Employment Allowance (Increase of Maximum Amount) Regulations 2020

Baroness Burt of Solihull Excerpts

Tuesday 5th May 2020 Lords Chamber

[Baroness Burt of Solihull (LD)]

My Lords, unlike my noble friend Lord German and the other speakers this afternoon, I do not know a lot about tax—I did not even when I was an entrepreneur. I hope that the House will forgive me if I say anything that is uninformed or naive to the initiated.

I am afraid that I was unable to get through to the recommended Treasury helpline. Apparently, it is not functioning; perhaps that could be checked out. So, for help, I phoned a friend—Rick, an accountant—who gave me a stark account of what life is like for small businesses under lockdown. I will return to this later, if I may. On the positive side, Rick told me that the employment allowance has been a lifeline for many small businesses, and that many a sole trader has taken on their first member of staff as a result, so the increase in the allowance of £1,000 to £4,000 in the current financial year is very welcome indeed.

Employment allowance was first introduced in 2013 and has been increased several times since. As I understand it, however, in the summer 2018 Budget the allowance was removed from businesses with an NICs bill of more than £100,000. This was scheduled to commence in April 2020. Can the Minister confirm that while this year, most small businesses will pay £1,000 less in tax, larger businesses will pay £4,000 more than they otherwise would have? Does she think that now is a good time to remove this help, albeit that it will come as less of a blow than it would have to smaller businesses? I look forward to the Minister’s response to the question put by the noble Baroness, Lady Anelay, about how charities are going to be affected. The Minister said that the cost of the employment allowance will be £2.3 billion, but how much will the Government save by not paying the employment allowance to larger companies and, indeed, to charities?

My next question, which is probably a naive one, concerns which categories of organisation will receive the increased allowance and which will not. The Explanatory Notes refer to some employers,

“charities and community amateur sports clubs”

being eligible. That strikes me as a bit odd. Community sports clubs are presumably constituted in a different way so that they do not fall into the same category as employers and charities. That is something I would really like to know the answer to, and prompts me to ask my next question. Are there other types of organisation paying NICs which will be excluded from the employment allowance? I appreciate that, knowledgeable as no doubt the Minister is, she is not a long way into what I am sure is going to be an excellent ministerial career and may not have the answers to all my questions at her fingertips. However, I would be grateful if she could write to me with her answers to anything that she cannot respond to today.

Finally, I want to return to my friend Rick and what he told me about the clients he had been ringing up to see how they have been faring during the pandemic. He said that owner-managers are faring the worst, principally because many of them have not qualified for the furlough scheme given that they are paid only through the profits they make. He said, “I feel like a doctor visiting an NHS ward full of terminally ill cancer patients and trying to assure them that they will be fine because help is on its way to save them, but knowing that it is not.” I believe that people should pay all their tax so I replied to him, “Well, they should have paid their NICs, shouldn’t they?” However, as a country we will be the poorer for it if we let these small businesses go to the wall. We will lose the VAT and corporation tax income they would have paid, not to mention the entrepreneurial jobs held by those who rely on them for their living, and of course who themselves pay tax. They will not be here to take risks and help drive the recovery. Will the Minister give some thought to this and speak to her friends and advisers in the Treasury to see whether anything can be done to help this category of entrepreneurs? We cannot afford to lose them simply because they chose the wrong category of employment status for themselves. Perhaps the Government can find some way of keeping them afloat.