National Insurance Contributions Bill

George Hollingbery Excerpts

Tuesday 3rd February 2015 Commons Chamber

[Mr Gauke]

There is a reference to employers’ national insurance contribution. The tax summaries state how much is paid in income tax and in employees’ national insurance contributions. There is also a line in the summaries saying, “Your employer has paid this much employers’ national insurance contribution.” Returning to the issue directly before us in relation to apprenticeships, there is an argument—I think a lot of economists would make this point—that ultimately the burden of employers’ national insurance contributions is taken up by the employee, as they receive less in salary as a consequence. There is also a case that it may be a disincentive for employers to take on employees.

We believe this sensible and well-targeted measure will encourage businesses to take on apprentices. We have not focused particularly on the limit, but there is provision to prevent manipulation such as the classifying of premier league footballers as apprentices, which might result in a 24-year-old footballer paying no NICs on a salary of £1 million. We have sought to address such abuses.

[George Hollingbery (Meon Valley) (Con)]

Will the Minister develop that point a little by saying exactly how many apprentices he thinks the change will encourage?

[Mr Gauke]

We anticipate that there will be about 3 million apprenticeships over the course of the next Parliament. The provision will come into effect in 2016-17. Not every apprentice is under 25, so not every apprentice will benefit from the provisions, but a large number of apprentices in the next Parliament will benefit.

Overall, we estimate that about 180,000 employers offering apprenticeships in the UK are likely to benefit from the measure. Apprenticeship data from the Department for Business, Innovation and Skills for England for the 2013-14 academic year show that about 500,000 apprentices under the age of 25 are employed throughout the country, and we estimate that about 130,000 apprentices in England are aged 21 to 24. That group will be directly affected by the measure, with those under 21 already benefiting from the zero rate for under-21s from April this year. I hope that information is helpful to the House.

Many Members were delighted by the Chancellor’s announcement on apprenticeships in the autumn statement, which demonstrated, yet again, the Government’s commitment to apprenticeships. If we wish to succeed in the global race, we need a well-educated and well-trained work force and to support employers who provide the training and experience that young people need if they are to be more productive and effective and more likely to make a substantial contribution to the economy.

Quite rightly, we often debate how to improve living standards, but ultimately it is down to improvements in productivity. As the economist Paul Krugman said—I do not often quote him:

“Productivity isn’t everything, but…it is almost everything”.

As part of our long-term economic plan, one measure we are taking to improve productivity is ensuring a well-trained work force, and encouraging apprenticeships is key to that. It is yet another aspect of our long-term economic plan. It will help us improve our productivity, and as productivity increases, so too will wages, salaries and living standards.

[George Hollingbery]

Will the Minister elaborate on the Government’s own productivity and on whether our investment in apprenticeships has been compared with other possible investments in productivity?

[Mr Gauke]

My hon. Friend makes a good point. As I said, the Government invest about £1.5 billion a year in apprenticeships. In its 2012 report, the NAO suggested that for every £1 spent in this area, we got a return of £18, and studies by the Department for Business, Innovation and Skills suggest that the return might be even greater: £28 for every £1 invested. Therefore this offers good value for money. Our policy on apprenticeships is an additional step, and I am delighted that the tax system can be used in this way. Once again, it demonstrates that the Government are on the side of those who wish to work hard, improve their skills and get on in life.

With those remarks, I hope that the House will agree with the Lords amendment.

Lords amendment 1 agreed to, with Commons financial privilege waived.