Social Security — House of Commons, 2020-05-05
Topic: Labor
Alexander Jesse Norman (Conservative, Centre-right): I beg to move, That the Employment Allowance (Increase of Maximum Amount) Regulations 2020 (S.I., 2020, No. 273), dated 11 March 2020, a copy of which was laid before this House on 10 March, be approved This draft legislation allows the Government to increase the employment allowance by one third, or £1,000, giving more than 1 million small and medium-sized businesses up to £4,000 off their employer national insurance contributions bills. Employers pay secondary class 1 national insurance contributions on their employees’ earnings above the secondary threshold, which is set at £8,788 this year. Those contributions are charged at 13.8% and constitute the largest business tax by revenue in the UK The employment allowance was introduced in 2014 to help businesses with the costs of employment and to encourage them to grow and to hire more staff. It is claimed by more than 1 million employers in order to reduce their employer NICs bill by up to £4,000 per year. The Government recently restricted the employment allowance to smaller businesses with a national insurance contributions liability under £100,000, thereby ensuring that this valuable support is targeted at those who need it most At Budget, the Chancellor announced that we would deliver our commitment to increase the employment allowance for smaller businesses from £3,000 to £4,000 from April 2020. Businesses have been able to access that increased support from the start of the tax year. The draft regulations, if passed, will legislate for that increase to the employment allowance. More than half a million eligible businesses will benefit from the increase by up to £1,000. The Treasury expects the average gain from this measure to be about £850 The Government are committed to supporting the UK’s smallest and often most entrepreneurial businesses, and this measure achieves that. Some 95% of the businesses benefiting from this increase are small and microbusinesses. Increasing the employment allowance to £4,000 means that 65,000 more businesses will see their employer national insurance liabilities fall to zero. Since introducing the employment allowance in 2014, the Government will have taken around 650,000 of the UK’s smallest businesses out of paying national insurance contributions entirely The Government are determined now more than ever to support people and businesses. At Budget, we increased the national living wage by 6.2% to £8.72 an hour. Along with increases to the income tax personal allowance and the national insurance primary threshold, that means an employee working full time on the national living wage is £5,200 better off today compared with April 2010 However, we are aware that by supporting people at work through national living wage increases, we also increase cost for businesses. Increasing the employment allowance helps businesses to meet that cost. Businesses will now be able to employ four rather than three full- time employees on the national living wage without paying any employer national insurance contributions This increase will cost more than £2.3 billion over this Parliament; it is a large tax measure. It should be noted that in just four years, the Government have doubled the value of the employment allowance. The draft regulations legislate for a Budget measure that is already helping more than half a million of our smallest businesses with the costs of employment and has been supported by the Federation of Small Businesses Before I conclude, let me welcome the hon. Member for Ilford North (Wes Streeting) to the Labour Front Bench. I enjoin him and all colleagues in the House to join me in supporting the draft regulations, which I commend to the House.