Pregnant women and “vulnerable” workers could be hit by a “stealth tax ” when leaving employment, MPs have been warned.
Shadow Treasury minister Peter Dowd said new national insurance measures could end up disproportionately affecting the most “vulnerable” people in the workforce.
He said some workers, including pregnant women voluntarily leaving the workforce, older people and those facing redundancy, would be disproportionately hit by a “stealth tax” under changes in the National Insurance Contributions (Termination Awards and Sporting Testimonials) Bill.
The Bill, which covers termination awards paid to departing employees, aims to align the way the payments are charged national insurance contributions (NICs) with the way they are subject to income tax.
It also aims to simplify the way sportsmen and women pay tax on testimonial matches.
Speaking in the House of Commons today, Mr Dowd said: “The facts indicate that women are most badly affected by austerity, and all this does is overlay that, ups the ante even further.
“In effect, it is a stealth tax. That’s what it amounts to. A stealth tax with no evidence base whatsoever to support it other than the Government just wanting somehow to get more and more cash in because of their failed economic policies.”
Tory MP James Cartlidge (South Suffolk) denied the Bill is a “stealth tax”, saying the Government has been up-front about the proposals.
He said: “The definition of stealth tax is surely one that is stealthy, i.e. is not immediately visible and has to be found in the small print.
“This is on the front of a Bill, this is the name of the Bill. I don’t think this could conceivably be described as a stealth tax. We’ve been very open about this and it is on the front of the Bill.”
Mr Dowd said: “The Bill before this House is yet another desperate attempt by the Government to shift tax burden from the well-off to workers, and I think that is quite simply the case.
“Rather than cracking down on tax avoidance, evidence-based tax avoidance, and ensuring that large corporations pay their fair share, ministers are yet again introducing measures in this Bill designed to raise additional revenue for the exchequer from the termination payments of workers.”
Mr Dowd said it is an “indirect form of taxation” in the form of a new employer national insurance charge.
He said this would “incentivise employers to cut wages, reduce non-statutory termination pay”, and would “leave some of the most vulnerable in the workforce” in a worse position as they “face the distress” of losing their job.
Treasury minister Robert Jenrick hit back, saying: “The key finding of the assessment we’ve done was in fact that it will disproportionately affect men rather than women.
“This is of course due to the fact that, unfortunately, in the present labour market, those who are higher earners are disproportionately male, so I don’t think that there’s any evidence to suggest that this measure will disproportionately affect women or indeed pregnant women.”
The Bill received a third reading by 270 votes to 207, majority 63. It will undergo further scrutiny in the Lords at a later date.