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National Insurance Contributions Bill

My hon. Friend is being very helpful. That is exactly the issue. I do not particularly want to debate the rights and wrongs of abolishing the upper earnings limit—nor, I suspect, is it in order to do so—but if that were to happen, or even if it were merely to be increased substantially, would the House have the opportunity to scrutinise it properly? We have such an opportunity under the existing legislative framework, but we will not if the Bill is passed in its current form. That is an important point. I stress that we object not to Parliament's ability to change the upper earnings limit—of course Parliament should have the right to do that—but to its not being able to do so by regulation, even by the affirmative procedure. We have set out two alternative approaches—they do not run together—for ensuring the scrutiny that we want. In amendment No. 8—which is mirrored by amendment No. 9 because we need to change two Acts in this process, one relating to England, Scotland and Wales and one relating to Northern Ireland—we suggest that there should be no increase in the upper earnings limit in excess of the retail prices index in September of the previous year. When we tabled a similar amendment in Committee, the Financial Secretary said that the reference date for national insurance contributions is December, not September, so we have rectified that error. She also said that December was not feasible because it would cause various IT costs and so on. That was essentially her argument against the link with the RPI. This is similar to the Rooker-Wise approach whereby thresholds for income tax increase in line with the RPI for September in the previous year. If the higher rate income tax threshold rises along with inflation, based on the RPI in September, and the upper earnings limit rises along with inflation using the same measure, they should continue to go hand in hand, which would enable the Government to fulfil their objectives. Neither of our sets of amendments aims to prevent the Government from achieving their stated policy objective of aligning the point at which the upper earnings limit exists and the point at which one starts paying higher rate income tax. The Financial Secretary might argue that they do not quite reflect the provisions that relate to income tax and the Rooker-Wise amendment. If so, would she object to the principle of the amendments, given that her objection to the equivalent amendment in Committee was essentially that December was the wrong date and that it should be September? Now that we have rectified that problem, does she have any objections to the amendment? The wording of amendment No. 10 is replicated in amendment No. 11. Depending on what the Financial Secretary says, we might well press amendment No. 10 to a Division. We might press for a vote on amendment No. 8, too, but I will wait to hear what she says before reaching any conclusions. Amendment No. 10 is a development of an amendment that we tabled in Committee to probe the Government. At that point, we proposed to allow the upper earnings limit to be increased as long as it did not exceed the level at which higher rate income tax becomes payable. The Financial Secretary advanced two arguments—two technical points—about why that would not work. The first was that national insurance contributions are calculated weekly whereas income tax is calculated annually. She construed our amendment—possibly a little harshly, but I concede that there was an ambiguity in it—as meaning that the relevant income tax level of, for example, £43,000 a year would be treated as a weekly limit. That was not our intention, and I believe that we have ended any ambiguity on that point. I concede fully the right hon. Lady's second objection, which was that national insurance contributions are determined by regulation before the beginning of a tax year. Income tax is not formally determined until the Finance Bill is enacted. Our proposal in Committee that the national insurance contribution upper earnings limit should not be raised above the point at which higher rate income tax becomes payable did not work because at the point where a regulation would have to be passed the Finance Bill would not have already gone through, even though am announcement would have been made in the Budget and there may be Budget resolutions. We accept that argument, which is why we have come back with a different solution. It is not the most elegant piece of drafting that has ever come before the House, but it attempts to address in good faith an entirely legitimate concern. We propose that within six months of the regulation setting the upper earnings limit—in other words, six months into the financial year—the Treasury will be required to review whether the upper earnings limit is above the level at which higher rate income tax is payable. If it is, we would then require the Treasury to bring forward regulations to reduce the upper earnings limit below the higher rate of income tax as existed at that time for the following year. That proposal would cause considerable inconvenience to the Treasury, and I make no apologies for that. The purpose of the amendment is to provide a deterrent to prevent any Government from activating the mischief to which I referred earlier. A Government would be able to raise the upper earnings limit through primary legislation, but if the limit were increased by regulation higher than the Government said that they intended, they would have to go through the embarrassment of producing a further order stating that they were wrong and that the upper earnings limit would be brought down the following year.