PARLIAMENTARY DEBATE
Employer National Insurance Contributions: Small Businesses in Hampshire - 2 September 2026 (Commons/Westminster Hall)

I beg to move,

That this House has considered the impact of changes to employer National Insurance contributions on small businesses in Hampshire.

It is an honour to serve with you in the Chair, Mrs Barker. I am equally privileged to be joined by a number of local business owners from North East Hampshire, who are in the Public Gallery.

Soaring energy costs, a business rates system in desperate need of overhaul and, perhaps the most damaging of all, a rise in employer national insurance contributions: individually, any one of those changes would be hard for a small business to absorb, but together they are too much for many small businesses across Hampshire. When a small business’s costs rise, that cost moves on to workers through stagnant wages, to customers through higher prices and to the business owners in lower profits. When the numbers simply cannot add up, the cost also moves on to local communities, through weaker local economies and hollowed out high streets. In Hampshire, where almost 98% of businesses are small businesses, that is felt by an entire county.

Small businesses cannot design their way around these tax changes. A big national chain can negotiate volume discounts, restructure its human resources or draw on a financial buffer; a beauty salon in Church Crookham or a care home in Ewshot cannot. That is why 35% of small firms say that they are planning to close or significantly scale back this year, and why these changes are, in plain terms, a jobs tax.

This matters because these are precisely the employers we need. The Government’s own research has warned that without urgent action, one in six young people could soon be a NEET—somebody not in education, employment or training. Hospitality, retail, personal care and customer service are the sectors facing the steepest rise in labour costs, yet they are the very sectors that traditionally give young people their first, vital experience in the world of work.

I wholeheartedly agree. That is the exact crux of the issue, and it is borne out in the data. The Bank of England decision-maker panel revealed that 46% of firms nationally have cut staff because of these changes, and that 20% have paid lower wages than planned. Nationally, small businesses account for 60% of private sector employment, so when they pull back it is not a footnote to the labour market; it is the labour market.

Nowhere is that clearer than in the hair and beauty sector. Kerry Mather has run KJM Salons in Fleet for 36 years, employing around 20 people including six apprenticeships, training a new generation in a key town centre location. In the past decade, apprenticeships in the UK hair and beauty industry have dropped from nearly 19,000 to 3,000. If we are not careful, soon there will be no apprenticeships left.

I thank the hon. Member for his intervention and I agree that this is a matter for Government, which, of course, is why I am raising it today.

The pressure compounds, of course, where a workforce is already stretched. Vehicle repair already loses around 1,700 workers a year. The Institute of the Motor Industry says:

“Protecting that workforce is not just a matter for bodyshops and garages—it is a matter for insurers, fleet operators, and ultimately for every driver who needs their vehicle repaired.”

Foster and Heanes, a name that is well known in North East Hampshire for providing MOTs and repairs, sits squarely in the path of that shortfall. Where there are no staff available to repair a vehicle, the consequences ripple out to every tradesperson who needs a van back on the road and every local supply chain that depends on vehicles moving on time. In a constituency with limited bus infrastructure, the school run is also affected, because for many families there is no alternative but to use a car.

As my hon. Friend the Member for Winchester (Dr Chambers) and the hon. Member for Strangford (Jim Shannon) have said, such business challenges are of course felt across the country. Some 69% of businesses cite employer national insurance contributions as one of the top three cost threats to UK labour market competitiveness, while business confidence has fallen—even since the market turmoil of autumn 2022, which is a really damning indictment of this policy. A quarter of firms cut back investment in the very quarter that these changes took effect, making it no surprise that growth under this Government has never once crept above 0.6%.

The policy is just so hard to understand given the rhetoric used by this Government. There is talk of growth, talk of apprenticeships and talk of opportunities for young people, but the action seems to be the opposite—fewer jobs, fewer apprenticeships, less business investment and an economy that continues to stagnate. Small business owners need to understand how the Government can justify this policy.

Nowhere is the policy harder to defend than in health and social care. This year alone, independent care providers have been billed an extra £940 million. Ministers point to additional social care funding, but for providers on the ground that funding is little more than a consolation prize, because the Government voted down every single Lib Dem amendment tabled in the House of Lords to exempt care and early years providers from this rise. It has landed on a sector that is already in profound crisis and that simply cannot reduce its workforce to cope.

Hundreds of thousands of people are currently waiting for care, many of them stranded in hospital beds simply because the care they need is not available, which piles more strain on to the NHS. Liberal Democrat analysis found that almost 900,000 people had their request for care denied in the last financial year, while—tragically—a further 6,000 people died while waiting for their care to be approved. This policy does not simply squeeze care providers’ margins; it deepens a crisis with a real human cost.

That gets to the very heart of the matter. At the centre of this situation, as local business owners in North East Hampshire have told me, are people. Good employers who pay their staff a fair wage, who train and invest in their teams and who contribute to the communities in which they operate are being squeezed to breaking point.

Having barely recovered from the covid years, service and retail businesses no longer have the financial buffers they once had. That means their staff lose out not just on a pay rise but on a Christmas party or a team training day, or perhaps their equipment is not replaced as regularly or they do not get a bonus. Whatever the consequence, it is people who are impacted—the ones who this Government claim they want to support.

Hampshire’s experience and the national picture are one and the same story, but none of this was inevitable. The Office for Budget Responsibility itself says that firms will pass on 60% of the higher costs, whether through reduced wages or higher prices. Coupled with five consecutive years of falling living standards, the changes to NICs are nothing short of regressive.

There is no doubt that our public services need funding and that our country’s infrastructure needs urgent repair, and I am the first to call for those things, but there is a fair way to do this—and one that will not strangle the UK’s economic growth. The Government must focus on taxing those with the broadest shoulders so that they contribute more through a higher digital services tax, on overhauling the broken business rates system, on ensuring that enormous multinational corporations are paying their fair share for doing business in the UK, and on reversing the Conservatives’ banking tax cuts.

Positive change is possible. The Government’s steps towards cross-party discussions on social care and the 20% cut in business rates for pubs, clubs and music venues are welcome, but we must go further. Any relief to those sectors cannot leave NICs off the table. Today and every day, I represent the brilliant North East Hampshire business community. Small businesses are the engine room of the British economy, so I call on the Government to give them the certainty they need to invest, grow and create jobs. Our businesses should be thriving, not barely surviving.