National Insurance Contributions Bill

Margot James Excerpts

Monday 4th November 2013 Commons Chamber

[Mr Gauke]

That is a similar point, and, as I say, I am nervous about giving precise numbers. Of the FSB respondents, 28% believed that this would help them. We believe that we have to consider a range of measures, but clearly measures that reduce the cost of taking on staff must help in increasing employment. For example, the Bill would enable a business to take on four people on the national minimum wage and not pay any employers’ national insurance contributions at all. That will clearly help.

[Margot James (Stourbridge) (Con)]

My hon. Friend mentions the welcome for this Bill from the FSB. Is he aware that charities and social enterprises will also benefit from it? Alex Swallow, chief executive of the Small Charities Coalition, said:

“For a lot of the smallest charities, having one paid member of staff is a big step forward…having this allowance now helps them to do that, so it is a very positive thing.”

[Mr Gauke]

I am very grateful to my hon. Friend for that intervention. She makes an important point that applies to both businesses and charities. Taking on the first member of staff can be the most difficult step, as it is a big event for a business. If we are able to help and to reform our tax system to enable businesses or charities to take that member of staff on without paying the jobs tax—employer’s national insurance contributions—that will clearly encourage those businesses, which, I hope, will then take on further staff and expand.

--- Later in debate ---

[Mr Gauke]

To have implemented the policy we inherited would have destroyed jobs. It did not do businesses in the United Kingdom any good to have the prospect of an increase, sending the wrong message that we were going in the wrong direction. I am pleased to say that we have reversed that direction of travel by not implementing the previous Government’s policy in full. We have increased thresholds for national insurance contributions, which has clearly helped. Now, through this Bill, we are providing an employment allowance of £2,000.

[Margot James]

Does my hon. Friend agree that the reason the previous Government proposed the ridiculous increase in the jobs tax was testimony to the fact that they could not countenance cutting public expenditure? That was their downfall. They were content to continue to borrow £1 for every £4 this country was spending, and their proposal was evidence of a wholesale mismanagement of the economy.

[Mr Gauke]

My hon. Friend makes a valuable point that is well worth highlighting. When running a deficit of the size that we were running, we face some tough decisions. We have taken a range of measures to reduce the deficit, and it has reduced by a third.

Ultimately, though, whoever was in government was going to have to take these difficult decisions. If we are not prepared to take difficult decisions on spending—there is no evidence that Labour Members would do so—the answer is that we have to increase taxes. When we look around to see what taxes are available, it is clear that some very difficult decisions have to be made. Labour Members chose to go for employers’ national insurance contributions; perhaps they considered that that option was less visible to the general public than some of the others. However, the consequences would have been higher unemployment, and this Government were not prepared to face that.

--- Later in debate ---

[Mr Gauke]

If I remember correctly, that was in autumn 2010, when the next leader of the Labour party was saying that 1 million jobs would go missing. The hon. Gentleman says that the NICs holiday was too complicated. One of the lessons that can be learned from the NICs holiday is that the simpler the scheme, the better. Perhaps the Labour party has not been listening to him because since that debate, it has proposed two NICs schemes, both of which are more complicated than the one that we had in place. If he is making the case for keeping NICs schemes simple, perhaps he ought to have a word with his party leader.

[Margot James]

My hon. Friend is being exceedingly generous in giving way. Does he agree that the Opposition’s latest wheeze of giving a subsidy to employers who take on employees at the living wage will have a huge dead-weight cost, because 12 months before the appalling prospect of the return of a Labour Government, employers are likely to stop giving salary increases to workers who are on the minimum wage, mindful of the fact that if they give it another year, they might get it all rebated by the taxpayer?

[Mr Gauke]

My hon. Friend makes two valuable points, but I detect that you do not want me to dwell on the issue, Madam Deputy Speaker.

--- Later in debate ---

[Margot James (Stourbridge) (Con)]

Before I come to my main points about this Bill, which I support, I would just like to follow on from the speech of the hon. Member for Edinburgh East (Sheila Gilmore) and talk about the big picture for a few minutes. One can quibble about the benefits or otherwise of this scheme or that one, but the Government’s economic policies and interventions have contributed to Britain becoming the fastest-growing country in the western world. Survey after survey confirms the figures, which are extremely optimistic about this economy. I sometimes think the Treasury team is, with characteristic self-effacement, almost cautious in putting forward the record of this Government in full technicolour, so I would like to take up that role this afternoon.

The Bill is a straightforward and simple measure, top-slicing £2,000 off every company’s employer national insurance bill. As such, it will provide significant help to small businesses. I have 5,200 small and medium-sized enterprises in my constituency, and I welcome this measure on behalf of them all. We have heard the quotes from various organisations representing small businesses, social enterprises and so on welcoming the measure. The fact that it has such independent support ought to speak for itself.

I also wish to draw attention to the ambitious sole trader. The SMEs will have their employer insurance bills cut, but we also need to consider the small sole trader who is ambitious and wants one day to grow his or her business, just as I did. When I started my business in the 1980s, it consisted just of my business partner and me—everyone else who helped was begged, stolen or borrowed. I well remember the agony of the decision to appoint the first paid member of staff. One knows that one has to do it at some point if one wants to grow the business, but the responsibility that comes from knowing that someone walking through the door is then dependent for their livelihood on the success of one’s business really makes one stop and think. Anything that makes that decision easier, as this Bill does, has to be welcomed.

I wish to talk about a young woman in my constituency, Amy Fairley, who has a passion for flowers. She worked in a florist’s shop until about six month ago, when she was made redundant. She decided to follow her passion and dream by setting up her own florist’s shop. She did that with help from the new enterprise allowance scheme—another good scheme—and a Prince’s Trust grant and the mentorship that the Prince’s Trust also provides. I helped her to open her wonderful florist’s shop on Coventry street in Stourbridge three weeks ago. As a Prince’s Trust mentor for four years before I was elected, I have had similar experience and I was always reluctant to advise on taking on that first member of staff, because of the cost and the risk. One wonders whether the member of staff will be needed all the time, although, of course, they could be taken on part-time. The Bill will mitigate that caution.

I also wish to make the point that the Bill is part of a package of measures designed to help employment and small businesses. The reforms to employment law are also crucial, because this is not just about the cost of taking someone on; it is also about the fear that if the wrong person is appointed, the business is in for a huge headache. The Government’s doubling of the qualifying period before people can make unfair dismissal claims to two years is a huge advantage, as is the fact that they are making settlement agreements easier, obviating the need for employment tribunals, which are expensive in many cases. I know from my work as a Parliamentary Private Secretary to Lord Green that the Government have invested hugely in UK Trade & Investment and UK Export Finance, again for the development of specific programmes to support small businesses with their exports.

[Julian Smith]

May I pay tribute to my hon. Friend for the work she has done to promote UKTI’s merits to MPs across the House and for doing that with a passion that I suspect has never been seen in this House before?

[Margot James]

I thank my hon. Friend for his kind contribution and for his wholehearted support of that work on trade—both are much appreciated.

[Ian Swales]

May I add my tribute to my hon. Friend for playing a role in this exercise? My constituency office is in a business centre and it was fantastic to see UKTI officials advising small businesses recently on exporting to China—I never expected to see that.

[Margot James]

I thank my hon. Friend for that intervention. Indeed, what he has observed might explain why British exports to China have risen at a record rate in the past 12 months.

Another aspect of Government support for the small businesses that are crucial to employment and many of the new jobs that have been created has been the reduction in the small companies tax rate to 20%. The small business rate relief scheme was doubled until 14 April and we have also had the start-up loans scheme and the new enterprise allowance, which I have already mentioned. All those measures were designed to have, and have had, a positive effect on the livelihood of our small businesses.

Of course, not just employers have benefited from such measures. Employees have benefited too. In my constituency, 3,794 people have been removed from income tax altogether. A vast number of people in my constituency—33,000—are now paying less tax and that is an important development, freeing people to spend more money on the high street, which is where the economy is starting to grow again.

It is instructive to recall the Opposition’s record. The shadow Business Secretary makes the laughable claim that Labour is now the party of small business, but I think that small business people judge Governments, Oppositions and former Governments on their actions, not their words. The Opposition have a long way to go before they can put themselves up as people who understand the needs of businesses. As I said earlier, I think that it was indicative of their deeply flawed management of our economy that they felt in 2011 that they needed to put up taxes by putting up national insurance, rather than cutting public spending, which, of course, is what—only the other day—Tony Blair said they should have done. We all know how the economy ended up.

[Sheila Gilmore]

Is it not in fact the case that the incoming Government put taxes up? In particular, they put up VAT and that was the choice that they made. To say that no taxes went up would not be true.

[Margot James]

I would apologise if I felt that I had said that no taxes had gone up. Let me clarify in response to that intervention. I was making the point that the previous Government proposed to increase national insurance, presumably because they could not face the public expenditure cuts that this country really needed. The hon. Lady is quite right that the Government were driven to put up VAT, but the important point is that in getting a grip on the public finances we had a rough ratio. Spending cuts delivered approximately two thirds of what was required and the tax increases, regrettable though they were, were necessary and delivered the other third. I fear I digress somewhat, Madam Deputy Speaker, and I feel your watchful gaze so I shall return to the subject of the Bill.

I congratulate the Government on introducing this important measure. I would have benefited hugely from it when I was in business and I welcome it on behalf of the many small businesses and sole traders in my constituency.

--- Later in debate ---

[Catherine McKinnell]

Coalition Back Benchers want to forget what the Government have done and the past three years of the policy we are debating. They want to debate a policy that never came into play.

None the less, despite the restrictive and complex nature of the previous scheme, the Exchequer Secretary and his Treasury colleagues had bold ambitions for it. He acknowledged from the Dispatch Box that some 400,000 new businesses would benefit from the scheme, with each successful applicant creating an average of two jobs. At that rate, the scheme would have created 800,000 new jobs, with a total cost to the Exchequer of £940 million over its three-year lifespan.

Given that the scheme, which was one of the Chancellor’s flagship policies, drew to a close in September, one might have assumed that the Exchequer Secretary would want to promote the outcome. Sadly, he cannot do so—sadly for the businesses that failed to benefit. Only through a written answer obtained by my hon. Friend the Member for Nottingham East (Chris Leslie), the shadow Chief Secretary to the Treasury, did we learn that a grand total of some 25,400 businesses successfully applied for the scheme over the three-year period. That is undeniably a sizeable number, and the creation of any new jobs in the past three years, during a period of economic stagnation, is welcome; but with only 6% of the target reached, the Exchequer Secretary has had to acknowledge that, as flagship policies for economic growth go, that one has been a bit of a flop.

When the previous scheme was introduced, the Opposition called for there to be no regional restrictions on it, for it to be extended to charities, and for a review of its effectiveness after six months. Those proposals were rejected. The Government ploughed on with a scheme that obviously was not delivering the goods throughout its operation. That was why, as long ago as September 2011, my right hon. Friend the Member for Morley and Outwood (Ed Balls), the shadow Chancellor, called for a one-year national insurance break for every small firm that took on extra workers, using the money left over from that failing Government policy—it was clear that it was failing even in September 2011.

The Government are now introducing the employment allowance. It is not regionally restricted and will apply to charities as well as businesses, and it will apply whether or not they are start-ups. It should be easier for firms to access it because it will be delivered by the standard payroll software and Her Majesty’s Revenue and Customs real-time information system, as the Exchequer Secretary said in his opening comments. The question is this: why did it take so long? Given that the scheme will not be available until April 2014, we have had nearly four wasted years when the Chancellor could have helped the thousands of small businesses about which Government Members have spoken so passionately to expand and create jobs.

[Margot James]

This might be a foreign notion to Labour Members, but one reason why it has taken three years to propose the Bill is that the Government have waited until the country can afford it and put the finances right in the meantime.

[Catherine McKinnell]

The budget for the policy in the Bill was there, but the Government introduced a failing policy that was badly delivered, badly thought through and not revised in the appropriate time frame. Given the Government’s record on delivering the previous national insurance contributions initiative, what reassurances can the Minister provide that they are on top of delivering this one?