National Insurance Contributions (Secondary Class 1 Contributions) Bill

Lord Howard of Rising Excerpts

2nd reading
Monday 6th January 2025 Lords Chamber

[Lord Howard of Rising (Con)]

My Lords, I declare an interest as an employer who will be adversely affected by the employer’s national insurance contribution increase and the proposed reduction in the threshold for paying it.

Market economics is simple. It is a fact that, as you lower prices, you sell more goods. You need only look at supermarkets to see daily evidence of this, whether it be two for one or prices being slashed. Conversely, if you increase the price of goods or services, they become more difficult to sell. People resist price increases. There are, of course, exceptions because of special circumstances, but the marketplace sooner or later inevitably reverts to normal. Do His Majesty’s Government understand this very simple fact that putting up prices reduces the amount of goods or services sold? If the Government cannot understand this, should they be entrusted with running the country? If the Government do understand the way in which market economics work, why do they not understand that increasing the cost of employment will lead to a reduction in the number of those employed in the same way that a supermarket putting up a price will lead to a reduction in sales of that item?

Today we are debating the proposed increase in employer’s national insurance. This comes on top of the increase in the minimum wage in the previous Budget. An increase in the minimum wage does not affect just the lower paid but means an increase all round. Your skilled worker does not want to be paid the same as a less skilled colleague; he or she wants to maintain the differential. The compounding effect on costs of even a small increase in the basic wage is dramatic. If the increase we are debating today is passed, we will end up with fewer people employed and the Government will consequently collect less tax. They will also most likely end up with a larger number of those requiring state assistance as redundancies are made. I would be most grateful if the Minister would be good enough to explain how these increases in the cost of employment will defy market economics. How will there not be a detrimental impact on employment and the economy as a whole? The Minister said in his opening remarks that the Government’s plans will wipe the slate clean—fat chance of that; they will make things worse.