Contribution
My Lords, I rise to move Amendment 30 on behalf of my noble friend Lady Monckton of Dallington Forest and to support Amendment 51 in the name of my noble friend Lady Neville-Rolfe.
Amendment 30 would delay the commencement of Clause 2 until an impact assessment had been published fully to assess the impact this tax will have on the retail sector, and Amendment 51 increases the employment allowance to £20,000 for that sector.
Retail is important because so many people work in it, not people on average or in aggregate in a Treasury forecast, but hundreds of thousands of individuals, some young, some in their first job, some working part time—as well as their families, their neighbourhoods and their customers—where they bring joy to themselves and to others every day. We know that this Bill will lead to job losses.
When the national insurance increase was first announced, there was an expectation, perhaps a hope, that the cost would be met by price rises or other changes rather than by job losses, but as the weeks have gone by, we know that the increase is being funded by job losses. That is why this impact assessment question is important because part of the impact is happening already. From the initial announcement to today, we already know that the policy is being funded by job losses, so the Bill is creating policy-driven unemployment. All of us in this Room share a little in the responsibility for this, but we should at least be very careful in our actions when we know that the cost will be unemployment.
As the noble Lord, Lord Eatwell, and others have said, we might hope that jobs will be created elsewhere. We must surely, on all sides of this debate, hope for job creation, but that does not change the short-term impact of job losses. Equally, we might hope for productivity improvements—say, the automation of retail—which is important anyway, as the noble Lord, Lord Wolfson, mentioned, but not, alas, if we can help it, at the cost of job losses.
To go back to what my noble friend Lord Leigh was talking about, to where the estimates at best are for those of us who are not in the Treasury, very roughly, it looks as if in retail the national insurance hike could easily lead to a 5% reduction in headcount, and if retail is of the order of 2 million or 3 million people, we could quite quickly get unemployment just from retail of 200,000. If you add a couple of hundred thousand from other areas, we are on the way to half a million job losses that could come from this policy. There was an expression earlier on about what is in scope in taxation and in the tax take. What is in scope here are individuals who will lose their jobs—unemployment is in scope. There are direct impacts on job losses.
The value of our retail sector cannot be understated. In 2024, retail sales in Great Britain were worth £500 billion, and 2.87 million people were employed in the sector: nearly 10% of all jobs in the British economy. That is therefore nearly 3 million people whose jobs will be put at risk due to this tax increase.
One of the great benefits of employment in the retail sector is that there is extraordinary element of flexibility, which allows a great number of young people to work in the sector. As has already been discussed in Committee, those who are paid the least will be affected the most. The noble Lord, Lord Wolfson, mentioned earlier that the cost impact on part-time and often very young workers is a 13% increase. This paints a bleak picture for our young people in the sector. Young people are already a more vulnerable group of people, and I am highly concerned that this tax increase will only paint a bleaker picture for young people trying to enter the job market.
The reduction of the threshold at which employers begin to pay employer’s national insurance to £5,000 will hit part-time employees the most. Given that half of all retail employees are part time, the fact that this jobs tax will bring 1.45 million part-time retail employees into the bracket is a devastating result for a sector that often employs young people.
The retail sector has responded with outcries at this tax that will be imposed upon it, with 81 major retailers writing to the Chancellor expressing concern over the impact the tax will have on the sector that typically operates with a 3% to 5% profit margin. In a survey done by the British Retail Consortium, 56% of chief financial officers said they would reduce the number of hours and overtime they offered their employees. This is why this is a jobs tax because businesses will be forced to cut costs in order to continue, and as such, it will hit workers the most.
I am concerned not only about the impact this tax raid will have on workers but about the impact consumers will face given the survey I mentioned above, where 67% of retailers responded that they would be forced to raise prices.
We in this Room are all aware of the impact that this tax increase will have and of the inevitable factor of creating unemployment. I look forward to hearing from other noble Lords on this issue, and I beg to move.