Lord Hanson of Flint
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National Insurance Contributions Bill
Lord Hanson of Flint Excerpts(13 years, 10 months ago)
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Mr Speaker
With this it will be convenient to discuss the following:
Amendment 5, page 2, line 20, clause 4, leave out ‘2013’ and insert ‘2012’.
Amendment 6, line 20, at end insert
‘The Treasury will carry out a review of the Regional Secondary Contributions Holiday before 5 December 2011 and may extend the relevant period until 5 September 2013.’.
Mr Hanson
The clue to the proposed changes before us is in the words that the Clerk read out, “not amended in the Public Bill Committee”. The proposals were reflected on and discussed in Committee, and I hope that the Exchequer Secretary to the Treasury has had time, with a good break behind him over Christmas, to reflect on the common sense in them.
I would find it amazing if the Minister were not able to accept new clause 1, because it simply asks for information that, if he looks carefully, he knows I could table questions—with probably more work for him and his officials—to secure in due course. It is important that he assesses the scheme to ensure that we have a national insurance holiday, which, under the current Bill, includes the whole United Kingdom minus three regions—London, the east and the south-east.
The Opposition support, welcome and recognise the Government’s objectives in seeking to use the mechanism of forgoing national insurance income to encourage businesses, but it is important that the Government, the Opposition and, indeed, the House, who endorse that proposal, know its impact over the relevant period.
New clause 1 asks the House to ensure that, following Royal Assent, there is an annual report to Parliament on the outcomes of the scheme, meaning that between now and 2013 we would potentially have three annual reports with the information outlined in the new clause. Essentially, that would include the total sum of national insurance expenditure saved by businesses under the scheme by constituency, but, if the Minister wanted to reflect on the proposal and have it brought back in another place, I would be happy for the information to be listed by sub-region or by region. The information would also include the number of businesses availing themselves of the secondary contributions holidays, the number of employees in each business and the total expenditure saved by businesses under the scheme.
I tabled new clause 1 for several reasons. It is important that we know the facts. The Minister said in Committee that he expects about 400,000 businesses to take part in the scheme during its operation. That figure is a valuable indication and a good benchmark by which we can judge the success of the scheme. When the Committee sat before Christmas, we were already effectively five to six months into the operation of the scheme and about 1,100 businesses had applied for it. An annual review to Parliament would not only have provided an indication of whether Parliament should pass the Bill but would have ensured that we know exactly the take-up of the scheme. New clause 1 refers to the fact that we would also know the take-up by constituency and by businesses.
That is important for two reasons. We need to know the trajectory of the take-up. Is the figure of 1,100 to date what was expected? What will the trajectory be for those businesses in 2011 and 2012? If we have our first annual report in, let us say, December 2011—when the scheme will have been operating for 18 months—what will the take-up of the scheme be? Is the trajectory for the remaining two years likely to mean we get to the 400,000 figure that the Minister has mentioned? An annual report would provide transparency and openness, to which the Government are committed, on those issues and those take-ups. There would be nothing in the report that I could not ask the Minister in a parliamentary question in December this year, next year or the year after. It would simply be good business for the Government to supply that information as a whole.
It is important to consider the number of businesses in each constituency, and we will return to the exclusion of London, the south-east and the east region when we discuss other amendments. Given the deprivation in many of the London constituencies represented by my hon. Friends in the Chamber this afternoon, we feel particularly strongly about that matter. The Bill will have a significant impact on 400,000 businesses across the remainder of the United Kingdom, but will it and the proposed holiday impact on areas that have the highest public sector employment, which is the Minister’s primary objective, and areas of high deprivation and unemployment?
We discussed unemployment and deprivation in areas of the United Kingdom a number of times in Committee. For the purposes of explanation, I shall randomly look at constituencies that currently benefit from the national holiday under the scheme and will benefit if the scheme goes ahead. The annual report is important because unemployment in the Tatton constituency of the Chancellor of the Exchequer is about 2.1%, in the Richmond constituency of the Foreign Secretary it is about 1.8% and in the Rushcliffe constituency of the Justice Secretary it is about 2%.
It is important that we look at where the scheme ultimately is taken up and who will benefit. If businesses are opening in Tatton, Rushcliffe, Richmond and, indeed, other constituencies with low unemployment, that is all well and good, but it will not tackle deprivation in Manchester Central, Liverpool, Riverside or Newcastle upon Tyne East, which ultimately also might benefit from the scheme. For transparency, it is important that the Minister produces an annual report showing not only how many people and businesses have taken up the scheme, but in which constituencies it was taken up outside London, the south-east and the east region.
Kelvin Hopkins (Luton North) (Lab)
I very much welcome what my right hon. Friend is saying. One of the estimates we should perhaps make is whether the loss of jobs as a result of the VAT hike will wipe out any possible advantage of the Bill?
Mr Hanson
My hon. Friend makes an important point. He will know that the Opposition are extremely concerned about the impact of the VAT rise on businesses, on consumer confidence and on consumer expenditure. Although the measure is not directly linked to the VAT increase, its aim is to help businesses in difficult times. From the Minister’s perspective, the measure is primarily designed to help businesses take up the slack caused by the massive 500,000 people who will lose their jobs as a result of public spending cuts. We will come back to the impact of that on London, the south-east and the east region, where many public sector related employment opportunities will be lost and there will be no benefit from the scheme.
It is important that the Minister not only takes on board where job losses will be but that he looks outside the three excluded regions at the benefits that the scheme will bring to England, Wales, Scotland and Northern Ireland. The production of an annual report will show with full transparency where the businesses are that benefit from and take up the scheme. If those businesses are in areas where there is already low unemployment and deprivation, or they are in areas in the rest of England or Wales where there is not high public sector employment, the objectives set by the Minister will not have been met. In the interests of transparency, it is important to have such a report.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
We support the Bill and the right hon. Gentleman’s new clause because we fear that the measure will not go far enough and that an annual report would show the need for further countervailing measures. Does he agree?
Mr Hanson
The purpose of the Bill, which the Opposition support, is to consider how we give limited help to start-up businesses through a national insurance holiday, so that we can get employment going across the United Kingdom with the exclusion, which we are trying to tackle, of London, the south-east and the east region.
Micro and macro-economic policy will need to be looked at again in many areas. My hon. Friend the Member for Luton North (Kelvin Hopkins) mentioned VAT. Hon. Members are concerned about the impact of public spending cuts on job losses. The issue of the economy generally is also extremely important, as are matters such as employment in west Wales. The annual report would clearly show where new businesses are commencing because of the scheme proposed by the Minister in the Bill and whether those new business commencements can be married to areas where there are high levels of public sector job losses, deprivation and unemployment and therefore where there is a necessity for new businesses to commence. If new businesses are starting up in areas where there is already prosperity, wealth and low unemployment, the loss of the £940 million of national insurance revenue that the Minister is proposing in the Bill could have been used elsewhere to meet the objectives of tackling deprivation and unemployment in a much more concerted manner.
Mike Gapes (Ilford South) (Lab/Co-op)
My right hon. Friend will know that the temporary Secretary of State for Business, Innovation and Skills represents a London constituency. Does he agree that it is deplorable that someone who represents a London constituency has not fought in Government for the interests of people living in London, including people in my constituency, who will be adversely affected by the measures?
Mr Hanson
This is a Treasury-led issue, but it will self-evidently have an impact on businesses. I would have expected the right hon. Member for Twickenham (Vince Cable) to use his Business Secretary responsibilities to bat very hard to ensure that the measure has an impact on London, the south-east and the east. Amendments that we will talk to later focus on those areas and show key issues that will be highlighted by the annual report, even if the Bill does not include London, the south-east and east regions.
If I look randomly at the figures before me, I can see that the unemployment rate in the constituency of my hon. Friend the Member for West Ham (Lyn Brown) is 6.8%, compared with the 1.6% unemployment rate in the North Somerset constituency of the Secretary of State for Defence. His constituency will get the benefit of the scheme; my hon. Friend’s will not. The annual report to Parliament will show whether businesses are being drawn to North Somerset at the expense of, for example, the micro-region of Somerset—Bristol and other areas—where there might be even higher levels of unemployment.
Joan Ruddock (Lewisham, Deptford) (Lab)
In my constituency, sadly, unemployment is even higher, but I want to make a different point to my right hon. Friend. Is there not a need to provide this assistance where there is the greatest risk of companies failing in their first year? In some of the most deprived areas, people with the fewest resources face the greatest difficulties in setting up businesses, and their business failure rate in the first year is highest. If we are to be fair, we should not be giving so much money to areas where that does not apply, and that is another reason for looking again at the distribution of this measure.
Mr Hanson
My right hon. Friend touches on an important point to which I will return when we discuss the group of amendments on London’s exclusion. She will be interested to know that the number of business deaths in London was 13.7% higher than anywhere else in the country. While business births are higher in London, at 12.6%, the figure for business deaths shows that there is a higher turnover and a greater loss of businesses in London than anywhere else.
London, the south-east and east region is not included in the Bill. However, even with the Bill as currently constituted, an annual report by constituency would clearly show where the business successes are, where new start-ups take place, and how many employees are being employed as result of the scheme—in other words, it would clearly show its success in meeting the Minister’s stated objectives. Without the annual report, I will have to table questions to find out that information. The Minister will need to have the information to monitor the progress of the scheme and look at its take-up and distribution, but it will not be public unless we have an annual report.
Kelvin Hopkins
On business deaths and bankruptcies, does my right hon. Friend agree that we have yet to see the full impact of the cuts in the school building programme, which will affect many small sub-contractors who work in the construction sector—precisely the businesses that might have benefited from the Bill had they continued to exist?
Mr Hanson
Indeed; my hon. Friend makes an extremely important point. The Minister’s objective in the Bill is to help new businesses to develop to compensate for the loss and shrinkage of public sector businesses in other parts of the country; that is his main focus. The annual report would clearly show not only where new businesses are commencing but, through other information that we will be able to glean, where businesses such as construction firms are shrinking because of cuts in public expenditure on schools, hospitals and other major capital projects. I can think of building firms in my own constituency in north Wales that depend on public sector contracts in housing, education and health for their work. As my hon. Friend says, if that sector shrinks, those employment opportunities will shrink too.
I would be interested to know how many new businesses commence, and how many people are employed in each of them, in my own area in north Wales as a result of this measure, but I will not have that information unless I table parliamentary questions.
Julian Smith (Skipton and Ripon) (Con)
I do not understand why one could not simply put a call through to Companies House. Why do we need a report from London about the minutiae of how British enterprise is developing as a result of this fantastic Bill?
Mr Hanson
We are forgoing £940 million of taxpayers’ money, in the shape of national insurance contributions, to pay for this scheme—£940 million that could be put into the Building Schools for the Future programme and hospital expenditure. I would have thought that the hon. Gentleman was interested in where and how that money was being spent and whether it was being spent effectively. The annual report would show clearly how that £940 million of forgone expenditure was being spent, and which constituencies or regions were receiving the benefit and which were not. My main focus is to ensure, from my perspective and that of my right and hon. Friends, that areas of unemployment, deprivation and high public expenditure get that resource, not areas that already have low levels of unemployment and high levels of prosperity, and do not require this level of resource.
The House is bound to consider how we expend public resources, and it is incumbent on the Government to provide that information. The Minister will have it as he monitors and receives reports on progress on projects, as I did when I was a Minister, and I do not see why he cannot publish it. Ultimately we can drag it out of him through parliamentary questions, but it would be far better for him to be transparent and open, in accordance with this proposal.
Kelvin Hopkins
On the point made by the hon. Member for Skipton and Ripon (Julian Smith), is it not important to disaggregate the statistics to show the specific impact of this Bill rather than taking them out of the general trends in small business creation and so on?
Mr Hanson
That is absolutely right. One of the key tenets of any objective in society has to be that if we set out on a course of action for which we have clear objectives, as the Minister has, then we need, at some point in time, to evaluate whether it has achieved what was claimed for it. The Minister’s objective is to ensure that this scheme benefits areas with high levels of public sector employment that are losing jobs because of public spending cuts. The annual report would show progress towards that objective. This is not meant to be threatening to the Minister—it is simply meant to say to him that the information that he will have, we should have, as a matter of course, so that we know exactly what the scheme has achieved. There is nothing wrong with that. We support the scheme. We are not complaining about the scheme—we are simply saying, “Let’s look at how it has operated in practice.”
Amendments 5 and 6 deal with the same issue in a different way. I suggest in amendment 5 that we should consider reducing the end of the scheme’s operational period from 2013 to 2012. That is not to say that we should stop the scheme in 2012, but that we should, as suggested in amendment 6, review it at the end of December 2011 and
“may extend the relevant period until 5 September 2013.”
The Minister’s scheme may well take off—the 400,000 businesses that he anticipates taking it up do so, and his objectives are being clearly and specifically achieved. However, it is also possible that only 200,000 businesses will have taken up the scheme by the end of the first or second year, and it might then be appropriate for him to amend it accordingly and consider widening its scope. Amendments 5 and 6 offer the Minister the opportunity, without scrapping the scheme, to evaluate it at a break point in December 2011. It is worth our examining whether the take-up he has promised has been achieved and, if not, whether we need to expand or modify the scheme accordingly.
The Minister has indicated that public sector employment is key to his objectives. The constituencies of Edinburgh South; Liverpool, West Derby; Glasgow North; Wansbeck; Wirral West; Blackpool North and Cleveleys; Plymouth, Moor View; Birmingham, Selly Oak; and Glasgow North East are in the top 10 on the scale of public sector employment. If, at the end of two years, there has not been business take-up in those constituencies, but there has been take-up in constituencies much lower down the scale, that would be a reason to review the operation of the scheme.
It may be appropriate to consider including London, the south-east and east region in the scheme. If the Minister cannot do that today through later amendments, he could consider doing so at a later date, and the proposed review point in the scheme would give him that opportunity. The Thames Gateway London Partnership, which is made up not only of authorities under Labour control but those under Conservative and Liberal Democrat control, says in a briefing sent to Members of this House:
“We urge the government to commit to an annual review of the National Insurance Holiday scheme. At this time should the minister find that some areas currently benefitting from the scheme already have a high rate of business survival and a low level of public sector job dependence we would urge him to consider retargeting the measure to allow some of the more deprived authorities in the Thames Gateway to take advantage of the benefits conferred by the scheme.
That reflects amendments that I will come to later. The briefing gives an example that is of particular interest to my hon. Friend the Member for West Ham:
“At a Local Authority level, Newham, which has a public sector employment level of 33.6% would not be eligible for the proposed NI Holiday, however, Macclesfield, which has a public sector employment rate of only 11.8% will benefit from the National Insurance holiday”.
Those issues could be reflected on and taken into account during the break in the operation of the scheme proposed in amendments 5 and 6.
The Minister would have my full support—even if he cannot accept including London, the south-east and east today—if he came back to the House in a year’s time to say that the Government had reviewed the scheme, come up with an annual report, and as a result would like to extend it to Luton South, Walthamstow, Lewisham Deptford, Ilford South, Luton North and Leyton and Wanstead, to give but six constituencies of Members in the House today. I am sure that my hon. Friends would welcome that move from the Minister; they would even say well done to him, invite him to visit the new businesses in their constituencies and cheer him from the rafters. I know that he would appreciate that greatly. I see no reason why he cannot say that he will review the scheme, even if he cannot accept the inclusion of other regions under later amendments. If the review shows that the benefit from the national insurance holiday is going to constituencies with low levels of unemployment, deprivation and public sector employment, he should consider bringing in those other constituencies by extending the scheme to a wider area.
Gavin Shuker (Luton South) (Lab/Co-op)
Those figures might also draw out the effects on constituencies that border areas that are covered, where there might be a differential effect on job growth and creation, which is an issue that came up in Committee.
Mr Hanson
Indeed. My hon. Friend knows that there are issues relating to the borders between London, the south-east and east and other regions, because there could be differentials relating to new businesses. He made that important point in Committee, and the hon. Member for Portsmouth North (Penny Mordaunt) has made it in parliamentary questions to the Minister. On Second Reading, Government Members asked questions similar to mine on why the scheme was not applicable to their regions.
I am not being aggressive, but am trying to give the Minister a chance to listen to the case. I hope that he accepts that there is a case for producing information, so that he can evaluate it and so that we as taxpayers know how the almost £1 billion of resource has been spent: where it is going, who is benefiting from it and how, and what levels of employment it is creating and where. Amendments 5 and 6 give the Minister an opportunity to have a break after about a year to review the scheme formally and to consider the issues that we will discuss later, which are important to my hon. Friends.
It does not matter where one is unemployed, because an unemployed person is 100% unemployed. For the Minister to say that we do not need to worry if public sector jobs are lost in London, the south-east and east, or in other regions of high employment, and that the scheme does not apply there, is not a positive way forward. I hope that he reflects on the proposals genuinely. I know that he is a reasonable chap and that he will consider them positively. He knows that the Bill will be considered in another place and that these matters can be discussed there, if not agreed today. I believe that a sensible case has been made for the proposals—although I would say that—and I commend them to the House and the Minister.
Stephen Hammond (Wimbledon) (Con)
I did not have the benefit of sitting on the Committee, although I did attend Second Reading and I think that I made a short intervention on the Minister.
I will make a short contribution in response to the new clause. I listened carefully to the Opposition spokesman’s speech, and to his closing remark that this is a sensible case that the Minister should accept. I ask the Minister to think carefully about the case that has been put to him. First, the full impact of the policy will inevitably not be shown after the first or second year. With such policies, there can be a significant cumulative effect, which is what the Government are looking for.
Secondly, it has been estimated that the scheme will have considerable benefits. The Opposition spokesman did not query the basis of the estimates made by the Government and outside bodies on the impact of the holiday. We have a pretty good assessment of its impact, so the Government should consider whether the annual report would add to that.
Thirdly, I ask the Minister to consider that the policy is temporary. Although it is a recurring cost, it is only for three years. Were the policy extant for a longer period, the Opposition spokesman’s arguments might have more basis.
Fourthly, the Opposition spokesman made the point several times to the Minister that he could table questions. He did not say whether he thought an annual report would be cheaper than that. If he wanted to do so, he should have given a cost analysis. I fear that the proposal is an expensive way of getting at the information that he wants, and probably does not cover everything.
Finally, when the panoply of talent on the Conservative Front Bench was not as great, I spent four years as an Opposition spokesman. I spoke on various measures that, like the Bill, were extant for the life of the Parliament, such as the Concessionary Bus Travel Act 2007. I made similar requests for annual reports and, time after time, Ministers told me that such proposals would be costly and serve no purpose; that they would of course keep the scheme under review; and that there was transparency through other sources of information available to me. Therefore, before the Minister is tempted by the beguiling words of the Opposition spokesman on transparency and the need to review the policy, I ask him gently to remember that, freed from the responsibility of Government, the Opposition are not accepting the arguments that they made in government.
Mr Gauke
My hon. Friend is absolutely right. Certain compliance problems would arise. Could we tell whether an address was for work or home? The scheme would become more complicated. Those claiming would need to ensure that they were in one particular postcode area or another, and there would be issues with boundaries. Distortions could be much greater than under the simpler scheme that we have introduced with essentially one boundary and three excluded regions. A host of difficulties would arise if we tried to follow the sub-regional route. Where would we draw the line? Would we end up considering boroughs, wards or polling districts? Exactly how would that work? We will revert to the matter later, but my hon. Friend is right.
Amendments 5 and 6 are aimed at providing flexibility to reduce the duration of the regional employer national insurance contributions holiday for new businesses. This would reduce the cost of the holiday to the Exchequer, and correspondingly reduce the benefit to new businesses. As I have explained, the Government want to target available resources to the regions most dependent on public sector employment. We do not intend to widen geographical coverage, and therefore have no need to find ways of reducing costs. We know that this scheme will reduce labour costs for new businesses, and has been widely welcomed by their representatives.
We have acknowledged that beyond this there is a good deal of uncertainty about exactly how the scheme will pan out in practice. However, introducing some flexibility to change the details of the scheme as proposed in these amendments would increase uncertainty for those who might potentially benefit, and could risk inhibiting decision making. This particular proposal could affect those who are already benefiting from the scheme, or those who are currently considering setting up a new business bearing in mind the Government’s policy. For example, a new business set up this month, which plans to take on employees towards the end of this year, would not get the full year’s holiday for these employees if we were to stop the scheme in September 2012.
I hope that the right hon. Member for Delyn would agree that we were right to start operating the scheme as soon as we could, in anticipation of legislation being passed. Had we not done so, the benefit to businesses would have been delayed, and new businesses that had planned to start operation might have delayed in order to benefit fully from the scheme. I am conscious of the fact that the scheme requires the consent of Parliament, and we have been very clear about that in our guidance to potential beneficiaries. We are not pre-empting the decisions of Parliament. However, I hope that hon. Members would agree that it would not be desirable to withdraw the benefits we had planned to give to entrepreneurs who have already decided to set up in business. That risk applies to these amendments, and I am advised that as drafted the amendment is insufficient to provide a mechanism for extending the holiday, and does not therefore meet the intended aim.
With the commitment I have made today on the reports, I hope that the right hon. Gentleman will withdraw new clause 1 and, in the light of my comments, not press amendments 5 and 6.
Mr Hanson
We have had a useful debate. I tabled the new clause and amendments to secure from the Exchequer Secretary a commitment that the expenditure that we are forgoing—some £940 million—will be monitored and reviewed for effectiveness, that a mechanism will be put in place by which we can judge where, for whom and how it is having a benefit, and that we will review take-up over the three years of the scheme. I am reassured that he has reaffirmed what he said in Committee and will produce information on take-up on a regional basis. I genuinely welcome that.
It might help if the Exchequer Secretary could indicate—he did not do this in his response—the current level of take-up of the scheme. In early December, at the end of the Committee stage, he mentioned that about 1,100 businesses had taken it up. One of our concerns was that his ambitious target of 400,000 over the duration of the scheme would not be met because of the slow take-up in the first six months. It would help initially if he could give that information now.
Mr Hanson
The key issue—this is one reason I have suggested an annual report—is that 1,500 is significantly less than the trajectory we would hope for and which is necessary to achieve a take-up of 400,000 by the end of the scheme. It is already six or seven months since the Exchequer Secretary announced the scheme, and we effectively have two years this September—until September 2013—before completion. A target take-up of 400,000 and today’s take-up of 1,500 show that the trajectory is not there.
I intend to withdraw the new clause—the Minister can relax in that knowledge and take it as a helpful contribution to the debate—but I hope he will still reflect on the fact that one reason we have asked for an annual report is to ensure that we are able to know every year what the trajectory of the take-up is and in which regions and sub-regions it is occurring. If, for example, by the end of 2011, 30,000 or 40,000 businesses have taken up the scheme, and there is a capacity of 400,000 and just two years left of the scheme, a considerable effort would be needed to generate those new businesses in the two years.
If the Minister does not want to build in failure to his scheme, he needs to monitor that and, if need be, consider the suggestions we will make later about expanding the scheme into other regions, such as London and the south-east, to ensure that the 400,000 take-up that he wants is met. I will make the case later, supported by my right hon. and hon. Friends, that high levels of public sector employment in London and the south-east region will be hit by public spending cuts; without the necessary debate on those issues generally, that will happen as much in London and the south-east as in north Wales, the north-west, Yorkshire, Scotland, Northern Ireland and other parts of the United Kingdom.
If we do not have the trajectory of take-up that the Minister anticipates, we might end up with a scheme that, after three years, does not deliver a take-up of 400,000. At the same time, colleagues in London and the south-east and eastern regions will have been impacted by public spending cuts, but their constituents will not have benefited from that scheme. In tabling the new clause and amendments, I was trying to give the Exchequer Secretary some flexibility to enable him to design the scheme, review it and bring back suggestions accordingly. More importantly, hon. Members on both sides of the House, including the hon. Member for Wimbledon (Stephen Hammond), whose constituency will not benefit from the scheme, can assess its impact.
We welcome the holiday and think it will have a positive impact, although it will not compensate for the things that my hon. Friend the Member for Luton North (Kelvin Hopkins) mentioned. We will have to consider what its outputs are, whether we achieve them and whether the scheme is successful, and we will return to these matters in parliamentary questions. I hope that the Exchequer Secretary will reflect on some of those issues before the Bill reaches another place. I beg to ask leave to withdraw the clause.
Clause, by leave, withdrawn.
Clause 3
Increased product of additional rates to be paid into National Insurance Fund
John Healey (Wentworth and Dearne) (Lab)
I beg to move amendment 8, page 2, line 2, at end insert
‘The National Audit Office shall report to Parliament by the time of Royal Assent on the Finance Act 2011 on the sum that would be required from the product of additional rates in order for the health service allocation to grow in real terms in every year.’.
It is good once again to face the Exchequer Secretary across the Dispatch Box, although not so good to do so from the Opposition side and with him on the Government side. However, he is a serious Minister doing a serious job. He showed that in the way he responded to my right hon. Friend the Member for Delyn (Mr Hanson) and the debate on the first group of amendments. I hope that the Exchequer Secretary will feel that amendment 8 and the amendments that were not selected were intended to be helpful to the Government. With them, we are offering to him, his boss the Chancellor and his colleagues in government the opportunity to act to prove to the public that they will honour the promises the Government made about protecting NHS funding and ensuring it sees a real funding increase each year, not a real cut.
The Bill and national insurance contributions legislation more generally are about raising and allocating national insurance funds and contributions paid into that fund. The NHS has had a special place in that legislation certainly since 2002, when we decided to move, from April 2003, to raise an extra 1% on earnings above £43,800 and to allocate all that extra income to the health service and the NHS. The amendments we tabled, including amendment 8, give the Government the chance to do the right thing by the NHS and the British people. Amendment 8 in particular lays the groundwork for the Exchequer Secretary and his colleague the Chancellor to make the right decisions in order to honour their promises in the Budget.
There were big improvements as a result of Labour’s investment in the NHS over the past decade—51,000 extra doctors, 98,000 extra nurses, patient satisfaction at an all-time high—and it is hard to remember that in 1997 there were more than 280,000 people waiting more than six months to get into hospital for the operations they needed. I make that point to explain the broader context to amendment 8, as I am conscious that the House is debating a relatively narrow provision.
Mr Deputy Speaker (Mr Lindsay Hoyle)
With this we will discuss the following:
Amendment 2, page 2, line 21, leave out subsection (5).
Amendment 3, in clause 11, page 6, leave out lines 24 to 29.
Amendment 4, page 6, leave out lines 35 to 41.
Mr Hanson
The purpose of the amendments is self-evident and clear. We discussed this issue at great length in Committee but it is worth revisiting today to see whether the Minister has reflected over Christmas and the new year on the views that we put forward in Committee. The amendments would do one simple thing: include the regions of London, the south-east and the east in the regional secondary contributions holiday in the Bill. As I have said in relation to earlier amendments and throughout the Bill’s proceedings, we welcome the idea of a payment holiday but we do not believe that its implementation is fair or that it meets the objectives that the Minister has outlined of helping to tackle problems in areas with high public sector employment that will be disadvantaged by the pending public sector cuts, which will impact on both local government and central Government services throughout the country.
I accept, as my hon. Friend the Member for Luton North (Kelvin Hopkins) has said, that the Bill as a whole is not a panacea for tackling long-term unemployment or, indeed, the impact of public spending cuts and further potential unemployment across the board. What it does do, however, with its limited scope, is ensure that we provide an incentive over a short period—the next three years—for new businesses to be established. They will receive a payment holiday for national insurance contributions, which will be a small but a significant help towards the establishment of new businesses.
The Minister’s logic is that the scheme will operate in the selected regions because it should be used to help businesses where there has been a major impact on public sector employment, and he has specifically excluded the whole of the London, south-east and east regions. Let me chide him slightly, because I think he has fallen into the trap of believing that the whole of the London, south-east and east regions are similar in characteristic, have low levels of unemployment, low levels of deprivation and a low level of public sector employment. If the Government did not believe those things, he would have included those three regions in the scheme.
There are certainly high levels of employment and great prosperity in the east and south-east regions and there are certainly constituencies and even sub-regions with low levels of public-sector employment. However, there are also areas, as I am sure my hon. Friends who represent those areas will testify today, with extremely high levels of deprivation, unemployment and dependency on public sector employment that will be excluded from the potential benefits of the secondary benefits holiday because the Minister has excluded those three regions from the scheme.
Joan Ruddock
Perhaps my right hon. Friend is aware that the average level of public sector employment in the UK is 21.7%, but the figure in my constituency is 30%. Does he share my astonishment that my constituency and other parts of London with such a high level of public sector employment—leading, I am sorry to say, in these times, to high public sector unemployment—are being excluded?
Mr Hanson
My right hon. Friend makes that point in relation to Lewisham and her constituency, but as I shall discuss, it is not just her constituency and Lewisham borough that will be excluded and disadvantaged by the scheme. For example, the constituencies of Oxford East; Luton North; Lewisham East; Canterbury; Southampton, Test; Eltham; West Ham; North Thanet; Hackney North and Stoke Newington; Tooting; Islington North; Dulwich and West Norwood; and Brighton, Kemptown all fall, by the Minister’s own criteria, in the top 60 constituencies for public sector employment, but they will not be eligible for the scheme because the Minister is excluding them from it.
If the Minister looks, as he has, at the House of Commons figures that I raised with him in Committee, he will see that 23 of the top 100 constituencies for public sector employment in England, Wales, Scotland and Northern Ireland fall within the three regions that are excluded from the scheme. So my right hon. Friend makes a clear and telling point on behalf of her constituents, but 23 of the top 100 constituencies fall into the same category.
Jonathan Edwards
I accept the point made by the right hon. Gentleman, but does he not recognise the need to rebalance the economy on a geographical basis? If he does not support this measure, what measures would he like to introduce?
Mr Hanson
I certainly would not have abolished the regional development agencies or cut public spending with the speed and to the extent that the Government are doing. I certainly would not have cut the Welsh Assembly Government’s budget in our own areas to the extent that the Government will do over the next two to three years. That would have helped to manage the necessary downturn in public spending that we needed to make to readjust the economy in a way that was proportionate, fair and met our constituents’ needs for public services and for employment.
Mike Gapes
My right hon. Friend refers to 23 of the top 100 constituencies, but if he extends the list to 105 constituencies to include Ilford South—my constituency—all those next five constituencies are also in the relevant regions, so he could refer to 28 of 105, and there is 38% public sector employment in my constituency.
Mr Hanson
I am grateful to my hon. Friend. Would I ever try to miss out the good constituency of Ilford South? My purpose was to indicate that the inclusion criterion that the Minister has selected is based on one simple issue: how to compensate for and deal with public sector job losses and provide a mechanism to help to support the creation of new jobs where public sector jobs are lost. On his criterion, 23 of the 100—or 28 of the 105, to take my hon. Friend’s figures—show that those issues are not being dealt with in the way in which the Minister has said.
If I look at the impact of the possible 490,000 public sector job losses, I see that they will hit hardest those constituencies with public sector employees. If I add to that, as I have to do, the benefits of job creation and look at local authorities on the economic deprivation index, I see that no fewer than seven of the top 12 of those economically deprived boroughs fall within areas that are excluded from the scheme. The boroughs of Hackney, Newham, which is represented here today by my right hon. Friend the Member for East Ham (Stephen Timms) and my hon. Friend the Member for West Ham (Lyn Brown), Tower Hamlets, Islington, Barking and Dagenham, Haringey and Lambeth are all in the top 12 economically deprived boroughs, yet they cannot avail themselves of the scheme.
Other constituencies throughout the country—again, I will alight on Tatton, because its is the Chancellor’s constituency and one that I know well—where unemployment is low and there are many business start-ups and great pockets of wealth, will benefit from the scheme and can apply to include businesses in the scheme, while boroughs such as Newham, Tower Hamlets and others that I have mentioned will not be able to do so. If we look at the unemployment rate across the United Kingdom, which is 7.9% on the latest figures, we see that unemployment in London is 9.1%.
Henry Smith (Crawley) (Con)
As an MP from the south-east, I resent being put into this invidious situation. But why does the right hon. Gentleman think that we are in this invidious situation, whereby we must make tough choices to re-stimulate the economy after the economic disaster in which the Labour party left the country?
Mr Hanson
I am happy to discuss macro and micro-economic issues with the hon. Gentleman. There is a clear divide between the current Government and the previous Government. We had a deficit reduction plan over three years. We would have cut public expenditure and made savings. In the Department in which I was a Minister in the last Government, we had earmarked £1.5 billion of savings over the next three years. We would have done that.
There is a difference about the scale and depth of the cuts. The hon. Gentleman and I can argue about that, but he needs to recognise that, if he walks through the Lobby to vote against the amendment today, he will be denying new businesses in his constituency the ability to gain access to the scheme, while allowing areas with lower unemployment and lower deprivation, perhaps in parts of the north of England, which are not completely a desert, to benefit from the scheme. He has to wrestle with that issue. Let me advise him that however he deals with it, we have the ability to let the residents of Crawley know what he will do on the issue. He and others need to look at that. There is still time for him to vote with the Government today, but then to speak to the Minister privately, to get his colleagues from Kent, other parts of Sussex, Berkshire and Hampshire together, to get them to talk to the Minister, and to get the Minister to reflect on this in the other place, so that we can make the scheme much wider. Colleagues from London and I would give him credit for doing that.
I put this to the Minister: the unemployment rate in London is higher than in the south-west, in my region and in that of the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards), in Wales. It is higher than in Scotland, the east midlands and the north-west, and it is above the UK average. The unemployment rate in the constituency of my hon. Friend the Member for West Ham was 6.8% at the last count. The rate is 7.7% in Tottenham, and 6% in Camberwell and Peckham; in Tatton, Richmond and Derbyshire Dales, it is under 2%.
I have no objection to a scheme being developed to help create employment where employment is lost, but if the logic of the scheme is what the Minister has made it out to be—to deal with public sector employment —I should point out that at the moment 23 of the 100 constituencies with the highest levels of public sector employment are not included. If it is to deal with unemployment, which is higher in the places that I have mentioned than in other parts of the country, the Minister needs to reflect on that in relation to what he has done today.
The Minister does not need to listen to me; John Walker, the national chairman of the Federation of Small Businesses, has said:
“With small firms in the South East most likely to be working below capacity, this shows how wrong the Government is to not include this vital region, as well as the East and London, in its proposals for a National Insurance holiday…With 600,000 public sector jobs expected to be lost, stimulating private sector job creation…in small firms, will be vital to rebalancing the economy.”
The Thames Gateway London Partnership makes similar points:
“the data clearly shows that…the National Insurance Holiday is unfair as it excludes areas in the Thames Gateway which we believe would otherwise be targeted for government support.”
The partnership has helpfully shown—this backs up what my right hon. Friend the Member for Lewisham, Deptford (Joan Ruddock) has said—that there are high levels of public sector employment in the London area, which would benefit from the scheme.
Joan Ruddock
I am most grateful to my right hon. Friend for giving way yet again. He may be aware that of the 10 Thames Gateway London boroughs, seven are in the 40 boroughs with the highest levels of multiple deprivation. My borough is at No. 39. Surely we have to be included in the scheme.
Mr Hanson
My right hon. Friend makes an important point supporting my central argument. I am trying to argue on the Minister’s own grounds. He argues that the scheme aims to help where there is loss of public sector employment. If 23 of the 100 constituencies with the highest levels of public sector employment do not benefit, the Minister’s scheme is not meeting the needs that he has set it to meet.
Let us look at public sector employment in the London Thames Gateway region. Some 21% of people employed in Barking and Dagenham work in the public sector. The figure is as high as 31% in Greenwich, 30% in Lewisham, 33.6% in the borough of Newham, 28.4% in Redbridge, and 26.6% in Waltham Forest, in the constituency of my hon. Friend the Member for Walthamstow (Dr Creasy). The Thames Gateway London partnership has helpfully provided me with information on the subject. Even boroughs represented by two Conservative Members of Parliament, such as Southend-on-Sea, will not benefit from the scheme, although it has 24.66% of people employed in the public sector. Let us look at authorities in Kent, represented not by Labour Members of Parliament, but by Conservatives. In Medway, nearly 24% of people are employed in the public sector. In Gravesham, it is 22.2%, and in Swale it is 19.7%. Those are areas with high public sector employment that will not benefit from the scheme.
Mr Gauke
The Government are doing a great deal to help London. We need only consider the transport infrastructure as well as the fact that we are protecting investment in Crossrail, in upgrading the tube and in Thameslink. We are taking a number of steps. I think it is astonishing that Labour is complaining about the fact that some businesses will not receive a reduction in their national insurance contributions when its policy at the last general election was that businesses should be paying more.
It is very helpful to look at the well-remembered interview with the shadow Chancellor on the “Today” programme on 4 January, when he said that we need to get the structural deficit eradicated and that there was no argument about that. He recognised the existence of a structural deficit and did not particularly differ from the Government’s position on the size of the structural deficit. There was a disagreement on timing—I think he disagreed with his own policy on timing, but he disagreed with the Government’s, too. He said that the balance between public spending cuts—we do not know which of our proposed public spending cuts the Opposition support—and tax rises should be 60:40. I think that the proportion for tax rises was 40%, although it was not entirely clear.
The shadow Chancellor was asked by Evan Davis:
“In principle you would like VAT not to go up and instead, at some point, not now, National Insurance to go up by more?”
The shadow Chancellor’s response was, “Yes.” He said that that was the Labour party’s argument at the general election and that it was still its argument now, because national insurance is a better tax. That is the Opposition’s position—they want to increase employers’ national insurance contributions. They oppose all the cuts and they oppose our VAT increase, but they want to increase national insurance contributions. Yet when we have a Bill in this House that provides a reduction in national insurance in some areas, their biggest complaint is that they want to do it in more areas. How incredible is that? How lacking in coherence is that policy?
Mr Gauke
The right hon. Gentleman knows the state of the public finances that we have inherited. We have pursued the policy that we set out in our party manifesto before the general election and have reversed the most serious effect of Labour’s jobs tax. The Opposition’s policy is to go further—they want a bigger jobs tax. The increase in the rate for employers’ national insurance contributions, which is mitigated by the increase in the threshold, involves the rate going up from 12.8% to 13.8%—I say that for the benefit of any Labour Members, including the shadow Chancellor, who are not quite aware of that. To raise the same amount of tax as the VAT increase would have done, Labour would have had to increase that rate not just to 13.8% but to 16.7%. What do hon. Members think that the impact on the Thames Gateway, east London and jobs in Walthamstow would have been if we had pursued that policy, which the Labour party believes in? It does not have much by way of economic policy, but that is one of them.
Mr Gauke
That is the same Federation of Small Businesses that said that the Labour party’s policy to increase national insurance contributions would cost about 52,000 jobs just among its own members.
We have touched on the fact that labour markets are much bigger than ward, borough or constituency boundaries. It is not quite clear what the Labour party would do if it were to extend the scheme. Its policy seems to be that it would remove the scheme from some parts of the regions that would currently benefit. It is not quite clear how the Labour party would do that. I do not know—perhaps the right hon. Member for Delyn could explain—whether the plan is that the scheme would be available in Flint but not in Prestatyn. I am not quite sure what the Labour party has in mind. Perhaps it thinks that the scheme should be available in Oldham but not in Saddleworth. I really do not know what the Labour party wants to do with the scheme, but it clearly wants to increase national insurance contributions, not to reduce them, despite what we have heard this afternoon.
The NICs holiday is targeted at regions and countries with the highest proportion of public sector dependence, to encourage new businesses to start up and take on employees. Expanding the holiday to the whole economy would undermine the policy rationale. I therefore ask the right hon. Member for Delyn to withdraw the amendment.
Mr Hanson
We have had a very good debate, and my right hon. Friend the Member for East Ham (Stephen Timms) and my hon. Friends the Members for Walthamstow (Dr Creasy), for Luton South (Gavin Shuker), for Ilford South (Mike Gapes) and for Luton North (Kelvin Hopkins) have put the case strongly for their constituents to be included in the scheme.
The scheme does not do what is says on the tin. It will not fulfil the Minister’s objectives. It will not help regions and areas with the highest public sector employment. I reiterate for the House’s benefit that 23 of the top 100 constituencies in the country for public sector employment will not benefit from the scheme. The Minister knows that we have suggested alternatives, and my hon. Friend the Member for Luton South mentioned a range of ways that we could cut the cake to include London, the south-east and east, so that those areas of high deprivation with high public sector employment could benefit from the scheme. I am not satisfied with the Minister’s response. We need to ensure that the scheme is fair and equitable. I therefore intend to press the amendment to a Division.
Question put, That the amendment be made.
Mr Hanson
This is the fourth Treasury Bill that I have dealt with as Opposition Treasury spokesman in four months, and it is the fourth Bill that has reached this stage without a single amendment being passed, so I am continuing with my fine record of scrutiny but little success in making changes.
I want to be clear at the start that despite concerns about some aspects of the Bill, we support the broad thrust of the measures before us. I note, however, that despite the rhetoric about national insurance that occurred at the general election, the Bill takes through the national insurance contribution increase of 1%. I accept that the Minister has included in the Bill changes to the employers’ threshold, which will make a contribution towards those costs. However, even after that has taken place, the Bill still brings in a rise that will cost businesses about £1.4 billion a year. I make no complaint about that, because we proposed to do it at the election; my complaint is that there has been a lot of smoke and mirrors from the Government in their approach to national insurance.
Mr Gauke
As the right hon. Gentleman will know, the policy that we are pursuing is entirely consistent with what we set out in our manifesto. Given the position of his party and the shadow Chancellor on this, presumably they will be opposing the increase in the threshold for national insurance contributions that will be introduced very shortly.
Mr Hanson
The electoral rhetoric does not match the actuality of this Bill. The Minister has rightly said that threshold increases were trailed in the election manifesto, but £1.4 billion of extra expenditure on businesses is still being put forward in the Bill. I make no complaint about that, as it formed part of our manifesto commitments. However, we should examine the electoral rhetoric. During the election the Conservatives said, “Let’s Stop Labour’s Jobs Tax”, but they are still executing, through this Bill, some £1.4 billion-worth of extra costs on employers; again, we have no objection to that. We will look at all these matters in due course and make our judgments when we see the proposals that the Government bring forward. However, given what was said at the election, there is still a sting in the tail for employers in the small print of what the Minister has brought forward today.
My right hon. Friend the Member for Edinburgh South West (Mr Darling) announced in the pre-Budget statement on 9 December 2009 that we would increase national insurance contributions by 1%. However, in this Bill there is not only that increase but, side by side with it, the 2.5% increase in VAT that the Government have introduced. The Minister has put an extra £1.4 billion on national insurance and, at the same time, increased VAT. At least we were clear about our objectives in the election. However, we will support the Bill today.
We support the national insurance holiday, which engendered most debate in Committee and on the Floor of the House. We think it is important to consider measures that encourage business, but we disagree with the exclusion of London and the south-east and eastern regions. We have made the case on that issue and I hope that the Exchequer Secretary will reflect on it.
This debate has been very positive. I thank my right hon. and hon. Friends who have contributed, particularly those from London and the south-east and eastern regions. I thank my hon. Friend the Member for Nottingham East (Chris Leslie) and the Whip, my hon. Friend the Member for West Ham (Lyn Brown), for their help and support during the course of the Bill. We will not vote against the Bill this evening, but we will undoubtedly return to the scrutiny of it in another place shortly. Some of the arguments bear further repetition in Committee and on the Floor of the House there. Finally, I thank the Minister for his patience and co-operation. I look forward to seeing him on numerous occasions in the future.