Social Security

Baroness Winterton of Doncaster Excerpts

Tuesday 5th May 2020 Commons Chamber

[Madam Deputy Speaker (Dame Rosie Winterton)]

I call Minister Jesse Norman to move the motion. He is asked to speak for no more than 20 minutes.

[The Financial Secretary to the Treasury (Jesse Norman)]

I beg to move,

That the Employment Allowance (Increase of Maximum Amount) Regulations 2020 (S.I., 2020, No. 273), dated 11 March 2020, a copy of which was laid before this House on 10 March, be approved.

This draft legislation allows the Government to increase the employment allowance by one third, or £1,000, giving more than 1 million small and medium-sized businesses up to £4,000 off their employer national insurance contributions bills. Employers pay secondary class 1 national insurance contributions on their employees’ earnings above the secondary threshold, which is set at £8,788 this year. Those contributions are charged at 13.8% and constitute the largest business tax by revenue in the UK.

The employment allowance was introduced in 2014 to help businesses with the costs of employment and to encourage them to grow and to hire more staff. It is claimed by more than 1 million employers in order to reduce their employer NICs bill by up to £4,000 per year. The Government recently restricted the employment allowance to smaller businesses with a national insurance contributions liability under £100,000, thereby ensuring that this valuable support is targeted at those who need it most.

At Budget, the Chancellor announced that we would deliver our commitment to increase the employment allowance for smaller businesses from £3,000 to £4,000 from April 2020. Businesses have been able to access that increased support from the start of the tax year. The draft regulations, if passed, will legislate for that increase to the employment allowance. More than half a million eligible businesses will benefit from the increase by up to £1,000. The Treasury expects the average gain from this measure to be about £850.

The Government are committed to supporting the UK’s smallest and often most entrepreneurial businesses, and this measure achieves that. Some 95% of the businesses benefiting from this increase are small and microbusinesses. Increasing the employment allowance to £4,000 means that 65,000 more businesses will see their employer national insurance liabilities fall to zero. Since introducing the employment allowance in 2014, the Government will have taken around 650,000 of the UK’s smallest businesses out of paying national insurance contributions entirely.

The Government are determined now more than ever to support people and businesses. At Budget, we increased the national living wage by 6.2% to £8.72 an hour. Along with increases to the income tax personal allowance and the national insurance primary threshold, that means an employee working full time on the national living wage is £5,200 better off today compared with April 2010.

However, we are aware that by supporting people at work through national living wage increases, we also increase cost for businesses. Increasing the employment allowance helps businesses to meet that cost. Businesses will now be able to employ four rather than three full- time employees on the national living wage without paying any employer national insurance contributions.

This increase will cost more than £2.3 billion over this Parliament; it is a large tax measure. It should be noted that in just four years, the Government have doubled the value of the employment allowance. The draft regulations legislate for a Budget measure that is already helping more than half a million of our smallest businesses with the costs of employment and has been supported by the Federation of Small Businesses.

Before I conclude, let me welcome the hon. Member for Ilford North (Wes Streeting) to the Labour Front Bench. I enjoin him and all colleagues in the House to join me in supporting the draft regulations, which I commend to the House.

[Madam Deputy Speaker (Dame Rosie Winterton)]

I call the shadow Minister, Wes Streeting, who is asked to speak for no more than 15 minutes.

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[Neil Gray (Airdrie and Shotts) (SNP) [V]]

Thank you, Madam Deputy Speaker. Like the shadow Minister, I do not intend to take anywhere near the quota of time on offer.

I thank the Minister for the motion. I dealt with him positively on the Roadchef Employee Benefits Trust issue and I hope we can continue to assist in progressing that matter. However, I must challenge him on his comments regarding the minimum wage. The minimum wage premium is not the real living wage. I encourage the UK Government to follow the Scottish Government’s lead by engaging with business to encourage more employers to pay the real living wage, if they cannot make it the minimum wage, and to remove the age discrimination that means under-25s cannot earn the same as their older colleagues for doing the same job.

As this is my first virtual speech, let me thank all those in the House staff who have gone out of their way to make the virtual House of Commons work and allow colleagues to hold the British Government to account. That includes Mr Speaker, you Madam Deputy Speaker and your fellow Deputy Speakers. Having spent considerable time on a committee with the Leader of the House, the irony of its being this particular Leader of the House who is proving that remote participation and eventually electronic voting can work, is certainly not lost on me.

Regarding the regulations, it is a pleasure to be able to respond on behalf of the SNP. Colleagues will be relieved that I do not intend to speak for very long. The business before us is uncontentious. We of course welcome an increase in employment allowance, but would have liked to have seen it go further. That is not an opportunistic position that we take for the afternoon to nit-pick or find division where there is none; our manifesto committed us to an increase in the employment allowance from £3,000 to £6,000 per employer, per year. Of course, that was the manifesto that helped the SNP win 80% of the seats we contested in December’s general election.

I welcome the shadow Minister to his place on the Opposition Front Bench. Like him, I encourage the UK Government to do more to assist small employers across the UK during the covid-19 crisis. The job retention scheme and business support schemes have massive gaps that so many of our constituents are falling through, and that is before we get on to the unsatisfactory self-employment scheme. I share the calls from the shadow Minister on bringing about flexibility to the furlough scheme. Something I would like to see on top of what he called for would be an appeals process, where an employer refusing to furlough a member of staff, leaving them without an income, can be challenged. The CBIL scheme is also not helping all those who need support. For many, incurring debt is just not an option. There needs to be much more in the way of grants available. Similarly, not all charities are covered in the third sector scheme, such as research-based charities, so I hope they will look at those areas again.

Short of the full powers of independence, we want the UK Government to devolve control of national insurance to Holyrood, so that the Scottish Government can use economic levers such as these measures to make decisions that support employers to create jobs. At the moment, our control over economic policy is very limited and largely rests with the UK Government, who take decisions that may favour other parts of the UK and may not be in Scotland’s best interests.

We will also continue to oppose the UK Government’s decision to restrict eligibility for employment allowance. In our view, it should cover all firms and all employers. The UK Government estimate that about 7% of all employers will no longer be eligible for the employment allowance. By removing this relief, they will be levying an additional £3,000 in tax on those employers.

In conclusion, we will not be forcing the regulations to a Division—I am sure that that will please those still testing remote electronic voting—but we would have liked the UK Government to have been more ambitious to support job creation by halting the eligibility restrictions and by expanding the relief that is available.

[Madam Deputy Speaker (Dame Rosie Winterton)]

I am now introducing a time limit of five minutes. I advise hon. Members who are speaking virtually to have a timing device visible. I call Kim Johnson.

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[Jim Shannon (Strangford) (DUP) [V]]

I very much welcome the Minister’s announcement today and the Government’s commitment to it. I thank you, Madam Deputy Speaker, for giving me the opportunity to speak.

Initially, the employment allowance was set at £2,000 but was increased to £3,000 from April 2016. From April 2020, the allowance may only be claimed by employers with employers’ national insurance contributions of below £100,000 in the previous tax year, a change announced in 2018. HMRC estimates that the annual cost of the allowance is around £2.2 billion.

I absolutely understand the reason for the inclusion of this measure in the Conservative party manifesto and the Minister’s announcement today, but I am a wee bit concerned that we need to be doing more to help the small and medium-sized businesses that continue to employ large numbers of people across my constituency and the whole United Kingdom of Great Britain and Northern Ireland. In my constituency and across Northern Ireland, we probably have a higher per capita percentage of small and medium-sized businesses than the rest of the United Kingdom. I welcome this measure, but we need to ensure that these small and medium-sized businesses are able to return to the position they were in, so that they can give the opportunity of employment and wages and give the economy a bit of a kick-start.

I want to say an incredibly large thank you to Frances and her staff at my local social security office, who have helped many people and given advice during this crisis. It is important that their hands are not tied by a system that understands the rules but has no discretion to understand individual circumstances.

I welcome the help that will be coming for the many charities that we and many others contribute to. I think of the National Society for the Prevention of Cruelty to Children, Cancer Care, Marie Curie, St John Ambulance and the Cancer Fund for Children here in Northern Ireland. All those charities have no or little fund raising at the moment. The moneys coming into them are direct donations. There may be other moneys coming in, but there is no fund raising taking place. The help that the Government have offered charities is very welcome, but it will never bridge the gap for the incredibly large amounts of money that they are losing.

I was very happy with the Chancellor’s decision to allow workers to be furloughed, although there will be no payment until June for the self-employed. I think also of self-employed directors—I asked the Secretary of State for Work and Pensions a question about this yesterday, and I raise it again now—who put their profits back into the business, so do not have much in the way of savings. Unfortunately, they do not get the real benefits here that they could.

I put on record my thanks to the Government and to Ministers for all that they have done. They have reached out to many people. As elected representatives, we are made aware with each passing day of others who perhaps do not tick the box—who do not fit into a certain category—and I am thinking of them. We therefore bring those people to the attention of Ministers whenever the opportunity arises.

Many of us will be in receipt of a paper from Ian Geary of the Salvation Army referring to the report that has already been mentioned, entitled “Understanding Benefits and Mental Health”. We cannot let this go by without reflecting—in a small way for this debate but in a big way for the individuals themselves—on the barriers that vulnerable groups experience, and on some of the multiple mental health challenges that they are facing. That paper emphasised that the aforementioned findings were collated before the current crisis, but it has highlighted the lack of resilience experienced by many people who need help at this moment.

Again, I welcome the provisions that we have today, which benefit the many who fall within the criteria, but there are others who perhaps fall just outside the criteria or outside the box-ticking exercise that Departments sometimes do. We need to identify and support vulnerable claimants. We need to help those with mental health issues. We need to support businesses and those self-employed people who cannot create the opportunity—

[Madam Deputy Speaker (Dame Rosie Winterton)]

Order. I thank the hon. Gentleman for his speech but we now have to move on to the Minister.