National Insurance Contributions (Reduction in Rates) (No. 2)

On Wednesday 13 March 2024 the House of Commons considered the National Insurance Contributions (Reduction in Rates) (No.2) Bill. The Bill introduces a cut in the rate of primary (employee) Class 1 National Insurance contributions (NICs) from 10% to 8% and a cut in the rate of self-employed Class 4 NICs from 8% to 6%. These cuts will take effect from 6 April. I have long consider the tax burden on working people is too high and should come down in a responsible way. Indeed, I opposed a National Insurance increase when the Government was pushing it through two years ago. I therefore support the reductions in NICs that the Bill seeks to deliver. 

However, this reduction in NICs does not change the fact that working people will be worse off – for every £5 that they get back from the NICs cuts, they will lose a total of £10 from a Government tax plan that will leave the average household £870 worse off and that will drag 3.7 million more people into paying tax by 2028-29. The tax burden will continue to rise in each of the next five years and the UK is still set to have its highest tax burden in seven decades.

I am also concerned that the Chancellor set out at the Budget a goal to abolish NICs, with no suggestion of how he would pay for this. This unfunded tax cut of £46 billion would leave a chasm in the public finances. It is a gamble for which working people would be forced to pay the price.  I therefore supported a new clause to the Bill that would have required the Government to set out before the end of the current parliamentary session what the impact on public finances of abolishing NICs would be. I also supported a new clause that would have required the Government to set out its forecasts for the number of people set to pay NICs as a result of the thresholds for payment remaining frozen until 2028. Unfortunately, the Government defeated both of these amendments.

New Clause 1: Ayes: 170 : Noes 292
New Clause 2: Ayes: 169 Noes: 293