Contribution
My Lords, I rise to support Amendments 18, 21 and 25 in the name of my noble friend Lady Noakes. I am particularly pleased to see my noble friend Lord Wolfson of Aspley Guise, who brings his unique knowledge of the difficulties that businesses are facing, especially in the retail sector. He runs one of Britain’s most admired companies—and has done so for 22 years, he tells us. I agree with everything that my noble friend Lord Leigh, and others, said about him and his business.
As always, my noble friend Lady Noakes stated the arguments very clearly and persuasively. My noble friend Lord Wolfson used a new phrase, for this Committee: he talked about a poll tax, rather than the “jobs tax” term that we have used before—that is always a warning. He said that the changes in national insurance could affect as many as 20 million jobs, which explains to some extent the huge reaction there has been to this measure right across business and, indeed, from many in work.
As he said, for relatively little cost, we could reduce the social and economic impacts of the changes. His spirit was very constructive. He acknowledged the productivity improvement that is needed, some of which is already in the pipeline, as he said, but also the difficulty of what I would call the shock tactic of the double whammy of the April changes. My noble friends Lord Swire and Lord Leigh gave us first-hand evidence of the loss of jobs which is taking place already, and which we have talked about before. My noble friend Lady Fraser evidenced the impact of that double whammy and brought out the point about the loss of skills: if people lose their jobs, we lose the skills in the industry. We had further estimates from my noble friend Lord Leigh, to add to those we had last week from the noble Lord, Lord Londesborough, which merit attention.
The amendment seeks to allow for a more gradual transition in the reduction of the secondary threshold. That would allow businesses time to adjust to the increase of a substantial new tax burden. It aims to be a small but important step in alleviating some of the burden on employers. The Government have to accept that they have placed considerable strain on business with their fiscal policies, and a phased introduction would provide a more manageable path forward.
Businesses are the backbone of the economy: they provide jobs, drive innovation and contribute to the prosperity of our communities right across the country. However, given the current pressures they are under, it is critical that we do not introduce changes that exacerbate their struggles. The sudden and sharp reduction in the secondary threshold will represent a huge burden, particularly for smaller employers, as we discussed last time, and for those grappling with rising costs and reduced cash flow. A gradual approach would ensure that the reduction was not a sudden shock to businesses and allow them to adjust their payroll and budgeting systems. It would be more predictable and manageable, and employers could plan and absorb the changes over time.
The IFS has found that the lowest salaries will be affected the most, with the lowest earners facing a larger than 4.5% increase in contribution, compared with less than 1.5% for the highest earners. It is partly because of the perverse effects and the adjustment issues that we are looking at today that the IFS has suggested that the Budget measure will—quite quickly—raise only £16 billion a year. My noble friend Lord Leigh has also modelled the impact of a 3% jobs cut, which he estimates would wipe out the revenue from the proposed changes.
We need to think again. My noble friends Lady Noakes and Lord Wolfson talked about the 10% to 13% increases coming in April, if you take NICs and the national minimum wage together; some delay or a reduction in the threshold would avoid the disaster, particularly on the high street, that I am so worried about.
I was talking to an excellent member of staff in the closing shop in Salisbury which I mentioned last week. She still does not have a job to go to. That has not been my experience of retail closures in the past; usually, the best employees are quickly snapped up by the competition. We have a bit of a problem here, and I would like to work with the Government to see whether anything can be done to alleviate the difficulties.