National Insurance Contributions Bill

Ian Murray Excerpts

Thursday 13th January 2011 Commons Chamber

[Ian Murray (Edinburgh South) (Lab)]

As was pointed out by my hon. Friend the Member for Edinburgh East (Sheila Gilmore), my constituency is at the top of the league in terms of public sector jobs, yet unemployment is less than half that in the constituency of my hon. Friend the Member for Walthamstow (Dr Creasy). Does that not highlight the discriminatory nature of the Government’s policy?

[Dr Creasy]

That is a very good point. I am talking about the public sector workers who are most at risk of redundancy. The people who live in my constituency may not do the same jobs as those who work in the public sector in Edinburgh. They are teaching assistants, nurses, and people working in inclusion units and Sure Start. They are losing their jobs because of the cuts that are being made in local and national Government. People such as civil servants—who knows, perhaps they include the admin assistants in the Minister’s offices—fear for their jobs. They are looking to the Government, who say that the private sector will pick up the pieces following the cuts in the public sector, and they are asking how that will happen. In my region, the answer is very unclear.

This policy could be part of the remedy, and that is the aim of the amendment. It asks, “How can we generate jobs? What are the motives that lead people to set up businesses and industries that generate jobs in the private sector?” Many of us share an interest in whether the private sector could generate jobs as part of the recovery. We think that the policy has failed that test, and needs to be amended. Excluding London and the south-east means excluding a key wealth-creating element of our national economy, and we feel that that is remiss.

I also think that the Government have been remiss in excluding the voluntary sector and charities, and in Committee I supported amendments seeking their inclusion. According to the National Council for Voluntary Organisations, if the voluntary sector could benefit from the change of policy on national insurance holidays, an extra 2,500 charities could be created. Perhaps even more could be created through the big society, given the interest in how the voluntary sector could work in public sector commissioning. Cruelly, however, they have been excluded. The questions “Who are the people who are generating jobs?” and “Where are the places where people who are losing their jobs in the public sector can best find employment in future years?” have not been answered; the test has not been passed.

I ask the Minister to consider amending the policy in the way we have suggested, not least on the basis of his own evidence. He will recall that, in Committee, I was particularly concerned about the way in which the Government had constructed the policy, and the evidence on which it was based. He himself has described it as an uncertain benefit, and his officials have admitted that they did not have much evidence on which to assess whether they could reach all the people whom they wanted to reach, or involve all the businesses that the Minister had hoped to involve. In the impact assessment, the Minister said that he hoped that the policy would help 400,000 businesses, but he has admitted today that only 1,500 have applied so far. In Committee, one of the officials suggested that the number of applications would increase at the remittance stage, but that is not job creation. The jobs would have already been created, and people would be applying retrospectively for remittances. That suggests a challenge to the status of the policy as a job creation measure.

According to the Minister’s own analysis, the inclusion of London and the south-east might well make possible the creation of an extra 300,000 businesses. Before he says that there is no extra money, let me suggest to him that the creation of those extra businesses might enable him to meet his target of 400,000 over the three years. He could then return to the House and reassure all of us who are concerned about the efficacy of the policy that it had succeeded in generating new business in the United Kingdom and forming a key part of our recovery. Let me also encourage him to consider the extra tax take that the Treasury would gain as a result of the creation of all those new businesses, as well as the fact that all the extra national insurance funds could be spent on the national health service or on pensions, as he desired. There are many benefits in considering how the Bill could be amended to include London and the south-east. Let us think about all the people who would be affected by the jobs that this would create, the money it would bring into our national Exchequer and, above all, the economic recovery it could help drive.

I therefore hope the Minister will accept the amendments and acknowledge that they have been tabled in good faith. They are motivated by a genuine desire to make sure this policy is effective. Whether or not we agree with the Government—and we certainly disagree with many of the changes they want to make—I hope the Minister will understand and share our concern that jobs must be the first priority of any British Government in the current economic climate.

--- Later in debate ---

[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.

[Ian Murray]

Let me give the Minister a little of my experience as a business owner with up to 12 staff. Small entrepreneurs and people who run small businesses in Edinburgh are, like me, far more concerned about the impact on our businesses of the number of customers not coming through our doors because of the VAT rise than they were about any increase in national insurance that the Labour party proposed before the election. I would gladly pay £30 a week more for each member of my staff than have no customers left.

[Mr Gauke]

I do not want to reopen the whole argument on everything that should be done to reduce the deficit, but we have to get it down. I am not sure whether the Labour party grasps the need to get the deficit down, but there is no doubt that it has to be eradicated at some point—even the shadow Chancellor agrees with that. The Labour party believes that national insurance contributions are the best tax by which to do that, but all we have heard from Labour Members this afternoon is why they want a cut—and they want a bigger cut than we are offering.