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Tax Credits, Child Benefit and Guardian’s Allowance Up-rating Regulations 2023

In some ways, that takes me on to the comments from the noble Lord, Lord Tunnicliffe, about the broader decision to uprate benefits by 10.1%, which has been welcomed across both Houses, at a time when families face significant pressures. That process followed the normal course for the uprating of benefits.

It is important to recognise that other significant support has been put in place at the same time to help those families to which the noble Lord referred. This includes not just energy support through the £400 energy bills support scheme and the £150 council tax rebate scheme for most households living in a property in council tax bands A to D; it also includes the targeting of support for millions of the most vulnerable households through cost of living payments, which were targeted specifically at those on means-tested benefits, pensioners and those who receive disability benefits, who are less able to meet those cost of living pressures. That has been at the forefront of the Government’s mind. Benefits uprating has been an important part of addressing that, but we took action in advance of the uprating; that support continues into next year.

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The noble Lord asked a specific question on the impact of the small tax increase in cash terms from the NICs changes in these statutory instruments. That refers specifically to the increases in class 2 and class 3 NICs, which were the only rates or thresholds of NICs to be uprated by inflation this year. To quantify a little for the noble Lord, the class 2 rate paid by all self-employed people earning more than £12,570 a year, as well as voluntarily paid by self-employed people earning less than £6,725 a year, has been set at £3.45 a week. That is an increase of 30p per person per week in that category. The class 3 rate, paid voluntarily by unemployed and employed people earning less than £6,396 a year who wish to add to their national insurance record, is set at £17.45 per week, which is an increase of £1.60. It is normal practice to uprate those cash rates of NICs by inflation each year. That was not a change to the normal process as announced at either the Spring Budget or the Autumn Statement. The change that took place was the freezing of those thresholds for years to come. It is that change which will, over time, bring in 55,000 additional individuals into paying NICs by 2027-28, the last year of the freeze, as a result of fixing the primary threshold and lower profits limit.

The one thing I would say to the noble Lord is that we increased that threshold earlier this year to £12,570 from 6 July. That was the largest ever increase to personal tax starting thresholds. The primary threshold is £5,100

higher in 2022-23 and will still be £3,700 higher by April 2028 than it would have been had those thresholds simply been uprated by inflation each year since 2010-11. I think that provides some context for the overall changes we have seen in NICs over that period. With that, I beg to move.