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National Insurance Contributions Bill

I beg to move, That the Bill be now read the Third time. We have reached the final stage of this House's deliberations on the National Insurance Contributions Bill, which will ensure that the personal tax package can be fully operative. I think that it will be helpful if I outline the details of the package again, as some hon. Members have focused on only a few aspects of it. Since 1997, the Government have delivered a comprehensive programme of reforms to the tax and benefit system. Their aim has been to simplify the system, to tackle child and pensioner poverty and to make work pay. Budget 2007 announced the next stage of the reforms as part of a rebalancing of the tax system to offer more support for work, families and pensioners. The package simplified income tax and national insurance contributions. It increased the personal allowances for those aged 65 and over, and it changed the rates and threshold for child tax credit and working tax credit. It was carefully balanced, so that the tax credit changes focus on those whose need is greatest, including low-income families with children. The personal tax changes provide a simpler system with a modest impact on most sectors, and increased support to pensioners over 65. Each change should not be looked at in isolation. Alongside producing the lowest basic rate of tax for over 75 years and one of the simplest personal structures in the developed world, that package results in four out of five households being better or no worse off, with the average household gaining £100 per year. A lone parent with one child will see their annual gain from returning to work rise by up to £350, and 200,000 children have been removed from poverty. Households with children in the poorest fifth of the population will be on average £340 per year better off, and around 600,000 fewer pensioners will pay income tax than would otherwise be the case, so that in total only 43 per cent. of pensioners will be taxpayers. In helping to deliver that package, the Bill first allows the upper earnings limit to be aligned with the point at which higher-rate tax starts to be paid, significantly simplifying the United Kingdom's tax and national insurance contribution systems. From April 2009 there will be just two main rates of income tax, and they will apply to the same bands of income as the two rates of national insurance contributions, creating one of the simplest personal tax structures of any developed country. Secondly, the proposals in the Bill are central to the Government's commitment to provide a solid and simpler state pension. By bringing forward the introduction of the upper accrual point, the Bill returns the timetable for the removal of earnings-related state second pension to that recommended by the Pensions Commission. That will mean that by around 2030 the complex earnings-related structure of the state second pension will be withdrawn, leaving a flat-rate scheme that will be simple to administer and to understand for both contributors and pensioners. I got a little carried away during my earlier contribution; I blame it on the flu. In trying to reassure the hon. Member for Gosport (Peter Viggers), which I patently failed to do, on winners and losers in respect of the upper earnings limit, I got the figures the wrong way round. The loss of the starting rate band and the upper earnings limit being raised mean that those people are worse off by the amounts that I gave. However, they are better off as a result of the basic rate being introduced at 20 per cent. I know that he knew that; he just did not want to cause me embarrassment in the debate. However, I was right to say that, overall, they will be £51.60 better off. I am grateful to hon. Members for the way in which this Bill has been debated. It is a short Bill. It makes the two changes that I have described, for the reasons we have debated. I am pleased to be able to conclude that the Bill has had thorough scrutiny. As I have said, I have been impressed by the constructive contributions. I thank hon. Members on both sides of the House for their contributions to the debate.