Clause 3 - Upper earnings limit

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

This clause provides that the upper earnings limit for any tax year for the duration of the Parliament shall not exceed the weekly equivalent of the income tax higher rate threshold proposed for that tax year. The class 1 upper earnings limit is the point at which an employee transitions from paying class 1 contributions at the main rate of 12% to paying class 1 contributions at 2%. Since April 2009, this point has been aligned with the higher rate tax threshold.

Photo of Rebecca Long-Bailey Rebecca Long-Bailey Shadow Minister (Treasury), Member, Labour Party National Executive Committee

Hon. Members will be pleased to hear that I do not wish to go into great detail on clause 3. We are aware that the clause links the upper earnings limit to the higher rate income tax threshold by setting out that it shall not exceed the weekly equivalent of the proposed higher rate threshold for that tax year. That means that employees stop paying national insurance contributions at the 12% rate when their income reaches the higher rate income threshold, and thereafter the rate of national insurance is 2%.

The upper earnings limit has been in line with the higher rate income tax threshold since April 2009. However, the Prime Minister made a pledge to legislate formally for this link before the general election. If this is already common practice, will the Minister explain why it has been necessary to legislate on this point in the Bill? Surely, this is another clear example of the irrelevance of the Bill and the political game the Chancellor is playing with the legislative integrity of this place. This is 15 minutes of Members’ time that we will never get back. That puts the matter into perspective.

I do not want to repeat previous discussion, and we broadly support the principles of the clause, but it is simply not necessary. None the less, we will not oppose it at this stage.

Photo of David Gauke David Gauke The Financial Secretary to the Treasury 2:15, 27 October 2015

I am sorry if we are detaining the hon. Lady. I am sure she has many useful things to do this afternoon, so I will not detain her longer than I have to. I come back to the point that we debated this morning. It was a manifesto commitment that we would legislate for this and it is similar to the argument on rates that we have just had on clauses 1 and 2. It underlines our commitment.

I suspect that, had the Bill contained just clauses 1 and 2, and not dealt with the upper earnings limit alignment, the hon. Lady would have been one of the first to identify an apparent lacuna in the legislation and would say that there was nothing to stop us increasing the 12% band of national insurance contributions above the point at which the higher rate threshold came into place. Indeed, I think that that was Labour party policy in 1992, so it is not an immaterial issue or one that has never been considered in public debate.

To be consistent with the capping of the employees’ NICs rate, it is right to set out the threshold and the fact that that is tied in with the higher rate threshold. That has been the practice for some years now and we wish to maintain it.

Photo of Rebecca Long-Bailey Rebecca Long-Bailey Shadow Minister (Treasury), Member, Labour Party National Executive Committee

On highlighting a lacuna, several need to be highlighted and we will take the same approach as the Government to the Bill. If they are going to legislate for every single pre-election promise, surely they should apply the same sort of legislation to every manifesto pledge. They are certainly not doing that.

As my hon. Friend the Member for Wolverhampton South West rightly said this morning, while the Government might be providing assurances to the market on this issue, they are certainly not providing any assurances on all their other pre-election promises because they are not legislating for them in the same way.

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

Again, I come back to the central point. The Conservative party, and indeed the Labour party, made pledges during the last general election campaign not to increase rates. We wished to underline our commitment to the British people by announcing during the election campaign that we would legislate for this. It further emphasised our commitment on this issue.

Having set out that we would legislate on rates, it is also right that we legislate on the way in which the national insurance thresholds currently tie in with the income tax thresholds, which is at the point where the upper earnings limit meets the higher rate threshold. It was logical to include clause 3, which meets exactly the same objective as clauses 1 and 2. We made a commitment that we would not increase the 12% band above the point at which higher rate income tax would be paid, and I think—I am sure I will be corrected—that the Labour party made the same commitment. Given that we are legislating in the Bill on rates, it made sense also to address that threshold point. That is why the clause is part of the Bill, and why I hope the Committee will support it.

Question put and agreed to.

Clause 3 accordingly ordered to stand part of the Bill.

Clauses 4 and 5 ordered to stand part of the Bill.

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

On a point of order, Mr Bailey. I am not sure whether it is appropriate or necessary to make a point of order at this point, but I think I should. I thank you for your guidance over the last 21 minutes. You have demonstrated all the skills we needed this afternoon, and I am grateful for that. I also thank Mr Rosindell for his assistance this morning.

I thank all hon. Members for their participation in our proceedings. They can report back to the Whips that they have served on yet another Bill Committee, and I hope they feel that this has been a day well spent.

I thank the Whips—the Lord Commissioner of Her Majesty’s Treasury, my hon. Friend the Member for Central Devon, and the hon. Member for St Helens North—for their assistance. I also thank Opposition Members, including the Front-Bench spokespeople, the hon. Members for Wolverhampton South West and for Salford and Eccles, for their constructive engagement with the Bill.

This is the second Bill that some of us have completed in recent days. It has taken considerably less time than the Finance Bill, for which I, for one, am very grateful.

May I conclude by thanking the Clerks, the Hansard reporters, the police and the attendants, as well as the officials from Her Majesty’s Revenue and Customs and the Treasury, for their assistance with this short but important Bill? I look forward to discussing these issues again—no doubt at some length—on Third Reading.

Photo of Rebecca Long-Bailey Rebecca Long-Bailey Shadow Minister (Treasury), Member, Labour Party National Executive Committee

Further to that point of order, Mr Bailey. I reiterate the thanks the Minister has expressed. I also thank him for what has, as always, been a lively and engaging debate. It has been a pleasure.

Photo of John McNally John McNally Scottish National Party, Falkirk

Further to that point of order, Mr Bailey. This is the first Bill Committee on which I have sat. May I, too, thank the Minister and the Clerks for taking us through the Bill and for the guidance  they have given us? I am equally glad that our proceedings have been quite short and relatively simple to follow and that I could associate them with my constituents back home in Falkirk.

Bill to be reported, without amendment.

Committee rose.