Business and the Economy
Damian Hinds Excerpts(2 days ago)
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Damian Hinds (East Hampshire) (Con)
It is a pleasure to join this lively debate. Small businesses are the backbone of the economy in my constituency. In fact, 99.9% of businesses in East Hampshire are small or medium-sized enterprises. We over-index in professional services, retail, information and communications, and, of course, agriculture. [Interruption.] I thought there were few Labour Members present before I stood to speak! The biggest sectors for employment are retail, health and care, and manufacturing. [Interruption.] I am starting to get a complex!
I have heard from all those sectors, which are worried about the prospects for their businesses and the economy under this Government. We must always remember two things about business. First, contrary to what the hon. Member for Loughborough (Dr Sandher) said—he is no longer in his place but I know he will return—only business can create the wealth and jobs, make the livelihoods and generate the tax that, in turn, makes the high-quality and brilliant public services that we all so value and on which we rely.
There is a second thing that we should always remember about business, and I encourage Ministers to remember it. Accountants talk about the entity principle and describe a business as an entity that is separate from the people who run it. That might be true in an accounting sense, but in a broader sense, businesses are people. They are collections of people coming together to achieve something. The joint stock company was created to share risk among different people, and the way that organisations work within companies is a way of increasing efficiency and productivity, compared with everybody doing their own thing as a sole trader. So, because businesses are ultimately people, there is ultimately no such thing as a tax on a business. Taxes can only ever fall on people. A so-called business tax falls on one or more of three groups of people: the business’s customers, the business’s employees or the business’s owners.
Sarah Dyke
The hon. Gentleman talks about the impact on people. A small business in Fifehead in my constituency has recently had to reduce its staff by four—small business, real impact. Small businesses create so much for our rural economy. Does he agree that the Government should scrap the national insurance contributions rise and replace the broken business rates with a new, fairer funding system to boost our rural economies and jobs in our rural areas?
Damian Hinds
The hon. Lady makes a good point about small businesses, particularly rural small businesses, and I will talk about national insurance contributions and business rates, but let me come back to how taxes on businesses are ultimately taxes on people.
Some Labour Members might say that they do not mind a tax on business owners, because they are the capitalists and they can afford it, but we need to remember that the owners of businesses are a mixture of institutional owners—which, by the way, includes your mum’s pension fund—small business owners, who are quite often sole traders, and family businesses. If the owners are not affected, either the customers or the employees will be affected, and I am afraid the effect of the national insurance contributions rise will ultimately be felt by those two groups of people, and particularly by employees, through a mixture of wage suppression over time and possibly some job losses. The bigger effect will not be about job losses; it will be about jobs that are never created in the first place, particularly among the youngest people and those furthest from the labour market.
Jerome Mayhew
My right hon. Friend is making a good point. When the Government brought in the increased national insurance contribution for employers, they used sleight of hand, saying that it was not a tax on working people, but does he agree that the Office for Budget Responsibility’s assessment of the impact concluded that the overwhelming majority of that cost will be borne by the employees and not by this notional employer?
Damian Hinds
It will, and I repeat that it can only be one of those three groups. There will be some price increases, and those costs will be felt by customers and consumers, but all the indications are that the big effects will be felt in wage suppression and in employment, which will ultimately mean slower economic growth.
In the same way that taxes on business ultimately land on people, taxes that look like they are on people can sometimes have an effect on business. I want to talk briefly about two examples. The first is the family farm tax. This is clearly a desperately ill-conceived measure, although, to be fair to Labour Ministers, they probably did not realise at the time quite what they were doing. However, their Members of Parliament representing rural seats found out very quickly exactly what they were doing and the effect it would have.
There is an alternative proposal on the table, which we know has been put to the Treasury by representatives of the sector. As this brilliant Treasury Minister the Parliamentary Secretary to the Treasury, the hon. Member for Swansea West (Torsten Bell) will be winding up, I am sure—at least I hope—he will find it possible to share with the House the Treasury’s critique of that alternative proposal, the so-called clawback proposal, which would be much fairer, and tell us why the Government are rejecting it.
There has been quite a lot of debate in the House on the family farm tax, but somewhat less on the business property relief situation, which is not quite as acute in some ways, but there are a number of parallels and similarities. Business property relief was put in place to level the playing field for family-owned businesses and others, so that people could invest in their family-owned businesses, confident that they could pass it on, within the family, without incurring a tax that applies to no other business ownership model.
Typically, these businesses will not have large amounts of net cash or liquid assets that will allow them to settle the tax bill upon the demise of the owner, and there are no listed shares, so there is typically no market for those. There has to be a theoretical valuation, because the shares cannot be valued, and that figure is likely to be considerably higher than the amount that could be realised in the event of a sale. The relief was created specifically to stop family firms having to be broken up; however, the net effect of the changes is that a substantial number of firms in this situation will be bought up, either in whole or in part, by foreign owners or private equity. Is that really what a new Labour Government had in mind?
Jerome Mayhew
Labour used to agree with the point that my right hon. Friend makes. Am I right in saying that it was a Labour Government in 1976 that generated the policy of having a relief in the first place?
Damian Hinds
Forgive me, but I do not have the history at my fingertips. The relief has been recognised over the years, and has been looked at in the past by Treasury officials. I have been a Treasury Minister, and I know that they get presented with various things that could be done, but generally speaking, when many Ministers before you have found good reasons to keep a measure, it is a good idea to wonder what those reasons might be.
Overall, this Government’s changes to the business taxation regime will affect many sectors, but particularly those that are labour intensive. We can all name hospitality, retail and care as the three really big-volume employers in the country. In my constituency, I would also mention nurseries, pubs and hair and beauty businesses. Of course, there are sector-specific pressures. For nurseries, for example, the issue is whether the unit rate per child per hour is sufficient. Many of my nurseries say that it is simply not sufficient to cover their costs, at a time when entitlement to nursery care is increasing. In the hair sector, there has long been an issue about those who have created a business that has employees, and their ability to compete with others who are below the VAT threshold.
The confluence of four things that the new Government have done is creating a big headache. First of all, the national living wage going up to £12.21 is a good thing in and of itself. We absolutely support a rise in wages for people on lower wages; it is the fact that it is happening at the same time as all the other things that is causing the problem. I will not talk in detail about the national insurance contributions increase, because others have done so, but that will have an effect, particularly on part-time employees, and the Government ought also to acknowledge the gender differential effect of that, which we have heard little about.
Today I have heard two Labour MPs say that business rates have gone down for retail and hospitality businesses. One was the Minister. Try telling that to those businesses—
Damian Hinds
Perhaps the hon. Gentleman is going to tell me that he has told that to his local retailers and pubs.
Dr Sandher
You brought in a temporary reduction of business rates during covid, but as with so much else, you did not fund that beyond those years, so you made a permanent reduction of 40% for the future.
Madam Deputy Speaker (Ms Nusrat Ghani)
Order. It is good etiquette to speak through the Chair, and to not use the word “you”; it just dampens the tone of the debate a little bit.
Damian Hinds
I shall suitably dampen. At a time when the Government are changing the relief from 75% to 40%, try telling those businesses already facing the national insurance contributions increase and all the other cost increases that their bill is being reduced. Clearly, it is going up.
Damian Hinds
I am conscious that I have gone on for quite a while, and I want to wind up.
Fourthly, there is the Employment Rights Bill. On the face of it, who would not like something with that name? It sounds like a positive thing, but the point is the effect that it will have, particularly on seasonal businesses, which might otherwise take somebody on at Christmas or in the summer. Hospitality, travel and events businesses rely on doing that. The Bill will affect the national health service, which will have to deal for the first time with some of those considerations. It turns out that the national health service is a considerable user of zero-hour contracts—by the way, not for someone’s first job, but usually for their second—so that staffing can vary according to the demands of a hospital or clinic. The Minister is a labour—and a Labour—economist, so I would be interested to hear his comments on the shift that we are likely to see from permanent to temporary contracts, and the shift that we are already starting to see in companies that are moving from relying on contracted, salaried employees to relying on agency workers.
Damian Hinds
Forgive me; I will not. Finally, there is the effect that the measures will have on the removal of job opportunities for those further from the labour market—perhaps those who have been out of work for a long time; ex-offenders, who it feels like more of a risk for an employer to take on; and, most of all, young people. That is the concern with this package of measures: the effect on unemployment, especially youth unemployment.
Today we heard the Government make the first of what I hope is a series of U-turns over the winter fuel payment. I ask the Government to look at what is happening, and what will happen to our small businesses and the unemployment statistics, and to please think again.
“Chapter 4A
Damian Hinds Excerpts(2 months, 1 week ago)
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Peter Dowd
I am pleased the hon. Lady asked me that question, because it is patently obvious that better working conditions lead to less absenteeism, more resilience in the workforce and better productivity. It is not a magic potion, but what is known as enlightened employment. She may like to read about that, and if she wants, I will put her in touch with a few people who can talk to her about it.
In that study I mentioned, 71% reported reduced levels of burnout, 54% said it was easier to balance work with household responsibilities, 60% found they had an increased ability to combine paid work with care responsibilities, and 62% reported that it was easier to combine work with social life, and so on and so on. As I have said, the Bill seeks to put this issue on the agenda, because I believe it is inevitable—history shows it—that changes in patterns of work, working arrangements, the nature of work and other associated issues, such as artificial intelligence, will eventually lead to a four-day week over a period of time. So let us embrace the change and let us plan for the change. If we do want to get the country back to work, get the country working productively and get many millions of people without work back into work, let us do this as progressively as we possibly can.
Finally, if we are lengthening the time we ask people to work by an extra year, two years or maybe three years in the future—if we ask them to have a longer working life—the least we can do is to ask them to have a shorter week. What is wrong with that, and is it really too much to ask? I do not think so, and many employers and employees take the same view, so let us not make an enemy of progress. Why do we not just embrace it?
Damian Hinds (East Hampshire) (Con)
I rise to speak to the measures on zero-hours contracts, and Opposition new clause 83 and amendment 283. It is absolutely right that we should pause to consider the effects of these changes on employment tribunals, but it is also right that we should pause to consider their effect just on employment. Of course, there are bad employers and those who would seek to exploit, which is a very bad thing. We should bear down on them, but there is no reason to believe that the measures the Government are bringing forward will achieve that.
I suggest that the Government want to get rid of zero-hours contracts not because intrinsically there is a great problem attached to them, but because of the special place zero-hours contracts have in Labour mythology. I want to take us back to the glory days of the modern Labour party when the leader of the Labour party was the current leader’s immediate predecessor, the right hon. Member for Islington North (Jeremy Corbyn). I see the then shadow Chancellor, the right hon. Member for Hayes and Harlington (John McDonnell) is with us in the Chamber, and as it happens, I was the Minister for Employment at the time.
When our Government came to power, unemployment had been 8%, and it then rose a little bit to 8.5% at the end of 2011. From then on, it came down, and it kept coming down. By late 2016, it was under 5%, and it would fall further still. However, that did not fit Labour Members’ narrative. They wanted to be able to say that this reduction in unemployment was not real: it was all fake employment or low-quality employment. That was not true, but it did not stop them saying it. In fact, three quarters of the increase in employment was in higher-skilled occupations, and three quarters of the jobs growth was in full-time work. At that time, employment was growing much more quickly than self-employment, and the No. 1 sector for employment growth was construction.
However, Labour Members still kept saying that the jobs being created were all low-quality ones, and at the top of the list of things to call out was the zero-hours contract. The then Leader of the Opposition used to talk about it weekly at Prime Minister’s Question Time. There were a couple of awkward moments, such as after his glorious appearance at Glastonbury, when it turned out that the Glastonbury festival—guess what?—employed people on zero-hours contracts. There was further embarrassment when it turned out that there were people working for none other than the Labour party conference who were on zero-hours contracts.
At the DWP we did some research, and it turned out that less than 3% of people relied on a zero-hours contract for their main employment. On average, it delivered them 25 hours of work a week, while, strangely, they had above-average job satisfaction, and most were not looking for more hours. People said the number had grown, but it is actually much more likely that that was because of growing awareness of the term “zero-hours contract”.
Thinking about our history, it has long been the case that far more than 3% of people have had irregular income patterns, where they have not had guaranteed hours of work or levels of salary—from casual labour to piece work, catalogue agents and commission-only sales. At a certain point, it dawned on me that my own first job had been washing dishes on a zero-hours contract—or at least it would have been, had a contract been involved at all.
Madam Deputy Speaker (Caroline Nokes)
Order. I think the hon. Lady is in fact making her speech, rather than an intervention. [Interruption.] Oh, her speech will come tomorrow.
Damian Hinds
The hon. Member is right: of course those things are different, but with the dawning realisation I had back then, I started to wonder who else might take a zero-hours contract? Yes, it is true that disproportionately they are young people, but for quite a lot of people a zero-hours contract is for a second job. I would be interested to hear from the Government their assessment of that. It turned out, when we looked at this in 2016, that one of the biggest users of zero-hours contracts in the country was none other than the national health service, so that it could cope with increases in demand. These were people who had a permanent job as well, but who could, as bank staff, supply other hours when that was needed.
For this Government, it is totemic to do something about zero-hours contracts because of that Labour mythology. For the unions, there is also another reason. This is classic insider-outsider theory, with a shift in remuneration from people who are not in work to people who are already in work, and it pushes up what is called the non-accelerating inflation rate of unemployment. In plain English, it is bad for jobs. The Chancellor of the Exchequer must know that because, as we all know, she is most definitely an economist—she has worked as an economist, she has trained as an economist and she is an economist—and this is classical economic reality.
For whom might zero-hours contracts work well? They work well for any employer with an unpredictable, variable need for workers—from the events business to the NHS, as I have mentioned—and there are other obvious cases in tourism, agriculture and food. However, some people may just choose to have that flexibility. Over the last two years it has been a seller’s market to go into teaching, but some people have still chosen to become a supply teacher because, for whatever reason, for them that works well.
The other group for whom this may work are those furthest from the labour market, who have perhaps been out of work for a very long time, who perhaps are ex-offenders, or who for some other reason find it difficult to immediately land a regular, full-time job. When this is combined with universal credit—which, by the way, the right hon. Member for Islington North also wanted to abolish—it can work very well, because the top-up payment can be adjusted according to how much someone earns week to week.
This Bill is bound to have unintended consequences. We do not know exactly which ones they will be, but I will suggest some of them. It could suppress seasonal peaks in employment—for tourism in the summer, but also at Christmas time—because employers will not want to take on the liability from the reference period. It could deter people from second jobs, which will be bad for growth. It could mean people move from contracted employment to self-employment or casual work. It could mean a move from permanent contracts to temporary contracts and, yes, it could hit our national health service and other important public sector employers.
I do not doubt that this piece of legislation will be good for unions, but it will be bad for the economy and bad for growth, and it will be especially bad for people in the hardest circumstances who so badly want to get back to work, and for whom this kind of contract can also be that important first step.
Louise Haigh (Sheffield Heeley) (Lab)
I congratulate the Deputy Prime Minister, my right hon. Friend the Member for Ashton-under-Lyne (Angela Rayner), and the Under-Secretary of State for Business and Trade, my hon. Friend the Member for Ellesmere Port and Bromborough (Justin Madders) on all their incredible work in bringing forward this landmark piece of legislation. I pay tribute to the hon. Member for Oxford West and Abingdon (Layla Moran), who is co-sponsoring new clause 74 with me today.
This is the first speech I have given as a Back Bencher in nearly 10 years. One of the few benefits of—ahem—elevating oneself to the Back Benches is the ability to speak much more routinely on behalf of my constituents and those without a political voice. The amendment I rise to speak to today is literally about the voiceless: those who have been legally silenced in the name of organisational and personal preservation.
New clause 74 would prohibit employers from entering into non-disclosure agreements with workers in relation to complaints of sexual misconduct, abuse, harassment or discrimination. It very closely mirrors legislation recently passed in Ireland that bans NDAs in those circumstances but allows them at the express consent of the victim, and legislation that has been passed in multiple US states in relation to sexual harassment.
NDAs have a perfectly legitimate use in business to protect commercial confidentiality and trade, but they are frequently misused to bully people into silence when they have already suffered at work. We know of the most high-profile cases, from Harvey Weinstein to Mohamed Al-Fayed, only because their brave survivors risked breaching their NDAs. But these agreements are far from confined to celebrity abusers; they are being misused and exploited on a vast scale. The campaign Can’t Buy My Silence—led by Zelda Perkins, who helped to expose the abuse of Harvey Weinstein—has also uncovered multiple scandals in the higher education sector, which led to action by the former Government to ban the use of NDAs in that sector.
We sadly know that, in our own labour movement, trade unions have been accused of using confidentiality clauses in settlements, which have the same chilling effect as NDAs. I have been told stories—