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Mr. Hendrick: It is strange that the Liberal Democrats are criticising us for not putting a penny on income tax while the Conservatives are accusing us of doing precisely

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that. What is the reason for the difference between the two Opposition parties? I would have thought that opposition is opposition.

Mr. Lidington: One thing I have learned in my time is not to attempt to claim responsibility for what happens on the Liberal Democrat Benches. We also intend to hold the Government to account on what they have said on the national insurance ceiling. The present Secretary of State for Trade and Industry said in May last year:

"We've got no plans at all to raise that ceiling on national insurance contributions . . . It is not going to happen."

However, the Chancellor and his team still cling to the pretence that the ceiling remains in place. As the Chancellor said when delivering his Budget:

"Save for this 1 per cent. contribution, the ceiling . . . remains in place".—[Official Report, 17 April 2002; Vol. 382, c. 591.]

Mr. Tom Harris: I wonder what position the hon. Gentleman held in the Conservative party in 1979, when Sir Geoffrey Howe promised the country that his party would not double the rate of VAT, but subsequently did so when it got into office. I also wonder what position he held when John Major, the former Prime Minister, promised not to extend VAT but then did so after the 1992 general election.

Mr. Lidington: On the first point, I was a student at the time. There is little point in going back and looking at what happened 20 and more years ago. I do not recall members of the Labour party praising Conservative Ministers for being ready to change their minds on those measures. Instead of going into the pros and cons of the Budgets of 1979 and 1992, we should remember that the key point, in the wake of the 2001 general election result, is that we agree that the quality of public services should take priority in the framing of policy for the future of this country, but we believe that the Government's approach will not deliver that quality. The Government's proposal will hit individuals and companies very hard through the imposition of tax increases.

How can the ceiling remain in place when people are paying national insurance contributions on income above that level? The Treasury Select Committee was surely right to conclude earlier this week that Government rhetoric on the matter was mere sophistry. That is a pretty damning indictment of the arguments employed by the Chancellor of the Exchequer and by others on his team.

However, I noticed that the Chief Secretary did not speak at all in his opening comments about the nature of the powers that the Government intend to assume. The Treasury Select Committee has rightly asked that the national insurance contributions Bill be framed in such a way that further primary legislation would still be needed before the rate of charge above the upper earnings limit could be increased. I hope that Ministers will make it clear later in the debate whether that will be the case. It would be wrong for the Government to include in the Bill an enabling power that allowed them to rush through further breaches of the national insurance contributions ceiling without adequate debate and scrutiny.

If the Paymaster General is unable to give that pledge when she winds up the debate tonight, that will only reinforce the widespread and growing suspicion that the

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Budget is only the first step towards the Government's objective of scrapping the upper limit altogether. People and companies must have real doubts about the Government's intentions, given the increasing scepticism expressed by many independent observers, as well as Opposition Members of Parliament, about the reliability of the Government's forecasts for economic growth. Such doubts were expressed most recently in a study published by the National Institute of Economic and Social Research.

The Chief Secretary did not refer either to the position of self-employed people. The Government have rightly talked a great deal about the need to encourage enterprise and competitiveness in this country, but the proposed increase in national contributions for self-employed people will act as a disincentive to enterprise, and will discourage it. Even allowing for the offsetting effects of tax deductibility, the proposals mean that a self-employed person with an annual income of about £20,000 a year could expect to pay an extra £143 a year, that one on £30,000 a year could expect to pay £232 more, and that one on £40,000 could pay £868 a year in additional national insurance contributions.

However, we intend to hold the Government to their word on employers' national insurance contributions. The proposals have rightly been dubbed a straightforward tax on jobs. The Labour party's business manifesto last year stated:

"United Kingdom business taxation levels, including employers' social security contributions and corporation tax, are competitive with the rest of the European Union. This is a situation we intend to maintain."

The motion breaks that pledge too.

All over the country, businesses and trade organisations are reckoning up the risks that the motion poses to their competitiveness and future success. Representatives of the glass industry told me only this morning that the increase in employers' national insurance contributions will give rise to an extra bill for them of around £1.5 million each year.

John Mann: Will the hon. Gentleman give way?

Mr. Lidington: No, I have given way to the hon. Gentleman twice already.

This week, the director general of the Confederation of British Industry said that businesses around the country are accusing the Government of

"talking an enterprise game . . . and yet on a major thing—something that overshadows it all—they are actually going backwards."

Even before this Budget, the CBI's figures showed that the business tax burden is higher in only one of our major trading partners than it is in the United Kingdom.

If business has to pay out more on national insurance, it will have less money to spend on other things. If business has to pay out more on national insurance, it will have less to invest. It is no wonder that the Item Club concludes that

"the Budget levies will further depress business investment".

The CBI fears possible cuts in capital spending, training, research and development. Business leaders are surely right when they say that pension contributions could also be hit.

Mr. Tom Harris: I am grateful to the hon. Gentleman for giving way again. Members on both sides of the House

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know how important it is for manufacturing industry in particular to invest. The fact is that with interest rates half what they were under the Conservatives, companies are finding it much easier to find the capital to invest now than they did then.

Mr. Lidington: The hon. Gentleman needs to listen to what businesses have been saying in the past week about the Budget. They have been scathing—[Interruption.] I hear the hon. Member for Bradford, North (Mr. Rooney) shout, "Whingeing." That will be a very interesting indicator to business and business organisations of the true attitude towards them of too many Labour Members.

What is shocking about the Government's approach is that they appear to have made no assessment of the effect of the increase in contributions upon jobs. I have read the compliance cost assessment that the Inland Revenue published today in respect of the Bill, which has yet to be published. I was disappointed that the compliance cost assessment made no attempt to analyse the impact of a higher rate of employers' contributions on jobs. The rise in employers' contributions is nothing other than a direct tax on jobs.

Mr. Webb: As for whether employers' national insurance is a tax on jobs, the hon. Gentleman will be aware that there was a ceiling on employees' but not employers' contributions, but that it was abolished in 1985. I will leave him to recall who did that. Does he think that that was a mistake and that it was a tax on jobs?

Mr. Lidington: The record shows that if all the changes to basic rate income tax and national insurance during the 18 years of Conservative government are taken together, the marginal tax rate was still significantly lower when we left office than it was in 1978 to 1979. I wish that Ministers would understand that as the director general of the CBI said recently:

"It might just be the straw that breaks the camel's back in a boardroom decision on whether to get rid of people."

Oxford Economic Forecasting, an independent body, reportedly estimates a potential cut in jobs growth of up to 100,000 over the next three years, depending on how great a cut in annual pay increases workers are willing to accept. The Government may have a more optimistic assessment of the impact on jobs of this increase in contributions than does Oxford Economic Forecasting. They owe it to the House, to business and to the wider public to make a clear statement and to place their analysis in the public domain so that their assumptions and figures can be judged against those made available in estimates by outside organisations. However, I fear that no such assessment has been carried out, for when asked by the Select Committee whether he had carried out any impact assessment of the increase in employer national insurance contributions, the Chancellor replied, quite simply, no.

We are being asked to vote through a motion without any assessment having been made of its impact on employment. This comes from the same Chancellor and Treasury team who two years ago claimed that the lower national insurance contributions that accompanied the climate change levy

"will act to promote employment opportunities."

We have a Government who think that lower national insurance contributions help to create jobs, but who refuse to acknowledge the damaging effect on jobs of higher

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national insurance contributions. Nor have they analysed the additional problems that these tax increases will cause to the very public services that Ministers say they want to help.

The Local Government Association reckons that the cost to local government of the rise in employers' contributions will be £300 million a year. That is equivalent to an increase of about £17 in the average band D council tax.

The national health service faces an increase in its payroll tax of about £250 million. We have it on the authority of none other than the Prime Minister's official spokesman that the total bill for the public sector is expected to be about £1.2 billion.

What about individual public service workers? Nurses, police officers, teachers and firefighters will all get hit, too. The place worst hit will be London, where the cost of living is higher and average wages, too, are higher. This tax rise might have been designed to clobber Londoners.

What will happen to those public servants? An operational fire station officer on £30,600 a year will pay about £289 more a year in national insurance. A police sergeant earning £33,400 will pay about £308 more a year in his national insurance contributions. I cannot see how that will do anything other than worsen the already desperate problems in recruitment and retention of key public service workers in London and elsewhere in the south-east of England.

All those workers, and many like them in both the public and private sectors, have been let down by the Government. Everyone relying on public services has been let down, too. The Labour party has no answers on how to improve the national health service. The Budget was a final and desperate throw of the dice. Business, taxpayers and, above all, the patients who actually use our health service will pay the price of the closed minds of the Labour party and Labour Ministers.

A Government who have talked long about enterprise have introduced a measure that is damaging to enterprise. A Government who said that there would be no tax rises are bringing in tax rises. A Government who promised no more money unless there was reform in the public services are now promising money but have failed to deliver the reforms. It is time to hold the Government to their word. That is why we shall vote against the motion.

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