National Insurance Contributions Bill

Lord Davies of Oldham Excerpts

Tuesday 7th January 2014 Lords Chamber

[Lord Davies of Oldham (Lab)]

My Lords, it is a happy occasion when I can congratulate the Minister on his opening speech and on the accuracy with which he presented the Bill. As the noble Lord, Lord Razzall, noted, there has been a 100% contribution by the Liberal Democrats on his side of the House. He put it as two-thirds of the speakers in the debate; perhaps he should have put it as 0% Conservative speakers. After all, this is a fairly worthwhile measure, so he should not be surprised if the Opposition look on certain elements of the Bill with considerable favour.

The judgment of the House appears to be that this is a fairly uncontentious Bill. As I look around, I notice that I have not got too much support from Labour Back-Benchers on the matter. They are totally reliant on me being able to deliver exactly what is necessary in criticism of the Bill—and to express support where we see the merits of it.

The Minister will be delighted to hear that we approve of the five main provisions in the Bill, although there are areas on which we will seek additional clarification in Committee. In at least two sections there are proposals with regard to regulations and other actions of the Government where it is not entirely clear how they will be phrased in future. I want to press the Government on these matters at that time.

I turn to the real issues. The main issue is the employment allowance, which we welcome, although we note the comment of the director of the Institute for Fiscal Studies, Paul Johnson, who said:

“Whether it will actually have any measurable effect on the creation of jobs we don’t know”.

Given that there is no pilot for this measure and that it is extremely difficult to measure its effects, we may never know its real effectiveness.

Nevertheless, one must welcome a step in the right direction by the Government, particularly when we look at the next major issue of the Bill. We of course approve of the abolition of national insurance contributions on the earnings of employees under 21, although we are concerned about the introduction of the measure. The Minister clearly indicated that it is significant and important, but we will not get it for another year. The Minister may be content with that rate of progress. I must say that this Government are undistinguished in their rate of progress on the issue of national insurance contributions. I do not think that the Minister was in that role when we considered the previous efforts by the Government to introduce some stimulus to job creation by legislation or national insurance contributions, but I was certainly in my place when that Bill was introduced. It was a complete disaster in its conception and absolutely absurd in its execution.

The Government argued that there should be some regional dimension to the provision on the grounds that some regions were less well favoured than others. It was quite difficult to accept because the Government bracketed with London and the south-east, which one might recognise as being different from the rest of the country and in less need of job creation, the eastern region, as if East Anglia were a high-wage, high-employment area—but the Government were convinced of the rectitude of their position at the time. What was the result? We were told that 400,000 businesses would benefit, with the possible creation of 800,000 jobs. In fact, after three years, just over 25,000 businesses, rather than 400,000, took advantage of the scheme, so it is not surprising that it was jettisoned and that the Government, after three wasted years, addressed themselves to a more realistic approach to the issue.

We welcome the second attempt. It is infinitely better than the previous effort, but the price is three wasted years on the matter when the Government have only five years of constructive activity, even assuming that the long run-in to the general election, which is based on the concept of a fixed date for the election, allows them to be constructive in their last few months, rather than just defensive about their record. We shall see.

We express general approval for the other aspects of the legislation. We shall seek to press the Minister in Committee on the effectiveness of the measures. They depend on other legislation or secondary legislation related to NICs—in fact, NICs are only a bit player in the strategy that the Government propose. The Minister will therefore not be at all surprised if he is pressed to identify just how significant this particular legislation is, so dependent is it on other, more significant activities by the Chancellor in conducting the economy.

The scheme for offshore employees—oil and gas workers—is unexceptional, but of course many aspects of the reforms in this area are to be delivered outside the Bill, so the Minister must expect that we will press him on greater clarification there.

The Bill also provides for alternative investment fund managers and members of limited liability partnerships a strategy in which the Government anticipate a considerable increase in returns from taxation, because they will have ended what we recognise is not just avoidance of tax but unfairness between the groups concerned. We are in favour of what the Government are doing there but, again, the Minister will recognise that quite a lot of what he has said in relation to the Bill here is only part of the general picture.

At this stage in my brief response, I am entirely happy to associate the Opposition with the broad thrust of the Bill—particularly as the noble Lord, Lord Razzall, indicated that we should concentrate on the Liberal Democrat part of the coalition when discussing this matter. We will of course seek to test the Government further in Committee, while applauding the fact that the main principles of the Bill are those to which we subscribe. In particular, we recognise the application of GAAR to this area. GAAR is always going to loom up as a deus ex machina in relation to a great deal of finance legislation. It does so here, and we noted the optimistic assessments that the Minister put forward on what it may achieve. The proof of that particular pudding will be in the eating—but, as a concept, we support that interaction in the Bill.

[Lord Newby]

My Lords, I thank both noble Lords for their broad welcome for the proposals in the Bill. I am very grateful to my noble friend Lord Razzall for setting the Bill in the context of all the other measures that we have taken to support business, particularly SMEs. The Bill contains useful and valuable measures but, as my noble friend pointed out, they are only a couple of pieces in the large jigsaw of provisions which, taken together, we believe will help to sustain the recovery and put Britain on the path to strong, prosperous growth in the years ahead.

The noble Lord, Lord Razzall, referred to the findings of the Federation of Small Businesses’ survey in this area and what small businesses said they would do with the additional resource. I thought that one of the more interesting aspects of that survey was that a substantial proportion of respondents said that they would increase wages. Given that I think both the Government and the Opposition are keen that wages at the bottom end are improved, if the measure does have the impact of increasing wages—as well as generating new jobs in other cases—that will mean that it has been effective.

The noble Lord, Lord Davies, slightly chided me on the fact that I had no support on my Benches. He will have seen support flooding in during this short debate.

[Lord Davies of Oldham]

If the Minister will allow me, the verb “flood” in the present circumstances is not the right one to use.