Social Security

Wes Streeting Excerpts

Tuesday 5th May 2020 Commons Chamber

[Wes Streeting (Ilford North) (Lab)]

It is a privilege to reply on behalf of the Opposition, and you will be relieved to know that I hope to speak for nowhere near as long as 15 minutes. My party has resolved to work constructively with the Government through the extraordinary and unprecedented challenges presented by the coronavirus. It is in that spirit that I address today’s motion to approve the proposed increase in the employment allowance.

There is an air of unreality to our proceedings that extends beyond this empty Chamber and virtual Parliament to the substance of this afternoon’s business. On Second Reading of the Finance Bill, my hon. Friend the shadow Chancellor observed that it felt as though the Bill had been written for a different age. I feel the same way when I look at today’s motion on the employment allowance. This measure, which was announced in the Budget, increases the maximum amount of employment allowance from £3,000 to £4,000 for the new tax year, benefiting small and medium-sized businesses, charities and amateur sports clubs. It is expected to reduce the national insurance contribution bill to zero for around 65,000 businesses.

We recognise that the intention behind the measure is actively to enable small, growing enterprises to take on staff without incurring national insurance contribution liabilities, recognising that small businesses may need assistance to meet the costs of the welcome increase in the national minimum wage—it is described as a living wage, but it is perhaps almost a living wage. In ordinary times, we would welcome that, but for the businesses, charities and sports clubs that stand to benefit, these are the most extraordinary circumstances, just as they are for the whole country. For many of those organisations, this crisis is an existential one. Despite their best efforts, some of the businesses and charities that the Government intend to help will simply not exist by the end of the year. Of course, any measure that reduces their outgoings will be of some help, but, taken alone—or even as part of the package of support already announced by the Chancellor—this will not be enough to stop many businesses and charities going bust, so I urge the Financial Secretary and his colleagues in the Treasury to go further.

I turn first to the SMEs that stand to benefit from the proposed increase in the employment allowance. Small businesses form the backbone of the economy in communities such as mine across the country, and their survival through this crisis will form a crucial part of the recovery that we hope will follow. As we have heard, the Federation of Small Businesses has, as ever, done a sterling job of making sure that the pressures facing those businesses are well understood by Parliament. I take this opportunity to thank the FSB for all that it is doing while grappling with the challenges that coronavirus poses to its own operations and ways of working. Just last week, the FSB’s Martin McTague told the Business, Energy and Industrial Strategy Committee:

“Most small businesses have gone into this crisis with very little in the way of cash reserves. The latest evidence is that about 30% operate with only two weeks of cash, so they are in a very vulnerable position trying to cope with this crisis.”

That is why my right hon. Friend the shadow Business Secretary has called on the Government to introduce a second wave of business support, including an extension of the furlough scheme where necessary and greater flexibility to enable part-time working. The Chancellor has indicated that the Government will not allow a cliff-edge to form, so some clarity on how he plans to avoid that risk would be both timely and welcome for businesses that are already facing make-or-break decisions.

According to the Office for National Statistics, two thirds of companies have made use of the Government’s furlough scheme, many of which are small businesses. Since the Chancellor is already considering how to unwind the scheme, can I ask the Financial Secretary what consideration the Treasury is giving to calls from the FSB and others to introduce some flexibility in the scheme to allow for part-time working? Many small businesses cannot afford to bring staff back full time to quote for work, generate new business, fulfil orders or keep back-office functions ticking along. A small business might want to furlough its staff for 80% of the time, but under the current rules that is not possible if it has just two or three staff.

A more flexible approach to furlough rules would give SMEs the flexibility they need, which the FSB has described as absolutely critical for survival and recovery. That is why my right hon. and learned Friend the Leader of the Opposition called for that flexibility as part of his attempt to build national consensus on the next phase of the coronavirus response. It would be reassuring to businesses if the Financial Secretary could give us some hope today that consensus on this issue can be achieved.

As the Financial Secretary will be aware, the sorts of businesses that the employment allowance is designed to benefit will benefit from the opening of the bounce back loan scheme. That is welcome, but some serious issues remain around the working of the CBIL scheme for SMEs. Many SMEs are reluctant to take on loans because of the concern that they will not be able to repay them on the terms on offer. What more will the Government do to ensure that cash is reaching the businesses that need it?

I shall turn now to the charities that stand to benefit from the proposed increase in the employer’s allowance. For small charities, this will come as some relief. According to the survey conducted by the National Council for Voluntary Organisations, the Institute of Fundraising and the Charity Finance Group, charities are reporting a projected loss of 48% on their voluntary income and a third being wiped off their total income, with 91% of those surveyed expecting to have their cash flow disrupted. Although the vast majority felt that they could play a role in responding to the coronavirus outbreak, 62% were anticipating reducing their charitable activity. So for the smaller charities that the employment allowance increase is designed to benefit, the financial challenge will be even more acute.

We recognise that the Government committed £750 million in support for the voluntary sector and that they provided match funding to “The Big Night In”, but this support has failed to match the scale of the challenge facing our charities. The NCVO has calculated that a three-month lockdown would cost the sector £4.3 billion, which is six times the £750 million of support announced, so will the Financial Secretary tell us what more the Government plan to do to ensure that the charities eligible for the increase in the employment allowance still exist by the end of the year?

Since I have the Financial Secretary’s ear this afternoon, and given that the opportunities to raise issues with the Government had become more limited by the constraints that are understandably in place as a result of the coronavirus, may I take this opportunity, with the brief indulgence of the Chair, to lay down a marker about the future of the social investment tax relief? SITR is the only tax break for investors in social enterprises and charities, and it would be damaging to lose it in the current climate, so may I ask the Financial Secretary if he will give serious consideration to calls for a time-limited two-year extension to the relief, so that the organisations that benefit from SITR can continue to leverage in philanthropy to benefit a wide range of good causes?

Returning to the issue of employment allowance, this measure is estimated to cost the Government £455 million in lost revenue for the current tax year, which makes it all the more important to ensure that the benefit of this increase is enjoyed by those who are genuinely eligible and for whom the increase is designed. The Financial Secretary will know that there have been concerns in the past that the employment allowance has been exploited by tax avoidance schemes using umbrella companies to avoid national insurance contribution liabilities. We know that Her Majesty’s Revenue and Customs included anti-avoidance measures in the allowance from launch, and made it clear through Spotlight 24 that attempted avoidance arrangements such as these, which seek to use artificial and contrived arrangements to gain an unintended advantage, do not work. However, these measures require enforcement. Given the significant cuts in resources that we have seen, including job losses and tax office closures under successive Conservative-led Governments in the past decade, can the Financial Secretary reassure the House that any such avoidance is being identified and that tax inspectors are taking appropriate action?

In conclusion, the increase in employment allowance may not have quite the impact that was intended when the policy was first announced, but in so far as it will provide a bit of extra help to small businesses and charities, we welcome it and will not be opposing the Government’s motion. Our charities, small businesses and enterprises often represent the best of Britain and the beating heart of our local communities, and I hope that this measure will provide some assistance to those going through tough times. Where the Government take the right action, they will find our support and co-operation, as they do this afternoon. Lives and livelihoods are at stake, and the Government must go further and faster to give small businesses and charities the backing they need to weather this crisis and play their part in building a better country in its aftermath.