National Insurance (Hansard, 1 April 1993)

§ 5. Mr. Cohen
To ask the Chancellor of the Exchequer what discussions he has had with employees' and employers' organisations about his plan to increase national insurance contributions.

§ The Chief Secretary to the Treasury (Mr. Michael Portillo)
National insurance contributions were mentioned in a number of representations received before the Budget.

§ Mr. Cohen
Did not those organisations tell the Chancellor and the Minister that an increase in national insurance contributions would be a tax on employment, with the result that about 18 million employees and 2 million self-employed people will be worse off and 500,000 people who have earned too little to pay income tax will have to pay the increase in national insurance contributions? Leaving aside the Prime Minister's statement last January that he had no plans to increase national insurance contributions, which now looks like an election con, does not the Government's insurance policy seem to be to up the premiums while cutting the benefit payouts?

§ Mr. Portillo
The hon. Gentleman ignores the fact that we are paying about £37 billion a year in contributory benefits. Is that to be paid mostly by people in work or by taxpayers in general? If the hon. Gentleman's solution is that it should be paid by taxpayers in general, he is asking pensioners, people who have retired and people who are not in work to contribute to the ongoing benefits of other people. I do not believe that the hon. Gentleman wishes to support such a policy. We have a national insurance fund and it is a sound principle that, taking one year with another, as much as possible of it should be balanced.

§ Mr. Luff
Does my right hon. Friend agree that as long as we have a national insurance fund it must be adequately financed and that it is right to increase contributions when demand rises and reduce them when it falls?

§ Mr. Portillo
The Government have shown some flexibility on that point in that, during the recession, when less money has come into the fund, we have been willing to see a Treasury supplement paid into it. But my hon. Friend must be right. We are paying out a huge amount in benefits. The average working person is now paying £10 each working day for social security benefits. It is right that people should be aware of that and, in principle, over a period of time, our national insurance fund should be balanced.

§ Mr. Stevenson
Will the Minister confirm that the proposed increases in national insurance contributions are not only a complete abdication of the promises given by the Conservative party at the election, but another increase in the overall level of taxation that the country is suffering? Will he further confirm that the overall level of taxation is now higher than it was when the Government took office in 1979?

§ Mr. Portillo
If the hon. Gentleman holds views so strongly, why did he sign up to a manifesto that intended to increase national insurance contributions by 9 per cent., on top of income tax increases of 10 per cent? He wanted to increase the burden on the country's wealth-creating sector by 19 per cent., yet he has the cheek to criticise the Government.