Employment Allowance (Increase of Maximum Amount) Regulations 2020 — House of Lords, 2020-05-05
Topic: Mixed Topics
Joanna Penn (Conservative, Centre-right): My Lords, I am very grateful for the consideration of these regulations and for the points noble Lords have raised. The noble Lord, Lord German, and my noble friend Lord Wei asked several questions on state aid. I can confirm that the majority of support announced by the Government in response to the coronavirus pandemic is not state aid and, specifically, the Coronavirus Job Retention Scheme is not state aid On exceeding the de minimis tax limit for state aid, we undertook consultations with external stakeholders, representatives and the devolved Administrations, and they provided no evidence to suggest that large numbers of agricultural businesses will lose access to the employment allowance because of state aid rules The bureaucracy of administering this allowance was also raised. I reassure noble Lords that the allowance will be applied automatically to businesses. The Government will write to those businesses to inform them that they have been in receipt of state aid There were also questions about the future of state aid more generally. I shall not go into huge detail in this debate, but the Government have negotiated a deal to exit the EU that includes the transition period we are currently in until December 2020, during which we must adhere to EU state aid rules. After that transition period, we will develop our own separate, independent policy of subsidy. We will have a modern system, supporting British businesses in a way that fulfils British interests On the restriction of this allowance to focus on small businesses and smaller employers, my noble friend Lady Anelay stressed that this impacts on charities as well as businesses. I can confirm that the net effect of the restriction to small businesses and the increased allowance is a more generous system. Our estimate is that it will be more generous by around £220 million per year. I reassure my noble friend Lady Anelay that 93% of eligible businesses, including charities, remain eligible for the employment allowance following the reform to restrict it to smaller businesses, organisations and employers I shall also address my noble friend’s broader point about the pandemic’s impact on charities. The restriction to the employment allowance announced in 2018 and the more generous increase in the allowance to which these regulations refer were announced before the full impact of the pandemic had been felt. Indeed, we still do not know what that full impact will be. We will continue to keep under review all the measures needed to support businesses and charities at this time. As my noble friend will know, we have announced a £750 million package of support specifically for charities during this pandemic Several noble Lords raised the question of the self-employed. The employment allowance is claimed against employers’ NICs only and the self-employed have no equivalent charge unless they have employees, in which case they can benefit in the same way as other employers. The self-employed also benefit from the increase to the personal allowance announced in the Budget and the increase in the NICs threshold Several noble Lords encouraged the Government to consider the debate in the context of the pandemic and its impact on jobs and livelihoods. The Government are considering that all the time. I thank my noble friend Lady Neville-Rolfe for her comments and agree that this increase will stand as a vital support for businesses as we pull together to recover from this crisis. It was not announced in that context in the Conservative Party manifesto, but the reason for this focus on smaller businesses and for the allowance increase is precisely to encourage small businesses and organisations to employ an additional or extra person; this is rather than targeting larger businesses, where the difference made would be smaller On my noble friend’s points on lockdown, our action plan to beat the pandemic is the right thing to do but we know people are worrying about their jobs and incomes. The Government’s strategy is to reduce the infection rate, ease the pressure on the NHS and save lives. The First Secretary announced on 16 April that the measures would remain in place for at least the next three weeks. As such, the Government will be conducting a review of social distancing measures before 8 May. The Government share concerns that we should protect jobs and head off a recession. The Chancellor yesterday offered reassurance that there will be no cliff edge to the furlough scheme. We are working out the most effective way to wind down the scheme and ease people back into work in a measured way I hope my response has addressed most of the points raised by noble Lords. If there are any that I have not addressed, I will, as the noble Baroness, Lady Burt, suggested, be very happy to write to noble Lords These regulations make important changes. Small businesses play a vital role in driving the economy and creating jobs. By increasing the employment allowance by one-third, these regulations increase by £1,000 the support such businesses are able to receive. They take a further 65,000 small businesses out of paying employer NICs entirely and provide an immediate benefit to over 500,000 businesses. I beg to move.