Contribution
My Lords, I will be brief, for two reasons. One is that I just do not think I could cope if this turned into yet another discussion of employers’ NICs, particularly as we have Third Reading tomorrow. As the Minister said, that is the broad context within which we discuss this. Also, when it comes to the very detailed details of various levels of NICs and thresholds, and making changes based on CPI, I lack the detailed knowledge to be able to add a whole lot to the value of the discussion.
I will make some comments on the National Insurance Fund. This is one of those days when I look around and think, “Where is Lord Davies of Brixton when you need him?”. He often talks to us about the integrity of the fund, and—although I do not want to put words into his mouth—regrets that it does not function in the role for which it was originally designed. I agree. Nominally it is a fund to pay social security benefits but, first, a portion of it—roughly 24% of the amount raised in NICs—is allocated to the NHS by formula. Secondly, if there is any surplus in the fund it can be lent to various departments under the auspices of the Treasury. Thirdly, it can be topped up by a grant from the Treasury if the amount is not sufficient for the payouts it needs to make. Indeed, that has been reinforced or extended in the context of the SI before us today.
Crucially, the level of the National Insurance Fund does not determine the amount that is spent on any form of social security, whether state pensions or other things. I agree with the Institute for Fiscal Studies that the idea that the National Insurance Fund is financially separated from other parts of government is illusory.
I think that a review of the status of the National Insurance Fund will begin in the fiscal year that starts in April 2025. This is the quinquennial review that is required for the fund. Given that UK demographics are such that they will drive up the cost of state pensions and a whole lot of other elder needs, which will take the concept behind the fund almost to breaking point, can the Minister say whether the next review will look again at the fundamentals, accepting that in many ways this has effectively become a variation on taxation, and see whether the system can be simplified and combined? It is unfortunate that people still feel that when they pay their national insurance contribution they are funding their state pension, which is not the reality, even if it sounds like that from some of the language.
Looking at the other content of the two SIs in front of us, it struck me that, although I fully understand child benefit and guardian’s allowance going up at CPI, the number is so tiny. This was brought home to me very much this past year when, for various reasons, I have had various grandchildren living with me. Does whoever designed these benefits have a clue how much a teenage boy can eat? There is a great argument for relooking at the whole benefit system and putting it into a much more realistic context. The Government have said that they will look again at benefits, but I wonder whether they will use that lens as they do so, because it is about time.
We support the extension of the 12-month NICs holiday for veterans, but I hope that our support for veterans will not stop there. With the change in approach we are now taking to defence, recognising that our military personnel need to be supported and treated in a very positive way rolls over into also taking care of our veterans, who form so much of the homeless population, for example. That is one of the reasons why—going back to the employers’ NICs Bill that we have been dealing with, which has its Third Reading tomorrow—we focus so much on things such as part-time, entry-level work and small businesses. It is, in part, to deal with the significant number of veterans who are not finding themselves a route back into a working and functional life once they return to civic society.
We will not oppose either of these SIs. I apologise for not being able to go through the nitty-gritty of many of the dimensions, but perhaps that will at least mean that the Committee can adjourn a little earlier.