PARLIAMENTARY DEBATE
Draft Social Security (Contributions) (Rates, Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations 2022 Draft Tax Credits, Child Benefits and Guardians Allowance Up-rating Regulations 2022 - 22 February 2022 (Commons/General Committees)

I beg to move,

That the Committee has considered the draft Social Security (Contributions) (Rates, Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations 2022.

These regulations set the national insurance contribution limits and thresholds as well as the rates of a number of national insurance contributions for the 2022-23 tax year, and make provision for a Treasury grant to be paid into the national insurance fund if required. As Members are aware, national insurance contributions or NICs are a key element of the nation’s welfare safety net, helping to support workers through ill health, unemployment and old age. They allow people to make contributions when they are in work in order to receive contributory benefits when they are not working. NICs receipts go towards funding contributory benefits as well as the NHS.

As announced at the Budget, the Government are using the September consumer prices index figure of 3.1% as the basis for setting all national insurance limits and thresholds and the rates of class 2 and 3 national insurance contributions for 2022-23. September CPI is the standard measure to increase NICs thresholds and class 2 and 3 rates. I will first outline the specific changes to the class 1 primary threshold and class 4 lower profits limit. The primary threshold and lower profits limit indicate the point at which employees and the self-employed start paying class 1 and class 4 NICs respectively. These thresholds will rise from £9,568 to £9,880 per year. The rates of class 1 and 4 NICs are unchanged by these regulations. The rates of class 1 and 4 NICs have already been increased, to 13.25% and 10.25% respectively, through the Health and Social Care Levy Act 2021. Increases to the primary threshold and lower profits limit do not impact on state pension eligibility. This is determined by the lower earnings limit for employees, which will increase, in line with CPI, from £6,240 in 2021-22 to £6,396 in 2022-23. I will come shortly to payment of class 2 NICs for the self-employed.

The upper earnings limit, the point at which the main rate of employee NICs drops to 3.25%, is aligned with the higher rate threshold for income tax. It was announced at spring Budget 2021 that the income tax higher rate threshold and the upper earnings limit would remain frozen at £50,270 until 2025-26. Similarly, the upper profits limit is the point at which the main rate for class 4 NICs drops to 3.25%. This will also remain at £50,270 per year.

As well as class 4 NICs, the self-employed pay class 2 NICs. The rate of class 2 NICs will increase from £3.05 in 2021-22 to £3.15 in 2022-23. The small profits threshold is the point above which the self-employed must pay class 2 NICs. This will increase from £6,515 in 2021-22 to £6,725 in 2022-23.

Class 3 NICs allow people to voluntarily top up their national insurance record. The rate for class 3 will increase, in line with inflation, from £15.40 a week in 2021-22 to £15.85 in 2022-23. The secondary threshold is the point at which employers start paying employer NICs on their employees’ salary. That threshold will increase from £8,840 in 2021-22 to £9,100 in 2022-23. The threshold at which employers of people under 21 and apprentices under 25 start to pay employer NICs on those employee salaries will remain frozen at £50,270 per year, to maintain alignment with the UEL.

The regulations also make provision for a Treasury grant of up to 17% of forecast annual benefit expenditure to be paid into the national insurance fund, if needed, during 2022-23. A similar provision will be made in respect of the Northern Ireland national insurance fund. A Government Actuary’s Department report laid alongside the re-rating regulations forecast that a Treasury grant will not be required in 2022-23, but in view of the economic challenges created by the covid pandemic, the Government consider it prudent to make the maximum provision at this stage. I trust that is a useful overview of the changes we are making to adjust contributions to the Exchequer in line with inflation.

On the second statutory instrument, the Government are committed to delivering a welfare system that is fair for claimants and taxpayers, while providing a strong safety net for those who need it most. The draft regulations will ensure tax credits, child benefit and guardian’s allowance increase in line with the consumer prices index, which measured inflation at 3.1% in the year to September 2021.

Some of us have not seen this statutory instrument. I was only given one when I came in. I did not realise there were two statutory instruments.

I am sorry, I did not mean to interrupt.

On a point of order, Sir Gary, I want to put the record straight. I was not here when Lloyd George originally introduced the national insurance legislation.

I am grateful for that helpful intervention. In summary, this proposed legislation makes changes to the rates, limits and thresholds for national insurance contributions, makes provision for a Treasury grant and increases the rates of tax credits, child benefit and guardian’s allowance in line with prices. These are important and necessary steps, and I hope colleagues will support them.

It is a pleasure to serve under your chairmanship, Sir Gary.

I will not detain the Committee for too long given that we are expecting a vote in the House but I want to put on the record that the proposed uplift, particularly that dealt with the second SI, does not reflect the true cost of living that many of our constituents are experiencing now.

When we debated the matter a couple of weeks ago, it was widely accepted by Members across the House that basing the uplifts on September figures will have to be reconsidered by the Government because the change is not working for our constituents. Far too many households in my constituency of Glasgow East and right across Scotland have been left behind and will not benefit from a paltry 3.1% increase from a Government who know that we are heading for a 7% inflation rate by April.

We have obviously had discussions about national insurance and it would be remiss of me not to put on record that the United Kingdom Government’s decision to go ahead with a regressive hike in national insurance will undoubtedly impact on the youngest and lowest earners in society. The Government often talk about supporting people in society, and the Minister uttered warm words about the social security net, but for far too many people who I represent that security net is getting weaker and there are more holes in it than ever before. The SIs before the Committee will not solve that.

In response to the hon. Member for Ealing North, in my opening speech I set out in some detail how the thresholds will increase for those starting to pay NICs. I am happy to combine information on those thresholds with that on the social care levy in writing to the hon. Gentleman.

In my introductory remarks, I set out how each threshold will be increased, but I am happy to set that out in writing to him. He also spoke about the steps we are taking to protect the most vulnerable. He will know that, last September, we put in place a support package of half a billion pounds to support the most vulnerable. He will have heard the Chancellor’s statement only last month about the steps we are taking in response to the energy price increases. He will also be aware of the £400 billion support provided by the Chancellor in the past two years.

The SIs before us are important to ensure that we continue to uprate the thresholds.

I do not want to extend the debate to excession because I know that we are in a hurry on account of Divisions in the House, but a Government Minister—a colleague of the Minister—has just resigned from the Government because of the amount of fraud that has been allowed to happen in our country under the present Chancellor’s guidance. Indeed, it was his legislation. Will the Minister confirm that £3.4 billion was lost? What could we have done with that £3.4 billion to ameliorate the impact of the NIC increase?

I am sure that the Minister can say something to us.

I value the hon. Gentleman’s contribution to the debate. He has obviously followed the issue very closely so he will know of the steps the Chancellor has taken to ensure that we combat fraud not only in relation to the coronavirus schemes but more broadly. The hon. Gentleman will have heard the Chancellor talk about the coronavirus fraud taskforce that has been set up—more than 1,000 people are now engaged to tackle fraud and the taskforce has already recovered half a billion pounds and is set to recover a further billion.

As I said earlier, I am happy to write to him on the subject.

Will the Minister also set out for us what the SIs will mean for levels of child poverty, because I am very concerned that more than 4 million children are already living in poverty, and the rate seems to getting worse?

I am very happy to do that.