National Insurance Contributions: Hospitality Sector

Earl of Effingham Excerpts

Thursday 13th February 2025 Lords Chamber

[Lord Altrincham]

To ask His Majesty's Government what assessment they have made of the impact on the hospitality sector of the cost of the increase in employer National Insurance contributions, and the savings from the increase in employment allowance for the smallest businesses.

[The Earl of Effingham (Con)]

My Lords, on behalf of my noble friend Lord Altrincham and at his request, I beg leave to ask the Question standing in his name on the Order Paper.

[The Financial Secretary to the Treasury (Lord Livermore) (Lab)]

My Lords, it was this Government’s duty, in the Budget last year, to fix the foundations of the economy and to repair the £22 billion black hole in the public finances. In doing so, and in recognition of the importance of small businesses, including hospitality businesses, to the economy, we protected the smallest businesses by increasing the employment allowance from £5,000 to £10,500. This means that, next year, 865,000 employers will pay no national insurance at all, and 1 million businesses will pay the same or less than they did previously.

--- Later in debate ---

[The Earl of Effingham (Con)]

My Lords, I thank the Minister for his Answer, but I am afraid that I have to challenge the validity of his data on what he refers to as the black hole. Please let me quote Paul Johnson, the director of the Institute for Fiscal Studies, who said that Rachel Reeves

“may be overegging the £22bn black hole”.

Most crucially, please let me quote Richard Hughes, the chair of the OBR itself, who said:

“Nothing in our review was a legitimisation of that”


£22 billion figure. I have a simple question for the Minister: when the OBR’s chair says that nothing in its review was a legitimisation of the number that has now been repeated 59 times from His Majesty’s Government’s Benches, is the chair of the OBR wrong?

[Lord Livermore (Lab)]

I am rather astonished that the noble Earl has gone on this line of inquiry, but I am absolutely delighted that he has, because, as he knows, it is one of my favourite topics; I hope that we can make it 60 times from this Dispatch Box that I talk about the £22 billion of unfunded spending that we inherited from the previous Government. The noble Earl will know that the OBR’s review was on the meeting that it had with the Treasury on 8 February 2024, when, under the legislation passed by the previous Government, the then Government were obliged to disclose all unfunded pressure against the reserve. The OBR’s review has established that, at that point, the then Government concealed £9.5 billion from the OBR. Before we dismiss £9.5 billion, that is equal to the entire capital education budget and the entire capital health budget. That is not a drop in the ocean; that is £9.5 billion. The OBR then made 10 recommendations to stop this from ever happening again, and we have accepted all of those in full. Of course, that was just in February; the previous Government then had until July. What makes anyone think that, because the previous Government thought they got away with it in February, they could stop until July? Treasury figures show that, come the spring Budget—