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Mr. Duncan Smith: We would not be having this debate in the context of the Bill--which is an absurdity--if the Government had not decided to dump all their national insurance changes on the back of legislation that had nearly completed its passage through the House of Lords. It is ironic that, although the Government have spent most of their first year saying how much they disagree with the other place and how little they regard what it does, they turn around at the first opportunity and put changes concerning a major part of their Budget at the back end of a Bill which had almost completed its Committee stage in the other place.
That means that we have only today in which to discuss the measures in this House. Given the Government's previous concern that elected chambers should have full rights of scrutiny, it seems strange that they did not follow the normal course and introduce a separate Bill in this place. It might have proceeded reasonably quickly and received a proper Committee stage when all the issues could have been discussed in detail. In essence, the Government have set out to avoid this Chamber for as long as they can with this legislation and have backtracked on their position regarding the other place, which verges on hypocrisy. However, I shall not dwell on that, as I wish to move on to the amendments.
There is concern that the Government's changes were not announced by the Chancellor in his Budget. I shall come to that matter in due course. In summary, there has been an abuse of this place and its processes by a Government who want to have their cake and eat it by saying what they like about the other place while using it as and when they see fit. In the Red Book, the Chancellor described the national insurance changes as
My noble Friend Lord Higgins moved the amendments in the other place in an attempt to point out the Chancellor's deception at the time of the Budget. The Chancellor essentially said one thing and then did another. In his statement of 17 March, he announced several changes to the national insurance contributions scheme, which we have discussed. At the time--his words are quite important--he said:
Mr. Phil Hope (Corby):
But was it accurate?
Mr. Duncan Smith:
If the hon. Member for Corby (Mr. Hope) had listened to "Money Box", he would know that it was precise about most of the Budget details. The interviewer said, in response to a caller that
When I studied the Red Book directly after the Budget, I could not find any figures that were relevant to the raising of the lower earnings limit, even though I looked hard. The Minister mentioned the complications--the need to sort out contributions, who would receive benefits and the effect on pensions. He rightly said that measures would have to be introduced and further discussions would have to take place.
Why did the Chancellor suggest the changes if he had no intention of implementing them in the next financial year? He said that he was flagging up the idea and that he would make the changes, but there is no provision for them in the Red Book. He was not simply saying that there was too little time before April next year; the Red Book clearly shows that he had no intention to introduce them.
Mr. Clifton-Brown:
My hon. Friend makes exactly the right point. Is he aware that the Red Book states, in paragraph 3.31 on page 45:
Mr. Duncan Smith:
My hon. Friend is absolutely right. The Chancellor said:
When the Chancellor appeared before the Treasury Select Committee, my hon. Friend the Member for Grantham and Stamford (Mr. Davies) asked him why he had used those words and what his intentions were. Remarkably, the Chancellor replied:
The Chancellor crafted his Budget speech well into the night--there was no chance that a word would slip out. He was content to let people believe that the raising of the lower earnings limit was part of the package of Budget measures--he wanted the public to believe that he was reducing their tax. He did not correct the papers the following morning; he did not send them letters saying, "You've got it wrong. You're misleading the public--that is not what I meant." He let the impression stand for that critical 24 hours during which the public are most focused on the changes in the Budget.
Why did the Chancellor do that? The answer can be found in an article in The Guardian, which reported that the Budget had been heavily tested with focus groups before it was announced to the House. It said:
The focus groups were, clearly, positive about the proposed change. They were told that their tax burden could be reduced, so they said: "That's wonderful. We rather like that." The Chancellor was not blind to that--the Labour party is not blind to focus groups, even though it is blind to everything else--so he hit on a plan: he would ensure that the Budget speech left the public with the impression that the changes would be made. He wanted to have his cake and eat it--he wanted to make minimal changes without going the whole way.
When my hon. Friend the Member for Grantham and Stamford confronted the Chancellor with the curious discrepancy between the Budget speech and the tables in the Red Book, the Chancellor made a crude attempt to rewrite the record. He did not want everyone to cotton on to the point.
These national insurance changes were dumped on the back end of the Bill in the other place because the last thing that the Government wanted was proper scrutiny in Committee of the whole House, which would have given the media plenty of time to realise exactly what was going on.
The Government love to talk about democracy and debate, but they hate discussing legislation. They are apparently strong on reforms of the other place, although we have yet to see what those will be, but they jumped at the first opportunity to bypass the Commons, because they worry about legitimately, democratically elected Members of Parliament scrutinising a deliberate attempt to force the press, the media and the public onto the wrong course in order to generate a warm feeling among the public.
I am extremely grateful to the House of Lords for giving us the chance to discuss these matters by amending the proposed national insurance changes. We finally have
the opportunity to expose the Chancellor's little scheme and his serious economy with the truth. We intend to support the original Lords amendments, and we will certainly oppose the changes proposed by the Minister.
"the biggest reform to the structure of national insurance contributions since 1975, at a cost of around £1.4 billion a year from April 1999."
I said at the time of the Budget that, by and large, we agreed with the national insurance changes. We believed that they were part of a natural process of reform, and I welcomed them. The changes follow those made by Lord Lawson when he was Chancellor, and I see no reason to oppose them. The Minister knows that, so we shall not waste too much time discussing the absolute merits of the case. I had several concerns, but I raised them at the time and I shall not repeat them now.
"I am abolishing the perverse entry fee that every employee pays to be part of the national insurance system and, in doing so, I am cutting national insurance for every employee in the country."
Almost immediately--again, his words are important--he added:
"Further reforms will also ensure that no one pays national insurance for the first £81 of their weekly earnings. All employees earning between £64 and £81 will have their right to benefits protected."--[Official Report, 17 March 1998; Vol. 308, c. 1106.]
The Chancellor was absolutely clear about what he was saying: his choice of words was vital to the meaning of the speech. He did not, as the Minister claimed, use the word "future"; he used the word "further". There is a reason for that. All hon. Members know--or they should know--what a Minister means when he uses the word "further" in a speech about legislation. We assumed--as did those in the Gallery and others--that, when the Chancellor used the word "further", he meant that, linked to the Budget would be further announcements regarding the process of change that he had announced. If he had used the word "future", we would have known that the changes were not connected with the Budget and would not necessarily be involved with it. When the Chancellor said:
"Further reforms will also ensure that no one pays national insurance for the first £81 of their weekly earnings",
I know that I was not alone in understanding that to mean that employees would be included as part of the reform. Members of the press made the same assumption. In a front-page article the day after the Budget, The Daily Telegraph stated:
"no workers will pay National Insurance contributions on the first £81 of earnings".
On the same day, similar front-page coverage in the Financial Times--a newspaper not given to over-statement--said:
"Employers and employees to pay no national insurance on the first £81 of wages."
Two major newspapers, among others, made clear what the Chancellor was doing. Many members of the public were left with the impression that the changes that the Chancellor had announced--and which the papers had confirmed--would take place; they knew that the effects would be substantial, particularly on their take-home weekly pay. They thought that the changes would amount to a reduction in personal taxation. Two days later, the "Money Box" programme on Radio 4, which is not a station given to overstatement--
7 pm
"a lot of people seem to think that they won't have to pay any National Insurance until their earnings hit eighty one pounds a week. I mean, even I've been a bit muddled by this."
13 May 1998 : Column 429
An expert from Scottish Equitable, Mr. Stuart Ritchie, replied:
Even two days after the Budget, commentators were still trying to figure out exactly what the Chancellor had promised. Newspapers and radio programmes were all saying that the Chancellor had a made a mistake--that was the best that they could say about it.
"No, the Chancellor got this a little bit wrong in his speech . . . and newspapers are actually still getting it wrong today".
"The lower earning limits for employees will remain unchanged (at £64 in 1998-99)"?
That is totally contrary to what the Chancellor said in his statement.
"I am abolishing the perverse entry fee that every employee pays to be part of the national insurance system and, in doing so, I am cutting national insurance for every employee in the country.
None of the newspapers and broadcast media managed, at the time, to connect that statement with the Red Book, which made it clear that, in reality, the Chancellor had no intention of introducing the changes.
"Further reforms will also ensure that no one pays national insurance for the first £81 of their weekly earnings."--[Official Report, 17 March 1998; Vol. 308, c. 1106.]
"I said: 'Future reforms will also ensure that no-one pays National Insurance for the first £81'. The word is 'future'."
One can almost see him knitting his brows and glaring:
"These are reforms we intend to make."
However, he had not used the word "future". If he had done, the media would not have made a mistake; they would have read the Red Book and asked, "Future? Which year does that mean? It is not in the Red Book, so it must be way out in the future." The Chancellor made his original statement so that the media would write a favourable story, even though it was not based in reality.
The Chancellor knew that few members of the public or the media would read the Select Committee's report--the thought that the media do not dwell on Select Committee reports is strange to hon. Members, I know--so he thought that he would try to rewrite the record. However, the record stands.
"Focus groups tested tax plans: Experiment in lifting Budget secrecy hailed as a success."
It is clear what happened. The Treasury was considering ways in which to raise the lower earnings limit, but had obviously not found a way to ensure that, as the Chancellor pledged, all employees earning between £64 and £81 would have their right to benefits protected. We understand that difficulty--the Government will have to resolve it.
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