HC Deb 13 May 1998 vol 312 cc420-74

Lords amendment: No. 64, after clause 50, to insert the following new clause—Class 1 contributions.—(1) For subsection (1) of section 5 of the Contributions and Benefits Act (earnings limits for Class I contributions) there shall be substituted the following subsections— (1) For the purposes of this Act there shall for every tax year be—

  1. (a) a lower earnings limit (for primary Class 1 contributions);
  2. (b) an upper earnings limit (for primary Class 1 contributions); and
  3. (c) an earnings threshold (for secondary Class 1 contributions).
(1A) For the tax year 1999–2000, the lower earnings limit (for primary Class 1 contributions) shall be £81. (1B) For the tax year 2000–2001 and each subsequent tax year, the limits and threshold referred to in subsection (1) above shall be specified for that year by regulations which, in the case of those limits, shall be made in accordance with subsections (2) and (3) below. (2) For subsection (1) of section 6 of that Act (liability for Class 1 contributions) there shall be substituted the following subsection— (1) Where in any tax week earnings are paid to or for the benefit of an earner over the age of 16 in respect of any one employment of his which is employed earner's employment—
  1. (a) a primary Class 1 contribution shall be payable in accordance with this section and section 8 below if the amount paid exceeds the current lower earnings limit (or the prescribed equivalent in the case of earners paid otherwise than weekly); and
  2. (b) a secondary Class 1 contribution shall be payable in accordance with this section and section 9 below if the amount paid exceeds the current earnings threshold (or the prescribed equivalent in the case of earners paid otherwise than weekly)."
(3) For subsections (1) and (2) of section 8 of that Act (calculation of primary Class 1 contributions) there shall be substituted the following subsections— (1) Where a primary Class I contribution is payable, the amount of that contribution shall be the primary percentage of so much of the earner's earnings paid in the tax week, in respect of the employment in question, as—
  1. (a) exceeds the current lower earnings limit (or the prescribed equivalent); and
  2. (b) does not exceed the current upper earnings limit (or the prescribed equivalent);
but this subsection is subject to regulations under section 6(5) above and sections 116 to 120 below and to section 41 of the Pensions Act (reduced rates of Class 1 contributions for earners in contracted—out employment). (2) For the purposes of this Act the primary percentage shall be 10 per cent; but the percentage is subject to alteration under sections 143 and 145 of the Administration Act. (4) For section 9 of that Act there shall be substituted the following section— Calculation of secondary Class 1 contributions. 9. —(1) Where a secondary Class 1 contribution is payable, the amount of that contribution shall be the secondary percentage of so much of the earnings paid in the tax week, in respect of the employment in question, as exceeds the current earnings threshold (or the prescribed equivalent). (2) For the purposes of subsection (1) above, the secondary percentage shall be 12.2 per cent; but the percentage is subject to alteration under sections 143 and 145 of the Administration Act. (3) Subsection (1) above is subject to regulations under section 6(5) above and sections 116 to 120 below and to section 41 of the Pensions Act."

Mr. Denham

I beg to move amendment (a) to the Lords amendment, leave out the first 'subsections' and insert 'subsection'.

Mr. Deputy Speaker (Mr. Michael Lord)

With this, we may consider Government amendment (b) to the Lords amendment, Lords amendments Nos. 65, 73, 117, 147 to 153, 160 to 162 and 164, Lords amendment No. 166 and Government amendment (a) thereto, Lords amendments Nos. 167, 168 and 176 to 179. I should inform the House that amendment No. 64 involves privilege.

Mr. Denham

This group of amendments puts into effect changes to the structure of national insurance contributions for employees and their employers from April next year. It also includes two amendments that overturn the changes made to the Government's proposals in another place.

In his Budget statement on 17 March, my right hon. Friend the Chancellor of the Exchequer announced a radical reform of the national insurance system. The amendments are a crucial part of that strategy. They help to make work pay by increasing take-home pay for every employee who pays national insurance contributions, they encourage employers to create jobs for people moving from welfare into work, and they cut red tape for business by simplifying the structure of employer contributions. The measures follow the recommendations made by Martin Taylor, the head of the Government's tax-benefit review, following his wide consultation with business. Overall, they are a major step in the Government's drive to bring the national insurance system up to date with the modern labour market. I shall explain the effect of the amendments in more detail.

The main thrust of the changes is provided by Lords amendment No. 64, as it would stand with amendments (a) and (b). In the form originally introduced by the Government, amendment No. 64 would reduce employees national insurance contributions without affecting the ability to build up rights to contributory benefits. I shall deal later with the changes made in the other place to the Government's proposals, and more particularly with the amendments that will overturn those changes. For the moment, I should like to concentrate on the Government's proposals.

As a result of the Government's amendments, employees would pay contributions only on that part of their earnings that exceeds the lower earnings limit—currently £64 a week. Under the current system, employees pay no national insurance contributions when their total earnings are below £64 a week, but when earnings reach the lower earnings limit, they have to pay contributions at a rate of 2 per cent. on all their earnings up to that point.

That perverse "entry fee" costs every employee who pays contributions £1.28 a week. It means that some employees earning above the lower earnings limit receive less take-home pay than their colleagues whose gross earnings are lower. That is clearly an absurdity, and the amendments put an end to it. From April 1999, employees will pay contributions only on the part of their earnings that exceeds the lower earnings limit. That will help to ensure that people find work attractive. It supplements the other steps that the Government are taking to make work pay.

Amendment No. 64 also makes three major changes to the structure of employer national insurance contributions. First, at the moment, employers begin to pay contributions when earnings reach £64 a week. The amendment will enable the Government to raise that threshold to the level of the single person's tax allowance—set at £81 a week this year. That will bring the system more closely into line with income tax, thus making it easier for employers to administer the two systems side by side.

Secondly, in parallel with the change to employee contributions, the employer entry fee will be abolished so that employers will not have to pay contributions on any earnings below the level of the single person's allowance.

Thirdly, the amendment simplifies the structure of employer national insurance contributions, bringing in a single rate of 12.2 per cent. in place of the four separate rates that apply now.

The package of changes to employer national insurance contributions is revenue neutral for employers as a whole. The changes will reduce the national insurance costs that employers face in respect of about 12.5 million people who earn below £450 a week. For example, employers will pay around £1.80 a week less for someone earning £155 a week, and £5 less for an employee on £220 a week. Those changes will make a very real difference. They will encourage employers to create jobs for people moving from welfare into work.

The reform of employer contributions will also remove distortions that mean that, when employees' wages increase, their employers' national insurance costs can increase by more than the wage rise itself. Simplification of the structure will reduce the amount that employers need to spend on administering the system.

Amendments Nos. 65 and 73 ensure that the proposed single rate of employer contribution will apply to the new class IB contribution. That is the new class of contribution being introduced in the Bill as part of the measures to enable employers to put items subject to national insurance in annual PAYE settlement agreements.

Amendment No. 147 makes a similar change in respect of class IA contributions paid by employers on company cars and car fuel provided to employees. I must make it absolutely clear that none of those changes to employee or employer national insurance contributions will affect people's rights to benefits and pensions, or their ability to build up such rights.

We have taken specific steps in amendment No. 166 to ensure that the changes do not reduce the rebates for employers with occupational pension schemes contracted out of the state earnings-related pension scheme. That means that people's future contracted-out pensions will not be affected. Government amendment (a) to amendment No. 166 is a consequential amendment required to correct a technical deficiency. Excluding those needed to reverse the changes made in the other place, the remaining amendments in the group are Nos. 117, 148, 149, 150, 151, 152, 153, 160, 161, 162, 164, 167, 168, 176, 177, and 178. Those make changes to schedules 7 and 8 by way of minor consequential amendments arising from the new contribution structure.

I must also draw the attention of the House to the fact that contributions payable into the national insurance fund are the subject of Commons privilege. That means that it is the privilege of this House to introduce measures on that subject. It is, of course, a privilege which the House is able to waive, and I invite the House to do so in this case.

I now turn to amendments (a) and (b) to Lords amendment No. 64, which seek to remedy the damage caused by the introduction into our measures of changes put forward by members of the Conservative party in the other place—changes that are ill judged, irresponsible and imprudent.

The Conservatives seek to introduce into the Bill a change that my right hon. Friend the Chancellor of the Exchequer has said that he will make at a later date. It is indicative that the only amendments that the Opposition seek to make to the structural national insurance measures relate to an idea that they have stolen from our Chancellor. Those amendments would have a damaging effect. They would remove access to certain contributory benefits from up to 1 million low-paid workers, four fifths of them women. They would cut future SERPS, occupational and personal pensions for millions of others, and they would reduce national insurance contribution revenue by almost £1.5 billion a year without any consideration of whether the financial circumstances are right. I will go on to say more about those effects later; they show how reckless the Opposition amendments really are.

However, the main arguments advanced by the Opposition in the other place for their amendments were not—

Miss Kirkbride

I am somewhat perplexed by what the Minister has just said. If he claims that we are filching an idea from his own Chancellor, why does he condemn what we propose?

Mr. Denham

Because of the timing, and the way in which the Conservative party has sought to bring the changes forward, which, as I have said, is imprudent and reckless.

Mr. Burns


Mr. Denham

I shall deal with that point in a moment.

The main arguments made for the amendments by the Opposition in another place were nothing to do with the substance of the measures introduced by the Government in the Bill, so one can only assume that the Opposition agree with the measures themselves, but are reluctant to say so.

The main arguments were not even to do with the substance of the changes that the Opposition sought to make. Instead, they revolved around the fact that the Chancellor had announced his intention to raise the lower earnings limit as part of future reforms, but that the Government had not included the change in the Bill. The Opposition argued that their amendments were necessary to give the House the opportunity to debate the Chancellor's intentions. Those arguments make no sense. I suspect that, in part, they were put forward by the Conservative party to deflect attention from the damage that would be caused by the ill-thought-out changes that they sought to make.

I have no doubt that people found it helpful to hear from the Chancellor about a change that he intends to make in the future. Early notice helps business to prepare for future changes, and gives everyone a clear picture of the direction that the Government are taking.

6.45 pm
Mr. Letwin

If the Minister thinks that people would have found it helpful for the Chancellor to talk about changes that he intended to make in the future, why did the Chancellor not say that he intended to make those changes in the future?

Mr. Denham

The Chancellor clearly indicated that he intended to make the changes in the future, and I will come to that point again in due course.

In developing his Budget proposals, the Chancellor felt that now was not the time to implement the change. That is clearly for him to decide. He must judge when financial circumstances are right for a measure with such significant revenue implications. As he explained, he would not implement the change until accompanying measures were in place to ensure that people did not lose access to contributory benefits as a result.

It is not, and never has been, the Government's intention to make that change to the lower earnings limit in April 1999. The Chancellor never said that it was. That is why the Government did not introduce the measure in the Bill.

Mr. Iain Duncan Smith (Chingford and Woodford Green)

Is the Minister now saying that the Hansard record of his right hon. Friend's Budget speech is incorrect?

Mr. Denham

I do not really appreciate the point that the hon. Gentleman is trying to make. I do not believe that there is anything in the Hansard record or elsewhere that suggests that the Government intended to make the change to the lower earnings limit in April 1999.

Mr. Geoffrey Clifton-Brown (Cotswold)


Mr. Denham

I shall listen to what the hon. Member for Chingford and Woodford Green (Mr. Duncan Smith) has to say—

Mr. Clifton-Brown

On that very point.

Mr. Denham

I must make some progress. I shall listen to what the hon. Member for Chingford and Woodford Green has to say, but it is clear that it is not and never has been the Government's intention to make the change to the lower earnings limit in April 1999. That is why the measure is not in the Bill.

Secondly, the House debated the Chancellor's Budget for a week. It has had ample opportunity to discuss every measure included in the Chancellor's announcement. The House and the other place will have ample opportunity to debate the alignment of the lower earnings limit with the single person's tax allowance, and the accompanying changes to benefit rules, when the Government bring forward the necessary primary legislation. That will be the time to debate the issues—when the Government have put forward detailed proposals on all aspects of them, and we have the proper legislation in front of us—not now, on the back of the Opposition's ill-considered amendments.

Mr. Clifton-Brown

Perhaps the Minister will clarify what the Chancellor said in his Budget speech, which was: Further reforms will also ensure that no one pays national insurance for the first £81 of their weekly earnings.—[Official Report, 17 March 1998; Vol. 308, c. 1106.]

Mr. Denham

I hope that this will prove the opportunity to ensure that we do not waste a considerable time on a discussion of the interpretation of those words. The "Shorter Oxford English Dictionary" defines "further" as meaning at a more advanced point of time, and I am certain that at a more advanced point of time we shall bring forward the changes mentioned by the Chancellor in his Budget statement. I hope that the time of the House will not be wasted on the debate on the issue in another place, which, if I may say so, was not the finest debate I have read.

The Opposition have nothing of substance to say about the measures, and they will fail to make any serious case about the wording of the Chancellor's statement. It is perfectly clear that "further" means at a more advanced point of time, and I am sure that the changes will be brought forward at a more advanced point of time—but it will be at the right time. I hope that, now that I have dealt with that matter, Opposition Members will not seek to waste the time of the House any further.

Mr. Desmond Swayne (New Forest, West)


Mr. Denham

I suspect that this may be on the same point, in which case I should not take a further intervention—but I shall risk it.

Mr. Swayne

Is not all this the consequence of the fact that the Chancellor's statement bore so little resemblance to the Red Book that underpinned it, and of the Chancellor's habit of hyping up everything that he has to say and offering jam tomorrow? Did that not give people legitimate expectations that what he said meant jam today?

Mr. Denham


To argue that the amendments were needed to give the House a chance to debate the issue is puzzling in the extreme. We have had such an opportunity, and we shall have further opportunities.

Let me turn to the impact that the Opposition's proposals would have in the absence of amendments (a) and (b) to Lords amendment No. 64. It is especially necessary for me to do so as the House may divide on the matter.

There is no doubt that, in terms of work incentives, the increase in the lower earnings limit would have very beneficial effects. It would increase take-home pay by up to £1.70 a week for every person who pays national insurance contributions. It would also further align the national insurance system with the tax system, thereby adding to the policies that the Government have already introduced to reduce burdens on business.

In those respects, of course, we favour the measure. We would. After all, as I have said, it is the Government's own policy. Unlike the Opposition, however, the Chancellor recognises that those effects are only part of the story. The change would mean that, in the absence of any other changes, up to 1 million people earning between £64 and £81 a week would cease to have access to certain contributory benefits. They would no longer get jobseeker's allowance if they became unemployed. They would no longer get statutory maternity pay if they became pregnant and many of them would no longer build up rights to a state pension for when they retire.

That is, in part, why the Chancellor is not introducing this measure in April 1999. He made it clear that those low-paid workers would be protected against benefit losses. It will take time to bring forward and implement proposals on how that should be done, but it must be done.

Mr. Letwin

The Minister's case would have much more force if the Chancellor had made the changes that he intended to make in the Finance Bill. By introducing them in the Social Security Bill, did he not give the Minister the chance to make precisely those consequential changes about whose absence the Minister is complaining?

Mr. Denham

The hon. Gentleman misses the point. It takes time to prepare the sort of changes that can alter policy while protecting the benefit rights of people on low pay. Those changes cannot simply be willed overnight: they must be prepared carefully. It will take time to introduce and implement those proposals, but that must be done. It would not be right to introduce measures that have not had proper consideration and preparation.

The proposals from the Conservative party blithely ignore all those issues. They make no attempt to protect low-paid workers against benefit losses or to help the millions of others whose future SERPS and contracted-out pensions would be cut as a result. That is not this Government's idea of modernising the system, and I am sure that the millions of losers would share our view.

There is another gaping hole in the substance of the Opposition's proposals. Raising the lower earnings limit to the level of the single person's tax allowance would reduce contributions revenue by approaching £1.5 billion a year from next April. A change with revenue implications of that magnitude can clearly be introduced only when financial circumstances permit. In his Budget considerations, the Chancellor decided that the time would not be right in April 1999. That is for him to judge.

In introducing the measures into the Bill, the Opposition have taken no account of those crucial considerations. They are pushing for a change to be made outside of Budget deliberations, without offering any proposals on how the Government should deal with the revenue shortfall that would result. Their amendments give us no clues, and that is imprudence in the extreme.

The changes proposed by the Opposition drive a sledgehammer through the Government's carefully considered plans for restructuring the national insurance system. The Conservatives have taken a good idea and turned it into a bad one. They would take up to a million people out of the reach of certain contributory benefits, and they would reduce national insurance revenue by approaching £1.5 billion, with no indication of how the hole should be filled. The changes are irresponsible and imprudent. I therefore urge the House to reverse the changes made in the other place by agreeing to amendments (a) and (b) to amendment No.64.

The Government's package of proposals has been widely welcomed. It will help to make work pay. If the new structure was in place today, were every employee paying national insurance would pay £1.28 a week less. Our proposals will also encourage employers to create jobs for people moving from welfare into work, and they will simplify the administration of the scheme for business. The overall effect will be to improve work incentives and make it more attractive to employ those moving from welfare into work.

The Government will build further on the measures in future reforms, but only when the time is right and when the benefit implications have been properly addressed. I urge the House to support this radical package of reforms by agreeing to this group of amendments.

Mr. Duncan Smith

We would not be having this debate in the context of the Bill—which is an absurdity—if the Government had not decided to dump all their national insurance changes on the back of legislation that had nearly completed its passage through the House of Lords. It is ironic that, although the Government have spent most of their first year saying how much they disagree with the other place and how little they regard what it does, they turn around at the first opportunity and put changes concerning a major part of their Budget at the back end of a Bill which had almost completed its Committee stage in the other place.

That means that we have only today in which to discuss the measures in this House. Given the Government's previous concern that elected chambers should have full rights of scrutiny, it seems strange that they did not follow the normal course and introduce a separate Bill in this place. It might have proceeded reasonably quickly and received a proper Committee stage when all the issues could have been discussed in detail. In essence, the Government have set out to avoid this Chamber for as long as they can with this legislation and have backtracked on their position regarding the other place, which verges on hypocrisy. However, I shall not dwell on that, as I wish to move on to the amendments.

There is concern that the Government's changes were not announced by the Chancellor in his Budget. I shall come to that matter in due course. In summary, there has been an abuse of this place and its processes by a Government who want to have their cake and eat it by saying what they like about the other place while using it as and when they see fit. In the Red Book, the Chancellor described the national insurance changes as the biggest reform to the structure of national insurance contributions since 1975, at a cost of around £1.4 billion a year from April 1999. I said at the time of the Budget that, by and large, we agreed with the national insurance changes. We believed that they were part of a natural process of reform, and I welcomed them. The changes follow those made by Lord Lawson when he was Chancellor, and I see no reason to oppose them. The Minister knows that, so we shall not waste too much time discussing the absolute merits of the case. I had several concerns, but I raised them at the time and I shall not repeat them now.

My noble Friend Lord Higgins moved the amendments in the other place in an attempt to point out the Chancellor's deception at the time of the Budget. The Chancellor essentially said one thing and then did another. In his statement of 17 March, he announced several changes to the national insurance contributions scheme, which we have discussed. At the time—his words are quite important—he said: I am abolishing the perverse entry fee that every employee pays to be part of the national insurance system and, in doing so, I am cutting national insurance for every employee in the country. Almost immediately—again, his words are important—he added: Further reforms will also ensure that no one pays national insurance for the first £81 of their weekly earnings. All employees earning between £64 and £81 will have their right to benefits protected." — [Official Report, 17 March 1998; Vol. 308, c. 1106.] The Chancellor was absolutely clear about what he was saying: his choice of words was vital to the meaning of the speech. He did not, as the Minister claimed, use the word "future"; he used the word "further". There is a reason for that. All hon. Members know—or they should know—what a Minister means when he uses the word "further" in a speech about legislation. We assumed—as did those in the Gallery and others—that, when the Chancellor used the word "further", he meant that, linked to the Budget would be further announcements regarding the process of change that he had announced. If he had used the word "future", we would have known that the changes were not connected with the Budget and would not necessarily be involved with it. When the Chancellor said: Further reforms will also ensure that no one pays national insurance for the first £81 of their weekly earnings", I know that I was not alone in understanding that to mean that employees would be included as part of the reform. Members of the press made the same assumption. In a front-page article the day after the Budget, The Daily Telegraph stated: no workers will pay National Insurance contributions on the first £81 of earnings". On the same day, similar front-page coverage in the Financial Times—a newspaper not given to over-statement—said: Employers and employees to pay no national insurance on the first £81 of wages. Two major newspapers, among others, made clear what the Chancellor was doing. Many members of the public were left with the impression that the changes that the Chancellor had announced—and which the papers had confirmed—would take place; they knew that the effects would be substantial, particularly on their take-home weekly pay. They thought that the changes would amount to a reduction in personal taxation. Two days later, the "Money Box" programme on Radio 4, which is not a station given to overstatement—

7 pm

Mr. Phil Hope (Corby)

But was it accurate?

Mr. Duncan Smith

If the hon. Member for Corby (Mr. Hope) had listened to "Money Box", he would know that it was precise about most of the Budget details. The interviewer said, in response to a caller that a lot of people seem to think that they won't have to pay any National Insurance until their earnings hit eighty one pounds a week. I mean, even I've been a bit muddled by this. An expert from Scottish Equitable, Mr. Stuart Ritchie, replied: No, the Chancellor got this a little bit wrong in his speech…and newspapers are actually still getting it wrong today". Even two days after the Budget, commentators were still trying to figure out exactly what the Chancellor had promised. Newspapers and radio programmes were all saying that the Chancellor had a made a mistake—that was the best that they could say about it.

When I studied the Red Book directly after the Budget, I could not find any figures that were relevant to the raising of the lower earnings limit, even though I looked hard. The Minister mentioned the complications—the need to sort out contributions, who would receive benefits and the effect on pensions. He rightly said that measures would have to be introduced and further discussions would have to take place.

Why did the Chancellor suggest the changes if he had no intention of implementing them in the next financial year? He said that he was flagging up the idea and that he would make the changes, but there is no provision for them in the Red Book. He was not simply saying that there was too little time before April next year; the Red Book clearly shows that he had no intention to introduce them.

Mr. Clifton-Brown

My hon. Friend makes exactly the right point. Is he aware that the Red Book states, in paragraph 3.31 on page 45: The lower earning limits for employees will remain unchanged (at £64 in 1998–99)"? That is totally contrary to what the Chancellor said in his statement.

Mr. Duncan Smith

My hon. Friend is absolutely right. The Chancellor said: I am abolishing the perverse entry fee that every employee pays to be part of the national insurance system and, in doing so, I am cutting national insurance for every employee in the country. Further reforms will also ensure that no one pays national insurance for the first £81 of their weekly earnings." — [Official Report, 17 March 1998; Vol. 308, c. 1106.] None of the newspapers and broadcast media managed, at the time, to connect that statement with the Red Book, which made it clear that, in reality, the Chancellor had no intention of introducing the changes.

When the Chancellor appeared before the Treasury Select Committee, my hon. Friend the Member for Grantham and Stamford (Mr. Davies) asked him why he had used those words and what his intentions were. Remarkably, the Chancellor replied: I said: 'Future reforms will also ensure that no-one pays National Insurance for the first £81'. The word is 'future'. One can almost see him knitting his brows and glaring: These are reforms we intend to make. However, he had not used the word "future". If he had done, the media would not have made a mistake; they would have read the Red Book and asked, "Future? Which year does that mean? It is not in the Red Book, so it must be way out in the future." The Chancellor made his original statement so that the media would write a favourable story, even though it was not based in reality. The Chancellor knew that few members of the public or the media would read the Select Committee's report—the thought that the media do not dwell on Select Committee reports is strange to hon. Members, I know—so he thought that he would try to rewrite the record. However, the record stands.

The Chancellor crafted his Budget speech well into the night—there was no chance that a word would slip out. He was content to let people believe that the raising of the lower earnings limit was part of the package of Budget measures—he wanted the public to believe that he was reducing their tax. He did not correct the papers the following morning; he did not send them letters saying, "You've got it wrong. You're misleading the public—that is not what I meant." He let the impression stand for that critical 24 hours during which the public are most focused on the changes in the Budget.

Why did the Chancellor do that? The answer can be found in an article in The Guardian, which reported that the Budget had been heavily tested with focus groups before it was announced to the House. It said: Focus groups tested tax plans: Experiment in lifting Budget secrecy hailed as a success. It is clear what happened. The Treasury was considering ways in which to raise the lower earnings limit, but had obviously not found a way to ensure that, as the Chancellor pledged, all employees earning between £64 and £81 would have their right to benefits protected. We understand that difficulty—the Government will have to resolve it.

The focus groups were, clearly, positive about the proposed change. They were told that their tax burden could be reduced, so they said: "That's wonderful. We rather like that." The Chancellor was not blind to that—the Labour party is not blind to focus groups, even though it is blind to everything else—so he hit on a plan: he would ensure that the Budget speech left the public with the impression that the changes would be made. He wanted to have his cake and eat it—he wanted to make minimal changes without going the whole way.

When my hon. Friend the Member for Grantham and Stamford confronted the Chancellor with the curious discrepancy between the Budget speech and the tables in the Red Book, the Chancellor made a crude attempt to rewrite the record. He did not want everyone to cotton on to the point.

These national insurance changes were dumped on the back end of the Bill in the other place because the last thing that the Government wanted was proper scrutiny in Committee of the whole House, which would have given the media plenty of time to realise exactly what was going on.

The Government love to talk about democracy and debate, but they hate discussing legislation. They are apparently strong on reforms of the other place, although we have yet to see what those will be, but they jumped at the first opportunity to bypass the Commons, because they worry about legitimately, democratically elected Members of Parliament scrutinising a deliberate attempt to force the press, the media and the public onto the wrong course in order to generate a warm feeling among the public.

I am extremely grateful to the House of Lords for giving us the chance to discuss these matters by amending the proposed national insurance changes. We finally have the opportunity to expose the Chancellor's little scheme and his serious economy with the truth. We intend to support the original Lords amendments, and we will certainly oppose the changes proposed by the Minister.

When a Chancellor makes a speech as important as the Budget statement, which, after all, is arguably the single most important speech made by him or possibly by any member of the Government, the whole country hangs on his words. It is the only speech that I know of which is regularly broadcast in full and analysed as it is going on; it is commented on and digested by experts; it covers the front pages of the following day's newspapers; and it dominates the television news on the day.

That coverage is not of press releases but of the Chancellor's words. He knows as well as anyone else in the House that the words that he chooses are vital. There is no way in which he would play fast and loose and not bother about the phrasing that he uses.

Mr. Christopher Leslie (Shipley)

Will the hon. Gentleman give way?

Mr. Duncan Smith

In a minute.

The Chancellor would not want anybody to get the wrong impression, leading to a wrong result in the media the following day. The words were carefully crafted.

If the Government amendment is defeated and the Lords amendment is sustained, the Government will have serious thinking to do about the contributory principle. The Minister knows that, in any case, there is a serious debate that must be engaged in, because, with the moving of the Contributions Agency across to the Treasury, we are already concerned with the contributory principle and what will happen to it. It is perhaps high time that that debate was brought more into the open. I had hoped that that would happen with the pensions reforms, but I recognise that that is a matter for another day.

If the Government allowed the Lords amendment to be made, there would be plenty of time for us to have a proper, rational and reasonable debate that could assist them to find ways in which to resolve the matter. When the Chancellor makes a statement as powerful as the one that he makes on Budget day, he chooses his words carefully and knows full well the effect that they will have, and there is no way in which the House can let him slide away from an obligation that the general public believe him to have committed himself to: they expect to be better off each week, beyond the changes to the employer contributions, and that expectation was deliberately raised by the Government. The Chancellor must answer for that.

The Government should explain tonight why they persisted in allowing that misleading statement to run in the media without correction for the first, most crucial, 24 hours.

Mr. Quentin Davies (Grantham and Stamford)

The Government have still not given the country an answer on what should be the future role of national insurance and whether they intend to make it part of the tax system. Elements of the Government's proposals, such as the decoupling of benefits from employer contributions and the merger of the Inland Revenue with the Contributions Agency, certainly tend in that direction. Will national insurance be treated as tax, or shall we maintain the contributory principle in our welfare system? The Government remain undecided after a year.

7.15 pm

Even more important than those issues of substance, however, is the great issue of how the Government mean to treat with the British people. Do they intend to be straight with the British people? Will Ministers state the facts as they are, or will they prevaricate, try to deceive by sleight of hand and imply something that they know not to be the reality? Will they try to bury major items of legislation in an inappropriate Bill, on which we have only a few hours for discussion?

Those are crucial issues concerning Parliament's role in legislation and the Government's obligation to be straight with the electorate. Even if we are overridden on the substance of this debate by the Government's large majority in the House, those issues will remain, demanding an answer from the Government.

Before I discuss the Chancellor's unedifying behaviour in this matter, let me say that I do not think that the Minister helped the Government's credibility by the way in which he dealt with some of the specific issues raised by the Lords amendment. If I heard him correctly, he said that implementing, as the Conservative party wants to do, the proposal that the Chancellor appears to have made in his Budget speech to eliminate employee class I national insurance contributions below the income tax threshold would mean that employees earning less than that amount would lose their benefit entitlements.

That is a terrible misrepresentation, because the fact is that the Chancellor said: Further reforms will also ensure that no one pays national insurance for the first £81 of their weekly earnings. All employees earning between £64 and £81 will have their right to benefits protected."—[Official Report, 17 March 1998; Vol. 308, c. 1106.] That proposal specifically eliminates the danger to which the Minister attached such importance tonight. He cannot possibly rubbish a proposal that includes the protection that he says is lacking. That is no way in which to deal with important matters.

The Minister then had the nerve to say that the changes in national insurance contributions introduced in the Budget would not damage benefits for employees. He specifically said 10 minutes ago that the changes would not damage the position of those who are opted out from the state earnings-related pension scheme.

I am particularly amazed that the Minister had the effrontery to say such a thing tonight, because when he and I debated this matter recently in a Delegated Legislation Committee, I made it absolutely plain—he could not deny the fact—that, although the new arrangements for SERPS rebates compensate those who have contracted out into personal pensions, they do not compensate those who have contracted out into salary-related occupational pension schemes, and that the SERPS rebate for money purchase schemes is actually being reduced.

Mr. Letwin

My hon. Friend is making this important point with great force. Does he agree that it was remarkable that the Minister did not refer to the distinction between money-related schemes and money purchase schemes? One would have thought, given the previous exchange, that he would at least try to claim that the provision affected the money-related scheme. Is it not now clear that he has admitted the very point that my hon. Friend made earlier?

Mr. Davies

Indeed. We shall have to read Hansard very carefully. One must count one's spoons carefully with this Government. When we read this debate in Hansard, we shall see that the Minister had the nerve to say that the position of those who contracted out from SERPS was being protected. He knows that the position of a substantial number of employees who contracted out into salary-related occupational pension schemes is not being protected. Far from being protected, the position of those in money purchase schemes will be worse and they will get less by way of a SERPS rebate.

The Minister's speech did not meet the most elementary demand for clarity and straightforwardness which we expect of a Minister of the British Government. A Minister cannot come to the Dispatch Box to deal with this matter and leave out two thirds of the picture.

Mr. Leslie


Mr. Letwin


Mr. Davies

I shall give way first to my hon. Friend and then, of course, I shall give way to the hon. Member for Shipley (Mr. Leslie).

Mr. Letwin

Will my hon. Friend focus on an important corollary to this matter? Does he agree that the issue might become even more important with the compulsion on stakeholder pensions, especially if they turn out to be salary related? Does he agree that that creates an extremely interesting tension between the Minister's utterances tonight and in a previous encounter, and what he seems to propose for occupational pensions?

Mr. Davies

My hon. Friend puts his finger on an extremely sensitive and interesting point. That is another area of governance of this country where the Labour Government, after a year in office, simply cannot make up their mind what to do about compulsion in relation to stakeholder pensions. They have been discussing the matter for months and have still reached no conclusions. Here again, we must watch carefully what they say because there will be all kinds of slippery talk and attempts to deceive, while providing for a future argument that no formal lie was stated. We must watch for every trick in the book on this important matter.

Mr. Leslie

The hon. Gentleman mentioned two thirds of the picture. Can he clarify—I know that he wants to be responsible—whether the Opposition amendments made in the other place would leave a hole in the Exchequer finances of £1.5 billion from the financial year that starts in April 1999? How does the Conservative party propose to fill that hole? Would they add it to the national debt, raise additional taxes, or cut public services?

Mr. Davies

Had the hon. Gentleman been following the proceedings of the Treasury Select Committee—no doubt he has not had time to do so; he cannot be blamed for being unable to follow the proceedings of every Select Committee—he would know two things. First, in dealing with the Budget, I made a range of proposals and criticisms, so one would have to explain across the range where one would have made different decisions on both the expenditure and revenue sides.

Secondly, when the Chancellor appeared before the Treasury Select Committee, I put to him the specific point that the hon. Gentleman correctly raised because I thought that it was possible to read the Chancellor's words in Hansard and believe that they carried the meaning ordinarily attached to them in the English language. Thus, when he said that further measures would be introduced to eliminate employee national insurance contributions of up to £81 a week, I, like the rest of the country—The Daily Telegraph and everyone else who has been quoted—naively believed that he was to be trusted.

I assumed that that was what the Chancellor genuinely intended to do, so I asked him, "How come you made that commitment, Chancellor, but in your Red Book—your projection of revenue and expenditure for the following four-year period—you take no account of the revenue cost of that measure?" If the hon. Gentleman reads the record of that sitting of the Treasury Select Committee, he will see that it was precisely that exchange that led to the comments that my hon. Friend the Member for Chingford and Woodford Green (Mr. Duncan Smith) quoted to the House.

Mr. Duncan Smith

Is not that the main point? My hon. Friend is making the point from his position in the Select Committee. However, if, as the Minister said, the Chancellor clearly intended to take such action, why was it not structured in the Red Book? Why did not the Chancellor announce in this year's Budget that everything would start from April next year? In this case, such action is not even mentioned in the Red Book, other than to say that it would not be done.

Mr. Davies

I could not agree more. Once the Chancellor had decided to promise further measures eliminating class I national insurance contributions below £81 a week, and decided to make no provision for that proposal in the Red Book, he was caught both ways. He was coming before the House either to make a proposal that was not costed, which was a serious failure for a Chancellor of the Exchequer, or to make a promise that he knew perfectly well was completely bogus. Arguably, that was an even greater failure—certainly a greater moral failure, if not a greater failure of competence. Clearly, he was guilty of one or the other.

I can only imagine that the reason for the Chancellor's committing that colossal error was that he underestimated the intelligence of the public and of Conservative Members. He will live to regret that, among many other things.

Mr. Clifton-Brown

I wonder whether there is a more sinister point to all of this—disagreement within the Labour party about its social security policy. Perhaps the Minister for Welfare Reform, who has genuinely campaigned in the House for years to look after the low-paid and the disadvantaged, wanted that measure, but was restrained by the Chancellor from bringing it about. When the Budget statement was produced, Labour Members did not know who would win.

Mr. Davies

I agree with my hon. Friend. Clearly, in this matter, as in others, the Government do not know whether they are coming or going. They do not know whether it is Tuesday or Saturday. We have been waiting for more than six months for a White Paper on stakeholder pensions. My hon. Friend the Member for Cotswold (Mr. Clifton-Brown) reminded me that we had a White Paper on welfare reform at the end of March. It was long on questions and platitudes, but extremely short on answers and solutions. It said that any reforms would be carried out over 10 or 20 years. I suppose that that is the Chancellor's definition of "future", and that everything will now be deferred until after the next and subsequent elections. That is the nature of the Labour Government and how they deal with urgent national problems.

I have not finished dealing with the way in which the Minister presented Government policies. There is a third way in which he was less than absolutely clear with the House and the British public in presenting the effects of the national insurance changes. He said that it was unambiguously good news for employers, or at least for all employers with employees earning less than £500 a week. He must know—in which case he should make it clear—that that is not the position. The provision does not have a straight-line effect.

If the Minister looks at page 47 of the Red Book—I sometimes wonder whether Ministers in this Government bother to read it—he will see chart 3.3, which is very peculiar and compares the effect of the introduction of the new rates of employer national insurance contribution with the current regime. We know that, in respect of employees on more than £500 a week, employers will pay more class II contributions, but some employers will pay more on modest earnings of between £100 and £200 a week. The table is clear: an employer will pay more than under the old regime for an employee earning £150 or £160 a week. However, the employer will pay less for an employee earning £170 or £180 a week.

7.30 pm

The anomalies are extraordinary. It is not true that the measures are unambiguously good news for employers and reduce the burden of national insurance contributions at low levels of income, only to be compensated by an increase at higher levels of employee incomes. There is one message in ministerial rhetoric and in the handout from Walworth road, and another reality in the detail of the Treasury documents.

You, Mr. Deputy Speaker, may think that I have been harsh on the Under-Secretary—after all, he has come to the House only to do his master's bidding—but I have been extremely kind to him, compared with what it is necessary to say about the Chancellor of the Exchequer. The Chancellor may simply have made a mistake. He said "further" when he meant to say "future". In the spirit of generosity that is part of the tradition of the House, we not only take account of that as a theoretical possibility, but hope that it ultimately proves to be the correct hypothesis.

Mr. Duncan Smith

I do not think so.

Mr. Davies

My hon. Friend does not think so, but perhaps he is less generous minded than I am.

Mr. Letwin

Is my hon. Friend neglecting the gyroscopic spinning of the Chancellor's servants? If the Chancellor had made such a mistake, would not Mr. Whelan have been informing the press of the catastrophe in 25 minutes, let alone 24 hours, and asserting that it was merely a slip of the stenographer's hand?

Mr. Davies

I agree with my hon. Friend that that is part of the evidence that there was not a simple mistake. A serious issue is before us, because there are only two possibilities: either the Chancellor made a mistake or he deliberately spoke with forked tongue. It would be extremely serious if a Chancellor of the Exchequer of the United Kingdom had deliberately spoken with forked tongue. That goes way beyond the economic significance of tax changes, issues of mere competence or the attractions and costs of different political programmes to the heart of the integrity of the House, and the integrity of government.

I want fully to consider the possibility that there was a mistake. I am the first to acknowledge that we can all make mistakes or slips of the tongue. I am no less likely to make such mistakes than anyone else, but there is a simple remedy in this place: an hon. Member simply apologises to the House. That is extremely easy to do, and the tradition of this place is that, once an hon. Member has apologised, no further sanctions are called for and the matter is at an end. That has been the basis of the honour of the House of Commons for centuries, as you, Mr. Deputy Speaker, know as well as—indeed, better than—anyone.

The Chancellor never took that opportunity. Instead, he did something extremely serious which, sadly, can only confirm his serious guilt in the matter. He said something in the House and, to cover himself when it became clear that there was a fundamental contradiction between what he had said in the Budget speech and the Red Book, which was issued after it, he had the Treasury put out a completely false version of the text.

We are familiar with Governments in the past—not, I am glad to say, in this country—who have adopted the Orwellian method of retrospectively changing the text of speeches, but I did not expect that in this country in my political lifetime. I have in my hands the text of a press release put out by the Treasury after the Budget speech and after the row had begun. It is identical to the Budget speech in Hansard and is headed "check against delivery". We must check carefully when a speech by the Chancellor is delivered or committed to paper. It says: Chancellor of the Exchequer Budget speech, 17 March 1998". I read the speech, and the text corresponded exactly to Hansard, until I reached page 13, which states: Future reforms will also ensure that no one pays national insurance for the first £81 of their weekly earnings. I thought that I must have made a mistake, had a brainstorm or imagined something; indeed, if I had had a dream, it would have been a nightmare.

I looked again at Hansard, and the speech refers not to future reforms, but, as we all heard the Chancellor say, to "Further reforms". That is a very serious matter. Although the incident is a credit to the integrity of Hansard, the Government, unlike some totalitarian regimes, are not in a position retrospectively to doctor Hansard. Nevertheless, the Treasury saw fit to put out a document purporting to be an exact text of the Budget speech. One key word had been changed, which, I fear, is evidence that there was no mistake made in good faith, but a deliberate attempt to disguise reality—to speak with forked tongue. I am being very careful, Mr. Deputy Speaker, not to use an unparliamentary expression.

Mr. Deputy Speaker

Order. The hon. Member for Grantham and Stamford (Mr. Davies) is being very careful. I shall not ask him to withdraw the words "forked tongue", but I ask him to be careful in choosing his words.

Mr. Davies

If hon. Members have not got the point by now, they never will.

The Government can do only one thing to undo the damage that they have done to their credibility by behaving in such a way. They must, even at this late date, make a full and grovelling apology for this attempt to pull the wool over the eyes of the British public. It was doomed to failure, because they misunderstood and underestimated the intelligence of the British people, and the fact that the Opposition were wide awake and would not let them get away with it.

Mr. Clifton-Brown

My hon. Friend the Member for Grantham and Stamford (Mr. Davies) is in good voice and form this evening, and he has made many telling and interesting points. His main point is that the Government's left hand did not know what the right hand was doing, because it is clear that the Government had a genuine intention to remove from the national insurance net those people who earn less than £81 per week.

I mentioned that dichotomy in my speech on Second Reading of the Finance (No. 2) Bill and I quoted the relevant passage from the Chancellor's Budget speech. It is worth repeating that again, so that the House can be crystal clear about what exactly the Chancellor said. He said: Further reforms will also ensure that no one pays national insurance for the first £81 of their weekly eamings."—[Official Report, 17 March 1998; Vol. 308, c. 1106.] That cannot be made much clearer—the crystal clear import of that statement is that anybody earning less than £81 per week would not pay national insurance. However, as I pointed out to my hon. Friend the Member for Chingford and Woodford Green (Mr. Duncan Smith), paragraph 3.31 of the Red Book states: The lower earnings limit for employees will remain unchanged (at £64 in 1998–99). Therefore, either the Chancellor was right or the Red Book was right, but they could not both be right.

What is so tragic and so dreadful about all this is that it is the low-paid who are being misled—inadvertently—by what the Chancellor said on Budget day. That is cruel. If it had been you or I, Mr. Deputy Speaker, who had to suffer a pound or two more paid in national insurance, we should have been in a position to pay that increase.

Mr. Swayne

Speak for yourself.

Mr. Clifton-Brown

If my hon. Friend were earning less than £81 a week and suddenly expected to have a little more take-home pay, he would have been absolutely delighted by what the Chancellor said, but he would have been dreadfully disappointed when it subsequently came to light that he had not quite understood what the Chancellor really meant.

I am on serving on the Standing Committee on the Finance (No. 2) Bill and members of that Committee have discovered that that Bill provides for an unprecedented transfer of secondary powers to Treasury officials. For example, clause 158 provides that all the necessary regulations connected with the implementation of the single European currency can simply be delegated to Treasury officials by secondary legislation. The Bill before us now similarly transfers huge powers to officials by secondary legislation. The message is that if the Chancellor cannot get it right on Budget day, it will be put right subsequently by secondary legislation.

That is a highly unacceptable way to go about these matters. It is a complete abrogation of the sovereignty of the House of Commons. We are here and, over the centuries, we have been given the power, enshrined in the Parliament Act 1688, to be the money-granting authority. There is no higher money-granting authority than the House of Commons. To abrogate that responsibility by secondary legislation is unacceptable.

Mr. Swayne

Does my hon. Friend accept that this amounts to something approaching the continental pattern of government by decree? Does he agree that it represents a complete negation of the achievements of the Chartists, who saw the question of the suffrage as a knife-and-fork question, a bread-and-cheese question?

7.45 pm
Mr. Clifton-Brown

I totally agree with my hon. Friend. It is an abrogation of the achievements not only of the Chartists, but of the Long Parliament of the 13th century. Throughout the long history of Parliament, the House of Commons has had primacy as the money-granting authority. Here we have a Government, in an unprecedented way, transferring powers to officials in the Treasury, whereas we in this place should be ensuring that such measures appear in primary legislation and are subject to the full glare of scrutiny, both here on the Floor of the House and upstairs in Committee, so that when things are not as they should be, the Opposition—and, I have no doubt, the Labour party when it goes back into opposition in due course—have the opportunity to correct the Government of the day.

The Government may well rue the day they embarked on the process of a huge transfer of power, because, having transferred it to Treasury officials, they will find it hard to claw back. Ministers do not have the proper scrutiny and control over secondary legislation, and we find that that control slowly slips still further towards Europe. That is a wholly undesirable state of affairs.

Much more importantly, I dislike the whole concept of national insurance. What we should do is abolish national insurance altogether and put it totally on income tax and corporation tax. That is a much fairer basis for taxation, because those are properly progressive taxes. Paragraph 3.30 of the Red Book reveals the huge distortion caused by the national insurance system, which the Conservative amendment made in the Lords started to address. To be fair, the Government have recognised that.

It is worth noting, because it is at the heart of this debate, that paragraph 3.30 states: The current structure of NICs bears particularly acutely on the low-paid and discourages job creation at the lower end of the earnings distribution. Steps in the structure of national insurance, whereby a one penny increase in pay can trigger an increase in NICs of up to £6.30 a week". In other words, a 1p increase in pay can trigger a 630 per cent. increase in tax. If that is not a massive distortion in the tax system, I do not know what is. Paragraph 3.30 says that the structure of NICs distorts the labour market, discouraging progression up the earnings ladder. These distortions are greatest at the lower earnings limit". To raise that lower earnings limit immediately and not wait a whole year is precisely the point of the Conservative Lords amendments. Paragraph 3.30 says that a rise in earnings from £63.99 to £64 a week triggers a NIC charge (the 'entry fee') for employees of £1.28 and for employers of £1.92 a week", and says that that is one of the last remaining causes of people being worse off when they earn more. That should be eliminated for ever, and thank god when it happens.

I support the Conservative Lords amendments, because of that distortion and that huge disadvantage for the low-paid. My own Government should have put it right years ago. I urged my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) to do that when he was Chancellor and I am sure that, had the Conservative Government been returned to office, he would have paid close attention to the problem.

Considering how much the Government have been able to reduce this country's debt burden, one might have thought that they would be prepared to spend £1.4 billion—which they have committed themselves to spending next year in any case—on helping some of the lowest-paid people in our society who are living in the most appalling and mean conditions. One might have thought that the Government would be only too anxious to introduce that measure as quickly as possible. The amendments are wholly right and I urge the Government to take them away, look at them on behalf of the low-paid, some of whom can hardly afford to feed themselves, and see whether they cannot be more generous and enact the provisions immediately.

We all recall that for employees earning more than £81 a week, the employer's rate will be increased to 12.2 per cent. The Red Book makes an interesting point about this, saying: The employer package is revenue-neutral, so that the burden of employer NICs as a whole will remain unchanged. There is no reason why the employer changes could not have been made immediately.

It is reprehensible that rather than the measures being included in the Finance Bill—as they would have been in the past—they have been tacked on to a measly Social Security Bill at the eleventh hour.

This demonstrates all too clearly that the present Government do not know what they are doing, and did not think the matter through before introducing a Budget.

The Standing Committee considering the Finance Bill is finding serious flaws in nearly every clause, because the Government have not consulted those who are most involved: tax practitioners, accountancy bodies and lawyers. If they had done as we did when we were in government, and taken the trouble to consult such experts—which, frankly, is the only correct thing to do—they might have produced a rather more orderly Bill, and might have avoided some of the more elementary errors.

I have written a paper on the reform of the state pension. The general issue of pensions is directly relevant to the change in national insurance contributions proposed in the excellent Lords amendments. One of the core problems encountered by the Minister today was how he could make up the amount if the lower earnings limit was raised from £64 to £81 a week. In my paper—which I submitted to the Minister for Welfare Reform, as a contribution to his White Paper and his review of the pensions system—I proposed a credit for all low-paid people, all people who were out of work and all working housewives who were earning less than the national insurance lower earnings limit. I feel that people who would normally expect such a credit should receive it, and that there is no reason why the Government cannot compensate for the rise in the lower earnings limit.

It is clear from the demographic trends that if nothing is done about the state pension, it will wither on the vine. When the time comes for me and you, Mr. Deputy Speaker, to retire—in many years' time—we shall suddenly find that the state pension is worth considerably less than it is now in real terms. The Government will have to deal with that problem; otherwise, it will cost all of us who are in work a good deal of money.

Allied to that problem is the problem of the state earnings-related pension scheme. We must encourage all people of working age, especially young people, to take out a second pension—through the national insurance system, if we must do that, or, in my book, through the income tax and corporation tax systems. We must provide a mechanism to make that possible. I think that the Minister for Welfare Reform wants that as well, but that the Chancellor has imposed a constraint because of the cost involved.

The Government must tackle the issue of second pensions. If they do not, they will be chucked out, and a future Conservative Government will have to tackle it. The abolition of advance corporation tax credits suggests to me that the Government are not interested in people's ability to retire with a decent pension and with dignity. As a result of 18 years of excellent government by the Conservative Administration, more than 50 per cent. of people retired with some form of second pension. That was a worthy achievement. People who have their own pensions can choose how to spend their money in their old age, and are much less dependent on the state. In this and other measures imposed in the previous and current Budgets, the Government are driving people into increasing dependency on the state. They want to level everyone down to the lowest common denominator.

I was sent here by my constituents to improve the lot of everyone in the country, including the lower-paid and, in particular, pensioners—especially pensioners who have little money and rely on benefits. I want future generations not to have to rely on a measly state pension topped up by some form of benefit; that is a disgrace to society, with which any well-meaning Government should try to deal.

I have drawn attention to the distortion involved in the marginal rate of tax which is shown in the Red Book. An increase of 1p in someone's income can result in an effective national insurance increase of 630 per cent. The Government should do something about that: if they are not prepared to, they should consider themselves an utter disgrace, and the sooner they are chucked out because they are uncaring, the better.

Mr. Rendel

I hope that the tone of my speech will be more tolerant than that of the last two speeches.

I sympathise to an extent with the view expressed by the hon. Member for Chingford and Woodford Green (Mr. Duncan Smith) and others; it is odd that such a major part of the Budget should be introduced in the form of a Lords amendment to a Social Security Bill. I think many people would consider it an unusual and, in some ways, undemocratic way of making a major alteration. In that respect, I have some sympathy with the Conservative party.

It must be said, however, that the Lords amendment was introduced because a large number of hereditary peers outvoted peers who were not hereditary. Conservative Members have referred to abuses of the parliamentary system; surely that is an abuse considerably further up the scale than anything that the Government are trying to introduce, or any method that they are attempting to employ.

Many people outside would think it a rather odd use of parliamentary time to engage in what will probably be three and a half hours of debate about whether the Chancellor said further or future, whether the change was the result of a slip of the tongue or was introduced deliberately and how the two words came to be muddled up—and, indeed, the exact meaning and implication of the two words. People might consider it not entirely sensible for those who have been sent here to represent their constituents to engage in such a debate.

Mr. Duncan Smith

Having recalled the Budget debate and the subsequent media coverage, does the hon. Gentleman not see that there was a clear recognition that changes were made that were relevant to employees? The public would have understood that because of what they read and listened to. The coverage that took place in the 24 hours, or perhaps two days, after the Budget speech is what people will have absorbed most; that is what will have given them an understanding of where the Government were going. There is nothing unintentional about that.

Mr. Rendel

I do not deny for a moment that people probably gained an impression—which was not to be realised in practice—of what the Chancellor intended. Perhaps we are all to blame for not pointing out how wrong, or how misleading, the Chancellor had been.

Let me make what is perhaps an even more important point. I am surprised that the main Opposition party makes such a fuss about the matter. Surely one of the things that put people off political parties is finding that they have been misled. I would expect the fact that many people who expected their national insurance contributions to fall have found that they have not fallen to be very damaging to the Government. I would expect the fact that the Government were able to mislead people in the short term to be to their disadvantage, and I am surprised that the Conservative party is complaining.

Mr. Quentin Davies

I entirely agree that trying to deceive the British public is not good politics and that the Government will pay a price for it. The important thing about the word that was used is not whether the Chancellor said future or further but why, having said the one, he then tried to make out that he had said the other. It is the cover-up which is sinister and which requires an explanation from the Government.

Mr. Rendel

I have no idea whether it was a slip of the tongue or deliberate, and I do not think it desperately important. The fact is that the public were given one impression, only to find now that it was wrong. They will take against the Government for that reason. I should have thought the Conservatives would be pleased about that instead of castigating the Government so much for it.

The increase in the lower earnings limit is welcome, whenever it comes. I sympathise with Conservatives who find it disappointing that it is not to happen in the first year. We, like everyone else, are disappointed by that.

Mr. Swayne

Does the hon. Gentleman agree that any reading of the Red Book suggests that the change is never to come?

8 pm

Mr. Rendel

The Red Book appears to give no indication of it, but that does not mean to say that it will never come. There is every impression that the Government still intend to introduce the change at some point. The Red Book comes out each year; if the Government intend to effect the change next year I expect them to change the Red Book then.

Our original criticism—the Chancellor certainly hoped to overcome it—concerned the difficulties caused for those who no longer pay contributions in terms of their rights to contributory benefits. When the changes are made, it is critical that, alongside them, changes to eligibility for contributory benefits are also made. People who no longer pay national insurance on the lower part of their income should retain their rights in that respect.

One of the most widespread criticisms of the welfare system is that benefits are sometimes not provided for those who most need them, maternity benefits being a case in point. Women on the lowest pay tend to be those who have to go without the benefits, which to most people seems absurd. The fact that the system is contributory has done the damage and has led to a great deal of justified criticism.

If we are to change the threshold at which contributions are paid, we need to overcome the difficulty I have described by making the necessary other changes alongside. That is why it is right on this occasion to support the Government's amendment—the two measures must go through together. They will both be welcome; I hope that they will be put into effect as soon as possible. The Lords amendment would prevent that, which is why it is important to amend it in the way the Government propose.

Mr. Swayne

I fear that I shall be unable to match the passion and anger of my hon. Friends the Members for Grantham and Stamford (Mr. Davies) and for Cotswold (Mr. Clifton-Brown). My heart is filled more with disappointment than with anger. I regard it as a bit rich of the Under-Secretary to accuse my party of irresponsibility and of being precipitate in our haste to bring in the Chancellor's plan to change the lower earnings limit to £81. We have been accused of not thinking the issue through properly and of not giving sufficient consideration to its financing or the rules protecting the benefit rights of those who would be affected.

The Red Book trumpets the reform as the most radical reform of national insurance since 1975. The trouble is that tagging it on to this and subsequent amendments severely restricts the time available for scrutiny and consultation. It is therefore a bit rich of the Government to accuse us of irresponsibility for opposing amendment (a).

My hon. Friend the Member for Cotswold has already pointed out that the amendments contain a range of open-ended powers that enable the Government to make changes subsequently, without reference to legislation.

Mr. Letwin

Does my hon. Friend agree that that is characteristic of the Bill and that such general powers are to be found throughout it?

Mr. Swayne

It is also characteristic of the Finance Bill. My hon. Friend the Member for Cotswold was right to correct me when I drew attention to the Chartists and their desire for no taxation without representation. That question goes much further back, to the Long Parliament, when ship money was the issue at stake. The Executive was raising taxes without the authority of the Commons. That led to the grand remonstrance, which in turn led to a complete change in the polity of this nation over 20 years during which the governance of the country was turned upside down.

Mr. Letwin

Would my hon. Friend agree, on reflection, that there is a remarkable similarity between Dr. Prynne, of ship money fame, and Mr. Whelan?

Mr. Swayne

That is a pertinent point. Ship money was actually a very fair tax, subsequently imposed by Parliament itself during the interregnum. The basis on which it had been calculated was fair and proper. What was wrong with the tax, just as with these arrangements, was that it did not have the proper authority of Parliament—at least not under Charles I.

I want to move on some 400 years now, to Lords amendment No. 64. My constituents thought that the Chancellor was raising the lower earnings limit for national insurance contributions to £81 a week—as witness column 1106 in Hansard for 17 March. My constituents can hardly be blamed for doing so: their representative sitting here during the Budget statement also thought that that was what was going to happen. I was thinking about the interview that I had agreed to give subsequently to Meridian Television, and my mind was concentrated on that. I heard the Chancellor's message with mixed feelings. My natural elation at the beneficial nature of the change was tempered only by my nervousness at knowing that I had to face the cameras and pour cold water on the Budget statement. Those contrary emotions rivalled one another.

The Under-Secretary will remember the interview well, because he shared it with me. He will no doubt recall my nervousness and inability to make up my mind one way or the other about the Budget. Had I had the benefit of the subsequent revisions and the gloss that has been put on that statement, I might have made a better fist of the interview.

Equally, my constituents could not be blamed for thinking that the lower earnings limit for national insurance contributions was to be raised to £81 because a disproportionate number of them read The Daily Telegraph, on the front page of which it was headlined on 18 May. For those few corporate bureaucrats who persist in reading the Financial Times, it was in that as well. My constituents were given the clear impression that the lower earnings limit was to rise to a new limit of £81 and, of course, much joy attended that announcement.

As my hon. Friend the Member for Cotswold has said, that would have had significant advantages for all people on lower incomes, particularly those who might properly be considered to move within what has often been characterised as the unemployment or benefits trap. Now they discover that this is a measure for the future. It is to be jam tomorrow, or, more properly, as any examination of the Red Book will reveal, beyond tomorrow—not so much jam tomorrow as the people's strawberry jam having been adulterated with wooden pips by the Chancellor himself.

Frankly, I would prefer the Budget as it was originally given by the Chancellor. That is why I wish to vote against Government amendment (a) to Lords amendment No. 64: to keep the Budget as it was and to preserve the Chancellor's original intention. The Under-Secretary has said that it is most irresponsible of us to do so. He has referred to the huge hole in the finances that will emerge as a consequence.

Perhaps I might be permitted to express an entirely personal opinion. It is my view that the Chancellor's Budget may have significantly overtightened the fiscal stance beyond what is advisable and that we might be thankful of a loosening of some £1.4 billion in the months to come, bearing in mind the significant difficulties in which the manufacturing sector already finds itself, so I reject any argument of irresponsibility that the Under-Secretary makes on the ground of fiscal loosening.

The Under-Secretary has said that we are irresponsible in that we have not properly thought through the protection of the rights of people who will benefit from this measure—the protection of their rights to benefit.

Mr. Clifton-Brown

One of the benefits of having to sit through these long debates is that one has an opportunity to scrutinise the Government's documents more carefully. My hon. Friend referred to a fiscal tightening in the Budget; there is no question but that it is a fiscal-tightening Budget. Is he aware of paragraph B.19 on page 116 of the Red Book, which clearly states: Net tax receipts are projected to grow by 6 per cent. in 1998–99, rather faster than money GDP"? That absolutely goes to prove that this is indeed a severe fiscal-tightening Budget.

Mr. Swayne

I thank my hon. Friend for that intervention. I fear that I do not have his eye for detail or his intellectual rigour in examining these things. I read the Red Book as an amateur, but, without being able to refer to chapter and verse, as he has done, I could clearly see that there was scope for a more generous fiscal stance in the Budget. It was certainly my belief that it was desirable to do that. I am deeply fearful of the consequences of our fiscal stance; I have already referred to the situation that the manufacturing sector faces. I reject entirely the argument that, in proposing this measure, we are being fiscally irresponsible.

8.15 pm

We have been accused of irresponsibility over the protection of social security benefits. I sat here on this Bench listening to the Chancellor's statement. He said that social security benefits would be protected. We now discover that he said so irresponsibly, according to the criteria that were defined by the Under-Secretary. The Chancellor had not, it appears, thought through the means by which the benefits would be protected, so if I and anyone else looking to vote against amendment (a) are to be accused of irresponsibility, the same applies to the very statement that the Chancellor made.

I cannot be expected to run the country from the bottom, but I can be expected to vote for the Lords amendment and, in so doing, put proper pressure on the Chancellor to think through how these benefit rights are to be protected while a fiscal hole appears in his Budget arithmetic.

Mr. Letwin

I should like to discuss three issues. The first relates closely to the powerful speech by my hon. Friend the Member for Grantham and Stamford (Mr. Davies)—I thought that it was one of the most bravura performances that I have heard since coming to the House—but takes his argument one stage further. It relates to the point that the hon. Member for Newbury (Mr. Rendel) raised: why are we concerned about further-future dispute, the minutiae of Hansard against press releases and so forth?

To answer that question, one has to consider a further question—perhaps I should say the future question. What was it that the Chancellor and Mr. Whelan between them were trying to achieve by the manoeuvres, first, of raising expectations, secondly, of fostering the raised expectations by not spinning to deny them and, finally, of denying that the expectations had ever been raised by issuing a press release, which, so to speak, retrospectively uncorrected the statement?

What was the purpose of that? It is a strange set of occurrences. We have to inquire of two highly intelligent and experienced people—the Chancellor, perhaps the most experienced and intelligent member of the Government, to judge by much of what has been said about him; and a man who is regarded as the rival of the legendary Mr. Campbell in his management of the press. What did those two highly intelligent and experienced people seek to achieve by those manoeuvres?

I cannot bring the power of analysis that my hon. and, I would say, learned Friend the Member for New Forest, West (Mr. Swayne) has brought to the historical exposition of the matter. I cannot be expected to be certain of this highly speculative inquiry, but I do think that there is a likelihood—a strong and serious likelihood—that what was going on was a conscious attempt to try to make the British public attend to one item, in order to make them attend less to other items in the Budget.

I may be wrong. I would be happy if the Minister were to contradict what I say, or if subsequently, his hon. Friends were to deny it, but that must be—stripping away all the rhetoric and politicking of this place and places outside—the most likely explanation of what was being done. It was hoped that the British public could be persuaded that there was something so nice in the Budget for them, alongside all the other goodies—

Mr. Swayne

Could it possibly have been that the Government hoped that the public, thinking that there was to be a raising of the lower limit of national insurance contributions, would be so blinded by that that they would not notice the abolition of retirement relief on capital gains tax, which has cost a constituent of mine—of very modest means—a staggering £55,000?

Mr. Letwin

My hon. Friend may be right in suggesting that the Government wanted to throw that item into low relief, but the Budget contained other such items—for example, it made it less favourable to be married. The Government presumably did not want the public to concentrate on that, either.

Miss Kirkbride

Would my hon. Friend speculate on matters between Mr. Whelan and Mr. Campbell? I am not sure that Mr. Campbell would be pleased by my hon. Friend's suggestion that it was all Mr. Whelan's idea and therefore had not come from the Prime Minister's office.

Mr. Letwin

My hon. Friend is taking me dangerously close to deep waters with thin ice over them. I fear that the Chair would call me to order if I indulged in further speculation about the liaison between Mr. Whelan and Mr. Campbell—which is, indeed, most interesting. I will let the matter rest on the naive supposition that we are dealing here merely with the Chancellor and Mr. Whelan, and their motive.

Whether it was the particular measure mentioned by my hon. Friend the Member for New Forest, West or other measures, as in any other Budget, this Budget contained measures which the Government did not wish the public to spend much time thinking about. However, there were also some measures that they did wish the public to think about, and they threw those into high relief. I do not think that it is any coincidence that the points made by my hon. Friend the Member for Chingford and Woodford Green (Mr. Duncan Smith) about what appeared not just in the press, but on the front pages, were the very matters that we are now discussing. I do not think that it is an accident, because I attribute to Mr. Whelan—not to mention Mr. Campbell—the greatest possible dexterity in steering editors towards those items that the Government would like to see on the front pages, and away from those that they would not like to see. That is not always successful, as is the case with the Foreign Secretary at the moment—

Mr. Duncan Smith

Does my hon. Friend think that had a front-page item appeared that the Government thought was not favourable, they would have let it stand and let the media commentators pursue it, enlighten the public and take it further? Or does he think that they would have used their undoubted arts to stamp on it, get rid of it, get the paper to retract it, or even go so far as expecting it to apologise for referring to it?

Mr. Letwin

Good heavens, the Government would have been there in a trice. The whole formidable armoury of their technology and their Government machine would have enabled them to clamp down on such a story in an instant. That is well established. In fact, the Government fostered the measure on to the front pages to distract attention from other items.

The hon. Member for Newbury (Mr. Rendel) is sitting in his place with his customary courtesy, but looking for all the world as though this is a ludicrous diversion. Why, he wonders, are we concentrating upon such a matter? It is because it tells us something about a process which even the hon. Gentleman, to do him justice, thinks a little strange—the process which underlies this group of amendments, which the Government introduced in the other place. The Chancellor, most remarkably, is attempting to enact a major part—indeed, a signal part—of his Budget without reference to this House until a very late stage, and then only for a very short debate, by means of introducing in the other place a series of amendments in a quite different Bill.

There is a profound link between the strange manoeuvrings of the Chancellor, with his fervour, and Mr. Whelan, with his fostering of the fervour and of the mistaken impression, and Mr. Whelan's subsequent future, and the process of going behind the back of this House and into another place to legislate. That profound link is that both are evasions of the parliamentary process. Both are means by which, instead of exposing issues to the full glare of debate in this House in an open fashion so that the public know what is happening, the issues are concealed—the issues that the Government do not wish to be dealt with in this House and before the public. They have arranged matters so that a few people, latish in the evening, are debating serious matters, preferably without attention, following a great splurge of publicity in which the pubic have been misled—consciously misled by the fine arts of Mr. Whelan—into believing that something very nice is being done for them.

I accept the point made—very poignantly, as always—by the hon. Member for Newbury that if we were an unprincipled and unscrupulous Opposition, all this would be a delight to us in one respect. After all, the next election is not won today or tomorrow, so it should be a delight to us—and, presumably, to the hon. Gentleman and his colleagues—that the Government will eventually be found out by the very many people who expect to benefit from a very nice benefit, but who, in the event, will not get it for the foreseeable future.

In fact, it is not a delight to us to be in circumstances in which the Government treat the House with such contempt that they do not mind using a statement in this House—above all, a Budget statement—purely for the purpose of manipulating the press, and then subsequently using a parliamentary device to minimise debate on a crucial measure that raises vast sums of money and has a great impact on the tax and benefit system.

That is not a trivial point; it is one of the utmost seriousness. I admit that there is an element of frivolity and amusement because we are able to attack a Chancellor who is not present, but the point underlying this debate is deadly serious and deserves to be answered. It was not answered in the Under-Secretary's opening remarks. I do not know whether the Minister for the Environment, who is now sitting on the Front Bench, or the Under-Secretary will answer it, but I hope that someone will—

Mr. Swayne

Will my hon. Friend reflect on the fact that where the Government have introduced very significant tax-raising measures, that has been done in a complicated way that has ensured that no one has noticed, but that where they have introduced measures that amount, in effect, to a giveaway, their approach has been quite the opposite?

Mr. Letwin

That is exactly the point that I am making. The contrast is between that which appears to be done in the light and that which is done, as far as is possible, in the dark. That is not the way to conduct government.

My second point relates to a matter raised by my hon. Friend the Member for New Forest, West in response to a serious accusation made by the Under-Secretary. The hon. Gentleman described the efforts of our noble Friends to amend the Bill, in the way that the Government's amendment would reverse, as irresponsible. As my hon. Friend pointed out, there were two elements to the accusation. One related to what was said to be the irresponsibility of not correcting the problems associated with the contributory principle—the problems for people who would otherwise lose their benefit—as part of raising the lower earnings limit.

The hon. Member for Newbury is learned in these matters and he spoke about them at great length in Committee and elsewhere. He pointed out his distaste for the contributory principle, at least so far as it affects people lower down the chain. He was making the argument—I hope that he will intervene if I am misrepresenting him—that people on lower earnings should not have to contribute in order to qualify for some of the benefits which, currently, require contributions in order to qualify. That is a serious argument and it may, in part, be right. However, that was not the substantive issue that the Under-Secretary raised. His argument was that we had failed to allow for the fact that it would take a long time to sort out—mechanistically, legally and through legislation—the problem that would arise in trying to protect the benefits of people below the £81 limit but above the £64 limit if amendment No. 64 were introduced without other changes.

The Under-Secretary of State for Social Security told the House that it was impossible—I am not sure that he used that word, but that was certainly the burden of his remarks—for the Government to introduce appropriate provisions in the other place. The fact is that, at that very time, the other place was itself producing a vast array of measures. The "Lords amendments to the Social Security Bill" is a huge document. Although I am not an experienced parliamentarian, I have not, since being elected to the House, seen anything like that number of amendments. After speaking to other hon. Members who are much older and more experienced than I am, I have been assured that the number of amendments in this group of Lords amendments is wholly exceptional.

8.30 pm

The Government were therefore tabling in the other place a vast array of technically complex amendments. They took months and months to do so. In Committee, we ended discussion on the matter months ago, but it took months for the issue even to reach Second Reading in the other place—although the Government had ample opportunity, if they so wished, to ensure that that happened earlier. The Government took their time on this measure.

The Under-Secretary was trying to tell the House that, in all those months, it was impossible for the Government—with all their ingenuity, and with all their officials supporting them; after they had, as my hon. Friend the Member for New Forest, West said, considered the issues sufficiently to allow the Chancellor to make the statement that the benefits would be protected—to find a way of dealing with the problem of people who are below the £81 and above the £64 limit, and who should continue to be entitled to have their benefits.

Mr. Clifton-Brown

I wonder whether my hon. Friend agrees that the genesis of the problem was the pledge made by the Labour party during the general election that it would not increase income tax? Having put themselves on that specific hook, they were unable to introduce measures that would have been wholly popular and helped some of the lowest paid and most vulnerable people in our society.

Mr. Letwin

I am grateful to my hon. Friend for his intervention. I shall deal in a moment with that matter, which is the second part of the gravamen of the attack made by the Under-Secretary—which was to do with whether a surplus was available for distribution. We will come back to that matter.

I should like to continue on the question of whether the Government could have produced mechanistic devices to remedy the problem of entitlement to benefit for those between the current and proposed lower earnings limits.

Mr. Desmond Browne (Kilmarnock and Loudoun)

As entertaining as this discourse is, does it not substantially misrepresent the Minister's argument, which is that the Chancellor's view is that this is not the appropriate time to be making such changes? The Minister's view was not that it could not be done, but that it would take time. He also said that the Chancellor had decided that this was not the appropriate time to make the changes, and that it was the Chancellor's prerogative to decide on the appropriate time.

Mr. Letwin

I shall deal with precisely that point in the second part of my remarks. I agree that that was part of what the Minister said.

Mr. Browne

It is what he said.

Mr. Letwin

No, it was not. If the hon. Gentleman reads Hansard tomorrow, I think that he will find that the Minister made two points. I took careful notes of what he said. The first point was that there was not time to consider what would have to be done about the very specific problem of benefit entitlement. Secondly—exactly as the hon. Member for Kilmarnock and Loudoun (Mr. Browne) said—he asserted that it was the Chancellor's prerogative to decide whether the money was available.

Mr. Browne

On this occasion, I intervene not because the hon. Gentleman has misrepresented the Minister's comments but because he has misrepresented mine. I reminded the hon. Gentleman that the Minister said that it was the Chancellor's prerogative to decide when the time was right.

Mr. Letwin

I agree that that is exactly what the hon. Gentleman said, and I shall deal with exactly that matter of whether the Chancellor should have taken that decision. However, that was only half of the Minister's argument; the other half was about insufficient time to make the change on benefit entitlement.

It is not only a matter of the Government not mustering the resources to make the change—although I am somewhat surprised about that—because the matter is much more serious than that. At least pro tem, the change could have been made with little difficulty. It certainly would not have required a Bill as large as the Social Security Bill, or such a vast array of Lords amendments.

The Government could have simply introduced a straightforward amendment, allowing it to be "deemed"— a simple word which the Government have used repeatedly in the Bill, and elsewhere—that people who had not made their contributions, but whose incomes lay between the earlier and later earnings limits of £64 and £81, had made such contributions as they would have made regardless. I do not say that that solution is perfect. It may be that, over time, the ingenuity of officials and Ministers would lead to a superior solution.

Mr. Rendel

If, as the hon. Gentleman says, it would have been comparatively simple to have done that, why did not he or other Conservative Members table an amendment to that effect for this debate?

Mr. Letwin

We did not table such an amendment because of the problem of trying to table amendments at this stage.

Mr. Bendel

It is possible.

Mr. Letwin

Had I realised that it was possible, I would have done it.

The serious question is why our noble Friends did not table an amendment in the other place during their consideration of the Bill, when, manifestly, it could have been done. I know, from discussion with those who were responsible, why it was not done. I believe that our noble Friends concluded that the Government were never planning on accepting Lords amendment No. 64. My noble Friends' sole reason for forcing the amendment through in the other place was to make the point—when the Bill was considered in this place, so that debate was focused on the issue—that it is the proper prerogative of the House to debate money issues, and that it is quite wrong that such a provision should go through on the nod in another place.

It would have been perfectly appropriate for my noble Friends to table a deeming amendment, but it was not necessary for them to do so to achieve their objective. However, it is something which the Government could have done. If Ministers had said—there were repeated discussions on the matter—"We accept the burden of the amendment. We should like to table, by agreement, a further amendment deeming a benefit entitlement", I do not suppose—and I do not suppose that the hon. Member for Newbury supposes—that my noble Friends would have objected to it.

Such an amendment would have been acceptable and would have done the job, although perhaps not perfectly. Nevertheless, the possibility utterly kiboshes the Minister's assertion that there was insufficient time to make the change. There was time to do so. An amendment would have taken less than half an hour to draft, and less than half an hour for the House to pass. It would also have been acceptable to those tabling the amendment.

Why was such an amendment not tabled? One was not tabled—taking us back to the earlier assertions—because the entire procedure was so bizarre. The Government had no intention of allowing such a change to occur at this time—which takes us to the very point made by the hon. Member for Kilmarnock and Loudoun which I now propose to deal with.

Mr. Clifton-Brown

I wonder whether my hon. Friend agrees that part of the difficulty in developing the type of credit system that I mentioned in my speech is the knock-on effect of the gateway benefits that it would involve, such as housing benefit, council tax reduction benefit and other benefits? It is therefore not simply a matter of giving credits to those earning between £64 and £81 a week.

Mr. Letwin

I have given some thought to that matter, both during my hon. Friend's speech and before it, when considering the question of deeming. I do not think that a deeming clause would have had that effect, although I stand to be corrected by the Minister. My understanding is that passporting arises only when a benefit that carries a passporting entitlement is introduced. If what is deemed to have occurred is a contribution, I do not think that passporting arises. I may be wrong, but I think that is how it would work. The Minister will no doubt correct me if I am wrong.

We come now to the real question. I have taken care to dismiss the first part of the Minister's argument, which leaves us solely with the second. The argument has to be that we are irresponsible in having fostered the amendment because the Chancellor of the Exchequer, in his wisdom, has decided that now is not the time for this policy—not, I stress, that it is a good policy made bad, as the Minister mentioned, because it could be unmade as a bad policy and made back into a good one by the simple deeming clause. No, the argument has to be solely that the Chancellor of the Exchequer, in his wisdom, has decided that now is not the right time to have introduced it; it is irresponsible on our part, it is alleged, to introduce what is effectively a spending measure, or negative revenue measure, at a time when the Chancellor has decided that it is not right to do so.

Mr. Browne

I greatly enjoy the hon. Gentleman's contributions although they always remind me of an Easter egg—they promise much in the packaging but have very little in the way of substance.

The criticism of the amendment from those on the Government Benches is not of the irresponsibility that the hon. Gentleman and his Front-Bench colleagues have locked into the Chancellor's thinking but of the irresponsibility in tabling such an amendment without facing up to its consequences. The amendment would generate a hole of £1.5 billion in revenue and would have consequences for the lowest paid, but the official Opposition are not prepared to face that.

Mr. Letwin

I am grateful to the hon. Gentleman for the kindness of his remarks about my speaking style and the substance of my speeches and also for making his point as he does, because his comments expose the problems with the arguments deployed by Labour.

We have already dealt with the question whether the amendment would cause a problem for the low-paid—with the deeming clause, it would not. The question is whether we are accused of being irresponsible in bringing forward a negative revenue measure at a time—the hon. Gentleman was very keen to point out in an earlier intervention that he was talking about timing and the Chancellor's view of timing—when the Chancellor does not regard it as sensible; or whether, according to the hon. Gentleman's new variant, we are irresponsible in bringing forward a negative revenue measure without proposing how to fill the gap. I shall deal with the first part first and the second second; if the hon. Gentleman has, by then, thought of a third variant, perhaps we can deal with that.

It is no part of the duty of the Opposition to be in sync—to use a ghastly phrase which has been used in my hearing by the Chancellor—with the Chancellor. The Chancellor has his views on timing and we have ours. That argument can be laid to rest.

The serious argument is the second variant deployed by the hon. Member for Kilmarnock and Loudoun although not, I think, by the Minister. I may be wrong about that; when we inspect Hansard, we might find that he did mention it and I did not hear him. The hon. Gentleman asserts that there would be a £1.4 billion hole in the Budget if this measure were introduced. He is no doubt extremely acute in matters of the economy and therefore needs to consult only the productions of his own Government which daily tell us about the Chancellor's surplus.

This is a Chancellor of the Exchequer who, for one reason or another—one may say it is through good planning, through inheritance or through luck—is in the extraordinary position of having the terrible problem of what to do with all his money. He is collecting far more that he ever dreamed of. He is reducing the national debt by an extraordinary proportion. The previous Government had to do things which the then Opposition said was selling the family silver to reduce the debt to a similar extent. Although the Chancellor's privatisation programme, such as it is, is failing at the moment, he is nevertheless able not only to fill gaps and plug holes, but to remove great swathes of the national debt. Where is the hole?

If I may presume, I shall set out for the hon. Member for Kilmarnock and Loudoun what should have been his argument—the third variant.

Mr. Denham

Just out of curiosity, is the view that the hon. Gentleman is advocating on the question of the public finances that of the official Opposition?

Mr. Letwin

Unfortunately, neither the current shadow Chancellor nor the previous Chancellor is currently the Chancellor, but the previous Chancellor has said many times that were he Chancellor, he would not have stuck in an extraordinarily rigid fashion to every item among his own projections, which is what the Government are intending to do. I have no way of knowing what would have been the case, but I know that a great pile of money is sitting there. We are not talking about a cash shortage.

The serious argument, whether deployed by the Minister or the hon. Member for Kilmarnock and Loudoun, is very clear. They must be asserting not that there is a hole in the Budget but that serious macro-economic consequences would arise from a decision to produce a revenue negative measure of this scale on top of what is already produced. That must be the shape of the argument. They did not put it that way, but it must be what the Government are asserting. It is the only intellectually respectable argument.

Obviously there are doubts and disagreements. None of us is perfect at projecting macro-economic effects, but it is probably the unanimous view of Opposition Members and I suspect, if they examine their souls, of the great majority of Labour Members, that the Chancellor's fiscal stance today is too tight in macro-economic terms. Certainly, I have heard Labour Members make eloquent pronouncements about the effect on the manufacturing sector of the current combination of a fiscal squeeze and an exchange rate squeeze. Under circumstances of very tight money, a very tight exchange rate and a very tight fiscal stance, there is ample evidence that the current recession in the manufacturing sector will continue and intensify.

8.45 pm

It is no part of the Opposition's argument to suggest that we should have too loose a fiscal stance, but, under circumstances where there is ample cash available, the national debt is decreasing and there are good economic arguments for supposing that the fiscal stance is too tight, it is perfectly responsible to introduce such a measure. I see nothing irresponsible in that; nor is it irresponsible to have introduced an amendment that needs to be debated in the House and not by subterfuge in another place; nor is it irresponsible at least to probe, as an Opposition must, whether the fiscal stance is too tight. Nor can it be asserted—as I have laboured mightily to establish—that there is any mechanical difficulty involved in restoring the benefit entitlement of those between the £64 and £81 limits. Consequently, I utterly refute the suggestion that there is the slightest irresponsibility entailed in amendment No. 64 or any need for amendment (a).

On the contrary, what is happening is clear. The Chancellor of the Exchequer made efforts with Mr. Whelan to mislead the British public by saying one thing in his Budget speech, by promoting and fostering an opinion in the press, by not correcting that opinion and by subsequently revising the truth through a press release—all with the intent of creating a euphoria that he then denied and sought to minimise in public by a back-door route of legislation in another place with the shortest possible debate here and with an accusation against the Opposition, no doubt dreamt up at a later date by the spin doctors, that we were being irresponsible even in raising the issue. That accusation is without substance, particularly in the light of the fact that it has at least served the purpose of bringing the matter to the attention of the House where it properly belongs.

Mr. Browne

I had not intended to speak in this debate, but I have been driven to do so—[Interruption.] Therefore, hon. Members are responsible for the fact that they have to suffer me for the next few minutes.

I have been amused and entertained for the past couple of hours, and I am sure that that was at least part of what Opposition Members intended to do with the froth of a debate that they have foisted on the House. I was mostly amused by the hon. Member for Cotswold (Mr. Clifton-Brown), who described the Bill as a measly Social Security Bill. Hitherto, I have heard it described as the Peter Lilley memorial Bill, so perhaps the subtitle of a measly Social Security Bill is appropriate, given the provenance attributed to it by the Opposition.

If I understood the thesis put forward by the hon. Member for Chingford and Woodford Green (Mr. Duncan Smith)—in the words of my hon. Friend the Member for Bolsover (Mr. Skinner), he made a four-course meal out of a pan of boiling water, repeated by the hon. Member for West Dorset (Mr. Letwin)—he accused my right hon. Friend the Chancellor of the Exchequer of taking advantage of a 48-hour window of public credibility. The Chancellor is accused of taking advantage of that 48 hours to mislead the public and create a false acceptance and bonhomie for his Budget, by deliberately using the word "further" instead of "future" in his Budget speech, having beforehand tested that subterfuge on the public in focus groups. Have I understood the accusation?

Mr. Letwin


Mr. Browne

That accusation was immediately undermined by the hype from the hon. Member for Grantham and Stamford (Mr. Davies), who flashed before us a press release with the word "future" in place of "further", which he argued was issued within minutes of the Chancellor sitting down. If the hon. Gentleman's copy is correct, the press release, which was, no doubt, designed to give all members of the press the information that the Chancellor intended to convey in his speech— indeed, the hon. Gentleman portrayed it as a word-for-word record of the Chancellor's speech—clearly used the word "future". The issue of that press release within minutes of the Chancellor's speech, and clearly therefore within the 48-hour window, grossly undermines the whole thesis that the hon. Member for West Dorset has constructed on a bed of sand, simply because Conservative Members do not seem to understand the definition of "further".

Mr. Letwin

I am grateful to the hon. Gentleman, with whom I always enjoy debating, for giving way. Does he agree that if the purpose of the press release was to change the minds of members of the press and make it clear that reforms would take place in the future, it is a little odd that Mr. Whelan—who, as far as we know, was awake and present on Budget day—did not make the slightest effort to persuade editors to read it in that light?

Mr. Browne

I have no way of knowing what Mr. Whelan said in conversations that he may or may not have had with economic journalists. Having sat through and listened carefully to the debate, I am merely trying to distil the evidence put before the House by Conservative Members to support their argument. Two successive contributions contained contradictory evidence from the same witnesses, which grossly undermines that argument.

I leave the public and those who will read Hansard tomorrow to make up their mind whether the argument of the hon. Member for Chingford and Woodford Green, who spoke from the Conservative Front Bench, stands the test of a Conservative Back Bencher's analysis. I suggest that those who want to do so—there will be some—consider carefully the contribution by the hon. Member for Grantham and Stamford and his reference to the press release.

I may be over-simplifying the matter, but if the press release containing the word "future" was issued within minutes of the Chancellor sitting down, no one was trying to take advantage of a 48-hour window to mislead anyone.

Mr. Letwin

I find the hon. Gentleman's naivety charming, and it does him credit. I ask him to imagine, for a moment, being inside the mind of someone so utterly different from himself as Mr. Whelan. Might it not enter his mind to foster an impression, to have a record that contradicts it, but not to correct that impression among journalists?

Mr. Browne

This is the first time that anybody has accused me of being charming. [HON. MEMBERS: "Ah."] It is sad to have reached this age and never have been accused of being charming.

I have no doubt that the hon. Member for West Dorset is far more capable than I am of analysing the mind of the fictitious Machiavellian character that he has created.

I am analysing the diversion to which we have been subjected for the past couple of hours because, with one or two notable exceptions, the Opposition—as they usually do in social security debates—are seeking to divert attention from the fundamentally beneficial effects on the structure of the national insurance contributions scheme for employees and employers that the Government seek to introduce from April next year. That is the intention of the bulk of the amendments. I make that general criticism, but exclude individuals from it because at least some hon. Members could not bring themselves to continue the charade to which we have been treated without having to concede that point.

Mr. Swayne

Will the hon. Gentleman reflect on whether tabling amendments in such a way as to implement what the Red Book describes as the most fundamental reform since 1975 is a proper way in which to deal with the measures to which he referred?

Mr. Browne

I am grateful to the hon. Gentleman, because I shall reflect on that very subject in due course. Indeed, the Minister dealt with that issue directly in his opening remarks.

The Opposition are seeking to divert attention from the Chancellor's measures. They seek at every turn to divert attention from one of the Government's driving forces. We are debating but one of a package of measures that are designed to help the low-paid and get those who are not in work into work. That the Opposition divert attention in such a fashion by seeking to accelerate a change, when it must have been very clear to them and anyone else who looked at the Chancellor's speech that my right hon. Friend intended to introduce the same change at some future date when the preparatory work had been done, is very obvious. They do so despite the valiant attempts by the hon. Member for West Dorset to explain why the Lords amendment is not reckless or irresponsible. They do so mindless of the damage that legislation in such a form would do to the very people whom the Government's changes are designed to benefit.

The damage that the Lords amendment would do has already been catalogued and debated, particularly by my hon. Friend the Minister, but it bears repeating. Without a deeming measure—the sort of Saturday afternoon matinee legislation that the hon. Member for West Dorset suggested very late in the debate—it would prevent 1 million low-paid workers from having access to contributory benefits. Although I am not in a position to judge the hon. Gentleman's suggestion of a deeming measure without giving it greater consideration, I suspect that the issue cannot be as simple as that. We cannot be tied up on the railway tracks one Saturday, and the next Saturday, with one bound, be free. It is no answer to the reduction in the £1.5 billion hole inside the Easter egg to say that the Government seem to be doing a fair enough job with the economy and there seems to be more money than some anticipated, so some of it can be used to fill the gap.

It is no part of the Opposition's role to be in sync—as the hon. Member for West Dorset said—with the Chancellor's thinking. They must respect that it is the Chancellor's prerogative to make decisions about the management of the economy when he is in government, which relate to his and the Government's priorities. If the Government's priorities are to run the economy efficiently, to try to squeeze out inflation, to try to level off the economy to avoid boom and bust and to pay back some of the crippling debt that they inherited, they happen to be priorities of the people, too. They happen to be the appropriate priorities.

Mr. Hope

Will my hon. Friend give way?

Mr. Swayne


Mr. Browne

I am giving way to my hon. Friend.

Mr. Hope

My hon. Friend mentioned earlier the 1 million low-paid workers who would suffer as a result of the Opposition's proposals. Is he aware that four fifths of those low-paid workers are women, so it is women who would cease to build up their rights to jobseeker's allowance were we to pursue those proposals? They would also lose the ability to build up their rights to incapacity benefit, maternity allowances and even the basic state pension. What the Opposition want to do would be a fundamental attack on some of the poorest women in the nation.

Mr. Browne

My hon. Friend makes an important point. Clearly, it is part of the Government's strategy to deliver work for the low-paid and to make it pay. That will be significantly to the advantage of women. It is no surprise that such damaging effects can be proposed by the Opposition in such a cavalier fashion, because at every turn in the short history of the Labour Government, when the Government have tried to introduce measures to bring work to workless people and to make that work pay, the Opposition have opposed them.

9 pm

Mr. Duncan Smith

I sense that the hon. Gentleman is beginning to tie himself up in knots. He and his hon. Friends are trying to say what a terrible business the proposals are, while maintaining that their Chancellor never gets anything wrong. May I ask him a simple question? What does he think the Chancellor was trying to do when he announced to the public, by making a speech in this place and through the radio and the other media, including the press, that further changes—changes that the hon. Gentleman says that he does not like—would be made, although there was no provision in the Red Book for them, at least in the lifetime of this Parliament?

Mr. Browne

I am grateful to the hon. Gentleman for giving me the opportunity to share my interpretation of the Budget speech with the House—although I hasten to add that I have not had the benefit of discussing it with my right hon. Friend the Chancellor. In my interpretation, the Chancellor was laying out in the Budget, not only in specific terms for the immediate future but, in general terms, the direction in which the Government were moving. He was giving both employers and low-paid employees the maximum notice of where the Government were going.

When the whole speech is read, it is clear that my right hon. Friend was saying that those objectives would be achieved when the circumstances were right and the preparatory work had been done.

Mr. Duncan Smith

The hon. Gentleman is now saying that his right hon. Friend was being utterly irresponsible when he raised in the Budget speech expectations on which, because he understood the difficulties, he had no desire to deliver. The hon. Gentleman has already mentioned those difficulties, and has criticised the Opposition for advancing our proposals because, apparently, they would damage so many people. Yet, at the same time, he says that the Chancellor was right. Surely the Chancellor was wrong, and was hurting people in raising those expectations. That is what the hon. Gentleman has just said.

Mr. Browne

The hon. Gentleman, not for the first time in the debate, misunderstands what has been said—but that may be my fault. I criticise the Opposition for supporting the Lords amendment because they are trying to make the change now, when the preparatory work has not been done, and they are mindless of the consequences for a significant number of people.

I do not expect the Chancellor to introduce legislation to achieve the objective at any time in the future until the preparatory work has been done. I do not accept that my right hon. Friend was being irresponsible in any way. He was raising legitimate expectations—expectations which the Government will fulfil—

Mr. Duncan Smith


Mr. Browne

No; the hon. Gentleman has, in his own words, had his moment in the sun.

I shall talk about the positive benefits of the other amendments shortly. No one can be in any doubt about the Government's commitment to the creation of employment. It is a crucial part of that strategy that we make work pay, especially for the low-paid. As I have said, every aspect of the package of measures that we have introduced over the past year to create work and to make it pay has been opposed root and branch by the Opposition. They opposed every aspect of the new deal, they opposed the minimum wage legislation and they will no doubt oppose the national child care strategy.

Reform of the national insurance system is an integral part of that package, and these measures are designed to achieve that reform. As my hon. Friend the Minister has explained, they will do that by increasing the take-home pay of every employee who at present pays national insurance contributions—and I willingly accede to that objective. They will reduce bureaucracy for employers and, in so doing, encourage them to take on more workers. The fact that the measures have appeared in a relatively short time is a remarkable achievement by the Government. The Government did not introduce the changes willy-nilly, but conducted a tax and benefit review that examined all the consequences of the package and concluded that this was the appropriate way forward.

Some Opposition Members have welcomed the package, but others have carped about it. They claim that it has arrived too late in what they have described as this measly Bill. They do not believe that this legislation is the appropriate vehicle for the measures, but it clearly is. The package did not need separate legislation: it needed to be inserted in a Bill that contained substantial references to national insurance. The Social Security Bill provided a ready-made vehicle. It gives the maximum notice to employers that the changes will be implemented next year. It ensures that the Government will meet our target of April 1999 and that the people at whom the measures are targeted will enjoy maximum benefits for a maximum period. For those reasons, I welcome the Government amendments.

Mr. Howard Flight (Arundel and South Downs)

This is an important debate about two issues. The first is a major reform of the national insurance arrangements. The second is about the conduct of government: should it be open and straightforward or does it involve governing by deceit in order to maximise propaganda?

The speeches by my hon. Friends the Members for Chingford and Woodford Green (Mr. Duncan Smith) and for Grantham and Stamford (Mr. Davies) exposed the fact that a deceit has clearly been perpetrated. I listened to the Chancellor's speech, and I was left with the clear understanding that the reforms to the national insurance arrangements following the Taylor report would affect both sides of the fence. I believed that they would raise the starting level of employers' contributions from £64 to £81 and would raise to £81 the level beyond which individuals paid class I contributions. That is what the major newspapers reported and it is what I think the public still believe to be true. They will be quite surprised to discover that the wool has been pulled over their eyes.

This package of measures has been tacked on at the end of the Bill in order to avoid full debate and exposure by the press. It is an attempt by the Government to pass the measures quietly without attracting attention. The Lords amendments are designed to expose that fact—we know that they cannot succeed. Labour Members have argued that the amendments should not have been made without first considering their consequences. Why did the Chancellor put his important proposals on the menu—including reducing disincentives to work—when he did not know how he would fund them? The Red Book has disclosed that there is no provision to fund those proposals in this Parliament.

What is the Government's position? Do they still seriously propose to reduce employees' contributions, so that contributions are paid only after £81 a week is earned, or was that a propaganda exercise?

All hon. Members share the objective of reducing disincentives to work. One of the most important aspects of the Budget was the proposal to remove the entry fee under the national insurance arrangements, so that employees' contributions would be significantly reduced—the lower paid would not begin to pay until they had earned £81 a week. The reforms would be more important for the employee than for the employer, as they would reduce disincentives to work. As my hon. Friends have said, astronomically high marginal rates of tax can be incurred when incomes rise at the lower end of the earnings scale. Bluntly speaking, we must encourage those who know how to obtain the most from the social security system to look for work. The level at which they have to start paying national insurance may be a disincentive to them.

For employers, the reforms represent a simplification. The Red Book makes it clear that, for them, the net cost of the reforms in contributions is virtually zero. The different scales will be phased out, to be replaced by the one scale that will take effect at £81—the old minimum scale took effect at £64.

There are pluses and minuses to the arrangements that the amendment would implement. People at some income levels will have incentives to work, whereas those at other levels will face disincentives. Worryingly, the disincentives will apply to those who are at the medium-skilled end of the market.

Like the public and the informed media, I welcomed the national insurance reforms on the understanding that the minimum level for contributions would be raised to £81 a week for both employee and employer. Candidly, I am shocked to find that, for employees, the proposal seems to have been no more than a devious propaganda trick.

I do not understand what the Chancellor wants to achieve. The Red Book seems to show that there is little prospect that the proposals for employees will be put into effect during this Parliament, yet that is the most important way in which to create incentives to work. Moreover, it is what the Chancellor has led the least privileged in society to expect. Was that a cheap propaganda trick? Was the Chancellor misleading himself? Did the Treasury fail to cater for the financing of the proposal?

The Taylor report makes it clear that the aim of national insurance reform is to benefit both employers and employees. As my hon. Friends have said, there is no substantial fiscal constraint to prevent the Government from biting the bullet and applying the reforms to both employers and employees. The Government are spending generously on work provision for the young, but that expenditure is not needed, as unemployment among young people has turned out to be much lower than expected.

The thrust of the Government's propaganda has been that the Budget will get people into work—it will provide incentives and remove disincentives to work.

I am extremely concerned that the family credit proposals, some of which are positive, also contain significant disincentives. The net effect of the reforms is that, for a woman, it will be worth having a husband only if he earns at least £400 a week. That is undesirable in terms of supporting the family unit and crazy in terms of incentives to work.

I thought that the national insurance reforms were to be about getting rid of disincentives to work, but they are merely about simplifying the arrangements on the employer side and doing nothing on the employee side.

9.15 pm

The Lords amendment is clearly designed to expose a deceit in the Budget statement—an intention to pull the wool over people's eyes. It sends a message to the Government that they must get on with putting that right. That is not such a difficult task; it could be addressed within six weeks if the Government really intended to do something. The issue is whether they are willing to spend the money and whether that expenditure is a top priority.

I believe that getting rid of disincentives to work should be a top priority for any Government committed to helping the less-privileged. The Government should get on, for goodness' sake, and do what they have led the people of Britain to believe that they would do.

Mr. Hope

I urge the House to support the Government amendment, because to do otherwise would be to hurt the low-paid and future pensioners. The Bill is a key part of modernising the welfare state and the social security system, a task which the Conservatives signally failed to perform in their 18 years in office. Far from supporting the Government in their endeavours to make the system fairer and more efficient, Conservative Members are seeking to undermine the measures and hurt those least able to defend themselves.

If the Government amendments are not made, 1 million low-paid people, many of them women, will be taken out of the reach of contributory benefits and will suffer, as they cease to build up their rights to benefits such as jobseeker's allowance, incapacity benefit and maternity allowances. The value of state earnings-related benefits would reduce if we went down that route. The amount paid in contracted-out pensions for millions of people would be reduced, and about £1.5 billion less would come to the Treasury in national insurance contributions.

The Lords amendments are designed not to expose the Government but to be vindictive and wrecking. Their effects would be unacceptable, indecent and simply wrong. They are irresponsible and border on hypocrisy.

The Government have said that future reforms will raise to the level of the single person's tax allowance the point at which employers start to pay national insurance, but that that will not happen until measures are in place to protect the benefit rights of those earning between £64 and £81 a week, who will no longer pay contributions.

It is not and never has been the Government's intention to make the change from April 1999. I am sure that the record will show that to be the case. The Government want to introduce the measures on both sides of the equation in due course. Labour Members find it impossible to take Conservative Members seriously when they say that they would support measures that, quite frankly, they would never have introduced had they been in government.

Mr. Swayne

The problem was that we thought that those measures had been introduced. The Daily Telegraph and the Financial Times thought that they had been introduced. What was so galling was to have the feast swept from under our noses.

Mr. Hope

I thank the hon. Gentleman for his intervention, although it would be helpful if he knew what he was talking about. What he said is untrue. The Opposition's amendments are not resulting in a serious debate on reform of the social security system but in rank opportunism, utter insincerity and complete humbug. When the Government introduce measures on both sides of the equation to ensure that the lowest-paid people benefit, it will be interesting to see how the Opposition vote. Many other amendments affect national insurance contributions, housing benefit and measures to help disabled people who want to work, which form part of the Bill.

Mr. Swayne

As the hon. Gentleman shows considerable interest in how we might vote when the Government introduce those measures, can he hazard an estimate on when that might be, so that we can consider how long we have to work on it?

Mr. Hope

We shall introduce the measures when the time is right. What we are debating, and what Opposition Members deliberately avoid discussing, is the measures that we are putting in place to restructure national insurance contributions. Employees will no longer have to pay a 2 per cent. entry fee as soon as their wages reach the lower earnings limit. They will pay national insurance contributions only on the portion of earnings that exceeds the lower earnings limit and is below the upper earnings limit. That will save them £1.28 a week, which the previous Government signally failed to do. Indeed, they had no intention of helping the low paid.

Mr. Swayne

The hon. Gentleman is concerned about our inability and unwillingness to debate the proposals. Would it not have been better if the Government had dealt with the proposals properly instead of tagging them on to this Bill, halfway through its progress through the Lords, so that they could have received the proper attention that he desires?

Mr. Hope

Those measures are included in the Bill to give businesses the necessary time to revise their payroll arrangements, and so that we can allow people to benefit from the measures as quickly as possible. Does the hon. Gentleman suggest that we should not have put the measures in place, thereby delaying some of the benefits that they will bring? Perhaps that is exactly what the Opposition believe.

Ms Patricia Hewitt (Leicester, West)

Does my hon. Friend agree that if Conservative Members had not spent so much time debating a measure that we do not propose to make in this Bill, they would have had ample time to debate the measures that we are including in the Bill and will bring into effect from April next year?

Mr. Hope

I could not have said it better myself. I hope that Conservative Members are listening to the points being made in this debate, because they are doing themselves no favours, in the eyes of the House or the public, by proposing spurious amendments designed to wreck a Bill which will benefit those most in need and bring about a system that genuinely helps those who need it.

I suspect that when people see the crocodile tears that Conservative Members are shedding, they will know whom to trust when they consider their choices in the future. It is a shame that Conservative Members have chosen to pursue amendments that would not only damage people's lives, but have not been costed and demonstrate what I can only describe as a shallowness and lack of genuine concern to build a modern, efficient and fair welfare state.

It is a pity that, rather than offering constructive and supportive contributions on the changes that are needed, the Opposition are treating the income of millions of people as a political football with which to score cheap political points across the Chamber.

Mr. Clifton-Brown

I can hardly believe what I am hearing. Is the hon. Gentleman defending a change in the national insurance system that is so mean minded that someone earning under £81 a week faces a tax reduction of about £1.10 a week? If he is defending that in terms of the low-paid, I shudder to think how they and the disadvantaged will fare under the Government in future years.

Mr. Hope

It is strange to hear Conservative Members telling Labour Members about defending the low-paid, when the Tories signally, deliberately and purposefully opposed a national minimum wage, root and branch—and kept us up all night to do so. No one will take lessons from the Opposition on supporting the low-paid. As a result of the Bill, the low-paid will be £1.28 a week better off, not worse off.

Miss Kirkbride

Does the hon. Gentleman accept that one of the greatest achievements of the Conservative Government was to bring down the marginal rate of tax, which considerably improved the take-home pay of the low-paid? The measure that we support goes even further in that direction.

Mr. Hope

We inherited a shambolic welfare state. The people in most need were not receiving the benefits, support and security that they should have received. For example, 1 million pensioners were not claiming income support to which they were entitled, and were abandoned by the Conservative Government. Having inherited a shambolic welfare state, the Government have embarked on a radical set of reforms and the Bill is paving the way for their introduction. They will bring back support and work for those who can work and security and dignity for those who cannot.

We inherited a welfare state in which people were trapped on benefits and not receiving the resources that they needed—the public did not support it—and a social security system that treated its customers as a burden rather than as people who needed help. The Bill paves the way for ending that.

The Government amendments are essential to the success of our reforms of the welfare state. We shall propose further measures as our programme of reform is implemented. It will be an exciting three or four years as, year on year, we table proposals for change that will dramatically increase the quality of people's lives, especially those of the poorest in our community. We shall not be swayed from that task, that vision and that commitment by an Opposition who not only lack vision and commitment, but prefer to play dangerous games with people's lives.

Miss Kirkbride

The Bill will not achieve any of the great reforms to the welfare state that the hon. Member for Corby (Mr. Hope) thinks that it will. It will introduce an appeals procedure that will truncate the rights of his constituents to gain the benefits to which he thinks they are entitled. He cannot claim that the Bill represents great reforming zeal and that it will transform people's lives, as he would have us believe.

The hon. Gentleman accused Conservative Members of seeking to wreck the Bill through the Lords amendments. We are trying to improve the Bill, and improve it considerably, for precisely the people he claims to want to protect and whose living conditions he wants to enhance. I support my hon. Friends, who spoke eloquently to the Lords amendments and against the Government's arguments. The Government have shamefully misled the general public and the newspapers about their intentions for the lower-paid.

The whole argument rests on the difference between "future" and "further". I can only claim to have been a Member of Parliament since May 1997, when I had the great good fortune of winning for the Conservative party in Bromsgrove; however, before that, I had considerable experience of the ways of the House as a Lobby correspondent and from working in the House in various capacities. It is only too clear to me what Ministers mean when they choose to say either "future" or "further".

9.30 pm

If a Chancellor says in a Budget speech that he intends to make "further changes", that is code for every single person who has experience of the House to report that those changes will take place when the Finance Bill is in Standing Committee, and that they will be embodied in that Bill, which is before the House in that financial year. Therefore, it could be expected by everybody who listened to the Chancellor's words that the measures promised in those words would be enacted in the same financial year. Although I have many criticisms of our Chancellor, lack of intelligence is not one of them, so I simply cannot believe that he was not perfectly aware of the word he chose when he said "further" in his Budget speech.

If the right hon. Gentleman had said "future", as it is now claimed he intended to say, that would have meant something entirely different. The future is exponential—it never has a due date in the House. It is an intention that, however honourable, has no financial reckoning. It is something that might not even happen within the lifetime of a Parliament. It is a good intention expressed by a Government, but it is certainly not an intention that anyone would take seriously until they saw it in black and white on the face of a piece of legislation. I cannot believe that the Minister does not understand that that is the difference between the uses of those two words.

I am therefore minded to agree with my hon. Friends, who have spoken so eloquently tonight, that there was a deliberate attempt to confuse the journalists who sit upstairs in the Gallery into believing that the Chancellor intended to make the changes this year. My hon. Friend the Member for West Dorset (Mr. Letwin) spoke magnificently about the whys and wherefores of the relationship between Ministers and the press. I know from my days working in the national media that there is a new element in that relationship: not only do we have to take Ministers out to lunch to try to ascertain their intentions for future legislation, but, if we are serious journalists, we have to try to get ourselves on to one of the focus groups, because if we succeed in doing so, we shall find out the Government's intentions and be able to manipulate those intentions by our reactions to the various proposals put before us.

I can quite believe that the Chancellor saw the value of saying that he intended to make changes to employees' national insurance contributions in the Budget, and that he deliberately allowed that intention to be expressed to our national newspapers on Budget day. Recalling my time on The Daily Telegraph, I know only too well the intense briefing and spinning that goes on in the Corridors upstairs on Budget day and on any other day a major Government announcement is made. Given the sort of press coverage that the changes got, it is simply inconceivable that they were not cross-referenced with the Government spin doctors—Charlie Whelan, perhaps Alastair Campbell himself and others. It is not possible that, in respect of a major and significant change—one of the most well-focused changes in the Budget—journalists would not have asked whether the Chancellor meant to say "further".

I am sure that, while not actually lying to members of the press, the spin doctors deliberately turned a blind eye to the presentation that they saw the press would give the facts the following morning. As we saw, even my former newspaper announced the intention—this year's intention by the Government—to make the changes to reduce employees' national insurance contributions. We also read it in the Financial Times—the doyenne in the Lobby of those who understand a balance sheet and whose journalists would know the import and intention of the measures.

There was also confusion on the radio about precisely what the Government intended. It comes as no surprise to me that the Government, who were very good at manipulating the media even before their election, allowed their supposed intention to fester in the minds of the public in order to gain credibility and acceptance.

Mr. Clifton-Brown

I am sorry to interrupt my hon. Friend, but I fear that she may be being too kind to the Government. I do not think that there was any media spin to create a warm impression of the Budget; I think that it is a question of the Chancellor's pure incompetence in not ensuring that his statement was in concert with the Red Book.

Miss Kirkbride

I do not wish to disagree with my hon. Friend. The fact remains that there is a huge dichotomy between what was said and what is now going to happen, and only our personal convictions and—perhaps—prejudices can suggest to us why that is so. Certainly, in the light of my experience of the relationship between Ministers and the press, I do not find it surprising.

The Under-Secretary's defence of his Government's position was the most disingenuous statement that I have ever heard. First, we were told how dreadful it was that we had pinched the Chancellor's idea; then, in the next breath, we were told what a terrible idea it was. I am still trying to get my mind around the peculiar message that the Government are sending us, which has been repeated by many of the Under-Secretary's hon. Friends. Something cannot be a good idea when voiced by the Chancellor and a terrible idea when the official Opposition seek to put it into practice by means of a Lords amendment.

Many Labour Members have criticised Conservative Members for not being particularly robust about low pay. I consider this the most important Bill that the Government could have introduced because, unlike the minimum wage—which may well destroy jobs—it will enable people who want to work to afford to do so. I urge the Minister to consider our arguments and the Lords amendments in a more favourable light.

Ms Hewitt

The hon. Member for Bromsgrove (Miss Kirkbride) reminded us that she was a journalist before she entered the House. Perhaps that explains her obsession—although it does not necessarily explain that of many of her hon. Friends—with the activities of journalists and spin doctors.

I have listened to the debate with a mixture of fascination and deep horror. I was reminded of the years that I spent studying English literature at university, where there was an obsession with textual analysis—but never, even in the rarefied atmosphere of Cambridge, did I encounter such a nit-picking approach as this. It is to no purpose to analyse "further" and "future", and what was said in this and that press release. Such an attitude betrays the fact that the official Opposition have no serious purpose in engaging in this lengthy debate.

We may have been entertained by much of today's proceedings, but I wonder how the debate has struck members of the public. I noticed that many young people who came here to observe the House of Commons in action—I suspect because they were equally appalled by much of the debate—

Mr. Deputy Speaker (Sir Alan Haselhurst)

Order. I am sorry to interrupt, but the hon. Lady should know that nothing exists outside this Chamber.

Ms Hewitt

I am afraid that I betray my lack of experience here, Mr. Deputy Speaker, but it is the fault of the Opposition that they have given the appearance this evening that, for them, nothing exists outside the Chamber. That is a great shame.

The Budget presented by the Chancellor earlier this year contained a long series of proposals for radical reform of the welfare state—which we inherited in a shambles from the previous Administration. Considerable progress will be made as a result of this Bill and of the Tax Credits (Initial Expenditure) Bill, to which we return tomorrow. They will make changes that will enormously improve work incentives and help my constituents, from April next year, who are trapped either in unemployment or in low-paid jobs.

The Government will go on to make further changes, as the Chancellor said, in the future. I welcome those changes, and I commend the Government amendments to the House.

Mr. Burns

This has indeed been an extremely interesting and invigorating debate. The nub of the argument has been the Chancellor's comments in his Budget statement on the lower earnings limit for national insurance contributions. My hon. Friend the Member for Chingford and Woodford Green (Mr. Duncan Smith) has powerfully exposed the Chancellor's shenanigans. My hon. Friends the Members for Grantham and Stamford (Mr. Davies), for Cotswold (Mr. Clifton-Brown), for West Dorset (Mr. Letwin) and for Arundel and South Downs (Mr. Flight) have all made powerful speeches exposing what went on during the critical 48 hours when the Government's spin doctors at the Treasury worked overtime to create an impression that was just an illusion.

I pay tribute to my hon. Friend the Member for Bromsgrove (Miss Kirkbride) for her elucidating speech. She used to be a journalist for The Daily Telegraph, so she is well aware of how spin doctors operate. They choose their words carefully when they want to convey a message. We are indeed grateful to her for exposing some of the hollow excuses proffered for the activities of Mr. Charlie Whelan.

I remind the House of the seriousness of the situation, although I can understand why Labour Members would like to downgrade the charges laid against them this evening: this is an issue of considerable embarrassment for them. In his Budget speech the Chancellor announced that he would raise the lower earnings limit for national insurance contributions from £64 to £81—so much is beyond dispute. He said: I am abolishing the perverse entry fee that every employee pays to be part of the national insurance system and, in doing so, I am cutting national insurance for every employee in the country … Further reforms will also ensure that no one pays national insurance for the first £81 of their weekly earnings. All employees earning between £64 and £81 will have their right to benefits protected."—[Official Report, 17 March 1998; Vol. 308, c. 1106.] When I heard the Chancellor say that, I understood—as did members of the press—him to mean that the measure was to be part of a reform package—[Interruption.] The hon. Member for Corby (Mr. Hope) should listen for a minute and then take the time to go to the Library, where he will find that the front page of The Daily Telegraph the day after the Budget stated that no worker would pay national insurance contributions on the first £81 of earnings. Similar coverage of that element of the Budget speech can be found in the Financial Times of the day after the speech.

It is clear that many members of the public were left with the clear impression that the changes would be part of the total package of changes in national insurance contributions. The confusion was so great that, a few days after the Budget, the BBC programme "Money Box", which my hon. Friend the Member for Chingford and Woodford Green mentioned, did an item on it to help clear up the confusion that had been created by the Chancellor's statement. In an interview with Stuart Richie of Scottish Equitable, which I will repeat for the benefit of the Minister, so that, just for once, he will be able to answer my questions in his winding-up speech, the interviewer said: a lot of people seem to think that they won't have to pay any National Insurance until their earnings hit eighty one pounds a week. I mean, even if I've been a bit muddled by this. But that's not quite right, is it? Stuart Richie said: No, the Chancellor got it a bit wrong in his speech and newspapers are actually still getting it wrong today". The response from the interviewer was: Yes, I notice the FT got that one wrong. Mr. Richie went on to say: Yes, the FT got it wrong and I think some others as well". The quotation suggests that the statement in the Budget was a mistake on the part of the Chancellor. As it turned out, however, there was no mistake.

When he appeared before the Treasury Committee, the Chancellor was specifically asked by my hon. Friend the Member for Grantham and Stamford about this curious omission. The Chancellor's answer was staggering. He said: I said: 'Future reforms will also ensure that no-one pays National Insurance for the first £81.' The word is 'future'. These are reforms we intend to make. That is what the Chancellor told my hon. Friend—[Interruption.] If the hon. Member for Kilmarnock and Loudoun (Mr. Browne), instead of nodding his head, hoping for a job in a few weeks' time, listened to the references, he would be able to check all this in Hansard to understand the significance. It is clearly a bit above him tonight.

9.45 pm

The Chancellor is being economical with the truth. He never used the word future. The Official Report of the Budget speech clearly says "Further". The Chancellor is only too well aware of the fact that the Budget speech is probably the most important speech that is delivered in the House during the parliamentary year. It is thoroughly prepared and looked over before it is delivered and anyone who has been a Minister will know that, immediately after it has been delivered, it is combed upstairs by civil servants to ensure that it is 100 per cent. accurate, so it is inconceivable that Hansard got it wrong and that the Chancellor said something else. The Chancellor made a mistake and is seeking to run away from that mistake.

Frankly, the real reason the Chancellor decided to include the statement in his speech is that he had the idea tested on focus groups—we have a Government of focus groups now. As the reaction was positive, he decided to press ahead with it for a soundbite in the hope that it would help to create the general feel-good factor for press coverage.

The Liberal Democrat spokesman, the hon. Member for Newbury (Mr. Rendel), said that he shared our concerns on this issue and agreed that people would now be disappointed—because they thought that they would benefit financially from what the Chancellor promised on national insurance contributions under £81 and would not now receive that benefit in the next 12 months—but, sadly, he then spoilt his remarks, because it became apparent that he had completely missed the point of the debate when he suggested that we should be grateful that the Government had misled the people and what on earth were we doing seeking to draw attention to that; we should have sat on our hands and said nothing about it. That seems an extraordinary raison d'être, but I suppose that anyone who has had the misfortune to fight a Liberal Democrat at a parliamentary election will understand that there is nothing comprehensive or consistent about their views. What does interest me is what will happen at 10 o'clock, if and when a Division is called.

Mr. Rendel

I am delighted that the hon. Gentleman has given me the chance to intervene. I thought that I had made it absolutely clear at the end of my speech that we would support the Government's amendment.

Mr. Burns

I am grateful to the hon. Gentleman. I admit to making the classic mistake of forgetting that we are in a state of coalition politics—the Liberal Democrats support the Government through thick and thin.

The Minister, in his opening speech—we await his closing speech—failed to deal with any of the important issues behind this sorry episode. I now specifically ask him to explain to the House, in his reply, why the Chancellor behaved in such a disingenuous way. Will he explain why national insurance for those earning less than £81 will not be cut when everyone expected it to be? Can he give some time scale for when the Government will do that? Will he also explain or repudiate the spin-doctoring behaviour of Charlie Whelan et al at No. 10 and No. 11 Downing street?

Because we believe that the Government have knowingly misled the public for party political reasons, we will vote against the Government's amendment that would reverse the measures that the Lords have put into the Bill.

Mr. Denham

The speech of the hon. Member for West Chelmsford (Mr. Burns) was in large part identical to the speech of the hon. Member for Chingford and Woodford Green (Mr. Duncan Smith)—the first example of the single transferable speech.

It is not good for a Government to face an Opposition as fatuous, vacuous, time wasting, leaderless and incapable of serious scrutiny as that we have faced tonight. My hon. Friend the Member for Kilmarnock and Loudoun (Mr. Browne) highlighted their irresponsibility towards public expenditure—£1.4 billion appears to be of no consequence to them. We now know why debt doubled under the Conservative Government. As we have seen tonight, they are an Opposition with nothing to say.

Two charges have been made. The first is that the Bill is being dealt with in the wrong place. Any doubts that there might have been about the way in which the Bill has been handled have been dispelled tonight. In four hours, the Opposition have shown that they are incapable of maintaining any serious critique of the policies that we are meant to be discussing.

The reality is that the measures mean that business has to implement major changes. It will have to revise its software and administrative procedures. If it has to rush those changes, that will cost it money. We did not want unnecessarily to limit the time that business had to implement the changes. We decided that, given the wide range of support for the measures, we should make use of the earliest available vehicle—this Bill. This allows time for debate in both Houses and gives business the time that it needs.

This Bill contained a substantial section concerning national insurance contributions before the introduction of the new clauses. It is the most appropriate legislative vehicle to introduce changes to national insurance. The changes have been widely welcomed and they need to be on the statute book quickly to provide employers with the time they need to make the changes.

The more serious charge was that the Government have deliberately misled the public about our intentions. I shall deal first with the Red Book. It is clear that when the proposals are introduced, the implications of the changes will be reflected in the Red Book at the time. It was obviously right and good for my right hon. Friend the Chancellor to indicate the direction in which the Government wish to move and the way we want to restructure national insurance in the future so that there is no misunderstanding about the Government's intentions.

The second charge was essentially that the constituents, specifically of West Dorset, of Cotswold and of Grantham and Stamford—generally Daily Telegraph readers of all constituencies—had been led to believe that there would be a larger reduction in their weekly income than was made.

I took the precaution of reading The Daily Telegraph of 18 March, the day after the Budget. It stated: From the start of the 199–0 tax year, no one will pay National Insurance on the first £64 of weekly earnings, saving every employee £1.28 a week—£66.56 a year. That was said in The Daily Telegraph not once, but twice. On the same page, it mentioned the £1.28 per week saving created by the Chancellor's proposal to scrap what he called 'the entry charge' for National Insurance contributions. Was that misleading? It was exactly what the Chancellor said in his Budget speech. He said: from next April, 20 million employees in Britain will benefit by paying £1.28 a week, or £66 a year, less in national insurance."—[Official Report, 17 March 1998; Vol. 308, c. 1106.] After four hours of debate, the official Opposition have failed to make a case that any misunderstanding could have arisen about the impact of my right hon. Friend's Budget on the pockets of 20 million employees. He stated in his Budget speech the exact cash amount by which every individual would be better off.

I am pleased to be able to tell the hon. Member for Bromsgrove (Miss Kirkbride)—who worked for The Daily Telegraph—that the Budget's impact was accurately reported by that newspaper not once, but twice, which is only what we would expect from a great national newspaper.

The entire basis of this debate, and of the debate in another place, was that the Chancellor had misled people about the amount by which they would be better off. The basis has been destroyed not only by the words of the Chancellor of the Exchequer but by the words reported twice, on the same page, by the one national newspaper that has been quoted as saying that the Government misled the public.

The proposition that the Chancellor misled the public is the whole reason why this debate has lasted for four hours. No criticism of the Government's policy has been made.

Mr. Burns


Mr. Denham

No. The hon. Gentleman did not give way in his speech, and I do not have time to give way now.

I believe that there will be considerable embarrassment among Opposition Members at the way in which their leadership has led them into today's ridiculous debate, chasing round and emptying the tea rooms and bars to find sufficient Members—who were not in the Chamber for the earlier part of the debate—to spin it out to 10 o'clock.

There was nothing of substance in the comments of the hon. Member for Chingford and Woodford Green. Moreover, he and his colleagues cannot escape the consequences of the measures that they will vote for at the end of this debate. They have confirmed that they will vote for measures that would remove up to 1 million low-paid people from contributory benefit rights. Those people's jobseeker's allowance, statutory maternity pay and pension rights would all be hit by the measures that the right hon. Gentleman and his colleagues will vote for.

Mr. Quentin Davies

Will the hon. Gentleman give way?

Mr. Denham

I shall not give way, because Conservative Members did not give way.

Mr. Davies

Will the hon. Gentleman give way?

Mr. Denham

No. [Interruption.] We have had—[Interruption.]

Mr. Deputy Speaker

Order. The hon. Member for Grantham and Stamford (Mr. Davies) must know that the Minister will not give way.

Mr. Denham

Today, we have had four hours of wasted debate. The Opposition must now face the consequence that they will vote—the country will see them voting—to remove benefit rights from up to 1 million low-paid employees, most of whom are women. Opposition Members must live with that. However, I am sure that Labour Members will use our majority to ensure that those benefit rights are protected.

When my right hon. Friend the Chancellor of the Exchequer judges that the financial circumstances are right to introduce further changes, we will ensure that the benefit rights of low-paid employees are protected. Such a measure must not be considered—as the hon. Member for West Dorset (Mr. Letwin) said—in half an hour; it will require careful consideration, which is precisely what we will give it. We shall also increase the benefits of moving from welfare to work, make all employees—but especially the low-paid—better off, and make it easier for employers to create jobs.

Question put, That the amendment to the Lords amendment be made:—

The House divided: Ayes 328, Noes 123.

Division No. 274] [9.59 pm
Ainger, Nick Casale, Roger
Ainsworth, Robert (Cov'try NE) Chapman, Ben (Wirral S)
Alexander, Douglas Chaytor, David
Allan, Richard Chisholm, Malcolm
Allen, Graham Church, Ms Judith
Anderson, Janet (Rossendale) Clapham, Michael
Armstrong, Ms Hilary Clark, Rt Hon Dr David (S Shields)
Ashton, Joe Clark, Paul (Gillingham)
Atkins, Charlotte Clarke, Charles (Norwich S)
Ballard, Mrs Jackie Clelland, David
Barnes, Harry Clwyd, Ann
Barron, Kevin Coaker, Vernon
Battle, John Coffey, Ms Ann
Beard, Nigel Cohen, Harry
Beckett, Rt Hon Mrs Margaret Coleman, Iain
Begg, Miss Anne Colman, Tony
Benn, Rt Hon Tony Cook, Frank (Stockton N)
Bennett, Andrew F Cook, Rt Hon Robin (Livingston)
Benton, Joe Cooper, Yvette
Bermingham, Gerald Corbett, Robin
Berry, Roger Cotter, Brian
Best, Harold Cousins, Jim
Betts, Clive Crausby, David
Blears, Ms Hazel Cryer, Mrs Ann (Keighley)
Blizzard, Bob Cryer, John (Hornchurch)
Blunkett, Rt Hon David Cummings, John
Boateng, Paul Cunningham, Rt Hon Dr John (Copeland)
Borrow, David
Bradley, Keith (Withington) Cunningham, Jim (Cov'try S)
Bradshaw, Ben Dafis, Cynog
Brinton, Mrs Helen Dalyell, Tam
Brown, Rt Hon Nick (Newcastle E) Darvill, Keith
Browne, Desmond Davey, Edward (Kingston)
Buck, Ms Karen Davey, Valerie (Bristol W)
Burden, Richard Davies, Rt Hon Denzil (Llanelli)
Burgon, Colin Davies, Geraint (Croydon C)
Burnett, John Davies, Rt Hon Ron (Caerphilly)
Burstow, Paul Dean, Mrs Janet
Butler, Mrs Christine Denham, John
Byers, Stephen Dewar, Rt Hon Donald
Caborn, Richard Dismore, Andrew
Campbell, Alan (Tynemouth) Dobbin, Jim
Campbell, Mrs Anne (C'bridge) Doran, Frank
Campbell, Menzies (NE Fife) Dowd, Jim
Campbell-Savours, Dale Dunwoody, Mrs Gwyneth
Canavan, Dennis Eagle, Angela (Wallasey)
Eagle, Maria (L'pool Garston) Kidney, David
Ellman, Mrs Louise Kilfoyle, Peter
Ennis, Jeff King, Andy (Rugby & Kenilworth)
Etherington, Bill King, Ms Oona (Bethnal Green)
Fearn, Ronnie Kingham, Ms Tess
Field, Rt Hon Frank Kirkwood, Archy
Fisher, Mark Ladyman, Dr Stephen
Fitzpatrick, Jim Laxton, Bob
Fitzsimons, Lorna Leslie, Christopher
Flint, Caroline Levitt, Tom
Flynn, Paul Lewis, Terry (Worsley)
Follett, Barbara Linton, Martin
Foster, Michael Jabez (Hastings) Livingstone, Ken
Foster, Michael J (Worcester) Livsey, Richard
Galloway, George Lloyd, Tony (Manchester C)
Gapes, Mike Llwyd, Elfyn
Gardiner, Barry Lock, David
George, Andrew (St Ives) Love, Andrew
George, Bruce (Walsall S) McAvoy, Thomas
Gerrard, Neil McCabe, Steve
Gibson, Dr Ian McCafferty, Ms Chris
Gilroy, Mrs Linda McDonagh, Siobhain
Godman, Dr Norman A Macdonald, Calum
Goggins, Paul McDonnell, John
Golding, Mrs Llin McFall, John
Gordon, Mrs Eileen McIsaac, Shona
Gorrie, Donald Mackinlay, Andrew
Grant, Bernie McLeish, Henry
Griffiths, Jane (Reading E) McNamara, Kevin
Griffiths, Nigel (Edinburgh S) McNulty, Tony
Griffiths, Win (Bridgend) MacShane, Denis
Grocott, Bruce Mactaggart, Fiona
Grogan, John McWalter, Tony
Hain, Peter McWilliam, John
Hall, Mike (Weaver Vale) Mahon, Mrs Alice
Hall, Patrick (Bedford) Mallaber, Judy
Hamilton, Fabian (Leeds NE) Mandelson, Peter
Hanson, David Marshall, David (Shettleston)
Harman, Rt Hon Ms Harriet Marshall, Jim (Leicester S)
Heal, Mrs Sylvia Martlew, Eric
Healey, John Meacher, Rt Hon Michael
Heath, David (Somerton & Frome) Meale, Alan
Henderson, Ivan (Harwich) Merron, Gillian
Hepburn, Stephen Michael, Alun
Heppell, John Michie, Bill (Shef'ld Heeley)
Hesford, Stephen Milburn, Alan
Hewitt, Ms Patricia Miller, Andrew
Hill, Keith Mitchell, Austin
Hodge, Ms Margaret Moffatt, Laura
Hoey, Kate Moonie, Dr Lewis
Hope, Phil Moran, Ms Margaret
Hopkins, Kelvin Morgan, Alasdair (Galloway)
Howarth, George (Knowsley N) Morgan, Ms Julie (Cardiff N)
Howells, Dr Kim Morley, Elliot
Hoyle, Lindsay Mudie, George
Hughes, Ms Beverley (Stretford) Mullin, Chris
Hughes, Kevin (Doncaster N) Murphy, Denis (Wansbeck)
Hurst, Alan Murphy, Paul (Torfaen)
Hutton, John Norris, Dan
Illsley, Eric Oaten, Mark
Jackson, Ms Glenda (Hampstead) O'Brien, Mike (N Warks)
Jackson, Helen (Hillsborough) Olner, Bill
Jamieson, David O'Neill, Martin
Jenkins, Brian Organ, Mrs Diana
Johnson, Alan (Hull W & Hessle) Palmer, Dr Nick
Jones, Barry (Alyn & Deeside) Pearson, Ian
Jones, leuan Wyn (Ynys Môn) Pendry, Tom
Jones, Ms Jenny (Wolverh'ton SW) Perham, Ms Linda
Pickthall, Colin
Jones, Dr Lynne (Selly Oak) Pike, Peter L
Jowell, Ms Tessa Pond, Chris
Keeble, Ms Sally Pound, Stephen
Keen, Alan (Feltham & Heston) Powell, Sir Raymond
Kennedy, Charles (Ross Skye) Prentice, Gordon (Pendle)
Kennedy, Jane (Wavertree) Prescott, Rt Hon John
Khabra, Piara S Primarolo, Dawn
Prosser, Gwyn Stinchcombe, Paul
Purchase, Ken Strang, Rt Hon Dr Gavin
Quin, Ms Joyce Straw, Rt Hon Jack
Radice, Giles Stringer, Graham
Rammell, Bill Stuart, Ms Gisela
Rapson, Syd Sutcliffe, Gerry
Raynsford, Nick Swinney, John
Reed, Andrew (Loughborough) Taylor, Rt Hon Mrs Ann (Dewsbury)
Reid, Dr John (Hamilton N)
Rendel, David Taylor, David (NW Leics)
Robertson, Rt Hon George (Hamilton S) Temple-Morris, Peter
Thomas, Gareth R (Harrow W)
Robinson, Geoffrey (Cov'try NW) Timms, Stephen
Roche, Mrs Barbara Tipping, Paddy
Rogers, Allan Todd, Mark
Rooker, Jeff Touhig, Don
Rooney, Terry Truswell, Paul
Rowlands, Ted Turner, Dr George (NW Norfolk)
Roy, Frank Twigg, Derek (Halton)
Ruane, Chris Twigg, Stephen (Enfield)
Ruddock, Ms Joan Vaz, Keith
Russell, Ms Christine (Chester) Vis, Dr Rudi
Ryan, Ms Joan Wallace, James
Salter, Martin Walley, Ms Joan
Sanders, Adrian Ward, Ms Claire
Sawford, Phil Wareing, Robert N
Watts, David
Sedgemore, Brian Whitehead, Dr Alan
Shaw, Jonathan Wicks, Malcolm
Sheerman, Barry Williams, Rt Hon Alan (Swansea W)
Sheldon, Rt Hon Robert
Simpson, Alan (Nottingham S) Williams, Alan W (E Carmarthen)
Singh, Marsha Williams, Mrs Betty (Conwy)
Skinner, Dennis Willis, Phil
Smith, Rt Hon Andrew (Oxford E) Wilson, Brian
Smith, Angela (Basildon) Winnick, David
Smith, John (Glamorgan) Winterton, Ms Rosie (Doncaster C)
Smith, Llew (Blaenau Gwent) Wood, Mike
Smith, Sir Robert (W Ab'd'ns) Woolas, Phil
Snape, Peter Worthington, Tony
Soley, Clive Wright, Anthony D (Gt Yarmouth)
Southworth, Ms Helen Wright, Dr Tony (Cannock)
Spellar, John Wyatt, Derek
Starkey, Dr Phyllis
Stevenson, George Tellers for the Ayes:
Stewart, David (Inverness E) Ms Bridget Prentice and
Stewart, Ian (Eccles) Mr. Greg Pope.
Ainsworth, Peter (E Surrey) Collins, Tim
Amess, David Cormack, Sir Patrick
Arbuthnot, James Davies, Quentin (Grantham)
Atkinson, David (Bour'mth E) Davis, Rt Hon David (Haltemprice)
Atkinson, Peter (Hexham) Day, Stephen
Beggs, Roy Dorrell, Rt Hon Stephen
Bercow, John Duncan, Alan
Beresford, Sir Paul Duncan Smith, Iain
Blunt, Crispin Emery, Rt Hon Sir Peter
Body, Sir Richard Evans, Nigel
Boswell, Tim Fabricant, Michael
Bottomley, Peter (Worthing W) Fallon, Michael
Bottomley, Rt Hon Mrs Virginia Flight, Howard
Brady, Graham Forth, Rt Hon Eric
Brazier, Julian Fowler, Rt Hon Sir Norman
Browning, Mrs Angela Fox, Dr Liam
Bruce, Ian (S Dorset) Fraser, Christopher
Burns, Simon Garnier, Edward
Butterfill, John Gibb, Nick
Chapman, Sir Sydney (Chipping Barnet) Gillan, Mrs Cheryl
Gorman, Mrs Teresa
Chope, Christopher Gray, James
Clappison, James Green, Damian
Clark, Rt Hon Alan (Kensington) Greenway, John
Clarke, Rt Hon Kenneth (Rushcliffe) Grieve, Dominic
Hague, Rt Hon William
Clifton-Brown, Geoffrey Hamilton, Rt Hon Sir Archie
Hammond, Philip Paterson, Owen
Hawkins, Nick Pickles, Eric
Hayes, John Prior, David
Heald, Oliver Randall, John
Heathcoat-Amory, Rt Hon David Redwood, Rt Hon John
Hogg, Rt Hon Douglas Robathan, Andrew
Horam, John Robertson, Laurence (Tewk'b'ry)
Howarth, Gerald (Aldershot) Rowe, Andrew (Faversham)
Hunter, Andrew Ruffley, David
Jack, Rt Hon Michael St Aubyn, Nick
Jackson, Robert (Wantage) Simpson, Keith (Mid-Norfolk)
Johnson Smith, Rt Hon Sir Geoffrey Soames, Nicholas
Spelman, Mrs Caroline
Kirkbride, Miss Julie Spicer, Sir Michael
Laing, Mrs Eleanor Spring, Richard
Lait, Mrs Jacqui Stanley, Rt Hon Sir John
Letwin, Oliver Steen, Anthony
Lewis, Dr Julian (New Forest E) Streeter, Gary
Lidington, David Swayne, Desmond
Lilley, Rt Hon Peter Syms, Robert
Loughton, Tim Tapsell, Sir Peter
Luff, Peter Taylor, John M (Solihull)
Lyell, Rt Hon Sir Nicholas Taylor, Sir Teddy
MacGregor, Rt Hon John Tredinnick, David
MacKay, Andrew Trend, Michael
Maclean, Rt Hon David Tyrie, Andrew
McLoughlin, Patrick Viggers, Peter
Madel, Sir David Wardle, Charles
Malins, Humfrey Wells, Bowen
Maples, John Whitney, Sir Raymond
Maude, Rt Hon Francis Wilkinson, John
May, Mrs Theresa Willetts, David
Moss, Malcolm Woodward, Shaun
Nicholls, Patrick Young, Rt Hon Sir George
Norman, Archie
Ottaway, Richard Tellers for the Noes:
Page, Richard Mr. Nigel Waterson and
Paice, James Mr. James Cran.

Question accordingly agreed to.

It being after Ten o'clock, further consideration of the Lords amendments stood adjourned.

Motion made, and Question put forthwith, pursuant to Standing Order No. 15 (Exempted business), That, at this day's sitting, Consideration of Lords Amendments to the Social Security Bill may be proceeded with, though opposed, until any hour.—[Mr. Kevin Hughes.] Question agreed to.

Lords amendments further considered.

Amendment (b) to the Lords amendment agreed to.

Lords amendment, as amended, agreed to [Special Entry].

Lords amendment No. 65 agreed to [Special Entry].

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