Lord Livermore

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That the Bill be now read a second time.

The Financial Secretary to the Treasury (Lord Livermore) (Lab)

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My Lords, I wish all noble Lords a happy new year. It is a pleasure to open this debate. I am aware that the noble Baroness, Lady Kramer, has tabled a regret amendment expressing concern about the measures in the Bill. While I of course understand and respect the points raised in it, this Government had to take some very difficult decisions—not decisions we wanted to take, but necessary decisions to clear up the mess we inherited.

In the time I have available today, I will seek to explain why not acting was simply not an option, and why this Bill is necessary to repair the public finances, while protecting working people and rebuilding our public services.

I will begin by setting out the economic context in which the Budget decisions contained in this Bill were taken. As noble Lords will know, on her arrival at the Treasury last July, the Chancellor was informed of a £22 billion black hole in the public finances—a series of commitments made by the previous Government which they did not fund and did not disclose. Ahead of the Budget, the independent Office for Budget Responsibility had conducted a review into the circumstances surrounding a meeting it held with the Treasury on 8 February last year, at which the previous Government were obliged to disclose all unfunded pressure against the reserve.

The OBR’s review established that at that point the previous Government concealed £9.5 billion. However, as we now know, during the remaining five months they had left in office, the previous Government continued to amass unfunded commitments, which they did not disclose. By the time of the spring Budget, Treasury records show these had reached £16.3 billion. By July, they had reached £22 billion.

The Treasury has provided to the OBR a line-by-line breakdown of these unfunded commitments: 260 separate pressures which the previous Government did not fund and did not disclose. Neither did they make any provision for costs they knew would materialise, including £11.8 billion to compensate victims of the infected blood scandal, and £1.8 billion to compensate victims of the Post Office Horizon scandal.

The country inherited not just broken public finances but broken public services: NHS waiting lists at record levels, children in Portakabins as school roofs crumbled and rivers filled with polluted waste. Yet, since 2021, there had been no spending review and no detailed plans for departmental spending set out beyond this year.

Faced with this reality of broken public finances and broken public services, any responsible Chancellor would have had to act. Some noble Lords, during today’s debate, may argue otherwise: that we should have ignored the black hole in the public finances. But this is the path of irresponsibility, the path chosen by the Liz Truss mini-Budget, when mortgage costs increased by £300 a month, and for which working people are still paying the price.

That is not the path chosen by this Government. Our number one commitment is economic and fiscal stability. That is why, as a result of the Budget—and only because of the measures contained in this Bill, combined with other difficult decisions we have taken—instead of £22 billion of unfunded spending plans, within three years not a single penny of day-to-day government spending will be funded by borrowing.

Yes, it was a significant Budget, on a scale commensurate with the challenging inheritance we faced. And yes, it did mean taking difficult decisions. As a result, however—and only made possible by the measures contained in this Bill—we have now wiped the slate clean, creating a platform of stability in the public finances.

The Budget made another very important choice: to keep the manifesto commitments we made to working people to not increase their income tax, their national insurance or VAT. Compare that with the choices made by the previous Government, who chose to freeze income tax thresholds, costing working people nearly £30 billion. This Government could have chosen to extend that freeze, but that was not the choice we made. Instead, from 2028-29, personal tax thresholds will be uprated in line with inflation once again. However, keeping those promises to working people, while repairing the public finances and rebuilding our public services, did mean we had to take some very difficult decisions on spending, welfare and tax, including those in the Bill before your Lordships’ House today.

The Bill contains three key measures: first, an increase to the rate of employer secondary class 1 national insurance contributions from 13.8% to 15%; secondly, a decrease of the secondary threshold for employers—the threshold above which employers begin to pay employer national insurance contributions on their employees’ salaries—from £9,100 to £5,000; and, thirdly, measures to protect small businesses by more than doubling the current employment allowance from £5,000 to £10,500. The Bill will also expand the eligibility of the employment allowance by removing the £100,000 threshold so that more employers now benefit.

I of course understand that some of these measures mean asking businesses to contribute more, and I fully acknowledge that some impacts will be felt beyond businesses too. These are difficult decisions, and I understand and respect the legitimate concerns that have been raised, including by business. However, taken together, the measures in the Bill mean that more than half of businesses with national insurance liabilities will either see no change or see their liabilities decrease. Some 865,000 employers will now not pay any national insurance at all, and over 1 million employers will pay the same or less than they did before. All eligible employers will now be able to employ up to four full-time workers on the national living wage and pay no employer national insurance contributions. The Government are also setting aside support for the public sector of £5.1 billion by 2029-30, ensuring that there is sufficient funding for our vital public services, including the NHS.

I also recognise that concerns have been raised about the wider economic consequences of the measures contained in the Bill—concerns I am sure we will hear in today’s debate. Let me be clear: not to act was not an option. The choices we have made were the only route to putting the public finances back on a stable path, while protecting working people and rebuilding the public services. The economic data we have seen in recent months is, of course, disappointing; in particular, the recent growth figures show the sheer scale of the challenge we face. However, there would have been far greater costs to continuing with the irresponsibility and instability that has been a near-constant feature of the past 14 years: from the chaos of Brexit and the disastrous deal that followed, through to the Liz Truss mini-Budget, which crashed the economy and devastated family finances.

Let us remember that the OECD now expects the UK to be the fastest growing European G7 economy, and at the Budget, the independent Office for Budget Responsibility was clear that, with particular reference to our capital investments, the Budget will increase the size of the economy in the long term. On living standards, the OBR forecast shows that real household disposable income will increase in real terms in each year of this Parliament; the level of real wages will rise by 3% over the next five years; and the number of people in employment will rise by 1.2 million over the course of this Parliament. Our planning reforms, pension reforms, skills reforms and industrial strategy will all contribute to higher growth, but none are yet included in the OBR’s forecast.

The measures contained in the Bill also contribute to significant new investment in the NHS. That vital investment—amounting to £25.7 billion extra for the NHS over this year and next—is only possible because of this Bill. It includes £1.5 billion for new surgical hubs; more than £1.25 billion to deliver over 1 million additional diagnostic tests; over £2 billion for technology and digital improvements to increase NHS productivity and save staff time; and £880 million more in local government spending to support social care. All of that will support the NHS to deliver an extra 40,000 elective appointments a week, helping us to bring waiting lists down more quickly.

The choices we have made are the right choices. They are not the easy ones, but the responsible ones: to rebuild the public finances, to protect working people and to invest in Britain’s future. None of those things would be possible without the Bill. It is of course possible to make different choices: to ignore the problems in the public finances, to continue to neglect our public services or to fail to protect working people. Noble Lords may wish to argue for that during today’s debate, but this Government were elected with a mandate to fix the foundations of our economy. The Bill delivers on that mandate and provides a foundation of stability on which we will now build long-term, sustainable growth. I beg to move.

Amendment to the Motion

Baroness Neville-Rolfe (Con)

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My Lords, I must start by thanking the noble Lord, Lord Livermore, for his clear explanation of this short and simple Bill, the context as he sees it, and the “happy new year” that we all hope to see, despite everything we will probably hear today.

I endorse the tribute from the noble Baroness, Lady Kramer, to Baroness Randerson: what a shock. I will come to the noble Baroness’s Motion later.

Despite the welcome increase in the employment allowance—effectively advocated by my friends at the Federation of Small Businesses—it is difficult to hide the fact that this Bill introduces a jobs tax right across the UK; it represents a £23.7 billion raid on employers. During the general election six months ago, the Labour Party claimed that, if it formed the next Government, the first priority would be to increase the rate of economic growth, and the Chancellor said that they would be the “most pro-business Government ever”—that was the promise. I attended the Times summit, and businesses were very reassured by everything the Chancellor said.

On taking office, the Government, notably the Prime Minister and Chancellor, relentlessly and consistently stressed the allegedly dire state of the national economy, constantly referring to their mythical black hole of £22 billion. I believe it would be true to state that no positive words on UK economic prospects ever passed their lips. But, as Keynes and many other eminent economists stressed long ago, economic success is in part a matter of morale. That discovery was, apparently, forgotten by the Prime Minister and Chancellor.

The Budget is the principal mechanism by which the new Government were able to give effect to their aspirations and objectives. Unfortunately, it was widely and correctly described as anti-business. It raised taxes substantially by placing large new burdens on business, most notably by way of increases in national insurance. The consequences of this pessimism at the top of government, and the extra burdens on business, are clear for all to see: a faltering economy, thought by some commentators even to be verging on depression, and an unpopular Government. That is quite an achievement when the Government are only six months old. Noble Lords will recall that in the first half of the year, the economy was growing strongly and inflation had reduced sharply from the highs created by Covid, Ukraine and the energy crisis. I suggest that gives a much more accurate summary of last year’s economics.

Sadly, the financial world is of a similar view. On 3 January, the critical measure of confidence, the 10-year gilts yield, was at 4.59%, which was higher than its peak after the Kwarteng Budget. In Germany, the bond yield rate at the end of December was 2.38%, and even in Italy it was only 3.52%. This morning, we had a stark warning from the British Chambers of Commerce that more than half of firms were planning to raise their prices in response to tax hikes announced by the Chancellor in October. Business confidence is at a two-year low.

The Government introduced several business-related measures in their Budget, and unfortunately, they were overwhelmingly negative. The increase in employer national insurance contributions, which I will come on to dissect, was accompanied by the partial removal of non-domestic business rate waivers dating back to Covid; a further increase in minimum wages; and an affirmation of plans to introduce costly new rigidities into the labour market. This was a quadruple hit on our hard-working businesses, and that is before accounting for the IHT changes that have so unsettled family businesses and our farming community.

The minimum wage is, of course, something we do not oppose, but it introduces further costs to businesses, especially small businesses, at a time when they are drowning in extra burdens. These businesses all play a crucial role in helping the British economy to grow, which is what we all want.

A number of sectors have released reports detailing the profound consequences these measures will have on their businesses, and this has highlighted the extent to which the Government fail to understand not only the private sector but how to promote and encourage a growing economy. The December growth figures from the ONS were very disappointing: down 0.1%, as were the OECD and IMF comparisons.

The noble Baroness, Lady Kramer, actually set out the Opposition’s position on the various sectors affected. However, her amendment is too kind to the Government; the NICs changes are a jobs tax on all business and not-for-profit sectors, not just a few. Passing it will have no effect on the Bill and do nothing for the groups mentioned. Instead, we need the Liberal Democrats to join us, on Wednesday, in opposing the Bill’s committal to Grand Committee. The Floor of the House is the revising Chamber that can be relied on to delve into vital detail and the perverse effects of such legislation. There is huge concern across the country and we should be debating this Bill, which can be amended—unlike money Bills—in Committee in this Chamber.

I turn to some individual sectors. The Government have angered businesses across retail. Over 70 businesses sent a letter to the Chancellor outlining their concerns. Big employers, including Tesco, Sainsbury and Next, said that:

“For any retailer, large or small, it will not be possible to absorb such significant cost increases over such a short timescale. The effect will be to increase inflation, slow pay growth, cause shop closures, and reduce jobs, especially at the entry level”.


We find it particularly concerning that the Government maintain a rhetoric that they are pro-growth and pro-business, without listening to the very businesses that can help them. If they did, they would realise that their plans have not been thought through and that they will have far-reaching consequences in closures and the prevention of growth.

The retail sector estimated that the measures introduced in the Budget will cost the sector up to £7 billion a year, and that these costs will be offset through a reduction in headcount, a freezing of wages and increased prices for the consumer. From my own retail experience and observations in recent weeks, I believe that we risk more insolvencies and empty shops on the high street. This is all too likely to have a multiplier effect on confidence and investment. Reports state that the Centre for Retail Research forecasts over 17,000 store closures in 2025, confirming my fears.

UK hospitality will also pay a high price in adapting to the new taxes. The sector indicated that it will pay at least £1 billion as a result of the increase in national insurance alone and that this will hit its far from buoyant profits. Take an example: a survey from the British Institute of Innkeeping indicates that 40% of independently operating pubs will have to reduce their opening hours as a result of this increase in national insurance contributions alongside the other harmful measures towards businesses included in the Budget. As a pub-goer, I know that turning up to a closed pub puts one off going to the pub again and that that has a multiplier effect.

The increase in NICs is unusual in causing pain to many not-for-profit sectors. They often get by, despite straitened circumstances, because of their workers’ passion and hard work. A good example is our wonderful hospices, as we heard during the PNQ. The charity, Together for Short Lives—a children’s hospice—estimated that this specific increase will put up the cost of providing such hospice care by £5 million across the sector. This will have a seriously detrimental impact on already underfunded hospices and will reduce the availability of lifeline care for children across the country. The Marie Curie charity concluded that the NICs changes will force it to reduce headcount and limit services, with more terminally ill patients staying in hospital, which is bad for them and the NHS, at a time when the debate on assisted dying has highlighted the inadequacy and unevenness of hospice provision. I hope that the Government are listening.

Regrettably, this is part of the wider picture of underfunding in social care, which has already been highlighted. The Nuffield Trust says that independent care providers will face £940 million in additional costs. That dwarfs the £600 million of support introduced in the Budget.

The Government are rightly trying to make more use of pharmacies to tackle waiting times, and yet Community Pharmacy England says that they will be hit by an extra £50 million a year. GPs are caught, as we heard: the Institute of General Practice Management estimates extra costs of about £20,000 a year for the average practice. Ironically, the BMA says that, as public authorities, they are unable to access support via the increased employment allowance. They look with envy and surprise at arrangements already made to protect the NHS and Civil Service from the NICs hikes.

Finally, there is the extraordinary impact on nurseries, where the last Government did so much to extend childcare and help more mothers into work, which boosted growth. The National Day Nurseries Association estimates that the combinations of NICs and salary increases will mean an extra £47,000 on average per nursery, and that those providing more than 50% government-funded childcare will also be deprived of the employment allowance.

I look forward to hearing from others in this debate about the effect of these changes and their unfairness and perverse impacts on so many sectors.

To conclude, we cannot support the key provisions of the Bill. It is a betrayal—yes, a betrayal—of the promise in the Labour manifesto that all reasonable people interpreted as a commitment not to increase national insurance. The stuff said about “working people’’ does not cut the mustard. Moreover, we know from the OBR that the national insurance changes alone will reduce labour supply by 0.2% and add 0.2% to inflation by 2029-30. Sadly, we are already seeing this in business recruitment plans.

We look forward to carrying out our scrutiny functions effectively as this important Bill progresses. It would be very helpful if the Government could update us with their latest view of the impact of the proposed changes on jobs, wages and prices. We are very much in favour of a proper evaluation of policies in the light of experience, and, accordingly, we will be tabling a proposed new clause requiring the Chancellor to publish an assessment of the NICs increases on the employment rate a year after the passing of the Bill. I know from my time as a Minister that such amendments are routinely resisted by the system but that they can be helpful down the road to a responsible Minister keen to do the right thing.

In short, our position is that, even if the Government thought it was right to raise many billions in taxation, this is the wrong way of doing it. The country will regret it.

Lord Frost (Con)

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My Lords, we have heard a lot from the Minister and just now from the noble Lord, Lord Eatwell, about the alleged terrible situation in which the previous Government left the current Government. I have been known to criticise the previous Government myself, and there is a degree of truth in the criticism that we were too ready to resort to spending and to tax and national insurance increases. Indeed, I spoke in Cabinet against the previous effort to increase national insurance; it was one of the reasons why I left that Cabinet a few months later. However, in mitigation of the previous Government and some of their predecessors, that was not unique; it followed the trend established over the past 20 or 30 years to increase the size of the state, push up taxation and spending, and increase the pressure on the private sector.

It is that reality of the past 30 years that makes what we have heard from the Minister and the Government more broadly—the suggestion that they are fixing the foundations and marking a moment of change—so ludicrous and ridiculous. The Government like to claim that they are marking a different path, when the truth is that they are just doubling down on the path that has been set for the past 30 years. There is no change in this at all other than in size and in the energy driving us to a larger state, with higher taxes and higher spending.

The noble Lord, Lord Eatwell, talked about understanding arithmetic, but the arithmetic that I find hard to understand is why it is thought to be a change of direction when the plan in this Budget is to push up public borrowing £20 billion or £30 billion higher than it would have been under the previous Government’s plan, even though taxation is going up by another £30 billion or £40 billion every year. Despite all that, the deficit is still 1% of GDP higher than it would have been at the end of this fiscal period under the previous Government. How is that fixing the foundations? It is doubling down on the trend and making the situation worse. We know that the consequences will be lower growth, less dynamism and lower wealth for the country as a whole.

The specific tax change that we are looking at in this Second Reading debate is a major part of that problem. It is a well understood principle in economics that if you tax a thing you get less of that thing, and if you tax jobs you will get fewer jobs. Even now, Britain has one of the lowest tax wedges in the OECD—the gap between what employers have to pay employees and what they actually receive. European economies with typically higher tax wedges have many more problems with youth unemployment and long-term unemployment. Countries with very high tax wedges, such as Germany, Spain and Italy, have long-term unemployment more than one-third higher than ours. Spain’s is two-thirds higher, Belgium’s is nearly twice as high and Italy’s is highly still. With these measures—and the new employment regulation that is coming our way soon, no doubt—we are heading the same way too. Hiring is falling already, at 23% lower than a year ago. The OBR forecasts a lower participation rate—the “drag” from employer national insurance contributions, as it puts it, which boosts the decline in the participation rate by 50%.

The Government know perfectly well that this effect exists, even if they do not want to acknowledge it more than they have to. We can tell that they know that it exists because they are having to compensate the public sector to mitigate the problem. In so doing, they are reinforcing a divide that already exists between the public and private sectors. My noble friend Lord Forsyth alluded to this just now. Wages are already higher in the public sector and pensions are much more generous. Now the Government are beginning to establish the principle that the public sector should be protected from the consequences of the Government’s own decisions—just like the French nobility before the revolution, who did not pay the taxes imposed on everybody else. It did not end well for them and it will not end well for the Government, or for this country, if they create a privileged class that does not contribute to economic growth but just feeds off it.

As a result of this, we are seeing much more complexity, yet we need simplicity, not complexity, in the way our fiscal and tax systems work. The principle that is being established means that if you are fortunate enough to be on the payroll of the public sector you are shielded from some of these changes, but if you are unlucky enough merely to supply the public sector—for example, as has been said, a car firm taking special needs patients to hospital—or if you merely carry out public sector functions, such as hospices, then you will be on your own. As a result, we are going to see—indeed, we are already seeing—ever-increasing and, in many cases, entirely reasonable demands for exemptions or changes to the rules from those who happen to fall beyond this boundary. There will be new reasons to lobby, new reasons to generate complexity and new reasons to push up costs over time.

The last thing we need is more taxation. I urge noble Lords to look at the OBR’s fascinating historical public finances databank—I find it fascinating, anyway. It shows that, after the Autumn Budget, we now have public sector spending at around its highest level ever, outside the world wars and the pandemic, and taxation is at the highest level it has ever been in this country, even during wartime.

It is true that we are seeing huge strains on the public sector—courts, schools, roads, transport and so on. That is obvious, but we are seeing those not because taxes are too low but because growth is too low. We are exhausting the capacity of the economy to pay for the public goods that we all want to see. There is only one way to resolve that problem, which is to get the boot off the private sector and allow it to generate wealth. The Minister spoke of stability. We all want stability, but there are different kinds of stability and, if we are not careful, we are going to get the stability of the morgue in the British economy. We need activity, dynamism, change, energy and growth. Reversing the trends that we are on against all those things is of huge importance. That, by the way, is why it is so important that Committee on this Bill should be on the Floor of the House.

There is no manifesto commitment to this measure and it is right that we do everything possible to reduce its impact. The non-crisis British state is the biggest it has ever been, and any responsible Government will be trying to reduce it—for example, to what some, at least, regard as the halcyon days of the first Blair term, when the state was a whole 10 percentage points of GDP smaller and, not coincidentally, trend growth was a whole 1% of GDP higher. The current route of spending more and producing less will drive people out of work, crush growth and lead this country to penury, and these NIC measures will take us one further step down that road. The Government need to think again.

Lord Livermore (Lab)

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My Lords, it is a pleasure to respond to this Second Reading of the national insurance contributions Bill, and in doing so to respond to the points raised by the amendment in the name of the noble Baroness, Lady Kramer. I am grateful to all noble Lords for their contributions during today’s debate. The Budget in October involved taking some very difficult decisions: to clear up the mess that we inherited, to repair the public finances, to protect working people and to rebuild our public services. Faced with the reality of broken public finances and broken public services, not acting was not an option, which is why this Bill is necessary, as my noble friends Lord Chandos and Lord Layard observed.

Some noble Lords, including the noble Baronesses, Lady Neville-Rolfe and Lady Noakes, the noble Lords, Lord Forsyth of Drumlean, Lord Ahmad of Wimbledon and Lord Mackinlay of Richborough, and the noble Viscount, Lord Trenchard, focused on the Government’s fiscal inheritance and sought to deny the £22 billion black hole that the previous Government left behind. I am, of course, very grateful to all noble Lords who mentioned the £22 billion black hole and thank them for doing so.

The Treasury has provided to the OBR a line-by-line breakdown of the previous Government’s unfunded commitments—260 separate pressures. Noble Lords need not just listen to the OBR and the Treasury. They need look only at the out-turn data: central government current expenditure, published by the ONS, shows that for the six months since March the out-turn is £11.8 billion higher than forecast. That is £11.8 billion over six months—well on course for £22 billion over the year. The noble Lord, Lord Moynihan of Chelsea, asked why the money is not there. I politely suggest to him that it is because of the policies he supported under the previous Government.

Faced with this reality, as the Chancellor was, any responsible Chancellor would have to act. Ignoring this black hole, as my noble friend Lord Eatwell said, would have taken us down a path of irresponsibility—the path chosen by Liz Truss in her mini-Budget, for which working people are still paying the price.

Some noble Lords, including the noble Baronesses, Lady Neville-Rolfe, Lady Noakes, Lady Bray of Coln and Lady Porter of Fulwood, the noble Lords, Lord Jackson of Peterborough and Lord Mackinlay of Richborough, and the noble Viscount, Lord Trenchard, sought to argue that the Bill breaches the Government’s manifesto commitments. That is clearly not the case. Despite the pressures on the public finances, the Government made a clear choice at the Budget to keep our promises to working people by not increasing their income tax, national insurance or VAT, and we went further by freezing fuel duty. Compare this with the decision made by the previous Government to freeze income tax thresholds—a decision which cost working people over £30 billion. Instead, our Budget ensures that, from 2028-29, personal tax thresholds will be uprated in line with inflation once again.

Some noble Lords, including the noble Baronesses, Lady Neville-Rolfe and Lady Moyo, the noble Lords, Lord Londesborough, Lord Forsyth of Drumlean, Lord Ahmad of Wimbledon and Lord Ashcombe, my noble friend Lord Eatwell and the noble Viscount, Lord Trenchard, focused on the impact of these measures on employers. We heard a lot during today’s debate from the noble Lords opposite about how much they know about business. One does wonder, then, why the economy was such a catastrophe over the past 14 years.

I accept, though, that the Bill will require some employers to contribute more. These are difficult decisions and not ones we wanted to take. I understand and respect the legitimate concerns that have been raised, including by some businesses. But, taken together, the measures in the Bill mean that more than half of businesses with national insurance liabilities will either see no change or see their liabilities decrease. As my noble friend Lady O’Grady of Upper Holloway said, 865,000 employers will now pay no national insurance at all, and over 1 million employers will pay the same or less than they did before. In answer to the noble Viscount, Lord Trenchard, around 250,000 employers will see their liabilities decrease. Around 940,000 will see an increase and 820,000 will see no change.

The noble Lord, Lord Macpherson of Earl’s Court, asked about reducing distortions. Recent changes, such as reforms of the off-payroll working rules, have reduced distortions and we will keep this issue under review.

To all those noble Lords who asked, we have no plans to combine income tax and national insurance. Relative to other countries, our tax burden on employers hiring average earners remains low. The UK will remain below the OECD average and the third lowest in the G7, below France, Italy, Germany and Japan.

The noble Lord, Lord Jackson of Peterborough, asked about the impact of these changes on the public sector. We have set aside funding to protect the spending power of the public sector, including the NHS, from the direct impact of the changes, totalling £4.7 billion next year, rising to £5.1 billion in 2029-30. We are now working with departments to ensure that this funding is allocated appropriately, and specific allocations will be set out in due course.

In answer to the noble Lord, Lord Bruce of Bennachie, the Barnett formula will apply in the usual way. My right honourable friend the Chief Secretary to the Treasury is in regular contact with the Scottish Government on funding, including on the application of the Barnett formula.

Some noble Lords, including the noble Baronesses, Lady Kramer and Lady Neville-Rolfe, and the noble Lords, Lord Scriven and Lord Sharkey, spoke about the impact of the Bill on GPs, dentists and pharmacists. As the noble Lords will know, every year, the Government consult with each sector about both what services they provide and the money that providers are entitled to in return under their contracts. As in previous years, this issue will be dealt with as part of that process. The Department of Health and Social Care will shortly confirm funding for GPs, dentistry and pharmacy.

The noble Baroness, Lady Kramer, and the noble Lords, Lord Forsyth of Drumlean, Lord Scriven, Lord Udny-Lister and Lord Sharkey, asked about adult social care providers. The Government are providing a real-terms increase in core local government spending power of 3.5% in 2025-26. To support social care authorities to deliver key services, we also announced a further £200 million for adult and children’s social care at the provisional local government finance settlement last month. This will be allocated via the social care grant, bringing the total increase of this grant in 2025-26 to £880 million, meaning that up to £3.7 billion of additional funding will be provided to social care authorities in 2025-26.

Several noble Lords—including the noble Baronesses, Lady Porter of Fulwood, Lady Bray of Coln, Lady Sater and Lady Neville-Rolfe, the right reverend Prelate the Bishop of Southwark and the noble Lord, Lord Blackwell—focused on the impact on charities, including hospices. We are supporting the hospice sector with a £100 million boost for adult and children’s hospices, to ensure that they have the best physical environment for care, and £26 million revenue to support children and young people’s hospices. More widely, the Government provide support for charities, including hospices, via the tax regime, which is among the most generous of anywhere in the world. Tax reliefs for charities and their donors were worth just over £6 billion for the tax year to April 2024.

The right reverend Prelate the Bishop of Southwark asked about listed places of worship. The outcome of this programme is currently being assessed by the DCMS, as it finalises its financial allocation for 2025-26. The right reverend Prelate also asked about SEN transport. In the Budget, the Government announced £2 billion of new grant funding for local government in 2025-26. This includes £515 million to support councils with the increase in employer national insurance contributions, which covers special educational needs home-to-school transport schemes.

The noble Baronesses, Lady Kramer and Lady Neville-Rolfe, asked about childcare and the impact on the rollout of the expanded entitlement. Early years providers play a crucial role in driving economic growth, which is why we have committed to open 3,000 new school-based nurseries in this Parliament. At the Budget, the Chancellor announced that total funding will rise to over £8 billion in 2025-26 to support providers. On top of this, last month, the Department for Education confirmed an additional £75 million to help the sector expand next year, and a further £25 million to support childcare for disadvantaged children through the early years pupil premium.

The noble Baroness, Lady Sater, asked when the impact assessment will be published. The tax information and impact note was published on 13 November, alongside the legislation when it was introduced. The latest forecasts for tax revenues were published alongside the Office for Budget Responsibility’s October Economic and Fiscal Outlook.

Many noble Lords—including the noble Baroness, Lady Neville-Rolfe, the noble Lords, Lord Macpherson of Earl’s Court, Lord Forsyth of Drumlean, Lord Londesborough, Lord Ahmad of Wimbledon and Lord Mackinlay of Richborough, and the right reverend Prelate the Bishop of Southwark—focused on the wider macroeconomic impact of the Bill. As I said in my opening speech, not to act was not an option. The choices we have made were the only route to putting the public finances back on a stable path while protecting working people and rebuilding public services. The economic data we have seen in recent months is disappointing. In particular, the recent growth figures show the sheer scale of the challenge we face, and the noble Lord, Lord Horam, set out the dire inheritance that we faced on growth.

The fact is that there would have been far greater cost to continuing with the irresponsibility and instability that has been a near-constant feature of the past 14 years—from the chaos of Brexit and the disastrous deal that followed, which reduced GDP by 4%, through to the Liz Truss mini-Budget that crashed the economy and devastated family finances. Let us remember that the Office for Budget Responsibility has also been clear that, with particular reference to our capital investments, the Budget will increase the size of the economy in the long term.

The noble Lord, Lord Blackwell, rightly identified the problem of inactivity, which is higher than it was before the pandemic. He rightly identified the issues in the benefits system that contribute to that. The Government will bring forward proposals in this area in the coming months. The noble Lord also asked about public sector productivity. Unlike the previous Government, we have introduced a 2% productivity target for all government departments and have said that above-inflation pay awards will be affordable only if they can be funded from improved productivity.

The noble Baronesses, Lady Neville-Rolfe and Lady Moyo, spoke about the impact on inflation. The independent Office for Budget Responsibility says that it expects inflation to remain close to the 2% target throughout the forecast period. This is of course very different from the previous Parliament, when inflation peaked at 11.1% and was above target for 33 consecutive months, and when mortgages rose by an average of £300 a month following the Liz Truss mini-Budget.

The noble Baronesses, Lady Neville-Rolfe and Lady Noakes, and the noble Lords, Lord Howard of Rising, Lord Elliott of Mickle Fell and Lord Altrincham, spoke about employment. The Office for Budget Responsibility’s October forecast, which takes into account all tax measures announced in the Budget, forecasts that the unemployment rate will now fall to 4.1% next year and remain low until 2029. It also expects the number of people in employment to rise by 1.2 million over the course of this Parliament. As I have said to the noble Lord, Lord Elliott of Mickle Fell, on previous occasions, we remain committed to the 80% employment ambition.

The noble Baroness, Lady Neville-Rolfe, asked about the impact of this Bill on living standards. As noble Lords will be aware, the previous Parliament was the worst for living standards ever recorded. The Office for Budget Responsibility’s forecast shows that real household disposable income will increase in real terms every year over the course of this Parliament.

The noble Lord, Lord Forsyth of Drumlean, and the noble Baroness, Lady Noakes, asked about the impact of the Bill on wages. The independent Office for Budget Responsibility expects real wages to increase by 3% over the next five years.

This Bill also serves another key purpose: to fix our broken NHS and put an end to over a decade of underinvestment, neglect and inequality, as my noble friend Lady O’Grady of Upper Holloway said. That is because this Government inherited not only broken public finances but an NHS experiencing the worst crisis in its history. It is for this reason that the Budget included extra investment of £25.7 billion for the NHS over this year and next—investment that is possible only because of the measures in this Bill.

This Government had to take some very difficult decisions, reflected in the Bill we have debated today; not decisions we wanted to take, but necessary decisions to clear up the mess we inherited. Some noble Lords have today argued otherwise. The noble Baroness, Lady Neville-Rolfe, set out her position eloquently, but I did not hear a single alternative proposal. What is her alternative—that we should have ignored the black hole in the public finances? That is the path of irresponsibility and a repeat of the path chosen by the Liz Truss mini-Budget. That is not the path chosen by this Government. Yes, it was a significant Budget, on a scale commensurate with the challenging inheritance that we faced.

I recognise that the measures in this Bill involve asking some businesses to contribute more. However, as a result, and made possible only by the measures contained in this Bill, we have now wiped the slate clean, creating a platform of stability in the public finances. In doing so, and in contrast to the previous Government’s choice to freeze income tax thresholds, we have protected working people, keeping our manifesto commitments not to raise their income tax, their national insurance, or VAT. Again, as my noble friend Lord Eatwell pointed out, the noble Baroness, Lady Neville-Rolfe, said that this was the wrong tax to raise, but gave no detail about what other taxes she would raise. Would she have raised taxes on working people instead? The noble Lord, Lord Forsyth, at least suggested taxing some pensioners more, but from the Official Opposition there simply is no plan.

We have made historic new investment in our NHS and begun to put an end to years of underfunding and neglect. The choices that we have made to repair the public finances, protect working people and invest in Britain’s future are the only responsible choices in the circumstances that we faced. None of these things would be possible without this Bill. This Government were elected on a mandate to fix the foundations of our economy, and that is exactly what we will do. The Bill delivers on that mandate and provides a foundation of stability upon which we will now build long-term sustainable growth so we can rebuild our public services and make working people better off.

Baroness Neville-Rolfe (Con)

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My Lords, I thank the noble Lord, Lord Scriven, for tabling these amendments and others who have spoken, particularly my noble friend Lord Randall, who supported the amendments highlighting the damage to smaller businesses. I very much share his view.

This has been an interesting discussion and it has brought out how unjust the proposals in the Budget for national insurance were. The amendment rightly draws attention to the problems created across the health sector, all of which we will discuss again in detail on other groups. “Stark” was the rather good word used by the noble Lord, Lord Scriven. As we heard at Second Reading, there are appalling consequences for those dealing with some of the most tragic services, including hospices and the transport of those with special educational needs. There will also be an immense strain on care homes, GPs, dentists and pharmacies—mostly small operations employing a number of part-time and low-paid staff. That will seriously impact on the health of the NHS.

What is so unfair is that the public sector is being compensated for the extra costs. That is in contrast to those carrying out public good in the private sector, which, incidentally, we know is more productive. For example, I have been amazed by the industry of family-run pharmacies, which helped so much during Covid and are asked to do more and more year by year. They are having to deal with the treble whammy of NICs, the national minimum wage rises—especially for the young—and the prospect of the Deputy Prime Minister Angela Rayner’s proposals for new employment legislation.

As I highlighted at Second Reading, many in the health sector say that they will be forced to reduce services and limit headcount. For example, we heard from the noble Lord, Lord Scriven, about the increased cost of social care faced by the independent care providers—I think he talked about £900 million; I had a figure of £940 million—which simply dwarfs the £600 million support rightly included in the Budget to help the sector. If the Government recognise that this tax is not sustainable for the public sector, why are they unable to apply that same logic to sectors that provide public services? These are not big businesses. They provide a critical service for the people and, if they are unable to do so, that will add to the pressure on the NHS. The noble and learned Lord, Lord Hope, gave a good example of the Cyrenians in Scotland and my noble friend Lord Forsyth rightly mentioned hospices, as I think everybody will do throughout this Committee.

Baroness Neville-Rolfe (Con)

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My noble friend makes an excellent point. It is a question of the dynamics. I know, having once been a Treasury Minister, that dynamics always worry it. But the fact of the matter is that, if we can get things done and get people out of hospital quicker, as my noble friend suggests, that would make a real difference.

I feel that the proposals that we are faced with for hard-working businesspeople and for social enterprises are a huge slap in the face. They are being discussed on a day when unemployment is rising and job opportunities are falling. I believe that that reflects the impact of the £23.8 billion hit on employers’ national insurance. It is a veritable jobs tax and the gloom that the Government have admitted for the first six months of their tenure has not helped. That is why my noble friend Lord Forsyth was right to regret that we were debating this not on the Floor of the House but in Grand Committee. I hope that none the less we will attempt to give the Bill proper scrutiny here, because if we do not, that would be a big failing.

In that respect, one of the things that annoys me most is the lack of a proper impact assessment. We have a very inadequate impact note, which was published on 13 November. That gives a run of the yield to the Exchequer year by year but does not break it down into the three categories: the costs of the increase to 15%, the lowering of the threshold, which is extremely regressive, and the welcome benefit from the rise in the employment allowance—and indeed anything else included in the figure of £23.8 billion, which was by far the biggest change in the Budget and which is why so many people are here today worrying about the Bill.

There is also an unexpected dynamic effect highlighted by the OBR, which means that, following the reduction in wages, profits and employment, this tax will raise over £5 billion less than the Treasury forecast, raising £18.3 billion in 2025-26 and nearly £10 billion less than the forecast in 2026-27. So there is a great deal of pain for wealth creators and effective employers, but not a lot of gain.

I cannot see how we can scrutinise the Bill without proper impact information, and I look forward to a proper discussion during the debate on Amendment 13. However, I think the Committee would also like to have authoritative, disaggregated figures on the impact on the health and care sectors under discussion today. That is why I am raising this now, and I hope the Minister will consider what he can do to assist the Committee so that we can have proper understanding and proper scrutiny. We want to do the right thing here.

It is against that sombre background that I shall speak to my Amendments 38 and 42, which have been grouped with this amendment. They seek to increase the employment allowance in the primary care sector. My purpose is to probe the Government’s openness to helping the sector a bit more through an increase. Perhaps the Minister could clarify the facts. The BMA has said that, as public authorities, they are unable to access support via the increased allowance and the noble Lord, Lord Scriven, made a similar point in relation to dentists. The Committee needs to know whether that is true.

Mine is a probing amendment and the first of several relating to Clause 3. To reply to the noble Lord, Lord Eatwell, as someone who has tried to reform taxes in the past, originally with the help of my noble friend Lord Heseltine as part of the deregulation initiative, it is very difficult to get simplification of the tax system. That is one reason why I have tabled an amendment relating to the employment allowance, because it comes at the matter in a different way.

Primary care is vital to the Government’s plans to improve the NHS. My fear is that the NICs changes, especially the lowering of the threshold and with part-time working so common in primary care, will lead to further problems in GP surgeries, increasing chronic conditions and waiting times for appointments across the NHS, and having the perverse effect that I think we will come back to as this Committee progresses.

The Financial Secretary to the Treasury (Lord Livermore) (Lab)

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My Lords, it is a great pleasure to respond to the debate on this first group of amendments, and I thank all noble Lords who have contributed so far. It is also a pleasure to see so many noble Lords in the Grand Committee. I know that some noble Lords are unhappy about being here, but the noble Baronesses, Lady Kramer and Lady Neville-Rolfe, in particular, and I know what it feels like to be in this Grand Committee on our own, so it is, at least, I have to say, nice to be popular.

Before I address each of the amendments in this group, I shall very briefly set out at the outset the context in which the Budget decisions contained in the Bill were taken. I would like to do so since this context is why we are here today and underpins the debates that we will have, not just on this group of amendments, but on all further groups. As noble Lords will know, the Government inherited three distinct challenges: the need to repair the public finances; the need to rebuild public services; and the need to protect working people.

The most pressing of these challenges was the need to repair the £22 billion black hole in the public finances as a result of a series of commitments made by the previous Government which they did not fund. The previous Government also made no provision for costs that they knew would materialise, including £11.8 billion to compensate victims of the infected blood scandal and £1.8 billion to compensate victims of the Post Office Horizon scandal. These pressures have to be funded, and it falls to this Government to do so.

Noble Lords will also know that the country inherited acute problems in public services, with NHS waiting lists at record levels, children in Portakabins as school roofs crumbled around them and rivers filled with polluted waste. Yet since 2021, there had been no spending review and no detailed plans for departmental spending were set out for beyond this year. Working people had also lived through a cost-of-living crisis, with inflation peaking at 11.1% and remaining above target for 33 consecutive months. Combined with the previous Government’s decision to freeze income tax thresholds—

Lord Livermore (Lab)

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Yes, I am. I said that I wanted to set out some context at the outset. I know that the noble Baroness may not like that context, but it is why we are here today, after all.

That meant taking some very difficult decisions on welfare, spending and tax, including those in the Bill. I recognise that this involves asking some businesses to contribute more and that the impacts of the Bill will be felt beyond businesses. These are difficult decisions—not ones we wanted to take—and I understand and respect the very legitimate concerns that have been raised, both during today’s debate and outside this House. Crucially, however, and I may find myself making this point repeatedly during these debates, noble Lords who oppose the measures in the Bill must be clear. Do they propose instead more borrowing, lower spending or alternative tax-raising measures? That is the key question at the heart of these debates.

Lord Livermore (Lab)

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I think the noble Lord did in his contribution; I remember him raising the minimum wage, for example. I do not think that is directly related to the amendment. We are all absolutely entitled to set out some contextual points in the points that we raise.

Let me turn directly to the amendments in the name of the noble Lord, Lord Scriven, the noble Baroness, Lady Kramer, and the noble Lord, Lord Randall of Uxbridge, which seek to exclude care providers, NHS GP practices, NHS-commissioned dentists, NHS-commissioned pharmacists, charitable providers of health and care, and those providing hospice care, from the new rate and threshold for employer national insurance. I say at the outset that I have listened very carefully to the points raised by all noble Lords during these debates and taken on board what has been said.

As I said, the difficult decisions the Government took in the Budget last year, including those in the Bill, were necessary to repair the public finances, protect working people and rebuild our public services. As a result of the measures in the Bill and wider Budget measures, the NHS will receive an extra £22.6 billion over two years to deliver 40,000 extra elective appointments a week. This investment is dependent on the Bill.

As noble Lords will know, the Government have already set out that they will provide support for departments and other public sector employers for additional employer national insurance costs. But independent contractors, including primary care providers, social care providers, charities, including hospices, and nurseries will not be supported with the costs from these changes. This follows the precedent for such national insurance measures. It is exactly the same as was the case with changes to employer national insurance rates under the previous Government’s plan for the health and social care levy.

Primary care providers—in general practice, dentistry, pharmacy and eye care—are important independent contractors, who provide nearly £20 billion-worth of NHS services. Every year, the Government consult each sector about what services it provides and what money it is entitled to in return under its contract. As in previous years, the issues we are debating today will be dealt with as part of that process.

The Government have announced a proposed £889 million uplift for general practice in 2025-26 and have set out the proposed areas of reform that will help us to deliver on our manifesto commitments. This is the largest uplift to GP funding since the beginning of the five-year framework; it means that we are reversing a recent trend, with a rising share of total NHS resources going to general practice. We have started consulting the General Practitioners Committee of the British Medical Association on the 2025-26 GP contract in England. We will consider a range of proposed policy changes. These will be announced in the usual way, following the close of the consultation later this year.

Turning to adult social care, the Government have provided a real-terms increase in core local government spending power of 3.5% in 2025-26, including £880 million of new grant funding provided to social care. This funding can be used to address the range of pressures facing the adult social care sector. Finally, we are also supporting the hospice sector, with a £100 million boost for adult and children’s hospices to ensure that they have the best physical environment for care, and £26 million of revenue to support children and young people’s hospices.

I turn to the amendments tabled by the noble Baroness, Lady Neville-Rolfe, and the noble Lord, Lord Altrincham, seeking to increase the employment allowance for employers in the primary care sector and for dental practices. Currently, small businesses with national insurance bills of £100,000 or less receive a £5,000 employment allowance, which means that they can deduct £5,000 from the total national insurance they pay on their employees’ wages. Under the proposals in the Bill, the employment allowance will increase to £10,500 from April 2025.

The Bill also expands the employment allowance to all eligible employers by removing the £100,000 eligibility threshold. This will simplify and reform employer national insurance contributions so that all eligible employers now benefit. Increasing the employment allowance for specific sectors, including just the primary care sector and dental practices, as my noble friend Lord Eatwell said, would add additional complexity to the tax system and would be incoherent, given the wider changes to simplify the employment allowance made in the Bill.

These changes would also create additional costs. How would these additional costs be met—through more borrowing, lower public spending or additional revenue-raising measures? If so, where would these additional taxes fall? If the Government were unable to meet these additional costs, we would be unable to provide the extra £22.6 billion for the NHS.

In the light of the points I have made, I respectfully ask noble Lords to withdraw or not press their amendments.

Baroness Neville-Rolfe (Con)

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I asked a question which, in relation to dentists, echoed by the noble Lord, Lord Scriven. It was about the definition of “public authorities” and how that affects payment of the employment allowance. I raised it at Second Reading as well. It would be helpful to have a judgment on that point.

Lord Livermore (Lab)

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The definition is set as it was previously. We have no intention of changing that definition.

Baroness Neville-Rolfe (Con)

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To be clear, that means these bodies will not have access to the employment allowance if they are public authorities. It would be helpful to know what the costings of that look like. I know that the Minister does not want to make any changes, but we are trying to understand what the numbers are here and in some minor areas, such as hospices. The Minister says that hospices will have extra money, but they will also have to pay a lot extra in national insurance. We are trying to understand all that to give him helpful feedback on the Bill; obviously, we are as keen as he is for it to succeed.

Lord Livermore (Lab)

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I would be very happy to look into the specific point made by the noble Baroness. I will feed back in my responses on a subsequent group.

Baroness Neville-Rolfe (Con)

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I did not say I wanted the Bill to go through. I agree that that it is a jobs tax, as the noble Baroness said. What I accept is that the Government have a large majority in the other House, and what I am trying to do in this House is to have a proper discussion on the Bill with a view, perhaps, to amending it and persuading the Government that they have made some mistakes and that we can improve the Bill.

Lord Livermore (Lab)

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My Lords, I am very grateful to all noble Lords who have spoken in this debate. I will address the amendments tabled by the noble Baronesses, Lady Smith of Newnham and Lady Kramer, and the noble Lord, Lord Randall of Uxbridge, which seek to exempt veteran salaries from the employer national insurance changes. These amendments would create a different employer national insurance rate and threshold set at the current levels for salaries of veterans. The Government of course recognise the huge contributions made by the UK Armed Forces and veterans in this country, and I completely understand the intention behind these amendments.

As some noble Lords have mentioned, there is already an employer national insurance relief available for the earnings of veterans, meaning that employers are not required to pay any national insurance contributions up to £50,270 for the first year of civilian employment. At the Budget, the Government decided to extend the national insurance contributions relief for employers who hire veterans to support veterans in their first year of civilian employment for a further year. Despite the challenging fiscal inheritance this Government face, this means we are maintaining this relief and it is not changing as a result of this Bill.

Further to this, we have more than doubled the employment allowance to £10,500, meaning that more than half of businesses with national insurance liabilities either gain or see no change next year. Businesses and charities will still be able to claim employer national insurance reliefs, including those for under-21s and under-25 apprentices, where eligible.

On veterans more widely, this Government have taken action to demonstrate our commitment to renew this nation’s contract with those who have served. We have awarded £3.7 million in veterans housing grants, veterans will be exempt from the local connection test for social housing in England and veteran cards are now accepted ID for elections. We are progressing veterans support programmes at pace, including a centralised referral pathway designed to support veterans who are homeless or at risk of homelessness, an NHS mental health specialist service designed to help veterans and their families in England and an NHS physical health specialist service designed to help veterans and their families in England.

Before I sit down, I shall also address the questions raised by the noble Baroness, Lady Neville-Rolfe, about dentists, which I was unable to answer during the debate on the previous group. As I said, the criteria have not changed, including the exclusion of those doing 50% of their work in the public sector. The eligibility is down to individual businesses, and the proportion of their work in the public sector may vary year to year. All charities can claim, including hospices.

Baroness Neville-Rolfe (Con)

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My point was in relation to the points made by the BMA and the dentists. There are two separate points. It is not in this group, but it might be as well to have a discussion on this so that we can be clear about this and on the impact on these important areas for the future of health in the NHS.

Lord Livermore (Lab)

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The noble Lord, Lord Altrincham, set out in his speech that it was extended year by year under the previous Government. This Government have done the same thing and have extended it for a further year.

On the basis of what I have set out, I hope the noble Baroness will feel able to withdraw her amendment.

Baroness Neville-Rolfe (Con)

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My Lords, I thank all noble Lords for their contributions, particularly the noble Baroness, Lady Kramer. I regret that the noble Lord, Lord Bruce, is not in his place and associate myself with the request for some information about Scotland.

The amendments address a matter of real importance, which is the impact of the measures on part-time and seasonal workers, SMEs, hospitality and tourism. The noble Baroness, Lady Kramer, is right about the importance of part-time working in tourism, pubs, restaurants and events. That sector is sometimes neglected in public policy-making, but it is vital to growth.

Baroness Neville-Rolfe (Con)

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My Lords, on growth, and indeed on the hospitality industry, it is particularly good to have the practical experience of the noble Lord, Lord Londesborough. I agree with him that it would be helpful to understand today’s employment decline a little better in the Committee.

According to the ONS, there are 8.4 million people working part-time in the UK, which is approximately one-quarter of the workforce. They work in large and small firms and include many young people, students and carers, as well as disproportionate numbers in hospitality, tourism and retail. I know from my days at Tesco how important part-time workers are to big employers as well as small employers, and, in particular, to 24/7 businesses—retail is a 24/7 business. That includes a lot of employment of elderly people. Also, as was said, part-time workers are not only the lowly paid—I had several part-time directors working for me—and good employers offer proper training to their part-time teams. It is an extremely important part of the economy.

While the rise in the national insurance rate to 15% will no doubt hit part-time workers, it is the huge reduction of the threshold to £5,000 from £9,100 that will have the most detrimental consequences for those who work part-time. It is yet another blow to the sector, alongside the increase in the minimum wage that comes into force in April.

As a result, a company that employs a part-time worker over the age of 21 who works just eight hours a week on the minimum wage—I think the noble Baroness, Lady Kramer, said it was down from 14 hours a week —will be hit with this jobs tax for the first time, and the hospitality sector will be disproportionately affected. I think Kate Nicholls used the word “eye-watering”. The industry has warned that the measures announced in the Bill will cost it £1 billion overall. My noble friend Lord Ahmad quoted that figure as well. He is right about the adverse consequences of this and the need for consultation on such changes. How can you adjust your business model and be ready if you do not know what is coming?

It is really difficult for these companies. For the first time, they will have to pay tax on the wages of thousands of part-time hospitality workers. UKHospitality has estimated that a company employing a part-time worker doing 15 hours a week will see a 73% increase in its national insurance bill. It goes without saying that business will have to make tough decisions, as employing part-time workers is soon to become much more expensive. The trouble is that part-time work provides a flexible form of employment for so many—I have mentioned students and carers, but parents are also affected. It can be very useful in juggling what families do. These are people who rely on the flexibility of part-time contracts and might not otherwise be able to work at all.

Can the Minister tell the Committee what assessment the Government have made of the effect of the changes enabled by the Bill on part-time workers? Perhaps he could also comment on the levels of employment within the hospitality sector and how he sees that panning out. How do the Government intend to support industries that will be most impacted by these changes to national insurance contributions? How can he give them hope and how can we be sure that they continue to play their part in growth? It is difficult and we need to try to find some comfort.

Lord Livermore (Lab)

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My Lords, I am grateful to all noble Lords for their contributions to this debate. I will address the amendments and the new clause proposed by the noble Baroness, Lady Kramer, and the noble Lords, Lord Bruce of Bennachie and Lord Londesborough. These seek to set a reduced rate of employer national insurance for part-time workers at 7.5%. As I have said before, the difficult decisions in the Bill were necessary to repair the public finances, protect working people and invest in Britain’s future. This amendment would reduce the revenue raised from the Bill and therefore prevent the Government achieving those objectives. In policy terms, reducing the rate of employer national insurance for part-time workers would create additional complexity in the tax system and distortions in the labour market.

The Government have taken action to support those on lower pay by increasing the national minimum wage, which I was interested to hear the noble Baroness, Lady Neville-Rolfe, describe as a blow. I think that will be interesting to those on lower pay. We have also introduced important protections for workers as part of the plan to make work pay.

Employers will also continue to benefit from employer national insurance reliefs, including for hiring under-21 and under-25 apprentices, where eligible.

The noble Baroness, Lady Kramer, also spoke about umbrella companies and mini umbrella companies. I will just note that the Government are committed to closing the tax gap and have announced, as part of the closing the tax gap package in the Budget, that we will bring forward measures to tackle non-compliance in the umbrella company market, including mini umbrella company fraud.

The noble Baroness, Lady Bennett, spoke specifically about equalities impacts. I can say that they were fully considered and we are confident that they are set out in the tax information impact note that she referred to.

Baroness Neville-Rolfe (Con)

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Before the noble Lord sits down, while no impact assessment is perfect, I think it is very difficult to call this note of 13 November detailed. The only numbers it gives are the global numbers, the £23.7 billion et cetera, and the run, and there are a few textual comments about equalities and things. What it does not do is even break down the costings into the different areas where different measures are being taken. It is not a detailed assessment; it is described, rightly, as an impact note. We will return to this, because we think that transparency and understanding the impact of policies is really helpful, including to His Majesty’s Government.

Lord Livermore (Lab)

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My Lords, in answer to the point made by the noble Baroness, Lady Neville-Rolfe, as I have said, the Government and the OBR have already set out the impacts of the policy change. The information provided is in line with the approach for other tax changes and the Government do not intend to publish additional assessments.

Lord Livermore (Lab)

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HMRC has provided a tax information note, as it does for all similar policy changes. The Government have no intention of publishing additional assessments.

Lord Livermore (Lab)

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I believe that that note is in line with what we have done for similar policy changes.

Lord Livermore (Lab)

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My Lords, I am grateful to all noble Lords. I will address the amendments and proposed new clauses proposed by the noble Baronesses, Lady Grender and Lady Kramer, and the noble Lords, Lord Storey, Lord Sharkey and Lord Randall of Uxbridge, which seek to exclude early-years settings, universities, charities, housing associations and town and parish councils from the new employer national insurance rate. I have listened very carefully to all contributions made in this debate and, of course, I understand the points raised.

The Government recognise that early-years providers have a crucial role to play in driving economic growth and breaking down barriers to opportunity. We are committed to making childcare more affordable and accessible. That is why, in our manifesto, the Government committed to delivering the expansion of government-funded childcare for working parents and to opening 3,000 new or expanded nurseries through upgrading space in primary schools to support the expansion of the sector.

Despite the very challenging circumstances the Government inherited, in the Budget in October the Chancellor announced significant increases to the funding that early-years providers are paid to deliver government-funded childcare places. This means that total funding will rise to more than £8 billion in 2025-26. It is very likely that many private nurseries will be able to claim the employment allowance, as receiving public funds does not necessarily mean that work is of a public nature, and they should check HMRC guidance.

On universities, I of course recognise the great value—

Lord Livermore (Lab)

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I totally understand the points that the noble Lord is making but, as I said at the outset, there are specific reasons for the Bill. Those decisions are difficult decisions, but they are necessary decisions.

On universities, I recognise the great value of UK higher education in creating opportunity, being an engine for growth in our economy and supporting local communities. The Budget provided £6.1 billion of support for core research and confirmed the Government’s commitment to the lifelong learning entitlement, a major reform to student finance that will expand access to high-quality, flexible education and training for adults throughout their working lives.

The Secretary of State for Education has since confirmed that maximum fees will rise in the academic year 2025-26 for the first time since 2017, from £9,250 to £9,535 for a standard full-time undergraduate course. This was a difficult decision which demonstrates that the Government are serious about the need to put our world-leading higher education sector on a secure footing.

I have previously set out the Government’s position on additional impact assessments.

I turn to charities and housing associations. The Government recognise the need to protect the smallest businesses and charities, which is why we have more than doubled the employment allowance to £10,500, meaning that more than half of all businesses, including charities, with national insurance liabilities will either gain or see no change next year.

The Government also provide wider support for charities via the tax regime. The UK’s tax regime is among the most generous in the world, with tax reliefs for charities and their donors worth just over £6 billion for the tax year to April 2024.

More broadly, the Government deliver a number of grant and support programmes, including the community organisations cost of living fund last year and the ongoing social enterprise boost fund. Across 2023-24, the National Lottery community fund made grant awards totalling more than £900 million, 84% of which were under £10,000, with the majority supporting grass-roots organisations.

Regarding housing associations, the Government have announced major steps towards delivering a once-in-a-generation increase in social housing, including supporting the housing associations that deliver this. We are consulting on long-term social rent settlements to provide housing associations with the long-term stability they need to deliver crucial services. I am afraid that I cannot comment on the specific case that the noble Baroness, Lady Grender, set out, as I do not have all the information about it, but I am of course more than happy to discuss with her at any time. On the wider points, any exemptions, carve-outs or delays would of course undermine the fundamental purpose of the Bill, which I have set out before.

Finally, Amendment 8, tabled by the noble Baroness, Lady Kramer, and the noble Lord, Lord Storey, seeks to exclude town and parish councils from the employer national insurance rate change. The Government have no direct role in funding parish and town councils and therefore do not intend to provide further support for the employer national insurance changes. This is in line with the approach taken for previous national insurance policy changes, including the previous Government’s health and social care levy.

All these proposed amendments would of course come at a cost. They would necessitate either higher borrowing, lower public spending or new revenue-raising measures. That is not what this Government intend to do. For the reasons I have set out, I respectfully ask noble Lords not to press their amendments.

Baroness Neville-Rolfe (Con)

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My Lords, I rise to move Amendment 6 in my name and to speak to my Amendments 23 and 48, all on small business—a subject dear to my heart, as noble Lords will recall from our debates on the Procurement Act in the last Parliament, mostly in this very Room.

Small business is at the entrepreneurial heart of the economy. We need a constant stream of start-ups for an economy that is dynamic. The amount of regulation on such businesses is already discouraging. My own findings are that the imposition of additional employer NICs is leading some businesses towards despair, with more closed shops on the high street and busy insolvency practitioners. Others are not setting up. Their customers are affected by the chill created by the Budget and the enormous NICs hit in particular, which has a multiplier effect on confidence.

I acknowledge that the increase in the employment allowance is helpful and I congratulate the Federation of Small Businesses on its work on this with the Treasury and DBT. However, more needs to be done to drive growth. I believe that easing the strain of NICs on SMEs could play an important part.

My Amendment 6 would exempt micro-businesses with an annual turnover of less than £1 million from this jobs tax. I have tabled this amendment because I want to understand whether the Government would consider an exemption that would have a relatively low impact on the revenue that the Treasury receives from this policy. To exempt such small businesses would not come at a great cost to the Treasury, yet it would have a big impact on the businesses that it would protect and on attitudes to the Government’s plans. The Financial Conduct Authority defines “small businesses” as companies with an annual turnover of less than £1 million—hence my choice for the threshold. I add that even many of these businesses may not survive recent tax rates. The Government will be failing in their promise, I fear, to be the most pro-business Government ever.

My proposal would be a modest step in the right direction and would reduce the negative knock-on effect of the NICs changes, in terms of jobs, shop and business closures and the higher prices that follow reduced competition. You see that effect, when a couple of coffee shops close, on the price of your latte.

I was interested to hear the Chancellor this morning saying that

“growth isn’t simply about lines on a graph. It’s about the pounds in people’s pockets. The vibrancy of our high streets”.

Chance would be a fine thing for the hard-working domestic SMEs that I am talking about.

Amendment 23 in my name seeks to increase the per-employer threshold at which employers begin paying national insurance on employees’ earnings, from £5,000 to £7,500—sort of halfway. We know that Clause 2 is the most punitive part of the Bill, hitting small businesses and social enterprises hardest. As the OBR acknowledges, this jobs tax will have the indirect effect of stifling wages, as employers look to offset these increased costs.

Amendment 48 would increase the employment allowance for small businesses to £20,000. The increase in the allowance is very welcome, as I have said, as is the lifting of the EU-based limit on eligibility—ironically, a new Brexit freedom, on which I congratulate the Minister. However, many small businesses have more than three or four people, or so, which means that the increase in the allowance will be less than the additional NICs charge. We should debate in Grand Committee, as we did on procurement, how to improve matters.

I would be delighted to be able to congratulate the Minister on an entrepreneurial step by increasing the allowance and removing the threat and hassle of NICs for more employers. I know that he shares my passion for easing barriers to growth and I see this as a new barrier that he could mitigate.

I very much look forward to hearing my noble friends Lady Noakes and Lord Londesborough and I am sorry that my noble friend Lord Ahmad of Wimbledon cannot be here this afternoon. We all feel the same way about the importance of cherishing the enterprise spirit and will welcome a constructive discussion on what more can be done to ease the pressure on small businesses. The Chancellor’s speech today and the long-term nature of most of her growth drivers strengthen the case for a concession on this now. I beg to move.

Baroness Neville-Rolfe (Con)

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That is 10 minutes.

Baroness Neville-Rolfe (Con)

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My Lords, I thank all noble Lords who have contributed to this valuable debate, especially those such as my noble friend Lady Lawlor who have run small businesses. Having heard the concerns from noble Lords across the Committee and from across the sectors, I hope that the Minister will consider these amendments very seriously before we get to Report.

We know that this jobs tax will be bad for small businesses. The Government have not provided sufficient information in the light of all the calls from hard-pressed businesses, so more detailed information is necessary. SMEs are more vulnerable, as the noble Lord, Lord Sharkey, said. Even covenants are at risk, as we heard from my noble friend Lord Leigh. The noble Baroness, Lady Kramer, rightly talked about scale-ups being knocked back because of the problems that they are facing. I was particularly interested to hear from the noble Lord, Lord Londesborough, and to see his amendments. He had some very telling questions based on SMEs and on particular examples. I think that the Minister and the Treasury should properly examine some of his spreadsheets and, indeed, some of the other examples raised today, such as by my noble friend Lord Howard of Rising, who rightly talked about international competitiveness, and my noble friend Lord Blackwell, who made a telling comment about the lower-margin sectors, start-up and scale-up.

It was notable that, in her growth speech today, Rachel Reeves had little to say about small businesses and the difficulty that these NICs changes have placed on them. As my noble friend Lady Noakes said, we are imperilling their success—their survival, even, in some cases—and the scale-ups that we need for growth. I detected a good deal of support for her amendment, so I hope that the Minister will bear that in mind. As I have explained, the Chancellor’s speech strengthens the case for an exemption or a concession to help some or all of our smallest businesses to survive and to thrive. I very much hope that the Minister will be able to respond positively.

The Financial Secretary to the Treasury (Lord Livermore) (Lab)

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My Lords, I am grateful to all noble Lords for their contributions during this debate. I turn first to the amendments tabled by the noble Baroness, Lady Neville-Rolfe, and the noble Lord, Lord Altrincham, which seek to exempt from the employer national insurance rate rise employers with an annual turnover of less than £1 million, and the amendments by the noble Lord, Lord Londesborough, the noble Baronesses, Lady Neville-Rolfe and Lady Kramer, seeking to limit or remove the reduction in the secondary threshold by business size. Clearly, these amendments would have cost implications for this Bill, necessitating either higher borrowing, lower spending or alternative revenue-raising measures.

I agree very much with the noble Baroness, Lady Neville-Rolfe, and the noble Lord, Lord Sharkey, that small businesses are the heart of our economy. The Government are aware of the pressures on small businesses, which is why we are taking action as part of this Bill to protect the smallest businesses by increasing employment allowance from £5,000 to £10,500. This means that, next year, 865,000 employers will pay no national insurance at all. More than half of employers will see no change or will gain overall from this package, and employers will be able to employ up to four full-time workers on the national living wage and pay no employer national insurance.

The Government have also taken steps to strengthen small businesses’ ability to invest and grow. This includes freezing the small business multiplier, permanently reducing business rates for retail, hospitality and leisure properties from 2026-27 and publishing the Corporate Tax Roadmap to provide stability and certainty within the tax system for businesses across the economy.

I should also note, as my noble friend Lord Eatwell said, that creating new thresholds or rates based on the size of a business would introduce distortion and additional complexity into the tax system, and could disincentivise small businesses from growing by creating a cliff edge in the tax system.

I turn now to the amendment tabled by the noble Baroness, Lady Neville-Rolfe, and the noble Lord, Lord Altrincham, seeking to limit the reduction in the secondary threshold to £7,500 rather than the proposed £5,000. A smaller reduction in the secondary threshold, as is proposed by this amendment, would not raise the level of revenue required to fix the foundations and invest in our public services. It would mean higher borrowing, lower spending or alternative revenue-raising measures.

I now turn to the amendment tabled by the noble Baronesses, Lady Noakes and Lady Neville-Rolfe, and the noble Lords, Lord Ahmad of Wimbledon and Lord Howard of Rising, which would prevent commencement until an impact assessment is published for small businesses of various sizes. The revenue raised from the measures in this Bill will enable the Government to repair the public finances while protecting working people and rebuilding our public services, including the NHS. Delaying commencement of this Bill would put this vital revenue at risk.

As I have already noted in the previous session of this Committee and, as the noble Baroness, Lady Noakes, mentioned, an assessment of the policy has already been published by HMRC in a tax information and impact note. As the noble Lord, Lord Londesborough, said, that assessment set out that employers’ national insurance changes

“will impact around 1.2 million employers. Around 250,000 employers will see their Secondary Class 1 NICs liability decrease and around 940,000 will see it increase. Around 820,000 employers will see no change. Overall, more than half of businesses with NICs liabilities next year will either gain or will see no change in their secondary Class 1 NICs liabilities”.

I listened carefully to the specific examples given by the noble Lord, Lord Londesborough. He asked for some specific figures, which I am afraid I am told are not available because the liability is on employers, not employees. As such, the data is not collected in the format that the noble Lord asked for.

Further, the OBR’s Economic and Fiscal Outlook sets out the expected macroeconomic impact of the changes to employer national insurance contributions on employment, growth and inflation. The Government and the OBR have, therefore, already set out the impacts of the policy change. This approach is in line with previous changes to national insurance and previous changes to taxation, and the Government do not intend to provide any further impact assessments.

After the previous session of the Committee, I looked back at comparable tax measures over the past 14 years to check that I was correct in saying that the assessment that we are providing is in line with what was provided on those previous occasions. I found four such measures of an equivalent size: the health and social care levy; the increase in the corporation tax main rate to 25%; the income tax threshold freezes of the previous Government; and the increase in the VAT main rate to 20%. I looked at all those and I am absolutely satisfied that what we are providing on this occasion is, in fact, more information than was provided on any of those occasions. In fact, on the occasion of the increase in VAT to 20%, no impact assessment was published at all.

Having studied those, I am very confident that what we are now providing is absolutely consistent with what previous Governments have provided, in terms of impact assessments, on all previous such equivalent occasions. I do not know whether noble Lords opposite, when they were in government, objected to the impact assessments that were put out on tax measures, but I am very confident that these are absolutely in line with what was put out in the past. As a result, the Government have no intention to provide any further impact assessments.

Baroness Neville-Rolfe (Con)

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On impact assessments, I think I am well known for my requesting them—I even voted against my own Government on one occasion —because they are very important and helpful. I do not think that the Minister has yet answered, although he may go on to do so, the point that my noble friend Lady Noakes made about the effect of adding in the minimum wage to the impact note that was produced. That would probably increase the figures, as she suggested; and cost benefit and transparency are very helpful. We have another amendment on this, and we will return to the charge, but I am very disappointed that there is no willingness to look at the specific examples from the noble Lord, Lord Londesborough, on the technicalities, which seem to merit some attention from the Government. I think that the Government must share our concern that we minimise the effect on small businesses as far as we can, which is why I am trying to be constructive in today’s Committee.

Lord Livermore (Lab)

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I will simply restate my point to the noble Baroness: the approach that we are taking is absolutely in line with the approach taken to previous changes in national insurance and previous changes to taxation, and the Government do not intend to provide further impact assessments.

Lord Livermore (Lab)

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I dispute the noble Lord’s description of the non-dom policy and the impacts that it has had. A tax information and impact note was put out alongside that policy, so we actually did put out an assessment alongside it.

Lord Livermore (Lab)

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We have not changed the policy; we have made the policy easier to use. The policy is absolutely as it was at the Budget, as is the amount of revenue that we are scoring from it. An impact assessment was put out alongside that. My point is that what we are doing on impact assessments, on all the taxes that the noble Lord mentioned, is absolutely in line with what all previous Governments have done on impact assessments. We are content that that is a sufficient amount of information, and we do not intend to put out any further impact assessments.

Finally, I turn to the amendments tabled by the noble Lords, Lord Londesborough and Lord Altrincham, and the noble Baroness, Lady Neville-Rolfe, which seek to increase the employment allowance for small businesses. Again, the proposals in these amendments would create additional costs, necessitating either higher borrowing, lower spending or alternative revenue-raising measures.

The Bill already seeks to protect the smallest businesses and is significantly increasing the employment allowance from £5,000 to £10,500. This means that, next year, 865,000 employers will pay no national insurance at all, and more than half of employers will see no change, or gain overall, from this package. For the reasons I have set out, I respectfully ask noble Lords not to press their amendments.

Lord Livermore (Lab)

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I am grateful to the noble Lord for his follow-up points. As I have said, we are not able to provide him with those figures and that remains the position.

Lord Livermore (Lab)

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I disagree with the noble Lord. The previous Government’s health and social care levy is a very direct precedent.

Baroness Neville-Rolfe (Con)

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I beg leave to withdraw the amendment.

Baroness Neville-Rolfe (Con)

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My Lords, I speak to Amendment 50 in my name, which would increase the employment allowance for farms from £10,500 to £20,000 and help to ease the very real cash-flow problems that many farmers now face. I would like to understand both the cost to the Exchequer and the plans that the Government have to ease pressures on the farming industry. This is vital to increasing self-sufficiency in food in these troubling international times.

I speak with some knowledge of the Wiltshire countryside, where I was brought up and retain a small and partial interest, set out in the register, in a couple of fields, let to a neighbour, on what was our family farm. My father’s business sadly went into insolvency in the 1960s. The farm was sold and the stock auctioned off—a very difficult day. I fear it is something that we may see more of again. As the noble Baroness, Lady Bakewell, said, farming is not a career choice for the faint-hearted.

I am grateful to my noble friend Lord Howard of Rising for tabling Amendment 36, which I fully support. It is intended to ensure that the Government publish a full impact assessment of the effect of this Bill on farms with regard to both the NICs costs and, separately, any offset for the increased employment allowance. Given the difficulties that farmers are facing on inheritance tax, fertiliser tax and the post-CAP changes to support, this is the least that the Government should do.

The noble Baroness, Lady Bakewell, in her compelling assessment of the squeeze on farmers, comes at the issue from a slightly different angle and suggests a review of the impact of the policy change, which is also worth considering. However, we would have to wait six months, by which time decisions on NICs, IHT and the fertiliser tax might be irreversible.

It has been made abundantly clear by now that this Government do not understand the importance of Britain’s farmers. The 2024 Labour Party manifesto claimed:

“Labour recognises that food security is national security”,


yet, since entering into Government, they have demonstrated the opposite. The Autumn Budget included a multitude of measures that will hammer farmers. The changes to agricultural property relief and business property relief could affect 33.5% of all farm holdings in the UK, according to the Treasury’s own figures. The vast majority in terms of numbers are small, family-run farms and, as we have discussed elsewhere, the Government need to think again about the right IHT thresholds.

The Government have also introduced carbon pricing on imported fertilisers through the UK carbon border adjustment mechanism, which will increase the cost of fertiliser that farms depend on to ensure adequate crop yields—up from approximately £25 a tonne to £75 a tonne. They have axed the rural services delivery grant introduced by the previous Government, meaning that rural councils will have less money to tackle the issues facing farms and rural communities. Given the already exorbitant costs facing farms, these measures could lead many to ruin. That goes back to my own experience in the 1960s and the excellent points made in the debate led by my noble friend Lord Leicester in December.

Above all, the proposals are putting a chill on rural communities, which are asking themselves why they elected so many Labour MPs and are writing to them, or getting on their tractors, to explore their discontent.

Lord Livermore (Lab)

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My Lords, I am grateful to all noble Lords who have contributed to this debate. I will turn first to the amendments tabled by the noble Lord, Lord Howard of Rising, and the noble Baronesses, Lady Bakewell of Hardington Mandeville and Lady Kramer, which require impact assessments of this Bill on farms.

The Government, of course, recognise and greatly value the important role played by the farming sector. We carefully consider the impact of all policies, including the changes to employer national insurance. Indeed, as we have previously debated, an assessment of the policy has already been published by HMRC in the tax information and impact note, including impacts on the Exchequer, the economy, individuals, households, families, equalities, businesses including civil society organisations, and details of monitoring and evaluation. Further, the OBR’s Economic and Fiscal Outlook sets out the expected macroeconomic impact of the changes to employer national insurance contributions on employment, growth and inflation. The Government have, therefore, already set out the impacts of this policy change. This approach is in line with previous changes to national insurance and previous changes for taxation, and the Government do not intend to publish further impact assessments.

I now turn to the amendments tabled by the noble Baroness, Lady Bakewell of Hardington Mandeville and Lady Kramer, seeking to exempt the salaries of farmers from the increase in employer national insurance, and the amendments tabled by the noble Baroness, Lady Neville-Rolfe, and the noble Lord, Lord Altrincham, seeking to increase the employment allowance for persons employed on farms. This amendment would reduce the revenue raised from this Bill and require either higher borrowing, lower spending or alternative revenue-raising measures. I also note that creating new thresholds or rates based on the sector of a business would introduce distortion and additional complexity into the tax system.

Despite the difficult fiscal situation, the farming and countryside programme budget has been protected at £5 billion across the across the next two years. This includes the largest ever proportion of the Budget directed at sustainable food production and nature recovery in our country’s history. This will accelerate the transition to a more resilient and sustainable farming sector, support investment in farm businesses and boost Britain’s food security. The Secretary of State for Defra has also set out the Government’s long-term vision to make farming more profitable. This includes reforms such as using the Government’s purchasing power to buy British food, planning reforms to speed up the delivery of farm buildings and other infrastructure that support food production, and work to ensure supply chain fairness.

For the reasons that I have set out, I respectfully ask noble Lords to withdraw or not move their amendments.

Lord Livermore (Lab)

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My Lords, I am grateful to all noble Lords who have taken part in this debate. I will address the amendments tabled by the noble Lord, Lord Altrincham, and the noble Baroness, Lady Neville-Rolfe, which seek to exempt the salaries of young people from the increase in employer national insurance.

An employer national insurance relief is already available for the earnings of those aged under 21 and for apprentices aged under 25, meaning that employers are not required to pay national insurance contributions up to £50,270 for these groups. Despite the challenging fiscal inheritance that this Government faced, we are maintaining these important reliefs for under-21s and apprentices under 25; they are not changing as a result of this Bill. Creating other thresholds and rates based on the age of staff would add additional complexity to the tax system. These amendments would introduce new pressures that would have to be met by more borrowing, lower spending or alternative revenue-raising measures.

The noble Lord, Lord Altrincham, mentioned NEETs. I completely agree with him, but the situation that this Government inherited is completely unacceptable. That is why, at the Budget, the Government announced £240 million to fund 16 pilot projects across England and Wales in order to improve the support available to the economically inactive, the unemployed and people who want to develop their careers. This will include eight youth guarantee pilots to test new ways of supporting young people into employment or training.

It is also why, in the spring, the Government will bring forward a welfare reform Green Paper. I have read with interest the proposals mentioned by the noble Lord, Lord Blackwell, from the Economic Affairs Committee of your Lordships’ House; I hope that many of them will feature in that Green Paper. For now, given the points that I have set out, I respectfully ask the noble Lord to withdraw his amendment.

Lord Livermore (Lab)

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My Lords, I am grateful to all noble Lords who have contributed to this debate. I will address the amendments tabled by the noble Baronesses, Lady Bennett of Manor Castle and Lady Neville-Rolfe, and the noble Lord, Lord Altrincham, which seek to maintain the rates of employer national insurance for charities at 13.8% and increase the employment allowance specifically for charities from £10,500 to £20,000. The Government of course greatly value the vital work that charities do in this country, and I have listened carefully to all the points that have been raised in this debate.

It is important to recognise that all charities benefit from the employment allowance, which the Bill more than doubles from £5,000 to £10,500. This will benefit charities of all sizes, particularly the smallest charities. The Government also provide wider support for charities via the tax—

Lord Livermore (Lab)

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That would be a misunderstanding, yes. I just repeat that all charities benefit from the employment allowance, which this Bill more than doubles from £5,000 to £10,500.

The Government also provide wider support for charities via the tax regime. This tax regime is among the most generous in the world, with tax reliefs for charities and their donors worth just over £6 billion for the tax year to April 2024. Providing further relief for the sector would have additional cost implications and would require either more borrowing, lower spending or alternative revenue-raising measures.

Baroness Neville-Rolfe (Con)

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My Lords, I start by thanking the Minister for his clarification on the full availability of the employment allowance in respect of charities; he agreed to look into this on day 1 of Committee. The query also related to GPs and dentists, where they were mainly involved in public work; clearly, clarity on those would be helpful too.

In moving Amendment 13, I am particularly grateful for the support of my noble friends Lord Altrincham and Lady Lawlor. My amendment would require the Government to publish comprehensive impact assessments and reviews of the impact of the planned jobs tax. This is the Budget measure with much the most impact on business and the private sector. We know just how burdensome it is from the screams of business and charities. It is vital that the Government calculate and share the impact on jobs, wages, inflation and, above all, growth—the Government’s stated prime mission.

There are established procedures for impact assessments on Bills. Despite the Minister’s resistance, I believe that it is a dereliction of duty not to have provided fuller details of the Bill’s various impacts. When we debated the Bill at Second Reading, my noble friend Lady Sater, who has just left, asked the Government about plans to publish a full impact assessment. In response, the Minister said:

“The tax information and impact note was published on 13 November, alongside the legislation when it was introduced”.—[Official Report, 6/1/25; col. 602.]


I have to say, although it is now available to the Grand Committee, the Printed Paper Office had to do quite a lot of online research after Second Reading to find me a copy. Curiously, it did not seem to have been delivered to it in the normal Bill bundle.

I can understand why there was not a huge rush to make it available. I am afraid that it is a very limited document, to say the least. The note includes no detailed assessment of the impact of the national insurance charge on a number of very important areas—not even a split into three between the effect of the increase to 15%, the new threshold of £5,000 and the revenue cost of the rise in the employment allowance. There is no information on the bureaucratic costs in respect of new personnel for whom NICs will be payable. We must have more detail from the Government before this Bill is considered on Report.

I note that, in response to intense questioning from the Opposition, in a parliamentary reply the Government split the £23.7 billion cost of NICs in 2025-26 into £11.1 billion related to the rise to 15% and £17.2 billion from lowering the threshold to £5,000. This demonstrates that the biggest hit in the Budget relates to the lower paid and part-timers, groups they feign to care a lot about. That is exactly the concern of many of us, including the charities that were the focus of the last group. There is no figure given for the rise in the employment allowance, but I calculate from the available data that it will be £4.6 billion in the first year. Perhaps the Minister could confirm that, or correct me. Could he also put on record the three-way split for the five years addressed in the impact note—in a letter to the Committee, if need be?

My Amendments 13 and 26 call for an impact assessment of the Bill’s impact on jobs, wages and growth. My Amendments 62, 63 and 64 call for a separate review of the impact of this legislation on employment, as well as on jobs, wages and inflation, and another on economic growth. While the Government are leaving us in the dark on the detailed effects of their jobs tax, the Office for Budget Responsibility has said that the national insurance changes alone will reduce labour supply by 0.2% and add 0.2 percentage points to inflation by 2029-30. Does the Minister believe that this assessment is accurate, particularly in the light of subsequent developments and the extraordinarily negative response to the NICs changes across the country? If the Government do not accept the OBR’s figures, can the Minister tell the Committee what his own figures say about the specific impact on jobs and inflation?

At Second Reading, the Minister was also questioned about the impact on businesses. Rather than giving us a detailed answer, we heard the same line from the department that 940,000 employers will pay more in NICs contributions through the jobs tax. If the Committee is to make progress on the Bill, it would be helpful to know exactly which sectors the Treasury expects to be hit hardest and what proportion of employers in those sectors are expected to see their liabilities increase. That is what Amendment 61 requires.

The Government owe it to Parliament and employers and employees in different sectors to explain much more clearly what the effect of the jobs tax will be. Where will it bite, who will it bite, and which sectors will be worst affected? It is a long list—some have already been discussed today—but, looking forward, we are interested in GPs, dentists, social care providers, hospices, small businesses, early years care providers, universities, charities, farms, retail and hospitality. There may be others, but the NICs changes are a blunt instrument, and we need a review clause of the kind that we have seen in other Bills, because of their scale, importance and bluntness. I especially look forward to hearing from my noble friend Lady Lawlor on the employment aspects.

Finally, I draw the Committee’s attention to the Government’s own Guide to Making Legislation which states:

“The final impact assessment must be made available alongside bills published in draft for pre-legislative scrutiny or introduced to Parliament”.


I know that the Treasury has its own rules and does not like to be held to account on finance matters. However, given the enormous effect that the Bill will have on so many businesses, it seems inappropriate that the Government have not published a full assessment in this case, in the same way that they do with other Bills. The decision not to publish an impact assessment is hardly in line with the commitment made by the Leader of the House of Commons in a Written Answer of 17 January. This was a refreshing approach by the new Government, overtaking the practice of the previous Government. In that Answer, she wrote:

“The Government is committed to ensuring Parliament has the information it needs to hold the Government to account and to understand the impact of legislation”.


Transparency is the route to better government, and it is a pity that the full rules for impact assessment on Bills, with an independent Regulatory Policy Committee review, do not apply to the Treasury. I beg to move and look forward to other contributions.

Baroness Neville-Rolfe (Con)

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My Lords, I shall just say this briefly: we need more transparency on such a major policy change, but we are not getting it. There is a large negative impact on business and charities, which is—I agree with my noble friend Lady Noakes, a fellow-in-crime in asking for impact assessments—unprecedented. As my noble friend Lord Blackwell said, we are seeing a shift in jobs from the private sector to the public sector, which we fear is bad for jobs, productivity and growth. That is why we need to find a way of getting better assessment and having a process for review.

Lord Livermore (Lab)

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I am grateful to all noble Lords who have contributed to this debate. The noble Baroness, Lady Neville-Rolfe, and the noble Lords, Lord Altrincham and Lord Londesborough, have tabled amendments that seek to delay the commencement of this Act until a further impact assessment is conducted on the economy. The noble Baroness, Lady Lawlor, has tabled an amendment that would delay commencement until a report is laid detailing the impacts on businesses of different sizes and on employment and wages.

As I have said previously, the revenue raised from the measures in this Bill will enable the Government to repair the public finances while protecting working people and rebuilding our public services, including the NHS. Delaying commencement of this Bill would put this vital revenue at risk and would require either more borrowing, lower spending or alternative revenue-raising measures. That is not the Government’s intention.

The Government do not believe that there is a need, as set out in these amendments, for further impact assessments on different sectors and economic indicators. As we have debated in previous groups today, as is the case with all tax policies, the Government have already published an assessment of the policy in the tax information and impact note. This includes impacts on the Exchequer; the economy; individuals; households and families; equalities; and businesses, including civil society organisations—as well as details on monitoring and evaluation. The tax information and impact note clearly sets out that around 250,000 employers will see their secondary class 1 national insurance contributions liability decrease, while around 940,000 will see it increase and around 820,000 employers will see no change.

The noble Baronesses, Lady Neville-Rolfe and Lady Lawlor, asked for specific additional detail. The noble Baroness, Lady Neville-Rolfe, asked in particular for a breakdown of the three lines of each of the three measures. My honourable friend the Exchequer Secretary to the Treasury has provided that information via various Written Answers. On 29 November, he published an estimate of the cost of the increase to the employment allowance at £3.6 billion. On 23 January, he published via a parliamentary Question the estimated revenue from increasing the rate at £12.4 billion and from reducing the secondary threshold at £18.6 billion. Beyond that, the Government have set out the impact analysis of this Bill that they intend to set out, in line with previous changes to taxation, and they do not intend to publish additional data or assessments.

Baroness Neville-Rolfe (Con)

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It would be helpful if he could write to clarify these figures. There have been figures made available, but they have not been made available to the Committee. They were made available in the other place in answer to some questions. The least he could do is write to the Committee with what figures there are, explaining how the splits work and giving that helpful figure on the employment allowance.

Lord Livermore (Lab)

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The noble Baroness says that it is the least that I can do; I have actually just read out the figures to the Committee. I think that is providing the information that she asked for. If she did not hear it, I am more than happy to set it out in a letter to her so that she can read it. As I say, they have been published in Written Answers and I have just read them out to the Committee, so I am not sure that her phrase “the least I can do” is appropriate in this instance.

As the noble Baroness, Lady Neville-Rolfe, also said, the OBR’s economic and fiscal outlook already sets out the expected macroeconomic impact of the changes to employer national insurance contributions on employment, growth and inflation. The Government and the OBR have therefore already set out the impacts of this policy change. The information provided is in line with other tax changes, and the Government do not intend to publish further impact assessments. Given the points that I have made, I respectfully ask noble Lords to withdraw or not to press their amendments.

Baroness Neville-Rolfe (Con)

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I beg leave to withdraw my amendment.

Baroness Neville-Rolfe (Con)

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My Lords, I also support Amendments 14 and 27, tabled so movingly by my noble friend Lady Monckton of Dallington Forest, and Amendment 67, spoken to by the right reverend Prelate the Bishop of Southwark, with additional and disturbing evidence on this vital issue. I am sorry that my noble friend, Lady Barran, who leads for the Opposition on education, is not able to be here. She is detained elsewhere. But I know she is concerned, as one would expect, about the thousands of SEND children who might be left without transport. The amendments concern transport providers for children with special educational needs and disabilities. The providers play a pivotal role in ensuring that children with special educational needs and disabilities can access education and other vital services.

A way must be found in the Bill or elsewhere to deal with the devastating impact on those transporting such children. Most of those drivers, as we have heard, work only 3.5 hours a day, according to the SEND group of the Licensed Private Hire Car Association. They will be caught by the lower NICs threshold, which we have been discussing in other amendments.

The potential impact is not a hypothetical concern; it is another good example of the perverse effects that we are seeing. Mencap, a charity that supports such individuals and families with these disabilities, has shown that the rise in national insurance contributions could force it to close at least 60 of its essential services. Those include running residential services for people with learning disabilities, offering advice on issues such as education and employment, as well as offering support for carers, a very important matter. This charity is facing an additional £5.3 million in annual costs due to the effects of the Budget.

I ask the Minister to look into the various points that have been made today, to undertake a proper assessment of the impact and cost to the sector, and to come forward with amendments or other concessions to ensure that transport providers are not put in a position where they can no longer meet the needs of these vulnerable children—that would be wrong.

Lord Livermore (Lab)

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My Lords, I am grateful to all noble Lords who contributed today. I have of course listened very carefully to all the points made.

I will address the amendments tabled by the noble Baronesses, Lady Monckton of Dallington Forest, Lady Neville-Rolfe and Lady Barran, and the right reverend Prelate the Bishop of Southwark about the impact of the Bill on persons who provide transport for children with special education needs and disabilities. I will endeavour to get the right reverend Prelate an answer to his letter as quickly as possible; I apologise to him for not having replied sooner.

The Government of course carefully consider the impact of their policies, including these changes to employer national insurance. As I noted previously, an assessment of the policy has already been published by HMRC in its tax information and impact note.

On the specific issue of the provision of transport for children with special educational needs and disabilities, the Government are committed to improving provision in mainstream state schools, while also ensuring that state special schools can cater to those with the most complex needs. At the Budget, the Government announced a £1 billion uplift in high-needs funding, and £740 million into creating more inclusive specialist places in mainstream schools and undertaking the adaptations that may be required in mainstream schools to make them more accessible. The aim is to reduce the cost of transport, because far too many children are being transported to other local authorities, over a large distance and time, as they cannot be educated locally.

There are several ways in which a local authority can fulfil its requirements to provide free school transport to eligible children, including those with special educational needs, disabilities or mobility problems. At the Budget and as part of the recent provisional local government finance settlement, the Government announced over £2 billion of new grant funding for local government in 2025-26. This includes £515 million to support councils with the increase in employer national insurance contributions.

This £515 million of additional funding has been determined based on a national assessment of the costs for directly employed staff across the public sector. However, this funding is unring-fenced, and it is for local authorities to determine how to use this funding across relevant services and responsibilities. This is part of an overall increase in additional grant funding for local authorities in 2025-26 of over £2 billion, resulting in an estimated 3.5% real-terms increase in core spending power.

Given the points I have set out, I respectfully ask noble Lords not to press their amendments.

Baroness Neville-Rolfe (Con)

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My Lords, I rise to support Amendments 18, 21 and 25 in the name of my noble friend Lady Noakes. I am particularly pleased to see my noble friend Lord Wolfson of Aspley Guise, who brings his unique knowledge of the difficulties that businesses are facing, especially in the retail sector. He runs one of Britain’s most admired companies—and has done so for 22 years, he tells us. I agree with everything that my noble friend Lord Leigh, and others, said about him and his business.

As always, my noble friend Lady Noakes stated the arguments very clearly and persuasively. My noble friend Lord Wolfson used a new phrase, for this Committee: he talked about a poll tax, rather than the “jobs tax” term that we have used before—that is always a warning. He said that the changes in national insurance could affect as many as 20 million jobs, which explains to some extent the huge reaction there has been to this measure right across business and, indeed, from many in work.

As he said, for relatively little cost, we could reduce the social and economic impacts of the changes. His spirit was very constructive. He acknowledged the productivity improvement that is needed, some of which is already in the pipeline, as he said, but also the difficulty of what I would call the shock tactic of the double whammy of the April changes. My noble friends Lord Swire and Lord Leigh gave us first-hand evidence of the loss of jobs which is taking place already, and which we have talked about before. My noble friend Lady Fraser evidenced the impact of that double whammy and brought out the point about the loss of skills: if people lose their jobs, we lose the skills in the industry. We had further estimates from my noble friend Lord Leigh, to add to those we had last week from the noble Lord, Lord Londesborough, which merit attention.

The amendment seeks to allow for a more gradual transition in the reduction of the secondary threshold. That would allow businesses time to adjust to the increase of a substantial new tax burden. It aims to be a small but important step in alleviating some of the burden on employers. The Government have to accept that they have placed considerable strain on business with their fiscal policies, and a phased introduction would provide a more manageable path forward.

Businesses are the backbone of the economy: they provide jobs, drive innovation and contribute to the prosperity of our communities right across the country. However, given the current pressures they are under, it is critical that we do not introduce changes that exacerbate their struggles. The sudden and sharp reduction in the secondary threshold will represent a huge burden, particularly for smaller employers, as we discussed last time, and for those grappling with rising costs and reduced cash flow. A gradual approach would ensure that the reduction was not a sudden shock to businesses and allow them to adjust their payroll and budgeting systems. It would be more predictable and manageable, and employers could plan and absorb the changes over time.

The IFS has found that the lowest salaries will be affected the most, with the lowest earners facing a larger than 4.5% increase in contribution, compared with less than 1.5% for the highest earners. It is partly because of the perverse effects and the adjustment issues that we are looking at today that the IFS has suggested that the Budget measure will—quite quickly—raise only £16 billion a year. My noble friend Lord Leigh has also modelled the impact of a 3% jobs cut, which he estimates would wipe out the revenue from the proposed changes.

We need to think again. My noble friends Lady Noakes and Lord Wolfson talked about the 10% to 13% increases coming in April, if you take NICs and the national minimum wage together; some delay or a reduction in the threshold would avoid the disaster, particularly on the high street, that I am so worried about.

I was talking to an excellent member of staff in the closing shop in Salisbury which I mentioned last week. She still does not have a job to go to. That has not been my experience of retail closures in the past; usually, the best employees are quickly snapped up by the competition. We have a bit of a problem here, and I would like to work with the Government to see whether anything can be done to alleviate the difficulties.

The Financial Secretary to the Treasury (Lord Livermore) (Lab)

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My Lords, I am grateful to all noble Lords for their contributions to this debate. I will address the amendments tabled by the noble Baronesses, Lady Noakes and Lady Neville-Rolfe, which would phase in the introduction of the secondary threshold cut to £6,760 in the next tax year and £5,000 from 2026-27.

I absolutely appreciate the concerns raised by noble Lords during this debate, and by businesses, about the impacts of the Bill. It was a privilege to hear the insights and expertise of the noble Lord, Lord Wolfson, and I greatly appreciate the constructive spirit of his contribution. However, as I have set out previously in this Committee, the Bill is necessary to repair the public finances, to protect working people and to invest in Britain’s future, including by providing more than £20 billion extra for the NHS over this year and next. This funding will reduce waiting times by supporting the NHS to deliver 40,000 extra elective appointments a week and will make progress towards the commitment that patients should expect to wait no longer than 18 weeks from referral to treatment. Reducing the threshold by less than that set out in the Bill would reduce the revenue generated by it and would therefore introduce new pressures, which would have to be met by more borrowing, lower spending or alternative revenue-raising measures.

Given these points, I respectfully ask the noble Baroness not to press her amendments.

Lord Livermore (Lab)

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The Government tend to cost the Government’s policies. It is not usual practice for the Government to cost Opposition policies.

Lord Livermore (Lab)

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The noble Lord set out some figures that are based on his assumptions, not the Government’s assumptions. I have no reason to dispute his maths or the computing power of Microsoft Excel, but I do not think I can commit Treasury resources to checking the figures in his own spreadsheet.

Baroness Neville-Rolfe (Con)

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My Lords, in moving this amendment, I will speak also to my Amendment 40; both concern early years provision. I am afraid that this measure is another example of not protecting working people. The Budget will have a disastrous impact on the early years sector, and we need to consider this fully.

My Amendment 28 asks the Government to produce an appropriate impact assessment on the effect of this jobs tax on the early years sector. There have been calls from across the sector for the Government to acknowledge the impact this measure will have. The Early Years Alliance has estimated that this harsh tax will cost each nursery an additional £18,600 per year. Yet, despite these calls, the Government have not acknowledged the especially harsh impact this tax will have on the early years sector.

The chief executive of the National Day Nurseries Association has told us that, on average, 75% of a nursery’s expenditure is spent on staffing costs, and that, as a result of this tax raid, nurseries will have to find an additional 11% on top of the usual amount they spend on staff. Her view was that, following this Budget, the only realistic options facing nurseries are to pass the extra burden on to parents and/or to reduce the number of places they offer, in order to prevent them going out of business. Although I welcome the additional funding for early years introduced in the Budget, this sector is already under financial pressure, and this additional burden on a sector that provides such an integral service seems incredibly short-sighted.

In December, the Government published their funding rates for 2025-26, but they failed to include an uplift for this damaging tax, which they themselves are introducing. My Amendment 40 seeks to reduce the impact on early years by increasing the employment allowance in this labour-intensive sector. This is often made up of part-time workers whose employers are hit worst by the reduction in the threshold for NICs, as we just heard from my noble friend Lord Wolfson. I would like to understand the cost to the Exchequer. The Minister helpfully gave us a figure for the overall cost of the increase in the employment allowance last time. Can he give an estimate of how much will go to early years providers, so that we can understand the impact of doubling it?

Lord Livermore (Lab)

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My Lords, I will address the amendment tabled by the noble Baroness, Lady Neville-Rolfe, which seeks to prevent commencement of this Bill until an impact assessment is published for the early years sector.

Delaying commencement of the Bill would reduce the revenue generated from it and require either higher borrowing, lower public spending or alternative revenue-raising measures. The Government carefully consider the impacts of all policies, including the changes to employer national insurance. As I have stated previously in Committee, an assessment of the policy has been published by HMRC in its tax information and impact note, including impacts on the Exchequer, the economy, individuals, households and families, equalities and businesses, including civil society organisations, with details on monitoring and evaluation.

Further, the OBR’s economic and fiscal outlook sets out the expected macroeconomic impact of the changes to employer national insurance contributions on employment, growth and inflation. The Government and the OBR have therefore already set out the impacts of the policy change. This approach is in line with previous changes to national insurance and taxation, and the Government do not intend to provide further impact assessments.

Amendment 40, tabled by the noble Baroness, Lady Neville-Rolfe, and the noble Lord, Lord Altrincham, seeks to increase the employment allowance for early years providers. This would introduce new pressures which would have to be met by either more borrowing, lower spending or alternative revenue-raising measures. I also note that creating new thresholds or rates based on what sector a business is in would introduce distortion and additional complexity into the tax system.

The noble Baroness, Lady Neville-Rolfe, asked for some specific figures. The figures are not broken down in the way that she asks for.

Early years providers have a crucial role to play in driving economic growth and breaking down barriers to opportunity. We are committed to making childcare more affordable and accessible. That is why, in our manifesto, the Government committed to delivering the expansion of government-funded childcare for working parents and to opening 3,000 new or expanded nurseries through upgrading space in primary schools to support the expansion of the sector.

Despite the very challenging fiscal circumstances the Government inherited, at the Budget the Chancellor announced significant increases to the funding that early years providers are paid to deliver government-funded childcare places. This means that total funding will rise to more than £8 billion in 2025-26.

In light of these points, I respectfully ask the noble Baroness to withdraw her amendment.

Baroness Neville-Rolfe (Con)

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I thank the Minister for his response. I hope that in the light of what has been said today and on previous days, the Government will look at the impact of these NICs changes on our early years sector.

When we were in government, we took steps to support the early years sector, and we know that the national insurance increase is going to be a significant setback. My noble friend Lady Lawlor talked about the numbers of providers spread across the country, which play a huge part in the induction to the world of education and in helping young people to get the right kind of start in life. The very least the Government can do is to look at the impact note again and produce an assessment of the impact of the policy on the early years sector in particular, not just the overall economic impact. We have heard from the Minister on several occasions that they have produced a note, but it is a macroeconomic—an overall—note, while what we have here are very big changes in the economy affecting individual sectors, some of them very badly. There does not seem to be any readiness to look at the impact in those sectors and to find solutions, whether through national insurance changes or some other way. I suggested the employment allowance as another route.

The noble Lord will also recall that when in government we took steps to increase the supply of early years provision by expanding the childminding sector and encouraging the establishment of new nurseries alongside our expansion of the 30-hours free childcare policy. Without an assessment of the impact of these changes, how can the Government be sure that they will be able to deliver on the ambitious plans that the Minister set out to expand free childcare hours for hard-working families? I think there is a measure of agreement on objectives, but we need to find a way to get there.

These are important questions, and Ministers need to answer them before we get to Report. It is intolerable that we are pressing ahead with a jobs tax without a full assessment of the policy. We have had some macro figures, now broken down into three chunks, but it is very difficult for us to know what the individual effect is on different sectors. This is a serious matter. Working families across the country are very concerned. My worry is that the noise of concerns on something such as early years will increase as April comes and early years providers discover just what sort of hole they are in, but in the interests of time, I beg leave to withdraw my amendment.

Baroness Neville-Rolfe (Con)

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My Lords, I will speak to my Amendment 41. I support Amendment 29 in the name of my noble friend Lady Monckton of Dallington Forest, who gave an extremely moving speech. She has made such a huge contribution to the charitable sector, as a supporter and a fundraiser. We must listen to her and the evidence that she has gathered in her work in the run-up to this discussion, which shows how important it is to find a way to match the compensation that NHS bodies are getting under the arrangements made for increasing national insurance and reducing the threshold.

That is the purpose of our series of amendments, some of which are probing, some of which we will pursue, because this is an important sector. Hospices are an essential part of our healthcare system, and the Bill will leave many unable to provide the services that they are currently offering. I was glad to have the support of my noble friend Lady Sater for both amendments, and that my noble friend Lord Swire was able to mention the fundraising for hospices which many have taken part in across this House. Indeed, hospices were one of my favourite charities of the year at Tesco, and one of the most moving with staff. We were talking about up to 300,000 people who were engaged in raising money for hospices. That taught us a lot about the difficulties and the wondrous jobs that they do.

My Amendment 41 seeks to increase the employment allowance for hospices, which would ease some of the financial pressures that they are facing at the hands of this Government. The noble Lord, Lord Scriven, intervened, and it was helpful, to say that an exemption would cost—£1.83 million or was it billion?

Baroness Neville-Rolfe (Con)

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That is the average salary bill, so the noble Lord is right that an increase in the employment allowance would not absorb all the extra costs.

Baroness Neville-Rolfe (Con)

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Obviously, for smaller bodies, the employment allowance is, as the Minister has said on several occasions, helpful because it alleviates the cost of the changes. Therefore, looking at the employment allowance is another way of coming at the issue, which is one of the reasons why we have put it forward for discussion.

Despite the fact that many hospices provide functions that would otherwise need to be provided by the NHS or social care, the Government have failed to recognise their importance and are instead taxing the hospices that the country relies on. Although hospices do not charge for their services, they receive only one-third of their funding from the Government and rely on charitable donations for the remainder of their income. This will place unnecessary and costly additional pressures on their finances at a time when demand for hospice care is growing. The Government seem to be unaware of the great help hospices provide and the fact that they reduce pressure on the NHS by providing services in a more efficient and effective way. There is a saving there to offset any cost.

While I am aware that the Minister claims that the already published impact note is enough, I have not heard another noble Lord agree with that. Although I am sure he will respond in a similar manner, the current note is simply not sufficient and does not include any impact assessment on the very businesses it is being imposed on. That is very concerning for hospices which do so much work to support the NHS and could well be bankrupted by this Government’s decision to introduce the jobs charge. The charity for children’s hospices, Together for Short Lives, has estimated that this tax rate will cost an additional £133,966 for every children’s hospice. That is an extraordinarily high number for a sector that is not profit-orientated, and I am concerned about that impact. Although I welcome the £100 million in funding that the Government have announced for hospice improvements, that money will not help with the staffing costs that these hospices will now face.

As my noble friend Lady Monckton said, hospices are life affirming and give wide support beyond the patients in the hospices to the families in their grief. They are a vital part of the palliative care system, as I hope the Minister will agree. I think that the Government will be blamed if hospices go into a downward spiral as a result of these extra costs in April. They should look again at some way of helping them, whether it is an exemption, a delay, a change to the employment allowance or some form of compensation. It is an important matter that we should address in this Committee.

Lord Livermore (Lab)

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My Lords, I will address Amendments 29 and 41. I am grateful to all noble Lords for their contributions. I acknowledge the powerful contribution from the noble Baroness, Lady Monckton of Dallington Forest; I listened very carefully to all the points that she and other noble Lords made.

As I noted in a previous sitting of this Committee, it is important to recognise that all charities, including hospices, can benefit from the employment allowance, which this Bill more than doubles, from £5,000 to £10,500. This will benefit charities of all sizes, particularly the smallest ones. The Government also provide wider support for charities, including hospices, via the tax regime. This tax regime is among the most generous in the world, with tax reliefs for charities and their donors worth just over £6 billion for the tax year to April 2024.

On the specific point made by the noble Lord, Lord Leigh of Hurley, the situation whereby independent contractors, including primary care providers, social care providers, charities and nurseries, will not be supported with the costs arising from these changes is exactly the same as with the changes to employer national insurance rates under the previous Government’s plan for the health and social care levy.

This Government have provided a real-terms increase of 3.5% in core local government spending power for 2025-26, including £880 million of new grant funding provided to social care. This funding can be used to address the range of pressures facing the adult social care sector. We are also supporting the hospice sector with an increase in funding of £100 million for adult and children’s hospices to ensure that they have the best physical environment for care—

Lord Livermore (Lab)

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We are also providing an additional £26 million of revenue to support children and young people’s hospices.

As I have said previously, delaying commencement of the Bill would reduce the revenue generated from it and require either higher borrowing, lower public spending or alternative revenue-raising measures. The Government carefully consider the impacts of all policies, of course, including the changes to employer national insurance. As I have also said previously, an assessment of the policy has already been published by HMRC in its tax information and impact note.

Further, the OBR’s economic and fiscal outlook sets out the expected macroeconomic impact of the changes. The Government and the OBR have therefore already set out the impacts of this policy change. This approach is in line with previous changes to national insurance and to taxation. The Government do not intend to provide further impact assessments.

In the light of the points I have made, I respectfully ask the noble Baroness to withdraw her amendment.

Baroness Neville-Rolfe (Con)

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My Lords, I shall speak to Amendment 51 and I support Amendment 30 in the name of my noble friend Lady Monckton, presented by my noble friend Lord Altrincham, who started by drawing attention to the very substantial number of people we are talking about in retail—hundreds of thousands of people—and the problems they are facing. As my noble friend Lady Lawlor said, jobs are being cut at the fastest rate since the financial crisis. This is a grim situation.

My Amendment 51 probes whether the Government would be willing to increase the employment allowance from £10,500 to £20,000 to offer support to the smallest businesses in the retail sector at a modest cost to the Exchequer. As my noble friend Lord Altrincham noted, our retail sector is invaluable in terms of the value it creates for our economy. In 2023, retail accounted for 4.7% of the UK’s total economic output, worth more than £110 billion. Much of this value added was in small shops, from barbers and hairdressers to farm shops. For every £1 spent in 2024, 30p was spent in food shops and 11p in clothing shops. Retail accounts for at least 50% of spending in Britain, but despite that, this Government—unlike the previous Labour Government, I have to say—appear not to understand the value that this sector provides to our economy and the jobs that it provides, particularly, as the noble Baroness, Lady Kramer, said, for part-time workers on low pay.

There have been warnings from a range of sources about the devastating impact of this tax raid on workers, who will face fewer pay rises or fewer working hours, and on businesses, which will be forced to raise prices in order to maintain their business. The British Chambers of Commerce warned that more than half of firms intended to raise prices in response to these tax hikes, and we have had a detailed analysis from the noble Lord, Lord Wolfson, a non-food retailer. He acknowledged that price rises or job losses in the food sector and food stores might be worse because of the lower margins in that part of the industry. I am glad that the noble Baroness, Lady Kramer, referenced the noble Lord, Lord Londesborough. It is good to see him back. He also tabled an amendment in a previous sitting which I very much supported.

There is further evidence that the Government have to think again, and there is an array of ways of doing so. I hope that, before Report, the Government will sit down, think about the devastating effects of these changes and consider whether there are ways, small or large, of alleviating their impact on many sectors of the economy and of social enterprise, which we will come on to discuss again.

Lord Livermore (Lab)

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My Lords, Amendment 30, tabled by the noble Baroness, Lady Monckton of Dallington Forest, and moved by the noble Lord, Lord Altrincham, seeks to prevent commencement of the Bill until an impact assessment is published for the retail sector. Delaying commencement of the Bill would reduce the revenue generated from it and require either higher borrowing, lower public spending or alternative revenue-raising measures. The Government carefully consider the impacts of all policies, including the changes to employer national insurance.

As I have said previously, an impact assessment of the policy has been published by HMRC in its tax information and impact note. Further, the OBR’s economic and fiscal outlook sets out the expected macroeconomic impact of the changes to employer national insurance contributions. The Government and the OBR have therefore already set out the impacts of the policy change. This approach is in line with previous changes to national insurance and to taxation, and the Government do not intend to provide further impact assessments.

Amendment 51, tabled by the noble Baroness, Lady Neville-Rolfe, and the noble Lord, Lord Altrincham, seeks to increase the employment allowance for those employed in the retail sectors. The Government are taking action as part of the Bill to protect the smallest businesses by increasing the employment allowance from £5,000 to £10,500. This means that next year, 865,000 employers will pay no national insurance at all, and more than half of employers will see no change or will gain overall from this package. This means that employers will be able to employ up to four full-time workers on the national living wage and pay no employer national insurance.

The Budget also set out further steps that the Government are taking to strengthen small businesses’ ability to invest and grow, including in the retail sector. This includes freezing the small business multiplier, permanently reducing business tax rates for retail, hospitality and leisure properties from 2026-27, and publishing the Corporate Tax Roadmap to provide stability and certainty within the tax system for businesses across the economy.

Increasing the employment allowance for specific sectors would add additional complexity to the tax system and, by adding further spending pressures, would require higher borrowing, lower spending or alternative revenue-raising measures. In light of the points I have made, I respectfully ask the noble Lord to withdraw his amendment and other noble Lords not to press their amendments.

Lord Livermore (Lab)

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I am grateful to the noble Lord for his comments and very happy to be his noble friend once again. As he knows, the Government keep all taxation under review, and I will take his submissions as representations on that matter.

Baroness Neville-Rolfe (Con)

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My Lords, I shall speak to my Amendment 49, and I support Amendment 31 in the name of my noble friend Lady Monckton of Dallington Forest. The fact is that, as we have also heard from the noble Lord, Lord Londesborough, we need an impact assessment here as well so that we can assess where to make changes and what impact this jobs tax is having.

My Amendment 49, along with others that I have tabled, would increase the employment allowance from £10,500 to £20,000. This sector, which is so important to our day-to-day life and to our tourist industry, is full of part-time workers and the lowest paid will suffer a tsunami from the NICs changes. We need to find a way of alleviating the pain, and my amendment is one such proposal.

It is a particular pleasure to welcome the noble Baroness, Lady Fleet, to the Committee and to hear her evidence of the impact on the arts. She is right that the creative industries and hospitality are integrally linked, but I was equally concerned to hear about the impact on museums, theatres and other aspects of the creative arts. She is also right that, on this evidence, the Government are no friend of the arts; that should be of concern to the Committee.

My noble friend Lady Monckton was right to talk of the spiral of price increases, the diversionary pressure on management, the impact on capital investment and the effect on jobs, especially the lowest level jobs. They are particularly hit by the double whammy, as I have said already today, of the changes in NICs and the national minimum wage, which will particularly bite younger people. For good reasons, the national minimum wage for younger people has been increased, but that is making a particular difficulty in terms of hiring them, which I fear we shall see in the results in the coming months.

I have further evidence about hospitality, which I think some local papers may be interested in, so I will run through it because it is important. There have been calls from across the sector about how damaging the tax will be. Restaurateur Tom Kerridge, despite backing Labour at the election, has expressed concern that this tax raid will have “a catastrophic effect”. He said that it would cost,

“£850 extra per member of staff per year”

and have a reaction into a negative process in terms of employment. He also said:

“This is a very difficult time for hospitality, because the next few weeks are particularly busy. They give a false sense of feeling that everything is okay … it’s going to have a catastrophic effect, moving into the new year”.


He said that just before Christmas, and things have got worse.

On top of that, UKHospitality said that the national insurance increase at the Budget will lead to business closures and job losses within a year. It said that

“the changes to the NICs threshold are not just unsustainable for our businesses, they are regressive in their impact on lower earners and will impact flexible working practices which many older workers and parents rely on. Unquestionably, they will lead to business closures and to job losses within a year”.

I was particularly pleased to hear from the noble Lord, Lord Londesborough, about his new evidence on pubs. The British Institute of Innkeeping, which has warned that the Budget will see 75% of pubs cut hours, thinks that 40% will reduce opening times and that one in three will make staff redundant. It said:

“The Budget, billed to support working people, will pull the rug out from under these already fragile small businesses and significantly reduce the employment opportunities they can provide. 75% will cut staff hours, 40% will reduce opening hours and 1-in-3 will make staff redundant”.


This will have an extraordinarily damaging impact on the sector and the economy.

More than 200 leading restaurant, pub and hotel companies including Stonegate, Greene King, Wetherspoons and Young’s wrote to the Chancellor warning that the Budget will cost the industry £3.4 billion a year. They said:

“As leaders of hospitality businesses, we are compelled to highlight our grave fears about the impact of the Budget, particularly relating to the Employer NICs threshold. Alongside the changes to the national minimum wage levels this will cost hospitality—at a conservative estimate—£3.4 billion a year”.


I would be grateful if the Minister would provide an actual number.

Finally, Simon Emeny, chief executive of Fuller’s, which owns about 400 pubs and hotels and employs almost 5,000 people, said he was “just utterly disappointed” by the Chancellor’s choices. He claimed they “disproportionately” impacted hospitality, which is a big employer of young people and part-time workers.

These are real impacts and the Government’s changes are disproportionately affecting mainly small and vibrant businesses such as these. The biggest hit is from the decrease in the threshold, which could be phased in. Alternatively, the Government could help smaller businesses by increasing the employment allowance, as I have also suggested. I simply urge the Government to act.

Lord Livermore (Lab)

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My Lords, I will address the amendment tabled by the noble Baroness, Lady Monckton of Dallington Forest, which seeks to prevent commencement of this Bill until an impact assessment is published for the hospitality sector. Delaying commencement of this Bill would reduce the revenue generated from it and require either higher borrowing, lower public spending or alternative revenue-raising measures. The Government, of course, carefully consider the impacts of all policies, including the changes to employer national insurance.

As I have said before, an assessment of the policy has been published by HMRC in its tax information and impact note. Further, the OBR’s Economic and Fiscal Outlook sets out the expected macroeconomic impact of the changes to employer national insurance contributions. The Government and the OBR have therefore already set out the impacts of the policy change. This approach is in line with previous changes to national insurance and to taxation, and the Government do not intend to provide further impact assessments.

I turn to the amendment tabled by the noble Lady, Baroness Neville-Rolfe, and the noble Lord, Lord Altrincham, which seeks to increase the employment allowance for those employed in the hospitality sectors. The Government are taking action as part of this Bill to protect the smallest businesses by increasing the employment allowance from £5,000 to £10,500. This means that next year, 865,000 employers will pay no employer national insurance at all; more than half of employers see no change, or gain overall, from this package. The specific data the noble Baroness requested is not broken down in the way she asks for.

Increasing the employment allowance for specific sectors would add additional complexity to the tax system, and adding further spending pressures would require higher borrowing, lower spending or alternative revenue-raising measures. In light of these points, I respectfully ask the noble Baroness to withdraw her amendment.