Social Security (Contributions) (Amendment) Regulations 2010

My Lords, I thank the Minister for introducing these regulations, which are also one of the highlights of the Treasury year. Social security contributions, otherwise known as national insurance, are a tax in all but name. They go into a rather arcane National Insurance Fund, but this is notional. The money is not held in a fund and the excess of receipts over payments each year funds the Government’s expenditure. The effect of this order is that there will be an estimated surplus of receipts over expenditure of £1.4 billion. That is not a large sum in the context of borrowing £185 billion, but I imagine that every little bit helps. It should be noted that one of the side effects of these regulations is that the Government will benefit from a £32 million decrease in payments for contracted-out rebates. This, too, is not a large sum, but its impact is on employers with defined benefit schemes and it is yet another small nail in the coffin for those schemes. I have lost count of how many adverse changes, starting with the ACT raid in 1997, the Government have introduced to pension schemes. The latest changes to the tax effect of contributions for the higher paid will simply deprive defined benefit schemes of their last corporate supporters. It has seemed like a 13-year war on pensions in which the casualties are private sector employees, few of whom now have access to a defined benefit scheme when they change jobs or enter the workforce. Increasing numbers of defined benefit schemes are also now being closed to future accrual. When the history of this Government is written, high on the list of their dubious achievements will be the decimation of defined benefit pensions for employees in the private sector, while protecting at taxpayers’ expense public sector pensions. These regulations for 2010-11 are a side show compared with next year’s. Whether or not the thresholds and limits are tinkered with, if this Government are in power this time next year they will increase the employer and employee rates by 1 per cent. This was announced in two stages of 0.5 per cent in each of the 2008 and 2009 Pre-Budget Reports. This will be nothing more than a tax on jobs, as all employer groups have protested. It will also be seen as a tax hike by employees. If we are elected to form the next Government, we have made it clear that we will try our hardest to manage the public finances so that at least the second 0.5 per cent can be avoided. We believe that economic recovery must be built on job creation in the private sector. The Government seem not to understand that. We do not object to these regulations but we have the very greatest objections to the future direction of national insurance on which the Government plan to embark.