National Insurance Contributions (Hansard, 24 April 2002)

§ Baroness Noakes
asked Her Majesty's Government:
What will be the cost of the Budget increases in national insurance contributions to public sector employers in the financial year 2003–04.

§ Lord McIntosh of Haringey
My Lords, the cost of the 1 per cent increase in employer national insurance contributions to public sector employers is estimated to be around £1.2 billion in 2003–04.

§ Baroness Noakes
My Lords, I thank the Minister for that reply. However, does he agree that at least 245 £200 million of the increase will comprise national insurance contributions borne directly by the NHS? Does he also agree that the increased contributions payable by nurses, doctors and other healthcare professionals will simply fuel their demands for further pay, thus diverting more money away from the NHS?

§ Lord McIntosh of Haringey
My Lords, first, I welcome the concern now expressed by Her Majesty's Opposition for public services after many years in which they have denigrated public services left, right and centre. In broad terms the figure for the cost to the National Health Service is £300 million, not the £200 million to which the noble Baroness, Lady Noakes, referred. However, we have to look at that in the context of an increase in spending in 2003–04 over this year's figures of £19.5 billion in total and of £6.7 billion For the National Health Service. In those circumstances perhaps the relative importance of these figures takes on a different aspect.

§ Baroness Pitkeathley
My Lords, does my noble friend agree that the fact that these increases are increases in national insurance is significant as those people who do not pay national insurance—that is, pensioners—are the biggest users of the NHS?

§ Lord McIntosh of Haringey
My Lords, the increase in national insurance follows a good principle which has been in operation ever since Beveridge and the 1940s. The principle is that people in work should contribute to benefits and health services that they will need when they are unable to work. I hope that my noble friend agrees that the ability to pay is the correct consideration and the one which has been taken into account in the Budget decisions. Indeed, she is right that it does not and should not apply to pensioners.

§ Lord Marsh
My Lords, the principle of Beveridge was based on the establishment of an insurance fund which has long since passed. Will the Minister set out the simple and fundamental differences between so-called national insurance contributions and a poll tax on employers and employees?

§ Lord McIntosh of Haringey
My Lords, I do not agree with the original analysis of the noble Lord, Lord Marsh. Ever since the 1940s the receipts from national insurance contributions have gone in large part to the National Insurance Fund for contributory benefits. From that period there have also been payments from national insurance contributions to the Consolidated Fund for the benefit of the National Health Service. This is not a poll tax.

§ Baroness Carnegy of Lour
My Lords, can the noble Lord tell the House what the increase in employers' national insurance will be for schools, colleges and universities?

§ Lord McIntosh of Haringey
My Lords, in general I am reluctant to go down the line of indicating what it 246 will be for individual public sector employers. They must make their own calculations. However, the figure for schools in England is approximately £180 million.

§ Lord Newby
My Lords, does the Minister accept that local government as a whole will be faced with increased national insurance costs of about £360 million? That is the same sum as the extra money they are due to receive for social services. Will the Minister urge the Chancellor to ensure that in the Comprehensive Spending Review the funding available to local government will be increased to take account of its increased national insurance costs so that those costs do not lead to substantial cuts in core services?

§ Lord McIntosh of Haringey
My Lords, I have already indicated that I am reluctant to go down the route of giving figures for individual services. That is particularly difficult as regards local authority services which cover such a wide variety of authorities, departments and occupations. My answer to the question of the noble Lord, Lord Newby, about the spending review should be taken in the context of what I have already said about an increase in spending next year over this year of £19.5 billion. The principle of proportionality ought to be observed in considering these matters.

§ Lord Peston
My Lords, does my noble friend agree that if there is to be an increase in public expenditure—there is and it is widely welcomed—it is inevitable that it has to be paid for? To suggest that because we raise taxes to pay for it—which certainly used to be the policy of noble Lords opposite as well—that is somehow a problem surely cannot be the case. It is quite correct that if we are I o raise public expenditure, we have to ask someone to pay for it. If they pay for it, they have to give up something else. That is more a matter of arithmetic than economics, but we simply have to accept that.

§ Lord McIntosh of Haringey
My Lords, there are two answers to that pertinent question. First, is it not remarkable under these circumstances that last night the Conservative Party voted against the Budget and voted against the provision to pay for extra services and has consistently refused to say whether it agrees with the additional expenditure on public services? Secondly, the proposals for increases in national insurance contributions from employers—which is the subject matter of the original Question—reflect in part the fact that it is to employers' benefit that we should have an effective National Health Service. Last year the cost to employers of absence from work was in the order of £10 billion.

§ The Earl of Northesk
My Lords, can the Minister confirm that the total revenue to be raised by national insurance contributions on employers is estimated to be £4.1 billion? At the same time is it not the case that, somewhat at odds with the claim that this has been a 247 Budget for the NHS, rather more than this—some £4.6 billion—is intended to be spent on the new tax credits?

§ Lord McIntosh of Haringey
My Lords, as regards the noble Earl's first question, my figure is £4 billion. However, I suspect that that is a matter of rounding. The noble Earl must remember that the increase which is proposed here is in addition to all of the other increases that have taken place. I said that there would be a £6.7 billion increase in health service expenditure next year. I can extend that because the figures for the period 2002–03 up until 2007–08 will be between £7 billion and £9 billion each year. We need to look at these matters in proportion.