National Insurance Contributions (Secondary Class 1 Contributions) Bill

(Limited Text - Ministerial Extracts only)

Consideration of Commons amendments and / or reasons
Monday 24th March 2025 Lords Chamber

Moved by

[Lord Livermore]

That this House do not insist on its Amendment 1, to which the Commons have disagreed for their Reason 1A.

1A: Because the Lords Amendment interferes with the public revenue, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

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

My Lords, in moving Motion A, I will speak also to Motions E, E1, H, H1, W and W1. Before I address these Motions directly, I will briefly set out why the Bill before your Lordships’ House is necessary.

Upon taking office, this Government inherited three distinct crises: a crisis in the public finances; a crisis in our public services; and a crisis in the cost of living. That included a £22 billion black hole in the public finances, public services at breaking point, NHS waiting lists at record levels, and working people suffering the worst cost of living crisis in a generation, with inflation having reached over 11%. Faced with this reality, any responsible Government would need to act. That is why we took action in the Budget to wipe the slate clean, to repair the public services, to protect working people and to invest in Britain. That included an historic investment of an additional £25.7 billion for the NHS, which is helping to bring down waiting lists more quickly and put an end to over a decade of underinvestment and neglect.

We took this action in the fairest way possible, by keeping our manifesto promises to working people not to increase their income tax, national insurance or VAT. However, we needed to take some very difficult decisions elsewhere on tax, including the changes to employer national insurance contributions contained in this Bill. Following this change, more than half of businesses with national insurance liabilities will see no change or will see their liabilities decrease, and 865,000 employers will now not pay any national insurance at all next year.

We have consistently acknowledged that some businesses will now contribute more and that the impacts will be felt beyond businesses. This was a difficult decision, but it was the right decision, because not acting was simply not an option. As a result of the decision, and others, taken in the Budget, we have created a foundation of stability on which we are now taking forward our agenda of growth and reform.

There are consequences to responsibility, but the consequences of irresponsibility for the economy and for working people would have been far greater. We saw that with the Liz Truss mini-Budget, which crashed the economy and increased typical mortgage payments by £300 a month.

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[Lord Londesborough (CB)]

My Lords, it is with some regret that I do not insist on my Amendment 8 and its consequential amendments. I am disappointed that financial privilege has been invoked to prevent a full and proper debate in the other place on the potential damaging impact that reducing the class 2 secondary threshold by a brutal 45% will have on jobs and growth for small businesses and organisations employing fewer than 25 staff. I fear the Government will look back on 6 April, the day the new NICs regime kicks in, as a day of economic self-harm—a second April Fools’ Day, if you like.

I do propose to move Amendment 8B in lieu. In the spirit of pragmatism, my amendment, like that from the noble Lord, Lord Scriven, would simply bestow on the Treasury the power—through statutory instrument—to specify exemptions on the lowering of secondary class 1 thresholds for businesses, charities and, indeed, all organisations employing fewer than 25 people. We are talking about 10 million jobs across the UK that are not protected by Clause 3’s increase in the employment allowance, which offsets the NICs increases but, typically, only for those employing three or fewer staff. Given the potential damage to employment, wages and growth, why would the Government not want this weapon in their armoury in what will be a very difficult year ahead for small employers, who also face close to 7% increases in the national minimum wage and added compliance costs with the new Employment Rights Bill?

I support Amendments 1B and 5B in the name of the noble Lord, Lord Scriven, which strike me as an entirely sensible and pragmatic exemption tool to give to the Treasury given the very challenging circumstances facing care homes, hospices, pharmacies and other primary care providers.

Finally, I also support Amendment 21B in the name of the noble Baroness, Lady Neville-Rolfe, which seeks a review of the impact of NICs increases by sector. The impact note that came with the Bill was extraordinarily light on detail, especially when you consider that the Bill commits employers across these sectors to more than £5 billion per annum in additional NICs and impacts more than 10 million jobs.

I asked the Minister in Committee how many jobs in each sector would be impacted by the increase in NICs—a fairly basic question, one could argue, and yet no answer has been forthcoming. We heard on Report that such assessments would be

“econometrically impossible”.—[Official Report, 25/2/25; col. 1672.]

I respectfully disagree. We are asking for sectoral impact assessments that cover such key issues as the number of jobs impacted and the impact on vacancies, job creation, redundancies, labour activity and output, and wages. It was an entirely reasonable request and one the Treasury should readily embrace.

[Baroness Neville-Rolfe (Con)]

My Lords, the amendments in this group, including my Amendment 21B, address the very real negative impact of this jobs tax that the Government refuse to acknowledge. The Bill is the most important economic measure they have put forward so far and it makes significant changes to millions of businesses and social enterprises on a very short timescale. These businesses have raised concerns that are reflected in a flat-lining of growth, as worried owners seek to anticipate such a brutal change. Noble Lords from across the House have raised the consequences a number of times, yet the Government remain unreceptive.

At every stage of this Bill’s progression, we have raised the concerns of the healthcare sector about the effects on care homes, pharmacies, dentists, GP surgeries and hospices. It will have a real impact on people’s lives. I am particularly concerned about the hospice sector. The recent extra funding provided is capital funding and will not support day-to-day functions. Hospice UK has reported that the burden of the increase in employer NICs will be £44.3 million a year, which will not be covered by the £26 million of revenue funding for children and young people’s hospices, previously mentioned by the Minister. Last year, children’s hospices were provided with £25 million through the children and young people’s hospice grant. Can the Minister tell us how much of his £26 million is additional funding and how much is in fact recurring?

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[Baroness Kramer (LD)]

My Lords, we on these Benches do not dispute that the Government were handed a dire fiscal situation; the question is what taxes they choose to raise to remedy it? We feel that they have made the wrong choice in this instance.

With these amendments in lieu—certainly those from my noble friend Lord Scriven and the noble Lord, Lord Londesborough, from the Cross Benches—we have proposed that, in key areas, power is provided to the Government and to the Treasury to reverse that decision in these narrow circumstances if they discover, as they see this event play out, that the choices they made were not those that they thought they had made. It is very unusual from these Benches for us to be willing to provide what is, in effect, a Henry VIII power to the Government, and that we do so reflects our deep anxiety. This is not political game playing; we are deeply anxious about what will happen with community health, social health, small businesses and the knock-on consequences of all that.

I want to thank the noble Baroness, Lady Noakes, because it was her thought in Committee that one way to at least find some common ground would be to pass powers over to the Secretary of State. That is the pattern that we have followed. I hope that the Government will see that they are not forced to act in any way by two of these amendments in lieu; they are being given the opportunity and the possibility, and we hope they will accept them in that spirit.

The noble Baroness, Lady Neville-Rolfe, has proposed an amendment in lieu which would require an impact evaluation. I have to say to the Minister that, when he spoke at the opening of this debate about how few businesses would be impacted by the increase in employer NICs, I began to think that he had not been given the central information that he should have been given. If he were to look, he would discover that that vast number of companies that are not affected are those with three employees or fewer, but that those small companies that we look to for scale-up and to drive growth are impacted.

Again, this underscores the fact that to roll it out effectively—and I fully accept that this is new and has not been the pattern of past Governments—we need to move to a time when we get much more detailed impact evaluation as we deal with these issues in this House. We on these Benches hope very much that the Government will accept the three amendments in lieu. If they do not, then we will support all three.

[Baroness Neville-Rolfe (Con)]

My Lords, we have worked together on these three modest, common-sense amendments, and we will also support them if it comes to a vote.

[Lord Livermore (Lab)]

My Lords, I am very grateful to all noble Lords who have taken part in this debate. As I have outlined, the measures contained in this Bill are necessary to repair the public finances, to rebuild public services, to protect working people and to invest in Britain. This includes an historic investment of an additional £25.7 billion for the NHS that is helping to bring down waiting lists more quickly and puts an end to over a decade of underinvestment and neglect. In doing so, the Government have kept their promise to working people to not increase their income tax, their national insurance or their VAT. We have always acknowledged that there are costs to responsibility, but the cost of irresponsibility would have been far greater.

The noble Baroness, Lady Neville-Rolfe, asked about the impact of the Bill on hospices. The Government of course recognise the vital role that hospices play in supporting people at the end of life and their families, and the cost pressures that the hospice sector has been facing over many years. That is why, as several noble Lords have mentioned, we are supporting the sector with a £100 million increase for adult and children’s hospices to ensure that they have the best physical environment for care, and £26 million revenue funding to support children’s and young people’s hospices. All charities, including hospices set up as charities, can also benefit from the employment allowance, which this Bill more than doubles from £5,000 to £10,500.

On assessments, as I have said previously, the Government and the OBR have already outlined the impacts of this policy change. This approach is in line with previous changes to national insurance and previous similar changes to taxation; the Government do not intend to provide further impact assessments.

The revenue raised from the measures in this Bill will play a critical role in repairing the public finances and rebuilding our public services. Any future changes which exempt certain groups would have cost implications, necessitating higher borrowing, lower spending or alternative revenue-raising measures. For these reasons and the other reasons that I have already set out, I respectfully ask noble Lords not to press their Motions containing Amendments 1B, 5B, 8B and 21B.

[Lord Scriven (LD)]

My Lords, I thank all noble Lords who have taken part in this informative and important debate. I support the Motions in the names of the noble Lord, Lord Londesborough, and the noble Baroness, Lady Neville-Rolfe.

It is a strange world we live in. I never thought that I would come to this House as a Liberal Democrat and argue for a Minister to have a Henry VIII power to try to help the Government with the consequences of a policy, and to have a Minister turn it down. No one is denying the right of the Government to raise revenue; what my amendment does is give the Government a tool to act swiftly on the consequences of what may, and probably will, happen in health and social care. It is not just pharmacists, GPs, hospices and dental practices that will suffer but people who require their services. Some of the most vulnerable will find that services stop because of the cash-flow and debt issues that the Bill will exacerbate in services that are already pressurised.

It is disappointing that when the olive branch is given, the Minister has decided to continue with the folly. Looking at the faces of some Members behind him, I think that they understand some of the potential consequences. It is disappointing that the Government and the Minister have not agreed to the olive branch. I therefore believe that it is right that I ask the House to agree to my Motion A1. I would like to test the opinion of the House.

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16:28

Division 1

Ayes: 271

Noes: 173

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Moved by

[Lord Livermore]

That this House do not insist on its Amendment 2, to which the Commons have disagreed for their Reason 2A.

2A: Because the Lords Amendment interferes with the public revenue, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

[Lord Livermore (Lab)]

My Lords, in moving Motion B, I will speak also to Motions C, D, F, G and J to V. The other place has disagreed to Amendments 2, 3, 4, 6 and 7 and Amendments 9 to 20, as they interfere with public revenue. The other place did not offer any further reason, trusting that this reason is sufficient. On that basis, I hope that noble Lords are content not to insist on Amendments 2, 3, 4, 6, 7 and 9 to 20. I beg to move.

[Baroness Neville-Rolfe (Con)]

My Lords, the Government have rejected a number of amendments which call for the exemption of various sectors from the jobs tax, citing financial privilege. The amendments would have protected small business, providers of transport for students with special educational needs, small charities, providers of early years education and hospices, which we have already heard a lot about today, because of their desperate situation, from my noble friends Lord Leigh, Lord Ashcombe, Lady Monckton and Lady Noakes.

The Government’s refusal to acknowledge the damaging impacts that this tax on jobs will have is very concerning. The tax is in complete contrast to their insistence that they are the party of growth. Indeed, the most recent GDP statistics from the ONS indicate that the economy shrank by 0.1% in January. The way the Government are now taxing the more productive private sector to pay for a huge increase in less productive public projects and salaries means, I fear, that this trend will continue.

We have recast our review clause into a modest one, which we will be voting on shortly. We will not oppose the government amendments in this second group, but I give notice that we are planning to seek assistance for those providing SEND transport in the Bus Services (No. 2) Bill.

[Baroness Kramer (LD)]

My Lords, briefly, we regret very much that the other place rejected amendments that would have exempted key groups such as universities, nurseries and those providing SEND transport—essential services that provide key support will be under huge financial pressure. We have had to be selective. We have offered the Government opportunities to take powers in the areas where we think the greatest damage will be done most rapidly. Therefore, we will not press the Government on these amendments.

[Lord Livermore (Lab)]

My Lords, I am very grateful to the noble Baronesses, Lady Neville-Rolfe and Lady Kramer, for their agreement not to insist on these amendments. We have had to take difficult but necessary decisions to repair the public finances and rebuild our public services. Not acting was simply not an option. As a result, through this decision, and others taken in the Budget, we have created a foundation of stability on which we are now taking forward our agenda of growth and reform.

Motion B agreed.

Moved by

[Lord Livermore]

That this House do not insist on its Amendment 3, to which the Commons have disagreed for their Reason 3A.

3A: Because the Lords Amendment interferes with the public revenue, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

Moved by

[Lord Livermore]

That this House do not insist on its Amendment 4, to which the Commons have disagreed for their Reason 4A.

4A: Because the Lords Amendment interferes with the public revenue, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

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Moved by

[Lord Livermore]

That this House do not insist on its Amendment 5, to which the Commons have disagreed for their Reason 5A.

5A: Because the Lords Amendment interferes with the public revenue, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

[Lord Livermore (Lab)]

My Lords, I beg to move.

Motion E1 (as an amendment to Motion E)

Moved by

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Moved by

[Lord Livermore]

That this House do not insist on its Amendment 6, to which the Commons have disagreed for their Reason 6A.

6A: Because the Lords Amendment interferes with the public revenue, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

Moved by

[Lord Livermore]

That this House do not insist on its Amendment 7, to which the Commons have disagreed for their Reason 7A.

7A: Because the Lords Amendment interferes with the public revenue, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

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Moved by

[Lord Livermore]

That this House do not insist on its Amendment 8, to which the Commons have disagreed for their Reason 8A.

8A: Because the Lords Amendment interferes with the public revenue, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

[Lord Livermore (Lab)]

My Lords, I beg to move.

Motion H1 (as an amendment to Motion H)

Moved by

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16:45

Division 2

Ayes: 276

Noes: 165

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Moved by

[Lord Livermore]

That this House do not insist on its Amendment 9, to which the Commons have disagreed for their Reason 9A.

9A: Because the Lords Amendment interferes with the public revenue, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

Moved by

[Lord Livermore]

That this House do not insist on its Amendment 10, to which the Commons have disagreed for their Reason 10A.

10A: Because the Lords Amendment interferes with the public revenue, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

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Moved by

[Lord Livermore]

That this House do not insist on its Amendment 11, to which the Commons have disagreed for their Reason 11A.

11A: Because the Lords Amendment interferes with the public revenue, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

Moved by

[Lord Livermore]

That this House do not insist on its Amendment 12, to which the Commons have disagreed for their Reason 12A.

12A: Because the Lords Amendment interferes with the public revenue, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

Moved by

[Lord Livermore]

That this House do not insist on its Amendment 13, to which the Commons have disagreed for their Reason 13A.

13A: Because the Lords Amendment interferes with the public revenue, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

Moved by

[Lord Livermore]

That this House do not insist on its Amendment 14, to which the Commons have disagreed for their Reason 14A.

14A: Because the Lords Amendment interferes with the public revenue, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

Moved by

[Lord Livermore]

That this House do not insist on its Amendment 15, to which the Commons have disagreed for their Reason 15A.

15A: Because the Lords Amendment interferes with the public revenue, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

Moved by

[Lord Livermore]

That this House do not insist on its Amendment 16, to which the Commons have disagreed for their Reason 16A.

16A: Because the Lords Amendment interferes with the public revenue, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

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Moved by

[Lord Livermore]

That this House do not insist on its Amendment 17, to which the Commons have disagreed for their Reason 17A.

17A: Because the Lords Amendment interferes with the public revenue, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

Moved by

[Lord Livermore]

That this House do not insist on its Amendment 18, to which the Commons have disagreed for their Reason 18A.

18A: Because the Lords Amendment interferes with the public revenue, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

Moved by

[Lord Livermore]

That this House do not insist on its Amendment 19, to which the Commons have disagreed for their Reason 19A.

19A: Because the Lords Amendment interferes with the public revenue, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

Moved by

[Lord Livermore]

That this House do not insist on its Amendment 20, to which the Commons have disagreed for their Reason 20A.

20A: Because the Lords Amendment interferes with the public revenue, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

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Moved by

[Lord Livermore]

That this House do not insist on its Amendment 21, to which the Commons have disagreed for their Reason 21A.

21A: Because information has already been published about these matters and a further review is not necessary.

[Lord Livermore (Lab)]

My Lords, I have already spoken to Motion W. I beg to move.

Motion W1 (as an amendment to Motion W)

Moved by

[Baroness Neville-Rolfe]

At end insert “, and do propose Amendment 21B in lieu—

21B: After Clause 3, insert the following new Clause—
“Review of effect on certain sectors
(1) The Chancellor of the Exchequer must, within six months of the day on which this Act is passed, lay before Parliament a review of the impact of the measures contained in this Act on the persons and sectors in subsection (2).
(2) The review must consider the impact on—
(a) charities with annual revenue of less than £1 million;
(b) early years providers;
(c) hospices;
(d) the hospitality sector;
(e) pharmacies;
(f) small businesses;
(g) social care;
(h) transport for children with special educational needs or disabilities.””

[Baroness Neville-Rolfe (Con)]

My Lords, I beg to move Motion W1 and to test the opinion of the House.

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16:58

Division 3

Ayes: 273

Noes: 172