HL Deb 10 November 1999 vol 606 cc1348-51

2.53 p.m.

Baroness Castle of Blackburn

asked Her Majesty's Government:

What proposals they have for capping national insurance contributions.

Lord McIntosh of Haringey

My Lords, no national insurance contributions are paid by employees above the level of the upper earnings limit which will be set at £535 in 2000–01 and £575 in 2001–02. The upper profits limit which sets the point at which the self-employed cease to pay contributions will be comparable. From 2000 to 2001, there will be no national insurance contributions payable on earnings less than £76 a week, although deemed contributions will be credited for earnings over £67.

Baroness Castle of Blackburn

Is it not a fact that yesterday the Chancellor told us that the national insurance contribution of employers is to be cut by 0.3 per cent in order to placate the business community for the climate change levy? That will deplete the fund to the tune of £1.7 billion. Does not that compare unhappily with the £300 million, which is all the Government are prepared to pay to pensioners for the free TV licence, which we all welcome? Why should pensioners see their fund depleted in order to satisfy the Government's relationship with the business community? Is it not hypocritical for the Government to tell us, as they have done over the past few weeks, that they cannot afford to restore the earnings link—the one thing that pensioners want more than anything as of right in the uprating of their pensions—and at the same time to deplete the National Insurance Fund to the tune of £1.7 billion?

Lord McIntosh of Haringey

My Lords, the Chancellor made a number of announcements yesterday, one of which certainly was that in order to maintain and improve the effectiveness of the climate change levy there would be a small reduction in employers' national insurance contributions. But he also announced the total amount of benefits for pensioners over the period of this Parliament, which is a figure of £4 billion. That is a significant improvement in the standard of living of pensioners in this country. My noble friend is not right to say that it is simply the pensioners' money which goes into the National Insurance Fund. Retirement pensions account for 78 per cent of the benefits from the National Insurance Fund, but incapacity benefit accounts for 17 per cent; widows' pensions account for 2 per cent; JSA accounts for 1 per cent; and there are other smaller amounts.

Lord Goodhart

My Lords, will the Minister accept that many people take precisely the opposite view to that of the noble Baroness, Lady Castle? They support a shift of taxation away from employment and on to non-renewable energy. We object to the announcement yesterday by the Chancellor of the Exchequer that there would be a lower level of reduction in NICs than that originally proposed at 0.5 per cent and a lower level of energy tax.

Lord McIntosh of Haringey

My Lords, so far as it goes, I am grateful for what the noble Lord says. It has been agreed in all parts of the political spectrum that we must honour our legal obligations under the Kyoto agreements for the climate change levy. As to how that is achieved, the Chancellor announced yesterday that the reduction in employers' national insurance contributions was sufficient not only to maintain the targets previously set, but also to improve on them, together with taking the other measures that he announced.

Baroness Turner of Camden

My Lords, can my noble friend say whether or not there are plans to introduce means testing in respect of other contributory benefits in addition to those already covered by the recently debated Welfare Reform and Pensions Bill?

Lord McIntosh of Haringey

My Lords my noble friend is asking me to speculate about future announcements. If announcements were to be made about benefits or taxes, they would be made by the Chancellor of the Exchequer and not from this Dispatch Box.

Lord Saatchi

My Lords, my heart goes out to the noble Baroness, Lady Castle. Is not her suggestion in relation to NICs just too straightforward, simple and transparent for this Government's liking? Do not this Government have the strategy of cutting visible taxes on voters and raising invisible taxes elsewhere? Does the Minister agree with a Labour MP's assessment of the Government's tax policy when he said: We haven't increased the top rate of tax and the standard rate of tax, but we have increased a lot of other taxes … we have done it with all these stealth taxes. I just think it would have been better to have honestly told people beforehand"?

Lord McIntosh of Haringey

My Lords, the noble Lord pays more attention to the views of Mr Ken Livingstone than some of us do in government; or, indeed, on the rest of these Benches. We have a very good story to tell about national insurance contributions. Not only have we made announcements in the Finance Act this year about the upper earnings limit, which have been well publicised, but, also— I do not think that the noble Lord noticed the last part of my original Answer—there is the enormous benefit to lower earners as regards the lower limit of £76 a week, below which such workers will receive benefits without actually paying the national insurance contribution. I believe that to be a step in the right direction. It was part of the Welfare Reform and Pensions Bill, which was passed by your Lordships' House last night.

Lord Hardy of Wath

My Lords, should we not note with some relief that the Government have taken steps that will safeguard a number of vital and strategically important industries, which would otherwise have faced very serious comparative disadvantage under the original proposals of the climate change levy? Let us hope that that concession from Her Majesty's Government yesterday will suffice to remove any comparative disadvantage.

Lord McIntosh of Haringey

My Lords, I am not sure that I would use the word "concession". We are as determined as we ever were to adhere to our obligations on the climate change levy. We have changed our assessment of what is necessary to achieve that aim. Naturally, we make the most advantageous changes for the benefit of British industry.

Lord Lawson of Blaby

My Lords, if the noble Lord does not want to listen to Mr Ken Livingstone, will he at least listen to the views of independent energy economists who are at one in saying that the reason this Government are getting into such difficulties with the climate change levy—indeed, difficulties which were not dissipated by yesterday's announcement—is that they ran away from the logical response to Kyoto of a carbon tax because New Labour, like Old Labour, is still in thrall to the National Union of Mineworkers?

Lord McIntosh of Haringey

My Lords, I have great difficulty in listening to the views of independent energy economists when they have not been identified or named. If the noble Lord cares to open up a more extended debate on the subject in which he can name his sources, we shall be able to give him proper responses.

Baroness Castle of Blackburn

Is the Minister in fact saying that a national insurance fund is not the property of those who contribute to it? Why should any concessions to the business community, to which no one may object in principle, be financed by the pensioners? There are others in our society who are far better placed to meet that burden. If this kind of behaviour were practised in occupational pension schemes, would not the Government have a word or two to say about it? In fact, it is defrauding pensioners of what they have contributed to—not a means test of pensions, but a pension as of right. Does not this latest move show that the Government are planning a systematic destruction of the state insurance principle and a substitution of means tested benefits in its place?

Lord McIntosh of Haringey

My Lords, I am sorry that my noble friend should find it necessary to use such words as "defrauding" and "systematic destruction". When I referred to the beneficiaries of the National Insurance Fund, I was very precise. I said that 78 per cent of the benefits from that fund do indeed go to retirement pensions. I merely pointed out that such pensioners are not the only beneficiaries and that there are others, such as those on incapacity benefit and widows, whose needs must also be considered. None of this is any indication of an extension of means-testing to state retirement pensions.

Lord Marsh

My Lords, does the Minister agree that the whole problem surrounding this issue is the fact that there is no national insurance scheme? In fact, this scheme is unfunded and is topped up each year by the Treasury, if it is so needed. The Government—indeed, any government—retain the right to change the contribution level or the benefit level. When people have tried to do that sort of thing in the private sector, it is called "fraud", and they have gone to gaol.

Lord McIntosh of Haringey

My Lords, it is certainly true that the surplus or deficit in the National Insurance Fund is the difference between two very large figures. It is also certainly true that the Government retain the right, as all governments have, to make changes in the very wide range of benefits which are covered by the fund. However, there are very strict controls over the National Insurance Fund. The Government Actuary has to produce a report on each measure which affects the level of the fund, and the Government are obliged to pay heed to the views of the actuary and, indeed, those in the quinquennial review.

Earl Russell

My Lords, in 1993, in a context it would be wide of the Question to dwell on, Mr Peter Lilley remarked: This raises big questions about the future of the contributory principle, when we have not decided which way we want to go". Can the Minister give me any reason to believe that those words are one whit less true than they were on the day Mr Lilley wrote them?

Lord McIntosh of Haringey

My Lords, I do not think that this Government need be over-concerned with the past views of members of a government of another political colour; indeed, neither now nor for some years to come.

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