National Insurance Contributions Bill

Mike Gapes Excerpts

Thursday 13th January 2011 Commons Chamber

[Mr Hanson]

The purpose of the Bill, which the Opposition support, is to consider how we give limited help to start-up businesses through a national insurance holiday, so that we can get employment going across the United Kingdom with the exclusion, which we are trying to tackle, of London, the south-east and the east region.

Micro and macro-economic policy will need to be looked at again in many areas. My hon. Friend the Member for Luton North (Kelvin Hopkins) mentioned VAT. Hon. Members are concerned about the impact of public spending cuts on job losses. The issue of the economy generally is also extremely important, as are matters such as employment in west Wales. The annual report would clearly show where new businesses are commencing because of the scheme proposed by the Minister in the Bill and whether those new business commencements can be married to areas where there are high levels of public sector job losses, deprivation and unemployment and therefore where there is a necessity for new businesses to commence. If new businesses are starting up in areas where there is already prosperity, wealth and low unemployment, the loss of the £940 million of national insurance revenue that the Minister is proposing in the Bill could have been used elsewhere to meet the objectives of tackling deprivation and unemployment in a much more concerted manner.

[Mike Gapes (Ilford South) (Lab/Co-op)]

My right hon. Friend will know that the temporary Secretary of State for Business, Innovation and Skills represents a London constituency. Does he agree that it is deplorable that someone who represents a London constituency has not fought in Government for the interests of people living in London, including people in my constituency, who will be adversely affected by the measures?

[Mr Hanson]

This is a Treasury-led issue, but it will self-evidently have an impact on businesses. I would have expected the right hon. Member for Twickenham (Vince Cable) to use his Business Secretary responsibilities to bat very hard to ensure that the measure has an impact on London, the south-east and the east. Amendments that we will talk to later focus on those areas and show key issues that will be highlighted by the annual report, even if the Bill does not include London, the south-east and east regions.

If I look randomly at the figures before me, I can see that the unemployment rate in the constituency of my hon. Friend the Member for West Ham (Lyn Brown) is 6.8%, compared with the 1.6% unemployment rate in the North Somerset constituency of the Secretary of State for Defence. His constituency will get the benefit of the scheme; my hon. Friend’s will not. The annual report to Parliament will show whether businesses are being drawn to North Somerset at the expense of, for example, the micro-region of Somerset—Bristol and other areas—where there might be even higher levels of unemployment.

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[Mike Gapes]

I will be brief. This amendment is important. As my hon. Friend the Member for Walthamstow (Dr Creasy) said, it has been tabled in the context of the fact that provision for spending on social care is being taken into consideration in the overall budgeting, and there are clearly big problems. There are already concerns about the impact of bed blocking this winter.

I saw a letter yesterday from the chief executive of the Barking, Havering and Redbridge University Hospitals NHS Trust, John Goulston, that was sent to my constituency neighbour, my right hon. Friend the Member for Barking (Margaret Hodge). It was about the closure for periods over this recent winter of the accident and emergency services at the Queen’s hospital and the King George hospital, because of the impact of massive increases in admissions and bed blocking. That is serious, and it shows that we need the commitment to the ongoing level of spending in the NHS that is conveyed in the amendment. Because of the decisions of the Joint Committee of Primary Care Trusts in December, the Barking, Havering and Redbridge trust is about to close the accident and emergency and maternity services of King George hospital in my constituency.

Also, yesterday I was informed that the chief executive of the Barking, Havering and Redbridge trust is about to leave for pastures new—for a job with London regional NHS—after three years in post, during which he has not managed to remove the deficit, which is ongoing in that two-hospital trust. He is to be replaced by the chief executive of Chase Farm. She has presided over getting rid of the accident and emergency services at Chase Farm, and she will presumably get rid of the accident and emergency service at King George hospital, Ilford next.

[Nick de Bois (Enfield North) (Con)]

She has not done away with it yet, and nor, indeed, has North Central London, but they have been putting up a determined fight to do so, and I entirely understand the point that the hon. Gentleman is making.

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[Mike Gapes]

I am grateful for that intervention. The hon. Gentleman will know that the previous Member of Parliament for his constituency, Joan Ryan, fought very hard over many years, as I was fighting for my hospital with my neighbour, the hon. Member for Ilford North (Mr Scott) and others, and we continue to do so. As a result of a motion carried unanimously, across the parties, by Redbridge council last week, we are calling on the Secretary of State to intervene to save the accident and emergency and maternity services at King George hospital, Ilford.

If the spending is not in place, more and more hospitals and NHS trusts will face such a problem. It is not just about money; it is about management incompetence, NHS bureaucrats and some consultants who have a model of health care that is not in the interests of the community. However, it is about resources. Those responsible hide behind all kinds of arguments, but ultimately this is an extremely important issue that cannot be left to consultants or NHS managers. It requires political accountability and political decision making, because the public provide the money and vote the money, and it is important that we are accountable for how that money is spent—and so should those people in the NHS bureaucracy on massive inflated salaries, earning two, three, four times what Members of Parliament earn, who do not take account of the wishes of the local community, the local councillors or local Members.

[Nick de Bois]

The hon. Gentleman should take some comfort, as we have done since the election, from the fact that the Secretary of State has imposed four very determined tests that will allow for GP support and public support. He can take some encouragement from that.

[Mike Gapes]

I am sorry to disappoint the hon. Gentleman, but I have read the tests. They talk about clinical support, but what we have had is a rigged consultation and a group of placemen and women—hand-picked GPs—who are in charge, and there has been no ballot of GPs so there is no means of assessment. Those responsible say that the decision is clinically led, but we are now beyond that because the Joint Committee of Primary Care Trusts has said there has been clinical support, even though we know there is significant opposition. We now require the Secretary of State to intervene, and to save King George hospital’s accident and emergency and maternity services, which we have had in my constituency since 1926.

[Mr Gauke]

First, may I welcome the right hon. Member for Wentworth and Dearne (John Healey)? It is a great pleasure to debate with him again. My first experience as a Front Bencher was debating with him and, although we now sit on different sides of the House, it is good to do so once again. I am pleased to be sitting on the Government Benches now, rather than on the Opposition side, but I am sure he has ambitions to return to these Benches. There are not many subjects on which I agree with the vast majority of Labour MPs, but one on which I do is the high regard in which they obviously hold the right hon. Gentleman. I am pleased by his popularity and the progress he has made.

Amendment 8 would require the National Audit Office to report on how much would be required from the additional rates in order for the health service allocation to grow in real terms every year. It may be useful to clear up one or two potential misconceptions. The amount that is to be spent on the NHS was confirmed at the spending review, and is unaffected by whether funds come from national insurance contributions or elsewhere. The amount of national insurance contributions allocated to the NHS depends on economic circumstances as well as the proportions specified in legislation. I would like to reassure the House that it is no part of Government policy to cut NHS funding automatically if, for example, global economic conditions lead to a reduction in national insurance contributions allocated. To be fair, that has not been the position of any Government, notwithstanding the fact that there has been an allocation element of national insurance contributions not just from 2003, but from 1948 when the NHS was created.

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[Mr Hanson]

I certainly would not have abolished the regional development agencies or cut public spending with the speed and to the extent that the Government are doing. I certainly would not have cut the Welsh Assembly Government’s budget in our own areas to the extent that the Government will do over the next two to three years. That would have helped to manage the necessary downturn in public spending that we needed to make to readjust the economy in a way that was proportionate, fair and met our constituents’ needs for public services and for employment.

[Mike Gapes]

My right hon. Friend refers to 23 of the top 100 constituencies, but if he extends the list to 105 constituencies to include Ilford South—my constituency—all those next five constituencies are also in the relevant regions, so he could refer to 28 of 105, and there is 38% public sector employment in my constituency.

[Mr Hanson]

I am grateful to my hon. Friend. Would I ever try to miss out the good constituency of Ilford South? My purpose was to indicate that the inclusion criterion that the Minister has selected is based on one simple issue: how to compensate for and deal with public sector job losses and provide a mechanism to help to support the creation of new jobs where public sector jobs are lost. On his criterion, 23 of the 100—or 28 of the 105, to take my hon. Friend’s figures—show that those issues are not being dealt with in the way in which the Minister has said.

If I look at the impact of the possible 490,000 public sector job losses, I see that they will hit hardest those constituencies with public sector employees. If I add to that, as I have to do, the benefits of job creation and look at local authorities on the economic deprivation index, I see that no fewer than seven of the top 12 of those economically deprived boroughs fall within areas that are excluded from the scheme. The boroughs of Hackney, Newham, which is represented here today by my right hon. Friend the Member for East Ham (Stephen Timms) and my hon. Friend the Member for West Ham (Lyn Brown), Tower Hamlets, Islington, Barking and Dagenham, Haringey and Lambeth are all in the top 12 economically deprived boroughs, yet they cannot avail themselves of the scheme.

Other constituencies throughout the country—again, I will alight on Tatton, because its is the Chancellor’s constituency and one that I know well—where unemployment is low and there are many business start-ups and great pockets of wealth, will benefit from the scheme and can apply to include businesses in the scheme, while boroughs such as Newham, Tower Hamlets and others that I have mentioned will not be able to do so. If we look at the unemployment rate across the United Kingdom, which is 7.9% on the latest figures, we see that unemployment in London is 9.1%.

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[Kelvin Hopkins]

I am strongly in favour of proper targeting, but the RDAs could do that: they could look at their regions, advise on which areas needed the most support and provide assistance in that way. I am in favour of targeting, but if we are to exclude areas, it should not be done regionally, because within regions there are areas that need strong support and other areas that need less support. As I said in earlier debates in the Chamber today, I would use that £1 billion in other ways and target it rather better. We in Luton feel unfairly discriminated against for the reasons that I have set out.

There is also a problem with regional boundaries, which have been mentioned before. In Committee I mentioned a regional boundary that goes right through a small conurbation not far from me, Leighton-Linslade. Linslade is in the south, in Buckinghamshire, and Leighton Buzzard is in Bedfordshire. We therefore have a conurbation that is split by the regional boundary. How will people in that small conurbation feel about one side of the town getting a benefit and the other side not getting it?

I think I have probably made my point, and others wish to speak. The Government have got this wrong. I hope that they will accept the reasonable amendments tabled by my right hon. Friend the Member for Delyn and make this a fair Bill that we can all support.

[Mike Gapes]

Allegedly, we are all in this together. If so, why is it that those of us in east London, along with people in the 21 authorities in the Thames Gateway, which include authorities in Kent, where there is not a single Labour Member of Parliament—they are only Conservatives—and those in Essex, are excluded from the package that we are discussing? We heard earlier today about the Maoist chaos of the Government’s regional policy. That is not the responsibility of the Treasury; it is the responsibility of its close allies and partners, and the Business Secretary. However, as we are all in this together, presumably the Treasury is also involved up to its neck.

We have also heard that, apparently, the Government are refocusing regional policy. Well, that regional policy refocus includes, in today’s measures, discrimination against poor people in poor communities. My right hon. Friend the Member for Delyn (Mr Hanson) spoke from the Front Bench about a number of boroughs and constituencies that have high unemployment—higher than the national average—and where, at the moment, there are also high levels of public sector employment. Those areas will take a disproportionate hit because of the measures announced in the comprehensive spending review and the Government’s policy to reduce, for ideological reasons, the size of the public sector so drastically and quickly.

So, we are not all in this together: some of us are in it much deeper than others. I suppose that we are a bit like the residents of Brisbane, Australia. When the tsunami or flood comes in, we hope that it will meet a certain ceiling point before going back down, and that the next day it will go no higher. Some people have a little footbridge or step to get them above the water, but others are pushed down below it. People in the small business sector in my community—in Ilford and Redbridge, which is a Conservative-Liberal Democrat borough—will not benefit from these measures. When it comes to benefits, we are not in this together with those in Tatton or elsewhere. We will lose out.

Other Members represent poorer communities than mine, but I have wards in my constituency with very high unemployment. I also have a very diverse community. One of the interesting features of excluding London from the proposals is that it is not only discriminatory geographically; it could also be discriminatory ethnically. That needs to be taken into consideration, given the way in which the measures disproportionately affect different communities in different parts of the country.

I do not want to delay the House for long. I spoke on Second Reading in November. I hoped at that time that the Government would come forward with some changes to their proposals. I hoped that they would listen to the logic, but they did not. We have already had Committee stage and Report brings us to today.

The Thames Gateway Partnership for London, Kent and South Essex recently wrote to Members, urging us to make representations to the Minister—[Interruption.] He might wish to listen to this. It wanted us to write to him to point out the discriminatory nature of the proposals and to urge the Government, even at this stage—I say again, even at this stage—to see what they can do to help the Thames Gateway authorities. The partnership pointed out that there are 3.5 million residents in the Thames Gateway local authorities area and that it believes that in

“excluding London and the South East from the regional freeze on National Insurance contributions the government is failing to take proper account of local economies, particularly the challenges faced by the Thames Gateway growth corridor.”

My right hon. Friend the Member for East Ham (Stephen Timms) has already referred to that.

The Bill is damaging to a potential growth sector of our economy. The Thames Gateway is part of the future of London as a global city. It is vital to the prosperity of our nation, yet this short-sighted, quasi-Maoist Government are operating in such a chaotic way that they cannot see the damaging consequences of what they are proposing. Next year, I hope, they will come seriously to regret what they are doing. I urge all local authorities in the Thames Gateway area to look very closely at the Division lists for today and to register which Members from Essex, Kent and London went through the Lobby in favour of such discrimination against London, Kent and Essex and which Members voted against it. Then, hopefully, those local authorities, councillors and communities will hold those Members to account.

[Dr Creasy]

I want to talk about three things in my comments on the amendment, the first of which is the test set by the Opposition about what this policy is designed to achieve. Secondly, I shall explain why the amendment is needed to ensure that the policy achieves what is intended. Thirdly, I shall say a little about the evidence base for the policy, which was a matter of great concern to me in Committee—and the Bill is still found wanting in that respect. I shall show how the amendment addresses some of those challenges.

The test we set for this policy and, indeed, for this Government, given our concerns about their economic approach, relates to jobs. At the heart of what we do as a Parliament must be the concerns of our constituents, and I know that one of the main concerns of my Walthamstow constituents and those of many other Members is jobs. How are people going to keep a roof over their heads, keep their families fed and ensure that their families stay together? Those concerns relate to the jobs people have and the support we can give to them in their jobs. Job creation is, as my hon. Friend the Member for Edinburgh East (Sheila Gilmore) ably set out, absolutely key to how we judge this policy.

In that context, the symptoms are not good. We know that unemployment is rising and that it has hit 2.5 million—it has been suggested that it is likely to increase further, especially in areas currently excluded from this policy—so job creation is a critical aspect of what the Government can and should be doing. Six people are chasing every vacancy in this country; if there were ever a time when we needed to create more jobs for which people can apply, it is now. We cannot have a jobless recovery; that is not sustainable. Indeed, the cost to the public purse of doing so would be tremendous. It is worth noting that every extra 100,000 people on the unemployment register is half a billion pounds of welfare expenditure that has to be found. There is a great cost to us of not doing something about rising joblessness.

We therefore look at this policy and ask how it will meet the test that the Minister set. In Committee, he said that the purpose of the policy was specifically “the creation of jobs”. It was to

“help the wealth-creation sector in regions currently reliant on the public sector”. ––[Official Report, National Insurance Contributions Public Bill Committee, 2 December 2010; c. 47, Q167.]

That is the second test that we put: does this policy affect not the regions but the people it is designed to help? If we look at the people test, we see that, as currently constructed, the policy does not meet it; it fails on that basis.

Many Members have named areas in which some of the public sector workers most affected by the Government’s cuts are living. My constituency is already among the top 100 in the unemployment league. Our current unemployment rate is 8.5%, and it is rising as we speak. About 24% of people living in Walthamstow work in the public sector. They are losing colleagues, and they are worried about themselves. My surgeries are full of people asking for help after receiving redundancy notices. I ask the Minister what I should tell those people. What will this policy offer them? The task of Government is supposedly to support people and create jobs in the economy. What can I tell those people in Walthamstow who work in the public sector and risk losing their jobs, or have already received redundancy notices?

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[Mr Gauke]

Not that I am aware of, but as the right hon. Gentleman knows, tax is a matter for the Treasury. I must say that the Thames Gateway would have been hit by a much greater jobs tax if the Labour party were in power.

Both today and in earlier debates, I have understandably been asked about take-up and whether there is a plan, if take-up is lower than expected, to expand the holiday to cover the whole of the UK. Let me reiterate to the House and Opposition Members that this is not just about cost; it is also about the policy rationale for the holiday, which is to target incentives on new businesses in regions with high levels of public sector employment. In their evidence to the Committee, representatives of the Federation of Small Businesses and the British Chambers of Commerce made it clear that the south-east is more resilient than the rest of the UK and that new business formation would not be harmed significantly because the holiday would not be available there. I should also mention to the House, and particularly to the right hon. Member for Delyn that all new and existing businesses in the south-east will benefit from the increase in the employers’ national insurance contributions threshold, which I assume the Labour party will oppose when we bring it forward, and from the reduction in corporation tax rates, as compared with the increase that Labour was going to bring in for small businesses.

[Mike Gapes]

The Minister refers to the FSB. Will he confirm that it wrote before Christmas saying that his proposal is

“a crude assessment as it does not account for areas within these regions that would really benefit from policies that would help bolster employment”?

That remains the position of the FSB.

[Mr Gauke]

That is the same Federation of Small Businesses that said that the Labour party’s policy to increase national insurance contributions would cost about 52,000 jobs just among its own members.

We have touched on the fact that labour markets are much bigger than ward, borough or constituency boundaries. It is not quite clear what the Labour party would do if it were to extend the scheme. Its policy seems to be that it would remove the scheme from some parts of the regions that would currently benefit. It is not quite clear how the Labour party would do that. I do not know—perhaps the right hon. Member for Delyn could explain—whether the plan is that the scheme would be available in Flint but not in Prestatyn. I am not quite sure what the Labour party has in mind. Perhaps it thinks that the scheme should be available in Oldham but not in Saddleworth. I really do not know what the Labour party wants to do with the scheme, but it clearly wants to increase national insurance contributions, not to reduce them, despite what we have heard this afternoon.

The NICs holiday is targeted at regions and countries with the highest proportion of public sector dependence, to encourage new businesses to start up and take on employees. Expanding the holiday to the whole economy would undermine the policy rationale. I therefore ask the right hon. Member for Delyn to withdraw the amendment.