National Insurance Contributions (Secondary Class 1 Contributions) Bill

Gareth Davies Excerpts

2nd reading
Tuesday 3rd December 2024 Commons Chamber

[Gareth Davies (Grantham and Bourne) (Con)]

It is a great pleasure to wind up the debate on behalf of the official Opposition. I pay tribute to and thank all colleagues from both sides of the House for their contributions. I will try to touch on some of their points as I go through.

Just nine months ago, I opened the Second Reading of a Conservative national insurance Bill that cut taxes for millions of working people across the country. Today, we have before us a Labour national insurance Bill that will take the tax burden to the highest levels in history on the backs of working people. That is the stark difference that a Labour Government make, but it is not the change that people voted for.

Nine months ago, the Economic Secretary to the Treasury told the House that the then Opposition supported our tax cut, but barely three hours later, she and her Labour colleagues remarkably failed to vote for it and back up their words with actions. Now we know why: it is Labour’s playbook to say one thing as loudly as possible and then do the exact opposite as quietly as it can.

[Stuart Anderson]

On the Government’s tax policy, does my hon. Friend think it is concerning that the Chancellor today refused to rule out further tax rises in future Budgets?

[Gareth Davies]

Absolutely. We all heard what the Chancellor said at the Confederation of British Industry conference. It is remarkable that the Prime Minister will not back up her words, and even more remarkable that the Chancellor herself would not back up her words today at Treasury questions.

The British people see the Bill for what it is: the biggest broken promise of them all, and there are plenty to choose from. It is a good job the Chancellor has experience on a complaints desk, because, quite frankly, there are quite a lot coming in at the moment—not least from the business community, as my hon. Friend the Member for South Shropshire (Stuart Anderson) highlighted so well in his speech. Before the election, the Chancellor embarked on what she referred to as the “smoked salmon offensive” with British business; now the election is over, she has dropped the smoked salmon and is focusing on just being offensive.

Today’s Bill will introduce tax rises on working people in business that were never declared before the election. It is a double whammy, as the Federation of Small Businesses has said in Lincolnshire: it introduces not just the rate rise, but a reduction in the threshold. This tax is the only major tax that is paid exclusively by working people. It is a £25 billion tax rise on jobs. The OBR makes it clear that by 2027, 76% of the total cost of this tax increase will be passed on to working people through lower wages and higher prices, as the hon. Member for Angus and Perthshire Glens (Dave Doogan) said in what I thought was a very thoughtful speech for the SNP.

As I said at Treasury questions this morning, the OBR says this is a tax on working people; the IFS says this is a tax on working people; even the Resolution Foundation says this is a tax on working people. By anyone’s measure—be in no doubt—this is a manifesto breach the public will not forget. That is clear.

What is not so clear any more is what this Labour party stands for. The Budget was an attack not just on working people, but on the very lowest paid working people, according to the IFS. This is a fundamentally regressive policy, leaving many out in the cold and giving businesses no choice but to freeze hiring and freeze wages. It will hit others, too. It will hit the doctors and the nurses working in general practice and social care, as my right hon. Friend the Member for East Hampshire (Damian Hinds) set out in his speech. It will hit charities and voluntary organisations, with Marie Curie expecting that it will cost the charity £3 million next year alone—all part of a £1.4 billion bombshell to hit all charities next year. It will hit hospices, homeless support groups and disability charities, which are all warning they face reducing headcount and limiting services. This is not what the British people voted for.

[Dave Doogan]

Is the hon. Gentleman concerned, as many of my colleagues are, that the Government will not give the full details on compensation for the non-core public sector activities that are the lifeblood of the NHS because, if they gave them the compensation that they need, the net benefit from the tax would be so risibly small as to demonstrate that it is utterly pointless and a concoction that could come only from a dysfunctional Treasury like this one?

[Gareth Davies]

There is really nothing to add to that. The hon. Gentleman made that point in his speech and at Treasury questions—it is a very important point.

In just six months, we have hit the highest tax burden in history. Debt is up, with debt interest payments above £100 billion—for the first time ever—in every year of the forecast. Today’s Bill will result in lower wages, higher prices and a tougher employment market. I urge this Government to reverse course, but I will not hold my breath. Instead, I think I can predict what the Minister is going to say. She is going to say three things when she stands up to speak. First, she is going to try to blame the Conservative party—blaming everybody else for this clear political choice. She will not explain the £8 billion on GB Energy—an energy company that will not actually reduce bills or produce any energy—or the £10 billion on public pay splurges that come with no reform on productivity, or £7 billion on rebranding the national infrastructure bank. Perhaps if the Government dropped those pet projects—which will not actually grow the economy—they would have a little more money and would not have to screw with small businesses and make people unemployed.

Secondly, the Minister will forget that she is in government and that I am in opposition. She will ask me what my party would do instead. To that, I simply say that we would fund the NHS well, but we would also reform it.

[Dan Tomlinson]

Would the shadow Minister increase borrowing or increase a different tax, or are there some public spending cuts that he would like to announce?

[Gareth Davies]

I hope the British people are listening to this: none of those things. I remind the hon. Gentleman, although he was not here, that NHS spending increased by 45% in cash terms in the last Parliament under a Conservative Government. The issue is not spending—the Labour party will never get this—but reforming the NHS, as my hon. Friend the Member for Bromsgrove (Bradley Thomas) said. It is about growing our economy faster than the Labour party would grow it, according to the OBR, as my hon. Friend the Member for Isle of Wight East (Joe Robertson) said. We would tackle the welfare bill—£12 billion of savings that we set out in government—and we would boost productivity, because if public sector productivity returned to pre-pandemic levels, £20 billion would be saved.

Finally, the Minister will try to suggest that she is bringing stability, even though businesses and consumer confidence have plummeted ever since she and her colleagues took office. Let us remind ourselves of what she means by stability. In just a few months, we have seen a Downing Street chief of staff sacked, a Cabinet Minister resign, a Back-Bench MP quit the party, key manifesto promises like cutting energy bills by £300 completely dropped, a delayed spending review, fiddled fiscal rules and, just this week, complete confusion about whether the Prime Minister will drop his economic growth pledge. It is all so predictable, yet so damaging to our economy. The Bill breaks Labour’s manifesto. We cannot back it. We will not vote for it. We urge the Government to think again

National Insurance Contributions (Secondary Class 1 Contributions) Bill

Gareth Davies Excerpts

Committee of the whole House & 3rd reading
Tuesday 17th December 2024 Commons Chamber

[Joe Morris]

My hon. Friend eloquently makes the point that I have been trying to make when I have tripped over my words.

I am extremely proud that the Government are committed to achieving economic stability, being frank with the public about the choices that we face and not simply taking the easy options. We need to implement these tough measures in order to resolve the previous Government’s disastrous economic mismanagement and to restore our foundations. I will finish by saying that traditionally, as far as I am aware, it is poor form for the arsonist to criticise the actions of the fire brigade.

[Gareth Davies (Grantham and Bourne) (Con)]

I rise to speak, on behalf of the official Opposition, to amendments 13 to 18 and new clause 1, which stand in my name.

First, it is important to remember the context of the situation we find ourselves in today. Throughout the election, the Chancellor and the Prime Minister promised the British people that they would not raise taxes on working people. They committed specifically to not raising national insurance, but here we are in Committee debating a national insurance tax on working people worth some £25 billion. Each and every Government Member made specific promises to their constituents on national insurance, which they have now broken. We have it here in black and white.

Clause 1 raises the rate of secondary class national insurance from 13.8% to 15%. To compound the impact, clause 2 drastically cuts the secondary threshold from £9,100 to £5,000. This two-pronged attack on business means that while clause 1 squeezes more from businesses, clause 2 simultaneously pushes more businesses into the taxman’s grasp. Taken together, based on data from His Majesty’s Revenue and Customs, a staggering 940,000 employers are set to lose out in net terms from the Bill. The Office for Budget Responsibility has made it clear that each one will be hit by an average of £26,000 in additional tax.

On Second Reading we heard the same old script from the Government and their Back Benchers. Time and again we hear that the Bill will hurt only the largest businesses, but that is not correct. Most high street hair salons would not say that they are a big business with mounds of profit to give away to the Exchequer, no matter how much hair mousse this Prime Minister buys from them. A village family butcher surely would not regard themselves as profiteering fat cats. Community pharmacies providing vital services to residents young and old surely cannot be put in the same category as a large multinational pharmaceuticals company. Yet they are.

[Gareth Snell (Stoke-on-Trent Central) (Lab/Co-op)]

The hon. Gentleman is making an eloquent argument against increasing the employer’s part of national insurance contributions. Yet he himself voted for the health and social care levy, which was an increase of greater proportion on both employees and employers. I have just checked Hansard—he made none of the arguments that he progresses today when his Government were putting that through. Why has his mind been changed now that he is in opposition?

[Gareth Davies]

I find it difficult that the Labour party says that we are irresponsible with public finances, yet when we faced a once-in-a-century pandemic and spent £400 billion or £500 billion to support residents, business and families in Stoke and across the country, we decided that we needed to pay that money back and did not want debt to keep on rising. Yes, we made difficult decisions in the face of a global pandemic. There is no global pandemic today. This is a political choice, and that is the difference.

[Dr Scott Arthur (Edinburgh South West) (Lab)]

The hon. Gentleman is very kind in giving way again so quickly. The point has been made about the billions of pounds that were spent during the pandemic. Can he outline how much of that money went to Tory party mates and donors through dodgy contracts?

[Gareth Davies]

The hon. Gentleman was not here at that time, but those of us who were in Parliament then faced an incredibly challenging time in very difficult circumstances. Billions of pounds went to support businesses in his constituency; if he has a conversation with the average business that benefited from the furlough scheme, I am sure he will correct the record.

The problem is that socialists fundamentally do not understand or care what it means to have an idea, to take a risk or to work hard day in, day out to make a business a reality. That is the problem. They think it is all so easy—that profits just flow in. They think it will all be all right, because Government can step in and take us much tax as they want. That is not the case. If Government Members talk to the average business in their constituencies, they will find this out; if they set up a business, they will see it for themselves.

Perhaps most worrying of all, not only do the Government not understand the private sector, but they have completely overlooked the different ways in which the public sector provides for our communities, as my hon. Friend the Member for Hinckley and Bosworth (Dr Evans) set out. Whether healthcare, childcare or the charity sector, organisation after organisation has warned Ministers that this tax rise will impact the services they provide. That may not have been intended, but the Government have yet to act. That is why we have tabled amendments 13 to 15 and 16 to 18, which seek to protect certain key sectors from both parts of this tax in Great Britain and Northern Ireland respectively.

[Dr Luke Evans]

My hon. Friend has hit the nail on the head, and the Treasury really needs to answer this question. Did it knowingly implement these tax rises on these industries, which would be a travesty in itself, or did it do so by mistake because it does not understand these issues? If that is the case, will the Government look to rectify the matter so that hospices, GPs and childcare providers are protected?

[Gareth Davies]

I could not have put it better myself. These amendments highlight the fact that Labour’s attempt to paint this tax rise as a necessity for public services is nothing but plain politics; Labour has always intended to do this, and now it is hiding behind public services to justify it.

Those working on the frontline of healthcare in and alongside the NHS will be deeply impacted. The Institute of General Practice Management estimates that the tax bill of each GP surgery will increase by £20,000 a year, likely resulting in a reduced number of appointments. The Nuffield Trust has said that providers in the adult social care sector will face a £940 million increase, dwarfing the social care support announced in the Budget. Community Pharmacy England says that community pharmacists will be hit by an additional £50 million each year, inevitably causing pharmacies to close and services to deteriorate. Hospice UK warns that £30 million will be added to the bill for 200 hospices across the country, which will lead to greater pressure on NHS palliative services.

[Sir Edward Leigh]

My hon. Friend is a fellow Lincolnshire MP. In Lincoln we have St Barnabas hospice, a greatly loved local institution where most people would want to spend their final days. We also have the Lincolnshire air ambulance, and we have GPs all over our huge county who are struggling. Can he explain how it is in the public interest to attack these people?

[Gareth Davies]

My right hon. Friend—a Lincolnshire colleague and Father of the House—puts it perfectly. Labour says that it supports public services and that those services are apparently being trashed, so why on earth would the Government then go and tax them? Why add to their cost base, which they have very clearly said will reduce services across every constituency? Labour Members will all walk through the Lobby tonight and add to the cost burden of those services. It does not make sense. Charities have also signalled the alarm, with more than 7,000 writing to the Chancellor to warn of the £1.4 billion hit that they will face next year.

[Graham Stuart]

Does my hon. Friend agree that Labour Back Benchers need to speak to their Ministers? As my hon. Friend the Member for Hinckley and Bosworth (Dr Evans) suggested, the Government cannot have meant to do this deliberately. They could accept our amendments today or move some of the funds for the NHS—the £22 billion or £25 billion, whatever it is—across to this, because the NHS depends on social care and other services. At the moment, the Government risk turning something that could be a triumph for them into a disaster, both for the NHS and, more importantly, for patients and those most in need.

[Gareth Davies]

Once again, my right hon. Friend makes a valid point. As I have said already, I am not sure that this was intended. I do not think the Government understand what these measures will do to our communities, to the sectors I have outlined and to the businesses that I will speak about in a minute. The Minister will have to address my right hon. Friend’s point. What will the Government do to mitigate the damage of the Bill on the communities and organisations that I have highlighted?

A sector I have not yet highlighted is childcare, without which millions of parents across the country could not go to work—including, by the way, many in this House. The Bill will contribute an average of £47,000 in additional costs per nursery next year, according to the National Day Nurseries Association. The previous Government did so much to extend childcare to more families, boosting workforce participation and economic growth, but this tax hike will pull us back from that progress. That is not what people voted for. There is no mandate for this harm. I urge the Government to think again.

Ideally, all employers would be made exempt, which is why the Conservatives voted against the Bill. At this time of year, people should be reflecting on another year gone by all too soon and looking to the new year with hope, ambition and optimism, but so many employers will now enter 2025 with fear. Many will be thinking again about that planned expansion or the investment in new equipment or premises. Worse, some will be thinking about who they need to let go—never mind awarding the pay rises in the spring they once hoped to give.

[Dr Luke Evans]

My hon. Friend is an astute man, and he has picked up on something that I fear. According to S&P Global’s purchasing managers’ index, this has been the third consecutive month of job losses; December has seen the highest number since 2021, in the pandemic. It has said:

“Barring the pandemic, the survey has not seen job losses on this scale since the global financial crisis in 2009.”

That is a direct impact of the choices in the Budget and this NIC increase. Does my hon. Friend agree that this is something the Government really need to think about?

[Gareth Davies]

I agree completely with my hon. Friend, who has once again made a very astute intervention. It marries very clearly with what we have seen in business confidence. He mentioned the record since the pandemic. Business confidence has tanked to low levels that we have not seen since the economy had to be shut down during the pandemic. A survey by the CBI, which makes for stark reading, says that 62% of businesses have said that they will have to reduce recruitment, while 48% have said that they will be reducing existing staff levels. That is all because this Bill will impact them in ways they never imagined and were never told about. Whether businesses freeze or cut jobs, or, as the Chartered Institute of Taxation has warned, shift employees to a self-employed basis, or, even worse, offshore workers to overseas destinations, the potential impact on employment should absolutely worry us all.

That is why we have tabled new clause 1, which would require the Chancellor to publish an assessment of the impact of this tax rise on the employment rate within a year of the passage of the Act. It is not controversial; it just seeks clarification and an assessment.

[Kit Malthouse (North West Hampshire) (Con)]

This impact assessment is extremely important, not least because at a macro level—given that the UK is essentially a services-based economy in which human capital is the most expensive fixed cost, effectively—there is no way to escape this tax. Unlike corporation tax, which is levied on profits, this tax is levied whether a business is making a profit or not; businesses that have been marginal but struggling may well be forced into a loss, and may therefore choose to close down. It therefore has to be essential that we look backwards, if this tax goes ahead, and ask what the impact has been from a services point of view.

[Gareth Davies]

That was a classic case of how to make an intervention, because it added to the debate. I had not mentioned that point, but my right hon. Friend is absolutely right. The impact on employers, who will pay the tax whether they are profitable or not, is absolutely right. That is, again, not something I think the Government have fully appreciated.

National Insurance Contributions (Secondary Class 1 Contributions) Bill

Gareth Davies Excerpts

Consideration of Lords amendments
Wednesday 19th March 2025 Commons Chamber

[Madam Deputy Speaker (Ms Nusrat Ghani)]

Order. This debate has to conclude within two hours of its start, so we will have a six-minute time limit, other than for Front-Bench Members. I call the shadow Minister.

[Gareth Davies (Grantham and Bourne) (Con)]

I rise on behalf of the official Opposition in support of Lords amendments 1 to 4, 8, 10, 14 and 21.

Before I dive into the detail, I want to get a little nostalgic. One year and six days ago, I opened Second Reading of the National Insurance Contributions (Reduction in Rates) Act 2024, which cut national insurance for some 29 million working people across the country. What a difference a year makes. At the end of my speech that day, I posed a simple question to the shadow Minister, now the Exchequer Secretary, which was really bugging me at the time: how will Labour pay for all its many spending commitments? I asked specifically what taxes Labour would put up, and called for Labour to just be straight with the British people. Alas, no straight answer was forthcoming, but now we know the answer, don’t we? It is just a shame that Labour gave it to us only after the general election.

Labour promised not to raise national insurance, and that it was on the side of British business. It said that it would deliver economic growth; how is that going? The fact is that the Chancellor is delivering a £25 billion tax rise on jobs across the country. That will stifle growth, hold back British business, and harm public services. This Labour national insurance Bill will, unbelievably, take the tax burden to its highest level in history on the backs of working people.

We are debating a series of amendments tabled and voted through in the other place with the aim of mitigating at least some of the damage to three vital parts of our economy and our communities: healthcare providers, charities and small businesses. Lords amendments 1, 3 and 4 seek to exempt from the measures care providers, NHS GP practices, NHS-commissioned dentists and pharmacists, providers of transport for children with special educational needs and disabilities and charitable providers of health and social care, such as hospices, as we have heard. That is because we have been warned that as a direct result of the national insurance tax hikes, we could see fewer GP appointments, reduced access to NHS dentistry, community pharmacies closing, adults and local authorities paying more for social care, and young working families being hit with even higher childcare costs. We have to avoid that.

[Dr Jeevun Sandher (Loughborough) (Lab)]

Would the hon. Member reverse this national insurance tax change? What spending would he cut to do so?

[Gareth Davies]

If the hon. Gentleman looks back at the record of proceedings on earlier stages of the Bill, he will see that we voted against it. If he looks at our record in government, he will see that we cut national insurance for 29 million people across the country. As I have said so many times in this place, why are we not debating the Government’s creation of an £8 billion quango in Great British Energy? Why are they spending £7 billion on a rebrand of the UK Infrastructure Bank? Why are they spending £9 billion on giving up our sovereignty to Mauritius? Let us start with those discussions; we can then have a real debate.

Lords amendment 2 recognises the role that the voluntary sector plays in the provision of essential services by seeking to exempt charities with an annual revenue of less than £1 million from the national insurance rate rise. Charities with an income of less than £1 million make up some 95% of registered charities and undertake vital work in all our communities, yet this Chancellor will force charity staff and volunteers across the sector to raise £1.4 billion more to cover this tax rise next year alone. Supporting this Lords amendment would prevent so many services provided by the third sector from being reduced, or even removed altogether.

Lords amendments 8, 10 and 14 seek to exempt the smallest businesses—those with fewer than 25 full-time employees—from the proposed cut to the threshold at which an employer is required to pay secondary class 1 national insurance.

[Jess Brown-Fuller (Chichester) (LD)]

The hon. Member mentions small businesses. Local hairdressers in my constituency have been in touch with me to say that given the difficult economic picture, these NICs rises will mean that they cannot take on apprentices this year. Does he agree that this NICs rise is a tax not just on business, but on education?

[Gareth Davies]

Absolutely. To be fair, I do not think the profound impact of this tax is appreciated by Labour Front Benchers. The hon. Lady has pointed out yet another area in which it will have an impact—tax on education. I could talk about the impact on universities as well.

[Sir Julian Smith]

Does my hon. Friend think that the Government have assessed the loss of tax revenue that will result from this measure? In North Yorkshire, almost all of the jobs that would have been created in small businesses over the coming year are now being repressed, leading to a loss of income for the Exchequer.

[Gareth Davies]

To answer simply, I do not think the Government did that assessment before announcing this tax rise, but with plummeting business confidence, declining economic growth and forecasts for economic growth that are consistently downgraded, the profound impact on businesses and growth—as I was saying—is clear for all to see.

[Rachel Blake (Cities of London and Westminster) (Lab/Co-op)]

I listened carefully to your answer to the Minister’s question about what you would cut if this change were to be reversed. You have not been clear about whether you would reverse it, but I listened carefully to the answer, and what I heard you say—[Interruption.] I am so sorry, Madam Deputy Speaker. The shadow Minister referred to GB Energy and the National Wealth Fund. Will he clarify whether he is really saying that he wants to reverse record levels of investment in energy infrastructure and innovation jobs, and in jobs across this country, to stabilise our economy into the future?

[Madam Deputy Speaker (Ms Nusrat Ghani)]

I remind hon. Members that interventions should not be short speeches. The hon. Lady is absolutely right; looking at the Chair should hopefully prevent her from saying the word “you” repeatedly.

[Gareth Davies]

The problem with that intervention is that the chairman of GB Energy himself disagrees about the number of jobs that it will supposedly be creating. I have set out clearly some of the things that we would do differently, and the different choices we would make from the choices this Labour Government are making.

When we talk about small businesses, and about the impact of this national insurance tax increase on businesses as a whole, the Minister and other Labour Members incorrectly suggest that only the largest businesses will be forced to pay this jobs tax. As I have told them consistently in every debate we have had on this Bill, that is simply not the case. Village butchers, high street hair salons and community pharmacies are not what most people would regard as large businesses, yet businesses such as those will be hit. If the Government really want to ensure that our smallest businesses are exempt from at least part of this damaging tax, they should support the Lords amendments that are before us today.

[Sir Gavin Williamson]

We know that the Minister is having to defend the undefendable—he has got a certain Matt Hancock about him in how he does it with zeal. [Interruption.] Sorry, Madam Deputy Speaker. Does the shadow Minister agree that the people who are paying for these increases are taxpayers? They are people who are working hard. I was talking to a manufacturing business in my constituency that was going to give its employees a 4.5% pay increase, but can now only afford to give them a 2% increase. This money is coming out of the pockets of hard-working people.

[Madam Deputy Speaker (Ms Nusrat Ghani)]

I remind hon. Members that language should be respectful at all times.

[Gareth Davies]

The jungle awaits the Minister, clearly. My right hon. Friend is absolutely right; in fact, the OBR has clearly demonstrated in its analysis that 76% of this tax increase will be passed on to working people. That is a manifesto breach if ever I saw one. Not only that—the Institute for Fiscal Studies has made clear that this tax increase will not just have an impact on working people. It is the lowest-paid people in our country who will be paying for it, which is another under-appreciated and under-commented fact for the Labour party.

[Sir Roger Gale]

It is worse than that, is it not? The money that is being paid to bail out Demelza and Shooting Star children’s hospices is being generously donated by people who have already paid tax. Those working people are effectively being taxed twice on the money they are generously giving to support some of the most needy children in this country—needy in terms of health. Is that not absolutely appalling?

[Gareth Davies]

Yes, it is. My right hon. Friend is exactly right; the Government are giving a small amount with one hand and taking a larger amount with the other, but the bottom line is that it is all taxpayers’ money. It is a double tax on those people who now face the brunt of this tax increase.

[Tim Roca (Macclesfield) (Lab)]

Will the shadow Minister give way?

[Gareth Davies]

I will make some progress, if the hon. Gentleman will allow me, and then give way.

This tax, purely and simply, is a financial penalty on 940,000 businesses—that is how I look at it. The analysis shows that it is going to cost businesses an average of £26,000 per year per employer. Not content with ruining farmers’ futures through the immoral family farm tax, the Chancellor wants to hammer them with this Bill, too. She is going to make pubs, cafés and restaurants stump up more to cover her jobs tax, without regard for the impact on our high streets or the communities they serve. She is going to squeeze the creative industries, from theatres to film producers, in a desperate attempt to keep this circus on the road. It is crucial that we understand the impact that the Bill will have. That is why Lords amendment 21 requires the Chancellor to carry out a review within six months of the Bill’s impact on the sectors I have described as well as on farming, creative industries, hospitality, retail and universities.

[Mike Martin (Tunbridge Wells) (LD)]

The shadow Minister has mentioned cafés, and when we have been debating this point previously in the House, I have mentioned Basil’s café in Tunbridge Wells. It now informs me that it is having to put its prices up because of the NIC rises. Does the shadow Minister think that we are going to see a bump in the inflation figures as a result of this tax?

[Gareth Davies]

I remind the House that inflation has already gone from 2% to 3% under this Labour Government, and in fact, the OBR scored the Hallowe’en Budget as inflationary. The hon. Gentleman is right that when these tax rises hit, they will be passed on through higher prices. I hope that that will not put pressure on inflation, but it will inevitably do so.

The combination of factors and how they are affecting businesses, including cafés, is not always appreciated either. The national living wage is going up. Conservative Members have welcomed that—we implemented the national living wage—but it is about the context in which it is going up: national insurance is on the rise and business rates relief for hospitality businesses and high street businesses is being reduced from 70% to 40%. All those things are compounding the impact on cafés, such as the one in the constituency of the hon. Member for Tunbridge Wells (Mike Martin). They will be devastated, inevitably leading to job freezes or job losses, which I will come to.

From healthcare to charities and small and medium-sized enterprises, I have made the consequences of this Bill clear since it began its stages in the House. Today, the Government have one more chance to change course, because what many people across the country want to know is this. What is this Bill for? We were told that it was a one-off tax rise to fix the foundations of the economy. We were told that there would be no more tax rises after this, yet we find ourselves just a week away from an emergency Budget, with speculation rife that other taxes may have to rise because the Chancellor will not meet her own new fiscal rules. Some are suggesting that Labour will break another pre-election promise and not unfreeze the income tax thresholds in 2028, but will rather extend the freeze to pay down their new debts. That surely cannot be true—the Minister himself gave me his personal assurance in this House that income tax thresholds would be unfrozen from 2028. I would like him to reconfirm that promise to me today, in order to end the speculation.

This is vital context for Members as we consider the amendments before us today. If more tax rises will be needed—if the original justification for this Bill is now void—why should we stomach the Bill’s terrible consequences? Why should Labour MPs have to go out and defend this to their constituents? Why should we allow the Government to punish the sectors that the amendments before us seek to protect? In fact, why must we stand here and see this entire Bill implemented at all?

One impact that hits every sector of our economy is the impact on jobs. Just yesterday, we heard Labour talk about the importance of lifting people out of welfare and getting them back into work, and it is right to do that. As Conservatives, we know that the dignity of work and the security of a regular pay cheque is what lifts us up as a country and lifts families out of poverty. The tragedy is that this Bill has caused so much concern and so much uncertainty that employment is already declining in anticipation of its passing. The Office for Budget Responsibility tells us that the Bill will depress workforce participation for years to come.

Put simply, this Government are cutting welfare to boost employment, while at the same time boosting taxes, which will cut jobs. No wonder business confidence has completely and utterly nose-dived. It is inexplicable and entirely avoidable.

[Dave Doogan (Angus and Perthshire Glens) (SNP)]

The shadow Minister says it is inexplicable, and I agree that on the face of it, it is. However, is one possible explanation for fiscal misadventure on this scale not that the Government Benches are filled with people who have scarcely any understanding of the real economy, much less what it means to try to start, run and sustain a business?

[Gareth Davies]

That is right, and it is an important point, because the decisions made by this Government are having such a profound impact on people in the real economy. I simply say to the British public that if they are unhappy with the decisions being made, they have to change the people making them. [Interruption.] Unbelievably, I am getting heckled on that point. The hon. Member for Hamilton and Clyde Valley (Imogen Walker) should get out and talk to the average businessperson in her constituency. She might quieten down significantly.

The Minister implied that the Government had no choice, and he still seeks to ask me what the Conservatives would do differently. Others on the Government Benches are trying that, implying that there is no other alternative. The Minister should look at the £70 billion of wasteful spending commitments that I have already listed, including the quangos, such as GB Energy, the pay-offs to the unions without any reform or productivity gains, and the billions of pounds being surrendered as part of the surrender deal to Mauritius. We have growth on the decline and inflation, debt and unemployment on the rise. We have a Chancellor on the brink, and confidence crumbling. We may not be able to kill this Bill, but we have our chance now to dent the damage. I urge Ministers and Members across the House to do the right thing and to support these amendments.

[Several hon. Members rose—]

National Insurance Contributions (Secondary Class 1 Contributions) Bill

Gareth Davies Excerpts

Consideration of Lords message
Tuesday 25th March 2025 Commons Chamber

[Madam Deputy Speaker (Ms Nusrat Ghani)]

I call the shadow Minister.

[Gareth Davies (Grantham and Bourne) (Con)]

I rise on behalf of the official Opposition to support Lords amendments 1B, 5B, 8B and 21B. It feels like only last week that we were all here, but it is clear that our colleagues in the other place feel as strongly as the Opposition do about these amendments, as they have returned them to us with a similar aim once again.

Lords amendments 1B, 5B and 8B seek to address two of the most serious consequences of the Bill that should concern and unite us all: that a rise in secondary class 1 national insurance could lead to a significant reduction in health and social care services, including our hospices, hitting the most vulnerable in our society; and could represent a complete hammer blow to the future aspirations and very survival of small businesses throughout the country.

We all know that the Chancellor has an addiction to creating fiscal black holes. First she used a fictional black hole, discredited by the Office for Budget Responsibility, as an excuse for her manifesto-breaking tax rises. This has led to more black holes, only this time they are very real because they are being felt out there in the real economy. The Bill before us today will create black holes in the finances of hospices, GP practices, farms, fruit shops, butchers, bakeries and businesses of all shapes and sizes, but especially the very smallest.

[Sammy Wilson (East Antrim) (DUP)]

Does the shadow Minister find it puzzling that the NHS will be exempt from these changes, yet the many services on which people depend for their health—dental services, social care and so on—will be hit by this rise in national insurance contributions? [Interruption.] No services will remain unaffected, so people will not experience the healthcare that they require.

[Gareth Davies]

It is rare that questions come with a musical accompaniment, but the right hon. Gentleman’s mobile ringtone made for a great effect. None the less, his point is the right one, which is that, whether it was intended or not, the rationale for the Bill is to “protect”—in the Government’s words—public services. I could say “bolster” public services if I were being generous. The fact is that the Government are taxing public services on which we all rely and he is absolutely right to emphasise that.

Lords amendments 1B and 5B seek to provide the power to exempt from both prongs of attack of the Chancellor’s jobs tax: care providers, NHS GP practices, NHS-commissioned dentists, NHS-commissioned pharmacists, and charitable providers of health and social care, such as hospices. And it is hospices specifically that I want to speak more about today.

Hospices are there at what, for many, will be the hardest moments of their lives. They provide vital physical and emotional support to individuals who are coming towards the final chapter of their lives and for their loved ones. In short, hospices are there to look after us at our most difficult time. So, whether through funding, charitable donations or legislation, they deserve our utmost support to continue in this task.

However, as I set out in Committee, this disastrous jobs tax will cost hospices up to £30 million next year alone. Hospice UK has repeatedly warned this Government that the Bill risks a reduction in hospice services, which will lead only to even greater pressure on NHS palliative care services.

Of the more than 200 hospices across our country, around 40 provide care for children. These are children who are living with terminal illness, many of whom have an all-too-limited time left in this world. The organisation Together for Short Lives estimates that the Labour Government’s decision to raise national insurance will add almost £5 million to the annual cost of providing care for seriously ill children and their families. Let us be clear: this will mean that every children’s hospice in England alone will need to spend an average of £140,000 more just to maintain services for the children in their care, after paying the additional tax that this Bill will impose. The Government cannot seriously be demanding that staff and volunteers at charitable children’s hospices—the very people who already give their heart and soul to look after sick and dying children—fundraise their share of £5 million next year alone just to keep their lights on and their doors open.

At Treasury questions on 21 January, the Chancellor stated, in response to an excellent question from my Lincolnshire colleague, my right hon. Friend the Member for Gainsborough (Sir Edward Leigh), that the settlement for hospices announced by the Health and Social Care Secretary just before Christmas includes money to specifically “compensate” hospices for the national insurance increase. That is not correct, and I am pleased that at least this Minister has tried to acknowledge that point.

[Sir Edward Leigh (Gainsborough) (Con)]

When I visited staff at the much-loved St Barnabas hospice in Lincoln, which provides excellent palliative care, they told me that they are losing £300,000 a year. In the debates on assisted dying, we all agree that we want more palliative care. I just cannot understand the logic of what the Government are doing. I make one last appeal to them not to load this extra cost on to hospices.

[Gareth Davies]

My right hon. Friend has raised that matter at every single opportunity that he has been afforded, and he is right to stand up not just for St Barnabas, but for all hospices. However, I have to say that St Barnabas holds a particular place in the hearts of people in Lincolnshire. I know, as a Lincolnshire Member of Parliament, that it has been around for 40 years, employs 300 staff and treats more than 12,000 people across our county every single year. The fact that it is going to be hit with a cost worth hundreds of thousands of pounds for no good reason is unacceptable. I pay tribute to my right hon. Friend the Father of the House for raising that point so consistently. I hope that the Government will listen to him.

The settlement announced does not compensate St Barnabas, or any hospice, for the damage that the Government are doing, not least because we know that much of this money cannot be spent on facing down the additional running costs that this tax hike will bring. There is £100 million of capital funding, which has been set aside for buildings and equipment. Although that funding is welcome, it will not fill the national insurance blackhole that the Chancellor has created for the hospice sector, and she should not suggest otherwise. Today the Government have a chance to exempt hospices and other key areas of our health and social care sector from this tax hike, by accepting Lords amendments 1B and 5B.

In addition, Lords amendment 8B seeks to provide the power to exempt the smallest businesses—those with fewer than 25 full-time employees—from the proposed cut to the threshold at which an employer is required to pay secondary class 1 national insurance. The Chancellor has spoken a lot about growth, but growth has been consistently downgraded since she took office. Something that we, as Conservatives, know, and that she, as a socialist, does not know, is that that is because economic growth cannot come from the Floor of the House of Commons; it comes from the factory floors and bustling high street shop floors in each of our constituencies. It comes not from state-created quangos such as GB Energy, but from individuals who had an idea, stuck it out, made it work and saw it through. It comes from people in this country who, by seeking a better life through enterprise, create the jobs and services that make our country strong.

Those small businesses are being hammered, but not just by the national insurance hike. In less than a year they have already seen: business rates relief cut from 75% to 40%; aspiration penalised with changes to business property relief; and crippling new red tape through the Employment Rights Bill, adding a staggering £5 billion in additional costs. This is a potent and damaging combination of costs that many fear will mark the end. Lords amendment 8B gives the Government another chance today to change their approach, to throw our smallest businesses a lifeline—a chance of survival.

Finally, while our smallest businesses require specific attention, I made it clear last week that, sadly, this Bill does not discriminate. It will hit business groups of all types, across all sectors, in all parts of our country—from charities to cafés, from pharmacies to children’s nurseries and special educational needs and disabilities transport. We must understand the impact the Bill will have. That is why Lords amendment 21B requires the Chancellor to carry out a review of the impact of the Bill on a range of sectors of our economy within six months of its passing into law. I urge Members to support the amendment.

Tomorrow the Chancellor will come to this House to launch her latest attempt to reverse as much as possible of the damage of her Hallowe’en Budget of horrors. Despite the hopes and dreams of business owners across the country, we can be sure that her emergency Budget will not include scrapping this awful Bill. It is incumbent on all of us in this place to work to protect and support the most vulnerable in our society, and to take decisions that drive growth, backing the people out there who make it happen. They are the people who will be hit hardest by the Bill. The Government must change course.