National Insurance Contributions (Secondary Class 1 Contributions) Bill

Sarah Dyke Excerpts

Consideration of Lords amendments
Wednesday 19th March 2025 Commons Chamber

[Llinos Medi (Ynys Môn) (PC)]

I rise to speak in support of these Lords amendments, and I will speak today on those that would protect small businesses with up to 25 employees.

In Wales, more than 99% of all businesses are small or medium-sized enterprises. Of those, nearly 95% are micro-sized, meaning that they employ between one and nine people. For all the protections that the Government say they have put in place for small businesses, the increase to employer national insurance contributions will still hit these enterprises hard.

There is a lack of home-grown Welsh businesses developing beyond the micro-enterprise level and becoming larger businesses themselves. We need a Government who will step up and support local businesses to grow. Unfortunately, this Government are doing the exact opposite, as it is estimated that an employer of 40 people on an average salary is about £29,000 worse off a year under the national insurance changes. Why would Welsh businesses now be incentivised to grow and take on more staff given this extra cost? It is worth noting, too, that the OBR forecasts that 76% of the cost of the national insurance contributions increase will be passed on to workers through higher prices and lower pay rises.

The Government have said that small businesses will be shielded from the national insurance increases through the changes to employment allowances. However, when asked specifically how many businesses in Wales will benefit, the Government responded by saying that they did not know. This Government like to talk about growth as their central mission, but can they explain how this policy is good for growth for our small businesses in Wales? All I can see is that it is bad for Welsh business, bad for Welsh workers, and bad for the Welsh economy.

I urge the Government to support these Lords amendments to at least protect more businesses from the damage that the national insurance hike will cause. I have raised concerns previously in this Chamber that this Labour Government are not considering the needs of small and local businesses in their decisions, and these damaging national insurance hikes are only further proof that that is the case.

[Sarah Dyke (Glastonbury and Somerton) (LD)]

I rise to speak to Lords amendments 1, 4, 5, 9 and 13. These amendments tabled by the Liberal Democrats in the other place would ensure that care providers, NHS GP practices, NHS-commissioned dentists, NHS-commissioned pharmacies, charitable providers of health and social care, and hospice care continue to pay secondary class 1 contributions at the rate of 13.8%.

With healthcare in such a dire state in Glastonbury and Somerton, it is essential that providers are not put into further financial difficulties due to increases in employer national insurance contributions. Like so many Members, my inbox has been brimming with correspondence on this matter from organisations across my constituency. The measure will disproportionately impact businesses run by women. For example, early years provider Acorn Day Nursery in Somerton has told me that it believes that the employer national insurance contribution increases, in combination with other recent funding announcements, could be the final nail in the coffin for its business, leaving families without crucial early years care provision. I have heard from hospice care providers such as Dorothy House, which provides crucial end of life care for my constituents. It will be hard hit by the rise in employer national insurance contributions, which will impact care provision for people who live in rural areas.

Vine GP surgery in Street shared with me its concerns about the impact of the changes to employer national insurance contributions, stating that it will undermine access to patient care following years of neglect from the previous Conservative Government. A constituent from Langport recently wrote to me to raise their concerns about the negative impact of the rise in national insurance on care homes. Already stretched care homes could see an increase of around £650 per employee for anyone working more than eight hours a week. That will have a knock-on impact on the cost of care provision.

Community pharmacies play an essential role in providing care in the community, in line with the Government’s strategic agenda. However, if the rise in national insurance contributions goes ahead, pharmacies such as Bruton, Castle Cary, Stoke-sub-Hamdon and Martock could all be put at risk. If they go, vital frontline services for rural communities will be lost. The National Pharmacy Association has predicted that around 1,000 will close by 2027. The combined effect of changes to the national insurance contributions and the national living wage could add an extra £25,000 to each pharmacy in rural Somerset, affecting their viability. Given the rate of pharmacy closures in Glastonbury and Somerton is nearly double the national average, my constituents will be hard hit by this tax hike.

In rural areas we simply cannot afford to lose any more pharmacies or our critical frontline services. I fear that these measures will only increase the pressure on GPs and other services that will be badly impacted by this decision. I urge colleagues to back the Liberal Democrats’ amendments so that we can protect frontline health providers, who, shockingly, are not included in the Government’s exemption. Without it, health and early years provision across the country will be drastically reduced.

[James Murray]

I will respond briefly to some of the points raised in the debate. I thank all hon. Members for their contributions. The shadow Minister, the hon. Member for Grantham and Bourne (Gareth Davies), repeated many points that I addressed in my opening remarks. He asked a fundamental question: why must the Bill be implemented? My response is because of the mess that his party left when we won the election last July. I noted that he refused to say whether he would reverse the national insurance changes that we are making, despite being asked by Government Members. He refused to make clear his party’s position, as the leader of his party did earlier.

The hon. Member for Gosport (Dame Caroline Dinenage) spoke of choices in politics. She is right that politics is about choices. But she was also incapable of explaining what different choices she and her colleagues would make, since they oppose our changes to national insurance contributions. Would they go for higher borrowing, lower spending or other tax rises?

My hon. Friend the Member for Poole (Neil Duncan-Jordan) Poole and the hon. Member for Chester South and Eddisbury (Aphra Brandreth) spoke about special educational needs transport facilities. I mentioned in my earlier remarks that the Budget and the provisional local government finance settlement set out £2 billion of new grant funding for local government in 2025-26. That includes £515 million to support councils with employer national insurance contributions. However, it is not ringfenced, which means that it is for local authorities to determine how to use this funding across relevant services and responsibilities.

There was a comment from the right hon. Member for Stone, Great Wyrley and Penkridge (Sir Gavin Williamson), although he is not in his place and I do not know where he is—perhaps he is off feeding his spider. He made a rather colourful comparison between some of my points and those made by a former colleague of his. I do not know whether he realised that in doing so he implied that the position that the former Secretary of State for Health was defending was indefensible. I would be interested to see which of the previous Government’s policies he thought were indefensible. When he returns from his spider-care duties I will ask him, but in his absence, let me say what is indefensible: for Conservative Members to have voted for the Liz Truss mini-Budget. What is indefensible is what they did to public services over 14 years. What would have been indefensible would have been our letting the situation carry on as it was when we won the general election.

The Bill makes some of the difficult but necessary decisions that we as a Government have had to take to fix the public finances and get public services back on their feet. The amendments from the other place require information that has already been provided. They do not recognise other policies that the Government have in place, and most seriously they seek to undermine the funding that the Bill will secure. I therefore respectfully propose that this House disagrees with the Lords amendments.

Question put, That this House disagrees with Lords amendment 1.