Social Security (Up-rating of Benefits) Bill — House of Lords, 2021-11-02
Topic: Macroeconomics
Prem Sikka (Labour, Centre-left): My Lords, if I may say so, I am a little surprised. I did say "Content" when the question was put on the previous amendment; it may not have been loud enough for some, but the people watching out there will no doubt form their own opinion on why a vote was not allowed I turn to my amendment to Clause 2. It requires that suspension of the triple lock not become effective until the Government present a report to Parliament showing its effects on the National Insurance Fund account By a happy coincidence, the Minister wrote to me on 25 October in a joint letter, which was also copied to a number of other Members of your Lordships’ House. The background is that, during the Second Reading of the Bill on 13 October 2021, I stated that the most recent audited accounts of the National Insurance Fund, for the year to 31 March 2020, showed a surplus of £37 billion, and said: "That is more than enough to meet the triple lock obligation of £5 billion." Eventually, the Minister replied: "This is a pretty challenging question, and I do not know. I will go away and find out, write to the noble Lord and place a copy in the Library."—[Official Report, 13/10/21; cols 1869, 1888.] The subsequent letter from the Minister seems to deny that there is a surplus of £37 billion, or that, if there is, it is not available to fund the triple lock It would be helpful for me to refer to the appropriate parts of the letter, so that I can challenge and debunk the claims being made. First, the Minister said: "The National Insurance Fund (NIF) part-funds the NHS as well as paying for contributory State Pensions and contribution-based benefits. The NIF operates on a multi-year basis and balances expected contributory pensions and benefits spending with forecast National Insurance income. The NIF is currently forecast to have an annual deficit in 2022/23." She continued: "There is no surplus in the Fund that can simply be drawn upon. The Government Actuary’s Department recommends a surplus is kept in the NIF to cover day to day variations in expenditure. The surplus is lent to the Government while that happens—it cannot simply be spent again. When the fund runs low, the Treasury injects new money into it in order to ensure that the State Pension and other benefits are still paid. When the Fund is in surplus as it currently is, the surplus is invested in order to help pay down the national debt" First, let me confirm that I agree with the Minister when she said that: "The National Insurance Fund (NIF) part-funds the NHS as well as paying for contributory State Pensions and contribution-based benefits." That said, the National Insurance Fund has a different accounting basis. Page 14 of the fund’s 2020 accounts states: "An allocation for the NHS is paid over by HMRC before the contributions are paid into the NIF and therefore the NICs are shown net of the NHS element" That does not support what the Minister said. Page 16 of the same accounts tells us: "The NHS allocation is paid over by HMRC to the NHS before any contributions are paid into the NIF and so the figures shown are net of this NHS allocation. The NHS allocation was £26.5 billion in 2019 to 2020 (£25.4 billion in 2018 to 2019) and forms part of the total NHS funding".