National Insurance Contributions (Secondary Class 1 Contributions) Bill

Richard Fuller Excerpts

2nd reading
Tuesday 3rd December 2024 Commons Chamber

[Richard Fuller (North Bedfordshire) (Con)]

I beg to move,

That this House declines to give a Second Reading to the National Insurance Contributions (Secondary Class 1 Contributions) Bill because it breaks the manifesto commitment of the Labour Party not to increase National Insurance; and will lead to lower growth, lower wages for working people, fewer jobs and the closure of businesses.

Today we turn to the latest chapter in this Government’s book of economic incompetence, which is their choice to increase employers’ national insurance contributions—Labour’s job tax on workers across the UK. Today’s measures are the major reason that the public’s immediate reaction to the Budget was negative, with YouGov polling the day after the Budget showing that nearly twice as many people thought it would leave the UK worse off than thought it would be better off. When it came to judging each of the many measures in the Budget in turn, today’s proposal to increase national insurance was rated the second worst decision of all in the Budget, just behind hiking bus fares by 50%. Back in October, 47% of the public thought Labour’s job tax was the wrong thing to do, but as employers have spelled out the impact of Labour’s job tax, the public’s view has soured further. In polling last Monday, those saying that this measure is wrong have increased from 47% to 57%. The public know that the Labour Chancellor has got this choice wrong.

[Dr Luke Evans]

The shadow Minister is an astute man, and he has picked up on some of the indices of concern. One of those is the economic confidence index, which in October was -52. In November, it was -65. That is the second lowest figure on record since the pandemic in 2020. If we had an eminent economist running the Treasury, they would be able to see that this is a bad idea for businesses and the country.

[Richard Fuller]

Obviously it would be useful to have people with business experience in the Cabinet, if they are going to levy taxes on business. Sadly, the Government do not have that. My hon. Friend’s point about business confidence and the reaction from businesses goes to what the Minister was trying to say in his summing up about what the Conservative party would do. The way we raise more taxes is by enhancing business confidence, so that they invest, grow and make profits that can be taxed. This Budget has done precisely the opposite. Each and every day since the Budget, confidence in the financial competence of this Labour Government has been ebbing away. Less than one in four of the public now believe that this Government are handling the economy well.

[Mark Ferguson (Gateshead Central and Whickham) (Lab)]

The hon. Gentleman appears keen on polling. Can he talk us through the polling for Liz Truss and Kwasi Kwarteng’s Budget?

--- Later in debate ---

[Richard Fuller]

To be fair, my former colleague did not last quite as long as the lettuce, and the public made their judgment clear on that and many other issues at the general election. The hon. Gentleman’s point is fair, but it is not particularly relevant to the decisions he will be asked to vote on today. Hospices in his constituency will know how he votes. GPs in his constituency will know how he votes. Charities in his constituency will know how he votes. I will be interested to see whether he votes with his conscience or with the party line.

Less than one in four of the public now believe that the Government are handling the economy well. It is not just the public who have lost faith in the economic competence of His Majesty’s Treasury; it is the Prime Minister himself, who apparently on Thursday will ditch the ambition for the United Kingdom to be the fastest-growing economy in the G7, removing at a stroke one of the key planks of Labour’s economic plans. The Bill will add to that lack of faith in this Labour Government, because this measure to raise national insurance contributions directly contradicts Labour’s election promise not to increase taxes on working people.

In the election campaign, the Prime Minister, the Chancellor and the entire Labour Treasury team, including the Minister, repeated the phrase from their manifesto, which stated:

“Labour will not increase taxes on working people, which is why we will not increase National Insurance, the basic, higher, or additional rates of Income Tax, or VAT.”

Yet today, with the election behind them, increasing taxes on working people is exactly what Labour is proposing to do.

The shadow Minister is shaking his head.

[The Economic Secretary to the Treasury (Tulip Siddiq)]

You’re the shadow Minister.

[Richard Fuller]

I am terribly sorry—the Minister. He shakes his head and says that it is not true. Let me turn to one of his favourite independent economic groups, the Resolution Foundation, whose analyst James Smith said, “Even if it”—the employers national insurance change—

“doesn’t show up in pay packets from day one, it will eventually feed through to lower wages…This is definitely is a tax on working people, let’s be very clear about that.”

[Jonathan Davies (Mid Derbyshire) (Lab)]

It is a little wearisome to listen to the Opposition talk about taxes on working people. We have the highest income taxes since world war two because they did not increase the thresholds, and in 2011 VAT went up to 20%, which was a massive tax on working people. I would like to hear what the shadow Minister has to say about that.

[Richard Fuller]

The hon. Gentleman talks about the Conservative record. Shall I talk to him about our record on national insurance? In 2010, when Labour was last in office, it broke the economy and left a note saying that there was no money left. We did have to increase national insurance rates—but not by as much as is proposed today. Thereafter, we increased national insurance thresholds with inflation; these proposals do not do that. We introduced the employment allowance, which admittedly the Government are increasing. We then introduced national insurance reliefs for young workers. We increased national insurance income thresholds in 2022, 2023 and 2024. That is the Conservative record. We do not believe in the jobs tax: we do not think it helps growth, and we do not think that it will increase taxation.

[Sir Desmond Swayne]

rose—

[Richard Fuller]

I will make a bit more progress and then give way to my right hon. Friend.

If the Minister does not like the Resolution Foundation’s judgment on this tax, he should just listen to the Institute for Fiscal Studies, which said:

“Simple economic theory suggests that the incidence of employer NICs and employee NICs should be the same, at least in the long run. It is likely that the long-run incidence of both employer and employee NICs is predominantly on employees”.

The measures in the Bill represent by far the largest part of the tax grab in the October Budget. The Treasury Red Book assesses that these measures will raise £23.7 billion in the next financial year, rising to £25.7 billion, but the Minister knows that behavioural changes means that they will actually raise substantially less; the IFS estimates about £16 billion.

I note that in the Red Book there were three opportunities for this jobs tax to be referred to as “Delivering on our Promises”. There is:

“Delivering on our Promises—New Policy to Close the Tax Gap”,

“Delivering on our Promises—Collecting Tax That is Due”

and even the catch-all:

“Delivering on our Promises—Other Manifesto Tax Commitments”,

but the increase in national insurance contributions cannot be included in any of those, because Labour politicians hid their intentions from the British voters at the election.

[Paul Waugh (Rochdale) (Lab/Co-op)]

The hon. Gentleman refers to the history of the Tory party on national insurance. Can he tell us why he and his party voted for the health and social care levy, which put up national insurance for employees not so long ago?

[Richard Fuller]

That is a very odd question when the Minister himself has said that the objective today is to provide more money for the health service. I guess I will think about what the hon. Gentleman has asked.

[Clive Lewis]

Will the hon. Gentleman give way?

[Richard Fuller]

I will be very happy to give way, but I will make some progress first.

If we take the Government at their word that their intention is to raise funds for public services, this measure is an inefficient way to do so. Under the provisions of the 1992 Acts on social security provision, only a proportion of the moneys raised by this form of taxation will be allocated to public services; the vast majority is essentially hypothecated to the national insurance fund. Will the Minister tell us what proportion of the moneys raised by the Bill will actually be allocated to the national health service? Will he also advise us of why the Chancellor chose this particular tax, which, uniquely, will burden the economy with far more in taxes levied than will actually end up going to support public services?

Employers large and small across the United Kingdom have been pleading with the Government to reverse this measure, letting them know about the impact it will have on jobs and on wages; the particularly harsh impact it will have on female workers and on young people starting out in their careers; the vulnerability of our hard-pressed hospitality businesses and high street retailers; or the pre-Christmas pleas of our charities, hospices and GPs about the way their contribution to public services has been completely ignored. Has the Minister been listening to the voices of people who actually have experience of running a business, creating jobs or delivering public services, who are telling him about the negative impact the Bill will have on jobs and pay, and even on their own viability, or has he been turning a deaf ear?

[Dr Luke Evans]

Is it not the biggest slap in the face for people listening to this that when Labour uses “working people”, it cannot define that term? Pub landlords and people working in charities are by definition working people—they are of working age and earn a living—and they will now be hit by this tax, which will have such a detrimental impact on their livelihoods. Is that not a disgrace?

[Richard Fuller]

I have been listening to questions from Members who believe that this is “not a tax on working people” asking for exemptions from it. When we hear that these taxes are being levied on hospices, charities, GPs and small businesses, we cannot help but believe that Labour thinks that people work only when they work for the Government. The truth of the matter is that working people work in many institutions across the country—in small businesses, large businesses and in the third sector—as well as for the Government. This Government are taxing working people.

[Clive Lewis]

I think sometimes, listening to the Opposition, it is as if that money goes into a complete black hole. Those billions are not just going to go into public services like health, education and social housing; we are also putting that money into people’s pockets—into the pockets of nurses, doctors, engineers and builders—who will then spend their money in those businesses. It is called the multiplier effect. That money will go back into our economy, rebuild our public services, which the Conservatives destroyed, and go into the pockets of people through the economy. What’s not to like?

[Richard Fuller]

The hon. Gentleman asks, “What’s not to like?”, but just a few minutes ago he was saying what he did not like in the Bill. He said he wanted exemptions that the Minister was not prepared to give him; I think his dispute is not with me, but with his hon. Friends on the Front Bench.

The British Retail Consortium—another section of the economy—wrote to the Chancellor detailing the costs of the measures to retailers: £0.57 billion from the rate increase and £1.76 billion for the reduction in the national insurance contributions threshold. It spelled out the consequences:

“For any retailer, large or small, it will not be possible to absorb such significant cost increases over such a short timetable. The effect will be to increase inflation, slow pay growth, cause shop closures, and reduce jobs, especially at the entry level. This will impact high streets and customers right across the country.

[Ms Polly Billington (East Thanet) (Lab)]

I would just like the hon. Gentleman to apologise for the fact that all the things he has just outlined are the impact of his Government’s kamikaze Budget in 2022.

[Richard Fuller]

Since the hon. Lady is reviewing history, she should look at the Bank of England review by Bernanke, commissioned under the last Government, which looked at the impact on interest rates in the UK compared with other countries and included that period. She will see that the real impact of those changes on interest rates was no different from any other year. The UK stayed in exactly the same place every year. There is a difference between facts and reality and what the Labour party thinks is history.

[Ms Creasy]

Will the hon. Member give way?

[Richard Fuller]

No, I am drawing my speech to a close, because plenty of people wish to speak.

UKHospitality is also concerned. It estimates that our pubs, clubs, hotels and restaurants will have to stump up £1 billion more because of the Bill. It points out that for a typical staff member aged 21 or over earning the national living wage and working 38 hours a week, the jobs tax will increase by 53.9%, from £1,863 to £2,869. Does the Minister honestly think that that will not mean job cuts in the hospitality sector?

The Government claim to have shielded the public sector from the jobs tax, but the reality is murkier. Many of our GPs will have to stump up more money, and our hospices and charities will have to find more money. As we approach the Christmas season, will the Minister give some hope to our charities, voluntary groups, GPs and hospices, and say that they, too, will be exempt from Labour’s jobs tax?

The Labour party in government is stumbling badly. I know from my own experience that no amount of resets will inspire confidence, and certainly not when a Prime Minister is forced into a reset within five months of taking office. The Labour party in government is also getting a reputation for a series of cruel policies motivated by socialism based on hate. The removal of winter fuel payments for the elderly was cruel. The family farm tax, penalising British farmers who have toiled in our fields for generations, was cruel. Today’s jobs tax, attacking businesses, charities, GPs, hospices and employment opportunities and growth is cruel, too. I urge all Members of this House to support our amendment.