§ Mr. Frank Field
To ask the Secretary of State for Social Security when the upper limit on employer's national insurance contributions was abolished; if he will state the additional revenue gained each year since; and if he will make a statement on the outcome of research the Government commissioned on the impact of this change on the employment patterns of higher and lower-paid earners.
§ Mr. Arbuthnot
An estimate of the amounts raised each year following the abolition of the upper limit on employer's national insurance contributions is in the table.
Year £ billion2 1985–19861 0.50 1986–1987 1.50 1987–1988 1.75 1988–1989 2.25 1989–1990 2.75 1990–1991 3.00
Year £ billion2 1991–1992 3.00 1992–1993 3.00 1993–1994 3.00 1994–1995 3.25 1 Upper Earnings Limit abolished on 6 October 1985. 2 Figures are founded to nearest £¼ billion.
Abolition of the upper earnings limit for employer's national insurance contributions made it possible for the rates of employees' and employers' national insurance contributions to be reduced, especially at lower levels of pay. This was aimed at improving job prospects for the low paid, particularly among the young and unskilled, by reducing individuals' national insurance payments and reducing the business costs of prospective employers.
Research commissioned by this Department shows that a fifth of employers consider national insurance contributions when setting wage levels and that some employers take contribution rates into account when fixing staffing levels. This supports the view that reducing employers' wage costs in respect of lower-paid workers helps to promote their employment prospects.