Grand Committee

Tuesday 25th February 2025 Grand Committee

Tuesday 25 February 2025

Arrangement of Business

Tuesday 25th February 2025 Grand Committee

Announcement

15:45

[The Deputy Chairman of Committees (Baroness McIntosh of Hudnall) (Lab)]

My Lords, we are expecting Divisions in the Chamber this afternoon, so when they happen, the Committee will adjourn as soon as the Division Bells are rung and resume after 10 minutes.

Social Security Benefits Up-rating Order 2025

Tuesday 25th February 2025 Grand Committee

Considered in Grand Committee

15:45

Moved by

[Baroness Sherlock]

That the Grand Committee do consider the Social Security Benefits Up-rating Order 2025.

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Sherlock) (Lab)]

In speaking to this order, I will also speak to the draft Guaranteed Minimum Pensions Increase Order 2025. In my view, the provisions in both instruments are compatible with the European Convention on Human Rights.

Let us begin with the draft Social Security Benefits Up-rating Order. This instrument will increase relevant state pension rates by 4.1%, in line with the growth in average earnings in the year to May to July 2024. It will increase most other benefit rates by 1.7%, in line with the rise in the consumer prices index in the year to September 2024. As such, the up-rating order commits the Government to increased expenditure of £6.9 billion in 2025-26. In so doing, it maintains the triple lock, benefiting pensioners in receipt of both the basic and the new state pensions; raises the level of the pension credit safety net beyond the increase in prices; increases the rates of benefits for those of working age; and increases the rates of benefits to help with additional costs arising from a disability or health condition, as well as carers’ benefits.

I turn now in more detail to the issue of state pensions. The Government’s commitment to the triple lock means that the basic and full rate of the new state pension will be uprated by the highest of the growth in earnings or prices, or 2.5%. This will therefore be 4.1% for 2025-26, in line with the conventional average earnings growth measure. As such, from April 2025 the basic state pension will increase from £169.50 to £176.45 a week, and the full rate of the new state pension will increase from £221.20 to £230.25 a week. The basic and new state pensions will increase by 4.1% in April of this year, benefiting 12 million pensioners by up to £470 next year. That is up to £275 more than if pensions had been uprated simply by inflation. Other components of state pension awards, such as those previously built under earnings-related state pension schemes, including the additional state pension, will increase by 1.7%, in line with the statutory minimum requirement of prices.

The safety net provided by the pension credit standard minimum guarantee will increase by 4.1%. For single pensioners it will increase from £218.15 to £227.10 a week, and for couples it will increase from £332.95 to £346.60 a week. The Government are committed to supporting pensioners on the lowest incomes and want everyone entitled to this support to receive it. That is why we launched the national pension credit campaign.

I turn now to the support given to those in the labour market, such as universal credit and the legacy means-tested benefits it replaces. The up-rating order increases the personal and standard allowances of working-age benefits, including universal credit, by 1.7%, in line with the increase in prices in the year to September 2024. Around 5.7 million families are forecast to benefit from the uprating of universal credit, with an average annual gain for a family estimated to be £150. Additionally, this order increases statutory payments by 1.7%, including statutory maternity pay, statutory paternity pay, statutory shared parental pay and statutory sick pay.

The up-rating order will also increase rates by 1.7% for those with additional disability needs and for those who provide unpaid care for them. This commits the department to increased expenditure of £0.9 billion in 2025-26. This means that benefits such as disability living allowance, attendance allowance and personal independence payment, intended for those who have additional costs as a result of disability or health conditions, will rise in line with the rise in CPI in the year to September 2024.

This order will also increase carer’s allowance by 1.7% from April 2025, from £81.90 to £83.30 per week. Recognising the vital role played by unpaid carers, the Government have also announced that from April, the weekly carer’s allowance earnings limit will be tied to the level of 16 hours’ work at the national living wage.

I turn now to the draft Guaranteed Minimum Pensions Increase Order 2025—the GMP order—which is a routine, technical matter we attend to each year. I shall therefore be brief.

The GMP order was laid before the House on 16 January 2025. It sets out the annual percentage increase that must be applied to the GMP part of an individual’s contracted-out occupational pension earned between 1988 and 1997. Occupational pension schemes that provide GMPs are required to increase GMPs earned during that period, and which are in payment, by 1.7% for the tax year 2025-26.

The 1.7% figure is taken from the CPI inflation rate for the year to September 2024. That approach is broadly consistent with other uprating approaches, and it balances the need to provide members with a measure of inflation protection while giving schemes greater certainty about their ongoing liabilities.

In summary, the draft Social Security Benefits Up-rating Order implements the Government’s commitment to the triple lock; it provides for a real-terms increase in the value of the safety net in pension credit; and it increases the rates of benefits for those in the labour market, as well as those with additional disability needs, and those providing unpaid care to people with those needs.

The draft GMP order requires formerly contracted-out occupational pension schemes to pay an increase of 1.7% on GMPs in payment earned between April 1988 and April 1997. This provides people with a measure of protection against inflation, paid for by their scheme. I beg to move.

[Baroness Lister of Burtersett (Lab)]

My Lords, I have lost count of the number of these debates I have participated in while in opposition on the Benches opposite. This is the first debate I have participated in while knowing that there is a commitment to tackle child poverty and a serious government taskforce drawing up a strategy to do so. So I can applaud that, and the welcome improvements in benefits announced in the Budget. But I am afraid I have to concur with the Joseph Rowntree Foundation, which in its recent poverty review described the improvements as “timid” and falling

“a long way short of what is required to deliver the scale of changes needed.”

So this speech is less supportive than I would have liked.

As already noted, the uprating of working-age and children’s benefits by 1.7% follows the convention of increasing them in line with inflation the previous September. But as JRF points out:

“According to OBR and Bank of England forecasts, this may well be the low point of inflation in the near term, with inflation in 2025/26 likely to be higher, meaning benefits will lose a little value next year”.


Indeed, inflation is already at 3%, and just today we heard of a higher than expected energy price cap increase. Losing a little value may not sound very significant, but when benefits are so low to begin with, as I will come back to, it can make a real difference for families struggling to get by.

My noble friend the Minister previously raised the long reference period for the uprating, as did the Work and Pensions Committee in last year’s report on benefit levels. Disappointingly, the DWP told the committee that even in the longer term, when the migration to universal credit is completed, it has no plans to shorten the reference period. Can my noble friend say whether this might be looked at again under the new Administration?

The Work and Pensions Committee also recommended that limits on benefit entitlements such as the benefits cap be uprated annually. Again, it is disappointing that no such increase was announced for this year. As a recent report by the IPPR, supported by Save the Children, notes, the effect of the near constant freeze is to make the policy

“considerably more punitive than at the point of introduction”.

The stock response from the DWP—that the legislation requires the level of the cap to be reviewed every five years only, and that therefore, following the 2022 review, another review is not required until November 2027 —simply is not good enough. It may not be required but it is permitted, and so long as the cap continues, it should be reviewed annually so that, at the very least, those hit by it, mostly families with children, can benefit in full from the annual uprating.

Together with the two-child limit—also ignored in the Budget—the cap is a key driver of child poverty, as well as contributing to homelessness and disproportionately affecting survivors of domestic abuse. Research has shown that it is not achieving its aims. I know that my noble friend will say that we have to await the outcome of the child poverty review for any decision on the cap and the two-child limit, but every day they continue spells misery for many thousands of parents and children.

The other serious omission in this year’s uprating is the local housing allowance. As the IPPR report points out, this is tantamount to a benefit freeze for housing support and breaks the principle that support should be tied to changing rents in a local area. The result is that, for those with housing costs at or above the current LHA, the real value of their uprated UC will in effect be cut.

The impact of all this has to be understood in the context of benefit levels that, in the words of JRF, fall a

“long way short of what is needed to enable recipients to escape poverty”,

and that mean that many continue to “struggle needlessly”. Paid work may be the best route out of poverty, but it is not a route open to all. For too many, it proves a cul-de-sac, as they swap out-of-work poverty for in-work poverty. Inquiries by the All-Party Parliamentary Group on Poverty, of which I am co-chair, and the Work and Pensions Committee received

“a wealth of evidence that benefit levels are not meeting need”.

Benefit levels were never generous, but the effect of years of freezes, cuts and restrictions imposed by the Conservatives have meant that, in the words of the Financial Fairness Trust,

“we do not have a safety net worth its name”.

As a result, claimants are denied access to the most fundamental material resources needed to function day to day and to have healthy lives. The Work and Pensions Committee’s recommendations concerning the establishment of a benchmark for assessing benefits adequacy and the review of the extent to which current benefit levels are meeting this benchmark were rejected by the previous Administration. I urge my noble friend and her colleagues to look at them again. I ask her whether any consideration has been given to Trussell’s and JRF’s proposals for a protected minimum floor in UC, as a first step towards an essentials guarantee. For anyone who believes that poverty is relative, this is a pretty minimalist demand.

The Work and Pensions Committee also recommended that the local authority household support fund should be made permanent, so that local authorities can better plan the support they provide. This is not the place to go into detail but, if my noble friend has not already done so, I urge her to read the recent proposal from Trussell for a permanent and effective system of discretionary cash-first local crisis support, with broad statutory duties and ring-fenced funding that would incorporate both the household support fund and welfare assistance schemes where they still exist. It sees such a scheme as a crucial element in meeting our manifesto pledge to try to end mass dependence on emergency food parcels, which is a moral scar on society. At a recent meeting of the APPG on Ending the Need for Food Banks, the Minister for Employment assured us that the reform of local crisis support is definitely under review. It would be good if my noble friend could confirm this on the record in Hansard. As welcome as the extension of the fund for another year is—and it is welcome—those working on the ground need to be given some hope for the future. We heard reports at the meeting that food bank workers on the front line are scared and are burning out.

Scared, too, are many in receipt of disability benefits, in the face of mounting speculation about cuts to their benefits. It is worth remembering that disabled people are at disproportionate risk of poverty, in part because of the additional costs associated with disability. A recent report by Pro Bono Economics for Z2K warned that cutting the benefits that go some way toward meeting these costs could have a seriously damaging impact on the health and well-being of disabled people.

Also looking ahead, the Minister for Social Security and Disability advised, in the Commons debate on this order, that the Government would “set out shortly” how they plan to fulfil the manifesto commitment to a review of UC. Is my noble friend able to say any more at this stage about, for example, whether it will follow the example of the child poverty review in taking evidence from stakeholders, including those with lived experience of UC?

16:00

In conclusion, there is a lot of talk these days about the so-called ballooning welfare bill, ignoring the £50 billion a year which, according to CPAG, has been cut from the social security budget over the past decade or so. As charity after charity has emphasised, in the words of JRF, any credible child poverty strategy must include policies that rebuild the tattered social security system. This will of course take money, so it is crucial that the Treasury is on board. I know that my noble friend understands all this and is limited in what she can say to us, but I hope that she will feed back to the Treasury the concerns that have been raised.

I finish by quoting someone with lived experience of living on benefits who is part of the Changing Realities project. Gemma is disabled and a single mother of three children, as well as a carer for her autistic nephew. She writes of sleeping in the same bed as her children to keep warm during the cold spell and of the black mould that is starting to appear: “For families like mine, living on a low income, we have run out of corners to cut. I cannot wait for warmer days. I’m at the bottom of a dark hole and there is no way of getting out. I sometimes find it difficult to imagine how my situation can get better, but it really has to because life should not be this hard”. My Government have a responsibility to give parents like Gemma some hope that their situation will get better and that their lives will not continue to be that hard. As Gemma herself advises, that has to mean bold and real change by investing in social security.

[The Lord Bishop of Chelmsford]

My Lords, it is very good to be here today and I am glad to be able to contribute on this important subject. As we consider a proposed uprating of 1.7%, as compared with 6.8% last year and 10.1% the year before, I am mindful of the different backdrop to this year’s decision. We may no longer be in a period of soaring inflation, but costs remain high in just about every area of life. The discrepancy between the inflation rate from September 2024, by which most means-tested benefits will be uprated, and the current rate of 3% will be felt particularly by those who have not benefited from wage growth this year. This is a timely moment to explore social security as the Government set out their wider agenda in this area.

The manifesto commitments to review universal credit as a means of supporting people into work and addressing poverty and to produce a child poverty strategy could give us a basis on which to improve the lives of millions of people in our country. Indeed, bold action is required in both these areas and, like other noble Lords, I await the outcome of these reviews with keen interest.

As the Church of England’s lead bishop for housing, I see the consequences of not aligning housing support with housing costs, with half of private renters on housing benefit experiencing poverty. I suggest that local housing allowance ought to be linked to private rents as a matter of course, especially taking into account research from the Joseph Rowntree Foundation, which shows that 81% of low-income private renters in receipt of housing benefit are going without essentials such as food, heating and warm clothing. I very much hope that the Government will consider the adequacy of social security in their review of universal credit. For the first time since its introduction, we have an opportunity to explore how well the system works and to consider carefully the impact of sanctions, deductions and the five-week wait on the lives and incomes of people who rely on social security simply to make ends meet.

I welcome the introduction of the fair repayment rate, which is an important step towards ensuring that deductions do not cause people to fall below the threshold of what we would consider an acceptable standard of living. Despite this, I still worry about the impact of the deductions. I draw the Committee’s attention to the Private Member’s Bill brought forward by the right reverend Prelate the Bishop of Manchester, which would equalise the standard allowance of universal credit for care leavers under the age of 25. Care leavers have shared their experiences of deductions from their universal credit, which, when taken from an already lower rate, can leave them struggling to afford essentials. This cohort of young adults cannot necessarily rely on the same level of family support as many of their peers.

Even though we have resumed uprating benefits in line with inflation, their real-terms value is low by historic standards. The major issue is that benefits are not calculated in relation to the day-to-day costs people face. One solution could be for benefits to rise in line with wages rather than prices, as advocated by, among others, the Resolution Foundation. Another could be to introduce a minimum floor in universal credit to ensure that people have the money they need to afford the essentials, as advocated by the Trussell Trust and the JRF. It seems eminently sensible to calculate benefits in relation to the day-to-day costs people face. We have a precedent for this, with pensions credit calculated by comparing a person’s income with the amount the Government think necessary to live on. I would be grateful to hear the Minister’s views on whether means-tested benefits could be subject to a similar assessment.

As I close, I reflect on the impact of poverty on our places of worship and wider communities. There will always be a place for voluntary provision, particularly when it comes to support that requires a more human and relational touch; but we must be attentive to the reasons why there is so much demand for food banks, warm spaces, breakfast clubs and the many other activities hosted in church buildings and by other faith groups and charities. We see first hand what the statistics bear out: poverty is deepening in our country. Investment in social security, alongside reforms in other areas, is essential in order to turn the tide on poverty.

[Baroness Drake (Lab)]

My Lords, I refer to my entry in the register of interests as a trustee of pension schemes, and I thank the Minister for her clear explanation of the two statutory instruments before us.

I want to raise an issue concerning the Guaranteed Minimum Pensions Increase Order 2025. Given the pace at which DB pension schemes are transitioning to buyout contracts, this raises the issue of the extent to which, and how, a buyout contract contains liability for a guaranteed minimum pension, and the contractual provision of a promise to provide at least that pension from the age of 60 or 65. Is this a liability that all buyout contract providers must take on when they accept the original transfer from the defined benefit pension scheme? Secondly, does the DWP intend to update its guidance on the guaranteed minimum pension, considering the extent of buyout activity now taking place among DB pension schemes?

[Baroness Janke (LD)]

My Lords, I, too, thank the Minister for her presentation. I also support very strongly the Government’s commitment to the triple lock, despite the loud and frequent calls for it to be abandoned. It is worth repeating that those who call for it to be abolished often do so from a position of financial security, conveniently ignoring the fact that large numbers of pensioners are dependent on the state pension, which is still one of the lowest in Europe.

I also welcome the capping of automatic deductions on debt from universal credit that leave people far below the amount they need to live on. But over the last year there have been reports of record levels of deductions from universal credit, and I wonder if the Minister could comment on the reasons for those.

The 1.7% uprating for other benefits will be of little comfort to the growing numbers in poverty. The Joseph Rowntree report has been mentioned already; it tells us that one in five people in the UK—21%—are in poverty. Of these 14.3 million people, 8.1 million are working-age adults, 4.3 million are children and 1.9 million are pensioners. Children, as we have heard, have higher risks of poverty overall, at 30%, versus 21% for the whole population. But larger families with three or more children have consistently faced a higher rate of poverty: 45% of children in large families were in poverty in 2022-23. That is an appalling indictment of this policy, which Labour Oppositions have criticised so much, as the noble Baroness, Lady Lister, acknowledged. I wonder how long it will take for the Government to abolish it.

Today’s uprating means that we are looking to approve a basic rate of universal credit of £92 a week for a single person aged over 25, and £145 for a couple. Yet the Joseph Rowntree Foundation and the Trussell Trust have estimated that at least £120 is needed for a single person, and £200 for a couple, in order to afford even the basic essentials—a shortfall of around £30 a week on the bare minimum needed to survive. Shortfalls in the benefit system are key drivers of poverty, depriving people of the basic necessities for survival. Specific features have been found to increase the numbers in poverty, including the benefits cap and the two-child limit, and the erosion of the value of universal credit means that its standard allowance is now at around its lowest levels as a proportion of average earnings. I too support the Joseph Rowntree Foundation on having a basic minimum floor for universal credit.

Another feature is that the capital cut-off for universal credit has been frozen since the benefit was introduced. This is a form of taxation by stealth of the least well-off, and it hits hard people in their 50s and 60s who are on benefits, having saved something for later life. For example, if they have more than £16,000 in non-pension ISAs, they are disqualified from universal credit. I wonder whether this needs to be looked at again.

The House of Lords Select Committee report Hungry for Change recommended that:

“The Government should embed consideration of the cost of the Eatwell Guide into calculations of benefit payment rates”.


Many of us were very surprised to hear that this is not factored into the calculation of the amount of benefits needed to live on. The report continued:

“The cost of the Government’s dietary guidance should be built in as a reference point to consideration of government interventions, including those relating to welfare and public food provision”.


It also cited, horrifyingly, that

“the poorest decile of UK households would need to spend 74% of their after-housing … income on food just to meet the cost”

of the Government’s Eatwell Guide, as

“compared to just 6% in the richest decile”.

With individuals and families denied the means of buying bare essentials, will the Government undertake a proper assessment of the adequacy of benefit payments to pay for the cost of essentials, including food?

The uprating today, as others have said, is not realistic in the face of ever-increasing poverty in the UK. A far-reaching and radical review of the benefits system is needed to tackle some of the fundamental problems. I know that we all look forward to the forthcoming benefit review, and the child poverty strategy, which we very much hope will address some of these desperate issues that continue to condemn families and individuals to a life of insecurity, hunger and misery, and children to a childhood of deprivation that will stay with them for life.

[Viscount Younger of Leckie (Con)]

My Lords, I, too, thank the Minister for clearly outlining the essence of these two SIs. I recall that last year, they were debated separately but I cannot remember why. Nevertheless, we are reverting to the status quo ante, and I hope that this will speed things up somewhat.

16:15

However, at the outset, I wish to state that His Majesty’s Opposition support the core principles of these SIs—namely, the uprating of pensions in line with earnings, and of benefits in line with inflation. I also acknowledge that the SIs are largely technical in nature. I shall now turn to the effect of the orders. I do not intend to go into too much detail because the Minister set out the specifics, and for that I am grateful. However, I note the pension uprating and the guaranteed minimum pension, and the two questions raised by the noble Baroness, Lady Drake. I am sure that the Minister will put her mind to answering those. This is very much an annual issue and a technical adjustment. The GMP also remains an annual point of discussion in the Committee.

However, I understand that some pensioners may not see the effect and value of the uplift until the end of May, due to a quirk in the timing of payments, as pensions are paid four weeks in arrears. The change takes effect from 7 April, as we know, and unless I have misunderstood, this issue warrants clarification from the Minister, particularly regarding any mitigating measures that can be put in place. I am ever mindful of the pensioners affected by the cut in the winter fuel allowance. What might be done there?

The uplift will see the benefits rise in line with inflation. The level of the rise is based, as we know, on retrospective statistics—1.7%—in line with the September CPI rate of inflation, which has been alluded to today. As the noble Baroness, Lady Lister, and the right reverend Prelate the Bishop of Chelmsford have said, we should all be concerned about the latest ONS figures on inflation, up 0.5% from December and now at 3% for January. Inevitably, this will erode the value of family finances. Price rises of certain goods are the core of the problem. This is another blow on top of the winter fuel allowance cut for pensioners and the employer national insurance contribution rises, with their impact on businesses and job security, and the emerging evidence of a chill on recruitment, I am afraid.

Although this debate focuses on the two SIs, it provides an opportunity for me to reflect on the wider welfare and pensions landscape. I hope the Committee will forgive me for doing that, because we face the serious issues of inactivity and dependency on our welfare system, with taxpayers currently spending £65 billion a year on incapacity and disability benefits—a figure expected to rise to £100 billion by 2029 unless the Government undertake clear, serious and immediate reform. We have also seen an alarming rise in musculo- skeletal and mental health issues, with people opting for sickness benefits whose financial support far exceeds what they could earn from work. The system is failing to incentivise work and, as a result, we are seeing a growing number of individuals on long-term sickness benefits. We have read a lot about that in the press.

Universal credit has succeeded in reducing unemployment benefit claims and moving people into work by providing support and strict job-search conditions. However, the incentives in the sickness benefit system, particularly the limited capacity for work-related activity allowance—the so-called LCWRA category—have led to individuals receiving significant support without any meaningful obligation to re-engage with the workforce. So, I should like to touch briefly on welfare reform proposals and the delays. Here, I diverge from the views of the noble Baroness, Lady Lister, and one or two others who have spoken. The Government have picked up from where we left off with the opportunity for substantial reform. Suggestions in the media about scrapping the LCWRA category, abolishing the work capability assessment or introducing a duty to engage—if that is the way it is described—with work coaches are certainly encouraging.

So, here are my questions for the Minister. Can she update the Committee on the current strategy for incapacity benefit? Can she confirm that fit notes from doctors are not being reformed? If so, what will the process be to move from a doctor’s medical assessment—as I understand it, the current sign-off rate is 94%—to a detailed and fair assessment, with a definitive decision on an individual’s ability to work, to work part-time, to work from home only or, as I do acknowledge, to do no work at all if that is the outcome of the assessment?

The concern remains that too many people are being consigned to sickness benefits without proper reassessment or support. Can the Minister provide a timeline for the Green Paper on welfare reform and clarify when we can expect actual decisions on the ground to be made? If she cannot tell us the contents of the Green Paper—I realise that she may not be able to—can she at least tell us what to expect in terms of process? Will there be, for example, a White Paper after the Green Paper, and how long will that take? I lived in hope that a decision on welfare reform would be made today, in addition to the announced cuts in overseas development aid, in line with the increase in defence spending—on this aspect, we are in favour.

The Government are also reviewing universal credit—yet another review. I hope they will conclude, as they should conclude, in my view, that it serves the country well. More than this, does the Minister agree that it more than proved itself as a robust system during the incredibly challenging times of the pandemic, when the old system comprising six benefits would most likely have failed? Does she agree that the Government should work with UC and just use it?

There was a brief debate in the Commons on the Government’s commitment to the triple lock for pensions, and the Minister there recently confirmed the triple lock. Of course, it has been mentioned here today, including by the Minister herself. I have a specific but fairly easy question for her: can she specify how long this commitment will last?

Finally, the 1.7% rise also benefits those who are receiving benefits but are not supposed to. Fraud is prevalent primarily in the benefit system, but the Government have acknowledged that there is some limited fraud in the pension sector. The Minister is well aware that we are broadly behind the crackdown on fraud, with upwards of £8 billion of fraud to rein in. I was pleased to read in the papers last week that the Government acknowledge that they are, in effect, continuing a lot of the good work that I believe we started; I hope that the Minister recognises this. Although we will have many questions when the Bill in question eventually reaches the Upper House, in general, we will support efforts to stop fraud; no more uplift of fraudulent payments is what we all want.

With that, I look forward to hearing the Minister’s responses to these points.

[Baroness Sherlock (Lab)]

My Lords, I thank all noble Lords who contributed to this afternoon’s debate. In opposition, the presence of lots of well-informed Peers asking great questions seemed like a good thing, but in government its appeal has waned very slightly. It turns out that it is rather harder to answer questions than to ask them—who knew? I will do my best, and if I do not provide answers, I will be in touch afterwards.

It is worth beginning by briefly touching on the context in which today’s uprating decisions are being made. These decisions are being taken against the very difficult backdrop of a challenging fiscal inheritance and a seriously uncertain global economic outlook. I think we all know the situation we face. Despite those challenges, today’s orders commit the Government to an increased expenditure of £6.9 billion on social security in 2025-26. I just want to note that as a starting point. That said, I very much hear the challenges referred to by the Committee, and I will try to work my way through them.

I thank the noble Viscount, Lord Younger, for his support for the approach taken by the Government and the traditions here. I also thank the noble Baroness, Lady Janke, for her support for our position on the triple lock; it is helpful to know that. I wish to address the noble Viscount’s question head on. This order demonstrates the Government’s commitment to pensioners by maintaining the triple lock, even in the current economic climate. The commitment was made very clear in our manifesto: we committed to the triple lock for this Parliament. This will mean spending on the state pension being forecast to rise by more than £31 billion across this Parliament.

The noble Viscount raised a specific point about pensioners waiting for their first uprated payment of the state pension. I think he will know from his time doing the job I now do that the state pension is paid in arrears, so the date on which somebody is first paid the higher rate—their pay date, essentially—will depend on where their cycle is. I understand that that means two things. For example, if somebody were paid on 2 May, in practice, roughly three weeks of that payment would be at the higher rate and the rest would be at the earlier rate, so there would be another month before they got their first full payment. But, crucially, this means that people receive the same rates of state pension for an equal number of weeks across the year, regardless of their pay day. I hope that helps to clear the matter up, but if I have made it more confusing, the noble Viscount can let me know afterwards and I promise to write to him.

The noble Viscount referenced the change to the winter fuel payment eligibility. Without relitigating that yet another time, I should just say that, as I have said before, the decision to target winter fuel payments on the poorest pensioners was difficult, but I believe it was right given the challenging public finances. But we are determined to get help to those who need it most, which is why the winter fuel payment is still available to those on pension credit. It is why the Government have done so much to promote pension credit and have seen such significant increases in applications for it.

A number of noble Lords mentioned the challenges of the cost of living, particularly energy. It is maybe worth reminding the Committee that additional financial help is available for low-income pensioners, first through the cold weather payments in England and Wales but also through the warm home discount scheme. Committee Members may know that this provides a £150 rebate on winter energy bills to eligible low-income households across Great Britain. We expect over 3 million households to benefit from that this winter, including over 1 million pensioners. I do not know whether noble Lords have heard the news that, just today, the Government published a consultation on an expansion of the warm home discount, which would bring another 2.7 million households into it. This means that up to 6 million households could benefit from that rebate by next winter. I hope that that will be welcomed.

The Government are also working closely with Ofgem to accelerate proposals for a debt relief scheme—something previously consulted on. The idea is that it would target the unsustainable debt built up during the energy crisis, which has led to some of the deductions that have been mentioned and challenges elsewhere.

A couple of noble Lords mentioned the household support fund in England, which is there to provide discretionary support to those most in need with the cost of essentials such as food, energy and water. I am grateful to my noble friend Lady Lister for welcoming the household support fund. It was pretty challenging. It was one of the very first things my department had to do: six weeks after the election, it had to find £0.5 billion to continue the household support fund for the rest of the last financial year. The Government have now found the money to extend the fund by a further year from 1 April 2025 until 31 March next year, with funding of £742 million plus Barnett consequentials for the devolved Administrations.

On the longer question, I regret to say to my noble friend that all I can say at the moment is that no decision has been made at this stage on the funding beyond the end of March 2026, and all the problems will be considered in the round. But we hope at least that, by giving notice ahead, we have enabled local authorities to plan much further ahead than in the slightly hand-to-mouth situation of previous times. But we will keep this under review and, if there is any change, we will obviously share any news as soon as possible.

My noble friend Lady Lister, the right reverend Prelate the Bishop of Chelmsford and the noble Baroness, Lady Janke, raised the levels of benefits and the need to tackle poverty. The Government are committed to tackling poverty and making work pay, and they have already taken some steps. I really appreciate the right reverend Prelate the Bishop of Chelmsford welcoming the decision to fund what we call the fair repayment rate. I am so grateful that my boss, Liz Kendall, wanted to spend a significant sum of money on that, even though most people will have no idea what it is. It genuinely targets those most in need by helping them to keep more of their money. But we know we have more to do on this.

The Child Poverty Taskforce is continuing its work and will explore all levers, although I am not in a position to say anything today about changes to matters such as the two-child limit. The Child Poverty Taskforce will look to span the key themes of increasing incomes, which will include social security reforms and reducing essential costs, and increasing financial resilience and better local support, especially in the early years. We will continue to watch this space as best we can.

The noble Viscount, Lord Younger, and the right reverend Prelate, among others, asked about the Government’s review of universal credit. We have now started the review, and the idea is to make sure that universal credit does its job in tackling poverty, helping people manage their money, making work pay and improving work incentives. We want to maximise the potential of universal credit, looking at its impact on customers. I say to the noble Viscount that there are things that universal credit does well, but aspects of its design have caused significant challenges to the people using it. This is an opportunity to look at how it is designed, to listen to those with experience of it and to look at whether there are ways we can better achieve the objectives I have outlined.

16:30

To respond to my noble friend Lady Lister, the Minister for Social Security and Disability, Stephen Timms, is going to lead the review and will engage with people over the next year, inviting views on how we can improve universal credit and looking at the sort of issues I have raised. We will continue to work with stakeholders, and I will take back to the department her specific point about those with lived experience of poverty and make sure that it is heard.

The right reverend Prelate raised the important issue of support for care leavers. While the Government have not been able to support the Private Member’s Bill, and although, as she will be disappointed but not surprised to hear, I cannot offer to increase the rate of universal credit, I want to reassure her of the support the Government give to care leavers. We offer various support, such as the exemption from the shared accommodation rate, and “staying put” arrangements. We try to make sure we are supporting care leavers into work. They have special single points of contact in jobcentres, priority access to universal credit budgeting support, and the opportunity to make advanced claims for universal credit to try to bridge those gaps as they effectively become independent adults. We are doing our best to support them to move into work and to develop in work, to give them a more sustainable future.

There were a number of questions about the timing of uprating. It has been done this way for a long time for a reason. The first challenge is that inflation clearly moves, but when inflation is stable it might be worth using actual inflation rates for the previous September. That will mean that, over the medium term, benefits will hold their value over the course of the year and broadly match inflation trends. It might be worth noting that for the past two financial years, using the September inflation figure actually resulted in increases higher than the rate of inflation the following year. Working-age individuals, for example, benefited from an increase that was 1.4% higher than the rate of inflation in April 2023 and 4.4% higher than the rate of inflation in April 2024. It does move, but it often moves in different directions.

My noble friend asked whether we can move to a shorter timeframe. Inevitably, things are always more complicated when one is in government. It is worth saying that the Government begin programming the IT systems for the new rates for the following April in November. Using a shorter timeframe could only ever be achieved for universal credit, not across all benefits, because the systems are different. I will take this idea back and we will keep looking at it, but one of the challenges is the number of interdependencies. For example, we are quite dependent on data going to and from DWP, but also housing benefit for pensioners, and HMRC for calculation of 12 million tax notices. These interdependencies mean that it is never quite as straightforward as one hoped, but I take note of her aspiration and I will keep conversations going on that.

On the levels themselves, we recognise that there are challenges, and different benefits do different things and have therefore always been uprated in different ways. We probably do not have time to go into that, but I take the broader points that have been made. On the question of work, the Government are absolutely committed to providing financial support for those in low-paid work, those who are looking for work and those who cannot work, but we also know that reducing economic inactivity and increasing the number of people in work is crucial to their best interests, and to growing the economy. That is why this Government’s Get Britain Working White Paper outlines the biggest employment reforms in a generation, backed by £240 million of investment.

My noble friend Lady Lister raised the question of in-work poverty. One thing that will help, of course, is that the Chancellor has raised the national living wage and the national minimum wage from next April, which will benefit 3 million full-time workers by up to £2,500 a year. Part of our job is to pursue good work, and to get people into work and moving up within that.

In response to the noble Viscount’s comment about reform of health and disability benefits, we might have to disagree about the effectiveness of the previous Government’s attempts to get people into work and what the consequences were, but we can have that debate at more length when we publish the document. I am afraid that it is good revenge for all the times I have pressed him to tell me when reforms would happen. All I am able to say to him now is what he has often said to me in the past: “in due course”. In fact, I can be more specific: the Green Paper will come out in the spring, and it will contain details. We are looking to develop proposals specifically to reform the system of health and disability benefits, in order to promote and enable employment among as many people as possible.

The noble Viscount raised the issue of work capability assessments. We are clear that the WCA is not working and needs to be reformed or replaced, alongside a proper plan to help disabled people into work, which will help them, business and the economy. We will reconsult on the WCA changes as part of the Green Paper.

The right reverend Prelate the Bishop of Chelmsford, my noble friend Lady Lister and others raised the question of housing—the LHA issue. The Government had to take some difficult decisions in the Budget to address the challenging fiscal context. But we clearly have a problem with the housing market. We currently spend around £33 billion a year on support for renters in both private and social rented sectors. One of the things that we are determined to do is work with MHCLG on its long-term housing strategy, which will be published in the spring. That will set out a plan to reform the housing market to work better for communities, to build another 1.5 million high-quality homes and deliver an increase in affordable housing.

I will try to run through the other questions quickly. I have plenty of time. On the question of food banks, this Government are committed to reducing mass dependence on food banks, and we are open to evidence from anywhere, including from the Church —particularly in relation to child poverty—about what is driving that. I am meeting with Church organisations and looking forward to visiting projects exactly to see at first hand the kind of things the right reverend Prelate is describing. We are keen to learn from that as part of the process in trying to review the child poverty strategy. I ask noble Lords to intervene if I have missed anything out.

[Baroness Janke (LD)]

Can I ask about the record levels of deductions in universal credit that have been made in half of last year, which hit record numbers? I have been reading reports about them. Could we have some insight into that?

[Baroness Sherlock (Lab)]

I do not have an insight on that at the moment. It is something I have asked about and have not yet got clear data on, but we are hoping that the changes we will make around things such as the fair repayment rate will help to rebalance that at the bottom, but I will have a look and, if I have any more data, I will write to the noble Baroness, if that is okay.

I turn briefly to the guaranteed minimum pensions increase order. I am grateful for the support for it. It simply aims to ensure that members who have a guaranteed minimum pension earned between 1988 and 1997 receive a measure of protection against inflation.

My noble friend Lady Drake asked a good question, as ever—in this case, about whether all buyout contract providers have to take on GMP liabilities in full when they accept the original transfer from the defined benefit pension scheme. I am happy to say that the Pension Schemes Act 1993 and associated regulations require all bulk annuity contracts to provide GMP benefits where applicable. From the point of view of scheme trustees, if a scheme was contracted out and still contains GMPs, both its trust deed and rules, and the legislation, will require the trustees to make sure that the bulk annuity contract provides those GMPs. From the point of view of the buyout contract provider, if a buyout contract includes GMPs, the provider is under a contractual obligation to provide those benefits. If the correct benefits somehow are not properly reflected in the bulk annuity contract, the scheme trustees, I am afraid, will remain liable for any additional liability, and that would include any GMPs. A question has been raised about whether there should be additional guidance, but the schemes and providers already have a clear legal duty or requirement that they have to follow and that they should be familiar with before they consider a buyout.

To conclude, through these orders, the Government are increasing the basic state pension and new state pension in line with earnings growth by 4.1%, meeting our commitment to the triple lock. We are increasing the pension credit standard minimum guarantee in line with earnings growth by 4.1% to support pensioners on the lowest incomes, increasing benefits to meet additional disability needs, and increasing carers benefits and working-age benefits in line with prices by 1%, and we are ensuring indexation on guaranteed minimum pensions earned between 1988 and 1997 that are in payment. I commend these orders to the Committee.

Motion agreed.

Guaranteed Minimum Pensions Increase Order 2025

Tuesday 25th February 2025 Grand Committee

Considered in Grand Committee

16:39

Moved by

[Baroness Sherlock]

That the Grand Committee do consider the Guaranteed Minimum Pensions Increase Order 2025.

Motion agreed.

Social Security (Scotland) Act 2018 (Scottish Adult Disability Living Allowance) (Consequential Modifications) Order 2025

Tuesday 25th February 2025 Grand Committee

Considered in Grand Committee

16:41

Moved by

[Baroness Anderson of Stoke-on-Trent]

That the Grand Committee do consider the Social Security (Scotland) Act 2018 (Scottish Adult Disability Living Allowance) (Consequential Modifications) Order 2025.

[Baroness in Waiting/Government Whip (Baroness Anderson of Stoke-on-Trent) (Lab)]

My Lords, this draft order is the result of collaborative working between the two Governments of Scotland and supports the Scottish Government’s decision to introduce the Scottish adult disability living allowance in Scotland next month. Discussions on this order began over a year ago under the previous Government. I thank the noble Lord, Lord Cameron, for his previous work in the Scotland Office to facilitate this order.

The Scotland Act 2016 devolved significant powers, including responsibility for certain social security benefits and employment support, to the Scottish Parliament. The Scottish Government’s introduction of the Scottish adult disability living allowance under Section 31 of the Social Security (Scotland) Act 2018 exercises this responsibility. The Scottish Government will administer this new benefit in Scotland through their executive agency, Social Security Scotland.

At introduction, the Scottish adult disability living allowance will operate on broadly the same terms as the disability living allowance that it replaces. It is the intention of the UK Government that those individuals in receipt of the Scottish adult disability living allowance should receive the same treatment in the reserved social security and tax systems as those on the disability living allowance, the Scottish recipients of which will transfer from DWP to Social Security Scotland.

The order before us is made under Section 104 of the Scotland Act 1998, which allows for necessary amendments to legislation in consequence of any provision made by or under any Act of the Scottish Parliament. It is therefore the appropriate vehicle to make these technical—by which I mean “very technical”—but important changes to recognise the Scottish adult disability living allowance in reserved systems. Scotland Act orders are a demonstration of devolution in action, and I am pleased to say that the Scotland Office has taken through over 250 orders since devolution began.

I turn to the effect that this order will have and the provisions that it will make. The order makes amendments to UK legislation to ensure that the Scottish adult disability living allowance is recognised as a qualifying benefit, in the same way as disability living allowance, in the reserved social security system with regard to entitlements to additional reserved UK Government benefits and premiums. This includes the Christmas bonus and the carer’s allowance. This means that recipients of the Scottish adult disability living allowance will be entitled to receive the annual £10 Christmas bonus payment if it has not already been paid via another benefit. Should all other eligibility criteria be met, it will also ensure that the reserved carer’s allowance can be paid to someone caring for someone in receipt of the Scottish adult disability living allowance.

This order also prevents dual entitlement to benefits paid because of the same needs: individuals entitled to Scottish adult disability allowance cannot be entitled to attendance allowance, disability living allowance or personal independence payments. This is in the same way that disability living allowance and PIP are not payable to people in receipt of attendance allowance. It also amends the taxation of trusts with disabled beneficiaries, to treat those with beneficiaries in receipt of Scottish adult disability living allowance in the same way as those with beneficiaries that receive DLA.

Without this order, people in Scotland on Scottish adult disability living allowance would not receive the equivalent tax treatments and entitlements to reserved premia and additions as individuals in receipt of DLA in England and Wales, or Northern Ireland. The Scotland Office, the DWP, HMRC, the Scottish Government and the Northern Ireland Executive have worked closely to ensure that this order can be made, clearly demonstrating cross-government support for it. This Section 104 order is yet another example of devolution in action and I beg to move.

[Lord Bruce of Bennachie (LD)]

My Lords, I am grateful to the Minister for her introduction of this order. As she says, it is technical and complex but there can be the rub in these kinds of things. I also welcome the fact that there is constructive collaboration between the Scottish Government and the UK Government on this. The people of Scotland have two Governments; it is important that they know that they do, and who is doing what and where they are working together. I take it that the same funding transfer will take place as in other social security benefits that have been transferred to Scotland. Again, it is important that the UK Government make that clear and that the Scottish Government acknowledge it, but it obviously gives the Scottish Government the ability to adapt these benefits to local circumstances, which is really the advantage of this.

I think we might all be grateful for the Scottish Commission on Social Security’s analysis. There are one or two aspects of concern which it has raised— I do not intend to pursue them all—that I want to explore with the Minister. In my previous capacity as a Member of Parliament, obviously I saw many circumstances where benefit claimants had problems with the administration. They also had family involved in that too.

Perhaps the biggest issue that happens is that those people who have succeeded in applying for and getting long-term benefit, in particular, have a real anxiety about anything that involves a review, even though they have been told that it is permanent. As the commission points out, the fact that there is an option to apply for adult disability payment—the Scottish adult DLA can effectively continue as if it was DWP—sounds like an improvement on the situation in England, where there is an automatic transfer to PIP. But the problem for many claimants is that if they apply, they really do not know whether they will be better or worse off. That is aggravated by the fact that once they have applied, if they find out that they are worse off they cannot revert to the previous benefit.

To some extent—I expect the Minister will argue this—it is a matter for the Scottish Government, and I accept that. But equally, the Minister wanted to make it clear that the DWP and the UK Government wanted to be sure that there would be no loss of benefit. Nor do I take the view that the Scottish Government have any obvious intention to disadvantage people who may be in that situation.

A particular recommendation of the commission that seems valid is that people must have access to independent, professional advice as to whether it would be in their interests to apply to switch to the new Scottish benefit or stay on their current effective benefit. Why would they want to transfer? In some cases, it will give them access to other related benefits which are triggered by the benefit that they are claiming. On the other hand, by leaving one they may also forfeit benefits that they currently can get, so it really is important that people know what they are going to do. The question of the grace period of two years also arises; the commission has suggested that it should be more flexible, because people really may not know what the advantage or disadvantage of doing it would be.

That is the main point of concern. There are obviously issues relating to those of working age and those of pensionable age. There is also the possibility that one benefit may give you access to related benefits while the other one does not.

So, in sum, to what extent is the collaboration a continuing one as opposed to handing it over and basically saying to the Scottish Government, “There you go. We’ve handed over some account of the money. You now have it and you can do what you like with it”? Alternatively, is there a recognition of good will on both sides and that people should be able to opt for what is best for them? The Scottish Government’s objectives are that benefits should always offer the best that is available for which people qualify. But the danger, sometimes, is that opting for one benefit as opposed to the other may lead to a loss. Why is it not possible to opt for the transfer but if, as a result of that, it becomes clear at the point of swapping over that it is a disadvantage to switch, are people in a position to say, “No, I’m not going to switch”, or are they already too far committed? That is really the point.

I think the Minister will appreciate that people who find themselves on the wrong side of that will be aggrieved and will let people know they are aggrieved, which is surely not what we want. The objective is to ensure that people who have applied for benefits get them on a fair basis and that, once they have secured them, they continue on a fair basis and there is no arbitrary situation where what they can or cannot claim changes simply because they have opted for one benefit as opposed to the other. So the choice is great, but not if people do not know the reason, the benefits and the outcomes.

A number of other issues were raised by the commission, but the Minister will know what they were. It did a very useful report that covered pretty well everything that needed to be covered. The assurances we have are that the British Government will not simply wash their hands but that the collaboration will continue, allowing the Scottish Government to do what they are doing—but perhaps recognising that there are some transitional things here that may require a bit more flexibility than appears to be provided for by the instrument itself.

[Lord Cameron of Lochiel (Con)]

As ever, I am grateful to the noble Baroness for her helpful introductory remarks and for her kind words about me and my brief stint as a Minister in the Scotland Office. I feel somewhat undeserving of those. The July election meant that I never quite got the opportunity to present a Scotland Act order in this Committee, and I now find myself, regrettably, scrutinising them in opposition.

In general terms, this is indeed a sensible and technical order that we will not oppose. Clearly, those who are entitled to the Scottish adult disability allowance should not also be entitled to the UK Government’s disability living allowance at the same time. Further, it is important that the relevant UK legislation is amended to ensure that recipients of the new Scottish DLA are treated in the same way as recipients of DLA in the rest of the UK, in respect of reserved taxes and benefits.

Since 2016, the devolution of some aspects of welfare to the Scottish Government has been complex and certainly not straightforward. It is perhaps a unique policy area, where some elements are reserved and some are devolved. That means that it requires sophisticated operating systems to be in place within both the new Social Security Scotland and the DWP. It also necessitates close and collaborative working between the Scottish and UK Governments at an official level—a point made so well by the noble Lord, Lord Bruce.

With that in mind, I raise the following points. Is the noble Baroness confident that these operating systems are agile and accurate enough to avoid the very duplication that this order seeks to preclude, as well as ensuring that cases that might be complex and difficult do not lead to people being denied payments that they are entitled to?

Secondly, although there has been no formal consultation here, can the Minister update the Committee on what informal consultation has occurred, if any? Has there been a public information campaign of any kind to ensure that those affected by these changes are aware of them?

Thirdly and finally, I return to divergence; I accept that it is a bit of a pet subject of mine, but it is important. There remains the distinct possibility that, in time, the Scottish and UK systems might diverge, whether in terms of rates, payables or benefits in more fundamental terms. Has any assessment been made of the consequences of potential divergence when it comes to eligibility for benefits? I look forward to hearing the Minister’s answers to these points.

[Baroness Anderson of Stoke-on-Trent (Lab)]

I thank both noble Lords for their contributions to the debate this afternoon. As ever, they asked some pertinent and relevant questions. However, I reiterate that this is a technical SI and that the policy process is a matter for the Scottish Government. We are, as our responsibilities make clear, providing them with the legal framework that already exists.

With regard to the questions asked by the noble Lord, Lord Bruce, the same funding transfer arrangements will take place. As I said, this is technical. I completely agree with him in terms of his experiences as an MP. Some of the most heart-wrenching conversations I ever had were with my former constituents who were in fear of what might happen in terms of a review—not even of the review itself. Then the appeal process was something else. So I completely agree with the noble Lord, but I reiterate that the application and review processes are a matter for the Scottish Government and Social Security Scotland. However, I assure him that there will be ongoing collaboration between both Governments, who touch on the lives of the people of Scotland and of people in every corner of the United Kingdom. There is genuine good will; I hope that there will be even better good will after the next set of Scottish elections, but we will see.

With regard to the benefit options, the Scottish Government are making sure that individuals can make an informed choice about what will benefit them, but I want to clarify something for noble Lords: everybody currently on DLA will ultimately end up transferring into the new benefit. It is a replacement benefit. As that process happens, it is a matter for the Scottish Government.

I turn to the noble Lord, Lord Cameron. I am sorry—not necessarily for the country but for him—that he never got to stand on this side of the Room to put forward a Section 104 SI. However, he started the work that we are discussing today, and I am grateful for that. With regard to his specific questions on the agile systems that we expect to be in place, the Scottish Government and Social Security Scotland believe that they are ready for them. In fact, the process will get under way on 21 March. So they are definitely aware, but we will continue to work closely with them. In terms of whether those affected are aware, that will be an ongoing process, but we will make sure that we work closely with anyone who is affected, especially anyone who either is on the border or would have been entitled and who lives in either Scotland, England or Wales—as the onus will be on us, I think; my officials have not shouted at me yet so I think we are okay.

I know that divergence is of huge interest to the noble Lord, Lord Cameron, as well as to many other noble Lords. The Scottish adult disability living allowance operates in broadly the same way as the DLA, and the UK Government have agreed that it can be treated in the same way—it is a qualifying benefit but is very similar. We will consider any changes that the Scotland Government make to the Scottish adult disability living allowance in future and, if those changes meant that it diverges significantly from the DLA, it would be for the UK Government to consider how to identify individuals in Scotland who may be eligible for additional support in the reserve system. So we will continue to monitor that. I think that answers the noble Lord’s question.

I believe I answered everything so, in closing, I say that this instrument demonstrates the UK Government’s continued commitment to working with the Scottish Government and to delivering for the people of Scotland.

Motion agreed.

Safeguarding Vulnerable Groups Act 2006 (Amendment) (Provision of Information) Order 2025

Tuesday 25th February 2025 Grand Committee

Considered in Grand Committee

17:01

Moved by

[Lord Hanson of Flint]

That the Grand Committee do consider the Safeguarding Vulnerable Groups Act 2006 (Amendment) (Provision of Information) Order 2025.

Relevant document: 14th Report from the Secondary Legislation Scrutiny Committee (special attention drawn to the instrument).

[The Minister of State, Home Office (Lord Hanson of Flint) (Lab)]

My Lords, I beg to move that the Committee has considered the order, which amends the Safeguarding Vulnerable Groups Act 2006 in order to give the Disclosure and Barring Service, the DBS, an express power to share its barred list information with UK non-territorial police forces and the Crown dependency police forces of Guernsey, Jersey and the Isle of Man. I hope this will be a relatively straightforward Motion for the Committee because, as well as issuing criminal record certificates, commonly known as DBS checks, the DBS also maintains two lists—one of people that the DBS has barred from working in regulated activity with children, and one of those it has barred from working in regulated activity with adults. Regulated activity for the purposes of this includes sensitive roles such as work in schools, health and social care.

The DBS bars people from such work if their criminal history or other information held by the police, or their behaviour in the workplace, indicates that they pose a high risk to either or both of those groups. The DBS itself updates the police national database, PND, on a weekly basis with the names of individuals who have been barred. If the police then look up a named individual on the police national database—for example, for the purposes of criminal investigation or police officer vetting—the police will be able to see if that person is on one or other of the DBS barred lists.

An express power to share such information with the police is provided to the DBS by Section 50A of the Safeguarding Vulnerable Groups Act 2006. This gives the DBS the power to provide any information it has to a chief officer of police for the purposes specified in the Act, and it confirms that a chief officer of police includes the Police Service of Northern Ireland and Police Scotland. However—and this is the nub of the order before the Committee—it does not make express reference to the non-territorial police forces or the Crown dependency police forces. Following an extensive review, which includes arrangements for accessing the police national database, the DBS has decided on a precautionary basis that there should be express statutory ground for sharing its barred list data with these forces. It therefore took steps in March 2024 to prevent them accessing the barred status of individuals, pending resolution of the legislative position. This means that, at the moment, non-territorial forces and the Crown dependency police forces cannot currently access an individual’s barred list status.

We therefore intend, through this order, to make it clear that the definition of “chief officer of police” in Section 50A also includes the chief officers of the UK, non-territorial and Crown dependency police forces. Those non-territorial forces are the British Transport Police, the Civil Nuclear Constabulary, the Ministry of Defence Police, the Royal Navy Police, the Royal Air Force Police, the Royal Military Police, the National Crime Agency and the tri-service serious crime unit. The Crown dependency forces, for the purposes of this order, are the States of Jersey police force, the salaried police force of the Isle of Guernsey and the Isle of Man Constabulary. This order effectively gives the Disclosure and Barring Service the certainty it seeks to provide all forces with access to information that indicates that someone is considered to pose a risk to children and vulnerable adults.

In conclusion, the DBS’s barred list exists to help protect the most vulnerable in our society from those who pose a high risk of harm to them. That information is important to decisions made by police forces, whether related to police officer vetting or related to the prevention and investigation of crime.

This order’s purpose is to give the DBS the statutory power, beyond any doubt, to share this information with all forces, including the non-territorial and Crown dependency forces. I commend it to the Committee.

[Baroness Brinton (LD)]

My Lords, just before I contribute, are we not doing both SIs together?

[The Deputy Chairman of Committees (Baroness McIntosh of Hudnall) (Lab)]

That is not what my brief indicates, but of course, if the noble Lord wishes to do that, he can propose it.

[Baroness Brinton (LD)]

I apologise.

The first reading of this brief regulation and the Explanatory Memorandum is misleading. It appears to be a minor correction to ensure that access to DBS barred list details will now include non-territorial and specialist police officers. Nothing to see here—or is that the case?

Once again, I thank the Secondary Legislation Scrutiny Committee for its 14th report of this Session, in which it set out the real background to this SI and the previous history of errors in law by this department being corrected by regulations—but with Explanatory Memorandums lacking in information to inform those parliamentarians wishing to scrutinise regulations. It points out at least 10 SIs for this period since July 2024 that have been unsatisfactorily presented to your Lordships’ House—referenced by the committee in its third, fourth, eighth and 10th reports. This SI now needs to be added to that list.

The reality of this SI is that highly confidential information under the DBS legislation had been passed on to police bodies even though they were not permitted to receive it. The original Act, passed in 2006 under the previous Labour Government—nearly 20 years ago now—has clearly not been reviewed in detail since then. One must commend the new Government for dealing with not just this issue but the other ones as well. However, it is a real shame that the somewhat underhand tactics of the Explanatory Memorandum, designed to elicit confidence in the reader, are misleading as to be against the spirit of the relationship between a Government and the Parliament that is there to ensure that it can hold that Government to account. Can the Minister say whether the systems have been changed in the Home Office to ensure that this type of obfuscatory approach is now ended and that all such legislation that needs to be updated has been updated?

On the SI itself, the Secondary Legislation Scrutiny Committee raises the issue that the implication of the draft order is that unlawful sharing of data may have happened, even if it did not concern very many people. Individuals on the list may have been affected by being denied a job or made the subject of a protection order. So can the Minister tell the Grand Committee how many individuals—even if the number is small—may have been affected by the unlawful activity, and, perhaps even more importantly, whether those individuals have been told?

[Lord Cameron of Lochiel (Con)]

My Lords, I am grateful to the Minister for setting out the detail and rationale for this order. I make no comment on the on the observations just made by the noble Baroness and seek to address only the substance of the order.

As the Minister said, this statutory instrument seeks to grant explicit statutory authority for the DBS to share information with a range of non-territorial and specialist police forces. Although the need for this clarification is important and of course understandable, there are several questions about how this change will affect safeguarding practices more widely.

The order seeks to address a gap in the legal framework and expand the list of forces with access to the DBS. These were listed by the Minister, and I do not seek to repeat them. Given the critical role that these forces play in safeguarding vulnerable people, it is vital that they have access to all the relevant data that could indicate a risk to public safety. If properly implemented, the changes discussed today should enable the relevant forces to access that information and enhance protection.

I will probe the Minister on a couple of points. Is he confident that the forces now granted access to DBS data are fully equipped—in terms of both training and technology—to handle and act upon this sensitive information effectively? Safeguarding data is of the utmost sensitivity, and the risks of misuse or failure to act on such information are significant. What specific protections are in place to ensure that qualified authorised personnel within these forces can access and use the data properly?

Further, the SI allows the sharing of data on individuals barred from working with children or vulnerable adults. There is obviously an expectation that that data will be actively used to prevent harm. Therefore, are any guidelines or protocols in place to govern how this information will be used by the additional range of forces?

Finally, it is important to understand how these new regulations will fit into the broader safeguarding landscape. While recognising the need to protect and secure sensitive personal data for a host of reasons, I ask: does that preclude a more integrated approach to data sharing in general, not just among police forces but perhaps with agencies such as social services and healthcare providers?

The Opposition see this a positive step toward improving safeguarding. Plainly, it is important that its utility is measured and evaluated. I look forward to hearing the Minister’s responses.

[Lord Hanson of Flint (Lab)]

I am grateful for the contributions from the noble Baroness, Lady Brinton, and the noble Lord, Lord Cameron. I first address a point that the noble Baroness made about the Explanatory Memoranda for Home Office SIs. I am going to be honest with her: there has not been a been a good performance by the Home Office for a long period of time. The Home Office has recognised that. I am responsible for what has happened since 4 July last year. A number of SIs criticised by the statutory instrument committee were lacking in information and assessments from the previous Government. I am not going to pick a fight with the previous Government for that; that can happen.

On entering office in July, my job was to recognise that concern from the statutory instruments committee and to ensure that we try to address it. In addressing it, I did two things: I met the then chair of the statutory instruments committee—the noble Lord, Lord Hunt—and I have since had discussions with the noble Lord, Lord Watson, who has subsequently taken over that position. We will continue to liaise with him on that and we will examine that with him. I initially gave the noble Lord, Lord Hunt, the assurance that we will try to improve performance on SIs. I am committed to ensuring that SI legislation is delivered to the highest standard.

We are in a transitionary period. We are still in only the seventh or eighth month of this current Government. Therefore, we, the Home Office, are working hard to drive improvements in explanatory materials where there have been deficiencies. That includes organising refreshment training and guidance for members of staff. I have personally met with officials who deal with the statutory instrument guidance across the board. They are fully aware that not only I but the Leader of this House and the Leader of the House of Commons are very keen to ensure that SIs and Explanatory Memoranda are at a better standard than they were. I give that assurance to the noble Baroness today. It is starting to yield results, with the Secondary Legislation Scrutiny Committee having commended the department recently for its explanatory materials provided in support of several of the latest Home Office instruments. I assure the noble Baroness that that will get better over time, all being well.

17:15

There were valid questions from both Front-Bench spokespeople with regard to the assessment. I will first take the question of legal risk, which was party to both of their contributions. To go back to first base: the DBS was, until March 2024, sharing this information with the authorities that are in this order. It was sharing it with Guernsey, Jersey and the other police forces that I mentioned, therefore, to go back to the point made by the noble Lord, Lord Cameron, it had confidence that those organisations were capable, efficient and able to use that information in a proper and effective way.

What it did not have was what it perceived to be full legal cover, so it was worried about the potential for legal challenge. That issue led to the proposal in March 2024 —again, before I came into office—saying, “Can we review this procedure to give it full legal status?” In a sense, we are making sure that what happens now, which happened before March 2024, is on a fully legal basis so that it does not have the type of challenge that the noble Lord indicated and which I think the noble Baroness, Lady Brinton, also mentioned.

Most of those who are barred by the DBS will have been barred because of a conviction for a serious offence or because police information disclosed on an enhanced DBS check led to the DBS considering them for barring. That is information which is currently in the police computer. When these forces search for information on their systems, they will find the criminality and police information to which they already had access, as well as the barred list status of the individual.

What we are looking at now is in relation to the small number of individuals—again, this goes to the nub of the points made by both Front-Bench speakers—who are on the barred list for reasons other than a relevant criminal conviction or other police information. It is still possible that the police may have information on those individuals on their systems via, for example, a criminal investigation. That leaves a small potential cohort on the barred list where the barred status, which can be accessed only with DBS permission, would be the only information available on police systems. In those cases, the number in this small group is reduced further as it concerns only those being looked into by those forces added by this order which, by definition, are a minority of police forces. The assessment we have made is that there is a minimal risk to the public from that change.

The noble Baroness mentioned the potential for individuals to know whether they are on a barred list. If they have a criminal conviction or other things that I mentioned previously, they will know that they are on it. What they will not necessarily know is when someone accesses that information. I hope that the concerns that she has mentioned are not founded, but I am happy to reflect on what she said when I read the Hansard transcript. If need be, I will write to her accordingly.

I hope that I have answered the points mentioned by the noble Lord, Lord Cameron, because on capability, guidelines and protocol, that was all happening before March 2024. The DBS, the police national computer and the agencies receiving that information were content, but the DBS itself said, “We think we potentially don’t have the legal cover to do that”, so this order is to ensure that that legal cover is there. The jurisdiction in Guernsey, Jersey and other places is a matter for them but we are now sharing that information on the same basis that we were pre-March 2024, subject to this order, but given that legal certainty on top. With those comments, I hope that I have answered the points—

[Baroness Brinton (LD)]

I thank the Minister very much for his very helpful answer. I was asking about individuals because if this tiny group do not know that they are on the barred list but are having jobs denied them, we are going back to the system that used to operate 30 years ago when I was chair of education in a county council. It was essentially a secret list then. The point about those who have criminal records is that the individuals concerned know. It may be only a small number but I am very concerned about that group.

[Lord Hanson of Flint (Lab)]

I think I said—but I will check Hansard again—that all individuals will know that they are barred. Having reflected on this matter, I can confirm that all individuals will know that they are barred. Again, this is, in a sense, a process matter to ensure that there is legal certainty for the agencies that share that information.

[Baroness Brinton (LD)]

What about the individuals?

[Lord Hanson of Flint (Lab)]

The individuals know that they are barred because of the reasons they have. So there is legal certainty about that. I hope I have answered the noble Baroness, but, if she wishes to intervene again, I am obviously happy to reply. If she does not, I commend this instrument to the Grand Committee.

Motion agreed.

Immigration and Nationality (Fees) (Amendment) Order 2025

Tuesday 25th February 2025 Grand Committee

Considered in Grand Committee

17:20

Moved by

[Lord Hanson of Flint]

That the Grand Committee do consider the Immigration and Nationality (Fees) (Amendment) Order 2025.

Relevant document: 16th Report from the Secondary Legislation Scrutiny Committee

[The Minister of State, Home Office (Lord Hanson of Flint) (Lab)]

My Lords, this fees order sets out the immigration and nationality functions for which a fee is to be charged and the maximum amount that can be charged in relation to each of those functions. Within the order, we propose a number of changes that will facilitate major government policy.

Fees charged by the Home Office for immigration and nationality applications are an essential part of the department’s funding settlement and help to support the sustainable operation of the migration and borders system while reducing reliance on taxpayer funding. It is important, therefore, that we have sufficient flexibility within the department’s legislation to set fees at levels that support this funding approach. This amendment order will play an essential role in delivering this flexibility while also helping to ensure that our legislation remains current and reflects changes in the wider migration and borders system.

I will go into more detail on each of the changes that we propose, but, to summarise, this order covers a number of areas. First, it will increase the fee maxima that can be set for the electronic travel authorisation—ETA—for sponsorship on work routes, for naturalisation as a British citizen or British Overseas Territory citizen, and for certain nationality services. It will also remove the fee provision related to the electronic visa waiver and make consequential amendments to the Immigration and Nationality (Fees) Regulations 2018 to remove the fee.

I turn to the changes we propose to the fee maximas. The figures set out in this order act as a ceiling within which the Home Office is able to make changes to fee levels by laying separate legislation and seeking agreement across government. It is sensible to keep these maximas under review, to ensure that the order continues to support our fees and funding objectives. The changes we propose today, which are accompanied by an economic impact assessment, will provide the necessary flexibility to make changes to fee levels where they are required to ensure that the sustainability of the migration and borders system is maintained.

I emphasise that the actual fee levels that are charged to those seeking to enter or remain in the UK are not changing in this order. Any changes to the fee levels will be made through separate legislation and will also be accompanied by full economic impact assessments. However, in laying this order, we have sought to provide some clarity to Parliament and the public about our intention to increase certain fees when parliamentary time allows and when further orders are brought forward. We will, first, increase the fee maxima applying to an application for an electronic travel authorisation—ETA—from £15 to £16, in order to facilitate a subsequent increase in the chargeable fee from £10 to £16. The fee maxima that applies to certificates of sponsorship, which are assigned by employers to employees who need a visa to work and stay in the United Kingdom, will increase from £300 to £525. This maxima increase will also apply to the successor sponsor a worker process, which is being rolled out on a phased basis currently. In both cases, the chargeable fee for the main category of application will increase from £239 to £525.

We will also increase from £1,500 to £1,605 the fee maximum that applies to adult applications made to naturalise as a British citizen or a British Overseas Territory citizen. This will facilitate a subsequent increase in the chargeable fee for applications to naturalise a British citizen to the new maximum level. We will also increase the fee maxima that apply to various nationality-related services, which include an amendment to the certificate of registration or naturalisation and the supply of a certified copy of a document granted under current or former nationality Acts or, indeed, the supply of any of the documents specified in Table 7 in this fees order. All these will increase from £400 to £428. The review of a decision related to immigration and nationality will increase from £450 to £482, and the issuance of a document confirming that a person has the right of abode in the United Kingdom will be increased from £550 to £589.

To be clear to the Grand Committee, although we have announced our intention to increase fee levels later this year, they will not be increased until we lay separate legislation, the immigration and nationality fees regulation, which will be subject to agreement and approval by Parliament.

Finally, we will remove from this order the chargeable function from an electronic visa waiver and make the necessary amendment to the Immigration and Nationality Fees Regulations to remove the fee. This change is being made because the electronic fee visa waiver has been replaced by the ETA for nationals of Qatar from October 2023 and for nationals of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates from February 2024. The changes we will be making through this order are vital to provide flexibility to amend fee levels. They will subsequently have to have the approval of Parliament to ensure that the system is sustainably funded. I emphasise once again, there is no fee increase today through this order, but I move the principle so that Parliament, the public and those who want to access those services know where they stand for a future planning purpose.

[Lord Rowlands (Lab)]

My Lords, it was my pleasure for the past three years to have served on the Secondary Legislation Scrutiny Committee. It has reported on a whole series of immigration and nationality fees, and it is in that context that I wish to raise a particular, serious issue that has arisen. That committee has never questioned the need or requirement for such fees, or that they should be appropriate and should match the costs. However, an extraordinary situation has arisen in the context of some of the fees that have been charged by the Home Office. That is, a whole series of fees have been charged unlawfully, in that it proved to be the case, after years of these fees being charged, that there is no statutory basis for doing so.

On top of that, worse is to follow. In fact, VAT has also in some cases been inappropriately served on some of these fees. The Secondary Legislation Scrutiny Committee has drawn the special attention of the House to this extraordinary situation. The committee recommended that those fees that were considered unlawful should be suspended until such time as the matter had been resolved. The department refused to do so and, in fact, is continuing unlawfully to charge fees in some areas, despite the recommendations of the Secondary Legislation Scrutiny Committee.

I seek to draw attention to this extraordinary situation. I have been around for a very long time and have never come across the situation where a major government department has behaved in this way. In a three-year period, it collected £50 million without statutory authority. That is an astonishing situation. Therefore, we on the committee have been pressing—indeed, everybody should press—the department to resolve this legislative shambles that has occurred.

It appears that the possible resolution for this situation is that it may require retrospective legislation to sort it out. I therefore ask my noble friend the Minister, first, whether the department now agrees that it is necessary for such retrospective legislation to resolve this legislative fiasco? Secondly, if so, when will that be introduced? He cannot drag his feet any longer. This unlawful imposition of fees has been going on for a long time. I therefore ask the Minister to assure us not only that there will be such legislation but that it will be brought in promptly, so that the intolerable situation that has arisen can be resolved.

17:30

[Lord Foster of Bath (LD)]

My Lords, I am fascinated to follow the noble Lord, Lord Rowlands, with the information that he has provided to us today; I very much look forward to the Minister’s response to the points that he made. I shall concentrate on only one very small bit of the statutory instrument before us: the bit that relates to the electronic travel authorisation, or ETA.

I serve as the chair of your Lordships’ Justice and Home Affairs Select Committee. We have on a number of occasions looked in a great deal of detail at the planned introduction, and now the actual introduction, of the ETA. It is an authorisation requirement for anybody who does not have a visa and who wants to come here for a short stay from non-visa countries. We welcome the pushing out of the boundaries and the borders that this measure involves, giving us the opportunity to collect information about visitors to our country before they have even arrived, but we have expressed a number of concerns and made a number of recommendations to the Government about it. That is why I am focusing on this one particular issue.

What is proposed here is an increase in the maximum fee from £15 to £16, which of course seems incredibly limited; it is a very small increase. However, as the Minister rightly pointed out, the Government have made it absolutely clear that it is their firm intention that, as soon as time allows, another statutory instrument will come along; this one will increase the current fee from £10, as it is now, to a new maximum of £16. Obviously, that is a very significant 160% increase that we are going to see.

Bear in mind that, when this measure was introduced, we heard a number of things from the previous Government, who, in fairness, introduced it. In a Written Ministerial Statement of 6 June 2023, the then Minister of State for Immigration, Robert Jenrick, said:

“This fee level is competitive with that of equivalent systems run by other countries”,—[Official Report, Commons, 6/6/23; col. 821WS.]


so the £10 is a competitively charged amount. Of course, he was absolutely right. Currently, in Israel, it is £5.61; in South Korea, it is £5.53; in New Zealand, it is £7.68; and in the Seychelles, it is £8.33. In Australia, it is free unless you pay roughly £10 to use the smartphone application. All the EU countries are about to introduce their own similar scheme, and they have already announced that that will cost €7. So, clearly, £10 is of an order of magnitude but is actually slightly higher. By the time we get to £16, it is going to be significantly higher.

I acknowledge there is one aberration in that: the United States. However, if we look back at its history, it had a very much lower figure for a very long time during the measure’s introduction and it has only just recently increased that. So we will be out of line, when the original plan was to be in line and be competitive with other countries. The question is: will that have an impact? The answer is that the committee is concerned that it will have a significant impact on tourism.

To those who think, “Well, what’s the evidence for that?”, I say that we already have some evidence. One of the other things we were concerned about was the original intention for transit passengers to Heathrow and Manchester to have to apply for, and pay for, an ETA; we thought that that would be a disadvantage to Manchester and Heathrow Airports in particular. The current Government have looked at that, and we are pleased that they have decided not to go ahead with it and, temporarily at least, it is not happening.

17:35

Sitting suspended for a Division in the House.

17:45

[Lord Foster of Bath (LD)]

It is a brave Minister who continues without his Whip.

I was trying to explain why fees such as the ETA fee must be looked at in the context of the possible impact on tourism. The example I was giving to illustrate it relates to the system that we had until recently, whereby an ETA fee was charged for people who were travelling from a third country through the UK in transit to somewhere else, using Heathrow and Manchester in particular. We as a committee were concerned about that and thought that it would have an impact on tourism; that was backed up when the ETA was introduced initially for a few Gulf countries. As a result of that introduction, Heathrow Airport alone recorded a reduction of 122,000 people transiting through Heathrow from those relatively small countries. That was when the fee was at £10; if it is to go to £16, you can see the impact that it will have on people—not for transit but for people thinking of coming here. There is real, clear evidence that this fee increase being proposed, from £10 to £16, could have a huge impact on tourism.

Of course, our committee expressed a particular concern in relation to these fees in terms of tourism in Northern Ireland and issues in relation to the common travel area between the Republic of Ireland and Northern Ireland. This issue was picked up in the 16th report of the Secondary Legislation Scrutiny Committee, which said:

“We asked the Home Office for any assessments it has made about ETAs to date, especially in relation to Northern Ireland (NI). The Home Office stated that as a result of its monitoring … it was working with a range of government and tourist bodies to ensure that ‘ETAs are not seen as a barrier to cross-border tourism on the island of Ireland’”.


I ask the Minister the very question that the committee suggested, which is

“whether (or when) firmer evidence can be made available on the practical impact of the ETA on”

Northern Ireland tourism. If the Minister has any information, clearly, that would be very helpful. More generally, given that the Minister said that this SI has been introduced following a review of all these fees, can he tell us whether the issue of tourism was taken into account? In particular, can he give a categorical assurance that, when the new SI comes forward—the one that will actually make the increase to the new maximum—the impact assessment will take account of tourism?

I said that Robert Jenrick, when he announced the whole scheme, made two points. His second point was that the £10 charge

“will ensure that the Department’s costs in delivering the scheme are effectively covered across a range of volume scenarios”.—[Official Report, Commons, 6/6/23; col. 44WS.]

Can the Minister, whose department has conducted this review, tell us whether the increase that is being proposed is as a result of evidence that the £10 is insufficient to cover the costs of the operation of ETA; or whether this is in fact just a way of making additional money for the Exchequer? I am sure that he will be able to answer that and will have the figures to back it up.

I just say to the Minister that, given that we see in the notes for this particular SI that the longer-term effect is to bring £260 million-odd into the Exchequer, I suspect that the fee increase for ETA is about adding to that. However, I also warn him that, if tourism is seriously affected in the way I have suggested, the Government will not be able to make that amount of money.

My final point is about the ease of operating the ETA system. If it is difficult to operate, that will put people off bothering and it will stop people even thinking of coming to this country as tourists and perhaps also for business sessions, and so on. When we looked at the ETA introduction, we were concerned about the lack of different languages in which the information about ETA was being provided. The then Government actually agreed with us and accepted that official information relating to ETA should be made available in a wider number of languages “as soon as possible”, including French, German and Spanish. So can the noble Lord tell us whether this has happened?

I should tell him that, prior to this meeting, I sought to find out for myself whether I could get details of how ETA operates in other languages. I could not. So I asked our good friends in the Library whether they could find out, and they told me that they too could not find any evidence that information is provided in any language other than English. They pointed out to me that, of course, some platforms have a translate option—that might be the clever way out—but, when we checked some of the platforms, we could not get the ETA to translate into different languages. So the evidence I have shows that what was promised has not been done. Of course, it may have an impact on people choosing to come to this country if they find it hard to get this information. So perhaps the Minister can address this.

There are many other issues with the ETA operation which are not relevant to the SI, so I will not raise them now, but the Committee and the Justice and Home Affairs Committee are very keen to have an opportunity to discuss those issues with the Minister. However, in the meantime, on this SI and the proposed future SI, I very much look forward to the Minister’s response.

[Baroness Brinton (LD)]

My Lords, it is a pleasure to follow my noble friend Lord Foster, who raised serious questions about the ETA and whether there will be an impact. He provided evidence to show that having an ETA at the current level, before any increases, is already having an impact. One of the general themes I will cover is what the impact assessment does not say about the impact on businesses, including tourism in this case, and other areas that I will come to. This is yet another charge that has gone up, adding to overheads, and it is becoming a problem in certain sectors.

It is also a pleasure to follow the noble Lord, Lord Rowlands, who outlined many of the problems that the Secondary Legislation Scrutiny Committee has been reporting on over the years. I look forward to the Minister’s response to his questions.

I will start on an optimistic note, given our debate on the previous SI. The Secondary Legislation Scrutiny Committee does not often hand out commendations in its reports, but it has commended the Minister and his officials on the Explanatory Memorandum, which was very helpful. With my calculator out, I did a lot of calculations and, although Minister may be irritated by some of the questions he gets, it is actually because we understand what is happening. That needs to be to be credited because we have not necessarily been able to give that credit in the past. The impact assessment was helpful, but I am not sure that it asked the right people about the impact. I will come back to that in a second.

Paragraph 29 of the Secondary Legislation Scrutiny Committee’s 16th report says that

“the net benefit of the changes is relatively small. Further, we note that in some scenarios set out in”

the impact assessment,

“the costs of the changes outweigh the benefits. This possibility arises because … it is ‘highly uncertain’ what goods and services visitors and visa-holders consume, and how many of those are provided”

by British businesses. Can the Minister comment further on this, or is the impact assessment just guesswork? That is the perhaps slightly unfair approach to trying to translate what the Secondary Legislation Scrutiny Committee said.

I say that because the maxima level set here is, pretty broadly, a 7% increase. I very much echo the comments made by my noble friend; the Government have made it very plain that when they do introduce fee rises—as opposed to setting a new maxima—most of them will go up to the new maxima. As the impact assessment says, the Government are trying to ensure that they can cover the costs of migration and the staffing for that, but I am concerned because 7% seems high.

For example, the pension triple lock is increasing by 4% this year. Many felt that was too high in the current financial circumstances. I am not going to comment on that but am trying to weigh it up as 7% seems to be a general increase, if not for the next year. I know the Minister will say it is only a maxima, but we heard elsewhere that there is an intention in most cases to go to that.

It is true that in paragraph 5.2, the EM says:

“The department is seeking to implement changes to fees to generate additional income from end users to support the funding of the migration and borders system and reduce reliance on funding from the taxpayer”.


However, the increases that are not 7% are the ones that really worry me. They seem bizarre and, in one particular case, ill thought through. For example, the skilled worker and temporary worker fees have both been increased by over 100%: from £239 to a £525 maxima for the skilled worker fee and from £25 to £55 for the temporary worker maxima. The reality is that in just over seven months, this Government have increased other costs to businesses—not Home Office costs, I grant you—but it is difficult and tedious for employers to recruit staff from overseas at the moment. I am not commenting on whether it was right or wrong, but the previous Government really tightened down on who could come to work here. Part of that was to start increasing substantially the costs that businesses and individuals coming here had to pay.

One of the costs I am particularly concerned about—we have just had a vote on this and there will be more before the evening is done—is on the increase to employers’ national insurance contributions. Not only are these increasing, but the floor for payment is lowered to include many lower-paid workers. Migrant workers filling gaps in our economy, such as in social care, hospices, agriculture and hospitality, are much more likely to be in those sectors where the margins for businesses are extremely low.

Our social care sector is already in complete crisis. Only today, there are reports of care at home being removed and clients being told they will have to leave their home and move into care homes, solely because of the economics of the increased national insurance contributions and the high costs associated with care delivered in a home setting. To have extra fees for migrant workers—often paid for by the businesses because the migrant workers just do not have their own resources—is going to add further to those sectoral problems. I wonder why the impact assessment says there are no financial implications from a 100% increase in these fees.

If these increases are as set out in paragraph 5.2 of the EM, did the Home Office actually seek advice from some of the sectors most reliant on overseas workers, whether skilled or temporary? I am slightly less worried about the very high-value skilled workers, where an employer will not only take on somebody at a high salary but be prepared to manage an oncost. It is those who are given temporary leave to work here, or in the health sector, where we know they have been granted.

Finally, paragraph 5.10 sets out the increase for the review of a decision related to immigration and nationality. The main fee maxima is increased by 7% and I have already commented on that. Hidden a few lines further down is a really shocking increase from £80 to £480 for an administrative review of a decision. This is nothing to do with the relevance of costs and I wonder if it is a financial punishment. An administrative review is very different to a review by a panel or senior officer, as referred to earlier in that section. Can the Minister explain why this particular administrative review has now hit the same maxima level as the much more complex and personnel-intensive level required under the main type of panel review?

By the way, it is interesting to note that, at paragraph 11.1, that particular increase has not been highlighted, whereas others have. I wonder why that might happen. The reason why the noble Lord, Lord Rowlands, my noble friend Lord Foster and I are raising these issues is to try to understand the strategy behind these increases, as opposed to just a reason to raise money. We are concerned that at least some of them may backfire and stop the increase in growth that this Government are keen to see.

18:00

[Lord Cameron of Lochiel (Con)]

My Lords, again, my thanks go to the Minister for setting out the background to this order and for the specific detail that he outlined. As he said, it is a matter of the principle of the fee increase, not the actual increases themselves. I am also grateful for the pertinent and interesting points made by the noble Lords, Lord Rowlands and Lord Foster, and the noble Baroness, Lady Brinton.

As the Government have outlined, this order seeks to increase the maximum fees that can be levied for a range of key immigration services, including the ETA, certificates of sponsorship and applications for naturalisation. This measure is not unexpected. It aligns with the policy direction pursued by successive Governments—including the previous Conservative Administration, who sought to make the immigration system financially self-sustaining and to reduce its reliance on general taxation.

Noble Lords will know that the principle that those who benefit most from the immigration system should contribute to its costs is a long-standing one. In this context, it is logical that the Home Office looks to raise fees, given the increasing financial strain on the system. The proposed fee increases are expected to generate an additional £133.6 million annually while reducing public service provision, thereby saving the Exchequer a further £12.42 million. On the surface, this appears to present a clear net benefit to the Government’s finances; the previous Government acknowledged the necessity of fee increases to maintain the sustainability and integrity of the system.

Going forward, it is of course important to assess whether these revenue projections are robust, particularly in the light of the complex and ever-changing landscape of immigration; and to ask whether these measures will in effect lead to the intended behavioural changes. For instance, we are told that previous fee increases had little impact on demand. Is that always going to be the case? The Government’s own impact assessment here on ETA, for instance, indicates a modest reduction in ETA applications due to the fee increase. All of this points to a general question for the Minister: what ongoing monitoring is in place to assess, on a continuing basis, the impact of fees on issues such as behaviour, demand and costs? I would be grateful if the Minister could outline that in his response.

In conclusion, we do not oppose the Government’s desire to increase fees in order to fund the immigration system. We must ensure that these fee increases are implemented in a way that is fair and equitable and which truly serves the long-term interests of both the immigration system and the broader public. It is in the best interests of the United Kingdom to have an immigration system that is financially sustainable and fair to all those who seek to contribute to our society. I trust that the Government will continue to monitor the effects of these increases and remain responsive to any concerns that may arise.

[Lord Hanson of Flint (Lab)]

I am grateful for the contributions from noble Lords and from the noble Baroness, Lady Brinton, on behalf of the Liberal Democrats. I want to remind the Grand Committee of something it already knows, but it is worth putting it in context at the beginning: there is no increase today in the fee levels, and impact assessments for each potential future fee increase, if this order were to be approved, would be put in place. There would be an impact assessment for each potential new fee level determined by the Government, in due course. That fee level may or may not be put forward by them at some point in the future, up to the maxima being agreed today, and would include an assessment of the impact on tourism, jobs, investment, growth and on the appertaining costs of any fee as a whole.

I know that the Committee knows that, but it is worth putting it in context. This is the hors d’oeuvre to a meal; it is not the main meal, because that will come downstream when potential new fee levels are put before both Houses of Parliament for approval, with an appropriate impact assessment covering the many points made by Members here today.

I will start with my noble friend Lord Rowlands, who I am pleased to see in his place. We shared a long time together in the House of Commons and it is good to see him again here today. He touched on a very important point. First, there is the scrutiny of legislation by the statutory instruments committee, which was also touched on by the noble Baroness, Lady Brinton. The points my noble friend made about that, and the performance of the Home Office, are well made. They were made in the previous debate by the noble Baroness, Lady Brinton; I am hoping that they will not be made in future debates, for the reasons I outlined then. The Government intend to make sure that statutory instruments have proper Explanatory Memoranda and are thoroughly investigated and overseen by Ministers, and that measures which are brought forward are appropriate and testable by the SI committee, and defensible by Ministers accordingly.

My noble friend Lord Rowlands made a clear reference to the failure to provide legislative cover for fee increases. This was round about April of last year. My first defence is that, as he will know, I was not the Minister responsible at the time. Why it happened is a matter of conjecture, but it has. I am not going to put the proverbial political boot in to previous Ministers or officials. That is where we are and, in their defence, there was a general election, which has impacted upon any timescales to rectify that error, but that error has existed. When it was noticed, measures were brought to the attention of Ministers in the current Government, and we brought forward regulations at around Christmastime. Those were taken through the Grand Committee and the House and approved accordingly, so that the fees now being charged are on a legal statutory basis.

As my noble friend mentioned, that leaves a gap of some months—maybe April to November—where fees were charged accordingly, with no legal backing. He asked, rightly, what measures there are to ensure that we take action on that. The Border Security, Asylum and Immigration Bill has within it measures to provide retrospective statutory authority for those fees that were charged in connection with services provided by Ecctis Ltd. On that basis, that Bill, which has been published in the House of Commons, is correcting the position on fees charged to date.

Those who have previously been charged have received a service that they have paid for. We want to avoid putting an additional burden on taxpayers, so we do not intend to issue refunds, because although the fee was charged without that legislative cover, the service that the fee provided was still received by the individuals concerned. We are trying to ensure that we regularise not just the situation, as we have now done, but that gap which happened—not on my watch, but it did. It is now being regularised by this legislation, which will be challenged. The noble Baroness, Lady Brinton, also mentioned this point. It is open to scrutiny and to approval, rejection or amendment in this House, but it is the Government’s position to try to resolve something we were not responsible for. I hope that answers my noble friend’s point, but I will happily take an intervention.

[Lord Rowlands (Lab)]

I believe so. The most important thing is: have the lessons been learned as a result of the fiasco that occurred, so that we can be assured that, in future, there will never be a fee that is not statutorily based?

[Lord Hanson of Flint (Lab)]

I will give my noble friend what I would say is a guarded response: I hope so. It is my intention that that will not happen again. I cannot verbally legislate today to say that mistakes will not be made by Ministers and/or officials downstream, but I hope that lessons have been learned. The moment it was drawn to this Government’s attention, we introduced legislation to regulate the current level of fees that were being proposed and, through the proposed Bill, cover legislatively the backdated gap that was in place. I hope I can give my noble friend that assurance. Certainly, it is something that current Ministers are aware of and do not wish to have—but, as ever, it is a human system, as my noble friend knows.

I turn to the meat of other points that were made noble Lords. I welcome the support of His Majesty’s Opposition Front Bench. The noble Lords, Lord Foster and Lord Cameron, and the noble Baroness, Lady Brinton, raised the impact on tourism, on jobs and on a range of other things. Let me put this into context again. The Government have to cover the costs of the immigration border control system. This is potentially helping with any future decisions taken—not the increase today, but any future decisions—to meet the costs of that system and to put in place measures to ensure that we have border control for tourism and employment, as well as the measures we are taking separately in the immigration Bill to look at illegal migration. It is important that we regulate that and that the taxpayer gets resource back from it. We have taken decisions, which may not be popular with the noble Baroness, to look at how we can potentially raise money from that. As I said, we will bring forward further impact assessments and proposals on the actual figures for each of the sectors that she mentioned, but we have made a judgment that we have to cover those costs and we must ensure we can do that.

The Government have a growth agenda. We do not want to hinder growth in jobs or in tourism; we want people to come to the United Kingdom. The question I throw back to the noble Lord, Lord Foster, is: would a fee of £16 deter somebody from coming to the United Kingdom on a tourist visit? I think he said yes from a sedentary position. That is a judgment we will have to examine and look at. The impact assessment shows a marginal impact. It is something we will have to look at. When and if we bring forward proposals on the rise from £10 to a potential maximum in the future, we will look at those issues. I do not know—do I not go to America because it costs me £35 or whatever it is for an ESTA? Do I not go to France, in due course, when I am charged a fee for its equivalent of an ESTA? Do I not go to Spain, to Greece or to other countries? Alternatively, do I absorb that as part of my tourism package?

[Lord Foster of Bath (LD)]

There is a great deal of research evidence on this very point. Going to America turns out to be very different from going to a country within the European Union. Going to a Schengen area country turns out to be very different now from going to the UK, because of course you can get one document to get into all the different countries. There is a great deal of evidence already about this, and when we bear in mind that this country has higher VAT on, for instance, accommodation, tourist attractions and so on than most other countries, we are already at a disadvantage. All I am grateful for is that the Minister has assured me that we are going to have full consultation and a full impact assessment when he brings the next stage forward.

18:15

[Lord Hanson of Flint (Lab)]

There will be an impact assessment. I still say to the noble Lord that people want to come to London: they want to see this building and Buckingham Palace; they want to see Downing Street and Trafalgar Square. In my home city of Liverpool, people want to see Beatles-related material or they go for football matches. People will go to York because of its history. People go to Scotland—the noble Lord’s home base—because they like Edinburgh and Scottish culture. That is not going to change because we have gone from £10 to £16. There might be other factors that stop people coming but I am not convinced that that figure will be looked at. I reassure the noble Lord that if the figure goes at a future date from £10 up to the maximum of £16 on that proposal, there will be an impact assessment and he can test it. He can vote for or against it in due course.

The noble Lord made another important point on the ETA form and I am grateful to him for raising it. I want to get the bottom of the source of his knowledge about potential translations—I will do this, if I may, outside the Grand Committee. I will look at it and write back to him in due course. At the moment, the form is available only in English. It has been launched in the Gulf countries. We have had no significant feedback, but I will take that point away. If there were assurances given previously by Ministers or officials, I want to get to the bottom of them. I am not aware of them from the discussions that we had today or from my discussions with officials in the Home Office. We will look at that in due course.

The noble Baroness, Lady Brinton, talked about the logic for all of this. The logic is that we have to fund the cost of the migration system. The logic is that if there are fee-level increases—which are not yet on the table, but could come—with impact assessments, these will be to ensure that we maximise the income to cover the cost of administration and of border systems generally. There may also be some businesses that ask, “Can I recruit home-grown employment?”. That is an important consequence as well.

[Baroness Brinton (LD)]

I am grateful for the Minister’s response. I am mindful that the Secondary Legislation Scrutiny Committee said that some of the increases in the maxima might not cover the administrative costs of introducing them. That then starts to be a burden on the Home Office’s budget, so is analysis being done to look at that? It will otherwise become counter- productive.

[Lord Hanson of Flint (Lab)]

The driver for some of these issues is to ensure that we have self-sufficiency on costs for this area. Obviously, I am talking today about the potential for maximas. We are not talking about what those fees are going to be. They may be the maximas and they may not. The Home Office will take that decision and it will lie predominantly with Ministers who are Members of the House of Commons, rather than of the House of Lords—such as myself. We will discuss those fee increases. That is a decision taken by the Minister for Migration and Borders, who is a Member of the House of Commons in the Home Office team. We will look at that and these orders will come forward to both Houses in due course. I will take feedback and discussion, as I am doing now with colleagues in this House.

The general principle of this is that we ensure that we raise that resource and potentially look at challenging behaviour so that we give opportunities for people to say, “If it costs X to bring someone from Y country, are those skills available locally to boost the economy locally?” That is a perfectly legitimate policy objective that I think was shared by the last Government and which is not difficult for Members to accept and understand.

I hope that I am covering all the points. The final point that I want to make is on Northern Ireland. Citizens of the UK, including citizens who live in Northern Ireland—whether they identify as Irish or British—will not have an ETA to go to Ireland, and, vice-versa, Irish citizens will not need an ETA to go to Northern Ireland. There will be tourist movement from other countries into Ireland and Northern Ireland, and potentially into the United Kingdom as a whole through that route. I am cognisant of that and we are aware of it. We will make an assessment on that. Again, I repeat my record that says that we have not yet made the decisions on the figures. We have not brought those forward or made the impact assessment but when we do, I will be ensuring with colleagues that that impact on Northern Ireland tourism is assessed, as will be the impact of the collectability of that ETA in relation to the island of Ireland and the common travel area.

I am grateful to noble Lords who have raised that issue but it is something on which we have worked closely with the Northern Ireland Executive and the Irish Government since the inception of the ETA policy. We will continue to work with those partners to understand the impact of ETAs in Northern Ireland. By requiring an ETA on crossing the land border, we will also have a better understanding of those who are seeking to come to the United Kingdom. However, as noble Lords, particularly the noble Lord, Lord Foster, will know, the land border issue in Northern Ireland is sensitive and not one that we wish to see imposed—as it was, even in the times when I was a Northern Ireland Minister 20 years ago.

With that, I hope that I have answered the points made. I commend this order to the Grand Committee.

Motion agreed.

Committee adjourned at 6.21 pm.

House of Lords

Tuesday 25th February 2025 Lords Chamber

Tuesday 25 February 2025

14:30

Prayers—read by the Lord Bishop of Chelmsford.

Introduction: Baroness Longfield

Tuesday 25th February 2025 Lords Chamber

14:39

Anne Elizabeth Longfield, CBE, having been created Baroness Longfield, of Lower Wharfedale in the County of Yorkshire, was introduced and made the solemn affirmation, supported by Baroness Andrews and Baroness Armstrong of Hill Top, and signed an undertaking to abide by the Code of Conduct.

Introduction: Baroness Nichols of Selby

Tuesday 25th February 2025 Lords Chamber

14:43

Wendy Ruth Nichols, OBE, having been created Baroness Nichols of Selby, of Selby in the County of North Yorkshire, was introduced and took the oath, supported by Baroness Anderson of Stoke-on-Trent and Baroness Winterton of Doncaster, and signed an undertaking to abide by the Code of Conduct.

UK Border Strategy: Single Trade Window

Tuesday 25th February 2025 Lords Chamber

Question

14:48

Asked by

[Lord Kirkhope of Harrogate]

To ask His Majesty’s Government why they have paused the implementation of the Single Trade Window as set out in the 2025 UK Border Strategy (CP352), published in December 2020.

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

My Lords, in the context of a challenging fiscal inheritance—

[Noble Lords]

Oh!

[Lord Livermore (Lab)]

In the context of a challenging fiscal inheritance, the Government paused the delivery of the single trade window as part of a wider value-for-money review across public spending. It remains our long-term intention to deliver a single trade window to support businesses trading across the UK border, and we will provide an update as part of the next phase of the spending review.

[Lord Kirkhope of Harrogate (Con)]

I find that Answer somewhat disappointing and repetitive. I put it to the Minister that this trade window has been accepted. It was a Conservative proposal, which, for once, I believed that the new Government were going to agree to. It has massive support among our traders and all our businesses. It will save them £2 billion in the next 10 years in extra paperwork and red tape. Does the Minister not agree that having the trade window would fit exactly within the Government’s policies of improving the growth in our economy and encouraging trade around the world?

[Lord Livermore (Lab)]

I am grateful to the noble Lord for his question. He is absolutely right when he talks about additional bureaucracy and red tape—created by the Brexit trade deal that the previous Government agreed to. That is the only reason why we need to try to ameliorate the difficulties created by that trade deal. It remains our long-term intention to deliver a single trade window. Businesses benefit from trade, so minimising administrative burdens and reducing trade frictions remain a priority for this Government. We will consider the role the single trade window can play in that, and we will provide an update as part of the next phase of the spending review.

[Lord German (LD)]

My Lords, the European Union is the biggest trading partner for the United Kingdom. Obviously, a single trading window is very important, so can the Minister outline when and whether we will get a single customs review, and a single customs window with the European Union?

[Lord Livermore (Lab)]

I agree, I think, with the underlying point that the noble Lord is making. Clearly, trade with the European Union is incredibly important. The European Union is our largest single trading partner. Four of our top five export markets are in the EU, and eight out of the top 10 in the EU account for nearly 50% of our trade. This is exactly why we must reset our relationship with the EU, our single biggest trading partner. We recognise that delivering new agreements will take time, but we are ambitious, we have clear priorities, and we want to move forward at pace.

[Lord Watts (Lab)]

My Lords, is the Minister as bored as I am by the Opposition’s attacks on the Labour Government for trying to resolve the problems that were created by the last Government? When will he remind them what Boris said about the benefits of the leaving the European Union? We have seen all the problems with it, but we have not seen many of the benefits.

[Lord Livermore (Lab)]

My noble friend is obviously absolutely right on that point. We are being attacked here for not implementing the solution to the problems that they created. Importers now face up 40 pages of forms that they must fill in: customs declarations, goods movement records and agricultural declarations. Exporters face up to 100 questions every time they wish to move goods to the European Union. We were told that, as a result of Brexit, we would continue to enjoy the exact same benefits. I think nothing could be further from the truth.

[Lord Holmes of Richmond (Con)]

My Lords, I declare my technology interests set out in the register. What steps are the Government are taking to promote the benefits of the Electronic Trade Documents Act, to both current exporters and exporters, and to get nations around the world to pass similar legislation so that the whole world can benefit from electronic trade documents? These cut the time it takes to trade from days to minutes, delivering economic, environmental and social benefits for all.

[Lord Livermore (Lab)]

I am grateful to the noble Lord for his question and his expertise on this matter. It is not something I know about, I am afraid, but I will happily write to him on this issue.

[Baroness O’Loan (CB)]

My Lords, in the context of the endless reiteration of the fiscal hole that the Government keep referring to, I was reading last night that the OBR did not recognise the figures given. I do not think it helps the House when we go round in circles on that. At a time when the Minister seeks to develop trade and industry, when the Government are moving to improve the economy, and when a single trade window would undoubtedly deliver significant benefits for the British economy, the Government are imposing additional burdens on business, such as the measures on which we will vote this afternoon. Would it not enable significant development simply to move on this process?

[Lord Livermore (Lab)]

Yes, I agree with some of what the noble Baroness says about the benefits of a single trade window. Again, we have to be able to pay for these things. We have had to pause many of the previous Government’s spending commitments because the money was simply not there to pay for them, which goes to the heart of the issue that she started her question on. She may dispute the figures, but I do not think anyone disputes the fact that those spending commitments were there but there was not the money there to pay for them. As I say, it remains our long-term intention to deliver the single trade window, but we will have to do so when resources allow, and we will update noble Lords at the time of the next spending review.

[Lord Cameron of Lochiel (Con)]

My Lords, given that this is the second delay to the single trade window announced by this Government since they took office, and that the rollout will be halted until April 2026 at the very earliest, does the Minister accept that there is a significant cost from such a lengthy delay, not least in the view of the National Audit Office, which reported that a 12-month delay in delivering the STW could reduce the benefits realised by more than £850 million over 10 years?

[Lord Livermore (Lab)]

I am grateful to the noble Lord for his question, but let us remember what the costs are that we are trying to reduce here: they are from the previous Government’s ill-conceived Brexit deal, which imposed new trade barriers on businesses equivalent to a 13% increase in tariffs for manufacturing and 20% in tariffs for services. As a result, the Office for Budget Responsibility found that GDP will be 4% lower and overall trade intensity will be 15% lower than had the UK remained in the European Union. Of course, we want to try to ameliorate the difficulties of the previous Government’s disastrous Brexit deal, but it will take time to ensure that the fiscal resources are there. As I say, it remains our long-term intention to deliver that single trade window, but we can do so only when resources allow.

[Lord Brennan of Canton (Lab)]

My Lords, it is not just trade in goods that is important but trade in services. The last Government promised free cultural touring after Brexit, but they were unable to deliver it. What progress are this Government making in delivering a cultural touring agreement with the European Union to allow musicians and other artists to perform more freely across Europe?

[Lord Livermore (Lab)]

I am grateful to my noble friend for his question. It was a key manifesto commitment of this Government to deliver those touring visas and it remains a key ask of ours in the EU reset negotiations. We recognise that delivering such new agreements will take time, but we are ambitious and we want to move forward at pace.

[Lord Newby (LD)]

My Lords, I agree with the Minister’s analysis about the bad economic consequences of Brexit, with 12% lower GDP. Does he not agree that the only way that we can get rid of trade costs, as he wishes, is by rejoining the customs union and single market? Tinkering at the edges will have virtually no positive benefit for most small exporters.

[Lord Livermore (Lab)]

I agreed very much with the beginning of the noble Lord’s question but less as he progressed. He is absolutely right that the measures he proposes would eliminate those challenges and I pay tribute to him for consistently advocating a pro-European case. We are committed to resetting our relationship with the EU. It is our biggest trading partner. As I said, the Prime Minister was the first Prime Minister since Brexit to have attended a meeting of the EU Council and the Chancellor was the first Chancellor since Brexit to have attended a meeting of the Eurogroup of EU Finance Ministers. We are ambitious to reset that relationship and we will continue to move forward at pace.

[Lord Young of Cookham (Con)]

My Lords, further to the original Question, can the Minister explain why it would cost the Government quite so much to introduce this window?

[Lord Livermore (Lab)]

There are costs from designing, developing and administering the technical delivery platform, which have been clearly set out by Deloitte, with support from IBM. We have retained the technical platform in order to retain the option for a future restart of the project. This would allow us to capitalise on the previous investment and could enable a simpler and faster restart of development activity in the future. As I say, we will update the House at the next spending review.

[Lord Foulkes of Cumnock (Lab Co-op)]

My Lords, returning to the initial Answer, could the Minister remind the House of the challenging fiscal deficit that we inherited?

[Lord Livermore (Lab)]

I am grateful to my noble friend for giving me the opportunity to say “£22 billion” just once.

Stockton and Darlington Railway: 200th Anniversary

Tuesday 25th February 2025 Lords Chamber

Question

14:58

Asked by

[Viscount Stansgate]

To ask His Majesty’s Government what steps they are taking to commemorate the 200th anniversary of the Stockton and Darlington Railway.

[Viscount Stansgate (Lab)]

My Lords, I beg leave to ask the Question standing in my name on the Order Paper, and I declare a lifelong interest in railways.

[The Minister of State, Department for Transport (Lord Hendy of Richmond Hill) (Lab)]

The Stockton and Darlington Railway, the world’s first railway to use steam locomotives to transport passengers, shaped modern railways. To mark its 200th anniversary, Railway 200—a national celebration—is supporting the Stockton and Darlington bicentenary festival. That festival will highlight its impact on the local and regional industry, communities and innovation. My department is supportive of these events and of ensuring that the Stockton and Darlington Railway is rightly honoured for transforming transport and Britain’s and the world’s economy.

[Lord Houchen of High Leven (Con)]

My Lords—

[Viscount Stansgate (Lab)]

My Lords, I thank my noble friend for that Answer. There are clearly many activities to which we can look forward. May I ask three quick questions? First, can he say a little bit more about the so-called Greatest Gathering, which I understand is going to take place in August in Derby, and which will bring together an unprecedentedly wide range of trains illustrating 200 years? Secondly, what hopes do the Government have that this anniversary will help the heritage railway industry, on which so much of our historical culture and tourism depends? Finally, will it look ahead to the future of railways, particularly the exciting new direct journeys from London to places in Europe and beyond?

[Lord Hendy of Richmond Hill (Lab)]

I thank my noble friend. The celebration in Derby is from 1 to 3 August. It will be a huge gathering of historic and current railway equipment. It is entirely put on by Alstom, which occupies Britain’s oldest train manufacturing plant, and it will be a great occasion. The heritage railways movement is worth £600 million a year to the economy and has 4,000 employees and 22,000 volunteers. It has had a hard time since Covid, and one of the purposes of Railway 200 is to give it a bit of a hand in survival and growth. In respect of the present and the future, the real reason why this Government should support this celebration so much is that the railway is extraordinarily relevant to the modern economy: connectivity drives growth, jobs and housing, and, on the future, the technological change that the railways are presently going through is an eminently marketable resource. He is also right, of course, that European connectivity is important. My department is working as hard as it can to increase the number of European destinations accessible through Eurotunnel.

[Lord Houchen of High Leven (Con)]

My Lords, I hope noble Lords can already sense my excitement at this Question, so I appreciate the time. It is an extremely important celebration—I declare an interest as the regional mayor for the Darlington and Stockton area—which will go down as a point in history for a key piece of infrastructure that hopefully will shape not just our past but our future. Along those lines, I ask the Minister: what is the department’s and the Government’s position on the CRSTS2 budget, which is still under review ahead of the spending review, and what representations is he making to the Treasury to make sure we protect that capital investment, to make sure that we can invest it not just in general transport but specifically within our rail infrastructure, to make sure we have a rail infrastructure fit for the 21st century?

[Lord Hendy of Richmond Hill (Lab)]

Well, it is not much of a leap to funding in the spending review, so the noble Lord has answered his own question—the CRSTS2 budget is in process, there will be a spending review, and my department is extraordinarily active in making sure that the position of transport is well represented to the Chancellor in the Budget. But he will have to wait, as everybody else will, for the outcome of the spending review in due course.

[Lord Grocott (Lab)]

My Lords, is it not worth reflecting that, 200 years ago, British engineering designed and built the first steam locomotives, built a phenomenal network of railways across our country, most of which is still intact and used today, exported all over the world and built railways in pretty well every continent? Fast forward to today and we have a situation where, while large numbers of countries across the world are building new railways and new high-speed lines, the last Tory Government took the absurd and costly decision to cancel HS2 north of Birmingham. Would not it be a wonderful way of celebrating 200 years of railway history if the Minister could come to this Dispatch Box and say, “We are going to clear up the Tory mess and build HS2”?

[Lord Hendy of Richmond Hill (Lab)]

I thank my noble friend for that. The first priority of this Government is to get the present phase 1 of HS2 back under control. This Government inherited a situation where they could predict neither the cost nor the timescale of completion of the line between London and Birmingham. The Chancellor has taken the brave but right decision of restarting the tunnels to Euston, without which the railway would have no proper end, and our job is to make that work. Our job is also to put forward a plan for railway infrastructure for the rest of the country, particularly the Midlands and the north, and a lot of effort is going on in my department to do that logically, properly and in a properly costed and prioritised way.

[Baroness Pidgeon (LD)]

My Lords, given this Question is about commemorating the railway, can the Minister confirm what plans the Government have to mark the first rail franchise coming into public ownership this May? Could it be commemorated with the provision of a basic catering service for passengers on the Waterloo to Exeter line, and perhaps even some seat reservations?

[Lord Hendy of Richmond Hill (Lab)]

The first publicly run South Western Railway train will be at an extraordinarily early hour on 20 May. I fear I will have the doubtful privilege of traveling on it. I doubt it will have catering, because I suspect it is a suburban service from Strawberry Hill to Waterloo. The more serious answer about the Waterloo to Exeter line is that it could be more reliable, and a lot of effort is being put into making it more reliable. South Western, like most other current franchises, has a shortage of drivers, and I am working extremely hard with the department to make sure that it works better for the passengers both prior to and post the operation coming back into public ownership. We will look at catering, but the first priority is to make the train service reliable.

[Lord Wigley (PC)]

My Lords, in joining the good people of Stockton in celebrating the 200th anniversary, will the Minister recall that the first steam engine ran a decade earlier in Merthyr Tydfil, designed by the outstanding Cornish engineer Richard Trevithick? That was a reflection of the industrial greatness of those valleys at that time. Looking at HS2, which was mentioned a moment ago, will the Government now ensure that the Barnett consequentials come through to the Welsh Government in order for them to build a future for the railways in Wales that Wales most certainly deserves?

[Lord Hendy of Richmond Hill (Lab)]

There is a Celtic competition between the Penydarren tramway of, I think, 1814 and its originator, Trevithick, who came from Camborne. Personally, I side on the Cornish side of that argument. The more serious point the noble Lord raised is of course a matter of national finance and one for my Treasury colleagues and the Chancellor.

[Lord Forsyth of Drumlean (Con)]

My Lords, will the Minister recall that the steam engine was invented by a Scot, James Watt? I declare my interest as chairman of the Steam Boat Association and raise the serious point that we are very dependent on heritage railway in our country for tourism. The decision to close the last remaining coal mines means that coal has to be imported at great expense for that purpose. What are the Government going to do about it? Is this not an example of net-zero ideology harming our economy?

[Lord Hendy of Richmond Hill (Lab)]

I am certainly willing to give credit to another Celtic nation for the invention of the steam engine. The matter of coal is, of course, a much wider question than coal for heritage railways. I would ask the noble Lord to look at an aerial photograph of the last Welsh opencast coal mine and the hideous blot on the landscape that it represents, and also at the huge damage that coal and the coal-fired equipment has done to the environment and the atmosphere. It is a factor in the continued provision of heritage railways and, as he says, steamboats, that there should be some coal. There is some coal, and I can write to him, if he wants, about the means by which coal substitutes can be procured rather than reopening coal mines.

[Lord Moylan (Con)]

My Lords, returning to the Question, Parliament, particularly your Lordships’ House, played a crucial role in the creation of the railways. Over a period of 200 years, noble Lords have toiled at the coalface of the hybrid Bills and other legislation without which the railways would not exist at all today. Can the Minister say that Parliament will feature prominently in the celebrations of the 200th anniversary of the railways? Might there even be an opportunity for noble Lords to fulfil some childhood dreams and drive a steam train?

[Lord Hendy of Richmond Hill (Lab)]

I can certainly ensure that the noble Lord is able to drive a steam train, but it will not be on a railway line near Parliament. Parliament will have a unique opportunity this year to contribute to the future of Britain’s railways by considering and then passing the forthcoming railways Bill, which will put the railway back into a state where it can generate revenue, run better and reduce its costs. I think that will be an excellent contribution of Parliament to the future of the railway.

Airport Expansion

Tuesday 25th February 2025 Lords Chamber

Question

15:10

Asked by

[Earl Russell]

To ask His Majesty’s Government whether they intend to consult the Committee on Climate Change before taking decisions on airport expansion.

[The Minister of State, Department for Transport (Lord Hendy of Richmond Hill) (Lab)]

The Government published their report on the Climate Change Committee’s latest progress report in December last year. The response makes it clear that we recognise the role for airport expansion where it provides economic growth and is compatible with our net-zero target and strict environmental standards. As part of the Airports National Policy Statement review, referred to by the Chancellor in her recent Statement, we will engage with stakeholders on how aviation expansion can be made consistent with our net-zero framework.

[Earl Russell (LD)]

This level of airport expansion is always going to be incompatible with our climate change commitments. It would undo all our work on climate change in under five years. When just 15% of the population is responsible for 70% of all flights, the Government must do more to curb demand. No economy in the world has grown from building runways alone. Meanwhile, in 2024, the green economy grew by 10%, adding £83 billion. Does the Minister agree that what is needed more than anything else are clear and consistent government policies on climate change and green growth, not this damaging policy confusion?

[Lord Hendy of Richmond Hill (Lab)]

I certainly do not agree with the noble Earl’s assertion about the incompatibility of this. The Government have been clear that any airport expansion proposals need to demonstrate that they contribute to economic growth, can be delivered in line with the UK’s legally binding climate change commitments, and meet strict environmental requirements on air quality and noise pollution. The work of the department has shown that we can achieve aviation net zero by 2050 under a range of assumptions about future technology development without the Government needing to intervene directly to limit airport expansion.

[Lord Sharma (Con)]

My Lords, when it comes to airport expansion and more flights, one of the key measures that can be used to reduce emissions is the increased use of sustainable aviation fuels. I welcome the SAF mandate but, when it comes to job creation and energy security, it is important that the SAF we are using in the UK is manufactured in the UK. Will the Minister set out what plans the Government have to support SAF production in the UK? Will he tell me how many jobs he expects to have been created in that sector specifically under those plans by 2030?

[Lord Hendy of Richmond Hill (Lab)]

The noble Lord is right that sustainable aviation fuel is important in reducing the carbon footprint of air traffic. This Government have taken forward the SAF mandate, which came into force in January, which progressively increases the percentage of sustainable jet fuel used from this year onwards. It is also important, as the noble Lord says, that the UK is a supplier, and the actions of the Government are to make sure that there are jobs in Britain and that Britain is a leading supplier of this. On 29 January, the Government announced £63 million of funding for the advanced fuels fund in the next financial year to support SAF producers based across the United Kingdom. I do not have a jobs figure to hand for SAF, but I will willingly write to the noble Lord and tell him what we know about it.

[Lord Brennan of Canton (Lab)]

My Lords, on the subject of airport expansion, there are airports around the country that are under capacity currently, including Cardiff Airport. What consideration have the Government given to working with the Welsh Government on driving more business in the direction of airports such as Cardiff Airport?

[Lord Hendy of Richmond Hill (Lab)]

The Government recognise the importance of regional airports. I do not have in front of me what the Government are doing about the expansion of Cardiff Airport, but I will willingly write to my noble friend and tell him exactly what we know about Cardiff’s expansion and the Government’s role in helping it.

[Baroness Brown of Cambridge (CB)]

My Lords, when we did the Airports Commission review, the UK’s 2050 target was only an 80% emissions reduction, yet the third runway at Heathrow still required reduced growth at regional airports to keep within our carbon budgets. Has this analysis been redone and are the conclusions the same? Should we not wait for the seventh carbon budget, which is being published tomorrow?

[Lord Hendy of Richmond Hill (Lab)]

I stand by the earlier figures I mentioned on achieving aviation net zero by 2050. The noble Baroness is right that the seventh report will be published tomorrow. The proposals from Heathrow, or any other promoter’s proposals, for a third runway have not yet been received. They will have to be followed by an application for a development consent order, which will have to be properly processed. It is not incompatible with the forthcoming publication for the Chancellor to express her enthusiasm for a third runway and the economic growth that it will produce.

[Baroness Jones of Moulsecoomb (GP)]

My Lords, by 2040 aviation will be responsible for 27% of the UK’s carbon emissions. Given that most people in Britain—and in fact the world—do not get on a flight in any given year, is it not time to see that aviation is a luxury and not a human right, and to bring in a frequent flyer levy?

[Lord Hendy of Richmond Hill (Lab)]

While I respect the noble Baroness’s view, the fact remains that a decent analysis suggests a third runway will create economic growth of measurable proportions to the British economy. This Government are extraordinarily keen on economic growth, for the obvious reason that the legacy of the previous Government left the economy in a really bad place. We need to use every means of economic growth that we have got to grow the economy and make the country more prosperous.

[Lord Moylan (Con)]

My Lords, when Heathrow was previously promoting this runway some eight or nine years ago, the estimated cost was £18 billion. Because of the regulated asset-based model on which it is funded, this cost will fall on the airlines and then further, consequently, on the passengers of airlines. Should not the Government be consulting passengers about whether they want this runway, as much as anything else? What plans do the Government have to consult them, and indeed the airlines?

[Lord Hendy of Richmond Hill (Lab)]

As soon as the noble Lord got up, I was reminded that he was one of the principal promoters of the Thames estuary airport. That was a good, innovative and brave proposal, but would have cost the country far more than the figures he is quoting for the expansion of Heathrow. We have to wait for the proposals from Heathrow, or any other promoter, for the third runway and see what they look like. We can then see what the application for a DCO actually consists of, how much it is said to cost and what else needs to be done in order to achieve it. That will clearly be work in progress, considering that a proposal is expected only early in the summer.

[Baroness Kramer (LD)]

My Lords, the Government—the Minister referred to this a moment ago—based their pronouncements on Heathrow on a report by Frontier Economics, but I recognise the key graph. It looks like a forecast for high demand for air travel, which is then met by Heathrow runway 3, but it is actually a graph of how much more air travel could be induced by runway 3 if a company applied an aggressive marketing strategy. How does a strategy based on inducing more air travel fit with the Government’s statements on climate change?

[Lord Hendy of Richmond Hill (Lab)]

The next process is that the Government are committed to reviewing the Airports National Policy Statement, which is a government action. Then, as I say, this summer we will receive proposals from Heathrow, or from any other promoter, about a third runway, followed by an application for a development consent order. The matters that the noble Baroness refers to will no doubt be set out in Heathrow’s proposals and those of any other promoter, and then set out in detail in the DCO. We have to wait until then to see what they say about the demand, how it should be paid for—which was the subject of the previous question—and the Government’s view about what it will do for the economy.

[Lord Trefgarne (Con)]

My Lords, where there are major changes to large airports, will the Government take into account the needs of smaller aircraft such as air taxis, which are very often subject to changes in wind speed and direction, for example?

[Lord Hendy of Richmond Hill (Lab)]

I cannot say whether a third runway at Heathrow will materially affect the ability of the airport to accept air taxis. There is clearly a limit to what size of aircraft can be landed, not only at the moment but in the future, but we will bear the noble Lord’s suggestion in mind.

[Baroness Foster of Aghadrumsee (Non-Afl)]

I know that the Minister is a great supporter of UK connectivity; indeed, I would recommend his report on the same to the House. Given that that is the case, could he confirm that, for some of us, flight is essential?

[Lord Hendy of Richmond Hill (Lab)]

I thank the noble Baroness. She will know that I spent a large portion of lockdown looking at connectivity in the United Kingdom. I entirely agree with her that the economy of Northern Ireland is utterly dependent on good flights to and from London and other places in mainland Britain. One of the opportunities that a third runway would give is better connectivity to Heathrow, the UK’s only hub airport, especially for Northern Ireland and places in Scotland, to make that economy grow, as well as mainland Britain’s economy.

Democratic Republic of the Congo: M23 Group

Tuesday 25th February 2025 Lords Chamber

Question

15:21

Asked by

[Lord Harries of Pentregarth]

To ask His Majesty’s Government what is their response to reports that Rwandan troops are supporting the M23 group in the Democratic Republic of Congo.

[The Parliamentary Under-Secretary of State, Foreign, Commonwealth and Development Office (Lord Collins of Highbury) (Lab)]

My Lords, the United Kingdom condemns the recent M23 and Rwandan Defence Force advances in the eastern Democratic Republic of Congo as an unacceptable breach of DRC’s sovereignty. On 22 February the Foreign Secretary met with President Kagame and was clear that there can be no military solution. The United Kingdom today announced several policy measures, which we will maintain until there is a withdrawal of all RDF from the Congolese territory.

[Lord Harries of Pentregarth (CB)]

I thank the Minister for his reply. It has recently been reported that 7,000 people were killed during January, and 450,000 people have been displaced from about 90 camps. According to reports, the M23 intends to advance right across to Kinshasa. Is it not totally unacceptable for one country to support a rebel group in a neighbouring country? What steps are the Government taking in relation to the United Nations and the African Union to bring this conflict under control before it gets totally out of hand and engulfs the whole of an already fragile DRC?

[Lord Collins of Highbury (Lab)]

Noble Lords will appreciate what I have reported before. Right from day one, we have been engaged with President Lourenço of Angola to ensure that there is a process to achieve long-lasting peace in the region. That is long overdue, because the internally displaced people are numerous and suffering hugely. These recent advances create an even worse situation.

On Friday I was pleased to talk to the Ministers in Dar es Salaam who were hosting the EAC-SADC summit, which produced a communiqué towards peace in the region and set out a very clear road map to achieve the withdrawal. Our concern is that the Rwandans have not fully complied with that, which is why we have made the announcement today of the measures we are taking, along with our allies, to ensure that they respond to that African-led peace process.

[Lord Callanan (Con)]

My Lords, the Minister will be aware that the UK has given more than £1 billion in development aid to Rwanda in recent years. As has been said, evidence is mounting that Rwandan troops are heavily involved in the fighting in DRC. Is it not increasingly difficult to justify this funding when the Rwandan Government themselves are spending so much time, energy and money intervening militarily in a sovereign neighbouring state?

[Lord Collins of Highbury (Lab)]

The noble Lord’s previous Government reached an agreement to give substantially more money to Rwanda.

The important point here is that our focus for development assistance is on those most in need. The measures that we announced today—I was able to convey these to the Foreign Minister of Rwanda in Geneva this morning at the Human Rights Council—are as follows: we will cease high-level attendance at events hosted by the Government of Rwanda; we are freezing trade promotion activity with Rwanda; we are reviewing our existing trade infrastructure in facilitation projects; and we are pausing direct bilateral financial aid to the Government of Rwanda. We are excluding from this our support for the poorest and most vulnerable, which is not direct support; we are committed to that. We are also co-ordinating with partners on potential sanctions designations and suspending future defence training assistance to Rwanda. Our position is absolutely clear. We want to ensure that these measures achieve what they set out to do: to ensure that Rwanda commits to the peace process led by the African Union.

[Lord Browne of Ladyton (Lab)]

My Lords—

[Lord Purvis of Tweed (LD)]

My Lords—

[Captain of the Honourable Corps of Gentlemen-at-Arms and Chief Whip (Lord Kennedy of Southwark) (Lab Co-op)]

We will hear from my noble friend Lord Browne and then from the Liberal Democrat Benches.

[Lord Browne of Ladyton (Lab)]

My Lords, my right honourable friend the Foreign Secretary warned that the conflict in the DRC

“risks spiralling into a regional conflict”.

It is already a humanitarian crisis, with 40,000 refugees fleeing to Burundi alone—the largest influx that country has had in 25 years. Are we contributing to the UNHCR’s $40.4 million appeal to provide life-saving assistance to 275,000 internally displaced people in the DRC and to support refugees and returnees across Burundi, Rwanda, Tanzania, Uganda and Zambia?

[Lord Collins of Highbury (Lab)]

My noble friend makes a very good point. The real risk was that this was going to create regional instability, which is why we not only supported the Luanda process but very much welcomed the convening of the SADC-EAC meeting in Dar es Salaam last week, which set out a very clear process. He is absolutely right to draw attention to the huge humanitarian cost of 2.7 million people displaced—IDPs in eastern DRC. The United Kingdom is the leading humanitarian partner in DRC and the second-largest donor in the country, allocating over £62 million for this financial year for humanitarian programmes in eastern DRC. I also take seriously my responsibility as the envoy for the prevention of sexual violence in conflict. That is a huge risk at the moment, and we are devoted to supporting survivors of sexual violence in that region. We are not going to rest until we ensure that all parties are focused on that agreement reached in Dar es Salaam at the end of last week.

[Lord Purvis of Tweed (LD)]

My Lords, during the passage of the Illegal Migration Bill and the safety of Rwanda Bill, I asked the previous Government for details—but failed to get them—of the £240 million economic and integration fund that the previous Government gave to Paul Kagame’s Government. Can the Minister assure me that not a single penny of UK money has gone to non-humanitarian assistance in Rwanda, and especially the £20 million credit line provided to Paul Kagame’s Government for preparation of facilities that were not then needed? How much money are we getting back from his Government?

[Lord Collins of Highbury (Lab)]

The noble Lord knows that we stopped that agreement immediately when we came into office. We are absolutely clear that we have ceased all payments in respect to it and will not return to making any of those payments. But we are determined to support those most vulnerable and most in need, and we will continue to do that.

[Lord Alton of Liverpool (CB)]

My Lords, can the Minister tell us what happened in Kasanga in Kivu on Thursday last, when 70 people were hacked to death with machetes and hammers by an organisation that is said to be linked to ISIS as they took refuge in a church? What are we doing to confirm those reports? Have we raised this with the International Criminal Court and the African Union to ensure that those responsible for this terrible atrocity are brought to justice?

[Lord Collins of Highbury (Lab)]

The noble Lord is right to draw that to our attention, but the reality is that we are trying to ensure that all crimes committed in the process of this advance are properly investigated so that we can hold people to account. When I met the Foreign Minister of Rwanda this morning in Geneva, he denied all these accusations and refuted the story in the Guardian. I reassured him that we would be absolutely determined not only to ensure that they comply with the communiqué but to hold people to account for crimes against humanity.

[Lord Bellingham (Con)]

My Lords, is the Minister aware that it is not just a question of regular Rwandan troops being embedded in M23? There are now special forces involved as well, and there is overwhelming evidence that war crimes have been committed on both sides. I congratulate the Minister on the very robust set of measures he announced; the Government deserve credit for this. He mentioned SADC, but can he say what he is doing with the AU? Its offices can also be very useful in trying to find a way forward.

[Lord Collins of Highbury (Lab)]

The noble Lord is absolutely right. When we committed to the Luanda process, we were not sure exactly what steps we could achieve in the final outcome. President Lourenço assured me about what he was trying to achieve. We cannot restore trust, but we can build confidence at each stage. Unfortunately, the 15 December summit did not take place; things fell apart, and we saw the advances. Now, as I said, SADC and the EAC have come together in Dar es Salaam, overseen by the African Union. They are taking the lead. The African Union has also appointed three facilitators to ensure that the process is moved forward in a much more consistent and coherent way.

[Lord Anderson of Swansea (Lab)]

My Lords, is there not a danger of contradictory policies? A country invades its neighbour. Its forces carry out human rights atrocities and take several cities. We rightly condemn what Russia is doing in Ukraine. Should we not be equally robust in respect of a Commonwealth country, Rwanda?

[Lord Collins of Highbury (Lab)]

My noble friend is absolutely right. We have been clear with all allies, including the United States, in condemning this absolute breach of DRC’s sovereignty. We are making it clear that it is unacceptable. We and our allies have taken co-ordinated action so that Rwanda commits to the process it has agreed to and delivers the long-lasting peace that the people of DRC so deserve.

Holocaust Memorial Bill

Tuesday 25th February 2025 Lords Chamber

Order of Commitment

15:32

Moved by

[Lord Khan of Burnley]

That the Bill be committed to a Grand Committee.

Motion agreed.

Plant Oxford Site

Tuesday 25th February 2025 Lords Chamber

Commons Urgent Question

The following Answer to an Urgent Question was given in the House of Commons on Monday 24 February.

“This Government are determined to see a strong, thriving UK automotive industry. We recognise the vital role that the British motor industry plays within our manufacturing landscape, employing more than 150,000 people, with tens of thousands more working in the wider supply chain. That is why we are ploughing £2 billion into the sector’s green transition and £300 million to encourage the uptake of new, clean, green electric vehicles—a big incentive for the global automotive sector to invest in the UK. Building on this momentum, our modern industrial strategy will back automotive companies that want to invest in Britain and drive long-term sustainable UK growth.

BMW has taken a commercial decision to delay the production of two new electric Mini models at its Oxford plant. Undoubtedly, that news will be unsettling for the company’s many hard-working employees, not least those working directly on the production line, but I must stress that BMW remains committed to its investment in the UK. It is by no means unusual for a manufacturer to adjust its product line-up or production start dates for commercial reasons.

We are proud that BMW considers Oxford to be at the heart of Mini production. As a Government, we are throwing our weight behind its investment. We want big automotive brands from Britain and around the world to lie at the heart of our growth mission and plan for change, creating well-paid jobs and putting more money into people’s pockets. As part of that effort, this Government are working closely with BMW as it reviews its investment timelines, ensuring that more cars are built right here in the United Kingdom”.

15:33

[Lord Hunt of Wirral (Con)]

My Lords, I start by saying how delighted we all are to see the Minister back in her place on the Front Bench. We were all appalled to hear about her sad accident and hope that her appearance today means that she is now restored to full health.

Having said all that, given BMW’s decision to review its £600 million investment in electric Mini production due to slowing EV demand, I ask the Government whether they now acknowledge that their decision not to delay the 2030 ban on internal combustion engine cars was a mistake. Will they reconsider their approach to ensure that the UK remains an attractive destination for automotive investment?

[The Parliamentary Under-Secretary of State, Department for Business and Trade and Department for Science, Information and Technology (Baroness Jones of Whitchurch) (Lab)]

I thank the noble Lord for his kind comments and look forward to working with him in our new roles in the future.

The precise timeline for the launch of Oxford’s Mini new electric vehicle models is a commercial matter for the company. It is not unusual for a manufacturer in the automotive industry to adjust its plans for future products, including production dates. However, the reasons given by BMW are the “multiple uncertainties” that it is facing rather than any specific issue. Its concerns are about the timings and not about the willingness to invest. We are, of course, in regular dialogue with BMW to understand its future investment timelines and to discuss its plans for the UK plants and those employed there.

[Lord Fox (LD)]

My Lords, perhaps it would help if we identified some of the headwinds that our automotive industry is facing. To meet the mandate and try to sell enough EVs, last year our top motor brands discounted a total of £4.5 million and still they will not reach the mandate and will face penalties. On top of that, energy costs are up to 65% higher than the costs faced in the rest of Europe and of course there are higher business rate multiples and employer NIC costs coming up. Those are the challenges that our businesses face. Will the Minister at least acknowledge that there is a challenge and undertake to find ways of better meeting it, perhaps by helping consumers to buy more EVs and looking at energy costs?

[Baroness Jones of Whitchurch (Lab)]

My Lords, of course we understand the challenges faced by the sector. The Government have been working closely with stakeholders across the automotive industry and beyond to support demand for zero-emission electric vehicles. Defra has been consulting on this issue and recently closed a consultation to understand stakeholders’ views on the transition to zero-emission vehicles. However, this is not just a UK issue; a number of countries, particularly in Europe, have similar zero-emission targets for cars. It is a challenge that all automotive companies are facing globally. Nevertheless, we are committed to making the UK one of the best places in the world for automotive investment. In the Budget, we committed over £2 billion of capital and research funding for zero-emission vehicle manufacturing and its supply chains. We continue to work with this very important growth sector; it is one of the arms of our industrial strategy, so we see a strong future for the automotive industry. Nevertheless, the noble Lord has made an important point.

[Baroness Royall of Blaisdon (Lab)]

May I ask my noble friend to pay tribute to BMW? These are very difficult times, with global headwinds making it extremely difficult for the automotive industry. BMW is an excellent employer, and I hope that there will not be redundancies, but should there, be I hope that the Government would do everything they could to safeguard jobs in Oxford. I take this opportunity to pay tribute to BMW for the work that it does in the community—it believes in enhancing the lives and opportunities of people who live in the environs of the factory.

[Baroness Jones of Whitchurch (Lab)]

I concur with my noble friend’s point. BMW often describes Oxford as the home of the Mini and sees that investment as crucial. I hope that my noble friend and other noble Lords will welcome our new announcement for the Oxford-Cambridge corridor and the high-potential sectors within that, in which the automotive sector could well play a part. My noble friend Lord Vallance will be the Oxford-Cambridge growth corridor champion; it will ensure new investment into the sector and, I hope, provide further encouragement for BMW to carry on investing in the Mini lines.

[Lord Alton of Liverpool (CB)]

My Lords, in light of the lighter restrictions which many of our allies have placed on the import of cars made in China, and given that the labour used to manufacture those vehicles is often connected to slave labour in Xinjiang and there can therefore never be fair or proper competition in any sense of the word, what account are the Government taking of the threat posed by the flooding of our markets by the unrestricted import of large numbers of electric cars from China?

[Baroness Jones of Whitchurch (Lab)]

My Lords, we are very aware of the situation with regard to China, in particular Chinese electric vehicles. China’s role in the global automotive industry is growing, which presents both risks and opportunities for us. We will not hesitate to act where that creates issues or problems for the UK, but we are very mindful of the opportunities that this presents as well. Our automotive industry in the UK is very different from those of other European countries because it is export oriented; we export 80% of our cars abroad, unlike, for example, the EU and the US, where production is sold domestically. Nevertheless, we are aware of the issues that the noble Lord raises and will continue to act in our interests.

[Baroness O'Grady of Upper Holloway (Lab)]

My Lords, I declare an interest as the daughter of a former assembly line worker at Cowley—I am very conscious of the incredibly skilled and dedicated workforce there—and as a trade unionist who, frankly, has worked with motor companies and unions through many ups and downs over the years and knows the importance of working together. Can my noble friend reassure us that, as well as working closely with the company, the Government are working closely with the unions to ensure a strong future for the car industry and that that future is electric?

[Baroness Jones of Whitchurch (Lab)]

My noble friend makes a very important point. We are talking not just to the employers but to the unions about the future for the staff employed there. They have a central role to play in helping us build the development of the manufacturing of the future. When we enact the forthcoming Employment Rights Bill, there will be further opportunities for unions to be consulted and involved in decisions such as this.

[Lord Sterling of Plaistow (Con)]

My Lords, I have a deep concern. There is now a general view at Motability, which I founded, as some noble Lords will be aware, that it will not go to electric cars. For many car manufacturers today—very much in Germany and other places such as that—the margins are so thin that, over the next few years, many of them will go broke. I draw that to the Government’s attention before we put money into a company which may eventually go broke. Capitalism will work, but not necessarily in our favour.

[Baroness Jones of Whitchurch (Lab)]

The noble Lord makes an interesting point of which I was not aware. I will go away and look into it. We are investing in the development of electric vehicles; just today, the Department for Transport has extended the plug-in van grant for another year to help van drivers and businesses transition to zero-emission vehicles, which will mean that businesses and van drivers can receive grants of up to £2,500 when buying small vans. I do not know whether that will apply to the circumstances the noble Lord mentions, but I will certainly look at whether that is covered.

Great British Energy Bill

Tuesday 25th February 2025 Lords Chamber

Third Reading

Relevant documents: 4th Report from the Constitution Committee and 7th Report from the Delegated Powers Committee. Welsh, Scottish and Northern Ireland legislative consent granted.

15:44

Amendment 1

Moved by

[Lord Hunt of Kings Heath]

1: After Clause 6, insert the following Clause—
“Reviews of Great British Energy’s effectiveness
(1) The Secretary of State must appoint an independent person to carry out reviews of the effectiveness of Great British Energy.
(2) In carrying out the review, the independent person must have regard to the statement of strategic priorities prepared by the Secretary of State under section 5(1).
(3) After each review, the independent person must—
(a) prepare a report of the review, and
(b) submit the report to the Secretary of State.
(4) On receiving a report, the Secretary of State must—
(a) send a copy of the report to the Scottish Ministers, the Welsh Ministers and the Department for the Economy in Northern Ireland, and
(b) no less than 14 days after complying with paragraph (a)—
(i) publish the report, and
(ii) lay a copy of the report before Parliament.
(5) The first report must be submitted to the Secretary of State within the period of 5 years beginning with the day on which this Act comes into force.
(6) Subsequent reports must be submitted to the Secretary of State at intervals of not more than 5 years.
(7) In this section, references to an “independent person” are to a person who appears to the Secretary of State to be independent of—
(a) the Secretary of State, and
(b) Great British Energy.”
Member’s explanatory statement
This amendment requires the Secretary of State to appoint an independent person to carry out reviews of the effectiveness of Great British Energy.

[The Minister of State, Department for Energy Security and Net Zero (Lord Hunt of Kings Heath) (Lab)]

My Lords, Amendment 1, in my name, inserts a new clause after Clause 6 which requires the Secretary of State to appoint an independent person to carry out reviews of Great British Energy’s effectiveness. Throughout the Bill’s passage, the Government have made it clear that we are committed to ensuring that Great British Energy is subject to appropriate accountability and reporting requirements.

In particular, we have set out in the Bill that Great British Energy’s annual report and accounts will be published and laid before Parliament. The annual report and accounts of Great British Energy will be subject to external audit and the Comptroller and Auditor General will be appointed as the company’s external auditor, in line with the Managing Public Money guidance. The accounting officer of Great British Energy, once appointed, will also be accountable to Parliament, and the National Audit Office will have the right to review Great British Energy’s work and report its findings publicly, and to the Public Accounts Committee.

Having reflected on arguments made on Report in relation to independent reviews, particularly by the noble Lord, Lord Vaux, I am bringing forward this amendment. It will require the Secretary of State to appoint an independent person to carry out a review of the effectiveness of Great British Energy, including having regard to the statement of strategic priorities with which Great British Energy must comply.

The review prepared by this independent person will be submitted to the Secretary of State, who must ensure that it is published and laid before Parliament. The Secretary of State must share the report with the devolved Governments at least 14 days before publication. The first review must be submitted to the Secretary of State within five years of the Act coming into force, and there will be further reviews at a maximum of five-year intervals. We think that this sensibly balances additional accountability alongside the existing mechanisms of review and reporting, while not overburdening Great British Energy and ensuring that it has the time and space to take long-term strategic decisions as an operationally independent company, and as we have debated extensively during the preceding stages of the Bill.

I also repeat the assurance I gave to the noble Lord, Lord Vaux, on Report, which relates to additionality, and confirm that this will be an important principle for Great British Energy, particularly in respect of its investment activity. As such, we expect that these independent reviews will consider “additionality” as part of any assessment of Great British Energy’s effectiveness, having regard to the statement of strategic priorities in doing so.

This amendment is in keeping with a commitment I gave on Report. I hope noble Lords will support the amendment and I beg to move.

[Lord Vaux of Harrowden (CB)]

My Lords, I rise very briefly to thank the Minister for tabling this amendment, which, as he says, introduces a periodic independent review of Great British Energy’s effectiveness, as he undertook to do on Report. I am most grateful to him for the constructive discussions we have had around this as the Bill has moved through its stages. I also thank all noble Lords who have added their support to this through the process.

The amendment does not go quite as far as my amendment on Report, in two respects. First, as the Minister has just alluded to, it does not include any mention of reporting on the extent to which GBE has succeeded in encouraging private investment. However, the noble Lord was very clear on Report about the importance of the additionality principle for GBE and that he therefore expected that it will be covered by the independent review of effectiveness, and he has just repeated that in his speech just now, which gives me more than sufficient comfort on that question.

Secondly, my original amendment proposed a review every three years. While I think that it would have been better to have the initial review before 2030, which is the Government’s deadline for achieving decarbonisation —therefore, there would be time to do something about it if things were not going right—the five-year interval that the noble Lord’s amendment requires is a reasonable compromise.

I do have one question about the amendment. It was changed at the last minute to give the devolved Governments the opportunity to see the independent report 14 days prior to it being laid before Parliament. I fully understand and agree that the devolved Governments should be given the independent report, but I really do not understand why they should get it in advance of the UK Parliament. I would be grateful if the Minister would explain the reasons for that.

Frankly, however, that is not a major issue. I am very grateful to the Minister for tabling the amendment, which will be a very significant improvement to the transparency and accountability regime that Great British Energy will be subject to, and I therefore urge all noble Lords to support it.

[Lord Naseby (Con)]

My Lords, I took part at Second Reading, but, sadly, I had a short sojourn in hospital during Committee and Report. I will make three points, although I support the whole Bill in principle.

It seems to me that three key areas fall under this amendment. The first is mini-reactors. Three years ago, I was told that Rolls-Royce was ready to go. It is fundamental that the mini-reactors get going.

Secondly, I understand there is some discussion about the role of hydrogen. I have contacted two universities, Cranfield and Manchester, which are doing extensive work. Additionally, the boiler workers’ union is totally involved. Hydrogen work is absolutely fundamental to the future of our energy, particularly for domestic heating.

Finally, there is still a view that, rather than import oil and gas, we should carry on some degree of exploration in the North Sea.

[Baroness Bennett of Manor Castle (GP)]

My Lords, I welcome the government amendment and the way in which the Government have listened to your Lordships’ House on this Bill and overseen considerable improvements. One was the inclusion, finally, of community energy, something your Lordships’ House has been fighting for through two Governments and several energy Bills.

However, an important issue arises at this moment relating to community energy. While the amendment that the Government have put down will help community energy to grow in the medium to long term, the sector faces an urgent short-term problem: the uncertainty of the community energy fund’s future. The fund began in January 2024 and has been very successful and heavily oversubscribed: more than 150 community energy projects have been awarded grants. More than 100 projects are ready to go and are eligible for funding, but they will not receive it because the initial £10 million is expected to run out in May. This is the only substantive mechanism helping community energy to grow, yet it has no future beyond this year.

I make no apologies at all for representing Community Energy here. Its members have asked me to say that we have seen so many times with energy policy over the years a boom-bust cycle of funding and defunding and then funding and defunding again. There is a short-term issue here, although the Government have expressed their support for the long term. So can the Minister give me a clear statement on how the Government will deal with the uncertainty over the community energy fund’s future? Can he assure me that there will be early action to deal with the enthusiasm that the fund has not been able to meet, and clear instructions on that in the statement of strategic priorities for Great British Energy, as required by Clause 5 of the Bill?

[Baroness McIntosh of Pickering (Con)]

My Lords, I take this opportunity to congratulate the Minister on bringing forward the amendment.

I support the words from the noble Baroness, Lady Bennett, and ask the Minister what the current position is on the future of the community energy fund: the Government seem to support it, but we need to know how it will proceed and when it will come into effect. How comprehensive will the review, to which the amendment refers, be? It appears to be limited to finances, but can the Minister confirm that it will also cover sustainable development?

We heard for the first time, I think, on Report about the framework document, of which the noble Lord said at col. 1204 of Hansard that it will become available only after the Bill has received Royal Assent, yet it would seem to go to the very heart of sustainability and environmental protection, which are so key to this Bill. Can the Minister explain, if the framework document will indeed cover these points, because he linked it to the sustainable definition that he was using, as recognised by the UN, why it is not part of the Bill, why we have not had the opportunity to debate it, and what the relationship will be between the framework document and the contents of the amendment that he has just put forward?

[Lord Alton of Liverpool (CB)]

My Lords, I briefly add my remarks to those of the noble Baronesses, Lady McIntosh and Lady Bennett, about the community energy fund. I thank the Minister for responding so positively to my noble friend Lord Vaux by bringing forward this amendment on more general accountability. It is a good step forward, but will he respond on those companies—I gather there are around 150—that would have been eligible for the community energy fund but will not be able to receive funding if the money indeed runs out in May, as is forecast? On that specific point, when the £100 million runs out in May, what will be put in its place?

[Lord Howell of Guildford (Con)]

My Lords, I find the amendment extremely interesting. Perhaps I may just make a general point about the nature of such amendments and provisions outside this Bill. We see here a grey area between what is strictly on the Government’s credit and bill under the PSBR and what is in the private sector. Previous Governments have been caught on this barbed wire for many years as to what lies in the public sector and influences the Government’s credit and what does not. I think we are going to see the model contained in the Minister’s amendment in many other areas as well. Right around the world, Governments have all the demands on them to make utilities work, vast changes to infrastructure and so on, and the private sector has the money. Somehow, the two must be brought together, as we tried to do in the late 1990s with PFI—the private finance initiative—which ran into great difficulties, but there were some lessons to be learned from it.

We have to learn more lessons now, otherwise the finance for these things simply will not be found. This applies particularly in the energy sector, where very large investments are required over many years. The Government cannot do it because they cannot raise the money and the private sector does not want to take such risks. This is very interesting, and I see that the Minister has done his best in plunging into this still very grey area, because we do not really know how to define accountability or what it is we are calling to account.

As to the amendment itself, I had to smile. We have had similar arrangements in the distant past for bodies that are neither public nor private, and this is an attempt to overcome the problems of that in the past.

It is, frankly, not very easy to evaluate the amendment to appoint this independent person to review effectiveness if we are not quite sure what “effectiveness” means. It says, “turn to Section 5(1) on the obligations on the Secretary of State to lay down certain criteria”, which, apparently, he has not done yet, so we do not know what the criteria will be. They will appear in six months’ time. Of course, it is easy to think of various criteria to allow one to say, “An organisation has, unfortunately, lost a lot of money but has still done terribly well, because I have these criteria here which show that it has achieved certain other objectives”. There are criteria that we can think about: externalities, opportunities for broader contributions, geopolitical objectives. All these things not only rest on highly subjective judgments but will be very far in the future. The analogy comes to mind of goalposts on wheels: the goalposts have been moved from time to time and from year to year as to whether effectiveness has been achieved, even though a lot of money may have been lost.

I have to put in a reservation that all these issues are matters of intense debate. All round the planet some of the best minds are wrestling with the effectiveness measurements of certain huge investments of a green nature, which look terrific but, unfortunately, either do not make money or go wrong, but nevertheless contribute to some part of the battle against climate violence and to some limitation on the ever-rising carbon dioxide and methane emissions.

16:00

It would be nice to have that broad set of criteria as soon as possible and for it to be shared with Parliament. To be asked to pass this amendment before we know what on earth the judgments will be, what they will be based on, or who the polymath will be who can somehow convincingly second-guess the market is asking quite a lot of us. I can see how the amendment adds something to the accountability side, but that something is very vague. I hope that there will be more efforts by the Government before long to give us a clearer idea of what “effectiveness” is, how it will be judged, how much the market will be overridden by views in five years’ time, and whether, in fact, it is going to work at all.

[Earl Russell (LD)]

My Lords, I will speak first to the amendment in the name of the noble Lord, Lord Hunt, which is supported by the noble Lord, Lord Vaux. These Benches are pleased to see that continued progress has been made and that this government amendment has been brought forward. There has been a unanimous voice across the House that there needed to be more reviews in the Bill and that it was important to have this amendment, so we are pleased to have it in place.

I echo what was said on the Government’s amendment to the amendment and the addition of proposed new subsection (4)(a), which requires a copy of the review to be sent to the devolved Ministers 14 days before it comes to Parliament. My assumption is that that is there so that the devolved authorities have a chance to comment on the review and that those comments have a chance to come before Parliament, but it would be useful if the Minister could confirm why that new subsection has been added and what the Government’s thinking is on it.

We welcome the review, but it is happening over a five-year timeframe, with the first review completed at the important date of 2030. If the Government recognise the need for the review, why not have it on a more regular basis? A three-year or four-year timeframe would be more useful for this proposed new subsection to have the effect that the Government intend it to have.

I turn beyond the amendment to what I want to say at the end of Third Reading. These Benches have been consistently supportive of the Government and their objectives in this Bill. We believe that, done well, GB Energy will help to secure our energy independence and reduce our reliance on volatile international gas markets, which have proved so costly for UK bill payers and our economic prosperity.

The previous Conservative Government spent some £40 billion subsidising bill payers, and that money provided no long-term benefit to our overall energy security. Just this week, the Energy and Climate Intelligence Unit published a report on the anniversary of the invasion of Ukraine, stating that £140 billion has been spent by the UK on the international gas markets since 2021—the equivalent of £1,300 per person. Again, this has brought no long-term benefits.

We have the third-best wind resources in the world, so it is great to see that these are finally being properly developed to bring us long-term energy security and to reduce costs for our energy bill payers. The CBI reported this week that the green economy contributed £80 billion in gross value added to the UK economy last year and grew at a rate of 10%—three times faster than the rest of the UK economy.

Having said all that, I always felt that the Bill was a little bit too short and lacked the content that it needed; that has caused us some challenges when scrutinising it. We welcome all the amendments that have been passed; we believe they add value and that the Bill leaves this place in a stronger position than when it arrived. I am particularly grateful to the Minister and his Bill team for including community energy in the Bill. This is a really important amendment, and it will benefit our communities and help with the energy transition. Community energy has been supported by MPs and noble Lords on all sides, so this is a win for everybody. I am grateful to Power for People, which has provided support to all of us on these matters, and we will continue to press the Government, as others have already mentioned, on the future of the community energy fund.

We also welcome the other amendments that were tabled: the amendment on strategic priorities; and the amendment that the noble Baroness, Lady Hayman, negotiated with the Minister on sustainable development.

Finally, if noble Lords will excuse me, I want to say something about the words that we use as parliamentarians and how we talk to each other on the issues of climate change. I deeply regret the end of the political consensus on climate change. My personal feeling as a relatively new Peer in this House is that while bits of our debates on this Bill were excellent, there were too many moments when points were repeated, purely party-political points were made that did not improve or challenge the Bill, filibustering took place, or we had numerous votes that took place very late at night.

The public support action on climate change. Polling consistently shows 70% support. The public also want to see reductions in their energy bills; they do not much care, frankly, how that happens, but it requires all of us to make progress. These matters are challenging enough to address with a sense of consensus, and they are made even more difficult when political hostility is added to the mix. My final point is that we must all work better together so that we can all achieve more.

[Lord Offord of Garvel (Con)]

My Lords, in concluding for His Majesty’s loyal Opposition, I thank noble Lords from across the House for their tenacity in scrutinising the Bill, and in particular the noble Lords, Lord Alton of Liverpool and Lord Vaux of Harrowden, for their amendments. On my own Benches, I note the contributions of many noble friends, who have done sterling work to temper what is a misguided piece of legislation which will not deliver cheaper energy for UK households or businesses.

GB Energy is flawed because it exposes the conflict at the heart of this Government between the Chancellor’s stated priority of economic growth on the one hand and, on the other, the accelerated pursuit of net zero at any cost that the Energy Secretary has made his ideological obsession. While this scrap rages at the centre of Whitehall, there is only one loser: the public, who, it has been confirmed today, will be loaded up with the price of net zero to the tune of another £111 per household this year. That is directly because of this Government’s policies and a far cry from the promise in the Labour manifesto of a reduction in energy bills by £300 per year per household—a manifesto pledge which this Government have refused to include in this legislation.

As the Bill has progressed through your Lordships’ House and the other place, the chasm between rhetoric and reality has indeed been exposed. I believe that in a decade we will look back and ask why we invented this cardboard cut-out company. But despite our deep scepticism, it would be churlish not to wish GB Energy a positive start, so I offer some start-up advice. With its £8 billion of borrowed money, the first order of business should be a feasibility study of all the energy sources available to us in the UK. If it does so, it will discover the following. The dash for renewables at any price is a folly. In doing so, we are loading excessive costs on to our energy bills, to the point now where our industrial energy in the UK is five times more expensive than in the US and seven times more expensive than in China. All the while, we are offshoring jobs from the UK to China, turning UK revenue into Chinese profits. This is impoverishing our nation.

The Government are denying the facts. We are an energy-rich country, and our hydrocarbon industry is the envy of the world in terms of compliance and sustainability. Surely it is irresponsible to refuse to even explore the opportunities that onshore gas could bring, while of course undertaking an assessment of risk. The fact that this Government’s policy continues to tilt towards shutting down offshore oil and gas is surely an affront to the hundreds of thousands of skilled workers in Aberdeen and the north of Scotland. They surely deserve better than this.

Meanwhile, both parties agree that nuclear is efficient and clean, but it should be accelerated. We should cut the red tape by unleashing our homegrown engineers while being unafraid to learn from those, such as the Koreans, who have been able to roll out nuclear energy more quickly and at a lower cost.

If GB Energy does this feasibility study, it will realise the facts and then it should pivot net zero accordingly to ensure that our transition to a cleaner energy system is both fair and affordable to UK households and industry. For the sake of the country, we can only hope that it does so.

Finally, I believe it is important to state unequivocally that my own party must reflect on the last 14 years of government energy policy. The verdict of the electorate in July was clear and resounding. As many noble Lords are aware, an error does not become a mistake until one refuses to correct it, and I would encourage the current Government to heed these wise words.

[Lord Hunt of Kings Heath (Lab)]

My Lords, we were debating my amendment, but we seem to have done the “the Bill do now pass” speeches as well, so if noble Lords allow, I will do both in my response.

I thank noble Lords for their general welcome for my amendment. I think it is a very satisfactory outcome of our debates in Committee and on Report. On the question asked by the noble Lord, Lord Vaux, and the noble Earl, Lord Russell, about the devolution aspect, the noble Earl put his finger on it. It seems perfectly appropriate that the devolved Governments should receive a copy before publication, because that then allows them to have sight of any findings that might be relevant and which they may have to answer on the day of publication. No slight is intended to Parliament in this, it is just the normal business of Government-to-Government relationships and courtesy. That is why we withdrew the original amendment and replaced it with the revised one, in the light of representations made to us by the devolved Governments.

On the timings of the review, noble Lords will know that we had in mind, at first, the UK Investment Bank, which I think has a seven-year review period. The noble Lord proposed three years and in the end we compromised. That is not unreasonable: Great British Energy must be allowed some time to set itself up and get itself into working order and then, at an appropriate point, we will have a review. It is worth making the point that GBE’s work does not come to an end in 2030; that is just a deadline we have given for clean power. We expert GBE to go on for many years to come, and therefore it is going to be a judgment, but we think five years is not an unreasonable time.

I say to the noble Lord, Lord Naseby, that I agree with him about the potential for small modular reactors —we have a programme that Great British Nuclear is running at the moment and I hope it will be able to come to some important decisions over the next few weeks and months—and he is absolutely right to mention them. I also share his view about the potential of hydrogen. We do not disagree at all with the noble Lord on that.

As far as community energy is concerned, this was raised on Report and I do not think there is anything more I can say at the moment. Clearly, we recognise the important role that community groups can play. Our intention is that Great British Energy will build on existing support, by partnering with and providing funding and support to local and combined authorities, as well as community energy groups, to roll out renewable energy projects and develop up to 8 gigawatts of clean power. I am afraid I cannot give any more details at the moment, but I understand and take note of what noble Lords have said about the companies concerned. I take this seriously and will ensure that it is considered, and we will set out further details in due course.

On the issues raised by the noble Baroness, Lady McIntosh, about sustainability, let me be clear that the independent review is focused on the effectiveness of GBE in delivering its mission. It will cover all aspects of the work of Great British Energy and will not focus solely on its financing, as the noble Baroness feared. To give an example, one of its important roles will be to clear the way to allow developers to come in. That will be an important part of the review. Furthermore, as I have already said to the noble Lord, Lord Vaux, additionality will be an important part. Clearly, the amendment that I brought on Report—about GBE needing to keep under review the impact of its activities on the achievement of sustainable development—means that that will be part of any review undertaken by the independent reviewer. I hope that reassures the noble Baroness.

16:15

We have had some interesting and detailed discussions on more general points about what is, after all, a rather short Bill. I note that the noble Earl, Lord Russell, thinks it could have been longer. My department hopes to bring forward other legislation as time allows, and subject to the usual discussions in government. No doubt we will make progress on that.

As for the statement made by the noble Lord, Lord Offord, I was interested in his point about his party’s stewardship of energy policies over 14 years. I very much regret that the Opposition seem to be backing away from the consensus that we had on the crucial importance of responding to climate change and net zero. Of course, rising prices are a concern to all of us, but we believe that the only way to ensure that we have long-term energy security, and to wean ourselves off the international gas market and the volatility that that has brought, is to move as quickly as we can towards clean power and net zero. The noble Lord, Lord Offord, knows that I totally agree about the importance of nuclear, but his party did not open a single nuclear power station during its stewardship—they fiddle-faddled around and decisions were delayed. This Government will ensure that nuclear has a strong role to play in the future.

Having said that, we have had what I can only describe as detailed scrutiny by your Lordships’ House on this very short Bill. I am grateful to all noble Lords who have taken part and enabled us to tease out some important issues, including the noble Lord, Lord Offord, and his colleagues on the Opposition Front Bench, and the noble Earl, Lord Russell, whom I thank for his constructive approach to the Bill. I resisted amendments that sought to add lists of items to be considered in the Bill, giving the usual government reason that by listing items you exclude others.

It is invidious to name names at these proceedings, but I want to mention the noble Lord, Lord Vaux, and his perseverance and persistence in ensuring that GBE has effective accountability; the noble Baroness, Lady Hayman, and her diligence in ensuring that climate and sustainability issues were fully considered; the noble Baroness, Lady Noakes, and her forensic scrutiny of the financial aspects of the Bill—she was once a formidable director of finance in the NHS, and I know only too well the skill and expertise that she brings; and the noble Lord, Lord Alton, and his continuing and hugely impressive work on human rights issues. Many other noble Lords have played significant parts in these debates and I thank them very much indeed.

I am grateful to my excellent Bill team, led by Safia Miyanji, who gave huge support from a wonderfully committed team; to my private office, led by Angus Robson; and to Ayeesha Bhutta and the Whips’ Office for the remarkable way that they underpin all our activities.

I end by acknowledging the unsung heroes in the Public Bill Office, who do so much to make sure that the amendments we debate are actually coherent and fit in the legislation. I commend this amendment to the House.

Amendment 1 agreed.

16:20

Bill passed and returned to the Commons with amendments.

National Insurance Contributions (Secondary Class 1 Contributions) Bill

Tuesday 25th February 2025 Lords Chamber

Report

16:21

Clause 1: Rate of secondary Class 1 contributions

Amendment 1

Moved by

[Baroness Barker]

1: Clause 1, page 1, line 1, at end insert—
“(A1) In section 9(1A) of the Social Security Contributions and Benefits Act 1992, after paragraph (aa) insert—“(ab) if the employer is a specified employer under subsection (1B), the specified employer secondary percentage;”.(A2) After section 9(1A) of that Act insert—“(1B) A “specified employer” means—(a) a person providing a care home service or a domiciliary support service who is regulated under—(i) Part 1 of the Health and Social Care Act 2008,(ii) Part 1 of the Regulation and Inspection of Social Care (Wales) Act 2016, or(iii) Part 5 of the Public Services Reform (Scotland) Act 2010,(b) a person contracted to provide primary care under the provisions of—(i) Part 4 of the National Health Service Act 2006,(ii) Part 4 of the National Health Service (Wales) Act 2006, or(iii) sections 17J to 17O of the National Health Service (Scotland) Act 1978,(c) a person contracted to provide general dental services under the provisions of Part 2 of the National Health Service (General Dental Services) Regulations 1992, (d) a person contracted to provide pharmacy services under the provisions of—(i) Part 7 of the National Health Service Act 2006, or(ii) Part 8 of the NHS (Pharmaceutical and Local Pharmaceutical Services) Regulations 2013, or(e) a charitable provider of health and care,(f) a person providing hospice care whether in a hospice or elsewhere, or(g) a carer to whom section 2(3A) of the National Insurance Contributions Act 2014 applies.(1C) For the purposes of this Act, the specified employer secondary percentage is 13.8%.””Member's explanatory statement
This amendment, together with Baroness Barker’s amendments to Clause 2, page 1, line 12, Clause 2, page 1, line 14, and Clause 2, page 1, line 15 provides that care providers, NHS GP practices, NHS commissioned dentists, NHS commissioned pharmacists, charitable providers of health and care, and those providing hospice care would continue to pay contributions at current rates.

[Baroness Barker (LD)]

My Lords, it may be a surprise that I stand up to take part in proceedings at this point, having not taken part in the Bill so far. I do so because my noble friend Lord Scriven is unable to be here. Indeed, my only involvement in the Bill so far was to be the chair when it was in the early stages of its consideration in Grand Committee. I was therefore forced to remain sedentary and say nothing throughout the proceeding. It was very good, actually: I sat and listened to everybody else’s contributions, and that turned out to be excellent preparation for today’s debate, in which I seek to move Amendment 1 and to speak to the consequential amendments in this area.

As noble Lords who have taken part in and listened in great detail to previous stages of the Bill will know, the central issue that the amendments are having to address is the sudden imposition of a rather blunt fiscal instrument, in the form of an increase not only to national insurance contributions but to the rate at which they are paid, and the effects that that will have across the whole economy. These amendments address just one part of that wider problem.

I should at the outset declare an interest: in my family, we are reliant upon carers. We pay for those carers ourselves, and do so through a private agency. This issue is therefore not academic for me but very personal at the moment.

I should also say that before your Lordships today there is a manuscript amendment, for which we thank the clerks for their consideration. This is a tax matter which is UK-wide, but it has effects, which the amendments tabled so far seek to mitigate, in England and Northern Ireland. Noble Lords may well have been contacted by care providers in Scotland who will need similar provisions to enable them to cope with the problems.

The problem we are dealing with is that, in the health and social care sector, the sudden imposition of these changes to national insurance, along with the increases in the minimum wage, are going to threaten the existence of large numbers of providers and have a profound impact on budgets.

We have a real problem in that the health and social care sector is not solely a statutory one. We have a number of different providers, many of which are small but are related to large statutory providers. Unfortunately, because of the swift nature of the imposition of this rather dramatic change, we are having to come up with ways in which we can mitigate the damaging impact, which means we have had to resort to measures that perhaps we would not otherwise have wanted to take, in seeking to create different classes of employers.

The Government have come forward with some of their public sector exemptions because they realise the effect that this is likely to have. But those exemptions will not apply across the board. In particular, they will not apply to the organisations set out in these amendments, such as dentists, pharmacists, providers of care services and hospices, all of which are central to the Government’s other stated policy objective of improving health and of improving the health service and making it a community-based and more preventive service, thereby driving down demand on our health service, which is the greatest problem our NHS is facing at the moment. Because the Bill does not do that—indeed, it cuts across those other policy objectives—we have been forced to take these measures.

It would perhaps help noble Lords if I were to explain that 87% of a typical local authority’s budget spend is now on social care. That expenditure is not capital heavy; it is labour heavy and labour intensive. These are not organisations, unlike some of their private sector counterparts, that can suddenly adjust and vary their income streams to a dramatic extent that will enable them to mitigate rapidly or absorb the effects of the imposition of this policy.

I listened very carefully in Committee to all the arguments put to my noble friend Lord Scriven, and he and I, and others, went away and redrafted our amendments in order to take on board as many of those criticisms as we could. We have extended the remit of these amendments as far as we possibly can to include private sector providers of NHS services. I agree that there is not the exact equivalence between the private and public sectors that many people would want, but it is, within the scope of this measure, a significant step forward. We did that not least because one of the consequences, perhaps unintended, of the government proposals as they stand is that they will disproportionately affect local authorities that have for prudent reasons sought to outsource much of their provision. If their provision is outsourced, they will be hit and will have no mitigation against this change in national insurance.

I sat and thought about this the other night. You could have a realistic situation in which you have two local authorities that have broadly the same demographic profile and challenges, and that probably work to the same acute hospital, yet they could be in a completely different position in terms of their budget, solely because of the imposition of this measure.

We on these Benches have been quite clear. We have said that we understand that there is a need to increase funding, not least for health and social care. We believe there are other ways in which that could have been done—by closing capital gains loopholes and doing things such as taxing online gambling and taxing share buybacks.

There are a number of ways in which that could be done, and none of them would have the direct counter-effect on policy of changing and moving our National Health Service away from being a very inefficient organisation which does not at the moment have a system which works towards greater productivity, promoting health and driving down demand. For all those reasons, we are proposing these amendments today, and I hope that noble Lords will see the case to support them. I beg to move.

[The Deputy Speaker (Lord Haskel) (Lab)]

My Lords, I must inform the House that if Amendment 1 is agreed, I am unable to call Amendments 6, 7 or 9 by reason of pre-emption.

16:30

[Baroness McIntosh of Pickering (Con)]

My Lords, I take this opportunity to support the sentiments of the noble Baronesses, Lady Barker and Lady Kramer, in tabling these amendments, in particular Amendment 9A. I declare my interest as advising the board of the Dispensing Doctors’ Association. I wonder whether, when the Minister comes to respond to this group, he could clarify the position. I noticed that dispensing doctors are not referred to in Amendment 9A, but in effect they probably employ more staff than other GPs, pharmacies or organisations itemised in the amendment.

The reason for that is that, in addition to dispensing to regular patients, dispensing doctors also perform a profoundly important role in rural areas where there is no community pharmacy, because their patients have nowhere else to go. A dispensing doctor normally intervenes to dispense in those rare circumstances. I have to say that the reason I am so familiar with dispensing doctors is that my late father and my now retired brother were both dispensing doctors.

As dispensing doctors are quite large employers in this regard, is the Minister minded to look favourably on reimbursing them for the additional costs that they will incur through the increase in national insurance contributions, either through the very helpful amendment moved by the noble Baroness, Lady Barker, by adding dispensing doctors to it, or will he look at some other avenue to ensure that the costs incurred by dispensing doctors will be met? I am sure the Minister is aware that pharmacies and dispensing doctors are currently not being fully reimbursed for the costs of medicines that they are dispensing or prescribing, so they are in an acutely difficult position caused by the Government’s announcements on national insurance contributions in the last Budget. I ask him to answer those points in addition to those raised by the noble Baroness, Lady Barker.

[Lord Hope of Craighead (CB)]

My Lords, I support the amendments in this group, which seek to mitigate the effect that the measures in this Bill will have on charities that provide social care. Particular attention needs to be paid to those that provide services in areas where the primary responsibility lies on the public sector. I understand that about one-third of social care staff in Scotland are employed by the voluntary sector. The support that they provide is an essential part of the system of social care in Scotland as a whole, and without their support the public services as currently funded would be quite unable to meet what the public need demands of them.

To put a little colour on what I have just been saying, I will return very briefly to an example I gave to the Grand Committee—that of the Cyrenians, a charity that addresses the causes and consequences of homelessness in the south-east of Scotland. It sees homelessness as something which is always about much more than a lack of housing; it cannot be solved simply by building more houses, nor can it be solved by the public sector alone. What the Cyrenians do is help people to avoid becoming homeless in the first place. It provides a range of services, such as mediation and support to families that are at risk of breakdown—which leads in due course to homelessness of one partner or the other.

The Cyrenians charity also provides services to ensure that people coming out of hospital are not discharged into homelessness. It runs a residential community which provides accommodation for people with acute psychiatric and mental health problems who have been discharged from a hospital where they have been receiving treatment. These are people who can be discharged only because that support is available.

All in all, the Cyrenians run over 60 services with a staff of over 200. It estimates that the increase to national insurance contributions provided for in the Bill will cost it about £170,000 a year. This is a significant burden on its finances which, for various reasons, are already being stretched very thin. I am told that it cannot benefit from any increase in the employment allowance. The Minister will correct me if I am wrong, but the charity believes that it is not eligible, as its class 1 national insurance liabilities were more than £100,000 in the last year. The public sector exemption is not available either.

The result is that the charity will no longer be able to provide the training and development that its staff need. That will lead, inevitably, to an erosion in the extent and quality of the service that it offers. Those who will suffer will be those most in need of protection: those who are at risk of, or who are already suffering from, homelessness, for whom the public services cannot provide.

Another Scottish charity that works in the area of social care is Ark Housing Association. It is a larger organisation which is in a similar position to that of the Cyrenians in that it seeks to provide services across a large area of Scotland. In its case, these services are offered to vulnerable adults, such as those with a learning disability and other complex needs. As matters stand, that charity too is not eligible for any support from the Government, as it has a turnover of about £24 million per year and employs over 700 people. It estimates that the effect of the Bill on its operations will be, in its own words, “devastating”.

As matters stand, the charges that it faces to do its work barely break even, year after year. It estimates that its national insurance increases will amount to a further £600,000 per year. This means that it will not be able to survive without damaging cuts to its services to reduce costs, and even these may not be enough for it to survive. As in the case of the Cyrenians, the people most affected are the thousands of vulnerable people for whom the social care that Ark provides is a vital lifeline, and who have nowhere else to go.

It is not an exaggeration to say that, as the Bill stands, social care and support providers in the third sector in Scotland will face a situation of crisis that the public services simply cannot cope with. Something has to give, and the responsibility for this lies with the Government. I hope that the Minister will feel able to assure the House that he recognises that something needs to be done to minimise the impact of these increases on this sector. For the time being, however, I will support the noble Baroness, Lady Barker, if she decides to press her amendment.

[Lord Howard of Lympne (Con)]

My Lords, I am afraid that I too was unable to be present at the earlier stages of the Bill, but I rise to support this amendment—in particular, the provisions relating to hospices. These would have the same effect as later amendments in the name of my noble friend Lady Neville-Rolfe, to which I have also put my name. I draw attention to my entry in the register as vice-president and past chairman of Hospice UK.

The added burden that the increased contributions will place on the hospice sector are considerable. The extra cost has been estimated at no less than £34 million a year. St Christopher’s Hospice in south London has said that it will face increased costs of around £450,000 a year—equivalent to the cost of nine specialist nurses. Dorothy House hospice in Wiltshire estimates additional costs of £422,000 a year. The Kirkwood Hospice has had to put 33 roles at risk of redundancy, citing the increased national insurance costs as one of the drivers. Nottinghamshire Hospice is also proposing redundancies, again citing these extra costs as one of the factors.

These are just some of the examples of the devastating effect that these measures will have on hospice care. This is all so short-sighted. We all know that one of the major challenges facing the NHS is bed-blocking. As I have told your Lordships before, hospices can make a huge contribution to overcoming this challenge by looking after patients in the community, either in hospices or looked after by hospices at home. To make that contribution, hospices need more resources, not fewer, so this change will add to the challenges facing the NHS, not only directly in respect of its own employees but indirectly by diminishing the capacity of hospices to help.

The Minister will no doubt refer to the Government’s recent announcement that £100 million would be made available to hospices, and that is indeed welcome. But that money is for capital projects. Not a penny of it is available to defray the extra costs of the increase in national insurance contributions, which we are debating today, so it will have little or no effect on the crisis in hospice care that I have described.

I urge the Government to think long and hard about this amendment and to come up with a constructive solution.

[Lord Eatwell (Lab)]

My Lords, I find some difficulty in addressing this group of amendments, specifically because these amendments are but a part of 38—out of the total of 44—amendments in the Marshalled List that are essentially all the same. The 38 amendments all propose exemptions to the changes proposed in the Bill, or variations in the various thresholds at which employers’ national insurance is charged. All the amendments have the same internal logic: they are designed to reduce revenue. All 38 are the same; they vary only in the individuals, firms or groups that are to be exempted. The House will, of course, deem many of the individuals and groups not just worthy but really deserving of support.

I wish to address the 38 amendments collectively because they are the same. The Liberal Democrat Benches, notably with amendments associated with the noble Baroness, Lady Kramer, seek to exempt providers of care homes or domiciliary care, primary care providers, dentists, pharmacists, charitable providers of healthcare, hospice care, carers and part-time workers. She adds providers of education or childcare to children under five years of age, universities, providers of further or higher education, registered charities, housing associations, small or micro businesses, town councils, parish councils and businesses in the hospitality sector.

16:45

Not to be outdone, the noble Baroness, Lady Neville- Rolfe, adds providers of transport for children with special needs, employers of persons under 25 years of age, small charities, all charities, employers in the early years sector and farmers. In addition, the noble Lord, Lord Londesborough, focuses on firms with fewer than 25 staff. All these are to be exempt from the measures in the Bill. Finally, as the coup de grâce, the noble Baronesses, Lady Noakes and Lady Neville-Rolfe, add Amendment 39, which provides for yet further exemptions that they have not actually thought of yet.

The 38 amendments with identical intent add up to a set of wrecking amendments, since they wreck the Chancellor’s Budget judgment. Moreover—this is hugely important in the context of this House considering what is essentially a money Bill, because of the technicalities of national insurance—the 38 amendments embody two serious fiscal errors. First, consider the fact that every exemption, every adjustment of a threshold to diminish revenue, is an expenditure of taxpayers’ money. Are the proposers of the 38 amendments really prepared to endorse this scattergun, blunderbuss approach to public spending? All the proposals in 37 of the 38 amendments involve commendable, valuable public services and contributions to the economy and society, but this wild scattering of public funds is not a serious way to determine the structure of public expenditure.

It might be argued by the proposers of the wrecking 38 that they are only pitting their scattering of funds against unintended consequences of the measures in the Bill, but to make that argument would be the second serious fiscal error. In the raising of revenue, simplicity is a fundamental requirement, as contrasted with the necessary complexity of carefully targeted expenditure decisions. If it is felt that taxpayers’ money should be spent on any or all of the causes outlined in 37 of the 38 amendments, those decisions should be taken as the outcome of a considered spending decision, not by corrupting the revenue system.

Simplicity of taxation is one of the great principles of taxation set out in Adam Smith’s The Wealth of Nations. As Smith argued, proposals for raising revenue should always emphasise the reduction of complexity to make compliance easier and administration more efficient and, most important of all, to reduce opportunities for avoidance. The 38 amendments add up to a charter for avoidance. You can be sure that they will be gamed and exploited by those with avoidance skills.

In opposing the amendments in this first group, I am opposing all the wrecking 38. All add damaging complexity to the Bill and scatter public funds in an ill-considered manner. All should be withdrawn.

[Lord Wallace of Tankerness (LD)]

My Lords, I echo some of the comments made by the noble and learned Lord, Lord Hope of Craighead, who identified some key Scottish voluntary organisations that play a vital role in supporting particularly vulnerable people.

I draw attention to CrossReach, the social care arm of the Church of Scotland. CrossReach employs something like 16,000 people. Over recent years it has been able to support its services by drawing on reserves to the extent of not thousands but millions of pounds. That sort of thing is not sustainable. It has 32,000 beneficiaries across Scotland. In my year as moderator of the General Assembly of the Church of Scotland, I remember visiting many of these facilities and seeing the valuable work done by CrossReach in supporting young children, many of whom had disabilities. It also supports drug and alcohol rehabilitation schemes, elderly care and care homes, and young people with learning difficulties moving from the school environment into the adult environment. The work being done was quite remarkable. I fear that you cannot continue to run down your reserves for ever.

I received representations from the Coalition of Care and Support Providers in Scotland, which surveyed its members. More than 50 members participated, with a combined expenditure of £850 million, employing around 28,000 staff and supporting 230,000 people across Scotland. In the responses, 57% of respondents were seriously considering handing contracts back to commissioners next year; 55% were considering reducing the amount of support available to beneficiaries in services they do not plan to continue next year; 92% said that if employers’ national insurance contribution changes are not fully reimbursed, it will negatively impact on pay awards; 88% said it will negatively impact on staff pay differentials; 67% are budgeting for 2025-26 on the basis that they expect to reach financial balance only through the use of reserves, and 91% of these said they will no longer be a going concern within four years if they continue to reach financial balance through drawing down reserves in this way.

I hear what the noble Lord, Lord Eatwell, says, but when CrossReach is spending millions of its own reserves, that is not exactly taxpayers’ money. I will not make the excuse that these are unintended consequences; one must assume the Government know what they are doing, even if that is a bit of a far stretch. I would like to know what impact assessment the Government have made of the cost to the public purse if these services are withdrawn. If it is not a cost to the public purse, it is a cost to vulnerable people the length and breadth of this country. That is a completely unacceptable position for the Government to take up. I would like the Minister to tell us the impact assessment of the consequences if some of these services have to be withdrawn.

In my exchanges with the Coalition of Care and Support Providers in Scotland, it flagged up to me, only at the very end of last week, a possible problem with some of the definitions. You have English organisations with legislation passed by this Parliament, Welsh ones with legislation passed by the Welsh Senedd and Scottish ones with legislation passed by the Scottish Parliament. But, for example, “domiciliary support service” in Amendment 1 is not a definition that is known to Scottish legislation. It was too late to table a manuscript amendment to try to address that. The coalition also wanted some time to try to see what precisely needed to be done to extend it to Scotland. I am sure the House would agree that if this amendment is carried, we would also like to make sure it is fully adequate for the entire United Kingdom, not just for some parts of it. I therefore propose to table an amendment at Third Reading, if my noble friend’s amendment is carried, to try to address the specific Scottish issue.

[Viscount Chandos (Lab)]

I shall speak briefly to support the arguments and analysis of my noble friend Lord Eatwell and to remind your Lordships of the comments at Second Reading of the noble Lord, Lord Macpherson, who said that if we aggregate the reductions in employee national insurance that were introduced in the last year of the last Government with the effects of this Bill, the effect is about net unchanged. As my noble friend Lord Eatwell has said, all the various causes and organisations that will be proposed as excepted have benefited as employers, in effect, from the employee national insurance cut. Therefore, if they have to moderate their future wage rises, the net income over that period of 12 or 18 months will essentially be the same. That seems to me another argument for treating all the 38 amendments to which my noble friend referred as a heartfelt cry for help that has already been given.

[Baroness Stedman-Scott (Con)]

My Lords, I have not spoken on the Bill so far, but I want to speak now on behalf of charities. Charities are not for profit and they are not for loss. The impact of the Bill’s proposals provides a fiscal challenge, whichever way we look at it. I understand that the increase proposed will impose on charities about £1.4 billion in additional annual costs, and 87% of charities are worried about absorbing these and other costs that are forthcoming. Charities are emotionally driven and business-led organisations; they give their heart and soul to the people they get up in the morning to serve, and we must make sure that the people who need their services are not impacted detrimentally in any way.

While people in the finance departments of organisations, not least the Government, are focused clinically on money, and I understand that, I ask that they look at the impact that the Bill will have on individuals. My dad used to say to me, “Debbie, measure twice and cut once”, and I would like that saying to be applied to decisions in the Bill.

[Lord Hogan-Howe (CB)]

My Lords, I support the Government in opposing all these amendments. Some individually are attractive, especially the later amendment about the level at which national insurance is set. However, I shall not support any of the amendments because I think it is for the Commons and the Government to decide on taxation. It is an unfortunate event that has already been remarked on, and there is an opportunity here to comment and vote on it. I realise the political attraction of forcing the Government to remove these amendments one by one when the Bill returns to the Commons. Some are very attractive—I get that, intuitively —but it seems unfair to unpick a Budget, which is a comprehensive account of the macroeconomics of the country, and then pick off each of these measures by an amendment. I cannot support that; it is good to have the debate, and the Government may decide to change their opinion on any one of them.

The noble Lord, Lord Eatwell, made the point that taxation should be simple, and I agree. If every one of these cases were to be included by the Government in their new Budget, I think that it would be incomprehensible for the public in general. Although I see that, individually, some cases are attractive, I cannot support the amendments for the reasons that I have set out.

[Baroness Noakes (Con)]

My Lords, I rise briefly to challenge the analysis of the noble Viscount, Lord Chandos. He claimed that if we took the health and social care levy employer element and what was proposed here, it would sort of level itself out. It would not. The employer element of the health and social care levy is roughly one third of the amount that is expected to be raised by this Bill. The two cannot be compared.

[Lord Macpherson of Earl’s Court (CB)]

I support the comments from my noble friend Lord Hogan-Howe: I think that it is an important principle that Budgets should be determined by the House of Commons. Those who argue for exemptions should be obliged to explain how they will pay for the tax cuts in those exemptions. If you cut taxes in one area, they will need to be raised somewhere else. That will result in higher marginal rates for everybody else, which do far more damage than low ones.

17:00

I also support the points made by the noble Lord, Lord Eatwell. I ask the House to spare a thought for the HMRC official. These amendments are being applied to narrow professions and employments and will cause all sorts of problems in determining whether particular businesses or individuals are entitled to the exemptions. We do not need a more complex tax system; it is too complex as it is. I wish we would return to the principles of the late Lord Lawson, who believed in as wide a tax base and as low marginal rates as possible.

Finally, I want to take issue with the noble Baroness, Lady Masters—

[Noble Lords]

Noakes.

[Lord Macpherson of Earl’s Court (CB)]

Many apologies to the noble Baroness; I stand corrected. The cut in employee national insurance was considerable. Looking at the macro effects of employee and employer national insurance on the labour market, I regard the changes that have taken place as broadly neutral across the board.

[Baroness Fraser of Craigmaddie (Con)]

My Lords, I am not an economist, but I run a small Scottish charity that provides health services. I want to come back on some of the points raised.

I wish the noble Lord, Lord Eatwell, the noble Viscount, Lord Chandos, and even the noble Lord, Lord Macpherson, had had the recess that I have just had—looking at our employees, some of whom have been with us for over 20 years and are highly trained clinical specialists, and telling them that their roles are under threat of redundancy. As I said at an earlier stage of this Bill, I have not been able to participate in it as much as I would have wished because of its effects on my organisation, which are that people will lose their jobs and organisations will lose skill. Those are very difficult things to build up again.

Like the noble and learned Lord, Lord Wallace, I have been in touch with the Coalition of Care and Support Providers in Scotland. I am slightly concerned that these amendments do not cover health and social care services in Scotland. If he is to bring back an amendment at Third Reading, I will happily work with him on it.

I would love a simpler tax regime and would absolutely support it. The way to have one is not to have this national insurance increase—that would be very simple. The lists covered by these amendments are all of organisations that support public services and the public sector. These are services that many government agencies are required to provide by law, yet they are farmed out to organisations such as ours, as well as to CrossReach, Ark and others.

Frustratingly, this demonstrates a huge lack of understanding by this Government of how these measures will affect vulnerable people—the people who these organisations support. My organisation, Cerebral Palsy Scotland, is a regulated, registered charity, so we cannot put up prices. Our raison d’être is to make our services available to the most vulnerable who cannot pay for them, and so we cannot put up our prices. Yes, we may have benefitted last year from paying slightly less employers’ or employee national insurance, but all our providers—the people who clean our centres, help us with IT, empty our sanitary bins, and things like that—employ people and they are all putting up their costs. Our costs are rising, our national insurance is rising, and because of the minimum wage increases at the same time, it is becoming more and more expensive for us to employ people. The only thing we can therefore do is to cut our cloth and employ fewer people.

I do not understand these measures. I support having lists of different sectors, because these are the sectors that are delivering support that gives people choice, quality of life and control over their lives, and that support the NHS and the social care sector, which would otherwise be stuck. This is a measure that will not save public services, as the Minister has told us it has been put in place to do, but that will, I am afraid, crush them.

[Lord Ahmad of Wimbledon (Con)]

My Lords, briefly, I support the amendment so ably tabled by the noble Baroness, Lady Barker. I pay tribute to her for her attentive nature during Committee. I say to the noble Lord, Lord Eatwell, that the fact there is this extensive list demonstrates once again the lack of an impact assessment, on which I implored the Minister in Committee.

I was a Minister for over 12 years. One thing you learn as a Minister is that, when taking a Bill through, you must consult with and speak to the sectors—you must talk to them and understand their challenges and then address those issues. Unfortunately, that had not been done. Take adult social care, where the impact is close to £1 billion. We may hear from the Minister that this has been addressed in the Budget, but it has not. The Nuffield Trust has said as much: the actual measures put forward in the Budget will be dwarfed by these contributions, and that is just in adult social care. Talk to community pharmacies and they will make a desperate plea, akin to what we have just heard from my noble friend, and say that they will have to shut. Why? Because they cannot afford to keep their employees.

Even at this late stage, I implore the Minister to listen, connect and communicate, and, I hope, to take on board some of the challenges and important concerns being put across in this House on behalf of the many different community services that will so desperately be impacted by these national insurance increases.

[Lord Leigh of Hurley (Con)]

My Lords, I am somewhat amazed by some of the arguments I have heard in this debate. The Bill is before us and we are a revising House. Our purpose is to debate the Bill, put forward amendments, debate the amendments and vote on them. The idea that we should not be changing this because we should not change the Budget is absurd; it defeats the whole purpose of having the House of Lords. We are a revising Chamber; we bring with us expertise and experience, which many of us would like to think assist the Government in their decisions, particularly when they make bad decisions—of which this is one.

The noble Lord, Lord Eatwell, talked about Adam Smith’s desire for simplicity, but he also wanted fairness. What has happened here is not fair. If the noble Lord consults the organisations with which I know he has been connected in the charitable and university sector, they will all say that this is a very unfair imposition on their modus operandi.

There is a reason why there are so many amendments. The first amendment is excellent, and passing it will deal with all the issues in one go. If it is not successful, other amendments will follow that will detail the sectors on which laws can focus their attention.

The noble Lords, Lord Eatwell and Lord Macpherson of Earl’s Court, and others may not have heard me in Committee, where I attempted to cost the various types of amendments, as well as the whole effect of the Bill, on the charitable sector. We have made attempts to detail them, and in other groups of amendments I will discuss those numbers and invite the Government to comment on them. The absolute total that the charitable sector itself has said that this would impact will be £1.4 billion, out of the alleged £22 billion black hole that the Government claim. We have made suggestions about how this may be recouped in other areas.

In Committee, I talked about the enormous damage that the Government are about to impact on the adult social care sector. It is utterly demotivating for the very many people, including me and others in this Chamber, who go out fundraising for such charities, doing our best to help those in need, only now to see the Government snatch it away in such a heartless manner.

In Committee, we discussed some of the big numbers. At that stage, I focused on social care and, as an example, the cost that Jewish Care faces—£1.1 million, which it does not have—to pay for this increase in national insurance. This time, I will discuss hospices, because I do not want to repeat what was said in Committee—albeit it was in Grand Committee and so did not allow us the opportunity to vote, which was extremely disappointing.

I will look at one hospice: Thames Hospice, which is close to Hurley. I was introduced to it by my then local MP, who is now my noble friend Lady May of your Lordships’ House. Its excellent CEO, Dr Rachael de Caux, is reported as explaining that it will now have to post a £1 million deficit and that the NI increases, together with the national minimum wage increases, will cost it £650,000. This is a charity that raises some £4 million from its fundraising, so that is a very material sum. As she herself memorably put it:

“The NHS is supposed to be from cradle to grave and what we have is from cradle to a few months before”


the grave.

Yes, a £100 million for the sector was announced before Christmas, but, as my noble friend Lord Howard of Lympne explained, it is a one-off spend over two years—actually, it is largely back-ended, with most of it in the second year—and restricted to capital sums. In fact, it is spread over 170 hospices, so it is a bit of an insult to claim that that is proper compensation.

Thames Hospice is looking to try to serve 400 people, mainly in their homes. I was very pleased to see that, in the amendment, proposed new paragraph (f) specifically covers those who are being cared for at home. As a charity, it is dependent on the local community for its generosity and financial support. The Government cover only about 30% of its costs, and the hospice has to raise £34,000 a day to provide all its services. The Government know that the demand for these sorts of services will grow. It is estimated that, in Thames Hospice’s catchment area alone, the overall demand for palliative and end-of-life care is expected to grow by at least 9% by 2030, with the number of deaths rising to 4,150 in 2030.

Perhaps the Minister can explain to Thames Hospice what it is expected to do, following this attack on hospices by the Government. Is it supposed to turn away people? Will it have to offer less care? It will see more people die in pain and agony, as it cannot offer the palliative care that it wishes to provide. I am sorry to be so graphic, but that is the choice for your Lordships’ House today. How can anyone hold their head up high if they walk through the Division Lobby seeking to cause such damage to the hospice sector?

[Lord Clarke of Nottingham (Con)]

My Lords, I agree with the noble Viscount, Lord Chandos, and others that, in principle, it is not a very good idea to have a system of taxation in which you suddenly start providing dozens of exemptions for particularly chosen groups when it is introduced. Taxation should be simple and collected in the most straightforward fashion across the whole economy, although there will always be bits that are subject to different effects of such taxes.

I will be supporting these amendments, mainly as a symbolic sign that I disapprove extremely strongly of the choice of tax rise that the Government made in the Budget. In fact, this increase in employers’ national insurance has had a serious, damaging effect on very important sections of the economy as a whole. Many small and medium-sized businesses—and many giant ones in labour-intensive parts of the economy—are being badly affected at a time when many other features of our financial crisis are affecting them as well. We had some exchanges in the House a few moments ago about the withdrawal of the investment proposals by BMW in Oxford. This country is not an attractive place for investment at the moment, yet we desperately need investment if we are to begin to recover from the appalling stagflation in which the economy is now stuck.

17:15

Everybody knew when we fought the general election that whichever party won was going to have to raise taxation because of the appalling fiscal state of the nation. I trust that both party leaderships gave some thought to which particular taxes they would have to raise in the first, inevitably unpopular Budget that it would be the duty of the new Government to introduce. Of course, the choice would have been difficult, but I think the tax chosen was one of the very worst possible, in view of the state of the economy as a whole and, as these amendments illustrate, in view of the particular crisis we face in providing for the lack of social care, and the desperate dependence that so many families have on charitable support, hospices and so on. These amendments illustrate some of the worst effects of the choice that was made.

I will not start a debate about what taxes might be raised. Of course, any tax increase is unpopular and they are all open to objections. I think I probably would have gone for fuel tax or VAT, and looked at air passenger duty—certainly an awful lot of others before, at this particular time, I would have looked at employers’ national insurance.

No doubt the Government will go to desperate attempts in the elected House to get any amendments we pass reversed. They will have to do that. No doubt they will have difficulty, because many MPs will find it very uncomfortable to support that. I certainly think that, as far as this House is concerned, I am attracted by the idea of casting a vote to show how strongly I feel, for the many sentiments that have been expressed, about the damaging effects on many families and many people when hospices, charities and others find their whole work threatened by this unexpected and wholly undesirable imposition.

I think the Minister, certainly as far as this debate in this House is concerned, is defending an indefensible position.

[Baroness Kramer (LD)]

My Lords, I shall be very brief as the leader of the winding speeches. I just join the noble Lord, Lord Leigh, in saying to the noble Lords, Lord Hogan-Howe and Lord Macpherson, that Parliament has given us the responsibility under the national insurance contributions legislation, to come forward with amendments and press them. I am not going to walk away from that responsibility simply because it looks rather difficult.

I say to the noble Lord, Lord Eatwell, who talks about simplification, that it is very easy to have a high-level issue such as that, but I am not going to put simplification ahead of what will basically be the cancellation of something like 2 million GP appointments because of the additional costs on GPs. I am not going to sit by and watch dental practices cut back their services, so that we have much more of this DIY dental care that people are carrying out. I am shocked by the rise in dental sepsis alone. I am not going to sit here while pharmacies basically cut their hours and services. I am not going to sit here while adult social care—we have heard about so many cases—basically has to work out how it sets aside the most vulnerable in our society, because that is the implication.

We have heard also from hospices. People are being told now that their jobs are at risk. This is not a hypothetical or some exaggerated claim; this is a process that is under way across the community healthcare and social care sectors to absolutely cut back in response to this increase in employers’ national insurance contributions. We are trying to stop a disaster. When they came forward with their proposals, the Government did not absorb the fact the National Health Service does not work in isolation. It is part of a much more holistic, complex landscape, and if you undermine the private elements of both social care and community healthcare, you undermine the NHS, and that surely is not what the Government want to be doing under these circumstances.

I could go on because there is so much to be said, but it has been brilliantly said by so many across this House. If the Government were to stand up and say that they accepted this amendment, I think there would be a hallelujah, quite frankly. Will they please understand the problems we are trying to deal with? This is not hypothetical or playing party-political games; this is dealing with a really difficult and serious problem that our society is facing. I do not know quite what I can do in a winding speech, but if I can move anything, I will.

[Baroness Neville-Rolfe (Con)]

My Lords, I echo much of what has been said by the noble Baronesses, Lady Barker and Lady Kramer, what my noble friend Lord Ahmad said about it being a pity that the Minister had not engaged more with all those affected, and the plea for fairness from the noble Lord, Lord Leigh. This Bill is the most important economic measure the Government have put forward since they took office and, as has become apparent from our debates, especially the detailed examination in Committee, it is a misguided measure with numerous defects. It will hit hardest those sectors that employ more labour, such as care homes and hospices, but there will also be flow-through to SMEs and bigger businesses as they seek to cut costs and staff. We have seen this in action with big names such as Sainsbury’s shedding staff and the Federation of Small Businesses and the Chartered Institute of Personnel and Development recording collapsing confidence and planned headcount cuts in the surveys.

During our debate today, the Opposition are proposing amendments to reduce some of the Bill’s most egregious effects. That is the answer to the noble Lord, Lord Eatwell. We have to find a way to limit the impact of this ill-thought-out jobs tax. The tax system is not simple and we are where we are because of the choices the Government have made. The changes are having real impacts on real people in their everyday lives: on charities, small businesses, nursery schools, special needs drivers, pubs, young people and—the specific subject of this amendment—care homes, pharmacies, dentists, GP surgeries and hospices. That is why we are supporting the amendment from the noble Baroness, Lady Barker, and will be voting in favour.

At every stage throughout the progress of this Bill, we have raised the plight of these sectors because of the decisions the Government made in the Budget. They are facing these changes in a very short timescale, as the noble Baroness, Lady Barker, has rightly said. At every stage, the Government have remained unmoved. The Minister has been stony-faced and utterly unreceptive to the genuine and deeply felt concerns of millions of businesses and charity trustees across the country.

We have heard from the noble Lord, Lord Hope, about the Cyrenians, from my noble friend Lady Stedman- Scott about the sheer scale of the impact on charities, and from my noble friend Lady Fraser about the loss of jobs and skills and the difficulties of deciding what to do. These organisations and others are facing a financial cliff edge in April and that is thanks to the Government, who have chosen to put them in this position while at the same time choosing to give a £9.5 billion pay rise to their friends in the public sector, to pledge £8.3 billion to the amorphous GB Energy project and to increase day-to-day spending by £23 billion this year.

These were all choices, and it is hospices, charities, healthcare providers, early years settings and small businesses that will pay the price. That is what my noble friend Lord Clarke of Nottingham was saying: he felt that it was the wrong choice.

In November last year, the Nuffield Trust predicted that the Government’s jobs tax would cost the independent sector’s social care employers in the region of £940 million in 2025-26, and that is on top of around £1.85 billion more that they need to meet the new minimum wage rates from April. These are all relevant to this amendment.

I am particularly concerned about the hospice sector, and that is why I have tabled my own amendment with the support of my noble friends Lord Leigh of Hurley and Lord Howard of Lympne. Both my noble friends spoke with great eloquence, as did the noble Baroness, Lady Kramer, so I will not repeat any of that, but I will say that Hospice UK has confirmed to us that the sector is headed for a £60 million deficit this year. The Health Secretary announced £100 million to make sure we are protecting our hospices, but last week the Prime Minister was forced to admit that that is capital funding and will not have a direct impact on the day-to-day costs. Further to that, I understand from boring into the detail that the £26 million that the Minister mentioned in Committee on day 3 represents almost no new money at all; so, we have a big problem.

Finally, it was reported that the National Pharmacy Association has taken the unprecedented step of voting for collective action in protest at a £250 million hike in business costs that pharmacists face under the Government. If the Minister will not listen to the Official Opposition, perhaps he will listen to the experts, the GPs, the hospices and the charities, which are all telling us that the Government must think again. We agree with the noble Baroness, Lady Barker: the Government must act urgently to protect our health and care providers, our GPs and our hospices before it is too late. Should the noble Baroness choose to test the opinion of the House, we will be with her in the Lobby.

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

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 Barker and Lady Kramer, seeking to maintain the rates and thresholds at their current level for NHS commissioned services including GPs, dentists, social care providers and pharmacists. As noble Lords will know, as a result of the measures in this Bill and wider Budget measures, the NHS will receive an extra £22.6 billion over two years, helping to deliver an additional 40,000 elective appointments every week.

Primary care providers, general practice, dentistry, pharmacy and eyecare are important independent contractors who provide nearly £20 billion-worth of NHS services. Every year, the Government consult with these primary care sectors about what services they provide and what money they are entitled to in return under their contract; this continues to be the case this year.

The Government have announced an extra £899 million for general practice in 2025-26 and have set out the proposed areas of reform which will help to deliver on our manifesto commitments. This is the largest uplift in GP funding since the beginning of the five-year framework and reverses the recent declining trend in funding. As a result, a rising share of total NHS resources will now go to general practice. The Department of Health and Social Care is consulting with the General Practitioners Committee in England of the British Medical Association on the 2025-26 GP contract and 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.

The Department of Health and Social Care has also entered into consultation with Community Pharmacy England regarding the 2024-25 and 2025-26 community pharmacy contractual framework, and the final funding settlement will be announced in the usual way following this consultation. The NHS in England invests around £3 billion in dentistry every year. NHS pharmaceutical, ophthalmic and dental allocations for integrated care systems 2025-26 were published alongside NHS planned guidance.

The noble Lords, Lord Howard and Lord Leigh, spoke about hospices. The Government recognise the vital role that hospices play in supporting people at the end of life and their families, and we recognise the range of cost pressures that the hospices sector has been facing over a number of years. As the noble Lords mentioned, we are supporting the hospice sector with a £100 million increase for adult and children’s hospices to ensure they have the best physical environment for care. We have also allocated an additional £26 million in revenue to support children and young people’s hospices. The £100 million investment will go towards helping hospices improve their buildings, equipment and accommodation, to ensure that patients continue to receive the best care possible.

Regarding 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.

To answer the noble and learned Lord, Lord Hope, all charities can benefit from the employment allowance. As a result of this Bill, from April 2025 the threshold of £100,000 or less will be removed.

17:30

The noble and learned Lord, Lord Wallace, raised the question of impact assessments. As we discussed at length in Grand Committee, HMRC has published a tax information and impact note, and the OBR has set out the macroeconomic impacts of the Bill. Ultimately, though—I say this, in part, in response to the point by the noble Baroness, Lady McIntosh of Pickering, about adding additional sectors—the Bill is necessary to fund public services, and the proposals contained in these amendments would, as my noble friend Lord Eatwell said, put much of that funding at risk. They would require either higher borrowing, lower spending or alternative revenue-raising measures. In light of this, I respectfully ask the noble Baroness to withdraw her amendment.

[Baroness Barker (LD)]

My Lords, I thank all noble Lords who have taken part in this debate, including the noble Lord, Lord Eatwell; I disagree with him, but he raised an important point. It is entirely wrong to characterise the amendments as “blunderbuss” and “scattergun”. We are dealing with a very crude fiscal measure that will impact all sorts of sectors in different ways. The amendments, on the contrary, are not; they are very targeted and precise, and they are different attempts to mitigate the overall problem.

My amendments are confined solely to health and social care. One of the issues I am driving at in them is that, for all the announcements of increases in funding, particularly those for the NHS that the Minister just laid out for us, the question of productivity and sustainability of public services is very important. A key aspect of this is driving down demand on the NHS. The work done by many of these organisations, if it is correctly funded and targeted, will lead in future to a lower demand for elective surgery in the NHS. We are not a “blunderbuss” at all; we are trying to be very precise about what we are doing.

Secondly, perhaps it is not particularly obvious but a number of noble Lords might understand this: thousands of people in this country continue to be able to work because their family members are looked after by these organisations. This is a question not just about the cost of public services; it is about the indirect costs to the economy of taking people out of other productive jobs in order to sustain their family members.

Finally, many of the services that I and other people are trying to maintain are comparatively inexpensive. A lot of them rely on volunteers, and they are much less expensive than acute public services. For all those reasons, this is important. I agree with the noble Lord, Lord Ahmad: I do not think we have had an adequate impact assessment of the Bill. If we had, perhaps we would have been able to take on more of what the Minister was indicating. I think he does not get that these are not wrecking amendments. They are about trying to improve the nation’s health, well-being and finances as a whole. In view of all that, I wish to test the opinion of the House.

17:34

Division 1

Ayes: 305

Noes: 175

17:47

Amendment 2

Moved by

[Baroness Kramer]

2: Clause 1, page 1, line 1, at end insert—
“(A1) The Social Security Contributions and Benefits Act 1992 is amended as follows.(A2) In section 9(1A) after paragraph (aa) insert— “(ab) if section 9AA applies to the earnings, the part-time worker secondary percentage;”.(A3) After section 9A insert—“9AA Part-time worker secondary percentage(1) Where a secondary Class 1 contribution is payable as mentioned in section 6(1)(b), this section applies to the earnings paid in the tax week, in respect of the employment in question, where the earner is a part-time worker.(2) For the purposes of section 9(1A)(ab), the part-time worker secondary percentage is 7.5%.(3) For the purposes of this section, a “part-time worker” has the meaning given in Regulation 2 of the Part-time Workers (Prevention of Less Favourable Treatment) Regulations 2000.”(A4) The Social Security Contributions and Benefits (Northern Ireland) Act 1992 is amended as follows.(A5) In section 9(1A) after paragraph (aa) insert—“(ab) if section 9AA applies to the earnings, the part- time worker secondary percentage;”(A6) After section 9A insert—“9AA Part-time worker secondary percentage(1) Where a secondary Class 1 contribution is payable as mentioned in section 6(1)(b), this section applies to the earnings paid in the tax week, in respect of the employment in question, where the earner is a part-time worker.(2) For the purposes of section 9(1A)(ab) above, the part-time worker secondary percentage is 7.5%.(3) For the purposes of this section, a “part-time worker” has the meaning given in Regulation 2 of the Part-time Workers (Prevention of Less Favourable Treatment) (Northern Ireland) Regulations 2000.””Member's explanatory statement
This amendment sets a new National Insurance Contributions rate for part-time workers.

[Baroness Kramer (LD)]

My Lords, I start by thanking everybody who voted for the previous amendment. Such a powerful message is engaged with that statement.

I am here to move Amendment 2, which is different in character from Amendment 1. The amendments in this group are primarily mine. There are a couple there from the noble Lord, Lord Londesborough, which I also support and know that he will present very effectively. The amendments in my name and that of my noble friend Lord Bruce of Bennachie, in essence, deal with part-time workers.

While looking at the impact of the changes to employer NICs, we became conscious of the changed position of part-time workers as members of our workforce. There are now more than 8.4 million people engaged in part-time work, who are exceptionally hard hit by the changes proposed by the Government in the NICs Bill. People who typically worked 14 hours a week incurred employer NICs in the past; that now drops to individuals who work typically only eight hours a week. Suddenly, there is a huge group of part-time workers who have become far less attractive to the employers that have provided their opportunities in the past.

The impact is especially great on the hospitality industry—an industry that we know is already on its knees. Some 37% of employees in hospitality are part time, and I think there is a view in the Treasury—I think that the noble Lord, Lord Macpherson, expressed it unwittingly in Committee—that part-time work is a sort of rich person’s luxury; it is people working for pin money. That, frankly, is a completely outdated attitude.

Today, part time is concentrated in the lowest pay bands. It is an entry point to work for many people in disadvantaged communities or with difficult histories. It is an economic lifeline for carers who can work part time but not full time, for students, for many with disabilities and for those who are economically inactive. We have a Government who say they want to take 2 million people off benefits and get them into work: part-time work is the entry point and the obvious first step.

We also want employers to see part-time work as exceedingly attractive, so that they start to add additional support, such as training and career opportunity, to part-time work because of this far more fundamental role that it can play. Instead, we have seen with this Bill that many employers are now openly saying that they intend to outsource abroad rather than employ part-time workers or that they will require part-time workers to become self-employed, with all the complexities of IR35.

As we looked at our concerns for hospitality and the high streets—many in those sectors are the backbones of communities—and because we looked at the nature of the part-time workforce, we made the call to go further in this amendment than in our others and seek not just to exempt part-time workers from the increase in employers’ NICs but to reduce the rate of employers’ NICs to 7.5%. As the noble Baroness, Lady Barker, said in the debate on the previous set of amendments, we had it in our manifesto and have since identified other tax opportunities that are available for fundraising. None of them is easy but, frankly, we would close loopholes in capital gains tax, we have talked about taxes on share buybacks and we would reinstate the surcharge on the major banks.

In the previous set of discussions we had a whole series of proposals from the noble Lord, Lord Clarke, who of all people is very aware of the range of possible choices. They may not be ideal, but they are certainly much better than the choice of employers’ NICs, with the impact that is happening. In this case we made that decision, and that is the characteristic of this amendment. The other amendments in the group in my name are all consequential. The noble Lord, Lord Londesborough, also has amendments in this group, and I am fully supportive of them. I beg to move.

[Lord Londesborough (CB)]

My Lords, I rise to speak to my manuscript Amendment 15A and its consequential Amendments 17 and 24, both of which are supported by the noble Baronesses, Lady Neville-Rolfe and Lady Kramer. I am very grateful for their support. I will also speak to consequential Amendments 30A, 31A and 32A in my name. For clarity’s sake, I will not be pressing Amendments 30, 31 or 32.

In short, these exemption amendments seek to protect all small businesses and organisations that employ fewer than 25 staff, including charities, from Clause 2’s steep and sudden drop in the NICs threshold from £9,100 to £5,000 per annum—or, on a monthly basis, from £758 to £417 and, for those who are paid weekly, from £175 to £96 per week. By maintaining these existing thresholds, these amendments would particularly protect part-time workers and smaller organisations including charities, hospitality and retail, which in some cases face increases in their NICs bill per employee as high as 50% to 70%. For this reason, I support the noble Baroness, Lady Kramer, with her Amendment 2.

I should quickly declare my interests as set out in the register, specifically as an adviser and investor to a range of small businesses in the UK, including a community-owned public house.

I will come on to the impact of these amendments shortly, particularly in relation to the challenging and interesting comments from the noble Lord, Lord Eatwell. I certainly do not agree that my amendments are designed to reduce government revenue, and I will come on to that in a moment. Surely, this is our role. This is the most important economic policy that this Government have yet to produce. We are where we are, and surely we should be scrutinising, particularly if we feel that poor decisions or poor structuring of these national insurance increases are doing damage to the economy.

On that theme, I will quickly share this: the latest survey from the Federation of Small Businesses reported that the proportion of its members facing contraction in the last quarter, Q4, jumped to 24%, its highest-ever level outside the pandemic. That is up from 14% in Q3. The FSB has also reported that confidence among its membership has fallen to its lowest point in 10 years. Meanwhile, the Chartered Institute of Personnel and Development has reported that over a third of the 2,000 firms that it interviewed plan to reduce their headcount in 2025 through redundancies or recruiting fewer workers. Rather than taking a sectoral approach, for which many others have spoken passionately already, my exemption amendment applies to all small businesses and organisations, including charities with fewer than 25 staff, which, as the Bill stands, face sudden and steep drops—in fact, 45% drops—in their per-employee threshold at which employers become liable to pay NICs.

Just to illustrate this, employee NICs on a salary of £30,000 are set to increase by 30%, from £2,884 to £3,750, for those employing more than three staff. For part-time workers earning, say, £15,000, the employer NICs can increase by more than 50% per job. These are not trivial increases. While I salute the Government for increasing the employment allowance in Clause 3, it is from £5,000 to £10,500, and this typically washes out increases only for micro-businesses, those employing fewer than three staff. All told, the larger the business in terms of employees and the higher the salaries paid, the lower the increase in percentage terms to its NICs.

Of course, I understand why the Government are raising tax revenues—I have no issue with that—but, by placing this burden so disproportionately on small employers, the Bill threatens to do significant damage to jobs, pay and economic growth. Anecdotal evidence suggests that this is already happening.

My amendments would help to protect the jobs of some 6 million workers employed by about 1 million businesses and organisations across the UK. Many of these are nascent companies that operate on low margins and are at critical stages of their development—yet they grow at the fastest rate, create jobs at the fastest rate and, through their size and agility, can be great innovators. They are a vital component of GDP and our growth, with annual turnover of some £900 billion. But this group also includes a huge swathe of family and local businesses spread across the country, struggling to keep their heads above water in what have been five very difficult trading years. A fall of just 2% to 3% in employment levels or hours worked in this small business sector could cost the Treasury more in lost tax revenues and increased benefit payments than it would gain from this measure.

Incentivising employment by restoring the NICs threshold would be accretive to GDP growth, the Government’s number one priority. It would help boost income tax revenues and employees’ NICs, and it would bolster VAT revenues and corporation tax. Above all, it would lift business sentiment and stimulate investment.

I listened with interest to the noble Lord, Lord Eatwell, describing all these amendments as wrecking amendments. Because we do not have a proper detailed impact assessment, that is an unfair charge and I challenge it on behalf of these amendments. I look forward to hearing from the Minister but, with respect, I expect to press these amendments when the time comes.

18:00

[Lord Bruce of Bennachie (LD)]

My Lords, I will speak briefly to Amendments 2 and 36, to which I have added my name. On Amendment 2, I do not need to add much to what has been said, other than that the disproportionate hit on part-time workers seems to me to be extraordinarily damaging. As has been said, very often these are incipient businesses that might grow to be full-time businesses. There are whole swathes of the economy, such as students, which nearly all of us have in our family, who depend on this kind of work to get them through their studies. So it is a significant impact, as has been said.

The hospitality industry has not just had five difficult years. I have personal knowledge of a number of hospitality businesses that did not survive Covid, and many that survived Covid but with a massive debt overhang that they are still trying to pay off. Add this particular measure on top of that and those that just managed to survive will now probably fail, and those that can hang in there will struggle to get themselves back into viability.

I have an amendment I shall speak to later about the impact of these taxes on the public sector in Scotland. In the private sector, there is a difference in hospitality business rates between Scotland and England. Although the way the business rates are determined is not exactly comparable, UKHospitality Scotland has done an analysis of businesses in Scotland in a comparable sector. It gives an example: a local pub, an average kind of pub, would pay £6,000 more in business rates, 66% more than an equivalent business in England. A town centre restaurant would pay almost £10,000 more, which is also 66% more, and a hotel would pay £26,000 more, which is 70% more than an equivalent business.

I am not here to apologise for or justify the measures of the Scottish Government, who obviously have not followed the UK Government in terms of business rate discounts—it would have been helpful if they had—but I challenge the Government to recognise that the combined activities of two Governments on businesses in Scotland is leaving many businesses in Scotland comparable to similar businesses all over the rest of the UK substantially disadvantaged compared with the rest. I do not believe the Government gave any consideration to that unintended consequence and they have not recognised that it means that the Scottish economy will be disproportionately hard hit by this.

I will throw one political grenade into the mix. It is fine to say that we have an SNP Government, but the majority of people in Scotland did not vote SNP and I think they are entitled to look to a UK Government to at least give some recognition that they are looking for an approach to their businesses that shows some appreciation and understanding that things are different north of the border. Just occasionally, it would be helpful if the UK Government acknowledged that.

[Lord Hodgson of Astley Abbotts (Con)]

My Lords, I have not spoken on the Bill before but I add, very briefly, my support to the proposals from the noble Lord, Lord Londesborough. I have spent a lifetime in the city helping businesses grow—funding them, looking after them and developing them. They are vulnerable throughout, but they are particularly vulnerable in their early stages, which is the point of the noble Lord’s amendment.

With 25 people or fewer, it is easy to forget just how difficult it is, and how persistent an effort is needed, to get a business going, keep it going and to eventually grow it, hopefully, to a great size where it will employ people and increase the prosperity of the country. It is our feedstock—this is where I take issue with the noble Lord, Lord Eatwell, who served with me on a City regulatory body many years ago—and if you cut down the trees in any one year, those trees will never reappear. We shall have a smaller number of growing companies from the years when this proposal has its impact.

It is also surprising, when I hear debates in your Lordships’ House, how many Members cannot conceive of circumstances when the pay cheque will not turn up at the end of the month. A lifetime in public service insures you against that. But, if you run a business, you have to think every day about will happen at the end of the month. Will there be a call from the bank manager saying, “I’m very sorry, I’m not going to be able to meet your payroll”? When you have responsibility for other people, that ghastly pressure is increased by the sorts of measures the Government propose to take here.

I say to the Minister, very gently, that the phrase is: revenue is vanity, profit is stability, but cash is reality. In this Bill the Government are proposing to undermine the reality of the cash that is desperately needed by the very smallest among our companies.

[Lord Eatwell (Lab)]

My Lords, the amendments proposed by the noble Baroness, Lady Barker, are a classic example of how to distort a market. She wishes not only to exempt part-time employees from the measures in the Bill but to reduce the national insurance charge on part-time employees. She does not appear to have reflected on what would be the impact on full-time employees. How many full-time employees will, as a result of this measure, lose their jobs and be replaced by two or three part-time employees? How many companies will reach a cliff edge with respect to their employment policies that will ensure they develop only part-time employees, who often have fewer opportunities, and certainly fewer opportunities for promotion, than full-time employees? What has the noble Baroness got against full-time employment? We need an answer to that. Why is she so content to distort the labour market in this way?

With respect to the amendments proposed by the noble Lord, Lord Londesborough, I have greater sympathy with what he says, but he too is creating a cliff edge. The cliff edge is at 25 employees and it will considerably distort the operations of the market at that stage. It will discourage companies from growing above 25 employees. It will encourage the break-up of structures, so that units employ only 25 employees.

Most interestingly, the noble Lord asked for an impact assessment of the overall impact on employment of the measures in the Bill. There have been at least three—one by the National Institute of Economic and Social Research, another by the OBR and another by the Treasury. They all demonstrate that, taking the measures in the Budget as a whole, employment in the next year will increase, not diminish. The error which, I am afraid, the noble Lord made in his argument is that, yes indeed, because of higher employment costs, there may be a reduction in employment per unit output, but, because of the stimulation of aggregate demand in the Budget, there will be more units of output. So, not only will these measures encourage the growth of labour productivity by reducing the input of labour per unit output but the expenditure of these measures, through a technical device called a balanced budget multiplier, will increase the level of employment in the coming year. The impact assessment is there for all to see.

[Lord Blackwell (Con)]

My Lords, the noble Lord, Lord Eatwell, is a distinguished economist and I defer to his expertise, but I have to challenge him on the assertion that the measures in this Bill which raise national insurance are job creating. The Budget as a whole does not spend only the money raised through this tax; it spends another £40 billion a year, I believe—a total of £70 billion extra over each year of the course of the Parliament. Now, you have to assume that any measure that increases public spending by £70 billion a year will increase employment. It would be a strange measure that increased public expenditure without increasing employment. The difficulty is that all that employment increase will be in the public sector. The fact that this Government have to understand is that you have to earn wealth before you spend it and that compressing the wealth-creating part of the economy in order to spend on the public sector leads to financial disaster in the long run. So I do think his argument on that point needs to be challenged.

[Lord Elliott of Mickle Fell (Con)]

My Lords, I strongly support the amendments tabled by the noble Lord, Lord Londesborough, to protect small businesses with fewer than 25 employees from the increase in national insurance. Before I begin, I should declare my chairmanship of a small fintech company, as declared in the register.

I am particularly concerned about the impact of the national insurance rise on SMEs because they are the main vehicle for job creation. A 2022 report by the Ewing Marion Kauffman Foundation looked at the United States and found that, in 2019, companies in their first year created, on average, five jobs each, while companies older than that created, on average, just one new job every two years. A similar pattern can be found in the UK. Analysis by Santander of ONS data in 2018 showed that employment growth in SMEs was three times faster than in larger businesses in percentage terms.

The Government’s ambition in their Get Britain Working White Paper to increase the employment rate to 80% is laudable, and I very much support this objective as the president of the Jobs Foundation, again as declared in the register, but achieving this objective requires moving 2 million people from welfare into work. There are currently around 800,000 job vacancies in the economy, according to the ONS, so we need to create an additional 1.2 million jobs to achieve this target, and that will be very difficult with the employer NI rises. SMEs employ 16.6 million people in the economy, and small businesses, those which have between zero and 49 employees, provide 13 million jobs in the economy.

We should seize the national mission to get the employment rate back to pre-Covid levels. This target cannot be achieved if SMEs are not thriving. Therefore, I very much support the amendments to exempt smaller businesses from the increase in NI to enable them to fulfil their role as the biggest engine of job creation and, even more importantly, the biggest mechanism for poverty alleviation here in the UK.

[Baroness Neville-Rolfe (Con)]

My Lords, this has been a good debate and I rise to speak briefly. I listened carefully to the arguments put forward by the noble Baroness, Lady Kramer, for Amendment 2, and I commend the noble Baroness for championing part-time workers, as she has done during the passage of this Bill, much as my noble friend Lord Altrincham has been championing youth employment, which is also so important. She is right to raise the impact that the policy will have on jobs. We know that part-time workers are likely to be more at risk of losing their jobs or missing out on future opportunities as a result of this Bill, particularly as a result of the drop in the threshold, which is one of the proposals.

I also support the noble Baroness’s call for more information on the Government’s assessment of the impact of the Bill. I have tabled a review clause, which is in a later group, that goes wider than Amendment 36 and seeks to correct the Government’s failure to produce a proper impact assessment.

I should add that I have tabled Amendment 34—it has been put into this group—to increase the employment allowance available to farmers. Our farmers are hurting. “Starmer Farmer Harmer” signs are now a common sight on the country lanes of England, although I doubt many Ministers have seen them, but we will not press that amendment to a Division. We tabled that amendment to call on the Government, once again, to support our farmers and reverse the family farm tax, which is undermining, unfortunately, the long-term viability of British farming.

18:15

I now turn to Amendment 17, from the noble Lord, Lord Londesborough, which I wholeheartedly support and have put my name to. As noble Lords know, small business is close to my heart because it is at the entrepreneurial heart of the economy, as my noble friend Lord Elliott explained. The Federation of Small Businesses feedback mentioned by the noble Lord, Lord Londesborough, was particularly concerning. I was also pleased to hear from my noble friend Lord Hodgson, from his practical business perspective that we have benefited so much from over the years, about the desperate need for cash in some of these smaller enterprises. That certainly echoes my own experience.

The noble Lord, Lord Londesborough, has been indefatigable during the progress of this Bill and, for all the reasons he has given, I believe we should all support his amendment. The British Business Bank tells us there are 5.5 million small businesses in the UK. They employ 16 million people and—I hope the Minister will take this point well—they contribute massively to economic growth, which we know is the number one priority. That is something I think there is a wide measure of agreement on. So why will the Minister not roll up his sleeves and work with the noble Lord, Lord Londesborough, to protect smaller SMEs from the impact of this Bill? I believe that more can be done to fix this. We feel very strongly that the Government should consider further steps to support SMEs beyond the welcome, but very modest, employment allowance, and that is why we will support the noble Lord, Lord Londesborough, if he chooses to test the opinion of the House.

[Lord Livermore (Lab)]

My Lords, I am very grateful to all noble Lords who have spoken in this debate. I will address first the amendment tabled by the noble Baroness, Lady Kramer, and the noble Lord, Lord Bruce of Bennachie, which seeks to set a reduced rate of employer national insurance for part-time workers at 7.5%. As I have said before, the difficult decisions contained in this Bill were necessary both to repair the public finances and rebuild our public services. This amendment would reduce the revenue raised from this Bill, and therefore would reduce the Government’s ability to achieve these objectives. Reducing the rate of employer national insurance for part-time workers only would also create additional complexity in the tax system and, as my noble friend Lord Eatwell said, create distortions in the labour market. The Government have taken action to support those on lower pay by increasing the national living wage. Employers will also continue to benefit from employer national insurance reliefs, including for hiring under-21s and under-25 apprentices, where eligible.

I turn to the amendments tabled by the noble Lord, Lord Londesborough, and the noble Baronesses, Lady Kramer and Lady Neville-Rolfe, which together seek to maintain the current rates and thresholds for businesses employing fewer than 25 staff. These amendments would also have cost implications, again necessitating higher borrowing, lower spending or alternative revenue-raising measures. I stress that 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 national insurance. 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 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.

The new clause tabled by the noble Baroness, Lady Kramer, and the noble Lord, Lord Bruce of Bennachie, would require the Government to produce an impact assessment on the effect of the Bill on SMEs, hospitality, tourism and seasonal workers. The Government of course consider the impacts of all policies, including the changes to employer national insurance. As we discussed at length in Committee, an assessment of the policy has already been published by HMRC in a tax information and impact note.

The OBR’s Economic and Fiscal Outlook also 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 the approach taken for other similar changes, and the Government do not intend to publish additional assessments.

Finally, I turn to the amendment tabled by the noble Baroness, Lady Neville-Rolfe, that seeks to increase the employment allowance for farms. This amendment would again reduce the revenue raised from the Bill, necessitating either higher borrowing, lower public spending or new revenue-raising measures. The Government of course recognise and greatly appreciate the vitally important role of the farming sector. Despite the Government’s challenging fiscal inheritance, the farming and countryside programme budget has been protected at £5 billion 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, supporting investment in farm businesses and boosting Britain’s food security.

Ultimately, this Bill is necessary to fix the public finances and to fund the public services. Many of the amendments in this group would reduce the Government’s ability to do these things, so I respectfully ask noble Lords not to press their amendments.

[Baroness Kramer (LD)]

My Lords, I will be extremely quick. This has been a short but very useful debate. On the impact assessment, I think I acknowledged that the noble Baroness, Lady Neville-Rolfe, has tabled Amendment 38, which covers the scope more effectively than the amendment we have tabled. That is one which I hope we will have an opportunity to support later on today.

I say to the noble Lord, Lord Eatwell, that there is already a cliff edge—the Minister has set it at three employees. The amendment tabled by the noble Lord, Lord Londesborough, moves this to a far more sensible 25 employees. That is a significant improvement that I hope the House will accept, and that we will certainly be supporting.

Returning to our Amendment 2 that deals with part-time workers, this is an issue which we are going to continue to pursue; we have begun to realise how significant the change is in the structure of the workforce. If the noble Lord, Lord Eatwell, were to look at that, I think he would be very surprised and begin to think rather differently over the kind of measures we are looking at here. Providing this additional support for part-time work is very much pro-growth. It ought to appeal to the Prime Minister; he has positioned himself as the pub champion. Of all the sectors that need the support of part-time workers, and that are going to be impacted by the way this increase in employer’s NICs has been drafted, it is going to be the pubs sector—it is already seeing six pubs close per week. I hope we can look to the Prime Minister for a champion who can try and provide us with some support around this issue.

Because of the importance of the sectors and the changing nature of the workforce, I wish to test the opinion of the House.

18:23

Division 2

Ayes: 97

Noes: 169

18:33

Amendment 3

Moved by

[Lord Sharkey]

3: Clause 1, page 1, line 1, at end insert—
“(A1) In section 9(1A) of the Social Security Contributions and Benefits Act 1992, after paragraph (aa) insert—“(ab) if the employer is a specified employer under subsection (1B), the specified employer secondary percentage;”.(A2) After section 9(1A) of that Act insert—“(1B) A “specified employer” means—(a) a provider of education or childcare to children under five years of age—(i) registered in England in the early years register maintained by the Office for Standards in Education, Children’s Services and Skills,(ii) registered in Wales with Care Inspectorate Wales, or(iii) registered in Scotland with the Scottish Care Inspectorate;(b) a university;(c) a provider of further or higher education;(d) a registered charity;(e) a housing association;(f) a small or micro business, as defined by section 33 of the Small Business, Enterprise and Employment Act 2015; (g) a town council;(h) a parish council;(i) a business in the hospitality sector.(1C) For the purposes of this Act, the specified employer secondary percentage is 13.8%.””Member's explanatory statement
This amendment provides that certain specified employers would continue to pay contributions at the current rates. The specified employers include early years settings, universities, charities, and small businesses.

[Lord Sharkey (LD)]

My Lords, this amendment, in the names of my noble friend Lady Kramer and myself, adds to the list of exemptions from the proposed increase in employer national insurance contributions. I thought I would make that clear at the outset, although I see that the noble Lord, Lord Eatwell, is temporarily not in his place.

The arguments in favour of the nine proposed exemptions in this amendment were discussed in some detail in Committee. What the nine exemptions have in common is that they protect services that are vital to community life and are likely to suffer grave damage if the higher employer NIC is introduced. These services include early years education, charities, housing associations and town and parish councils. Each of these organisations makes a vital contribution to our communal life, and they also have in common the fact that most have no—or no significant—money. The proposed ENIC increase will inevitably reduce the critical services they provide, in many cases to the most disadvantaged in our communities.

The list of exemptions in our amendment also includes further and higher education, and I declare an interest as a member of council at UCL. Both our FE and HE institutions are in grave financial difficulties. This has been true for many years for our somewhat neglected FE sector and is now also obviously true for our higher education sector. The country’s future prosperity and its prospects for growth depend very largely upon these sectors being properly and sustainably funded. If we want a skilled and upskilled workforce, then FE colleges have a vital and irreplaceable role to play, but to play that role they need adequate funding.

I did ask, in Committee, about the funding arrangements for the FE sector. The Minister replied last week. He noted, by way of preamble, that the Government would

“provide support for departments and other public sector employers for additional employer national insurance contributions”.

He does not say what “support” means. He does say that the Autumn Budget provided an additional £300 million in revenue for funding for FEs for the financial year 2025-26

“to ensure young people are developing the skills this country needs”.

He does not say to what extent this will mitigate the imposition of the higher employer national insurance contribution. Could I therefore ask him again to tell us, when he replies: what percentage of the increase in the employer national insurance contribution will be mitigated by the allocation of funds from this £300 million, both in the short term from April to July this year and in the academic year 2025-26?

The Minister’s reply to my Committee stage question also includes a mention of the rise of £285 per annum in student fees chargeable by HEIs from the academic year 2025-26. This will not be enough to sustain our higher education sector. As I mentioned in Committee, our universities are already showing signs of deep financial distress. I noted then that nearly three quarters of institutions are expected to run deficits in the next academic year, and 40% have less than a month’s liquidity. I also noted that three Russell group research-intensive universities—Cardiff, Durham and Newcastle—had joined the long list of universities cutting jobs and costs. Now, Edinburgh has joined them in also announcing cuts, and I hear that at least one eminent university is close to breaching its banking covenants, with all the usual consequences. It is no surprise that it is estimated that 10,000 jobs will go this year.

This is a genuine crisis and it is made worse by the proposed increase in employer national insurance contributions. This new ENIC levy completely wipes out and more any net increase arising from the increase in student fees. The UK has four of the world’s top 10 universities and 16 of the world’s top 100 universities. We absolutely need to have our universities prosper and to be sustainably funded if we are to continue to be a world-class centre for education and research and to contribute to the growth that we so obviously need. Our amendment would, at least, prevent the already perilous situation from getting worse while the Government devise a new and sustainable funding arrangement.

Our amendment also excludes any SMEs and the hospitality sector from the rise in ENICs. SMEs are the wellspring of our economy and of its future. Some 60% of all jobs are provided by SMEs and these companies, almost by definition, are those that will have most difficulty absorbing the proposed rise in the ENIC rates. Significant job losses are inevitable. This matters not only because any job lost is regrettable but because SMEs are the engines of growth, renewal and innovation in our economy, and they create the jobs. Large corporations may be easier for government and Whitehall to deal with, but they are, and have been for a long time, net destroyers of jobs.

Many of the jobs created by SMEs will, of course, be in the hospitality sector, which this amendment also excludes from the proposed rise in contributions. Many of those jobs in the hospitality sector—currently around 350,000—are held by people under 25. For many, this will be their first job and the first step on a career ladder. To keep all these young people in employment after the proposed ENIC rise would nearly double the employers’ costs from £82 million to £153 million. We should protect these young entry-level employees from job losses by exempting their employers from the proposed NIC rise. I beg to move.

[Baroness Bennett of Manor Castle (GP)]

My Lords, I will speak to Amendment 8 in my name and Amendment 41 in my name and that of the noble Lord, Lord Alton of Liverpool. This is the first time I have taken part on Report but I sat and listened carefully to the entire debate on the first group, which covered a lot of the issues that relate particularly to Amendment 8.

Amendment 8 has a very simple and clear purpose, even though the technicalities are quite technical. It aims to delay for one year the introduction of the raised level of national insurance for all registered charities. Other amendments in this group deal with smaller charities and others with groups of organisations, many of which may be charities, but this is an exemption for one year for all charities.

I want to take on a couple of points made by the noble Lord, Lord Eatwell. I am not quite sure which amendments he was counting in his 38, but I strongly assert that neither Amendment 8 nor Amendment 41 could in any way be described as a wrecking amendment, because they do not affect the Government’s long-term economic policy or plans. They mean that for one year the Government would not receive, in their own estimate, £1.4 billion.

I tabled the same amendment in Committee and did not get an answer from the Minister to my question; I would be interested to hear any response tonight. It was on a point raised in the first group of amendments. If charities go under or are forced to slash their services, how much are the Government going to have to fund through other means—through social care, government provision or whatever mechanisms? I do not have the capacity to put a figure on that, but it seems likely that there may not be very much difference between those two figures.

I tabled this in Committee because of the CEO of a fairly large charity with whom I happened to be having dinner. We were not having a deeply political, detailed discussion. She simply said to me, “If I just had one year to sort this out, I would have half a chance”. It is interesting that the noble Lord, Lord Clarke of Nottingham, who is not currently in his place, said in the debate on the first group that so many organisations— I think he was specifically referring to charities—were encountering this unexpected expense. It is the suddenness and the lack of a chance to think, “Can we shift some money into fundraising to increase the funding stream so that we can cope with this down the track?”. That is what this amendment seeks to do.

I find myself in quite an unusual position as a Green, saying that I have put forward this really moderate, reasonable amendment that is quite small in scale compared with some of the other things we are discussing here. But it is a really practical step to attempt to protect charities and all the essential services.

We heard so much passion from people who are directly involved in delivering these services from charities. I am not going to repeat that long list now, but I will just raise one point—I do not think it has been raised up to now—on the place of charity shops on our high streets. They are already struggling. We are already seeing significant closures of charity shops, faced with rising energy costs and—no one is complaining—rising staff costs due to the increase in the minimum wage. If we further hollow out our high streets by losing those charity shops, that too will have all sorts of costs that in one way or another the Government are going to have to pick up.

So that is Amendment 8. I gave notice that I was going to see how this evening went. I am currently feeling inclined to test the opinion of your Lordships’ House on it.

18:45

Amendment 41 is slightly different because it addresses issues that I know a number of noble Lords will pick up with stronger, more radical amendments. It is about transport for children with special educational needs. As I said, Amendment 41 is also backed by the noble Lord, Lord Alton, and it has a pedigree. It was put forward in Committee by the right reverend Prelate the Bishop of Southwark and co-signed by the noble Lord, Lord Forsyth.

The right reverend Prelate first raised concerns at Second Reading about the impact of the Bill on the ability of children with special educational needs or disabilities to get to school. The noble Lords, Lord Udny-Lister, Lord Forsyth and Lord Frost, also expressed concern about this issue. I also have to mention the noble Lord, Lord Wigley, who is not currently in his place, who also expressed strong concern.

I have revised the right reverend Prelate’s amendment to reflect the passage of time and the fact that the Bill is now likely to reach the statute book less than a month before the provisions take effect. Consequently, this proposed new clause would impose a duty on the Chancellor of the Exchequer to conduct, within one week of the measure receiving Royal Assent, a review of the Bill’s impact on the ability of local authorities to meet their statutory duties in respect of supplying school transport services, either directly or through private providers, for children with special educational needs and disabilities in the tax year 2025-26. The duties to review regarding 2026-27 and 2027-28, while still urgent, allow a month for these reviews so that they can feed into Treasury thinking well ahead of the well-advertised conclusion of phase 2 of the spending review in early June.

I have a great deal of detail here, but I will cut it short given the time and the desire of your Lordships’ House. I suspect that many of these issues may be mentioned later. I am going to really stress what this amendment is about. Let us remember who the real victims are here. We are here in your Lordships’ House but we are talking about children, out there in communities up and down the land, who risk losing known, reliable, trusted services. Many of these services will have been caring for these children, looking after them and taking them to school for many years.

I had a meeting and a long discussion about this with the SEND transport operators group of the Licensed Private Hire Car Association. I heard a couple of tales of what these services do. A driver and a carer transported a child who was non-verbal, and off their own bat they decided to learn sign language so that they could communicate with the child. They were not funded for this; it was just something they did. Imagine that child having those people wrenched away from them because the service cannot be afforded any more. The other story was about a girl who was really stressed because, through no fault of anyone, she was going to be 15 minutes late for school. She was really stressed about getting into school at that point, so the carer said, “It’s okay—you’re not going in on your own; I’ll come in with you”. Again, it was not in the contract but was people going that extra mile.

All those services will be thrown into turmoil because they cannot suddenly renegotiate the contracts. They are going to have to hand the contracts back, and that is really not acceptable. The noble Baroness, Lady Neville- Rolfe, has a stronger amendment than this later, and I hope we might put that to the vote. We really have to do something about SEND transport.

[Baroness Grender (LD)]

My Lords, I support Amendment 3, moved by my noble friend Lady Kramer and supported by my noble friend Lord Sharkey, and other amendments in this group, but I will not mention them so that we can speed through as quickly as possible and get to the vote. We discussed in some detail in Committee the plight of charities, with a view to moving an amendment of this nature at this point.

I have a plea around the simplification of the tax system. I think everyone would acknowledge that national insurance contributions will never be part of asking, “Would we start from here?”, and then simplifying the tax system. Perhaps there is culpability on these Benches: they were introduced by Lloyd George, but massively expanded by Clement Attlee, so I am looking at the Benches opposite to share a bit of the responsibility from some time ago.

Failure to retain charities at the current rate will cost the sector £1.4 billion in the next financial year according to the NCVO. This compounds levels of underfunding in the long term and threatens services for some of the most vulnerable in society. To take just one example, Homeless Link is a charity with 800 member organisations, all of which work on the front line of homelessness. It estimates that the national insurance changes alone could take between £50 million and £60 million out of the homelessness sector. That is peanuts when it comes to revenue raising but absolutely fundamental to services run by 800 different organisations.

Most charities do not function as profit-making businesses and cannot adapt to increased costs, as the private sector can, by putting up prices or recovering elsewhere. Instead, the increase in national insurance must be accounted for by cutting costs in staff, and therefore services to people in acute need, such as those who need a bed for the night. The Government’s very welcome objective to develop a cross-departmental homelessness strategy is undermined by this additional cost.

At Second Reading, the Minister defended the current UK tax regime for the charity sector, arguing that it is

“among the most generous of anywhere in the world”.—[Official Report, 6/1/25; col. 601.]

I ask the Minister to study with care the latest results of the Charities Aid Foundation’s World Giving Index, which has the UK now at number 22—its joint lowest position ever, having fallen out of the top 20 at the end of last year after a recent period of decline.

The charitable sector is a significant partner in many of this Government’s future plans. This change in national insurance directly harms charities and the people who they need to serve. We urge the Government to reconsider this additional financial burden.

[Lord Bruce of Bennachie (LD)]

My Lords, I will briefly speak to Amendment 40, which is in my name. It asks for an impact assessment of this Bill on Scotland, because of the differences that have been identified.

The Government have said that they will compensate the public sector, but we are all waiting for the detail of how they will do it. A figure of £4.7 billion as the global sum has been mentioned, but not the detail. There is a concern that the structure of the public sector in Scotland is significantly different from that in England and that it may not be sufficient to sustain public services at even the current level in Scotland, where they ae struggling, as they are everywhere else. My own health board, Grampian, has had to absorb a £20 million charge just for this Bill, on top of a £75 million deficit that it is currently running. It is in a substantial crisis.

I have questions for the Minister. He will have seen the Fraser of Allander review of the impact; it may not be definitive but it is independent. It suggests that the impact is something around £550 million in Scotland. If one applied the normal rules of the Barnett formula, £4.7 billion would presumably give Scotland something between £400 million and £450 million. However, government officials in Scotland tell us that the Treasury has said the Barnett formula will transmit £300 million, or just over that. How can the Minister justify a £300 million transfer through the Barnett formula against a £4.7 billion overall budget for compensation?

More to the point, how will the Government establish the criteria for what level of compensation they will give to which kind of public bodies? If they do that, can they ensure that the same conditions that apply in England will follow through in Scotland, and that the money will go with them? All I am asking for is equality of treatment, not special treatment.

As I have said before, there is quite a lot wrong with what is going on in Scotland. The Scottish Government are not known for their efficiency in management; I am not trying to defend them and I do not think the UK Government should compensate them for their incompetence. However, I do not think that the public sector and the people of Scotland should suffer because of that, when an additional measure brought by the UK Government has added insult to injury or misery to misery.

Will the Minister acknowledge that, if he is talking about compensation of just over £300 million, that falls a long way short of the comparable impact, pound for pound, in Scotland compared with England? What are the criteria? Will they be applied fairly and consistently across the UK?

[Lord Leigh of Hurley (Con)]

My Lords, I will speak to Amendment 9, which is in my name. I suspect that it may have been subject to pre-emption, along with Amendment 8. If the noble Baroness, Lady Bennett of Manor Castle, is surprised, I am equally surprised that I think I agree with all of her remarks. That means that I would like to focus on Amendment 4, dealing with charity revenues of less than £1 million, which I believe is not subject to pre-emption.

According to the Charity Commission website, there are about 170,000 charities in the UK, with about £100 billion of income in aggregate and 1.3 million employees. My noble friend Lady Neville-Rolfe wants us to concentrate on those charities with an annual revenue of below £1 million.

There is different terminology that can be used by the Charity Commission, because it talks about gross income. On average, charities’ donations and legacies are about one-third of their total income, as was the case with the Thames Hospice, which I described earlier. The rest of the income is grants, investments and so on. A charity with £1 million of revenue will probably raise only some £350,000 in donations. I calculate from the available information that the sums raised by charities with revenues of less than £1 million total some £12 billion, which is 12% of total charity income. But there are 162,000 charities with an income of under £1 million, which means that we are talking about 95% of all UK charities.

As for their spend on national insurance, it is hard to determine, because we do not know exactly how much they spend on employment. We do know how much they spend on total expenditure, which is some £12 billion. If we assume that 50% of that—it is a very generous assumption—is on employee costs, and if we assume a salary of around £25,000, because it is a low-paid sector, then my noble friend Lady Neville-Rolfe’s amendment would impact only 240,000 people.

To try to answer the criticisms from the noble Lord, Lord Eatwell, I calculated that my noble friend’s amendment would cost the Government around £480 million—half a billion pounds. Is the Minister going to tell us that he is not prepared to protect 95% of charities for just £500 million? Does he recognise my figure? If not, what is the cost of the amendment? I invite him to join us in pausing the hike until we work out what it is, so that we can then have a meaningful discussion.

I remind the Minister that in a speech to the civil society summit last year, hosted by Pro Bono Economics, Sir Keir Starmer promised to reset the relationship between civil society and government. Is this what he meant? He said that

“for too long, your voice has been ignored”.

I have read the full speech, and he also said,

“we know it’s people on the ground, people with skin in the game, who understand the problems best and have the best answers”.

He continued in his speech to civil society leaders, which largely rubbished Tory policies, by saying,

“let’s be honest, for too long, your voice has been ignored between the shouts of the market and the state”.

Are the Prime Minister and his Ministers listening now? Those leaders are calling for this national insurance hike to be dropped.

Why would the Government want to penalise 162,000 charities, where our fellow citizens give so much of their time freely, and in many cases their cash, simply for the betterment of fellow citizens at home and abroad? It is a shameful imposition.

[Baroness Bennett of Manor Castle (GP)]

My Lords, on a point of clarification, I have received information that my Amendment 8 has not been pre-empted and still stands.

19:00

[Baroness Sater (Con)]

My Lords, I shall speak to Amendment 9, to which I have added my name, and to Amendment 4. I declare my interest as set out in the register and as a trustee of the Dartington Hall Trust.

My contribution today will be short, as so much as already been said during the passage of the Bill. We have heard many passionate statements today. I have already spoken of my concern about the impact of the increases in national insurance contributions on the future of the charity sector and its ability to continue to deliver much-needed services and support. Along with many others, I believe that we have put forward compelling and passionate reasons why the charitable sector should not be subject to the Government’s national insurance contribution increases.

At both previous stages of the Bill, I have respectfully asked for the impact assessment of this tax on the sector. The Minister and his Government have not, to date, reconsidered their position or produced the impact assessment, which other noble Lords have again asked for today. It seems extraordinarily unfair that the Government indirectly exempt the public sector but decline to exempt or reimburse the charity sector. I cannot understand it.

At the risk of repetition, let me say that the National Council for Voluntary Organisations estimates that the increased cost of this tax to the sector is £1.4 billion. It has raised its concerns to the Treasury. Together with the Association of Chief Executives of Voluntary Organisations and the Charity Finance Group, they perfectly summed up this situation when they wrote that

“the knock-on impact it will have on individuals, communities and local economies who rely on us will be devastating”.

Those are voices from the sector, who represent so many charities across the country.

I am sure that the Minister has heard many calls for help himself from across the charity sector. I hope that he recognises that this tax will have a long-lasting impact on the sector’s ability to deliver many of the vital services on which government and so many others rely. Let me put to your Lordships this: if a charity approached you for support for a good cause, I have little doubt that you would be generous to the extent that you could afford; if the same charity asked you for a donation not to do good works but so that it could pay the increased taxes to the Government, I suspect that you and I would not feel inclined to put our hand in our pockets. The charity sector should not be a cash cow for the Government.

Sadly, unless the Government reconsider this tax on our charities, they will greatly diminish, and the majority will need, at best, to shrink the number of people they employ and the services they provide. In the worst scenarios, charities will close. We have already heard from charities, including from my noble friend Lady Fraser, of staff reductions, redundancies and potential closures. Fundraising and costs management is difficult enough for charities; the future of the sector is looking very bleak. Many of them help the most vulnerable in society, do wonderful work across many other areas—I will not list them today—and are the backbone of our civil society. I hope that the Minister will reconsider his position and listen to what is said today.

[Baroness Fraser of Craigmaddie (Con)]

My Lords, I rise to thank my colleagues. As the chief executive of a charity, I know that the sector is watching and listening to what we are doing here and urging us on to do everything we can to mitigate this disastrous policy.

The noble Lord, Lord Bruce of Bennachie, mentioned Scotland. In an earlier debate, it became apparent that the drafting of some of the amendments perhaps did not cover Scotland. Any charity in Scotland of any size has to be registered by the Office of the Scottish Charity Regulator and I would want to be reassured that exemptions covered the entire sector. It amounts to 5% of Scotland’s workforce, and with an increasing number of redundancies and the struggle to recruit volunteers, the workforce is already under strain and potentially limited in its capacity to deliver services.

The Minister spoke earlier about the Government’s increased funding to various sectors, some of which are covered by the charity sector. However, he did not outline how that might help those not in receipt of public sector funding but who are delivering services which support public sector delivery.

Finally, as chief executive of Cerebral Palsy Scotland, SEND transport is an issue firmly in my bag. We already know that the SEND system is under immense strain. We already know of children who cannot go to the school it has been assessed they should attend because of transport issues. This is very complex: transport is provided mostly by private providers. There is already a limited choice of schools. Many children need specialist vehicles to get from A to B. As the noble Baroness, Lady Bennett, said, many firms will be forced to hand back contracts.

I look forward with interest to the Minister’s response to these challenges.

[Baroness Neville-Rolfe (Con)]

Amendment 3 in the name of the noble Baroness, Lady Kramer, seeks to establish a relief for early years settings, universities, charities and small businesses. These are all important sectors; they will be hit hard by the Government’s jobs tax, so we agree with the sentiments that she expressed. However, we have concerns about the financial implication of relief for all these sectors in one amendment. We are instead promoting some modest and separate amendments, which I am afraid makes for a big group.

Amendments 4, 14, 21 and 28 in my name would exempt charities with an annual revenue of less than £1 million from the increase in employer national insurance contributions. My noble friend Lord Leigh spoke persuasively in favour of this proposal, following the pre-emption of his own amendments. My Amendment 35 proposes an increased level of employment allowance for charities.

Noble Lords across the House have been contacted by many charities which are facing tough financial decisions. We have had many worrying examples throughout the stages of this Bill. My noble friends Lady Sater and Lady Fraser made the case for action strongly. My latest example was L’Arche in the UK, which brings together people with and without learning disabilities in life-sharing communities. Again, they are facing hugely steep rises in employment costs. The most vulnerable people in our society will pay the price for Ministers’ misguided Budget decisions.

Amendment 5 seeks to protect children with special educational needs or disabilities. I know that the Licensed Private Hire Car Association SEND transport operators group has written to many noble Lords highlighting the issues that families who rely on these services are facing. It estimates that the associated local funding shortfall in the next tax year, 2025-26, in respect of the services it contracts out to private providers, will be £40 million. That is a relatively small number compared with the overall revenue expected from the jobs tax— £23 billion to £26 billion, depending on the year—but the impact on vulnerable children is wildly disproportionate to that revenue. Like my noble friend Lady Fraser, we feel very strongly that these vital services should be protected. Like the noble Baroness, Lady Bennett, we prefer our formulation on SEND.

Finally, my Amendment 33 addresses early years provision by seeking to increase the employment allowance for early years providers. In government, we took strong action to support the early years sector, while expanding the free childcare offer to all children under five in England last year. The Government are right to adopt our expansion plan in full. We are grateful for that. However, some providers are worried that they will not be able to access the employment allowance because of the public work they do. It would be good if the Minister could look at that again. We are seeing very big cost increases in early years provision, which is extremely worrying.

In conclusion, the Official Opposition feel that the Government must change their approach. We are not satisfied by the Minister’s responses so far and our current intention is to divide on Amendments 4, 5 and 33.

[Lord Livermore (Lab)]

My Lords, I am very grateful to all noble Lords who have spoken in this debate.

I will first address the amendment from the noble Baroness, Lady Neville-Rolfe, which seeks to increase the employment allowance for early years providers. 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 we committed in our manifesto 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 challenging fiscal circumstances the Government inherited, in the October 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 over £8 billion in 2025-26.

The amendment tabled by the noble Baroness, Lady Kramer, and the noble Lord, Lord Sharkey, would exempt providers of higher and further education from changes in the Bill. The Government of course recognise the great value of UK higher education in creating opportunity, as an engine for social mobility and growth in our economy and in supporting local communities. We will provide support for departments and other public sector employers for the additional employer national insurance contribution costs. This funding will be allocated to departments, with the Barnett formula applying in the usual way. In answer to the noble Lord, Lord Bruce, it is for devolved Governments to make their own decisions on how that money is allocated.

I say to the noble Lord, Lord Sharkey, that all additional cost pressures will be considered as part of the spending review. The Autumn Budget provided an additional £300 million of revenue funding for further education for the financial year 2025-26, to ensure that young people develop the skills this country needs. This funding will be distributed specifically to support 16 to 19 student participation. Approximately £50 million of this funding will be made available to general further education colleges and sixth-form colleges for the period April to July 2025. This one-off grant will enable colleges to respond to current priorities and challenges, including workforce recruitment and retention. The remaining £250 million of funding will be made available in 16 to 19 funding rates in the academic year 2025-26, with the aim of ensuring that all 16 to 19 providers are funded on an equitable basis from 2025 to 2026. Furthermore, 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 which will expand access to high-quality flexible education and training for adults throughout their working lives.

I turn to the amendments tabled by the noble Baronesses, Lady Kramer, Lady Neville-Rolfe, Lady Bennett and Lady Sater, and the noble Lords, Lord Sharkey and Lord Leigh of Hurley, which seek to exempt charities from the changes in this Bill and increase the employment allowance for them. The Government of course recognise the important role that charities play in our society and the need to protect the smallest businesses and charities. That is why we have more than doubled the employment allowance to £10,500. This means that more than half of businesses, including charities, with national insurance liabilities will either gain or see no change next year.

As I have noted previously, it is important to recognise that all charities can benefit from the employment allowance. The Government also provide wider support for charities via the tax regime, with tax released for charities and their donors worth just over £6 billion for the tax year to April 2024. The noble Lord, Lord Leigh of Hurley, again asked me to cost his amendment; as I said in Committee, it is not for the Government to cost amendments that do not reflect government policy.

I turn to the amendments and proposed new clause tabled by the noble Baroness, Lady Neville-Rolfe, exempting providers of transport for special educational needs children to and from their place of education from the changes in this Bill and requiring the Government to publish an impact assessment on this topic. In the Budget and the recent provisional local government finance settlement, the Government announced £2 billion of new grant funding for local government in 2025-26, which includes £515 million to support councils with the increase in employer national insurance contributions. This 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 not ring-fenced and it is for local authorities to determine how to use it across relevant services and responsibilities.

Furthermore, 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 these key services, we announced in the provisional local government finance settlement a further £200 million for adult and children’s social care. This will be allocated via the social care grant, bringing the total increase of this grant in 2025-26 to £880 million. This means that up to £3.7 billion of additional funding will be provided to social care authorities in 2025-26.

On the amendment tabled by the noble Baroness, Lady Kramer, and the noble Lord, Lord Sharkey, seeking 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 are therefore not providing further support to them for the employer national insurance changes.

Finally, on the proposed new clause tabled by the noble Lord, Lord Bruce of Bennachie, requiring the Government to publish an assessment of the impact of the Bill on the Scottish public sector, as I have set out previously, the Government have published an assessment of this policy in a tax information and impact note. This clearly sets out that around 250,000 employers will see their secondary class 1 national insurance liability decrease and around 940,000 will see it increase. Around 820,000 employers will see no change.

The OBR’s economic and fiscal outlook also 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, similar tax changes and the Government do not intend to publish additional assessments. We will of course continue to monitor the impact of these policies in the usual way.

In light of the points I have made, I respectfully ask noble Lords to withdraw their amendments.

[Lord Sharkey (LD)]

I thank all noble Lords who have spoken in this debate. I was particularly taken by Amendments 4 and 5 in the name of the noble Baroness, Lady Neville-Rolfe, and I am glad that she will divide the House. We will support her when she does. I was less taken by the Minister’s response, and still I note the lack of a definitive answer to my question on the percentage relief to FE funding.

Having listened to speeches from all parts of the House, rescuing vital and vulnerable sectors from the increase in employers’ national insurance contribution seems to me almost a duty. I would like to test the opinion of the House on Amendment 3.

19:17

Division 3

Ayes: 77

Noes: 153

19:28

Amendment 4

Moved by

[Baroness Neville-Rolfe]

4: Clause 1, page 1, line 1, at end insert—
“(A1) In section 9(1A) of the Social Security Contributions and Benefits Act 1992, after paragraph (aa) insert—“(ab) if the employer is a specified employer under subsection (1B), the specified employer secondary percentage;”.(A2) After section 9(1A) of that Act insert—“(1B) A “specified employer” means a charity that has an annual revenue of less than £1 million.(1C) For the purposes of this Act, the specified employer secondary percentage is 13.8%.””Member's explanatory statement
Exemption for small charities: This amendment would exempt charities that have an annual revenue of less than £1 million from the Government’s planned increase in employer National Insurance contributions.

[Baroness Neville-Rolfe (Con)]

I wish to test the opinion of the House.

19:29

Division 4

Ayes: 235

Noes: 149

19:38

Amendment 5

Moved by

[Baroness Neville-Rolfe]

5: Clause 1, page 1, line 1, at end insert—
“(A1) In section 9(1A) of the Social Security Contributions and Benefits Act 1992, after paragraph (aa) insert—“(ab) if the employer is a specified employer under subsection (1B), the specified employer secondary percentage;”.(A2) After section 9(1A) of that Act insert—“(1B) A “specified employer” means a person providing transport for children with special educational needs and disabilities. (1C) For the purposes of this Act, the specified employer secondary percentage is 13.8%.””Member's explanatory statement
Exemption for SEND transport: This amendment would exempt employers providing transport for children with special educational needs and disabilities from the Government’s planned increase in employer National Insurance contributions.

[Baroness Neville-Rolfe (Con)]

I wish to test the opinion of the House.

19:39

Division 5

Ayes: 235

Noes: 152

19:49

Amendments 6 to 9 not moved.

Amendment 9A

Moved by

[Baroness Barker]

9A: Clause 1, page 1, line 3, at end insert—
“(1A) The Social Security Contributions and Benefits (Northern Ireland) Act 1992 is amended as follows.(1B) In section 9(1A) after paragraph (aa) insert—“(ab) if the employer is a specified employer under subsection (1B), the specified employer secondary percentage;”.(1C) After section 9(1A) insert—“(1B) A “specified employer” means—(a) a person providing a care home service or domiciliary support service regulated under the Health and Personal Social Services (Quality, Improvement and Regulation) (Northern Ireland) Order 2003,(b) a person providing primary medical services through contractual arrangements with a Health and Social Services Board,(c) a person providing general dental services under Part 2 of the General Dental Services (Northern Ireland) Regulations 1993,(d) a person providing pharmaceutical services under Part 2 of the Pharmaceutical Services Regulations (Northern Ireland) 1997,(e) a provider of health and care registered as a charity by the Charity Commission for Northern Ireland, or(f) a person providing hospice care whether in a hospice or elsewhere.(1C) For the purposes of this Act, the specified employer secondary percentage is 13.8%.””

Amendment 9A agreed.

Clause 2: Secondary threshold for secondary Class 1 contributions

Amendment 10

Moved by

[Baroness Barker]

10: Clause 2, page 1, line 12, after “£96” insert “or,
(b) for a specified employer under section 9(1B) of the Social Security Contributions and Benefits Act 1992, £175.”Member's explanatory statement
This amendment, together with Baroness Barker’s amendments to Clause 1, page 1, line 2, Clause 2, page 1, line 14, and Clause 2, page 1, line 15 exempts care providers, NHS GP practices, NHS commissioned dentists, NHS commissioned pharmacists, charitable providers of health and care, and those providing hospice care from the changes to the threshold.

Amendment 10 agreed.

19:50

Consideration on Report adjourned until not before 8.30 pm.

Ukraine

Tuesday 25th February 2025 Lords Chamber

Statement

The following Statement was made in the House of Commons on Monday 24 February.

“With permission, Mr Speaker, I will make a Statement on Ukraine.

In January 2022, I visited the Wall of Remembrance of the Fallen in Kyiv with my right honourable friend the Defence Secretary. Seeing the faces of all those who had lost their lives since 2014 brought home the human cost of Kremlin imperialism—and of the Ukrainian determination to stand up to it. Indeed, some weeks later, just as British and American intelligence services had warned, we awoke to news of Putin’s full-scale invasion, launched to shatter the sovereign state of Ukraine.

Today, we mark three years of Ukrainian courage in resisting that brutal, illegal and unprovoked invasion. I have witnessed their fortitude at first hand in three visits to Kyiv over the past year—their defiant blitz spirit as Russian missiles and drones rain down night after night after night. On this grim anniversary, amid all the talk about talks, we must not forget that Russia’s barbaric war goes on, that the Ukrainian people are suffering, and that, beyond Europe, the conflict is piling pressure on the world’s poorest, too.

This debate takes place against the backdrop of intense diplomatic efforts, responding of course to President Trump’s call to bring this war to a swift end. At the G20 in South Africa last week, I listened to Sergey Lavrov. Once again, he shamelessly played the victim, rehashing the same old lies. I will say to the House what I said in response: if Russia is serious about a lasting peace that respects Ukraine’s sovereignty, Ukraine’s independence and the United Nations charter, guarantees Ukraine’s security against future aggression, and rejects imperialism, then Britain will listen. No one wants that more than Ukraine.

At the Munich Security Conference, I underlined that Ukraine must be at the heart of any talks about Ukraine’s future, and I said that the West must learn from our history. Vladimir Putin and his war are no historical aberration. He draws on a tsarist tradition—the imperialism and authoritarianism of Peter the Great or Nicholas I—and a Soviet tradition; he is, after all, a KGB agent who operates by deception. It was an American diplomat, George Kennan, whose ‘Long Telegram’ in 1946 warned of a deep continuity in Kremlin thinking. He argued that the Kremlin would respond only to strength. That was the basis for the policy of containment, as part of which Britain contributed tens of thousands of troops to the British Army of the Rhine. It was that strength, not paper promises, that deterred Moscow from further advances west.

Today, let us look at the Kremlin’s recent record. The Helsinki Final Act of 1975—betrayed. The Budapest memorandum of 1994—betrayed. The NATO-Russia Founding Act of 1997—betrayed. The Minsk agreements of 2014 and 2015—betrayed. This is foreign policy by lies. We must respond by being true to ourselves and provide the support Ukraine needs to stay strong, because that is what is needed to secure a lasting peace and shape our collective security so that Putin never invades again.

The UK has a unique role in helping to make that happen. My right honourable and learned friend the Prime Minister was in Paris last week talking to our European allies about how we step up support for Ukraine, accelerate work on security guarantees and take more responsibility for the security of our continent. In Munich, I spoke to Vice-President Vance and Secretary of State Rubio. In Brussels, my right honourable friend the Defence Secretary chaired the Ukraine Defense Contact Group, where US Defense Secretary Pete Hegseth confirmed that, like us, the US wants to see a sovereign, prosperous Ukraine.

Europe must shoulder its share of the burden. With the United States and its unique capabilities, we can deter Putin from attacking Ukraine again and from escalating hybrid Russian attacks in Europe into some form of direct confrontation, so this week the Prime Minister and I will be travelling to Washington DC to meet President Trump. Ukraine needs friends and allies on both sides of the Atlantic working together to achieve ‘peace through strength’. Both President Trump and President Zelensky have spoken of their desire to achieve that, and the Prime Minister will reaffirm to Zelensky in a call today that it is Britain’s goal as well.

That must include European countries investing more in our own defence and capabilities. Already, the UK has stepped up and sped up military assistance. We have committed £3 billion in military aid a year—every year, for as long it takes. Over the next two years, we will provide an additional £2.26 billion earmarked for military spending, via our share of the $50 billion G7 loan backed by frozen Russian assets.

In addition, as the Prime Minister has made clear, we know our Kremlin history, and that is why we are ready to contribute to future security guarantees for Ukraine in the context of a US backstop, including by putting our own troops on the ground if necessary. That would not be an easy decision—anyone in this House who has taken responsibility for the lives of British service men and women can attest to that—but I know the whole House recognises that Ukraine’s security is our security.

The UK also continues to set the pace on ratcheting up the economic pressure on the Kremlin. Together with our international partners, we have already denied Russia access to $400 billion. Its war economy is increasingly unsustainable. Inflation is 9.9% and rising, and that is just the official figure. Interest rates are running at 21%. This year, Russia will spend almost 41% of its budget on defence and security.

Today, we are announcing our biggest package of sanctions since the early days of the war: over 100 targets, including 40 oil tankers—our largest set of ship specifications in a single sanctions package yet—as well as third-country enablers that are pouring money into Putin’s war chest. New legislation imposes additional trade sanctions on Russia, too. That will deny Russia access to the world-leading expertise needed to maintain its war.

Today, the UK is also solidifying our historic 100-year partnership with Ukraine, which was signed by the Prime Minister and President Zelensky in Kyiv in January. In February, I saw for myself how much that partnership means to Ukraine, and how much potential there is for our collective growth and security. Together, we lay that agreement in Parliament for scrutiny, and I look forward to it entering into force when the process is complete—a clear sign of our confidence in Ukraine’s future.

This is a critical moment. I want to acknowledge how colleagues have stood united over these past three years, including honourable Members from all parties as well as noble Lords in the other place, the shadow Foreign Secretary, and several of my predecessors as Foreign Secretary. I am proud of that unity, which is a tribute to our country; proud of this country’s unwavering support for our Ukrainian friends; and proud that the United Kingdom is rightly taking on the responsibility of bringing our allies together. That is how we confront a foreign policy based on lies, and how we secure Ukraine’s future, secure Europe’s future, and face down a Kremlin dictator once again. Slava Ukraini. I commend this Statement to the House”.

19:52

[Lord Callanan (Con)]

My Lords, I start by expressing my full support for His Majesty’s Government and for the unequivocal stance that they have taken in standing with Ukraine against Russia’s brutal and illegal war. Three years ago, the world watched in horror as Vladimir Putin launched his full-scale invasion. It was an act of aggression, not just against Ukraine but against the very principles of sovereignty, democracy and the rule of law. Today, as we mark three years of heroic Ukrainian resistance, we must recommit ourselves to ensuring that Ukraine not only survives but prevails.

The Foreign Secretary was right to remind the other place of the long history of Russian imperialism and deception. The Kremlin has repeatedly violated international agreements, treating diplomacy as a means of delay rather than resolution, and we cannot allow history to repeat itself. Strength is the only language that Putin understands, and strength is what we must demonstrate.

I am proud that the UK has played a leading role in supporting Ukraine from the very beginning. Under the previous Conservative Government, we were the first European nation to provide lethal aid. We trained tens of thousands of Ukrainian troops, and we led the world in sanctioning Russian assets. That proud legacy of leadership continues under this Government, and I welcome the Prime Minister’s and the Foreign Secretary’s commitment to ensuring that the UK remains at the forefront of international support. We were the first mover on vital lethal aid, such as Challenger 2 battle tanks and Storm Shadow missiles, and we brought other countries along with us. We were also one of the very first to provide a cast-iron, multi-billion, multi-year funding pledge for military aid. All of that was the right thing to do, and we stand by it totally.

Let me be clear: there can be no retreat, no wavering and no false compromises. A just peace cannot be dictated by Moscow, nor can it be one that rewards aggression. Ukraine must be the arbiter of its own future. We must ensure that any settlement guarantees its sovereignty, secures its territorial integrity and provides iron-clad security against any future Russian aggression.

To achieve that, we must all accept that we must do more, however politically difficult that will be. The UK has already committed £3 billion annually in military aid for as long as it takes. That commitment is right and necessary and we commend the Government for it, but we must also work with our European allies to ensure that they are stepping up to the plate. Europe must take greater responsibility for its own security, and that includes increasing defence spending and accelerating the provision of military support. We welcome the Government’s announcement of that earlier today.

I wish the Prime Minister and the Foreign Secretary well on their forthcoming visit to Washington DC. Our transatlantic partnership is vital, and I hope that it will be able to continue. But, like many people, I was profoundly shocked by last night’s UN vote. I never thought I would see, in my lifetime, the United States voting with North Korea, Russia and Iran against its own NATO partners for the first time since 1945. It was profoundly disturbing for all of us who believe in the transatlantic relationship, and it should be a wake-up call for us all. We can only hope that the many sensible voices in the US and Congress can perhaps, at some stage, talk some sense into Trump.

Sanctions remain a crucial tool in this fight. The Government’s latest package, targeting over 100 entities including Russia’s shadow fleet of oil tankers, is a significant step, but I hope the Minister will accept that we can do a lot more. We are buying more Russian fertiliser than we used to buy before the war, and there are still Russian LNG tankers that are unsanctioned and still transporting gas to Europe and elsewhere. We must continue to tighten the economic vice on the Kremlin, ensuring that Putin’s war machine is starved of resources. The Government will have our full support if they choose to do that. Additionally, the UK’s willingness to contribute to Ukraine’s future security, including the potential deployment of British personnel, while a very serious step, sends a powerful message. It demonstrates our long-term commitment to Ukraine’s defence and to the stability of Europe.

At this profoundly disturbing time, the stakes could not be higher. If Putin is allowed to succeed in Ukraine, we all know that he will not stop there. Moldova, the Baltics and beyond will be all at risk, particularly with the current US Administration. Authoritarian regimes around the world are watching. They are calculating what they can get away with. We must make it clear that aggression does not pay, that democracy will not be cowed and that the free world stands united. I commend the Government for their steadfast leadership. This is a time for resolve and not for hesitation, for action and not just for rhetoric. The United Kingdom should never falter, and Ukraine should never stand alone.

[Lord Purvis of Tweed (LD)]

My Lords, from these Benches I am very happy to associate myself with the noble Lord’s comments with regards to supporting the Government, as we did with the former Government. The noble Lord, Lord Ahmad, who is in his place, will know that I supported the previous Administration’s approach.

The noble Lord closed by referring to the free world being united; it is no fault of any of our political parties that the free world is no longer united, given the Trump Administration. It is a time for us to consider very carefully how we, with our European and other allies around the world who believe in genuine democracy, will support democracy.

It is worth reminding ourselves that the Putin plan was activated in February 2022 with a timeframe of three days. It had been planned that President Zelensky was either to be detained or assassinated. The Verkhovna Rada, the Ukrainian Parliament, was to be attacked and then dissolved and the Ukrainian people to have a puppet regime imposed on them. That was meant to happen in three days. Three years later, the bravery and the fortitude of the Ukrainian people, led by inspiring leaders and enduring a further war winter in terrible physical and psychological danger and stress, should be an inspiration for us all.

The fact that, under unbearable conditions, Ukraine’s democratic and representative functions continue should also be an inspiration for any democracy, not the source of an attack by a leading democracy led by Trump and Musk. The Minister knows that I have supported, since the current Labour Government have been in place, the sanctions and measures that have been introduced, and we will continue to do so. I welcome the sanctions that were announced today, especially those that seek to reduce the dark fleet, as well as the Russian war economy. We have played our part in the cross-party consensus in approving these measures, but we have also sought, in a constructive manner, to ensure that the Russian war economy does not exploit loopholes or circumvent sanctions with trading partners.

We have been able to have unanimity but also frank exchanges in this Parliament, because that is what democratic Parliaments do. We have also sought to raise the need to do more with our trading partners, who have seen an opportunity to profit from the war without contributing to the peace, be it Dubai or Delhi, seeking more investment from the former without penalty for financing the Kremlin, or, in the latter case, seeking conditionality in trade deal talks that we are now opening up again with India, potentially offering market access and energy to those who are purchasing energy from the Kremlin. We have to be frank with our allies that we have standards in both our trade and our diplomacy, and therefore we want to see that reflected in our agreements with them.

It is also why we have sought to continue the pressure not just for utilising the resource from assets that have been frozen but to seize them. We have debated this in this Chamber before, and the Minister has heard my comments on it. What has happened now with the Trump Administration, and in the vote in the Security Council, and Trump seeking to blackmail Zelensky over mineral rights, is that, frankly, any Russian assets that are seized should now be immobilised against being used by the Putin regime as part of some form of reward for doing a deal which excludes the Ukrainian people. There should be no moveable assets to reward this. There should be no impunity for this aggression, and therefore we should be using the capital of the assets for the benefit of the Ukrainian people.

I agree that we must counter a foreign policy based on lies, as the Statement says. The worry, with the vote in the UN Security Council, is that, increasingly, it is hard to disaggregate the lies and falsehoods from our strongest ally, not necessarily just from our strategic adversary in the Kremlin. As the Polish Foreign Minister put it, the new world is one where we now are seeing the reputation not just of the Trump Administration being put in question, but America as a whole. Given that our relationship with America is so important to our national security and diplomacy, this has to be something of consideration.

Therefore, I close by making the point that the debate we held in this House under my noble friend Lady Northover about the need to protect the rules-based international order was prescient. This is now an urgent matter for the United Kingdom. When it comes to the decision of the Trump Administration to demolish USAID and destroy the reputation of America, the UK response should have been filling the gap, seeing a strategic opportunity for us to expand our soft power and have a debate which means that our national security is one where we keep our people safe but we build up coalitions around the world, we prevent conflict and we work to remove the incentives for conflict, which could be hunger and migration.

The response to what is happening in America is for us to expand our international development, not to cut it by a bigger margin than the previous Government. This is sending the worst signal at the worst time about where the United Kingdom stands. We all support the increase of our national security defence expenditure. It should not be funded on the backs of the most vulnerable in the world, when, ultimately, for our security at home we are seeking to have coalitions abroad. I hope the Government will reconsider.

[The Parliamentary Under-Secretary of State, Foreign, Commonwealth and Development Office (Baroness Chapman of Darlington) (Lab)]

My Lords, we have discussed Ukraine many times in this Chamber, and on every single occasion we have done so there has been close agreement between all parties. I particularly commend the words of the noble Lord, Lord Callanan; he put the case for the Opposition incredibly well and he is supporting this Government as we endeavoured to support his Government when they were in power. And this matters: it is incredibly important that, as a country, we stand together on this issue and I am very proud of the way that this Chamber and the other place have done that again this week.

A just peace means Ukraine at the centre of any resolution. We all agree on that; we have said that consistently and that has not changed. The noble Lord is right to highlight the importance of the transatlantic relationship. We are all aware of what happened last night, but the Prime Minister and the Foreign Secretary will be going to Washington tomorrow and they will have the conversations that we would want them to have and that we would be proud to see them have on behalf of our country, making clear our position of support for Ukraine, which is in no way diminished.

On sanctions, we continued with a new raft of sanctions to mark the third anniversary. It is very important that we have the support expressed in terms by the Opposition and the Liberal Democrat Benches. The noble Lord, Lord Purvis, is absolutely right to continue, as he has done from the very beginning, to look for where we need to go next and to push us and to keep saying, “Why not here? Why not do this? What about these other considerations you could make?” That is right and welcome. We thank him for it and we hope that he continues in that way.

We thank him for reminding us of the bravery of the people of Ukraine. It is worth repeating that this was anticipated to be a short invasion. Zelensky was meant to leave. The world today was meant to be very different from what we see. Thanks to the bravery of the people of Ukraine and the leadership of President Zelensky, we find that Russia is in a situation where it is having to go to North Korea in order to shore up its troops. That has not happened by accident; it has happened because of the resolution of the United Kingdom and its allies and the people of Ukraine.

On the decision to change our development spending to 0.3% to support our defence spending rising to 2.5%, of course this is controversial and not a decision that any Labour Government would wish to make. We created the Department for International Development and we are very proud of it. We are proud, too, of the impact that our aid spending has had across the world over many years. But the world has changed and we have to be able to invest in our armed forces and in new technology that will keep us safe.

I accept what the noble Lord says about the impact that this will have in some places around the world—of course I do. But I am convinced—and I disagree with him on what he said—that actually increasing our defence spending to 2.5% will keep people safe. That is not just people here. It will enable us to prevent conflict; it will enable us to secure Ukraine; and it will provide stability around the world. Sometimes, it is about the tough choices. There is no doubt that this was a tough choice, but I am glad that our Prime Minister was able to make it. He made it quickly and clearly and he will not be rethinking it. We have made our decision. We want to get back to spending more on international development when we can. That relies on growing the economy, which is a key focus of this Government. I hear what he says and I respect what he says, but I have to disagree on that point tonight.

Having said all that, there is no reason that anyone should feel that they cannot continue to press us on this. When it comes to Ukraine, what matters most is that we are united and we maintain our firm and clear position of support, and that any negotiation has the people of Ukraine and their leadership at its centre.

20:09

[Lord Ahmad of Wimbledon (Con)]

My Lords, I will focus on the issues of justice and accountability. It is good that both the Defence Minister and the Attorney-General are present on the Government Front Bench. Can I get the Minister’s reassurance that we will continue to focus on the missing children of Ukraine and on the support we have given for the prevention of sexual violence in conflict? Will the prosecutor general’s office continue to ensure that the perpetrators of crime can be held accountable for their heinous crimes?

[Baroness Chapman of Darlington (Lab)]

I am very happy to provide that assurance to the noble Lord. I thank him for the work that he did while in government, of which he should be very proud. The situation with the children is one that I think wakes many of us at night. We must do whatever we can, and whatever is possible, to get those children home where they belong.

[Lord Anderson of Swansea (Lab)]

My Lords, the foundations of what we have taken for granted in the West, possibly since the Second World War but certainly since the fall of the Berlin Wall, are being put in question by the actions of Mr Trump. It is good that we hear today a remarkable consensus from all sides of the House. I hope that that will be heard not just in Ukraine but in Europe, and even among our friends in the United States. I wonder what has happened to those voices in the US that were so vocal about the strength and importance of the transatlantic alliance.

Three years ago, on the very eve of the invasion—and it was an invasion, pace President Trump—I was at the NATO headquarters in Brussels receiving a briefing. I was told at that time that if the Russians were to invade, Kyiv would fall within three or four days. It did not fall. Why? Because of their bravery, yes, but because of the national morale of the people of Ukraine. There are lessons there for us as a country on the importance of morale at a time of warfare.

It is so important now to see the changes that have taken place and to send out the clear message that we must rally round our friends in Ukraine. There must also be a clear message, from all sides of the House, that in this new world we must put any anti-European ideology aside and be ready to join with our European partners, not just those within the European Union. We must look at ways of sharing our common response. We must get the message through that we stand together and have much to contribute, through our military and intelligence, to our friends in Europe. I am sure my noble friend will agree with my sentiments about bravery, the morale of the people of Ukraine, and the need now to work more closely with our European friends.

[Baroness Chapman of Darlington (Lab)]

My noble friend speaks from a position of great knowledge and experience. I agree with him that it is vital that we work closely and co-ordinate with all our allies, and continue to make the case that it is for the people of Ukraine and their leadership to determine next steps. Obviously, we have to work harder at that now than perhaps we have done previously, but that is a task that I am proud that our Prime Minister is prepared for and is undertaking.

[Lord Beamish (Lab)]

My Lords, the Minister says that unity in the House is important. That is a clear message that we need to send out tonight. My noble friend knows that the threat from Russia is obviously a military one, but it is also in the grey zone as well. The Intelligence and Security Committee, which I sit on, produced a report in 2020 that highlighted the effects of the Russian disinformation campaign in this country and the use of the City of London as a laundromat. I therefore welcome the sanctions that were announced yesterday. What more can be done, certainly with our overseas territories, to find out where money is being laundered and to stop the abuse that is continuing?

[Baroness Chapman of Darlington (Lab)]

This is an important point and, as my noble friend would expect, we work very closely with our overseas territories on this issue. He spoke about misinformation, and that is something we work hard on. We should commend our partners, such as the World Service, the British Council and our other soft power partners. The work that they do is sometimes overlooked and underappreciated, but they are very effective at countering this misinformation. That is something we need to spend more time considering, and we might want to invest in some of that as well.

[Baroness Smith of Newnham (LD)]

My Lords, the Minister has just made an excellent point that I suspect many around this Chamber would agree with: spending more money on the British Council and soft power would be extremely valuable.

The noble Lord, Lord Callanan, mentioned the UN vote, when the United States voted with North Korea and Russia. Slovakia also voted with them—Slovakia is one of the countries that is potentially in Putin’s sights. Beyond that, there are many countries in the Commonwealth that have either abstained or voted against us on the Ukrainian question over the last three years. Does the Minister agree that we should be talking more with our Commonwealth partners? Reducing development aid reduces an opportunity for us to export our influence and will simply pave the way for Russia and China to take a greater role globally.

[Baroness Chapman of Darlington (Lab)]

We talk about Ukraine in every interaction that we have with all our partners, whether they are in the Commonwealth or not. To that extent, the noble Baroness is right. When we cut our official development assistance spend, there is clearly a trade-off, so the noble Baroness is right. What she says is not completely wrong. We have to make these difficult choices, but having a Ministry of Defence that is underpowered and underresourced would have not just a hard power but a soft power impact.

[Lord Shinkwin (Con)]

My Lords, the Minister commended the Ukrainian people on their heroic bravery, and I commend President Zelensky as well. Does the Minister agree with me that, ultimately, their front line is our front line?

[Baroness Chapman of Darlington (Lab)]

That is completely right, and I thank the noble Lord for reminding us of it. The idea that this conflict does not directly affect the people of the United Kingdom is wrong. It is important that we remind people in our country that the conflict in Ukraine and the invasion by Russia are a threat to our security here.

[Viscount Stansgate (Lab)]

My Lords, the House has been united on Ukraine and I hope it will be united in wishing the Prime Minister well in his visit to Washington. The Statement we are discussing now should have been taken in conjunction with the Statement made by the Prime Minister in another place about defence spending. Does my noble friend agree that the world is changing before our eyes? The recent UN vote, to which reference has already been made, is the most dramatic example from the last 80 years of the fact that we may have to face a future in which the protection of America is not there, in the way that it has been all my life.

[Baroness Chapman of Darlington (Lab)]

The world is changing. It changed when Russia invaded Ukraine, and we have tried to respond as best we can to support the people of Ukraine ever since. I am glad that we have a Prime Minister who is clear in what he thinks about this. He is very persuasive and he will take his message to Washington to discuss it respectfully with President Trump, as we would want. We agree with President Trump’s desire to see peace in Ukraine. Yes, there are things to talk about and there may be some differences. We should be very clear but relaxed about them, and make sure that our Prime Minister has our support when he goes to make that case. I fully expect a respectful dialogue in Washington, and I look forward to hearing the outcome of those conversations.

[Lord Fox (LD)]

My Lords, we have heard about soft power but we should also hear about hybrid warfare. We are already under attack from hybrid warfare and, the further east you go, the more intense that warfare is. Can the Minister assure your Lordships’ House that the Government are taking this seriously and are working properly with our European partners to counter the softening-up process that goes before the next stage, which is happening in the countries that have already been mentioned?

[Baroness Chapman of Darlington (Lab)]

My noble friend made the point that this Statement might well have been taken in conjunction with the Statement that the Prime Minister made earlier today in the other place. The changes to defence spending will not be just more of the same; there will be a particular focus on the things that he discussed. The strategic defence review is about to complete as well. The noble Lord’s point is well made and is something that the Government are carefully considering.

[Lord McConnell of Glenscorrodale (Lab)]

My Lords, I first raise the issue that was raised by the noble Lord, Lord Ahmad. In our discussions with our European allies, I hope that we press them to press the United States to make sure that the children who have been stolen by Russia, and remain behind Russian lines in this conflict, are part of any future agreement to bring the conflict to an end.

I was very proud of the Prime Minister and the UK last week, when he took a firm stand in support of Ukraine in the face of the global turmoil in politics, not just in diplomacy. I was proud again today when he announced an increase in defence spending, but I will not feel proud when I next meet somebody who lost their medicines or whose school closed because of the decisions that the Cabinet made this morning. I am particularly concerned that we did not first go after the Russian assets in London that could have helped finance some of that gap. What actions are the Government taking to go after Russian assets that we have already either seized or sanctioned? What specific action are we taking to release the money from the sale of Chelsea Football Club that could fund humanitarian programmes in Ukraine and beyond?

[Baroness Chapman of Darlington (Lab)]

We are working very hard on the Chelsea Football Club issue. It is quite difficult legally, but my noble friend is right to remind us about it and we are working on it at pace. I hear what he says about development spending and I would expect him to say nothing else. This is not a decision that anyone has taken lightly or glibly; it is a decision that had to be taken, because we needed to act quickly in this situation. We must go after Russian assets as well, but we needed to take this decision today to make sure that we have the investment in defence to provide the stability and security that we all need.

[Earl Attlee (Con)]

My Lords—

[Baroness Bennett of Manor Castle (GP)]

My Lords—

[Lord in Waiting/Government Whip (Lord Leong) (Lab)]

May we hear from the Greens first?

[Earl Attlee (Con)]

Of course.

[Baroness Bennett of Manor Castle (GP)]

I thank the noble Lord. First, I wish to add the Green Party voice to the widespread expressions of solidarity with Ukraine as a nation and the Ukrainian people. We are having this discussion in the shadow of the US lining up with Russia, Iran and North Korea. As the noble Lord, Lord Callanan, said, it is a wake-up call for us all; I agree with him. Does the Minister agree with me that we need to work with a wide range of other states—European states, obviously, but states around the world that are constructive, co-operative and reliable—and that that demands diplomacy, official development assistance, other soft power arrangements and tackling human security issues such as the climate chaos, food insecurity and cyber issues? By taking money from the aid budget and putting it into defence, are the Government not simply robbing Peter to pay Paul? A more secure and more stable world is better for the Ukrainians and obviously better for us. We do, after all, have an integrated review of security, defence, development and foreign policy. Do we not have to look at the world that way?

[Baroness Chapman of Darlington (Lab)]

The noble Baroness is not wrong. Obviously, it would be great to be able to do all the things that she describes everywhere that we would like to do them, but we have to be honest and realistic. At this moment, we had to make a decision to invest more in defence for the reasons that we all understand. It is a trade-off. This is not a decision with no consequence or that we are entirely pleased to be making, but one that I am proud that we have made. It is a clear choice. It will keep the world and our citizens safer. That is the right thing for this Government to have done.

[Earl Attlee (Con)]

My Lords—

[Lord Craig of Radley (CB)]

My Lords—

[Lord Leong (Lab)]

My Lords, we will hear from the Conservative Benches next, after the Cross Benches.

[Lord Craig of Radley (CB)]

My Lords, the sum of £3 billion per annum has been mentioned as our contribution to Ukraine, and that indeed is very commendable. I wonder whether it could be increased or whether it is limited in two ways: by the ability to produce new equipment and by the amount by which we have to withdraw from our own front line and munition stocks of our capability in order to support Ukraine.

[Baroness Chapman of Darlington (Lab)]

Part of the defence review will examine exactly that question. What has become clear as this conflict has progressed is that part of the battle is about defence production and capability, so our decisions on spending today will enable us to support Ukraine more securely into the future.

[Earl Attlee (Con)]

My Lords, is the Minister aware that many of us on these Benches are deeply appreciative of the action taken by the Prime Minister? He has had to make unbelievably difficult decisions, but the problem is that he will have to make even more difficult decisions in the future.

[Baroness Chapman of Darlington (Lab)]

That is undoubtedly true, but I believe that he is the right person to be in that particular role at this particular time, because making difficult decisions is his job and what he is good at. I think he made a good decision today, and I have every confidence that he will continue in that way.

[Lord Davies of Brixton (Lab)]

My noble friend mentioned the strategic defence review. Clearly, that is important in this context, but it strikes me that we are in a totally new situation that I, for one, did not anticipate within the last year. If necessary, perhaps the review needs to be delayed to take account of this totally new situation and a new form of warfare that we are going to have to pursue.

[Baroness Chapman of Darlington (Lab)]

I hear what my noble friend is saying, and things are undoubtedly moving quickly, but I do not think that starting the defence review again would be the right way to move forward with this. The noble Lord, Lord Robertson, will be very well aware of what has happened and the consequences, and I have every confidence that that will be reflected very well in his report when we get it.

[Lord Wallace of Saltaire (LD)]

My Lords, can I ask about expertise within the Government on Europe and the Russian sphere, so to speak? I well remember that there used to be a very good Soviet cadre, and an extremely good European cadre, within the Foreign Office. Both were run down under the past Government, but it is very clear that what we are now dealing with has implications not just for Ukraine but for Georgia, Moldova, Belarus and Kazakhstan. We need to know and speak to people in those countries about the implications of what we are doing for the broader region, and we clearly need to have a great deal more expertise and links with large and small European countries. I remember going to Slovakia some years ago and discovering that there were only two UK-based people in our Bratislava embassy. I suggest that one of the things we now need to look at is beefing up our contacts at all levels with that sort of Government.

[Baroness Chapman of Darlington (Lab)]

That is a very interesting point. Clearly, it is right that the Foreign, Commonwealth and Development Office constantly reviews where it places resources to reflect changing circumstances. That work does take place. I will take back the noble Lord’s comments about expertise and where that needs to be more keenly focused. He makes a good point that the Foreign Secretary and the Permanent Secretary at the Foreign Office will want to consider.

National Insurance Contributions (Secondary Class 1 Contributions) Bill

Tuesday 25th February 2025 Lords Chamber

Report (Continued)

20:30

Amendment 11 not moved.

Amendment 12

Moved by

[Baroness Neville-Rolfe]

12: Clause 2, page 1, line 12, after “£96” insert “or,
(b) for a person providing transport for children with special educational needs or disabilities, £175.”Member’s explanatory statement
Exemption for SEND Transport: This amendment would exempt employers providing transport for children with special educational needs or disabilities from the Government’s planned changes to the weekly threshold.

Amendment 12 agreed.

Amendment 13 not moved.

Amendment 14

Moved by

[Baroness Neville-Rolfe]

14: Clause 2, page 1, line 12, after “£96” insert “or,
(b) for a charity that has an annual revenue of less than £1 million, £175.”Member’s explanatory statement
Exemption for small charities: This amendment would exempt charities that have an annual revenue of less than £1 million from the Government’s planned changes to the weekly threshold.

Amendment 14 agreed.

Amendment 15 not moved.

Amendment 15A

Moved by

[Lord Londesborough]

15A: Clause 2, page 1, line 12, after “£96” insert “or,
(b) for businesses and organisations with fewer than 25 full-time employees, £175.”Member’s explanatory statement
This amendment is linked to others in the name of Lord Londesborough. It seeks to maintain the secondary threshold at which employers become liable to pay national insurance contributions on employees’ earnings at £175 for businesses and organisations employing fewer than 25 staff.

[Lord Londesborough (CB)]

I will not make another speech, but I thank all noble Lords for their thoughtful and supportive contributions when we debated this amendment. I welcomed the challenges, particularly from the noble Lord, Lord Eatwell, who is not in his place, which I listened to with great respect. However, I disagree with his analysis. The cliff edge threshold is there in the Bill for all to see, and Clause 2 has moved it in the wrong direction, to the detriment of small businesses, economic growth and jobs.

I thank the Minister for his patient and construction interactions, but I wish to test the opinion of the House. I beg to move.

20:35

Division 6

Ayes: 199

Noes: 149

20:46

Amendment 16

Moved by

[Baroness Barker]

16: Clause 2, page 1, line 14, after “substitute” insert—
“(i) for a specified employer under section 9(1B) of the Social Security Contributions and Benefits Act 1992, £758, and(ii) in all other cases,”Member's explanatory statement
This amendment is linked to Baroness Barker’s amendments to Clause 1, page 1, line 2, Clause 2, page 1, line 12, and Clause 2, page 1, line 15.

Amendment 16 agreed.

Amendment 17

Moved by

[Lord Londesborough]

17: Clause 2, page 1, line 14, after “substitute” insert—
“(i) for businesses and organisations with fewer than 25 full-time employees, £758, and(ii) in all other cases,”Member's explanatory statement
This amendment is linked to others in the name of Lord Londesborough. It seeks to maintain the monthly per-employee threshold at which employers become liable to pay national insurance contributions on employees’ earnings at £758 for businesses and organisations employing fewer than 25 staff.

Amendment 17 agreed.

Amendment 18 not moved.

Amendment 19

Moved by

[Baroness Neville-Rolfe]

19: Clause 2, page 1, line 14, after “substitute” insert—
“(i) for a person providing transport for children with special educational needs or disabilities, £758, and(ii) in all other cases,”Member's explanatory statement
Exemption for SEND Transport: This amendment would exempt employers providing transport for children with special educational needs or disabilities from the Government’s planned changes to the monthly threshold.

Amendment 19 agreed.

Amendment 20 not moved.

Amendment 21

Moved by

[Baroness Neville-Rolfe]

21: Clause 2, page 1, line 14, after “substitute” insert—
“(i) for a charity that has an annual revenue of less than £1 million, £758, and(ii) in all other cases,”Member's explanatory statement
Exemption for small charities: This amendment would exempt charities that have an annual revenue of less than £1 million from the Government’s planned changes to the monthly threshold.

Amendment 21 agreed.

Amendment 22 not moved.

Amendment 23

Moved by

[Baroness Barker]

23: Clause 2, page 1, line 15, after “substitute” insert—
“(i) for a specified employer under section 9(1B) of the Social Security Contributions and Benefits Act 1992 or section 9(1B) of the Social Security Contributions and Benefits (Northern Ireland) Act 1992, £9,100, and(ii) in all other cases,”Member's explanatory statement
This amendment is linked to Baroness Barker’s amendments to Clause 1, page 1, line 2, Clause 2, page 1, line 12, and Clause 2, page 1, line 14.

Amendment 23 agreed.

Amendment 24

Moved by

[Lord Londesborough]

24: Clause 2, page 1, line 15, after “substitute” insert—
“(i) for businesses and organisations with fewer than 25 full-time employees, £9,100, and(ii) in all other cases,”Member's explanatory statement
This amendment is linked to others in the name of Lord Londesborough. It seeks to maintain the annual per-employee threshold at which employers become liable to pay national insurance contributions on employees’ earnings at £9,100 for businesses and organisations employing fewer than 25 staff

Amendment 24 agreed.

Amendment 25 not moved.

Amendment 26

Moved by

[Baroness Neville-Rolfe]

26: Clause 2, page 1, line 15, after "substitute" insert—
“(i) for a person providing transport for children with special educational needs or disabilities, £9,100, and(ii) in all other cases,”Member's explanatory statement
Exemption for SEND Transport: This amendment would exempt employers providing transport for children with special educational needs or disabilities from the Government’s planned changes to the annual threshold.

Amendment 26 agreed.

Amendment 27 not moved.

Amendment 28

Moved by

[Baroness Neville-Rolfe]

28: Clause 2, page 1, line 15, after "substitute" insert—
“(i) for a charity that has an annual revenue of less than £1 million, £9,100, and(ii) in all other cases,”Member's explanatory statement
Exemption for small charities: This amendment would exempt charities that have an annual revenue of less than £1 million from the Government’s planned changes to the annual threshold.

Amendment 28 agreed.

Amendments 29 and 30 not moved.

Amendment 30A

Moved by

[Lord Londesborough]

30A: Clause 2, page 1, line 15, at end insert—
“(c) in sub-paragraph (c), leave out “the figure in sub-paragraph (b)” and insert—“(i) for businesses or organisations with 25 or more full-time employees, £5,000, or(ii) for businesses or organisations with fewer than 25 full-time employees, £9,100,”.”Member's explanatory statement
This amendment is linked to others in the name of Lord Londesborough. It seeks to maintain the existing £9,1000 annual per-employee threshold at which employers become liable to pay national insurance contributions on employees’ earnings for businesses and organisations employing fewer than 25 staff. This amendment applies to earnings periods which are multiples of a week.

Amendment 30A agreed.

Amendment 31 not moved.

Amendment 31A

Moved by

[Lord Londesborough]

31A: Clause 2, page 1, line 15, at end insert—
“(c) in sub-paragraph (d), leave out “the figure in sub-paragraph (b)” and insert—“(i) for businesses or organisations with 25 or more full-time employees, £5,000, or(ii) for businesses or organisations with fewer than 25 full-time employees, £9,100,”.”Member's explanatory statement
This amendment is linked to others in the name of Lord Londesborough. It seeks to maintain the existing £9,1000 annual per-employee threshold at which employers become liable to pay national insurance contributions on employees’ earnings for businesses and organisations employing fewer than 25 staff. This amendment applies to earnings periods which are multiples of a month.

Amendment 31A agreed.

Amendment 32 not moved.

Amendment 32A

Moved by

[Lord Londesborough]

32A: Clause 2, page 1, line 15, at end insert—
“(c) in sub-paragraph (e), leave out “the figure in sub-paragraph (b)” and insert—“(i) for businesses or organisations with 25 or more full-time employees, £5,000, or(ii) for businesses or organisations with fewer than 25 full-time employees, £9,100,”.”Member's explanatory statement
This amendment is linked to others in the name of Lord Londesborough. It seeks to maintain the existing £9,1000 annual per-employee threshold at which employers become liable to pay national insurance contributions on employees’ earnings for businesses and organisations employing fewer than 25 staff. This amendment applies to earnings periods which are multiples of a day.

Amendment 32A agreed.

Clause 3: Increase of employment allowance and removal of £100,000 threshold etc

Amendment 33

Moved by

[Baroness Neville-Rolfe]

33: Clause 3, page 1, line 20, at end insert—
“(2A) At end of section 1(2)(b), insert “or,(c) for an employer in the early years sector, £20,000.””Member's explanatory statement
This amendment, and another in the name of Baroness Neville-Rolfe to this Clause, would increase the employment allowance for employers in the early years sector from £10,500 to £20,000.

[Baroness Neville-Rolfe (Con)]

My Lords, I wish to test the opinion of the House.

20:51

Division 7

Ayes: 189

Noes: 151

21:01

Amendments 34 and 35 not moved.

Amendment 36 not moved.

Amendment 37

Moved by

[Baroness Neville-Rolfe]

37: After Clause 3, insert the following new Clause—
“Review of effect on economic growthThe Chancellor of the Exchequer must, within six months of the day on which this Act is passed, lay before Parliament a review of the impact of the measures contained in this Act on the rate of economic growth in the United Kingdom.”Member’s explanatory statement
This amendment would require a review of the impact of the measures in this Act on economic growth within six months of the day on which it is passed.

[Baroness Neville-Rolfe (Con)]

My Lords, I will speak to my amendments in this group and to Amendment 42 in the name of my noble friend Lady Lawlor.

One of the difficulties the House has faced in dealing with this Bill has been the Government’s refusal to provide official estimates of the effects they expect the proposals to have on the individual sectors of the economy where its effects are likely to be the most profound. When we discussed their assessment in Committee, the Minister referred us to the impact note published on 13 November 2024. But I am afraid it is a very limited document, with only five pages of substantive text and no detailed assessment of the impact of the national insurance charge on a number of very important areas. Given the harm this policy will have in the many sectors we have already discussed, it is vital that the Government assess this properly. So, as a second-best measure, we have suggested additions to the Bill requiring the Government to look at the various areas of concern and make an assessment of the effect of the NICs changes—including the employment allowance, which should of course limit the damage to the very smallest businesses.

My Amendment 38 would require a sector-by-sector analysis of the impacts of the Government’s jobs tax. I am very grateful to my noble friend Lady Noakes and the noble Lord, Lord Londesborough, for supporting the amendment. It includes key areas that are adversely affected but that we have barely discussed today, notably hospitality, the creative industries and retail, whose challenges were starkly set out in Committee by my noble friend Lord Wolfson of Aspley Guise, with his unique experience of the sector.

Amendment 37 seeks to establish the Government’s view on the effect of the jobs tax on economic growth. We know that economic growth is the Chancellor’s number one policy, so I hope the Minister will be able to give the House some clarity on the Government’s expectations in this area. I also support my noble friend Lady Lawlor’s Amendment 42 and look forward to hearing from her.

We are very concerned about the Government’s failure to publish a full sector-by-sector impact assessment for this policy. I therefore intend to test the opinion of the House on my Amendment 38.

[Baroness Noakes (Con)]

My Lords, I have added my name to my noble friend’s amendment. We debated impact assessments several times in Committee and the Minister’s reply was always the same formula. It went along the lines of: “HMRC has published a tax information note”—which the rest of the Committee thought was wholly inadequate—“and the Government never do any more than this on tax legislation. The Government intend to do no more in respect of this Bill”. That was not a proper debate on impact assessments. The formula hardly changed over the four days we spent in Committee. The Minister eventually cited some precedents, but they were much smaller in scale and different in impact, and provided a precedent only really for the fact that the Treasury treats Parliament with contempt when it comes to providing full information on legislation. It is about time that Parliament stood up to the Treasury. I urge noble Lords to support my noble friend’s Amendment 38.

[Baroness Lawlor (Con)]

My Lords, I support my noble friend Lady Neville-Rolfe and will say a few words about my Amendment 42 on reviewing the impact of the Act one year on in respect of the different categories of employers in the business sector—small, medium and large.

This is needed given the worsening outlook for the UK economy and employment, which has been going from bad to worse month by month since, and in response to, the Budget. Unemployment figures are up. In the quarter ending December 2024, 1.56 million people of working age were unemployed and the UK unemployment rate was 4.4%. Unemployment levels have increased by 210,000 over the last year. Economic inactivity is also up. At the end of the last quarter of 2024, 9.29 million people aged 16 to 64 were economically inactive; the inactivity rate was 21.5%.

Jobs are being cut, as this month’s figures from S&P Global indicate. Data reveals that the decline in staffing numbers in February was the sharpest since November 2020. The chief business economist at S&P Global Market Intelligence explained that the data revealed that

“business activity remained largely stalled for a fourth successive month, with job losses mounting amid falling sales and rising costs … One in three companies reporting lower staffing levels directly linked the reduction to policies announced in last October’s Budget”.

The number of vacancies fell in the last quarter too, although they remain slightly above pandemic levels.

We want the Government to take responsibility for their actions and face up to the costs they have imposed on growth, productivity and employment and the impact on businesses, be they small, medium or large. I echo the comments of my noble friends throughout Committee that what we had on 14 November and the figures presented at the time of the Budget were inadequate in detailing the sort of impact this country is already facing. Employees’ lives and livelihoods are at stake.

[Lord Eatwell (Lab)]

My Lords, Amendment 38, as written, is econometrically impossible. This cannot be done unless we have further specification of what is to be done. For example, are we to look at the effect of these changes assuming that the Budget had not changed or to look at their effect taking into account the consequential effects of the Budget which were also dependent on the national insurance changes?

Then, there were other tax changes that took place at the time which were also dependent on the national insurance changes. Are they to be taken into account or not? At the moment, the amendment does not tell us. Any serious economist faced with this would say, “Sorry, I can’t do this unless you tell me what I have to take as the underlying conditions”.

Amendment 38 is seriously defective and cannot really be taken seriously as it stands because it simply does not specify the underlying circumstances within which the particular consequences of the changes in this Bill are to be assessed. Without that framework, it is simply not possible to do in any way—or, if you like, anybody could produce any result they like by assuming different background circumstances. So, I am afraid that Amendment 38 is underspecified and, as a piece of serious econometrics, impossible, because the framework is not specified for the amount of information required to perform the studies.

On Amendment 42, I was very struck by the request of the noble Baroness, Lady Lawlor, that the Government face up to their responsibilities. It would be really helpful if the Conservative Party faced up to the damage it has done to the British economy over the past 14 years and to the disaster it has inflicted on the British people, which the Labour Party is now desperately trying to repair in very difficult circumstances indeed.

Once again, the issue of the impact of employment and productivity depends on a whole series of other factors. Are they to be taken into account or not? How is the particular effect of the national insurance change to be examined? If they were independent, then you could do that by saying that the national insurance change has no relationship to other changes taking place in the economy and therefore we can isolate it. But that is not true; the national insurance change has direct effects on the other components of the Budget and has effects which are interdependent. Without specifying the framework in which this amendment is to be considered, it is a false exercise. You could sit down, make any assumptions you like and get any result you like, to be frank.

Although it would be very interesting to perform this exercise, I am afraid that these amendments are so defective that they cannot actually give the guidance as to the exercise to be performed. Therefore, it is entirely inappropriate for amendments such as these to be in the Bill.

[Lord Davies of Brixton (Lab)]

I have to confess a smidgen of support for the amendments in this group—but not nearly enough to make me vote for them. I am going to complain about a different lack of information that has been presented to this House in relation to the Bill.

The point is that it is a contribution Bill—a contribution to the National Insurance Fund. I pursue a somewhat quixotic and lonely quest to persuade people of the importance of the National Insurance Fund, the whole point of which is that it receives contributions, has reserves and pays benefits. Somewhat oddly, simultaneous to discussions of the money coming in, in the earlier stages of Report, there was a discussion in Grand Committee of the money going out. My complaint is that there has been no discussion of the state of the National Insurance Fund. I am very much in favour of such a discussion because it is a crucial element of our welfare state.

The problem is that the information is available. I have it in my hand: the Report by the Government Actuary on: The Draft Social Security Benefits Up-rating Order 2025; and The Draft Social Security (Contributions) (Rates, Limits and Thresholds Amendments, National Insurance Funds Payments and Extension of Veteran’s Relief) Regulations 2025. Noble Lords might ask, “What’s that got to do with the Bill?” It says on page 7:

“This report also includes the expected effect on the Fund of the National Insurance Contributions (Secondary Class 1 Contributions) Bill”.


This is information germane to our current discussions, but at no stage—I am sorry to complain to my noble friend the Minister—has this been adequately, or in any sense, discussed as part of an overall consideration about the state of the National Insurance Fund. That is my complaint, and I have got it off my chest.

21:15

[Lord Hodgson of Astley Abbotts (Con)]

My Lords, the number of times that I have heard debates in this House calling for a greater degree of post-legislative scrutiny—seeing whether we got what we thought we were going to get—is legion. Any effort to try to make sure that our judgment of what the Government of the day were proposing is worth having because it starts to increase the sum of human knowledge.

I am sorry that the noble Lord, Lord Eatwell, took such a dim view of it all, and I rather regret he sullied his comments with an attack on the previous Conservative Government’s economic policy, but so be it. I was not clear whether he was saying that it is a bad thing to do in principle or that the drafting is defective in practice. I am sure that if he felt that, in principle, it was a good idea to do it, our Front Bench would be happy to work with him to make sure that the drafting reached the economic standards that he felt would make it useful and worth while. However, it is a mistake just to discard, without further thought, an attempt to see what happens after the event.

Therefore, which of these amendments is the best? I am not sure, but “there’s gold in them thar hills”, and we should be mining it.

[Lord Londesborough (CB)]

My Lords, I will briefly speak in support of Amendment 38, in the names of the noble Baronesses, Lady Noakes and Lady Neville-Rolfe, to which I have put my name.

Given the enormity of the Bill, with its intention to raise £25 billion in NICs, and given the current broad-brush, macro impact note that came with it, it is surely incumbent on the Government to carry out sector-by-sector reviews and within six months. In particular, the impact on employment levels and hours worked in each of these sectors needs to be looked at, and there will be huge variations—anecdotally, we are getting evidence that variations are already there.

These reviews would also help the Government in shaping their industrial and sector strategies. I do not agree with the noble Lord, Lord Eatwell, that these studies are, in his words, “econometrically impossible”; yes, they are challenging, but not impossible. With the right will, suitable frameworks can be established for each of these sectors, and it is vital that this analysis is carried out.

[Baroness Kramer (LD)]

My Lords, I will be brief. I have some sympathy for the Minister, because, in providing the impact note—which, as the noble Lord, Lord Londesborough, said, had very thin content and was very high-level in general—he is merely following in Treasury tradition, which the previous Government, when in power, also pursued.

The time has come for us to make a stand and to say that we need detailed impact assessments of policy. As the noble Lord, Lord Londesborough, said, in a Bill as complex as this, and which affects many sectors, the impact note has to be far more granular than the kinds of documents we have received in the past. This is also valuable to the Government themselves, because I greatly fear that, within the Treasury, there is very limited understanding of what the consequences are for a wide range of sectors. This is a start in the right direction, making sure that both Parliament and the relevant government departments are informed and can act properly. We will support this.

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

My Lords, I will briefly address the new clauses proposed by the noble Baronesses, Lady Neville-Rolfe, Lady Noakes and Lady Lawlor, requiring the Government to conduct assessments on the economic and sectoral impacts of this Bill. As we discussed extensively in Committee, the Government have published an assessment of this policy in HMRC’s tax information and impact note. This sets out that 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. The OBR’s Economic and Fiscal Outlook sets out the expected macroeconomic impact of the changes to employer national insurance contributions on employment, on growth and on 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 similar tax changes, and the Government do not intend to publish further assessments. The Government will, of course, continue to monitor the impact of these policies in the usual way. As a result, I respectfully ask noble Lords not to press their amendments.

[Baroness Neville-Rolfe (Con)]

I thank the Minister for his reply, but I am sorry that he does not feel able to go further. I am particularly grateful to my noble friends Lady Noakes, Lady Lawlor and Lord Hodgson, and the noble Lord, Lord Londesborough, for their support, and I agree with the noble Baroness, Lady Kramer, that the time has come to take a stand. I do not share the concern of the noble Lord, Lord Eatwell. This is the sort of assessment that we do in the private sector, and in some other departments, and it is possible for the Government to add to the amendment in the other House if they feel they need to do so. We heard earlier from my noble friend Lord Ahmad that the Treasury had failed to consult individual sectors on the proposals under discussion. I know how averse the Treasury can be to that, having been a Minister in a similar position in the Treasury. I also share the fascination of the noble Lord, Lord Davies with the state of the National Insurance Fund, but I think that is for another day.

The Government’s impact assessment has been woefully inadequate for a change on such a huge scale. It is in the interests of the public that we understand fully the impact of the Government’s jobs tax on individual sectors—albeit retrospectively—and the overall figures that we have received from the Minister, which have been helpful in themselves, are just not enough. So I intend to test the opinion of the House on my Amendment 38, but in the meantime I beg leave to withdraw my Amendment 37.

Amendment 37 withdrawn.

Amendment 38

Moved by

[Baroness Neville-Rolfe]

38: After Clause 3, insert the following new Clause—
“Review of effect on certain sectors(1) The Chancellor of the Exchequer must, within six months of the day on which the Act is passed, lay before Parliament a review of the impact of the measures contained in this Act on the persons and sectors in subsection (2). (2) The review must consider the impact on—(a) charities;(b) creative industries;(c) dentists;(d) early years providers;(e) farms;(f) general practitioners;(g) hospices;(h) hospitality;(i) pharmacies;(j) retail;(k) small businesses;(l) social care;(m) universities.”Member’s explanatory statement
This amendment would require a review of the impact of the measures in this Act on certain sectors within six months of the day on which it is passed.

[Baroness Neville-Rolfe (Con)]

I wish to test the opinion of the House.

21:22

Division 8

Ayes: 182

Noes: 144

21:32

Amendment 39

Moved by

[Baroness Noakes]

39: After Clause 3, insert the following new Clause—
“Exemptions(1) The Treasury may by regulations specify that specified categories of person shall be exempt from the changes to secondary Class 1 contributions made by this Act.(2) The categories of person exempted by regulations may be defined by the activities which they carry out, their size, their legal status or in any other way that the Treasury considers appropriate.”

[Baroness Noakes (Con)]

My Lords, we come to an exciting part of this Report stage, having had several debates on this Bill.

The Bill will have significant impacts on: some types of employers; some business sectors and sizes of business; some types of employees; and some types of the provision of public services by bodies which are not themselves in the public sector. More broadly, we have heard that businesses will face the double whammy of the minimum wage increases and the national insurance increases together in just a few weeks’ time, and they are likely to respond by taking actions to reduce their workforce and the hours that their workforce can work and reduce wages where they are not constrained by the national minimum wage. Prices are likely to go up, and profits are likely to go down. All this will have negative impacts on the economy. It is difficult to avoid opening a newspaper nowadays without seeing one or more campaign groups, industry representatives and charity representatives making their case for the harmful impacts of this Bill, but to date the Government have been completely deaf to all these entreaties. All this is bearing down on the economy, which is already flatlining.

I can understand why the Government do not want to make any changes to a centrepiece of their growth-destroying Budget last October. We know there is almost no room left in their fiscal rules for any changes. There are lots of downside risks to the economy, and there are precious few upsides. These are all the results of choices that the Government have made in the last seven months, so I understand why the Minister’s response to every issue presented to him in Committee, and indeed again today, was that the Government reject the cases being made.

My Amendment 39 provides for a very simple power for the Treasury to issue regulations that exempt categories of employer from the national insurance changes that this Bill introduces. There is not even a parliamentary process attached to the regulations. My amendment would therefore allow the Treasury to act quickly, once it faces up to the fact that it really has created some problems. There are no downsides to the Government accepting this amendment, as they need never use it, but it would be a useful backstop if things turn out as badly as many of us believe they will.

It is not often that the Opposition Benches offer an unrestricted power to a Government to do things, but I and others are so alarmed by the potential impacts of this Bill that I think it is the right thing for the Government to take this kind of power in the interests of the country.

We have passed some amendments today that have taken some of the roughest edges off this Bill, and I hope they will survive their passage through the Commons, but this has not made the Bill completely harm free. My sincere hope is that the Government will support this amendment, if not in its current form then in a reworded form to their own taste at Third Reading. I beg to move.

[Lord Altrincham (Con)]

My Lords, I support Amendment 39 in the name of my noble friend Lady Noakes. I thank all noble Lords for their courage and grace in staying all the way through to group 7.

Amendment 39 would give the Treasury the power to exempt sectors that would suffer significantly under the Government’s national insurance rise. The amendment introduces a degree of flexibility that Ministers can use to protect the most vulnerable of British businesses; by allowing the Treasury to introducing specific exemptions when required, we can exempt them from the additional financial burden of the national insurance increase.

I am grateful to my noble friend for bringing forward Amendment 39. It is clear that we share many of the same concerns. The amendment in her name is closely aligned with those in the name of my noble friend Lady Neville-Rolfe that seek to exempt specific sectors, such as the social care or charity sectors. So many sectors need exemption from this policy, and we hope the Government will give the arguments thoughtful consideration.

[Lord Livermore (Lab)]

My Lords, Amendment 39, tabled by the noble Baroness, Lady Noakes, seeks to include powers as part of this Bill to exempt certain groups in future. As I have already set out, the revenues raised from the measures in this Bill play a critical role in repairing the public finances and rebuilding our public services. Clearly, any future changes that exempt certain groups from paying national insurance would have cost implications, necessitating either higher borrowing, lower spending or alternative revenue-raising measures. I would therefore respectfully ask the noble Baroness to withdraw her amendment.

[Baroness Noakes (Con)]

My Lords, I cannot make the Government accept a power that I have generously offered to be made a part of this Bill. I hope the Government do not regret at a later stage turning down this opportunity to allow them to save face in a simple, pain-free way. As I say, I cannot force the Government to accept a perfectly sensible measure that would allow them to repair some of the damage that this Bill will inevitably do. I beg leave to withdraw the amendment.

Amendment 39 withdrawn.

Amendments 40 to 42 not moved.

Amendment 43

Moved by

[Lord Fuller]

43: After Clause 3, insert the following new Clause—
“Impact of this Act on local authoritiesThe Secretary of State must, within six months of the day on which this Act is passed, lay before Parliament an impact assessment of the cost of the provisions of this Act on local authorities.”Member's explanatory statement
This probing amendment seeks to respond to concerns about increased costs for local authorities.

[Lord Fuller (Con)]

My Lords, I rise briefly to speak to Amendment 43 standing in my name on the Marshalled List. I know that it is late, but my purpose here is to probe whether the Government really understand and appreciate the impact, damage and hurt that these national insurance proposals will visit upon councils, those who work with them to deliver essential services and the users of those services—in many cases, the most vulnerable in society.

Since the Great Reform Act 1832, local authorities have been an integral part of our nation. Joseph Chamberlain unleashed the powers of municipal entrepreneurialism in the 1800s to bring gas and clean water to the growing metropolis of Birmingham. Councils sweep the streets. They collect the bins and run parks. They issue planning permissions and curate the conditions to build the national economy one local economy at a time.

I am a councillor and, for the last 14 years, I have led local government finance for Conservative councillors at the Local Government Association. I have seen it all. My noble friend Lord Pickles once said that there are only two people who really understand local government finance. I am not saying that I am one of those experts, but I am one of the small number of people who does more than most to celebrate the 140 things that councils do to make a civil society for every family, every street, every neighbourhood and every day.

That is why I know that councils’ finances in England are under pressure like never before. Reductions in grant funding, increases in the scale and complexity of service demand, and the recent spike in inflation and wage costs have created the perfect storm for town halls. The fundamental challenge facing the sector is that cost and demand pressures are rising faster than funding. While inflation has fallen steadily since the peak, significant cost and demand pressures remain in the system. In essence, council revenues tend to grow linearly with the growth in the economy, but lately costs have grown geometrically. There comes a point where the lines of income and demand diverge so much that the gap becomes unbridgeable.

Some of the reasons for this geometric growth have been demographic: as society ages, demand increases disproportionately. Some of them have been countercyclical: as the economy stutters, demand in respect of homelessness, for example, increases. There have been some consequences of changes elsewhere in the state. Well-meaning changes by the DWP, for example, have driven up councils’ second order spend on home-to-school transport by 62.7% in the five years to 2024. Of course, the Covid hangover has made things worse. We have already reached the moment where the gap between income and expenditure has become unbridgeable, and that is before the impact of national insurance on councils and their tied contractors, which is the subject of my amendment.

This is not a case of a Tory crying wolf. Just last week, the MHCLG announced that in the financial year 2025-26—next year—the Government have agreed to provide 30 councils with support to manage financial pressures via the exceptional financial support process. For eight of those councils, this included agreement to support in prior years. These are just the canaries in the mine. In aggregate, three services are responsible for two-thirds of all the cost—adult social care, children’s social care and SEND—and these pressures have seen the greatest increases.

Let us get some numbers on the record. Increased costs and demand in adult social care have seen a rise of £3.7 billion, which is 18% since 2019-20. Spend on children’s social care increased by 25% in real terms in the five years from 2019 to this year, owing to the increasing complexity of need and rising placement costs. The Labour-run LGA tells me that, by 2026-27, these cumulative pressures will have added 12.5% to the cost of delivering services in the two years since last year, leaving councils facing an annual funding gap of £6.2 billion across the two years from 2025 to 2027, just to maintain services at 2024 levels.

These pressures come on top of councils having already absorbed a 22.2% real-terms reduction in core spending power from 2011. That is before Labour produced its reckless war on the countryside by cancelling the rural services grant. This cannot carry on. There is no more fat to trim, and I want to explain why this is so serious and consequential, because we get to the nub of the matter.

21:45

The additional burden of national insurance on councils’ own payroll is estimated to be £628 million for directly employed staff, but indirect national insurance through commission providers will cost the councils an extra £1.13 billion next year. Taking the £1.13 billion and the £628 million, we see a total financial impact of the national insurance increases on councils and their tied contractors of £1.758 billion. Having given warm words and soft soap that the cost of NIC on local authorities would be compensated for, as they might be with the health service, the reality is that there is just a one-off £515 million allocated to the sector. Let us do the arithmetic. The extra costs and the Government’s grant have left councils with a £1.243 billion national insurance hole before all the other pressures that I have measured have been taken into account. The effect on the tied contractors is important to understand, because those outside contractors put their shoulder to the wheel: they work exclusively for councils, they are an extension of the council’s workforce, and they are on the team, but they cannot afford to take this one for the team.

I notice that he is not in his place, but it is time that the noble Lord, Lord Eatwell, appreciates the magnitude of the damage visited on councils by his party. The OBR and the MHCLG tell us that council tax raises about £40 billion a year, and that excludes parish precepts. We know councils have just put up council tax by between 3% and 5%. Whether it is 3% or 5%, the bold arithmetic is that the clear majority of last week’s council tax rises, which will kick in in April, will be passported straight to the Treasury through the national insurance tax. The vast minority of the extra money raised by council tax will not even stick to the sides and benefit local people in any measure. It means that most of the extra tax paid by council tax payers next year will not even benefit the local taxpayers themselves.

What this means, of course, is that, taken together with the other cost pressures, this is dangerously squeezing out all the other activities that should be the core purpose of a council—the sort of council that Chamberlain would recognise—such as planning for growth, keeping the streets clean and teaching kids to swim in the local baths. The council is perpetrating a deceit on the council tax payer. Next year’s council tax rises, for the most part, are not financing local services: most of that money is being passported straight to the Treasury. I really think that the noble Lord, Lord Eatwell, who tried to stifle debate earlier this evening, should be here in his place to hear that simple truth.

Put simply, this wholly new, unexpected NIC pressure fails to provide councils with the security of funding they need to reliably and effectively deliver for all their communities. Potentially worse, all this is aggravated because the £515 million that has been allocated as some sort of sop to compensate in small measure councils is for only one year, and none of it is guaranteed in any event after the comprehensive spending review, which could be another insult to injury.

I am conscious of the time, but it is a fantasy to think that local government reorganisation is the solution. Creating huge, remote strategic authorities to replace the local friendly districts will aggravate this funding situation even more. The work of districts still has to be done, but substituting that most efficient part of local government with mayoralties will not result in a reduction in layers of bureaucracy; there will still be three layers, but just bigger and more remote.

I have a warning about the profligacy of the new, larger, more remote tier of governance. My noble friend Lord Kempsell reports on his blog that the Greater Manchester Combined Authority

“has forked out a staggering £472,500 contract to fund its ‘Equality Panels’ … to … ‘advise, support and challenge’ Greater Manchester’s political leaders on matters that cause ‘injustice and inequality’. A further £52,500 has gone to a Faith and Belief Advisory Panel, and £54,000 to the Greater Manchester Youth Combined Authority”.

In total, that is nearly £600,000—money that would keep my district council going for nearly a month.

In fact, half the new unitaries established just three years ago, ostensibly to save the hard-pressed council tax payer in Cumberland and Somerset, are two of the 30 authorities now receiving exceptional financial support. Council finances are under stress, but the national insurance rises, coupled with local government reorganisation, will, if anything, cost council tax payers even more.

My amendment seeks for the Government to report on the effects of all this and, by extension, to open a conversation about compensating for the actual costs of the change. My amendment would have the effect that the doorstep services that residents value the most in cities, market towns, new towns, the countryside, coastal communities and cathedral cities can be protected.

I ask the Minister—I asked him before and he somewhat dismissively dissembled, but the issues are now even more stark—whether he accepts that the LGA’s updated figures are substantially correct when the direct and indirect costs of tied employment on NIC are taken into account. Does he recognise the £1.243 billion shortfall? Last time, he said that he did not really want to understand those figures and that he believed only figures calculated by the Treasury—the same people who told him that only a few hundred people would be affected by IHT.

I ask the Minister why local government is being treated differently from national government, when assurances were given at the outset that there would be equal treatment of the two. What assessment has been made on the most vulnerable? What commitment has been made to the comprehensive spending review? Can he tell us, clearly, how allowing councils to borrow against the additional costs of financing this national insurance rise helps meet the Chancellor’s golden rules?

My amendment is classified as a probing amendment, but it is no less serious for it. Labour has, quite simply, lost control of the handfuls of money that councils rely on to deliver their services, and this national insurance rise will push them to the edge. Labour cannot blame the Tories. This is a crisis devised in Downing Street, delivered by Marsham Street, but felt in every high street. I beg to move.

[Lord Altrincham (Con)]

My Lords, I support my noble friend and thank him for his brief-ish words on local taxpayers and his update on the Great Reform Bill as well. I thank him for his amendment to ensure that the Government initiate a review into the impact of this tax on local authority finances.

As countless noble Lords have remarked, both in Committee and during this debate, local authorities already find themselves in a perilous financial position. As my noble friend Lord Jamieson said in Grand Committee, local government currently spends more than 70% of its funding on adult and children’s social care. The Local Government Association has estimated that this measure will cost local authorities a total of £1.7 billion. Some £1.2 billion of that is indirect costs. While the Government may have offset the direct costs of local authorities, they have not done so for the indirect costs they will face. They will have either to cut public services or to put up council tax.

Given this, a review of the impact on local authorities is surely the minimum we can expect from the Government. I urge the Minister to accept this amendment.

[Lord Livermore (Lab)]

My Lords, I will speak briefly to Amendment 43 tabled by the noble Lord, Lord Fuller, which would require the Government to publish an impact assessment of the Bill on local authorities within six months of its introduction. The noble Lord set out eloquently the damage the previous Government did over 14 years to public services and to the funding available to local government. He asked me the same questions as he did in Committee, and I give him the same answer as I did then: it is not for me to comment on the calculations made by other organisations.

On impact, as I have set out previously this evening and extensively in Committee, the Government have already published an assessment of this policy and a tax information and impact note. The OBR’s Economic and Fiscal Outlook also 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 assessments.

The Government will of course continue to monitor the impact of these policies in the usual way. I therefore respectfully ask the noble Lord to withdraw his amendment.

[Lord Fuller (Con)]

My Lords, I am conscious that it is late, and I do not sense any appetite to divide the House on this matter. I regret that the Government do not really appreciate the magnitude of what they are visiting on local authorities and, in particular, on those people, some of the most vulnerable in society, who rely on the council to fight for them and act in their corner. We are in a really sticky situation in local government, and I am not hearing any reassurance or even any acceptance that they are making a £6 billion hole over the next two years that is going to be visited on every town, street and community.

I am disappointed by the brevity and lack of detail in the Minister’s response. But I accept that it is late at night and am conscious of the time, so I will withdraw my amendment with regret and hope that at some stage the Government will at least take away the importance of this matter so that it is taken full account of in the comprehensive spending review. Councils cannot afford to carry this alone.

Amendment 43 withdrawn.

Crown Estate Bill [HL]

Tuesday 25th February 2025 Lords Chamber

Returned from the Commons

The Bill was returned from the Commons agreed to with amendments.

House adjourned at 9.56 pm.