National Insurance (Contributions) Bill

Richard Fuller Excerpts

Tuesday 10th December 2013 Commons Chamber

[Richard Fuller (Bedford) (Con)]

If I heard the hon. Lady correctly, she said that she wanted the cut in the jobs tax to be brought in sooner, yet in 2010 she said in Committee that she was proud to stand on a record of increasing the jobs tax. Does that represent a flip-flop?

[Shabana Mahmood]

It does not represent a flip-flop, as the hon. Gentleman well knows. It would not be a debate on this issue if he did not make the point that he has made on a number of occasions. I would have felt as though I had missed out on something if he had not made that intervention, so I am grateful to him. He will not be surprised if I repeat my previous answers to him in relation to national insurance. I was very proud to stand for election on the Labour party manifesto at the 2010 general election and proud that the Labour Government had got the recovery under way at the time of that election—a recovery that was choked off by this Government as soon as they came into power. [Interruption.] Government Members might not like to hear it, but I am afraid that that does not stop it being true.

Let me clarify my point about the employment allowance. From the moment it was announced in the Budget, our immediate critique was not that it should not be introduced —we supported its introduction from the beginning—but to say, as we have continued to say, “Bring it in as soon as possible—why wait?” If there were compelling reasons for the wait, it would be understandable, but I am afraid that I find nothing compelling in anything the Minister has ever said about the delay in bringing these proposals forward. All the issues relating to IT and systems and getting software up and running could be sorted out, with a bit of will.

I understand that software developers are still waiting on HMRC to give them the full guidelines on what software they will need to produce to make sure that take-up of the employment allowance goes ahead with relative ease. I hope that the Minister has had sight of the submission by Mr Holloway of the Learn Centre to the National Insurance Contributions Bill Committee, which was submitted after the Committee had disbanded but was still made available to all its members, because it contains concerns about the delay in getting proper clarification and explanation to software developers on what they need to do in relation to the employment allowance. Given that it is December and they have to get ready for the employment allowance to come online in April 2014, they will not have a huge amount of time to get everything in place and ready. If that is the position on the employment allowance, then why not add in the proposal on NICs for under-21s and deal with both issues at the same time?

Given that we are speaking from the Opposition Benches—unfortunately—our amendment does not propose that the measure should be introduced immediately in 2014; otherwise Government Members would no doubt have shouted at us about the cost of doing so and the spending commitment entailed. However, we have asked for a review that would look at the level of youth unemployment now and the impact that introducing the measure in April 2014 would have had on the level of youth unemployment as it stands today. That is because the Government should not escape scrutiny for the impact that this measure may have had compared with what it will have, I hope, when it comes into force in 2015. If it is found that the measure would have had a significant impact, as we believe it would, that is an important bit of information and the Government would be put under pressure to introduce it sooner than they intended.

This Government found money in the autumn statement for the married couples allowance. They have always said that the recognition of marriage in the tax system is symbolic. However, government is about choices and priorities, and if money can be found immediately to do something that is symbolic and sends a message, then surely it should be found for a practical Government measure that helps to prioritise our young people who need jobs today and not on a date far from now. The choices and priorities of this Government are wrong and they should think again. The emergency presented to this country by the current rate of youth unemployment cannot wait to be dealt with on some future date. The Government should reconsider the start date of this proposal. We therefore intend to press our amendment to a vote.

--- Later in debate ---

[Shabana Mahmood]

Given that I am still relatively new to my shadow Treasury brief, I am not yet—as hon. Members who served in Committee will no doubt be pleased to note—suffering from review fatigue. Both of the new clauses seek further reviews from the Government. New clause 1 envisages a post-implementation review, which was the subject of some debate in Committee, and I felt it was worth having a further discussion to push the Government a little more in relation to the impact that the employment allowance will have on jobs and wage rates, and the effectiveness of the promotion of the employment allowance to all those who are eligible for it.

New clause 2 envisages an administrative and compliance cost review—a one-off review to take place six months after the employment allowance comes into force. It was prompted by the evidence of Mr Holloway, which I mentioned earlier, and I shall go into more detail shortly.

In Committee, the Minister helpfully indicated that he would publish information on two of the elements that I have included in new clause 1—the overall take-up of the employment allowance and its geographical spread. I understand from his comments in Committee that the information on the geographical location of those taking up the employment allowance will probably be available on a regional basis. I hope that he will clarify that point when he responds to the debate. The Minister said that he would put information on both elements in the Library so that Members can raise questions about the effectiveness of the employment allowance and its take-up levels. We have in mind the previous regional national insurance employers’ holiday, which had difficulties from the start. We have made the point that those difficulties should have been dealt with sooner, and it is in that context that we think the Government should have a formal post-implementation review of the take-up of the employment allowance.

[Richard Fuller]

The hon. Lady earlier made the breathtaking assertion that although the Labour party was proudly in favour of increasing the jobs tax in 2010, its attempt now to reduce it was not a flip-flop. With the proposal of an annual review, businesses will be concerned that the Labour party is not committed to the employment allowance, as we are. The hon. Lady said in Committee that she could not commit the Labour party to supporting the employment allowance at the next election, so will she therefore admit that Labour’s support for employment allowance is at risk in their shuffle of policies before that election?

[Shabana Mahmood]

I will repeat exactly what I said to the hon. Gentleman when we had this debate in Committee: we have been unequivocal in our support for employment allowance since it was introduced in the Budget earlier this year. We have taken every opportunity to say to the Minister and his colleagues in the Treasury team that it should be introduced sooner. We could not have been more unequivocal in our support.

The purpose of the review is not to put the employment allowance at risk. The regional national insurance employers’ holiday scheme had problems with take-up from the start. They were raised with Ministers in this House at every available opportunity—in oral and written questions—yet we had to wait for the full three years of the scheme to run before the Government brought forward a proposal without the same problems. That is the context for tabling new clause 1. We want employment allowance to succeed and not suffer from low take-up—we want it to be taken up. The Government say that it will be taken up by 90% of eligible employers. I am sure that all Members want to see 100% take-up, and there seems to be no real reason why 10% should be missed off. We want to ensure that take-up is not affected by any unforeseen issues during roll-out.

--- Later in debate ---

[Richard Fuller]

I start by thanking the hon. Member for Birmingham, Ladywood (Shabana Mahmood), if I may, for her grace and courtesy in responding to my persistent and somewhat repetitive questions about her party’s commitment to the proposals on employment allowance, and on its continuing commitment to it in the lead-up to the next election. The reason for my persistence is that I think it is an absolutely fantastic measure. It will have a positive impact on employment, on wages and on the economy, and it should be embraced by all parties across the House, now and in the lead-up to 2015. I wish the hon. Lady every courage in talking to her colleagues to ensure that their support for it is maintained in the Labour party’s next manifesto. I wish her every success in that regard.

This small measure is so important because it has shone a light on a much broader and deeper issue—namely, the extent of Government intervention in the wages and living standards of people on low incomes. I should like to give the House some figures. Let us take the example of someone on the minimum wage earning £13,000 a year, and assume that they are the only earner in the household and have two children. Taking into account the impact of the tax and national insurance paid and the benefits received, that person’s take-home pay will be £25,000. Their wages will be £13,000, but their take-home pay including benefits will be £25,000, which is nearly twice as much. The difference will not be so significant for people without children, but even someone who is single and earning the minimum wage will see an increase on the £13,000 being paid by their employer to a total of £17,600 in pay and benefits.

I do not want to question the level of Government intervention in the labour market, other than to say that a better outcome could be achieved if it were the employers who were paying the higher levels of wages that people need to achieve an adequate living standard. That outcome can be achieved in a number of ways. There will be uplift in the economy thanks to the measures that this Government are taking to encourage growth and boost the economy, and wages should increase over time as a result. It can be achieved through measures to increase the skills of our employees, to ensure that people can aspire to take on more complex tasks and earn higher wages as a result. It can also be achieved through innovation among our entrepreneurs as they create new higher sector employment, and through action on the minimum wage. I hope that all the political parties will think carefully about their policies on each of those points, so that we can make progress.

In the proposals in the Bill for the employment allowance, the Government have found a tool to tackle the additional costs that we place on labour. The chart on page 18 of the autumn statement shows that, since early 2001, employers’ social contributions as a share of total employee compensation have increased from 13% to 17%. The employment allowance will start to make a change in that regard, and I encourage the Minister to see it as a first step, with more still to come.