18:59 - The House divided: - Ayes: 105 / Noes: 293 - Question accordingly negatived.
The Financial Secretary to the Treasury and Paymaster General (James Murray)
The Budget of two weeks ago was a Budget to steer Britain through the economic storms we are facing. It provided breathing space now on the cost of living and the cost of business with fresh hope for the future, and it was built on fiscal discipline, which underwrites every promise this Government make. When the Chancellor stood at this Dispatch Box two weeks ago, he faced a choice: he could have followed the route of the Conservatives—sacrifice stability, borrow irresponsibly and make unfunded promises straight out of Liz Truss’s playbook—but instead he chose a responsible route to keep the public finances under control, protect working people, back businesses and invest in Britain’s future.
James Murray
Working people are those millions of people across the country who put so much in every day but have not been getting back what they deserve. Those are the people this Government are backing, and that is why, at this Budget, the Chancellor chose to prioritise breathing space for families and businesses, including on the cost of energy. He set out how we will tackle the long-term challenges facing our country. For families, that will mean a £100 household energy payment to support 20 million households—80% of households in England—along with an extension of the VAT cut for electricity bills and a further extension to the fuel duty freeze.
Dr Neil Hudson (Epping Forest) (Con)
I am grateful for the Minister giving way—I have a huge amount of respect for him. He is always the brave Minister who has to pad up and go out to bat to defend the indefensible, such as the jobs tax, the family farm tax or the family business tax. I wonder if the Minister could enlighten me: if there is a pub landlord hiring local people and serving beer to customers—who may or may not own black Labradors—are they a working person?
James Murray
Of course they are. If the hon. Member wants to talk about defending the indefensible, I wonder how he ever stands up in this place to talk about the previous Conservative Government because that must be an insurmountable challenge. I hope that he would welcome what the Chancellor announced at the Budget to give breathing space to businesses because it will mean that more than 70,000 small retail, hospitality and leisure properties are taken out of paying business rates altogether, that pubs will have a 20% cut in their business rates from next April and that business rates for retail, hospitality and leisure premises of all sizes will either fall or be frozen in real terms. In addition to business rates, many firms will benefit from our freeze on red diesel duty and from the reduction in energy bills by up to 25% for more than 10,000 eligible businesses from next April through the British industrial competitiveness scheme. That is what breathing space for businesses looks like, alongside the breathing space for families.
As I said earlier, the bedrock of our approach—our lodestar—to the public finances is fiscal discipline. That is why the Budget set out how we will fully fund all new policy and breathing space measures for families and businesses. In deciding his approach, the Chancellor rejected broad-based tax rises, instead taking decisions about tax changes that are fair, proportionate and targeted. That included having banks help pay for the energy help for households this winter through a temporary increase to the bank surcharge and an increase in machine games duty for higher-stakes machines to help fund cuts for business rates.
Graham Stuart
Could the Minister confirm that, under the current regulatory regime, the £1.5 billion that will be taken over 15 months in this doubled bank tax could be lent out to a maximum of £25 billion? There is a risk that having withdrawn £1.5 billion from the banks’ equity, £25 billion—it is the maximum—in lending to the UK businesses we are talking about could be lost?
James Murray
I am sure the right hon. Gentleman will have been interested in our measures in the Budget for the British Business Bank, for instance, to increase access to finance, particularly for many of those businesses that are trying to scale up and increase. But I come back to this central point—I know what his position will be because he is a loyal member of the Opposition Benches and will follow what the Leader of the Opposition said on Budget day itself—which is that the Conservative party does not support our decision to require banks to pay a little more for a temporary period of time to fund household support across the country. We know that banks are coming from a strong position. It is a temporary increase. It is one that we believe is fair, targeted and proportionate. We are asking banks—requiring banks—to pay that extra amount, and they are therefore contributing towards the important support for households. What I think is sad about this debate is that the Opposition do not support that breathing space for households. I thought the right hon. Gentleman was loyal to his party leader, but if he would like to break ranks and intervene on me again to confirm that he supports our £100 household energy payment, that would be helpful.
Graham Stuart
The slavish loyalty of the Minister has already been remarked upon, along with the courage that goes with defending the indefensible quite as often as he has done—always with wit and good humour. Could he address this particular point? The truth is that banks are a popular target to hit with the public and with Labour Members, but if there is actually less money to go to the pubs, restaurants and small businesses in my constituency and elsewhere, can he not accept that that multiple should give people pause for thought before they go for the easy, popular target and take it out of the big, fat, rich banks, if it turns out the small business in trouble will actually lose the credit it desperately needs?
James Murray
I was listening carefully to the right hon. Gentleman, as I always do whenever he speaks in this Chamber, and I did not hear a response to the question I asked of him, which is whether he supports the household energy payment, which the Leader of the Opposition so clearly opposes. I invited him to intervene to clarify his position given there seems to be some confusion on the Opposition Benches around the household energy payment and whether they support it or not. I would have thought that given the Leader of the Opposition was so clear in not supporting the household energy payment, the hon. Gentleman—
James Murray
I would have thought that the right hon. Gentleman—excuse me—would have no difficulty in rowing in behind her, but he seems to be struggling with that somewhat, so I will make some progress.
I was speaking about the fiscal discipline that underwrites everything we are doing as a Government. Through the approach that we took in the Budget, we have maintained our fiscal rules while making no changes to rates of income tax or national insurance on income from employment or self-employment, or to the rate of national insurance that employers pay on wages or salaries for their staff.
Nigel Huddleston (Droitwich and Evesham) (Con)
The Minister is giving us lots of opportunity to intervene on him, and we are grateful for that. We keep hearing about the “difficult decisions” that Ministers are making to increase taxes. I do not think that is a difficult decision; it is a very easy decision to make—the laziest decision for a Government. I noticed that his list did not include the new tax on tourism. Will he please explain how Labour believes that we can help an industry by taxing it more?
James Murray
As the hon. Gentleman may know, the overnight visitor levy is a power that we are giving to strategic authorities across the country. It will be a decision for mayors or foundational strategic authorities to take about whether to introduce that levy, and if they do so, at what percentage to introduce it. Any proceeds will be reinvested in the local visitor economy and other infrastructure in the local area, and will support that area to get more visitors in future, thereby supporting economic growth—I hope that is something the hon. Gentleman would support.
Let me turn directly to the role of employers in our country, given the title of the motion. As I said in response to an earlier intervention, employers are working people and they are the backbone of our economy. As I also said, that is why the Budget gives businesses breathing space, with 70,000 retail, hospitality and leisure properties taken out of business rates altogether, and bills for others cut or frozen in real terms.
Rebecca Smith (South West Devon) (Con)
I thank the right hon. Member for giving way yet again. He is helpfully listing things from the Budget that are supposed to help businesses, but I wonder whether he has come across anyone in his constituency, or in his work at the Treasury who, like businesses I am aware of, have seen the standing charge for their business electricity double. We are talking four figures in the first place, so that is a significant increase. In one case a business invested in solar panels, which the Government would no doubt welcome, but ultimately the investment that it made will be completely wiped out by increased standing charges. Will the Minister address that specific point?
James Murray
I thank the hon. Lady for mentioning energy bills, because as MPs and Ministers we all recognise that energy costs are one of the primary concerns for households and businesses across the country. In the Budget two weeks ago, we offered breathing space for families and businesses, including with energy bills. Crucially, we also set out the work we will be doing in the years ahead to get those energy bills down for good, and ensure that we can invest in home-grown, renewable cleaner sources of energy, break the link between electricity and gas prices, and remove standing charges from gas bills and then electricity bills. All that is about reforming the way the energy market works, because while breathing space is what households and businesses need now, we know that longer-term reform is needed over time.
I was explaining the breathing space for businesses, and I mentioned the cuts to business rates announced in the Budget. I remind hon. Members that we are backing people who want to start and grow businesses by cutting red tape and unlocking billions of pounds of investment. We also introduced our new founders’ relief for founders of high-growth companies, and a new young entrepreneurs allowance to cover a year of living costs for young founders while they bring ideas alive. Employers and businesses drive growth, offer job opportunities and create wealth across our country.
Helen Maguire (Epsom and Ewell) (LD)
I am sure the Minister will agree that the Conservatives left the high street on life support, but unfortunately I feel that Labour has failed to resuscitate it. Epsom and Ewell has a coffee shop called Brew Forty Two. The staff work really hard, but rising costs mean it is difficult to employ young people, and the Saturday job is pretty much now extinct. Does the Minister agree that we need to reinstate lower national insurance contributions?
James Murray
I will come to that later in my remarks. Employers do not pay national insurance contributions for under-21s, because of the relief that already exists, or for apprentices under the age of 25. That goes some way towards supporting the objective that the hon. Lady mentions, which is to ensure that employers are supporting young people into work. I agree with her comments about the state in which the Conservatives left high streets across the country, having not done what was necessary to support them over 14 years.
Businesses across the country are the ones who drive economic growth, and every employer across the country knows the importance of fiscal discipline. It is crucial in enabling them to succeed, just as it is the crucial bedrock of economic stability for the country and the foundation that we need to support confidence and long-term growth.
James Murray
I will give way one more time, then I will make a bit of progress.
Sir John Hayes
The Minister is being immensely generous in taking interventions. Employers in my constituency include many farmers and growers and related food firms and hauliers, yet much of the land in my constituency is threatened with immense solar developments, which will take that land out of production. That threatens the country’s food security, and we risk making energy security the enemy of food security. That is bound to undermine our economy in the long term, as we import more and more of what we need to feed the nation. Will he take a look at that, discuss it with colleagues across Government and see how we can reverse that trend? It puts our national economic resilience at risk.
James Murray
While I agree with the right hon. Gentleman drawing attention to the importance of food security as part of our national security, he and I take a different approach to energy security. The reforms that we are implementing as a Government, including through investment in home-grown, independent sources of energy to increase our energy security and make us more independent from fossil fuel prices around the world, are crucial to bringing bills down over time and ensuring greater energy independence and energy security. That is what the Government are doing, and that is how we see ourselves responding to one of the greatest pressures that many households and businesses face: the immediate and long-term costs of energy.
I was talking about employers recognising the importance of fiscal discipline in their own businesses, just as the Government recognise the importance of fiscal discipline for the country. We know that this Government inherited a crisis in our public services, our public finances and the cost of living. NHS waiting lists were at record levels, children worked in portacabins as school roofs crumbled, and rivers were filled with polluted waste. Billions of pounds of spending commitments had not been funded or even properly disclosed to the Office for Budget Responsibility. Faced with that reality, any responsible Government would have to act. We kept our manifesto commitment to working people not to increase their income tax, their national insurance or VAT, and we went further by freezing fuel duty and raising the national minimum wage.
Patrick Spencer (Central Suffolk and North Ipswich) (Con)
Will the Minister give way?
James Murray
I will make some progress, as I have taken a few interventions. Maybe I will address the hon. Gentleman’s point in a moment.
After taking office, we had to take decisions on tax, welfare and spending to fix the public finances and repair our broken public services. It was to restore stability in the public finances and to get our NHS and other essential services back on their feet that we increased national insurance contributions from employers. In making that change, we also more than doubled the employment allowance from £5,000 to £10,500 so that around 900,000 employers—around 40% of employers—have no employer national insurance liability at all.
As I mentioned earlier in response to the hon. Member for Epsom and Ewell (Helen Maguire), we maintained reliefs for those employing younger workers, with businesses able to claim employer national insurance contribution reliefs, including for those aged under 21 and apprentices under the age of 25. That means that employers pay no employer national insurance contributions for employees under the age of 21 or apprentices under the age of 25 on earnings up to £50,270, which saves up to £6,750 a year for each eligible employee.
We know that the decision to increase employer national insurance contributions had an impact on businesses, but we recognise that because of that choice and others, we have been able to put the NHS back on its feet, with waiting lists down by more than 250,000 since the Government came into power. As well as getting the NHS back on its feet, our fiscal rules and the discipline of meeting them mean that we are boosting investment in Britain’s future—the investment that families and businesses want and need. Across this Parliament, we will invest an additional £120 billion in Britain’s roads, rail, energy and other infrastructure, which is so important for driving growth, and last year we delivered the highest number of affordable homes in a decade.
John Slinger (Rugby) (Lab)
Does my right hon. Friend agree that this Government’s investment in our infrastructure and our NHS, which is significantly higher than the risible amount of investment delivered under the previous Government, is pro-business and pro-economic growth, and that that is why the Budget measures will help our country and help businesses across this land?
James Murray
My hon. Friend is absolutely right that businesses want to make sure that the population—their employees or future employees—are healthy, are able to get to work and are able to access the support they need to get a job. That is as important for businesses as it is for the people themselves, and of course businesses want to see the investment in infrastructure that our adherence to our fiscal rules enables. That investment in rail, road and energy is so important to businesses, as it is to families across the country.
In their motion, the Conservatives propose halving employer national insurance contributions for under-25s. Apart from a brief mention in the shadow Secretary of State’s speech, they appear to have forgotten that employers already pay no employer national insurance on any earnings up to £50,270 for every employee under 21, and for all apprentices under 25. However, the bigger problem—one that goes to the very heart of why the Conservatives failed in government and why it is clear that they have learned nothing—is that they are very good at announcing tax cuts, yet always entirely fail to credibly say how they would pay for them. If they want a reduction in employer national insurance, what is the cost? Where does the money come from? Is it from higher borrowing, higher taxes on someone else or cuts to the NHS and other public services that working people rely on?
Just look at the Conservatives’ announcements on tax more widely. They have promised billions of pounds-worth of unfunded and poorly targeted tax cuts for the very wealthiest—exactly the same irresponsibility that led to the disastrous Liz Truss mini-Budget that crashed the economy and sent mortgages skyrocketing. That is the difference between us as a responsible Government and them as a discredited Opposition.
Dave Doogan
There is a constant tension in that those who criticise Government fiscal policy must say where they would get the money from. On that basis, could the Minister advise the House what progress the Government have made over the past two years on closing the tax gap, and say what size it currently is?
James Murray
If the hon. Gentleman wants to have a conversation about the tax gap, I am very happy to pick that up. When we came into office in 2024, one of our first priorities was to close the tax gap before asking for any further tax contributions from any other sources. That was an essential part of our wider plan to restore public services and the public finances and to create the conditions for economic growth. That work continues, and I am very pleased to be playing a role in the Treasury, continuing that work to close the tax gap and modernise the service His Majesty’s Revenue and Customs provides, so that more people pay the right tax first time and can pay it automatically without mistakes or errors creeping into the system.
Because of the decisions we have taken as a Government—including closing the tax gap, as the hon. Member for Angus and Perthshire Glens (Dave Doogan) mentioned— we are providing certainty and stability. Meanwhile, the Conservative party cannot resist playing games with the public finances, irrespective of the fact that whenever it has done so in the past, it is working people who have suffered the most. Britain is a country of entrepreneurs, shopkeepers, manufacturers, publicans, start-ups, family firms and growing businesses, and I am proud of the people across our country who take on risk and put in every hour they can to start and grow businesses. Above all, they need—and they have—a Government who are prepared to do the hard work of building a stable economy in which businesses can prosper. Employers need stability in order to plan for the future, create good jobs, invest and innovate, and providing that foundation is our responsibility as a Government. That is why, in the face of global storms, fiscal discipline will always underwrite every promise this Government make. The opposite is true of the Conservative party.
Government is about making choices, not pretending that choices do not exist. We in this Government are choosing to back working people. We are choosing to back the employers who create jobs. We are choosing to back young people into work, and we will always choose, with fiscal discipline as our lodestar, to maintain the economic stability on which our success as a country depends. For all those reasons, I urge Members to reject the motion.
Madam Deputy Speaker (Ms Nusrat Ghani)
I call the Liberal Democrat spokesperson.
The Parliamentary Under-Secretary of State for Business, Innovation, Science and Trade (Blair McDougall)
It is a pleasure to respond to the debate with you in the Chair, Madam Deputy Speaker. I join other Members in paying tribute to the work that entrepreneurs do in our country—to the sacrifice, long hours and sleepless nights that have been referenced.
The right hon. Member for Beverley and Holderness (Graham Stuart) singled me out as being someone who has empathy with and an understanding of business. I do not know if that will result in him having to surrender his party card, or perhaps in me doing so, but I will take it in the spirit that it was intended. We absolutely understand the feeling of jeopardy that he talks about.
My hon. Friend the Member for Loughborough (Dr Sandher) spoke powerfully about the feeling of responsibility that employers have, including his parents, towards their workers. For all the disagreement that there will be in this debate about how we do it, our job is to make that just a little bit easier, because it can be an all-encompassing and, at times, lonely enterprise running a business.
I will endeavour to respond to as many points raised by right hon. and hon. Members around the Chamber as possible. Several made me hungry and reminded me that I skipped lunch earlier on today. The right hon. Member for Witham (Priti Patel) and my hon. Friend the Member for Truro and Falmouth (Jayne Kirkham) referred to fantastic food businesses in their constituencies, and even the reference to the prawn sandwich offensive from the hon. Member for Central Suffolk and North Ipswich (Patrick Spencer) brought on that feeling.
I do, however, want to echo the remarks made by my right hon. Friend the Financial Secretary to the Treasury in his opening speech. The big macroeconomic picture for the UK is this: we were the joint fastest growing economy in the G7 in the first half of this year, the IMF has upgraded our growth for this year, and the IMF’s chief economist has called the UK the “stand out” economy for deficit reduction, with the lowest forecast deficit in the G7 by 2029.
Esther McVey
Will the Minister inform us how many businesses have gone to the wall since Labour came into government?
Blair McDougall
It has been a dreadful decade for businesses, and for small businesses in particular. As I said at the beginning, our job is to make it easier to invest and to ensure that we are cutting red tape and increasing access to finance. I will talk about that in a moment.
In the Budget, we took action to give the businesses that the right hon. Member for Tatton (Esther McVey) is concerned about and employers some breathing space. We continue to work on the long-term changes that are necessary to create good jobs and growth in every part of our country. As a result of that work, employment is up this year—it is higher than previously forecast in March—and, in fact, the UK has the third highest employment rate in the G7. Meanwhile, business investment—so often embarrassing under the previous Government—relative to the size of the economy remains at its highest level for a decade.
Of course, as Members have said, there are global headwinds from the conflict in the middle east. [Hon. Members: “Ah!”] Conservative Members say “Ah”, and they do not like to be reminded of that, because they were calling for us to take part in that conflict. People and employers are seeing the impact of that conflict in their bills. We know that there is more to do, but this is a country that is turning a corner.
With that, I turn to the points raised throughout the debate, starting with national insurance, which was raised by several hon. Members. The facts are these. Employer national insurance contributions are forecast to raise about £150 billion in 2026-27. That is a significant contribution to the funding of our public services. Why is that needed? Because we cannot have a strong NHS or strong public services without investing in them, investing in our country and rebuilding the crumbling infrastructure we inherited after 14 years of austerity.
Stuart Andrew
The national insurance rises are really affecting hospices: in some cases, 40% of their beds are closing. Where will those people go? They will go to the national health service. How does that help our public services?
Blair McDougall
We recognise that and, as was mentioned, we are providing additional resources throughout the NHS and hospices to help with that.
On relief for employers, hon. Members will know that the employment allowance was estimated to be worth £7.4 billion in 2025-26. That provides eligible employers with up to £10,500 a year towards their national insurance contribution bills.
That is obviously not the only help that we gave to businesses in the Budget. As my hon. Friend the Member for Norwich North (Alice Macdonald) noted, we have lifted tens of thousands of businesses out of business rates. Several hon. Members raised concerns about youth unemployment.
Graham Stuart
Will the Minister acknowledge, because he not only has the ear of business but is a very honest Member of this House, that, notwithstanding the talk about support for business and the 70,000 businesses that have been mentioned, overall the Budget raised the tax on business by another £2.2 billion, on top of the £66 billion that came in the two previous ones?
Blair McDougall
We asked business, and banks in particular, to pay a little more so that we could give people help with their energy bills. We have heard in the debate, once again, that the Conservative party opposes that and so opposes that additional support that people are getting with their energy bills this winter.
As has been said, no employer is paying national insurance contributions on under-21s up to a salary of £50,000 and similarly for apprentices who are under 25, which is a saving of around £6,700 at most for employers. We have doubled the employment allowance and ensured that 40% of companies do not pay national insurance contributions.
Lincoln Jopp (Spelthorne) (Con)
Has unemployment gone up or down on this Government’s watch, and what has caused it?
Blair McDougall
Unemployment is still lower than in comparable economies—[Interruption.] The hon. Gentleman asked the question, so I will answer. Employment is up and inactivity is down in this country. It is precisely because we are concerned about youth unemployment that we are introducing measures such as the £2,000 hiring payment for smaller employers to take on young people and the £3,000 jobs grant for those at risk of sliding into youth unemployment. As several hon. Members have noted, that is in stark contrast with the increase of a quarter of a million in youth unemployment and inactivity in the last few years of the Conservative Government.
Blair McDougall
I will give way to the hon. Member for Hamble Valley (Paul Holmes) for one last intervention and then I will make some progress.
Paul Holmes
The Minister has outlined the £2,000 payment to businesses. Does he think that it is best for a Government to administer that payment or to reduce taxation on businesses so that they can choose to employ younger people without that Minister getting in the way?
Blair McDougall
It is precisely because we recognise, as many right hon. and hon. Members have mentioned, that retail and hospitality give so many young people their first job that we are lifting so many of those businesses out of business rates and lowering the tax burden on those individuals.
I will follow the Prime Minister’s lead and note that we agree on a lot despite the debate across the House. We agree, as many hon. Members have said, that small businesses in particular are the backbone of our economy, we agree that more must be done to support business to employ people, and we agree that young people should be supported.
Blair McDougall
I will make some progress.
We agree that young people should be supported into work. However, we disagree fundamentally on how to go about that. The hon. Member for South West Devon (Rebecca Smith) spoke about the minimum wage, but told the House that she did not want to talk about what might happen in the future. I think I know why that is. It is because in a report from the Prosperity Institute, the shadow Business Minister in the other place committed to freezing the minimum wage for five years. That is a real-terms cut of 12% for the poorest workers that will not just take £8,900 out of the pockets of the poorest workers in the country, but take that money out of the tills of businesses in their communities.
The way to fix the issue we have with youth unemployment is to increase the number of apprenticeships, increase the flexibility of those apprenticeships, invest in the growth sectors that will create the well-paid jobs of the future, ensure that those young unemployed people are more attractive to potential employers and take all the other measures that we are taking to invest in business.
The Tory plan for those young people who have been rejected over and over again and who are close to being broken by the experience of being let down by the system is to punish them for that. We will not do that. The Conservatives offer only insecure hours, cuts to incomes and poverty pay. That did not work for 14 years, it did not work for employers and it will not work now.
Question put.