National Insurance Contributions (Secondary Class 1 Contributions) Bill

Ben Lake Excerpts

2nd reading
Tuesday 3rd December 2024 Commons Chamber

[Ben Lake (Ceredigion Preseli) (PC)]

It is a pleasure to follow the hon. Member for Rochdale (Paul Waugh). I rise to relay some of the concerns that have been raised with me by constituents and businesses. They are concerned not only about the impact of the Bill’s proposals on small businesses in my constituency, but about the provision of public services there.

It has been interesting to listen to various opinions on this matter, but I will begin by pushing back on the implication made by some that the changes in the Bill will not have an impact on small businesses. The fact is that the Office for Budget Responsibility estimates that from 2026-27 onwards, 76% of the total cost of the increased employer national insurance contributions will be passed on through lower real wages. That tells us not only that there will be an impact on businesses, but that contrary to what has been suggested by some in the Chamber, there will be an impact on workers.

Much has been said about the impact on businesses, and I very much agree with those concerns, but I will concentrate my remarks on the impact on public services in Wales. It is worth noting that 30% of the Welsh workforce is employed in the public sector—a much higher proportion that the rest of the UK—so the proposed increase in employer national insurance contributions equates to some £380 million. Clearly, the Bill will therefore have significant consequences for the provision of public services, and it remains unclear whether the additional Government support—or the reimbursement—will meet the increased cost.

Local authorities across Wales already face budget shortfalls of over half a billion pounds. At a time of significant budgetary pressure, Ceredigion county council—one of the county councils in my constituency—estimates that the increase in NICs will total over £4 million in one year alone. Communities deserve assurances that essential services will not be further jeopardised because funding gaps are exacerbated by the changes in the Bill. Can the Minister confirm that the full cost of the increased national insurance contributions will be reimbursed to local government in Wales? Furthermore, will that additional support be recurring? The last thing we want is for additional costs to be covered in years one, two and three, only for local government to face a funding cliff edge after that.

In addition to the direct cost to public authorities, for which the Government have suggested they will provide additional support, we should also bear in mind the other organisations—public and third sector organisations—that are integral to delivering many of the public services that we consider valuable to society. Social care providers are one example. They care for the vulnerable and help to alleviate pressure on the NHS, yet the cost of the NICs increase could be devastating for them. Care Forum Wales estimates that the cost to its members across Wales will total a staggering £45 million. I heard what was said from the Treasury Bench about additional support being allocated in the usual way, but I would like to know how that additional cost will be allocated to Wales. I understand that, in their conversations with the Welsh Government, the Government in Westminster are discussing the additional costs of only the public sector organisations that will be reimbursed directly. There are other examples in the third sector, including citizens advice bureaux, which, although they provide invaluable support to some of the most vulnerable in society, are facing significant additional costs without there being any talk of Government support.

[Graham Stuart]

The hon. Gentleman may have noticed that the OBR had to amend the numbers that it produced after the Budget because it had reduced the cost of compensating the public sector and social care by around £800 million a year. Does he, like me, want the Minister to clarify whether the Government intended to put nearly £1 billion extra into social care costs, and when it was decided, and by whom, that they should not go ahead and should leave social care in the parlous position it now finds itself in?

[Ben Lake]

I very much agree. I hope that the Minister will return to that in her summing up.

I labour the point about the third sector and public sector organisations that do not stand to receive reimbursement from the Government because they are so crucial to delivering many of the public services that we have heard so much about in the debate. There is a real risk that if our social care hubs, hospices, dentists and GPs are not adequately reimbursed, all the Government will do is erode the value of the investment that they claim to be making in those services.

I could also say a little bit about the university sector. Higher education is a very important sector in my constituency: Ceredigion Preseli is home to two universities, Aberystwyth University and the University of Wales Trinity Saint David. Both organisations are currently facing very difficult times, as are most higher education institutions, and both state that they will be dealing with quite significant additional costs next year when the Government’s proposals come into force. There is no talk of additional support for those institutions, so I worry very much that we will lose the incredible economic contribution they make to my constituency, let alone their important social and cultural contribution.

[Luke Murphy]

Is the hon. Member about to come on to the part where he welcomes the largest real-terms settlement for Wales since devolution?

--- Later in debate ---

[Ben Lake]

I am very grateful to the hon. Gentleman for his intervention—we have been blessed with many of his contributions this afternoon. With the Barnett formula, I am not going to thank the hon. Gentleman’s Government for a larger settlement, because that settlement is only a function of spending decisions made to address the needs of public services in England. If they had proposed a reform of the Barnett formula to make it a proper needs-based formula, I would very much congratulate the hon. Gentleman and his Government on doing so.

We all recognise the need to raise revenue to meet the challenges facing our economy. We have heard some alternative suggestions this afternoon—the Government could well have decided to look again at corporation tax, or at least to tackle businesses on the profits they make. Other proposals that the Government might have considered include changes to capital gains tax; for example, a full equalisation of capital gains tax rates could raise £14 billion a year. There has also been no mention by the Government of exploring a wealth tax on the ultra-rich. It is not fair that wealth inequality continues to grow at the expense of our public services and communities. It has been suggested by some that a 2% tax on assets over £10 million, which would target the top 20,000 richest people in the country, could raise £24 billion.

I fear that the proposals in this Bill will have a significant impact on both the workers and the businesses in my constituency, as well as—quite importantly—the provision of public services. We have already heard in this debate many alternative proposals that the Government could have implemented, but decided not to.

Finance Bill

Ben Lake Excerpts

2nd reading
Wednesday 27th November 2024 Commons Chamber

[James Murray]

I will make some progress. That is the impact the changes have on domestic flights and short-haul destinations in economy class. However, in addition to the broad changes in air passenger duty rates, the higher rates for larger private jets will also increase by a further 50% to ensure they contribute fairly to the public finances.

The Bill also renews the tobacco duty escalator and enables His Majesty’s Revenue and Customs to prepare for the introduction of a new duty on vaping products. The Bill increases the soft drink industry levy over the next five years to reflect the 27% increase in consumer prices index inflation between 2018 and 2024, as well as increasing the rate in line with CPI each year from 1 April 2025. Finally, while the Bill increases alcohol duty for non-draught products, in line with retail prices index inflation, duty on qualifying draught products will be cut by 1.7% in cash terms to support pubs, and we will increase the duty discount on products that qualify for small producer relief from 1 February 2025.

The Chancellor has been clear that the Budget was a once-in-a-generation event, at which the Government took difficult but necessary decisions. By taking those tough decisions, the Budget delivers economic stability, sound public finances and stronger public services. On those foundations, we will work day in, day out across the rest of this Parliament to boost investment and growth.

Many of the measures to boost investment are being delivered outside of the Finance Bill, from the planning reform that we got under way within days of taking office to the creation of mega-funds for pension investments, which the Chancellor announced at Mansion House. The Bill introduces additional reliefs for our creative industries, for visual effects within film and high-end TV, which will play a key role in strengthening the UK as a global hub for film and TV. Likewise, the Bill introduces measures to support the transition to electric vehicles, through higher vehicle excise duty first-year rates for hybrid and internal combustion engine vehicles, which boosts the incentive for EVs, and by an extension of first-year allowances for electric cars and charge points until 2025-26.

Above and beyond any individual measures, the impact of the Bill and the Budget that it follows is to lay the foundation for greater investment and growth, through fiscal responsibility, stronger public services and economic stability. We have laid the foundations for creating wealth, jobs and opportunity in every part of this country, enabling people to meet their aspirations for themselves and their families, and making people across Britain better off.

[Ben Lake (Ceredigion Preseli) (PC)]

One of the measures that has a bearing on the provision of public services is the increase to the employer national insurance contributions. I understand the Treasury is in discussion with the devolved Governments and local Government across England to ascertain precisely how much extra funding support is required to offset the increased cost upon their services. Will the Minister give us an update on those discussions and when he believes local authorities and, indeed, the devolved Governments will know how much money in additional support they will receive?

[James Murray]

I am afraid I will not give the hon. Gentleman inside information on any ongoing discussions between the Treasury and devolved Governments. The policy for reimbursing increases in employer national insurance contributions is well established. The last Government followed a similar process in relation to the health and social care levy, whereby Departments, employees and other direct public sector employees are typically refunded the entire increase and third parties, contractors and so on are not. As for the devolved Governments’ settlements, they have their own process to go through with the Treasury. I am sure the hon. Gentleman will understand why I cannot give a running commentary on that, but I am sure that his colleagues will pick that up.

Public Spending: Inheritance

Ben Lake Excerpts

Monday 29th July 2024 Commons Chamber

[Rachel Reeves]

I thank my hon. Friend for raising this issue. I will ask my right hon. Friend the Transport Secretary to meet him and discuss it further.

[Ben Lake (Ceredigion Preseli) (PC)]

I am grateful for the Chancellor’s clarity on the state of the public finances and for confirming that the Government will accept the recommendations of the independent pay review bodies. She explained that doing so incurs an additional in-year cost of £9 billion and that Departments will be tasked with finding savings of up to £3 billion. Can she outline whether she anticipates that they will have to cover the entire cost of the pay review bodies’ recommendations, or does she anticipate that the Treasury will need to make additional funds available to make up the shortfall?

[Rachel Reeves]

I thank the hon. Gentleman for the question. We have asked Departments to absorb £3.2 billion of the pressures, but it will be different in different Departments. We know that in the Department of Health and Social Care and the Department for Education, for example, it will be harder to absorb those pay pressures, given the huge challenges that they face. It will be different in different Departments, as we will set out in written ministerial statements by the relevant Secretaries of State.