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National Insurance Contributions Bill

The sums are based on the assessment made by the independent Office for Budget Responsibility at the time of the Budget. I hope that that provides some clarification to the hon. Gentleman. Part 1 of the Bill provides for changes, which the previous Government announced in two instalments, to national insurance contributions from next April. Initially, a 0.5% increase in rates was announced in the 2008 pre-Budget report. That was then changed to a 1% increase in the pre-Budget report of the following year. I am sure that Members will remember that reversing the most significant impacts of those rate rises was a key issue at the general election. The Federation of Small Businesses said that the policy would cost 57,000 jobs. Thirty business leaders supported our campaign to reverse the policy. When the letter from those 30 business leaders—many other business leaders followed shortly—was published, Tony Blair apparently considered that for Labour the game was up. Thankfully, he was right, and we now have in place a Government determined to bring down the deficit but also to put in place conditions favourable to private sector-led growth. In June, we announced our plan to reverse the most damaging aspects of Labour's jobs tax. There was a choice how best to do this—for example, we could have cancelled the rate and threshold rises—but we have chosen the option that best protects low earners. In the emergency Budget, my right hon. Friend the Chancellor confirmed that national insurance contribution rates would rise by 1%, that the personal allowance would increase by £1,000 from next April, and that the employer national insurance contribution threshold would rise by £21 a week plus indexation. The reform of employer national insurance contributions is exactly as set out in the 2010 Conservative party manifesto. The Bill sets out how these rises will apply to the main rates of class 1 national insurance contributions. The employer rate will rise from 12.8 to 13.8% and the employee main rate will rise from 11 to 12%. The 1% increase will also apply to class 1A and 1B contributions that are paid on benefits in kind and pay-as-you-earn settlement agreements. The same 1% rise will apply to class 4 contributions paid by the self-employed, which will rise from 8 to 9%. Taking into account the increase in the personal allowances and employer threshold, the net effect of these changes will reverse the damaging £6 billion-a-year net increase in the cost of labour planned by Labour Members. Our package of measures entirely reverses this increase. Compared with the plans that this Government inherited, no changes are being made to the rates. More than £3 billion a year is being returned to employers through the threshold increase, and even more to individuals through the increase in the personal allowance. Our actions will mean that some 880,000 low earners in the UK will be taken out of income tax altogether.