National Insurance Contributions (Secondary Class 1 Contributions) Bill

Gareth Snell Excerpts

Tuesday 17th December 2024 Commons Chamber

[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.

--- Later in debate ---

[Helen Maguire]

Yes, I am aware of that and I agree that it is a good way forward.

Another business in my constituency, the Family Building Society, is also facing substantial repercussions. Last Friday I met its chief executive officer, Mark Bogard, who shared that this national insurance increase will cost him approximately £300,000 every year. He said:

“Even as a mutual building society, with no shareholders to generate returns for, we cannot simply swallow that cost. So, going forward, we will inevitably now employ five or six fewer people.”

Madam Chair, these are real-world examples of the damaging ripple effects of the Bill. It will hit not just businesses, but employees, with fewer jobs, lower wages and missed opportunities. This Government claim that they want to kickstart economic growth, but how can firms grow when they are forced to cut jobs instead of investing in their business. How can the economy thrive when ambition is replaced with survival? This Bill does not kickstart economic growth; it slams on the brakes.

Across the board, this Bill threatens sectors vital to our economy and to society. Social care providers, GPs and hospices, already at breaking point, will now face further financial strain. Most of these organisations do not qualify for the employment allowance, meaning that they are exposed to these increases.

The Liberal Democrats have called on the Government to exempt these essential providers from the tax rise, but those calls have been ignored. This decision will worsen the crises in our NHS and social care system, pushing more providers to the brink of bankruptcy.

Six in 10 care homes in the UK are operated by companies vulnerable to even mild economic shocks. How then can the Government justify imposing additional financial burdens on a sector already struggling to stay afloat? Let us be clear: the Government’s own analysis admits that nearly four times as many employers will lose out under this Bill as will benefit. For many employers, this will translate into an average annual tax increase of over £26,000. This is not just a jobs tax, but a growth tax, a productivity tax and, ultimately, an attack on people’s living standards.

This is a deeply inefficient way to raise funds, especially when fairer alternatives exist. The Liberal Democrats have proposed several measures that would raise revenue without harming jobs and growth. These include reversing Conservative tax cuts for big banks, increasing the digital services tax and introducing a fairer form of capital gains tax to ensure that ultra-wealthy people pay their fair share. These measures would protect small businesses, support families and safeguard essential services, while still addressing the country’s fiscal challenges.

The people of Epsom and Ewell deserve better. They deserve a Government who support, not stifle, innovation, enterprise and community spirit. They deserve a Government who listen to small businesses, healthcare providers and families who are already struggling under the weight of rising costs and stagnant wages. This Bill is not the solution to our economic challenges; it is a blunt instrument that will do more harm than good, jeopardising jobs, living standards and essential services. I urge the Government to reconsider this unfair and counterproductive measure and to work with us to develop a fairer, more sustainable approach to taxation that prioritises people and communities.

[Gareth Snell]

I wish to start by reflecting on something that the hon. Member for Grantham and Bourne (Gareth Davies) said in his opening speech. He talked about socialists thinking that taxes just flow in. Given that he was a member of a Government that raised taxes to their highest level in history, perhaps this season it is less secret Santa for him, and more secret socialist. Perhaps, if he is lucky, under his Christmas tree on 25 December he will find a red flag that he can fly. I jest, Madam Chair, but the point is that that Government agreed with tax and spend—they taxed; the trouble was what they chose to spend the money on.

That is the difference between this Government and the Government that came before: we have made clear commitments about what we will spend the money raised by this national insurance Bill on. We will make investments into the NHS and our public services, such as our schools and hospitals, and we will fix the railways. [Interruption.] The hon. Member for North Bedfordshire (Richard Fuller) chunters, but I cannot actually hear what he is saying. If he wishes to intervene, I will happily give way—no, I thought not.

The fact of the matter is that although this is not a decision that I would particularly have liked the new Government to make, having looked at the levers available to us and having made a political choice to protect the pay packets of individuals in work, this is a way of raising revenue.

[Graham Stuart]

Will the hon. Gentleman give way?

[Gareth Snell]

I often think that we do not hear enough from the right hon. Gentleman, so on this one occasion I will give way.

[Graham Stuart]

Given the competition on the Labour Benches, the hon. Gentleman is one of the more honest and up-front Members in addressing some of the issues. Does he regret the exclusion of the various groups we have heard of today, from hospices to social care and childcare? Will he urge Ministers to look at whether they can create a more coherent and joined-up approach, so that the £22 billion—or whatever it is—going into the NHS actually works to improve the healthcare of the nation?

[Gareth Snell]

If the right hon. Gentleman hangs fire, he may be surprised by some of the things I will say as I try to progress my speech. Although, in that context, is it not laughable and ludicrous that some of the most important parts of our social care sector—our air ambulances and our hospices—are dependent upon charity; that they have to rattle tins in supermarkets, dependent on handouts and philanthropic grants on a non-reoccurring basis, just to continue the service they deliver? There is a much broader conversation that we have to have as a nation about how far general taxation should fund some of those programmes. The right hon. Gentleman rolls his eyes, but I would rather make a small contribution to ensure that hospices and air ambulances can run than to have to watch people sit in baths of beans to try to ensure that vulnerable people get the help and support they need when they need it. He may disagree with that, but we should discuss that broader point of how we fund some of those things and whether we consider them to be vital infrastructure to our health and care system.

[Neil Duncan-Jordan (Poole) (Lab)]

Does my hon. Friend accept that any fair taxation system should place the biggest burden on those with the broadest shoulders? That means taxing the wealthiest in this country, rather than hospices and the charitable sector.

[Gareth Snell]

Again, if my hon. Friend bears with me, I will get to that point, but I absolutely agree in principle that taxation in this country should fall on those most able to make that contribution. There is also a question about how we spend that money and use it in preventative services. Again, there is an argument to be had about how much of the money given to, for instance, the Staffordshire and Stoke-on-Trent integrated care board is spent on reactive services that treat people, as opposed to preventative services that keep people well in the first place. There is definitely a discussion to be had in our communities about whether the commissioning bodies that have the money are commissioning the preventative services necessary to reduce acute demand.

Last Friday I listened to the charities convened by Voluntary Action Stoke on Trent, and they themselves said that their biggest challenge before the national insurance increase was even mooted was the fact that they cannot get recurring funding year on year from health bodies, councils and the public sector. When they manage to get to the end of a project, they are told, “You’ve done that project. Come up with something new.” They are asked to redesign their service to chase a pot of money in order to deliver what essentially is the preventative service that stops the more acute services from facing greater demand. Again, we as a nation need to have a conversation—in part it is brought to a head by this Bill—about what role we see for charities in this and how we fund those services.

[Daisy Cooper]

For a long time we in this place have had debates about ensuring that the shift happens upstream in the sector, to support public health and primary care. Does the hon. Member accept that this measure will undermine the effort to put more investment upstream, and that it will force many charities to do even more fundraising to backfill the gap created by the national insurance contributions hike?

[Gareth Snell]

I absolutely agree. If the hon. Lady will bear with me, I will come to exactly that point later on.

My constituency is often in the top 50 for social and economic deprivation, and we are often wholly dependent on the charitable sector picking up people when they are at their lowest and most in need. Charities often do the really hard work in getting those individuals back to a place where they can even begin to access statutory support services, such are the demands placed on them by the services with which they are seeking to engage.

Let me take the example of supported housing. We talk quite rightly about giving people homes, but many of the people in Stoke-on-Trent who access the services that will be impacted by the national insurance contribution increases would not be able to live independently on their own in the months to come if it were not for supported housing. As the hon. Member for St Albans (Daisy Cooper) points out, that has a huge bearing on the acute cost at the presentation of final service.

Last Friday, Voluntary Action Stoke on Trent, an excellent organisation run by Lisa Healings and her team, convened a meeting of local charities and the three Members of Parliament for Stoke-on-Trent. Lisa helped me by compiling some of the specific impacts that the national insurance increase will have on charities and organisations in my community, and with the indulgence of the Committee, I will refer to some of them so that Members can hear the scale of the challenges that we face.

The first relates to the citizens advice bureau in Stoke-on-Trent, which does a phenomenal amount of work. It will see an increase of £150,000 to its national insurance contributions. Although it will be able to mitigate some of that impact, the change will just mean that people wait longer for help, or, perversely, that more people will enter MPs’ caseloads and visit our surgeries because the CAB often signposts to other agencies when it cannot meet demand.

The second largest impact I was told about is to the YMCA North Staffordshire, which will see its NI contributions rise by £101,000. That organisation routinely provides homes for young people who would ordinarily find themselves on the street, works with families to ensure that family units can stay together, supports community meal initiatives to bring together different Stoke-on-Trent communities, and does a lot of work on community cohesion, which is a particularly contentious issue in my city.

A smaller organisation, Savana, which I must declare is run by my ex-wife, although we are still on favourable terms—

[Mike Martin (Tunbridge Wells) (LD)]

rose—

[Gareth Snell]

No—I will give way in a second. Savana is the provider of the rape and sexual advice service in Stoke-on-Trent. It gets all its money from the Ministry of Justice; it is essentially running a Government service by virtue of contracts, yet it will now see an increase in its national insurance contributions of something between £16,500 and £17,000, which will reduce the number of people it can support with independent domestic violence advisers and independent sexual violence advocates. The other half of its money comes from the Home Office via the police and crime commissioner. Again, that is essentially public money providing a public service that just happens to be provided by a charity that is not covered by the rebate provided to other organisations.

Disability Solutions helps those who are entitled to additional support to access it. That charity brings millions of pounds a year into the city, which has a cumulative economic benefit, because the money brought in is spent on our high streets and in our local economy. The people it helps are not the wealthiest in my city; they quite often have very little in their pockets, and every penny that is given to them is spent in the local economy. They do not hoard it in a savings account, put it into the Cayman Islands or use it as a downpayment on a new car or furniture; they go out and buy food, shoes and school uniforms for their children, or they use it in one of the local entertainment venues.

North Staffs Mind faces an impact of £55,000. That organisation is specifically designed to help people with their mental health, which the Government have rightly identified as a huge inhibitor to economic growth, because if people cannot get their mental health sorted, they cannot get back into work. Another mental health organisation, Changes, wrote to me to say that these changes to national insurance would be unsustainable for them. Finally, the Dove Service is a bereavement counselling service that faces a cost of £2,000. All those organisations are filling a void in state provision in my city.

[Simon Hoare (North Dorset) (Con)]

In essence, the hon. Gentleman has described what we on the Conservative Benches would have called the big society some years ago. Does he share my concern, however, that that huge bank of volunteers who often prop up and form the supports for the organisations he has described are likely to drift away as their organisations come under pressure? Not only will there be a financial pressure, there will be a pressure on the resource of people who are volunteering, because they will just say, “If the Government are not prepared to help us this one little bit, why should we help?”

[Gareth Snell]

I actually do not agree with the hon. Gentleman’s assessment, because in my city of Stoke-on-Trent, when there is need, people arrive to offer help. It is one of the things that people often say; we are a friendly, welcoming people, and if someone is in need, we roll up our sleeves and get stuck in.

However, I agree that although dedicated volunteers are excellent, they are not a replacement for staff. In particular, they are not a replacement for the highly trained staff who provide very bespoke services, such as some of the ones I have mentioned. There are thousands of volunteers across Stoke-on-Trent, and I thank every single one of them for every moment of their time that they donate, but as the hon. Gentleman will know from his constituency, we sometimes talk about voluntary organisations as if they have no costs associated with staff, because they are entirely volunteer-run. I think everyone across this House would recognise that that is simply not the case; if it were not for the cadre of professionals who help co-ordinate those volunteers, things would fall apart.

Although I have set out the challenges faced in my city, I am not necessarily drawn to some of the proposed amendments that would set differential rates for charities or other organisations. That is not because I do not believe those organisations should not be protected from the national insurance increase that is coming, but if we are saying that they should have a differential rate, why should that rate not be zero? Why should we not just exempt them entirely? I am also not convinced that we would not see people seeking to reorganise their own businesses to try to claim charitable status and reduce their own liabilities. Fundamentally, I believe that paying tax is a patriotic duty—if someone should, then someone must.

There have been record levels of settlements for the NHS, and I accept the points that have been made about hospices and GPs. I sincerely hope that Staffordshire and Stoke-on-Trent ICB will make use of the better care fund, putting some additional money into that fund to pay for the social care that could help offset some of the national insurance increases that will make those jobs much more difficult. However, many of the organisations I have mentioned receive their operating budgets from Government, albeit passported through funds, a local council or another public body. They are essentially running Government services—they are running a public service on behalf of the Government. Is it not incumbent on us to make sure the services we ask them to provide are provided at the level we expect, and that we resource them efficiently? I would like to think that the difference between this Government and the previous one is that we value the work sufficiently that we will pay those organisations correctly and accordingly. If the Minister could address those points when he sums up, I would be most grateful.

[Graham Stuart]

It is a pleasure to follow the hon. Member for Stoke-on-Trent Central (Gareth Snell), who I am pleased to say honoured his words at the beginning of his speech, quite rightly. I think that is because he has been in this House for some time and knows the difference between legislative intent and legislative outcome. No one believes that the Minister on the Front Bench or other Ministers wilfully want to damage GPs and hospices —how could anyone reasonably want to do that? However, that is the effect of this Budget of broken promises overall, and of the particular measure on national insurance contributions that we are debating today.

No one has really explored where this measure came from, but the genesis of it was actually a desire, in the pre-election period, to reassure those with long memories who thought that Labour was not a party of growth. In trying to reassure the nation that Labour was on the side of business, it was saying, “Economic growth is mission No. 1, so if you are an entrepreneur, you can relax, because we are on your side.” The other big fear about Labour Governments over time is that they will come along and raise people’s taxes. Labour therefore came out with very specific pledges and oft-repeated promises again and again, saying that it would not raise an array of taxes, including of course national insurance contributions. That is why Paul Johnson, who is an independent commentator, said that he thought this measure was an absolutely clear breach of that pledge.

On coming into power, the Government said there was this £22 billion black hole, and Labour Members have mentioned it again today. I think the hon. Gentleman was notable in not doing so, because he knows there is no substance to it.

[Gareth Snell]

Will the right hon. Gentleman give way?

[Graham Stuart]

The hon. Gentleman can intervene to rectify that in a moment if he feels the need to do so for reasons of tribal loyalty. Again, the OBR said there was nothing in its calculations that supported or validated—I think the word used was that it did not “validate”—the so-called £22 billion black hole, but let me give way to him so that he can rectify that omission.

[Gareth Snell]

The phrase damned by faint praise springs to mind. To be clear, I think the analysis of the Treasury and the Chancellor of the state in which we found the public finances is absolutely accurate. I think the remedies we are taking, while unpalatable to some, are necessary. I just wish we were able to mitigate some of the worst aspects of them.

[Graham Stuart]

I thank the hon. Gentleman, and it is good of him to show that tribal loyalty. He did not criticise the OBR, but it said that it could not validate the so-called analysis. The £22 billion black hole does not exist, and it is quite clear from the OBR that that is true.

Let us, however, assume that the black hole is true: I think the Government are spending £1,270 billion this year, so let us assume that, in that £1,270 billion, this gargantuan black hole of £22 billion actually has veracity, while it does not. Having gone to the lengths of forcing even someone as up front and candid as the hon. Gentleman to feel obliged under tribal Labour rules to keep backing this measure, and having established the figure, one would think that the Government would want to come forward with a tax rise, if that is what they wanted to do all along. Alternatively, to give the Government credit, perhaps they came into office and found that things were much worse than was thought to be the case beforehand, in which case they would want to come up with a rational way of raising the funds with minimum possible damage.

I suggest it could be said to be a fib, but let us say there is a £22 billion black hole and they need to fill it. The Government should come forward with sensible tax plans. The Government have reneged on their pre-election promises, so why not renege on this one, and come forward with a sensible tax that does not particularly disincentivise those who are furthest from the jobs market? That is what the reduction in the NIC allowance to £5,000 does, and we know that it is particularly going to hurt people are struggling to get back into work, perhaps after a mental health episode, or perhaps because they are young and are struggling to get into the jobs market.

There may be worse taxes than the way this one will work out. I think £26 billion is the headline amount that will be raised and taken out the economy, but 76% of that in year 2 or 3—whichever it is—will come out of wages. By my rough arithmetic that means about £19 billion is going to come out of pay cheques, which is the very thing the Government were trying desperately to avoid doing. This measure will take £19 billion out of pay cheques, and because of the reduction in investment, the reduction in employment and the resulting reduction in profits, it will net only £16 billion.

Then the Government, having got that £16 billion, have decided to compensate the public sector, and we know about this because of the changes the OBR put out at the time of the election. It had to make a correction, because it had clearly been asked and told to allow another £800 million or £900 million for social care, recognising the issues that have been raised so powerfully by colleagues today. However, that was changed and removed, and it had to make an amendment to its response. By the time we have taken off the compensation as currently restricted to the public sector, which I think rises to about £5 billion, that takes the net receipts to £10 billion or £11 billion. That is a £26 billion hit to the economy, a reduction in investment, higher interest rates, lower growth, and £19 billion removed from working people’s pay packets—the people who Government Members believe they are on the side of—yet the measure nets only £10 billion or £11 billion to spend on public services. It is truly a ruinous approach to raising the money.