As we have heard, this Bill enacts the Conservatives’ manifesto pledge not to increase NICs in this Parliament. It is part of their wider pledge to cap income tax, VAT and national insurance contributions. The Bill contains only three substantive clauses and, as we have heard, no amendments have been tabled for consideration today. Clause 1 creates a “tax lock” for employee NICs, capping the rates of employee class 1 NICs to 12% and setting the additional percentage to 2% for the duration of this Parliament. Clause 2 freezes the rate of employer NICs by setting the maximum secondary percentage payable by employers at 13.8%. By doing so, it also fixes the class 1A and 1B contributions. Clause 3 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. In practice, that means that employees stop paying class 1 national insurance contributions at the 12% rate when their income reaches the higher rate income tax threshold. Thereafter, the rate of national contribution is 2%.
As the Minister is aware, my Labour colleagues are not opposed to the principle of maintaining the rates of national insurance contributions. Indeed, it was Labour that, on 25 March, first committed to halt any increase, and I am pleased that the Conservatives heeded our wise advice. It is just one of our many pre-election pledges that the Chancellor has chosen to implement.
However, without wishing to repeat what has already been said by my colleagues in previous debates, I question the need to implement legislation that forces the Government to keep their own election pledges—surely they should do that anyway. The Chancellor also seemed to share my sentiments back in 2009 when he stated:
“No other Chancellor in the long history of the office has felt the need to pass a law in order to convince people that he has the political will to implement his own Budget.”
Indeed, he went on to suggest that only two conclusions could be drawn from such an occurrence:
“Either the Chancellor has lost confidence in himself to stick to his resolution, and is, so to speak, asking the police to help him, or he fears that everyone else has lost confidence in his ability to keep his word”. —[Official Report, 26 November 2009; Vol. 501, c. 708.]