Debates between Baroness Bakewell of Hardington Mandeville and Lord Howard of Rising during the 2024 Parliament

Wed 29th Jan 2025

National Insurance Contributions (Secondary Class 1 Contributions) Bill

Debate between Baroness Bakewell of Hardington Mandeville and Lord Howard of Rising
Baroness Bakewell of Hardington Mandeville Portrait Baroness Bakewell of Hardington Mandeville (LD)
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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 Portrait Lord Howard of Rising (Con)
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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.