraged, as I am sure you are, Mr Bailey, by the consensus, at least on being brisk this afternoon.

As for future plans for national insurance contributions, of course, all taxes—and for these purposes, we count national insurance contributions as a tax—are kept under review. Any announcements are made by the Chancellor in Budgets and autumn statements. I have nothing to add to what has previously been said in Budgets and autumn statements. As was touched upon in our evidence session this morning, the Office of Tax Simplification is looking at national insurance contributions and their alignment with income tax. It has examined that in the past, and it and the Government believe that it would be helpful to draw out some of the related issues in quite a complex matter.

Photo of Rob Marris Rob Marris Shadow Minister (Treasury)

I appreciate that consultation is ongoing and evidence is still being gathered, but is the Government’s preferred option at this point to have such an alignment?

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

The Government’s position is very much an open one. There is no preferred position as such. Clearly, the matter has been raised on numerous occasions over many years. I suspect that all parties have looked at this issue to a greater or lesser extent. The Office of Tax Simplification has made recommendations in the past on this matter, and we think that it would be beneficial for it to continue to look at the subject with a view to developing potential ideas and then, after that further investigation, for us to have an informed debate on whether to take the proposals forward. The Government do not have a predetermined position, but we think that it would be beneficial to the general debate for the OTS, which is a respected organisation that has already done good work in this area, to take the matter forward.

In short, we do not have further proposals other than those that we previously set out—not least, of course, the cap. The hon. Gentleman is right to say that the Bill provides for a cap, not a freeze.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.