Arrangement of Business
The Deputy Chairman of Committees (Lord Geddes) (Con)
My Lords, as is customary at this hour, I must advise the Grand Committee that if there is a Division in the Chamber while we are sitting, this Committee will adjourn as soon as the Division Bells are rung and resume after 10 minutes.
Non-Domestic Rating (Levy and Safety Net) (Amendment) Regulations 2025
(1 day, 10 hours ago)
Grand CommitteeRead Hansard Text Read Debate Ministerial Extracts
Lord Khan of Burnley
That the Grand Committee do consider the Non-Domestic Rating (Levy and Safety Net) (Amendment) Regulations 2025.
The Parliamentary Under-Secretary of State, Ministry of Housing, Communities and Local Government (Lord Khan of Burnley) (Lab)
My Lords, the Government are currently working to strengthen the local government finance system, a task that I am sure many noble Lords will agree is an essential course of action. However, as we do this, we must also enable councils to set budgets and provide essential services now by providing them with the financial certainty they need.
The business rates retention system is a cornerstone of the local government finance system, through which councils in England retain a fixed proportion of the business rates they raise locally. This enables them to benefit when business rates income increases in their local areas. Despite the system’s simple premise, the administrative arrangements that underpin it are unavoidably complex. This results from not just the arrangements between local councils and central government to operate the system but changes that have been implemented over time to honour the system’s original commitments.
As the Committee may remember, the rates retention system was set up, and is run, according to a suite of legislation, with the day-to-day arrangements covered by several sets of regulations. For the system to continue to run as it should, and so that councils pay or receive the correct amounts, the regulations that govern these arrangements must be regularly updated. The amendment regulations before the Committee this afternoon make updates that are needed this year and, while the changes they bring about may be technical, the reasons for making them are straightforward.
Today, we need to make changes only to the levy and safety net regulations. These regulations set out within the system a safety net that protects councils from decreases in business rates income below 92.5% of their need assessment funded through the rates retention system, and how this mechanism is partially paid for via a levy on the growth in their business rates income.
I will now explain the changes that the amendment regulations make and why we need to make them. Within the rates retention system, several councils benefit from what are known as enhanced rates retention arrangements, which, simply put, mean that they retain more than 50% of the growth in their business rates income. To prevent councils that run at the standard 50% level being disadvantaged by any additional safety net arrangements that enhanced retention councils may receive, levy and safety net calculations for all councils must be made at the standard 50% rates retention level. The amendment regulations will make sure this happens by substituting the figures of enhanced retention councils in the local government finance report with the figures those councils would have had if they were operating at the 50% rates retention level.
Secondly, each year we need to reflect in the rates retention system newly introduced measures that change business rates as a tax. Where changes amend the bills of businesses, such as reliefs, there is a consequential impact on the income that councils collect locally. This year, the only such change needed to the regulations for this purpose is to ensure that major precepting authorities—which for these purposes are primarily county councils and fire authorities—are not doubly compensated via the levy and safety net for business rates reliefs announced for 2025-26 which reduced their income.
We are making this change because major precepting authorities already receive compensation for their share of the loss of income due to the awarding of these reliefs via a grant from government. However, this does not show up in their retained rates income, which, resultantly, would appear too low in levy and safety net calculations. The amendment regulations quite simply add the value of the new business rates reliefs back to major precepting authorities’ retained rates income, therefore ensuring that the compensation they receive is accounted for and that a more accurate measure of each council’s income is fed into levy and safety net calculations.
The last change the amendment regulations make is to put right an erroneous figure, originally set out in the Non-Domestic Rating (Levy and Safety Net) (Amendment) Regulations 2022. This figure will be used as part of calculations to ascertain how much small business rates relief to add back to North Northamptonshire’s retained rates income, on which levy and safety net calculations will be made. I confirm that we are taking the first opportunity to rectify the error, having discovered it only recently.
We are yet to perform the relevant statutory end-of-year levy and safety net calculations required by the regulations based on certified—or audited—data, as we have not yet received this data. Once we have received it, we will make these calculations. Noble Lords will understand that in cases such as these, where the required data from councils is outstanding, we carry out interim calculations while the relevant councils are waiting for their accounts to be audited. This is sensible to ensure that councils do not lose out or end up needing to provide for future payments of levy.
For North Northamptonshire, the correction of this error will not affect its levy and safety net calculation or, therefore, its payments for 2021-22 or 2022-23. This is because no levy payment is due, and it is not eligible for any safety net in respect of those years—a situation that will not change as a result of the amendment of this figure. However, due to the increase in income in the local area that North Northamptonshire has seen following the 2023 revaluation, it became a tariff authority from 2023-24. This means that from 2023-24 it is due to start paying levy on its growth, which in turn also means that adjusting the figure will have a small impact on the amount of levy paid going forward. The amendment regulations make this change, correcting the figure from 67.4% to 67.8%. My officials have engaged with the council so that it is aware of this change.
In conclusion, these amendment regulations update the administration of the business rates retention scheme and are required to ensure that councils receive the amount of business rates income they are anticipating and on which they have budgeted. I hope that noble Lords will join me in supporting these regulations. I beg to move.
Baroness Pinnock (LD)
My Lords, I declare that I have relevant interests in local government, as recorded in the register. I hope the Minister has understood every bit of what he has read out, because it is very complicated—that is not meant as anything more than a statement—particularly as there are no examples in front of us as to what the impact of the changes will be.
This statutory instrument needs to be understood in relation to the Non-Domestic Rating (Multipliers and Private Schools) Bill, which has just completed its Committee stage. That Bill, if enacted without amendments, will change the norms for business rates income, on which local government absolutely depends for a significant part of its income. The changed multipliers that the Bill envisages will, obviously, also alter the amount that different businesses will pay in non-domestic rates. This, in turn, will alter the income that different local authorities will receive as part of the 50% business rates retention scheme.
That impact will affect local authorities in very different ways. Local authorities with many properties that exceed the £500,000 rateable value boundary set in the Bill will gain in income. These businesses are primarily in major cities and include, for example, office blocks, hotels and major premises of that sort. Local authorities that are more reliant for income from retail, hospitality and leisure businesses will see their income in the 50% retained element decrease.
During the passage of the non-domestic rating Bill, I sought—and was granted—an assurance that local authorities will not be penalised as a result of the changes. However, that is on the national, global level. This statutory instrument is, I guess, the attempt to deal with these changes so that individual local authorities do not lose income or, conversely, gain too much income. The key question is whether that can be achieved in full. Is it possible under the new system that is going to come into effect in a year, whereby the Covid relief will gradually slip away and the new multipliers implemented will change the balance of income from businesses across the country? I have been assured that the national figure of income will not change. Will individual local authorities have assurance from the Minister that they will not lose out as a consequence of the changes? I accept that this is a very complicated set of calculations, so it would be absolutely fine if the Minister would prefer to write to me.
As the Minister will know, 43% of local authorities are on the verge of issuing 114 notices, so in this instance every penny will count. That is why I am asking the question. The lack of hard examples in the Explanatory Memorandum and the Minister’s introduction makes it really difficult to judge the implications of this instrument, so any further evidence will be extremely helpful for folk like me to understand what is going on.
My other point is about the changes to the 100% retention authorities; I want to know how that is worked out and I think it needs a bit more explanation. If those with 100% retention are no longer going to be able to retain 100%, how is it going to be worked out? Those authorities will expect to retain 100%. Again, I understand if the answer needs to be in writing, because this is not obviously easy or straightforward.
Finally, the issue that these changes bring to the fore is the current inability of councils to raise local income—be that in a small tourist tax, as the Manchester combined authority is now doing, or by any other means. A bit more flexibility for local authorities in raising their own small amounts of additional income would be of enormous benefit to many councils as they struggle to make ends meet. It would be worth knowing why flexibility in raising income does not seem to be in the Government’s agenda, because it would help to stem the enormous downward pressure on local public services. I look forward to what the Minister has to say, and a written response if needed.
Lord Jamieson (Con)
My Lords, I mention my interests as a councillor in Central Bedfordshire. I thank the Minister for clearly outlining the essence of this SI. While these are technical adjustments that may sound reasonable on paper, it is useful to consider the wider impact of government actions in relation to the business rates system, particularly as it pertains to our small and medium-sized enterprises alongside larger businesses. As the noble Baroness, Lady Pinnock, mentioned, this is a very complex system, so when we make changes to it there tend to be unintended and uncertain changes. That is the whole reason we have this SI in the first place. I would like some assurance on that, which I will raise in a moment.
I turn to the regulations themselves. The primary change is to adjust how the levy and safety net payments are calculated for authorities that retain a greater share of business rates. The most notable change is ensuring that these authorities, sometimes referred to as 100% authorities, do not have to bear the brunt of additional payments that should, in fairness, be a central government responsibility.
Lord Khan of Burnley (Lab)
My Lords, I thank noble Lords for their very interesting contributions, their broad support for what the Government intend to do, and their interest in this subject. I will first summarise what we are trying to do here. We make several changes to the regulations each year, so what we are doing this year is not out of the pattern. We make these changes to ensure that we update the legislative framework that underpins the business rates retention system. This is to reflect policy announcements already made that affect the business rates retention system, such as the introduction of new reliefs or the modification of existing ones. These changes usually adjust council income or the values that underpin redistribution within the system. These changes are generally uncontroversial, meaning that they are put in place practically—the result of policy decisions already taken.
All current region-wide enhanced business rates retention arrangements, including those in place in authorities in Greater Manchester and the West Midlands, will continue for 2025-26. The current patchwork of business rates retention arrangements allows only certain areas to benefit from enhanced retention of growth in business rates. The Government will consider how a new model of business rates retention could be better and could more consistently support strategic authorities to drive growth, as part of the Government’s reform of funding for local government through a multiyear settlement from 2026-27.
I turn the points raised by the noble Baroness, Lady Pinnock. These are technical regulations providing for the current operation of the system. Next year, the Government will reset the amount of income by remeasuring how much income there is. This will take into account the changes in the multipliers and the revaluation in 2026—a point on which the noble Lord, Lord Jamieson, also touched.
Both noble Lords touched on the top-ups and tariffs for 100% authorities’ calculations at the 50% level. The tariffs and top-ups, including the levy and the safety net calculations for 100% retention authorities, are simply the tariffs or top-ups that each authority would have paid or received if it had been operating under the normal 50% retention arrangements. By using this proxy, we ensure that any safety net payment to an authority is the same as it would have been if it had not been a 100% retention authority. We then carry out a separate calculation for the amount that is due under the 100% arrangements. If this is greater than the safety net payment calculated under 50% rates retention, we pay them the difference via a grant. In his way, central government—not the rest of local government—picks up the cost of any increased risk under the 100% arrangements. This approach was agreed with the relevant areas when these arrangements were set up.
On the changes, I want to touch on what we are trying to do. We use a measure of council business rates income, called retained rates income, to calculate levy and safety net payments for a year. Retained rates income is based on an authority’s measurement of income in that system and includes the authority’s top-up or tariff for that particular year. If we simply used 100% top-up or tariff figures, it would mean that councils that retain 50% of the growth in their business rates might end up paying for the increased safety net arrangements—a point that I have made before. For the purpose of making the levy and safety net calculations, to ensure that that does not happen, we substitute the top-up and tariff figures of councils that have enhanced retention arrangements in place for 2025-26 for the figures that they would have if they were operating at 50% business rates retention.
On the related changes to tax measures, the Government support businesses in England by providing business rates reliefs and exemptions. This year, the discretionary business rates measures that we are adjusting in relation to the calculation of small business rates relief are also for rental, hospitality and leisure relief. This has been a point of discussion and debate across two days in Committee. As I said in Committee—I say it to the noble Baroness, Lady Pinnock, now—analysis on the impact of the policy will be done only when the rates are set by the Treasury at Budget. It would be remiss of me to try to give any assurances, particularly in terms of assessments and analysis of the impact, when—
Baroness Pinnock (LD)
I thank the Minister for seeking to respond to my question about whether any local authorities will lose as a consequence of these changes, alongside the other changes that were made in the non-domestic rates multiplier Bill. So far, the Minister has not said that the Government are not able to give an absolute assurance that local authorities will not lose. Is that right? Is that what I am hearing?
Lord Khan of Burnley (Lab)
No. As far as we understand it, we are moving towards a system where business rates are the first part of the overview, and changing the whole system includes the non-domestic rates multiplier Bill—the NDR business rates Bill—to which we have referred. We have that as part of a process to make sure that the system is sustainable and continues in a fair way. Of course, we are working to ensure that we support local authorities, as far as is possible. At this stage, we think that the system and the way in which it will work will provide sustainable and fair practice where we have put in higher multipliers for a rateable value of £500,000 and, elsewhere, where we have put in lower multipliers. In that way, we are working closely with local councils and we will continue to work with them to ensure that local authorities do not lose out as part of this process. We are watching this closely. However, we—not my department but the Treasury—will publish an impact analysis when the multipliers are set.
If anything, I have not picked up on the noble Baroness’s detailed and specific questions. We will write to her, as she has invited me to write to her; it would only be kind to write back if somebody wants a letter.
I thank noble Lords for their valuable contributions to the debate. In closing, while the changes made by the regulations are few and technical, they are important to make sure that the business rates retention system continues to operate correctly, so that authorities receive what they should. I hope that noble Lords join me in supporting them.
Town and Country Planning (Fees for Applications, Deemed Applications, Requests and Site Visits) (England) (Amendment and Transitional Provision) Regulations 2025
(1 day, 10 hours ago)
Grand CommitteeRead Hansard Text Read Debate Ministerial Extracts
Baroness Taylor of Stevenage
That the Grand Committee do consider the Town and Country Planning (Fees for Applications, Deemed Applications, Requests and Site Visits) (England) (Amendment and Transitional Provision) Regulations 2025.
Relevant document: 15th Report from the Secondary Legislation Scrutiny Committee
The Parliamentary Under-Secretary of State, Ministry of Housing, Communities and Local Government (Baroness Taylor of Stevenage) (Lab)
My Lords, the Town and Country Planning (Fees for Applications, Deemed Applications, Requests and Site Visits) (England) (Amendment and Transitional Provision) Regulations 2025 were laid before the House on 13 January 2025. These draft regulations increase planning fees for householder and other applications. This will provide essential extra funds to local planning authorities and improve the efficiency of our planning system. This is vital to speed up decision-making and support the Government’s plan of building 1.5 million homes and delivering economic growth.
I will start by providing some context and background to these regulations. Currently, the income from planning fees does not cover the cost to local planning authorities of determining applications. Overall, there is a national funding shortfall of approximately £362 million, the burden of which is borne by the general taxpayer. By increasing fees for applications with the greatest funding shortfalls, we can cover a greater proportion of the costs associated with processing these applications.
It is estimated that these fee increases will generate an additional £56 million annually for local planning authorities. This is a substantial sum that will significantly enhance the capacity and efficiency of our planning services.
We consulted on proposals to increase fees in July 2024. Respondents were generally supportive of our proposals, recognising the need to boost the funds available to local planning authorities, if this leads to improvements in planning performance. Noble Lords will realise that the Local Government Association has long campaigned for increases in planning fees.
I now turn to the detail of the regulations. First, they increase the fees for householders who want to enlarge, extend or alter their home from £258 to £528 for a single house and from £509 to £1,043 for more than one house. I recognise that some may consider that, during times of economic pressures for householders, we should not be increasing planning fees. However, in light of the clear funding shortfall that exists, it is right that applicants should contribute more towards the costs incurred by local planning authorities in delivering a planning service, rather than the taxpayer funding it.
We estimate that, in most cases, the cost of the planning application is less than 1% of overall development costs. Furthermore, some householder development can already be undertaken through permitted development rights and so would not be subject to a planning application fee.
The regulations also increase fees for a range of other application types, which currently are set too low. They increase the planning fees for prior approval applications from a flat fee of £120 to £240 and from £258 to £516 where they include building operations, and for the change of use of commercial buildings to residential uses from £125 per dwelling to £250 per dwelling. The regulations also increase the fees for discharge of conditions from £43 to £86 for householders and from £145 to £298 for all other applications, including discharge of biodiversity gain plans.
Finally, the regulations introduce a new three-tiered fee structure for Section 73 applications that are used to vary or remove conditions on planning applications. This reflects the higher costs associated with Section 73 applications on major developments. The regulations also make corrections to two fees that were erroneously set too low when the fee regulations were last amended in 2023. These regulations do not impose a fee on listed building consents, which continue to incur no fee.
I want to be clear that the Government expect local planning authorities to use the income from planning fees on their planning application service, so that they can build up their capability and capacity and improve performance. We know that this is what applicants expect in return for paying higher fees. In addition to these fee increases, the Government have committed to a £46 million package to enhance the capacity and capability of local planning officers. This includes recruiting 300 additional planners. I recognise that there is no planning officer tree where we can go and pick them; this is going to take a little time.
The Government have also announced their intention to introduce a measure in the planning and infrastructure Bill that will enable local planning authorities to set their own planning fees to meet their costs. This comprehensive approach ensures that local planning authorities are not only better funded but better equipped to handle the demands placed on them.
To summarise, while we take forward our measures for local fee setting, these regulations will provide local planning authorities with an immediate boost in resourcing. This will enable local planning authorities to budget with more confidence and be better equipped to deliver the housing and growth that our country needs. I hope that noble Lords will join me in supporting the draft regulations, which I commend to the Committee.
Baroness Thornhill (LD)
My Lords, the Liberal Democrats wholeheartedly support this rise in planning fees, so I apologise now for repeating some of the very good points that the Minister made. She should not expect me to keep saying that for ever, but I do on this occasion.
We have all known for years that planning departments are underfunded; they are not covering their costs, and the position is simply unsustainable. I am interested that the Government have decided to go for an interim position rather than a full cost recovery. I can kind of understand their wanting it to be balanced, but I wonder whether the work has been done on what will be needed to get to that position, which we believe we should get to.
As the Minister said, planning departments have long been subsidised by the taxpayer through council tax; they have been bearing the burden of the costs of planning applications, which do not directly benefit them—particularly for individual householder applications. It seems completely illogical that everyone should contribute to an individual’s home improvements, which usually add value to just their property.
We welcome the change of emphasis from the last Government, who did at least increase the fees in December 2023—but I always felt that their agenda seemed to be to keep fees down. I note that a Conservative Member of Parliament in the other place described the rise as “eye-watering”. My riposte is that he clearly does not know what builders are charging these days, as the planning fee, which is an essential tool to getting the development right, is but a tiny fraction of the total cost. Two friends have recently had extensions to their homes, and when I hear how much they spent on the projects as a whole, I feel that £528 is probably the lowest in the grand scheme of their costs.
Major housebuilders are demonstrably making money, and their applications take the most time and expertise, so a rise to begin to cover costs seems entirely reasonable—more so given the financial challenges that local government faces. Some of the pre-app talks and site visits can be really extensive and time consuming.
If we have a concern regarding sustainability, it is about the recruitment and retention of planners. The ambition to recruit 300 new planners is laudable and welcome, and it seems churlish to point out the fact that it equates to just one planner per authority—but that is the reality. The Home Builders Federation pointed out, through a freedom of information request, that 80% of local planning authorities are operating below capacity.
The recruitment and retention problem is exacerbated by differential salaries. The best young graduates appear to be snapped up by the major housebuilders, as they can afford to pay significantly more than local authorities. Especially in areas of high house prices, that can make recruitment even more of a challenge.
The Minister will know that some local authorities are working together to look for solutions by co-operating rather than working against each other, competing for the same people and even poaching. Career opportunities can be better for an individual if they can work across several councils, especially with smaller districts.
The RTPI has pointed an important fact—that there is a lack of robust data on how many planning officers we have in each region and local planning area. Accurate data would help to pinpoint where resources and training are most needed, so perhaps the Minister could give us some more detail on the changes to the Pathways to Planning programme.
We think that all these increases are necessary and overdue, and accept that it is sensible to tie this to an annual increase. The fact that previous rises were not index-linked was part of the problem. The gap between the cost of processing an application and the fees charged has widened significantly over time.
There has been some talk of monitoring and ring-fencing of funds. Because of the parlous situation of local government funding, will local authorities rob Peter to pay Paul? In my experience, most councils will honour the intentions of government when money is handed out for specific needs, and we see no reason why that would not be the case here, without the need to mandate it or introduce checks. This Government are committed to decentralisation, so it is essential to let go and trust local authorities. Trying to micromanage budgets could be unnecessarily overbearing. We believe that councils should make all their own spending decisions. The Government already have mechanisms in place to monitor planning performance.
The Minister was right to point out that councils get no fees from the massive extension to permitted development rights, yet when there are problems with those conversions, the planners are drafted in to give advice and help to put things right. The key is that if there had been a need to obtain planning permission, the issues would have been sorted out right at the beginning. Will the forthcoming planning Bill be more helpful in this regard? We hope so, and in particular we look forward to allowing local planning authorities to set their own planning fees to meet their costs. A degree of flexibility to adjust to local circumstances and needs is essential.
Lord Jamieson (Con)
My Lords, I reiterate my declaration of interest that I am a Central Bedfordshire councillor. These regulations propose important changes to the planning process, including substantial fee increases for householder applications, prior approvals and approval of details reserved by condition; and a new three-tier structure that will differentiate charges for householders, non-major developments and major developments. I thank the Minister for going through the instrument in some detail, and I will try not to repeat too often what she said.
Although His Majesty’s Opposition do not oppose these regulations in principle, we recognise that careful consideration is needed to ensure that these changes serve the interests of both home owners and developers.
The proposed increase in planning fees reflects the increasing demands on planning authorities and the need to recover costs, as the Minister mentioned. The fee for household applications will rise by 105% overall. We agree that these higher fees are necessary, as they ensure that planning authorities will have the resources to operate effectively. However, we must also be mindful of the impact on home owners, especially those who wish to make relatively modest improvements on their homes. We need to strike the right balance between cost recovery and affordability, ensuring that these fees do not place an undue burden on householders already facing financial pressures.
In addition to the householder fee increases, there are Section 73 increases, which, as outlined, will range from £86 for householders, £586 for non-major developments and £2,000 for major developments. This three-tiered structure is logical, and it is fair that the larger developments pay more, but we must ensure that the distinctions between the different types of development are clear, transparent and rational. We must also consider whether these fees inadvertently discourage smaller-scale developments or overburden individual home owners.
Finally, for biodiversity net gain approvals, there are increases of over 100%, from £145 to £298. What is the cumulative impact of all these fees? That is vital. What will they do for various developers, householders and so on? It is right that we get the right resources, but we also need to ensure that we do not overburden developers or small SMEs and enable them still to have financially viable projects.
The aim of these fees is to give resources to planning departments, so it is vital that they then deliver. Given the amount of frustration I get from householders, developers and so on about delays in the planning process and bureaucratic hold-ups, it is important that the fees result in faster, more efficient decision-making. We cannot just raise fees; we have to deliver faster, better planning processes.
I take this opportunity to note that, as mentioned earlier, the proposal to increase planning fees was originally a Conservative proposal—we did it in the previous Government—but I commit again that we need to fix the planning system so that stuff gets done in the allotted time. Timeliness and efficiency must accompany these fee increases.
Looking further ahead, I will touch on some of the proposals in the NPPF, which is really important. One reason we have delays in the planning process is that the planning system is complex, difficult and uncertain. The Government have made it clear that their intention is to simplify the planning process, and we welcome these efforts. We hope that they deliver a simplified planning system, but I also urge caution that simplification, while an important goal, should not come at the cost of clarity or integrity in the planning system. We need a process that is both simpler and more certain, and delivers quality developments so that businesses and individuals can have confidence in the decisions that affect their properties and developments.
In conclusion, while acknowledging the necessity of these fee increases and the proposed changes to the planning system, we urge the Government to ensure that the reforms strike the right balance. The Official Opposition are not opposed to reform, but we call on the Government to ensure that the planning system remains accessible and fair, particularly for smaller developers.
Moreover, as we look at these fee increases and the broader changes to the planning system, we encourage the Government to reflect on the need for a system that is not only more efficient but more responsive and certain. It is essential that the planning process delivers timely and effective decisions to business communities and home owners alike.
Baroness Taylor of Stevenage (Lab)
I am very grateful to noble Lords for their helpful comments and overall support for this increase in planning fees. As I said, it is something that the Local Government Association and the local government community have campaigned on for some time. Before I go into some of the other specific issues, I too am glad that my noble friend from the Department for Education is here; the issue of skills and the development of skills in planning is critical to driving that key mission of delivering the 1.5 million homes that we know are desperately needed in the country.
The noble Baroness, Lady Thornhill, raised the sufficiency of the fee increase. These increases have been targeted to those applications with the greatest funding shortfalls, and that is why this interim measure has been structured in this way. Those applications constitute the greatest proportion of applications received by local planning authorities so, as I said in my introduction, this will provide them with an immediate and significant boost, then the planning and infrastructure Bill will set the wider framework when we come to it. As the noble Baroness said, planning fees represent only about 1% of development costs and we do not consider that burden disproportionate.
Both noble Lords raised the issue of capacity and capability in the planning system. It is worth repeating that we have put together a £46 million package of investment. My noble friend Lady Smith of Malvern set up Skills England so that we can try to attract more people to be planners, and that funding will provide the recruitment and training of 300 additional planners and the development of the skills needed. We have already recruited a cohort of around 20 senior built environment professionals, across a range of specialisms, to work directly with and advise local authorities, and with Homes England as our delivery partner. We are also developing a wider programme of support, working with partners across the planning sector, to make sure that local planning authorities have the skills and capacity that they need. I am very pleased that the Construction Industry Training Board has also stepped up and put some money towards this project.
The noble Baroness, Lady Thornhill, mentioned that accurate data is needed and asked me for an update on Pathways to Planning. We fund the Local Government Association’s Pathways to Planning and, on 27 February, we announced an allocation of £4.5 million for the Local Government Association’s initiative to fund salary bursaries for new planning roles in councils. I hope that gives her some indication of where we are going with that.
The noble Baroness mentioned ring-fencing. We are not specifically ring-fencing planning fees, but we have been clear that we expect the income from planning fees to be retained and directly invested in the delivery of planning application services. Ring-fencing will be considered as part of the longer-term plans that will enable local planning authorities to set their own planning fees, but the noble Baroness is quite right that, as local authorities face a difficult financial position at the moment, they should have the flexibility to decide where their funding is going.
The noble Baroness also mentioned permitted development rights. We know that national permitted development rights play a role in the planning system, but we acknowledge that there has been criticism of them, particularly those that enable a range of commercial buildings, such as offices, shops and agricultural buildings, to change use, including to residential use. There have been some good examples of that, but there have also been some pretty poor ones. We continue to keep permitted development rights under review.
The noble Lord, Lord Jamieson, raised the important issue of why this increase is focused on householders. We are increasing the fees for householders because these have the greatest funding shortfalls, as I said. The fees for major applications are estimated more closely to cover the costs to local planning authorities. It is not possible to increase fees for developers above cost-recovery levels in order to cover the costs of other applications. That is the reason for this measure. The forthcoming planning and infrastructure Bill will enable planning authorities to set their own planning fees, but we have to take action now to address the funding shortfalls. To support our measures to enable planning authorities to set their own planning fees, we will undertake a benchmarking exercise to establish the robust baseline that we need for full cost recovery of all planning fees.
The noble Lord mentioned the key issue of small builders and medium-sized enterprises. We recognise the need for a diverse housing market sector that can respond to local needs. SMEs are an indispensable part of our housebuilding sector. We know that they have a vital role in making the housing market more diverse and resilient and contribute to housing supply by building out the majority of small sites. I have had great personal experiences—as I am sure both noble Lords have had in their areas—of SMEs making a big contribution.
Through our planning reforms, we are committed to ensuring that the right support is in place for SMEs, and we have engaged extensively with the sector to better understand existing challenges. On 12 December last year, we published the revised NPPF, which makes clear the necessity of ensuring that sufficient small sites are made available to support SME housebuilders and to better enable authorities to support that community-led development. We are committed to strengthening small sites policy and providing additional support for SME housebuilders with further measures later this year.
Planning performance is a key issue, as mentioned by the noble Lord, Lord Jamieson. How do we ensure that increased fees result in better performance by local authorities? In return for increasing planning fees, we expect local authorities to invest more in their planning services to deliver better performance. We will continue to monitor the performance of local planning authorities through the planning performance dashboard and quarterly planning statistics. The planning performance regime ensures that underperforming local planning authorities are held to account; it is an important way of making sure that that happens.
The noble Lord referred to the new NPPF and to simplification and clarity in the planning system. It is a complicated system—I understand that. We attempted to simplify the system with the NPPF, and we will continue to look at what further measures are necessary. When we get the planning and infrastructure Bill, we will hopefully be able to clarify the system further for everybody who needs to use it. If I have not covered any points, I will look at Hansard and reply in writing.
In conclusion, the proposed increase in fees is a necessary and timely measure. It addresses a critical funding shortfall faced by our local planning authorities and will help provide them with the resources they need to deliver improved services. This will benefit householders, businesses, developers and, ultimately, all of us, as the economy grows and more homes are built. I hope the Committee will welcome these important regulations.
Higher Education (Fee Limits and Fee Limit Condition) (England) (Amendment) Regulations 2025
(1 day, 10 hours ago)
Grand CommitteeRead Hansard Text Read Debate Ministerial Extracts
Baroness Smith of Malvern
That the Grand Committee do consider the Higher Education (Fee Limits and Fee Limit Condition) (England) (Amendment) Regulations 2025.
Relevant document: 16th Report from the Secondary Legislation Scrutiny Committee (special attention drawn to the instrument)
The Minister of State, Department for Education (Baroness Smith of Malvern) (Lab)
My Lords, I thank the Secondary Legislation Scrutiny Committee for its scrutiny of these draft regulations. This statutory instrument, which was laid in draft on 20 January, increases the limits on tuition fees that higher education providers can charge students studying undergraduate courses at approved fee cap providers in the 2025-26 academic year. It also introduces new lower tuition fee limits for foundation years in classroom-based subjects offered by approved fee cap providers, starting in the 2025-26 academic year. A separate SI making changes to maximum fees, loans and living costs support for the 2025-26 academic year was laid before the House on 13 February.
As so many noble Lords, including those present today, have witnessed at first hand, our higher education sector is something to be immensely proud of and, as I am sure they agree, to protect for this and future generations. We have spoken recently in this House about how our higher education sector is one of the best in the world, delivering internationally recognised research and teaching. It is an engine for national economic growth as well as providing important local anchor institutions, contributing significant employment, delivering local skills needs, supporting local communities and enriching society. Higher education providers change the lives of individuals by opening up new opportunities and allowing them to follow their passions. We have also heard in the House how higher education is a public good, benefiting not only those who walk through its doors but the wider communities in which the providers sit.
But now that world-leading sector is facing severe financial challenges. This House acknowledged the financial health of the sector when we debated it in the Chamber in September. With tuition fees frozen for the last seven years, universities have suffered a significant real-terms decline in their income. Teaching income per student that higher education institutions receive has declined in real terms since 2015-16 and is now approaching its lowest level since 1997. The Office for Students reports that a growing number of higher education providers face significant financial difficulty. Its analysis suggests that, by 2025-26, up to 72% of providers could be in deficit and 40% will face low liquidity if no mitigating action is taken.
As many noble Lords said during our debate on financial sustainability, the time for action is now. We must ensure that our higher education sector is put on a secure footing in order to face the challenges of the next decade and to ensure that all students have confidence that they will receive the world-class education they deserve. We also need to ensure that students are receiving value from their investment. I will take each of those objectives in turn.
This SI is intended to fix the foundations and put our higher education sector on a more secure footing. It will mean that, from 1 August 2025, tuition fee limits for undergraduate courses will increase by 3.1%, in line with forecast inflation based on the RPIX inflation measure. This means an increase to a maximum of £9,535 for a standard full-time course, £11,440 for a full-time accelerated course and £7,145 for a part-time course. Increasing maximum fees has not been an easy decision, but it was the right decision to ensure that the sector has an injection of funding before it faces irreparable damage. Increasing fees will mean that providers can continue to contribute to our economic growth, globally important research and delivering for our local communities.
Lord Willetts (Con)
My Lords, I very much welcome this measure. I should declare my interests as a visiting professor at King’s College London and a member of the University of Southampton’s council. I know from seeing universities close up that the situation is indeed serious, as the Minister rightly said. The freeze in the level of fees has meant a 28% cut in the real resource available for universities in the last seven years. This cannot carry on, so I support this measure.
Having heard the Minister’s arguments about the need to strengthen universities’ financial position, I would add that it is a pity that the entire extra revenues for universities from this measure go in meeting the national insurance costs that they face. I hope that the Minister will be able to tell us, in her winding-up speech, her estimate of the extra expenditure on national insurance for universities as compared to the extra receipts from these higher fees. What I conclude from this is that, if the Minister is to live up to the excellent rhetoric about putting universities on a sounder financial footing, she will need to go further in future. I hope that, in her response, she can give some indication of her plans for the future. I would encourage the Minister to carry on with indexation as an absolute minimum—after all, that is what the Blair Government did, automatically indexing fees year after year—because, otherwise, the problem that she described so eloquently will just continue to get worse.
A range of us have, in different ways, tried to find an alternative system for funding higher education. Employers will not put up any more, and the Treasury and the taxpayers are not going to put up any more either. So we all end up reluctantly concluding that this is the only game in town. All three political parties represented in the Committee today have concluded that you have to put up fees in order to sustain our higher education system—and that is the case.
We could all learn a lot from my noble friend Lord Johnson, who introduced the TEF. Clear pressure to raise the quality of teaching is an important part of any future increase. Personally, instead of the rather random process of an Augar review or a freeze, I always wanted to see a quinquennial review—a review every five years—modelled to some extent on the way in which the social security system operates, from which we can always learn. A quinquennial review would enable a judgment to be made about the right level of the repayment threshold and the right level of fees, in the light of what had happened to earnings and the cost of higher education, and it could set out a formula that lasted for the life of a Parliament.
I will not comment on foundation years. I recognise the political and popular anxieties about measures such as this. Such measures never poll well, but the reason for that is often a misunderstanding. A lot of people still think that students have to pay up front, and a lot of people, including parents, think that the debt is like a credit card debt or an overdraft, meaning that, if their child has a £50,000 debt, they can take out £50,000 less as a mortgage. Those are misconceptions. The fundamental case for these measures is that they are in the best interests of students. Students will have a well-financed and well-funded higher education and, as the Minister rightly explained, will pay back only on a repayment formula that is not changed by these measures.
Finally, I urge that, now that the Government are operating with a model that they themselves were crucial in designing, the Minister and the Government own it. All three parties have a shared interest in trying to communicate the reality of this system. If ever we lapse into saying that the fees should not go up because there is a cost of living crisis, that feeds misunderstanding and is extremely irresponsible.
I hope that the Minister will be able to spare the time for a meeting where we could go through the painful lessons I have learned about how one tries to communicate the reality of the system. I also hope that she might consider a more strategic approach, so that universities know that the real resource they have will at least be protected in the years to come.
Baroness Wolf of Dulwich (CB)
My Lords, I also must declare an interest, as a member of the academic staff of King’s College London. I would also like to note that I was a member of the Augar review. Apropos of the suggestion by the noble Lord, Lord Willetts, of a quinquennial review, I am rather pleased that it has taken only six years since the final report of the Augar review to get to some of the implementation of it.
Obviously, I welcome the Government’s decision finally to raise fees a little, but I would like to say something about foundation years. As the Government’s memorandum points out, this came out of the Augar review’s recommendation: basically, foundation years should go, except in a few specific high-skill and very important subjects, such as medicine. It is worth noting that, although the Government—indeed, their predecessor was in a similar position—decided not to go that far, as has been pointed out,
“there is little evidence that studying a foundation year is always necessary for students wishing to access an undergraduate course in these subjects, and potential foundation year students can choose functionally similar courses—such as Access to HE diplomas—that cost significantly less”—
or, as in the case of A-level resits, cost them nothing at all.
Although I very much welcome the decision to reduce the level of fees on classroom-based foundation years, I recollect for the record that when we first looked at them on the Augar committee, nobody had really noticed, including us. It was pointed out to us by the FE principal member of our committee, Bev Robinson, who basically said, “Do you realise what’s happening?”. She also noted—I cannot tell how widespread this was—that she had come across some very aggressive recruiting by universities of young people who, in her view, would have been much better off either doing access to HE or retaking their A-levels.
I underline that the Government recognise this, and that the Secondary Legislation Scrutiny Committee also noted:
“While we welcome attempts to encourage under-represented groups into HE, we would be concerned if these came at the expense of poor value for money for those students and for taxpayers”.
The consultation process resulted in a small majority of people saying that they did not want the fees to go up. However, the majority of non-higher education provider respondents definitely wanted the fees to go down. That is where we are.
My view is that there is still a question mark over these years. I thank the Minister for cutting the fees for foundation years in classroom-based subjects, but can she assure us that the Government will continue to monitor enrolments to see whether that does in fact put an end to the enormous growth that there has been? Will she consider asking the department to study the impact of foundation-year study on young people who go by that route, and how successful they are? It is very easy to forget about it again, and it crept up on everybody unawares—and I think everyone is agreed that it is a good thing that we are taking some action.
Lord Johnson of Marylebone (Con)
My Lords, I also have to declare an interest as a visiting professor at King’s. I have other education-related entries on the register, which I will not list here.
I welcome the Government’s decision to allow the increase of fees in line with inflation. It is long overdue, and I wish that previous Administrations had had the good sense to crack on with it, as this Government have. The feast-to-famine approach to funding higher education is hugely inefficient and leads universities to make job cuts and programme closures that they might not otherwise do, if there were greater certainty over their funding. I echo what my noble friend Lord Willetts said about the need to put this situation on a more stable footing, ideally, with annual indexation. That would be eminently sensible. Like him, I would be interested to find out from the Minister, when she replies in due course, how much of that fee increase will be left to institutions once they have dealt with the increase in national insurance contributions down the line.
The key thing is that inflation is an ongoing cost, and the OBR has made forecasts of near 3% inflation for each of the next three years. If the Government do not allow for further indexation in coming years, universities are going to be looking at another real-terms fall in their income of around 11% or 12% by 2030, so it is really no joke at all. I urge the Government to keep on gripping the nettle and dealing with it. From a political point of view, the sooner in the political cycle they do that, the easier it will be. Making these sorts of decisions should not be difficult, but leaving it to years 2, 3 or 4 of a Parliament means that it becomes much less palatable. I urge the Minister to get on and announce the continuing indexation for the coming few years.
Welcome though this funding is, there cannot be something for nothing. As the noble Baroness, Lady Wolf, said, the sector has to continue to demonstrate value for money for students and taxpayers whose loans underpin the funding of higher education.
I am very pleased that my noble friend Lord Willetts mentioned the TEF. I was also glad to see that the Office for Students strategy—now out for consultation—gives a prominent role to the TEF in how it plans to ensure quality in the system. The TEF plays a valuable role in driving excellence and good student outcomes above the baseline ensured by the B3 metrics. It has a really useful role to play in that respect, so I am pleased to see that it is going to be part of the future quality arrangements.
Lord Storey (LD)
My Lords, the Minister is right to talk about financial sustainability. She is also right to talk about how we must value students. I remember quite clearly how the noble Lord, Lord Johnson, told us at every opportunity that we needed to increase tuition fees for the sake of the university sector. It always struck me as interesting how we would laud our university sector by saying, “We have three universities in the top 10 in the world rankings” and “We have got x number in the top 100 rankings” and—
Lord Storey (LD)
It always seemed to me that were almost gloating about this, but what a fine way to show that in the financing of our university sector, or in how we look after our students in many cases.
As I think has been said by the noble Lord, Lord Willetts, last year the Minister very bravely said the Government were going to increase tuition fees to get over that difficulty. Then, of course, along came national insurance and all that wonderful extra financial resource is completely lost.
My knowledge of the university sector has increased over the years with my children going to university and I also served on the governing council of Liverpool Hope University, so my interest has grown. I always think that we do not really grapple with some of the issues that face us; we try to push them away. I thought that when loans were introduced, it would put students in the driving seat of a university education. I do not think that has happened. In some universities, the way students are regarded is not as good as it should be.
I also wonder whether Tony Blair saying he wanted 50% of young people to go to university was the right way of deciding how we grow the university sector. I look now, and I see some universities really struggling, offering very low grades to get into university. I see universities almost competing with each other on courses when they are in the same city, for goodness’ sake—I just do not understand that. I look at private universities, which, obviously, get finances from the system. I was heavily involved in the Greenwich School of Management, where the Government were able to say, “We’re taking all these young people from deprived backgrounds and giving them a university education”—but, at the end of the first year, they took the money and ran. What went on in that particular private institution, along with others, was completely wrong. When it was highlighted on “Panorama”, the college was closed down, along with others. In one case, police took action. So we have to look carefully at how we use the money as well. Some of the practices that we currently carry out are, in my mind, just not acceptable.
I want to see students really value their university education. I will give an example of something that is a great pity. When I was at university, I stayed on Merseyside, but I loved the fact that I met people from all over the country, who are some of my best friends—from the north-east and elsewhere. Nowadays, students cannot afford that and, increasingly, they go to the university in their home area or even their home city. The figures for Liverpool John Moores or the University of Liverpool, for example, increasingly show that the students come from that city, that conurbation or that region. We have lost something in losing that opportunity.
I am delighted that the Minister talked to us about how we need to look at this properly and come forward with some proposals in the summer. I am delighted and excited by that, to be quite honest, but I hope those proposals will give us the opportunity to give our ideas and thoughts on what that might be. But, in terms of this SI, I very much support what the Government are doing.
Baroness Barran (Con)
My Lords, as we have heard, this statutory instrument increases by 3.1% the maximum tuition fees that higher education providers can charge for the majority of courses and, in turn, the amount of tuition fee loans that students can take out. It also reduces the maximum amount of tuition fees that can be charged for foundation year courses in certain classroom-based subjects, such as business studies, humanities and social sciences. These Benches very much welcome the Government’s decision on foundation year courses; we have seen potentially troubling increases in the number of students taking these courses, particularly where franchise providers are used to deliver them.
However, I have three main concerns about the approach that the Government are taking to the tuition fee increases. First, this increase, in line with inflation, sets a precedent for future fee increases. I absolutely hear the points made by the Minister and my noble friends about the importance of giving universities visibility and stability in their financial model. But if we assume, in line with the OBR, that inflation remains at around 3%, it will take only a further two years of this policy before students will have to pay more than £10,000 a year in fees. So, after a typical three-year degree, students will leave with debt of around £59,000, or up to £68,600 if they live in London. Echoing the requests of my noble friends, I ask the Minister to clarify whether the Government plan to increase fees again in this Parliament in line with inflation—taking my noble friend Lord Johnson’s advice and doing that quickly—or is this a one-off decision?
Secondly, the Government have stated that they increased university fees for 2025-26 to
“help cement higher education providers’ roles as engines of growth in the heart of communities”.—[Official Report, Commons, 20/1/25; col. 19WS.]
The Secretary of State for Education deemed that this action was necessary to
“secure the future of higher education”.—[Official Report, Commons, 4/11/24; col. 47.]
However, as we have heard from all speakers this afternoon, this increase will not result in a net improvement in university budgets; indeed, the Secondary Legislation Scrutiny Committee commented in its report on this SI that the increase will “not reduce those difficulties” that higher education providers are facing. Our understanding is that the Government’s choice to increase employers’ national insurance will cost the university sector around £372 million, which will more than offset the increase in fees. So we are left in a situation where the Government have increased costs for all parties—students and taxpayers—without fixing the root of the problem. Indeed, the Secondary Legislation Scrutiny Committee noted that
“the ultimate costs of increases in tuition fee loans (and presumably also of maintenance loans, for the same reason) fall on the public purse to a significantly greater extent than the costs of those loans overall”.
So, although the focus is on students, the committee clearly believes that, ultimately, it will be the taxpayer who picks up the bill.
Thirdly, although, as I noted previously, we very much support the Government’s decision to reduce fees on foundation year courses, again, the SLSC notes that about 12 or so institutions will be most affected by the drop in income, which it estimates—or, perhaps, the Government estimate—as being between £154 million and £239 million annually. What assessment have the Government made of that impact? Can the Minister update the Committee on it?
More broadly, I hear and respect the comments of my noble friend Lord Johnson but I think it is fair to say that, as the number of degrees has expanded, some degrees have—my noble friend does not want to use the term “value for money”; I am fine with that—resulted in the taxpayer picking up a greater proportion of the costs than was the case in the past. The IFS noted in its 2020 report that total returns from a degree will be negative for about 30% of the men and women undertaking them. I totally understand that a degree is about much more than one’s earnings power, but one’s earnings power, particularly if you come from a disadvantaged community, is not insignificant either.
So I would be interested to know what the Government are doing to try to give students greater transparency about the degree choices that they are making in terms of future employability, career options and earnings power. The Minister will know that even a degree such as maths, depending on where you do it, will end up with very different outcomes in terms of earnings. It is important for students to understand the implications of their degree choices. The latest data showed that the median first-degree graduate earnings five years after graduation were £29,900 as compared to £33,800 for a level 4 apprentice. I appreciate that they are not interchangeable; I just use that as a demonstration of the point I am making.
It has taken a freedom of information request from my honourable friend Neil O’Brien to reveal the wide variations in the share of loans that are being repaid between different higher education institutions. In some cases, we see only very small fractions of what is being loaned out getting paid back, which means that these courses are definitely not great for the taxpayer but are arguably not great for the student either, who may feel that their degree has cost them a lot but not taken them to where they had hoped to get to.
Baroness Smith of Malvern (Lab)
I thank noble Lords for their contributions to this debate. It should perhaps have been sponsored by King’s College; there was clear quality from King’s on display in the quality of the contributions made. I will endeavour to answer noble Lords’ questions but, before I turn to those questions, I would like to reiterate the importance of this SI in putting our higher education sector on a secure footing and ensuring that students receive value from their investment; I will go further into some of the challenges and questions from noble Lords on that.
First, there is recognition that this a decision made for one year. That is why I was keen to emphasise in my opening comments that, in the summer, the Government will return to a fuller programme of reform that will include a longer-term answer to the question of the financial stability of higher education. It will also recognise the considerable investment in higher education that we are asking students to make and the responsibility, therefore, on the higher education sector to maximise its contribution to the growth of the economy in its role as a civic player and an anchor in communities; to ensure the quality of both teaching and the student experience; to close the gap in access and participation in higher education; and to ensure that that is done on the basis of efficiency and value for money.
I hear the call from the noble Lord, Lord Storey, for the Government to listen widely to contributions made on those reform pillars. That is the reason why, at the point at which we announced our decision to increase maximum tuition fees, we set out our determination to come back with that programme of reform. I will certainly reflect on many of the points that noble Lords have made today as we go forward on that work. I will want to hear—even if I did not want to, I am sure that I would—noble Lords’ views on all of those areas of reform.
On the point made by several noble Lords about the impact of national insurance contributions, I draw noble Lords’ attention to the Office for Students’ estimate that the employer national insurance contribution changes will result in additional costs for the sector of £133 million in 2024-25 and £430 million each year from 2025-26. However, although noble Lords have rightly called for recognition of the value of higher education and its impact on other areas of public service, it is also important to recognise the Chancellor’s challenge, as set out in the Budget, in raising the revenue required to fund public services and restore economic stability. It is important to recognise that that required difficult decisions on tax, which is why this Government are asking employers to contribute more through national insurance contributions. We strongly believe that this is the fairest choice to help fund the NHS and wider national priorities.
The HE finance and funding system needs to work for students, taxpayers and providers. The fee increase represents a significant additional investment from students into the sector. As I say, that will both support higher education providers in managing the financial challenges that they face and bring a responsibility for them to engage in the type of reform focus that I outlined earlier.
Several noble Lords asked about not only the process for repayments but the way in which students starting their higher education, and others, understand the consequences of taking on the loans that enable them to cover the cost of tuition up front. We understand that some students may worry about the impact that the increased fee limits will have on the size of their loans. As other noble Lords have done, we want to reassure students that, when they start repaying their loans, they will not see higher monthly repayments as a result of these changes to fee and maintenance loans.
That is, of course, because student loans are not like consumer loans. Monthly repayments depend on earnings, not simply the amount borrowed or interest rates. At the end of any loan term, any remaining loan balance, including interest that has built up, will be cancelled. I hope, therefore, that those considering higher education will recognise both the enormous and broad benefits that come from higher education and the fair and manageable way in which they will be expected to repay out of their higher earnings—from higher education—the contribution that has been made towards their education.
I will be very pleased to meet the noble Lord, Lord Willetts—I am sorry that we have not already organised it—to learn from his experience, to consider his scars and to think about what we could gain from that as part of our longer-term thinking.
The noble Baroness, Lady Wolf, talked about her contribution to the independent Augar review and the conclusion it came to on foundation years. She welcomed the Government’s approach on this, but it is fair to challenge us to continue to monitor the levels of enrolment and see what the impact is. We could undertake to do that. She also made the important point that we need to be clear that students are accessing this level of education preparatory for higher education in the right institution. That is why another important area of focus for this Government and for the higher education reform process will be a greater emphasis on routes for students—particularly in the collaboration between higher and further education—and ensuring that they get the opportunity to learn at the appropriate institution, cost and time. We are clear about the contributions that institutions in further and higher education can play in that.
A couple of weeks ago, I was very impressed to see the relationship between the University of Birmingham and an FE college in Birmingham, where students were studying the first two years of an engineering degree before going on to gain that degree at the University of Birmingham in the third year. That is the type of innovative approach to opening up access and to high-quality pathways that we are keen to see more of.
The noble Lord, Lord Johnson, rightly emphasised and recognised the arguments that the Government have been making around value for money. He also described how that is not always necessarily best measured by a direct correlation with earnings from a particular degree, quite often within a relatively short period of time. It is important to think about how we measure that: how it might be influenced by the different types of institution, particularly those which might be contributing more to social mobility, and what the impact of that quite crude measure would be on those choosing to go into our public services.
I was taken back to an event I attended where the noble Lord, Lord Willetts, spoke about his recent pamphlet on precisely this issue. It is complex, and it is important that we do not make a direct correlation, as occasionally the last Government fell into, between earnings levels and the quality of particular courses, particularly when that tips over into a suggestion—I am sure that the noble Baroness never did this—that there are Mickey Mouse courses and others. There is quality in higher education courses. Although it is important, as the noble Lord rightly says, to ensure that that quality is properly and broadly measured, including through the TEF, crude measures may not necessarily help us make the best decisions here. However, ensuring quality in higher education is an important element of the Government’s reforms that we will say more about.
The noble Lord, Lord Storey, rightly focused on the student experience. He makes a fair point that we should have high expectations of higher education, increasing expectations such that students not only can access university but succeed in their time there, whether they choose to stay close to home—there are benefits to that—or to travel. We also need to ensure that universities are working closely with local authorities and others to make sure that the costs and quality of accommodation and the impact on students of the broader need for accommodation in university areas are properly considered. As I have said, the noble Lord volunteered to contribute ideas towards the higher education reform work that we are doing, which I welcome.
I have covered some of the points and questions raised by the noble Baroness, Lady Barran, but she made a specific point about the foundation fee reduction falling on a few providers. It is likely not to fall equally across providers and to fall on particular providers. It will be important for the OfS to consider that in its analysis of financial stability.
Pneumoconiosis etc. (Workers’ Compensation) (Payment of Claims) (Amendment) Regulations 2025
(1 day, 10 hours ago)
Grand CommitteeRead Hansard Text Read Debate Ministerial Extracts
Baroness Sherlock
That the Grand Committee do consider the Pneumoconiosis etc. (Workers’ Compensation) (Payment of Claims) (Amendment) Regulations 2025.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Sherlock) (Lab)
My Lords, I will also speak to the draft Mesothelioma Lump Sum Payments (Conditions and Amounts) (Amendment) Regulations 2025.
The schemes we are debating today provide vital support for sufferers of certain dust-related diseases, often caused by occupational exposure to asbestos and other harmful dusts. Having attended these debates in the past, I am always grateful for the opportunity to discuss these schemes and the wider support for people diagnosed with these diseases, which cause such terrible suffering. I know that many noble Lords have friends and colleagues who have died as a result of these awful conditions. Every year when we gather, it is worth taking a moment to remember those who have suffered and their families.
I will begin by providing a brief overview of these two no-fault compensation schemes and of what these regulations seek to amend. The Pneumoconiosis etc. (Workers’ Compensation) Act 1979—henceforth “the 1979 Act scheme”—provides a single lump sum compensation payment to eligible individuals who suffer from one of the diseases covered by the scheme. This includes diffuse mesothelioma, pneumoconiosis and three other dust-related respiratory diseases. It was designed to compensate people who could not claim damages from former employers that had gone out of business and who had not brought any civil action against another party for damages. To be entitled to a lump sum award, claimants must have an industrial injuries disablement benefit award for a disease covered by the 1979 Act scheme, or would have had an award but for their percentage disablement.
The 2008 diffuse mesothelioma lump sum payment scheme was introduced to provide compensation to people who contracted diffuse mesothelioma but were unable to claim compensation through the 1979 Act scheme. For example, they may have been self-employed or their exposure to asbestos was not due to their work. This would include cases we have often discussed in this Committee in years gone by, such as of spouses or other family members who may have washed the overalls of those who worked with asbestos and contracted the disease themselves.
The 2008 Act scheme provides support to people with diffuse mesothelioma quickly at their time of greatest need. Regrettably, for adults diagnosed with mesothelioma in England between 2016 and 2020, one-year survival was below 50%. Timely financial support is especially important for such diseases. Although both schemes aim to provide compensation to sufferers within their lifetime, each scheme also allows for claims by dependants if the person suffering from the disease sadly dies before they are able to make a claim. This is in recognition of the suffering these diseases can bring to whole families.
These regulations will increase the value of one-off lump sum payments made under these schemes. These rates will apply to those who first become entitled to a payment from 1 April 2025. While there is no statutory requirement to increase the rates of these payments in line with prices each year, we are maintaining the position taken by previous Governments and increasing the value of the lump sum awards by 1.7%, in line with the September 2024 consumer prices index. This also means that the increase will once again be in line with the proposed increases to industrial injuries disablement benefit as part of the main social security uprating provisions for 2025-26.
Between April 2023 and March 2024—the latest financial year for which data are available—1,620 awards were made under the 1979 Act scheme and 320 awards were made under the 2008 Act scheme. Expenditure on lump sum awards made under both schemes totalled £30 million in 2023-24. It is clear that these schemes continue to provide vital support to sufferers and their families.
According to data from the Health and Safety Executive, there were 2,257 mesothelioma deaths in Great Britain in 2022. That is slightly lower than the 2021 figure and substantially lower than the average of 2,529 deaths per year over the period between 2012 and 2020. The most recent projections from the HSE suggest that annual deaths due to mesothelioma in men will reduce during the 2020s, although for women annual deaths are not expected to start to reduce until the late 2020s. This difference may reflect particularly heavy asbestos exposures in certain industries that mainly affected men, such as shipbuilding, being eliminated first, whereas exposures due to the use of asbestos in construction, which affected many men but also some women, continued after 1970.
While these trends offer us some reason to be hopeful, we must do whatever we can to prevent future asbestos exposures and reduce the risks of developing these terrible diseases. I am pleased to say that the HSE continues its vital work to enable employers to take action to prevent and reduce the most common causes of work-related ill health. Following the asbestos awareness campaigns of previous decades, the HSE continues to make a wide range of information freely available through its website. In January 2024, it also launched a duty to manage communications campaign called “Asbestos—Your Duty” to raise awareness and understanding of the legal duty to share information on asbestos with those liable to disturb it. I am sure noble Lords will join me in recognising the continued importance of the compensation offered by the 1979 Act and 2008 Act schemes.
Finally, I am required to confirm that these provisions are compatible with the European Convention on Human Rights; I am happy to do so. I commend the increases in the payment rates under these two schemes to the Grand Committee and ask approval to implement them. I beg to move.
Lord Jones (Lab)
My Lords, I thank the Minister for her introductory exposition of these regulations, which one can only support wholeheartedly. There could be no more caring and compassionate Minister to introduce them. The Minister has a brilliant record on detail, research and expertise—and no little enthusiasm. She has been steering and informing at the elbow of Prime Ministers with fierce commitment and considerable intellectual mastery for years, and with success. I offer my congratulations on her appointment in an important department. I also thank the department—in particular, Mr John Latham and his committed, diligent team—for its helpful Explanatory Memorandum.
I rise to speak because one believes in the principle of the Executive always being held to account and questioned; that is a good, long-standing principle of Parliament. These regulations are of great importance to the post-industrial regions of Britain. Their industries disappeared and shrank rapidly but, distressingly, the human consequences remain. One would have liked these regulations to have been taken in your Lordships’ Chamber, given their importance to communities that have served Britain so well in those recent times. It is good to know that the Government have delivered a 32% pay rise to 112,000 former miners; that is something like an average of £29 per week.
Although the Minister always gives information, what is her judgment as to how well the war on asbestos is progressing? Is there any estimate available to the department of the number of deaths caused by asbestos and its associated diseases in the various industries that she has touched on? Do we know how many people’s deaths have been recorded as being caused by pneumoconiosis? I ask this in relation to coal mining and quarrying specifically; it may be that that information is not available immediately but might be in written form at another time.
Lord Harold Walker—an engineer, a one-time House of Commons Minister of State and then Chairman of Ways and Means—told me that, in 1968, workers in a Hebden Bridge factory had literally played snowballs with blue asbestos, such was the ignorance at that time. In Blaenau Ffestiniog and Dinorwig in north-west Wales, there were world-famous slate quarries; sadly, the quarrymen were endangering their lives by the inhalation of slate dust. Their work was dangerous in itself, and sometimes they worked in huge, dark, underground, cavernous locations. Poorly paid, they even had to buy their own candles, so it was no surprise when the small hospital ward on site had a year-long bitter strike.
Baroness Donaghy (Lab)
My Lords, it has become a tradition for me to follow my noble friend Lord Jones on this subject. I thank the Minister for her presentation and the proposed uplift. I also pay tribute to the noble Baroness, Lady Stedman-Scott, for the work that she did when in government and thank my colleagues in the DWP with whom I work as chair of the mesothelioma oversight committee, as I have been doing for a considerable number of years now. That group represents the trade unions, victims, insurers and all interested parties. That quiet work is done and the tragedies carry on. The numbers may be smaller but, unfortunately, there will be a long tail indeed. Some professional people are going to get it—those teaching in schools with asbestos—as will other areas.
To inform the Committee—I have said this before—I lost a sister-in-law to mesothelioma in Scunthorpe. We still do not know whether that was because she pushed trolleys around as a nurse in a hospital basement that was full of asbestos or whether it was because she was washing her husband’s uniforms when he worked at the Scunthorpe steelworks. I also lost a very close friend in my union, on the same subject, so this is a personal issue, as well as something that I have been pleased to do for the DWP.
That is really all I have to say, except to ask the Minister—my noble friend Lord Jones indirectly indicated the future—what money the Government are thinking of putting into more research on this dreadful disease.
Baroness Janke (LD)
I, too, thank the Minister for her presentation. As she said, we have heard from many other noble Lords about sufferers from these diseases and that they are the legacies of old industries and still very much in evidence among many communities across the country. The diseases are not caused just by such industries; some sufferers still do not know how they contracted them. They are vicious and cause tremendous suffering, so I think, as the Minister said, that this is vital support for the sufferers. We also need to recognise that these are sick people; they may be very old and dependent on this payment. With the rising costs of energy, and so on, I hope that we might, at some stage, look more closely at how adequate these upratings are.
I am grateful to hear about the mesothelioma oversight committee, which I had not heard of before, but I would like to know a little more about the profile of this cohort of recipients. We hear a lot about their suffering—they have suffered through no fault of their own—and, as the noble Baroness said, their life expectancy is very short. So that would be helpful to me, but obviously we cannot have that today. The noble Baroness mentioned the number of recipients—I am sorry; I did not manage to write that down—but perhaps we could have something on that, on the age profile and on how many dependants are receiving the payments, as opposed to the actual sufferers. Can we hear a bit more about the life expectancy of some of the sufferers? It may be that we might get a more detailed approach to this payment, perhaps with the help of the mesothelioma oversight committee and other bodies.
I believe the Labour Party will conduct a benefit review. I hope there may be an opportunity to look in more detail at some of the cohorts. I have mentioned before that benefit payments are not really related to the cost of living or the cost of healthy eating. In looking at whether these recipients’ payments are adequate, we ought to think about the treatment, the suffering and the conditions that they must endure.
I hope that we may have the chance, in a review, to look at the particular needs of these people who are suffering from these terrible, debilitating and terminal diseases. I am sure that we all support the uplift, but I suspect that we all wonder whether it is adequate, so I hope that that will be looked at again.
Baroness Stedman-Scott (Con)
My Lords, I have stood where the Minister is standing on many occasions to bring forward SIs on this subject. I have always been horrified by the impact and the effects on people’s lives, and by early deaths that have come so quickly after diagnosis.
However, quite recently, a letter dropped into my letterbox at home from a legal firm in the north of England, advising me that the lady I had employed as my first PA, 43 years ago, had contracted mesothelioma. That made it a little more personal to me. I was then asked whether I could remember the names of other people I employed at that time, whether I knew where they were and whether I could give a rundown of the buildings that we worked in, in those early days. I did my best to do that, and that put me in touch with this lady, who ended up as the deputy director of HR at the John Radcliffe Hospital—a very able person. She is now coming to terms with what will happen in her life. That has made me more committed to understanding and supporting efforts to help them.
I thank the Minister for her clear outline of the purpose of these two statutory instruments. These regulations seek to increase the value of the one-off lump sum payments made under the two compensation schemes—the Pneumoconiosis etc. (Workers’ Compensation) Act 1979 and the Child Maintenance and Other Payments Act 2008—by 1.7%, in line with the inflation rate. Although we acknowledge that these increases are a positive step forward, particularly for those living with life-threatening conditions due to past exposure to hazardous substances, we must consider whether these adjustments are truly sufficient in the light of the immediate and long-term needs of the affected individuals.
The compensation schemes in question provide vital support to individuals who have suffered as a result of working in hazardous environments, particularly from asbestos exposure. Under the 1979 Act, lump sum payments are made to those affected by dust-related issues, while the 2008 Act compensates individuals diagnosed with diffuse mesothelioma, including those who may not be eligible under the 1979 Act. These instruments propose to increase the sum by 1.7%. Although this increase offers some relief to those affected by asbestos-related diseases, it is important to ask whether this adjustment adequately meets the ongoing and growing needs of individuals whose lives have been irrevocably impacted by these conditions.
The previous Conservative Government consistently supported, and made increases to, these lump sum payments during their last Administration. Can the Minister commit to further increases in the payments in the future? I am sure she will.
His Majesty’s Opposition agree with these measures, but one concern that arises is the long-term sustainability of the compensation schemes. The draft regulations predict a gradual decline in long-term cost, as fatalities due to asbestos exposure stabilise. However, it is important to recognise that asbestos-related diseases continue to have a significant impact on individuals and families, and the effects of exposure can endure for generations.
I ask the Minister how the Government plan to ensure that the funds required to support these individuals will remain available as we see a decline in the number of claims over time. What steps are being taken to ensure that the national insurance and compensation systems can continue to meet the needs of those who continue to suffer from asbestos-related diseases?
Furthermore, the Government propose that the increase will apply only to claims where the individual first fulfilled the conditions of entitlement on or after 1 April 2025. This raises an important point for consideration. By setting this deadline, there is a risk that individuals currently in the middle of their claim process may miss out on the increase, potentially placing an added burden on those who are already in vulnerable situations. I ask the Minister how this decision was made, and whether there is any flexibility built into the process to accommodate those who may be affected in the interim.
The uprating of the compensation scheme is a necessary and welcome action, but we must recognise that these increases may not be sufficient to address the full extent of the challenges faced by those affected by asbestos-related diseases. I hope that the Government will ensure that the long-term sustainability of these schemes is maintained, and that they will remain attentive to the needs of those who continue to suffer as a result of past industrial practices. We on these Benches absolutely support the uplift.
Baroness Sherlock (Lab)
My Lords, I am grateful to all noble Lords for their contributions and their support for these regulations. I always find that this is one of the most moving debates we have in any year, and it gives us an opportunity to remember those who have lost their lives. My noble friend Lady Donaghy described her sister-in-law and her trade union colleague. There are also new cases: I was so sorry to hear about the employee of the noble Baroness, Lady Stedman-Scott. One of the reasons why we come back here year after year is in order to honour those who have died because of things that were no fault of their own—in most cases simply going to work or caring for others whom they loved.
I loved to hear my noble friend Lord Jones, whom I thank for his inordinately kind words about me. It is a real privilege every year to hear him. I commend him for his faithfulness: he comes here every year to bear witness to what happened to the slate men, the quarrymen and the miners of his homeland of Wales, and to what they suffered. I love the fact that he reminds us every time that the only reason why these things were attacked in the workplace was that trade unions organised and defended people there, and made sure that we had proper legislation, so that people were not being sent into dangerous places and expected just to put up with it. I thank him once again for reminding us what happened at Hebden Bridge and Blaenau Ffestiniog, and so on. We must never forget that history; otherwise, we will be condemned to repeat it.
I will try to work though some of the questions that were asked. I commend my noble friend Lady Donaghy on chairing the mesothelioma oversight committee. I am not surprised that the noble Baroness, Lady Janke, has not heard of it. It is typical of my noble friend Lady Donaghy that she does incredibly important work in the background, and always points away from herself, never towards herself. This is another example, and I thank her for the work that she does. In this, as in so much else, I am grateful to her.
I will try to go through as many of the cases as I can. My noble friend Lord Jones asked how many cases of mesothelioma there are a year, and for a breakdown. We publish data on mesothelioma deaths in Great Britain, and I will send him a link so that he can see the breakdown of that. Unfortunately, mesothelioma is usually rapidly fatal following the onset of symptoms, but that means that annual deaths give a pretty clear indication of what is happening with the disease. Breakdowns are available by age, by last occupation and by geographical area—that is, where the person was living when they died. The statistics also include analysis of the relative frequency of different occupations recorded on mesothelioma death certificates, which is probably more useful as an indication of what happened in the past rather than of where we are going in the future—or, indeed, of numbers for particular occupations. It is a pattern.
Mesothelioma Lump Sum Payments (Conditions and Amounts) (Amendment) Regulations 2025
(1 day, 10 hours ago)
Grand CommitteeRead Hansard Text Read Debate Ministerial Extracts
Baroness Sherlock
That the Grand Committee do consider the Mesothelioma Lump Sum Payments (Conditions and Amounts) (Amendment) Regulations 2025.
Social Security (Contributions) (Rates, Limits and Thresholds Amendments, National Insurance Funds Payments and Extension of Veteran’s Relief) Regulations 2025
(1 day, 10 hours ago)
Grand CommitteeRead Hansard Text Read Debate Ministerial Extracts
Lord Livermore
That the Grand Committee do consider the Social Security (Contributions) (Rates, Limits and Thresholds Amendments, National Insurance Funds Payments and Extension of Veteran’s Relief) Regulations 2025.
The Financial Secretary to the Treasury (Lord Livermore) (Lab)
My Lords, I beg to move that the Committee approves these regulations, which are made each year to set national insurance contributions rates, limits and thresholds; and to uprate child benefit and the guardian’s allowance.
First, the Social Security (Contributions) (Rates, Limits and Thresholds Amendments, National Insurance Funds Payments and Extension of Veteran’s Relief) Regulations 2025 set the national insurance contributions —NICs—limits and thresholds of a number of national insurance contributions classes for the 2025-26 tax year. The lower earnings limit, the small profits threshold, the rate of class 2 and the rate of class 3 will all be uprated by the September CPI of 1.7%, while the other limits and thresholds that these regulations cover will remain fixed at their existing level.
The regulations also make provision for a Treasury grant to be paid into the National Insurance Fund if required for the same tax year, which is a transfer of wider government funds to the National Insurance Fund, and for the veterans’ employer NICs relief to be extended for a year until April 2026. The scope of the regulations under discussion today is limited to the 2025-26 tax year.
National insurance contributions are social security contributions, paid when individuals are in work to receive contributory benefits when they are not working—for example, after they have retired or if they become unemployed. NICs receipts fund these contributory benefits, as well as helping to fund the NHS.
The primary threshold and lower profits limit are the points at which employees and the self-employed start paying employee class 1 and self-employed class 4 NICs respectively. The primary threshold and lower profits limit have been frozen by the previous Government at £12,570 until April 2028. However, the level of these thresholds does not affect people’s ability to build up entitlement towards contributory benefits, such as the state pension. For employees, this entitlement is determined by their earnings being above the lower earnings limit, which these regulations will uprate from £123 per week in 2024-25 to £125 per week for 2025-26. That is equivalent to an uprating from £6,396 to £6,500 per annum. For self-employed people, their entitlement is determined by their earnings being above the small profits threshold, which these regulations will uprate from £6,725 in 2024-25 to £6,845 for 2025-26.
Uprating the lower earnings limit and small profits threshold maintains the real level of income where someone gains entitlement to contributory benefits and is the standard approach that has been taken by Governments in most years since 1999 for the for the relevant thresholds. Wage growth is currently higher than inflation, which means that, following the uprating by CPI, there will be a reduction in the number of hours that someone who has received a typical wage increase needs to work to gain entitlement compared to last year.
The upper earnings limit, the point at which the main rate of employee NICs drops to 2%, and the upper profits limit, the point at which the main rate of self-employed NICs drops to 2%, are aligned with the higher rate threshold for income tax at £50,270 per annum. The previous Government also froze those thresholds until April 2028.
Self-employed people earning below the small profits threshold of £6,845 may pay class 2 NICs voluntarily to protect their entitlement to certain contributory benefits. The flat cash rate of class 2 NICs will increase from £3.45 in 2024-25 to £3.50 in 2025-26, in line with September CPI of 1.7%. Class 3 NICs allow people to voluntarily top up their national insurance record. The rate for class 3 will increase in line with inflation from £17.45 a week in 2024-25 to £17.75 a week in 2025-26.
On thresholds for employer NICs reliefs, noble Lords will be aware that the Government have had to make difficult decisions to fix the public finances. One of the toughest decisions that we faced was to increase the rate of employer NICs and reduce the secondary threshold. Although those changes are contained in the National Insurance Contributions (Secondary Class 1 Contributions) Bill, and not the regulations before us, they are the context in which our decision to maintain other targeted NICs reliefs is so important. Those employer NICs reliefs include those for under-21s, under-25 apprentices, veterans and new employees in freeports and investment zones. The regulations that we are debating set these thresholds in line with other personal tax thresholds or maintain the existing level.
The regulations also make provision for the NICs relief for employers of veterans to be extended for another year until April 2026. This measure means that next year businesses will continue to pay no employer NICs on salaries up to the veterans’ upper secondary threshold of £50,270 for the first year of a qualifying veteran’s employment in a civilian role. The continuation of this relief is part of the Government’s commitment to support our veterans. It is intended to further incentivise employers to take advantage of the wide range of skills and experience that ex-military personnel offer; it supports those who have given so much to our country, and it helps make sure that our country further benefits from the skills and potential of our service leavers.
I will now move on to the Treasury grant and National Insurance Fund, which is where the majority of NICs are paid, and which is used to pay the state pension and other contributory benefits. The National Insurance Fund is generally self-financing, with NICs receipts paying for contributory benefits. However, the Treasury has the ability to transfer funds from wider government revenues into the National Insurance Fund in the event that the balance of the National Insurance Fund falls below one sixth of estimated annual benefit expenditure. The regulations before us make provision for a transfer of this kind—known as a Treasury grant—of up to 5% of forecasted annual benefit expenditure to be paid into the National Insurance Fund, if needed, during 2025-26. A similar provision will be made in respect of the Northern Ireland National Insurance Fund.
It is important to note that the Government Actuary’s Department report laid alongside these regulations forecasts that a Treasury grant will not be required in 2025-26, but, as a precautionary measure, the Government consider it prudent to make a provision at this stage for a Treasury grant, which is consistent with previous years.
Baroness Kramer (LD)
My Lords, I will be brief, for two reasons. One is that I just do not think I could cope if this turned into yet another discussion of employers’ NICs, particularly as we have Third Reading tomorrow. As the Minister said, that is the broad context within which we discuss this. Also, when it comes to the very detailed details of various levels of NICs and thresholds, and making changes based on CPI, I lack the detailed knowledge to be able to add a whole lot to the value of the discussion.
I will make some comments on the National Insurance Fund. This is one of those days when I look around and think, “Where is Lord Davies of Brixton when you need him?”. He often talks to us about the integrity of the fund, and—although I do not want to put words into his mouth—regrets that it does not function in the role for which it was originally designed. I agree. Nominally it is a fund to pay social security benefits but, first, a portion of it—roughly 24% of the amount raised in NICs—is allocated to the NHS by formula. Secondly, if there is any surplus in the fund it can be lent to various departments under the auspices of the Treasury. Thirdly, it can be topped up by a grant from the Treasury if the amount is not sufficient for the payouts it needs to make. Indeed, that has been reinforced or extended in the context of the SI before us today.
Crucially, the level of the National Insurance Fund does not determine the amount that is spent on any form of social security, whether state pensions or other things. I agree with the Institute for Fiscal Studies that the idea that the National Insurance Fund is financially separated from other parts of government is illusory.
I think that a review of the status of the National Insurance Fund will begin in the fiscal year that starts in April 2025. This is the quinquennial review that is required for the fund. Given that UK demographics are such that they will drive up the cost of state pensions and a whole lot of other elder needs, which will take the concept behind the fund almost to breaking point, can the Minister say whether the next review will look again at the fundamentals, accepting that in many ways this has effectively become a variation on taxation, and see whether the system can be simplified and combined? It is unfortunate that people still feel that when they pay their national insurance contribution they are funding their state pension, which is not the reality, even if it sounds like that from some of the language.
Looking at the other content of the two SIs in front of us, it struck me that, although I fully understand child benefit and guardian’s allowance going up at CPI, the number is so tiny. This was brought home to me very much this past year when, for various reasons, I have had various grandchildren living with me. Does whoever designed these benefits have a clue how much a teenage boy can eat? There is a great argument for relooking at the whole benefit system and putting it into a much more realistic context. The Government have said that they will look again at benefits, but I wonder whether they will use that lens as they do so, because it is about time.
We support the extension of the 12-month NICs holiday for veterans, but I hope that our support for veterans will not stop there. With the change in approach we are now taking to defence, recognising that our military personnel need to be supported and treated in a very positive way rolls over into also taking care of our veterans, who form so much of the homeless population, for example. That is one of the reasons why—going back to the employers’ NICs Bill that we have been dealing with, which has its Third Reading tomorrow—we focus so much on things such as part-time, entry-level work and small businesses. It is, in part, to deal with the significant number of veterans who are not finding themselves a route back into a working and functional life once they return to civic society.
We will not oppose either of these SIs. I apologise for not being able to go through the nitty-gritty of many of the dimensions, but perhaps that will at least mean that the Committee can adjourn a little earlier.
Baroness Neville-Rolfe (Con)
My Lords, I thank the Minister for clearly outlining the essence of these two SIs, and the noble Baroness, Lady Kramer, for her comments. We had substantial discussions about national insurance in this House last week, on the national insurance contributions Bill, during which significant amendments were made. If carried through the whole legislative process, the changes agreed would result in significant changes to declared government policy. But from those political highs, we move to today’s debate, which is at a much more technical level and, as the Minister said, does not impinge directly on the proposed changes in the Bill.
I note in passing that I read with great interest the Government Actuary’s report, the existence of which I confess I was previously unaware. It provides first-rate briefing across the whole complex of social security benefits, and I thank the Government for it. Reflecting on the references to the National Insurance Fund, already mentioned by the noble Baroness, Lady Kramer —and, sadly, in the absence of the noble Lord, Lord Davies of Brixton—I ask the Minister whether the Government have any plans to put matters on a more realistic basis. The fund does not do what it says on the label.
In particular, the projections in the report indicate that the estimated 2025-26 end-year fund balance of £81.6 billion is only 53% of the estimated benefit expenditure of £152.9 billion. This is another factor in the case for reform of the welfare system, which we in the Conservative Party have called for to incentivise work, cut costs and fraud, and raise productivity. This is not least because of the significant long-term demographic changes which, as the last quinquennial review published in 2022 shows, are projected to exhaust the fund before 2085. There is a big challenge ahead.
Finally, on the measures in these two orders, the Minister will be glad to know that we are also broadly content. I welcome especially the rollover of support for Armed Forces veterans entering the civilian workforce, which we introduced in April 2021. The truth is that readjusting to civilian life is a major problem for many, and this measure is an imaginative incentive to employers to give them a chance and take advantage of their skills and experience, as the Minister pointed out in his opening remarks. Incidentally, the arrangement also shows that exemptions from the standard national insurance rules are possible.
Lord Livermore (Lab)
My Lords, I am very grateful for the support from the noble Baronesses, Lady Kramer and Lady Neville-Rolfe, for the measures I outlined.
The noble Baroness, Lady Kramer, asked some questions about the National Insurance Fund and the review. The noble Baroness, Lady Neville-Rolfe, also touched on the Government Actuary’s Department report and the National Insurance Fund. The next quinquennial review of the fund will provide an update of these longer-term issues and projections over the period starting April 2025, so perhaps we will return to debate some of these issues at that point.
The noble Baroness, Lady Neville-Rolfe, also talked about reform of the welfare system. She will know that we are coming forward very shortly with a Green Paper to achieve exactly the things that she set out. I know we tend to be less political in this Room, but I will say that they were in power for 14 years and did not do those things. However, I hope that we will be doing those things very shortly to ensure that the welfare system incentivises work in the way the noble Baroness described.
I am very grateful to both noble Baronesses for their support of the extension of the veterans’ relief, which I totally acknowledge the previous Government introduced. The relief is part of the Government’s commitment to make the UK the best place in the world to be a veteran. It is intended to further incentivise employers to take advantage of the wide range of skills and experience that ex-military personnel offer. I totally take the points that the noble Baroness, Lady Kramer, made: you see homeless veterans across London and the transport network, and of course we need to do more work across government to support them in their efforts to get back into work and to eliminate that homelessness.
Finally, I take the point made by the noble Baroness, Lady Kramer, around CPI for child benefit. The noble Baroness, Lady Sherlock, in the previous debate very eloquently made the point that some of those smaller upratings compound previous upratings when CPI has been so much higher. I echo the words she said. I hope I have covered the points made by both noble Baronesses.
Child Benefit and Guardian’s Allowance Up-rating Order 2025
(1 day, 10 hours ago)
Grand CommitteeRead Hansard Text Read Debate Ministerial Extracts
Lord Livermore
That the Grand Committee do consider the Child Benefit and Guardian’s Allowance Up-rating Order 2025.