National Insurance Contributions (Secondary Class 1 Contributions) Bill

Dan Tomlinson Excerpts

Tuesday 17th December 2024 Commons Chamber

[Joe Robertson (Isle of Wight East) (Con)]

The Government knew that if they raised national insurance contributions in the Budget, it would be devastating for health and social care. That is why they exempted the NHS; they knew that it would be put under acute pressure by the Budget. They did not exempt some of the key partners that deliver health and social care in this country, that they will rely on to move people out of acute care and into community care, and that they will rely on to achieve prevention rather than cure—all things that the Secretary of State for Health and Social Care says he wants to do. They will rely on GPs, pharmacies, hospices and social care, yet the national insurance contributions fall on them.

Hospices will pay £260 million. According to Community Pharmacy England, pharmacists will pay £50 million. Social care will pay £2.4 billion. All that money will move across to the NHS, which is largely slanted towards acute provision. That runs completely counter to what the Health Secretary said he wants to do. His answer to those GPs, pharmacists and hospices who are deeply concerned is, “We will deal with this in due course.” “Due course” means “We have absolutely no idea and no plan at all.” He and, indeed, Treasury spokespeople say that they will deal with hospices in the usual contracting way.

The contracts of hospices like Mountbatten just outside my constituency on the Isle of Wight are with the integrated care board. They do not have a contract with Government, the Department of Health and Social Care or an NHS employer. Under those contracts, there is no clause for uplift of salary, or for recovering the increased cost of national insurance contributions. Saying, “We will deal with it in the usual way through contracting” shows either a complete lack of understanding of how hospice services contract with the public sector, or a complete indifference, disregard and, frankly, contempt.

As for other sectors of the economy, national insurance increases hit those who employ people—sectors that rely on larger workforces, such as hospitality and tourism, which my constituency on the Isle of Wight is heavily reliant on. This is a tax on working people, because it disincentivises employing working people, and even the OBR says that 60% of the impact will likely be felt by those on lower wages. It also says that growth will peak next year at 2%—in fact, that is the Treasury’s own figure—and then it will fall away for the rest of the decade. This is not a growth Budget. As for those working in hospitality and tourism, many of whom are seasonal or part-time workers, they will be brought into the national insurance tax regime for the first time.

Brilliant businesses in my constituency, such as the Yarbridge Inn in Brading, the Spyglass Inn in Ventnor, and all the independent hotels in Sandown, Shanklin and elsewhere, will be squeezed further, right at the time when they are trying to recover from covid, and when our tourism and hospitality sectors are competing with cheaper, overseas holidays. The sector is already heavily taxed compared with hospitality and tourism elsewhere in Europe. This is an unpatriotic tax, because it disincentivises the visitor economy and tourism in Britain.

I urge the Government to go back and look again at providing relief to hospitality and tourism, as well as to health and social care. As my right hon. Friend the Member for Beverley and Holderness (Graham Stuart) said, there is no shame in the Government recognising their mistakes in both sectors, and coming up with genuine relief for health and social care and for tourism and hospitality.

[Dan Tomlinson (Chipping Barnet) (Lab)]

I very much welcome the chance to speak in this debate on an important topic. I am sure that Members on both sides of the House will be glad to know that this is the first speech of mine that is not subject to a time limit, so I can speak for as long as humanly possible on the intricacies and joys of national insurance contributions, and I hope to stay on the topic at hand.

Not having a time limit also gives me the chance to make a great parliamentary speech on this important topic. We all know what good speeches look like; they are not a simple list of points reeled off in order, but may include great rhetorical flourishes, the use of the English language at its finest, and nuanced arguments. But, Madam Chair, I will make six simple points, in list form, in favour of the national insurance changes before us. I have missed my opportunity, but maybe I will make such a speech in future.

These changes are incredibly important. I urge Opposition Members to vote with the Government against the amendments, so that we can get the changes that we need for our country. The first reason that I think the changes are important and sensible is that they will mean that the Labour Government stick to the pledge we made in the election campaign not to increase taxes on working people. It is important that we rebuild trust in our politics, which has fallen to a record low. I know that this is contested in the House, but Labour is clear that these specific changes protect working people’s payslips and mean that we do not have to make the changes that others have suggested for income tax and value added tax. Trust in our politics is very important.

The second reason I encourage Members to vote with the Government tonight is that the changes provide vital funding for our public services. I am not too sure whether Conservative Members—I would be interested to hear from them—support the additional funding for public services. I said this in the previous debate on the Bill, so I am a bit like a broken record, but if they do support additional funding, would they raise it through additional borrowing or different tax rises?

[Joe Robertson]

rose—

[Dan Tomlinson]

Before I have even heard the hon. Member’s request to intervene, I happily give way.

[Joe Robertson]

I can offer the hon. Member a solution for growing the tax base: grow the economy. That is by far the best way of increasing the tax take. This Budget does not grow the economy—that is the problem.

[Dan Tomlinson]

I will come to growth, which is the sixth point on my very exciting list, but I will just say that this Budget will see growth increase in the short term and stay broadly unchanged over the forecast period, and the OBR says that the increased public sector investment that we are making will lead to a small but significant increase in growth in the long run. I wholeheartedly agree with the hon. Member that we need economic growth in this country.

It is important that we provide the revenue to fund our public services. I will not repeat the convincing and powerful arguments made by Labour Members about the broken nature of our public services. In Chipping Barnet, policing is really struggling, and 100,000 people in the Royal Free London NHS foundation trust area are waiting to be seen by our local hospital. We need to provide funding in a sustainable way.

The third point on my exciting list of reasons to vote with the Government tonight is that these changes provide stability. We all know that we need economic stability—it is the foundation of the economic growth that the hon. Member for Isle of Wight East (Joe Robertson) just made an important intervention on. I believe that the Chancellor and the Treasury team made the right decision, even though it was difficult, to raise revenues to fund our public services and put our public finances on an even keel once again. This change means that over the coming years, we will get to a place where, for the first time in a very long time, day-to-day spending will be matched by the tax revenues that are coming in. I think all Members of the House will agree that that is important, but I know that Labour Members prioritise that stability, which has been lacking for too long.

Fourthly, these changes cut taxes for the smallest businesses—a quarter of a million businesses, as my hon. Friend the Member for Glasgow East (John Grady) made clear. Again, I am interested to know whether Opposition Members support or oppose the cut in taxes for the smallest businesses that this Budget provides.

Fifthly, we have prioritised sound public finances, which is a big change from recent years. The mini-Budget that was passed by Liz Truss contributed to pushing up interest rates in our economy, making things more difficult for families in my constituency and across the country. It also added not £6 billion, or even £16 billion, but £60 billion to Government borrowing costs each year—Members can see those numbers in the Office for Budget Responsibility’s report. That and other failures to manage our public finances over the past 14 years have driven up our public debt from £1 trillion, as it was in 2010, to £2.8 trillion, which I believe was the latest estimate from the Office for National Statistics. If we support additional spending on our public services, it is vital that we also make the right decision to raise revenue that will cover that increase in public spending, so that we can have the sound public finances that the public want from this Government.

[David Chadwick (Brecon, Radnor and Cwm Tawe) (LD)]

Can the hon. Member explain why his Government are choosing to raise taxes on GPs’ surgeries, which did not crash the economy or the public finances, rather than opting to raise the revenue from the big banks, as the Liberal Democrats suggest?

[Dan Tomlinson]

We have made changes to a whole range of taxes in the Budget, and it is important to note that the scale of revenue that the Liberal Democrat party is talking about would not cover the additional funding that we are providing—£20 billion for our health services and additional funding for a whole range of public services. I understand that in the coming weeks, the Health Secretary will come forward with more details on many of the vital services that Members have mentioned today. I must put on record that I very much enjoyed meeting GPs in my constituency over recent weeks. They raised a whole range of issues with me, including the big challenges they have faced over the past 14 years in getting the support and funding that they need. I hope and trust that in the coming weeks and months, this Government will put that right.

I am sure that the hon. Member for Isle of Wight East will enjoy my final point. My sixth reason for voting for this Bill, rather than for the mistaken and erroneous amendments that have been tabled, is that the changes we have put forward in this Budget, including on national insurance, will pave the way for higher growth and higher living standards. As in all good speeches, this last point brings together some of the other points made—so this may not have been just a boring list. Through ensuring economic stability and funding our public services properly, we will make sure that people get the health services that they need, so that they are not struggling with ill health that drives them to economic inactivity and pushes them away from the jobs market. We will make sure that people feel secure on their streets, and that businesses feel safe, rather than struggling with shoplifting, which has become all too rife. Those are the changes that this Budget and the measures in this Bill provide.

[Lincoln Jopp]

I am grateful to the hon. Member for giving way, particularly on the subject of growth. He, like me, is an avid reader of the Labour party manifesto, so he knows that sustained economic growth is the first mission of this Government. I think we all agree on the point that sustained economic growth is a really good thing, so could he simply tell us whether he thinks these national insurance changes are pro-growth or anti-growth? It is a very simple question.

[Dan Tomlinson]

I thank the hon. Member kindly for his intervention. I am not sure whether all Members know this, but the Labour party chair has appointed me as the growth mission champion, so I am very much in favour of economic growth. We can see the impact of the changes in the round at the Budget, leading to higher growth in the short term and further growth in the long run, which is very important.

Without the changes in this Bill and in the Budget as a whole, we will not be able to turn the page on the low growth we have experienced as a country over the last 14 years. Productivity growth since the financial crisis has been at just 0.2%, which is why we had the longest squeeze on wages since Napoleon was making his way around Europe on the Conservative party’s watch. We need to turn that around and make sure that we provide the foundation of stability, fund our public services and, yes, support some of the very smallest businesses with these changes, so that we can get the economic growth that Members on all sides, including growth champions, would very much like to see in the years ahead.

[James MacCleary (Lewes) (LD)]

I have to start by disappointing the hon. Member for Chipping Barnet (Dan Tomlinson), in that I rise to support the amendments tabled by my hon. Friend the Member for St Albans (Daisy Cooper). I will speak about my deep concerns about the proposed national insurance changes because of the real-world impact they will have businesses, GP surgeries, community organisations and vital care services in my constituency of Lewes. While I recognise the fiscal pressures, which have been mentioned by a lot of Members, I ask that we fully consider how these changes will affect those working tirelessly to keep our communities vibrant, secure and healthy.

GP surgeries are the frontline of the NHS. A local GP practice in my constituency has been in touch with me just today to describe its shock at discovering that it will be paying at least £60,000 more a year under these changes. GP practices provide vital healthcare services to our local population and in doing so are under ever-increasing pressures. Yet under the new proposals, GP practices are treated as if they are private businesses capable of absorbing significant cost increases. The reality is, of course, quite different. Every additional £1 spent on national insurance is £1 that is not spent on patient care, staffing or critical medical equipment. For practices already operating under immense strain, this extra burden could be the tipping point that pushes them towards unsustainable financial territory. When cutbacks occur, it is our communities that will lose vital healthcare access, and the NHS, which is already stretched, will be left struggling even more.

We must also acknowledge that our social care providers, including hospices such as St Peter and St James hospice, which looks after my constituents so well—I visited it recently—are caught between rising wages, fixed local authority fees and higher national insurance. They cannot pass on these costs without threatening their very viability. If care providers close or scale back, the most vulnerable in our community will suffer, and so will our healthcare system as hospital stays lengthen and A&E attendances rise. In other words, it will drive up costs for the NHS, making the system less efficient and less humane. It is particularly galling that NHS employers are set to be compensated for the changes while there is no equivalent commitment for the social care sector. Separating social care reform from NHS support will not only hurt vulnerable people today, but make it impossible to achieve strategic priorities for the health service tomorrow.

We must also consider community organisations. Take the Sussex Community Development Association in my constituency. It is a local organisation that reinvests every penny of surplus into essential services such as youth work, emergency food provision and childcare for deprived communities in my constituency. It is already contending with increased wage costs, and it now faces an estimated additional £70,000 per year due to the national insurance rise. Because of its size, it does not qualify for allowances that might soften the blow. This facility was invested in to deliver Sure Start services under a previous Labour Government, and it is now considering cuts to essential services thanks to this one. It now faces a desperate scramble for funding at a time when its services have never been more crucial.

The rise, coupled with the increases to the national living wage and the minimum wage, will hit the early education and childcare sector particularly hard. As chair of the all-party parliamentary group for childcare and early education, I must make the Committee aware of how dire the situation is. An average nursery will face additional staffing costs of nearly £40,000 a year due to the increases. That is because staffing costs account for 75% of nurseries’ running costs, compared with just 30% for the average restaurant. If Government funding rates do not cover the gap, parents will face higher fees, potentially leaving them to reduce their working hours or to leave the workforce altogether.

The situation is exacerbated by the fact that private nurseries delivering Government-funded hours may not be eligible for employment allowance. That means that they may not receive the intended financial support from the Government. The sector is already facing recruitment challenges, with 29,000 new staff needed by September 2025 to deliver the promised 30 hours of funded childcare. The national insurance changes could lead to recruitment freezes, reduced staff training and even nursery closures. That is the precise opposite of what this Government claim they want to see for working parents and carers. That would have a detrimental effect on families and the economy, hindering economic growth, and it could seriously impact the Government’s commendable aim of having half a million more children hitting early learning goals by 2030.

Finally, let us not forget that even successful local businesses are feeling the strain. Rathfinny, a renowned Sussex wine producer in my constituency that has invested in our local economy and environment, faces a significantly higher national insurance bill. It may be forced to slow its growth, reduce investment or even curb local employment opportunities, undermining the prosperity that benefits us all. This Government talk about economic growth, as Government Members have done today, but this tax increase will inhibit the ability of many British businesses to expand and flourish.

If introduced without nuance, these national insurance changes risk delivering a series of damaging shocks to my community and places across the country. I urge the Government and the Minister to reconsider, to review the thresholds, to consider exemptions for sectors that cannot pass on costs and to ensure that our GP practices, childcare providers, community organisations and valued local employers are not left shouldering burdens they cannot bear. I implore the Government to recognise the unintended consequences and to commit to measures that will preserve local jobs, sustain our community services and uphold the quality of care we offer our vulnerable citizens. I hope that the Government will do more to ensure that this tax increase does not harm the very communities and services we have pledged to serve and protect.

[Sammy Wilson]

The outcome of the debate is of course inevitable: we know that when we go through the Lobby, we will be smashed by the overwhelming strength on the Government side, not because their arguments are strong but because of the parliamentary arithmetic. I suspect that even the hon. Member for Walthamstow (Ms Creasy), who indicated in her speech that this measure will hit especially labour-intensive services that employ low-paid people and are vital to the smooth running of the economy, will walk through the Lobby with the Government. Some people might say, “Is that not just the politics of despair?” It is important that the arguments made are at least challenged, despite the fact that, because of the parliamentary arithmetic, it may not come to anything.

I do not actually have a political point to score here, because the DUP will never be the alternative Government in this place—though the country is the worse for it. I therefore hope that all the predictions made here today and by independent bodies that have looked at the impact of the Budget are wrong. I hope that we do not find that small employers have to go out of business, that recruitment goes down, that the real wages of those who are employed—especially at the lower end of the wage spectrum—are cut, and that the services that are so vital to the health service are impacted on. I hope that all those things do not happen. I hope that economic growth is not impacted by it, but all the economic evidence, the economic logic and the forecasts made indicate that the arguments made against this measure by Opposition Members are correct.

[Dan Tomlinson]

My understanding is that the Office for Budget Responsibility says that growth will be higher in the short term, broadly unchanged over five years and higher in the long term.

[Sammy Wilson]

We have seen over the last five months that growth has already been impacted. Of course, the OBR has indicated that in two and three years’ time, growth will be impacted negatively as well. I do not think that one can hide behind those arguments. As I said, I hope that I am wrong, but I suspect that all the economic logic on the impact of this measure and what we are already hearing from employers indicate that that is not the case.