Lord Blackwell (Con)

My Lords, I would like to put this discussion in the context of the profitability of the small businesses that we are talking about. The noble Lords who proposed these amendments have effectively made the point that many of these small businesses will be the engine of growth—the acorns that will develop and be the big businesses of the future. In successful small businesses, profitability varies tremendously, depending on the sector and capital intensity, but it would not be unusual for a business of this scale to have a net profit margin of around 10%. However, in some sectors, such as retail, hospitality and construction, that margin may be as low as 2% or 3%. When you are talking about adding 1% to the cost of employment, where the employment may be a significant part of the turnover, you can see that the impact on the net profit margin is potentially devastating, particularly since, in many cases, the percentage increase in their national insurance bill will be larger than 1%. Clearly, we must be particularly concerned about start-ups because they are not yet successfully established trading businesses. They may have to undergo a number of years of losses before they get to that position. They accumulate those losses and they have to pay interest on those losses and, projecting forward, the additional costs may well tip the balance on whether those profitability equations earn an adequate return on capital to make the investment worth while. Amendment 6 proposes to exempt businesses with a turnover of below £1 million. Obviously, that is a broad category to cover. We do not know exactly how many people are employed in such businesses but, as a rough proxy, the number of people employed in businesses with less than 50 employees is 47% of the entire UK workforce. We are talking about a significant part of the workforce being impacted by these changes, potentially in a significant way. I heed the message from the noble Lord, Lord Eatwell, that we should not be complicating the tax system, but the only reason why we are discussing these amendments is the proposal to increase national insurance. If the Minister does not want to accept a broad exemption for small businesses, it would be helpful to the Committee if the Government could suggest amendments that would exclude those businesses that we are particularly concerned about—the start-ups and those on narrow profit margins—and see if there is a way in which to ensure that the engines of growth in this sector are not destroyed or damaged.