Marcus Fysh is the Conservative Member of Parliament for Yeovil.
The Government was elected with a mandate to take difficult decisions, particularly to reduce £12 billion in welfare. This is to protect our children and grandchildren from spiralling debt, to give ourselves a safety margin against future financial storms, and to ensure a platform for the financing of high quality public services on which we depend.
As an MP in the party of government, I am focused on working behind the scenes to influence government policy. I know that we are constantly thinking again about what we are doing, and what else we can do, to enhance people’s lives, by enhancing their prospects. It is a team approach, rather than a selfish one. Sometimes we make self-sacrifices, in the interest of the team, and so it is in the modern compact of society.
In further discussion with George Osborne this week, following exchanges which have been in process now for many months, I have been pressing for a change to National Insurance to help working people, in particular those on lower incomes. It is time to look at National Insurance because it does not in reality act as an insurance scheme, contrary to general understanding.
Insurance businesses work by taking premiums from people and investing them over long periods, usually in dividend-paying and other shares that grow in value substantially over time, to generate returns that are then available to those who need to claim on the scheme. Unfortunately our current National Insurance contributions are not invested this same way. They are spent, year-in, year-out, on the current claims of those using the NHS and state pension, or lent out to other government departments for their spending.
Reform of this system could be added to the positive package of measures announced in the Summer Budget.
We need to move away from the low wage, high welfare economy we inherited from Gordon Brown. Bringing in the Living Wage, raising the personal tax allowance and positive employment conditions mean big pay rises are now on the way, and more job choice for millions of people. Free and expanded childcare for three- and four-year-olds, free school meals, keeping mortgage rates low, Help-to-Buy schemes, and frozen fuel duties and council tax also help with many people’s personal budgets.
We should add major savings reform, by reforming National Insurance so that within it a real, low cost, defined contribution investment scheme is created, which people can use to supplement their entitlements under the State Pension system itself, and to make available under certain circumstances ahead of retirement age.
Credits could be offered to the lowest paid even if they don’t meet the threshold for payment of traditional National Insurance, to kick off their contributions and get used to saving, and these could be substantial. The scheme could also be available to others who wanted to make a contribution from other parts of the income scale, alongside or instead of the more fiddly ISA system.
I believe this should be accompanied by tapering the threshold for payment of traditional National Insurance contributions and tapering the rate, to make the marginal incentives to work more efficient, at the same time as letting people keep more of their earnings.
This can be paid for by tapers on the higher limit and rate of National Insurance obligations, and entitlements to State Pension, for those on higher incomes. It is not right in my view that retirees with a retired income of £65,000 and above, for example, should get exactly the same level of state pension as those with very little, all other things being equal.
This approach is consistent with the Conservative manifesto pledge to protect winter fuel allowances and bus passes for pensioners, and the triple lock on the rate of pension payments.
That’s the context of the current discussion of tax credits, in which I am keen to find sustainable ways to protect and give opportunities to the most vulnerable.