(13 years, 10 months ago)
Commons ChamberRead Hansard Text Read Debate Ministerial Extracts
14:17 - The House divided: - Ayes: 0 / Noes: 0 - Question accordingly negatived.
15:56 - The House divided: - Ayes: 92 / Noes: 271 - Question accordingly negatived.
Mr David Hanson (Delyn) (Lab)
I beg to move, That the clause be read a Second time.
Mr Speaker
With this it will be convenient to discuss the following:
Amendment 5, page 2, line 20, clause 4, leave out ‘2013’ and insert ‘2012’.
Amendment 6, line 20, at end insert
‘The Treasury will carry out a review of the Regional Secondary Contributions Holiday before 5 December 2011 and may extend the relevant period until 5 September 2013.’.
Mr Hanson
The clue to the proposed changes before us is in the words that the Clerk read out, “not amended in the Public Bill Committee”. The proposals were reflected on and discussed in Committee, and I hope that the Exchequer Secretary to the Treasury has had time, with a good break behind him over Christmas, to reflect on the common sense in them.
I would find it amazing if the Minister were not able to accept new clause 1, because it simply asks for information that, if he looks carefully, he knows I could table questions—with probably more work for him and his officials—to secure in due course. It is important that he assesses the scheme to ensure that we have a national insurance holiday, which, under the current Bill, includes the whole United Kingdom minus three regions—London, the east and the south-east.
The Opposition support, welcome and recognise the Government’s objectives in seeking to use the mechanism of forgoing national insurance income to encourage businesses, but it is important that the Government, the Opposition and, indeed, the House, who endorse that proposal, know its impact over the relevant period.
New clause 1 asks the House to ensure that, following Royal Assent, there is an annual report to Parliament on the outcomes of the scheme, meaning that between now and 2013 we would potentially have three annual reports with the information outlined in the new clause. Essentially, that would include the total sum of national insurance expenditure saved by businesses under the scheme by constituency, but, if the Minister wanted to reflect on the proposal and have it brought back in another place, I would be happy for the information to be listed by sub-region or by region. The information would also include the number of businesses availing themselves of the secondary contributions holidays, the number of employees in each business and the total expenditure saved by businesses under the scheme.
I tabled new clause 1 for several reasons. It is important that we know the facts. The Minister said in Committee that he expects about 400,000 businesses to take part in the scheme during its operation. That figure is a valuable indication and a good benchmark by which we can judge the success of the scheme. When the Committee sat before Christmas, we were already effectively five to six months into the operation of the scheme and about 1,100 businesses had applied for it. An annual review to Parliament would not only have provided an indication of whether Parliament should pass the Bill but would have ensured that we know exactly the take-up of the scheme. New clause 1 refers to the fact that we would also know the take-up by constituency and by businesses.
That is important for two reasons. We need to know the trajectory of the take-up. Is the figure of 1,100 to date what was expected? What will the trajectory be for those businesses in 2011 and 2012? If we have our first annual report in, let us say, December 2011—when the scheme will have been operating for 18 months—what will the take-up of the scheme be? Is the trajectory for the remaining two years likely to mean we get to the 400,000 figure that the Minister has mentioned? An annual report would provide transparency and openness, to which the Government are committed, on those issues and those take-ups. There would be nothing in the report that I could not ask the Minister in a parliamentary question in December this year, next year or the year after. It would simply be good business for the Government to supply that information as a whole.
It is important to consider the number of businesses in each constituency, and we will return to the exclusion of London, the south-east and the east region when we discuss other amendments. Given the deprivation in many of the London constituencies represented by my hon. Friends in the Chamber this afternoon, we feel particularly strongly about that matter. The Bill will have a significant impact on 400,000 businesses across the remainder of the United Kingdom, but will it and the proposed holiday impact on areas that have the highest public sector employment, which is the Minister’s primary objective, and areas of high deprivation and unemployment?
We discussed unemployment and deprivation in areas of the United Kingdom a number of times in Committee. For the purposes of explanation, I shall randomly look at constituencies that currently benefit from the national holiday under the scheme and will benefit if the scheme goes ahead. The annual report is important because unemployment in the Tatton constituency of the Chancellor of the Exchequer is about 2.1%, in the Richmond constituency of the Foreign Secretary it is about 1.8% and in the Rushcliffe constituency of the Justice Secretary it is about 2%.
It is important that we look at where the scheme ultimately is taken up and who will benefit. If businesses are opening in Tatton, Rushcliffe, Richmond and, indeed, other constituencies with low unemployment, that is all well and good, but it will not tackle deprivation in Manchester Central, Liverpool, Riverside or Newcastle upon Tyne East, which ultimately also might benefit from the scheme. For transparency, it is important that the Minister produces an annual report showing not only how many people and businesses have taken up the scheme, but in which constituencies it was taken up outside London, the south-east and the east region.
Kelvin Hopkins (Luton North) (Lab)
I very much welcome what my right hon. Friend is saying. One of the estimates we should perhaps make is whether the loss of jobs as a result of the VAT hike will wipe out any possible advantage of the Bill?
Mr Hanson
My hon. Friend makes an important point. He will know that the Opposition are extremely concerned about the impact of the VAT rise on businesses, on consumer confidence and on consumer expenditure. Although the measure is not directly linked to the VAT increase, its aim is to help businesses in difficult times. From the Minister’s perspective, the measure is primarily designed to help businesses take up the slack caused by the massive 500,000 people who will lose their jobs as a result of public spending cuts. We will come back to the impact of that on London, the south-east and the east region, where many public sector related employment opportunities will be lost and there will be no benefit from the scheme.
It is important that the Minister not only takes on board where job losses will be but that he looks outside the three excluded regions at the benefits that the scheme will bring to England, Wales, Scotland and Northern Ireland. The production of an annual report will show with full transparency where the businesses are that benefit from and take up the scheme. If those businesses are in areas where there is already low unemployment and deprivation, or they are in areas in the rest of England or Wales where there is not high public sector employment, the objectives set by the Minister will not have been met. In the interests of transparency, it is important to have such a report.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
We support the Bill and the right hon. Gentleman’s new clause because we fear that the measure will not go far enough and that an annual report would show the need for further countervailing measures. Does he agree?
Mr Hanson
The purpose of the Bill, which the Opposition support, is to consider how we give limited help to start-up businesses through a national insurance holiday, so that we can get employment going across the United Kingdom with the exclusion, which we are trying to tackle, of London, the south-east and the east region.
Micro and macro-economic policy will need to be looked at again in many areas. My hon. Friend the Member for Luton North (Kelvin Hopkins) mentioned VAT. Hon. Members are concerned about the impact of public spending cuts on job losses. The issue of the economy generally is also extremely important, as are matters such as employment in west Wales. The annual report would clearly show where new businesses are commencing because of the scheme proposed by the Minister in the Bill and whether those new business commencements can be married to areas where there are high levels of public sector job losses, deprivation and unemployment and therefore where there is a necessity for new businesses to commence. If new businesses are starting up in areas where there is already prosperity, wealth and low unemployment, the loss of the £940 million of national insurance revenue that the Minister is proposing in the Bill could have been used elsewhere to meet the objectives of tackling deprivation and unemployment in a much more concerted manner.
Mike Gapes (Ilford South) (Lab/Co-op)
My right hon. Friend will know that the temporary Secretary of State for Business, Innovation and Skills represents a London constituency. Does he agree that it is deplorable that someone who represents a London constituency has not fought in Government for the interests of people living in London, including people in my constituency, who will be adversely affected by the measures?
Mr Hanson
This is a Treasury-led issue, but it will self-evidently have an impact on businesses. I would have expected the right hon. Member for Twickenham (Vince Cable) to use his Business Secretary responsibilities to bat very hard to ensure that the measure has an impact on London, the south-east and the east. Amendments that we will talk to later focus on those areas and show key issues that will be highlighted by the annual report, even if the Bill does not include London, the south-east and east regions.
If I look randomly at the figures before me, I can see that the unemployment rate in the constituency of my hon. Friend the Member for West Ham (Lyn Brown) is 6.8%, compared with the 1.6% unemployment rate in the North Somerset constituency of the Secretary of State for Defence. His constituency will get the benefit of the scheme; my hon. Friend’s will not. The annual report to Parliament will show whether businesses are being drawn to North Somerset at the expense of, for example, the micro-region of Somerset—Bristol and other areas—where there might be even higher levels of unemployment.
Joan Ruddock (Lewisham, Deptford) (Lab)
In my constituency, sadly, unemployment is even higher, but I want to make a different point to my right hon. Friend. Is there not a need to provide this assistance where there is the greatest risk of companies failing in their first year? In some of the most deprived areas, people with the fewest resources face the greatest difficulties in setting up businesses, and their business failure rate in the first year is highest. If we are to be fair, we should not be giving so much money to areas where that does not apply, and that is another reason for looking again at the distribution of this measure.
Mr Hanson
My right hon. Friend touches on an important point to which I will return when we discuss the group of amendments on London’s exclusion. She will be interested to know that the number of business deaths in London was 13.7% higher than anywhere else in the country. While business births are higher in London, at 12.6%, the figure for business deaths shows that there is a higher turnover and a greater loss of businesses in London than anywhere else.
London, the south-east and east region is not included in the Bill. However, even with the Bill as currently constituted, an annual report by constituency would clearly show where the business successes are, where new start-ups take place, and how many employees are being employed as result of the scheme—in other words, it would clearly show its success in meeting the Minister’s stated objectives. Without the annual report, I will have to table questions to find out that information. The Minister will need to have the information to monitor the progress of the scheme and look at its take-up and distribution, but it will not be public unless we have an annual report.
Kelvin Hopkins
On business deaths and bankruptcies, does my right hon. Friend agree that we have yet to see the full impact of the cuts in the school building programme, which will affect many small sub-contractors who work in the construction sector—precisely the businesses that might have benefited from the Bill had they continued to exist?
Mr Hanson
Indeed; my hon. Friend makes an extremely important point. The Minister’s objective in the Bill is to help new businesses to develop to compensate for the loss and shrinkage of public sector businesses in other parts of the country; that is his main focus. The annual report would clearly show not only where new businesses are commencing but, through other information that we will be able to glean, where businesses such as construction firms are shrinking because of cuts in public expenditure on schools, hospitals and other major capital projects. I can think of building firms in my own constituency in north Wales that depend on public sector contracts in housing, education and health for their work. As my hon. Friend says, if that sector shrinks, those employment opportunities will shrink too.
I would be interested to know how many new businesses commence, and how many people are employed in each of them, in my own area in north Wales as a result of this measure, but I will not have that information unless I table parliamentary questions.
Julian Smith (Skipton and Ripon) (Con)
I do not understand why one could not simply put a call through to Companies House. Why do we need a report from London about the minutiae of how British enterprise is developing as a result of this fantastic Bill?
Mr Hanson
We are forgoing £940 million of taxpayers’ money, in the shape of national insurance contributions, to pay for this scheme—£940 million that could be put into the Building Schools for the Future programme and hospital expenditure. I would have thought that the hon. Gentleman was interested in where and how that money was being spent and whether it was being spent effectively. The annual report would show clearly how that £940 million of forgone expenditure was being spent, and which constituencies or regions were receiving the benefit and which were not. My main focus is to ensure, from my perspective and that of my right and hon. Friends, that areas of unemployment, deprivation and high public expenditure get that resource, not areas that already have low levels of unemployment and high levels of prosperity, and do not require this level of resource.
The House is bound to consider how we expend public resources, and it is incumbent on the Government to provide that information. The Minister will have it as he monitors and receives reports on progress on projects, as I did when I was a Minister, and I do not see why he cannot publish it. Ultimately we can drag it out of him through parliamentary questions, but it would be far better for him to be transparent and open, in accordance with this proposal.
Kelvin Hopkins
On the point made by the hon. Member for Skipton and Ripon (Julian Smith), is it not important to disaggregate the statistics to show the specific impact of this Bill rather than taking them out of the general trends in small business creation and so on?
Mr Hanson
That is absolutely right. One of the key tenets of any objective in society has to be that if we set out on a course of action for which we have clear objectives, as the Minister has, then we need, at some point in time, to evaluate whether it has achieved what was claimed for it. The Minister’s objective is to ensure that this scheme benefits areas with high levels of public sector employment that are losing jobs because of public spending cuts. The annual report would show progress towards that objective. This is not meant to be threatening to the Minister—it is simply meant to say to him that the information that he will have, we should have, as a matter of course, so that we know exactly what the scheme has achieved. There is nothing wrong with that. We support the scheme. We are not complaining about the scheme—we are simply saying, “Let’s look at how it has operated in practice.”
Amendments 5 and 6 deal with the same issue in a different way. I suggest in amendment 5 that we should consider reducing the end of the scheme’s operational period from 2013 to 2012. That is not to say that we should stop the scheme in 2012, but that we should, as suggested in amendment 6, review it at the end of December 2011 and
“may extend the relevant period until 5 September 2013.”
The Minister’s scheme may well take off—the 400,000 businesses that he anticipates taking it up do so, and his objectives are being clearly and specifically achieved. However, it is also possible that only 200,000 businesses will have taken up the scheme by the end of the first or second year, and it might then be appropriate for him to amend it accordingly and consider widening its scope. Amendments 5 and 6 offer the Minister the opportunity, without scrapping the scheme, to evaluate it at a break point in December 2011. It is worth our examining whether the take-up he has promised has been achieved and, if not, whether we need to expand or modify the scheme accordingly.
The Minister has indicated that public sector employment is key to his objectives. The constituencies of Edinburgh South; Liverpool, West Derby; Glasgow North; Wansbeck; Wirral West; Blackpool North and Cleveleys; Plymouth, Moor View; Birmingham, Selly Oak; and Glasgow North East are in the top 10 on the scale of public sector employment. If, at the end of two years, there has not been business take-up in those constituencies, but there has been take-up in constituencies much lower down the scale, that would be a reason to review the operation of the scheme.
It may be appropriate to consider including London, the south-east and east region in the scheme. If the Minister cannot do that today through later amendments, he could consider doing so at a later date, and the proposed review point in the scheme would give him that opportunity. The Thames Gateway London Partnership, which is made up not only of authorities under Labour control but those under Conservative and Liberal Democrat control, says in a briefing sent to Members of this House:
“We urge the government to commit to an annual review of the National Insurance Holiday scheme. At this time should the minister find that some areas currently benefitting from the scheme already have a high rate of business survival and a low level of public sector job dependence we would urge him to consider retargeting the measure to allow some of the more deprived authorities in the Thames Gateway to take advantage of the benefits conferred by the scheme.
That reflects amendments that I will come to later. The briefing gives an example that is of particular interest to my hon. Friend the Member for West Ham:
“At a Local Authority level, Newham, which has a public sector employment level of 33.6% would not be eligible for the proposed NI Holiday, however, Macclesfield, which has a public sector employment rate of only 11.8% will benefit from the National Insurance holiday”.
Those issues could be reflected on and taken into account during the break in the operation of the scheme proposed in amendments 5 and 6.
The Minister would have my full support—even if he cannot accept including London, the south-east and east today—if he came back to the House in a year’s time to say that the Government had reviewed the scheme, come up with an annual report, and as a result would like to extend it to Luton South, Walthamstow, Lewisham Deptford, Ilford South, Luton North and Leyton and Wanstead, to give but six constituencies of Members in the House today. I am sure that my hon. Friends would welcome that move from the Minister; they would even say well done to him, invite him to visit the new businesses in their constituencies and cheer him from the rafters. I know that he would appreciate that greatly. I see no reason why he cannot say that he will review the scheme, even if he cannot accept the inclusion of other regions under later amendments. If the review shows that the benefit from the national insurance holiday is going to constituencies with low levels of unemployment, deprivation and public sector employment, he should consider bringing in those other constituencies by extending the scheme to a wider area.
Gavin Shuker (Luton South) (Lab/Co-op)
Those figures might also draw out the effects on constituencies that border areas that are covered, where there might be a differential effect on job growth and creation, which is an issue that came up in Committee.
Mr Hanson
Indeed. My hon. Friend knows that there are issues relating to the borders between London, the south-east and east and other regions, because there could be differentials relating to new businesses. He made that important point in Committee, and the hon. Member for Portsmouth North (Penny Mordaunt) has made it in parliamentary questions to the Minister. On Second Reading, Government Members asked questions similar to mine on why the scheme was not applicable to their regions.
I am not being aggressive, but am trying to give the Minister a chance to listen to the case. I hope that he accepts that there is a case for producing information, so that he can evaluate it and so that we as taxpayers know how the almost £1 billion of resource has been spent: where it is going, who is benefiting from it and how, and what levels of employment it is creating and where. Amendments 5 and 6 give the Minister an opportunity to have a break after about a year to review the scheme formally and to consider the issues that we will discuss later, which are important to my hon. Friends.
It does not matter where one is unemployed, because an unemployed person is 100% unemployed. For the Minister to say that we do not need to worry if public sector jobs are lost in London, the south-east and east, or in other regions of high employment, and that the scheme does not apply there, is not a positive way forward. I hope that he reflects on the proposals genuinely. I know that he is a reasonable chap and that he will consider them positively. He knows that the Bill will be considered in another place and that these matters can be discussed there, if not agreed today. I believe that a sensible case has been made for the proposals—although I would say that—and I commend them to the House and the Minister.
Stephen Hammond (Wimbledon) (Con)
I did not have the benefit of sitting on the Committee, although I did attend Second Reading and I think that I made a short intervention on the Minister.
I will make a short contribution in response to the new clause. I listened carefully to the Opposition spokesman’s speech, and to his closing remark that this is a sensible case that the Minister should accept. I ask the Minister to think carefully about the case that has been put to him. First, the full impact of the policy will inevitably not be shown after the first or second year. With such policies, there can be a significant cumulative effect, which is what the Government are looking for.
Secondly, it has been estimated that the scheme will have considerable benefits. The Opposition spokesman did not query the basis of the estimates made by the Government and outside bodies on the impact of the holiday. We have a pretty good assessment of its impact, so the Government should consider whether the annual report would add to that.
Thirdly, I ask the Minister to consider that the policy is temporary. Although it is a recurring cost, it is only for three years. Were the policy extant for a longer period, the Opposition spokesman’s arguments might have more basis.
Fourthly, the Opposition spokesman made the point several times to the Minister that he could table questions. He did not say whether he thought an annual report would be cheaper than that. If he wanted to do so, he should have given a cost analysis. I fear that the proposal is an expensive way of getting at the information that he wants, and probably does not cover everything.
Finally, when the panoply of talent on the Conservative Front Bench was not as great, I spent four years as an Opposition spokesman. I spoke on various measures that, like the Bill, were extant for the life of the Parliament, such as the Concessionary Bus Travel Act 2007. I made similar requests for annual reports and, time after time, Ministers told me that such proposals would be costly and serve no purpose; that they would of course keep the scheme under review; and that there was transparency through other sources of information available to me. Therefore, before the Minister is tempted by the beguiling words of the Opposition spokesman on transparency and the need to review the policy, I ask him gently to remember that, freed from the responsibility of Government, the Opposition are not accepting the arguments that they made in government.
Kelvin Hopkins
I welcome what was said by my right hon. Friend the Member for Delyn (Mr Hanson), and support strongly new clause 1 and amendments 5 and 6.
In the context of the current economic situation and the level of the cuts being imposed by the Government, the Bill is a relatively small reflationary measure. It is a supply-side measure, rather than the direct reflationary measure of additional spending that I would like to see. If I was in government and had £1 billion to spend—I would love that opportunity, but am unlikely to get it, at least in the short term—I would not spend it in this way. We could, for example, increase capital spending programmes in sectors such as construction and restore school building programmes; £1 billion would sustain a much larger capital programme as a measure of revenue support, so that is the direction in which I would go.
Stephen Hammond
I am interested to hear the hon. Gentleman’s argument. Has he noticed the latest academic evidence on the size of the public expenditure multiplier? It suggests that in an open economy, the actual size of the multiplier is something like 0.1%.
Kelvin Hopkins
I have not seen that academic work, but I will be interested to read it in due course. I remain fairly convinced that spending capital funds on school building actually generates a lot of employment, certainly in my area. The cuts in school spending programmes will have a damaging effect on local employment in Luton. We can debate that in another economic seminar, perhaps, and we shall see. Nevertheless, the measures in the Bill pale into insignificance compared with the overall level of cuts that will be imposed. Some have suggested that the VAT rise alone will cause 250,000 jobs to be lost, which is a staggering figure and surprised me greatly.
In Committee, the Exchequer Secretary leapt on the fact that I was giving lukewarm support to a measure of tax relief, which is not normally my politics. However, it was lukewarm—I said that the Opposition had decided to acquiesce in what the Government were proposing, but that our Front Benchers had tabled substantial amendments. I still believe that tax reliefs are the wrong way to go. They tend not to be as reflationary as direct spending on jobs, particularly in areas where manual workers on relatively low wages tend to spend all their money, which is then circulated in the economy, causing the multiplier effect that the hon. Member for Wimbledon (Stephen Hammond) mentioned. Tax reliefs tend to go at least partly, and sometimes substantially, into savings and have less of a reflationary effect, so I prefer direct spending to help job creation.
The Chartered Institute of Personnel and Development has suggested that there might be as many as 900,000 job losses in the private sector, which is a vast number. Added to the nearly half a million jobs being lost directly through public expenditure cuts, we are talking about 1.5 million jobs being lost. The Bill will go only a tiny way towards countering those massive losses. Indeed, the effect of those job losses, added to the 2.5 million people already unemployed, means that nearly 4 million people will be unemployed, which is a staggering figure. That will be deflationary, because people will become frightened of losing their jobs and stop spending in the shops.
Stephen Hammond
I wonder whether the hon. Gentleman would like to clarify the number of private sector job losses that he has just mentioned. Actually, we have seen in the past two quarters—the evidence from the following quarter is the same—that the private sector is creating jobs.
Kelvin Hopkins
I thank the hon. Gentleman for that intervention, which gives me the opportunity to say what I have said many times in recent weeks and months. We are still benefiting from the pre-election reflation of the Labour Government. To save the economy from a massive depression, and perhaps from sliding into serious long-term deflation, Labour sharply reflated the economy, and it was absolutely right to do so. We are still benefiting from that, because of the time lag effect in economics.
John Cryer (Leyton and Wanstead) (Lab)
May I remind my hon. Friend that some time ago, leaked Treasury papers demonstrated clearly that unemployment in both the private and public sector would rise very sharply during this Parliament? When the Prime Minister was questioned about those figures on the Floor of the House, he refused to answer the question.
Kelvin Hopkins
I am not at all surprised that the Prime Minister was not prepared to be drawn on that. What happens in a year’s time, and in two years’ time, as a result of what the Government are doing now will be the true measure of whether their policies are successful. I suspect that we will have a massive rise in unemployment, as forecasts suggest. That will tend to damage confidence among consumers, businesses and everyone else in the long-term future of our economy, so the Government are pursuing a dangerous policy.
The Bill, although welcome, is modest in comparison with what the Government are doing as a whole. The precise impact of what it will do needs to be measured and published, so that we can set it in the context of the rest of the economy rather than let it drift along, with the Government perhaps making exaggerated claims for its success.
Dr Stella Creasy (Walthamstow) (Lab/Co-op)
Does that mean that my hon. Friend agrees with the Minister, who told me in a letter that £940 million was a large sum of money to allocate for an uncertain benefit? That is exactly why we need to see the figures, to see whether the Bill is working.
Kelvin Hopkins
My hon. Friend is absolutely right, and in the context of the current economic situation, the level of Government cuts and what the Government are spending on the European Union, bailing out Ireland and so on, £1 billion is a small amount of money, especially when it is spread over a number of years. My right hon. Friend the Member for Delyn is right to insist that the new clause be inserted into the Bill, so that we can measure its true impact.
I will leave my comments there, although I will wish to speak to other amendments later. The Bill is modest, and, as my right hon. Friend has suggested, we must ensure that a true measure of its impact is published.
The Exchequer Secretary to the Treasury (Mr David Gauke)
It is a great pleasure to return to the Bill and to some of the arguments that were made many times in Committee, and indeed many times in the speech of the right hon. Member for Delyn (Mr Hanson) this afternoon. It is always fascinating to hear Opposition Members talk about the beneficial effect on employment of reducing employers’ national insurance contributions, although to be fair, I should exempt the hon. Member for Luton North (Kelvin Hopkins) from that comment.
I do not intend at this point to address all the points about regional matters and so on that the right hon. Member for Delyn touched upon, because we will return specifically to them later. I shall address new clause 1, which would require the Treasury, after Royal Assent, to provide to Parliament an annual report on the national insurance contributions holiday for new businesses. The report would be required to contain the total sum of business expenditure saved under the scheme and a breakdown by constituency of
“the number of businesses availing themselves of the secondary contributions holiday…the number of employees designated qualifying employees under the scheme; and…the total expenditure saved by businesses under the scheme.”
I think it would be fair to say, as my hon. Friend the Member for Wimbledon (Stephen Hammond) did, that it is not uncommon for Oppositions to table amendments requiring reports on the implementation and operation of a Bill, and for Governments to resist them. I say to the right hon. Member for Delyn that I do not believe the new clause is necessary, because in Committee I undertook to provide updates to the House and the public on the operation of the scheme after the end of the tax year, including information at regional level. His point that we should provide such information was entirely reasonable, and I can now give a little more detail about what we intend to provide.
We envisage a factual report that will state, regionally and nationally, the number of new businesses applying, the number of applications rejected, the number of qualifying employees for whom a holiday has been claimed and the amount claimed. The main difference between what I am saying we will do and the requirements of the new clause is that the latter would require a constituency-level breakdown, even though the scheme is regional in England and will not cover every English constituent.
The central point, which I made in Committee several times—the hon. Member for Luton South (Gavin Shuker) also touched on it—is that the locations of people’s work and of the businesses for which they work are not necessarily the same as the locations of people’s homes. Many people travel to work, and operating specifically on a constituency basis could result in a somewhat misleading view of the way in which the scheme works. We could identify one constituency that falls within a relevant region, where many businesses that benefit from the scheme are created and have many employees, and where public sector employment or unemployment is not high, and the right hon. Member for Delyn might then say, “This is an example of the scheme not operating as it should. Money is going into a relatively prosperous area and is not well targeted.” However, that ignores the fact that many employees who benefit from the scheme could live in neighbouring constituencies that are heavily dependent on the public sector, or where unemployment is high. I believe that looking at the matter on a constituency basis does not necessarily give a fair indication, and that examining it on a regional basis is better and more accurate. I therefore intend to prepare my reports on not a constituency but a regional basis. None the less, that should be helpful to hon. Members.
Joan Ruddock
The Exchequer Secretary seemed to say that even if an hon. Member tabled a parliamentary question requesting the information on a constituency basis, he would not provide it. That is unacceptable. Often, what happens to one’s constituents is affected by the neighbouring borough or area where a small company sets up. That is of interest to us, and I think that we should know.
Mr Gauke
I do not intend in any way to restrict what hon. Members ask, or the responses to the questions. My point is that it would be better for the Government report that sets out the working of the scheme to consider matters on a regional and national basis. I can understand why individual Members would want to ask about their constituencies. If information is available, it will be provided. I do not dispute that. However, when the Government provide an update on the scheme, it is right to focus regionally and nationally. I understand the right hon. Lady’s concern about her constituents, and the scheme will not apply in her constituency, but a regional or national approach is a more reasonable and reliable way of examining areas where it applies than trying to break it down into individual constituencies.
Joan Ruddock
I am most grateful to the Exchequer Secretary, who must clarify the matter, for giving way again. If an hon. Member tables a question requesting information about his or her constituency, will he be in a position to provide it?
Gavin Shuker
Will the Exchequer Secretary confirm that the evidence we took in Committee shows that there are no technical restrictions on looking at the postcodes of qualifying businesses and therefore on providing that information? In other words, restricting the information would be an ideological rather than a technical decision.
Mr Gauke
It is not an ideological position. I am finding it surprisingly difficult to convince Labour Members of my point—or perhaps they are not prepared to be convinced of the fact that people do not necessarily work in the constituency in which they live, and that it would therefore be wrong to try to make a big case about the number of employers in a particular constituency being low compared with the number of people living there, and their not benefiting from the scheme.
John Cryer
If the information is available, I do not see any problem with just publishing it. I represent some of the poorest wards in London—and that is against some pretty stiff competition. My constituency will not be subject to the holiday for start-up businesses, whereas some of the leafier areas in the north-west will benefit. Tatton, a wealthy area with low unemployment, springs readily to mind as somewhere that will be subject to the national insurance contributions holiday.
Mr Gauke
We come back to the central point that we are acting on a regional basis rather than trying to break down the figures for wards, constituencies or boroughs because of the nature of the labour market and people travelling to work. I concede that several hon. Members will not accept that, but it is the right approach given the nature of the labour market.
Gavin Williamson (South Staffordshire) (Con)
Seventy per cent. of my constituents travel out of the constituency to work in neighbouring boroughs—in Wolverhampton, Dudley and Stourbridge. It is more typical for the benefits to come to those boroughs than to South Staffordshire, but people throughout the region will benefit.
David Mowat (Warrington South) (Con)
I want to respond to the point about Tatton. Many of my constituents work in Tatton, yet parts of Warrington are extremely deprived. Perhaps Labour Members will explain how publishing numbers specifically for Tatton would identify the impact on the deprived areas of my constituency next door.
Mr Gauke
My hon. Friend is absolutely right. He brings a great deal of business experience to the subject. Trying to pick out individual constituencies in the way in which the right hon. Member for Delyn intends will add little to our understanding of the operation of the scheme, but, as a Government, we are keen to put out more information and to make the scheme transparent.
Mel Stride (Central Devon) (Con)
Does my hon. Friend agree with Mr Mitah from HMRC who pointed out in Committee that the greater complexity and costs involved in the sub-regional route would damage the scheme overall? He said:
“If you have a system that required us to operate a more complicated, or a narrower, range of areas, by reference to which we were giving relief, that would raise the costs of compliance substantially.”––[Official Report, National Insurance Contributions Public Bill Committee, 2 December 2010; c. 35-6, Q121.]
Mr Gauke
My hon. Friend is absolutely right. Certain compliance problems would arise. Could we tell whether an address was for work or home? The scheme would become more complicated. Those claiming would need to ensure that they were in one particular postcode area or another, and there would be issues with boundaries. Distortions could be much greater than under the simpler scheme that we have introduced with essentially one boundary and three excluded regions. A host of difficulties would arise if we tried to follow the sub-regional route. Where would we draw the line? Would we end up considering boroughs, wards or polling districts? Exactly how would that work? We will revert to the matter later, but my hon. Friend is right.
Amendments 5 and 6 are aimed at providing flexibility to reduce the duration of the regional employer national insurance contributions holiday for new businesses. This would reduce the cost of the holiday to the Exchequer, and correspondingly reduce the benefit to new businesses. As I have explained, the Government want to target available resources to the regions most dependent on public sector employment. We do not intend to widen geographical coverage, and therefore have no need to find ways of reducing costs. We know that this scheme will reduce labour costs for new businesses, and has been widely welcomed by their representatives.
We have acknowledged that beyond this there is a good deal of uncertainty about exactly how the scheme will pan out in practice. However, introducing some flexibility to change the details of the scheme as proposed in these amendments would increase uncertainty for those who might potentially benefit, and could risk inhibiting decision making. This particular proposal could affect those who are already benefiting from the scheme, or those who are currently considering setting up a new business bearing in mind the Government’s policy. For example, a new business set up this month, which plans to take on employees towards the end of this year, would not get the full year’s holiday for these employees if we were to stop the scheme in September 2012.
I hope that the right hon. Member for Delyn would agree that we were right to start operating the scheme as soon as we could, in anticipation of legislation being passed. Had we not done so, the benefit to businesses would have been delayed, and new businesses that had planned to start operation might have delayed in order to benefit fully from the scheme. I am conscious of the fact that the scheme requires the consent of Parliament, and we have been very clear about that in our guidance to potential beneficiaries. We are not pre-empting the decisions of Parliament. However, I hope that hon. Members would agree that it would not be desirable to withdraw the benefits we had planned to give to entrepreneurs who have already decided to set up in business. That risk applies to these amendments, and I am advised that as drafted the amendment is insufficient to provide a mechanism for extending the holiday, and does not therefore meet the intended aim.
With the commitment I have made today on the reports, I hope that the right hon. Gentleman will withdraw new clause 1 and, in the light of my comments, not press amendments 5 and 6.
Mr Hanson
We have had a useful debate. I tabled the new clause and amendments to secure from the Exchequer Secretary a commitment that the expenditure that we are forgoing—some £940 million—will be monitored and reviewed for effectiveness, that a mechanism will be put in place by which we can judge where, for whom and how it is having a benefit, and that we will review take-up over the three years of the scheme. I am reassured that he has reaffirmed what he said in Committee and will produce information on take-up on a regional basis. I genuinely welcome that.
It might help if the Exchequer Secretary could indicate—he did not do this in his response—the current level of take-up of the scheme. In early December, at the end of the Committee stage, he mentioned that about 1,100 businesses had taken it up. One of our concerns was that his ambitious target of 400,000 over the duration of the scheme would not be met because of the slow take-up in the first six months. It would help initially if he could give that information now.
Mr Hanson
The key issue—this is one reason I have suggested an annual report—is that 1,500 is significantly less than the trajectory we would hope for and which is necessary to achieve a take-up of 400,000 by the end of the scheme. It is already six or seven months since the Exchequer Secretary announced the scheme, and we effectively have two years this September—until September 2013—before completion. A target take-up of 400,000 and today’s take-up of 1,500 show that the trajectory is not there.
I intend to withdraw the new clause—the Minister can relax in that knowledge and take it as a helpful contribution to the debate—but I hope he will still reflect on the fact that one reason we have asked for an annual report is to ensure that we are able to know every year what the trajectory of the take-up is and in which regions and sub-regions it is occurring. If, for example, by the end of 2011, 30,000 or 40,000 businesses have taken up the scheme, and there is a capacity of 400,000 and just two years left of the scheme, a considerable effort would be needed to generate those new businesses in the two years.
If the Minister does not want to build in failure to his scheme, he needs to monitor that and, if need be, consider the suggestions we will make later about expanding the scheme into other regions, such as London and the south-east, to ensure that the 400,000 take-up that he wants is met. I will make the case later, supported by my right hon. and hon. Friends, that high levels of public sector employment in London and the south-east region will be hit by public spending cuts; without the necessary debate on those issues generally, that will happen as much in London and the south-east as in north Wales, the north-west, Yorkshire, Scotland, Northern Ireland and other parts of the United Kingdom.
If we do not have the trajectory of take-up that the Minister anticipates, we might end up with a scheme that, after three years, does not deliver a take-up of 400,000. At the same time, colleagues in London and the south-east and eastern regions will have been impacted by public spending cuts, but their constituents will not have benefited from that scheme. In tabling the new clause and amendments, I was trying to give the Exchequer Secretary some flexibility to enable him to design the scheme, review it and bring back suggestions accordingly. More importantly, hon. Members on both sides of the House, including the hon. Member for Wimbledon (Stephen Hammond), whose constituency will not benefit from the scheme, can assess its impact.
We welcome the holiday and think it will have a positive impact, although it will not compensate for the things that my hon. Friend the Member for Luton North (Kelvin Hopkins) mentioned. We will have to consider what its outputs are, whether we achieve them and whether the scheme is successful, and we will return to these matters in parliamentary questions. I hope that the Exchequer Secretary will reflect on some of those issues before the Bill reaches another place. I beg to ask leave to withdraw the clause.
Clause, by leave, withdrawn.
Clause 3
Increased product of additional rates to be paid into National Insurance Fund
John Healey (Wentworth and Dearne) (Lab)
I beg to move amendment 8, page 2, line 2, at end insert
‘The National Audit Office shall report to Parliament by the time of Royal Assent on the Finance Act 2011 on the sum that would be required from the product of additional rates in order for the health service allocation to grow in real terms in every year.’.
It is good once again to face the Exchequer Secretary across the Dispatch Box, although not so good to do so from the Opposition side and with him on the Government side. However, he is a serious Minister doing a serious job. He showed that in the way he responded to my right hon. Friend the Member for Delyn (Mr Hanson) and the debate on the first group of amendments. I hope that the Exchequer Secretary will feel that amendment 8 and the amendments that were not selected were intended to be helpful to the Government. With them, we are offering to him, his boss the Chancellor and his colleagues in government the opportunity to act to prove to the public that they will honour the promises the Government made about protecting NHS funding and ensuring it sees a real funding increase each year, not a real cut.
The Bill and national insurance contributions legislation more generally are about raising and allocating national insurance funds and contributions paid into that fund. The NHS has had a special place in that legislation certainly since 2002, when we decided to move, from April 2003, to raise an extra 1% on earnings above £43,800 and to allocate all that extra income to the health service and the NHS. The amendments we tabled, including amendment 8, give the Government the chance to do the right thing by the NHS and the British people. Amendment 8 in particular lays the groundwork for the Exchequer Secretary and his colleague the Chancellor to make the right decisions in order to honour their promises in the Budget.
There were big improvements as a result of Labour’s investment in the NHS over the past decade—51,000 extra doctors, 98,000 extra nurses, patient satisfaction at an all-time high—and it is hard to remember that in 1997 there were more than 280,000 people waiting more than six months to get into hospital for the operations they needed. I make that point to explain the broader context to amendment 8, as I am conscious that the House is debating a relatively narrow provision.
Mr Kevan Jones (North Durham) (Lab)
Does my right hon. Friend agree that the NHS will incur another huge cost—a cost that will not go towards improving patient care—owing to the announced reorganisation of the NHS? For example, with the abolition of the primary care trust in my constituency, most of the money will go on redundancy and organisational costs, which will be another burden and, basically, a cut in the NHS budget.
John Healey
It is an extraordinary state of affairs that a series of serious and significant pledges, set out formally in the coalition agreement in May, should have been broken in the White Paper produced by the Health Secretary in July. My hon. Friend is right: the one thing that the Government promised not to do in the coalition agreement was to go ahead with a top-down internal reorganisation, but that is exactly what is now planned. It could cost up to £3 billion. It is high risk and high cost; it is exactly the wrong thing to do at this stage, when the NHS is facing such tight financial pressures. I also have to say to the Minister that his colleagues are already showing signs of strain.
I am anxious to return to the amendment that the House is discussing. The House will notice that it refers to the National Audit Office, which is an independent, authoritative body. The Minister will appreciate the assessments, analyses and authoritative views of independent bodies. He and his colleagues set up the Office for Budget Responsibility. Its independence has—shall we say?—been put on perhaps a slightly more questionable footing than that of the NAO, but it is nevertheless an important organisation. Indeed, the problems of the hon. Gentleman and his colleagues were compounded when their Office for Budget Responsibility updated the economic forecast and the fiscal numbers in November. One of the significant changes in its independent, authoritative assessment of this country’s economic prospects was to its forecast for inflation, thereby changing the deflator—in other words, the amount by which the Government and everyone else anticipate that costs in general, and Government spending in particular, will rise. Instead of a GDP deflator for 2011-12 of 1.9%, as set out in the OBR’s June report, its updated economic forecasts in November gave a deflator of 2.5%.
In other words, even before we take into account the double-counting of funding for both the NHS and social care, we have, instead of the wafer-thin rise of 0.1% for England that the Chancellor promised, a much heavier cut, of 0.5%. That has been confirmed by the Library, and by independent, authoritative bodies in the health field and the Select Committee on Health, which said in its report into public expenditure on 14 December that
“the Government’s commitment to a real terms increase in health funding throughout the Spending Review period will not be met.”
So the Government are breaking their promises to protect NHS funding in England, Scotland and Wales. Next year, Scotland is now being short-changed in NHS funding by £70 million, while Wales is being short-changed by £40 million. In total next year, there will be a shortfall from the promise made by the Government to the British people in their coalition agreement of more than £1.3 billion—not a rise in NHS funding next year, but a cut. On 20 October, the Chancellor promised to increase health spending over and above inflation. That promise is being broken by £1.3 billion.
Our amendments today, including amendment 8, are intended to be helpful, as I said to the Minister. They are intended to demonstrate how the Government can deal with the problem, if they have the will to keep their promises on funding for the NHS. We endeavour to act as a responsible Opposition, as our leader promised we would. The amendment is therefore designed to show helpful ways in which the Government can use this legislation to keep good both the Chancellor’s word and the Government’s promise to protect NHS funding, and thereby to see a real increase each year in this Parliament, and not, as at present, to deliver a real-terms cut.
The amendment suggests having an independent assessment and a report carried out by the National Audit Office. The independence is important: it is designed to try to give the public more confidence in what the Government are doing; to give this House more confidence in what they are doing; and to give everyone more confidence that what was a central promise from the Government and a personal promise from the Prime Minister is in fact being met.
This subject came up at the last Prime Minister’s Questions before Christmas, and it was interesting to note that the Prime Minister told the House:
“I am confident that we will fulfil our goal of real-terms increases every year in the NHS.”—[Official Report, 15 December 2010; Vol. 502, c. 902.]
That will not happen next year. The Exchequer Secretary is a talented Minister and he has an opportunity to give his big boss, the Prime Minister, the confidence that he clearly wishes to see by accepting the amendment and allowing the NAO to do an independent report, demonstrating the extent of the shortfall and the extent to which the Government are breaking their promise fully to fund the NHS. By doing so, he would do the House and perhaps even himself a favour.
Jonathan Edwards
In the light of the situation that he has explained applies in England, does the right hon. Gentleman agree that it is reckless for the Conservatives in Wales to promise in the forthcoming National Assembly elections to increase spending on health above the retail prices index?
John Healey
One of the two consequences of devolution is that in this area of health such decisions are taken in Wales for Wales. The second, however, is, I have to concede to the House, that I, as an English shadow Health Secretary do not follow those decisions in detail, so I think the hon. Gentleman is going to have to prosecute that argument in his home area.
Finally, the House will note that the date in the amendment is anticipated to be after the expected Royal Assent to the Bill, so it is tied to the Finance Act. The Exchequer Secretary might want to discuss with the Chancellor the idea of doing this assessment, publishing the report and highlighting the shortfall, showing the extent to which the promises they made to protect NHS funding and give it a real-terms increase in each year of this Parliament are being broken. The Budget, of course, provides the Chancellor’s opportunity to make good his word and make good the promises that his Government have given to the British people on the NHS.
Dr Creasy
I rise to speak to amendment 8, because it goes to the heart of the Bill and what we do in this House. We do not pass laws to raise money for no purpose. Clearly, we raise national insurance for social insurance purposes. Since 2003 there has been a hypothecated fund in our national insurance contributions specifically for funding the NHS, and the amendment addresses that. It is critical that we get the Bill right and that it reflects the important purpose that we attribute to national insurance. I note that, back in 2003, the then Opposition opposed such use of national insurance, but they have come a long way in the past seven years. That is why it is important to get the Bill right and make sure that the public can have confidence that when national insurance is levied, funding will go to national health care services. My first point concerns why that is important and why the NHS therefore needs the guarantee that amendment 8 would provide. Secondly, I will explain why the public have a reasonable expectation that such provision be made.
Mel Stride
Does the hon. Lady accept that, irrespective of whether the amendment is accepted, the Government have the ability to provide whatever level of resourcing for the national health service that they deem fit?
Dr Creasy
The hon. Gentleman raises the interesting question of how we guarantee that. That is precisely the point that I am coming to, because his Government made a pledge to my Walthamstow constituents that they would “cut the deficit, not the NHS”. As my right hon. Friend the Member for Wentworth and Dearne (John Healey) has set out in his remarks, there is some uncertainty over whether that is the case. Indeed, we could be seeing cuts in the NHS unless we can be sure that the money it needs will be generated. The amendment provides the Government with an opportunity to show how and why they will do so and to consider hypothecation through the national insurance contributions fund, which has been accepted as a principle across the House, to ensure that the money is provided.
There has been sleight of hand in the investment promised by this Government for the NHS through the attribution to social care. As a former local councillor I know that social care is one of the largest costs that any local authority will face, so the cuts that we have seen in local authority budgets over the last couple of months raise severe questions about the ability to deal with adult social care—even before we consider its relationship to health care at local level. It is very clear to me that there are real concerns about the funding that will go to the NHS in the years ahead.
The amendment would mean that we could all have confidence in the fact that money would go to the NHS budget, about which I know Members across the House care, so that the real-terms increase that my constituents and the Minister’s constituents were promised can be made good—not to mention concerns about job losses in the NHS as a direct result of some of this Government’s policies. If Government policy is about job creation and the Bill is about ensuring that people are employed and the economy is in recovery, cuts in the NHS that will lead to job losses will provide a real challenge. The amendment is designed to make sure that, given the pressures on its budget, the NHS has the money that it needs, and that the public’s expectation, which is reasonable and proportionate given the statements made by Ministers both before and after the general election, will be met.
I note in particular that before the election the Chancellor was very concerned about what the national insurance contribution rise might do to the NHS budget. I am sad to see that the Chancellor is not in his place today; I wish he was here to talk to us. I know that my right hon. Friend the Member for Wentworth and Dearne wrote to him, encouraging him to participate in today’s debate. The Chancellor should apply the same degree of concern to ensuring that the money is there for the NHS.
As a member of the Public Accounts Committee, which deals with the National Audit Office, I particularly support the amendment. The amendment would involve the NAO, which has a strong track record of ensuring not just probity but value for money. It is a key concern for us all in these times of economic austerity to ensure that the money goes to the front line in the NHS, that there is a real-terms increase, as we have been promised, and that the Government are held to account if we do not get that, because my constituents living in a poor area such as Walthamstow are already losing out by not getting the national insurance holiday and should at least have confidence that when national insurance contributions go up, the money will go to the NHS, as many of us hope.
I hope that the Government will accept the amendment. It is a reasonable amendment to help the Government keep their promise to the people of Britain that the money goes to the NHS so that we can all have confidence that the NHS will thrive in the years to come.
Kelvin Hopkins
I shall speak briefly in support of the amendment. I strongly endorse what my right hon. Friend the shadow Health Secretary and, indeed, my hon. Friend the Member for Walthamstow (Dr Creasy) have said. Strains in the health service are already being felt, as are pressures on jobs. In my constituency, we are already seeing job losses in the primary care trust and the hospital trust.
There are obvious points to be made about the increasing costs of modern treatments and the reorganisation mentioned by my hon. Friend the Member for North Durham (Mr Jones), who is no longer in the Chamber. Even Conservative Members have suggested that that reorganisation will lead to further privatisation of the health service, and private health services are inherently more inefficient than public health services. The Americans spend twice as much on health as we do, yet millions of Americans have no proper health cover, because private sector health care is much more expensive than public sector health care. We want to keep public health care in the public sector. Indeed, I believe that even the services that have already been privatised should be returned to a full public national health service. I am sure that Nye Bevan would agree. No doubt he is turning in his grave at this moment at the thought of what the Tories are going to do to the health service, but that is a debate for another day.
However, there are other, less obvious points to be made about the health service. It is, for example, inherently labour-intensive. Unlike manufacturing, it cannot take advantage of productivity gains. Its costs rise not in line with inflation, but in line with average earnings. If we are to ensure that health service employees are properly paid, there must be real-terms increases equivalent to the rise in earnings, not just the rise in prices. In general, earnings rise more quickly than prices as the economy grows, although that is not necessarily the case at present. If we are to have a health service that is as good as we wish it to be, we must bear the employment costs in mind.
I agree with what my right hon. Friend the Member for Wentworth and Dearne (John Healey) said about what Labour achieved during its 13 years in office by increasing spending and improving the quality of the health service. The previous Tory Government had left it in a terrible state. However, although the improvements have been massive, there is still more to do. We must not allow health service funding to be threatened in the ways that have been mentioned today. Amendment 8 is important because it will ensure that that funding is protected. There are many other problems in the health service, and we must not put more pressure on it. We do not want what happened at Stafford hospital to happen elsewhere because of underfunding and understaffing in wards. We must ensure that the service is properly funded.
Steve Baker (Wycombe) (Con)
I cannot help wondering whether the hon. Gentleman realises that Buckinghamshire, for example, has inherited an underfunding of 17% per head in comparison with the national average. I am afraid that Labour did leave us a legacy of underfunding, although only in certain parts of the country.
Kelvin Hopkins
I believe that there is a massive difference between the proportion of gross national product spent on health under the Tories before 1997 and the proportion spent on it now. Although I think that we should spend more on health—I have always argued that we should spend as much on it as Germany and France, but we have still not quite reached those funding levels—we have made massive improvements.
For a long time I complained that health service spending in Luton was below the fair funding target. We lobbied our own Ministers heavily on the issue, and I think that we made some progress in persuading them to move in the right direction, but we must ensure that health funding in all areas increases as a proportion of GDP. I hope that Buckinghamshire as well as Luton North will benefit in that regard.
We must accept that improving health care sometimes means increasing rather than decreasing labour intensity. Health care will improve if a ward containing 20 beds and two nurses is given a third nurse. That is certainly true in the elderly care sector, about whose future I am seriously concerned. The fact that our population is ageing is an additional major burden for the health service. We all want to ensure that we are cared for properly when we are elderly—even more elderly than I may be at present. When we are elderly and need care, we want that care to be properly funded, so that we do not suffer in the later stages of our lives.
I strongly support what was said by my right hon. Friend the Member for Wentworth and Dearne, and I hope very much that the Government will accept the amendment.
Sheila Gilmore (Edinburgh East) (Lab)
It has puzzled me slightly over the years that successive Governments, and the Treasury in particular, have been so reluctant to engage in hypothecated funding. I know that there are arguments for and against it, but one of the main arguments for it—as has been borne out by the changes in 2003 involving the hypothecation of increased national insurance contributions—is the building of public support for the deed itself. It is true that if we want good services we must pay for them, but people want to know for sure that their money is going where they think it is going.
People in Britain tend to say that we should have Scandinavian-style public services with American-style taxes, but the two simply do not fit together. Scandinavian-style public services come with high taxation. If people can feel confident that their money is going where it is most needed, they will be much more committed to spending it. As I said earlier, I have not always understood why even my own party’s Governments have not necessarily been particularly keen on that point of view. It seems that Members have been captured by the Treasury as soon as they have become Treasury Ministers. However, an innovative step has been taken.
Amendment 8 does not ask for the national insurance increase to be hypothecated at this stage. It merely suggests that the door should be left open, and that if it proves impossible to reach the health service spending target to which the Government have committed themselves, it should be possible to use the national insurance increase to ensure that that commitment can be fulfilled.
Gavin Shuker
Have not the Government already accepted the case for the hypothecation of national insurance contributions for the health service? Does not the amendment merely seek to help them along the way by ensuring that the hypothecated funds end up in the right place so that they can fulfil their own commitment?
Sheila Gilmore
It is true that they have not chosen to retreat from the path taken by the previous Government, but the amendment gives them an opportunity to use the fresh, additional contributions if that is required.
The Government have taken a huge step forward in accepting that more money needs to be spent on the health service. For some years, when we were in government, one of the themes that emerged from the then Opposition was that spending lots of extra money was not making a difference. According to them, lots of money was going in at one end, with no indication that anything good was happening at the other end. I perceived that as a sort of softening up: they were telling people that they would still have a good service if they did not spend as much on it. Now, however, there seems to be a recognition that the money is important, and that spending is necessary after all.
That approach is vindicated by the increase in public support for the health service over the past 13 years. According to the findings of a 1997 survey, the level of public satisfaction with the service then stood at 34%. When the same question was asked in 2009, it had risen to 64%—the highest level since the study was first conducted, well before 1997—which showed that people really appreciated what was happening to health spending. I urge the Government not to put all that at risk, but to leave this opportunity open by accepting an amendment that would allow them to meet their own health spending targets and ensure that we do not lose people’s current satisfaction with the NHS.
Mike Gapes
I will be brief. This amendment is important. As my hon. Friend the Member for Walthamstow (Dr Creasy) said, it has been tabled in the context of the fact that provision for spending on social care is being taken into consideration in the overall budgeting, and there are clearly big problems. There are already concerns about the impact of bed blocking this winter.
I saw a letter yesterday from the chief executive of the Barking, Havering and Redbridge University Hospitals NHS Trust, John Goulston, that was sent to my constituency neighbour, my right hon. Friend the Member for Barking (Margaret Hodge). It was about the closure for periods over this recent winter of the accident and emergency services at the Queen’s hospital and the King George hospital, because of the impact of massive increases in admissions and bed blocking. That is serious, and it shows that we need the commitment to the ongoing level of spending in the NHS that is conveyed in the amendment. Because of the decisions of the Joint Committee of Primary Care Trusts in December, the Barking, Havering and Redbridge trust is about to close the accident and emergency and maternity services of King George hospital in my constituency.
Also, yesterday I was informed that the chief executive of the Barking, Havering and Redbridge trust is about to leave for pastures new—for a job with London regional NHS—after three years in post, during which he has not managed to remove the deficit, which is ongoing in that two-hospital trust. He is to be replaced by the chief executive of Chase Farm. She has presided over getting rid of the accident and emergency services at Chase Farm, and she will presumably get rid of the accident and emergency service at King George hospital, Ilford next.
Nick de Bois (Enfield North) (Con)
She has not done away with it yet, and nor, indeed, has North Central London, but they have been putting up a determined fight to do so, and I entirely understand the point that the hon. Gentleman is making.
Mike Gapes
I am grateful for that intervention. The hon. Gentleman will know that the previous Member of Parliament for his constituency, Joan Ryan, fought very hard over many years, as I was fighting for my hospital with my neighbour, the hon. Member for Ilford North (Mr Scott) and others, and we continue to do so. As a result of a motion carried unanimously, across the parties, by Redbridge council last week, we are calling on the Secretary of State to intervene to save the accident and emergency and maternity services at King George hospital, Ilford.
If the spending is not in place, more and more hospitals and NHS trusts will face such a problem. It is not just about money; it is about management incompetence, NHS bureaucrats and some consultants who have a model of health care that is not in the interests of the community. However, it is about resources. Those responsible hide behind all kinds of arguments, but ultimately this is an extremely important issue that cannot be left to consultants or NHS managers. It requires political accountability and political decision making, because the public provide the money and vote the money, and it is important that we are accountable for how that money is spent—and so should those people in the NHS bureaucracy on massive inflated salaries, earning two, three, four times what Members of Parliament earn, who do not take account of the wishes of the local community, the local councillors or local Members.
Nick de Bois
The hon. Gentleman should take some comfort, as we have done since the election, from the fact that the Secretary of State has imposed four very determined tests that will allow for GP support and public support. He can take some encouragement from that.
Mike Gapes
I am sorry to disappoint the hon. Gentleman, but I have read the tests. They talk about clinical support, but what we have had is a rigged consultation and a group of placemen and women—hand-picked GPs—who are in charge, and there has been no ballot of GPs so there is no means of assessment. Those responsible say that the decision is clinically led, but we are now beyond that because the Joint Committee of Primary Care Trusts has said there has been clinical support, even though we know there is significant opposition. We now require the Secretary of State to intervene, and to save King George hospital’s accident and emergency and maternity services, which we have had in my constituency since 1926.
Mr Gauke
First, may I welcome the right hon. Member for Wentworth and Dearne (John Healey)? It is a great pleasure to debate with him again. My first experience as a Front Bencher was debating with him and, although we now sit on different sides of the House, it is good to do so once again. I am pleased to be sitting on the Government Benches now, rather than on the Opposition side, but I am sure he has ambitions to return to these Benches. There are not many subjects on which I agree with the vast majority of Labour MPs, but one on which I do is the high regard in which they obviously hold the right hon. Gentleman. I am pleased by his popularity and the progress he has made.
Amendment 8 would require the National Audit Office to report on how much would be required from the additional rates in order for the health service allocation to grow in real terms every year. It may be useful to clear up one or two potential misconceptions. The amount that is to be spent on the NHS was confirmed at the spending review, and is unaffected by whether funds come from national insurance contributions or elsewhere. The amount of national insurance contributions allocated to the NHS depends on economic circumstances as well as the proportions specified in legislation. I would like to reassure the House that it is no part of Government policy to cut NHS funding automatically if, for example, global economic conditions lead to a reduction in national insurance contributions allocated. To be fair, that has not been the position of any Government, notwithstanding the fact that there has been an allocation element of national insurance contributions not just from 2003, but from 1948 when the NHS was created.
Kelvin Hopkins
We have to be very precise about what we mean when talking about cutting funding. Previous Governments and Ministers have talked about funding not being cut when it has stayed the same in money terms, which is a real-terms cut. Even raising funding in line with one or other measure of inflation may mean a cut. We have to talk about this in real terms in the sense of what is actually done within the health service. That is the measure we should use, in order to make sure nothing is cut inside the health service.
Mr Gauke
I note the hon. Gentleman’s remarks. The position is set out in the coalition agreement, and the October 2010 spending review met the Government’s commitment on HNS funding in full, and did so without changing the allocation of national insurance contributions to the NHS. The effect of our policy is to maintain the level of national insurance contributions allocated to the NHS and to allocate additional revenues from rate rises to the national insurance fund. This helps ensure that plans for payment of pensions and other contributory benefits are sustainable in the long term. We can protect pensioners by the new triple-lock, which guarantees each and every year a rise in the basic state pension in line with earnings, prices or a 2.5% increase, whichever is greater.
In ordinary circumstances, we should expect contributions to rise broadly in line with earnings, and therefore to rise in real terms. Therefore, under the Government’s proposals we should expect allocations to the NHS to rise in real terms in a typical year. Amendment 8 would require the NAO to report on how much would be required from the additional rates in order for the health service allocation to grow in real terms every year. The Government’s view is that this would be a pointless exercise, since whether or not the NHS allocation grows, the Government have decided on the amount the NHS will spend. In any case, the amount allocated to the health service from national insurance contributions would, other factors being equal, be expected to grow in line with earnings and therefore grow in real terms every year under the terms of the Bill. This amendment is therefore unnecessary, and I recommend that the right hon. Member for Wentworth and Dearne withdraw it.
I have focused my remarks narrowly on what the amendment is about and why it does not do what is intended. However, I must remind the House of Labour Members’ comments on the subject of health spending more widely. The right hon. Gentleman’s predecessor as shadow Health Secretary, who is now shadow Education Secretary, has said:
“It is irresponsible to increase NHS spending in real terms within the overall financial envelope that he, as chancellor, is setting.”
It was also not that long ago that the shadow Chancellor, whose remarks we study closely, said that there was
“no logic, sense or rationality”
to the policy of ring-fencing NHS spending. I am pleased that Labour Members are now taking a different approach. It has been clear from the remarks made by the right hon. Member for Wentworth and Dearne that they are in favour of real-terms increases in health spending, and we are pleased that the Government have won that argument.
John Healey
The Minister was talking about the shadow Chancellor and the approach we take to the decisions that the Government have made on NHS funding. May I therefore remind the Minister of what my right hon. Friend said when he so ably responded to the spending review statement? He said:
“We support moves to ring-fence the health budget”.—[Official Report, 20 October 2010; Vol. 516, c. 968.]
Mr Gauke
That was the shadow Chancellor’s position then, but I believe that a few days earlier he had said that there was
“no logic, sense or rationality”
to the policy. If he has changed his position, Government Members would welcome that. The Prime Minister—my “big boss”, as the shadow Health Secretary has described him—has said that we are
“confident that we will fulfil our goal of real-terms increases every year in the NHS.”—[Official Report, 15 December 2010; Vol. 520, c. 902.]
That will occur, regardless of whether any amendment such as that proposed by the right hon. Member for Wentworth and Dearne is included in the Bill; this is a matter of spending and this mechanism is not terribly helpful. Given those comments, I hope that he will withdraw the amendment, although I am not optimistic.
Chris Leslie (Nottingham East) (Lab/Co-op)
I should like to say how pleased I am that my right hon. Friend the shadow Health Secretary has been able to extend the offer of support to the Government with this amendment. He seeks to be as helpful as an Opposition can be and to encourage the Government to live up to their coalition agreement promise to ensure real-terms growth for our national health service.
As many of my hon. Friends have said, the NHS is absolutely at the top of our constituents’ concerns and it is important that we ensure that we deliver a real-terms increase, particularly given the relatively high level of NHS inflation compared with mainstream inflation. I am sorry that, despite the hand of friendship being offered, the Minister felt that amendment 8 was “a pointless exercise” and “unnecessary”. I thought that rather cruel. We think that the National Audit Office probably would be more than happy to undertake a study to find out how much money the Chancellor would need to add to the sum already committed in order to fulfil the Prime Minister’s promise. Interestingly, the Minister said that he was confident that the Government “will” meet their commitment; he did not say that they “have” met it. Perhaps I am reading between the lines in a way that I should not, but it was almost as though the Minister was conceding, to a degree, that the sums allocated in the spending review do not fulfil that real-terms growth.
I am sorry that the Minister did not address the two key points, and I would be more than happy to give way to him if he would care to address them. The first relates to the social care switch, whereby accounting and statistical opportunities have suddenly been taken to move a sum that had been and still is to be delivered by local authorities under the budget heading of the NHS—of course, social care will continue to be delivered by local authorities. Perhaps the Minister would like to confirm that that is the case. Therefore, to classify this money as part of the NHS growth is disingenuous in almost anybody’s book.
Kelvin Hopkins
My hon. Friend mentioned inflation costs, over which the health service currently has no control, because they relate to things such as energy, fuel and food. All those costs are externally generated, because we import a lot of those things, and so we have no real control over the costs. Therefore, the health service has to be compensated properly for the extra costs.
Chris Leslie
Absolutely. My hon. Friends the Members for Luton North (Kelvin Hopkins), for Walthamstow (Dr Creasy) and for Edinburgh East (Sheila Gilmore) have all mentioned that these costs are increasing. As we know, the drugs budgets and so forth are increasing, so this issue will be right at the centre of the national political debate. We know that this Government have a habit of casually casting aside the commitments that they made in the coalition agreement. We really do not want them to rack up yet another broken promise, but it is starting to look as though the Treasury is in that particular space. This situation is not good for our constituents, we want the national health service to grow successfully and we thought that this amendment would offer the olive branch of friendship across the Chamber so that the NAO could, once and for all, clarify whether the Government are living up to their promise. The Minister’s description of our attempt as “a pointless exercise” is hurtful and, for that reason, we probably have to divide the House to ensure that we can at least test this issue and try to keep the Government to their commitments.
Question put, That the amendment be made.
The House divided: Ayes 90, Noes 262.
Mr Deputy Speaker (Mr Lindsay Hoyle)
With this we will discuss the following:
Amendment 2, page 2, line 21, leave out subsection (5).
Amendment 3, in clause 11, page 6, leave out lines 24 to 29.
Amendment 4, page 6, leave out lines 35 to 41.
Mr Hanson
The purpose of the amendments is self-evident and clear. We discussed this issue at great length in Committee but it is worth revisiting today to see whether the Minister has reflected over Christmas and the new year on the views that we put forward in Committee. The amendments would do one simple thing: include the regions of London, the south-east and the east in the regional secondary contributions holiday in the Bill. As I have said in relation to earlier amendments and throughout the Bill’s proceedings, we welcome the idea of a payment holiday but we do not believe that its implementation is fair or that it meets the objectives that the Minister has outlined of helping to tackle problems in areas with high public sector employment that will be disadvantaged by the pending public sector cuts, which will impact on both local government and central Government services throughout the country.
I accept, as my hon. Friend the Member for Luton North (Kelvin Hopkins) has said, that the Bill as a whole is not a panacea for tackling long-term unemployment or, indeed, the impact of public spending cuts and further potential unemployment across the board. What it does do, however, with its limited scope, is ensure that we provide an incentive over a short period—the next three years—for new businesses to be established. They will receive a payment holiday for national insurance contributions, which will be a small but a significant help towards the establishment of new businesses.
The Minister’s logic is that the scheme will operate in the selected regions because it should be used to help businesses where there has been a major impact on public sector employment, and he has specifically excluded the whole of the London, south-east and east regions. Let me chide him slightly, because I think he has fallen into the trap of believing that the whole of the London, south-east and east regions are similar in characteristic, have low levels of unemployment, low levels of deprivation and a low level of public sector employment. If the Government did not believe those things, he would have included those three regions in the scheme.
There are certainly high levels of employment and great prosperity in the east and south-east regions and there are certainly constituencies and even sub-regions with low levels of public-sector employment. However, there are also areas, as I am sure my hon. Friends who represent those areas will testify today, with extremely high levels of deprivation, unemployment and dependency on public sector employment that will be excluded from the potential benefits of the secondary benefits holiday because the Minister has excluded those three regions from the scheme.
Joan Ruddock
Perhaps my right hon. Friend is aware that the average level of public sector employment in the UK is 21.7%, but the figure in my constituency is 30%. Does he share my astonishment that my constituency and other parts of London with such a high level of public sector employment—leading, I am sorry to say, in these times, to high public sector unemployment—are being excluded?
Mr Hanson
My right hon. Friend makes that point in relation to Lewisham and her constituency, but as I shall discuss, it is not just her constituency and Lewisham borough that will be excluded and disadvantaged by the scheme. For example, the constituencies of Oxford East; Luton North; Lewisham East; Canterbury; Southampton, Test; Eltham; West Ham; North Thanet; Hackney North and Stoke Newington; Tooting; Islington North; Dulwich and West Norwood; and Brighton, Kemptown all fall, by the Minister’s own criteria, in the top 60 constituencies for public sector employment, but they will not be eligible for the scheme because the Minister is excluding them from it.
If the Minister looks, as he has, at the House of Commons figures that I raised with him in Committee, he will see that 23 of the top 100 constituencies for public sector employment in England, Wales, Scotland and Northern Ireland fall within the three regions that are excluded from the scheme. So my right hon. Friend makes a clear and telling point on behalf of her constituents, but 23 of the top 100 constituencies fall into the same category.
Jonathan Edwards
I accept the point made by the right hon. Gentleman, but does he not recognise the need to rebalance the economy on a geographical basis? If he does not support this measure, what measures would he like to introduce?
Mr Hanson
I certainly would not have abolished the regional development agencies or cut public spending with the speed and to the extent that the Government are doing. I certainly would not have cut the Welsh Assembly Government’s budget in our own areas to the extent that the Government will do over the next two to three years. That would have helped to manage the necessary downturn in public spending that we needed to make to readjust the economy in a way that was proportionate, fair and met our constituents’ needs for public services and for employment.
Mike Gapes
My right hon. Friend refers to 23 of the top 100 constituencies, but if he extends the list to 105 constituencies to include Ilford South—my constituency—all those next five constituencies are also in the relevant regions, so he could refer to 28 of 105, and there is 38% public sector employment in my constituency.
Mr Hanson
I am grateful to my hon. Friend. Would I ever try to miss out the good constituency of Ilford South? My purpose was to indicate that the inclusion criterion that the Minister has selected is based on one simple issue: how to compensate for and deal with public sector job losses and provide a mechanism to help to support the creation of new jobs where public sector jobs are lost. On his criterion, 23 of the 100—or 28 of the 105, to take my hon. Friend’s figures—show that those issues are not being dealt with in the way in which the Minister has said.
If I look at the impact of the possible 490,000 public sector job losses, I see that they will hit hardest those constituencies with public sector employees. If I add to that, as I have to do, the benefits of job creation and look at local authorities on the economic deprivation index, I see that no fewer than seven of the top 12 of those economically deprived boroughs fall within areas that are excluded from the scheme. The boroughs of Hackney, Newham, which is represented here today by my right hon. Friend the Member for East Ham (Stephen Timms) and my hon. Friend the Member for West Ham (Lyn Brown), Tower Hamlets, Islington, Barking and Dagenham, Haringey and Lambeth are all in the top 12 economically deprived boroughs, yet they cannot avail themselves of the scheme.
Other constituencies throughout the country—again, I will alight on Tatton, because its is the Chancellor’s constituency and one that I know well—where unemployment is low and there are many business start-ups and great pockets of wealth, will benefit from the scheme and can apply to include businesses in the scheme, while boroughs such as Newham, Tower Hamlets and others that I have mentioned will not be able to do so. If we look at the unemployment rate across the United Kingdom, which is 7.9% on the latest figures, we see that unemployment in London is 9.1%.
Henry Smith (Crawley) (Con)
As an MP from the south-east, I resent being put into this invidious situation. But why does the right hon. Gentleman think that we are in this invidious situation, whereby we must make tough choices to re-stimulate the economy after the economic disaster in which the Labour party left the country?
Mr Hanson
I am happy to discuss macro and micro-economic issues with the hon. Gentleman. There is a clear divide between the current Government and the previous Government. We had a deficit reduction plan over three years. We would have cut public expenditure and made savings. In the Department in which I was a Minister in the last Government, we had earmarked £1.5 billion of savings over the next three years. We would have done that.
There is a difference about the scale and depth of the cuts. The hon. Gentleman and I can argue about that, but he needs to recognise that, if he walks through the Lobby to vote against the amendment today, he will be denying new businesses in his constituency the ability to gain access to the scheme, while allowing areas with lower unemployment and lower deprivation, perhaps in parts of the north of England, which are not completely a desert, to benefit from the scheme. He has to wrestle with that issue. Let me advise him that however he deals with it, we have the ability to let the residents of Crawley know what he will do on the issue. He and others need to look at that. There is still time for him to vote with the Government today, but then to speak to the Minister privately, to get his colleagues from Kent, other parts of Sussex, Berkshire and Hampshire together, to get them to talk to the Minister, and to get the Minister to reflect on this in the other place, so that we can make the scheme much wider. Colleagues from London and I would give him credit for doing that.
I put this to the Minister: the unemployment rate in London is higher than in the south-west, in my region and in that of the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards), in Wales. It is higher than in Scotland, the east midlands and the north-west, and it is above the UK average. The unemployment rate in the constituency of my hon. Friend the Member for West Ham was 6.8% at the last count. The rate is 7.7% in Tottenham, and 6% in Camberwell and Peckham; in Tatton, Richmond and Derbyshire Dales, it is under 2%.
I have no objection to a scheme being developed to help create employment where employment is lost, but if the logic of the scheme is what the Minister has made it out to be—to deal with public sector employment —I should point out that at the moment 23 of the 100 constituencies with the highest levels of public sector employment are not included. If it is to deal with unemployment, which is higher in the places that I have mentioned than in other parts of the country, the Minister needs to reflect on that in relation to what he has done today.
The Minister does not need to listen to me; John Walker, the national chairman of the Federation of Small Businesses, has said:
“With small firms in the South East most likely to be working below capacity, this shows how wrong the Government is to not include this vital region, as well as the East and London, in its proposals for a National Insurance holiday…With 600,000 public sector jobs expected to be lost, stimulating private sector job creation…in small firms, will be vital to rebalancing the economy.”
The Thames Gateway London Partnership makes similar points:
“the data clearly shows that…the National Insurance Holiday is unfair as it excludes areas in the Thames Gateway which we believe would otherwise be targeted for government support.”
The partnership has helpfully shown—this backs up what my right hon. Friend the Member for Lewisham, Deptford (Joan Ruddock) has said—that there are high levels of public sector employment in the London area, which would benefit from the scheme.
Joan Ruddock
I am most grateful to my right hon. Friend for giving way yet again. He may be aware that of the 10 Thames Gateway London boroughs, seven are in the 40 boroughs with the highest levels of multiple deprivation. My borough is at No. 39. Surely we have to be included in the scheme.
Mr Hanson
My right hon. Friend makes an important point supporting my central argument. I am trying to argue on the Minister’s own grounds. He argues that the scheme aims to help where there is loss of public sector employment. If 23 of the 100 constituencies with the highest levels of public sector employment do not benefit, the Minister’s scheme is not meeting the needs that he has set it to meet.
Let us look at public sector employment in the London Thames Gateway region. Some 21% of people employed in Barking and Dagenham work in the public sector. The figure is as high as 31% in Greenwich, 30% in Lewisham, 33.6% in the borough of Newham, 28.4% in Redbridge, and 26.6% in Waltham Forest, in the constituency of my hon. Friend the Member for Walthamstow (Dr Creasy). The Thames Gateway London partnership has helpfully provided me with information on the subject. Even boroughs represented by two Conservative Members of Parliament, such as Southend-on-Sea, will not benefit from the scheme, although it has 24.66% of people employed in the public sector. Let us look at authorities in Kent, represented not by Labour Members of Parliament, but by Conservatives. In Medway, nearly 24% of people are employed in the public sector. In Gravesham, it is 22.2%, and in Swale it is 19.7%. Those are areas with high public sector employment that will not benefit from the scheme.
Andrew Bingham (High Peak) (Con)
I support the general idea and hear the points that Opposition Members make, but we have to remember that in High Peak setting up a business is not easy. It is not easy anywhere in the country, but we need to look at rebalancing the economy, and in the north-west, or in the east midlands where High Peak is, we have to contend with such issues as rurality and communication links that are not of the same gravity in the south-east. Members might recall how I went on about the Mottram-Tintwistle bypass, but that road link in and out of High Peak makes it difficult for businesses to get going and to survive.
I remember setting up a business years ago and how difficult it is. On transport costs, we used to deal predominantly with south-east companies. We had to get goods up from the south-east and deliver them around the country, which created extra costs. Hon. Members might smile, but one of the things I have noticed since being elected to the House is that it is so much warmer in the south. I can assure hon. Members that it is cold in High Peak and that there are extra heating costs and numerous other extra costs and overheads. The measure is an incentive to business men and, importantly, new business men to start their businesses in the north.
Dr Creasy
I draw the hon. Gentleman’s attention to the fact that business men and women in the south-east may well be familiar with a concept called the living wage, which reflects the high cost of living in London and therefore some of the difficulties that new employers might face in attracting staff because they have to pay a higher wage in the south-east. It is not all grim up north.
Andrew Bingham
We have expensive houses in High Peak—I have seen something on my BlackBerry today about house prices being expensive. We have issues, but it is not grim up north. Speaking as someone who is technically the Member for Royston Vasey, as the programme concerned was filmed in my constituency, I implore all southern MPs to come to High Peak. It is not grim. [Interruption.] It is beautiful. Thank you; we agree on something.
I reiterate the point that there are challenges to setting up businesses outside the south-east—for example, slower broadband. That is another hobby-horse of mine. The measure is an incentive. It will get local people setting up local businesses in the north and outside the south-east, which will rebalance the economy. I hope that more businesses will flow up north to High Peak and other constituencies. The measure is an excellent policy. We hear all about the cuts, but they are having to be made because of the economic carnage left by the Labour party. If we acknowledge that, we might get somewhere.
Stephen Timms (East Ham) (Lab)
I am very grateful to my right hon. Friend the Member for Delyn (Mr Hanson) for tabling the amendment and for the fact that he has already referred to the Thames Gateway. I want to refer to issues associated with the Thames Gateway area and the borough I represent, Newham, together with my hon. Friend the Member for West Ham (Lyn Brown) who is in her place.
It is clear that the Government have simply got this wrong. If we consider the criteria that the Government have said should be applied to choosing where this incentive is available, as my right hon. Friend has said it is in those parts of the country where the proportion of public sector dependence is high that we need to encourage new businesses to start up and take on employees. Of course that is exactly the situation and is what is required in the Thames Gateway area on the east side of London. It is absurd to omit from the scope of this initiative areas that the Government have themselves identified for the promotion of new business growth.
I put it to the Minister that he is not being invited to support the policies of the Labour party or, indeed, any other institution; he is being invited to support the policies of the Prime Minister. It is extraordinary that the one area of the country where the Prime Minister has called explicitly for the creation of Silicon Valley-style economic regeneration based on high-tech start-ups is being missed out from the initiative. Let me refer the Minister to the speech that the Prime Minister gave in east London on 4 November—his east end tech city speech—and point out some of the comments he made. The Prime Minister said:
“Only three years ago, there were just fifteen technology start-ups around Old Street and Shoreditch…it’s clear that in East London, we have the potential to create one of the most dynamic working environments in the world. And I believe we can really turn this vision into a reality.”
I agree with the Prime Minister. I am baffled by the fact that in this Bill the Prime Minister’s initiative is being undermined, and I want to find out from the Minister why that is so. I hope he will accept the case that my right hon. Friend the Member for Delyn has made and, even at this late stage, accept the amendment.
Joan Ruddock
I think my right hon. Friend is providing the answer to the hon. Member for High Peak (Andrew Bingham). This is not about rebalancing between the south and the north; it is about rebalancing within London and the south-east where people are put out of public sector jobs and we hope that they might go into new businesses.
Stephen Timms
My right hon. Friend is absolutely right. I also agree with the hon. Member for High Peak (Andrew Bingham) about the importance of high-speed broadband for bringing about this kind of change. Of course, at the moment we do not know which Department in Government is responsible for broadband—we were attempting to clarify that earlier.
In his speech on 4 November, the Prime Minister went on to spell out how his vision could be achieved. He said that experience
“teaches government some simple things. Go with the grain of what is already there. Don’t interfere so much that you smother. But do help out wherever you can. Help to create the right framework, so it’s easier for new companies to start up, for venture capital firms to invest, for innovations to flourish, for businesses to grow.”
That is what the Prime Minister has said he wants to happen in the east end tech city initiative.
Gavin Williamson
Does the right hon. Gentleman feel a sense of responsibility, as a former Minister, for the 11,000 pages of tax code which, every single day and every single year, stifles new businesses in setting up? Does he accept a responsibility for that stifling of innovation and industry?
Stephen Timms
I take a good deal of satisfaction from the progress that we saw with the development of high-tech business spin-outs from universities under the aegis of the previous Government. That was one of their very significant achievements.
Gavin Williamson
Do you not accept that the 11,000 pages of tax code, which doubled under the last Labour Government, is stifling British industry, and that that is partly your responsibility and your party’s responsibility?
Stephen Timms
I do not think that it is the Deputy Speaker’s responsibility.
Mr Deputy Speaker (Mr Lindsay Hoyle)
In fairness, some may hold me responsible, but I can assure the hon. Gentleman that I am not.
Stephen Timms
This is what the Prime Minister called for in November:
“The right framework, so it’s easier for new companies to start up”.
That is what he wants to happen in the east London tech city initiative. My question to the Minister is why is the Bill not doing that which the Prime Minister has so clearly called for? If it were my right hon. Friend the Member for Delyn appealing to the Minister to do that, I could understand why he would not be willing to do it, but it is the Prime Minister, who appointed the Minister to his job. Why is the Minister not doing what the Prime Minister said?
I commend to the Minister the Prime Minister’s speech of 4 November, in which he went on to describe what different parties are doing to help to secure this vision of a new high-tech city in east London:
“But what about here—in the heart of east London where there’s already so much to work with? We’re working with business to make sure the infrastructure and advice you need is in place. Imperial Innovations, the venture capital arm of Imperial College London”—
Andrew Bridgen (North West Leicestershire) (Con)
Does the right hon. Gentleman welcome the coalition Government’s reintroduction of the enterprise allowance scheme, which we have opened to people the length and breadth of the UK who have been unemployed for six months or more to help them get into self-employment?
Stephen Timms
I have always taken the view that self-employment is a very important vehicle for helping people not in work to get into work. That is why the new deal for self-employment, as an element of the new deal in the past, was so valuable, and I welcome other initiatives to achieve the same thing.
The Prime Minister went on to say that Imperial Innovations
“is going to advise on making sure this accelerator space is attractive to spinout companies from academia and beyond. Indeed, they will be encouraging some of their own brilliant companies to be based here.”
I very much welcome that. I look forward to those start-up companies being established.
Harriett Baldwin (West Worcestershire) (Con)
I am fascinated to hear the right hon. Gentleman make these points, because I do not remember you proposing a national insurance cut. Indeed, you went to the polls with a national insurance increase.
Mr Deputy Speaker
Order. I was not in the Treasury. I am getting a lot of your blame, and I do not like it.
Stephen Timms
I reassure the hon. Lady that when I was in the Treasury, I put an enormous amount of effort into supporting exactly this kind of initiative. I supported the Thames Gateway initiative specifically, as well as other regeneration initiatives.
The Government are now saying that they will not give grant funding, but instead will provide incentives. This is our one opportunity to boost the incentives for establishing the kind of business that the Prime Minister wants in east London, and it will be forgone unless the amendment is agreed by the House this afternoon.
I do not know exactly how things work in the Conservative party. Who speaks to whom, and who is on whose side is all closed to me. It may be that the Exchequer Secretary feels that he does not need to take much notice of what the Prime Minister says. Perhaps he speaks to other people in his party. Let me therefore point out that it is not just the Prime Minister who wants the initiative to go forward. I point him to what the Mayor of London said—perhaps he takes more notice of him than the Prime Minister, I do not know. The Mayor said:
“we can and must do more to cement our position as a global magnet”.
He went on:
“the Olympic and Paralympic Games will bequeath to London a vibrant new business quarter in the east of our city. We must do everything we can to support its development”.
This afternoon, we have the opportunity to do something to support the Mayor of London’s call to develop the vision set out by the Prime Minister. We must not let this opportunity pass us by.
Perhaps the Exchequer Secretary does not take much notice of what the Mayor of London says, either—again, I do not know about that. If that is the case, let me point out to him the position of the Department for Communities and Local Government. Its website states:
“The Government is committed to making a success of the Thames Gateway…we will promote incentives to invest and develop in the area, instead of grant funding specific projects.”
That returns me to the point that I made a moment ago in response to the hon. Member for West Worcestershire (Harriett Baldwin). We understand that the Government are not now willing to contribute grant funding. We disagree with them about that, but are told that there will instead be incentives to invest and develop. Here we have an opportunity to provide just such an incentive. As far as I am aware, the Government have not come forward with any other incentive, and we can provide one along the lines of the policy that the DCLG has set out. We should take that opportunity, and I hope that the Exchequer Secretary will do so this afternoon by accepting the amendment, so that we can provide an incentive in an area that has been so specifically identified by the Prime Minister, the Mayor of London and the DCLG.
The DCLG website also states that the Government will
“work with other departments to identify how their programmes bear on the Thames Gateway and need to be adapted”.
The initiative in the Bill clearly needs to be adapted to fulfil the Government’s policy for the Thames Gateway. I hope that the Minister will tell us what representations he has received from the DCLG, because it is an extraordinarily disjointed approach for one Department to say that it will introduce incentives and initiatives in one area and for the Treasury to take not a blind bit of notice and send all the incentives somewhere completely different.
The previous Government used to talk about “joined-up government”, and indeed we made important progress towards achieving it, so that all the different parts of Government were pushing in the same direction towards the same goal. Here we have a case in which the Prime Minister, the Secretary of State for Communities and Local Government and the Mayor of London are on one side, and the Exchequer Secretary and his colleagues are on the other. I invite him to support what his right hon. and hon. Friends are saying, and not to stand aloof from the policies of the Government of whom he is a member. The Treasury should not be an island, cut off from everybody else and doing its own thing without talking to others or supporting what they are doing, but that seems to be the position with this Bill.
I invite the Exchequer Secretary to accept the amendment and agree that the incentive should be applied in places in which the Prime Minister has so clearly identified its importance.
Sheila Gilmore
As a Member from Scotland, I might be expected to give the Scottish whinge about how everything goes to the south-east and nothing comes to Scotland. I am not going to do that, because the way in which the Bill has been constructed has not been well thought through. It is not clear, at least to me, what are the intentions behind parts of it and what set of policies it is meant to fulfil.
Is the Bill about helping areas with high levels of unemployment, some of which have never fully recovered from previous recessions, or helping areas with high levels of public sector employment, which we anticipate will suffer greatly from what will happen over the next couple of years? They are not necessarily the same places. The constituency of my hon. Friend and neighbour the Member for Edinburgh South (Ian Murray) is at the top of the list provided by the Library of areas with the highest public employment. Most people would think that large parts of that constituency are fairly affluent, because the public employment is, I suspect, largely at the university. It is perhaps not perceived, certainly in Edinburgh or even in Scottish terms, as in particular need of employment support. My hon. Friend, who is sitting on my right, probably disagrees.
We must decide what we are trying to achieve. I am very persuaded by what I have heard from many colleagues, particularly in London but also in other parts of the south-east, which has a long history of difficulty. The south-east is by no means all affluent. It is important to create employment in the parts of London and the south-east where unemployment is high. Those places are suffering many problems and are now affected by the cuts in public expenditure. People there are being told that they may have to move because their homes are too expensive for them. Many things are coming at those areas, and I am persuaded by my colleagues’ words and by what I have seen in London that there is a need to boost employment in many places.
I am not convinced that the particular cut of the cake for which the Bill provides is the best. I am not clear about the reasons for it. On Second Reading and in Committee, it was suggested that it was done to target places that need help most. I do not think that that is necessarily the case. At other times, it was suggested that we have to do what the Bill proposes because we cannot act everywhere—that would cost too much. We are then back to the arguments about the need to reduce the deficit and the speed at which that has to happen.
However, the best way in which to get out of recession is to grow the economy and create jobs, and it is important to do that everywhere. I appreciate that, in terms of the amendment, we cannot ask for further expenditure at this stage, although we could review the position in later years. However, tax loss could be recouped quickly if new businesses grow and employment increases. It is important to build employment throughout the country. There is no particular reason for taking the route that has been suggested.
We are constantly told that we have to act in this way because the country is in such a mess and we must reduce the deficit more quickly. Labour Members do not accept either the Government’s description of how and in what circumstances the deficit arose, or their prescription. We must build employment and provide the economic stimulus that we need in various ways—the scheme is only one method; there are many others. National insurance contribution relief is only one small, albeit important part of a bigger picture.
We need a continuation of the policies that, in early 2010, meant that unemployment did not rise as high as had been predicted and that the deficit was falling more than had been predicted before the election. It is not true to say that the deficit was increasing—it was falling under our policies. The growth in various quarters of 2010 was the result of the economic stimulus package that we put in place. We should continue the economic stimulus. National insurance contribution relief is one small way of doing that and, in my view, it should be country-wide.
Kelvin Hopkins
I strongly support the amendments, which my right hon. Friend the Member for Delyn (Mr Hanson) moved so ably. As it stands, the Bill has crude, arbitrary and unfair discrimination built into it. The amendments would remove the unfairness and discrimination at a stroke and turn the measure into something that we could all happily accept.
I have to declare an interest: my constituency is in one of the excluded areas. The proportion of public sector employment in Luton North puts it at the top end of the table—number 48 out of 650 constituencies. Some 41.2% of employment in my constituency is in the public sector, so it will suffer substantially as a result of the Government’s cuts in public spending. If 450,000 jobs go nationally, we could be talking about 1,000 jobs in my constituency at the very least. Already it is suggested that 500 jobs might be going in Luton as a result of the cuts, and a higher proportion of those will be in Luton North because of the degree of public sector employment there. I therefore have a vested concern and a constituency interest.
I am more concerned, however, about the overall principle, which will affect so many other people unfairly. My right hon. Friend the Member for Delyn suggested that because of the likely decline—certain decline, I think—in economic activity and rising unemployment, take-up will be much lower, owing to the fact that far fewer businesses will be formed in an atmosphere of the economy entering recession, with jobs being lost in both the public and private sectors. If the economy were expanding, of course, we would expect many more small businesses to be created, and therefore a much higher take-up. The take-up will probably be well below anything that the Government anticipate, simply because the economy is going to enter—I believe—serious recession as a result of their policies.
It is strange that the Government have chosen the British standard regions to discriminate in this way. They have actually played down regionalism—they are abolishing the regional development agencies—and are diminishing the regions as a basis for policy in other areas, but they are using the standard regions as a basis of policy in this area. That seems to be contradictory. If we are to provide assistance to industry and employment, it would be preferable to target it much better and in other ways. Given that the Bill will work in such a way, however, the only fair approach is to apply it across the country as a whole. As my right hon. Friend the Member for Delyn said, the costs would not be so great of including the three regions excluded in the Bill and ensuring that every small business across the country has the advantage of the subsidy.
Neil Carmichael (Stroud) (Con)
Surely the whole point of the regional argument is that we should be focusing on the regions that need extra help to encourage the development of smaller business. On the hon. Gentleman’s point about the state of the economy, it is the growth of new small and medium-sized businesses that will boost the economy. That is what we want to encourage through this legislation.
Kelvin Hopkins
I thank the hon. Gentleman for his intervention, but the Government have chosen to play down regionalism by getting rid of RDAs, yet have chosen regions as a crude way of excluding certain areas from the policy in the Bill. Within those regions, of course, some areas really require assistance, and by any standards, Luton is one of those. We have seen a massive loss of jobs there as a result of the decline in manufacturing industry. Fortunately, we have an airport, public sector employment and so on, which has helped, but we have also lost a lot of jobs and need assistance more than most other areas not just in the south-east, but elsewhere in the country.
Stephen Williams (Bristol West) (LD)
The hon. Gentleman said that the Government have abandoned regionalism. It is true that RDAs are going, but they have been replaced on a more localised basis by local enterprise partnerships. If he and his colleagues have a really compelling case for investment in the Luton or greater Bedfordshire area, surely a bid to the LEP would benefit his town, even though it cannot benefit from the scheme in the Bill.
Kelvin Hopkins
I am strongly in favour of proper targeting, but the RDAs could do that: they could look at their regions, advise on which areas needed the most support and provide assistance in that way. I am in favour of targeting, but if we are to exclude areas, it should not be done regionally, because within regions there are areas that need strong support and other areas that need less support. As I said in earlier debates in the Chamber today, I would use that £1 billion in other ways and target it rather better. We in Luton feel unfairly discriminated against for the reasons that I have set out.
There is also a problem with regional boundaries, which have been mentioned before. In Committee I mentioned a regional boundary that goes right through a small conurbation not far from me, Leighton-Linslade. Linslade is in the south, in Buckinghamshire, and Leighton Buzzard is in Bedfordshire. We therefore have a conurbation that is split by the regional boundary. How will people in that small conurbation feel about one side of the town getting a benefit and the other side not getting it?
I think I have probably made my point, and others wish to speak. The Government have got this wrong. I hope that they will accept the reasonable amendments tabled by my right hon. Friend the Member for Delyn and make this a fair Bill that we can all support.
Mike Gapes
Allegedly, we are all in this together. If so, why is it that those of us in east London, along with people in the 21 authorities in the Thames Gateway, which include authorities in Kent, where there is not a single Labour Member of Parliament—they are only Conservatives—and those in Essex, are excluded from the package that we are discussing? We heard earlier today about the Maoist chaos of the Government’s regional policy. That is not the responsibility of the Treasury; it is the responsibility of its close allies and partners, and the Business Secretary. However, as we are all in this together, presumably the Treasury is also involved up to its neck.
We have also heard that, apparently, the Government are refocusing regional policy. Well, that regional policy refocus includes, in today’s measures, discrimination against poor people in poor communities. My right hon. Friend the Member for Delyn (Mr Hanson) spoke from the Front Bench about a number of boroughs and constituencies that have high unemployment—higher than the national average—and where, at the moment, there are also high levels of public sector employment. Those areas will take a disproportionate hit because of the measures announced in the comprehensive spending review and the Government’s policy to reduce, for ideological reasons, the size of the public sector so drastically and quickly.
So, we are not all in this together: some of us are in it much deeper than others. I suppose that we are a bit like the residents of Brisbane, Australia. When the tsunami or flood comes in, we hope that it will meet a certain ceiling point before going back down, and that the next day it will go no higher. Some people have a little footbridge or step to get them above the water, but others are pushed down below it. People in the small business sector in my community—in Ilford and Redbridge, which is a Conservative-Liberal Democrat borough—will not benefit from these measures. When it comes to benefits, we are not in this together with those in Tatton or elsewhere. We will lose out.
Other Members represent poorer communities than mine, but I have wards in my constituency with very high unemployment. I also have a very diverse community. One of the interesting features of excluding London from the proposals is that it is not only discriminatory geographically; it could also be discriminatory ethnically. That needs to be taken into consideration, given the way in which the measures disproportionately affect different communities in different parts of the country.
I do not want to delay the House for long. I spoke on Second Reading in November. I hoped at that time that the Government would come forward with some changes to their proposals. I hoped that they would listen to the logic, but they did not. We have already had Committee stage and Report brings us to today.
The Thames Gateway Partnership for London, Kent and South Essex recently wrote to Members, urging us to make representations to the Minister—[Interruption.] He might wish to listen to this. It wanted us to write to him to point out the discriminatory nature of the proposals and to urge the Government, even at this stage—I say again, even at this stage—to see what they can do to help the Thames Gateway authorities. The partnership pointed out that there are 3.5 million residents in the Thames Gateway local authorities area and that it believes that in
“excluding London and the South East from the regional freeze on National Insurance contributions the government is failing to take proper account of local economies, particularly the challenges faced by the Thames Gateway growth corridor.”
My right hon. Friend the Member for East Ham (Stephen Timms) has already referred to that.
The Bill is damaging to a potential growth sector of our economy. The Thames Gateway is part of the future of London as a global city. It is vital to the prosperity of our nation, yet this short-sighted, quasi-Maoist Government are operating in such a chaotic way that they cannot see the damaging consequences of what they are proposing. Next year, I hope, they will come seriously to regret what they are doing. I urge all local authorities in the Thames Gateway area to look very closely at the Division lists for today and to register which Members from Essex, Kent and London went through the Lobby in favour of such discrimination against London, Kent and Essex and which Members voted against it. Then, hopefully, those local authorities, councillors and communities will hold those Members to account.
Dr Creasy
I want to talk about three things in my comments on the amendment, the first of which is the test set by the Opposition about what this policy is designed to achieve. Secondly, I shall explain why the amendment is needed to ensure that the policy achieves what is intended. Thirdly, I shall say a little about the evidence base for the policy, which was a matter of great concern to me in Committee—and the Bill is still found wanting in that respect. I shall show how the amendment addresses some of those challenges.
The test we set for this policy and, indeed, for this Government, given our concerns about their economic approach, relates to jobs. At the heart of what we do as a Parliament must be the concerns of our constituents, and I know that one of the main concerns of my Walthamstow constituents and those of many other Members is jobs. How are people going to keep a roof over their heads, keep their families fed and ensure that their families stay together? Those concerns relate to the jobs people have and the support we can give to them in their jobs. Job creation is, as my hon. Friend the Member for Edinburgh East (Sheila Gilmore) ably set out, absolutely key to how we judge this policy.
In that context, the symptoms are not good. We know that unemployment is rising and that it has hit 2.5 million—it has been suggested that it is likely to increase further, especially in areas currently excluded from this policy—so job creation is a critical aspect of what the Government can and should be doing. Six people are chasing every vacancy in this country; if there were ever a time when we needed to create more jobs for which people can apply, it is now. We cannot have a jobless recovery; that is not sustainable. Indeed, the cost to the public purse of doing so would be tremendous. It is worth noting that every extra 100,000 people on the unemployment register is half a billion pounds of welfare expenditure that has to be found. There is a great cost to us of not doing something about rising joblessness.
We therefore look at this policy and ask how it will meet the test that the Minister set. In Committee, he said that the purpose of the policy was specifically “the creation of jobs”. It was to
“help the wealth-creation sector in regions currently reliant on the public sector”. ––[Official Report, National Insurance Contributions Public Bill Committee, 2 December 2010; c. 47, Q167.]
That is the second test that we put: does this policy affect not the regions but the people it is designed to help? If we look at the people test, we see that, as currently constructed, the policy does not meet it; it fails on that basis.
Many Members have named areas in which some of the public sector workers most affected by the Government’s cuts are living. My constituency is already among the top 100 in the unemployment league. Our current unemployment rate is 8.5%, and it is rising as we speak. About 24% of people living in Walthamstow work in the public sector. They are losing colleagues, and they are worried about themselves. My surgeries are full of people asking for help after receiving redundancy notices. I ask the Minister what I should tell those people. What will this policy offer them? The task of Government is supposedly to support people and create jobs in the economy. What can I tell those people in Walthamstow who work in the public sector and risk losing their jobs, or have already received redundancy notices?
Ian Murray (Edinburgh South) (Lab)
As was pointed out by my hon. Friend the Member for Edinburgh East (Sheila Gilmore), my constituency is at the top of the league in terms of public sector jobs, yet unemployment is less than half that in the constituency of my hon. Friend the Member for Walthamstow (Dr Creasy). Does that not highlight the discriminatory nature of the Government’s policy?
Dr Creasy
That is a very good point. I am talking about the public sector workers who are most at risk of redundancy. The people who live in my constituency may not do the same jobs as those who work in the public sector in Edinburgh. They are teaching assistants, nurses, and people working in inclusion units and Sure Start. They are losing their jobs because of the cuts that are being made in local and national Government. People such as civil servants—who knows, perhaps they include the admin assistants in the Minister’s offices—fear for their jobs. They are looking to the Government, who say that the private sector will pick up the pieces following the cuts in the public sector, and they are asking how that will happen. In my region, the answer is very unclear.
This policy could be part of the remedy, and that is the aim of the amendment. It asks, “How can we generate jobs? What are the motives that lead people to set up businesses and industries that generate jobs in the private sector?” Many of us share an interest in whether the private sector could generate jobs as part of the recovery. We think that the policy has failed that test, and needs to be amended. Excluding London and the south-east means excluding a key wealth-creating element of our national economy, and we feel that that is remiss.
I also think that the Government have been remiss in excluding the voluntary sector and charities, and in Committee I supported amendments seeking their inclusion. According to the National Council for Voluntary Organisations, if the voluntary sector could benefit from the change of policy on national insurance holidays, an extra 2,500 charities could be created. Perhaps even more could be created through the big society, given the interest in how the voluntary sector could work in public sector commissioning. Cruelly, however, they have been excluded. The questions “Who are the people who are generating jobs?” and “Where are the places where people who are losing their jobs in the public sector can best find employment in future years?” have not been answered; the test has not been passed.
I ask the Minister to consider amending the policy in the way we have suggested, not least on the basis of his own evidence. He will recall that, in Committee, I was particularly concerned about the way in which the Government had constructed the policy, and the evidence on which it was based. He himself has described it as an uncertain benefit, and his officials have admitted that they did not have much evidence on which to assess whether they could reach all the people whom they wanted to reach, or involve all the businesses that the Minister had hoped to involve. In the impact assessment, the Minister said that he hoped that the policy would help 400,000 businesses, but he has admitted today that only 1,500 have applied so far. In Committee, one of the officials suggested that the number of applications would increase at the remittance stage, but that is not job creation. The jobs would have already been created, and people would be applying retrospectively for remittances. That suggests a challenge to the status of the policy as a job creation measure.
According to the Minister’s own analysis, the inclusion of London and the south-east might well make possible the creation of an extra 300,000 businesses. Before he says that there is no extra money, let me suggest to him that the creation of those extra businesses might enable him to meet his target of 400,000 over the three years. He could then return to the House and reassure all of us who are concerned about the efficacy of the policy that it had succeeded in generating new business in the United Kingdom and forming a key part of our recovery. Let me also encourage him to consider the extra tax take that the Treasury would gain as a result of the creation of all those new businesses, as well as the fact that all the extra national insurance funds could be spent on the national health service or on pensions, as he desired. There are many benefits in considering how the Bill could be amended to include London and the south-east. Let us think about all the people who would be affected by the jobs that this would create, the money it would bring into our national Exchequer and, above all, the economic recovery it could help drive.
I therefore hope the Minister will accept the amendments and acknowledge that they have been tabled in good faith. They are motivated by a genuine desire to make sure this policy is effective. Whether or not we agree with the Government—and we certainly disagree with many of the changes they want to make—I hope the Minister will understand and share our concern that jobs must be the first priority of any British Government in the current economic climate.
Gavin Shuker
I believe these amendments would make a real and fundamental difference to people in my constituency who wish to start their own businesses—to people who are creative and dynamic, and who want to have the opportunities that come from not being at a disadvantage to those running businesses in other parts of the country.
This Bill seeks to bring about a social benefit. There is a reason why national insurance contributions are going up. They are going up to help bring down the deficit, which is important. The structural deficit needs to be tackled over time. There is a further aspect to the Bill, however: it is also about trying to rebalance the economy.
The Minister has been very clear about his desire to see public and private sector employment rebalanced in various regions, but I personally do not have a problem in this regard, because for me a job is a job. I do not think people in the public sector should be in any way disadvantaged or looked down on because they work in the public sector rather than the private sector. We accept that private sector jobs should be generated, however, because Opposition Members believe that economic growth is the way to tackle the deficit, not slash-and-burn economics.
We accept that under the Government’s plans to reduce the number of public sector workers by about 500,000, those of us in areas with high public sector employment will need more businesses coming up and through. My point is simple, therefore. Across wide swathes of the greater south-east, including the Luton seat I represent, there are areas of very high public sector employment and high unemployment, and the Minister would do well to accept these amendments in order to ensure that we are not disadvantaged, which we are. That would be a positive step.
I agree that legislation has a role to play in helping to moderate behaviour. We want more businesses coming up and through. In Committee, the Minister made a number of salient points about the complexity that might be added by including regions such as the greater south-east, but we are not just in politics to administrate. We are in politics to make a difference. We are in politics to ensure that everyone in this country has a job they enjoy and through which they can generate both wealth for their family and self-worth, and it is unfair to the people in my constituency, and to others in the east, the south-east and London, that they should be exposed to this great disparity.
We in Luton have a number of particular issues with this proposed legislation. First, we have great transport links, which is a positive. It is why businesses like to locate in Luton. However, those same transport links also allow people to travel outside Luton to set up their new businesses, meaning that people in Luton who need a job cannot find employment. We have a young and creative work force; they are the kind of people who want to get stuck into building new businesses, and I am constantly amazed by the range of new businesses I see in my constituency. They are innovative, professional young people who want to establish businesses and set out on their own path, but they are going to be disadvantaged by these measures.
Luton has areas of deprivation, and we also have high public sector employment; that is certainly the case in the constituency of my hon. Friend the Member for Luton North (Kelvin Hopkins), as well as in Luton South. It would be deplorable to say to the people in my constituency that if they move 15 or 20 minutes up the train line or on the roads they will get a £50,000 golden hello, which they would not get if they set up their business in Luton.
Labour Members who represent seats in the greater south-east are willing to make a stand. We want to stand up for our constituents and constituencies, and to talk about our creative people. I hope that the Government will support these amendments, and that Conservative Members will want to stand up for their constituents as well, and say that this disparity is wrong.
In Committee, the Minister discussed why this exemption is being applied and spoke of a constrained budget. We could tackle that in a number of ways, and the amendments take account of them. Obviously, we could address the amount of time on the scheme, the number of businesses that engage in it, the percentage rate of take-up and the number of employees that the businesses take on. I urge the Government to re-examine the matter and find a way to include the greater south-east in this arrangement.
I make my final point to ensure that we are not in any doubt. The Committee took evidence from the assistant director of Her Majesty’s Revenue and Customs, who made it clear that it is possible to check where people are in the scheme. There was a high level of postcode accuracy about businesses, so it would be possible to re-examine this. As his first point in thinking again, I urge the Minister to consider the greater south-east as a region. It has great disparity between parts and constituencies, containing areas of deprivation, areas with high public sector employment and areas with high unemployment. He should say that those areas are just as deserving as the others represented here today.
Mr Gauke
In this group of amendments, the right hon. Member for Delyn (Mr Hanson) has returned to a matter that was debated extensively on Second Reading and in the Public Bill Committee. I commend him on his persistence, but I expect that he will not be surprised with my response, given the Government’s position, which I have set out in the earlier debates.
The amendments relate to the regional nature of the national insurance contributions holiday, a matter that was raised during all the earlier stages of our consideration of this Bill. Amendments 1, 2, 3 and 4, if taken together, would make the holiday a UK-wide scheme. The NICs holiday is aimed at helping the formation of new businesses employing staff in those countries and regions most reliant on public sector employment. The reason why the Greater London, east and south-eastern regions are excluded is that the proportion of the population in public sector employment is lower in those regions as a whole than in any other part of the UK. We also estimate that a national scheme would increase the costs by about 70%.
Joan Ruddock
Before the Minister goes into more detail—I warn him that I might seek to intervene again then—can he tell us whether any assessment was made of the impact of this on ethnic minority communities? The real observation has been made that the proportion of ethnic minority people who are great entrepreneurs and who wish to set up a business may well be greater in London and parts of the south-east than in some other regions.
Mr Gauke
Of course the Treasury examined all these matters in respect of its policies as a whole, its budget announcements and so on. I must point out that although the excluded region as a whole is diverse, the areas that will be included are equally so. I am not strongly persuaded by the arguments that have been made about this being discriminatory. When listening to these arguments, I was struck by the fact that it is worth reminding the House of what we are seeking to do. We are seeking to reduce the amount of NICs that will be collected, because we believe that in the way that we are doing so, we will be able to help to encourage business—
Mr Gauke
I want to develop this point, but I shall give way after I have done so. We want to encourage the creation of new businesses and more jobs. That issue has been raised in some of the earlier remarks. The hon. Lady discussed the importance of jobs and the hon. Member for Ilford South (Mike Gapes) discussed the impact that failing to reduce NICs might have on the Thames Gateway. The conceit of the speech made by the right hon. Member for East Ham (Stephen Timms) was that there was some division between the Treasury and No. 10. I do not know whether he was thinking of his own lengthy period in the Treasury rather than of the current circumstances, but let me assure him that there is no great tension between the Treasury and No. 10. I know that that has not always been the case in recent years.
Mr Gauke
I will give way on that point, but the central point I want to make is that all Labour Members fought the last election—indeed, the right hon. Gentleman was the Minister responsible—on a policy of increasing national insurance contributions throughout the entire country, which would have done harm not just to the Thames Gateway, east London and Walthamstow, but across the country.
Stephen Timms
I am grateful to the Minister for giving way. On 6 January, the Prime Minister spoke—I think at No. 10—about
“nurturing small clusters of innovative companies and web start-ups, as we are in the new Tech City—our own Silicon Valley—in East London.”
Why is the Minister not contributing to this nurturing of start-ups in east London? This is his one opportunity.
Mr Gauke
The Government are doing a great deal to help London. We need only consider the transport infrastructure as well as the fact that we are protecting investment in Crossrail, in upgrading the tube and in Thameslink. We are taking a number of steps. I think it is astonishing that Labour is complaining about the fact that some businesses will not receive a reduction in their national insurance contributions when its policy at the last general election was that businesses should be paying more.
It is very helpful to look at the well-remembered interview with the shadow Chancellor on the “Today” programme on 4 January, when he said that we need to get the structural deficit eradicated and that there was no argument about that. He recognised the existence of a structural deficit and did not particularly differ from the Government’s position on the size of the structural deficit. There was a disagreement on timing—I think he disagreed with his own policy on timing, but he disagreed with the Government’s, too. He said that the balance between public spending cuts—we do not know which of our proposed public spending cuts the Opposition support—and tax rises should be 60:40. I think that the proportion for tax rises was 40%, although it was not entirely clear.
The shadow Chancellor was asked by Evan Davis:
“In principle you would like VAT not to go up and instead, at some point, not now, National Insurance to go up by more?”
The shadow Chancellor’s response was, “Yes.” He said that that was the Labour party’s argument at the general election and that it was still its argument now, because national insurance is a better tax. That is the Opposition’s position—they want to increase employers’ national insurance contributions. They oppose all the cuts and they oppose our VAT increase, but they want to increase national insurance contributions. Yet when we have a Bill in this House that provides a reduction in national insurance in some areas, their biggest complaint is that they want to do it in more areas. How incredible is that? How lacking in coherence is that policy?
Mr Gauke
The right hon. Gentleman knows the state of the public finances that we have inherited. We have pursued the policy that we set out in our party manifesto before the general election and have reversed the most serious effect of Labour’s jobs tax. The Opposition’s policy is to go further—they want a bigger jobs tax. The increase in the rate for employers’ national insurance contributions, which is mitigated by the increase in the threshold, involves the rate going up from 12.8% to 13.8%—I say that for the benefit of any Labour Members, including the shadow Chancellor, who are not quite aware of that. To raise the same amount of tax as the VAT increase would have done, Labour would have had to increase that rate not just to 13.8% but to 16.7%. What do hon. Members think that the impact on the Thames Gateway, east London and jobs in Walthamstow would have been if we had pursued that policy, which the Labour party believes in? It does not have much by way of economic policy, but that is one of them.
Ian Murray
Let me give the Minister a little of my experience as a business owner with up to 12 staff. Small entrepreneurs and people who run small businesses in Edinburgh are, like me, far more concerned about the impact on our businesses of the number of customers not coming through our doors because of the VAT rise than they were about any increase in national insurance that the Labour party proposed before the election. I would gladly pay £30 a week more for each member of my staff than have no customers left.
Mr Gauke
I do not want to reopen the whole argument on everything that should be done to reduce the deficit, but we have to get it down. I am not sure whether the Labour party grasps the need to get the deficit down, but there is no doubt that it has to be eradicated at some point—even the shadow Chancellor agrees with that. The Labour party believes that national insurance contributions are the best tax by which to do that, but all we have heard from Labour Members this afternoon is why they want a cut—and they want a bigger cut than we are offering.
Kelvin Hopkins
The chief economic adviser for the Chartered Institute of Personnel and Development has said that
“the VAT hike will prove a far more significant ‘tax on jobs’”—
to use the Government’s term—
“than the hike in…National Insurance contributions”.
That outside organisation estimates that 250,000 jobs will be lost because of the VAT rise.
Stephen Timms
Has the Minister received representations from the Department for Communities and Local Government about the inclusion of the Thames Gateway area in this incentive?
Mr Gauke
Not that I am aware of, but as the right hon. Gentleman knows, tax is a matter for the Treasury. I must say that the Thames Gateway would have been hit by a much greater jobs tax if the Labour party were in power.
Both today and in earlier debates, I have understandably been asked about take-up and whether there is a plan, if take-up is lower than expected, to expand the holiday to cover the whole of the UK. Let me reiterate to the House and Opposition Members that this is not just about cost; it is also about the policy rationale for the holiday, which is to target incentives on new businesses in regions with high levels of public sector employment. In their evidence to the Committee, representatives of the Federation of Small Businesses and the British Chambers of Commerce made it clear that the south-east is more resilient than the rest of the UK and that new business formation would not be harmed significantly because the holiday would not be available there. I should also mention to the House, and particularly to the right hon. Member for Delyn that all new and existing businesses in the south-east will benefit from the increase in the employers’ national insurance contributions threshold, which I assume the Labour party will oppose when we bring it forward, and from the reduction in corporation tax rates, as compared with the increase that Labour was going to bring in for small businesses.
Mike Gapes
The Minister refers to the FSB. Will he confirm that it wrote before Christmas saying that his proposal is
“a crude assessment as it does not account for areas within these regions that would really benefit from policies that would help bolster employment”?
That remains the position of the FSB.
Mr Gauke
That is the same Federation of Small Businesses that said that the Labour party’s policy to increase national insurance contributions would cost about 52,000 jobs just among its own members.
We have touched on the fact that labour markets are much bigger than ward, borough or constituency boundaries. It is not quite clear what the Labour party would do if it were to extend the scheme. Its policy seems to be that it would remove the scheme from some parts of the regions that would currently benefit. It is not quite clear how the Labour party would do that. I do not know—perhaps the right hon. Member for Delyn could explain—whether the plan is that the scheme would be available in Flint but not in Prestatyn. I am not quite sure what the Labour party has in mind. Perhaps it thinks that the scheme should be available in Oldham but not in Saddleworth. I really do not know what the Labour party wants to do with the scheme, but it clearly wants to increase national insurance contributions, not to reduce them, despite what we have heard this afternoon.
The NICs holiday is targeted at regions and countries with the highest proportion of public sector dependence, to encourage new businesses to start up and take on employees. Expanding the holiday to the whole economy would undermine the policy rationale. I therefore ask the right hon. Member for Delyn to withdraw the amendment.
Mr Hanson
We have had a very good debate, and my right hon. Friend the Member for East Ham (Stephen Timms) and my hon. Friends the Members for Walthamstow (Dr Creasy), for Luton South (Gavin Shuker), for Ilford South (Mike Gapes) and for Luton North (Kelvin Hopkins) have put the case strongly for their constituents to be included in the scheme.
The scheme does not do what is says on the tin. It will not fulfil the Minister’s objectives. It will not help regions and areas with the highest public sector employment. I reiterate for the House’s benefit that 23 of the top 100 constituencies in the country for public sector employment will not benefit from the scheme. The Minister knows that we have suggested alternatives, and my hon. Friend the Member for Luton South mentioned a range of ways that we could cut the cake to include London, the south-east and east, so that those areas of high deprivation with high public sector employment could benefit from the scheme. I am not satisfied with the Minister’s response. We need to ensure that the scheme is fair and equitable. I therefore intend to press the amendment to a Division.
Question put, That the amendment be made.
Mr Gauke
I beg to move, That the Bill be now read the Third time.
We have reached the final stage of the House’s deliberations on the National Insurance Contributions Bill. The first part of the Bill, on which we perhaps spent less time, introduces a 1% increase in the class 1 employee and employer and class 4 self-employed rates of national insurance contributions from April this year. As some hon. Members will remember, that was announced by the previous Government in the 2009 pre-Budget report. Although not part of the Bill, we intend to reverse the impact of the previous Government’s tax on jobs by increasing the employer national insurance threshold and income tax personal allowance. Those changes are part of a progressive package of measures that shifts the burden of Labour’s taxation away from lower earners and lower-paid jobs.
First, I remind the House that the provisions will increase the employer rate from 12.8% to 13.8%. That is a fact I am sure we should all get right. That 1% increase will also apply to class 1A and 1B contributions that are paid by employers on benefits in kind and pay-as-you-earn settlement agreements. Secondly, the Bill will increase the employee main rate from 11% to 12%. The same 1% rise will also apply to class 4 contributions paid by the self-employed, which will rise from 8% to 9%. Thirdly, the additional rates of employee class 1 and self-employed class 4, payable on earnings or profits above the upper earnings limit and the upper profits limit respectively, will rise from 1% to 2%. Compared with the plans that the Government inherited, more than £3 billion a year is being returned to employers through the threshold rise, and even more to individuals through the increase in the personal allowance.
Our actions will mean that some 880,000 low earners in the UK will be taken out of income tax altogether. Around 950,000 low earners will no longer pay national insurance contributions, although their benefit rights will be protected. Employees earning under £35,000 a year will pay less income tax and national insurance contributions and employers will pay less national insurance contributions on all workers earning less than £20,000 a year. We are keen to reduce the burden in this area although, as I set out earlier, it appears the shadow Chancellor wants substantially to increase that burden.
The regional employer national insurance contributions holiday for new businesses, contained in the second part of the Bill. That provision encourages employment and enterprise in the areas of the UK that are most dependent on public sector employment. Our aim is to help those regions in the transition to a more sustainable economic model based on private sector growth and investment. That is why we are introducing a holiday from employer national insurance contributions for qualifying new businesses in targeted countries and regions. The measure will reduce the costs of taking on staff and provide support in the vital early stages of business development. In order to ensure affordability, the holiday is limited to the first 10 employees taken on in the first year of business. For each of those workers, the holiday will last for 12 months, unless the closing date for the scheme—5 September 2013—is reached before the 12 months have elapsed.
In the Budget, we estimated that new businesses would save around £940 million of national insurance contributions over the next three years, giving them the ability to hire more staff, expand their business and invest in the recovery.
Nick de Bois
Will the Minister advise whether he envisages any problems from perhaps less than scrupulous companies that might go into pre-pack administration? Would they be able to claim the benefit if their new business started after a pre-pack administration, for example? If that is the case, will he take some measures to consider what can be done about this?
Mr Gauke
As we discussed in earlier stages of the debate, it is right that we look at this closely to see that the scheme applies where we believe it should, that we do not have artificial creations, that there is a proper need for this, and that the compliance capability of HRMC to address the matter is adequate, and we are ensuring that that happens.
I thank the many right hon. and hon. Members who have participated in the debates on the Floor of the House and in Committee. We have had a thorough examination of many of the arguments, perhaps occasionally at the risk of repetition, and we may have another opportunity for that later—who knows? I am grateful for the constructive way in which the Bill has been scrutinised by Members from all parties.
The Bill enables the reduction of taxation of labour nationally, and it provides extra support in targeted areas. It is good for growth and good for jobs, and I commend it to the House.
Mr Hanson
This is the fourth Treasury Bill that I have dealt with as Opposition Treasury spokesman in four months, and it is the fourth Bill that has reached this stage without a single amendment being passed, so I am continuing with my fine record of scrutiny but little success in making changes.
I want to be clear at the start that despite concerns about some aspects of the Bill, we support the broad thrust of the measures before us. I note, however, that despite the rhetoric about national insurance that occurred at the general election, the Bill takes through the national insurance contribution increase of 1%. I accept that the Minister has included in the Bill changes to the employers’ threshold, which will make a contribution towards those costs. However, even after that has taken place, the Bill still brings in a rise that will cost businesses about £1.4 billion a year. I make no complaint about that, because we proposed to do it at the election; my complaint is that there has been a lot of smoke and mirrors from the Government in their approach to national insurance.
Mr Gauke
As the right hon. Gentleman will know, the policy that we are pursuing is entirely consistent with what we set out in our manifesto. Given the position of his party and the shadow Chancellor on this, presumably they will be opposing the increase in the threshold for national insurance contributions that will be introduced very shortly.
Mr Hanson
The electoral rhetoric does not match the actuality of this Bill. The Minister has rightly said that threshold increases were trailed in the election manifesto, but £1.4 billion of extra expenditure on businesses is still being put forward in the Bill. I make no complaint about that, as it formed part of our manifesto commitments. However, we should examine the electoral rhetoric. During the election the Conservatives said, “Let’s Stop Labour’s Jobs Tax”, but they are still executing, through this Bill, some £1.4 billion-worth of extra costs on employers; again, we have no objection to that. We will look at all these matters in due course and make our judgments when we see the proposals that the Government bring forward. However, given what was said at the election, there is still a sting in the tail for employers in the small print of what the Minister has brought forward today.
My right hon. Friend the Member for Edinburgh South West (Mr Darling) announced in the pre-Budget statement on 9 December 2009 that we would increase national insurance contributions by 1%. However, in this Bill there is not only that increase but, side by side with it, the 2.5% increase in VAT that the Government have introduced. The Minister has put an extra £1.4 billion on national insurance and, at the same time, increased VAT. At least we were clear about our objectives in the election. However, we will support the Bill today.
We support the national insurance holiday, which engendered most debate in Committee and on the Floor of the House. We think it is important to consider measures that encourage business, but we disagree with the exclusion of London and the south-east and eastern regions. We have made the case on that issue and I hope that the Exchequer Secretary will reflect on it.
This debate has been very positive. I thank my right hon. and hon. Friends who have contributed, particularly those from London and the south-east and eastern regions. I thank my hon. Friend the Member for Nottingham East (Chris Leslie) and the Whip, my hon. Friend the Member for West Ham (Lyn Brown), for their help and support during the course of the Bill. We will not vote against the Bill this evening, but we will undoubtedly return to the scrutiny of it in another place shortly. Some of the arguments bear further repetition in Committee and on the Floor of the House there. Finally, I thank the Minister for his patience and co-operation. I look forward to seeing him on numerous occasions in the future.
Gavin Shuker
I, like many hon. Members, have followed the debate extremely closely. When the changes were first announced in June, I authored an early-day motion that stated the inadequacies of the Bill for the greater south-east—the south-east, the east and London. On Second Reading, I flagged up my concerns and in Committee we looked at the evidence in greater detail. The Bill will have a real impact on my constituents, and on those of hon. Members from across the House. In particular, it will impact on people in the greater south-east.
Obviously, we accept the Treasury’s need for more national insurance income to sort out the structural deficit. Although we are not opposed to the legislation and will not press for a Division, I still have a number of concerns that it is important to place on the record.
First, I believe that the Exchequer Secretary’s motivation is confused. We have heard contradictory statements. We have head that it is about rebalancing the economy; we have heard that it was decided which areas should receive a holiday to match the price tag that was set for the policy; and we have heard that it is about simplicity. Clearly, it would be simplest to implement the scheme for all new businesses across the country, yet that is not the scheme we are looking at.
Secondly, I believe that the implementation of the scheme is flawed. So far, just 1,500 applications have been received. We all hope that every eligible new business will take up the scheme, but the target of 400,000 for the next three years seems a long way off, given the current trajectory. The simplest approach would have been a blanket scheme, and that would have been simple to communicate to new businesses. Certain groups will be disadvantaged by the holiday: the east, south-east and London will be disadvantaged, and, as was discussed in Committee, charities who employ people will miss out compared with businesses. Also, as we discussed earlier, the NHS, for which some of the money is hypothecated, will not benefit to the extent we believe it should.
Thirdly, I believe that the spin relating to the Bill has been conflated. The Exchequer Secretary said that he is not implementing Labour’s jobs tax. However, there is a 1% increase, and it is important for this place to acknowledge that. The scheme will have an effect on businesses in certain areas. Although we accept the need to find fair and just ways to reduce the deficit, I am worried about some of the rhetoric about public sector jobs. Public sector workers not only support their families but serve us. Whether a job is in the public or private sector, people should be able to have pride in it.
Finally, I believe that the analysis that comes out of the legislation will be flawed in a number of ways. We tabled amendments calling for a report and more information on the effectiveness of the scheme, but we will not receive the constituency-level data we would like. They would enable us to compare data for future reference, so that after, say, three years, we could consider how we might wish to implement the scheme again, whether it was worth extending or whether the time for which it was in place should be reduced. Instead, we will have to go through a laborious process of tabling parliamentary questions and will not be able to examine constituency-level data as a whole. That is a real shame.
The Exchequer Secretary says that in this case simplicity should outweigh justice and that the simplest way to balance the scheme is to exclude certain groups. I do not believe that that is the case, but we accept that there is a need for the scheme, and for that reason the Bill will go forward tonight.
I have one question for the House, though: what is just about business men and women in my constituency, an area with deprivation, losing out compared with those setting up businesses in other constituencies just 20 minutes away up the train line? I do not believe that there is a whole load of justice in that. I ask the Minister to think again as the Bill proceeds, and I know that if he does, living where he does, he will receive the thanks of a grateful constituency.
Jonathan Edwards
In general we support the Bill, not because we think it will make much of a difference—as we have heard, the take-up has been far from promising so far—but because it is recognition by the UK Government that the UK’s economy is geographically unbalanced and that action needs to be taken to address the problem.
The gross value added of the communities that I represent is 20% of that of inner London, something that clearly has to be addressed. Under the last Government, 10 jobs were created in the south-east of England for every job created in the north and the midlands, and I fear that Wales fared even worst. One of the great themes of the last Government was the concentration of jobs and money in the south-east and London, with massive growth in the financial sector and the destruction of other sectors of the economy, particularly manufacturing. That led to huge wealth polarisation on both a regional and an individual basis, and it was refreshing to read today in The Independent that the Leader of the Opposition at least recognises that damaging legacy.
We should also consider other areas that need action. The UK Government have been talking about the creation of enterprise zones in Northern Ireland and the use of different levels of corporation tax to stimulate private enterprise in areas of the state that are lagging behind. We will therefore support the Bill.
Question put and agreed to.
Bill accordingly read the Third time and passed.