Employer National Insurance Contributions

I beg to move,

That this House regrets that increasing the rate of employers’ National Insurance contributions (NICs) to 15%, and reducing the per-employee threshold at which employers become liable to pay NICs on employees’ earnings to £5,000, will lead to increased costs for businesses and lower wages for employees, including in particular young people; will force companies to cut employment, leading to some 130,000 job losses according to Bloomberg Economics; will increase costs for retailers by £2.3 billion according to the British Retail Consortium, leading to higher prices for consumers; will create an annual additional bill of £1.4 billion for charitable service providers according to the National Council for Voluntary Organisations, so they will struggle to maintain support for vulnerable people; and will increase childcare costs for families; further regrets that the Government has not published its complete assessment of the effect this policy will have on the public and private sector, or indeed any impact assessment; and regrets also that, as a result of the Government’s economic policies, GDP forecasts are down, inflation is up and business confidence is down.

“Growth” was the leitmotiv of the Labour party. Its members chuntered on about it during the run-up to the last general election, and in their manifesto, under the heading “Kickstart economic growth”, they said that they would secure the highest sustained growth in the G7. They also said—and I know that you like a good joke, Madam Deputy Speaker, but I would ask you to contain yourself—that they would forge a

“new partnership with business to boost growth everywhere”.

Given what has happened, those are fantastical statements. Reading Labour’s manifesto was somewhat like stepping through the looking glass. It had something of Lewis Carroll about it. This lot were less the Prime Minister and the Chancellor than the Walrus and the Carpenter, cruelly leading businesses to their demise. For all the fantasy in the manifesto, they might just as well have spoken

“Of shoes—and ships—and sealing-wax—

Of cabbages—and kings—

And why the sea is boiling hot—

And whether pigs have wings.”

Because what happened to growth? The Office for Budget Responsibility tells us that the Budget will lead to less growth across the forecast period than was the case back in the spring under the last Government. The Office for National Statistics tells us in the third-quarter GDP data that the economy grew by 0.1%—one seventh of the growth in the United States. In the third month of that quarter, which was September, growth was actually negative. That is the record of this Government.

The right hon. Gentleman talks about the OBR figures, but he fails to mention that his party misled the OBR to the extent that it had to put the failure in writing. Given that he is talking about Lewis Carroll, is it not true to say that the figures that the OBR was working with were more likely to have been received from the Mad Hatter?

That is an amusing intervention, but it is thoroughly inaccurate, I am afraid. The OBR did indeed look into the suggestion that there was a black hole of £22 billion, and what did it conclude? It concluded that the fiscal pressure in that year was less than half that amount. The OBR readily accepted that had it had discussions with Treasury officials about that at the time, it may well have reduced the amount still further. Members from across the House know that it is not unusual for the Treasury to manage down in-year fiscal pressures as a matter of course, so the argument has been debunked. It is the dead parrot. It is pushing up the daisies. It is no more.

The hon. Gentleman’s point is indicative of what this Government have done: they have talked down the UK economy. In turn, business confidence has slumped in a way seldom seen in our history, with purchasing managers index surveys falling through the floor. We have seen the Institute of Directors’ optimism tracker scoring minus 60 in November—one would have to go back to April 2020 to find a lower score than that. We also know that at the centre of the Budget is the biggest broken promise of all: the increase in employer’s national insurance contributions. That is weighing on growth.

And what of jobs? Labour’s fantastical manifesto talks about job creation, which is mentioned several times, but the Government are destroying jobs by breaking a manifesto commitment. It was there in black and white in their manifesto that they would not raise national insurance. Do not take my word that they breached their manifesto; take that of Paul Johnson of the Institute for Fiscal Studies, who says precisely the same.

The right hon. Member refers to broken manifesto pledges. The Conservatives’ 2019 manifesto said they would not raise national insurance, yet three years later he and all his colleagues voted to raise national insurance—not just on employees, but on employers. Can he help us with that process of logic?

I think the hon. Gentleman might just be overlooking a little something called covid, which shrank the UK economy by over 10% overnight.

What this Government have done is take us right back to the 1970s when it comes to the jaw-dropping level of tax increases and spending splurges. The impact on jobs is stark, and it is clear. The OBR says there will be 50,000 fewer full-time equivalent jobs as a result of the measures in the Budget. Bloomberg says that 130,000 jobs will be destroyed. The Confederation of British Industry, in a survey of its membership, says that 50% of businesses report that they will cut employment as a consequence of the Budget, and two thirds say that they will row back on the recruitment plans that they previously had.

It is not just about the headline rate; the threshold is so pertinent and important here. It is bearing down on sectors where wages are lower, and on cohorts in the labour market who earn the least, because of the disproportionate impact of lowering the threshold. They include hospitality, leisure, retail and women. Some of the youngest people in our country will now see their jobs taken away from them as a consequence of what this Government are doing. We know that the Labour party has form when it comes to youth unemployment. Under the last Labour Government, youth unemployment increased by over 40%. Under the last Conservative Government, it reduced by over 40%.

Labour said in this fantastical document that it would keep inflation as low as possible. It said the same of mortgages, and yet what has happened? This fiscal splurge, this £70 billion each year that the Government are now going to be spending, will mean higher inflation in every single year of the forecast, compared with the forecast back in the spring. What is that doing to people’s living standards? It is destroying them, and I will come to that momentarily. Part of the inflationary pressure is the national insurance increase itself, because while we know that, according to the Office for Budget Responsibility, about 80% of it will be transferred into lower employment rates and depressed wages, about 20% of it will go into higher prices.

We on this side of the House will not take lectures on living standards from the party that left us with the worst squeeze on wages since Napoleon, the highest energy prices in the G7 and the highest inflation. The Conservatives left us with the worst-insulated homes and dependent on natural gas. That is why this party will invest in insulation to make us all better off in the long run.

I am surprised that the hon. Gentleman raises the inheritance that his party has received from the Conservatives. We had the highest rate of growth in the G7. We had brought inflation right down from 11.1% in October 2022 to 2%—bang on target—at the time of the general election. We had a near-record level of employment. We had a near-record low level of unemployment. We had real wages that had been increasing month after month for 13 or 14 months prior to the general election. That was not a bad inheritance.

I am grateful to the shadow Chancellor for giving way, even if I cannot quite believe what I am hearing. Anyone boasting about the economic record of the previous Government, particularly in the immediate run-up to the last election, should read this week’s release from the Office for National Statistics on the reweighted labour force survey. It shows that productivity in the year running up to the election fell by 0.9%. That was in just one year. That is what economic failure looks like.

No matter what points the hon. Gentleman may make, I am afraid he cannot get away from the fact that this Government are bearing down on growth, pressing up on unemployment, bearing down on employment and bearing down on living standards.

The OBR also says that real household disposable income by 2029 will be 1.25% lower than it was back in the spring, at the time of that forecast. We know the impact that national insurance is going to have on wages. It will press them down and it will further diminish living standards.

Does my right hon. Friend the shadow Chancellor remember any Labour MP in the last general election standing on a fully costed manifesto that would mean economic growth was forecast to be lower than under the previous Government? Perhaps the hon. Member for Swansea West (Torsten Bell) should remember that Labour MPs stood on a manifesto that was apparently fully costed but then had different commitments. We had a faster rate of growth under the last Government than is projected under this Government.

The simple fact is that, at the time of the general election, we had the fastest-growing economy in the G7. The simple fact is that the Labour manifesto said it would deliver precisely that, yet we have heard very little about that commitment in recent days and weeks—I wonder why.

Does my right hon. Friend agree that it is important to set the facts right? It is important to reflect on the fact that, during our 14 years in government—despite the 2008–09 financial crisis, despite the pandemic and despite the energy crisis—more than 1 million jobs were created, and 4 million people were in employment who were not in employment when we took office.

My right hon. Friend is absolutely right. Our record on employment shows that we were a job-creating machine after 2010, and the statistics he cites are quite right.

When it came to business—this is a killer worthy of a stand-up comedy routine—the manifesto said:

“Labour will…support business through a stable policy environment”.

Of course, we know that all sorts of businesses have been hit by this tax increase, including many that directly support our public services: our hospices, our GPs and our pharmacists. Marie Curie has said that it is about to get a tax bill for an additional £3 million. Just think of the impact that will have.

The question that many are now feverishly and worriedly asking is whether there is more to come. Are the Government going to run out of road with their approach to our economy, and will they come back for more? Well, the Chancellor recently told the CBI that the Government will not be

“coming back with more borrowing or more taxes.”

Yet when the Leader of the Opposition put this assertion to the Prime Minister at Prime Minister’s questions today, we heard no answer. When I twice asked exactly that question of the Chancellor yesterday, we heard no response. Currently, these businesses do not know whether the Chancellor’s assertion that there will be no more borrowing and no more taxes is true or false.

It sounds like the shadow Chancellor is unconvinced by the shrill chants of Labour Members that the Government will fix the foundations of the economy, and he has good reason for being suspicious. In October, when the Government had scarcely been in office for three months, they had more in-month borrowing than any UK Government since 1993, with the exception of one month during covid. Does that look like fixing the foundations to the shadow Chancellor?

I have heard the hon. Gentleman intervene in various debates, and I am coming to the conclusion that he is probably a rather sensible SNP Member, because he is absolutely right. [Interruption.] I did not opine on how sensible his party is. I just said that he is one of its most sensible Members.

It is very clear that this Government will not create firm foundations for the economy. They will actually create a vulnerable economy, because there are risks around the central forecast and downside risks around growth, inflation, net migration, economic inactivity, energy prices, interest rates and so on. There will also be risks around the spending envelope after the first couple of years, particularly for a profligate Labour Government who may find that constraint unbearable.

There are also external risks. We know that there will be a new Government in the United States, and there is talk of tariffs. It may be that the deficit financing of tax cuts leads to interest rates rising around the world as bond yields increase, and that could be imported to our shores.

All these things mean that we need a good level of headroom against our fiscal targets, yet, on the stability target, it is quite possible that the headroom has already evaporated. Why? Because, to my earlier point, the Government talked down the UK economy and, partly as a result, are paying more to service the debt that this country carries.

I thank the shadow Chancellor for giving way; my interest was piqued by his talk of deficit financed tax cuts. Does he agree with his boss, the Leader of the Opposition, that the Liz Truss mini-Budget, which is the prime example of the thing he criticises, was the right package, but just with the wrong communication?

If the hon. Gentleman has a look at the history of that time, he will see that I was the Chair of the Treasury Committee, and I had a great deal to say about the economic policies that were pursued in the so-called mini-Budget, so I will leave it at that.