Steve
Webb: I did not really want to detain the Committee and I
apologise for doing so, but the Minister said two things, neither of
which I quite understand. He said that 300,000 employees would pay
more. I can see that there might be 300,000 people in that band, but
presumably everybody else above that band would pay more as well. There
have got to be more than 300,000 irate taxpayers, so I do not quite
understand that point.
My other
point concerns what the Minister said about the overall positive
effect. Surely, if NICs are going up by £480, what income tax
cut is greater than £480 and leaves a net positive effect? The
allowance rises by £120, so how does that become positive
overall?
Mr.
Timms: I am talking about the number of people in the band
who, for that particular band, will be paying at the rate of 11 per
cent. rather than the 1 per cent. additional rate that would have been
paid on that part of their income. That number is 300,000.
Of course,
however, as well as the allowance change that the hon. Gentleman
referred to, there is the reduction in the basic rate of tax, which
makes a big impact here as well. So, if one looks at the whole package,
it is, as I say, a gain for people rather than a
loss. For
those who are self-employed, the equivalent number of people paying
more national insurance, because of this change in the band that we are
talking about, is 20,000. Again, however, the overall impact is
positive.
What is the
cost of collection for class 2 contributions? We do not have a separate
figure for collecting this particular part of the national insurance
sums. I can say to the hon. Gentleman that 60 per cent. of those who
pay class 2 contributions pay by direct debit. The remainder pay by
quarterly bill. At the time of the pre-Budget report, we announced
measures to streamline corrections further for those who are not yet
paying by direct debit.
The hon.
Gentleman asked me what I thought was quite a complicated question
about the time that it will take to get to a flat-rate state second
pension. I think that it is the upper accruals point that is the limit
for state second pension entitlement rather than the upper earnings
limit. The upper accruals point is fixed at £770 for 2009-10. So
I do not think that there will be the effect that he was concerned
about. If he would like to pursue the matter further, he can take the
matter up with my right hon. Friend the Secretary of State for Work and
Pensions, who I am sure will be able to give him an even more cogent
answer than the one that I have just provided.
The hon.
Gentleman makes a perfectly fair point about the increase in class 3
contributions. He also supported the change that we have made here and
he is right to do so. It was made absolutely clear right from the start
that the way we would fund the greater availability of voluntary class
3 contributions was through an increase in the rate. Indeed, my noble
Friend Lord McKenzie of Luton said in the other place when this matter
was being
debated: “The
Government usually announce the national insurance rate at the
Pre-Budget Report, and they intend to increase the price of class 3
NICs to ensure that the overall package is cost
neutral.”—[Official Report, House of Lords, 29
October 2008; Vol. 704, c.
1589.] So that
was very clear right from the
beginning. Of
course, payment of class 3 national insurance contributions is
voluntary. People will need to make a decision for themselves about
whether or not paying for
additional years will be of overall benefit to them, taking into account
their circumstances at the time. About 300,000 people pay class 3 NICs
every year and the hon. Gentleman is perfectly right to say that people
will need to consider quite carefully whether it is the right thing to
do, just as they have needed to consider that quite carefully in the
past, albeit the number of people taking advantage of this now may well
be greater and the sums of money, as he pointed out, will certainly be
greater in the future. He is right; this could be quite a subtle
decision to make. I am certain that my right hon. Friend the Secretary
of State for Work and Pensions and the Pension Service will do all they
can to ensure that people have the information they need to make a
sound
decision. HMRC,
for which I am responsible, together with DWP, produces advice on class
3 contributions, including on the interaction with pension credit. I
hope that those who ring the Pension Service for advice about this in
the months ahead will get a rather more helpful response than the one
the hon. Gentleman described. HMRC is currently working with DWP on
material to advertise the changes in time to ensure people have the
information that they need.
The hon.
Gentleman also asked whether people can claim money back, if they
change their mind. The answer generally is no. The voluntary
contributions can only be repaid if the money was taken in error. He is
right, therefore, that people do need to make a well considered
decision before buying the additional contributions. I am grateful for
the Committee’s support and commend these provisions to the
Committee. Question
put and agreed to.
Resolved, That
the Committee has considered the draft Social Security (Contributions)
(Re-rating) Order
2009. Resolved, That
the Committee has considered the draft Social Security
(Contributions) (Amendment No. 2) Regulations
2009.—(Mr.
Timms.) 3.31
pm Committee
rose at twenty-nine minutes to Four
o’clock.
| 
