Gareth Davies

I welcome the opportunity to contribute on behalf of His Majesty’s Opposition. As the Minister said, the first statutory instrument sets rates, limits and thresholds for national insurance contributions for the 2025-26 tax year. It covers the rate of class 2 NICs, the small profits threshold, the rate of voluntary class 3 NICs, the zero-rate relief on secondary class 1 NICs for qualifying armed forces veterans—a Conservative Government legacy that we are very proud of—and the various upper secondary thresholds and the upper limits and thresholds that determine class 1 NICs. These regulations also allow for payments of a Treasury grant not exceeding 5% of the estimated benefit expenditure for the 2025-26 tax year. This is to be made into the national insurance fund, with a corresponding provision for Northern Ireland. We welcome the uprating with CPI of the class 1 lower earnings limit and the class 2 small profits threshold, but the overall picture in these regulations is one of continuity, not of change. The secondary threshold, however, is the exception. Although the regulations leave it unchanged, that will not last for very long. They will be overridden by the National Insurance Contributions (Secondary Class 1 Contributions) Bill, which is under consideration in the other place. It will cut the secondary threshold from a weekly level of £176 to £96 in the coming tax year, on top of raising the secondary class 1 NICs rate to 15%. The disastrous, job-destroying consequences of Labour’s £25 billion tax on working people are well known by now, and have been debated in this place many times. They are also widely acknowledged, from the independent Office for Budget Responsibility to the left-wing Resolution Foundation. This time last year, when in opposition, the Minister put on record his concern over the distributional impact of the freezes on allowances, limits and thresholds, which his Government are in large part continuing. We accept that these are difficult decisions, but we took them to return the public finances to a sustainable footing in the aftermath of the double crisis of the pandemic and the energy price shock driven by the disgraceful invasion of Ukraine. If the Minister was concerned about the distributional impact back then, and in particular about “the post-tax income for low and middle earners”—[Official Report, Sixth Delegated Legislation Committee, 7 February 2024; c. 6.], I wonder just how concerned he is now, in the context of his own party’s Budget. The Institute for Fiscal Studies has shown that the largest percentage increases in labour costs will be inflicted on lower-wage workers; meanwhile, as much as 76% of the additional tax burden will be passed on to those same workers in the form of lower real wages, according to the independent OBR. Does the Minister agree with the OBR and the IFS on the distributional impact of the NICs tax hike?