National Insurance Contributions Bill

Gavin Shuker Excerpts

Tuesday 23rd November 2010 Commons Chamber

[Gavin Shuker (Luton South) (Lab/Co-op)]

As a new Member of this House, I am learning an awful lot of lessons, including the one that says never attempt to follow my hon. Friend the Member for Ealing North (Stephen Pound) at the end of a long debate, so I will keep my remarks characteristically short.

Like many Members, I was surprised to find myself as one of the MPs for the greater south-east—a new region of which we are all delighted to be a part, particularly those of us in the east of England. Joking aside, this Bill will have a serious impact on my constituents in Luton South. Luton is my home town; it is a jewel in the east of England and businesses like it.

A 2010 survey showed that access to a strategic road network, rail networks and Luton airport and its proximity to London are all great for business. None the less, we have problems, too. Even as a jewel in the east, we suffer from unemployment. Jobseekers’ allowance claimants form 7.5% of the population—it has risen over the past couple of years—compared with an average of 4% in the wider east. Median earnings are £350 a week in Luton compared with £410 a week in the rest of the east.

The east is a vastly disparate area. I am reminded of that when it takes me two and a half hours to drive to Norwich and two hours to Cardiff. It is a vast area as well, but it gets the same blanket national insurance conditions under this Bill, which is surely unfair.

Being at the margins of the east is also a problem. Those same road and rail networks that make Luton an attractive place for business can help its creative work force to leave—and to receive a £50,000 golden hello for setting up a business elsewhere. If the purpose is to encourage jobs in the non-excluded areas rather than in the greater south-east, then areas at the margins will be disproportionately affected. For places such as Luton it is a double whammy because there will be public-sector job losses over the coming years and a less competitive environment in which to establish a new business. Indeed, it is a triple whammy because Luton’s great road and rail networks will encourage people to move 15 or 20 minutes away to establish their business, and the area will lose valuable new jobs at a time of rising public sector unemployment. That is why I sponsored early-day motion 537, which said:

“That this House notes that the Government’s decision to introduce a Class 1 Employer National Insurance exemption for new businesses in regions other than the East, South East and London will have a negative effect on growth in those areas collectively termed the Greater South East; further notes that in areas which border, or have good rail and road links with non-Greater South Eastern town and cities, the strategy positively encourages entrepreneurs to start new businesses away from their own communities, breaking community ties and vastly increasing unemployment; and further notes that the same strategy fails to recognise the vast disparity within the Greater South East region, where some towns and cities experience levels of unemployment and deprivation that are equal to or worse than the parts of the country that will benefit from this scheme.”

The disparity within regions is the key point. Luton’s businesses will be hit hard as will others across the south-east. Potential new businesses will be affected. Some 82% of Luton’s businesses employ fewer than 10 members of staff, which are exactly the sort of operations that this policy is meant to help in other parts of the country. Again, more than four-fifths of local businesses do not have sites elsewhere in Luton. These are Luton-based businesses run by Luton people, and they will be hit before they even have the chance to get started.

The Government argue that anything other than the binary distinction between south-east and the “other” would be too difficult a distinction for the boffins at the Treasury to work out. In response to the hon. Member for Gosport (Caroline Dinenage), the Exchequer Secretary said that the measure

“is targeted on countries and regions within the UK where reliance on public sector employment is at its highest. For practical reasons the Government have no plans to introduce national insurance contribution exemptions for smaller geographical units.”—[Official Report, 10 November 2010; Vol. 518, c. 359W.]

I hope that in Committee, the Government will be open to considering different models or different, more graduated distributions of the national insurance holiday schemes. Changing the ratio is the stated ambition of the Bill. The data for it exist for local authority areas, which are explicitly listed by name in the Bill. Will the Government choose to look at that as an option for applying the changes? My constituents in the Luton local authority would be extremely grateful if they did so.

In summary, the Government have chosen to favour some people, some businesses and some communities over others. Although I understand that there are pros and cons to such an approach, to apply that choice as a blanket holiday over vast swathes of the country, meaning a £50,000 golden hello for some businesses just 15 or 20 minutes away from the borders of my constituency, will have a negative effect on Luton South. Such an approach does not fulfil the other part of the Government’s stated bargain, which is that if a business loses out by having higher national insurance rates on new start-ups, that will be offset by living in an area that is already doing better when it comes to higher public sector employment. As we heard from my hon. Friend the Member for Luton North (Kelvin Hopkins), his constituency is in the top 10 seats for public sector employment rates, so his constituents will be affected.

In short, if the Government scheme is to favour some areas over others, and it does not work, it will be a waste of money and parliamentary time. If it does work, it will hit my constituents hard and unfairly—judged by the Government’s own criteria. A reasoned amendment will not be moved tonight, and Opposition Members will not oppose the business as it goes forward. We accept that responsible national insurance increases will be required to address the deficit. None the less, I hope that the Government will have the courage to look at the distribution of this holiday so that the hard-pressed and creative people of Luton are not the victims of a Tory triple whammy.