National Insurance Contributions Bill

Bob Stewart Excerpts

Monday 4th November 2013 Commons Chamber

[Caroline Dinenage]

My hon. Friend makes a key point. The fact that the measure is open to charities and social enterprises, as well as businesses, is really important. That is another step in the right direction by the Government to make it easier for small firms and charities to take on new employees. This is not just about business; the head of policy and research at the National Council for Voluntary Organisations, Karl Wilding, says that the idea is

“a very positive thing…To a small organisation, £2,000 is a lot of money.”

He is absolutely right. When I set up my business at the age of 19, £2,000 would have been a massive incentive to take the big step of hiring my first member of staff.

My hon. Friend the Member for Stourbridge (Margot James) spoke powerfully about her experiences of starting up a business. As she said, taking on that first member of staff is a really big moment—a huge decision. It is a massive responsibility; the person hiring becomes responsible for someone’s income, livelihood and wages.

[Bob Stewart (Beckenham) (Con)]

And their family.

[Caroline Dinenage]

And their family. I am pleased that the Bill makes that moment so much more likely. There are many statistics that show how great an impact the change will have. We have heard some amazingly powerful statistics this afternoon; for example, over a year, employers with fewer than 10 employees will have their national insurance contribution bill cut by 80%. However, it is easy to get bogged down in figures. What does the Bill mean for charities and small businesses up and down the country? It means that the small-time cupcake seller who works out of their kitchen and wants to expand, but is not sure that they can afford to, is now £2,000 more likely to give a young person their first foot on the jobs ladder. It means that the mechanic who needs another pair of hands to deal with a recent increase in demand can take someone on and pay them up to £22,000 without having to pay any jobs tax. It means that the Government are continuing to deliver exactly the kind of policies that have, so far, created 1.4 million private sector jobs and put the country on the path to prosperity.

There are so many ways in which the Government have helped small businesses to flourish. Locally, I have been involved in a really successful regional growth fund bid—a partnership between The News, which is our local newspaper, and the Solent local enterprise partnership. The Bridging the Gap scheme is a pot of money that new start-ups and small firms can bid for to help grow their business and create jobs. I recently visited three of the Bridging the Gap success stories in my constituency, including Kev Jones and Son, an independent convenience store at the heart of the community, which is, you will be interested to hear, Madam Deputy Speaker, the go-to shop for your Christmas meat hamper. The people there had very ambitious plans to expand. With a little bit of extra money, they were able to bring those plans forward, and they have now doubled their floor space and created some of the new jobs the area so desperately needs. These are exactly the kinds of businesses that we will be supporting through this Bill. That is absolutely the right thing to do, because they are not just the backbone of our economy but the lifeblood of our communities. The Bill is a key part of the wider programme to make Britain the most small-business-friendly environment in Europe.

By cutting Labour’s deficit, the Government have secured record low interest rates for hard-working families and small businesses across the country. From April 2015, corporation tax will be cut to 20%—the lowest in the G20. As a result of the Government’s policies, the UK recently topped KPMG’s list of the most competitive countries in which to do business, beating Switzerland, the USA and France for the first time ever. This hard work is getting results. The latest figures from the Office for National Statistics showed strong growth of 0.8% for the third quarter of 2013. That proves that the only way to create real prosperity and to raise living standards is not through quick-fix gimmicks but through straightforward solutions: backing businesses to create growth, cutting taxes to boost growth, and supporting hard-working people.

Labour Members have presented this as being somehow their idea. That appears to show brass neck of almost biblical proportions. Anyone who ran a business under the previous Labour Government, as I did for 13 years, will know that we were shackled by endless amounts of bureaucracy as the country fell deeper into debt and slipped down the international competitive league tables. We cannot escape the fact that they got it very badly wrong on the economy as well. They said we would lose 1 million jobs. Instead, we have seen the creation of 1 million net jobs—three in the private sector for every one lost in the public sector. Because this Government have cut taxes, slashed red tape and unleashed innovation, we have seen record levels of small business creation and employment. I am confident that the Government will continue to deliver the right policies.

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[David Rutley (Macclesfield) (Con)]

It is an honour and a privilege to follow the impassioned speech of my hon. Friend the Member for Skipton and Ripon (Julian Smith).

I was fortunate enough to secure an Adjournment debate last week. The good news was that it was on the subject of supporting first-time employers, but the bad news was that I secured the 2.30 pm on a Friday afternoon slot, which is not always prime time in Parliament. I am therefore pleased to be able to return to the subject and debate it further in the presence of a few other colleagues.

The good news is that over the past decade the number of people who work for themselves has increased to 4.2 million, or 14% of all those in employment—up from 12% at the start of the century. They are taking the chance to be their own boss and often embracing new technologies to enable that. Record numbers of people are working for themselves. As I have said, that is good news, but it would be even better if more of the self-employed, one-person businesses and sole traders took the step from being first-time entrepreneurs to being first-time employers. That is why I support the new employment allowance: it is a huge step forward.

Entrepreneurialism is a culture that spreads. Once a person is in it, they live it. They go native, as they say, and embrace risk-taking. Significantly, entrepreneurs are more likely than established businesses to take on workers from the ranks of the unemployed or the non-active, who often find the formalised application processes, let alone the working practices, of large firms restrictive. Established companies may tend to value the ability to adhere to existing processes and systems above the creativity, dynamism and individual flair that smaller businesses help to stimulate. Doing more to encourage the smallest firms to take on staff, particularly a first member of staff, has to be a step in the right direction.

Despite siren warnings from the unions and others that self-employed jobs are not proper jobs, there is clear evidence that the self-employed and those employed by them in the smallest companies enjoy better industrial relations. Data from the most recent workplace employment relations survey suggest that 67% of employees in the small and medium-sized enterprise sector strongly agree that managers treat them fairly, compared with 53% of those who work in large firms.

Furthermore, a survey by the TUC, no less, and YouGov has shown that a greater proportion of employees in small firms report the highest levels of job satisfaction, compared with employees in larger firms. However, as my hon. Friend the Member for Skipton and Ripon has said, there is still a tendency in Whitehall to prefer to deal with larger companies and to underestimate the burdens on the smallest businesses when introducing uniform regulations. The new employment allowance, however, shows that this Government understand the importance of measures that, though uniform, are of greatest benefit to the smallest operators, and that is why they should be commended.

[Bob Stewart]

I endorse my hon. Friend’s last point. It is clear that if the boss of a business works closely with his first employee, industrial relations should be excellent and there should be no problems. That is the reason for the 67% satisfaction rate.

[David Rutley]

My hon. Friend makes an important point. That is absolutely the case. This is about how we build good working relationships and a strong economic base through SMEs. That is far more sustainable than the approach adopted by the previous Government, which seemed to be underpinned by more and more public spending. That is completely unsustainable.

What a boost it will be for more of the growing army of the self-employed to become small employers. Indeed, if they all, or a vast proportion of them, took on one employee, that would make a huge dent—even bigger than the current one—in the unemployment figures. The number of self-employed people with no employees has increased, but the number of self-employed people with a small number of employees has not kept pace, and that is what the Bill seeks to address. In the past, the focus has been more on encouraging people to start up a business and less on taking the next step to becoming micro-employers. The Bill is an opportunity to further liberate the self-employed from barriers to growth and to nudge first-time entrepreneurs into becoming first-time employers. The prize is stronger, more sustainable economic growth.

Micro-businesses play an important role in Macclesfield, working in forums like Make it Macclesfield and the Poynton business forum. They make a huge contribution to strengthening the community and, at the same time, moving our economy forward by creating jobs.

Surveys and statistics abound to show that small businesses can be, and often are, job-creation machines. They also show that small businesses are more likely to employ the longer-term unemployed and those who may struggle to enter the job market as a result of a lack of formal qualifications or, indeed, their ethnic background. This is what the Federation of Small Businesses calls the “entrepreneurial pipeline” to what Professor Mark Hart calls “growth gazelles”. We need to encourage more growth gazelles. Essentially, this is about everyday entrepreneurs, street-level small businesses and office-share operators giving people a chance to work. Analysis by the FSB suggests that 74% of those who become self-employed and who have employees come from the self-employed who had no employee, and that a further 13% come from employees who had been working in micro-businesses. Clearly, there will be a multiplier effect once we get this right and start moving in the right direction.

The Government are absolutely right to introduce the new employment allowance. Slashing the cost of national insurance and taking many employees out of it completely will encourage more of the self-employed to become employers. However, this is not—and nor should it be—the only measure to increase the number of first-time employers. The Bill must be viewed in concert with the new enterprise allowance—for which Levi Roots is an ambassador for the Government—which seeks to encourage the longer-term unemployed into self-employment. The three-year moratorium on new regulations for small businesses is another important step in the right direction. I encourage Ministers at the Department for Business, Innovation and Skills to view it as a rolling moratorium.

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[Damian Collins (Folkestone and Hythe) (Con)]

I will say a few words in support of the Bill. Like all Government Members, I believe that this is an excellent measure that recognises that it is businesses of all sizes that create jobs in this country. People are now finding jobs in growing numbers. By reducing taxes on employment, we will make it more likely that businesses will employ more people. The strength of the recovery in the private sector underlines the growth in the economy as a whole. The Labour party predicted that growth would not come and that jobs would not be created. By reducing the cost of national insurance to employers, the Government are in this Bill taking another excellent step in the right direction.

I agree with the Exchequer Secretary that we should look at the Bill as one of a range of important measures that the Government are introducing to support the business community, and all those measures support each other. My hon. Friend the Member for Skipton and Ripon (Julian Smith) spoke of meeting young people under the age of 30 who had received StartUp loans from the Government to invest in starting their own businesses, which have had a great deal of success. The Bill will help businesses like those to get to the next stage on the path to growth and to go from being a start-up to employing a small number of people. There is an enormous appetite among people in this country to have a go at starting their own business. That is one of the most positive things to come out of the recession. We need policies that work with the grain of people’s entrepreneurial instincts and back them as they back themselves.

[Bob Stewart]

I have listened carefully to this debate. I have never run a small business; I have run a medium-sized business, but it was not my own. Would it not be a tremendous fillip to small businesses if HMRC was slightly more proactive when it saw a business making a clear mistake, and wrote to it saying, “It would be better if you did it this way”?

[Damian Collins]

My hon. Friend makes an important point. The quality of the advice to businesses from all quarters is important. That echoes a point made by my hon. Friend the Member for Skipton and Ripon, who said that we all need to advocate the Government’s policies to ensure that businesses benefit from them.