National Insurance Contributions (Secondary Class 1 Contributions) Bill

Debate between Baroness Bakewell of Hardington Mandeville and Lord Howard of Rising

Committee stage
Wednesday 29th January 2025 Grand Committee

[Baroness Bakewell of Hardington Mandeville (LD)]

My Lords, I will speak to Amendments 7 and 66 in my name. I apologise for not being able to speak at Second Reading. Much in my general points will have been said by many others previously.

Farmers provide a vital role in the country. They grow crops, keep stock, protect land and have engaged with the change from BPS to ELMS, with many farmers seeing biodiversity on their farms increase as a result. Farming is not a career choice for the faint-hearted. The early, dark and cold mornings, the late nights at harvest time and a seven-day week, often for 52 weeks of the year, take their toll. But farmers are essential to food supply.

Amendment 7 is intended for farmers who, on a small farm with a low income, still have to pay national insurance, as would any other low-wage employers. The vast majority of farm businesses are small, with a farmer and a small number of family members. These family members are either paid employees on PAYE or partners in the family business, which pulls them into self-employment and payment of NI through that route.

Class 2 contributions are at a flat rate and used to be charged on self-employed people. From April 2024, self-employed people no longer have to pay them. The self-employed farmer therefore does not have to pay class 2 contributions, but has to pay class 4 contributions on their profits—if there are any.

The next group of farmers employs a small number of people—one or two workers—on PAYE with the usual NI implications. Some farmers with a small number of workers employ the workers as contractors, who work on multiple farms during the season or week. I ask the Minister whether some farms might actually see a saving in NI contributions, as the threshold for small businesses was increased. Would this help the sole or family farmer?

There is, of course, another group of large farms that employ significant numbers of people, many of which will be impacted by the NI increases: dairy farms; horticultural businesses; pig and poultry enterprises; and large arable and livestock farms. These larger farms are profitable and may be able either to absorb the additional cost of the NI rise or to pass it on. It is those farms in the middle range that are likely to struggle and may not survive in their current form.

I came here this afternoon from a meeting discussing the horticulture sector. We were informed that the rise in wage rates, coupled with the NI contributions rise, will cost members of Horticultural Trades Association £134 million. This was causing considerable concern around how the industry would cope. The Horticultural Trades Association has a considerable number of garden centres in its membership.

I shall now move on to Amendment 66. My very real concerns are for those in the food supply chain. In the meat industry, ignoring retail, the total additional cost is in the order of £160 million a year: £60 million is down to wage increases and £100 million to national insurance. In some supply chains, employment costs are huge. For example, in the beef industry, the cost of labour on a farm to produce cattle is not in itself huge but the labour costs in killing, processing and transporting the cattle and meat are significant. The national insurance change for employers and employees in the supply chain will put financial pressure on these businesses, which include meat processors, vegetable packers and dairy processors. The costs imposed on them will inevitably trickle down to the farm gate as the supply chain looks to recover the money from farmers.

The same can be said for retailers. Farmers will be squeezed. Retailers are not making money on basic foodstuffs; they make their money on cornflakes, cereals and similar products. There will be huge pressure on food prices and food supply chains. Some businesses—mainly the medium-sized operations—will go under. The larger ones will pass on the increase and survive. The smaller farmer, by adding value and providing niche products, may survive. The small business threshold is helpful. Such businesses often employ only one person; the national insurance goes down in this case.

The employment costs on most family farms are not the big cost. Apart from in the meat industry, where costs are in the supply chain, the other farming sections with large on-farm costs include dairy farms and those engaged in horticulture. In the latter case, workers who plant crops then pick them when they are ripe represent a significant cost. Not all crops can be harvested by machinery. There will always be a role for a real person to be involved in the horticultural side of produce—often a seasonal worker.

When making an alteration to the financial employment arrangements, which could have a significant impact on those employed, it is always prudent to review the impact of the policy change. It will not be acceptable to say at a later date, “Oh, we didn’t realise how this change would affect certain sections of society”. Amendment 66 asks for a review of the effect on farming, which includes those in the supply chain as well as those working on farms. The effect of the increase in national insurance is going to be considerable; a review will be essential to measuring the impact accurately. I realise that the Minister is not engaged in farming, but I hope that he will be able to make the case for these two amendments to his colleagues in the Treasury. I beg to move.

[Lord Howard of Rising (Con)]

My Lords, I rise to speak to Amendment 36 in my name. I declare my interests as a farmer and an employer. I have already spoken about a lot of what is relevant to this amendment in an earlier stage, so I will spare your Lordships from any repetition.

Farming is a difficult business with unpredictable factors that do not appear in every business: weather; insect life; the ability of animals to damage themselves, and so on. Of course, the most difficult thing of all is the uncertainty of what they will receive for their product. Commodity prices vary greatly, not only from year to year but in the time between the planting and harvesting of a crop. The Government have already hit farmers with the 20% inheritance tax on agricultural land. To burden them now with an increase in national insurance contributions is brutal.

Deregulation Bill

Debate between Baroness Bakewell of Hardington Mandeville and Lord Howard of Rising

Wednesday 11th February 2015 Lords Chamber

[Lord Howard of Rising (Con)]

In moving the amendment I will also speak to Amendments 46AB, 46BA and 46HA. These are all amendments to the amendments proposed by my noble friend the Minister. Before so doing, I must declare an interest as an owner of rented-out residential properties.

Amendment 46AA would allow for a landlord to be away when a letter of complaint arrives. He or she may be absent for whatever reason—business, holiday, et cetera. In spite of what my noble friend said, I believe that it would be sensible to allow for this possibility when imposing a time limit. There may also be a need to seek professional advice to be able to give an adequate response to a complainant, so the time period should be adequate to allow for those items.

Under Amendment 46AB, the situation would be avoided when a tenant makes a written complaint and the local authority does not react promptly, say for four months, and the authority then issues a relevant notice, and when that relevant notice is issued a new six-month period begins. In effect, the ability to issue a Section 21 notice will have been blocked for 10 months—four months starting with the tenant’s written complaint, which was not acted on by the authority, followed by the six months starting with the issue by the local authority of a relevant notice. I do not believe that that was what was intended. I may have misunderstood it but perhaps my noble friend can make that clear.

That point becomes particularly relevant when I come to Amendment 46BA. It allows a Section 21 notice to be served if a tenant is in arrears of rent for two or more consecutive payment dates, even if the tenant has made a written complaint. My noble friend referred to Section 8 of the Housing Act but I understand that the only method of controlling the situation would be the issue of a Section 21 notice. Any tenant not wishing to pay his rent only has to put a complaint in writing to the landlord, and the tenant has security of tenure without paying any rent for the next six months—or if the local authority delays in its actions, an even longer period. This creates a situation that is open to abuse, and although most tenants would not dream of doing so, there will be occasions when such action is taken deliberately. It could be argued that my amendment is too lenient because, in effect, sanctions against non-payment of rent are taken away the moment a complaint is issued.

Amendment 46HA allows any money owing to a landlord to be deducted when returning rent to a tenant. Frequently a deposit is taken to cover damage by tenants over and above normal wear and tear. These deposits are regulated and held by a third party. It is only fair that where there is a reasonable claim for dilapidation, that is deducted from any rent due to be repaid to a tenant.

Finally, I would be grateful if my noble friend will say what is to happen when a landlord does not have the resources to make necessary repairs or improvements quite reasonably asked for by the tenant. In this context my noble friend might like to consider that where I live and rent out properties a full repair costs on average 16 times the annual rent, and a minor refurbishment five years’ rent, and that does not allow for any tax. That makes it difficult for many people to finance repairs. I am not trying to say that they should not make repairs but the Minister should consider what happens when people cannot pay.

[Baroness Bakewell of Hardington Mandeville (LD)]

My Lords, I support Amendment 46A, as well as Amendments 46B, 46C to 46H and Amendment 46J in the group. In supporting this amendment, I pay tribute to my colleague, Sarah Teather MP. On 28 November, she secured a Private Member’s Bill, the Tenancies (Reform) Bill, to deal with the problems caused by retaliatory evictions. Sadly, some Members in the other place that day were landlords and did not share the ethos of the Bill, and they talked it out. It is a great privilege for me to support the essence of the Bill in this amendment and to help to protect vulnerable tenants.

This amendment is not about penalising conscientious landlords; nor is it about protecting bad tenants who do not respect the property that they are renting. It is about protecting the rights of both groups and giving security to tenants who, when reporting a fault which affects their ability to live happily in their home, will not dread an eviction notice landing on the doormat as a result. It will give a clear signal to those landlords who currently ignore the state of their properties that this is no longer acceptable and that, if they engage in a regular programme of maintenance, they are likely to have a much better relationship with their tenants. Costly tenancy turnover will be lower and they will be less likely to face expensive repair bills for major incidents, such as collapsed ceilings due to persistent leaks, later.

I am sure that we can all give examples of where tenants have lived with poorly maintained and damp properties but have been too afraid to report this to the landlord. They may have seen other tenants who complained suffer eviction. Such evictions put pressure on local authorities, housing associations and others in the rented sector, and cause expensive, temporary accommodation solutions. These are a potential burden on the council tax payer and bring misery and uncertainty to families and children.

I am grateful to Citizens Advice and Shelter for their tireless efforts to bring the plight of those who are suffering from the injustice of retaliatory evictions to the notice of a wider audience. These and similar organisations have done all that they can to alleviate the suffering and uncertainty of those affected in our communities. It is often those on the lowest incomes and with the least options who are the most penalised in the housing market. They frequently have no choice but to turn to the private sector for accommodation.

It is long overdue that we seek to protect this section of our community and to give them some security, as well as decent homes to live in and in which to bring up their children. At the same time, we must protect those landlords who are assiduous in maintaining their properties. Without these landlords there would be an extreme shortage of properties to let around our cities and countryside. This amendment is all about establishing and maintaining a balance between the tenant and the landlord, and I am pleased to support it.