National Insurance Contributions (Secondary Class 1 Contributions) Bill

Baroness Neville-Rolfe Excerpts

Committee stage
Wednesday 29th January 2025 Grand Committee

Moved by

[Baroness Neville-Rolfe]

6: Clause 1, page 1, line 1, at end insert—
“(A1) In section 9(1A) of the Social Security Contributions and Benefits Act 1992, after paragraph (aa) insert—“(ab) if the employer is a specified employer under subsection (1B), the specified employer secondary percentage;”(A2) After section 9(1A) of that Act insert—“(1B) A “specified employer” means a business with an annual turnover of less than £1 million.(1C) For the purposes of this Act, the specified employer secondary percentage is 13.8%.””Member’s explanatory statement
This probing amendment would exempt the smallest businesses from the increase in national insurance contributions.

[Baroness Neville-Rolfe (Con)]

My Lords, I rise to move Amendment 6 in my name and to speak to my Amendments 23 and 48, all on small business—a subject dear to my heart, as noble Lords will recall from our debates on the Procurement Act in the last Parliament, mostly in this very Room.

Small business is at the entrepreneurial heart of the economy. We need a constant stream of start-ups for an economy that is dynamic. The amount of regulation on such businesses is already discouraging. My own findings are that the imposition of additional employer NICs is leading some businesses towards despair, with more closed shops on the high street and busy insolvency practitioners. Others are not setting up. Their customers are affected by the chill created by the Budget and the enormous NICs hit in particular, which has a multiplier effect on confidence.

I acknowledge that the increase in the employment allowance is helpful and I congratulate the Federation of Small Businesses on its work on this with the Treasury and DBT. However, more needs to be done to drive growth. I believe that easing the strain of NICs on SMEs could play an important part.

My Amendment 6 would exempt micro-businesses with an annual turnover of less than £1 million from this jobs tax. I have tabled this amendment because I want to understand whether the Government would consider an exemption that would have a relatively low impact on the revenue that the Treasury receives from this policy. To exempt such small businesses would not come at a great cost to the Treasury, yet it would have a big impact on the businesses that it would protect and on attitudes to the Government’s plans. The Financial Conduct Authority defines “small businesses” as companies with an annual turnover of less than £1 million—hence my choice for the threshold. I add that even many of these businesses may not survive recent tax rates. The Government will be failing in their promise, I fear, to be the most pro-business Government ever.

My proposal would be a modest step in the right direction and would reduce the negative knock-on effect of the NICs changes, in terms of jobs, shop and business closures and the higher prices that follow reduced competition. You see that effect, when a couple of coffee shops close, on the price of your latte.

I was interested to hear the Chancellor this morning saying that

“growth isn’t simply about lines on a graph. It’s about the pounds in people’s pockets. The vibrancy of our high streets”.

Chance would be a fine thing for the hard-working domestic SMEs that I am talking about.

Amendment 23 in my name seeks to increase the per-employer threshold at which employers begin paying national insurance on employees’ earnings, from £5,000 to £7,500—sort of halfway. We know that Clause 2 is the most punitive part of the Bill, hitting small businesses and social enterprises hardest. As the OBR acknowledges, this jobs tax will have the indirect effect of stifling wages, as employers look to offset these increased costs.

Amendment 48 would increase the employment allowance for small businesses to £20,000. The increase in the allowance is very welcome, as I have said, as is the lifting of the EU-based limit on eligibility—ironically, a new Brexit freedom, on which I congratulate the Minister. However, many small businesses have more than three or four people, or so, which means that the increase in the allowance will be less than the additional NICs charge. We should debate in Grand Committee, as we did on procurement, how to improve matters.

I would be delighted to be able to congratulate the Minister on an entrepreneurial step by increasing the allowance and removing the threat and hassle of NICs for more employers. I know that he shares my passion for easing barriers to growth and I see this as a new barrier that he could mitigate.

I very much look forward to hearing my noble friends Lady Noakes and Lord Londesborough and I am sorry that my noble friend Lord Ahmad of Wimbledon cannot be here this afternoon. We all feel the same way about the importance of cherishing the enterprise spirit and will welcome a constructive discussion on what more can be done to ease the pressure on small businesses. The Chancellor’s speech today and the long-term nature of most of her growth drivers strengthen the case for a concession on this now. I beg to move.

[Lord Londesborough (CB)]

My Lords, I shall speak to Amendments 22, 39 and 53 in my name in this group, to which the noble Baroness, Lady Kramer, and my noble friend Lady Neville-Rolfe have added their names. I shall also speak to Amendments 6 and 33, tabled by my noble friends Lady Neville-Rolfe and Lady Noakes respectively.

Rather than taking a sectoral approach, about which others spoke passionately last week, my three amendments focus on the size of businesses and organisations impacted by the measures in the Bill, specifically those categorised as small businesses, which means that they employ between 10 and 50 full-time staff. I should again declare my interests as set out in the register, as I advise and invest in a number of businesses of this size, predominantly start-ups and scale-ups. These are the companies that grow and create jobs at the fastest rate and, through their size and agility, seize the nettle of productivity. If I may mix my metaphors for a moment, these are the acorns that seek to become unicorns or, at the very least, sturdy oaks.

The Department for Business and Trade reports that there are some 220,000 businesses across the UK that employ between 10 and 50 staff—that is 4.3 million of the 28 million jobs in the private sector and they generate £780 billion in annual turnover. However, this group involves not just fast-growing early-stage start-ups but a huge swathe of family and local businesses spread across the country and, indeed, businesses that have been struggling to keep their heads above water in what have been five very difficult trading years.

While the Government have sought to protect the majority of our micro-businesses, those employing between one and nine staff, from rising NICs, they have left all other small businesses exposed to these sudden and dramatic increases. In terms of impact, the Government tell us that 250,000 employers will see their NICs decrease, 940,000 will see theirs increase, while about 800,000 employers will see no change. This has allowed the Government to claim that the majority of employers will see no increase. With respect, that is deeply misleading. The question that matters is what proportion of jobs will attract increased national insurance contributions. I ask the Minister that question. Can he confirm, if he does not have the numbers at hand, that in fact the number is close to 80%?

I turn to the financial impact of Clauses 1, 2 and 3 to small businesses. For businesses of 25 staff paying the national full-time median salary, which is put at £37,000 by the ONS, their NICs bill will rise from £90,000 to £110,000. That is an increase of more than 20%.

However, most small businesses, given their nature and stage of development, pay less than the median national average. For them, the increases get even steeper. For those employing 25 staff and paying an average salary of £25,000, as is common out in the regions, their NICs bill will rise by no less than 30%. For those employing 50 staff at that salary, they face an eye-watering 33% increase. As we know, the main culprit for those outsized increases is Clause 2: the brutal and, in my view, economically illiterate drop in the per-employee threshold from £9,100 to £5,000. Ironically, this hits the lowest-paid jobs the hardest. In short, it is a regressive tax.

Then we come to retail and hospitality, with thousands of outfits that rely on part-time shift workers. For those employing 20 part-timers, typically earning £300 per week, their NICs bill goes up by an extraordinary 70%. I will stop there with the examples but noble Lords, including the Minister, will be delighted to know that I have here all the spreadsheets to prove it; I will happily share them out later. In the interest of transparency, on the impact for 5 April, I strongly suggest that the Government have the honesty to publish these figures.

These increases are of course bad news for the working person, especially the 4 million of them who work in small businesses. They rather grate against Rachel Reeves’s statement this morning about kick-starting the economy. Let me turn to my Amendment 22, which seeks to address this in what I hope noble Lords will agree is a measured, proportionate way to help protect our small businesses. In short, the per-employee threshold would remain at £9,100 for those employing fewer than 25 staff, while those employing fewer than 50 but more than 25 staff would see their threshold reduced to £7,500. Somewhat reluctantly, I have left the £9,000 threshold for all businesses employing more than 50 staff.

By my calculations, the nominal cost to the Treasury of this key amendment would be less than £2 billion—that is, to support and sustain 4 million jobs and almost £800 billion in turnover. I humbly suggest that this amendment would more than pay for itself in economic growth and increased revenues to the Exchequer. Commencing Clause 2 without undertaking a full impact assessment on small businesses—addressed by Amendment 33 in the name of the noble Baroness, Lady Noakes, which I fully support—strikes me as reckless.

I turn now, much more briefly, to my Amendment 53, which addresses the increase in the employment allowance. Clause 3 is designed to soften the increase in NICs from Clauses 1 and 2. It offsets the costs but, having crunched the numbers, it does so only for those employing seven staff or fewer. My Amendment 53 would raise the employment allowance from £10,500 to £15,000 for all small businesses employing fewer than 25 staff. This would help around 200,000 businesses across the country. I estimate that the cost to the Treasury would be less than £1 billion. Again, I argue that such an amendment would more than pay for itself in the medium term.

I hope that the Minister will carefully consider the amendments in this group, given the severity of these increases to SMEs and the potential damage to both jobs and economic growth. I have spoken to Amendments 22, 39 and 53.

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[Lord Forsyth of Drumlean (Con)]

I completely agree with my noble friend. Actually, it is worse than manufacturing going abroad. Just think of this: where are the sorts of areas of business, in terms of distribution or marketing, where people are employed who are not particularly well paid but on whom there will be a big impact from this national insurance cost on the employers? They are in places like call centres. Suddenly you find that you get a huge additional bill for running your call centre, which you may be required to do as a matter of government regulation or for all kinds of reasons—it may not be directly related to your product. So what will you do? You will outsource it to India or some other country. The jobs will go, because it will be much cheaper. The quality may not be the same, but it might be the difference between surviving and not. So, as the noble Lord, Lord Eatwell, pointed out, this national insurance thing has to be seen in the round. Then add all the other things that are going up: the energy costs, which are going up—

[Baroness Neville-Rolfe (Con)]

That is 10 minutes.

[Lord Forsyth of Drumlean (Con)]

It may be 10 minutes; I will sit down and then I will get up and make my speech again, if the noble Baroness likes. It is advisory.

There are energy costs that people are faced with, the impact of increasing regulatory burdens and the fact that people are just giving up. The lack of an impact statement, which seems to be becoming a habit for this Government, is a major criticism. They have already got into difficulty due to not doing this. They have had to revise the proposals they put forward for non-doms because they suddenly discovered that the impact of their policy would actually reduce revenue, so they had to change it. Had they done a proper impact statement, they would never have made that mistake—and there are other examples.

So these amendments are important, and I hope the Minister will take these arguments on board and think again.

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[Baroness Lawlor (Con)]

My Lords, I come in just to endorse what my noble friend Lady Noakes said about small businesses and indeed to support these amendments generally. I will speak on my own set of amendments later on with respect to impact assessments.

I founded a small business. Yes, it was a not-for profit-business—Politeia, which is a think tank—but, in 1995, we went through the phase described so well by my noble friend Lord Forsyth of wondering how we would meet employer payroll at the end of every month. From a comfortable position now looking back, we are still not exactly in a rosy situation because, every time policy changes or there are external shocks such as Covid, we face more costs. It is difficult to see how any small business needing to make a profit can do so and expand.

In my case, as someone involved in running a small business, I would say that we have a done a lot of good. It is a not-for-profit charitably funded think tank, but we train graduates and even young people coming straight from school who are finding their place in the job market. We have always paid slightly over the minimum wage once they get on to the payroll, and they go on to do great things: they join the Civil Service; they join the public sector; or they get training contracts and continue working with us, because it helps them to pay the fees for the next phase. We will have to think about that model, because they are going to cost a great deal more. Some of the senior staff earn much more decent salaries than perhaps even the people who founded the organisation do, and we will have to rethink the senior and experienced team because of the enormous hit that we are taking. That is not to mention all the other costs in the Budget.

From the perspective of a very micro-business, this will have serious consequences. I speak as somebody still involved in running it and raising the money. Noble Lords will know that people’s spare money that goes to think tanks such as mine will cease and those people will have to cut their own jobs—that is where the funding comes from. I urge the Government to think again about the proposal from my noble friend Lady Noakes and all the other excellent proposals in this group of amendments.

[Baroness Neville-Rolfe (Con)]

My Lords, I thank all noble Lords who have contributed to this valuable debate, especially those such as my noble friend Lady Lawlor who have run small businesses. Having heard the concerns from noble Lords across the Committee and from across the sectors, I hope that the Minister will consider these amendments very seriously before we get to Report.

We know that this jobs tax will be bad for small businesses. The Government have not provided sufficient information in the light of all the calls from hard-pressed businesses, so more detailed information is necessary. SMEs are more vulnerable, as the noble Lord, Lord Sharkey, said. Even covenants are at risk, as we heard from my noble friend Lord Leigh. The noble Baroness, Lady Kramer, rightly talked about scale-ups being knocked back because of the problems that they are facing. I was particularly interested to hear from the noble Lord, Lord Londesborough, and to see his amendments. He had some very telling questions based on SMEs and on particular examples. I think that the Minister and the Treasury should properly examine some of his spreadsheets and, indeed, some of the other examples raised today, such as by my noble friend Lord Howard of Rising, who rightly talked about international competitiveness, and my noble friend Lord Blackwell, who made a telling comment about the lower-margin sectors, start-up and scale-up.

It was notable that, in her growth speech today, Rachel Reeves had little to say about small businesses and the difficulty that these NICs changes have placed on them. As my noble friend Lady Noakes said, we are imperilling their success—their survival, even, in some cases—and the scale-ups that we need for growth. I detected a good deal of support for her amendment, so I hope that the Minister will bear that in mind. As I have explained, the Chancellor’s speech strengthens the case for an exemption or a concession to help some or all of our smallest businesses to survive and to thrive. I very much hope that the Minister will be able to respond positively.

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

My Lords, I am grateful to all noble Lords for their contributions during this debate. I turn first to the amendments tabled by the noble Baroness, Lady Neville-Rolfe, and the noble Lord, Lord Altrincham, which seek to exempt from the employer national insurance rate rise employers with an annual turnover of less than £1 million, and the amendments by the noble Lord, Lord Londesborough, the noble Baronesses, Lady Neville-Rolfe and Lady Kramer, seeking to limit or remove the reduction in the secondary threshold by business size. Clearly, these amendments would have cost implications for this Bill, necessitating either higher borrowing, lower spending or alternative revenue-raising measures.

I agree very much with the noble Baroness, Lady Neville-Rolfe, and the noble Lord, Lord Sharkey, that small businesses are the heart of our economy. The Government are aware of the pressures on small businesses, which is why we are taking action as part of this Bill to protect the smallest businesses by increasing employment allowance from £5,000 to £10,500. This means that, next year, 865,000 employers will pay no national insurance at all. More than half of employers will see no change or will gain overall from this package, and employers will be able to employ up to four full-time workers on the national living wage and pay no employer national insurance.

The Government have also taken steps to strengthen small businesses’ ability to invest and grow. This includes freezing the small business multiplier, permanently reducing business rates for retail, hospitality and leisure properties from 2026-27 and publishing the Corporate Tax Roadmap to provide stability and certainty within the tax system for businesses across the economy.

I should also note, as my noble friend Lord Eatwell said, that creating new thresholds or rates based on the size of a business would introduce distortion and additional complexity into the tax system, and could disincentivise small businesses from growing by creating a cliff edge in the tax system.

I turn now to the amendment tabled by the noble Baroness, Lady Neville-Rolfe, and the noble Lord, Lord Altrincham, seeking to limit the reduction in the secondary threshold to £7,500 rather than the proposed £5,000. A smaller reduction in the secondary threshold, as is proposed by this amendment, would not raise the level of revenue required to fix the foundations and invest in our public services. It would mean higher borrowing, lower spending or alternative revenue-raising measures.

I now turn to the amendment tabled by the noble Baronesses, Lady Noakes and Lady Neville-Rolfe, and the noble Lords, Lord Ahmad of Wimbledon and Lord Howard of Rising, which would prevent commencement until an impact assessment is published for small businesses of various sizes. The revenue raised from the measures in this Bill will enable the Government to repair the public finances while protecting working people and rebuilding our public services, including the NHS. Delaying commencement of this Bill would put this vital revenue at risk.

As I have already noted in the previous session of this Committee and, as the noble Baroness, Lady Noakes, mentioned, an assessment of the policy has already been published by HMRC in a tax information and impact note. As the noble Lord, Lord Londesborough, said, that assessment set out that employers’ national insurance changes

“will impact around 1.2 million employers. Around 250,000 employers will see their Secondary Class 1 NICs liability decrease and around 940,000 will see it increase. Around 820,000 employers will see no change. Overall, more than half of businesses with NICs liabilities next year will either gain or will see no change in their secondary Class 1 NICs liabilities”.

I listened carefully to the specific examples given by the noble Lord, Lord Londesborough. He asked for some specific figures, which I am afraid I am told are not available because the liability is on employers, not employees. As such, the data is not collected in the format that the noble Lord asked for.

Further, the OBR’s Economic and Fiscal Outlook sets out the expected macroeconomic impact of the changes to employer national insurance contributions on employment, growth and inflation. The Government and the OBR have, therefore, already set out the impacts of the policy change. This approach is in line with previous changes to national insurance and previous changes to taxation, and the Government do not intend to provide any further impact assessments.

After the previous session of the Committee, I looked back at comparable tax measures over the past 14 years to check that I was correct in saying that the assessment that we are providing is in line with what was provided on those previous occasions. I found four such measures of an equivalent size: the health and social care levy; the increase in the corporation tax main rate to 25%; the income tax threshold freezes of the previous Government; and the increase in the VAT main rate to 20%. I looked at all those and I am absolutely satisfied that what we are providing on this occasion is, in fact, more information than was provided on any of those occasions. In fact, on the occasion of the increase in VAT to 20%, no impact assessment was published at all.

Having studied those, I am very confident that what we are now providing is absolutely consistent with what previous Governments have provided, in terms of impact assessments, on all previous such equivalent occasions. I do not know whether noble Lords opposite, when they were in government, objected to the impact assessments that were put out on tax measures, but I am very confident that these are absolutely in line with what was put out in the past. As a result, the Government have no intention to provide any further impact assessments.

[Baroness Neville-Rolfe (Con)]

On impact assessments, I think I am well known for my requesting them—I even voted against my own Government on one occasion —because they are very important and helpful. I do not think that the Minister has yet answered, although he may go on to do so, the point that my noble friend Lady Noakes made about the effect of adding in the minimum wage to the impact note that was produced. That would probably increase the figures, as she suggested; and cost benefit and transparency are very helpful. We have another amendment on this, and we will return to the charge, but I am very disappointed that there is no willingness to look at the specific examples from the noble Lord, Lord Londesborough, on the technicalities, which seem to merit some attention from the Government. I think that the Government must share our concern that we minimise the effect on small businesses as far as we can, which is why I am trying to be constructive in today’s Committee.

[Lord Livermore (Lab)]

I will simply restate my point to the noble Baroness: the approach that we are taking is absolutely in line with the approach taken to previous changes in national insurance and previous changes to taxation, and the Government do not intend to provide further impact assessments.

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[Lord Livermore (Lab)]

I disagree with the noble Lord. The previous Government’s health and social care levy is a very direct precedent.

[Baroness Neville-Rolfe (Con)]

I beg leave to withdraw the amendment.

Amendment 6 withdrawn.

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The costs for farmers have gone up steadily in recent years, year on year, for fuel and fertilisers and so on. Feed goes up regularly, but the price of the end product tends to go down. Anyone who has watched Jeremy Clarkson’s programme on farming will have seen a graphic illustration of the difficulties that farmers face. Farming is, as much as anything, a way of life. To add this burden is unfair. I urge the Minister to carry out an impact assessment to assess properly whether agricultural employees should be exempted from this increase.

[Baroness Neville-Rolfe (Con)]

My Lords, I speak to Amendment 50 in my name, which would increase the employment allowance for farms from £10,500 to £20,000 and help to ease the very real cash-flow problems that many farmers now face. I would like to understand both the cost to the Exchequer and the plans that the Government have to ease pressures on the farming industry. This is vital to increasing self-sufficiency in food in these troubling international times.

I speak with some knowledge of the Wiltshire countryside, where I was brought up and retain a small and partial interest, set out in the register, in a couple of fields, let to a neighbour, on what was our family farm. My father’s business sadly went into insolvency in the 1960s. The farm was sold and the stock auctioned off—a very difficult day. I fear it is something that we may see more of again. As the noble Baroness, Lady Bakewell, said, farming is not a career choice for the faint-hearted.

I am grateful to my noble friend Lord Howard of Rising for tabling Amendment 36, which I fully support. It is intended to ensure that the Government publish a full impact assessment of the effect of this Bill on farms with regard to both the NICs costs and, separately, any offset for the increased employment allowance. Given the difficulties that farmers are facing on inheritance tax, fertiliser tax and the post-CAP changes to support, this is the least that the Government should do.

The noble Baroness, Lady Bakewell, in her compelling assessment of the squeeze on farmers, comes at the issue from a slightly different angle and suggests a review of the impact of the policy change, which is also worth considering. However, we would have to wait six months, by which time decisions on NICs, IHT and the fertiliser tax might be irreversible.

It has been made abundantly clear by now that this Government do not understand the importance of Britain’s farmers. The 2024 Labour Party manifesto claimed:

“Labour recognises that food security is national security”,


yet, since entering into Government, they have demonstrated the opposite. The Autumn Budget included a multitude of measures that will hammer farmers. The changes to agricultural property relief and business property relief could affect 33.5% of all farm holdings in the UK, according to the Treasury’s own figures. The vast majority in terms of numbers are small, family-run farms and, as we have discussed elsewhere, the Government need to think again about the right IHT thresholds.

The Government have also introduced carbon pricing on imported fertilisers through the UK carbon border adjustment mechanism, which will increase the cost of fertiliser that farms depend on to ensure adequate crop yields—up from approximately £25 a tonne to £75 a tonne. They have axed the rural services delivery grant introduced by the previous Government, meaning that rural councils will have less money to tackle the issues facing farms and rural communities. Given the already exorbitant costs facing farms, these measures could lead many to ruin. That goes back to my own experience in the 1960s and the excellent points made in the debate led by my noble friend Lord Leicester in December.

Above all, the proposals are putting a chill on rural communities, which are asking themselves why they elected so many Labour MPs and are writing to them, or getting on their tractors, to explore their discontent.

[Lord Livermore (Lab)]

My Lords, I am grateful to all noble Lords who have contributed to this debate. I will turn first to the amendments tabled by the noble Lord, Lord Howard of Rising, and the noble Baronesses, Lady Bakewell of Hardington Mandeville and Lady Kramer, which require impact assessments of this Bill on farms.

The Government, of course, recognise and greatly value the important role played by the farming sector. We carefully consider the impact of all policies, including the changes to employer national insurance. Indeed, as we have previously debated, an assessment of the policy has already been published by HMRC in the tax information and impact note, including impacts on the Exchequer, the economy, individuals, households, families, equalities, businesses including civil society organisations, and details of monitoring and evaluation. Further, the OBR’s Economic and Fiscal Outlook sets out the expected macroeconomic impact of the changes to employer national insurance contributions on employment, growth and inflation. The Government have, therefore, already set out the impacts of this policy change. This approach is in line with previous changes to national insurance and previous changes for taxation, and the Government do not intend to publish further impact assessments.

I now turn to the amendments tabled by the noble Baroness, Lady Bakewell of Hardington Mandeville and Lady Kramer, seeking to exempt the salaries of farmers from the increase in employer national insurance, and the amendments tabled by the noble Baroness, Lady Neville-Rolfe, and the noble Lord, Lord Altrincham, seeking to increase the employment allowance for persons employed on farms. This amendment would reduce the revenue raised from this Bill and require either higher borrowing, lower spending or alternative revenue-raising measures. I also note that creating new thresholds or rates based on the sector of a business would introduce distortion and additional complexity into the tax system.

Despite the difficult fiscal situation, the farming and countryside programme budget has been protected at £5 billion across the across the next two years. This includes the largest ever proportion of the Budget directed at sustainable food production and nature recovery in our country’s history. This will accelerate the transition to a more resilient and sustainable farming sector, support investment in farm businesses and boost Britain’s food security. The Secretary of State for Defra has also set out the Government’s long-term vision to make farming more profitable. This includes reforms such as using the Government’s purchasing power to buy British food, planning reforms to speed up the delivery of farm buildings and other infrastructure that support food production, and work to ensure supply chain fairness.

For the reasons that I have set out, I respectfully ask noble Lords to withdraw or not move their amendments.

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Moved by

[Baroness Neville-Rolfe]

13: Clause 1, page 1, line 7, at end insert “or on the day after an impact assessment is published assessing the impact of the provisions in this section on jobs, wages, inflation and growth, whichever is later”
Member’s explanatory statement
This amendment would prevent commencement of this section until a full impact assessment is published, noting the impact note of this policy that was published on 13 November.

[Baroness Neville-Rolfe (Con)]

My Lords, I start by thanking the Minister for his clarification on the full availability of the employment allowance in respect of charities; he agreed to look into this on day 1 of Committee. The query also related to GPs and dentists, where they were mainly involved in public work; clearly, clarity on those would be helpful too.

In moving Amendment 13, I am particularly grateful for the support of my noble friends Lord Altrincham and Lady Lawlor. My amendment would require the Government to publish comprehensive impact assessments and reviews of the impact of the planned jobs tax. This is the Budget measure with much the most impact on business and the private sector. We know just how burdensome it is from the screams of business and charities. It is vital that the Government calculate and share the impact on jobs, wages, inflation and, above all, growth—the Government’s stated prime mission.

There are established procedures for impact assessments on Bills. Despite the Minister’s resistance, I believe that it is a dereliction of duty not to have provided fuller details of the Bill’s various impacts. When we debated the Bill at Second Reading, my noble friend Lady Sater, who has just left, asked the Government about plans to publish a full impact assessment. In response, the Minister said:

“The tax information and impact note was published on 13 November, alongside the legislation when it was introduced”.—[Official Report, 6/1/25; col. 602.]


I have to say, although it is now available to the Grand Committee, the Printed Paper Office had to do quite a lot of online research after Second Reading to find me a copy. Curiously, it did not seem to have been delivered to it in the normal Bill bundle.

I can understand why there was not a huge rush to make it available. I am afraid that it is a very limited document, to say the least. The note includes no detailed assessment of the impact of the national insurance charge on a number of very important areas—not even a split into three between the effect of the increase to 15%, the new threshold of £5,000 and the revenue cost of the rise in the employment allowance. There is no information on the bureaucratic costs in respect of new personnel for whom NICs will be payable. We must have more detail from the Government before this Bill is considered on Report.

I note that, in response to intense questioning from the Opposition, in a parliamentary reply the Government split the £23.7 billion cost of NICs in 2025-26 into £11.1 billion related to the rise to 15% and £17.2 billion from lowering the threshold to £5,000. This demonstrates that the biggest hit in the Budget relates to the lower paid and part-timers, groups they feign to care a lot about. That is exactly the concern of many of us, including the charities that were the focus of the last group. There is no figure given for the rise in the employment allowance, but I calculate from the available data that it will be £4.6 billion in the first year. Perhaps the Minister could confirm that, or correct me. Could he also put on record the three-way split for the five years addressed in the impact note—in a letter to the Committee, if need be?

My Amendments 13 and 26 call for an impact assessment of the Bill’s impact on jobs, wages and growth. My Amendments 62, 63 and 64 call for a separate review of the impact of this legislation on employment, as well as on jobs, wages and inflation, and another on economic growth. While the Government are leaving us in the dark on the detailed effects of their jobs tax, the Office for Budget Responsibility has said that the national insurance changes alone will reduce labour supply by 0.2% and add 0.2 percentage points to inflation by 2029-30. Does the Minister believe that this assessment is accurate, particularly in the light of subsequent developments and the extraordinarily negative response to the NICs changes across the country? If the Government do not accept the OBR’s figures, can the Minister tell the Committee what his own figures say about the specific impact on jobs and inflation?

At Second Reading, the Minister was also questioned about the impact on businesses. Rather than giving us a detailed answer, we heard the same line from the department that 940,000 employers will pay more in NICs contributions through the jobs tax. If the Committee is to make progress on the Bill, it would be helpful to know exactly which sectors the Treasury expects to be hit hardest and what proportion of employers in those sectors are expected to see their liabilities increase. That is what Amendment 61 requires.

The Government owe it to Parliament and employers and employees in different sectors to explain much more clearly what the effect of the jobs tax will be. Where will it bite, who will it bite, and which sectors will be worst affected? It is a long list—some have already been discussed today—but, looking forward, we are interested in GPs, dentists, social care providers, hospices, small businesses, early years care providers, universities, charities, farms, retail and hospitality. There may be others, but the NICs changes are a blunt instrument, and we need a review clause of the kind that we have seen in other Bills, because of their scale, importance and bluntness. I especially look forward to hearing from my noble friend Lady Lawlor on the employment aspects.

Finally, I draw the Committee’s attention to the Government’s own Guide to Making Legislation which states:

“The final impact assessment must be made available alongside bills published in draft for pre-legislative scrutiny or introduced to Parliament”.


I know that the Treasury has its own rules and does not like to be held to account on finance matters. However, given the enormous effect that the Bill will have on so many businesses, it seems inappropriate that the Government have not published a full assessment in this case, in the same way that they do with other Bills. The decision not to publish an impact assessment is hardly in line with the commitment made by the Leader of the House of Commons in a Written Answer of 17 January. This was a refreshing approach by the new Government, overtaking the practice of the previous Government. In that Answer, she wrote:

“The Government is committed to ensuring Parliament has the information it needs to hold the Government to account and to understand the impact of legislation”.


Transparency is the route to better government, and it is a pity that the full rules for impact assessment on Bills, with an independent Regulatory Policy Committee review, do not apply to the Treasury. I beg to move and look forward to other contributions.

[Baroness Lawlor (Con)]

My Lords, it is a great pleasure to follow my noble friend Lady Neville-Rolfe, and I support her amendment. My amendments in this group are Amendment 15 to Clause 1, on the increase in the rate of secondary class 1 contributions; Amendment 37 to Clause 2, on the lowering of the threshold for secondary class 1 contributions; and Amendment 57, on increasing employment allowances and removing the £100,000 cap. They are aimed at ensuring that an adequate impact assessment is made available to both Houses of Parliament for each of the proposed changes before the Act comes into force and after it has been in operation.

--- Later in debate ---

[Baroness Kramer (LD)]

My Lords, I shall be extremely brief. It must be galling for the Minister to sit here and be lectured by the Conservative Benches because he and I so often tried to obtain information and were consistently denied it. The noble Baroness, Lady Noakes, asked why there was not a greater outcry. Everybody just got so used to being denied information.

I am sure that the Minister will also be able to cite many economic crises when information was not provided—I have to say, the silence on the Conservative Benches in not calling out for that information was very loud, if I can put it that way. I am sure that, if the Conservatives were back in government again, we would get the same absence of transparency and limitations on information. There are perhaps two honourable exceptions—the noble Baronesses, Lady Noakes and Lady Neville-Rolfe—who stood out against their party when every other voice was one that co-operated in that silence.

That silence was part of the reason why there was so much mistrust of the Conservative Government in the end; it was part of their undermining. As the Minister and his Government start to look at reform, which they are looking at more generally—particularly in dealing with the Civil Service—looking for opportunities for transparency would be a really positive move. With information, we stand on more secure ground. Will he consider that? I have asked him that before.

It is realistic to understand that we are unlikely to get impact assessments ahead of the actions that the Government contemplate doing in the next few weeks, or just in the next couple of months, but post reviews are at least a place to begin. They shed light, and they help both the Government and Parliament to understand where things have been effective and where they have not. If the Minister feels that he cannot accept these kinds of requests for immediate impact assessments, will he consider seriously the various requests made in other groupings for post-facto analysis and review?

[Baroness Neville-Rolfe (Con)]

My Lords, I shall just say this briefly: we need more transparency on such a major policy change, but we are not getting it. There is a large negative impact on business and charities, which is—I agree with my noble friend Lady Noakes, a fellow-in-crime in asking for impact assessments—unprecedented. As my noble friend Lord Blackwell said, we are seeing a shift in jobs from the private sector to the public sector, which we fear is bad for jobs, productivity and growth. That is why we need to find a way of getting better assessment and having a process for review.

[Lord Livermore (Lab)]

I am grateful to all noble Lords who have contributed to this debate. The noble Baroness, Lady Neville-Rolfe, and the noble Lords, Lord Altrincham and Lord Londesborough, have tabled amendments that seek to delay the commencement of this Act until a further impact assessment is conducted on the economy. The noble Baroness, Lady Lawlor, has tabled an amendment that would delay commencement until a report is laid detailing the impacts on businesses of different sizes and on employment and wages.

As I have said previously, the revenue raised from the measures in this Bill will enable the Government to repair the public finances while protecting working people and rebuilding our public services, including the NHS. Delaying commencement of this Bill would put this vital revenue at risk and would require either more borrowing, lower spending or alternative revenue-raising measures. That is not the Government’s intention.

The Government do not believe that there is a need, as set out in these amendments, for further impact assessments on different sectors and economic indicators. As we have debated in previous groups today, as is the case with all tax policies, the Government have already published an assessment of the policy in the tax information and impact note. This includes impacts on the Exchequer; the economy; individuals; households and families; equalities; and businesses, including civil society organisations—as well as details on monitoring and evaluation. The tax information and impact note clearly sets out that around 250,000 employers will see their secondary class 1 national insurance contributions liability decrease, while around 940,000 will see it increase and around 820,000 employers will see no change.

The noble Baronesses, Lady Neville-Rolfe and Lady Lawlor, asked for specific additional detail. The noble Baroness, Lady Neville-Rolfe, asked in particular for a breakdown of the three lines of each of the three measures. My honourable friend the Exchequer Secretary to the Treasury has provided that information via various Written Answers. On 29 November, he published an estimate of the cost of the increase to the employment allowance at £3.6 billion. On 23 January, he published via a parliamentary Question the estimated revenue from increasing the rate at £12.4 billion and from reducing the secondary threshold at £18.6 billion. Beyond that, the Government have set out the impact analysis of this Bill that they intend to set out, in line with previous changes to taxation, and they do not intend to publish additional data or assessments.

[Baroness Neville-Rolfe (Con)]

It would be helpful if he could write to clarify these figures. There have been figures made available, but they have not been made available to the Committee. They were made available in the other place in answer to some questions. The least he could do is write to the Committee with what figures there are, explaining how the splits work and giving that helpful figure on the employment allowance.

[Lord Livermore (Lab)]

The noble Baroness says that it is the least that I can do; I have actually just read out the figures to the Committee. I think that is providing the information that she asked for. If she did not hear it, I am more than happy to set it out in a letter to her so that she can read it. As I say, they have been published in Written Answers and I have just read them out to the Committee, so I am not sure that her phrase “the least I can do” is appropriate in this instance.

As the noble Baroness, Lady Neville-Rolfe, also said, the OBR’s economic and fiscal outlook already sets out the expected macroeconomic impact of the changes to employer national insurance contributions on employment, growth and inflation. The Government and the OBR have therefore already set out the impacts of this policy change. The information provided is in line with other tax changes, and the Government do not intend to publish further impact assessments. Given the points that I have made, I respectfully ask noble Lords to withdraw or not to press their amendments.

[Baroness Neville-Rolfe (Con)]

I beg leave to withdraw my amendment.

Amendment 13 withdrawn.

--- Later in debate ---

[Baroness Neville-Rolfe (Con)]

My Lords, I also support Amendments 14 and 27, tabled so movingly by my noble friend Lady Monckton of Dallington Forest, and Amendment 67, spoken to by the right reverend Prelate the Bishop of Southwark, with additional and disturbing evidence on this vital issue. I am sorry that my noble friend, Lady Barran, who leads for the Opposition on education, is not able to be here. She is detained elsewhere. But I know she is concerned, as one would expect, about the thousands of SEND children who might be left without transport. The amendments concern transport providers for children with special educational needs and disabilities. The providers play a pivotal role in ensuring that children with special educational needs and disabilities can access education and other vital services.

A way must be found in the Bill or elsewhere to deal with the devastating impact on those transporting such children. Most of those drivers, as we have heard, work only 3.5 hours a day, according to the SEND group of the Licensed Private Hire Car Association. They will be caught by the lower NICs threshold, which we have been discussing in other amendments.

The potential impact is not a hypothetical concern; it is another good example of the perverse effects that we are seeing. Mencap, a charity that supports such individuals and families with these disabilities, has shown that the rise in national insurance contributions could force it to close at least 60 of its essential services. Those include running residential services for people with learning disabilities, offering advice on issues such as education and employment, as well as offering support for carers, a very important matter. This charity is facing an additional £5.3 million in annual costs due to the effects of the Budget.

I ask the Minister to look into the various points that have been made today, to undertake a proper assessment of the impact and cost to the sector, and to come forward with amendments or other concessions to ensure that transport providers are not put in a position where they can no longer meet the needs of these vulnerable children—that would be wrong.

Inheritance Tax, National Insurance and VAT

Baroness Neville-Rolfe Excerpts

Monday 27th January 2025 Lords Chamber

[Baroness Neville-Rolfe (Con)]

My Lords, I hope that last autumn’s Budget has been a useful learning experience for the Government. Today’s debate has been about regional impact, especially in Northern Ireland, and I agree with almost everything that has been said about its devastating impact. The CBI has said today that pessimism is widespread across the private sector and that firms expect another significant fall in activity over the next three months.

The truth is that labour-intensive sectors such as retail and hospitality are suffering a triple whammy throughout the country, brought about first, by the changes in NICS; secondly, by the rise in the national minimum wage, especially for the young; and thirdly, by the costly and counterproductive new employment regulations pioneered by Angela Rayner and her union friends. As the noble Lord, Lord Morrow, said, Sainsbury’s announced last Thursday plans to cut 3,000 jobs— a bid to save money ahead of a £140 million leap in costs resulting from the Budget. Confidence has plummeted everywhere. Two of my favourite Wiltshire shops, in Salisbury and Tisbury, are among many shops and pubs that are now closing their doors. In light of these unfortunate events, can the Minister confirm whether the Government value these industries? If so, what will they do to help them across the UK?

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

My Lords, I begin by congratulating the noble Lord, Lord Morrow, on securing this debate and on his opening speech. I am grateful to all noble Lords for their contributions this evening. Due to the popularity of this debate, I know that noble Lords have been restricted to very short contributions. Fortunately, we have had previous opportunities to debate the measures covered by the Question during the Budget debate and the recent Conservative Party debate on agricultural property relief. We will of course have further such opportunities to discuss these important issues during the passage of the National Insurance Contributions (Secondary Class 1 Contributions) Bill and the Finance Bill. As I address the three measures covered by the Question this evening, I assure noble Lords that I have listened carefully to all the points made and that I understand and respect the concerns of all noble Lords.

I begin by considering the context of the decisions that we took on tax at the Autumn Budget, the reasons they were taken and the economic challenge that confronted this Government upon taking office. The Government inherited three distinct crises: a crisis in the public finances, as the noble Baroness, Lady Kramer, said; a crisis in the public services; and a crisis in the cost of living. As the Chancellor has said, this was therefore a once-in-a-generation Budget, on a scale commensurate with the challenging inheritance that we faced.

The Government inherited a £22 billion black hole in the public finances, consisting of a series of commitments made by the previous Government which they did not fund and did not disclose. Public services were also at breaking point, with NHS waiting lists at record levels, children in portakabins as school roofs crumbled, and rivers filled with polluted waste. Working people had suffered from the worst cost of living crisis in a generation, with inflation having reached 11%, coupled with a decision by the previous Government to freeze income tax thresholds, which cost working people some £30 billion.

Faced with this reality, any responsible Government would need to act. That is why this Government took action to wipe the slate clean, repair the public services, protect working people and invest in Britain. We did so in the fairest way possible, by keeping our promises to working people not to increase their national insurance, VAT or income tax. That involved taking some very difficult other decisions on spending, welfare and tax.

One such difficult decision we took in the Budget was the reforms to agricultural property relief, the first measure mentioned in today’s Question and addressed by the noble Lords, Lord Morrow, Lord Thurlow and Lord McCrea, the noble Duke, the Duke of Somerset, my noble friend Lord Davies of Brixton, the noble Baroness, Lady McIntosh of Pickering, and the right reverend Prelate the Bishop of Lincoln. Under the previous system, the 100% relief on business and agricultural assets, introduced in 1992, was heavily skewed towards the wealthiest landowners and business owners. According to the latest data from HMRC, 40% of agricultural property relief is claimed by just 7% of estates making claims. That amounts to just 117 estates claiming £219 million of relief. It is neither fair nor sustainable to maintain such a large tax break for such a small number of claimants given the wider pressures on the public finances.

A secondary issue relates to the purchase of farmland. The reality today is that buying agricultural land is now one of the most well-known ways to shield wealth from inheritance tax. This has artificially inflated the price of farmland, locking younger farmers out of the market. That is why the Government have changed how we target agricultural property relief and business property relief from April 2026, in a way that maintains significant tax relief for estates while supporting the public finances in a fair way. Under the new system, individuals will still benefit from 100% relief for the first £1 million of combined business and agricultural assets. Above this amount, there will be 50% relief. That means inheritance tax will be paid at a reduced effective rate up to 20%, rather than the standard 40%. All estates making claims for these reliefs will continue to receive generous support, at a cost of £1.1 billion to the Exchequer in the first year.

The reliefs also sit on top of other spousal exemption and nil-rate bands which exist. Therefore, a couple with agricultural or business assets will typically be able to pass on up to £3 million of assets without any inheritance tax having to be paid. This change will apply in the same way across all nations and regions, and we expect that up to 520 estates across the UK will be affected in 2026-27. The Government are also investing £5 billion over this year and next to support farming and food security.

The second measure in today’s Question is the increase in employer national insurance contributions, raised by the noble Lords, Lord Morrow, Lord Morse, Lord Browne and Lord Elliott. To protect small businesses, the Government have also more than doubled the current employment allowance from £5,000 to £10,500 and expanded its eligibility. Of course, I understand that some of these measures mean asking businesses to contribute more, and we have consistently acknowledged that the impacts will be felt beyond business too. These are difficult decisions, and not ones we wanted to take. But, taken together, the measures mean that more than half of businesses with national insurance liabilities will either see no change or see their liabilities decrease; 865,000 employers will now not pay any national insurance at all, and over 1 million will pay the same or less than they did before.

These changes will apply in the same way across all nations of the UK. The Government are also setting aside support for the public sector across the UK of £5.1 billion by 2029-30. This support will be allocated to departments, and we have already confirmed that the devolved Governments will receive a share of the £4.7 billion the UK Government have set aside. As the noble Baroness, Lady Kramer, said, the devolved Governments will receive this funding through the Barnett formula in the usual way. Exact allocations will be confirmed in due course; however, this is the normal operation of the funding arrangements between the UK Government and the devolved Governments.

The Government do not publish data covering detailed regional or national impacts. The location of the headquarters of a business and the location of its economic activity are not necessarily the same and are often split across multiple locations. However, the Government have published a tax impact and information note, which sets out a comprehensive UK-wide analysis of this tax measure.

The final measure covered in the Question is the introduction of VAT on private school fees, raised by the noble Lords, Lord Morrow, Lord Kempsell, Lord Weir and Lord McCrea. Nine out of 10 children in this country attend state schools; however, too many children do not get the opportunities they deserve because too often these schools are held back by a lack of investment. That is why the Government introduced VAT on private school fees from 1 January this year: to secure the additional funding needed to improve educational outcomes across the UK, in all nations and regions. Together with our changes to business rates, this will raise around £1.8 billion a year by 2029-30 and just under £500 million in this year alone.

VAT is a reserved tax, and our objective is to maintain consistent VAT treatment of different types of schools across the UK. Therefore, all schools across the nations and regions that meet the definition of a private school, as set out in the Finance Bill, are within scope of this policy. Education is of course a devolved matter, and the circumstances of individual schools will vary across the UK.

Business rates are also fully devolved. Scotland has already enacted legislation removing charitable rate relief from private schools, and the Welsh Government have published a consultation. The Government do not expect that private schools will pass on the full amount of VAT in fees, and the increase in fees in recent years suggests that private school fees are highly demand inelastic.

I can also assure noble Lords that our changes will not impact pupils with the most acute special educational needs, where these can be met only in private schools. Currently, local authorities fund pupils’ places in private schools where their needs can be met only in a private school. In these cases, local authorities will be able to reclaim the VAT from the Government. As the noble Lord, Lord Kempsell, said, we have also chosen to support our diplomatic staff and serving military personnel, who are required to be mobile and are often posted overseas. That is why we have increased funding for the continuity of education allowance, which provides support for school fees to serving diplomatic and military personnel so that their children’s education is not disrupted.

To support children in the performing arts, the Government have also adjusted the music and dance scheme bursary contribution for families with income below £45,000, ensuring that the total parental fee contributions for these families remain unchanged.

This debate has addressed the difficult decisions this Government needed to take, but in doing so, we should not lose sight of the fact, as my noble friend Lord Davies of Brixton said, that public services right across the UK will benefit significantly from and only as a result of those decisions. Overall, the devolved Governments received the largest spending settlement in real terms of any settlement since devolution. Each has seen their budget increase in real terms in 2025-26; and each will receive at least 20% more per person than equivalent government spending in the rest of the UK, a figure which rises to over 24% for the Northern Ireland Executive when including the funding received as part of the 2024 restoration package.

Across Northern Ireland, Scotland and Wales, this translates to £16 billion extra to invest in schools, housing, health and social care, and other public services. People in businesses in the devolved nations will also benefit from our UK-wide tax decisions taken in the Budget. For example, the uplift to the national living wage to £12.21 per hour will benefit an estimated 270,000 workers across Scotland, Wales and Northern Ireland.

The Government will continue to work in partnership with devolved Governments and English regions to drive economic growth and support working people. That is why we have established the Council of the Nations and Regions and the council of mayors. We are also working with local areas in England on the upcoming English devolution White Paper as they develop local growth plans, and we have put “place” at the heart of our upcoming modern industrial strategy.

This Government had to take difficult decisions in the Budget, but they were the right decisions to restore stability, protect working people and invest in Britain across all our nations and regions. As we take forward our strategy of stability, investment and reform, the Government remain committed to delivering a shared economic future for the whole of the United Kingdom, underpinned by higher and more sustainable economic growth. I look forward to continuing to work with all noble Lords who have spoken in this debate on this vital agenda.

[Baroness Neville-Rolfe (Con)]

Will the Minister say a little bit more about retail and hospitality, which have been particularly impacted by the NICs changes? I am interested in understanding his attitude to that.

[Lord Livermore (Lab)]

We had to take difficult decisions in the Budget. In multiple debates on that issue, the noble Baroness has never said whether she wants higher borrowing, higher taxes or lower spending as a result of the decisions that she is putting forward.

Covid-19 Inquiry

Baroness Neville-Rolfe Excerpts

Thursday 23rd January 2025 Lords Chamber

[Baroness Neville-Rolfe (Con)]

I thank the noble Baroness for her kind words and I am very glad that the Government are building on the work we did on resilience. I am particularly delighted by the plans for an emergency dummy run and for the extra testing of alerts. Those practical measures are really important.

The noble Baroness also mentioned data sharing. We discussed that yesterday at the Statistics Assembly, which was recommended by Professor Denise Lievesley, as she may know. It comes through strongly that we still have a lot more to do on data sharing.

Can the noble Baroness tell us how much the inquiry has cost? Obviously, there are two parts to that. There is the large cost of the team of the noble and learned Baroness, Lady Hallett, and all her lawyers. There is also the cost of the civil servants engaged, and of the supporting witnesses. I am very interested to know what we have spent so far and the estimate of the cost for the future, at this difficult time when we are trying to bear down on expenditure everywhere. I see the noble Lord, Lord Livermore, in his seat.

[Baroness Twycross (Lab)]

The inquiry regularly publishes details of the money that has been spent. The figures I have relate to the inquiry costs. The noble Baroness is correct that the organisations involved, particularly those with core participant status, are also likely to be putting in additional resources. I will try to establish whether we have an estimate of that.

From its establishment up to September 2024, the inquiry spent £124.2 million. As I noted in my initial response to these questions, the inquiry chair is delivering on the terms of reference agreed with the previous Government. She is under a statutory obligation to avoid unnecessary costs in the inquiry’s work and has been clear that she intends to complete her work as quickly and efficiently as possible. The Government also regularly publish their costs in relation to the inquiry response, and I will write to the noble Baroness on that.

Today’s debate has shown how it is hard to constrain costs when you have demands for the inquiry to look at every single aspect. This was a whole-society crisis—a whole-society emergency. It touched every aspect of society. That is not to downplay the cost of the inquiry. I note that the House of Lords report that was referenced earlier highlighted costs as one of its concerns.

Economic Growth

Baroness Neville-Rolfe Excerpts

Thursday 23rd January 2025 Lords Chamber

[Baroness Neville-Rolfe (Con)]

My Lords, creating the right conditions to promote growth is a critical challenge that we must address. I am grateful to my noble friend Lord Farmer for initiating this debate so thoughtfully, and for bringing in social and cultural factors that are important to growth as well.

Thanks to the last Conservative Government, this Government inherited the fastest-growing economy in the G7. They pledged that their first priority would be to increase economic growth. However, growth has since evaporated, and that follows the recorded 0.7% growth in the summer. During the UK investment summit, the Prime Minister said:

“You have to grow your business”.


Then two weeks later, in the Budget, the Chancellor increased national insurance contributions by a whopping £23.7 billion, including a regressive lowering of the threshold at which employer national insurance is paid.

This was widely seen as an attack on business—business is an easy target—and a jobs tax, so not conducive to growth. This week, it was announced that the early estimate of the number of payrolled employees for December 2024 decreased by 47,000 on the month. Then today, Sainsbury’s has sadly announced 3,000 job losses. These may be the harbinger of worse as businesses and social enterprises reduce hiring and increase prices. The debt figure for December was a shock too, especially as every pound of interest paid on debt comes off public services or investment.

I agree with my noble friend Lord Udny-Lister that this has been devastating, because doom and gloom have become the order of the day, and that is a mistake because it dampens the animal spirits that are needed for enterprise and growth. Economic success is heavily influenced by morale. Yet, for six months, the Prime Minister and the Chancellor barely said a positive word about the economy or the fine prospects we believe we have in our country—the optimism that my noble friend Lord Horam called for. Instead, during the second half of the year, we saw the impact on consumer confidence, and the CBI indicated that manufacturers expected their output to fall during the beginning of 2025.

Like the noble Lord, Lord Fox, I like to look forward. Like him, I will try to tackle four areas but with fewer questions, which I hope the Minister will feel able to answer either today or in writing. First, on education and skills, the intrinsic link between improved education and skills and economic growth is widely accepted. Of course, this is a long-term endeavour. The Conservative Government devoted great effort to improving education, and this was reflected in amazing improvements in our PISA scores. However, the new Children’s Wellbeing and Schools Bill will undermine academies and free schools, which have been at the heart of this revolution in standards. The proposed restrictions on academies’ pay, the exclusion of veterans and others bringing their strengths to teaching from other careers and the imposition of a Labour curriculum risk reversing those very improvements. Can the Minister explain how academies will continue to attract the best teachers? The IFS has warned that they may struggle. Is consideration being given to the impact of the new policies on school standards?

Investment in skills, apprenticeships and education is key to promoting both productivity and economic growth, and I am particularly glad that the Government have stated their intention of doing much better on vocational education. My time at Tesco convinced me of this and that there is a snobbery about universities that has held us back in this sector.

Secondly, on productivity, in the long term, the overall rate of growth in productivity is reflected in the rate of growth in the economy. The important metric is GDP per capita, as my noble friend Lord Moynihan of Chelsea explained. Concerningly, in the third quarter of 2024, productivity was estimated to be 1.8% lower than in the previous year—the noble Baroness, Lady Moyo, told us that. The problem is partly cultural, and I believe that working from home and poor management in the public sector have contributed to this. In our Budget debate, I called for an internal productivity and growth assessment, modelled on the equality assessment, of every proposal for a new policy, an SI or a Bill. The Minister agreed to look at this and I wonder what conclusion he has reached. It feels as if its time has come and that it could be useful to the Treasury in prioritising the pro-growth policies that we need.

Thirdly, on regulation, possibly the most powerful contribution to productivity growth is by regulatory reform rather than just by trying to flex taxes. My noble friend Lord Agnew of Oulton made a number of excellent suggestions on trade facilitation, involving things such as trusted trader schemes and getting the single trade window, which I was sorry to hear had got lost, back on track. My noble friend Lord Frost talked about the intellectual case for regulatory reform.

At the UK investment summit, the Prime Minister said he was

“determined to do everything in my power to galvanise growth”,

so I found it particularly baffling that the election manifesto promised to ramp up so many regulations, such as in football and in employment. Then, after figures indicated that the economy had flatlined, the Prime Minister wrote to regulators asking them to go for growth. That is obviously an indication that he fears that the regulators are hampering growth, and I think he is right. Unfortunately, that is a bit like putting the fox in charge of the hen coop. Those bodies need external challenge to tackle what my noble friend Lord Farmer called the “sticky web of regulation” and its negative effect on wealth creation. It is hard to deliver, as my noble friend Lord Hannan of Kingsclere said.

As the chair of the CBI, Rupert Soames, explained, government policies, particularly new employment regulations, will bruise businesses. The Government’s own impact assessment on its workers’ rights package estimated that it will cost companies £5 billion a year, and of course that comes on top of the NICs increases, the minimum wage rises and so on, which we have discussed at length—my noble friend Lord Petitgas is right that they were very disappointed by that. There is a real need to restore trust in business so that it can play its part in growth. What assessment have the Government made of the impact on economic growth of all the increased regulations that are coming forward? Does the Minister agree that keeping a tracker as part of his work on growth could be valuable and help us to prioritise the right areas?

My fourth and final area is infrastructure. A number of comments have been made on how we can improve investment, venture capital and so on, but I am going to focus on delivering major national infrastructure projects, because they are essential to the Government’s mission to kick-start growth. Unfortunately, the cost of building delays to projects exceeds those of our international peers. The FT has described modern UK infrastructure projects as containing a bewildering number of contractors, with multiple layers passing down cash and responsibilities protected by complicated legal agreements, and then you add environmental regulations. Spending £100 million on a bat tunnel along the edge of HS2 was ridiculous.

Analysis from BCG of four major projects—Crossrail, the Arundel A27 bypass, Hinkley Point and Royal Liverpool Hospital—has identified several themes that are driving costs and delays. The Government have announced that they are looking at judicial review, and I was glad to hear from the noble Baroness, Lady Lane-Fox, about the BCC list of things that are ready to go. Poorly defined objectives overcomplicate projects, and the UK fails to look at key projects within a wider portfolio setting, identifying the most efficient path.

The Government have also failed to prioritise investment in critical energy infrastructure despite the fact that British companies pay the highest electricity prices in the developed world. The punitive taxes on the North Sea oil and gas industry, in an effort to achieve an ideological target of a decarbonised grid by 2030, will cut tax revenue and jobs and drive up business bills further, as we heard from my noble friend Lord Swire.

Can the Minister confirm how the Government will support nuclear energy projects? Currently the timeframe for grid connections for a new energy project can be as long as 10 years, so will he commit to national grid development? The Government must address infrastructure development delays and costs if they are to achieve their number one mission of growth.

National Insurance: Charity Sector

Baroness Neville-Rolfe Excerpts

Monday 13th January 2025 Lords Chamber

[Baroness Twycross (Lab)]

I hope it is reassuring to the noble Baroness that the smallest charities and organisations should not see a rise in their national insurance contributions. If she has examples of citizens advice bureaux where they think this is not the case, I ask her to let me know. I am hugely aware of and in awe of the work that the citizens advice bureaux do in supporting some of our most vulnerable citizens.

[Baroness Neville-Rolfe (Con)]

My Lords, the increase in NICs is highly regressive and the very general impact note does not make that clear. It disproportionately affects charities employing those on lower incomes or working part-time and, unfortunately, the employment allowance barely scratches the surface of the problem that has been created. Does the Minister think it is right to target the lower-paid in this way through the NICs changes?

[Baroness Twycross (Lab)]

My understanding of the NICs change is that it is about employer increases. This Government have not increased the tax paid by workers, including national insurance.

UK Entrepreneurs

Baroness Neville-Rolfe Excerpts

Wednesday 4th December 2024 Lords Chamber

[Lord Leong (Lab)]

My Lords, I thank the noble Lord for his question. The Government are committed to attracting investment. That was illustrated in our recent International Investment Summit, where £65 billion was pledged in this country, showing confidence in the Government. I remind noble Lords that in the past few years, FTSE 100 companies have been sitting on a gross cash pile of close to £160 billion, with pre-tax profits ranging from £500,000 to around £2 billion. Shareholders’ dividends have been rising three times faster than wages. We should pay staff well and pay suppliers on time. If more money is spent, companies will make bigger profits—it is a win-win situation.

[Baroness Neville-Rolfe (Con)]

I have listened to the Minister. Does he acknowledge that the measures announced in the Budget, such as the increase in capital gains tax, make the UK look like a less attractive place for entrepreneurship?

Ministerial Code: Policy Announcements

Baroness Neville-Rolfe Excerpts

Wednesday 30th October 2024 Lords Chamber

[Baroness Neville-Rolfe (Con)]

Does the Minister feel any shame that the Labour Party has constantly assured the country how devoted it is to propriety and the Ministerial Code, while the Speaker of the House of Commons has rightly criticised the Government for an unparalleled breach of that code? There was a major announcement overseas last week on the fiscal rules. As we have now seen, this formed a critical part of today’s Budget, allowing a huge increase in spending. What a contrast with the Government’s previous attitude. The Government could, and I believe should, have made a Statement to Parliament on Thursday on these changes. Will the Minister, in her position at the Cabinet Office, seek to persuade her colleagues that they should abide by conventions and the rules of the code? Will she apologise now for this unfortunate breach?

[The Parliamentary Under-Secretary of State, Department for Culture, Media and Sport (Baroness Twycross) (Lab)]

My Lords, the Government take their obligations to Parliament extremely seriously. As the Minister for the Cabinet Office said in the other place yesterday, the Speaker’s comments have been heard by Ministers across government, including in this House. As for Treasury Ministers making announcements in the other place, the Chief Secretary to the Treasury made an Oral Statement to Parliament on Monday about the fiscal rules and Treasury Ministers answered questions in the other place yesterday. Today, the Chancellor set out in Parliament the full details of the Budget, which will fix the foundations of our economy. Anyone who was watching the faces of the Opposition Front Bench will know that most of the measures were clearly a surprise. The leader of the Opposition seemed particularly glum as he looked at his phone for his revised lines.

Statutory Instruments (Amendment) Bill [HL]

Baroness Neville-Rolfe Excerpts

2nd reading
Friday 18th October 2024 Lords Chamber

[Baroness Neville-Rolfe (Con)]

My Lords, I welcome the opportunity to debate this important matter. I am especially grateful to the noble Lord, Lord Thomas of Gresford, for warning me of his intention and for his clear and very amusing explanation of recent history.

I thank the other speakers, including my noble friend Lord Hunt of Wirral, the distinguished chair of our Secondary Legislation Scrutiny Committee, which does such a wonderful and often unheralded job in sifting through thousands of SIs, both negative and affirmative, the latter being the subject of this Bill.

I agree with the noble and learned Lord, Lord Thomas of Cwmgiedd, and the noble Lord, Lord Wallace of Saltaire, that impact assessments are important—I always used to say that from the Back Benches, as many will remember.

I welcome the noble Baroness, Lady Anderson of Stoke-on-Trent, to the Dispatch Box for the Cabinet Office and very much look forward to hearing from her.

The arguments have been well made. However, I believe that the Bill as drafted has major constitutional implications. We need to consider it very carefully and, as far as possible, in a spirit of non-partisanship. The most significant effect of the Bill if enacted is that it would leave the House of Lords with greater theoretical power than the House of Commons across significant sections of rules and regulations. Is this credible? Much as I love this House, I fear the answer is no.

I have a number of other points to make. Having lived with fellow Peers through the relentless increase in the use of secondary legislation, I have sympathy with the objectives of the noble Lord, Lord Thomas of Gresford. Under the provisions of the Bill, only the House of Lords would be capable of triggering a mechanism to amend a statutory instrument. There are no provisions in the Bill that would allow concerned MPs to instigate a change themselves. It would be decidedly odd for elected Members of Parliament to find themselves in this position of inferiority; it would undermine the primacy of the House of Commons.

The noble Lord, Lord Thomas of Gresford, claims that the provisions in the Bill, which would require the Commons to debate the concerns of the House of Lords, would ensure that the balance of power remained as it should. However, as we know, Parliament is a busy place and the House of Commons schedule is already packed. The mechanism suggested here would only add to that in an unpredictable manner.

Further, it concerns me that the Bill might enable an interventionist or troublesome House of Lords—perish the thought—to obstruct the actions of a Government by amending a succession of draft affirmative statutory instruments. While the noble Lord believes that in practice the suggested mechanism would not be used more frequently than regret Motions, there is nothing in the Bill to ensure that that is the case.

At first sight, Clause 2, which nobody has mentioned, looks unobjectionable. I do remember my fury at the business department when I inherited SIs that needed to be corrected because of typos or sloppy drafting. However, there is an unfortunate lack of precision in the Bill. What would constitute a “substantive error” as opposed to an error? I might also ask how a Minister could correct an instrument to achieve a so-called “intended effect” when he or she has no defined means of ascertaining the intention of Parliament.

I believe that the lawyers who draft statutory instruments should get them right first time—a principle of mine. It stands to reason that, should we make it easier to repair errors in secondary legislation, there would be less pressure to ensure that the initial drafting was clear and effective. Further, if it became easier to tweak secondary legislation, I believe, from my experience as both a civil servant and a Minister in many departments, including the Cabinet Office, that it would reduce the impetus to craft good primary legislation.

We have an ever-growing problem with the amount and content of secondary legislation. The noble and learned Lord, Lord Thomas of Cwmgiedd, called it an “addiction”, while the noble Lord, Lord Thomas of Gresford, rightly mentioned the Product Regulation and Metrology Bill, which will introduce huge delegated powers, including alignment with EU law, on matters of real substance. Similarly, the Water (Special Measures) Bill grants significant power to Ministers to make regulations under the legislation, and the Government expect this House to pass it without sight of the draft regulations.

We cannot allow what the Delegated Powers and Regulatory Reform Committee terms “skeleton legislation” to become the norm. We should also look back at the agriculture and environment Bills, which on our watch also overuse delegated powers, as I argued at the time. The fact is that Governments of all colours should know what they are doing when they introduce Bills and not just take wider powers to do what they like. I sound like the grandmother that I am but, when I was a civil servant, we drafted the statutory instruments alongside the legislation and consulted on them as well. A power to think again could provide yet another excuse for initial sloppiness in parent primary legislation.

For the reasons I have stated, this side of the House has doubts about the Bill. Of course, as part of comprehensive reform of the House of Lords, there might be scope for increasing a second Chamber’s control of legislation, and that could include secondary legislation. That could mean better use of the wide experience and expertise of many noble Lords. However, that is a much bigger topic, requiring widespread agreement across the political parties on the way forward. I believe we need more comprehensive reform, rather than bits and pieces—one of the reasons I regret the House of Lords (Hereditary Peers) Bill, although that is not for today.

In conclusion, I thank the noble Lord, Lord Thomas of Gresford, for leading such an important debate. However, I have outlined a number of concerns that I believe show that this particular Bill should not proceed.

Procurement Act 2023

Baroness Neville-Rolfe Excerpts

Tuesday 15th October 2024 Lords Chamber

Asked by

[Baroness Neville-Rolfe]

To ask His Majesty’s Government what plans they have to change procurement guidance and operations under the Procurement Act 2023.

[The Parliamentary Under-Secretary of State, Department for Culture, Media and Sport (Baroness Twycross) (Lab)]

My Lords, the Procurement Act 2023 aims to create a simpler and more transparent regime for public sector procurement that will deliver better value for money and reduce costs for businesses and the public sector. I commend the noble Baroness on the Benches opposite for the commitment to small businesses, in particular, in the Act that she personally championed. The new regime will now go live on 24 February next year—a short delay of four months from the previous go-live date—in order to allow time for a new national procurement policy statement to be produced that clearly sets out this Government’s priorities for public procurement and economic growth.

[Baroness Neville-Rolfe (Con)]

I thank the noble Baroness for her courtesy. I remind the House that, in June, Prime Minister Starmer said that his number one mission was economic growth, so it is ironic that in addition to the Employment Rights Bill, the Government are planning to damage economic growth by delaying the Procurement Act 2023. Why are they adapting the rules on procurement to help their union paymasters and to encourage costly equality and green add-ons? My concern is the resulting red tape, which is against the direction that the Prime Minister set—yesterday he said that he wants to get rid of red tape —and which I believe will harm efficiency and the path to growth.

[Baroness Twycross (Lab)]

I absolutely and wholeheartedly refute the noble Baroness’s suggestion. I would also note that, last week, I was criticised for continuing with measures announced by the previous Government and this week I am being criticised for their delay. I hope that noble Lords from across the House agree that we should look at such matters on a case-by-case basis to ensure that this country gets back on the stable footing it needs and deserves.

Public Sector Productivity

Baroness Neville-Rolfe Excerpts

Wednesday 9th October 2024 Lords Chamber

Asked by

[Baroness Neville-Rolfe]

To ask His Majesty’s Government what steps they are taking to improve productivity across the public sector.

[Baroness Neville-Rolfe (Con)]

My Lords, you might say that securing growth in productivity is the most important issue we face—it is certainly the most important economic issue. This is because in the long run the overall rate of growth in productivity is reflected in the rate of growth in the economy, and from economic growth virtually everything else flows. We are debating public sector productivity today, but many of the same problems are found in the private sector.

I acknowledge that there are a few utopians who might think that this is a mercenary view of life, but a very large majority of us want to be better off personally and to benefit from improvements in the provision of public services—education, transport, healthcare and defence, for example. Better services need money, and a bigger economy provides more money via taxes. The best measure of our economic prosperity is probably GDP per head, and on this the recent history is disquieting. GDP per head in the UK has scarcely risen since the start of the financial crisis in 2007 and it is among the worst in the OECD.

It reflects the fact that productivity suffered a huge hit during the financial crisis, partly because of the importance of financial services to the UK economy. After a modest recovery, matters deteriorated again during Covid. As the IMF said in May:

“Although the UK has done better than peers in terms of total hours worked, the drop in labor productivity growth, the key driver of living standards—from around 2 percent pre-GFC to around ½ percent thereafter—has been noticeably bigger than in other advanced economies”.


Although the IMF refers to labour productivity rather than productivity, the two measures are closely related.

Part of our problem is cultural. Many—probably most—of us do not think of efficiency much of the time. In particular, there is a wilful disregard in the body politic for the costs of bureaucracy and monitoring. Like other noble Lords, I take part in the debates in this House on legislation. I have taken careful note in recent years and I regret to say that virtually every amendment to a Bill that we discuss would, if accepted, have the effect of increasing the cost of doing things, reduce efficiency and/or hit growth and dynamism. SIs and guidance can be even worse. Do noble Lords pause to consider whether the cost of the amendments they advocate is proportionate to the benefit hoped for? I fear the answer is often no.

The truth is that much of what government does affects the private sector, so the public sector contributes in two ways to the productivity problem: in what it does to others, such as in the huge build-up of financial, energy and environmental legislation in recent years, and in what it does in the way it organises itself.

We need to limit our interventions to matters where it is really needed, such as safety. We have too big a rulebook and that means a bigger, less efficient state. We need to change the culture. If I were put in charge, I would require a new productivity and growth assessment, like the equality assessment, on every proposal for a new policy, an SI or a Bill. Indeed, it should replace the equality assessment, which has had its day. Productivity assessments could be short, but a requirement for them would make our civil servants and lawmakers view changes through productivity spectacles. I would be interested in the Minister’s thoughts on this. It could make her and her Treasury colleagues new allies in the pursuit of value for money.

I am afraid that the figures for public sector productivity are even less positive than those for overall productivity. As the graph in the excellent Library Note makes clear, public sector productivity is significantly lower than in 1997, with the modest increase in the 2010s entirely eliminated by Covid and with the NHS a particular concern. I look forward to hearing from the noble Lord, Lord Patel, on what can be done. I believe working from home has also been a productivity sapper, with almost comic inefficiencies. As we heard from Guy Adams of the Mail recently, only 17% of the Business and Trade civil servants were coming in to work in their glorious Old Admiralty Building.

What else can be done? I am leaving to one side the obvious points, such as improved skills and education and the timely application of capital, so that I can make less obvious points from my own experience in business, the Civil Service and as a Minister in four departments, including the Treasury.

The first change needed is better management. The public sector needs fewer layers with simpler, flatter structures and wider spans of control. In the Cabinet Office when I was a Minister, one-third of staff were one on one. Government is also top-heavy. When I was at Tesco, I noticed that our considerable success was achieved without the CEO having a large private office staffed by people with their own agendas. This helped with clear focus and direction and a deep understanding of the business. It also limited the office politics. The contrast with Downing Street could hardly be greater.

I come back to the management of the public sector. There is a need for focus, which I think the Government are seeking with their new missions, but also for more delegation. For example, the Institute for Government has found that allowing nurses to self-roster reduces turnover. Other key areas where the public sector could learn from commerce are to mandate more comprehensive induction training for outsiders, who often fail in the Civil Service but bring vital skills, and training on easing out poor performers fairly. This seems likely to be even harder under Labour’s new employment rights Bill.

We also need a culture and working methods that help us to avoid mistakes. This includes both big things, such as HS2, the failings of the Post Office, and infected blood, and smaller things, such as letting some of the wrong people out of prison last month or setting the heating systems incorrectly in public buildings. We need to learn how to get things right first time because it avoids waste and mistakes. AI is making that easier—for example, on diagnostics from hospital scans. Equally, in my book it is okay to take risks and fail, but only if you learn from the experience. At the top of Tesco, we spent a lot of time in stores modestly carrying out routine tasks, observing what went wrong and seeing how policies and retail productivity could be improved.

We have a very big canvas for improvement. A recent paper by the University of Exeter Business School discusses the fact that virtually the same services were and are provided in similar NHS organisations and how this duplication allowed substantial efficiency improvements to be identified and made, amounting to £1 billion. The authors argue persuasively that the same approach could be used elsewhere in the thousands of organisations in the public sector. It is a great pity that, in awarding £9.4 billion to the public sector in above-inflation pay rises, the Government failed to impose productivity requirements on public sector workers. I know from experience that restrictive practices are hard to tackle and easier to remove with the warmth of a pay rise.

Public policy also effects productivity in the private sector. I said earlier that legislation often includes measures which reduce productivity unnecessarily. I turn to another current example: net zero. A lot can be done with small steps that have wide application, such as the transition to LED bulbs and putting porches on to retail stores, which quickly pay for themselves in lower energy bills. However, some of the measures to counter global warming now being taken by this Government—in particular, shutting the North Sea early—will hasten net zero neither in the UK nor globally. It will, however, ensure that the UK’s net exports are reduced, and it will reduce overall UK productivity, thereby making us all poorer, most notably the workers on oil rigs, as their trade union has pointed out. This is all for no rational reason. Public regulation will have reduced the productivity of the private sector and made it more difficult to deliver the growth and wealth we need for the future.

Improving productivity is a subject I feel passionate about because it can unlock great benefits. To be honest, it is rather a big subject for a short debate, but I am very keen to hear other ideas, build up alliances and ensure that the need to increase productivity is properly considered in all public sector decisions. I thank all those who are kind enough to speak and especially look forward to hearing from our new Minister.