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Mr. Clifton-Brown: My hon. Friend the Member for Grantham and Stamford (Mr. Davies) is in good voice and form this evening, and he has made many telling and interesting points. His main point is that the Government's left hand did not know what the right hand was doing, because it is clear that the Government had a genuine intention to remove from the national insurance net those people who earn less than £81 per week.

I mentioned that dichotomy in my speech on Second Reading of the Finance (No. 2) Bill and I quoted the relevant passage from the Chancellor's Budget speech. It is worth repeating that again, so that the House can be crystal clear about what exactly the Chancellor said. He said:


That cannot be made much clearer--the crystal clear import of that statement is that anybody earning less than £81 per week would not pay national insurance. However, as I pointed out to my hon. Friend the Member for Chingford and Woodford Green (Mr. Duncan Smith), paragraph 3.31 of the Red Book states:


    "The lower earnings limit for employees will remain unchanged (at £64 in 1998-99)."

Therefore, either the Chancellor was right or the Red Book was right, but they could not both be right.

What is so tragic and so dreadful about all this is that it is the low-paid who are being misled--inadvertently--by what the Chancellor said on Budget day. That is cruel.

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If it had been you or I, Mr. Deputy Speaker, who had to suffer a pound or two more paid in national insurance, we should have been in a position to pay that increase.

Mr. Swayne: Speak for yourself.

Mr. Clifton-Brown: If my hon. Friend were earning less than £81 a week and suddenly expected to have a little more take-home pay, he would have been absolutely delighted by what the Chancellor said, but he would have been dreadfully disappointed when it subsequently came to light that he had not quite understood what the Chancellor really meant.

I am on serving on the Standing Committee on the Finance (No. 2) Bill and members of that Committee have discovered that that Bill provides for an unprecedented transfer of secondary powers to Treasury officials. For example, clause 158 provides that all the necessary regulations connected with the implementation of the single European currency can simply be delegated to Treasury officials by secondary legislation. The Bill before us now similarly transfers huge powers to officials by secondary legislation. The message is that if the Chancellor cannot get it right on Budget day, it will be put right subsequently by secondary legislation.

That is a highly unacceptable way to go about these matters. It is a complete abrogation of the sovereignty of the House of Commons. We are here and, over the centuries, we have been given the power, enshrined in the Parliament Act 1688, to be the money-granting authority. There is no higher money-granting authority than the House of Commons. To abrogate that responsibility by secondary legislation is unacceptable.

Mr. Swayne: Does my hon. Friend accept that this amounts to something approaching the continental pattern of government by decree? Does he agree that it represents a complete negation of the achievements of the Chartists, who saw the question of the suffrage as a knife-and-fork question, a bread-and-cheese question?

7.45 pm

Mr. Clifton-Brown: I totally agree with my hon. Friend. It is an abrogation of the achievements not only of the Chartists, but of the Long Parliament of the 13th century. Throughout the long history of Parliament, the House of Commons has had primacy as the money-granting authority. Here we have a Government, in an unprecedented way, transferring powers to officials in the Treasury, whereas we in this place should be ensuring that such measures appear in primary legislation and are subject to the full glare of scrutiny, both here on the Floor of the House and upstairs in Committee, so that when things are not as they should be, the Opposition--and, I have no doubt, the Labour party when it goes back into opposition in due course--have the opportunity to correct the Government of the day.

The Government may well rue the day they embarked on the process of a huge transfer of power, because, having transferred it to Treasury officials, they will find it hard to claw back. Ministers do not have the proper scrutiny and control over secondary legislation, and we find that that control slowly slips still further towards Europe. That is a wholly undesirable state of affairs.

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Much more importantly, I dislike the whole concept of national insurance. What we should do is abolish national insurance altogether and put it totally on income tax and corporation tax. That is a much fairer basis for taxation, because those are properly progressive taxes. Paragraph 3.30 of the Red Book reveals the huge distortion caused by the national insurance system, which the Conservative amendment made in the Lords started to address. To be fair, the Government have recognised that.

It is worth noting, because it is at the heart of this debate, that paragraph 3.30 states:


In other words, a 1p increase in pay can trigger a 630 per cent. increase in tax. If that is not a massive distortion in the tax system, I do not know what is. Paragraph 3.30 says that the structure of NICs


    "distorts the labour market, discouraging progression up the earnings ladder. These distortions are greatest at the lower earnings limit".

To raise that lower earnings limit immediately and not wait a whole year is precisely the point of the Conservative Lords amendments. Paragraph 3.30 says that


    "a rise in earnings from £63.99 to £64 a week triggers a NIC charge (the 'entry fee') for employees of £1.28 and for employers of £1.92 a week",

and says that that is


    "one of the last remaining causes of people being worse off when they earn more."

That should be eliminated for ever, and thank god when it happens.

I support the Conservative Lords amendments, because of that distortion and that huge disadvantage for the low-paid. My own Government should have put it right years ago. I urged my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) to do that when he was Chancellor and I am sure that, had the Conservative Government been returned to office, he would have paid close attention to the problem.

Considering how much the Government have been able to reduce this country's debt burden, one might have thought that they would be prepared to spend £1.4 billion--which they have committed themselves to spending next year in any case--on helping some of the lowest-paid people in our society who are living in the most appalling and mean conditions. One might have thought that the Government would be only too anxious to introduce that measure as quickly as possible. The amendments are wholly right and I urge the Government to take them away, look at them on behalf of the low-paid, some of whom can hardly afford to feed themselves, and see whether they cannot be more generous and enact the provisions immediately.

We all recall that for employees earning more than £81 a week, the employer's rate will be increased to 12.2 per cent. The Red Book makes an interesting point about this, saying:


There is no reason why the employer changes could not have been made immediately.

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It is reprehensible that rather than the measures being included in the Finance Bill--as they would have been in the past--they have been tacked on to a measly Social Security Bill at the eleventh hour.

This demonstrates all too clearly that the present Government do not know what they are doing, and did not think the matter through before introducing a Budget.

The Standing Committee considering the Finance Bill is finding serious flaws in nearly every clause, because the Government have not consulted those who are most involved: tax practitioners, accountancy bodies and lawyers. If they had done as we did when we were in government, and taken the trouble to consult such experts--which, frankly, is the only correct thing to do--they might have produced a rather more orderly Bill, and might have avoided some of the more elementary errors.

I have written a paper on the reform of the state pension. The general issue of pensions is directly relevant to the change in national insurance contributions proposed in the excellent Lords amendments. One of the core problems encountered by the Minister today was how he could make up the amount if the lower earnings limit was raised from £64 to £81 a week. In my paper--which I submitted to the Minister for Welfare Reform, as a contribution to his White Paper and his review of the pensions system--I proposed a credit for all low-paid people, all people who were out of work and all working housewives who were earning less than the national insurance lower earnings limit. I feel that people who would normally expect such a credit should receive it, and that there is no reason why the Government cannot compensate for the rise in the lower earnings limit.

It is clear from the demographic trends that if nothing is done about the state pension, it will wither on the vine. When the time comes for me and you, Mr. Deputy Speaker, to retire--in many years' time--we shall suddenly find that the state pension is worth considerably less than it is now in real terms. The Government will have to deal with that problem; otherwise, it will cost all of us who are in work a good deal of money.

Allied to that problem is the problem of the state earnings-related pension scheme. We must encourage all people of working age, especially young people, to take out a second pension--through the national insurance system, if we must do that, or, in my book, through the income tax and corporation tax systems. We must provide a mechanism to make that possible. I think that the Minister for Welfare Reform wants that as well, but that the Chancellor has imposed a constraint because of the cost involved.

The Government must tackle the issue of second pensions. If they do not, they will be chucked out, and a future Conservative Government will have to tackle it. The abolition of advance corporation tax credits suggests to me that the Government are not interested in people's ability to retire with a decent pension and with dignity. As a result of 18 years of excellent government by the Conservative Administration, more than 50 per cent. of people retired with some form of second pension. That was a worthy achievement. People who have their own pensions can choose how to spend their money in their old age, and are much less dependent on the state. In this and other measures imposed in the previous and current

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Budgets, the Government are driving people into increasing dependency on the state. They want to level everyone down to the lowest common denominator.

I was sent here by my constituents to improve the lot of everyone in the country, including the lower-paid and, in particular, pensioners--especially pensioners who have little money and rely on benefits. I want future generations not to have to rely on a measly state pension topped up by some form of benefit; that is a disgrace to society, with which any well-meaning Government should try to deal.

I have drawn attention to the distortion involved in the marginal rate of tax which is shown in the Red Book. An increase of 1p in someone's income can result in an effective national insurance increase of 630 per cent. The Government should do something about that: if they are not prepared to, they should consider themselves an utter disgrace, and the sooner they are chucked out because they are uncaring, the better.


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