National Insurance Contributions (Hansard, 9 May 2002)

§ 4. Tim Loughton (East Worthing and Shoreham)
What discussions he has had with the Department for 263 Health about how the increase in class 1 national insurance contributions announced on 17 April will affect costs in the medical profession. [53546]

§ 6. Dr. John Pugh (Southport)
What estimate he has made of the impact of the proposed change in employers' national insurance contributions on services' company profitability for financial year 2003–04. [53548]

§ 13. Patrick Mercer (Newark)
What discussions he has had with ministerial colleagues about how the increase in class 1 national insurance contributions announced on 17 April will affect workers in the public sector. [53555]

§ The Chief Secretary to the Treasury (Mr. Andrew Smith)
It is estimated that the changes to employer national insurance contributions announced in the Budget will add around 0.7 per cent. to pay costs on average next year. The cost to the public services will be just over £1 billion, which compares with a planned rise in spending on public services of nearly £20 billion. The changes will, of course, help to fund improvements in public services and a real-terms increase in spending on health over the next five years of over 40 per cent.

§ Tim Loughton
Will the Chief Secretary confirm that, according to the House of Commons Library, within those figures —217 million of the increase in national insurance contributions relates to the national health service? On the public sector generally, does he expect that higher employers' national insurance bills in the public sector will be financed by Departments or passed on to public sector workers in the form of lower pay settlements? Can he explain to me specifically how hospices up and down the country will cope with the big increases in national insurance contributions, given that they are run by the voluntary sector and largely on voluntary contributions? They will not, therefore, be the beneficiaries of his supposed NHS largesse.

§ Mr. Smith
If the Conservative party is suggesting that the public sector should somehow be exempt from national insurance contributions, that is an extraordinary proposition. When the Conservatives increased employees' contributions 10 times and employers' contributions five times, I do not remember them ever addressing the question of the impact on the public sector. The money will be found from within the additional resources that we are making available—departmental expenditure limits are increasing by £19.5 billion.
The hon. Gentleman makes a fair point about hospices, which make an invaluable contribution across the country and in many of our constituencies. As part of the spending review, there will be a cross-cutting review of the role of the voluntary sector in the delivery, and in assisting the delivery, of public services. I shall ensure that that examines the position of hospices.

§ Dr. Pugh
The service sector of industry employs a huge number of people. As the service sector is not made more profitable by an increase in employers' national insurance contributions, is it fair to say that this sector is 264 one of the major net losers? If not, which business sectors are the major financial losers, or is this the first Budget in history when absolutely everyone is a winner?

§ Mr. Smith
As we have made clear on many occasions since the Budget, we believe that the national insurance increase is a fair way to fund the much-needed improvements in the national health service, which even the Conservatives claim they recognise are necessary. On the impact on the service sector, I remind the hon. Gentleman that for the average small business, the rise in national insurance contributions is substantially offset by cuts in corporation tax.

§ Patrick Mercer
I wonder how the Chief Secretary would reply to public sector workers in my constituency to whom I have spoken recently. First, I spoke to two policemen in Newark who doubt that, with the increase in national insurance contributions, they will be able to continue serving in the police force. Secondly, I spoke to nurses in Tuxford—not surgeons or doctors but the lowest-paid of the national health service workers—one of whom said to me that the Chancellor's catchphrase should not have been "Enterprise and fairness" but "Physician heal thyself'.

§ Mr. Smith
The nurses, doctors, police officers, firefighters and other public service workers to whom I have spoken recognise the crucial importance of the extra investment in the national health service. They recognise that that has to be paid for, and national insurance is a fair way of doing that.

§ Mr. Jim Cousins (Newcastle upon Tyne, Central)
I represent one of the largest groups of NHS workers outside London. They all say, "Yes, we will pay more national insurance but, for goodness sake, get on and tackle the health inequalities that mean that people in the north-east of England live seven to 10 years less than people in the south-east of England." The direct and indirect costs of those health inequalities far outweigh the direct costs of 1 per cent. on national insurance. Is my right hon. Friend the Chief Secretary getting that message too?

§ Mr. Smith
I certainly am. It is already a well-established commitment of the Government that health inequalities are a key priority. Indeed, analysing those factors featured large in the Wanless report. It is therefore crucial that resources go into prevention, community health and primary care, as they will do as a consequence of the extra £40 billion that we are making available over the next five years. In addition, we have the benefits of the working families tax credit, the child tax credit, the new deal and our other policies for sustaining high employment. As we all know, unemployment and poverty have long been a big factor in the health inequalities to which my hon. Friend refers. The Labour party is committed to tackling them while the Conservative party, which is unable to come here with any credible policies on health, would allow them to get worse, just as they allowed inequalities to worsen when they were in government.

§ Roger Casale (Wimbledon)
My right hon. Friend will be aware that my constituency of Wimbledon has one of 265 the highest proportions of professional and managerial people in the work force. There is a high degree of support for the Budget measures, because people understand and support the fact that money will be spent on rebuilding the NHS. Is it not the case that, even with the increase in national insurance contributions, Britain is still in a much more competitive position than some of our major competitors such as France and Germany? Is it not also the case that we are taking a number of measures to boost productivity and competitiveness? Finally, is it not the case that when we see the changes that the investment in the NHS will bring, we will find even more support from people in the work force for these measures than we find today so soon after the Budget?

§ Mr. Smith
My hon. Friend is right. The CBI pointed out that ill-health costs business in this country £10 billion a year. Even after this increase in national insurance contributions, business in this country will contribute on average £10 a week towards health care, compared with £60 a week in France and £30 a week in Germany. The contributions in this country are fair and, as my hon. Friend said, they will be welcomed by people in the business community. Anthony Stone of the British Chambers of Commerce said about the Budget: Any of us in business know that we get what we pay for. If we want a world class health service in the UK we need to pay more. I believe that that message is well understood in business.

§ Mr. Michael Howard (Folkestone and Hythe)
Does the Chief Secretary recall the words of Labour's 1997 election manifesto, which said: How and what governments tax sends clear signals about the economic activities they believe should be encouraged or discouraged"? What economic activity do the Government think will be encouraged or discouraged by their tax on jobs?

§ Mr. Smith
In our manifesto for the election in 2001, we made our position very clear. The manifesto said: Tax policy will be governed by the health of the public finances, the requirement for public investment, and the needs of families, business and the environment. We also pledged that we would put schools and hospitals first and that we would put investment in our public services ahead of the cuts in taxation for which the right hon. and learned Gentleman and his colleagues were arguing. They cannot have any credibility in the House when they say that the national health service needs more resources but oppose our measures to raise them. We have introduced reforms to match those resources, but they say that they have no alternative. The right hon. and learned Gentleman and his colleagues are not advancing a politically or intellectually credible proposition.