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National Insurance Contributions Bill

Indeed, but for this Government, harmonisation is always harmonisation up in respect of taxation rather than harmonisation down or evenly. The origin of the lower and upper earnings limit and the six and a half and seven and a half multiple limit on the size of the UEL lies, of course, as my hon. Friend the Member for South-West Hertfordshire pointed out, in the transition from national insurance contributions to an earnings-related contributory system in the mid-1970s. When national insurance contributions were first introduced in 1911, they were flat rate and continued to be so until world war two, although they were varied by age and sex. Partially earnings-linked graduated contributions were added to the structure in 1961, but it was not until 1975, as my hon. Friend said, that national insurance contributions became fully related to earnings. As part of that reform, lower and upper earnings limits for contributions liability were introduced. A lower limit was required for practical and administrative reasons and to concentrate contributions and benefits on people who depended substantially on income from work. The lower limit was linked to the level of the basic retirement pension and an upper limit was required to prevent excessive burdens and the acquisition of very high benefit entitlements. Those limits had been set in statute and considerable thought was given to them, as my hon. Friend noted, in the 1975 legislation. At that time, the Government deliberately set themselves a longer-term framework within which national insurance contributions were to be levied. The press notice put out by the Treasury at the time of the Budget is worth citing:"““Current Social Security legislation requires the maximum UEL to be less than seven and a half times the Primary Threshold. The Primary Threshold is the point at which Class 1 ""NICs become due. Changes to the UEL below this amount are made by Regulations annually. Any change to the UEL above this maximum requires primary legislation in a NICs Programme Bill””," which is, of course, what we are facing now. It continues:"““The first step in the alignment of the UEL…with the amount at which higher rate tax is payable will be made in 2008 by Regulations and the Re-rating Order respectively. The second step for the UEL alignment will be made in a NICs Programme Bill in time for a start date of April 2009””." By setting a framework that made it necessary for the Government to come back to the House with primary legislation before raising the national insurance contributions upper earnings limit, the Government deliberately set themselves a structure that would be self-inhibiting in preventing them from raising taxes lightly—because national insurance contributions are indeed a tax. My hon. Friend has pointed out the deliberately cumbersome legislative programme that would be necessary were the seven and a half times limit to be broken. For us to agree, as the legislation proposes, that it should be possible for the Government to come back by way of affirmative resolution would make it so much easier for them to increase the burden of taxation on individuals in this country. The amendments proposed by my hon. Friend—of those, I prefer amendment No. 8—are well judged. Amendment No. 10 would oblige the Treasury to audit its own procedures, which might introduce a rod for its own back, had it not fulfilled the requirements of those procedures. I do not share my hon. Friend's confidence that the Treasury could do that and create, as it were, a burden for itself. I much prefer amendment No. 8, which I strongly support.