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National Insurance Contributions Bill

My Lords, in moving Amendment 2, I shall speak to the other amendments in the group, which seek to remove the excluded regions from the Bill so that the national insurance contributions holiday will apply without geographical restriction. It will bring London, the eastern region and the south-east within the benefits of the provisions. There are two fundamental reasons why we continue to advance this proposition. The first is fairness and the second is to do with simplicity. To deal with the latter first, it was clear from probing that having excluded regions is a complicating factor in the construction of the legislation and the operation of the scheme, and would discourage a clear understanding and therefore take-up of the scheme. We identified complexities for some types of businesses as to where the new business was principally carried on and, I think, established that some of the 10 employees by whom the national insurance holiday could be enjoyed could anyway be working in the excluded regions. I think that we left unresolved the issue of how, if at all, the holiday would work whereby new business might contribute to the shared services of a group. I am sure that the Minister accepts that having the excluded regions as part of the scheme creates additional bureaucracy and administrative cost, but the real issue is fairness. Excluding three regions from the holiday scheme means that significant parts of the UK that are every bit as deprived as other parts and have equal if not higher unemployment and a heavy reliance on public sector employment are denied this incentive. If the national insurance contribution holiday is a meaningful incentive, while we do not think that it is perhaps the most effective means of stimulating growth, we can see that it will help and believe that it should be fairly available. Help, of course, is needed especially at the current time, with the unemployment figures looking continually grim. The unemployment rate for the three months to December 2010 was up to 7.9 per cent, and the total number of unemployed people increased by 44,000. For 16 to 24 year-olds, unemployment increased by 66,000 to reach 965,000—the highest figure since comparable records began in 1992. The Minister has to date been a little coy about providing up-to-date figures for the take-up of the scheme, which has now been running with effect from June last year. Figures given in another place suggest take-up by January this year of some 1,500 businesses, which is obviously disappointingly short of what might have been expected, as the overall projection is that 400,000 businesses will participate over the three years and two months that the scheme will operate. If the Government are not to fall woefully short of their target and to miss an opportunity to deploy to the full the resources allocated to stimulate the growth of jobs, the scheme requires better take-up or an expanded application. We offer by way of a later amendment the requirement for an annual report to take more formal stock of progress. That could lead to changes in the scheme if the report showed that including the currently excluded regions was leading to overspending. Modifications could then be made. It is worth putting this in the context of the most recent labour market statistics, which showed in the quarter to September last year a net increase of 9,000 jobs, including 63,000 additional jobs. Clearly, those additional jobs will not all come from start-ups and some will come from the currently excluded regions, but that illustrates the headway in the current budgetary provision. The holiday was projected to cost the Exchequer £50 million this year. At £2,000 per business, which I think is the estimate, that should mean 25,000 businesses at least having taken up the scheme by 31 March. Can the Minister give us any assurance on this point? It is difficult for him to argue that removing the exclusion of regions would cause the budget allocation to be exceeded if he cannot assure us that the scheme is currently on track. The Government have targeted the holiday by reference to the reliance on public sector employment, the idea being that the holiday will promote the formation of new businesses in the areas most reliant on public sector employment. Estimates of job cuts arising from government spending cuts vary, but 500,000 could be in the pipeline, together with consequential effects on the private sector job market. The VAT rise simply adds pain to that. By targeting areas of existing public sector employment, the national insurance holiday seems to be focusing on what is to come, not on what exists, although there may be a correlation between the two. Whether the focus is on the reliance on public sector employment, existing unemployment levels or deprivation, significant anomalies occur by taking a broad regional analysis. Nearly half of constituencies that are the lowest 15 for claimant count unemployment are in regions that can benefit from the national insurance contribution holiday, and 20 per cent of constituencies in the highest 30 for claimant count unemployment are in regions that are denied the benefit of the holiday. We know that of the top 12 most deprived local authorities on the economic deprivation index, seven will miss out on the contribution holiday. The House of Commons Library produced a report that sought to analyse public sector employment by constituency. While caveating the complete accuracy, it set out figures for the relative importance of public sector employment. Again, we find that 25 constituencies in the top 100 for reliance on public sector employment are in regions that cannot benefit from the holiday, and that 43 constituencies in the bottom 100 for such reliance are in regions that can benefit. The ONS public sector employment statistics bulletin for quarter 1 2010 not only shows a generally relatively narrow spread across the English regions but shows London to have a higher public sector employment rate than the West Midlands and the east Midlands. London, of course, is excluded. Even assuming that the Government are correct in targeting just by reference to the reliance on the public sector—in the current climate of savage job cuts in the public sector, that is not unreasonable—their regional approach is missing too much of the target. Each region and country of the UK has pockets of deprivation, high unemployment and a high reliance on public sector employment, as well as areas of prosperity and high employment. To limit the holiday on a regional basis is too crude. The Government need either considerably to fine tune the approach, with the bureaucracy that that would entail, or to lift the excluded region prohibitions. This is what fairness demands. I beg to move.