Contribution
My Lords, Amendment 31, in my name, would prevent commencement of this section until a full impact assessment is published for hospitality. I have spoken to several organisations in this sector and the message is clear: His Majesty’s Government have differentiated between larger and smaller businesses, making smaller businesses exempt, but larger businesses could have their profitability wiped out. As I said in the debate, the Government should have considered the mix of the labour bill on a company’s P&L and tiered the increase to relieve the pressure on high-labour, low-margin businesses, such as hospitality.
Companies are proposing to increase tariffs and pass on increases to their clients. This will bring its own problems. Bearing in mind that we have just managed to stabilise inflation, this will bring a cycle of increased prices. Companies are already getting signals from their supply chains that prices will increase due to the NI changes, so the spiral will continue. Meanwhile, growth plans are being reduced, new job opportunities are being cut and restructuring and redundancies are already under way. The people I spoke to saw no opportunity to grow their business and therefore the economy, and this is creating huge risk and pressure for businesses. They say that they are going to be so busy negotiating price increases and restructuring that they will have no time to address their strategic priorities. One business told me that it would significantly reduce the amount of capital it would have been spending in the year ahead, as it is unable now to justify the level of return. It is also reviewing labour costs to find efficiency savings to offset the cost increase. Prices for customers will increase, which will probably result in customers spending less, which will increase the pressure on businesses to reduce hours further to offset the volume decline. Entry level jobs, as we have heard already today, will simply disappear.
I had an email from someone who owns three hotels, and she gave me three examples of the effect that this will have. An over-21 year-old full-time kitchen porter having an increase of 50p per hour would mean that his salary would increase by £1,040 to £26,520 and the employer’s NI will increase by £818. A 21 year-old gardener with an increase of £1 an hour would increase his salary by £2,080 to £27,000, and his national insurance will also increase by £818. A part-time waitress over 21 with an increase of 50p an hour will have a total pay increase of £416 and the employer’s national insurance will increase by £690. So, across just three staff members, the extra salary is £3,536 and the extra national insurance is £2,477. When you consider that she employs 198 staff members across three hotels, the increase is huge. As she put it to me, “This is absolutely terrifying for us, as we simply cannot increase our prices to the same extent”.
I then spoke to James Chiavarini, who runs a long-established family restaurant in London, Il Portico. He said, “It is difficult to overstate how much hospitality helps our country by providing skills, training and employment to thousands of people, many of them neurodiverse, who want to work, want to contribute, but are not a natural fit for a 9 to 5 office job”. This is what we do at Team Domenica. We train people with a wide range of learning disabilities who want to work in this sector. With this new threshold, we know already that it will be so much harder to place them. James also said, “All the proposed increases will do is drive more businesses to close, create more unemployment and an even bigger benefit burden on the creaking state”. I will edit, for the sake of propriety and decency, his final sentence. “It’s a policy dreamt up by public servants who have never once in their lives taken on a risk to open a business, employ a struggling or vulnerable teen, or even work over a weekend”. Amendment 31 is important because jobs in the hospitality sector will disappear and restaurants, cafes and even hotels will be forced to close. I beg to move.