§ 3.12 p.m.
§ Baroness Castle of Blackburnasked Her Majesty's Government:
What reductions they have proposed in the employers' national insurance contribution, when these have taken or will take effect, and by how much they will reduce the National Insurance Fund.
§ Lord McIntosh of HaringeyMy Lords, as announced by the Chancellor of the Exchequer, the rate of employers' secondary Class 1 national insurance contributions will be reduced from 12.2 per cent to 11.9 per cent in April 2001, and from 11.9 per cent to 11.8 per cent in April 2002. As a result of those changes, employers' contributions to the fund will reduce by around £1 billion and £350 million respectively.
§ Baroness Castle of BlackburnDoes not the Minister think that is a scandal? It is not the Government who are giving the employers a sweetener but pensioner contributors, because the National Insurance Fund will shrink by £1.35 billion. The Government say, "We can't afford an earnings link. Look what it would cost. Contributions would have to go up". Would they? If only the Government would stop using pensioners' insurance contributions, as has happened over the years, to sweeten the taxes that they are levying on employers.
§ Lord McIntosh of HaringeyMy Lords, the short answer to my noble friend is that I do not think that it is a scandal. It would be a mistake to think that such a change in a very large fund is "defrauding"—my noble friend used that word last November—pensioners. Pension entitlement has not been taken away by the changes to national insurance contributions. Neither a surplus nor a deficit in the National Insurance Fund determines how much is available for pensioners; otherwise, if there were a shortfall in the fund, as in 1993–94, it might be suggested that pensions ought to be cut. I do not think that my noble friend would agree with that being done.
§ Lord TomlinsonMy Lords, will my noble friend explain why some 81 million national insurance numbers are currently in use? Can he give some indication of how many of those numbers involve neither an employer's nor an employee's contribution? Does he agree that any reform of the national insurance system should involve the allocation of national insurance numbers—whose proliferation only seems to be of benefit to potential fraudsters?
§ Lord McIntosh of HaringeyMy Lords, as Professor Joad used to say, it all depends what one means by "in use". Many more national insurance numbers have been issued than there are persons who have them for legitimate purposes. That does not necessarily mean 11 that the other numbers are being used fraudulently. However, the availability and potential misuse of national insurance numbers is a problem that the Treasury is addressing.
§ Lord GoodhartMy Lords, does the Minister agree that employers' national insurance contributions are a straightforward employment tax? Would it not be better to move away from taxes on employment— which we wish to encourage— to taxes on the use of non-renewable resources and on environmental pollution?
§ Lord McIntosh of HaringeyMy Lords, I am glad the noble Lord asked that question. As I was responding literally to the previous question, I was not able to say that the first reduction in employers' national insurance contributions in April 2001 is to ensure that the climate change levy is neutral in its effect on industry as a whole; and that the second, smaller reduction in April 2002 will ensure that the aggregates levy is neutral in its effect on industry as a whole. Both are desirable environmental objectives. Although I do not agree with the noble Lord's wider generalisation, I hope that he agrees that those two reductions argue in support of his concern for the environment.
§ Baroness Castle of BlackburnDoes not the Minister's reply and the comments made by others opposite mean that the Government are not treating state insurance as an insurance system at all? It is thought not to matter and is to be left to wither on the vine. As Mr Michael Portillo said when he was Financial Secretary to the Treasury a short while ago, it becomes nugatory. The Labour manifesto stated that a Labour Government would make the basic state pension the foundation of their pensions provision. Now they are admitting that it does not matter: "It is expendable. A fund doesn't mean a fund. We can allow it to continue to diminish". This is not the first cut. The Tories cut it. They would. They do not believe in state insurance. I thought that this Government did. May we take it from the Minister's reply that he is giving us a guarantee today that there will be no further cuts in employers' contributions?
§ Lord McIntosh of HaringeyMy Lords, I am not responsible for what the Conservative Party says in government or in opposition; I certainly do not subscribe to the views that my noble friend attributes to them. The present Government have not in any way cut the state basic pension. It has been continued on the same basis since 1980. The effect of all government policies over the whole of this Parliament will mean that an extra £6.5 billion is available to pensioners, compared with the smaller figure of £4.5 billion that would be available if my noble friend's proposal to restore earnings-related pensions had been followed.