National Insurance

Monday 5th March 2012 Lords Chamber

Question

15:01

Asked By

[Lord Knight of Weymouth]

To ask Her Majesty’s Government what is their latest assessment of the overall annual value of employers’ national insurance contributions; and what proportion of that total is accounted for by the employment of those under 20 years old.

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, the latest assessment of overall employers’ national insurance contributions shows it to be worth £54.2 billion in the tax year 2009-10. Of this total value, 0.4 per cent is attributed to the employment of those under the age of 20.

[Lord Knight of Weymouth]

My Lords, I thank the Minister for his reply and note that the proportion taken up by those under the age of 20 was 0.4 per cent, which is a very small sum. From a previous Written Answer, I think that that amounts to about £200 million. Does the Minister share my concern about an emerging lost generation, with youth unemployment at record levels of more than 1 million? I do not expect him to support Labour’s five-point plan for jobs and growth because of the “not invented here” principle, but given that the bank payroll tax raised £3.46 billion, is not waiving employers’ national insurance contributions for those under 20, funded by a bankers’ bonus tax, a price worth paying to help to prevent the scarring effects of long-term unemployment?

[Lord Sassoon]

My Lords, first, a position in which youth unemployment is more than 1 million is not at all acceptable. While I am very happy to receive Budget submissions from wherever they come from around the House or outside the House, what is important here is that the Government have a clear strategy for dealing with the youth unemployment challenge. Only last November, we introduced the new youth contract, which becomes live on 2 April, with more than £940 million of funding going into it in the spending round. This youth contract will enable up to 500,000 young people to get into employment and education. The Government are actively on the case.

[Lord Newby]

My Lords, the Minister will be aware that in the budgetary provisions already made for the forthcoming tax year, some £300 million has been made available by way of national insurance holidays for new companies employing new people. It is clear from experience to date that the Budget level will not be reached. Could that money be redirected beyond new companies employing additional staff either to existing small businesses employing additional staff or specifically to small businesses employing young people who are currently unemployed?

[Lord Sassoon]

Again, I am happy to hear the thoughts of my noble friend about what might be done. The national insurance holiday, which is estimated to be already supporting some 40,000 jobs in new firms, is only one part of the package to help small businesses: the reduction of the corporation tax rate, the extension of business rate relief for a further six months from 1 October this year onwards, the coming national loan guarantee scheme, as well as what the Government did with the above-indexation increase in national insurance thresholds. This is a significant package of which the holiday is only one element.

[Lord Davies of Oldham]

My Lords, the Chancellor has always claimed that the last Budget was not a tax-raising Budget, but I am sure the Minister will acknowledge that national insurance was raised. How much is that going to cost the average worker up to the end of this Parliament?

[Lord Sassoon]

My Lords, the subject of the Question is employers’ national insurance. By introducing the £21 a week above-indexation rise in the threshold, the Government benefited all employers by £3 billion a year through that very significant increase. Job creation in the private sector is in many ways very remarkable. Since the election over 500,000 new jobs have been created in the private sector, thus increasing employment, and only today Tesco announced 20,000-net new jobs in the UK over the next two years. We really must not run down what the private sector is doing to create new and sustainable jobs.

[Lord Roberts of Llandudno]

My Lords, there are many reasons for youth unemployment, one of which is the present economic circumstance. However, we have seen a growth in youth unemployment over the past 10 or 15 years. What are the Government going to do about the long-term rate of youth unemployment, which will not be solved by these sticking-plaster proposals?

[Lord Sassoon]

I am grateful to my noble friend because, of course, when Labour came into office in 1997 the number of unemployed and inactive youngsters was around 1.4 million, and that is where it remains. My noble friend is quite right that there is a significant structural issue, which we have inherited, and that is why schemes such as the youth contract are so important in order to get our young people into sustained and sustainable employment.