National Insurance Contributions (Secondary Class 1 Contributions) Bill
Tuesday 3rd December 2024
(1 month ago)
Commons ChamberRead Full debate National Insurance Contributions (Secondary Class 1 Contributions) Bill 2024-26 Read Hansard Text Watch Debate Read Debate Ministerial Extracts
18:40 - The House divided: - Ayes: 186 / Noes: 330 - Question accordingly negatived.
18:54 - The House divided: - Ayes: 332 / Noes: 189 - Question accordingly agreed to.
Madam Deputy Speaker (Judith Cummins)
The reasoned amendment in the name of Mel Stride has been selected.
The Exchequer Secretary to the Treasury (James Murray)
I beg to move, That the Bill be now read a Second time.
In her Budget statement on 30 October, the Chancellor set out the difficult decisions that we as a Government have been prepared to make on welfare, spending and tax. Those decisions were not just difficult but necessary, given the fiscal irresponsibility and economic mismanagement that had become hallmarks of the previous Government. We inherited a mess, so those decisions were needed to fix the public finances, fund the NHS and other public services and deliver economic stability. We have been determined to take those decisions while protecting working people. That is why our Budget made no changes to income tax, the rate of VAT, or the amount of national insurance that working people pay. As a result of our Budget, people will not see a penny more tax on their payslips.
Dave Doogan (Angus and Perthshire Glens) (SNP)
Is the Minister seriously suggesting that, with the best brains in the Treasury on hand, he does not understand that it is a moot point whether someone has a higher national insurance contribution in their payslip, or whether their wages are suppressed and the job that they were going for is not there anymore, because the employer cannot afford to increase their payroll due to this national insurance increase?
James Murray
We recognise that we are asking businesses to contribute more, and that this will have impacts, but it will be up to individual businesses to decide how to respond to these changes. The one thing that we know for certain is that if we had chosen a different path—if we had followed the previous Government and increased income tax or national insurance—that would have led to a tax on people’s payslips. It would have led to the amount of money in people’s pockets going down, which would have broken our manifesto promise.
Imran Hussain (Bradford East) (Ind)
I apologise for intervening so early in the debate, but a number of my small businesses, charities and voluntary sector organisations have raised concerns and asked for clarity. Can the Minister outline what safety nets and other measures for support are available to small businesses, charities and voluntary sector organisations?
James Murray
I thank my hon. Friend for his question. I will get to the detail of the Bill in a moment, but I can briefly reassure him that the Bill doubles the employment allowance, which will go from £5,000 to £10,500. That means that small businesses and charities are protected; they can employ up to four people on the national living wage without paying a penny in national insurance. In the context of the tough decisions that we had to take in this Bill, that is important protection for small businesses and charities.
Wendy Morton (Aldridge-Brownhills) (Con)
Does the hon. Gentleman not accept that in the UK, the definition of a small business is one that employs fewer than 50 employees and has an annual turnover of less than £10 million? Thanks to his changes and political choices, thousands of small businesses across the country will face the decision of whether to keep staff on or lay them off.
James Murray
We know that the tough decision that we have had to take will have impacts—we have been up front with people about that—but we also know that over half of all employers will pay no more or less national insurance than they did before. We acknowledge that this decision will have an impact, but we believe that it is the right decision. I will explain why that is.
Ms Stella Creasy (Walthamstow) (Lab/Co-op)
It is clear that the Government are working hard to get this right, but may I press the Minister on the point about the employment allowance? What he says about doubling the threshold is welcome, particularly when it comes to childcare provision, and we all want an expansion of childcare places. He will be aware that the employment allowance doubling that he is talking about will apply to state-provided childcare places, but not to private and co-operative nurseries. Some 85% of places are in private and co-operative nurseries, so will he look at extending the employment allowance that he is giving to state nurseries to private and co-operative nurseries, so we can support the expansion of childcare?
James Murray
I thank my hon. Friend for her question, but eligibility for the employment allowance is not changing. It is the same as it was before, and we are maintaining that provision. On protecting small businesses and charities, the crucial thing for us is the doubling of the employment allowance. In individual cases, I would recommend that organisations get the right advice, but the eligibility criteria for the employment allowance will not change as a result of the Bill.
Sammy Wilson
Is not the fact of the matter, despite what the Chancellor has said, that businesses have been abandoned? There is no safety net for them. To use the words of the Chancellor,
“What we have done with the increase in employer national insurance is leave it to the business to work out”.
Businesses are bearing the brunt of this, and it is really too bad. As far as the Chancellor is concerned, they will have to grin and bear it.
James Murray
I am sorry, but there are tough decisions that we have to take, and there are difficult decisions that businesses will have to take. The only people to have abandoned businesses were the Conservatives when they were in government. They abandoned any pretence of economic stability, fiscal responsibility, and supporting businesses to invest and grow. That is the difference between the Opposition and the Government.
Several hon. Members rose—
James Murray
I will make some progress, and take more interventions shortly. For me, keeping the promises on income tax, employee national insurance and VAT is crucial, but making those decisions and needing to get our country back on track has meant that other tough decisions in the tax system have been necessary. That is why, at the Budget, we took the decision to increase national insurance contributions from employers, while, as I mentioned to my hon. Friend the Member for Bradford East (Imran Hussain), increasing protections for small businesses and charities. It is those measures that the Bill seeks to introduce.
I will set out the detail of how the Bill seeks to achieve that. First, it increases the main rate of employer secondary class 1 national insurance contributions from 13.8% to 15%. It decreases the secondary threshold for employers—the threshold above which employers begin to pay employer national insurance contributions on their employees’ salary—from £9,100 to £5,000. At the same time, as I have mentioned to hon. Members, the Bill increases the protection for small businesses by more than doubling the employment allowance from £5,000 to £10,500. That increase in the employment allowance, alongside the removal of the £100,000 eligibility threshold, means that all eligible businesses will be able to employ four full-time workers on the national living wage without paying any national insurance contributions.
Mr Angus MacDonald (Inverness, Skye and West Ross-shire) (LD)
Is the Minister aware of the complete disaster this will cause for Scottish hospitality businesses? We do not have business rates relief, as businesses do in England Wales. We have a very large number of young people in the hospitality sector. For example, for someone working part-time for 25 hours a week on the minimum wage, their salary is £15,912, and the national insurance has just gone up by 74%. This is wiping out the hospitality industry in Scotland.
James Murray
I recognise that the decision we are taking will have impacts, and in some cases it will mean that employers have to take difficult decisions. We are, however, reforming business rates to help retail, hospitality and leisure on the high street, so I would suggest that the hon. Member speaks to the Scottish Government about their doing something to support businesses in the same way; I cannot speak on their behalf.
Taken together, the measures, should the Bill pass, will mean that 865,000 employers pay no national insurance at all next year, with over 1 million—more than a half of all employers—paying the same or less than they did previously. I have been clear, however, that I recognise that there will be impacts on some employers as a result of the changes. While many small businesses and charities will be protected through the employment allowance increase, others will have to contribute more.
Dr Luke Evans (Hinckley and Bosworth) (Con)
The Minister talks about protecting businesses or charities, but hospices, for example, employ many more than four people. I cannot think of one hospice that does not employ more than four people. How will they be protected?
James Murray
I thank the hon. Gentleman for his question. That will depend on the exact set-up of the hospice, but typically hospices are independent charities, so they will be able to use the employment allowance against their national insurance contributions liability. They will also be able to access the other tax reliefs in the system that benefit charities, such as business tax relief and gift aid relief, which we have maintained in the Budget. We have taken the decision to maintain—
James Murray
Members will have to wait a second so that I can answer this question.
We will maintain the charitable reliefs in the system, such as business tax relief and gift aid relief. However, it is important to recognise that the decisions we have taken overall mean that over half of all employers will not pay any more or will pay the same national insurance as they did before. Their national insurance bill will be the same or less than it would have been otherwise.
Clive Lewis
Many of us in this House appreciate the work that my hon. Friend’s team are doing to unpick the mess we inherited, but one thing that has been pointed out is the need for better targeting. I have been talking to social enterprises and small businesses in my constituency. Social enterprises often do things that charities may do, but are considered as small businesses, although they do not get the same tax reliefs as charities. They also provide critical services in my constituency and in constituencies around the country. Is there not a better way to target micro-businesses and social enterprises to enable them to better manage what is quite a tough Budget for some of them?
James Murray
We recognise that tough decisions had to be taken throughout this Budget, but that is exactly why we have balanced the difficult decisions on the rate of national insurance and the decrease in the secondary threshold with the increase of the employment allowance, which helps small businesses and charities. There is no way that we can get through the measures announced in the Budget, and say that there will not be any difficult decisions for organisations or businesses to have to take. We are being up front about this. It is a tough decision for the Government to have to take, and it will mean that businesses must take difficult decisions as well. However, it is essential that we do this to fix the public finances, get our public services back on their feet and restore the economic stability that was squandered by the Conservative party.
Christine Jardine (Edinburgh West) (LD)
How does it help morale and positivity among small businesses, which will be vital to economic growth, if some of them are going to see their salary bills double? An employer in my constituency—not quite a small business, but a medium-sized business—is facing crippling increases in the salary bill. How will it help growth if those companies go to the wall and we lose jobs?
James Murray
The hon. Member focuses on the national insurance contributions changes, which is rightly the focus of this Bill, but I urge her to look at that in the context of everything else the Government are doing, not least the employment allowance doubling that I have mentioned. There is also our decision to freeze the small business rates multiplier as it applies in England, our decision to introduce permanently lower retail hospitality and leisure rates for businesses on the high street in 2026-27, and the decision in our corporation tax road map to maintain the small profits rate and other allowances from which small businesses can benefit. I urge her to understand that what we are doing on national insurance is taking a tough decision to fix the public finances, while at the same time providing the stability that businesses need to invest and grow, and that is the way to move our country forward.
Tom Hayes (Bournemouth East) (Lab)
Does the Minister agree that many people who want to work have struggled to do so because of poor health? They are unable to get access to a doctor, a hospital appointment or a dentist appointment—to a whole range of appointments—and as a consequence they have been forced out of work when they want to be in work, earn a living and get dignity from work. With the changes that the Government are bringing forward, we will see investment in our NHS and our public services that will help people to get the appointments they need to return to work. Does he agree that this investment is much needed and a good thing for our economy?
James Murray
I thank my hon. Friend for his intervention, and he is right. He points out why we are taking these difficult decisions, and why it is so important to fund public services and fix the public finances. Healthy businesses need a healthy NHS, healthy businesses need a healthy workforce and healthy businesses need public services to be functioning so that they can maintain their investment and grow the economy. I am sure that my hon. Friend, and other Members, will have seen the Government’s “Get Britain Working” White Paper, which sets out the barriers that ill health puts in the way of people being economically active. We are determined to challenge that and to help people who are able to get back into, and stay in, work. That will be a mission of this Government.
Several hon. Members rose—
James Murray
I will make a bit of progress; I have been generous in giving way.
The choice that we have taken is difficult; it is not one that we have taken lightly. As I have fully acknowledged in the Chamber, the impacts of this measure will be felt beyond businesses, as the Office for Budget Responsibility has acknowledged. Let me put the decision in context and say what we could have done instead. We could have reversed the previous Government’s cuts to employee national insurance. Those cuts were simply not honest because they were based on a forecast that the OBR said would have been “materially different” if the true extent of the last Government’s cover-up had been known. We made a commitment to not increase the taxes that working people pay, and we have delivered on that promise and made a different choice.
Sir Desmond Swayne
The manifesto said that Labour would not increase rates of national insurance contributions. The Minister is perfectly entitled to use the argument, “We never realised that it was this bad, so we have had to change what we said we would do”, but to pretend that Labour has not resiled on its manifesto promise is pure sophistry.
James Murray
In fact, it is both things: it is true that we have kept to our manifesto pledge of protecting working people by not increasing income tax, the national insurance that working people pay or VAT; at the same time, the situation is far worse than we thought it would be when we won the general election, with the £22 billion black hole and the fact that the OBR said that its forecast would have been “materially different” in March, had it known the true extent of the previous Government’s cover-up. Those are facts that the OBR put out there and from which we cannot hide.
Stuart Anderson (South Shropshire) (Con)
I believe the Minister is misleading the House—[Interruption.] Inadvertently. The OBR did not say the words “cover-up” so will he correct the record?
James Murray
I said that the OBR said that its forecast would have been “materially different” had it known what the previous Government did not share with it at the time of its March forecast. I have been absolutely clear, and I suggest that the hon. Gentleman reads the OBR forecast as it might be illuminating—
James Murray
No, I will not give way again. It might be illuminating for him to read the OBR forecast and understand what it says about the previous Government’s relationship with it, how much information was not shared, and how that impacted on its forecast going into the election.
Several hon. Members rose—
James Murray
I will make some progress as I want to explain why we are taking this tough decision, and why it is so important that we take this decision now, as set out by the Chancellor in the Budget. Revenue raised by measures in the Bill will play a critical role in enabling the Government to fix the public finances, restore economic stability in a fiscally responsible way, and get the NHS back on its feet.
James Murray
I will make some progress.
We know how crucial economic stability is for businesses taking investment decisions, and as I said to my hon. Friend the Member for Bournemouth East (Tom Hayes), we know how crucial it is for businesses to have a healthy NHS. As a result of measures in the Bill, as well as wider measures announced in the Budget, the NHS will receive an extra £22.6 billion increase in resource spending to deliver 40,000 extra elective appointments a week. That is urgently needed to get the NHS back on its feet. The increase in funding will be done within our tough fiscal rules—new rules that will bring an end to borrowing for day-to-day spending, something that the previous Government never achieved or even aimed for.
Wendy Morton
The hon. Gentleman refers to the NHS, and I believe the NHS and hospital trusts will receive an exemption to the increase in national insurance contributions. Given his clear passion for the NHS, will he look again at the impact that his rise in national insurance contributions will have on air ambulances? Under the current proposals air ambulances, like hospices, will face a huge increase in their costs.
James Murray
The way that we are approaching the reimbursement of employer national insurance costs for Departments and public sector employees is similar to what the previous Government did with the health and social care levy. It means that money goes to Departments, local governments, and public sector employees directly to help compensate for the increase in employer national insurance. For other people who are paying employer national insurance, if they have a contract with the public sector they are treated as contractors or private organisations. If they have concerns about their cost base they should talk to their sponsoring Department, the NHS, or whoever they have a contract with, so that those considerations can be taken into account in the round. It was the same for adult social care, and it is the same for other organisations that are funded through the public sector.
Munira Wilson (Twickenham) (LD)
Let me pick up on the point about local authorities and public services. I pressed the Minister on that this morning during Treasury questions, and I fear he did not give me a clear answer. Richmond council, my local authority, delivers children’s services through an arm’s length body called Achieving for Children. As a result of these measures, with all the employees who deliver services for vulnerable children in Richmond upon Thames, it faces a bill of £588,000 in employer’s national insurance. Will the Minister assure local authorities up and down the country that operate similar models for delivering services that these arm’s length bodies will be exempt from the national insurance rise? Otherwise he will be damaging the very public services that he claims to be investing in today.
James Murray
We are protecting public services by providing relief directly to Departments and other public sector employers. Third parties, private organisations, or those who have a contract with the public sector are dealt with differently and they should approach their local council, or whoever is sponsoring them, to talk about their funding arrangements. I might draw the hon. Lady’s attention to the fact that local government financing is increasing by 3.2% next year as a result of decisions that this Government have taken. I expect she would probably support that increase in funding, but sadly she does not have the guts to support what we need to do to raise the money in the first place.
Damian Hinds (East Hampshire) (Con)
On the £22.6 billion for the NHS, or the figure just mentioned for local government, have the Minister or his officials calculated what the numbers would be, net of the national insurance cost? Those bodies— the national health service and local government—carry on with exactly the same services as before, but now face extra bills for national insurance contributions. Have they done the maths?
James Murray
In the statistics put out by the Government at the time of the Budget, a specific amount is earmarked directly for Departments and public sector employers. That amount is effectively netted off against the amount that will be available for net spending in public services. For other organisations, such as third parties that contract with the NHS, there should be a conversation between the person under the contract and the contracting organisation to consider pressures in the round. As I said, this is in the context of, for example, the local government budget going up by 3.2% next year, and a huge amount of extra investment in the NHS, with £600 million going to local authorities in England to help deal with social care pressures. That is the context of the decisions that we had to take and pressures in the round.
Christine Jardine
I thank the Minister for giving way again. What about GP surgeries?
James Murray
GP funding for 2025-26 will be confirmed by the Department for Health and Social Care in the usual way as part of the GP contracting process, and it will consider all the pressures on GPs in the round.
I will make some progress, because the points we have made are clear. It is important for me to look also at what the Opposition might do, given the important vote today on these tax changes, which are necessary to raise funding for the NHS and other public services. I would like to think that the Opposition might join us today, back our plans to provide extra funding for the NHS and support this Bill to help pay for it. It seems though, from an article in The Sunday Times in the name of the shadow Chancellor, the right hon. Member for Central Devon (Mel Stride), that that may not be the case. In that piece, he wrote that the Conservatives apparently
“want to provide further funding for the NHS.”
Sadly, they refuse to take the tough decisions to pay for it.
I note that in that article, the shadow Chancellor rehashed the discredited pledge from the recent Conservative manifesto to make £12 billion of welfare savings, which the Institute for Fiscal Studies politely described at the time as being “difficult in the extreme.” Perhaps he missed the admission from his predecessor, the right hon. Member for Godalming and Ash (Jeremy Hunt), during the election campaign that those welfare cuts were in fact not new, and the money had already been spent. Either way, it is hard to fathom why the new shadow Chancellor would rest his first intervention on a pledge from a manifesto that led to his party losing nearly 250 seats. It only serves to underscore the fact that the Conservatives are getting further and further away from being a credible Opposition by the day.
We recognise that the decision to increase employer’s national insurance will have impacts. Although measures in this Bill will help to protect small businesses and charities, other measures mean that larger businesses and organisations will have difficult decisions to take. Let me be clear, however: the Budget was a one-off and a once-in-a-generation event. The difficult decisions we took meant that we were able to wipe the slate clean of the previous Government’s fiscal irresponsibility and economic mismanagement. Public services now need to live within their means and the means we have set them for the rest of this Parliament. The Budget delivered stability and fiscal responsibility, meaning that our focus can now be resolutely on boosting investment and growing the economy. That fiscal responsibility is possible only when we take tough decisions. This Bill makes it clear that this Government will not shy away from tough decisions and that we will do what is right in the circumstances we face. I commend it to the House.
Richard Fuller (North Bedfordshire) (Con)
I beg to move,
That this House declines to give a Second Reading to the National Insurance Contributions (Secondary Class 1 Contributions) Bill because it breaks the manifesto commitment of the Labour Party not to increase National Insurance; and will lead to lower growth, lower wages for working people, fewer jobs and the closure of businesses.
Today we turn to the latest chapter in this Government’s book of economic incompetence, which is their choice to increase employers’ national insurance contributions—Labour’s job tax on workers across the UK. Today’s measures are the major reason that the public’s immediate reaction to the Budget was negative, with YouGov polling the day after the Budget showing that nearly twice as many people thought it would leave the UK worse off than thought it would be better off. When it came to judging each of the many measures in the Budget in turn, today’s proposal to increase national insurance was rated the second worst decision of all in the Budget, just behind hiking bus fares by 50%. Back in October, 47% of the public thought Labour’s job tax was the wrong thing to do, but as employers have spelled out the impact of Labour’s job tax, the public’s view has soured further. In polling last Monday, those saying that this measure is wrong have increased from 47% to 57%. The public know that the Labour Chancellor has got this choice wrong.
Dr Luke Evans
The shadow Minister is an astute man, and he has picked up on some of the indices of concern. One of those is the economic confidence index, which in October was -52. In November, it was -65. That is the second lowest figure on record since the pandemic in 2020. If we had an eminent economist running the Treasury, they would be able to see that this is a bad idea for businesses and the country.
Richard Fuller
Obviously it would be useful to have people with business experience in the Cabinet, if they are going to levy taxes on business. Sadly, the Government do not have that. My hon. Friend’s point about business confidence and the reaction from businesses goes to what the Minister was trying to say in his summing up about what the Conservative party would do. The way we raise more taxes is by enhancing business confidence, so that they invest, grow and make profits that can be taxed. This Budget has done precisely the opposite. Each and every day since the Budget, confidence in the financial competence of this Labour Government has been ebbing away. Less than one in four of the public now believe that this Government are handling the economy well.
Mark Ferguson (Gateshead Central and Whickham) (Lab)
The hon. Gentleman appears keen on polling. Can he talk us through the polling for Liz Truss and Kwasi Kwarteng’s Budget?
Richard Fuller
To be fair, my former colleague did not last quite as long as the lettuce, and the public made their judgment clear on that and many other issues at the general election. The hon. Gentleman’s point is fair, but it is not particularly relevant to the decisions he will be asked to vote on today. Hospices in his constituency will know how he votes. GPs in his constituency will know how he votes. Charities in his constituency will know how he votes. I will be interested to see whether he votes with his conscience or with the party line.
Less than one in four of the public now believe that the Government are handling the economy well. It is not just the public who have lost faith in the economic competence of His Majesty’s Treasury; it is the Prime Minister himself, who apparently on Thursday will ditch the ambition for the United Kingdom to be the fastest-growing economy in the G7, removing at a stroke one of the key planks of Labour’s economic plans. The Bill will add to that lack of faith in this Labour Government, because this measure to raise national insurance contributions directly contradicts Labour’s election promise not to increase taxes on working people.
In the election campaign, the Prime Minister, the Chancellor and the entire Labour Treasury team, including the Minister, repeated the phrase from their manifesto, which stated:
“Labour will not increase taxes on working people, which is why we will not increase National Insurance, the basic, higher, or additional rates of Income Tax, or VAT.”
Yet today, with the election behind them, increasing taxes on working people is exactly what Labour is proposing to do.
The shadow Minister is shaking his head.
The Economic Secretary to the Treasury (Tulip Siddiq)
You’re the shadow Minister.
Richard Fuller
I am terribly sorry—the Minister. He shakes his head and says that it is not true. Let me turn to one of his favourite independent economic groups, the Resolution Foundation, whose analyst James Smith said, “Even if it”—the employers national insurance change—
“doesn’t show up in pay packets from day one, it will eventually feed through to lower wages…This is definitely is a tax on working people, let’s be very clear about that.”
Jonathan Davies (Mid Derbyshire) (Lab)
It is a little wearisome to listen to the Opposition talk about taxes on working people. We have the highest income taxes since world war two because they did not increase the thresholds, and in 2011 VAT went up to 20%, which was a massive tax on working people. I would like to hear what the shadow Minister has to say about that.
Richard Fuller
The hon. Gentleman talks about the Conservative record. Shall I talk to him about our record on national insurance? In 2010, when Labour was last in office, it broke the economy and left a note saying that there was no money left. We did have to increase national insurance rates—but not by as much as is proposed today. Thereafter, we increased national insurance thresholds with inflation; these proposals do not do that. We introduced the employment allowance, which admittedly the Government are increasing. We then introduced national insurance reliefs for young workers. We increased national insurance income thresholds in 2022, 2023 and 2024. That is the Conservative record. We do not believe in the jobs tax: we do not think it helps growth, and we do not think that it will increase taxation.
Richard Fuller
I will make a bit more progress and then give way to my right hon. Friend.
If the Minister does not like the Resolution Foundation’s judgment on this tax, he should just listen to the Institute for Fiscal Studies, which said:
“Simple economic theory suggests that the incidence of employer NICs and employee NICs should be the same, at least in the long run. It is likely that the long-run incidence of both employer and employee NICs is predominantly on employees”.
The measures in the Bill represent by far the largest part of the tax grab in the October Budget. The Treasury Red Book assesses that these measures will raise £23.7 billion in the next financial year, rising to £25.7 billion, but the Minister knows that behavioural changes means that they will actually raise substantially less; the IFS estimates about £16 billion.
I note that in the Red Book there were three opportunities for this jobs tax to be referred to as “Delivering on our Promises”. There is:
“Delivering on our Promises—New Policy to Close the Tax Gap”,
“Delivering on our Promises—Collecting Tax That is Due”
and even the catch-all:
“Delivering on our Promises—Other Manifesto Tax Commitments”,
but the increase in national insurance contributions cannot be included in any of those, because Labour politicians hid their intentions from the British voters at the election.
Paul Waugh (Rochdale) (Lab/Co-op)
The hon. Gentleman refers to the history of the Tory party on national insurance. Can he tell us why he and his party voted for the health and social care levy, which put up national insurance for employees not so long ago?
Richard Fuller
That is a very odd question when the Minister himself has said that the objective today is to provide more money for the health service. I guess I will think about what the hon. Gentleman has asked.
Richard Fuller
I will be very happy to give way, but I will make some progress first.
If we take the Government at their word that their intention is to raise funds for public services, this measure is an inefficient way to do so. Under the provisions of the 1992 Acts on social security provision, only a proportion of the moneys raised by this form of taxation will be allocated to public services; the vast majority is essentially hypothecated to the national insurance fund. Will the Minister tell us what proportion of the moneys raised by the Bill will actually be allocated to the national health service? Will he also advise us of why the Chancellor chose this particular tax, which, uniquely, will burden the economy with far more in taxes levied than will actually end up going to support public services?
Employers large and small across the United Kingdom have been pleading with the Government to reverse this measure, letting them know about the impact it will have on jobs and on wages; the particularly harsh impact it will have on female workers and on young people starting out in their careers; the vulnerability of our hard-pressed hospitality businesses and high street retailers; or the pre-Christmas pleas of our charities, hospices and GPs about the way their contribution to public services has been completely ignored. Has the Minister been listening to the voices of people who actually have experience of running a business, creating jobs or delivering public services, who are telling him about the negative impact the Bill will have on jobs and pay, and even on their own viability, or has he been turning a deaf ear?
Dr Luke Evans
Is it not the biggest slap in the face for people listening to this that when Labour uses “working people”, it cannot define that term? Pub landlords and people working in charities are by definition working people—they are of working age and earn a living—and they will now be hit by this tax, which will have such a detrimental impact on their livelihoods. Is that not a disgrace?
Richard Fuller
I have been listening to questions from Members who believe that this is “not a tax on working people” asking for exemptions from it. When we hear that these taxes are being levied on hospices, charities, GPs and small businesses, we cannot help but believe that Labour thinks that people work only when they work for the Government. The truth of the matter is that working people work in many institutions across the country—in small businesses, large businesses and in the third sector—as well as for the Government. This Government are taxing working people.
Clive Lewis
I think sometimes, listening to the Opposition, it is as if that money goes into a complete black hole. Those billions are not just going to go into public services like health, education and social housing; we are also putting that money into people’s pockets—into the pockets of nurses, doctors, engineers and builders—who will then spend their money in those businesses. It is called the multiplier effect. That money will go back into our economy, rebuild our public services, which the Conservatives destroyed, and go into the pockets of people through the economy. What’s not to like?
Richard Fuller
The hon. Gentleman asks, “What’s not to like?”, but just a few minutes ago he was saying what he did not like in the Bill. He said he wanted exemptions that the Minister was not prepared to give him; I think his dispute is not with me, but with his hon. Friends on the Front Bench.
The British Retail Consortium—another section of the economy—wrote to the Chancellor detailing the costs of the measures to retailers: £0.57 billion from the rate increase and £1.76 billion for the reduction in the national insurance contributions threshold. It spelled out the consequences:
“For any retailer, large or small, it will not be possible to absorb such significant cost increases over such a short timetable. The effect will be to increase inflation, slow pay growth, cause shop closures, and reduce jobs, especially at the entry level. This will impact high streets and customers right across the country.
Ms Polly Billington (East Thanet) (Lab)
I would just like the hon. Gentleman to apologise for the fact that all the things he has just outlined are the impact of his Government’s kamikaze Budget in 2022.
Richard Fuller
Since the hon. Lady is reviewing history, she should look at the Bank of England review by Bernanke, commissioned under the last Government, which looked at the impact on interest rates in the UK compared with other countries and included that period. She will see that the real impact of those changes on interest rates was no different from any other year. The UK stayed in exactly the same place every year. There is a difference between facts and reality and what the Labour party thinks is history.
Richard Fuller
No, I am drawing my speech to a close, because plenty of people wish to speak.
UKHospitality is also concerned. It estimates that our pubs, clubs, hotels and restaurants will have to stump up £1 billion more because of the Bill. It points out that for a typical staff member aged 21 or over earning the national living wage and working 38 hours a week, the jobs tax will increase by 53.9%, from £1,863 to £2,869. Does the Minister honestly think that that will not mean job cuts in the hospitality sector?
The Government claim to have shielded the public sector from the jobs tax, but the reality is murkier. Many of our GPs will have to stump up more money, and our hospices and charities will have to find more money. As we approach the Christmas season, will the Minister give some hope to our charities, voluntary groups, GPs and hospices, and say that they, too, will be exempt from Labour’s jobs tax?
The Labour party in government is stumbling badly. I know from my own experience that no amount of resets will inspire confidence, and certainly not when a Prime Minister is forced into a reset within five months of taking office. The Labour party in government is also getting a reputation for a series of cruel policies motivated by socialism based on hate. The removal of winter fuel payments for the elderly was cruel. The family farm tax, penalising British farmers who have toiled in our fields for generations, was cruel. Today’s jobs tax, attacking businesses, charities, GPs, hospices and employment opportunities and growth is cruel, too. I urge all Members of this House to support our amendment.
Luke Murphy (Basingstoke) (Lab)
For too long, this country has suffered from irresponsible and short-sighted fiscal management from Conservatives, saddling working people with the bill for their broken promises, incompetence and chaotic approach to governing. They hiked taxes for working people to record rates and left behind a £22 billion black hole in the public finances. Then, to add insult to injury, the Conservatives spend their first few months in opposition washing their hands of 14 years of failure in power. That changed on 30 October when my right hon. Friend the Chancellor of the Exchequer gave a historic Budget, which led to this Bill. The Budget delivers the swift action needed to repair the immediate fiscal crisis and a long-term plan to repair our public finances, while also laying the foundations for a decade of national renewal.
We heard a lot from the shadow Minister, the hon. Member for North Bedfordshire (Richard Fuller), and no doubt we will hear much from Opposition Members, about the Bill. But really, the gist of their argument is that they want all the benefits of the Budget, but have no idea how to pay for it. Boris Johnson may no longer be the leader of the Conservative party, but his belief in cakeism lives on. On cake, they are pro having it and pro eating it.
The right hon. Member for Richmond and Northallerton (Rishi Sunak) attempted at first to wean the party off its cakeism addiction. Running in the first leadership context, he told his party not to believe in
“comforting fairytales that might make us feel better in the moment, but will leave our children worse off tomorrow”.
But under his leadership, the Conservatives once again succumbed to the fairytale of cakeism. That is why they lost the general election. The hon. Member for North Bedfordshire spoke of polls, but he will remember that they lost an election just a few months ago because they could no longer handle the challenges of the world as it is. They ducked the hard choices and, in opposition, they continue to duck them and to drift away from reality.
Back in the real world, let me remind the House what this Government are delivering, funded in large part by the Bill. They are delivering £25.6 billion in increased NHS funding, ensuring that our health service can meet rising demand and creating 40,000 more elective appointments every week. They are delivering more teachers, and investing £1 billion in special educational needs provision. They are investing billions in surgical hubs and diagnostic scanners. There is a further £1.5 billion to rebuild crumbling schools and ensure that every child learns in a safe environment. Those are investments that Conservative Members must surely support.
Mr Angus MacDonald
Does the hon. Gentleman not agree that the impact of this measure is hitting the most vulnerable businesses and the most vulnerable charities throughout the United Kingdom? Surely a much better way of raising the money—which I can understand is needed—would be to raise corporation tax, or to increase taxes on, for instance, social media or the very largest companies.
Luke Murphy
The Bill, and the Budget, protect the smallest businesses, as the Minister has already explained. It is disappointing to hear the hon. Member sharing the Conservative party’s cakeism. Opposition Members must surely support the investments that the Bill will deliver, but if they oppose the Bill, how do they propose to fund them? Turning up at the supermarket with a long shopping list but no means to pay does not work in real life, and it does not work in government either.
The Conservatives have clearly learnt nothing from their kamikaze mini-Budget of 2022. Perhaps they believe that cakeism has just not been tried properly. This Government, by contrast, have taken the tough but fair decisions to protect working people, invest in our NHS and rebuild our public services. For too long the burden of tax has fallen on working people, but under this Government, larger businesses and the richest will pay a little more in tax to help fund the NHS and other public services on which working people rely. Where the Conservatives would either cut public services or pick the pockets of working people, this Government are asking those with the broadest shoulders to pay a bit more to help repair our broken public services—broken over the last 14 years. This Bill will help to deliver on the priorities of my constituents in Basingstoke, who will be able to see a doctor when they need one, and schools will be able to deliver the best—
Pippa Heylings
Will the hon. Member reassure the GPs in my constituency, in Harston, Comberton, the Eversdens, Melbourn and Queen Edith’s, who have sought reassurances that the Government do not intend to threaten the viability of thousands of NHS general practices through these charges?
Luke Murphy
I am not sure that it is for me to give reassurances—it is probably for Ministers to do that—but what I can do is repeat what the Minister said earlier: the Government will bring forward the settlement for GPs in the usual way.
Dr Luke Evans
Part of the biggest problem that I have with the way this is being done, looking at the NHS as a whole, is that while at the front door of primary care the raising of national insurance contributions means that GPs do not want to recruit, at the back door social care is also being hit by the increase. It is all very well protecting the centre—the hospitals—but the biggest problem is system-wide, in that both the back door and the front door are jammed shut. How will the Bill resolve that? This is the practicality that the Labour party must explain to the health services, because they are asking the same question and it is going unanswered.
Luke Murphy
Both the back door and the front door of the NHS have been broken over the last 14 years, so we will take no lectures from the Conservatives about the state of the NHS or the impact of policies.
The protection of small business is also built into the Bill. The increase in the employment allowance to £10,500—as the Minister said—and the expansion to all employers mean that 250,000 employers will pay less national insurance, and that 820,000 employers will see no difference in their national insurance bills. That will ensure that these changes fall only on the businesses with the broadest shoulders. This Government continue to champion entrepreneurship and wealth creation, boosting public investment by more than £100 billion over this Parliament.
Monica Harding (Esher and Walton) (LD)
My constituency has a higher proportion of business owners, entrepreneurs, and high-growth enterprises and start-ups than many others. One of them wrote to me this week to say that they will cut their operations, and that the Budget has crashed any incentive or possibility for businesses to grow. Does the hon. Member agree that this Bill does not protect businesses or the workers they employ, and does not leave any hope for economic growth?
Luke Murphy
I take it that the hon. Lady must oppose the large investment in public services that the Government are proposing, and that she opposes the Government’s industrial strategy, which is one of the ways we will grow the economy. I remind Opposition Members that workers in small and large businesses depend on the NHS. As others have already said, many workers have continued to be out of work, which has a massive impact on our productivity. We should make no apologies for investing in our public services.
Munira Wilson
The hon. Gentleman keeps accusing those of us on the Liberal Democrat Benches of not supporting public sector investment. We have championed it, and we have said that the big multinationals—the big banks and the social media giants—should bear the brunt. Just yesterday, at the Small Business 100 reception here in Parliament, the owners of Shambles, a popular family-run restaurant in Teddington, told me that the impact of the Budget on them next year will cost £50,000 to £60,000. What are they doing? They are freezing all recruitment for the next few months. How will that deliver the growth that the Labour party is apparently desperate to achieve?
Luke Murphy
As I have already said, we are protecting small businesses through this Bill and we have an industrial strategy. We are delivering record levels of public investment in the economy, and I doubt very much that the measures that the hon. Lady set out would deliver the kind of funding that this Bill will deliver. We need serious investment to fix the mess left by the previous Government.
We are providing businesses with certainty through a corporate tax road map, as others have said, and upholding our commitment to maintain corporation tax at the lowest rate in the G7. I am proud to support the investment in our country, in our NHS, in education and in rebuilding the infrastructure on which hard-working people across our country rely. We are bringing the funding needed to kick-start a decade of national renewal. While the Conservatives sit back to have their cake and eat it, this Government have acted decisively to invest strategically and build for the future.
Several hon. Members rose—
Madam Deputy Speaker (Caroline Nokes)
Order. Members will be able to see that a significant number of people wish to contribute to this debate. A time limit of six minutes will be imposed after we hear from the Liberal Democrat spokesperson.
Daisy Cooper (St Albans) (LD)
This Saturday is Small Business Saturday. It is an opportunity for every single one of us to celebrate the fantastic small businesses in our constituencies—businesses that are the engine of our economy and the backbone of our communities.
We know that behind every single business there is a story. Either it is a family business that has passed through the generations and evolved, or it is a start-up that was somebody’s life’s dream, but behind every story there is blood, sweat, tears and hard work. This Saturday, as we all go around our constituencies meeting and greeting small business owners, we only need to scratch the surface of even the most successful business to know that they are very worried about the impact of the Budget, particularly the rise in employer’s national insurance contributions. We have heard from many of them already, and we know what the impact will be: they will suppress wages, freeze recruitment and, in the worst cases, shut up shop.
Rightly, the Government keep talking about growth. We all want economic growth, but this particular tax will undermine growth, not unleash it. We have all heard from GPs, dentists, hospices, social care providers, charities that are commissioned to provide health and care, and public health programmes. They are all incredibly worried. None of them has been given a guarantee that the money being taken away with one hand through the rise in employer’s national insurance contributions will be given back through the renewed contracts with the NHS. We oppose this tax, but if the Government will not reverse it, we urge them at the very least to exempt health and care providers.
Dr Evans
We have heard a number of times from the Prime Minister and the Chancellor, and even from the Exchequer Secretary to the Treasury today, that allocations will be made in the usual way, but we are six weeks on from the Budget and health services are trying to decide what to do now. They cannot wait.
Daisy Cooper
I agree with the hon. Gentleman that GP services, dentists and hospices are having to make decisions now on freezing recruitment and not providing wage increases, so there is real urgency to this measure.
The changes go beyond health and care. They will also affect early years providers and education providers, at a time when we should be reducing the costs of childcare and care services and supporting parents back into work. The measure will undermine that. I have heard from housing associations, Citizens Advice and hospitality companies that the pressure from this measure will make life incredibly difficult for them. Hospitality in particular relies on a lot of part-time workers, and the changes to national insurance contributions will have a terrible effect. Many of them tell me that at the moment—before the changes have taken effect—employer national insurance contributions liability is incurred only once a part-time worker starts earning £9,100 per annum. That is 15 hours a week on the current national minimum wage. Once the changes take effect, however, liability will be incurred at only £5,000 per annum, or the equivalent of 7.5 hours a week on the new national minimum wage. That will disincentivise small businesses from taking on part-time workers. Let us be honest: many people can only work part time because they are picking up the pieces of a broken health and social care system.
Graham Stuart (Beverley and Holderness) (Con)
The hon. Lady is making a powerful speech. Someone coming back from a mental health crisis who manages to get one day’s work a week—that may initially be all that they can manage—will, under this so-called Government of workers, find themselves hit by the measure and so will be less likely to be employed. Also, most of the cost of the measure will come out of their wages.
Daisy Cooper
I thank the right hon. Gentleman for that point. Many people work part time, for all sorts of reasons. They could be coming back from a period of poor mental health. They could be returning to work after bringing up their children. They could have a fluctuating health condition, be recovering from surgery or, as I was saying, be picking up the pieces of a broken social care system, having become a family carer. We all know these people. They live among us. They are our friends, our neighbours and our family members. Many people need to work part time in order to contribute to the economy and be productive, and it is also good for their self-esteem.
A number of Labour Members have rightly challenged the Conservatives on how they would pay for this investment in the NHS, and they are right to do so, because the Institute for Fiscal Studies gave a damning account of the Conservatives’ manifesto. It said that it contained
“giveaways paid for by uncertain, unspecific and apparently victimless savings.”
Also, the Conservatives could not say where the £20 billion-worth of cuts could come from, so Labour Members are right to point to the fact that the Conservatives have not answered that question. We should hold their feet to the fire on that point, because we heard time and again in the run-up to 4 July that everything was broken and that the Conservatives had driven our economy into the ground and left our public services on their knees.
By contrast, we Liberal Democrats have set out how we would fund many of these services. The Labour party says that its measures will amount to £28 billion for investment in health and social care, or at least in the NHS, but the Office for Budget Responsibility says that once the amount is adjusted for behaviour changes and public sector rebates, it comes to only £10 billion. We have suggested a number of measures and, in the spirit of constructive opposition, I urge Labour Members to look at them, if not for this Budget, then at least for the next.
If the Government had reversed the Conservatives’ tax cuts for the big banks, that would have raised £4 billion a year. If they had doubled the remote gambling duty, that would have raised up to £900 million a year. If they had trebled the digital services tax, that would have raised £2 billion a year. We have pointed to examples of ways that the Government could have raised funds from those with the broadest shoulders. In the spirit of constructive opposition, I urge Labour colleagues to look at those measures.
Luke Murphy
The hon. Lady has cited the IFS, which said of the Liberal Democrat manifesto that
“there are clear risks that their package of tax measures would not raise the £27 billion a year that they claim.”
The IFS also described some of the measures as “a bad idea economically.” Confronted with a Bill promising actual investment and delivering actual money, will the Liberal Democrats really oppose it?
Daisy Cooper
The fact remains that the IFS said that our proposals for capital gains tax, which would raise £5 billion, go in “a sensible direction”. I recognise that the IFS does not like our proposal for share buy-backs, but other think-tanks are available. Indeed, the Social Market Foundation and the Institute for Public Policy Research support our online gambling proposals. A broad range of think-tanks support a number of measures in our manifesto. As I said, in the spirit of constructive opposition, I urge Labour Members to look at those ideas.
I finish where I started. This Saturday is Small Business Saturday, and small businesses will shoulder a disproportionate burden from the increase to national insurance contributions. We urge the Government not to proceed with this measure, but if they do, they should, at the very least, exclude health and care providers, which are essential to getting health and care back on their feet.
Dr Jeevun Sandher (Loughborough) (Lab)
It is a pleasure to be called to speak in this incredibly important debate. On 30 October, the Chancellor delivered a Budget that will rebuild the foundations of our broken economy through public investment paid for by tax revenues. We are proud that those revenues will be raised from both the largest businesses and the wealthiest individuals. Public investment will be paid for by those who can best afford it, to benefit us all and make our nation more prosperous.
We entered office with the worst economic inheritance since 1945, after years of under-investment—the lowest rate in the G7—years of failure, the worst fall in wages since Napoleon, and years of chaos. In 2022, we built fewer onshore wind farms in England than we had Conservative Prime Ministers.
The Conservatives left our nation far weaker than they found it—a nation where 3 million people are too sick to work because one in 10 nursing jobs is unfilled; a nation where one in three young people fails maths GCSE because around half of our schools do not have the maths teachers that they need; the nation with the highest energy bills and inflation, because we have the worst-insulated homes in western Europe. That is what we were elected to change.
As well as having a mandate to rebuild this nation, we were also elected to rebuild hope by creating a country that, once again, gets better rather than worse.
Graham Stuart
In the spirit of hoping for growth, the hon. Gentleman will be interested to know that I sent a survey to all the businesses in my constituency. Perhaps we are an outlier, but 95% of businesses in Beverley and Holderness said that they expect things to be worse as a result of the Budget. It might be different in the hon. Gentleman’s constituency, especially if he stays at home.
Dr Sandher
I politely suggest that the right hon. Gentleman should not set up a polling company, as that is not an effective sampling strategy. Deary me. Where do I start?
Anyway, we are insulating our homes and hiring more nurses and teachers—and yes, we will pay those nurses and teachers enough money to keep them, because that is what responsible Governments do. All that investment needs to be paid for. That is why we are raising national insurance contributions for the largest employers, with £3 out of every £4 raised coming from the largest 2% of businesses. That will raise some £23 billion of investment that every family and business will benefit from. Crucially, we are raising that money while protecting the smallest businesses.
Mr Angus MacDonald
The hon. Gentleman keeps talking about the largest businesses, but the Government are completely wiping out small and medium-sized businesses across the whole hospitality and retail sector. This is a catastrophic piece of legislation. He talks about a kamikaze Budget; we are considering a kamikaze Budget right here, today.
Dr Sandher
Not only are we protecting the smallest businesses by raising the employment allowance, but there will be business rates relief for the hospitality businesses to which the hon. Gentleman refers.
Christine Jardine
Does the hon. Gentleman understand how frustrating it is for Liberal Democrat Members to be told that this is the Scottish Government’s problem? It is not the Scottish Government’s problem; it is the problem of Scottish businesses if they are being hit by national insurance contribution increases without business rates relief. We are tired of hearing that this was a tough decision; it was an easy decision that is tough for businesses.
Dr Sandher
It is the responsible decision to invest in this country’s foundation, so that we get the doctors, nurses and teachers that we all need, and to insulate our homes.
Adrian Ramsay (Waveney Valley) (Green)
I share the hon. Gentleman’s aspiration for getting more funding into the NHS. On Friday, in the debate in this House on supporting people at the end of life, hon. Members from across the Chamber highlighted the importance of getting more funding and support for palliative care, but Sue Ryder warns that financial pressures, such as the rise in national insurance contributions, could force closures of crucial hospices, which patients desperately need. Noting the wider case that the hon. Gentleman is making, would he join me in urging the Government to review and revisit the impact that the measure will have on health and care providers, and the wider voluntary sector?
Dr Sandher
The Government will set out exactly what the health and care budgets will be before next April, and the investment will go towards improving the health and care system that we and our loved ones rely on. All the money that is being invested in the health service, our teachers and elsewhere across the economy needs to be raised—and, yes, we are raising it from the largest employers.
By increasing the employment allowance, we are protecting the smallest businesses. Half of businesses will pay the same national insurance or less. A quarter of a million of the smallest businesses will see their national insurance tax bill fall. From tax revenue, we will invest in our people and our places to ensure that they can thrive, building on public investment in our infrastructure and our services.
Countries that grow the fastest are not simply those that tax the least. If all we needed to do to create prosperity was cut taxes to their lowest level, Somalia would be richer than Sweden. However, IKEA is not about to relocate to Mogadishu. The countries that grow the fastest are those that raise a return on investment. Returns are higher when businesses have the roads that they need to transport their goods, workers have the skills that they need to produce more, and all of us have cheaper electricity and well insulated homes. Those are the decisions that we have made, and were proud to make, in this Budget.
Across the Atlantic, in the United States, we have seen a multi-trillion dollar investment package, which helped to deliver the fastest growth in the G7. There were new roads, new factories and new clean energy projects from Wisconsin to Wyoming. That public investment led to the fastest post-pandemic recovery in the G7, whereas we had one of the weakest. That is why, here at home, we are investing to raise returns; investing in our schools, our NHS and home insulation to make us better educated and healthier and to get energy bills down for all and for good
Sean Woodcock (Banbury) (Lab)
Opposition parties have spent an awful lot of time attacking various measures in the Budget. Does my hon. Friend agree that if they are going to do that, they need to point out which investment—money to our schools or to hospitals—they would not provide to alleviate their concerns?
Dr Sandher
I entirely agree with my hon. Friend. If Opposition parties wish to criticise the tax rise on the largest businesses and the wealthiest individuals, they must set out what services they will cut and who will not get a GP appointment or the teachers that are needed.
We are investing to raise returns. Investing in our schools, NHS and home insulation makes us better educated and healthier and gets energy bills down for all of us. That investment is paid for through tax revenue. The principle behind which we raise that is simple yet powerful: it is about collective contribution for collective benefit, sharing in the rebuilding of our nation and, of course, the rebuilding of hope.
Madam Deputy Speaker
I assure Members that we have now resolved the problem with the clock and that there is a six-minute time limit. I call Stuart Anderson.
Stuart Anderson (South Shropshire) (Con)
It is a pleasure to speak so high up on the list and to follow the hon. Member for Loughborough (Dr Sandher). I believe I will have different views from him in this jobs tax debate.
Manifesto commitments are very important. As politicians, we go out to the public and tell them what we are going to do. I heard time and again the phrase, “We will not raise taxes”, which Government Members will finish with “on working people”—I will come to the definition of “working people” shortly—so why are we now in a debate discussing national insurance contributions and how they will rise?
I have a couple of questions for the Minister. When the Chancellor looked at the figures and the OBR forecast, did she either not spend enough time on them, or did she not understand them? I am keen to understand that. Also, in the access talks, when Labour sat with the civil service, they were told about everything that was happening. At what stage did they then realise that the figures were completely different? They were not. Labour was able to see behind the scenes and the Chancellor had a full view, through which they could go to the British people and tell them they would not raise taxes—yet here we are today with a debate on raising taxes for working people.
I met a group of working people—I define them as working people—made up of almost every publican in Ludlow. They deal in hospitality at the highest level, given that Ludlow is the fine food capital of the UK; indeed, I invite Members to come and see that great quality. I sat with those members of the hospitality industry. Some had been in it for a few years and many for a decade or two. They knew the trade in South Shropshire and know hospitality exceptionally well, having worked year on year and created a great reputation. They are at the stage where their turnover is the same, their footfall is roughly the same, but they cannot see, as of next April, how they can make a profit. We can argue backwards and forwards about what we think. I am listening to my constituents, in a town, who almost unanimously agree that they cannot see a way forward when the Budget comes into play next year.
Chris Curtis (Milton Keynes North) (Lab)
Under the last Conservative Government, 10 pubs closed every single week. Before the hon. Member talks about our record, will he apologise for the record of the last Conservative Government, which was incredibly damaging to businesses, particularly hospitality businesses, across the country?
Stuart Anderson
I thank the hon. Member for his intervention. I am pretty sure the Chancellor has just said, “Hold my beer, I will make that 20 pubs a week.”
My constituents are really struggling with this Budget. They cannot see a way forward and are pleading with me to lobby the Government to say that this will not work for them. These are people who know what works for them inside out. They do not own massive businesses, but many of them employ more than four people. They may not have the broadest shoulders, but they have worked for many years to make things work. Businesses are struggling not just in Ludlow, but across my constituency. Small Business Saturday is coming up, and I am hearing business after business saying that they are finding it impossible to see a way forward next year.
Luke Myer (Middlesbrough South and East Cleveland) (Lab)
The hon. Member is talking about small businesses. Last week, I was proud to host the Federation of Small Businesses in Parliament. Representatives welcomed the Budget, particularly the increase in the employment allowance, which will see the smallest businesses benefit. Some 250,000 of the smallest businesses say that they are better off now than they were before the Budget. Are they wrong?
Stuart Anderson
I am pretty sure that the Federation of Small Businesses has not welcomed the national insurance rise on small businesses. I am happy to look at that, but I am convinced that no small business is enjoying a rise in employers’ national insurance contribution rates.
Finally, I have a question for the Minister. Does she believe that the Chancellor will still be in her position when this Bill comes into play—if it is voted through tonight?
Paul Waugh (Rochdale) (Lab/Co-op)
My hon. Friend the Exchequer Secretary rightly said that this Bill was about tough decisions. The Conservative party used to be about taking tough decisions. We may not have liked them, but we respected them because we thought that they were doing things in a pragmatic and consistent way. Earlier this year—in my former life as a journalist—I interviewed the former Chancellor, Ken Clarke. He said this about tax:
“I didn’t have a fixation on taxation. Taxes sometimes have to go up. Taxes sometimes have to go down. It depends on the needs of the macroeconomy and the public need…And, yes, I raised taxes quite frequently and I cut some taxes…I made my mind up on what was necessary.”
Sadly, that Tory party is long gone, replaced by the libertarian ideological collaborators of chaos whom we see on the Opposition Benches. Worst of all, their sums simply do not add up, and, as a result, it has been left to Labour to clean up the mess they left behind.
The economic situation that we inherited in the summer was much worse than anyone anticipated, so much so that Richard Hughes of the Office for Budget Responsibility said that Treasury Ministers “failed their statutory duties”. He told the Treasury Committee that there was about
“£9.5 billion worth of net”—
spending—
“pressure…which they did not disclose to us…which under the law, and under the Act they should have done.”
That is what he said to the Treasury Committee. If the hon. Member for Grantham and Bourne (Gareth Davies) wishes to dispute his words, will he please get up and say so?
I remember that Liz Truss and her Cabinet, some of whom are now in the shadow Cabinet, were in favour of fracking. Well, her mini-Budget certainly fracked our economy. It was a high pressure injection of debt-fuelled tax cuts made in the hope of extracting hidden growth. Instead, it created an earthquake on the money markets and led to rocketing mortgage bills that many are still feeling the aftershocks of today.
One thing that struck me most about that “Kami-Kwasi” Budget—yes, I do claim copyright on that phrase—was that the alleged tax cutters on that day were actually increasing the tax burden for millions through fiscal drag. Yes, buried away in that growth plan was the continuation of the previous Government’s plans to freeze tax thresholds, and they all backed that massive increase in the tax burden. I am pleased to say that this Government will end that fiscal drag act in 2028, uprating personal thresholds in line with inflation once again.
The chaos did not end with the Truss-Kwarteng double act, who drove themselves and the economy off a cliff like the Tory “Thelma & Louise”. Sadly, even the normally sensible right hon. Member for Godalming and Ash (Jeremy Hunt) put his own last desperate tax cuts before public services. His spending plans were incredible in that they lacked credibility.
Graham Stuart
On a point of order, Madam Deputy Speaker. I would never dare to tread on your toes, but perhaps something is wrong with the electronic equipment because the screen says that this is a national insurance debate, rather than some generalised debate. I sympathise, though, with the hon. Gentleman and other Labour Members for not wanting to talk about their own policies—they would rather slag us off.
Madam Deputy Speaker (Caroline Nokes)
The right hon. Gentleman will be aware that that was not really a point of order. I am sure the hon. Member for Rochdale (Paul Waugh) is getting to the point on the Second Reading of the National Insurance Contributions (Secondary Class 1 Contributions) Bill.
Paul Waugh
I am, indeed, coming to exactly that point, because this is set in the context of what the Tories left behind. The clear trajectory of their last Budget was to squeeze day-to-day public spending to just 1% above inflation every year until 2029. That carried dire implications for every unprotected Department—up to £20 billion of cuts a year. The Resolution Foundation calculated that that would be the equivalent of three quarters of the cuts of the austerity years—austerity 2.0.
Sadly, there is no evidence that the former Chief Secretary to the Treasury, the right hon. Member for Sevenoaks (Laura Trott), left her own note for her successor. If she had, it surely would have read, “I’m afraid to tell you there is no money for public services.” If the Conservatives had won the last election, what would that have meant in practice? My right hon. Friend the Health Secretary revealed that when he took office, he was told that the NHS was facing such large deficits it would have to cut 20,000 appointments and operations a week. Thanks in part to the national insurance rises in the Bill, he can now deliver on our manifesto commitment to provide 40,000 extra appointments every week, with our investment in mental health services treating an extra 380,000 patients.
Dr Luke Evans
Is the hon. Member aware that the Royal College of General Practitioners said that it will cost 2.2 million appointments just to service the NIC payments that must be made? How does that resolve our service provision in primary care?
Paul Waugh
The Heath Secretary said that he will address that in due course, and I am sure that he will before April, as my hon. Friend the Member for Ealing North (James Murray) set out. The hon. Member for Hinckley and Bosworth (Dr Evans) may want to answer the question I put to the Conservative Front Bench. If they are so opposed in principle to national insurance rises, why did they support the health and social care levy in 2021? The hon. Member voted for it, as did the hon. Member for South Shropshire (Stuart Anderson) and the right hon. Member for Beverley and Holderness (Graham Stuart)—why? They cannot tell me why because they know they are being inconsistent.
Dr Evans
Absolutely. Does the hon. Member realise that we had to deal with that because the amount that we had to borrow in 2010 was £158 billion? For the pandemic, it was £400 billion. That is the kind of thing that the Conservatives have had to deal with that led to the difficult decisions. We were on track to have the fastest growing economy, which has now been trashed by decisions taken by Labour.
Madam Deputy Speaker
Order. That is the second time the hon. Gentleman has done it: I have left nothing.
Paul Waugh
Forgive me, Madam Deputy Speaker. Labour is the party taking tough decisions today and refusing to duck the issues that the Conservatives were so timid to grasp, from planning reform to energy security, from welfare reform to removing tax breaks for the richest.
In the past four weeks, the Conservatives have made £6.7 billion of commitments to cut taxes, but they have not said which public services they would cut to fund them. But the most damning indictment of their low-pay, low-growth, low-investment, low-productivity economics was the model that totally failed. In 1964, the outgoing Tory Chancellor Reggie Maudling bumped into James Callaghan and said,
“Good luck, old cock. Sorry to leave it in such a mess.”
It is a shame that the current Tory party cannot earn up to their own failures with a similar sense of regret or humility.
Ben Lake (Ceredigion Preseli) (PC)
It is a pleasure to follow the hon. Member for Rochdale (Paul Waugh). I rise to relay some of the concerns that have been raised with me by constituents and businesses. They are concerned not only about the impact of the Bill’s proposals on small businesses in my constituency, but about the provision of public services there.
It has been interesting to listen to various opinions on this matter, but I will begin by pushing back on the implication made by some that the changes in the Bill will not have an impact on small businesses. The fact is that the Office for Budget Responsibility estimates that from 2026-27 onwards, 76% of the total cost of the increased employer national insurance contributions will be passed on through lower real wages. That tells us not only that there will be an impact on businesses, but that contrary to what has been suggested by some in the Chamber, there will be an impact on workers.
Much has been said about the impact on businesses, and I very much agree with those concerns, but I will concentrate my remarks on the impact on public services in Wales. It is worth noting that 30% of the Welsh workforce is employed in the public sector—a much higher proportion that the rest of the UK—so the proposed increase in employer national insurance contributions equates to some £380 million. Clearly, the Bill will therefore have significant consequences for the provision of public services, and it remains unclear whether the additional Government support—or the reimbursement—will meet the increased cost.
Local authorities across Wales already face budget shortfalls of over half a billion pounds. At a time of significant budgetary pressure, Ceredigion county council—one of the county councils in my constituency—estimates that the increase in NICs will total over £4 million in one year alone. Communities deserve assurances that essential services will not be further jeopardised because funding gaps are exacerbated by the changes in the Bill. Can the Minister confirm that the full cost of the increased national insurance contributions will be reimbursed to local government in Wales? Furthermore, will that additional support be recurring? The last thing we want is for additional costs to be covered in years one, two and three, only for local government to face a funding cliff edge after that.
In addition to the direct cost to public authorities, for which the Government have suggested they will provide additional support, we should also bear in mind the other organisations—public and third sector organisations—that are integral to delivering many of the public services that we consider valuable to society. Social care providers are one example. They care for the vulnerable and help to alleviate pressure on the NHS, yet the cost of the NICs increase could be devastating for them. Care Forum Wales estimates that the cost to its members across Wales will total a staggering £45 million. I heard what was said from the Treasury Bench about additional support being allocated in the usual way, but I would like to know how that additional cost will be allocated to Wales. I understand that, in their conversations with the Welsh Government, the Government in Westminster are discussing the additional costs of only the public sector organisations that will be reimbursed directly. There are other examples in the third sector, including citizens advice bureaux, which, although they provide invaluable support to some of the most vulnerable in society, are facing significant additional costs without there being any talk of Government support.
Graham Stuart
The hon. Gentleman may have noticed that the OBR had to amend the numbers that it produced after the Budget because it had reduced the cost of compensating the public sector and social care by around £800 million a year. Does he, like me, want the Minister to clarify whether the Government intended to put nearly £1 billion extra into social care costs, and when it was decided, and by whom, that they should not go ahead and should leave social care in the parlous position it now finds itself in?
Ben Lake
I very much agree. I hope that the Minister will return to that in her summing up.
I labour the point about the third sector and public sector organisations that do not stand to receive reimbursement from the Government because they are so crucial to delivering many of the public services that we have heard so much about in the debate. There is a real risk that if our social care hubs, hospices, dentists and GPs are not adequately reimbursed, all the Government will do is erode the value of the investment that they claim to be making in those services.
I could also say a little bit about the university sector. Higher education is a very important sector in my constituency: Ceredigion Preseli is home to two universities, Aberystwyth University and the University of Wales Trinity Saint David. Both organisations are currently facing very difficult times, as are most higher education institutions, and both state that they will be dealing with quite significant additional costs next year when the Government’s proposals come into force. There is no talk of additional support for those institutions, so I worry very much that we will lose the incredible economic contribution they make to my constituency, let alone their important social and cultural contribution.
Luke Murphy
Is the hon. Member about to come on to the part where he welcomes the largest real-terms settlement for Wales since devolution?
Ben Lake
I am very grateful to the hon. Gentleman for his intervention—we have been blessed with many of his contributions this afternoon. With the Barnett formula, I am not going to thank the hon. Gentleman’s Government for a larger settlement, because that settlement is only a function of spending decisions made to address the needs of public services in England. If they had proposed a reform of the Barnett formula to make it a proper needs-based formula, I would very much congratulate the hon. Gentleman and his Government on doing so.
We all recognise the need to raise revenue to meet the challenges facing our economy. We have heard some alternative suggestions this afternoon—the Government could well have decided to look again at corporation tax, or at least to tackle businesses on the profits they make. Other proposals that the Government might have considered include changes to capital gains tax; for example, a full equalisation of capital gains tax rates could raise £14 billion a year. There has also been no mention by the Government of exploring a wealth tax on the ultra-rich. It is not fair that wealth inequality continues to grow at the expense of our public services and communities. It has been suggested by some that a 2% tax on assets over £10 million, which would target the top 20,000 richest people in the country, could raise £24 billion.
I fear that the proposals in this Bill will have a significant impact on both the workers and the businesses in my constituency, as well as—quite importantly—the provision of public services. We have already heard in this debate many alternative proposals that the Government could have implemented, but decided not to.
Ms Polly Billington (East Thanet) (Lab)
The decision we are taking today to raise employer’s national insurance contributions is a difficult one, but ultimately, it is the right choice. The situation we inherited from the last Government was so dire that it means tough choices need to be made. Asking larger businesses to pay a little more so that we can fix our broken services is a fairer option than asking working people—who already face the highest tax burden since the second world war—to pay more.
My case today is not only a moral case, but an economic one. People who think public services are a drain on the economy fail to understand how those public services make our economy function. I am reminded of a 70-year-old woman I met on the doorstep in East Thanet who was told she would have to wait 16 weeks for an initial scan to find out whether she had cancer, or the mother who had to drive around east Kent in the dark before Christmas to get medical treatment for her child who was suspected of having meningitis, because she could not register her child at a GP practice. Healthcare in east Kent is on its knees. This year, East Kent hospitals trust, which runs the Queen Elizabeth The Queen Mother hospital in Margate, recorded the highest number of 12-hour waiting times in England. When polled, only 45% of its staff said that they would be happy for a loved one to be treated at that trust—what an indictment.
I am prepared to accept that problems like this have existed for longer than 14 years in coastal constituencies such as mine. The NHS crisis is particularly acute in coastal communities such as East Thanet, as highlighted by a 2021 report by Chris Whitty entitled “Health in Coastal Communities”. We have some of the worst healthcare outcomes in England, with a higher rate of major diseases and a lower life expectancy, so this funding is essential for healthcare outcomes in East Thanet and in coastal communities across the country. There is a real need for a coastal communities healthcare strategy, but I challenge the Opposition to say how they would fund our NHS and improve health outcomes in coastal communities. They want all the benefits of the Budget, but they will not back the measures to deliver those benefits. They need to take some responsibility for the situation we find ourselves in.
There are structural problems that we can put down to the last 14 years of Tory Government. Chronic mismanagement of the NHS and years of underfunding have left the health service crying out for help. Shifting public health responsibilities to local authorities makes sense and moving healthcare to where people live is an essential reform, but doing that while cutting real-terms funding for local authorities has been a disaster.
This is not just about making a moral argument for free healthcare at the point of use. I hope that argument has been won across most of society and in this place. This is an argument about people being able to contribute to the economy. We cannot have growth with a sick workforce and a failing healthcare system. This is about the people who are using savings to go private, or having to take time off work because they cannot afford to pay and are too sick to work. There are shift workers trying to earn money and waiting weeks for a doctor’s appointment, and small business owners working through healthcare issues when they should be getting treatment, because they cannot afford to take time off. Nobody says that this does not have an economic impact.
Dr Roz Savage (South Cotswolds) (LD)
I know that difficult decisions have had to be made, but I have been talking to small business owners. I am particularly thinking of the owner of a chain of convenience stores in Lechlade, and the difficult decision he is having to make of which of his part-time workers he is going to lay off in the run-up to Christmas. Should not the difficult decisions be those of the big tech companies about whether they actually pay their fair share of corporation tax? Should they not be the really tough—
Madam Deputy Speaker (Caroline Nokes)
Order. If the hon. Lady wishes to speak later in the debate, she is very welcome to do so, but interventions have to be short, and we have a lot of people to get in.
Ms Billington
I thank the hon. Lady for her intervention. I agree that if we are to revive the high street, we will need to make sure that the online giants pay their way, and I look forward to making that argument in the future.
I refer again to the 70-year-old woman I met on the doorstep in East Thanet who was told she had to wait 16 weeks for a potential cancer diagnosis. She also told me that this is impacting on her ability to provide childcare for her family. We sometimes do not appreciate the impact on society and our economy of having an inadequate healthcare system, but it has an enormously wide-ranging impact. Raising national insurance contributions on employers is a difficult choice, but given our economic inheritance and the dire state of our NHS, it is the right one.
Do the Opposition think we should not increase NHS funding by £25.6 billion or that we should not recruit 6,500 new teachers for our schools? If they agree with these investments, how do they suggest we pay for them? There is a choice—stability, investment and reform, or chaos, incompetence and stagnation. I urge the House to support these measures to fund the NHS that the economy desperately needs.
Ben Obese-Jecty (Huntingdon) (Con)
The Government have repeatedly claimed that this is a tax on businesses, not a tax on working people, and how wrong they are. They are not only wrong, but deeply disingenuous to the people we represent who will see prices increase, their chances of employment become more difficult, and many businesses having to wind down or restrict their operations.
The owner of the Barley Mow pub in Hartford wrote to me expressing his concerns and frustration at the lack of detail the Government have provided about support for the hospitality industry. This echoes the representations made by UKHospitality, which has said that
“the tsunami of employment costs coming in April will ultimately do more to hamper growth than incentivise it. Increases to employer NICs and wages will make it harder for businesses to support employment and invest in their businesses.”
I would like to hear from the Economic Secretary, when she sums up, why the Government want the amazing pubs, restaurants and catering businesses in Huntingdon to suffer this unfair, ill thought through and deeply unpopular jobs tax.
The British Retail Consortium wrote to the Chancellor expressing its grave concerns about the impact this will have on the businesses it represents, with our largest supermarket chains having to pass on these costs to consumers, and that is before we talk about the impact of this Budget on farmers, but I am sure Labour Members will have plenty to say about that tomorrow.
Not only will businesses with high numbers of lower-paid workers be impacted, but I have received many emails from GP surgeries and hospices that are terrified about what this means for them. I pay tribute to the Cambridgeshire local medical committee for the work it has done in raising the fact that the average GP surgery in Huntington, with just under 14,000 patients, will face increased costs, with the minimum wage and national insurance changes, of approximately £48,000. That money is equivalent to the salary for three and a half sessions of a newly qualified GP, one full-time equivalent nurse, and almost two full-time healthcare assistants. Added to that, a GP who has served Huntingdon for 30 years told me that the increased costs might see many practitioners hand back their contracts. Who will suffer from that? The staff of Moat House surgery or Grove medical practice who could be out of jobs, and the patients of Priory Fields or Brampton surgeries who might lose their GPs.
Dr Duncan Outram and Dr Barbara Uszycka have a combined 62 years of service in the NHS, 50 of which have been serving Huntingdon. They told me that the estimated black hole of £37,000 is causing great concern not only about their future plans, but because it risks more young professionals leaving the NHS. GPs serve our communities in the most amazing way and they are a key part of medical care for so many of us. The impact that the measure will have on NHS provision is deeply damaging and must be reviewed. We must protect the NHS to ensure that our constituents get the care they need, but this policy does the opposite.
Added to the list of those concerned are hospices, which are already so overstretched. Despite being a key part of end of life care, they are terrified about the impact of this measure on the amazing care that they offer. Furthermore, we have hardly heard what it would mean for our armed forces. Although we constantly hear from the Government that they are prioritising national security, we do not know what the potential impact of this provision would be on the MOD’s budget. All that shows that the Government are rushing into implementing something, without any detail about what the impact will be in so many areas.
In conclusion, I urge the Government to rethink and have the moral courage to take ownership of their mistake. If they go ahead with this policy, we will see people lose their jobs, businesses be unable to expand, care provision stretched even further, and working people suffering. The Government should go back to their manifesto and say no to back-door stealth taxes on working people.
Andrew Lewin (Welwyn Hatfield) (Lab)
The Budget delivered in this House a few weeks ago was a Budget for growth, investment and public services. It was a Budget delivered by a Chancellor who was direct about the scale of the challenge that we inherited from the Conservative party, and who was clear and optimistic that we can build a better country, but only with honesty and clarity about how we raise the revenue we need. The increase in employer national insurance contributions will raise £25 billion. That is a choice made by this Labour Government, but it was the only responsible choice available to us on discovering the depth of the damage done over the last 14 years.
Graham Stuart
The cost to the economy is over £25 billion, but the net cost, having adjusted for behavioural change and compensating the public sector, is more like £10 billion or £11 billion. Does he regret that this particular vehicle was chosen? It damages the economy, it will take nearly £20 billion out of people’s wages, and it raises only £10 billion or £11 billion. It is about the worst tax imposition we could think of.
Andrew Lewin
I do not regret the vehicle we have chosen. I have faith in the figures in the Red Book. Interestingly, I have heard colleagues on the Opposition Benches cite the OBR, and that is from the same party who, just two years ago when it was in government, wanted to get rid of the OBR and not listen to expert voices at all. Indeed, I remember them saying that they had “had enough of experts”.
We have heard lots of supposedly deep concern for business from Conservative Members. Of course that was not so much of an issue for the former Member for Uxbridge and South Ruislip, who as Prime Minister told his Government to “eff business”. Or indeed for his successor, the former Member for South West Norfolk. Her one fiscal event as Prime Minister was called a “mini-Budget”, but the lasting damage that it did to our economy was anything but small—markets in turmoil, higher mortgage repayments for thousands of my constituents in Welwyn Hatfield, debt rising, debt interest payments up, and of course not even a hint of an apology.
As for the most recent Administration, I am sorry not to see the shadow Chancellor in his place. During the election campaign I hugely respected how many times he hit the airwaves of TV and radio stations to defend the manifesto that the Conservatives put to the country. For a verdict on that manifesto I defer to Paul Johnson, director of the Institute for Fiscal Studies, who said:
“What the manifesto did not tell us was where the £10 to £20 billion of cuts to spending on unprotected public services…might come from. This manifesto remains silent on the wider problems facing core public services.”
The Labour party will not stay silent on the problems facing our public services. Opposition parties can choose fantasy economics; we choose a change to national insurance to fund the rescue and reform that our public services need. That change starts with paying our public servants properly. When I go through the Lobby to support this national insurance Bill, I will think of the serving members of the armed forces, who received a 6% pay rise from this Labour Government, the biggest in 22 years. I will think of the extra money in the pockets of the police, who faced down the shocking disorder in our communities across the country this summer. I will think of Daisy and Jake, the two paramedics I joined on a shift in Hertfordshire a few months ago.
Stuart Anderson
Has the hon. Member spoken to anyone in his constituency who is not in the public sector?
Andrew Lewin
Absolutely. I speak to businesses day in, day out. Those businesses say to me, “Thank goodness we have had a change in government after the past 14 years.” I will return to Daisy and Jake, because I would like to put them on the record. I joined those two paramedics on a shift in Hertfordshire. They are extraordinarily dedicated public servants finally receiving an overdue boost to their incomes.
I also think of our teachers. I have visited a different school in Welwyn Hatfield in almost every week of this job, and it is invariably the highlight of my week to meet such dedicated staff and inspiring pupils. At the same time, it is evident how many schools are stretched to their limit and beyond. This change to national insurance helps to fund a billion in extra revenue for the special education needs and disabilities budget and, further, it makes sure that we can recruit 6,500 additional teachers across the country.
Everyone in this House has a choice today. Members can choose to oppose the Bill and by doing so confirm that they are not serious about the public finances or our public services, or they can support it, and back our nurses, the police, the fire service, teachers and our serving military personnel. I will back this Bill as I backed the Budget. Together, they are the foundation on which this Government will deliver on our manifesto and drive the change our country so badly needs.
Adam Dance (Yeovil) (LD)
I welcome some of the measures introduced in the Budget, such as more investment in the NHS to start repairing all the damage done to our local health services by the Conservatives. However, the increase to employer national insurance contributions is the wrong decision and will have a serious impact on key sectors and services across the country.
A few examples of such negative impacts stand out. First, on local authorities, I was glad to hear from Somerset council that it believes it will be fully compensated in the settlement for its share of the increase in employer national insurance contributions this year, but as the Minister knows, Somerset council works with care organisations and care homes to provide care for more than 5,000 people. As their share is not covered, those companies will need to increase their charges to Somerset council, impacting hugely on the council finances. Will the Minister commit to supporting the council with those extra costs?
Secondly, many community pharmacies that provide essential services in my constituency and across the country, affecting everyone, are struggling with existing financial pressures. The community pharmacy sector has faced a decade of funding cuts, and the NHS workload has increased. We have already lost 1,200 pharmacies from our communities since 2015. However, as independent contractors, pharmacies will not be exempt from the rise in national insurance. How does the Minister expect pharmacies to continue to support communities and the NHS when yet more pressure is being placed on them?
Finally, the Government have made funding and supporting access to nurseries a priority, which I welcome, but raising the national insurance rate for employers could worsen the shortfall of nursery funding, with parents having to pay. The Early Years Alliance said that 95% of childcare providers were set to increase fees, as the Government did not mitigate the national insurance contributions increase and the rise in the minimum wage. Will the Minister commit to supporting nurseries too?
In conclusion, raising national insurance is a tax on jobs that will deal a hammer blow to small businesses and struggling care providers. Should the Government not look to raise money by reversing the Conservatives’ tax cuts for big banks or by asking social media giants to pay their fair share, rather than burdening sectors that provide essential services to our communities?
Jim Dickson (Dartford) (Lab)
It is real pleasure to rise in support of the Bill and to follow excellent speeches from Labour Members setting out eloquently why the Bill is necessary. As the House has dissected at length in recent weeks in the debates following the Budget and last week’s debate on the Finance Bill, which I was happy to take part in, the public finances that the Government have inherited are clearly in an incredibly parlous state—that is probably the politest description that anyone has used today. I want to outline briefly why the Bill is necessary and how it will protect and promote small businesses across our country.
The Bill forms part of a long-term plan to fix the foundations of our public expenditure and provide much-needed support to public services, which we must have if all our constituents are to receive the support they need. The measures in the Bill on national insurance cannot be seen in isolation; they are part of a range of actions announced at the Budget, including abolishing non-dom tax loopholes, extending the levy on oil and gas companies, and reforming stamp duty land tax.
The Bill represents not the easy choice so often taken by the Conservatives, who self-evidently failed to fix the roof while the sun was shining, while still putting up taxes to their highest levels for 70 years. It represents the tough choices that are necessary to get us back on an even footing. The measures contained in the Bill are in large part how the new Government will begin to address the need to cut NHS waiting times, which we all know were at record highs before the devastation caused by the covid-19 pandemic, as well as the crises in our courts, local government, social care and our schools among other areas.
I want to focus in particular on how small businesses are protected in this legislation as well as more broadly on the measures announced at the Budget. Small businesses are the lifeblood of our economy across our country, and particularly so in my constituency. One of the great pleasures of the last few months has been to visit and meet the people who run small businesses across Dartford, in Swanscombe, Greenhithe, Longfield and other places.
I want to quote the Federation of Small Businesses, since it has been mentioned in the debate. In response to the Budget, and recognising that it was a tough Budget, it stated:
“Increasing the employment allowance for small businesses by a record amount is a very welcome move and we’re pleased the Chancellor has heard us loud and clear.”
Ben Obese-Jecty
Sorry, Madam Deputy Speaker. The hon. Member stated that he has spoken to constituents and many small businesses across his constituency, but he quoted the Federation of Small Businesses. Could we hear from businesses that he has spoken to as to how this measure benefits them?
Jim Dickson
The businesses in my constituency feel that the most important thing is to have a good trading environment, and I am happy to report that they feel that if we have support for public services and economic growth, the trading environment will be right for them.
The FSB also said:
“Against a challenging backdrop, today’s Budget shows a clear direction in business policy now for the whole of this Parliament to target support at small businesses, rather than big corporates—prioritising everyday entrepreneurs working in local communities in all parts of the country.”
That is thanks to the choice that the Labour Government have made to protect small businesses by increasing the employment allowance, as has been said, and expanding it to all eligible employers.
It must also be seen alongside the Government’s plans to rebalance business rates and new measures announced in September, which I very much welcome, to support small businesses and the self-employed by tackling the scourge of late payments, which, according to the Smart Data Foundry, cost small and medium-sized enterprises £22,000 a year on average and, according to research by the Federation of Small Businesses, lead 50,000 businesses to close each year. Taken on balance, the measures to assist small businesses and the measures to invest in public services make this a Budget that is positive for our country and will help to rebuild our economy.
Bradley Thomas (Bromsgrove) (Con)
There appears to be a glaring omission on the part of the Government: without a thriving private sector, there is no public sector to fund at all. I wish that Labour would acknowledge that much more vehemently and clearly than it appears to.
The Government talk a lot about public services and how the proposals they have put forward in the Budget will support a thriving public sector, but we do not hear about the public sector needing to deliver much more, in terms of productivity gains. If we keep throwing money into public services without a serious plan for structural reform, we fail every single stakeholder—the taxpayer, and, if we are talking about the NHS, the patient and the doctor.
Rachel Blake (Cities of London and Westminster) (Lab/Co-op)
We have heard a lot this afternoon about investment in the public sector and what the proposals will do to small businesses, but we have not heard the Opposition recognise that this country needs a healthy workforce. The Bill proposes a sustainable and manageable approach to funding that healthy workforce. Will the hon. Gentleman describe to the House how damaging the previous Government’s treatment of the workforce was, and the long-standing and growing number of people claiming out-of-work benefits? Does he not see that the Bill will make a sustainable contribution?
Bradley Thomas
I think the hon. Lady misses the point that I am making. If we are to have a thriving, sustainable set of public services, it is not just a case of funding them; we need structural reform, so that we can deliver the best-quality services at the point of need. Take the NHS as an example. It is fundamentally different from how it was at its inception. People live longer and suffer from different illnesses. It is incumbent on Government, the whole of the public sector and this Parliament to focus on how money is spent to deliver value for money for everyone involved.
A few weeks ago, the Chancellor said that businesses that were concerned about the impact of proposals in this Budget should “cut their cloth accordingly”. Well, the same should apply to Government. Every single one of us should challenge Government to spend our money much more effectively. Once we do that, the tax burden will come down, and when that happens, we can pass on those savings. It is those savings that will ultimately underpin and provide the foundation for an economy that will grow and incentivise businesses across the board.
The Government talk a lot about the climate and the context that they inherited, but they repeatedly fail to acknowledge covid—one of the biggest public finance interventions this country has seen, which took place only a few years ago.
Tom Hayes
I agree that there needs to be reform of the NHS alongside this investment, and I welcome the point that the hon. Gentleman is making. In a recent speech, the Secretary of State set out what some of those reforms could be; I would welcome hearing what the hon. Gentleman thinks the reforms to go alongside the investment ought to be. Would he acknowledge, too, that one of the reasons why the NHS was in such a difficult position when dealing with the pandemic was that it was starved of funding and left under-prepared?
Bradley Thomas
Absolutely not. I do not agree with the hon. Gentleman. Under the previous Government, the NHS received record levels of funding. The Government have committed additional funds to the NHS, but they have not put forward a productivity improvement plan. The Government are unable to deliver structural reforms because they are in the pocket of their union paymasters. They have zero incentive at all to structurally reform the public services that they claim to care about so dearly. I touched on covid and the financial climate that this Government inherited. Over 14 years, the previous Government delivered 800 jobs per day. The previous Government also delivered a direct cut of £900 in national insurance to the pocket of every “working person”.
Governing is about choices. In this Budget, the Government are borrowing £40 billion of additional spending. In reality, we are seeing the same old tax-and-spend Labour. Let us look at some of those choices. National insurance contributions are up. The Chancellor said that NIC increases for employers would be a jobs tax. The Institute for Fiscal Studies said that would be a straightforward breach of the manifesto. Rate relief is down. A typical pub is paying £6,000 more in business rates per annum. There is the family farm tax, which I desperately hope this Government will do a U-turn on, and the education tax.
Let us look at the impact of all those decisions. The economy is flatlining—there was 0.1% growth in quarter 3. Inflation is up, from 1.7% to 2.3%. There was a 64% increase in business closures the week after the Budget. Asda has said that the Government’s decisions in the Budget risk price rises. John Lewis has said that it is worried about the impact of the national minimum wage increase. Two thirds of businesses claim that they are looking at freezing recruitment or making job cuts. We have already heard hon. Members talk about the impact on the charity sector. In fact, during this debate, I received an email from YMCA, which said that because of the increase in national insurance that it will have to pay in Worcestershire, it will look to freeze all recruitment and probably make redundancies. It will not be able to give a pay award to any of its staff, and it will look at cutting services. That is damning. We see from the Government an ideological pursuit of a policy that is really a false economy. Labour is failing the very working person that it claims to be protecting.
Olivia Bailey (Reading West and Mid Berkshire) (Lab)
I have been an MP for five months. I have had some wonderful moments in my constituency and in this place, but there have also been some tough and sobering moments. One of those was soon after the election, when I sat here listening to the Chancellor’s statement on the public spending inheritance. I heard about the huge hole in the public finances, the promises made without the money to pay for them, a promised new hospitals programme with no money behind it, and promised compensation for miscarriages of justice and promised funding for Ukraine that were not in the Conservatives’ budget. I was truly shocked by the sheer scale of Conservative economic mismanagement and—I will admit—I was intimidated by the sheer scale of the challenge to put it right.
Stuart Anderson
Has the hon. Member seen a breakdown of the £22 billion black hole? Because I have not.
Olivia Bailey
The hon. Member should go on Google.
In the months that have followed, I have been proud that this Government have been willing to make the hard choices necessary to protect our economic security, and have taken the long-term decisions necessary to fix the foundations of our country and finally prioritise our broken public services. We are investing in the NHS, rebuilding our crumbling classrooms and recruiting thousands of teachers to end the era of government by press release and empty promises. That is why I support this legislation.
Paul Holmes (Hamble Valley) (Con)
The hon. Lady stated that she was intimidated by her Budget. I should imagine that is very true—
Paul Holmes
Okay. Well, was she intimidated by her Budget? I take it that she would be intimidated by the growth that has been revised downwards, by business confidence crashing, and by private sector employers stating that they will have to let employees go because of the red tape put on businesses, all through this Government’s Budget.
Olivia Bailey
I ask the hon. Gentleman not to twist my words. I very clearly said that I was intimidated by the sheer scale of the mess that the Conservative party left our economy in, and the hard conversations I have had to have with my constituents because of how much harder that has made it to make things better for them.
Some of the bigger businesses in my constituency will find the changes difficult, and I thank those who have shared their views with me, but I believe that this was a fair choice, given the situation that we are in. Small businesses in my constituency will benefit from the changes, and there is also the benefit to all of us from our significant investment in public services. Hairdressers, beauticians, cleaners, independent shops and artisan bakers—the lifeblood of Reading West and Mid Berkshire —will stand to benefit from the expanded employment allowance, which will allow them to employ the equivalent of four full-time workers on the national living wage without paying any national insurance contributions on their wages.
Businesses in my constituency will also benefit from our reforms of business rates, our action to tackle late payments, our significant investment in roads and infrastructure, our plan to restore our high streets, our commitment to the lowest corporation tax in the G7, and, of course, our cast-iron commitment to protecting economic stability and growing our economy.
As we heard from my hon. Friend the Member for Basingstoke (Luke Murphy), the Conservatives want to have their cake and eat it. They say that they support investment in our public services, but they do not say how they would pay for it. They have perfected faux outrage, but they crashed the economy and left a huge mess for us to clean up. They are yet again unwilling to make tough decisions in the national interest, but we will not repeat their mistakes. We will fix the foundations of our economy and our public services, working hand in hand with our great British businesses, and we will get our future back on track.
Dave Doogan (Angus and Perthshire Glens) (SNP)
What is the café owner, the hotelier, the mobile mechanic, the gardener, the florist and—dare I even say it?—the farmer, if not an ordinary working person? The Government’ s false prospectus and their dubious cleavage between who is and who is not an ordinary working person is the snake oil that will be their undoing sooner rather than later. I also inform Treasury Ministers, which I really should not have to do, that when they refer to a business consisting of four or five people, they are referring to a microbusiness, not a small business. One would really expect the Treasury to be able to make such a distinction.
The Scottish Government pointed out last week that Labour’s raid on national insurance would leave a shortfall of at least £200 million in Scottish public sector finances. Labour’s own figures show that the cost to Scotland of the national insurance increase will be over £500 million, including a cost of £191 million to Scotland’s NHS, and that is corroborated by the Fraser of Allander Institute, which has estimated that the Scottish Government will be left with a £500 million shortfall as a result of these taxes. In my constituency, Perth and Kinross council is facing a £5.4 million recurring pressure, while Angus council faces a £5 million pound pressure. When indirect employees such as those in childcare settings, general practices, colleges or social care are included, the figure in Scotland rises to £750 million pounds, for which we have been offered £300 million in compensation. It is absolutely scandalous. In Scotland, which has more top universities per head of population than any other nation in the world, the university sector is under tremendous pressure. And what of the private sector? The bill for Scotland—the gross quantum by which it will be penalised by this fiscal misadventure—is £2 billion, and the private sector is on the hook for £1.25 billion of that, which is entirely unacceptable.
While we are talking about what is happening to Scotland, wouldn’t it have been nice if some of the Scottish Labour MPs had turned up for the debate to speak up for their constituents? [Interruption.] Perhaps one who was not a parliamentary private secretary, and did not have to be here.
About 600,000 people in Scotland are employed in the public sector, making up 22% of the workforce, as opposed to about 17% in the UK as a whole. That means that exposure in Scotland is even greater. The Fraser of Allander Institute has said that the UK Government appear to be applying Barnett consequentials to the public sector compensation for increased NICs, although public sector employees are not uniformly distributed between Scotland and rest of the UK. It notes:
“The UK Government has set aside £4.7 billion to compensate public sector employers”,
although the institute says that “it remains unclear” how they have done that. It says that
“The size of the Scottish devolved public sector is 547,000, which is 9.2% of all public sector employment in the UK”.
That is a consequence of Scotland’s geography, and of political decisions that have been made in Scotland. I am not shying away from that; far from it. I am proud of it.
The Westminster Government have increased the Scottish block grant for 2025-26 by £3.4 billion, which comes with a £2 billion clawback. That is devolution in a nutshell. The increase in national insurance will prove disastrous for wages, public services, businesses and growth in Scotland. Ahead of Scotland’s Budget tomorrow, it is vital for the UK Government to reconsider their approach and fully fund this Labour national insurance raid.
The OBR has said that it believes most of the increase in national insurance will be passed on to workers and consumers in the form of lower wages and higher prices—you do not need to be an economic wizard to work that out—and the Institute for Fiscal Studies has warned that the move will increase the cost of employing a worker in the bottom fifth of earners by 4%, compared with around 1.5% for workers in the top fifth of earners. As such, it is clear that this intervention will hit lower-paid workers worst and increase the risk of fewer jobs being available in the marketplace.
Business owners have said that they are now rethinking expansion plans for 2025 or delaying planned investments. In a joint letter earlier this month, 81 of the biggest retail names in the UK warned the Chancellor that her Budget
“will make job losses inevitable, and higher prices a certainty.”
The chief executive officers of Sainsbury’s, Asda and BT are all talking about rises in their operating costs, which will have to be funded somewhere, most likely through price rises.
The British Medical Association has described the national insurance increase as an
“existential threat to NHS General Practice”.
GPs are already struggling with a recruitment crisis and staff shortages at a time of growing demand and increasing pressures, and a survey of care home providers in Scotland found that nearly half of them are noting the very real possibility of service closure as a result of the increase in national insurance. Similarly, charities are negatively affected.
This measure is dysfunctional in a literal sense. It will not deliver what the Government hope; rather, as we all know and the Government should know, it will reduce growth, suppress wages, cost jobs, lower recruitment, increase inflation and lower living standards. What kind of Government would carry out such a calamitous act of economic self-harm? Well, we know: this kind of Government. I look forward to voting against this Bill tonight.
Mark Ferguson (Gateshead Central and Whickham) (Lab)
In the recent autumn Budget—it might feel like a long way away, but it was only a few weeks ago—the Chancellor made a decision to change the system of employer’s national insurance contributions. The purpose was to make the largest businesses make a contribution to fund the public services on which working people and businesses rely.
As part of the changes to national insurance, we have increased the employment allowance to £10,500, explicitly to protect small businesses. The changes mean that a quarter of a million employers will see the amount of national insurance that they pay get cut.
Richard Tice (Boston and Skegness) (Reform)
Does the hon. Gentleman seriously consider a GP surgery in my constituency with seven doctors and six members of staff to be one of the largest businesses, even though it is suffering from tens of thousands of pounds in extra costs and will have to lay people off, which will reduce capacity?
Mark Ferguson
I thank the hon. Gentleman, because he makes an excellent point that I was hoping to come to later in my speech. The previous Government cut national insurance, and do you know what was also cut? The number of GPs in my constituency. It is more complicated than Members pretend; it is not “national insurance vs. GPs”. If it were that simple, I would have more GPs, not less, in Gateshead Central and Whickham. I would urge those who were enthusiastically cheerleading the previous Government to take a moment to think about that.
Chris Vince (Harlow) (Lab/Co-op)
It is right to say that politics is far more complicated than soundbites. The previous Government, alongside their coalition partners, brought in austerity, which had a huge impact on small and medium-sized businesses, because it affected the spending power of working people. Does my hon. Friend agree?
Mark Ferguson
I thank my hon. Friend for making that point. It is always worth reminding Members of all shades and stripes of the existence of the coalition Government. Quite often I hear the Liberal Democrats talk about 14 years of terrible decisions, but I am afraid that they have to own five of those years.
We have not heard the Opposition thank this Government for increasing the minimum wage—the words are “thank you”, by the way—to £12.21 an hour. As we have seen, when we increase the minimum wage and put more money in the pockets of working people of all stripes, we see more money spent on high streets and in local communities, and more thriving local businesses. I have been meeting local businesses recently, including Prism Coffee in Saltwell park—it does an excellent flat white, by the way—the Rare Drop in Low Fell, which has an absolutely fantastic selection of beers and cheeses, and my next-door neighbour, the owner of Creations and Alterations, who can do some work on your suit.
But what people in Low Fell have been speaking to me about recently is crime—retail crime and crime on our high streets—and we are going to tackle that by raising money and spending more on the police so that they can be not only a visible presence in our communities but solve crimes. For too long, break-ins have been ignored, and that is a fundamental problem for businesses. If they are having to spend £1,400 on getting shutters for their shop on the high street, that is a fundamental hit to their bottom line. If they are having the back door of their business kicked in every night of the week, whether money is stolen or not, that it is pushing up their insurance premiums and it is a hit to their bottom line. How do we tackle that? With more police on the streets, and we will fund that with this national insurance increase.
Dave Doogan
The Government will receive £10 billion from this intervention in the tax regime. How many times are they going to spend it?
Mark Ferguson
I thank the hon. Member for his point. This is what is known as a balanced Budget, and we on this side of the House are going to do something remarkable. The amount of money that we raise will match the amount of money that we spend. I know that might seem alien to some of those on the Opposition Benches, but that is what we are going to do.
Mark Ferguson
No, I have been more than generous in taking interventions so far.
It is amazing to see the anger that has been generated among Conservative Members. Let us remember their record, because it is important for the context. In government, they doubled the national debt, stagnated wages—which is awful for businesses, by the way, especially small businesses that rely on local people spending money—and caused a cost of living crisis. Their own Prime Minister, Liz Truss—remember the name?—delivered a Budget made up of £45 billion of unfunded tax commitments and crashed the value of the pound to its lowest ever value against the dollar. The British people suffered, waiting lists soared, schools crumbled, buses did not come on time or at all and we waited hours for ambulances or years for surgery.
I am concerned about GPs, because I am sick of people having to call at 8 o’clock every morning to demand an appointment for themselves or for their child, only to be told that there are no appointments that day. This Government will invest in our NHS to tackle the GP crisis, because that is what hurts working people. When people are unwell, when people cannot go to work and when there is crime in their communities, that has an impact on business. It is false to say otherwise, and we cannot continue having this debate. We are taking a balanced and, in my view, reasonable position, which is why I will be voting for the Bill this evening. We raise taxes and we spend the money on things that are good for society. We cannot pretend that we can do good things for society without raising the taxes to pay for them.
Like many Labour Members, I have a huge amount of experience of opposition. I have never sat on the Opposition Benches and I do not want to sit on them any time soon, but I have a huge amount of experience of the business of opposition, and I would gently offer some advice that I doubt will be taken. You are going to have to do a lot better than this if you want to convince—[Interruption.] Sorry, Madam Deputy Speaker, I do apologise. The Conservatives will need to do a great deal to convince the British people that they have heard the lesson that was given to them in July. If they continue in this vein of listening to only one side of the conversation—the one that they want to hear—they might not like the answer they get.
Joe Robertson (Isle of Wight East) (Con)
It is the job of any Government to grow the economy and grow jobs. The best way of delivering money for public services is to grow the tax base without having to increase taxes, so it is hardly surprising that the Chancellor wrapped up her bad Budget as a growth Budget. Unfortunately, when she unwrapped it at the Dispatch Box, it was nothing of the kind. The Treasury’s own analysis said that growth would peak at 2% next year, and then fall for the rest of the decade. The OBR’s analysis said that the Budget was inflationary. It is bad for the economy and it is bad for the businesses that we rely on to grow our tax base for public services.
I turn now to public services, particularly health and social care. The Chancellor knows—and knew—that the increase in national insurance contributions will be devastating for healthcare, which is why she exempted the NHS, but that shows an extraordinary lack of understanding of how healthcare is delivered in this country. The NHS directly delivers a part of healthcare that is free at the point of use, but much of the rest is delivered indirectly through contracting, via partnerships such as GP practices, charities such as hospices, and businesses such as pharmacy, dentistry and social care providers. The NHS cannot exist without those key healthcare services, none of which shares in the exemption from the national insurance contribution rises.
The chief executive of Hospice UK has said that that means charitable income raised by hospices to the tune of £30 million will be taken in national insurance contributions to fund the NHS, which does not properly fund hospices in the first place. The British Dental Association wrote to the Secretary of State to ask whether there has been an impact assessment of the effect of national insurance contribution rises on the finances of dentists. The answer was that no impact assessment had been done. The Government do not even understand the effects of their Budget and these national insurance contribution rises on healthcare in this country.
For two local hospices just outside my constituency, Mountbatten Isle of Wight and Mountbatten Hampshire, which serve my constituents, the combined effect of these national insurance contribution rises and the pay rises for nurses, for which the NHS will not pay the hospices, is £900,000 of costs, with not a penny promised or delivered through the contract with the integrated care board.
It is all very well for Labour Members to say that this Budget will deliver for the NHS, but that is not much good when it will put further pressure on GP practices, pharmacies, hospices, dentistry and social care. If those services crumble, the NHS will not be able to continue in its current form, so I urge Labour Members to press the Secretary of State for Health and Social Care to get on with his reforms to properly fund GPs, hospices, pharmacies and dentists before they have to make tough decisions that will mean redundancies and job losses.
Several hon. Members rose—
Madam Deputy Speaker (Ms Nusrat Ghani)
I have just calculated how to get everybody in before we run out of time, and I will have to drop the time limit to four minutes.
Mr Mark Sewards (Leeds South West and Morley) (Lab)
It is clear to everyone on this side of the House that the measures in the Bill are a vital step towards securing the long-term stability of the public finances. We are not prepared to continue with the fiction that no difficult decisions are required to balance the books. Unlike the Conservatives, this Labour Government are not interested in more decline, more austerity or forcing the poorest in society to pay for the previous Government’s mistakes.
The decisions that we are taking are not easy. Increasing employer national insurance contributions to 15% is not easy. Reducing the secondary threshold to £5,000 is not easy. And, of course, constituents are absolutely right to ask me why this is happening. Well, that question would be best answered by the Conservatives.
The Conservatives crashed our economy, mortgage rates went through the roof, and billions of pounds of taxpayers’ money was wasted on a failed asylum system and on dodgy covid contracts. They promised the victims of the infected blood scandal that they would be compensated, but they did not put a single penny aside for it. They promised the same for the sub-postmasters. They promised 40 new hospitals, but they did not allocate anywhere near enough money to deliver them, and they are still pretending that they would not have given a single penny in pay rises to our public sector workers.
The Conservatives spent the national reserve three times over in the first three months of this financial year, and all before calling an election they expected to lose, so somebody else could clean up the mess. They chose to govern not in the national interest, but in their own interest. Some Conservative Members have been brave enough to come to the House today and remind us of their great legacy, but I have to tell them that 14 years of failure and a £22 billion black hole, leaving our nation on the brink of bankruptcy, is their legacy.
By making changes to national insurance contributions, we will be able to provide the funding to public services that is desperately needed, including, but not limited to, investing £25 billion in our NHS, recruiting 6,500 new teachers and providing local authorities with £600 million for social care.
Patrick Spencer (Central Suffolk and North Ipswich) (Con)
On that point, will the hon. Gentleman give way?
Mr Sewards
I will not, as I want to ensure everybody gets in.
In addition, we are committed to protecting small businesses by increasing the employment allowance to £10,500. We are blessed in Leeds South West and Morley with hundreds of small businesses, right across the constituency, from Queen Street in Morley, to Wortley, and back again to Ardsley. I can say to many of them that the changes will mean that many small businesses will pay the same or less than they do now.
We will not run away from the difficult decisions—we back our country to succeed. Given the obvious opposition of Conservative Members to the measures, I ask them, how will they pay for our public services? Perhaps I need to give way at this point.
Patrick Spencer
I serve on the Education Committee with the hon. Gentleman, and I wonder what he will say to people who work in the education sector, many of whom are low paid and running schools that support teaching assistants to work with children with special educational needs and disabilities. They now face a bigger wage bill because of the measures the Government are introducing. Will the hon. Gentleman address those points?
Mr Sewards
In the minute remaining to me, I gently say to the hon. Gentleman that he needs to have a word with the Leader of the Opposition. The simple truth is that she has welcomed the positive spending plans that we have put forward in the Budget, but has rejected every revenue-raising measure we have suggested.
We are going to take the tough decisions, including those set out in the Bill, to fix the foundations of our economy and restore our public finances. The choice is pretty clear: a Labour Government who invest in our country’s future or a Conservative party still obsessed with fantasy politics based on saving the party, not our country. The choice is clear, and I know which side I am on.
Steff Aquarone (North Norfolk) (LD)
Since the changes to national insurance were announced in the Budget, I have been contacted by constituents from a whole load of different sectors who have said how worried they are about the changes.
I have had deeply concerned GPs tell me about the impact the changes will have on their already overstretched budgets. Local dentists, of whom there are already far too few, have said the changes make it even harder for them to deliver treatments under the current NHS dental contract. Small business owners, who, as we have heard, are the backbone of much of the local economy, especially in North Norfolk, are worried the changes might push their slim profit margins into the red.
I want to raise the plight of a very important part of the North Norfolk business economy: our small cultural venues. I heard recently from Debbie, who runs the much-loved Sheringham Little Theatre, which might be little in name but is big in impact. Sheringham Little Theatre has nurtured the careers of dozens of young theatre performers, as well as technicians, writers and directors. It is a fantastic venue to put on productions, and was supported by one of North Norfolk’s most famous residents, the late and great John Hurt. As a registered charity, Sheringham Little Theatre also provides volunteering opportunities that are vital to reducing social isolation and supporting the local community. The changes in the Budget are a cause for serious concern to Debbie and her team. They have been able to secure fundraising in the past for exciting new projects and capital investment, but now they will need to raise thousands of pounds in donations just to keep the lights on.
Even in commercial venues, the pressure of a blanket increase in employer national insurance is threatening jobs and entire venues. Cromer pier is one of the most famous icons in North Norfolk, and is 2024’s pier of the year. Even with a commercial operator, who has brought it from loss making to net revenue generating for the local council, these changes risk shuttering Europe’s last end-of-pier theatre.
The lack of protection for arts and cultural venues is hugely demoralising for both those venues, and prevents them from making new investments and providing more opportunities locally. North Norfolk’s creative industry is incredibly exciting and growing at pace. The loss of venues and organisations such as the Little Theatre would be a hammer blow for a blossoming sector in my constituency. Our small cultural and arts venues contribute so much to North Norfolk, both through the joy they bring with their events and through their contribution to our local economy. They are crucial to our tourism industry as well.
Unlike those on the Conservative Benches, the Liberal Democrats are happy to share our alternative solutions when it comes to our concerns with the Budget. Rather than imposing a blanket pre-profit tax such as this, why do the Government not try a tech tax, tighten up on tax havens that are still Crown dependencies or disallow brand licensing as a deduction against profits by global corporations? Where we were once promised radical reform, we have ended up with hope-crushing, growth-stifling jobs taxes. It cannot be fair that organisations such as Sheringham Little Theatre are forced to struggle while billionaire tech barons such as Elon Musk and others continue to sit on great hoards of taxable revenue.
I hope the Government will listen to the Liberal Democrats’ proposals and go back to the drawing board to make their plans fairer for everyone. Unfortunately, the Bill punishes small businesses, burdens local authorities and adds even more strain to our health services. I will vote against it this evening.
Tom Hayes (Bournemouth East) (Lab)
As a new Member of Parliament, I was looking at the shadow Minister, the hon. Member for North Bedfordshire (Richard Fuller), when he was responding to the Minister, and trying to figure out why he looked so familiar. I realised that it was because he was Liz Truss’s Economic Secretary to the Treasury; the person who had to go out and defend Liz Truss’s mini-Budget. I therefore wonder why this new Conservative party led by a new person is sending out Liz Truss’s Treasury Minister to respond to a Labour Budget that is mopping up some of the mess created by her. When I realised that, it got me thinking about how much we should be listening to the Conservative party. This is a party that, in its contributions today, has shown no desire to learn a lesson from the election or listen to voters who were so damaged in their incomes and their lives by the Government we have replaced, but only a desire to play politics at its worst. The Conservative party has done that rather than actually scrutinise what this Government’s Budget is intended to achieve.
It is worth reflecting on what has happened over recent years. The economy crashed, mortgages were sent through the roof and an early election was called to avoid the Conservative party having to deliver the Budget. There were covid contracts that cost this country millions and a £22 billion black hole; that is what this Government are having to respond to.
Stuart Anderson
As this is such an important topic, why are there fewer than half a dozen Back-Bench Government MPs here to discuss it? It is not important enough to get their Benches full?
Tom Hayes
I have literally just said that this debate should not be about party politics, but about the scrutiny of this Government’s Budget. Instead of asking questions about the nature and substance of the Budget, the Opposition are resorting to party politics. [Interruption.] As my hon. Friend the Member for Harlow (Chris Vince) says from a sedentary position, we could list debates such as the Grenfell Tower inquiry debate yesterday, during which Conservative Members were deserting their Benches.
The burden of tax has fallen on working people for far too long under the Conservatives. Working people have suffered in many more ways, too: they have been unable to get the NHS appointments they want, the mortgages they want and all the services they should be entitled to. When I have knocked on doors in Bournemouth East and spoken with thousands of people over the last two years, the overwhelming feeling has been of hopelessness. It is the feeling that nothing ever changes in politics because there is a constant back and forth between our Benches about unimportant things rather than a focus on what those people actually want.
People want an NHS that will truly deliver. They want the 40,000 additional appointments a week. They want the billion pounds that is being invested in SEND. They want the £600 million going into social care. They want the £22 billion going into our NHS to start to fix the problems that have been ongoing for 14 years. I say to Opposition Members that if they are dedicated to their constituencies, if they care deeply about putting our public services back on track, and if they care about an economy that grows so that we have private businesses supporting our investment in the public sector, they should be voting with the Government tonight. I am disappointed to see so many of them saying that they will not be doing so.
Damian Hinds (East Hampshire) (Con)
We are the Opposition. You are the Government.
Tom Hayes
We are the Government taking decisions in the national interest. The Conservatives are the Opposition taking decisions on behalf of their party’s interest. That is why, I am afraid, the Conservatives will not be coming back into power any time soon. They are not prepared to listen to what voters want, they are not prepared to take the tough decisions, and they are not prepared to come to the table, be constructive and try to put right the problems that they have created.
We have a long road ahead to put our NHS our economy and our public finances back on track, but this is a Government with a historic majority and a historic mandate to serve our nation’s interest. I call on those on the Opposition Benches—obviously not the Conservatives—to support this Government in what we are doing, because, together, we can put this country back together.
Damian Hinds (East Hampshire) (Con)
We have a mission-led Government. I am not sure whether anybody knows exactly what that means, but we do know what the mission is meant to be: delivering for working people. But I am afraid that the Government have forgotten how working people become working people. It is the people—the other people—who employ them. All of us in this House want excellent public services, but it is only the Conservatives who understand that to get excellent public services, business needs to generate the wealth. The Government have a bit of a “four legs good, two legs bad” mantra that sees business as a cash cow to be milked to pay for the public sector. They have forgotten that fundamental dependency. They have even messed up the “four legs good, two legs bad” theory, because they seem to have forgotten that a very large part of what delivers our public services is people—people who are not directly employed by the public sector.
Let us take nurseries as an example. We have had another mission this week on early years education, which I welcome, but it will be hampered in its delivery by this national insurance contributions rise. Then there are the universities. They received a bonus of £390 million from a fee increase a couple of weeks ago, but they will be paying £400 million in extra national insurance contributions.
I have also heard from many GPs across my constituency in East Hampshire, who see the Government giving with one hand and taking away with the other. The Minister says that the Government will take care of this in the settlement for GPs, which is fine, but it should have come on top of what they should have been doing for GPs anyway. Lord Darzi and the Secretary of State have been talking about increasing the focus on primary care. We know how the Treasury works when it is making its spending allocations to Departments; things will be tucked in under that settlement, so we need to see it rise. How do the Government think GP practices plan? Here we are in December, and the new financial year starts at the beginning of April. Do Ministers not think that, in the national health service, general practitioners need certainty now about what is going to happen?
The wider point is this: the Treasury can reimburse GPs, but it cannot reimburse the private sector. Ultimately, there is no such thing as a tax on business. Taxes can only ever ultimately fall on people. They fall on the owners of that business, the customers of that business, or the employees of that business. The analogy for the Treasury reimbursing GP practices for their increased costs is the employees of a private company reimbursing their employer for that cost. It is they who will ultimately pay. Economists are united in saying that employer national insurance contributions are only ever, in the end, seen in lower wages or lower employment figures. The Government talk about difficult decisions, but difficult decisions are the ones that employers will be faced with: do I cut down my wage settlements or do I let people go?
Jim Shannon (Strangford) (DUP)
Not more than half an hour ago, I met a businessman from Northern Ireland whose firm employs 1,200 people. He said national insurance contributions will cost the firm almost £1 million a year. The cost will ultimately be passed on in its food prices, which will rise by between 15% and 20%, and the ordinary man or woman on the street will pay for it. Does the right hon. Gentleman agree that that is where the Labour party has got this wrong?
Damian Hinds
The hon. Gentleman is quite right. This is not some trivial increase that is easy for an organisation to absorb. While 1.2 percentage points may not sound like much, with the serious decrease in the threshold at which it starts being paid, it is a lot of money. The cost of employing the average worker on medium earnings goes up by £900. For a 21-year-old on the legal minimum wage working full time, the cost goes up by £770. Moreover, it is regressive because it will fall more harshly on people at the lower end of the wage spectrum and on people who are part time. It cannot be seen in isolation; it must be seen alongside all the other things the Government are doing. Of course, the national living wage has risen. That increase is a good thing in itself, but the effect compounds with the other measures being taken.
Two of the three volume employer sectors in this country—retail and hospitality—are also seeing a massive reduction in the business rates relief they are getting next year. When unemployment hits, young people are always hit first and most, and that will be true again. It will hit those furthest from the labour market, those who need most help, those coming back to work after a long period and those who were ex-offenders. I sometimes wonder if Ministers talk to each other about the contradiction and irony of one of them producing a document called, “Get Britain Working” while their colleague is hellbent on doing the opposite.
Dan Tomlinson (Chipping Barnet) (Lab)
It is good to speak in this important debate. This is an issue of much importance, in part because it touches on trust in politics. We know from looking at the datasets that trust in politics has fallen to a record low in this country. People sadly do not trust politicians any more to deliver on the commitments they set out in their manifestos and to bring the change necessary to improve our public services. That is the data we can see, and we can see it because of the decisions of the Conservative party.
Patrick Spencer
Does the hon. Member not think that the fact the Labour party went into the last general election promising not to raise taxes on working people might be part of the problem?
Dan Tomlinson
We have stuck to the commitments we made in our manifesto, and that is why the British people will see over the months and years to come that they voted for change and investment in our public services, and that is what this Budget makes possible.
When we came into power in July, we faced a difficult economic inheritance. I wish we had taken power in more benign circumstances, but Opposition Members will know that public sector debt had increased to 100% of GDP—the same size as the economy—and trillions of pounds, constraining our ability—[Interruption.] They are chuntering from the Front Bench, but it is true that public sector debt increased to 100% of GDP—a massive increase on the Conservatives’ watch—making it more difficult for us to manage the public finances in a sustainable way, which is what we want to do and what they failed to do.
We also took over after 14 years of failure on productivity and wage growth. If wages had grown in line with the pre-financial crisis trend, families in my constituency and constituencies across the country would not be £100 or £200 better off a year; each worker would be £10,700 better off a year.
Stuart Anderson
On productivity, all the public sector wage increases that have been given since the Government have been in power come with no productivity requests or increases. How does the hon. Member square that circle?
Dan Tomlinson
I think we will see productivity increases in the NHS, because part of the reason that it has struggled for productivity in recent years is that it has not had the necessary investment, so doctors and nurses have not had the beds and capital expenditure that they need in their hospitals. I have been to Barnet hospital in my Chipping Barnet constituency and spoken to the chief executive of the trust. They were clear that what has happened nationally, and has filtered through to their hospital, is that capital spending budgets have been raided to fund day-to-day spending, and that has made it more difficult for the NHS to be productive. More beds and £3 billion for scanners and other capital equipment will make a difference to productivity in the NHS. [Interruption.] Conservative Members know that that is the case.
Let us just go back to the inheritance that the Labour Government face. We have high public debt, low productivity and wage growth. Our economy has also been hampered because the Conservative party has made it much more difficult for us to trade with our nearest neighbours. That has been bad for competition and productivity across the country. I could go on about the economic inheritance, but I do not wish to make hyperbolic statements or overdo it; we can just look at the facts presented to the Labour Government.
Bradley Thomas
When the Conservative Government headed by David Cameron were elected in 2010, the circumstances that they faced following Labour’s trashing of the economy meant that it took two and a half to three years to get the public on board. That stands in great contrast to what happened this summer, when Labour inherited good economic circumstances, with the economy growing and inflation down. In fact, has the electorate not been deceived?
Dan Tomlinson
The economy was not growing at a fast pace when we took over; we were growing slower than five other G7 countries in the quarter before the Conservative party lost power. That is the truth. Conservative Members can deny it if they want, and come up with a fancy way to analyse the economic statistics in order to claim that we were the fastest-growing economy in the G7, but in the final quarter before they lost office—and in 2023—we were growing slower than five other G7 countries. We were growing faster than other countries in 2022 only because we were recovering from the pandemic. They know that that is the case.
I fear that, in their stance today, Conservative Members are again covering themselves in the pong of the Liz Truss Administration. That Administration made the mistake of not making efforts to balance day-to-day public spending and tax increases. That is what caused interest rates to rise and the economy to be in much turmoil. The Labour Government are ensuring that increases in day-to-day spending are matched by increases in tax revenues—[Interruption.] I said increases in day-to-day spending are being matched by tax revenues.
Madam Deputy Speaker (Ms Nusrat Ghani)
Order. The hon. Gentleman has already taken two interventions, and the clock will now continue to run for every subsequent intervention that he takes, just in case he was not aware of that and wants to take this intervention from Mr Hinds.
Dan Tomlinson
Maybe I will take further interventions when I speak in tomorrow’s debate, Madam Deputy Speaker, because I know that many Members still wish to speak.
In my final 13 seconds, let me conclude by saying that the risk for the Conservative party is that it forgets the importance of managing the public finances, which gives us the economic stability from which growth can come. By voting against the Government, Conservative Members will make that more difficult, and will signal that they do not wish to have economic stability and growth.
Sammy Wilson (East Antrim) (DUP)
The Bill represents a major breach of the promises made by the Government when they stood for election. The previous speaker, the hon. Member for Chipping Barnet (Dan Tomlinson), was right: people should be cynical, and people are cynical about the way in which politics is sometimes conducted in this country. He talked about his amazement at the anger expressed from the Opposition Benches. I assure the House that, were the situation reversed—with the Conservative party on the Government Benches, introducing measures that the Office for Budget Responsibility, the IFS and everybody else said would hurt ordinary working people—Labour Members would be incandescent with rage.
That is the whole point. A promise was made: “We will not tax working people.” At the end of the day, when people have to pay for their goods, their shopping and so on, it really does not matter to them whether their income has been reduced as a result of direct taxation being taken out of their pay packets in the form of income tax, or whether it has been reduced indirectly by taking the money from their employer. In turn, as the IFS, the OBR and others have said, that will impact on real wages. As the IFS pointed out, it will especially impact the real wages of the lowest paid—that is the whole point. We can play with words, but the truth of the matter is that a tax increase has been imposed on employers, and the OBR says that in 76% of cases, the impact on wages will be felt by ordinary working people. That is a broken promise, no matter how we look at it.
The Government’s excuse has been that they will try to alleviate that impact. People have talked about different sectors so far in the debate, and I am not going to go through all of them, but let us just look at two examples. The first is small businesses. We are told that they can deal with the impact because they are geniuses. What will they do? They will increase productivity. Funnily enough, the public sector is to be protected—the Government are not looking for any increases in productivity there.
We are told that small businesses will find ways of decreasing their expenditure, but funnily enough, the Government are actually looking for ways of spending more money. They are spending £9 billion on a quango, Great British Energy. The Secretary of State for Energy Security and Net Zero came back from COP29 and told us that the Government were now committed to giving £300 billion away to foreign Governments for climate change, but he would not even tell us how much the Government were going to pay out to those Governments. For the nationalisation of the railways, again, there is an open cheque book. We are told that there are no alternatives. Businesses have to find alternatives, but the Government happily spend the revenue that they are taking.
Then, of course, the social care sector and GPs are told, “Go to the NHS and renegotiate your contract.” The NHS does not have to pay the national insurance rise itself—it is exempt. Do we really believe that when the GPs and the social care sector go to the NHS and say, “We want to renegotiate our contracts,” the NHS is going to say, “Oh, you need money for national insurance? There you are—take it.” All the excuses have been given today: we are told that there is no money, but it can be spent on other things. We are told that the social care sector and GPs can renegotiate, and that the private sector will be inventive. Let us see some invention by the Government, rather than broken promises.
Jess Brown-Fuller (Chichester) (LD)
Thank you, Madam Deputy Speaker, for the opportunity to share the concerns that my constituents and businesses in Chichester have raised with me since the announcement in the Chancellor’s Budget that employer’s national insurance contributions would be increased.
First, I would like to acknowledge the Labour Government’s inheritance from the previous Government, and recognise that tough decisions need to be made to rebuild public services, especially our health service. The Liberal Democrats welcome the proposed increase to employment allowance, but the blanket increase in the rate of secondary class 1 contributions across all sectors is going to make things harder for GPs, social care providers, charities and local authorities in my constituency and across the country. Those sectors have had a tough time for years, struggling with rising energy costs and higher interest rates, with thousands of care providers on the brink of bankruptcy, NHS dentists already delivering some NHS treatments at a financial loss, and charities already grappling with underfunded public sector contracts.
West Meads GP surgery is one of the smaller practices in Bersted in my constituency. It is looking at increased costs of at least £25,000, which will mean a reduction in staffing hours. The GP who wrote to me said:
“This is a first and will certainly impact on patient care if not addressed.”
The same can be said for Witterings Medical Centre, another practice that is already operating under extraordinary demand. The added costs will exacerbate strain in the system, because overstretched and under-resourced GPs will lead to an increase in hospital admissions, overwhelming NHS capacity at a time when it already cannot cope. The Government’s treatment of GPs as private entities excludes them from the employment allowance support, and if we do not fix the front and the back door of our national health service, the middle—our secondary care, our hospitals—will continue to bear the burden.
St Wilfrid’s hospice echoes these challenges, citing the inequity in exemptions being granted to NHS services, but not to charities providing similar health-related services. The hospice predicts a bill increase of £175,000. That would pay for four nurses, who could be out in the community providing care for the most vulnerable. The predicted national impact of this rise on the charitable sector is £1.4 billion. While I am on the topic of charities, I would like briefly to mention Stonepillow, a charity that supports individuals experiencing homelessness and with compound needs. It has seen a doubling of demand since 2018—it serves 1,000 clients annually—and it reports needing to find an additional £150,000 every year to continue offering its service.
The Secretary of State for Health and Social Care talked of moving the health model in this country from treatment to prevention and from hospital to community, but the increase in NICs directly undermines the ability to do that, if GPs have to reduce their services, if more dentists move further away from NHS contracts, if social care staff lose their jobs when their small and medium-sized care providers go bankrupt, and if community pharmacies, a key pillar in the NHS ecosystem, face spiralling debt and struggle to keep pace with operating costs.
In the interests of constructive opposition, I am not minded to bring problems without solutions. The Chancellor could have chosen to raise the money needed through the much fairer tax changes laid out in the Liberal Democrat manifesto during the general election, such as the reversal of the Conservative tax cuts for the big banks, doubling the rate of gaming duty paid by online gambling services or a fairer reform of capital gains tax. If I had more than 10 seconds left, I would give many other reasons why I am unfortunately unable to support this Bill on Second Reading.
Rupert Lowe (Great Yarmouth) (Reform)
I start by reminding the House of a prescient analogy of Winston Churchill’s:
“For a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.”
This national insurance increase and threshold cut is simply a tax on jobs in the private sector. It will result in less employment, fewer bonuses, smaller pay rises and higher prices—and for what? To fund a state that is out of control and shows no regard for taxpayers’ money. That is exemplified by the Department for Work and Pensions, which hands out money like confetti, without the requisite disciplines. The answer is to radically cut the size of the state and release the innate creativity of the British people. What we need is less state, less tax, less bureaucracy and more prosperity. Will the Government accept full responsibility for the suffering that this tax increase will inevitably cause to our working people?
Alison Bennett (Mid Sussex) (LD)
On Saturday evening, I was lucky to attend Sussex Chorus’s performance of Handel’s “Messiah” at St Andrew’s church in Burgess Hill. There was a collection at the end for the St Peter and St James hospice, which looks after many people in Mid Sussex. As I put my donation in the bucket, the lady holding the bucket thanked me, and she told me that her husband had spent his last days at St Peter and St James. When she realised that I was the local MP, she grasped my hand tightly, and said, “You have to do something about NICs.” I said that I had been trying to, and had been raising the matter in the Houses of Parliament, but having not been heard so far, I will raise it again today.
Our hospices and social care providers do hugely difficult, often invisible work. They look after the weak, the vulnerable and the dying, but these organisations are themselves even more vulnerable than they were as a result of the Government’s proposed changes to employer national insurance contributions, announced in the Budget. That jobs tax jeopardises the quality and reach of the services that will be available in my constituency and across the country. The children’s hospice charity Together for Short Lives estimates that the rise from 13.8% to 15% in April 2025 that was announced in the Budget will increase costs for children’s hospices, which provide lifeline care to seriously ill children, by nearly £5 million annually. Combined with inflation, falling local NHS and council funding, and uncertainty around the NHS children’s hospice grant, this policy risks reducing or even closing essential services. In the social care sector, MHA, which supports more than 17,000 older people across 80 care homes, 59 retirement communities, and 43 community based hubs, estimates that it will face an additional £4.6 million in costs in the first year alone.
Alison Bennett
I would like to make progress. Around 18,000 private social care providers operate in the UK. We must help them to help those in need, and we cannot afford to put up more barriers for them. How can we expect those providers to survive if we impose higher taxes on them? This is not making the most of an opportunity for long-term positive change; I am sad to say that it is squandering it.
The Government could have found better ways to raise the necessary funds. They could have reversed tax cuts for big banks, increased digital services taxes, or even reformed capital gains tax to ensure that the wealthiest pay their fair share. My Liberal Democrat colleagues and I have repeatedly urged the Government to exempt social care providers and hospices from the tax rise, and I do so once again today. Let us do right by those who work tirelessly to support and protect our most vulnerable, and in doing so, let us build a healthcare system fit for the future.
Graham Leadbitter (Moray West, Nairn and Strathspey) (SNP)
Government Members have talked about difficult choices. Not taking away the winter fuel payment from people, or voting to remove the two-child cap, might also have been difficult choices, but instead they have been easy targets. This Bill adds to those easy targets.
The Bill, presented under the guise of fiscal responsibility, is a thinly veiled austerity measure that will disproportionately burden Scotland and undermine our ability to deliver vital services to our citizens. The increase in employer national insurance contributions is touted by the Government as a necessary step to bolster public finances. However, closer examination reveals the stark reality: the increase will lead to a significant shortfall in Scotland’s public sector funding. We will be left grappling with the fact that the UK Government undervalued the cost of the measure by at least £200 million.
Scottish Government figures, corroborated by independent analysis from reputable institutions such as the Fraser of Allander Institute, paint a grim picture. The national insurance hike will cost Scotland more than £500 million, including a staggering £191 million burden on our already stretched NHS. That figure rises to an alarming £750 million when we factor in indirect employees in sectors such as childcare, GP practices and social care—sectors vital to the fabric of our society.
In Moray West, Nairn and Strathspey, a local firm with a number of care homes across the north of Scotland faces an £800,000 bill. It provides vital services to the community. To give another example, a local dentist has said that the increased cost of employment as a result of the Bill may force them to go private to recoup those costs. Finally, the Bill is a double whammy for GP practices. They face the national insurance hit, but by dint of being designated a public service, are not eligible for employment allowance.
The UK Government’s paltry offer of £300 million in Barnett consequentials is simply not enough to bridge the gap, and it fails to account for Scotland’s proportionally larger public sector, which employs 22% of the workforce, compared with 17% in the UK as a whole. Among other reasons, that is because in Scotland, we already have a publicly owned and managed rail service, and a publicly owned and managed water service. The funding disparity is a clear indication that the UK Government have given scant consideration to the unique needs and circumstances of Scotland. That includes the disregard demonstrated in the winter fuel payment debacle, which exposes a pattern of neglect, regardless of which party occupies the Government Benches. It is exactly this pattern of neglect and lack of understanding of Scotland by successive UK Governments that strengthens the case for Scottish independence, and for our ability to take decisions for ourselves, like every other normal country, on the delivery of public services and taxation that impacts us.
The impact of the Bill goes far beyond mere budgetary concerns. It will have a ripple effect across our economy, harming businesses, stifling growth and ultimately hurting the very workers it purports to protect. The Office for Budget Responsibility has cautioned that the increase will likely lead to lower wages and higher prices; effectively, the burden will be passed on to consumers, and the purchasing power of hard-working families will be eroded. We urge the UK Government to reconsider this damaging Bill, to fully fund the cost of this tax hike to public services in Scotland, and to engage in a meaningful dialogue with the Scottish Government, so that Scotland’s interests are protected.
Madam Deputy Speaker (Ms Nusrat Ghani)
We have two remaining Back-Bench contributions. Colleagues who have contributed to the debate should consider making their way back to the Chamber before the wind-ups.
Sarah Dyke (Glastonbury and Somerton) (LD)
I rise to share my concerns about the unintended consequences of this tax hike on small businesses, GPs, social care providers and farm businesses. The arguments about the damage that the previous Government left are well rehearsed, and significant effort is needed to rebuild public services and repair public finances, but this measure will do just the opposite. As GPs and the vast majority of care providers are private, they will not benefit from the compensation that the Chancellor will give to the NHS and other public sector employers to cover the cost of this tax increase.
Langport surgery in my constituency told me that it faces an additional cost of £45,000 a year, due to the national insurance rise. It said:
“at a time when general practice is facing workforce shortages, higher costs could make it even harder to hire and retain staff, directly impacting patient access”
to good-quality care. The impact on social care providers could also be severe; six in 10 of the UK’s care home beds are provided by companies that could go bankrupt if they experience even a mild economic shock. I have been discussing these difficulties with Wincanton Cares, a support and advice group for people needing care in south-east Somerset. It is concerned that care home closures may well happen, as the funding model is so precarious.
I am also worried about the impact that the measure could have on small businesses, which are the foundation of the Government’s growth agenda. In advance of Small Business Saturday, I have spoken to many businesses in Glastonbury and Somerton, including Topline Glass based in Ilton. It described the Budget as a triple whammy of increased NICs, wage rises and business rate increases. The OBR has estimated that the increases to employer NICs will reduce potential output by 0.1%, while the costs to businesses will lead to lower wages and profits. The Government should have instead listened to Liberal Democrat calls to raise money through fairer tax changes, such as reversing the Conservative tax cuts handed to big banks, increasing the digital services tax to 6%, doubling the rate of remote gaming duty paid by online gambling companies, and fair reform of capital gains tax, so that the 0.1% of ultra-wealthy individuals pay their fair share.
Many farming and agricultural businesses will also be hit by this tax rise. In addition, farming businesses will now be subject to increased NICs, further stretching their budgets. The CEO of the Nature Friendly Farming Network has stated that the increase in national insurance will be a big concern for businesses that rely on a large workforce to pick, process and package food. As farming yields very slim returns, those added costs will likely be passed on to consumers, pushing up food prices and disproportionately affecting those least able to afford high-quality, UK-produced food.
The likely increase in the cost of UK food would inevitably lead to a reliance on cheaper imports, particularly from countries with lower production and welfare standards, undermining UK farmers and potentially increasing climate-related harm elsewhere. Driving down food security and pushing up prices is damaging to national security. The Government have an opportunity to look again at these measures that damage British farming. If they will not, they will not be forgiven.
Liz Jarvis (Eastleigh) (LD)
I am grateful for the opportunity to contribute to this important debate. I have previously raised in the Chamber the impact that increased employer national insurance contributions will have on GPs, dentists, pharmacies and care providers in my constituency of Eastleigh. I have also been contacted by many owners of small businesses who are hugely concerned about the impact that changes to employer national insurance contributions will have on their businesses. That includes the early years sector, which plays a crucial role in supporting working families and the wider economy. Providers who operate on tight margins and with a limited ability to adjust income face unique challenges. For a sector that is already under immense financial pressure, this added burden feels short-sighted and risks undermining the stability of a service that families rely on so heavily.
Crestwood pre-school in my constituency serves local families by providing care and education for children aged two to five. As a charity-run pre-school, it is already stretched to its limits, despite huge fundraising efforts. Clare, the manager of Crestwood, wrote to me explaining how the increase in employer national insurance contributions will add tens of thousands of pounds to its annual costs. Those are funds that it simply does not have.
I have also heard from Forest Footsteps Childcare in Chandler’s Ford, another early years provider in my constituency. Erin, who opened the centre in 2022, is worried about how she will manage the extra costs. She calculated that the new national insurance plans for employers’ contributions along with the rise in the national minimum wage will cost her approximately £13,000 a year more. While she is showing remarkable resilience, she told me that some providers have been less fortunate and already closed their doors.
The YMCA Eastleigh nursery and community centre has also shared its concerns. It told me that the combined impact of these changes will cost the nursery and community centre an extra £95,000 a year. This is a problem being acutely felt across the whole sector.
These stories are not unique. Across the country, nurseries, pre-schools and childminders are warning that rising employer national insurance contributions coupled with inadequate Government funding will lead to higher fees for parents, reductions in staff pay and closures in those essential early years settings, which would not only harm working families but risk deepening the staffing crisis in the sector. What reassurance can the Minister give early years and childcare providers in Eastleigh and across the country that they will not be adversely affected?
Raising employer national insurance is a tax on jobs that will hurt small businesses and essential services. The Government must reconsider their approach. The early years sector, primary care and small businesses are not staffed by those with the broadest shoulders. This weekend we have Small Business Saturday, a chance to celebrate the incredible work of small businesses, who do so much for our communities. They need our support. The Government must think again and support working families. They must rethink this unhelpful policy.
Gareth Davies (Grantham and Bourne) (Con)
It is a great pleasure to wind up the debate on behalf of the official Opposition. I pay tribute to and thank all colleagues from both sides of the House for their contributions. I will try to touch on some of their points as I go through.
Just nine months ago, I opened the Second Reading of a Conservative national insurance Bill that cut taxes for millions of working people across the country. Today, we have before us a Labour national insurance Bill that will take the tax burden to the highest levels in history on the backs of working people. That is the stark difference that a Labour Government make, but it is not the change that people voted for.
Nine months ago, the Economic Secretary to the Treasury told the House that the then Opposition supported our tax cut, but barely three hours later, she and her Labour colleagues remarkably failed to vote for it and back up their words with actions. Now we know why: it is Labour’s playbook to say one thing as loudly as possible and then do the exact opposite as quietly as it can.
Stuart Anderson
On the Government’s tax policy, does my hon. Friend think it is concerning that the Chancellor today refused to rule out further tax rises in future Budgets?
Gareth Davies
Absolutely. We all heard what the Chancellor said at the Confederation of British Industry conference. It is remarkable that the Prime Minister will not back up her words, and even more remarkable that the Chancellor herself would not back up her words today at Treasury questions.
The British people see the Bill for what it is: the biggest broken promise of them all, and there are plenty to choose from. It is a good job the Chancellor has experience on a complaints desk, because, quite frankly, there are quite a lot coming in at the moment—not least from the business community, as my hon. Friend the Member for South Shropshire (Stuart Anderson) highlighted so well in his speech. Before the election, the Chancellor embarked on what she referred to as the “smoked salmon offensive” with British business; now the election is over, she has dropped the smoked salmon and is focusing on just being offensive.
Today’s Bill will introduce tax rises on working people in business that were never declared before the election. It is a double whammy, as the Federation of Small Businesses has said in Lincolnshire: it introduces not just the rate rise, but a reduction in the threshold. This tax is the only major tax that is paid exclusively by working people. It is a £25 billion tax rise on jobs. The OBR makes it clear that by 2027, 76% of the total cost of this tax increase will be passed on to working people through lower wages and higher prices, as the hon. Member for Angus and Perthshire Glens (Dave Doogan) said in what I thought was a very thoughtful speech for the SNP.
As I said at Treasury questions this morning, the OBR says this is a tax on working people; the IFS says this is a tax on working people; even the Resolution Foundation says this is a tax on working people. By anyone’s measure—be in no doubt—this is a manifesto breach the public will not forget. That is clear.
What is not so clear any more is what this Labour party stands for. The Budget was an attack not just on working people, but on the very lowest paid working people, according to the IFS. This is a fundamentally regressive policy, leaving many out in the cold and giving businesses no choice but to freeze hiring and freeze wages. It will hit others, too. It will hit the doctors and the nurses working in general practice and social care, as my right hon. Friend the Member for East Hampshire (Damian Hinds) set out in his speech. It will hit charities and voluntary organisations, with Marie Curie expecting that it will cost the charity £3 million next year alone—all part of a £1.4 billion bombshell to hit all charities next year. It will hit hospices, homeless support groups and disability charities, which are all warning they face reducing headcount and limiting services. This is not what the British people voted for.
Dave Doogan
Is the hon. Gentleman concerned, as many of my colleagues are, that the Government will not give the full details on compensation for the non-core public sector activities that are the lifeblood of the NHS because, if they gave them the compensation that they need, the net benefit from the tax would be so risibly small as to demonstrate that it is utterly pointless and a concoction that could come only from a dysfunctional Treasury like this one?
Gareth Davies
There is really nothing to add to that. The hon. Gentleman made that point in his speech and at Treasury questions—it is a very important point.
In just six months, we have hit the highest tax burden in history. Debt is up, with debt interest payments above £100 billion—for the first time ever—in every year of the forecast. Today’s Bill will result in lower wages, higher prices and a tougher employment market. I urge this Government to reverse course, but I will not hold my breath. Instead, I think I can predict what the Minister is going to say. She is going to say three things when she stands up to speak. First, she is going to try to blame the Conservative party—blaming everybody else for this clear political choice. She will not explain the £8 billion on GB Energy—an energy company that will not actually reduce bills or produce any energy—or the £10 billion on public pay splurges that come with no reform on productivity, or £7 billion on rebranding the national infrastructure bank. Perhaps if the Government dropped those pet projects—which will not actually grow the economy—they would have a little more money and would not have to screw with small businesses and make people unemployed.
Secondly, the Minister will forget that she is in government and that I am in opposition. She will ask me what my party would do instead. To that, I simply say that we would fund the NHS well, but we would also reform it.
Dan Tomlinson
Would the shadow Minister increase borrowing or increase a different tax, or are there some public spending cuts that he would like to announce?
Gareth Davies
I hope the British people are listening to this: none of those things. I remind the hon. Gentleman, although he was not here, that NHS spending increased by 45% in cash terms in the last Parliament under a Conservative Government. The issue is not spending—the Labour party will never get this—but reforming the NHS, as my hon. Friend the Member for Bromsgrove (Bradley Thomas) said. It is about growing our economy faster than the Labour party would grow it, according to the OBR, as my hon. Friend the Member for Isle of Wight East (Joe Robertson) said. We would tackle the welfare bill—£12 billion of savings that we set out in government—and we would boost productivity, because if public sector productivity returned to pre-pandemic levels, £20 billion would be saved.
Finally, the Minister will try to suggest that she is bringing stability, even though businesses and consumer confidence have plummeted ever since she and her colleagues took office. Let us remind ourselves of what she means by stability. In just a few months, we have seen a Downing Street chief of staff sacked, a Cabinet Minister resign, a Back-Bench MP quit the party, key manifesto promises like cutting energy bills by £300 completely dropped, a delayed spending review, fiddled fiscal rules and, just this week, complete confusion about whether the Prime Minister will drop his economic growth pledge. It is all so predictable, yet so damaging to our economy. The Bill breaks Labour’s manifesto. We cannot back it. We will not vote for it. We urge the Government to think again
The Economic Secretary to the Treasury (Tulip Siddiq)
It is an honour to close the debate on behalf of the Government. When the hon. Member for Grantham and Bourne (Gareth Davies) loses his seat, he can work as my speechwriter, because he is right that I am going to say all the things he said, but I will come on to that soon.
Let me start by thanking hon. Members for their contributions to the debate. There were some powerful speeches, including from my hon. Friends the Members for Chipping Barnet (Dan Tomlinson), for Bournemouth East (Tom Hayes), for Leeds South West and Morley (Mr Sewards), for Gateshead Central and Whickham (Mark Ferguson), for Dartford (Jim Dickson), for Welwyn Hatfield (Andrew Lewin), for East Thanet (Ms Billington), for Rochdale (Paul Waugh), for Loughborough (Dr Sandher), for Basingstoke (Luke Murphy) and for Reading West and Mid Berkshire (Olivia Bailey). .
Before I come to the specific points raised in this debate, I want to reiterate the purpose of the Bill. Our priority in the Bill is to restore stability to our economy, repair the public finances to fix our economy, and support long-term economic growth. The Chancellor recognised that to do that, the Government needed to make difficult decisions. That is why under the measures in the Bill, employers are being asked to contribute more. First, the Bill provides for a rise in the rate of employer secondary class 1 national insurance contributions from 13.8% to 15%. Secondly, it provides for a decrease in the secondary threshold for employers from £9,000 per employee to £5,000. Thirdly, it provides for changes to the employment allowance, to increase it from £5,000 to £10,500, and removes the £100,000 eligibility cap, so that the vast majority of employers benefit.
The hon. Member for North Bedfordshire (Richard Fuller) asked at the start of the debate where the extra money raised will go. Let me remind him that the Government uncovered a challenging fiscal and spending inheritance with £22 million of in-year pressure on public finances. We have taken difficult but necessary decisions to fix the foundations of our economy and to fix public services. The Budget provided additional day-to-day funding to stabilise and support public services. Day-to-day funding will now grow at an average of 3.3% in real terms over this year and next, compared to 0.2% under the last Government’s plans.
Dave Doogan
A £200 million black hole in the Scottish Government’s core finances, rising to £450 million when partner agencies are included—what kind of stability does the Minister think that will bring to public services in Scotland?
Tulip Siddiq
If the hon. Gentleman is patient and listens carefully to my speech, I will come on to the Scottish Government, so he does not need to worry.
The increase in employment NICs raises revenues for the NHS and increases funding for contributory benefits such as the state pension, easing wider pressures on public finances. It is part of the Government’s announcement of an additional £22.6 billion of day-to-day spending over two years for the Department of Health and Social Care, including the NHS.
Bradley Thomas
Can the Minister tell the House which decision was harder, giving an inflation-busting pay rise to union paymasters or cutting the winter fuel payment?
Tulip Siddiq
The best decision that we have ever made in government is putting money back into the pockets of working people.
Questions were raised by the hon. Member for Isle of Wight East (Joe Robertson), the hon. Member for Yeovil (Adam Dance) and the Liberal Democrat spokeswoman, the hon. Member for St Albans (Daisy Cooper). The hon. Lady asked a number of questions about the NHS. The Government will provide support for Departments and other public sector employers for additional ER NICs costs only. That will apply to central Government, public corporations and local government. Primary care providers—GPs, dentists, pharmacies and eyecare provider—are valued independent contractors who provide nearly £20 billion worth of NHS services. Every year we consult each sector both about what services they provide and about the money to which providers are entitled in return under their contracts. As in previous years, this issue will be dealt with as part of that process.
Daisy Cooper
I am grateful to the Minister for addressing my earlier questions. Rather than taking with one hand and giving back with the other, would the Minister support moves to exempt all health and care providers?
Tulip Siddiq
The Department of Health and Social Care will confirm funding for general practice for 2025-26 as part of the usual GP contract process later in the year, through consultation with the sector. I understand the concerns about the impact on the healthcare sector, but I can assure the hon. Lady that the Department of Health will continue to engage with GPs, dentists and pharmacists as part of the usual contract process, and that changes in NICs will be taken into account in those discussions.
Let me now turn to the rant, I would say, rather than speech, from the hon. Member for South Shropshire (Stuart Anderson). I was not quite sure what question he was getting to, but he did ask very clearly whether the Chancellor understood the impact of the economic policies that she was making, and whether she would remain in her place. Considering those questions, I wondered what he thought about economics as a whole, so I decided to look into him. Not long ago, he said:
“I have worked with Liz Truss on many occasions…I believe that her economic position…and her parliamentary experience make her the best option to lead our country.”
Stuart Anderson
I stand by the comments that I made. [Interruption.] I do. I fundamentally believe that Liz Truss would be a better Prime Minister than the one we have now.
Tulip Siddiq
If you will forgive me, Madam Deputy Speaker, I feel that a lettuce would have better judgment.
I turn to the devolved Governments. The Government will provide Departments and other public sector employers with support for additional ER NICs costs only. The funding will be allocated to Departments, with the Barnett formula applying in the usual way. The overall outcome of the Barnett formula is that all the devolved Governments will receive at least 20% more funding per person than the equivalent UK Government spending in the rest of the UK. The Scottish Government will receive £47.7 billion in 2025-26, including an additional £3.4 billion through the operation of the Barnett formula. The Welsh Government will receive £21 billion in 2025-26, including an additional £1.7 billion through the operation of the Barnett formula.
Dave Doogan
The Minister is being very generous in taking a second intervention from me. I realise that the bar for credibility in the Treasury is very low right now, but she hoots and toots about the level of the block grant for the Scottish Government. In what universe does the block grant go down year on year? Of course it is higher than in previous years. Has she got the faintest idea how it works?
Tulip Siddiq
I do have the faintest idea how it works, which is why I am on this side of the House and the hon. Gentleman is on that side. That is why I am a Treasury Minister and he is not, and probably never will be.
The hon. Member for Huntingdon (Ben Obese-Jecty) spoke about hospitality. Without any Government intervention, retail, hospitality and leisure relief would have ended entirely in April 2025, creating a cliff edge for business. [Interruption.] I know the truth hurts, which is why the hon. Member for Thirsk and Malton (Kevin Hollinrake) is chuntering from the Opposition Front Bench. Our Government have decided to offer a 40% discount to RHL properties by introducing a cash cap of £110,000 per business in 2025-26, and we have frozen the small business multiplier. This package is worth over £1.6 billion in 2025-26 and is aimed at supporting the most vulnerable businesses, ensuring that over 250,000 RHL properties receive the full 40% support.
Graham Stuart
I thank the Minister for giving way. The OBR had to issue a correction to table 3.2 in chapter 3 of its report. Originally, there was RDEL compensation for public sector employees and for adult social care. The correction was made to reduce the sums by £800 million, typically per year, for RDEL compensation just for public sector organisations. Why did the correction need to be made, when was it made, and why was the OBR told so late that social care was not getting the support that it clearly needs?
Tulip Siddiq
As far as I am concerned, the current numbers are the correct ones.
Kevin Hollinrake (Thirsk and Malton) (Con)
The Minister mentions business rates and the small business multiplier. Will she confirm the continuation of small business rates relief for the rest of this Parliament?
Tulip Siddiq
That is under review, and we will come back to the hon. Gentleman soon.
I turn to the questions from the hon. Member for Eastleigh (Liz Jarvis) about childcare providers. She may be aware that I served on the shadow Education team for a long time. I realise the value of early years providers, and I know that they drive economic growth and break down barriers to opportunity. We have committed to making childcare more affordable and more accessible, which is why we promised in our manifesto to deliver the expansion of Government-funded childcare for working parents, and to open 3,000 new or expanded nurseries by upgrading space in primary schools to support the expansion of the sector. However, I say to the hon. Member that the Government inherited the worst economic circumstances since the second world war, and our first step must be to fix the foundations of our economy. In spite of the challenges, the Chancellor announced in her Budget significant increases to the funding that early years providers are paid to deliver Government-funded childcare places, meaning that the total funding will rise to over £8 billion in 2025-26.
I am grateful to have had this opportunity to respond to the questions that have been raised today. I also want to thank my officials for their work on bringing the Bill to the House. Before I finish, however, I want to answer a question that the right hon. Member for East Hampshire (Damian Hinds) asked in his speech: what is the mission of this Government? Well, let me tell him. This Government’s mission is economic stability, restoring our public services, a thriving workplace, making sure that we have a strong education system and strong public services, putting more money in working people’s pockets, and fixing the foundations of our economy. The mission is to rebuild Britain. The Conservatives left a mess, and we will do a better job than them. I commend the Bill to the House.
Question put, That the amendment be made.
National Insurance Contributions (Secondary Class 1 Contributions) Bill
Tuesday 17th December 2024
(2 weeks, 6 days ago)
Commons ChamberRead Full debate National Insurance Contributions (Secondary Class 1 Contributions) Bill 2024-26 Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: Committee of the whole House Amendments as at 17 December 2024 - (17 Dec 2024)
17:55 - divided: - Ayes: 100 / Noes: 351 - Question accordingly negatived.
18:09 - The Committee divided: - Ayes: 206 / Noes: 353 - Question accordingly negatived.
18:22 - The Committee divided: - Ayes: 196 / Noes: 352 - Question accordingly negatived.
18:37 - The Committee divided: - Ayes: 195 / Noes: 353 - Question accordingly negatived.
18:54 - The House divided: - Ayes: 354 / Noes: 202 - Question accordingly agreed to.
The Second Deputy Chairman of Ways and Means (Caroline Nokes)
I remind Members that in Committee they should not address the Chair as Madam Deputy Speaker. Please use our names when addressing the Chair. “Madam Chair”, “Chair” and “Madam Chairman” are also acceptable.
Clause 1
Rate of secondary Class 1 contributions
Pippa Heylings (South Cambridgeshire) (LD)
I beg to move amendment 1, page 1, line 2, at beginning insert—
“(A1) In section 9(1A) of the Social Security Contributions and Benefits Act 1992, before paragraph (a) insert—
“(za) if the employer is a specified employer under subsection (1B), the specified employer secondary percentage;”
(A2) After section 9(1A) of that Act insert—
“(1B) A “specified employer” means—
(a) a person providing a care home service or a domiciliary support service who is regulated under—
(i) Part 1 of the Health and Social Care Act 2008,
(ii) Part 1 of the Regulation and Inspection of Social Care (Wales) Act 2016, or
(iii) Part 5 of the Public Services Reform (Scotland) Act 2010,
(b) a person contracted to provide primary care under the provisions of—
(i) Part 4 of the National Health Service Act 2006,
(ii) Part 4 of the National Health Service (Wales) Act 2006, or
(iii) sections 17J to 17O of the National Health Service (Scotland) Act 1978,
(c) a person contracted to provide general dental services under the provisions of Part 2 of the National Health Service (General Dental Services) Regulations 1992,
(d) a person contracted to provide pharmacy services under the provisions of—
(i) Part 7 of the National Health Service Act 2006, or
(ii) Part 8 of the NHS (Pharmaceutical and Local Pharmaceutical Services) Regulations 2013, or
(e) a charitable provider of health and care, or
(f) a person providing hospice care whether in a hospice or elsewhere.
(1C) For the purposes of this Act, the specified employer secondary percentage is 13.8%.””
This amendment, together with Amendment 2 provides that care providers, NHS GP practices, NHS commissioned dentists, NHS commissioned pharmacists, charitable providers of health and care, and those providing hospice care would continue to pay contributions at current rates.
The Second Deputy Chairman
With this it will be convenient to discuss the following:
Amendment 4, page 1, line 2, at beginning insert—
“(A1) The Social Security Contributions and Benefits Act 1992 is amended as follows.
(A2) In section 9(1A) after paragraph (aa) insert—
“(ab) if section 9AA below applies to the earnings, the reduced secondary percentage;”
(A3) After section 9A insert—
“9AA Qualification for reduced secondary percentage
(1) Where a secondary Class 1 contribution is payable as mentioned in section 6(1)(b) above, this section applies to the earnings paid in the tax week, in respect of the employment in question, where the earner is employed—
(a) by a charity registered in the charity register or the Scottish charity register,
(b) by a voluntary organisation within the meaning of regulation 2 of the Housing Benefit Regulations 2006,
(c) to work in a GP practice,
(d) by a university, or
(e) by a college of further education.
(2) For the purposes of section 9(1A)(ab) above, the reduced secondary percentage is 13.8%.””
Amendment 7, page 1, line 2, at beginning insert—
“(A1) The Social Security Contributions and Benefits Act 1992 is amended as follows.
(A2) In section 9(1A) before paragraph (a) insert—
“(za) if subsection (1B) below applies, the healthcare and small charities secondary percentage;”
(A3) After section 9(1A) insert—
“(1B) This section applies where the earner is employed to work—
(a) in any of the following settings—
(i) a GP surgery,
(ii) an optometry or dispensing optician practice,
(iii) a dental surgery,
(iv) a pharmacy,
(v) a residential care setting, or
(b) for a registered charity employing 50 people or fewer.
(1C) For the purposes of subsection (1A)(za) the healthcare and small charities secondary percentage is 13.8%.””
Amendment 13, page 1, line 2, at beginning insert—
“(A1) The Social Security Contributions and Benefits Act 1992 is amended as follows.
(A2) In section 9(1A) before paragraph (a) insert—
‘(za) if sub section (1B) below applies to the earnings, the specified sector secondary percentage;’
(A3) After section 9(1A) insert—
‘(1B) Where a secondary Class 1 contribution is payable as mentioned in section 6(1)(b) above, this subsection applies to the earnings paid in the tax week, in respect of the employment in question, where the earner is employed in any of the following specified sectors—
(a) adult social care,
(b) hospices,
(c) primary care,
(d) nurseries registered in the Early Years Register maintained by the Office of Standards in Education, Children’s Services and Skills, or
(e) a charity registered in the charity register or the Scottish charity register.
(1C) For the purposes of this Act above, the specified sector secondary percentage is 13.8%.’”
This amendment would provide that adult social care, hospice, primary care, nurseries and charities would continue to pay contributions at current rates.
Amendment 19, page 1, line 2, at beginning insert—
“(A1) In section 9(1A) of the Social Security Contributions and Benefits Act 1992, before paragraph (a) insert—
“(za) if the employer is a specified employer under subsection (1B), the specified employer secondary percentage;”
(A2) After section 9(1A) of that Act insert—
“(1B) A “specified employer” means—
(a) a provider of education or childcare to children under five years of age—
(i) registered in England in the early years register maintained by the Office for Standards in Education, Children’s Services and Skills,
(ii) registered in Wales with Care Inspectorate Wales, or
(iii) registered in Scotland with the Scottish Care Inspectorate; or
(b) a university.
(1C) For the purposes of this Act, the specified employer secondary percentage is 13.8%.””
This amendment provides that Early Years Settings and Universities would continue to pay contributions at current rates.
Amendment 20, page 1, line 2, at beginning insert—
“(A1) In section 9(1A) of the Social Security Contributions and Benefits Act 1992, after paragraph (aa) insert—
“(ab) if the employer is a specified employer under subsection (1B), the specified employer secondary percentage;”
(A2) After section 9(1A) of that Act insert—
“(1B) A “specified employer” means—
(a) a registered charity, or
(b) a housing association.
(1C) For the purposes of this Act, the specified employer secondary percentage is 13.8%.””
This amendment provides that charities and housing associations would continue to pay contributions at current rates.
Amendment 23, page 1, line 2, at beginning insert—
“(A1) The Social Security Contributions and Benefits Act 1992 is amended as follows.
(A2) In section 9(1A) after paragraph (aa) insert—
“(ab) if section 9AA below applies to the earnings, the veterans secondary percentage;”
(A3) After section 9A insert—
“9AA Veterans secondary percentage
(1) Where a secondary Class 1 contribution is payable as mentioned in section 6(1)(b) above, this section applies to the earnings paid in the tax week, in respect of the employment in question, where the earner is a veteran.
(2) For the purposes of section 9(1A)(a) above, the veterans secondary percentage is 13.8%.
(3) For the purposes of this section, a “veteran” means a former member of any of His Majesty’s forces.””
This amendment would exempt veterans' salaries from NICs changes.
Amendment 10, page 1, line 3, at end insert—
“(1A) The Social Security Contributions and Benefits (Northern Ireland) Act 1992 is amended as follows.
(1B) In section 9(1A) after paragraph (aa) insert—
“(ab) where the employer is a specified employer under subsection (1B), the specified employer secondary percentage;”
(1C) After section 9(1A) insert—
“(1B) A “specified employer” means—
(a) a person providing a care home service or domiciliary support service regulated under the Health and Personal Social Services (Quality, Improvement and Regulation) (Northern Ireland) Order 2003, or
(b) a person providing primary medical services through contractual arrangements with a Health and Social Services Board,
(c) a person providing general dental services under Part 2 of the General Dental Services (Northern Ireland) Regulations 1993,
(d) a person providing pharmaceutical services under Part 2 of the Pharmaceutical Services Regulations (Northern Ireland) 1997,
(e) a provider of health and care registered as a charity by the Charity Commission for Northern Ireland,
(f) a person providing hospice care whether in a hospice or elsewhere,
(g) a voluntary or community organisation, and
(h) a provider of childcare registered in the Family Support NI Register.
(1C) For the purposes of this Act, the specified employer secondary percentage is 13.8%.”
(1D) After subsection (3) insert—
“(4) The Secretary of State must by regulations define a voluntary or community organisation for the purposes of subsection (1B)(g).””
This amendment aims to provide that in Northern Ireland care homes, domiciliary care providers, GP and dental surgeries, pharmacists, health and care charities, hospice care providers, voluntary or community organisations and childcare providers would remain subject to the current secondary Class 1 contribution rate, not the increased rate proposed in the Bill.
Amendment 16, in clause 1, page 1, line 3, at end insert—
“(1A) The Social Security Contributions and Benefits (Northern Ireland) Act 1992 is amended as follows.
(1B) In section 9(1A) before paragraph (a) insert—
“(za) if sub section (1B) below applies to the earnings, the specified sector secondary percentage;”
(1C) After section 9(1A) insert—
“(1B) Where a secondary Class 1 contribution is payable as mentioned in section 6(1)(b) above, this subsection applies to the earnings paid in the tax week, in respect of the employment in question, where the earner is employed in any of the following specified sectors—
(a) adult social care,
(b) hospices,
(c) primary care,
(d) nurseries registered with Family Support NI, or
(e) a registered charity in Northern Ireland.
(1C) For the purposes of this Act above, the specified sector secondary percentage is 13.8%.””
This amendment would provide that adult social care, hospice, primary care, nurseries and charities in Northern Ireland would continue to pay contributions at current rates.
Clause stand part.
Amendment 2, in clause 2, page 1, line 12, leave out “£96” and insert—
“(i) for a specified employer under section 9(1B) of the Social Security Contributions and Benefits Act 1992, £175, and
(ii) in all other cases, £96.”
This amendment, and Amendment 3, exempts care providers, NHS GP practices, NHS commissioned dentists, NHS commissioned pharmacists, charitable providers of health and care, and those providing hospice care from the changes to the threshold.
Amendment 5, page 1, line 12, leave out “£96” and insert—
“(i) in respect of an earner listed in section 9AA(1) of the Social Security Contributions and Benefits Act 1992, £175, and
(ii) in all other cases, £96.”
Amendment 8, page 1, line 12, leave out “£96” and insert—
“(i) in respect of an earner to whom the healthcare and small charities secondary percentage under section 9(1B) of the Social Security Contributions and Benefits Act 1992 applies, £175, and
(ii) in all other cases, £96.”
Amendment 11, page 1, line 12, leave out “£96” and insert—
“(i) for a specified employer under section 9(1B) of the Social Security Contributions and Benefits (Northern Ireland) Act 1992, £175, and
(ii) in all other cases, £96.”
This amendment provides that the employers listed in Amendment 10 would be subject to the existing secondary threshold for secondary Class 1 contributions, not the lower threshold proposed in the Bill.
Amendment 14, page 1, line 12, leave out “£96” and insert—
“(i) in respect of an earner in a specified sector under section 9(1B) of the Social Security Contributions and Benefits Act 1992, £175, and
(ii) in all other cases, £96.”
This amendment would exempt adult social care, hospice, primary care providers, nurseries and charities from changes to the threshold.
Amendment 17, page 1, line 12, leave out “£96” and insert—
“(i) in respect of an earner in a specified sector under section 9(1B) of the Social Security Contributions and Benefits (Northern Ireland) Act 1992, £175, and
(ii) in all other cases, £96.”
This amendment would exempt adult social care, hospice, primary care providers, nurseries and charities in Northern Ireland from changes to the threshold.
Amendment 24, page 1, line 12, leave out “£96” and insert—
“(i) where the earner is a veteran within the meaning of section 9AA(3) of the Social Security Contributions and Benefits Act 1992, £175, and
(ii) in all other cases, £96.”
See Amendment 23.
Amendment 3, page 1, line 14, leave out paragraphs (a) and (b) and insert—
“(a) in sub-paragraph (a), for “£758” substitute—
“(i) for a specified employer under section 9(1B) of the Social Security Contributions and Benefits Act 1992, £758, and
(ii) in all other cases, £417”, and
(b) in sub-paragraph (b), for “£9,100” substitute—
“(i) for a specified employer under section 9(1B) of the Social Security Contributions and Benefits Act 1992 or section 9(1B) of the Social Security Contributions and Benefits (Northern Ireland) Act 1992, £9,100, and
(ii) in all other cases £5,000.””
This amendment is linked to Amendments 1 and 2.
Amendment 6, page 1, line 14, leave out paragraphs (a) and (b) and insert—
“(a) in sub-paragraph (a), for “£758” substitute—
“(i) in respect of an earner listed in section 9AA(1) of the Social Security Contributions and Benefits Act 1992, £758, and
(ii) in all other cases, £417”, and
(b) in sub-paragraph (b), for “£9,100” substitute—
“(i) in respect of an earner listed in section 9AA(1) of the Social Security Contributions and Benefits Act 1992, £9,100, and
(ii) in all other cases £5,000.””
Amendment 9, page 1, line 14, leave out paragraphs (a) and (b) and insert—
“(a) in sub-paragraph (a), for “£758” substitute—
“(i) in respect of an earner to whom the healthcare and small charities secondary percentage under section 9(1B) of the Social Security Contributions and Benefits Act 1992 applies, £758, and
(ii) in all other cases, £417”, and
(b) in sub-paragraph (b), for “£9,100” substitute—
“(i) in respect of an earner to whom the healthcare and small charities secondary percentage under section 9(1B) of the Social Security Contributions and Benefits Act 1992 applies, £9,100, and
(ii) in all other cases £5,000.””
Amendment 12, page 1, line 14, leave out paragraphs (a) and (b) and insert—
“(a) in sub-paragraph (a), for “£758” substitute—
“(i) for a specified employer under section 9(1B) of the Social Security Contributions and Benefits (Northern Ireland) Act 1992, £758, and
(ii) in all other cases, £417”, and
(b) in sub-paragraph (b), for “£9,100” substitute—
“(i) for a specified employer under section 9(1B) of the Social Security Contributions and Benefits (Northern Ireland) Act 1992, £9,100, and
(ii) in all other cases £5,000.””
This amendment makes provision for the monthly and annual thresholds in line with Amendment 11.
Amendment 15, page 1, line 14, leave out paragraphs (a) and (b) and insert—
“(a) in sub-paragraph (a), for “£758” substitute—
“(i) in respect of an earner in a specified sector under section 9(1B) of the Social Security Contributions and Benefits Act 1992, £758, and
(ii) in all other cases, £417”, and
(b) in sub-paragraph (b), for “£9,100” substitute—
“(i) in respect of an earner under section 9(1B) of the Social Security Contributions and Benefits Act 1992, £9,100, and
(ii) in all other cases £5,000.””
This amendment would exempt adult social care, hospice, primary care providers, nurseries and charities from changes to the threshold.
Amendment 18, page 1, line 14, leave out paragraphs (a) and (b) and insert—
“(a) in sub-paragraph (a), for “£758” substitute—
“(i) in respect of an earner in a specified sector under section 9(1B) of the Social Security Contributions and Benefits (Northern Ireland) Act 1992, £758, and
(ii) in all other cases, £417”, and
(b) in sub-paragraph (b), for “£9,100” substitute—
“(i) in respect of an earner under section 9(1B) of the Social Security Contributions and Benefits (Northern Ireland) Act 1992, £9,100, and
(ii) in all other cases £5,000.””
This amendment would exempt adult social care, hospice, primary care providers, nurseries and charities in Northern Ireland from changes to the threshold.
Amendment 25, page 1, line 14, leave out paragraphs (a) and (b) and insert—
“(a) in sub-paragraph (a), for “£758” substitute—
“(i) where the earner is a veteran within the meaning of section 9AA(3) of the Social Security Contributions and Benefits Act 1992, £758, and
(ii) in all other cases, £417”, and”
(b) in sub-paragraph (b), for “£9,100” substitute—
“(i) where the earner is a veteran within the meaning of section 9AA(3) of the Social Security Contributions and Benefits Act 1992, £9,100, and
(ii) in all other cases £5,000.””
See Amendment 23.
Clause 2 stand part.
Clauses 3 and 4 stand part.
New clause 1—Review of the impact of the Act—
“The Chancellor of the Exchequer must, within a year of this Act being passed, publish an assessment of the impact of the changes introduced by this Act on—
(a) rates of employment,
(b) real wages,
(c) inflation, and
(d) real household disposable income.”
New clause 2—Review of effect on SMEs, hospitality, tourism and seasonal workers—
“(1) The Chancellor of the Exchequer must, within six months of the passing of this Act, lay before Parliament a review of the impact of the measures contained in this Act.
(2) The review must consider in particular—
(a) the impact of those measures on the finances and staffing of small and medium sized businesses;
(b) the impact of those measures on the finances and staffing of small and medium sized businesses in the hospitality and tourism sector;
(c) the impact of those measures on sectors who rely on seasonal workers.
(3) In this section, “small and medium sized businesses” means any business which has an average headcount of staff of less than 250 in the tax year 2023-24.”
This new clause would require the Government to produce an impact assessment of the effect of the Act on SMEs, Hospitality, Tourism and Seasonal workers and on the sectors relying on seasonal workers.
New clause 3—Review of effect of employer NIC threshold—
“(1) The Chancellor of the Exchequer must, within six months of the passing of this Act, lay before Parliament a review of the impact of the measures contained in this Act on part-time workers.
(2) The review must consider in particular the effect of the threshold set by section 2 of this Act on part-time workers—
(a) earning £5,000 - £9,000, or
(b) working under 16 hours per week.”
This new clause would require the Government to produce a report into the impact of the employer NIC threshold on part-time staff, especially those who are lower paid or working less than 16 hours a week.
New clause 4—Employment allowance: review of exception on childcare service providers—
“(1) The Chancellor of the Exchequer must conduct a review of how the exception from the employment allowance under section 2 of the National Insurance Contributions Act 2014 (“the 2014 Act”) affects providers of childcare services.
(2) The review must consider the likely impact on providers of childcare services were section 2 of the 2014 Act to be amended to enable such providers to qualify for the allowance.
(3) A report setting out the findings of the review must be published and laid before both Houses of Parliament within six months of this Act being passed.”
Pippa Heylings
These hikes in employer national insurance contributions are not just numbers on a spreadsheet, but will have real and damaging consequences and will strike at the heart of small and medium-sized businesses, which are the backbone of our economy. In my constituency in South Cambridgeshire, we have one of the highest densities of small and medium-sized enterprises, principally in the biotech and life sciences sector, which is a growth area for our economy. It is critical that we get this right, and I have heard from the sector that it is troubled by this legislation.
More worryingly, the consequences will extend to our social and healthcare sectors, which are already under immense strain. GP surgeries and care homes across the UK are at risk of being severely impacted. Those are essential frontline services, which are essential to supporting the NHS and to fulfilling this Government’s mission of moving from treatment to prevention, and from hospital to community.
How can we expect to tackle the backlog in routine operations, and how can we deal with the winter waiting lists at accident and emergency, and with so much pain and anguish, if the primary care providers that form the foundation of our healthcare system are being undermined by this tax increase?
Carla Denyer (Bristol Central) (Green)
I thank the hon. Member for allowing me to speak briefly. She references primary care. I have heard from five different GP surgeries in my constituency, who have written to me to warn that the national insurance increase will directly undermine patient care, when GP practices are already under severe financial strain due to years of neglect. Does she agree that the Government’s process of addressing national insurance costs via GP contract negotiations is just too slow? It could go on until spring, but practices are making staffing decisions right now.
Pippa Heylings
I agree. What the hon. Member says is critical, and I will come on to the situation with our GPs. The Lib Dems continue to highlight the point that to fix the NHS, we have to fix the social care crisis. Freeing up hospital beds requires us to fix the social care sector. According to research, 60% of the UK’s care home beds are provided by private companies, which are on the brink of bankruptcy and are being tipped over the edge thanks to these changes and rises in employers’ national insurance contributions. We do not understand how that can align with the plans of the Chancellor and the Health Secretary to alleviate pressure on hospitals and ensure effective healthcare delivery.
Dr Luke Evans (Hinckley and Bosworth) (Con)
The hon. Member has hit the nail on the head. The Labour Government say that they want to deal with this situation, and that they effectively protected secondary care, but the NI applies to GPs at the front end and care homes at the back end. That means that it will be the hospitals who hold the responsibility—the acute places that we need to keep clear if we are to help the backlog move through. Without getting an answer now, we risk recruitment decisions being kept on hold over the next three or four months and cutbacks being made. Does the hon. Member agree that, on top of the difficulties of an already hard winter, that will cripple the NHS?
Pippa Heylings
I agree with the hon. Member. I will give one example: the Arthur Rank hospice, which serves all of Cambridgeshire. I had a tour there and saw the work being done by its dedicated professionals. I was informed by its senior leadership that these hikes in national insurance contributions for employers will be the equivalent of £230,000 in additional payroll costs on top of the fundraising that it already has to do. That is money that it does not have. We know from the debate on assisted dying, assisted suicide and the terminally ill how critical palliative care and end-of-life care is. That is one hospice that will struggle severely to deal with these charges.
Hon. Members have spoken about the GP crisis. According to the British Medical Association, 1,387 GP practices have closed since 2015 and the NHS has lost the equivalent of 1,333 full-time, fully qualified GPs. Each GP is responsible for an average of 2,294 patients, and about 3 million people have been directly affected in the last decade by shrinking GP numbers. At a time when we desperately need more GPs, we are introducing a tax that risks driving even more practices out of business. It is not just me saying that; I am sure that hon. Members across the House will have heard from GPs in their constituencies.
In my constituency of South Cambridgeshire, I have heard from the Harston, Comberton, Queen Edith, Eversden and Melbourn practices. I have spoken in particular to Dr Gee of Harston surgery, who has told me that his practice with 7,600 patients faces a £20,000 bill from April just to maintain its current services—just to stand still.
Dave Doogan (Angus and Perthshire Glens) (SNP)
The hon. Lady is making a tremendously informed speech and demonstrating a level of understanding of primary care and the care sector that we could only dream of from the Government. Is it her concern that many charities, voluntary sector organisations and GP surgeries are already operating on the thinnest margins of financial sustainability and that this measure will torpedo the very organisations that protect our communities from absolute chaos? Secondary care cannot do it alone; it is upheld by primary care and the care sector. Is she as concerned as many other hon. Members that this will cause absolute chaos?
Pippa Heylings
I agree with the hon. Member. I know that the Government are in conversation with GPs, but GPs are writing to us saying that they are seriously concerned.
The GP in Harston said:
“GPs cannot raise prices or operate at a loss.”
They have not had clarification or confirmation from the Government about how funding that is to be given to others in the public sector will be available to them. Just at the critical time when GPs are coming to their annual spending reviews and budgeting, the Government are bringing them this uncertainty. GPs do not feel that they are getting the right messaging or any kind of clarity that will save people’s jobs.
Robin Swann (South Antrim) (UUP)
I thank the hon. Member for giving way; she has been generous with her time. Does she realise that this is not just a problem in England, Scotland and Wales? It is a significant problem in Northern Ireland, where we have already seen a high number of GP practices returning their contracts. At this time when the solution was meant to be to move to multidisciplinary teams, the increase in national insurance contributions for GPs as employers is putting additional stress on their contracts, given the amount of money they are receiving from central Government. In Northern Ireland, 75% of our domiciliary care and home care is provided by private suppliers, and this additional cost will be added to them as well.
Pippa Heylings
I agree with the hon. Member. In my constituency of South Cambridgeshire, we had the tragic situation of four much-loved, much-respected family doctors handing back their contracts. It happened at East Barnwell surgery, to the distress of those GPs and all their patients. That is because of the contract, and due to failures by the previous Conservative Government to understand in the GP funding formula what deprivation as well as age demographics mean in that contract. On top of that, the hikes in employer national insurance contributions have driven them over the edge.
Sir Edward Leigh (Gainsborough) (Con)
We had this great debate on assisted dying where every single person who spoke said it was essential that we improve palliative care. I wonder whether we could form a consensus in this Committee. One compromise that the Government could make is to take hospices out of this tax. That would be so popular, achieve so much and ensure that our elderly and frail people were properly looked after. I give that one compromise to the Government.
Pippa Heylings
I thank the right hon. Member. As I mentioned, Arthur Rank hospice in my constituency is one such hospice that should definitely have that compromise. Not only that; we have to look at the whole primary care sector—both GPs and independent care homes—because that is what will winter-proof our NHS. We cannot fix the NHS without fixing social care.
The national insurance increases are not just unwise; they are unthinkable. We are in a time of healthcare crisis when people are already struggling to secure appointments. Despite the Government’s assurances, these tax rises will inevitably affect ordinary people. They will particularly hurt those desperately trying to access their local GP and crucial appointments.
We cannot and will not fix the NHS by driving its primary care providers into the ground. I urge the Government to engage with our GPs, reconsider and provide immediate reassurance to GP practices, hospices and care homes that they will be protected them from these changes. Without those frontline services, the NHS stands no chance of coming off life support.
Joe Morris (Hexham) (Lab)
I rise to speak about the need for the Bill and the continued assault by the Conservative party on public trust and the public finances. When I go out in my constituency, I speak to people who are appreciative of the “bin fire”—that is the term that one of my constituents used—facing Treasury colleagues when we assumed office. Money for projects and half-baked plans was used more to launder the Conservative party’s reputation than to improve our public services.
When someone comes into office and finds out that the job is not as had been advertised and that the previous person in post set fire to the office, they have to do things differently. They have to begin to rebuild trust with the people they serve and to have honest conversations with the public. That is what the Government are determined to doing. [Interruption.] Opposition Members can chunter as much as they like, but they know that they gambled with public trust and undermined every aspect of themselves and the institutions of the British state. That is not just a failure on their part but a failure on the part of everyone in their party and everyone who knocked on doors. Ultimately, they were judged harshly by the British public for that.
The Bill is necessary to repair the public finances and rebuild public trust. We did not want to do this. We had to maintain our manifesto promise not to see tax rises for working people, but we must ensure that the country that we hand on is in a significantly better state than the country we inherited. That is the Government’s task.
Dr Luke Evans
I am enjoying the hon. Member’s exposition of his thinking on this matter. Will he set out how this works for national insurance contributions, which is what we are talking about? Those on the frontline—the likes of GPs and care homes—are private, but they are commissioned only by the NHS. Is he aware of where the funding will come from? Will it come from the £22.6 billion? That would make sense, but if so, the Government need to clarify where that money is going. Part of the problem is that it does not add up for the Government to say that they want to support the NHS yet tax those very people—the doctors, the hospices and the care homes—to fund it. Will he elaborate on how that will work?
Joe Morris
I was not sure if the hon. Member would take interventions during that. Ultimately, we need to support the NHS, our care homes and our GPs. It is very rich of the Conservative party to lecture us on supporting GPs and care homes. I have been out speaking to GPs in rural communities, who have been consistently undermined by the Conservatives’ failure to appreciate the challenges facing the modern countryside. I have been out speaking to care homes; I spoke to the Charlotte Straker care home, which looked after my grandmother, to hear its concerns. I have had those meetings, as is my duty as a constituency MP. Ultimately, perhaps if more of the hon. Gentleman’s Conservative colleagues had done the diligent thing as constituency MPs, there would be more of them on the Opposition Benches.
Dave Doogan
The hon. Member is very kind to give way. Twice in the past couple of minutes, he has used the word “ultimately”—“Ultimately we will have to do this, and ultimately we will have to do that.” It is “actually” that he should be saying. You actually have to make sure that there is funding, not ultimately—that can wait for another day. Actually is what will happen as soon as this legislation comes to pass—you will be in an absolute quagmire.
Joe Morris
I thank the hon. Gentleman for his guidance on the correct form of words to use. The reason that I used the term “ultimately” is that it is the fundamental goal of Government to improve the lives of our constituents. That is why I choose to use the form of words that I am using, and why I am focused on the eventual outcome for my constituents. As I said, we did not want to inherit the country in the circumstances that we did. That is fault of the Conservative party, its record and the inheritance it left. We need to bear in mind the context, because that shapes everything and how we go about this.
Graham Stuart (Beverley and Holderness) (Con)
Further to the question from my hon. Friend the Member for Hinckley and Bosworth (Dr Evans), we hear the hon. Gentleman’s critique of the previous Government, but we are trying to understand how imposing these costs on GPs at one end of the service and hospices at the other will remotely help the NHS and, more importantly, the people who rely on it. We would like him to explain that, not just slag us off, however much he might enjoy doing so.
Joe Morris
I have never turned down an opportunity to slag off the Opposition. I am always happy to do so.
The ultimate reason that the Budget was necessary was to raise the extra money to invest into the NHS. The extra infrastructure investment will support our rural communities, our rural GPs and our care homes. That is the fundamental point of the Budget. It is a reset moment to properly support our public sector once more, which the Conservative party failed to do, as the right hon. Gentleman well knows. We need to restore faith in our NHS and our small businesses that were so badly let down. I have spoken to many across my constituency who share my optimism about this Government and who are convinced of the need for that investment. [Interruption.] Opposition Members can chunter all they like, but it is true. Ultimately, those businesses know that we need to invest in the state in order to drive up standards and confidence and provide the stability that the country so desperately needs.
Wera Hobhouse (Bath) (LD)
The hon. Gentleman mentions public trust; we all understand how important it is to restore that, but how can that happen if the very things needed to support the public and restore trust—our hospices and the charitable sector—are being hit by this Government’s measures?
Joe Morris
As the hon. Lady well knows, when one inherits a difficult context, one has to take decisions that one did not want to take. The public understand that the NICs rise was important and was needed because of the circumstances that we inherited and to repair the black hole that we found in the public finances. Spending the national overdraft three times and not telling anyone about it is what has fundamentally undermined public trust.
Rachel Blake (Cities of London and Westminster) (Lab/Co-op)
Listening to Members speaking to the amendments has caused me to reflect on the challenges at the heart of this debate. Does my hon. Friend agree that the amendments that are trying to unpick a holistic approach to fixing the foundations of our public finances entirely miss the point, first of the challenge that this Government face in re-establishing confidence in public finances, and secondly of our approach to long-term investment in public services that are so desperately needed? I believe that all the amendments—
The Second Deputy Chairman
Order. The hon. Lady has every opportunity to contribute to this debate if she so wishes. Interventions are getting longer and longer; they must be shorter.
Joe Morris
My hon. Friend eloquently makes the point that I have been trying to make when I have tripped over my words.
I am extremely proud that the Government are committed to achieving economic stability, being frank with the public about the choices that we face and not simply taking the easy options. We need to implement these tough measures in order to resolve the previous Government’s disastrous economic mismanagement and to restore our foundations. I will finish by saying that traditionally, as far as I am aware, it is poor form for the arsonist to criticise the actions of the fire brigade.
Gareth Davies (Grantham and Bourne) (Con)
I rise to speak, on behalf of the official Opposition, to amendments 13 to 18 and new clause 1, which stand in my name.
First, it is important to remember the context of the situation we find ourselves in today. Throughout the election, the Chancellor and the Prime Minister promised the British people that they would not raise taxes on working people. They committed specifically to not raising national insurance, but here we are in Committee debating a national insurance tax on working people worth some £25 billion. Each and every Government Member made specific promises to their constituents on national insurance, which they have now broken. We have it here in black and white.
Clause 1 raises the rate of secondary class national insurance from 13.8% to 15%. To compound the impact, clause 2 drastically cuts the secondary threshold from £9,100 to £5,000. This two-pronged attack on business means that while clause 1 squeezes more from businesses, clause 2 simultaneously pushes more businesses into the taxman’s grasp. Taken together, based on data from His Majesty’s Revenue and Customs, a staggering 940,000 employers are set to lose out in net terms from the Bill. The Office for Budget Responsibility has made it clear that each one will be hit by an average of £26,000 in additional tax.
On Second Reading we heard the same old script from the Government and their Back Benchers. Time and again we hear that the Bill will hurt only the largest businesses, but that is not correct. Most high street hair salons would not say that they are a big business with mounds of profit to give away to the Exchequer, no matter how much hair mousse this Prime Minister buys from them. A village family butcher surely would not regard themselves as profiteering fat cats. Community pharmacies providing vital services to residents young and old surely cannot be put in the same category as a large multinational pharmaceuticals company. Yet they are.
Gareth Snell (Stoke-on-Trent Central) (Lab/Co-op)
The hon. Gentleman is making an eloquent argument against increasing the employer’s part of national insurance contributions. Yet he himself voted for the health and social care levy, which was an increase of greater proportion on both employees and employers. I have just checked Hansard—he made none of the arguments that he progresses today when his Government were putting that through. Why has his mind been changed now that he is in opposition?
Gareth Davies
I find it difficult that the Labour party says that we are irresponsible with public finances, yet when we faced a once-in-a-century pandemic and spent £400 billion or £500 billion to support residents, business and families in Stoke and across the country, we decided that we needed to pay that money back and did not want debt to keep on rising. Yes, we made difficult decisions in the face of a global pandemic. There is no global pandemic today. This is a political choice, and that is the difference.
Dr Scott Arthur (Edinburgh South West) (Lab)
The hon. Gentleman is very kind in giving way again so quickly. The point has been made about the billions of pounds that were spent during the pandemic. Can he outline how much of that money went to Tory party mates and donors through dodgy contracts?
Gareth Davies
The hon. Gentleman was not here at that time, but those of us who were in Parliament then faced an incredibly challenging time in very difficult circumstances. Billions of pounds went to support businesses in his constituency; if he has a conversation with the average business that benefited from the furlough scheme, I am sure he will correct the record.
The problem is that socialists fundamentally do not understand or care what it means to have an idea, to take a risk or to work hard day in, day out to make a business a reality. That is the problem. They think it is all so easy—that profits just flow in. They think it will all be all right, because Government can step in and take us much tax as they want. That is not the case. If Government Members talk to the average business in their constituencies, they will find this out; if they set up a business, they will see it for themselves.
Perhaps most worrying of all, not only do the Government not understand the private sector, but they have completely overlooked the different ways in which the public sector provides for our communities, as my hon. Friend the Member for Hinckley and Bosworth (Dr Evans) set out. Whether healthcare, childcare or the charity sector, organisation after organisation has warned Ministers that this tax rise will impact the services they provide. That may not have been intended, but the Government have yet to act. That is why we have tabled amendments 13 to 15 and 16 to 18, which seek to protect certain key sectors from both parts of this tax in Great Britain and Northern Ireland respectively.
Dr Luke Evans
My hon. Friend has hit the nail on the head, and the Treasury really needs to answer this question. Did it knowingly implement these tax rises on these industries, which would be a travesty in itself, or did it do so by mistake because it does not understand these issues? If that is the case, will the Government look to rectify the matter so that hospices, GPs and childcare providers are protected?
Gareth Davies
I could not have put it better myself. These amendments highlight the fact that Labour’s attempt to paint this tax rise as a necessity for public services is nothing but plain politics; Labour has always intended to do this, and now it is hiding behind public services to justify it.
Those working on the frontline of healthcare in and alongside the NHS will be deeply impacted. The Institute of General Practice Management estimates that the tax bill of each GP surgery will increase by £20,000 a year, likely resulting in a reduced number of appointments. The Nuffield Trust has said that providers in the adult social care sector will face a £940 million increase, dwarfing the social care support announced in the Budget. Community Pharmacy England says that community pharmacists will be hit by an additional £50 million each year, inevitably causing pharmacies to close and services to deteriorate. Hospice UK warns that £30 million will be added to the bill for 200 hospices across the country, which will lead to greater pressure on NHS palliative services.
Sir Edward Leigh
My hon. Friend is a fellow Lincolnshire MP. In Lincoln we have St Barnabas hospice, a greatly loved local institution where most people would want to spend their final days. We also have the Lincolnshire air ambulance, and we have GPs all over our huge county who are struggling. Can he explain how it is in the public interest to attack these people?
Gareth Davies
My right hon. Friend—a Lincolnshire colleague and Father of the House—puts it perfectly. Labour says that it supports public services and that those services are apparently being trashed, so why on earth would the Government then go and tax them? Why add to their cost base, which they have very clearly said will reduce services across every constituency? Labour Members will all walk through the Lobby tonight and add to the cost burden of those services. It does not make sense. Charities have also signalled the alarm, with more than 7,000 writing to the Chancellor to warn of the £1.4 billion hit that they will face next year.
Graham Stuart
Does my hon. Friend agree that Labour Back Benchers need to speak to their Ministers? As my hon. Friend the Member for Hinckley and Bosworth (Dr Evans) suggested, the Government cannot have meant to do this deliberately. They could accept our amendments today or move some of the funds for the NHS—the £22 billion or £25 billion, whatever it is—across to this, because the NHS depends on social care and other services. At the moment, the Government risk turning something that could be a triumph for them into a disaster, both for the NHS and, more importantly, for patients and those most in need.
Gareth Davies
Once again, my right hon. Friend makes a valid point. As I have said already, I am not sure that this was intended. I do not think the Government understand what these measures will do to our communities, to the sectors I have outlined and to the businesses that I will speak about in a minute. The Minister will have to address my right hon. Friend’s point. What will the Government do to mitigate the damage of the Bill on the communities and organisations that I have highlighted?
A sector I have not yet highlighted is childcare, without which millions of parents across the country could not go to work—including, by the way, many in this House. The Bill will contribute an average of £47,000 in additional costs per nursery next year, according to the National Day Nurseries Association. The previous Government did so much to extend childcare to more families, boosting workforce participation and economic growth, but this tax hike will pull us back from that progress. That is not what people voted for. There is no mandate for this harm. I urge the Government to think again.
Ideally, all employers would be made exempt, which is why the Conservatives voted against the Bill. At this time of year, people should be reflecting on another year gone by all too soon and looking to the new year with hope, ambition and optimism, but so many employers will now enter 2025 with fear. Many will be thinking again about that planned expansion or the investment in new equipment or premises. Worse, some will be thinking about who they need to let go—never mind awarding the pay rises in the spring they once hoped to give.
Dr Luke Evans
My hon. Friend is an astute man, and he has picked up on something that I fear. According to S&P Global’s purchasing managers’ index, this has been the third consecutive month of job losses; December has seen the highest number since 2021, in the pandemic. It has said:
“Barring the pandemic, the survey has not seen job losses on this scale since the global financial crisis in 2009.”
That is a direct impact of the choices in the Budget and this NIC increase. Does my hon. Friend agree that this is something the Government really need to think about?
Gareth Davies
I agree completely with my hon. Friend, who has once again made a very astute intervention. It marries very clearly with what we have seen in business confidence. He mentioned the record since the pandemic. Business confidence has tanked to low levels that we have not seen since the economy had to be shut down during the pandemic. A survey by the CBI, which makes for stark reading, says that 62% of businesses have said that they will have to reduce recruitment, while 48% have said that they will be reducing existing staff levels. That is all because this Bill will impact them in ways they never imagined and were never told about. Whether businesses freeze or cut jobs, or, as the Chartered Institute of Taxation has warned, shift employees to a self-employed basis, or, even worse, offshore workers to overseas destinations, the potential impact on employment should absolutely worry us all.
That is why we have tabled new clause 1, which would require the Chancellor to publish an assessment of the impact of this tax rise on the employment rate within a year of the passage of the Act. It is not controversial; it just seeks clarification and an assessment.
Kit Malthouse (North West Hampshire) (Con)
This impact assessment is extremely important, not least because at a macro level—given that the UK is essentially a services-based economy in which human capital is the most expensive fixed cost, effectively—there is no way to escape this tax. Unlike corporation tax, which is levied on profits, this tax is levied whether a business is making a profit or not; businesses that have been marginal but struggling may well be forced into a loss, and may therefore choose to close down. It therefore has to be essential that we look backwards, if this tax goes ahead, and ask what the impact has been from a services point of view.
Gareth Davies
That was a classic case of how to make an intervention, because it added to the debate. I had not mentioned that point, but my right hon. Friend is absolutely right. The impact on employers, who will pay the tax whether they are profitable or not, is absolutely right. That is, again, not something I think the Government have fully appreciated.
Yuan Yang (Earley and Woodley) (Lab)
Today I stand proud to welcome the Budget, which takes long-term fiscal planning seriously. I welcome a Government who will take us away from the course the previous Government steered, away from austerity, and away from the chaos and confusion of the past few Budgets.
First, I want to make a brief point about tax simplification and the confusion across the Chamber in this debate and in the many amendments. The way to reform a tax system is not to argue for various exemptions, reliefs and get-out clauses for different subsectors, but to have a consistent approach to collecting tax applied across the whole economy and then to fund those sectors of the economy, such as healthcare, transport and so on, which we should be funding. That is the approach the Budget has taken. Many Members of successive previous Governments have said that we need to simplify our tax system. I suggest that asking for dozens of small amendments to a Bill is not a way to achieve that aim. As my hon. Friend the Member for Cities of London and Westminster (Rachel Blake) pointed out, that is not the way to run any tax system, not even on local government level.
Dr Luke Evans
I am very grateful. The hon. Lady makes a fantastic point about wanting to set out the tax base. The difficulty is that the Government are also spending on the NHS. Fundamentally, GPs are private contractors to the NHS. Care providers are private contractors. Therefore, the Government have to make a choice: are they going to exempt them or will those private contractors have to pay? At the moment, the Government have done neither thing. That is the fundamental argument we are having on these amendments in trying to protect those contractors, because the Government have not made a choice. They have said that at some point there may be some payments along the way. That is the concern on the Opposition Benches. What is her answer to that?
Yuan Yang
I thank the hon. Member for his intervention and for highlighting the perilous state of GPs in my constituency of Earley and Woodley after 14 years of the previous Government stripping away the NHS. I am very confident in the announcements made by my right hon. Friend the Secretary of State for Health, which he has made several times in this Chamber, to take all funding decisions in the round. I very much look forward to seeing the quality of GPs improve. I also highlight the funding already announced for increasing the number of practitioners in GP surgeries. I expect to welcome them in my constituency, as well as across the UK.
I return to my point about long-term fiscal planning. The hon. Member for Hinckley and Bosworth (Dr Evans) made the point that we need to make choices. Over and over again on the doorstep I have been told that public services are broken, that crime too often goes unpunished on our high streets, and that mortgage rates, which have shot up wildly over the past few years, are too much of a burden on everyday families. All that creates uncertainty and it is that economic uncertainty that hurts businesses. That is why I welcome, for the first time in many years, a credible Budget that addresses the fundamental problems facing our society. Yes, we have to understand the current fiscal situation in the context of the bad decisions that were made before us. We all know about the tax giveaway mini-Budget under Liz Trust and the perilous effects it had on gilts, pension funds and, of course, mortgages, for which we are all now paying the price.
Yuan Yang
I will give way in a moment.
I add to that the bad decisions made in the previous two Budgets under the right hon. Member for Godalming and Ash (Jeremy Hunt). Those decisions were not credible. It was not credible, on the March 2024 OBR forecast, that the next Government would do anything about schools, special educational needs and disabilities or the NHS. Those were not credible promises made in the last two Budgets. Those giveaways were made by Governments without a plan; Governments who literally cut and ran by calling an early summer election so they would not have to face the consequences of their bad fiscal choices. They left us with a bill to pay and this Government are now making that possible in a considered way.
Graham Stuart
I am extremely grateful to the hon. Lady. She rightly highlights interest rates and mortgage payments. Was she disappointed when the OBR’s assessment of the Budget suggested that interest rates were going to stay higher for longer as a result of these measures? I invite her to discuss the topic under discussion today, rather than the past Conservative Government. We can have debates on that, but what we are trying to drill into today are the actions of this Government and their real-world impact on those who can least afford it.
Yuan Yang
I thank the right hon. Gentleman for his point. I always welcome conversations with the OBR, whose representatives came before the Treasury Committee only a few weeks ago. In that Committee discussion, we had a full debate on its forecasts. It found that the long-term infrastructure and capital spending in the Budget, which is made possible by the different tax announcements the Government have set out, means that the economy will, in the long run, be 1.5% larger. I would add that the forecasts in the OBR’s assessment of the Budget have not yet taken into account all the various details of the measures that will be announced in the forthcoming months. I expect those forecasts to improve.
To return to the bill that the Government are now paying, we need to build back our economy and public services. That task requires at least a decade of national renewal. That is why in the Budget we set out credible long-term funding commitments and plans for where the money comes from.
On small businesses, I recently spent Small Business Saturday out and about visiting local employers across my constituency of Earley and Woodley. I agree very much that those small businesses are the backbone of our local economy; they bring character and jobs to our high streets. One such shop I visited is called UnderTwoK, a shopfront on Wokingham Road. I asked the owner, Mark, what the Government could do to help small businesses like his. He said:
“keep going with the focus on economic stability and clean energy. That’ll bring more people our way.”
Small businesses know that the Government are on their side. They know that, because the Chancellor increased the employment allowance from £5,000 to £10,500, ensuring that the rise in employers’ national insurance contributions will not hit the smallest businesses. Those employing four members of staff on the minimum wage will not be hit by the measure. That means that 865,000 employers will not pay any NICs at all next year and over 1 million will pay the same or less than they did previously. The changes have been very much welcomed by the Federation of Small Businesses.
The top concern I heard about from those retail businesses is not about NICs, but about shoplifting and crime on our high streets, which all too often goes unpunished. The funds raised in the Budget allow us to employ over 13,000 additional neighbourhood police officers, police community support officers and special constables by 2029. They will also fund 1,200 new police officers. Introducing the specific offence of assaulting a shop worker and attaching prison time to that offence is backed up by the commitment to put £2.3 billion towards prison builds over the next two years. That is an example of how we are helping small businesses: not just by talking the talk, but by walking the walk fiscally.
Yuan Yang
I have taken two interventions, which was the number I set for myself, and we do like sticking to numbers on the Government Benches.
I am proud that the Labour Government are asking the wealthiest individuals and largest businesses to pay a little more, so we can rebuild the foundations of our broken economy. That means: more money into the NHS, with £25 billion in NHS funding over the next two years, which is sorely needed in my constituency and across the country; and £7 billion for education in the next financial year, including £1 billion for SEND. Those are the kinds of decisions that would not be possible under the March 2024 forecast. Opposition Members may look at the OBR assessment of that forecast if they are in any doubt about that. Those decisions would not be possible if the Government were not taking important and serious decisions. That is why I stand, very happily, to support the Budget that we set out.
Aphra Brandreth (Chester South and Eddisbury) (Con)
Let me begin by drawing attention to my entry in the Register of Members’ Financial Interests.
I support the amendment tabled by my hon. Friend the Member for Grantham and Bourne (Gareth Davies). Increasing employers’ national insurance contributions will be hugely detrimental not only to businesses, but to employees in my constituency. I have been contacted by many local businesses which have expressed disappointment about the Chancellor’s breaking of her manifesto promise not to raise national insurance contributions, anger that it has been done without a full realisation of the consequences for the wider economy, and fear that they may not be able to weather the impact of this decision. I want to take a few moments to share with the Committee some examples of organisations in my constituency that have reached out to me to explain why these amendments are so necessary.
Bradley Barns is a family-run nursery school in Malpas which provides full day care and early years education for nearly 80 families from the local community and surrounding areas. Access to quality childcare provision is vital for the many parents and carers who need to balance jobs with family life. Of course, Bradley Barns hugely values all its employees, and is keen to be the best employer it can be. It currently employs 24 staff whose skills, time and care are vital to children during their formative years. However, while the impact of the Bill might force some businesses to lose staff, in the nursery sector, where the child-to-staff ratio is so critical—indeed, it is a legal requirement—Bradley Barns cannot do that, and nor would it want to. Matt and Vicky, who run Bradley Barns, tell me that as a direct result of this policy, they will now need to find an additional £2,600 every year for each person whom they employ.
The Government made clear in their manifesto that they would not tax working people, so who exactly does the Chancellor think will be paying for her decision? It will be working people in Chester South and Eddisbury and across the country, and at many nursery schools like Bradley Barns they will be left with no option but to increase fees. For some families, the increase will not be affordable: that is the harsh reality of the Government’s choice.
I also want to highlight, as others have, the impact on the many hospices that provide vital support and care for people at the most vulnerable time in their lives. I recently visited St Luke’s Hospice and the Hospice of the Good Shepherd, two of the wonderful hospices caring for individuals and families throughout my constituency, and met their leaders and staff. We know about the funding challenges that such hospices already face. They rely on the good will and generosity of so many people who donate. This ill thought-through Bill will add substantially to their costs, and none of us wants to see them forced to cut services or reduce the level of care that they provide. I sincerely hope that hospices, and the people for whom they care so brilliantly, do not pay the price of this policy, and that the compromise suggested by my right hon. Friend the Member for Gainsborough (Sir Edward Leigh) is considered.
So many business have contacted me to share their concerns about the detrimental impact of this decision. It will be felt by community pharmacies, by GPs who may be forced to compromise on the care they provide for their patients because they are not eligible for employment allowance, by care providers and by nurseries.
Mr Adnan Hussain (Blackburn) (Ind)
The hon. Member has mentioned GPs. Blackburn has one of the highest numbers of patients per GP in the UK. Not enough appointments are available, which places a huge strain on the Royal Blackburn Teaching Hospital, and only last week the hospital was put on red alert. Does the hon. Member agree that increasing national insurance contributions will mean fewer GP appointments in Blackburn, that the hospital—which is already in a dire state—will be in an even worse position, and that the situation will get out of control?
Aphra Brandreth
That is an important point. These are the unintended consequences that must be considered, and this is why we really must consider the amendment. The impact of the Bill will be felt throughout the economy: it poses the risk of higher inflation, and it will mean fewer employment opportunities. This decision affects businesses both small and large, it affects our local and national economy, and it affects employees who will not enjoy a pay rise or, worse still, will potentially lose their jobs.
Daisy Cooper
Part-time workers, especially in the hospitality sector, will be very badly affected. Before these changes a person could work 14 hours a week without incurring employers’ national insurance contributions, but that has now been reduced to eight hours, which will be very disruptive to weekend shifts in particular. Does the hon. Lady agree that that is an especially negative consequence of the changes?
Aphra Brandreth
That is another important point, about yet another group who will be badly impacted by these ill thought-through changes. I urge the Government to think again, and to back these very necessary amendments.
Chris Curtis (Milton Keynes North) (Lab)
I support the measures in the Budget. Given the speech that we heard from the shadow Minister, before we get into the policy I want to pause and acknowledge the extraordinary contribution of small businesses in my constituency and throughout the country. Every single day, countless individuals take on the challenge of building and running these vital organisations. The task is not always easy, but it is a labour of love, involving long hours, personal sacrifice and financial risk. These businesses are the heartbeat of our communities and the backbone of the British economy, and we all owe them our deepest gratitude. I have had the privilege of working for small businesses and witnessing at first hand the dedication that it takes. Members of my family have run small businesses, so I know how personal it is. It is not just a job; it is a way of life, and a commitment to local community. We must celebrate and support the work of those businesses at every turn.
Since becoming an MP, I have made it a priority to listen to small business owners. Their stories, their challenges and their hopes drive, and will continue to drive, my work in this Chamber, and let make it clear that this Government stand firmly behind them and will continue to do so. That is why I am proud that the Chancellor has agreed to raise the employment allowance to £10,500, a move that ensures that the smallest half of businesses will see either no increase or a reduction in their national insurance bills. It is a lifeline for the businesses that need it the most—and let us dispel the myths we have heard from Opposition Members: 75% of the funds raised from this policy will come from the largest 2% of businesses. But my plea to every single member of the Government is this: please keep engaging and listening to small businesses, because they continue to need our support.
I am sorry, but I will not take any lessons from the Conservatives on supporting small businesses when they have spent 14 years making their lives miserable. When their Government came to power I was working in the kitchen of a small business, the Dolphin pub in Newport Pagnell High Street; admittedly there was a bit of nepotism there, as my uncle Trev was the landlord. Back then the high street was alive, but today it tells a very different story. Many buildings are shuttered, pubs have closed, and a number of our small businesses have been lost. Under the last Tory Government, 10 pubs closed every single week—including, I have just read, many in the shadow Minister’s constituency. In 2022 alone, 345,000 small businesses shut their doors. Members can walk up and down any high street in the country today and observe the toll. This Government are determined to turn the tide.
Too many shelves are empty after being raided by out-of-control shoplifters. The revenue raised through the national insurance changes means that the country can afford our manifesto commitment to 13,000 more police officers and staff who can crack down on the shoplifters who are affecting many small businesses—and, as an aside, we will reverse the outrageous Conservative decision not to pursue shoplifters for thefts of goods worth less than £200. Too many businesses, including some that survived world wars and a global pandemic, were put at risk by the spiralling costs and interest rates caused by the Liz Truss mini-Budget. The revenue raised from this Budget will close down the £22 billion pound black hole that the Conservatives left to us, so we will not see a repeat of those disastrous events.
Too many small companies saw their energy bills skyrocket because of the disastrous energy policies of the last Government. We are setting up Great British Energy, a publicly owned energy company that will invest in clean energy here in the UK and end our reliance on foreign oil and gas.
Too many small businesses are being crippled by staff shortages, often because workers are stuck on NHS waiting lists for months. Because of the NICs changes, we can afford to put a record amount of investment into our NHS to get those waiting lists down.
Daisy Cooper
Does the hon. Member agree that because the previous Government gutted public health and primary care, there is now a crisis in the NHS? Although it is right that the Government want to move care away from hospitals and back into the community, does he understand the concern of some of us on this side of the House that the move to increase national insurance contributions on GPs, dentists and pharmacists will actually undermine that drive?
Chris Curtis
I thank the hon. Lady for her contribution. I refer her back to the comments made by my hon. Friend the Member for Earley and Woodley (Yuan Yang). Our tax system has got even more complicated, particularly after the last 14 years, and we do not want to see the level of complexity, which costs businesses and organisations, continue to spiral out of control. It is important that we make these changes in a simple way, but extra money is going into our NHS and will be flowing through the system. At the moment, the Department of Health and Social Care is looking at how to make sure that the extra funding is spent as effectively and efficiently as possible. I look forward to hearing soon from the Health Secretary about how that money will benefit all elements of our national health service, but I do not think that that is a reason to add extra complexity to an already complex tax system.
We do not want to raise taxes, and I appreciate that decisions like this are never easy—[Interruption.] The Conservatives laugh, but they raised taxes to record levels, broke our public services and left us with a £22.6 billion black hole. The reality is that they left us with no choice. Our goal is to lay the foundations for a thriving, resilient economy, where businesses can grow, communities can prosper and future generations can thrive.
What we have heard from the Opposition today is a repeat of what got us into this mess time and again. Liz Truss promised unfunded tax cuts and crashed the economy. The last Tory leader promised unfunded tax cuts and left a £22 billion black hole. The Tory party is promising unfunded tax cuts again, and will not say where the money is going to come from. That is what got us into this mess, and it is ludicrous to think that it will get us out of it. However, the mess that the Conservatives got this country into is about more than basic arithmetic; it was a complete failure to achieve any economic growth.
If growth in the UK had simply matched the OECD average, workers would have £5,000 more in their pay packets and the Treasury would have £50 billion more in tax revenues, without having to raise a single penny in tax. Just imagine how much better families would feel with that money in their pockets. We would not need to raise any taxes today if we had the extra tax revenue that was stolen from us by the Conservatives’ failure. Instead, they trapped us in a cycle of low growth, low productivity and low investment. That is the grim legacy of a Government who failed to create conditions for businesses to thrive. From a chaotic planning system to a revolving door of four Chancellors in five years, they have sown uncertainty at every single turn. Let us not forget the economic self-harm of Brexit, which was executed without a clear plan.
The Budget, including the NICs changes—
Dr Luke Evans
On a point of order, Ms Nokes. We are debating the National Insurance Contributions (Secondary Class 1 Contributions) Bill, in which I am not sure that Brexit is mentioned. I look to your leadership to decide whether the hon. Gentleman is in order.
The Second Deputy Chairman
I thank the hon. Member for his point of order. He will be aware that it is important that Members stay in order. The hon. Member for Milton Keynes North (Chris Curtis) has given some context in his speech, but he might be reminded of the need to stick to national insurance contributions.
Chris Curtis
Thank you, Ms Nokes. I am happy to count the number of times I have mentioned national insurance in my speech, but I can guarantee Conservative Members that it has been quite frequent. I will mention it again in the following sentence.
The Budget, including the NICs changes, makes hard decisions to fix the foundations of our economy. We will work tirelessly to bring about the economic growth that the previous Government failed to achieve, so that we do not have to make such hard decisions in the future. It is only by doing so and not engaging in the fantasy economics of the Conservative party that we can break free from the cycle of failure, support businesses of all sizes and create a brighter future for our country.
Sorcha Eastwood (Lagan Valley) (Alliance)
I am proud to have tabled several amendments to the Bill to support people in Northern Ireland and, indeed, the organisations that lobbied me to do so. Amendments 10, 11 and 12 seek to protect Northern Ireland’s healthcare, social care, childcare, hospices, and community and voluntary sectors from the impacts of the proposed rise in employer’s national insurance contributions. Those sectors provide vital services in Lagan Valley and right across Northern Ireland, yet they are being asked to bear a disproportionate burden without the ability to mitigate the costs.
Let me begin by recognising the importance of sustainable funding for public services. My party welcomed many aspects of the Chancellor’s inaugural Budget, including changes to fiscal rules, NHS investment, and the unpausing of city and growth deals. However, we are deeply concerned about the consequences of the national insurance increase for critical sectors in Northern Ireland that are already operating under immense financial strain.
During the last five years, community and voluntary groups have played a critical role, from supporting our communities during the covid-19 pandemic to responding to the ongoing cost of living crisis. However, despite their vital contributions, they are once again treated as peripheral when it comes to matters of funding and taxation. In Northern Ireland, our higher public sector dependency and chronic underfunding mean that such groups in our region are uniquely vulnerable to the rise in NI. Indeed, the recent Executive monitoring round in October made it clear that the Barnett consequential remains inadequate to cover departmental overcommitments.
Community and voluntary organisations are not an optional extra. They are currently a cornerstone of public service delivery, often co-designing and implementing essential programmes in partnership with Government. However, when financial pressures mount, they are frequently left to shoulder an unfair burden. The national insurance hike risks further entrenching that inequity. Such organisations should not be regarded as expendable. They must be exempt from the increase, which is precisely what my amendments seek to achieve.
Northern Ireland’s hospices are overwhelmingly reliant on private donations, and Members from across the House have referred to the Westminster Hall debate that we had only a few weeks ago. Regardless of their opinion on the subject, everyone recognised the importance of hospices, yet the proposed NI rise will see some of their doors close. That is the reality of what we are facing today. As for trying to get a GP appointment, good luck—not just in Lagan Valley and Northern Ireland, but right across the UK—as general practice is struggling to meet the many demands that are put on it.
Today I want to highlight the unique circumstances that we in Northern Ireland face. The challenges are not abstract; they are real, tangible and deeply felt by my constituents. It should come as no surprise to Members present that Northern Ireland’s health waiting lists are some of the longest in Europe, and far exceed those in the rest of the UK. Despite being the bedrock of our healthcare system and being under immense financial strain in Northern Ireland, providers such as GPs, dentists and pharmacists are currently not exempt from the rise in NI, even though they are already struggling under immense cost pressures. Capacity reductions in primary care are simply not an option for Northern Ireland. Dental practices, particularly those providing NHS services, which are in high demand, have seen operating costs surge by 30% to 40% since 2019.
With Department of Health funding failing to keep pace, many practices are unable to provide affordable care to patients. Indeed, anecdotal and evidential data shows that, in some areas of deprivation, young children are presenting with extreme tooth issues and have nowhere to go. In a joint statement earlier this month, Community Pharmacy NI, the British Medical Association NI, the British Dental Association NI and Optometry NI said:
“Medical, pharmacy, dental and optometry providers are the front door to the health service for families across Northern Ireland and vital for the transformation of care here. Yet these services are under extreme financial pressure, resulting in the closure of general practices.”
Indeed, the hon. Member for South Antrim (Robin Swann) mentioned that many GPs are being forced to hand back contracts. The statement continues:
“Without adequate protection from these UK Government policy changes, the precarious position of Family Practitioner Services in Northern Ireland will deteriorate further. It is now an urgent imperative for the UK Government to protect primary care or risk the collapse of these vital services in communities across Northern Ireland.”
I turn to the voluntary and community sectors. The voluntary sector employs over 55,000 staff in Northern Ireland and delivers essential services, often on behalf of Government. New research from the Northern Ireland Council for Voluntary Action has revealed the devastating impact this NIC increase will have on the sector. A recent NICVA survey of 68 organisations found that 76% expect major financial impacts, with additional costs of between £5,000 and £200,000 annually. One social care provider anticipates annual increases of up to £500,000. Many organisations predict inevitable redundancies, particularly in core administrative roles.
Dr Jeevun Sandher (Loughborough) (Lab)
This Labour Government will invest to rebuild our broken nation. Investment in our future will be paid for by tax revenue, and today we are debating the largest revenue-raising policy in our Budget. I am proud that revenue will be raised from the largest businesses to fund the homes, jobs and skills that we need to create a good, affordable life for us all. For those of us in our nation who cannot afford a decent life, the picture has become increasingly bleak: non-graduates and the young are locked out of the opportunities that previous generations had, and there are not enough homes, good jobs or skills.
We are raising the money for investment in homes, jobs and skills from those who are most able to afford it. We are raising £23 billion—investment that every business, family and young person will benefit from—and 75% of the revenue is from the largest 2% of businesses. We are raising that money while protecting the smallest businesses by increasing the employment allowance; the Federation of Small Businesses has said that that is a huge help as we bring in this revenue raiser. Half of all businesses will pay the same or less, and a quarter of a million will see their tax bill fall.
Graham Stuart
The hon. Gentleman is most gracious for giving way. He is also a highly distinguished economist. He has talked about this record tax-raising element. What will the net value of the £23 billion or £26 billion be, after we have looked at behaviour change, reduction in corporation tax receipts and compensation of the public sector? How much of that will come into the Government coffers?
Dr Sandher
I thank the right hon. Member for his incredibly kind words. For me, this is actually rather simple. I follow the Office for Budget Responsibility forecast, which goes through the Treasury policy costing and gets signed off. Those are the numbers I look at, and that is the money that will come in.
We are raising the money, as set out in those forecasts, in a fair way to invest in our future prosperity. We are using that money to build the homes that we need. In the mid-1990s, it took a young person around three years to save for a deposit. Now it is over 14 years, and in London it is nearly 30. That is why nearly half of young people are living at home with their parents, and why we are investing the tax revenue from the measures that we are discussing in the affordable homes programme. That means more homes for young people.
We are also using this money to create good jobs. The idea that someone could leave school and get a decent wage left our nation long ago. There are low-paid and insecure service jobs for some, but many are unable to get a job at all. Today, around 15% of young people are not in education, employment or training. Our warm homes plan, which will upgrade 300,000 homes, will also create tens of thousands of good jobs.
Sammy Wilson (East Antrim) (DUP)
Analysis shows that this measure will hit the low paid and the young hardest. It will not help young people to get all the things that the hon. Gentleman describes, because they are the group who will find things most difficult as a result of it.
Dr Sandher
The young and the lowest paid work in the smallest businesses. Some analysis, including that from the Institute for Fiscal Studies, does not include these measures, and does not have matched employer-employee datasets. Indeed, Paul Johnson admitted as much when he came before the Treasury Committee.
Dr Luke Evans
I am grateful to my fellow Leicestershire MP for giving way. One of the ways that we can judge the market is by looking at vacancies. James Reed, who runs the Reed recruitment agency, has seen a 13% drop in advertisements on the company’s website. He has sounded the alarm that that could be a sign of recession, and that is the implication of what we are voting on today. How will the measure support young people if there are no jobs out there for them?
Dr Sandher
I direct the hon. Gentleman to today’s labour market statistics. Employment is still high; unemployment is about the same as it was; and I think inactivity is falling. In the official statistics, the picture looks good.
More broadly, vacancies are not the measure that we want to look at. Instead, we want to look at the number of people in jobs. The revenue that we are raising today will be invested in actions that directly create those good jobs. The warm homes plan will upgrade 300,000 homes, which is tens of thousands of good jobs. The expansion of early years childcare is tens of thousands of good jobs. Businesses need to know that they have the healthy workforce that they need, and more people who are available to work. This is a Budget for growth and for jobs.
Dave Doogan
The hon. Gentleman talks about the expansion of early years childcare, but that will not be of much use if nurseries shut down because they cannot pay their national insurance. Does he understand that dynamic?
Dr Sandher
I absolutely understand the benefits of early years childcare, which is why we are so proud that it is a key part of this Government’s opportunity mission and is one of our milestones. We know that money invested today will pay dividends in the future. Labour Members we are absolutely committed to expanding and investing in early years childcare.
More broadly, this measure is also about investing in our young people. One in three young people is experiencing mental health problems, and one in 20 is too sick to work. That number is only rising. There has been a threefold increase in health problems that make it too difficult to do day-to-day activities. This generation of mine is without hope and without health. For those who have been struck down by hopelessness, and who are now too sick to work, our “Get Britain Working” programme, combining health, skills and employment support, is rebuilding confidence. It is helping people into good jobs, and is restoring dignity, purpose and sense of community to every person and place in our nation.
This Bill speaks to our governing philosophy, which is that those with the broadest shoulders should carry the heaviest load. As we have seen, we are changing our nation and rebuilding hope in our communities, our country, and indeed our democracy. We are building a country that gets better, rather than worse; where every person can get a good job; where every person can afford a decent home; and where every person can get the skills that they need, so that we can all live once again in a country where working hard means a decent life. That is what we are investing in, and that is why we are proud to raise revenue through the measure that we are debating today.
Blake Stephenson (Mid Bedfordshire) (Con)
I rise to support the amendments and new clause 1 in the name of my hon. Friend the Member for Grantham and Bourne (Gareth Davies). If this Government’s goal was to fix the foundations, I am afraid the result has been subsidence. Business confidence has plummeted, and two thirds of firms think that Labour’s Budget, including the NI increase, will damage investment.
An economy grows on the back of hard-working people investing, taking risks and employing local people in constituencies like mine of Mid Bedfordshire. How does the Labour party reward those people for their hard work? It raises their taxes, it makes it harder for them to employ people, and it reduces the amount they take home at the end of the month. It justifies that by telling them that they are not really working people.
Conservatives understand that growth is created from the hard work of entrepreneurs up and down our country, driving our economy forward. Across the country, millions of people want stronger economic growth. That is what they voted for, but they now have a low-growth, high-tax, job-cutting Labour Government. They were promised change, but they did not expect that change to be to Labour’s manifesto commitment not to increase national insurance. That change hikes the cost of employing someone by £800, reduces the number of jobs in the economy, reduces the wages of working people and increases prices in shops.
Ms Stella Creasy (Walthamstow) (Lab/Co-op)
It is extraordinary to follow Opposition Members, with their short-sightedness and, frankly, short memory of the damage they have done to this country. Indeed, it is the very definition of chutzpah. I have been in this place for 14 years, and I watched what happened unfold in my constituency and across the country. That is how we got to this Bill today. New MPs may wish to rewrite history, but many of us can give testimony to the damage the Conservatives did.
This country should be grateful that we now have a Chancellor who is facing up to the fantasy public finances that we inherited from the previous Government, and who is trying to rebuild this nation. We finally have a framework for improving our rail services. Anybody thinking about getting on a train this Christmas knows how far we have to go. The damage lies at the door of the previous Conservative Government.
This Government are devolving meaningful powers to local government and generating clean electricity, which are just two things that the previous Government could not even understand, let alone get a grip of. We are certainly developing a better approach to our infrastructure.
In their final years in office, the Conservatives passed tax cuts that the country could not afford. There may have been genuine shocks around the world, but we can see the damage the Conservatives did, and we can see that they chose to compound it with bad choices. They did not just break Britain; they slashed it and burned it to the ground. That means this Government’s first year in office is a salvage operation. The previous Government’s decision to prioritise fake tax cuts over sustained investment in our public infrastructure has cost us all dearly.
Those who are sceptical of what I am saying should stand in an A&E and see the trolleys in the corridors, as 7.9 million people still wait for operations. They should talk to the schools with reinforced autoclaved aerated concrete, to the councils barely clinging on to provide social care, and to the police who just do not exist on our streets.
Graham Stuart
As the hon. Lady knows, 4 million jobs were created under the last Conservative Government. She has just talked movingly about patients stuck on trolleys in corridors. Could she explain to the Committee how the Labour Government’s policies in England will differ from the policies of the Labour Government in Wales, which has far worse outcomes and worse waiting lists than anywhere in England.
Ms Creasy
I will tell the right hon. Gentleman what this Government are going to do differently: they will make a difference to all our constituents by getting waiting lists down with the money provided to invest in our NHS. The previous Government were all vandals, and we have seen the damage they have done.
The challenge before us in the Bill is to ensure this Government do not make the same mistakes, but instead address head-on the need to build the necessary foundations. To deal with the expectations of the public—our constituents—we need to talk more openly about the fact that having better services requires better funding through taxation. The broken Britain we now see will not fix itself with a bit of time. Worse, the public cannot be distracted from the problems they see by being given someone else to blame—trans people, refugees, immigrants, women or foreigners generally. That is a fantasy the British public did not buy at the last election, and they should not be promised it again. They know we have a difficult road ahead and difficult choices to make, but they will back those choices if they can see there is a reason to do so.
Above all, the British public understand that this country needs investment and growth. I am chair of the Labour Movement for Europe and I think there needs to be discussion about our future relationship with Europe, but that is for another time. We also need infrastructure, which is why I have proposed new clause 4. Infrastructure is not just about roads and rail, but about the services people need every day to be able to get to work and to manage their commitments, including childcare.
As somebody who spent 14 years urging the previous Government to invest in childcare, I will brook no lectures from the Opposition now they have had a damascene conversion to the idea that it matters. Childcare is economic infrastructure. [Interruption.] The right hon. Member for Beverley and Holderness (Graham Stuart) is chuntering from a sedentary position, but time and again he voted against proposals to make childcare a matter of economic infrastructure.
New clause 4 is about how best we invest in our people to be able to grow our economy. As we make tough choices, it is important we do so in a way that means our productivity improves, which means looking out for parents as well as potholes. We are in the middle of the biggest expansion of childcare this country has ever seen, to try to get to a point where every parent can access 30 hours of free childcare for all under-fives. Under the last Government, some parents were paying more for childcare than for their rent or their mortgage. The previous Government repeatedly failed to invest, and then they made promises that they knew they could never keep, pushing up demand without increasing supply. We must not make the same mistakes.
It is vital for our economy to make childcare more accessible and affordable, and we know we have a way to go. In rural areas, there are 31% fewer childcare places compared with inner cities and town centres. The most deprived communities have 32% fewer places per child, compared with affluent areas. Of the poorest fifth of parents with young children, only a third use formal childcare, compared with 73% of the highest earning households. The previous Government reinforced that inequality, rather than addressing it in their childcare policies. That is why in my constituency there are still three children chasing every single childcare place.
Dr Luke Evans
The hon. Lady has always been an advocate for childcare. One way the previous Government tried to address the issue was to try to stop the cliff edge for childcare by looking at households rather than individual parents. In the last Budget, the Government were looking at the proposal to consider households as one unit. Does that mean the hon. Lady has changed her mind and would support that mechanism being looked at again? It would solve a lot of the problems caused by, for example, a single parent having to pay for childcare because they are exempt, whereas a household containing a couple who earn under £45,000 are not eligible.
Ms Creasy
Let me reach the hand of co-operation across the House to the hon. Gentleman, if he wants to finally work on what would be a genuinely affordable and accessible childcare system in this country. However, I will temper his enthusiasm, because his party made things worse. Under the previous Government, there was a 50% reduction in childcare place. We saw nurseries closing time and again because of the changes his Government made. We are starting from a foundation where the places simply do not exist. For the places that are there, too often it is those who can well afford childcare who are taking them.
If we are to get to a position where we have the childcare places we need, so that every child can get the best start in life in this country, we need to invest. We need to ensure that we save what is there and encourage those nurseries that can expand to do so. If we do that, we will reap the rewards, both in the Exchequer and in society. That is why early years provision matters to the future of this country.
Research by the Education Policy Institute shows that 40% of the disadvantage gap at the age of 16 has already emerged by the age of five. Equally, investment in early years means we could save £16 billion a year later, according to the London School of Economics. It also means we will get more money, because more people—mothers, fathers and carers—can make the choice to work and pay tax.
Daisy Cooper
The hon. Lady is making a compelling case about the need to invest to save. When we invest upstream in our public services, that often saves money for the taxpayer further down the line. Does she agree with the Liberal Democrats that that could be equally applied to investing in GPs, dentists and pharmacists to relieve pressure on the NHS?
Ms Creasy
I have worked with the hon. Lady on various issues, and I hope she will give me the latitude to expand my argument and set out my proposals, which we could move forward on together as a House. I do not doubt her sincerity, but I also recognise the fiscal destruction of the previous Government that we need to deal with, which means we need to tell the British public the truth about what needs to happen. Making unfunded promises is as bad as not promising to act.
Parent surveys show that a real difference is made when 30 hours of childcare is offered. That amount of childcare enables families to make choices about getting back into work. If we want to get to 30 hours by September next year, we need 60,000 additional childcare places and 29,000 extra members of staff. If we do not have fundamental root and branch reform of how we fund the provision of childcare, that will cost about £72 million extra a year on hiring staff alone. That is the challenge we face if we want to get this right.
I know how hard the Minister is working to get the economy growing again. I know he is going to hear pleas from every single sector about the impact of the national insurance changes; nobody should be under any illusion that they are not difficult changes. I make a plea for the childcare sector because I believe that in the end, it will pay for itself. If we are able to get more people back to work, especially mums, who all too often end up bearing the burden of childcare, we will be able to raise more taxes and there will be more investment as a result.
That is particularly true of the childcare sector because it is a people-intensive industry. Staffing costs make up 75% of a nursery’s running costs, compared with 30% for the average restaurant. Because the previous Government systemically failed to invest in childcare, the majority of childcare has been provided by the private sector. Some 85% of places are delivered outside the state sector. There is little flexibility on numbers in the sector, because ratios—the number of people looking after little people—matter. These are not businesses with small numbers of staff; an average nursery has 14 members of staff, which means the additional costs will be about £36,000 to £39,000 a year. Around £14,000 of that will be national insurance.
Many Members agree that we need to invest in that childcare and will be pleased to see this Government trying to address the balance. The damage done under the previous Government meant that 83% of nursery providers said the funding they received did not cover their costs. That is why closures increased by 50% in the last couple of years. This Government have already increased the funding for our nurseries, but while that takes account of increases in wages costs, it does not take account of the increases in national insurance.
I tabled new clause 4, which is about having a review of one element of all that, to ensure that we do not cut off our nose to spite our face when trying to get more people into work. We recognise that extra national insurance costs may have consequences, be they recruitment freezes, reduced staff training or even closures, at a time when we want the sector to expand. Indeed, the majority of nurseries have staff vacancies, so they need extra people already.
Dave Doogan
The hon. Lady is making a compelling case of logic as it applies to early years provision, and I do not think anybody in this place could argue with the logic she advances. Is it not so robust, however, that it also applies to primary care, hospices and charities, if it applies to nurseries?
Ms Creasy
I hope the hon. Gentleman recognises that I am talking about a specific function of the way in which the childcare sector operates and the fact that it generates public Exchequer funding when we get people back into work. My argument here is that we invest to save. This is specifically about childcare. I am sure the hon. Member has read new clause 4 in depth, by the look on his face.
Ms Creasy
He will therefore understand why I suggest that we as a Parliament could look at how we address those issues. Right now, the sector is concerned. I do not think that is a surprise to anyone. It may be a damascene conversion for the Conservative party to suddenly care about it, but there is a concern across the sector about not going backwards.
Clause 3 will increase the employment allowance from £5,000 to £10,500 and will reduce the current £100,000 threshold. It might be perceived that for some small businesses, particularly in the childcare sector, that would be a potential way forward in reducing some of the impact of the changes so those businesses can continue to expand. However, the challenge is right now, with the majority of childcare providers not qualifying for the employment allowance because of the way in which the sector operates and because it has been ignored, dismissed and derided by previous Governments. The majority of positions are produced in the private sector. That means they do not qualify.
There is perhaps an unintended irony in all that, however, which is that investing in more childcare, as we are doing, means that many of those small businesses will not be eligible for the employment allowance. As it is about companies that receive less than 50% of their income from public funding, while many childcare providers were originally in that position before money started going into them, the irony is that many fewer will be in that position in the coming years as a result, meaning that they will be denied the opportunity.
Childcare provision in educational settings will be able to benefit, so it is not a total denial. That means that if we are looking to expand childcare, in the current environment and without looking at how we can make that an equal opportunity for all childcare providers, that will have to be done through the state sector, which means having to find nurseries that can be provided in spare classrooms or childcare settings within an educational setting. That accounts for a small amount of the structures in place at the moment, and there is a risk that we will not see the investment in expansion because expansion in previous times has come through the private sector.
My concern, if I am frank, is that this is a perfect storm of our own making. With the best intentions of investing money from the Budget in childcare, we may inadvertently make it harder to expand childcare. That is why we need a review, because it is not clearcut that that will be the outcome, which is why I have tabled new clause 4. I also urge Ministers to look at business rates, which currently add around £21,000 to the average nursery. We found support in the Budget for those in retail and hospitality. We could look again at the childcare sector on the same basis.
Above all, we need to raise those questions and ask how we can ensure that we do not see a curtailment of childcare in this country, because the reality is that fees will then go up, making it even harder for parents to use it. That is what the Pregnant Then Screwed surveys are showing us: 90% of parents who have a place are terrified that costs will go up in the coming year, and 60% say that if that happened they would reduce their hours or leave work altogether.
This is a tough time, this is a tough Budget, and there are tough decisions to be made. We are not shying away from that and I am proud to be a member of a political party in government that is getting a grip of this country’s needs. However, I am also determined, as I am sure is everybody on the Back Benches, to make sure that we do that in the best way possible. If the Minister will not accept new clause 4, I hope he can tell us what work the Treasury is doing to ensure that childcare as a form of economic infrastructure can grow and support this country as it recovers from the last 14 years of Conservative Government.
We know that all those who will be affected—in the choice to work, to stay in work and to stay open and run a nursery—are literally the ones who have been paying the price of having a Conservative Government. We do not wish to make them pay all over again. The Conservatives broke Britain. We now need to be honest about the work and the investment that it will take to repair it.
Helen Maguire (Epsom and Ewell) (LD)
I am greatly concerned about the consequences of this Bill. There are consequences for businesses, for employees and for essential primary care providers in my constituency and across the country. The Bill represents an unfair jobs tax that risks harming the livelihoods of countless individuals and the viability of small businesses at a time when they are already grappling with a multitude of challenges.
I wish to begin by highlighting the impact that this legislation will have on community pharmacies, which are at the frontline of healthcare in our local areas. The owner of Horton Pharmacy and Travel Clinic in Epsom has expressed grave concerns about the financial burden that this increase in employer national insurance contributions will impose. He told me:
“We are estimating that it’s going to cost an extra £12,000 a year. It’s very distressing and making it harder to keep our doors open and help reduce the burden on other parts of the NHS.”
Community pharmacies such as Horton Pharmacy play a critical role in alleviating pressure on our overstretched NHS by providing accessible healthcare and advice, yet the Bill threatens their financial viability, which in turn risks leaving constituents without the local care they rely on, thus increasing the burden on the NHS.
Dr Luke Evans
Is the hon. Lady aware that the National Pharmacy Association has agreed to collective action for the first time in its history, directly as a result of this Government’s Budget? Does she have any comment on that?
Helen Maguire
Yes, I am aware of that and I agree that it is a good way forward.
Another business in my constituency, the Family Building Society, is also facing substantial repercussions. Last Friday I met its chief executive officer, Mark Bogard, who shared that this national insurance increase will cost him approximately £300,000 every year. He said:
“Even as a mutual building society, with no shareholders to generate returns for, we cannot simply swallow that cost. So, going forward, we will inevitably now employ five or six fewer people.”
Madam Chair, these are real-world examples of the damaging ripple effects of the Bill. It will hit not just businesses, but employees, with fewer jobs, lower wages and missed opportunities. This Government claim that they want to kickstart economic growth, but how can firms grow when they are forced to cut jobs instead of investing in their business. How can the economy thrive when ambition is replaced with survival? This Bill does not kickstart economic growth; it slams on the brakes.
Across the board, this Bill threatens sectors vital to our economy and to society. Social care providers, GPs and hospices, already at breaking point, will now face further financial strain. Most of these organisations do not qualify for the employment allowance, meaning that they are exposed to these increases.
The Liberal Democrats have called on the Government to exempt these essential providers from the tax rise, but those calls have been ignored. This decision will worsen the crises in our NHS and social care system, pushing more providers to the brink of bankruptcy.
Six in 10 care homes in the UK are operated by companies vulnerable to even mild economic shocks. How then can the Government justify imposing additional financial burdens on a sector already struggling to stay afloat? Let us be clear: the Government’s own analysis admits that nearly four times as many employers will lose out under this Bill as will benefit. For many employers, this will translate into an average annual tax increase of over £26,000. This is not just a jobs tax, but a growth tax, a productivity tax and, ultimately, an attack on people’s living standards.
This is a deeply inefficient way to raise funds, especially when fairer alternatives exist. The Liberal Democrats have proposed several measures that would raise revenue without harming jobs and growth. These include reversing Conservative tax cuts for big banks, increasing the digital services tax and introducing a fairer form of capital gains tax to ensure that ultra-wealthy people pay their fair share. These measures would protect small businesses, support families and safeguard essential services, while still addressing the country’s fiscal challenges.
The people of Epsom and Ewell deserve better. They deserve a Government who support, not stifle, innovation, enterprise and community spirit. They deserve a Government who listen to small businesses, healthcare providers and families who are already struggling under the weight of rising costs and stagnant wages. This Bill is not the solution to our economic challenges; it is a blunt instrument that will do more harm than good, jeopardising jobs, living standards and essential services. I urge the Government to reconsider this unfair and counterproductive measure and to work with us to develop a fairer, more sustainable approach to taxation that prioritises people and communities.
Gareth Snell
I wish to start by reflecting on something that the hon. Member for Grantham and Bourne (Gareth Davies) said in his opening speech. He talked about socialists thinking that taxes just flow in. Given that he was a member of a Government that raised taxes to their highest level in history, perhaps this season it is less secret Santa for him, and more secret socialist. Perhaps, if he is lucky, under his Christmas tree on 25 December he will find a red flag that he can fly. I jest, Madam Chair, but the point is that that Government agreed with tax and spend—they taxed; the trouble was what they chose to spend the money on.
That is the difference between this Government and the Government that came before: we have made clear commitments about what we will spend the money raised by this national insurance Bill on. We will make investments into the NHS and our public services, such as our schools and hospitals, and we will fix the railways. [Interruption.] The hon. Member for North Bedfordshire (Richard Fuller) chunters, but I cannot actually hear what he is saying. If he wishes to intervene, I will happily give way—no, I thought not.
The fact of the matter is that although this is not a decision that I would particularly have liked the new Government to make, having looked at the levers available to us and having made a political choice to protect the pay packets of individuals in work, this is a way of raising revenue.
Gareth Snell
I often think that we do not hear enough from the right hon. Gentleman, so on this one occasion I will give way.
Graham Stuart
Given the competition on the Labour Benches, the hon. Gentleman is one of the more honest and up-front Members in addressing some of the issues. Does he regret the exclusion of the various groups we have heard of today, from hospices to social care and childcare? Will he urge Ministers to look at whether they can create a more coherent and joined-up approach, so that the £22 billion—or whatever it is—going into the NHS actually works to improve the healthcare of the nation?
Gareth Snell
If the right hon. Gentleman hangs fire, he may be surprised by some of the things I will say as I try to progress my speech. Although, in that context, is it not laughable and ludicrous that some of the most important parts of our social care sector—our air ambulances and our hospices—are dependent upon charity; that they have to rattle tins in supermarkets, dependent on handouts and philanthropic grants on a non-reoccurring basis, just to continue the service they deliver? There is a much broader conversation that we have to have as a nation about how far general taxation should fund some of those programmes. The right hon. Gentleman rolls his eyes, but I would rather make a small contribution to ensure that hospices and air ambulances can run than to have to watch people sit in baths of beans to try to ensure that vulnerable people get the help and support they need when they need it. He may disagree with that, but we should discuss that broader point of how we fund some of those things and whether we consider them to be vital infrastructure to our health and care system.
Neil Duncan-Jordan (Poole) (Lab)
Does my hon. Friend accept that any fair taxation system should place the biggest burden on those with the broadest shoulders? That means taxing the wealthiest in this country, rather than hospices and the charitable sector.
Gareth Snell
Again, if my hon. Friend bears with me, I will get to that point, but I absolutely agree in principle that taxation in this country should fall on those most able to make that contribution. There is also a question about how we spend that money and use it in preventative services. Again, there is an argument to be had about how much of the money given to, for instance, the Staffordshire and Stoke-on-Trent integrated care board is spent on reactive services that treat people, as opposed to preventative services that keep people well in the first place. There is definitely a discussion to be had in our communities about whether the commissioning bodies that have the money are commissioning the preventative services necessary to reduce acute demand.
Last Friday I listened to the charities convened by Voluntary Action Stoke on Trent, and they themselves said that their biggest challenge before the national insurance increase was even mooted was the fact that they cannot get recurring funding year on year from health bodies, councils and the public sector. When they manage to get to the end of a project, they are told, “You’ve done that project. Come up with something new.” They are asked to redesign their service to chase a pot of money in order to deliver what essentially is the preventative service that stops the more acute services from facing greater demand. Again, we as a nation need to have a conversation—in part it is brought to a head by this Bill—about what role we see for charities in this and how we fund those services.
Daisy Cooper
For a long time we in this place have had debates about ensuring that the shift happens upstream in the sector, to support public health and primary care. Does the hon. Member accept that this measure will undermine the effort to put more investment upstream, and that it will force many charities to do even more fundraising to backfill the gap created by the national insurance contributions hike?
Gareth Snell
I absolutely agree. If the hon. Lady will bear with me, I will come to exactly that point later on.
My constituency is often in the top 50 for social and economic deprivation, and we are often wholly dependent on the charitable sector picking up people when they are at their lowest and most in need. Charities often do the really hard work in getting those individuals back to a place where they can even begin to access statutory support services, such are the demands placed on them by the services with which they are seeking to engage.
Let me take the example of supported housing. We talk quite rightly about giving people homes, but many of the people in Stoke-on-Trent who access the services that will be impacted by the national insurance contribution increases would not be able to live independently on their own in the months to come if it were not for supported housing. As the hon. Member for St Albans (Daisy Cooper) points out, that has a huge bearing on the acute cost at the presentation of final service.
Last Friday, Voluntary Action Stoke on Trent, an excellent organisation run by Lisa Healings and her team, convened a meeting of local charities and the three Members of Parliament for Stoke-on-Trent. Lisa helped me by compiling some of the specific impacts that the national insurance increase will have on charities and organisations in my community, and with the indulgence of the Committee, I will refer to some of them so that Members can hear the scale of the challenges that we face.
The first relates to the citizens advice bureau in Stoke-on-Trent, which does a phenomenal amount of work. It will see an increase of £150,000 to its national insurance contributions. Although it will be able to mitigate some of that impact, the change will just mean that people wait longer for help, or, perversely, that more people will enter MPs’ caseloads and visit our surgeries because the CAB often signposts to other agencies when it cannot meet demand.
The second largest impact I was told about is to the YMCA North Staffordshire, which will see its NI contributions rise by £101,000. That organisation routinely provides homes for young people who would ordinarily find themselves on the street, works with families to ensure that family units can stay together, supports community meal initiatives to bring together different Stoke-on-Trent communities, and does a lot of work on community cohesion, which is a particularly contentious issue in my city.
A smaller organisation, Savana, which I must declare is run by my ex-wife, although we are still on favourable terms—
Gareth Snell
No—I will give way in a second. Savana is the provider of the rape and sexual advice service in Stoke-on-Trent. It gets all its money from the Ministry of Justice; it is essentially running a Government service by virtue of contracts, yet it will now see an increase in its national insurance contributions of something between £16,500 and £17,000, which will reduce the number of people it can support with independent domestic violence advisers and independent sexual violence advocates. The other half of its money comes from the Home Office via the police and crime commissioner. Again, that is essentially public money providing a public service that just happens to be provided by a charity that is not covered by the rebate provided to other organisations.
Disability Solutions helps those who are entitled to additional support to access it. That charity brings millions of pounds a year into the city, which has a cumulative economic benefit, because the money brought in is spent on our high streets and in our local economy. The people it helps are not the wealthiest in my city; they quite often have very little in their pockets, and every penny that is given to them is spent in the local economy. They do not hoard it in a savings account, put it into the Cayman Islands or use it as a downpayment on a new car or furniture; they go out and buy food, shoes and school uniforms for their children, or they use it in one of the local entertainment venues.
North Staffs Mind faces an impact of £55,000. That organisation is specifically designed to help people with their mental health, which the Government have rightly identified as a huge inhibitor to economic growth, because if people cannot get their mental health sorted, they cannot get back into work. Another mental health organisation, Changes, wrote to me to say that these changes to national insurance would be unsustainable for them. Finally, the Dove Service is a bereavement counselling service that faces a cost of £2,000. All those organisations are filling a void in state provision in my city.
Simon Hoare (North Dorset) (Con)
In essence, the hon. Gentleman has described what we on the Conservative Benches would have called the big society some years ago. Does he share my concern, however, that that huge bank of volunteers who often prop up and form the supports for the organisations he has described are likely to drift away as their organisations come under pressure? Not only will there be a financial pressure, there will be a pressure on the resource of people who are volunteering, because they will just say, “If the Government are not prepared to help us this one little bit, why should we help?”
Gareth Snell
I actually do not agree with the hon. Gentleman’s assessment, because in my city of Stoke-on-Trent, when there is need, people arrive to offer help. It is one of the things that people often say; we are a friendly, welcoming people, and if someone is in need, we roll up our sleeves and get stuck in.
However, I agree that although dedicated volunteers are excellent, they are not a replacement for staff. In particular, they are not a replacement for the highly trained staff who provide very bespoke services, such as some of the ones I have mentioned. There are thousands of volunteers across Stoke-on-Trent, and I thank every single one of them for every moment of their time that they donate, but as the hon. Gentleman will know from his constituency, we sometimes talk about voluntary organisations as if they have no costs associated with staff, because they are entirely volunteer-run. I think everyone across this House would recognise that that is simply not the case; if it were not for the cadre of professionals who help co-ordinate those volunteers, things would fall apart.
Although I have set out the challenges faced in my city, I am not necessarily drawn to some of the proposed amendments that would set differential rates for charities or other organisations. That is not because I do not believe those organisations should not be protected from the national insurance increase that is coming, but if we are saying that they should have a differential rate, why should that rate not be zero? Why should we not just exempt them entirely? I am also not convinced that we would not see people seeking to reorganise their own businesses to try to claim charitable status and reduce their own liabilities. Fundamentally, I believe that paying tax is a patriotic duty—if someone should, then someone must.
There have been record levels of settlements for the NHS, and I accept the points that have been made about hospices and GPs. I sincerely hope that Staffordshire and Stoke-on-Trent ICB will make use of the better care fund, putting some additional money into that fund to pay for the social care that could help offset some of the national insurance increases that will make those jobs much more difficult. However, many of the organisations I have mentioned receive their operating budgets from Government, albeit passported through funds, a local council or another public body. They are essentially running Government services—they are running a public service on behalf of the Government. Is it not incumbent on us to make sure the services we ask them to provide are provided at the level we expect, and that we resource them efficiently? I would like to think that the difference between this Government and the previous one is that we value the work sufficiently that we will pay those organisations correctly and accordingly. If the Minister could address those points when he sums up, I would be most grateful.
Graham Stuart
It is a pleasure to follow the hon. Member for Stoke-on-Trent Central (Gareth Snell), who I am pleased to say honoured his words at the beginning of his speech, quite rightly. I think that is because he has been in this House for some time and knows the difference between legislative intent and legislative outcome. No one believes that the Minister on the Front Bench or other Ministers wilfully want to damage GPs and hospices —how could anyone reasonably want to do that? However, that is the effect of this Budget of broken promises overall, and of the particular measure on national insurance contributions that we are debating today.
No one has really explored where this measure came from, but the genesis of it was actually a desire, in the pre-election period, to reassure those with long memories who thought that Labour was not a party of growth. In trying to reassure the nation that Labour was on the side of business, it was saying, “Economic growth is mission No. 1, so if you are an entrepreneur, you can relax, because we are on your side.” The other big fear about Labour Governments over time is that they will come along and raise people’s taxes. Labour therefore came out with very specific pledges and oft-repeated promises again and again, saying that it would not raise an array of taxes, including of course national insurance contributions. That is why Paul Johnson, who is an independent commentator, said that he thought this measure was an absolutely clear breach of that pledge.
On coming into power, the Government said there was this £22 billion black hole, and Labour Members have mentioned it again today. I think the hon. Gentleman was notable in not doing so, because he knows there is no substance to it.
Graham Stuart
The hon. Gentleman can intervene to rectify that in a moment if he feels the need to do so for reasons of tribal loyalty. Again, the OBR said there was nothing in its calculations that supported or validated—I think the word used was that it did not “validate”—the so-called £22 billion black hole, but let me give way to him so that he can rectify that omission.
Gareth Snell
The phrase damned by faint praise springs to mind. To be clear, I think the analysis of the Treasury and the Chancellor of the state in which we found the public finances is absolutely accurate. I think the remedies we are taking, while unpalatable to some, are necessary. I just wish we were able to mitigate some of the worst aspects of them.
Graham Stuart
I thank the hon. Gentleman, and it is good of him to show that tribal loyalty. He did not criticise the OBR, but it said that it could not validate the so-called analysis. The £22 billion black hole does not exist, and it is quite clear from the OBR that that is true.
Let us, however, assume that the black hole is true: I think the Government are spending £1,270 billion this year, so let us assume that, in that £1,270 billion, this gargantuan black hole of £22 billion actually has veracity, while it does not. Having gone to the lengths of forcing even someone as up front and candid as the hon. Gentleman to feel obliged under tribal Labour rules to keep backing this measure, and having established the figure, one would think that the Government would want to come forward with a tax rise, if that is what they wanted to do all along. Alternatively, to give the Government credit, perhaps they came into office and found that things were much worse than was thought to be the case beforehand, in which case they would want to come up with a rational way of raising the funds with minimum possible damage.
I suggest it could be said to be a fib, but let us say there is a £22 billion black hole and they need to fill it. The Government should come forward with sensible tax plans. The Government have reneged on their pre-election promises, so why not renege on this one, and come forward with a sensible tax that does not particularly disincentivise those who are furthest from the jobs market? That is what the reduction in the NIC allowance to £5,000 does, and we know that it is particularly going to hurt people are struggling to get back into work, perhaps after a mental health episode, or perhaps because they are young and are struggling to get into the jobs market.
There may be worse taxes than the way this one will work out. I think £26 billion is the headline amount that will be raised and taken out the economy, but 76% of that in year 2 or 3—whichever it is—will come out of wages. By my rough arithmetic that means about £19 billion is going to come out of pay cheques, which is the very thing the Government were trying desperately to avoid doing. This measure will take £19 billion out of pay cheques, and because of the reduction in investment, the reduction in employment and the resulting reduction in profits, it will net only £16 billion.
Then the Government, having got that £16 billion, have decided to compensate the public sector, and we know about this because of the changes the OBR put out at the time of the election. It had to make a correction, because it had clearly been asked and told to allow another £800 million or £900 million for social care, recognising the issues that have been raised so powerfully by colleagues today. However, that was changed and removed, and it had to make an amendment to its response. By the time we have taken off the compensation as currently restricted to the public sector, which I think rises to about £5 billion, that takes the net receipts to £10 billion or £11 billion. That is a £26 billion hit to the economy, a reduction in investment, higher interest rates, lower growth, and £19 billion removed from working people’s pay packets—the people who Government Members believe they are on the side of—yet the measure nets only £10 billion or £11 billion to spend on public services. It is truly a ruinous approach to raising the money.
Mike Martin
The right hon. Gentleman talks about a more sensible tax strategy, and we all agree that the change to NICs is an extraordinarily bad idea, particularly given the hit to growth. Where would he raise that amount of tax from?
Graham Stuart
There are so many places where the Government have spent it. Having claimed this £22 billion black hole, they promptly agreed a £10 billion pay rise for their trade union backers. Train drivers on more than £60,000 a year are getting £10,000 pay rises while in talks about a four-day week. Those train drivers are not available for the holiday season, because they are so awash with that backdated pay increase that nobody wants to do any overtime. There are so many other areas. We have GB Energy to invest in renewable energy. I was the Energy Minister until April, and there was no shortage of investment available for renewables in this country. Before anyone points to last year’s failure to get offshore wind, that was because of the price window that we imposed. We did not want to overpay for it. There was no shortage of appetite, as was shown this year. One reason why we moved to an annual programme was precisely to ensure that we did not overpay, but could bring on all the renewables we wanted. There are so many areas where the Government could instead not spend the money that they have chosen to spend.
Fundamentally—we need this conversation, including in my party—one of the things that makes the Conservatives the most successful democratic political party in the history of the entire western world, I am proud to say, is that we believe in proper analysis and deferred gratification. We have to make sure that we have a growing private economy, because that is where wealth comes from. If we allow money to fructify in the hands of those who create wealth, it will duly come back to the Treasury with interest, as the Financial Secretary of Hong Kong said many years ago, in rather more pithy terms. The most important thing is to live within our means, and to recognise the importance of feeding the private sector economy, because it is only wealth from that sector that allows us to deliver the public services that we all want.
I support new clause 1. The hon. Member for Stoke-on-Trent Central made it clear that he has concerns about the Bill’s impact, and I hope that the Minister can acknowledge that impact. At the very least, we should look back and check that the impact is, as I hope it will be, more akin to the growth-producing, foundation-fixing, black hole-removing vision of the Government. However, if by any mischance the combined Opposition parties are right about the Bill’s disastrous impact on the most vulnerable, the people furthest from the labour market and the rest, we should find out the truth, and whether the Minister or his colleague the hon. Member for Stoke-on-Trent Central is correct.
I also support amendments 13 to 18. The NHS is the centrepiece of the tax-raising and spending elements of this Budget, and this rise in national insurance contributions will contribute £22 billion—or £20 billion; I hear different numbers at different times, but I will stick to £22 billion—to the NHS. There are a couple of ways to sort out the problems, because the system is entirely dependent on social care provision, the hospice system and ancillary services, including primary care—the things that make up the NHS. In my area, when an ambulance goes to Hull royal infirmary, it may take an hour to get the patient in. That is because patients in the hospital cannot be got out of their bed—even though they are ready to leave—and into social care provision. The Bill will make that worse. Perhaps funding can be vired over to social care. Through the amendments suggested by my hon. Friend the Member for Grantham and Bourne (Gareth Davies), we are probing the Government and the Minister, who is a decent, honourable man. We are asking them to look at the issue creatively and ensure that the misgivings of those such as the hon. Member for Stoke-on-Trent Central are listened to.
Daisy Cooper
It is music to my ears to hear a Conservative Member of Parliament finally recognise the connection between the NHS and social care. The right hon. Member will remember that former Prime Minister Boris Johnson stood on the steps of 10 Downing Street and promised to fix social care for good. Could he let us know why he did not?
Graham Stuart
The hon. Lady has not been in the House quite as long as I have. I was first elected in 2005, and in that Parliament I spent a lot of time—mostly in Westminster Hall, as I recall—in debates with then Labour Ministers talking about the importance of having a joined-up, coherent approach to the national health service and social care. It is clearly fiendishly difficult. The coalition Government, of which the hon. Lady’s party was a part, and the Conservatives kept working at it. We changed the name of the Department of Health to the Department of Health and Social Care precisely because of that. It is challenging, because social care is delivered through local authorities, but the opportunity is there. Before the Government get all that wiring and complexity fixed—we were working devotedly at that—they could vire funding over to the sector, or exempt from the Bill the sectors on which the NHS depends. Pouring money into the Hull royal infirmary while it is unable to unload the ambulances coming in, or get the healthier patients out, is a crazy approach. I am sure that the Minister recognises that.
I want to mention the impact on social care. Last Friday, I went to Merrywick Hall, a great example of a small, family-run, residential care home. Its 31 residents are not all elderly, but they all have learning disabilities. Some of them are elderly, making them doubly disadvantaged. The home charges a basic rate of just £699 a week to care for those people, and its staff are stretched. I met Katie, who runs the home, and her husband Carl, who oversees the finances, although the home is owned by another. It was quite clear that that they were not running a business in the way that I would recognise as a former businessman; they were running an institution that was absolutely committed to the welfare of the people in it. Between this jobs tax, which the Minister is foisting on us, and the national minimum wage increase, they have to find an extra £56,000 a year, which is equivalent to the care costs of 1.5 residents. That is the reality. That system and those places are vulnerable. If those places go, there will be a massive knock-on effect on the rest of the system.
I hope that hon. Members from across the House are less interested in the system—although it is our job to worry about it—and much more interested in the people. People cannot get much more vulnerable than the elderly who have learning difficulties.
Dr Luke Evans
When it comes to social care and GPs, there is a situation that has been described to me as Schrödinger’s care. Providers are seen by the state as being private, yet their services are commissioned solely by the NHS, which means that they are caught both dead and alive when it comes to NICs. This has happened either by design in the Treasury, or by accident. The answer from the Chancellor, the Prime Minister and the Health Secretary—I expect the Minister to say this—is that funding will be allocated in the usual way. The problem is that that will happen in April, four months away, while decisions are being made now. There are potential closures, and certainly redundancies, or decisions not to employ. How will that be addressed? Does my right hon. Friend agree that the Minister needs to address that, because these institutions are listening now, and need to know that answer?
Graham Stuart
I thank my hon. Friend, who is of course a doctor. In this and previous debates, such as Second Reading, it is good to encourage a discursive approach in the Chamber, if we are to be valuable. I hope that we will continue to gather in this Chamber, talking to each other and listening. No one would think less of the Government for making changes. I cannot speak for those on the Opposition Front Bench, but I would seek to give the Government some political cover if they found a way to ameliorate the impact of this measure on the system—and, more importantly, on the human beings on which the NHS relies.
In 2021, the then Leader of the Opposition, now Prime Minister, promised a plan
“to ensure that those with the broadest shoulders pay their fair share.”—[Official Report, 8 September 2021; Vol. 700, c. 295.]
Yet all the analysis available to Government Members shows that those with the least will pay the highest price for this measure. In my constituency, HICA, a large not-for-profit provider of social care homes and in-home care—a brilliant organisation that has had the same chief executive for the past five years—was finally getting a surplus to invest in its stock, some of which is almost as old as me, and to give its staff something above the national minimum wage. But following the changes in the Budget, it faces a bill of £3.5 million, more than offsetting any hope of a surplus, which it desperately needs in order to invest in its people and stock. The money will be taken away from that good social purpose in my local area, and instead will go into the Chancellor’s mythical black hole—for payment of additional sums almost greater than the total income of many pensioners, and for pay rises, for train drivers, so that they can pay their union fees; and so that Labour Members can carry on all too rarely mentioning in the Chamber their sponsorship by people who dictate so much of what they share with us—the hon. Member for Stoke-on-Trent Central aside.
Finally, it is interesting in these debates just how few of the more than 400 Labour Members—they can all cheer on the Government Benches at how many Labour MPs there are—want to come and defend these measures. The hon. Member for Hexham (Joe Morris) spoke bravely, but he looked a little world-weary. I think he has been going out and about in his constituency, so I am sure that he is hearing the same thing as me, but said a little more angrily, because he is responsible for it.
I appeal to those Members who are not here to seek change. The 2012 Budget by George Osborne, crudely and rudely called the omnishambles Budget, included a measure to bring in 20% VAT on static caravans. The Treasury civil servants love dusting these things off—they hate an anomaly more than anything. Those are the very caravans that ordinary working people use to holiday on the coast. I did not, alongside colleagues, run my campaign in the press; instead, I built up support from Conservative Members and coalition colleagues, who realised how damaging that measure would be for jobs in their area, the holiday opportunities of ordinary working people, and an industry that is 95% manufactured in the UK. People told me, “Change is impossible—this has been announced in a Budget. You cannot overturn a Budget measure.” You and I, Madam Chair, having been here some time, know that that is not true. Politics is a matter of arithmetic. If Labour Members can build enough support among colleagues on the Government Benches—they do not need to do it publicly, and they do not need to tell us about it—they have every chance of changing this. The Whips and Ministers start getting spooked when 15 Members turn up. If Labour Members can get 30 or 40, they can make a change. They should not feel powerless.
The Government could make changes. They could move £3 billion or £4 billion over to social care, hospices, GPs and the like. They could agree to our amendments. They could come up with some other solution. They have the power to do it. Stubbornness and perhaps a certain arrogance has crept in because of the size of their majority. Government Members, who go out to talk to their constituents more frequently than Ministers, will be in a great position to tell Ministers that up with this they will not put.
Daisy Cooper
The right hon. Gentleman is encouraging the Government to ameliorate their position. Does he agree that there is one very clear way of doing that today? Members on all Benches could vote for Liberal Democrat amendment 1, which excludes all GPs, dentists, hospices and charitable health and social care providers from this NICs increase.
Graham Stuart
Liberal Democrats did remarkably well at the election, pretty much on the back of sewage. Between water stunts and sewage, a record number of Liberal Democrats have been returned. I am pleased to say that the Conservative party remains His Majesty’s Opposition. Therefore, I urge the hon. Lady and her colleagues to support amendments 13 to 18, and new clause 1. She will find that exactly the same is achieved, but with the backing of His Majesty’s Opposition.
Chris Vince (Harlow) (Lab/Co-op)
I start by thanking the Exchequer Secretary to the Treasury for all his work on the Bill.
The burden of tax has fallen disproportionately on the shoulders of working people for too long. Families across the country and in my constituency, who are already battling the cost of living crisis, have been left to carry the weight, while larger businesses and the wealthiest have been let off far too lightly. That cannot continue. This Labour Government believe in a fairer tax system, where larger businesses and the richest pay a little more in tax to help fund our NHS and our public services, which working people rely on. That is the right and fair choice.
The Tory record on investment in our NHS is terrible. I can see that in my constituency. Although Princess Alexandra hospital was on the list of 40 new hospitals proposed by the previous Government, when we came to power it turned out that the money for it was not there. I thank the Secretary of State for Health and Social Care for allowing me to constantly follow him around the Palace and lobby him on that point.
The decision on employer national insurance is difficult, but it is the right choice. Waking up on 5 July, we knew that we would have to take these difficult decisions, but in the long run we really will see the difference. Being tough now can bring about real change in the future.
It has not gone unnoticed that the small businesses and charities that form the backbone of our local economy need to be protected and valued. Here are a few things the Labour Government are doing to achieve just that. We have increased the employment allowance to £10,500 and expanded it to all eligible employers. As a result, we will see two remarkable things: the OBR expects 250,000 employers to benefit from these changes and an additional 820,000 employers to see no change at all. We are seeking to strike a balance.
My hon. Friend the Member for Earley and Woodley (Yuan Yang) mentioned Small Business Saturday. I recently visited a wonderful local charity called Stort Valley Gifting, a brilliant local business that sources local produce and makes up hampers. I have to declare an interest at this point, because that is where I am doing my Christmas shopping this year, but I would add that my predecessor, Robert Halfon, did the same thing.
Labour also recognises the vital role played by public sector employees in our schools, hospitals and councils. That is why we have committed to providing support for additional employer NIC costs, ensuring that our public services remain resilient and well-resourced not just for today, but for future generations. We can protect working people while making the wealthiest contribute their fair share, so that we all contribute our fair share. Everyone from every walk of life is included as these decisions are being debated and made. We can choose to invest in our NHS and our public services; we can choose growth and fairness; we can choose to rebuild the future for generations to come, instead of the instability that has held our country back for too long. If we want the benefits of this Budget, we must make the hard decisions to get there.
Dave Doogan
I rise to speak to defend Scotland’s NHS, including our GPs, hospices, care homes and nurseries, from this Labour Government’s national insurance tax hike, as well as to protect the charity and higher education sectors. I am proud of the amendments the SNP has tabled to the Bill to protect these vital services from the increase in national insurance contributions put forward by the Government. The fears are genuine and escalating over the job cuts and service reductions that will be the inevitable and plain and simple consequence of this fiscal madness.
We in the SNP have consistently highlighted the brutal impact that Labour’s tax rises will have on GPs, charities, care homes and other sectors, with organisations warning that deep cuts will be made to the services they provide—vital services that are no less essential to communities and individuals than secondary care services just because they are received in the community or from a charity. That is why we have tabled amendments 4, 5, 6 and 26 in my name and the names of SNP colleagues.
On higher education, the University of Edinburgh was last month reported to have opened a redundancy process for staff as a result of Labour’s tax hike, and Universities Scotland is warning of a potential £45 million tax burden for Scottish universities. Yet again, we see key sectors of the Scottish economy hammered by a London Treasury out of touch, out of ideas and, if this goes through, demonstrably out of control. Higher education, agriculture, and oil and gas are all demonstrably larger elements of the Scottish economy than they are of the English or UK economy. This Government, with NICs and other specific tax increases or allowance removals, are hammering particularly important elements of the Scottish economy. As usual, what England wants Scotland gets.
The Labour Government’s national insurance increase will be a disaster for Scotland’s healthcare providers, voluntary organisations, nurseries, universities and colleges, but who on the Labour Benches has come along to speak up for those organisations in Scotland? Nobody. Not one Labour Scottish MP made a speech to protect Scotland’s interests. But Labour MPs from Scotland were there to nod through and vote through the cut to the winter fuel payment, freezing Scotland’s pensioners; Labour’s bedroom tax, entrenching poverty in Scotland; Labour’s two-child limit, punishing the poorest in Scotland; taxing Scotland’s oil and gas sector to the brink of extinction; attacking Scottish agriculture; and gouging Scotch whisky. They were all here to make sure that that happened and to speak to that, so I will leave the people of Scotland to draw their own conclusions about this particular lack of activity from Scottish Labour MPs.
Graham Stuart
I am grateful to the hon. Gentleman for giving way. When did the SNP do an about-turn on Scottish oil and gas? As far as I can tell, it seemed as opposed to its continuation as the Labour party is now in government.
Dave Doogan
I thank the right hon. Gentleman for his intervention. I refer him to Hansard from the previous Parliament. The comments I have just made are entirely consistent with the comments I made in the last parliamentary term.
With each day that passes, we learn more about the damage Labour’s Budget will inflict on household bills, businesses and charities, yet despite those warnings the Labour Government are determined not to listen and are ploughing ahead with this devastating proposal. The SNP will always stand up and protect Scottish jobs, Scottish services and Scotland’s people. That is reflected in John Swinney’s budget—a balanced budget in the interests of the people of Scotland and the businesses of Scotland. That is the SNP way. We have done it this year and we have done it in every one of the 17 previous years we have been in the Scottish Government.
Do the UK Government understand how commissioned services work? We have heard that quite a lot this afternoon and it is becoming increasingly clear that, at best, they have a sketchy understanding of why vital services are provided by non-statutory service providers. What is going to happen when this measure unwinds into the real economy is that charities, GP surgeries, hospices and other vital elements of healthcare provision will not have reserves. They are already operating at the very margins of financial sustainability, so when the sums do not add up, they will have two choices. They will approach the commissioning authority that has commissioned their services to ask for an uplift in their fees. The answer will be no, because the money is not there. Alternatively, they will withdraw their services or draw down their services. Either way, it will be enormously challenging and extremely damaging for some of the most vulnerable in our society.
Carla Lockhart (Upper Bann) (DUP)
The hon. Gentleman is making a powerful speech. The Labour party has said in the main that it is the right choice to increase NICs. Like Scotland, Northern Ireland’s health and social care will be hardest hit. The Northern Ireland children’s hospice estimates that half a million pounds will be needed to cope with the NICs increase. This is a hospice that provides care for the most vulnerable in our society: children with cancer and children with life-limiting conditions. Does he agree that the measure will see the end of these excellent services, which are much needed in our communities?
Dave Doogan
I agree entirely with the hon. Member. There is no road back from that. The difficulty that I implore the Government to pay attention to is that when the damage that will be inflicted by this measure is inflicted by this measure, they cannot just say, “Oops, we got that wrong. If you wouldn’t mind all coming back and start delivering these commissioned services, we’ll admit we got it wrong.” When it’s gone, it’s gone. It is not acceptable that the Government are playing fast and loose with the safety net that exists in our communities and our society to catch the most vulnerable people and prevent absolute chaos. That is exactly what the Government are doing.
However, the Government should not take the hon. Lady’s word for it, or mine. We can listen to people who are at the coalface. This is primary evidence from the Scottish Huntington’s Association:
“The entire charity sector is increasingly burdened by climbing costs, funding issues, recruitment and retention challenges and an increased demand for services.
All too many have had to close their doors, with more expected to follow. Additional burdens being imposed by government at this juncture”,
the association says, are deeply unhelpful.
“Coming just weeks after the prime minister announced a ‘new partnership that can harness civil society’s full potential’ this must surely be an unfortunate oversight, and one that simply cannot be allowed to stand given the scale of its implications for the not-for-profit sector and the many thousands of people who depend upon it in the absence of alternative statutory services.”
It is not just the association that takes that view. Turning Point Scotland has advised that this measure alone will add £1.1 million to its costs overnight, and it comes at a time of a pressured environment, when many of its services are already running at a deficit. That is true of the voluntary sector, but also of the nursery and college sectors.
On healthcare, I wonder whether the Government understand the concept of whole-system costs. As I and many Members have said, when charities fold, as many of them will, the services that they were providing will no longer be there. Who will then provide that care? It will be the provider of last resort, secondary care. People will present themselves at hospitals, where there will be no room. It will be chaotic, but in a purely Treasury and fiscal sense, it will be an extremely expensive form of chaos, for which the Government, through the whole-system paradigm, will need to pick up the costs. I am not certain that the Minister has been properly briefed by his Treasury officials on what the risk assessment actually says about the human and financial costs of the change when this heads south. This is what happens when the Chancellor treats the real economy as her own personal political piggy-bank. It will not be possible to fix this once it has been broken.
I have some sympathy for the Minister in one respect. We have heard, and I will not repeat, the headline figure—the gross quantum that the Government expect to generate by lowering the threshold and increasing the rates of employer national insurance. By the time everyone who is in a position to adjust their business and employment characteristics to accommodate it has done so, by the time the Government have compensated elements of the public sector and by the time the economy has contracted to accommodate that, we are already down from £25-something billion to £10 billion-odd. That is a lot of pain to accept to gain £10 billion.
If the Government were to exclude or make provision for hospices, nurseries, the voluntary sector more generally and universities, that £10 billion would be reduced to an embarrassingly small figure, so they are stuck between a rock and a hard place. I nevertheless encourage them to have the courage of their convictions and put the interests of the people of these islands first, rather than the political expediency of careering headlong towards a cliff edge that is as plain as the nose on the end of your face and jumping over it anyway in order to save face—because the Government will not save face. There is no escape from the corner they have painted themselves into. They can either U-turn and incur the political costs, which I would recommend, given that they have just come through the door—they should be at the height of their political powers, but if this is the height of their political powers, goodness me!—or they can carry on regardless, and pick up the pieces of all the chaos that will be wreaked across the sector.
This incompetence, for it is incompetence, did not start when the Government walked through the doors of Nos. 10 and 11 Downing Street. It started back in the election campaign, when they proscribed the use of the single biggest lever in the Treasury’s toolkit to get additional funding. They said that they would not increase income tax on ordinary working people, although with these measures they will take away financial opportunities and, actually, people’s money through payroll changes anyway. It is smoke and mirrors. However, by painting themselves into that corner on income tax, they have created a situation in which they have to make the most damaging tax intervention possible, which is entirely contrary to their stated ambition of generating growth.
Quite a lot of Labour Members have said, “It’s all very well listening to the Opposition, but what would you do?” I will give them two really easy things that the Government could have done. If they had mirrored the income tax thresholds that the Scottish Government have introduced, they would have generated £19 billion. That would not have had a single impediment on the real economy, would not have choked off growth and would not have put primary care on the precipice. They could have done that. Or, if they had thought that they could get by on less than £19 billion—they will have to, because they will raise less than £10 billion from this measure—they could have just reversed the previous Government’s two cuts to employee’s national insurance. Judging by the arithmetic in this place, the Conservatives did not exactly get a brilliant political return on cutting employee’s national insurance twice in two quarters of one financial year. The Government could have reversed those cuts, which would have netted £10 billion—roughly where they are now, on aggregate—but no, they did not want to do that and they refuse to do so.
John Slinger (Rugby) (Lab)
The crux of today’s debate is an interplay between our objectives and missions as a new Government and our inheritance from the previous Government. It is about the choices we have taken to achieve our objectives while mitigating and navigating the dire inheritance we received.
First, our objectives were clearly stated to the British people in our manifesto in July:
“to begin the work of national renewal. A rebuilding of our country, so that it once again serves the interests of working people.”
Secondly, the previous Administration bequeathed us the following: the highest tax burden on working people since the second world war; an economy built on weak foundations, with little or no industrial strategy, low productivity, low investment and low strategic visions; public services on their knees, having been cut to the core; staff undervalued and underpaid, but overburdened due to the previous Government’s failure; and after the cuts and chaos came that cut-and-run election, with unfunded spending commitments and, yes, a £22 billion black hole.
I turn to the choice that we face. The people resoundingly rejected a return to the chaos and cuts of the previous Administration. We rejected making further cuts to services when the people who voted in the election need those services so desperately. We rejected insulting people by increasing taxes on their pay packets after those dark, high-tax Tory days. We rejected increasing borrowing; we are keeping it under control with our stability rule in order to bring the current Budget into balance, so we will not borrow to fund day-to-day spending.
Therefore, we have had to take difficult choices. Some groups will have to contribute more, which is never popular. We are asking employers, not employees, to contribute more, but we fully recognise the need to protect the smallest businesses and charities. We have more than doubled the employment allowance to £10,500 and expanded it to all eligible employers, including charities. The OBR expects 250,000 employers to gain and an additional 820,000 to see no change.
The change that we are debating today should be seen in the context of the overall Budget—a Budget of huge, long-term investment in our economy; setting the right environment for better jobs, more opportunities for businesses, stronger public services and a more confident, optimistic future, particularly for our young people.
The last Government were very good at some things: kicking the can down the road, finding carpets and sweeping things underneath them, and making promises while dressed in the emperor’s new clothes. This Opposition are good at crying crocodile tears about the changes we are making, and wanting to have their cake and eat it. They seem to want all the benefits, but they do not want to say how they would pay for them. That is not this Government’s approach.
What is being proposed today is reasonable and proportionate; it is necessary, given our objectives and the inheritance we received; and it is part of a transformational Budget that will put the economy, our public services and our country on a proper footing, for a fairer and more prosperous future for the people of our country.
Shockat Adam (Leicester South) (Ind)
I refer the Committee to my entry in the Register of Members’ Financial Interests as an optometrist. I will speak to amendment 7, which stands in my name, which calls for GP surgeries, pharmacists, the often forgotten profession of optometrists and other health professionals to be excluded from the national insurance rise, along with charities with fewer than 50 employees.
We have seen the over-strain and burden on our GP services being taken over fantastically by the Pharmacy First programme. However, the National Pharmacy Association has voted for action, which could include reducing opening hours, in response to the increased costs that will be caused by the national insurance hike. This hike is going to cost each pharmacy business an estimated £12,000, which is absolutely unattainable for many of the pharmacists I speak to.
My constituency of Leicester South has the second-highest ratio of patients to GPs, with 3,260 patients to a single GP. This already overburdened service is going to be hit even further with this rise in national insurance, with the Royal College of General Practitioners warning in November that the national insurance hike risked GP practices making redundancies or even closures. Nearly 450 GP practices have already closed or merged since 2018, according to a survey by the GPs’ journal Pulse. This is simply an untenable state for the national health service and healthcare workers.
Pharmacists, dentists and optometrists employ their professional staff. Many people I have spoken to are now going to have to remove employment and bring in locums. I would like to ask the Minister whether any impact assessment has been made on the loss of earnings for employed staff if locum staff are brought in. Primary care services are the bedrock of the NHS and many are already on a financial tightrope due to years of austerity. The national insurance hike will see many community GPs, pharmacists and optical health facilities reduce services or completely close down.
Clive Jones (Wokingham) (LD)
GPs such as those in the Twyford surgery in my constituency have made it clear that the increase in employer national insurance contributions will impact their budgets. They urgently need clarity to determine what they can provide for my constituents and whether they will be forced to make redundancies. Does the hon. Member agree that the Government need to provide certainty on whether GPs will receive funding for national insurance increases, and not abandon them, as they were abandoned by the previous Government?
Shockat Adam
I totally agree with the hon. Member that GP services are already on their knees, and this is going to further increase their despondency. It will give them no confidence whatsoever.
A second issue relates to our charities. I do not think there will be a single Member in this House who has not posed in front of a charity for a photo for their social media or for the work that they do. In my short time in this profession I have seen that this country is virtually run by charities, but every single year they have to jump through fire hoops just to make ends meet. They have to prove their worth and look for funding every year, living virtually hand to mouth. This will be the final nail in the coffin for many charities that are doing vital work for our communities.
There are so many that I could mention, but I will mention just one. Jasmine House is a charity in my constituency that provides vital support for women who have been victims of sexual violence. We already know the dire state of the judicial system, with women who have been raped having to wait up to five years or sometimes seven years for justice. This home, which provides much-needed psychological and emotional support, already has a two-year waiting list. This rise in national insurance will completely destroy this charity and many more like it across the country, which is why I urge the Government to rethink this disastrous policy and accept my amendment.
Jim Dickson (Dartford) (Lab)
It is a pleasure to speak once more on this critically important Bill, after an excellent debate on Second Reading several weeks ago. I do not wish to rehearse the entire debate on these national insurance changes, but I will raise a few points about the Bill and why it is necessary.
As we have discussed at some length, this Government inherited public finances that were in a parlous state and public services that were not delivering what residents in Dartford and across the UK need. Yet, from their contributions today and on Second Reading, I do not think that Conservative Members have really accepted that legacy. In the five stages of grief, they are still in denial.
When the previous Government left office—it is painful to repeat these statistics—NHS waiting lists were at 7.6 million, with 300,000 people waiting longer than a year for treatment. Those waiting lists were already growing before the pandemic, with the number of people referred but waiting for treatment doubling between 2010 and 2019.
On crime and community safety, neighbourhood policing was decimated and PCSO numbers were halved, and the number of arrests has halved since 2010, including sharp drops for theft. Perhaps most concerningly, we face a real crisis in our prisons. The National Audit Office recently confirmed:
“The current crisis in the prison estate is a consequence of”—
the previous Government’s—
“failure to align criminal justice policies with funding for the prison estate, leading to reactive solutions which represent poor value for money.”
That is as close as the National Audit Office ever gets to saying, “You wasted money.”
The previous Government also spent a whopping £715 million on their Rwanda gimmick over two years, in exchange for a sum total of four voluntary departures. That is the legacy of the Conservative party, yet Conservative Members still refuse to acknowledge their mistakes. They vote against every measure, including the national insurance changes to raise crucial funding to fix the problems they left behind, without ever saying which investments in public services they would scrap.
In a long and, at times, entertaining speech, the right hon. Member for Beverley and Holderness (Graham Stuart) rehearsed the greatest hits of the previous Government, in which the omnishambles Budget seemed to feature very strongly, but his speech was fatally holed below the waterline by his inability to answer one simple question from the hon. Member for Tunbridge Wells (Mike Martin): “What would you do instead?” We heard a lot of flannel about train drivers, but that was basically it.
Graham Stuart
I talked about the need for fiscal discipline, one element of which is taking at least £12 billion of savings out of the benefits system, because we cannot continue with more and more of us out of work and out of the workforce. Most importantly, I also said that we have to grow the economy first, because that is the only way to sustain it. This Budget had the opposite effect, as the OBR has laid out.
The First Deputy Chairman of Ways and Means (Judith Cummins)
Order. I remind Members that this debate in Committee is about national insurance contributions.
Jim Dickson
I thank the right hon. Member for Beverley and Holderness for his comments. He praised the Conservative party as the most successful party in western democracy because it always takes a pragmatic and hard-headed view of matters such as the public finances, but I am afraid that he has just revealed why it is no longer in government. None of what he said added up. The £12 billion of welfare savings that we were repeatedly promised when he was in government were never realised, and none of what his party has proposed since makes those numbers any more likely to be achieved.
This week, The Guardian reported on a poll by the University of Bristol of 5,000 voters—a large sample—that found that fewer than a quarter of respondents thought that the changes to tax announced at the Budget were “not necessary”. Nearly 50% of people polled thought the changes were “necessary”. So the British people, showing admirable common sense, understand the steps that need to be taken to address our country’s problems.
Based on that polling, the kindest thing to say about the Conservative party is that it is out of touch. Indeed, we learned this week that the Leader of the Opposition is apparently toying with the idea of flat tax, which would be a big gift to the already wealthy. According to estimates from the Tax Policy Associates, such a change would mean average earners would pay £1,200 a year more and those earning above £200,000 would pay £30,000 a year less.
The First Deputy Chairman
Order. The hon. Gentleman is making an interesting speech, but I remind hon. Members that in order to be in scope for the debate, the majority of their remarks need to address the issue in front of us, which is national insurance contributions.
Jim Dickson
Thank you for your advice, Madam Chair.
In closing, in raising national insurance, the Labour Government are taking the tough choices to fix our public finances. As I said at Second Reading, the Bill is a crucial part of our plan to fix the foundations of this country. It provides a major part of the funding needed to fix our public services after 14 years of decline under the previous Government.
Jim Allister (North Antrim) (TUV)
When we talk about national insurance, it is easy to forget that it is only part of the tax burden placed upon employers. However, within the matrix of tax, the reach of national insurance that has been delivered by the change is truly shocking, particularly because of the reduction of the threshold to £5,000. I suspect that will mean that there is not a single person who does a part-time job whose employer will not now be paying 15% national insurance. Before we even come to the viability of the business they work for, that makes the viability of that job questionable.
To reduce the threshold by that amount is the most punitive part of the measure. It is not even tempered, as it could have been, by a phased reduction, so rather than paying 15%, someone could pay a lower amount, such as 5%, if the threshold was reduced to £5,000. The measure is excessively punitive and will hit many small businesses in everyone’s constituency, including mine.
I think of small businesses throughout North Antrim. They employ six, seven, eight or 10 people, and may stretch to take on an extra worker, but they will not be stretching like that any more. They will be stretching the other way, because the consequence of the measure is putting them over the edge in terms of what is affordable. I am talking not just about small businesses but about a vast swathe of a critical sector that keeps our society in operation. Our community and voluntary sector will be among those most cruelly affected and particularly those who are often doing the job of Government, delivering services in our community. They will bear it unabated, without any assistance such as the assistance that the public sector will have.
I was interested to receive and to read the report from the Northern Ireland Council for Voluntary Action, which is clear that whereas public sector organisations will have their budgets on this aspect reimbursed, voluntary and community sector organisations will not have the same protection. They will have to absorb the budget increase. Yet, as I have said, many of those in the voluntary and community sector deliver services on behalf of Government. The public sector therefore gets matters ameliorated, but those that deliver services for Government in the voluntary and community sector will not. That will have an effect not just on those organisations, but on the services they deliver and, therefore, on all our constituents to whom those services are delivered. When we ally 15% on national insurance with the increase in the living wage, we have a double whammy. The two together are the very thing that will produce a negative outcome.
The hospitality sector in my constituency, as a sector that already runs on relatively small margins and employs a lot of part-time people who will now fall within the ambit of employers’ national insurance, has drawn attention to the fact that the increase, along with the living wage increase, will impose a huge burden. Indeed, the sector’s organisation has suggested that the living wage and national insurance increases will add £2,500 a year for every employee. What business, in current circumstances, can simply shrug that off and carry on unaffected? There will be very few, indeed.
The consequences will be substantial and will affect many small businesses, be it the butcher on our high street, our community services provided by voluntary organisations, our doctors or our dentists. The latter are already under huge pressure and many are giving up national health service provision. Why? It is because they cannot make ends meet. Then, Government come along and put this burden upon them.
I therefore say to the Government that, yes, they have the numbers that mean they can close their ears to all of this. They can impose this if that is their will, but in imposing it they will do irreparable damage to those who they say they care about. This is a wake-up moment. If the Government truly care about ordinary people, whose jobs will be lost and who will be affected by this measure, and about ordinary businesses, which are not rolling in riches but making ends meet, they need to find a way to readdress this issue and to bring back some viability, going forward, for those businesses.
John Grady (Glasgow East) (Lab)
Like many on the Government Benches, I have spent many years of my career in business—in my case, as a lawyer. I have worked with some of the largest companies investing in the United Kingdom and some of the smallest companies in the country, such as charities, third sector organisations and others. What they value most of all is economic stability. What they do not value is huge increases in interest rates overnight and rampant inflation.
I understand how important it is to investors to ensure that the public finances are managed in a prudent way, which embraces and faces up to the realities. That is the foundation of the Budget and of our approach to the difficult decisions the Chancellor of the Exchequer has taken on national insurance contributions. A number of the parties on the Opposition Benches, and the Conservatives in particular, criticise, but they broke Britain’s economy and we are left to clean up their mess. There is nothing clever or great about promising that hospital after hospital will be built and not having the funds to cover that. That is the politics of the Santa Claus letter.
The Budget of my right hon. Friend, the Chancellor of the Exchequer, delivers on our commitments to the electorate. It puts an end to non-dom tax status and gets rid of a VAT exemption on private school fees to fund state schools, such as those in Glasgow. The national insurance contributions are an important part of that financial package. The Budget delivers a fairer, more sustainable tax system. Under the previous Government, the tax burden was placed mainly on the shoulders of working people. We heard from the hon. Member for Angus and Perthshire Glens (Dave Doogan), who represents a beautiful constituency, that that is precisely what SNP members are fans of—increasing income tax and national insurance on working people. We have seen that in Scotland time and again. The tax burden that working people face is absolutely enormous. If a person works in Newcastle and wants to move to Edinburgh, they will have to pay more tax to work in the NHS in Edinburgh. If that is supporting Scotland, who knows? We are delivering on our promise not to raise taxes on working people.
John Grady
I wish to make some progress if I may; I have been waiting a long time to speak.
Our plans will not see additional taxes coming out of a worker’s payslip. We are supporting small businesses by doubling the employment allowance before companies and charities have to pay national insurance, which will protect hundreds of thousands of employers from paying any national insurance at all.
According to the OBR, changes to the employment allowance will see 250,000 employers across the UK gaining from these changes, while an additional 820,000 or so will see no change. This means that around half of all businesses that are liable for national insurance will pay the same or less than they were previously, while, set against that, many businesses and charities in Scotland and Glasgow will be protected against the increase. This strikes a fair balance.
As a Scottish MP, I must turn to Scotland. The context of this national insurance rise is that around one in six Scots is on an NHS waiting list. On a Friday evening a few weeks ago, I was contacted by a constituent whose wife of 40 years was in hospital. He was petrified and devastated because there was no bed available for his wife after she had suffered a stroke. That is the context of this national insurance rise. It is correct to raise taxes to invest in our health service, and that is the beginning and the end of it. In Glasgow, this year, 172 teaching posts have been removed. That is the context of this national insurance rise.
Our Budget delivered the largest settlement for the Scottish Government in the history of devolution—£4.9 billion of additional funding and further funding to cover the national insurance rise over the next two years. This is a UK Government delivering for Scotland and giving the SNP the tools to clean up its mess. The changes to national insurance are critical to this additional funding, which will benefit the people, charities and businesses of Glasgow and Scotland.
Despite this extra funding, the SNP repeatedly criticises our Budget and our management of the public finances. This is—as some say of Christmas dinner—somewhat rich coming from the Scottish National party. After almost 18 years of the SNP Government in Holyrood, public finances are in a catastrophic mess. Let me provide a simple example: the replacement Arran ferries are hundreds of millions of pounds over budget and years late, making lives miserable for people trying to get from Arran and damaging the tourist industry. It would be unwise to choose Rod Stewart’s song “We are Sailing” for the SNP Christmas karaoke, because no one is sailing under the Scottish Government’s appalling management of the economy.
The SNP has criticised our choices. This Government have not been in power for even six months. The Tories were in power for 14 years and the SNP have been in power for 17 and a half years. On any view, the criticism of our Budget after nearly six months defies logic, but that defiance of logic does not end there. The Conservatives criticise our choices, but they do not say what they would do instead. They may have a shopping list of additional spending commitments, but they simply do not explain how they will tax or fundraise those spending commitments. This is not serious.
We are having to make difficult decisions. The Government are asking employers to contribute more. That will enable investment in public services, which is good for employers. We are being straightforward about the choices regarding the public finances, spending, tax and national insurance. I say to Opposition Members that cakeism is for Christmas. It is not an approach for serious Government or serious Opposition. The job of a serious Government is to make serious choices to progress the country—choices that will allow us to invest in our public services.
Joe Robertson (Isle of Wight East) (Con)
The Government knew that if they raised national insurance contributions in the Budget, it would be devastating for health and social care. That is why they exempted the NHS; they knew that it would be put under acute pressure by the Budget. They did not exempt some of the key partners that deliver health and social care in this country, that they will rely on to move people out of acute care and into community care, and that they will rely on to achieve prevention rather than cure—all things that the Secretary of State for Health and Social Care says he wants to do. They will rely on GPs, pharmacies, hospices and social care, yet the national insurance contributions fall on them.
Hospices will pay £260 million. According to Community Pharmacy England, pharmacists will pay £50 million. Social care will pay £2.4 billion. All that money will move across to the NHS, which is largely slanted towards acute provision. That runs completely counter to what the Health Secretary said he wants to do. His answer to those GPs, pharmacists and hospices who are deeply concerned is, “We will deal with this in due course.” “Due course” means “We have absolutely no idea and no plan at all.” He and, indeed, Treasury spokespeople say that they will deal with hospices in the usual contracting way.
The contracts of hospices like Mountbatten just outside my constituency on the Isle of Wight are with the integrated care board. They do not have a contract with Government, the Department of Health and Social Care or an NHS employer. Under those contracts, there is no clause for uplift of salary, or for recovering the increased cost of national insurance contributions. Saying, “We will deal with it in the usual way through contracting” shows either a complete lack of understanding of how hospice services contract with the public sector, or a complete indifference, disregard and, frankly, contempt.
As for other sectors of the economy, national insurance increases hit those who employ people—sectors that rely on larger workforces, such as hospitality and tourism, which my constituency on the Isle of Wight is heavily reliant on. This is a tax on working people, because it disincentivises employing working people, and even the OBR says that 60% of the impact will likely be felt by those on lower wages. It also says that growth will peak next year at 2%—in fact, that is the Treasury’s own figure—and then it will fall away for the rest of the decade. This is not a growth Budget. As for those working in hospitality and tourism, many of whom are seasonal or part-time workers, they will be brought into the national insurance tax regime for the first time.
Brilliant businesses in my constituency, such as the Yarbridge Inn in Brading, the Spyglass Inn in Ventnor, and all the independent hotels in Sandown, Shanklin and elsewhere, will be squeezed further, right at the time when they are trying to recover from covid, and when our tourism and hospitality sectors are competing with cheaper, overseas holidays. The sector is already heavily taxed compared with hospitality and tourism elsewhere in Europe. This is an unpatriotic tax, because it disincentivises the visitor economy and tourism in Britain.
I urge the Government to go back and look again at providing relief to hospitality and tourism, as well as to health and social care. As my right hon. Friend the Member for Beverley and Holderness (Graham Stuart) said, there is no shame in the Government recognising their mistakes in both sectors, and coming up with genuine relief for health and social care and for tourism and hospitality.
Dan Tomlinson (Chipping Barnet) (Lab)
I very much welcome the chance to speak in this debate on an important topic. I am sure that Members on both sides of the House will be glad to know that this is the first speech of mine that is not subject to a time limit, so I can speak for as long as humanly possible on the intricacies and joys of national insurance contributions, and I hope to stay on the topic at hand.
Not having a time limit also gives me the chance to make a great parliamentary speech on this important topic. We all know what good speeches look like; they are not a simple list of points reeled off in order, but may include great rhetorical flourishes, the use of the English language at its finest, and nuanced arguments. But, Madam Chair, I will make six simple points, in list form, in favour of the national insurance changes before us. I have missed my opportunity, but maybe I will make such a speech in future.
These changes are incredibly important. I urge Opposition Members to vote with the Government against the amendments, so that we can get the changes that we need for our country. The first reason that I think the changes are important and sensible is that they will mean that the Labour Government stick to the pledge we made in the election campaign not to increase taxes on working people. It is important that we rebuild trust in our politics, which has fallen to a record low. I know that this is contested in the House, but Labour is clear that these specific changes protect working people’s payslips and mean that we do not have to make the changes that others have suggested for income tax and value added tax. Trust in our politics is very important.
The second reason I encourage Members to vote with the Government tonight is that the changes provide vital funding for our public services. I am not too sure whether Conservative Members—I would be interested to hear from them—support the additional funding for public services. I said this in the previous debate on the Bill, so I am a bit like a broken record, but if they do support additional funding, would they raise it through additional borrowing or different tax rises?
Dan Tomlinson
Before I have even heard the hon. Member’s request to intervene, I happily give way.
Joe Robertson
I can offer the hon. Member a solution for growing the tax base: grow the economy. That is by far the best way of increasing the tax take. This Budget does not grow the economy—that is the problem.
Dan Tomlinson
I will come to growth, which is the sixth point on my very exciting list, but I will just say that this Budget will see growth increase in the short term and stay broadly unchanged over the forecast period, and the OBR says that the increased public sector investment that we are making will lead to a small but significant increase in growth in the long run. I wholeheartedly agree with the hon. Member that we need economic growth in this country.
It is important that we provide the revenue to fund our public services. I will not repeat the convincing and powerful arguments made by Labour Members about the broken nature of our public services. In Chipping Barnet, policing is really struggling, and 100,000 people in the Royal Free London NHS foundation trust area are waiting to be seen by our local hospital. We need to provide funding in a sustainable way.
The third point on my exciting list of reasons to vote with the Government tonight is that these changes provide stability. We all know that we need economic stability—it is the foundation of the economic growth that the hon. Member for Isle of Wight East (Joe Robertson) just made an important intervention on. I believe that the Chancellor and the Treasury team made the right decision, even though it was difficult, to raise revenues to fund our public services and put our public finances on an even keel once again. This change means that over the coming years, we will get to a place where, for the first time in a very long time, day-to-day spending will be matched by the tax revenues that are coming in. I think all Members of the House will agree that that is important, but I know that Labour Members prioritise that stability, which has been lacking for too long.
Fourthly, these changes cut taxes for the smallest businesses—a quarter of a million businesses, as my hon. Friend the Member for Glasgow East (John Grady) made clear. Again, I am interested to know whether Opposition Members support or oppose the cut in taxes for the smallest businesses that this Budget provides.
Fifthly, we have prioritised sound public finances, which is a big change from recent years. The mini-Budget that was passed by Liz Truss contributed to pushing up interest rates in our economy, making things more difficult for families in my constituency and across the country. It also added not £6 billion, or even £16 billion, but £60 billion to Government borrowing costs each year—Members can see those numbers in the Office for Budget Responsibility’s report. That and other failures to manage our public finances over the past 14 years have driven up our public debt from £1 trillion, as it was in 2010, to £2.8 trillion, which I believe was the latest estimate from the Office for National Statistics. If we support additional spending on our public services, it is vital that we also make the right decision to raise revenue that will cover that increase in public spending, so that we can have the sound public finances that the public want from this Government.
David Chadwick (Brecon, Radnor and Cwm Tawe) (LD)
Can the hon. Member explain why his Government are choosing to raise taxes on GPs’ surgeries, which did not crash the economy or the public finances, rather than opting to raise the revenue from the big banks, as the Liberal Democrats suggest?
Dan Tomlinson
We have made changes to a whole range of taxes in the Budget, and it is important to note that the scale of revenue that the Liberal Democrat party is talking about would not cover the additional funding that we are providing—£20 billion for our health services and additional funding for a whole range of public services. I understand that in the coming weeks, the Health Secretary will come forward with more details on many of the vital services that Members have mentioned today. I must put on record that I very much enjoyed meeting GPs in my constituency over recent weeks. They raised a whole range of issues with me, including the big challenges they have faced over the past 14 years in getting the support and funding that they need. I hope and trust that in the coming weeks and months, this Government will put that right.
I am sure that the hon. Member for Isle of Wight East will enjoy my final point. My sixth reason for voting for this Bill, rather than for the mistaken and erroneous amendments that have been tabled, is that the changes we have put forward in this Budget, including on national insurance, will pave the way for higher growth and higher living standards. As in all good speeches, this last point brings together some of the other points made—so this may not have been just a boring list. Through ensuring economic stability and funding our public services properly, we will make sure that people get the health services that they need, so that they are not struggling with ill health that drives them to economic inactivity and pushes them away from the jobs market. We will make sure that people feel secure on their streets, and that businesses feel safe, rather than struggling with shoplifting, which has become all too rife. Those are the changes that this Budget and the measures in this Bill provide.
Lincoln Jopp
I am grateful to the hon. Member for giving way, particularly on the subject of growth. He, like me, is an avid reader of the Labour party manifesto, so he knows that sustained economic growth is the first mission of this Government. I think we all agree on the point that sustained economic growth is a really good thing, so could he simply tell us whether he thinks these national insurance changes are pro-growth or anti-growth? It is a very simple question.
Dan Tomlinson
I thank the hon. Member kindly for his intervention. I am not sure whether all Members know this, but the Labour party chair has appointed me as the growth mission champion, so I am very much in favour of economic growth. We can see the impact of the changes in the round at the Budget, leading to higher growth in the short term and further growth in the long run, which is very important.
Without the changes in this Bill and in the Budget as a whole, we will not be able to turn the page on the low growth we have experienced as a country over the last 14 years. Productivity growth since the financial crisis has been at just 0.2%, which is why we had the longest squeeze on wages since Napoleon was making his way around Europe on the Conservative party’s watch. We need to turn that around and make sure that we provide the foundation of stability, fund our public services and, yes, support some of the very smallest businesses with these changes, so that we can get the economic growth that Members on all sides, including growth champions, would very much like to see in the years ahead.
James MacCleary (Lewes) (LD)
I have to start by disappointing the hon. Member for Chipping Barnet (Dan Tomlinson), in that I rise to support the amendments tabled by my hon. Friend the Member for St Albans (Daisy Cooper). I will speak about my deep concerns about the proposed national insurance changes because of the real-world impact they will have businesses, GP surgeries, community organisations and vital care services in my constituency of Lewes. While I recognise the fiscal pressures, which have been mentioned by a lot of Members, I ask that we fully consider how these changes will affect those working tirelessly to keep our communities vibrant, secure and healthy.
GP surgeries are the frontline of the NHS. A local GP practice in my constituency has been in touch with me just today to describe its shock at discovering that it will be paying at least £60,000 more a year under these changes. GP practices provide vital healthcare services to our local population and in doing so are under ever-increasing pressures. Yet under the new proposals, GP practices are treated as if they are private businesses capable of absorbing significant cost increases. The reality is, of course, quite different. Every additional £1 spent on national insurance is £1 that is not spent on patient care, staffing or critical medical equipment. For practices already operating under immense strain, this extra burden could be the tipping point that pushes them towards unsustainable financial territory. When cutbacks occur, it is our communities that will lose vital healthcare access, and the NHS, which is already stretched, will be left struggling even more.
We must also acknowledge that our social care providers, including hospices such as St Peter and St James hospice, which looks after my constituents so well—I visited it recently—are caught between rising wages, fixed local authority fees and higher national insurance. They cannot pass on these costs without threatening their very viability. If care providers close or scale back, the most vulnerable in our community will suffer, and so will our healthcare system as hospital stays lengthen and A&E attendances rise. In other words, it will drive up costs for the NHS, making the system less efficient and less humane. It is particularly galling that NHS employers are set to be compensated for the changes while there is no equivalent commitment for the social care sector. Separating social care reform from NHS support will not only hurt vulnerable people today, but make it impossible to achieve strategic priorities for the health service tomorrow.
We must also consider community organisations. Take the Sussex Community Development Association in my constituency. It is a local organisation that reinvests every penny of surplus into essential services such as youth work, emergency food provision and childcare for deprived communities in my constituency. It is already contending with increased wage costs, and it now faces an estimated additional £70,000 per year due to the national insurance rise. Because of its size, it does not qualify for allowances that might soften the blow. This facility was invested in to deliver Sure Start services under a previous Labour Government, and it is now considering cuts to essential services thanks to this one. It now faces a desperate scramble for funding at a time when its services have never been more crucial.
The rise, coupled with the increases to the national living wage and the minimum wage, will hit the early education and childcare sector particularly hard. As chair of the all-party parliamentary group for childcare and early education, I must make the Committee aware of how dire the situation is. An average nursery will face additional staffing costs of nearly £40,000 a year due to the increases. That is because staffing costs account for 75% of nurseries’ running costs, compared with just 30% for the average restaurant. If Government funding rates do not cover the gap, parents will face higher fees, potentially leaving them to reduce their working hours or to leave the workforce altogether.
The situation is exacerbated by the fact that private nurseries delivering Government-funded hours may not be eligible for employment allowance. That means that they may not receive the intended financial support from the Government. The sector is already facing recruitment challenges, with 29,000 new staff needed by September 2025 to deliver the promised 30 hours of funded childcare. The national insurance changes could lead to recruitment freezes, reduced staff training and even nursery closures. That is the precise opposite of what this Government claim they want to see for working parents and carers. That would have a detrimental effect on families and the economy, hindering economic growth, and it could seriously impact the Government’s commendable aim of having half a million more children hitting early learning goals by 2030.
Finally, let us not forget that even successful local businesses are feeling the strain. Rathfinny, a renowned Sussex wine producer in my constituency that has invested in our local economy and environment, faces a significantly higher national insurance bill. It may be forced to slow its growth, reduce investment or even curb local employment opportunities, undermining the prosperity that benefits us all. This Government talk about economic growth, as Government Members have done today, but this tax increase will inhibit the ability of many British businesses to expand and flourish.
If introduced without nuance, these national insurance changes risk delivering a series of damaging shocks to my community and places across the country. I urge the Government and the Minister to reconsider, to review the thresholds, to consider exemptions for sectors that cannot pass on costs and to ensure that our GP practices, childcare providers, community organisations and valued local employers are not left shouldering burdens they cannot bear. I implore the Government to recognise the unintended consequences and to commit to measures that will preserve local jobs, sustain our community services and uphold the quality of care we offer our vulnerable citizens. I hope that the Government will do more to ensure that this tax increase does not harm the very communities and services we have pledged to serve and protect.
David Chadwick
The Liberal Democrats agree that the country’s finances are in a mess thanks to the previous Conservative Government. However, we do not agree that increasing national insurance is the way to address the problem, as doing so will undermine efforts to improve public services across the United Kingdom. For example, last month Care Forum Wales issued a stark warning that the rise in national insurance could cause a collapse in the social care system in Wales, creating a £150 million funding gap. Social care in Wales is already on its knees. Over the past four years, 40 Welsh care homes have closed. If yet more are forced out of business due to increased costs, we will have even fewer social care spaces available. We know that the scenes of ambulances left queueing for hours outside our hospitals are the result of them being unable to discharge patients due to shortcomings in social care.
It is not just care homes that are affected, but primary care too. Our GPs, dentists and pharmacies will suffer from this tax rise. A local GP practice in my constituency told me that it will have to cut one day of practice nurse time and one day of GP time from April 2025. That is a direct result of the projected £30,000 increase in its national insurance bill, alongside an overall lack of funding for GPs. A second surgery is projected to have an increase in its NI bill greater than £100,000 in April 2025. Both are clear that without an exemption for health and social care providers, the NHS in Wales could face collapse. It already has the worst outcomes of any nation across the United Kingdom.
Charities and local authorities will suffer too from this decision. In my constituency, the chief executive officer of Powys Association of Voluntary Organisations has stated that the national insurance increase will
“place considerable financial pressure on voluntary sector organisations, many of whom are crucial partners in delivering essential services.”
That is the reality of the decision taken by the Government to use such a blunt tool to try to fix the nation’s finances. Many of my constituents are asking why Labour has chosen to go after the small businesses, charities, and health and social care providers rather than target the big banks, the oil and gas giants, or the social media giants. I urge the Government to reconsider their decision to raise income in this manner and to make exemptions for the health and social care sectors as well as for charities.
Sammy Wilson
The outcome of the debate is of course inevitable: we know that when we go through the Lobby, we will be smashed by the overwhelming strength on the Government side, not because their arguments are strong but because of the parliamentary arithmetic. I suspect that even the hon. Member for Walthamstow (Ms Creasy), who indicated in her speech that this measure will hit especially labour-intensive services that employ low-paid people and are vital to the smooth running of the economy, will walk through the Lobby with the Government. Some people might say, “Is that not just the politics of despair?” It is important that the arguments made are at least challenged, despite the fact that, because of the parliamentary arithmetic, it may not come to anything.
I do not actually have a political point to score here, because the DUP will never be the alternative Government in this place—though the country is the worse for it. I therefore hope that all the predictions made here today and by independent bodies that have looked at the impact of the Budget are wrong. I hope that we do not find that small employers have to go out of business, that recruitment goes down, that the real wages of those who are employed—especially at the lower end of the wage spectrum—are cut, and that the services that are so vital to the health service are impacted on. I hope that all those things do not happen. I hope that economic growth is not impacted by it, but all the economic evidence, the economic logic and the forecasts made indicate that the arguments made against this measure by Opposition Members are correct.
Dan Tomlinson
My understanding is that the Office for Budget Responsibility says that growth will be higher in the short term, broadly unchanged over five years and higher in the long term.
Sammy Wilson
We have seen over the last five months that growth has already been impacted. Of course, the OBR has indicated that in two and three years’ time, growth will be impacted negatively as well. I do not think that one can hide behind those arguments. As I said, I hope that I am wrong, but I suspect that all the economic logic on the impact of this measure and what we are already hearing from employers indicate that that is not the case.
Jim Shannon (Strangford) (DUP)
The reality is that those who own businesses in my constituency tell me that they will have to look at reducing wages and reducing numbers. Because of the Government’s policy, those working in doctors’ surgeries will have to look at a reduction in numbers as well. Whether Government Members like it or not, this measure will impact on small and medium-sized businesses and on GP surgeries. That is the reality. The Government are to blame for a recession—there really is talk about it. If a recession comes, the Labour party will be responsible.
Sammy Wilson
I thank my hon. Friend for his short speech to back up the points I have been making.
Let me look at some of the arguments presented today. The first is that the Bill will help to fix the NHS. I will not go into the arguments already made, but Members have made it clear that the NHS depends on primary services and, once people have gone through hospital, being able to discharge them into the community. The businesses that provide those services will be impacted by these tax changes. I am sure that there is not a Member here who does not already see that hospital beds are being blocked because there is insufficient capacity. People go into hospital and get mended but still need some respite before they go home, but the NHS cannot find places for them. If that is true now, then the situation will be even worse once these tax increases impact those businesses.
A&E is inundated with people who cannot get GP appointments. If the Government hit GPs, as has been outlined eloquently today, those services will be blocked and not available. Where do people go? They go to A&E. The Bill is meant to help the NHS, yet all the evidence from the people who support it and are part of the supply line say otherwise.
The Minister previously indicated that the people whose services are commissioned from the NHS can renegotiate those services and the payments for them. The very fact that the NHS is in difficulty and is having to be exempt from these national insurance changes is an indication that when they go with the bowl, they will be told that the cupboard is bare and no support will be given.
The second argument made today is that we need these changes to restore trust in politics, even though it was promised that working people would not be impacted. When evidence was given to the Treasury Committee, what did the representative from the Institute for Fiscal Studies say? They said that these changes will affect every working person. We cannot hide behind the argument that it is being done for the good of trust in politics. In fact, it will undermine trust in politics.
Another argument that was made is that we have no choice. The Government already made choices, even before this Budget. They chose to spend money even when they knew there was a black hole. They were spending the money that they want to raise from these national insurance contributions on wage increases, quangos and other things. Recently, they will not even tell us how much they are spending. The Energy Secretary went to COP and came back and told us of a £300 billion bill coming down the road for our sin of industrialising in the past, and he will not tell us how much we will have to pay. We gave away the Chagos islands, and we are going to pay for that but it is secret.
Adam Jogee (Newcastle-under-Lyme) (Lab)
I am enjoying listening to the right hon. Member. He is an esteemed former Finance Minister in the Northern Ireland Executive, so I defer to his experience. He is setting out his opposition to the measures in the Bill. Now that he has referenced the black hole, can he tell us what he would do to address the legacy of the previous Government?
The Chairman of Ways and Means (Ms Nusrat Ghani)
Order. I, too, enjoy listening to the right hon. Gentleman, but it would really help if he could continue to speak to the Bill at hand, and not make broader comments.
Sammy Wilson
The mentality is that with these national insurance increases we are imposing more taxes on small businesses and on all the sectors I have spoken about. I would ask the hon. Gentleman what spending decreases could have been looked at—have any productivity impositions been put on the public sector, for example? That should be the answer, rather than asking, “Who should we tax to pay for the black hole?” Instead, we should be asking how we can reduce and reprioritise the things that we do; looking at some of the things the Government do at present that they do not need to do, or that they could do better, or that they could save money on.
I listened with bemusement to the hon. Member for Dartford (Jim Dickson), who was relieved by a survey in The Guardian in which more than 50% of those surveyed were quite happy with this tax. If there are so many Guardian readers happy to pay more taxes, I am sure the Scottish National party would love them all to move to Scotland, because it might solve some of the problems they have. These are the kinds of strained arguments that we have had from Government Members.
They know the impacts the Bill will have. I am sure they are having the same conversations with their constituents as I have had with the people who have spoken to me in my constituency office—the small businesses, those in the hospitality industry, the GPs and those in the care sector and the charitable sector, who have come to me and told me the impact it will have on their organisation. I do not believe we can run away from this, despite what will happen when we vote later today.
I do not share the optimism of the right hon. Member for Beverley and Holderness (Graham Stuart) that somehow little cabals will form on the Government Benches—that they will all start whispering, and maybe 10 of them will go to see the Chief Whip, and then next week it will be 20, and then, by the time there are 50 of them going to see the Chief Whip, this will all change. I do not share that optimism. What I do hope, however, is that the predictions that have been made about the Bill will finally resonate with the Chancellor, and we will see a change in policy.
Carla Lockhart
In my constituency and that of my right hon. Friend, agrifood manufacturing is a big business base and a big sector. As he will know, many agrifood businesses are saying that these changes will increase their bill by £50,000, £60,000 or £100,000. On top of the death tax for family farms, that will absolutely decimate our agrifood sector. I urge the Government to pull back from this measure; otherwise, we will see the cornerstone of our economy destroyed.
Sammy Wilson
Of course, agrifood is another sector that I had not mentioned, along with hospitality, food processing, all the charitable sectors and some that are supporting the health industry—all are affected by it; they cannot escape it. I believe the impact will be far worse than what the Government are hoping for. Of course, as a result of the side effects of this measure, the revenue that is hoped for might not even be obtained.
Adam Jogee
For accuracy, I want to point out to the right hon. Gentleman that I am far more likely to be seen reading the Antrim Guardian than The Guardian.
Sammy Wilson
I am pleased to hear it. I certainly do not read The Guardian, and I certainly do not share the view, held by some of its readers, that we should pay more taxes.
In closing, the Government have a huge responsibility to tax wisely and to spend wisely, and I do not think they have got that equation right. In fact, they are spending recklessly in many areas, and taxing recklessly as well. That will impact on their long-term objectives, but it will also impact on the lives of our constituents day to day.
The Chairman
I know that colleagues read about how we manage the Chamber, so they will know that I cannot put speaking limits on individuals contributing in Committee of the whole House. However, if the last two Members speak for around five minutes each, the Minister will have time to respond before we have to conclude business, so please be mindful of that.
Robin Swann (South Antrim) (UUP)
I will shorten my speech on your guidance, Ms Ghani. I encourage all Members of the House to follow the example of the hon. Member for Newcastle-under-Lyme (Adam Jogee) and sign up to the Antrim Guardian—a very good local publication from my constituency that carries good articles.
I rise to come back to the topic of the debate, employers’ national insurance contributions, because we have covered many subjects this afternoon. I support the amendments that look to alleviate the punishing implementation of, and increases to, employers’ NICs, especially for our family health service and social care providers. Unlike other speakers on the Opposition Benches who have looked to blame the Government for the increases, I do not think the Government are to blame. I think this is more about the Treasury than the whole Government.
I want to pick up on a point raised, I think, by the hon. Member for Isle of Wight East (Joe Robertson). I have a lot of respect and sympathy for the Secretary of State for Health and Social Care, the right hon. Member for Ilford North (Wes Streeting). When he announced his 10-year plan for the national health service, there were three main platforms: to move from analogue to digital, to move from sickness to prevention, and to move from hospital to community. The increases to NICs for community-based health providers will put many of those services at risk and under pressure. This is where there is a disconnect between what the Government are trying to do and what they are actually going to do and achieve. I think that was the point described by the right hon. Member for Beverley and Holderness (Graham Stuart). If we put the additional charges on our GPs, community pharmacies, opticians, domiciliary care providers and social care providers, that will come back, in a circular route, in how we fund our health service.
On the specifics for Northern Ireland, we are looking to transform and modernise a health service that has been largely underfunded and under pressure for quite a number of years, and trying to exist on single-year budgets since 2016. We are doing that by introducing multidisciplinary teams, where a general practice has a psychologist and a social worker all within its practice. General practices are asking for that to be extended across Northern Ireland, but the increase in ENICs will increase wage bills and pressures on the pharmacies and general practices that have already taken that step.
The right hon. Member for Beverley and Holderness also made a point about the introduction of social care within the health service. We already have that in Northern Ireland, and 75% of the provision is done by the private sector. One thing this House needs to address, especially those on the Labour Benches, is that when we talk about private provision, they are not organisations making massive amounts of money. In my constituency they are often family-run social care practices that look after two or three homes. Nearly all nursing and residential care homes are privately owned too.
Josh Fenton-Glynn (Calder Valley) (Lab)
The hon. Gentleman makes an important point about the problems in the social care market. However—this is a point I have made before—a lot of that is owing to the fact that nothing has been done since Andrew Dilnot’s report in 2011. Perhaps the hon. Gentleman could point to where he has spoken out about that in the past.
Robin Swann
When I was Minister of Health in Northern Ireland—for four years—I looked to the Dilnot report, and I tried to introduce parts of it there because of the differential that exists: in our system, health and social care services are the overall responsibility of the Department of Health. I know what point the hon. Member may have been trying to make, but I think he failed to make it directly in that intervention. The impact of not only the Dilnot recommendations but the introduction of employers’ national insurance contributions on those services would actually run counter to anything that Dilnot was recommending, because he was talking about a funded, integral part of domiciliary care as part of the health service, which we already have, but that would put pressure on our health services at the moment.
Madam Deputy Speaker (Ms Nusrat Ghani)
Order. May I ask the hon. Gentleman to keep his contribution to just a few minutes, so that the Minister has time to respond to all the Back Benchers?
Iqbal Mohamed
Everyone in my constituency, and indeed in the whole country, knows that the last Tory Government decimated public services after 14 years of austerity, mismanagement, negligence and a sole focus on the rich, at the expense and neglect of the poor working class and the public sector. I sympathise with the new Government, and I will try to provide constructive support.
I wholeheartedly welcome the Government’s announcements in the Budget of increased investment in education, the NHS, infrastructure projects and other public services, but, like many other people in the House and throughout the country, I do not agree with the approach taken to the funding of those investments. Members on both sides of the Committee have indicated today that failing to protect key sectors and services such as general practices, care homes, pharmacies, childcare providers and third sector providers may have been an oversight or a mistake on the Government’s part, but I am not so sure. On the basis of the Government’s other blanket policies on abolishing the winter fuel allowance, imposing VAT on all private schools including low-fee and charitable schools and removing business rates relief from all private schools and charities without any announcement of safeguarding or compensatory measures to protect these services and sectors, it appears to have been a deliberate, or negligent, decision.
It is clear that the Government inherited a dire state of affairs that requires huge investment, which must be paid for in a responsible way. I am sorry to say that the way that has been chosen by this new Labour Government is not the right one. Viable and progressive alternatives are available to the Government to raise finances for the necessary investment rather than inflicting the increase in national insurance contributions on the impacted bodies. Let me suggest a couple of easy measures that would support the Government’s investment. One possible solution is the imposition of a 2% wealth tax on assets over £10 million, which would raise the amount predicted to be raised by national insurance contributions; another is the closing of corporation tax loopholes that allow corporations to save billions and to offshore profits.
The Exchequer Secretary to the Treasury (James Murray)
I am conscious that I have only a few moments to speak. I will not go through the four clauses of the Bill, as I take it that everyone will have read it already. I will instead go directly to the amendments that have been tabled, ahead of potential votes in a few moments.
I will address the amendments tabled by the hon. Members for St Albans (Daisy Cooper), for Angus and Perthshire Glens (Dave Doogan), for Leicester South (Shockat Adam), for Grantham and Bourne (Gareth Davies), and for Lagan Valley (Sorcha Eastwood). These amendments seek to exclude certain sectors, including healthcare providers, educational settings and charities, from the new rate and threshold for employer national insurance. As hon. Members know, the changes in the Bill before us represent one of the difficult but necessary decisions that the Government have had to take to fix the foundations of our economy and our public finances.
James Murray
I cannot give way. I have given way to the hon. Gentleman many times in recent weeks, but I have about four minutes in which to address everyone’s comments.
As hon. Members have set out, we recognise that the changes we are making today will have an impact on employers. Making these changes was a tough decision that we did not take lightly, but we are also clear that the revenue raised from the measures in this Bill and others in the Budget will play a critical role in both restoring economic stability and getting the NHS back on its feet. As a result of the measures in this Bill and the wider Budget measures, the NHS will receive an extra £22.6 billion over two years to deliver 40,000 extra elective appointments a week.
The Government will provide support for Departments and other public sector employers on additional employer national insurance costs, including central Government, public corporations and local government. Independent contractors, including primary care providers, social care providers, charities such as hospices and nurseries will not be supported with the costs. That is the same as was the case with the changes to employer national insurance rates under the previous Government’s plans for the health and social care levy.
Primary care providers—general practice, dentistry, pharmacy and eye care—are important independent contractors that provide nearly £20 billion-worth of NHS services. Every year, the Government consults each sector about what services they provide, and about the money to which they are entitled in return under their contract. As in previous years, the issue we are debating today will be dealt with as part of that process in the round. The Department of Health and Social Care will confirm funding for general practice, dentistry and pharmacy for 2025-26 as part of the usual contract process later in the financial year, including through consultation with sectors.
I turn to adult social care. The Government have provided a real-terms increase in core local government spending power of around 3.2% for 2025-26, including at least £680 million of new grant funding for social care. The funding can be used to address the range of pressures facing the adult social care sector; again, they will be considered in the round.
Some hon. Members have tabled amendments to exclude charities from the new national insurance rate and threshold. However, it is important to recognise that charities can benefit from employment allowance, which this Bill has more than doubled from £5,000 to £10,500. That will benefit charities of all sizes, particularly the smallest. The Government also provide wider support for charities, including hospices, via a tax regime. This tax regime is among the most generous in the world, with tax reliefs for charities and their donors that are worth just over £6 billion for the year to April 2024.
I recognise that some hon. Members have shown an interest in the impact of this Bill on childcare settings, as highlighted in the amendments tabled by the hon. Members for St Albans, for Grantham and Bourne, and for Lagan Valley, and in the new clause tabled by my hon. Friend the Member for Walthamstow (Ms Creasy). Early years providers have a crucial role to play in driving economic growth and breaking down barriers to opportunity. We are committed to making childcare more affordable and accessible, which is why the Government committed in our manifesto to deliver the expansion of Government-funded childcare for working parents, and to open 3,000 new or expanded nurseries, by upgrading space in primary schools to support the expansion of the sector. Despite the very challenging circumstances that the Government inherited, the Chancellor announced in her Budget in October significant increases to the funding that early years providers are paid to deliver Government-funded childcare places. This means that the total funding will rise to over £8 billion in 2025-26.
New clause 4, tabled by my hon. Friend the Member for Walthamstow, specifically refers to the eligibility criteria for employment allowance. I can assure her that they have not changed, except for the removal of the £100,000 threshold, which will mean that more organisations are able to access employment allowance. The eligibility of a particular organisation will depend on the make-up of an individual business’s work, which can be determined following detailed guidance from His Majesty’s Revenue and Customs. While every organisation will need to check its eligibility for the employment allowance, it is likely that many childcare providers will be able to access it.
Finally, I will turn to the amendments to exclude universities from the new rate and thresholds for employer national insurance. We greatly value UK higher education in creating opportunity, being an engine for growth in our economy and supporting local communities. The Budget provided £6.1 billion of support for core research and confirmed the Government’s commitment to the lifelong learning entitlement. The Secretary of State for Education has confirmed that the maximum fees in the academic year 2025-26 will rise, for the first time since 2017, from £9,250 to £9,535. This was a difficult decision, which demonstrates that the Government are serious about the need to put our world-leading higher education sector on a secure footing. I would like to continue, Madam Chair, but I should stop now—
James Murray
I beg to move, That the Bill be now read the Third time.
The Bill seeks to put into law one of the toughest decisions we made at the Budget in October. As I set out in earlier stages of the Bill, we recognise that there will be impacts on employers as a result of the changes, with employers facing difficult decisions. It will implement a difficult but necessary decision that, along with others, is critical to raising the revenue needed to fix the public finances, get public services back on their feet and restore economic stability.
The Bill before us has three measures: first, an increase to the main rate of employer secondary class 1 national insurance contributions from 13.8% to 15%; secondly, a decrease in the secondary threshold for employers from £9,100 to £5,000 per year from 6 April 2025; and thirdly, changes to the employment allowance to support small businesses. The measure will protect small businesses and charities by more than doubling the employment allowance from £5,000 to £10,500 pounds a year from April 2025. In addition, the £100,000 eligibility threshold will be removed.
Through the measures in the Bill and others in the Budget, the Government are taking the difficult but necessary decisions to fix the foundations of our economy. If hon. Members in other parties choose to vote against the Bill, the British people will see that they are voting to ignore the fiscal mess that we inherited. They are voting to cut investment in the NHS and to increase borrowing for day-to-day spending.
Finally, I reiterate my thanks to hon. Members who have participated in the debate, and I extend my thanks to all the officials for their support. I commend the Bill to the House.
Mel Stride (Central Devon) (Con)
This is not a Bill, but a Shakespearean tragedy. It is the “Hamlet” of our age. While the Labour party was tipping the poison into the ears of the electorate, it was assuring them in its manifesto that it would do nothing with national insurance. Look what it has done. This will hit inflation—all forecasts show it higher every year than it would have been under us back in the spring. Mortgages will be higher, living standards will be lower, wages will be driven further down and there will be a £770 reduction in the standard of living by October 2029, according to the Joseph Rowntree Foundation. We will see 50,000 jobs destroyed, particularly among our younger people. We will see growth impacted—lower across the forecast period than it would have been under ourselves back in the spring.
This is a far cry from our record when we left office, with employment at near record highs, unemployment at near record lows, the fastest growing economy in the G7 and real wages growing in every month for 13 consecutive months. We brought inflation down from over 11% in October 2022 to exactly the target of 2% on election day. The Bill is a calamity for businesses up and down our country. We are the party that understands that we only get good public services with a strong economy and strong businesses. The Labour party is consigning people up and down this country, plunging them into the tepid bath of managed decline over which it has presided.
Question put, That the Bill be now read the Third time.
National Insurance Contributions (Secondary Class 1 Contributions) Bill
Wednesday 18th December 2024
(2 weeks, 5 days ago)
Lords ChamberRead Full debate National Insurance Contributions (Secondary Class 1 Contributions) Bill 2024-26 Read Hansard Text Amendment Paper: Committee of the whole House Amendments as at 17 December 2024 - (17 Dec 2024)