National Insurance Contributions (Secondary Class 1 Contributions) Bill

Debate between Jeevun Sandher and Caroline Dinenage

Consideration of Lords amendments
Wednesday 19th March 2025 Commons Chamber

[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.