National Insurance Contributions (Secondary Class 1 Contributions) Bill

Jeevun Sandher Excerpts

2nd reading
Tuesday 3rd December 2024 Commons Chamber

[Dr Jeevun Sandher (Loughborough) (Lab)]

It is a pleasure to be called to speak in this incredibly important debate. On 30 October, the Chancellor delivered a Budget that will rebuild the foundations of our broken economy through public investment paid for by tax revenues. We are proud that those revenues will be raised from both the largest businesses and the wealthiest individuals. Public investment will be paid for by those who can best afford it, to benefit us all and make our nation more prosperous.

We entered office with the worst economic inheritance since 1945, after years of under-investment—the lowest rate in the G7—years of failure, the worst fall in wages since Napoleon, and years of chaos. In 2022, we built fewer onshore wind farms in England than we had Conservative Prime Ministers.

The Conservatives left our nation far weaker than they found it—a nation where 3 million people are too sick to work because one in 10 nursing jobs is unfilled; a nation where one in three young people fails maths GCSE because around half of our schools do not have the maths teachers that they need; the nation with the highest energy bills and inflation, because we have the worst-insulated homes in western Europe. That is what we were elected to change.

As well as having a mandate to rebuild this nation, we were also elected to rebuild hope by creating a country that, once again, gets better rather than worse.

[Graham Stuart]

In the spirit of hoping for growth, the hon. Gentleman will be interested to know that I sent a survey to all the businesses in my constituency. Perhaps we are an outlier, but 95% of businesses in Beverley and Holderness said that they expect things to be worse as a result of the Budget. It might be different in the hon. Gentleman’s constituency, especially if he stays at home.

[Dr Sandher]

I politely suggest that the right hon. Gentleman should not set up a polling company, as that is not an effective sampling strategy. Deary me. Where do I start?

Anyway, we are insulating our homes and hiring more nurses and teachers—and yes, we will pay those nurses and teachers enough money to keep them, because that is what responsible Governments do. All that investment needs to be paid for. That is why we are raising national insurance contributions for the largest employers, with £3 out of every £4 raised coming from the largest 2% of businesses. That will raise some £23 billion of investment that every family and business will benefit from. Crucially, we are raising that money while protecting the smallest businesses.

[Mr Angus MacDonald]

The hon. Gentleman keeps talking about the largest businesses, but the Government are completely wiping out small and medium-sized businesses across the whole hospitality and retail sector. This is a catastrophic piece of legislation. He talks about a kamikaze Budget; we are considering a kamikaze Budget right here, today.

[Dr Sandher]

Not only are we protecting the smallest businesses by raising the employment allowance, but there will be business rates relief for the hospitality businesses to which the hon. Gentleman refers.

[Christine Jardine]

Does the hon. Gentleman understand how frustrating it is for Liberal Democrat Members to be told that this is the Scottish Government’s problem? It is not the Scottish Government’s problem; it is the problem of Scottish businesses if they are being hit by national insurance contribution increases without business rates relief. We are tired of hearing that this was a tough decision; it was an easy decision that is tough for businesses.

[Dr Sandher]

It is the responsible decision to invest in this country’s foundation, so that we get the doctors, nurses and teachers that we all need, and to insulate our homes.

[Adrian Ramsay (Waveney Valley) (Green)]

I share the hon. Gentleman’s aspiration for getting more funding into the NHS. On Friday, in the debate in this House on supporting people at the end of life, hon. Members from across the Chamber highlighted the importance of getting more funding and support for palliative care, but Sue Ryder warns that financial pressures, such as the rise in national insurance contributions, could force closures of crucial hospices, which patients desperately need. Noting the wider case that the hon. Gentleman is making, would he join me in urging the Government to review and revisit the impact that the measure will have on health and care providers, and the wider voluntary sector?

[Dr Sandher]

The Government will set out exactly what the health and care budgets will be before next April, and the investment will go towards improving the health and care system that we and our loved ones rely on. All the money that is being invested in the health service, our teachers and elsewhere across the economy needs to be raised—and, yes, we are raising it from the largest employers.

By increasing the employment allowance, we are protecting the smallest businesses. Half of businesses will pay the same national insurance or less. A quarter of a million of the smallest businesses will see their national insurance tax bill fall. From tax revenue, we will invest in our people and our places to ensure that they can thrive, building on public investment in our infrastructure and our services.

Countries that grow the fastest are not simply those that tax the least. If all we needed to do to create prosperity was cut taxes to their lowest level, Somalia would be richer than Sweden. However, IKEA is not about to relocate to Mogadishu. The countries that grow the fastest are those that raise a return on investment. Returns are higher when businesses have the roads that they need to transport their goods, workers have the skills that they need to produce more, and all of us have cheaper electricity and well insulated homes. Those are the decisions that we have made, and were proud to make, in this Budget.

Across the Atlantic, in the United States, we have seen a multi-trillion dollar investment package, which helped to deliver the fastest growth in the G7. There were new roads, new factories and new clean energy projects from Wisconsin to Wyoming. That public investment led to the fastest post-pandemic recovery in the G7, whereas we had one of the weakest. That is why, here at home, we are investing to raise returns; investing in our schools, our NHS and home insulation to make us better educated and healthier and to get energy bills down for all and for good

[Sean Woodcock (Banbury) (Lab)]

Opposition parties have spent an awful lot of time attacking various measures in the Budget. Does my hon. Friend agree that if they are going to do that, they need to point out which investment—money to our schools or to hospitals—they would not provide to alleviate their concerns?

[Dr Sandher]

I entirely agree with my hon. Friend. If Opposition parties wish to criticise the tax rise on the largest businesses and the wealthiest individuals, they must set out what services they will cut and who will not get a GP appointment or the teachers that are needed.

We are investing to raise returns. Investing in our schools, NHS and home insulation makes us better educated and healthier and gets energy bills down for all of us. That investment is paid for through tax revenue. The principle behind which we raise that is simple yet powerful: it is about collective contribution for collective benefit, sharing in the rebuilding of our nation and, of course, the rebuilding of hope.

[Madam Deputy Speaker]

I assure Members that we have now resolved the problem with the clock and that there is a six-minute time limit. I call Stuart Anderson.

National Insurance Contributions (Secondary Class 1 Contributions) Bill

Jeevun Sandher Excerpts

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

The amendments are about fairness. They recognise the unique challenges facing Northern Ireland, and aim to protect sectors that are under immense pressure. Healthcare providers, voluntary organisations and childcare services are the lifeblood of our communities and cannot be left to shoulder additional financial strain. I urge the Government to support the amendments in order to safeguard the services that underpin our society. Northern Ireland’s people already face significant economic and social inequality. We need investment and support to build a fairer, more sustainable future, not further strain on our vital sectors and communities.

[Dr Jeevun Sandher (Loughborough) (Lab)]

This Labour Government will invest to rebuild our broken nation. Investment in our future will be paid for by tax revenue, and today we are debating the largest revenue-raising policy in our Budget. I am proud that revenue will be raised from the largest businesses to fund the homes, jobs and skills that we need to create a good, affordable life for us all. For those of us in our nation who cannot afford a decent life, the picture has become increasingly bleak: non-graduates and the young are locked out of the opportunities that previous generations had, and there are not enough homes, good jobs or skills.

We are raising the money for investment in homes, jobs and skills from those who are most able to afford it. We are raising £23 billion—investment that every business, family and young person will benefit from—and 75% of the revenue is from the largest 2% of businesses. We are raising that money while protecting the smallest businesses by increasing the employment allowance; the Federation of Small Businesses has said that that is a huge help as we bring in this revenue raiser. Half of all businesses will pay the same or less, and a quarter of a million will see their tax bill fall.

[Graham Stuart]

The hon. Gentleman is most gracious for giving way. He is also a highly distinguished economist. He has talked about this record tax-raising element. What will the net value of the £23 billion or £26 billion be, after we have looked at behaviour change, reduction in corporation tax receipts and compensation of the public sector? How much of that will come into the Government coffers?

[Dr Sandher]

I thank the right hon. Member for his incredibly kind words. For me, this is actually rather simple. I follow the Office for Budget Responsibility forecast, which goes through the Treasury policy costing and gets signed off. Those are the numbers I look at, and that is the money that will come in.

We are raising the money, as set out in those forecasts, in a fair way to invest in our future prosperity. We are using that money to build the homes that we need. In the mid-1990s, it took a young person around three years to save for a deposit. Now it is over 14 years, and in London it is nearly 30. That is why nearly half of young people are living at home with their parents, and why we are investing the tax revenue from the measures that we are discussing in the affordable homes programme. That means more homes for young people.

We are also using this money to create good jobs. The idea that someone could leave school and get a decent wage left our nation long ago. There are low-paid and insecure service jobs for some, but many are unable to get a job at all. Today, around 15% of young people are not in education, employment or training. Our warm homes plan, which will upgrade 300,000 homes, will also create tens of thousands of good jobs.

[Sammy Wilson (East Antrim) (DUP)]

Analysis shows that this measure will hit the low paid and the young hardest. It will not help young people to get all the things that the hon. Gentleman describes, because they are the group who will find things most difficult as a result of it.

[Dr Sandher]

The young and the lowest paid work in the smallest businesses. Some analysis, including that from the Institute for Fiscal Studies, does not include these measures, and does not have matched employer-employee datasets. Indeed, Paul Johnson admitted as much when he came before the Treasury Committee.

[Dr Luke Evans]

I am grateful to my fellow Leicestershire MP for giving way. One of the ways that we can judge the market is by looking at vacancies. James Reed, who runs the Reed recruitment agency, has seen a 13% drop in advertisements on the company’s website. He has sounded the alarm that that could be a sign of recession, and that is the implication of what we are voting on today. How will the measure support young people if there are no jobs out there for them?

[Dr Sandher]

I direct the hon. Gentleman to today’s labour market statistics. Employment is still high; unemployment is about the same as it was; and I think inactivity is falling. In the official statistics, the picture looks good.

More broadly, vacancies are not the measure that we want to look at. Instead, we want to look at the number of people in jobs. The revenue that we are raising today will be invested in actions that directly create those good jobs. The warm homes plan will upgrade 300,000 homes, which is tens of thousands of good jobs. The expansion of early years childcare is tens of thousands of good jobs. Businesses need to know that they have the healthy workforce that they need, and more people who are available to work. This is a Budget for growth and for jobs.

[Dave Doogan]

The hon. Gentleman talks about the expansion of early years childcare, but that will not be of much use if nurseries shut down because they cannot pay their national insurance. Does he understand that dynamic?

[Dr Sandher]

I absolutely understand the benefits of early years childcare, which is why we are so proud that it is a key part of this Government’s opportunity mission and is one of our milestones. We know that money invested today will pay dividends in the future. Labour Members we are absolutely committed to expanding and investing in early years childcare.

More broadly, this measure is also about investing in our young people. One in three young people is experiencing mental health problems, and one in 20 is too sick to work. That number is only rising. There has been a threefold increase in health problems that make it too difficult to do day-to-day activities. This generation of mine is without hope and without health. For those who have been struck down by hopelessness, and who are now too sick to work, our “Get Britain Working” programme, combining health, skills and employment support, is rebuilding confidence. It is helping people into good jobs, and is restoring dignity, purpose and sense of community to every person and place in our nation.

This Bill speaks to our governing philosophy, which is that those with the broadest shoulders should carry the heaviest load. As we have seen, we are changing our nation and rebuilding hope in our communities, our country, and indeed our democracy. We are building a country that gets better, rather than worse; where every person can get a good job; where every person can afford a decent home; and where every person can get the skills that they need, so that we can all live once again in a country where working hard means a decent life. That is what we are investing in, and that is why we are proud to raise revenue through the measure that we are debating today.

[Blake Stephenson (Mid Bedfordshire) (Con)]

I rise to support the amendments and new clause 1 in the name of my hon. Friend the Member for Grantham and Bourne (Gareth Davies). If this Government’s goal was to fix the foundations, I am afraid the result has been subsidence. Business confidence has plummeted, and two thirds of firms think that Labour’s Budget, including the NI increase, will damage investment.

An economy grows on the back of hard-working people investing, taking risks and employing local people in constituencies like mine of Mid Bedfordshire. How does the Labour party reward those people for their hard work? It raises their taxes, it makes it harder for them to employ people, and it reduces the amount they take home at the end of the month. It justifies that by telling them that they are not really working people.

Conservatives understand that growth is created from the hard work of entrepreneurs up and down our country, driving our economy forward. Across the country, millions of people want stronger economic growth. That is what they voted for, but they now have a low-growth, high-tax, job-cutting Labour Government. They were promised change, but they did not expect that change to be to Labour’s manifesto commitment not to increase national insurance. That change hikes the cost of employing someone by £800, reduces the number of jobs in the economy, reduces the wages of working people and increases prices in shops.

National Insurance Contributions (Secondary Class 1 Contributions) Bill

Jeevun Sandher Excerpts

Consideration of Lords amendments
Wednesday 19th March 2025 Commons Chamber

[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.

--- Later in debate ---

[Madam Deputy Speaker (Ms Nusrat Ghani)]

Due to the length of Front-Bench contributions, Back Benchers are now limited to five minutes.

[Dr Jeevun Sandher (Loughborough) (Lab)]

Thank you, Madam Deputy Speaker, for allowing me to rise to speak to Lords amendments 1 to 19. I want to speak about what makes a good tax system and, in particular, optimal tax theory, which is a topic that is as thrilling to me as it is no doubt to the entire Chamber.

A good tax system is defined by neutrality, simplicity and stability, as set out in the Mirrlees review. A tax system designed along those three principles will raise the maximum revenue with the minimum economic impact. Each of the amendments in isolation might seem reasonable, but together they introduce individual exemptions that make our tax system less neutral, less simple and less stable. The amendments would make our tax system worse.

Today, we are discussing raising national insurance contributions from the largest employers to fix our broken public services and invest in our prosperity. Three quarters of that £23 billion of investment is from the richest 2% of businesses, while we are reducing contributions from the 250,000 smallest businesses.

[Dr Luke Evans]

The hon. Member talks about simplicity. If that is the case, why is the Government splitting the NICs? They could have introduced an increase on employees at the same time as the increase on employers, but they have decided not to do that. That would have been a simple measure to raise taxes, without creating this complication. How does that tally with his theory?

[Dr Sandher]

It is a pretty well established introduction to the tax system to have both employee and employer NICs. The point about simplicity is about where the tax is levied. I will come to the specific point that the hon. Member raises later in my speech and hopefully provide some illumination.

The revenue we are raising will be used to invest in our nation’s prosperity: insulating our homes, rebuilding our crumbling schools and hiring more nurses to care for our loved ones. It is about getting costs down and creating good jobs. It is about rebuilding this country after, frankly, more than a decade of despondency and despair.

The amendments before us represent bad policy that puts that at risk. As I may have mentioned in this House once or twice before, I used to be an economist. I can tell the House that a good tax is one that raises revenue and does not introduce perverse incentives. A good tax ensures that resources go to activity because there are higher levels of productivity. A good tax system introduces three principles. The first is neutrality: it treats similar activities in similar ways. The second is simplicity: it is straightforward and easy to implement. The third is stability: it is predictable.

[Vikki Slade (Mid Dorset and North Poole) (LD)]

The hon. Member is talking about productivity and growth. How does he square that with the additional tax on early years care? That care allows parents to work. If parents cannot work and employers cannot afford to bring young people through, how are we going to get the nation working? Nurseries are on their knees and they cannot take on more children, because there are strict rules about ratios and the amount of space each child takes.

[Dr Sandher]

First, there is more funding going into the early years, but I will deal with the tax side as I speak to the specific amendments.

Each amendment seeks to carve out an exemption for something, and I am sure that Members across the House identify with and, indeed, support some of those individual exemptions. However, if we were to pass the amendments, they would give specified sectors advantages not enjoyed by others.

[Joe Robertson (Isle of Wight East) (Con)]

It seems to me that the hon. Member’s issue is not with some of the amendments, but with all of them taken together. Why does not he not back some of the amendments?

[Dr Sandher]

I do not, because that would introduce exemptions and perverse incentives and make the tax system less clear. It would make the tax system as a whole less efficient. I will come to the specific ways shortly.

Let us start with non-neutrality. Lords amendments 7, 12 and 16 would create non-neutrality between small charities and non-charities. That would incentivise more social enterprises to be charities instead of businesses. Lords amendments 8, 10 and 14 would create an additional NICs band for small businesses, thereby disincentivising them from growing. Under those amendments, if a business saw its revenue go over £1 million or it employed more than 25 people, all of a sudden it would incur a NICs charge. That is a cliff edge. It would introduce a perverse incentive and reduce productivity and economic growth.

[Dame Caroline Dinenage (Gosport) (Con)]

I am pleased that the hon. Member is talking about growth. He talks about perverse incentives. What possible kind of perverse incentive could he have in mind when removing a jobs tax from a children’s hospice, which cares for children and families going through the most unspeakable heartbreak? Where is the perverse incentive in that?

[Dr Sandher]

As I think I have set out, the question is not about carving out an exemption for this establishment or that establishment; it is about how we create a tax system overall that is simple and efficient. It is about ensuring that businesses and other organisations are operating more efficiently. I say this to the hon. Member: when the Conservatives were in government, they did not propose abolishing national insurance for all hospices. They should follow their arguments to the end of the line. I will move on, as I am conscious of the time.

The amendments would also reduce simplicity in the tax system. We are not exempting specific sectors or, indeed, specific establishments from this tax. Overall, Lords amendments 1 to 19 would complicate the tax system and reduce stability. Raising rates is accepted policy; introducing special rates for specific sectors or establishments is not. It would make for a less efficient tax system that is complicated to govern, expensive to enforce and more prone to fraud. This is not a predictable way of making tax policy. It is not neutral, it is not simple, and it is not stable. It is bad policy that all of us in the House should oppose.

All this may sound dry, but it matters to our constituents. Bad taxes do not just harm economic growth, but bring in less revenue. That means fewer appointments in the NHS, it means fewer new teachers, and it means less insulation in our homes. We are elected to this place as legislators. We have a duty to make policy that works, and that involves distinguishing the whole from its parts, ensuring we do not introduce loopholes and carve-outs that weaken our tax system, and governing responsibly.