Employer National Insurance Contributions

Paul Holmes Excerpts

Wednesday 4th December 2024 Commons Chamber

[Mel Stride]

No matter what points the hon. Gentleman may make, I am afraid he cannot get away from the fact that this Government are bearing down on growth, pressing up on unemployment, bearing down on employment and bearing down on living standards.

The OBR also says that real household disposable income by 2029 will be 1.25% lower than it was back in the spring, at the time of that forecast. We know the impact that national insurance is going to have on wages. It will press them down and it will further diminish living standards.

[Paul Holmes (Hamble Valley) (Con)]

Does my right hon. Friend the shadow Chancellor remember any Labour MP in the last general election standing on a fully costed manifesto that would mean economic growth was forecast to be lower than under the previous Government? Perhaps the hon. Member for Swansea West (Torsten Bell) should remember that Labour MPs stood on a manifesto that was apparently fully costed but then had different commitments. We had a faster rate of growth under the last Government than is projected under this Government.

[Mel Stride]

The simple fact is that, at the time of the general election, we had the fastest-growing economy in the G7. The simple fact is that the Labour manifesto said it would deliver precisely that, yet we have heard very little about that commitment in recent days and weeks—I wonder why.

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[Paul Holmes (Hamble Valley) (Con)]

It is a pleasure to follow the hon. Member for Makerfield (Josh Simons). I rise to speak in favour of the motion on the Order Paper in the name of the Leader of the Opposition.

I do not rise to speak in this House because I think the Labour party’s Budget is vindictive, but I do think that the national insurance rise we are debating today is a proposal that runs right through the Labour party’s DNA. Labour drives down growth, when growth should be the No. 1 priority for public services. It taxes the wealth creators and the small businesses, it borrows and makes the economic situation worse, and it is always the Conservative party that has to pick up the pieces after Labour has targeted the poorest people and smallest businesses in our society and made them suffer.

Ultimately, the lack of growth that the Labour party and every Labour Member have signed up to means that public services will suffer, fewer jobs will be created and more businesses will close. I gently say to the Chief Secretary that he challenged us repeatedly to outline what we would do instead of this measure to make sure that we can fund public services, and I will tell him a few things that we would not do. [Interruption.] Well, I will tell him in a minute, and he can intervene and elaborate, and I will get an extra minute. As he asked me what we would do, I will tell him: we would increase growth, as was outlined by the OBR. We would have growth, and higher growth than this Government are proposing. However, what we would not be doing is borrowing as much as him and spending £9 billion on public sector pay rises for his trade union paymasters, funded from borrowing. Those are the things we would not do.

[Darren Jones]

The hon. Member tells the House that he would go for growth. How did that go when his party tried it last time?

[Paul Holmes]

I simply say—and the Chief Secretary should know this because he supposedly wrote the Budget that we voted on a couple of weeks ago—that growth forecasts were higher under the last Government than those of the Government for whom he is now leading in the Treasury. I say to the Government that business confidence is at the lowest it has been for years.

[Torsten Bell]

The hon. Member has raised the issue of business confidence, which I have heard a few times from Opposition Members. That leaves me pondering why, if businesses were so confident under the previous Government, we had the lowest private sector business investment in the entire G7, and the only country in the OECD that saw lower levels of private investment was Greece.

[Paul Holmes]

I know the hon. Gentleman liked to pride himself on being the oracle of economics when he led a think-tank, but if he looks at the bare facts of business confidence out there, he will see that it has been lower under the five months of the Labour Government than it ever was under the 14 years of the Conservative Government.

I want to mention some of the impacts that this measure will have on my constituency of Hamble Valley. There are 4,000 people employed in the hospitality sector in my constituency. Just last night, a business leader—a small business leader who owns three local venues—outlined to me that, because of the measures this Government have brought forward, he now has to find 5% extra of his total turnover to pay his taxes. That leads to a number of options: he can reduce staff count, meaning higher unemployment in my constituency and nationally; he can close venues, which again means lower employment and the death of our town centres—in every constituency, I remind Members—or he has to choose between not hiring local staff and stopping expansion, as every extra person he wants to take on will cost the business an extra £800 because of this national insurance contributions rise. That choice is facing businesses up and down the country, with lower growth, higher bureaucracy and higher taxes on the people who create jobs and wealth in every constituency in this country and drive the economy that we need to fund public services.

What is most damaging about the Government’s proposal is the catastrophic impact it will have on charities across this country. I defy any Labour MP to stand up in this Chamber and say that they are willing to bring in and happy to vote for a measure that will mean frontline services delivered through our charitable sector are cut. There are other options the Government can take, and they have chosen not to.

[Yuan Yang (Earley and Woodley) (Lab)]

rose—

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[Paul Holmes]

I am not giving way. [Interruption.] Well, I do not have time.

Let us look at the hospice sector. Many Labour Members probably hoped that the parachute leads had been cut, but I raised £10,000 by jumping out of an aeroplane for the Mountbatten hospice in my constituency. Some 70% of its income is from charitable donations, and 24% of its income is delivered by the national health service. At no time when this Minister or any other Minister has stood up in this House have they apologised to the hospice sector for the cuts in services that will have to be delivered because of this measure. Mountbatten will have to find an extra £1 million in income just because of this measure, and that means more hospital beds being used by people who are unable to access hospice services. Ultimately, the NHS will be in further crisis because of the short-term measure this Government are taking through.

[Chris Curtis (Milton Keynes North) (Lab)]

Will the hon. Gentleman give way?

[Paul Holmes]

I like the hon. Gentleman, so I will give way.

[Chris Curtis]

I thank the hon. Gentleman. I was looking at some research the other day that shows that parachute jumps end up costing the NHS more money because of the risk of injury than they raise for the charities concerned. Does he agree that, rather than parachute jumps, what our NHS needs is the £22.6 billion investment that has been raised by the Budget?

[Paul Holmes]

The last Government gave the highest amount of investment into the national health service ever. I happened to jump out of a plane because I was very keen to do so, as I am a bit of a thrill seeker but also because I wanted to raise money for a good charity. If the hon. Gentleman votes for the Government measure or against the motion this evening, he will be ensuring that hospices across this country are unable to deliver the services they want to deliver and, as homelessness charities have said, that £50 million to £60 million will be taken out of frontline services. That will be the impact of this measure. Charities across this country are going to suffer under this Government’s proposal, as will hospitals and wealth creators, and I say to every Member who votes against this motion to protect frontline services that their constituents will be watching.

We should not be surprised that, five months after taking office, the Labour party has reverted to type: tax the most vulnerable, tax small businesses and borrow on the public purse; with poorer public services out there and lower growth going forward. I cannot wait for its defeat at the next election and us fixing the problems.

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[The Exchequer Secretary to the Treasury (James Murray)]

I thank all right hon. and hon. Members for their contributions during the course of the debate.

This Government were elected with an immediate and critical need to draw a line under the fiscal irresponsibility and economic mismanagement of the Conservatives. Since day one in office, we have been determined to deliver economic stability, and we have done so by fixing the public finances, introducing tough new fiscal rules, and getting the NHS and other public services back on their feet.

It is on those foundations that we will boost investment and drive long-term economic growth to make people better off. This is not an easy task, as the Chancellor has said, but fixing those foundations is what underpins all the difficult but necessary decisions we have taken. It is the goal of fixing the foundations of our public finances and the NHS that has driven our decision to make the changes to employer national insurance contributions that we have been discussing today.

In taking the difficult decisions at the Budget, the Chancellor has been determined to protect working people. That is why our Budget made no changes to income tax, rates of VAT or the amount of national insurance that working people pay. As a result of our Budget, people will not see a penny more on their payslips. However, a £22 billion black hole in the public finances cannot be fixed without taking any difficult decisions at all. The Conservatives in government hid their heads in the sand and ignored the fiscal realities. Now, both they and other Opposition parties are desperate to have it both ways. They say that they support extra money for the NHS, but they refuse to back the measures to fund it.

[Paul Holmes]

On that point, will the Minister give way?

[James Murray]

I have been very generous over the past 48 hours in giving way in this Chamber, but I will not. My time is very limited, although I would like to hear more about the plane the hon. Gentleman spoke about earlier.

We have made the tough but necessary choices that this set of circumstances requires, which is why we have decided to raise employer national insurance contributions. The changes broadly return national insurance revenues as a proportion of GDP to the levels they were at before the previous Government’s cuts to employee and self-employed NICs, but they do so in a way that does not result in higher taxes in people’s payslips.

They also do so in a way that increases protection for small businesses and charities, because we have decided to more than double the employment allowance to £10,500 and remove the business size threshold. That means that from April 2025, all eligible organisations will be able to employ up to four people on the national living wage without paying a penny of employer’s national insurance. Over half of all employers will pay the same or less national insurance than they did before, but we acknowledge that the decision will have an impact for other employers. Employers will have a choice about how they respond to the changes, and some of those choices will be hard.

I do not have enough time to respond to all the points raised by hon. Members directly, but I will briefly respond to the right hon. Member for Beverley and Holderness (Graham Stuart)—he has been intervening all afternoon but he is no longer in his place. He asked about table 3.2 in the OBR report. I am sorry to disappoint him, but my answer is nowhere near as interesting as I suspect he thought it might be; the table was simply published in error and has now been corrected. The Government provide support for Departments and other public sector employees with the additional employer national insurance contributions liability, and separately we have provided an additional 3.2% increase to local government spending power, including £600 million of new grant funding for social care.

I thank all the other hon. Members who made contributions: my hon. Friends the Members for Makerfield (Josh Simons), for Stevenage (Kevin Bonavia), for North East Derbyshire (Louise Jones), for Uxbridge and South Ruislip (Danny Beales) and for Rother Valley (Jake Richards), and the hon. Members for Hamble Valley (Paul Holmes), for Hazel Grove (Lisa Smart), for Rutland and Stamford (Alicia Kearns), for Wokingham (Clive Jones) and for Hornchurch and Upminster (Julia Lopez).

I want to briefly respond to the point of order made earlier by the hon. Member for South Shropshire (Stuart Anderson) because I welcome the chance to repeat the fact that the OBR said in October that its March forecast would have been “materially different” had it known what the previous Government did not share with it at the time of the March forecast. I am confident that the Hansard record is correct. It specifically includes “materially different” in quotations and not the rest of my statement.

I am grateful to have had the chance to respond on behalf of the Government to the questions that have been raised today. The decision to make changes to employer national insurance was not taken lightly. It was a tough decision for us to take. I recognise that while half of businesses and organisations will pay the same or less than before, others will face difficult decisions of their own. We have asked employers to make a greater contribution, and while we do not expect those affected to welcome that, I hope the majority will understand why we have done it.

The simple fact of the matter is that our country needed a Government prepared to fix the public finances, get public services back on their feet and restore economic stability. It is only through an ambitious and fiscally responsible approach that we can boost investment in growth, laying the path towards the brighter days ahead. The previous Government had completely lost sight of that.

My office in the Treasury building used to be that of Nigel Lawson. He once said:

“To govern is to choose. To appear to be unable to choose is to appear to be unable to govern.”

That very neatly reflects where the Conservative party has ended up now. Before, as the Government, the Conservatives had given up on effective governing, and since then they have given up on effective opposition. This vote today comes down to a choice: between irresponsibility on the Opposition Benches and a Government prepared to do what is needed to build a better future. It is this Labour party in government that is taking the tough but necessary decisions, with a once-in-a-generation Budget to wipe the slate clean and put our country on a better path. It is this Government that have restored economic stability, fixed the public finances and hardwired fiscal responsibility into the Budget-making process. It is this Government that are putting the NHS back on its feet, raising the national living wage and protecting people’s payslips, and it is this Government that will invest in our country, create wealth in every nation and region and make people across Britain better off. That is the choice today and that is why we reject the Opposition’s motion.

Question put.