Employer National Insurance Contributions

Toby Perkins Excerpts

Wednesday 4th December 2024 Commons Chamber

[Mel Stride (Central Devon) (Con)]

I beg to move,

That this House regrets that increasing the rate of employers’ National Insurance contributions (NICs) to 15%, and reducing the per-employee threshold at which employers become liable to pay NICs on employees’ earnings to £5,000, will lead to increased costs for businesses and lower wages for employees, including in particular young people; will force companies to cut employment, leading to some 130,000 job losses according to Bloomberg Economics; will increase costs for retailers by £2.3 billion according to the British Retail Consortium, leading to higher prices for consumers; will create an annual additional bill of £1.4 billion for charitable service providers according to the National Council for Voluntary Organisations, so they will struggle to maintain support for vulnerable people; and will increase childcare costs for families; further regrets that the Government has not published its complete assessment of the effect this policy will have on the public and private sector, or indeed any impact assessment; and regrets also that, as a result of the Government’s economic policies, GDP forecasts are down, inflation is up and business confidence is down.

“Growth” was the leitmotiv of the Labour party. Its members chuntered on about it during the run-up to the last general election, and in their manifesto, under the heading “Kickstart economic growth”, they said that they would secure the highest sustained growth in the G7. They also said—and I know that you like a good joke, Madam Deputy Speaker, but I would ask you to contain yourself—that they would forge a

“new partnership with business to boost growth everywhere”.

Given what has happened, those are fantastical statements. Reading Labour’s manifesto was somewhat like stepping through the looking glass. It had something of Lewis Carroll about it. This lot were less the Prime Minister and the Chancellor than the Walrus and the Carpenter, cruelly leading businesses to their demise. For all the fantasy in the manifesto, they might just as well have spoken

“Of shoes—and ships—and sealing-wax—

Of cabbages—and kings—

And why the sea is boiling hot—

And whether pigs have wings.”

Because what happened to growth? The Office for Budget Responsibility tells us that the Budget will lead to less growth across the forecast period than was the case back in the spring under the last Government. The Office for National Statistics tells us in the third-quarter GDP data that the economy grew by 0.1%—one seventh of the growth in the United States. In the third month of that quarter, which was September, growth was actually negative. That is the record of this Government.

[Mr Toby Perkins (Chesterfield) (Lab)]

The right hon. Gentleman talks about the OBR figures, but he fails to mention that his party misled the OBR to the extent that it had to put the failure in writing. Given that he is talking about Lewis Carroll, is it not true to say that the figures that the OBR was working with were more likely to have been received from the Mad Hatter?

[Mel Stride]

That is an amusing intervention, but it is thoroughly inaccurate, I am afraid. The OBR did indeed look into the suggestion that there was a black hole of £22 billion, and what did it conclude? It concluded that the fiscal pressure in that year was less than half that amount. The OBR readily accepted that had it had discussions with Treasury officials about that at the time, it may well have reduced the amount still further. Members from across the House know that it is not unusual for the Treasury to manage down in-year fiscal pressures as a matter of course, so the argument has been debunked. It is the dead parrot. It is pushing up the daisies. It is no more.

The hon. Gentleman’s point is indicative of what this Government have done: they have talked down the UK economy. In turn, business confidence has slumped in a way seldom seen in our history, with purchasing managers index surveys falling through the floor. We have seen the Institute of Directors’ optimism tracker scoring minus 60 in November—one would have to go back to April 2020 to find a lower score than that. We also know that at the centre of the Budget is the biggest broken promise of all: the increase in employer’s national insurance contributions. That is weighing on growth.

And what of jobs? Labour’s fantastical manifesto talks about job creation, which is mentioned several times, but the Government are destroying jobs by breaking a manifesto commitment. It was there in black and white in their manifesto that they would not raise national insurance. Do not take my word that they breached their manifesto; take that of Paul Johnson of the Institute for Fiscal Studies, who says precisely the same.

--- Later in debate ---

[Darren Jones]

We have factored small businesses into the design of our policy, in terms of both employer national insurance contributions and our commitment to permanent lower rates for business rates than were given under the previous Government, as well as other support for the high street. We are also expanding eligibility to the employment allowance by removing the £100,000 eligibility threshold to simplify and reform employer NICs so that all eligible employers can now benefit.

Changes to the employment allowance mean that around 250,000 employers will see their national insurance contributions liability decrease, and more than 1 million will pay the same or less than they did previously. Overall, that means that more than half of businesses with NICs liabilities will either see no change or will gain overall from the package. That design was put in place specifically to protect the small businesses that the hon. Gentleman raises. That means that 865,000 employers will not pay national insurance at all, enabling them, for example, to employ up to four full-time workers on the national living wage and pay no employer NICs. Employers will also continue to benefit from employer NICs relief, including for hiring workers aged under 21 and apprentices aged under 25. To support veterans, the Government are extending the national insurance contributions relief for employers of qualifying veterans for one year to April 2026, and we have set aside funding to protect the spending power of the public sector, including the national health service, from the direct impacts of the changes.

Even after accounting for the impact of this change, the OBR expects real wages to rise by 3% between now and the end of the forecast period, but we recognise that there will be impacts on employers. While many small businesses and charities will be protected through employment allowance, others will have to contribute more. There will also be impacts beyond business, as the Office for Budget Responsibility has acknowledged.

[Mr Perkins]

My right hon. Friend and I spent many years in opposition, and have spoken in many Opposition day debates. Does he agree that when the Opposition move a motion like today’s, which says that the Government should not do something without making any alternative suggestion about what they should do, it is a sign that the Opposition have not worked out their answer to the question? At some point, I hope that the Opposition will be able to help the country and the Government by having some policies, but does he agree that, until they do, the Government will just have to crack on as best they can on their own?

[Darren Jones]

I agree with my hon. Friend, and I encourage Opposition Members to put forward proposals. I am all ears. I am willing to listen to them, but so far all we have is opposition and no policies. Maybe that will change in the future.

The motion claims that the Government have not set out any impact assessment of the policy change, but the Government published a tax information and impact note on 13 November that explained the Government’s assessment of the policy, including its impact on businesses and the economy more widely. This was a difficult choice, and it is not one that we have taken lightly, but it is the right choice given the dire economic inheritance that the Government faced upon taking office, and the need to fix our broken public services. As the Chancellor set out in the Budget, healthy businesses depend on a healthy NHS, and a strong economy depends on strong public finances.

--- Later in debate ---

[Mr Perkins]

I am glad to hear that Liberal Democrats support the extra money for the health service, special needs education and social care. I apologise for my impatience, because I am sure the hon. Member is just about to get there, but can she tell us where the £25 billion should come from if not from this national insurance rise?

[Daisy Cooper]

I welcome that intervention. In the debate on the National Insurance Contributions (Secondary Class 1 Contributions) Bill yesterday, I addressed that question head on. I will try to remember my notes, which are sitting with Hansard. The hon. Gentleman will be aware that the OBR has said the £26 billion is actually reduced to £10 billion when behavioural changes and rebates to the NHS and care are factored in. On raising that £10 billion, we have said we would reverse the tax cuts that the Conservatives gave to the big banks, raising £4 billion. We could raise a further £3 billion by increasing the remote gaming duty and the digital services bill.

We set out proposals in our manifesto to reform capital gains tax in a different way from the Government. Our measures would have raised about £5 billion, so unlike the Conservatives—who did not set out the impact of the £10 billion to £20 billion of cuts that, based on their manifesto, would have been inevitable—we as a constructive Opposition have set out suggestions. I urge Labour Members to take up our ideas, if not in this Budget then certainly in the next.

We are approaching Small Business Saturday, when I am sure we will all be in our constituencies talking to small business owners. We know that small businesses are the engine of our economy and the backbone of our communities, and in many cases, they make our high streets what they are. When it comes to health and care businesses, though, I am concerned that this measure takes with one hand and gives back with another, but with no guarantee that the money that comes back will cover the costs. As such, I urge the Government to rethink these changes to national insurance contributions, but if they do not, I urge them at the very least to exclude health and care providers from these measures.