London Stock Exchange: Decline in UK Funds

Baroness Neville-Rolfe Excerpts

Thursday 13th February 2025 Lords Chamber

Asked by

[Baroness Neville-Rolfe]

To ask His Majesty’s Government what assessment they have made of the net £9.6 billion decline in investment in UK funds in the London Stock Exchange in 2024.

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

My Lords, there has been a net decline in investment in UK funds for the past nine consecutive years. This is, of course, a matter of concern, although this does reflect global trends, and the outflow in 2024 was £2.5 billion less than in 2023. The UK’s capital markets remain some of the strongest and deepest in the world, and the UK is a leading centre for international capital raising, last year raising over £20 billion of equity capital—more than the next three European exchanges combined.

[Baroness Neville-Rolfe (Con)]

My Lords, I was very glad to visit the stock exchange this week with other parliamentarians from the Industry and Parliament Trust. The stock exchange is important to national economic welfare. It is therefore unfortunate that the Government have scrapped the last Government’s plan for a tax-free Great British ISA, incentivising savers to invest in British stocks and shares. How does the Minister intend now to encourage people, including first-time investors, to invest in such shares?

[Lord Livermore (Lab)]

I am grateful to the noble Baroness for her question and for telling us about her first-hand experience this week. She may know that feedback from industry and consumers on the last Government’s proposed Great British ISA was mixed at best, and no clear value-for-money case was made for that, so, as she says, we will not be proceeding with it. But as she will know, at the Masion House speech the Chancellor published the interim report on the pensions investment review and launched consultations on measures that would deliver a major consolidation of the defined contribution market and local government pension schemes. They could unlock around £80 billion for investment in private equity and infrastructure, but of course, there is no guarantee that that will be invested in UK markets, as she says. The pensions review is absolutely committed to looking at further ways in which that can be achieved.

Economic Growth: Public Spending

Baroness Neville-Rolfe Excerpts

Wednesday 12th February 2025 Lords Chamber

[Lord Livermore (Lab)]

We of course monitor the effect of all our policies on all sectors of the economy. We have increased the amount of money going to charities, and we will stand by that increased investment.

[Baroness Neville-Rolfe (Con)]

My Lords, the fact is that people across the UK are deeply concerned about the rise in employers’ NICs, as we will discuss on Report on the NICs Bill on 25 February. This is the wrong tax raid, and the OBR has reported that next year it will raise £10 billion less than the Treasury forecasts. Last week we heard, as we feared, the Bank of England halving its growth forecast for the UK. Will the Minister accept that the threat of the Chancellor’s jobs tax has crashed business confidence and the economy?

[Lord Livermore (Lab)]

No, I will not. The noble Baroness says it was the wrong tax rise; she has said that several times. She has never said what the right tax rise is, so I am not sure how she plans to fill the £22 billion black hole. She talks about growth forecasts; I notice that she did not mention that the Bank of England upgraded its growth forecast for the next year and the year after. She did not mention that the IMF now forecasts us to be the fastest-growing major European economy. She did not mention that the UK is now the second most attractive country in the world for inward investment—the first time we have been so for 28 years. We have still heard no alternative at all put forward by the Conservative Party: no alternative for dealing with the challenges that we face, no alternative for restoring economic stability and therefore no plan for driving economic growth.

National Insurance Contributions (Secondary Class 1 Contributions) Bill

Baroness Neville-Rolfe Excerpts

Committee stage
Thursday 6th February 2025 Grand Committee

Moved by

[Baroness Neville-Rolfe]

47: Clause 3, page 1, line 20, at end insert—
“(2A) After section 1(2), insert— “(2A) For an employer in the social care sector, the employment allowance for the tax year is—(a) £20,000, or(b) if less, an amount equal to the total amount of the liabilities mentioned in subsection (1)(b) which are not excluded liabilities.””Member's explanatory statement
This amendment, and another in the name of Baroness Neville-Rolfe to this Clause, would increase the employment allowance for employers in the social care sector from £10,500 to £20,000. This amendment seeks to probe the Government’s openness to supporting those providing social care and the cost of that to the Exchequer.

[Baroness Neville-Rolfe (Con)]

My Lords, I rise to move the amendment in my name and that of my noble friend Lord Altrincham, and to support the amendment tabled by my noble friend Lord Leigh of Hurley. These amendments are not merely technical adjustments; they represent a critical step in recognising and supporting the social care sector, which remains indispensable to our society.

Amendment 47 proposes an increase in the employment allowance available to employers in the social care sector, raising it from £10,500 to £20,000 per tax year. This increase is of profound importance. Our social care providers are grappling with rising operational costs, staffing challenges and the ever-present need to deliver high-quality care to some of our most vulnerable citizens. By enhancing the employment allowance, we are providing smaller employers with essential financial relief that will help to sustain their operations in the light of the brutal national insurance increases, retain skilled and valuable staff and invest in the quality improvements that our social care users so desperately need.

For too long, the funding constraints on social care providers have meant that many have had to make painful compromises, such as reducing staff numbers, cutting back on training or deferring vital infrastructure improvements. These compromises ultimately diminish the quality of care provided and place additional strain on an already overstretched system. Increasing the allowance would acknowledge that social care is not a peripheral service, but a core pillar of our public support system, deserving of the same robust backing as the NHS, which is being compensated for the additional NICs charges.

Moreover, this amendment recognises the unique cost structures within the social care sector. Unlike other industries, social care providers face significant regulatory and operational burdens. They must meet stringent care standards, invest in specialised training and often operate in environments where margins are exceptionally thin. They are the backbone of a sector that touches so many lives. The Local Government Association estimates that the NICs charges create £1.77 billion in additional costs for councils, with £637 million for directly employed staff and £1.13 billion through indirect costs, via commissioned providers, including £628 million for adult social care alone. These are big figures.

There is also an important symbolic dimension to these amendments. By focusing on the social care sector, we are sending a clear message that the care of our elderly, our disabled and our most vulnerable is a national priority. This sector has often been on the back foot, underfunded and overlooked. Today we are recognising its importance and taking concrete steps to bolster it. In doing so, we honour the dedication of countless social care workers who deliver care with compassion, often under extremely challenging circumstances.

In conclusion, these amendments will provide a much-needed boost to the employment allowance for social care providers and introduce a mechanism of accountability that will ensure that the measures are delivering the intended benefits. They are a testament to our commitment to support a sector that is foundational in the well-being of our communities. I urge my colleagues to join me in supporting these amendments, recognising that those struggling with disabilities and an ever-ageing community, partly thanks to the miracles of modern medicine, need our help. We need to invest in a stronger, fairer and more caring society.

[Lord Leigh of Hurley (Con)]

My Lords, I rise to support Amendment 47 and my own Amendment 65, which is yet another request for an impact assessment. I raised the issues that small businesses and charities will have at our last session, but I shall focus on the social care sector, for some of the reasons that my noble friend Lady Neville-Rolfe has explained. This sector faces particular challenges, and to apply a one-size-fits-all to every employer in the UK is in this instance simply heartless and smacks of a policy rushed through without proper consideration of the particular issues in the sector.

The recent Budget, while providing additional funding to social care, does not go far enough to meet the needs of a sector facing increased costs from the rising national living wage and employers’ NI contributions. There is the £600 million grant, which we assume is to be shared between adult and children’s social care, but it is far from sufficient to address the estimated £3.7 billion increase in costs facing providers due to the changes announced in the Budget, which represent the 10.6% increase in pay from April 2025.

We know of course that councils will be expected to fill much of this gap through council tax precepts and local revenue, but, even with the £600 million grant, there is still a £1.3 billion shortfall that local authorities have. That figure relates only to the basic costs of providing care, with no consideration of inflation, the resources required to address ongoing workforce challenges, or the increased capacity, as my noble friend Lady Neville-Rolfe mentioned, of a growing ageing population. Because of this, there are reasons to believe that the estimates of a £2.24 billion gap for older person residential care is a conservative figure. If this is added to the homecare deficit, reported to be £1.76 billion, and the unquantified gap for working-age adults, the total gap between the average fee paid by local authorities and the actual costs of providing care could be significantly higher than the £4 billion.

I appreciate that these figures are so large that it is possibly difficult to take them all in and relate to them. If I may, I shall look on a micro basis at organisations I happen to know about personally. I am sure that each of us has a connection with such an organisation locally. In my case, I have connections with Jewish Care, which is Anglo-Jewry’s leading health and social care charity for the Jewish community in London and the south-east. It touches the lives of 12,000 people every week—including, of course, Holocaust survivors.

Jewish Care operates nine care homes, which provide a range of services, including fabulous residential care and also dementia care, mental health care and nursing care. It manages four retirement living schemes and an assisted living scheme, nine community centres and three centres for people living with dementia. My interest is that I was a trustee of Jewish Care, and I am still a proud fundraiser for it. I have been a patron for more than 25 years. I am grateful to Jewish Care for sharing with me its concerns, which reflect those of the whole industry.

In context, Jewish Care raises some £20 million in revenue donations—voluntary gifts. The total increase in workforce costs as a result of this Budget is estimated by Jewish Care at £1.1 million. The increase in the percentage for NICs from 13.8% to 15% increases the workforce costs by £400,000 and the lowering of the threshold, which we all know about, results in a further £700,000—hence £1.1 million.

Of course, it is disproportionately affected because it is a large employer with very many part-time staff. The immediate impact is that carers’ salaries will not be raised, as would otherwise have been the case. It will also force the charity to make choices about how care homes are operated and, just as importantly, to divert investments in other community-focused services. One specific example is that, until the announcement of the NI increases, it was planning to open a much-needed dementia day centre. It was all planned and ready to go, but these additional costs have forced Jewish Care to put that on hold. This is real damage that the Government are causing to people’s lives, and it is particularly poignant because both Wes Streeting and the Prime Minister proclaimed themselves, as recently as last June, just before the election, to be huge supporters of this charity and its objectives.

--- Later in debate ---

[Lord Livermore (Lab)]

My Lords, I shall address the amendment tabled by the noble Baroness, Lady Neville-Rolfe, and the noble Lords, Lord Altrincham and Lord Leigh of Hurley, which seek to increase the value of the employment allowance for those providing social care, and the amendment tabled by the noble Lord, Lord Leigh of Hurley, which seeks to require the laying in Parliament of an impact assessment on social care providers 12 months after commencement and every 12 months subsequently.

As a result of the measures in this Bill, combined with wider Budget measures, the Government have provided a real-terms increase in core local government spending power of 3.5% in 2025-26, including £880 million of new grant funding provided to social care. This funding can be used to address the range of pressures facing the adult social care sector. Increasing the employment allowance for specific sectors would introduce new pressures that would require either higher borrowing, lower spending or alternative revenue-raising measures. It would also add complexity to the tax system.

The Government of course carefully consider the impacts of all policies, including the changes to employer national insurance. As I have said previously, an assessment of the policy has been published by HMRC in its tax information and impact note. Further, the OBR’s economic and fiscal outlook sets out the expected macroeconomic impact of the changes to employer national insurance contributions. 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 taxation, and the Government do not intend to provide further impact assessments. In light of those points, I respectfully ask noble Lords not to press their amendments.

[Baroness Neville-Rolfe (Con)]

My Lords, I thank the Minister for his response. I hope he will take away noble Lords’ concerns about the social care sector, because there seems to be agreement that we have a problem. I thank my noble friend Lord Leigh for his careful analysis and his examples of individual carers from Jewish Care, the Voluntary Organisations Disability Group and Age UK, whose work in Wales and Scotland he also mentioned.

There is a strong case for looking at this area again. The noble Baroness, Lady Kramer, may differ on how we should do it, but there is agreement on the problem. The Minister confirmed the figure that I used at Second Reading, explaining that the cost of NICs would outweigh the £800 million for social care—which we were very glad to see in the Budget. That is not a great net position.

The proposal for an annual assessment of the impact on social care is not a bureaucratic requirement, but a vital mechanism of accountability and continuous improvement. By compelling the Chancellor and the Secretary of State to publish and lay before Parliament an annual report detailing the impact of these provisions, we can ensure that there is an ongoing dialogue between policymakers and those on the front lines of care delivery.

It serves several key purposes. First, it provides transparency, which I think the House is increasingly interested in, and allows Parliament and, by extension, the public to understand how policy changes are affecting social care providers in real time. This level of openness is essential to maintaining public trust and ensuring that government policies are working as intended. Secondly, it creates a framework for evidence-based policy-making. By regularly reviewing the impact of the increased employment allowance, the Government can adjust their approach to ensure that their measures are effective. Finally, importantly, it signals to social care providers that the Government are committed to monitoring and supporting their performance through not just lip service but concrete measures. The challenges facing the social care sector are not only multifaceted but serious, and demographic changes mean that the demand for social care services is set to rise dramatically in the years ahead.

An annual impact assessment would ensure that we remain vigilant. It would provide a structured opportunity to evaluate the effectiveness of the allowance increase and other changes, to identify unintended consequences and to take corrective action if necessary. I have spoken at length but, in the circumstances, I beg leave to withdraw my amendment for today.

Amendment 47 withdrawn.

--- Later in debate ---

I make just a couple more brief points about the Government’s work in this area. I note that the Task Force on Climate-related Financial Disclosures guidance issued in December 2024 argues for the public sector incorporating climate related disclosures into annual reports. Surely, that is also an indication that we should incorporate them into major legislative changes. I note also a speech from Tony Juniper at the launch of Natural England’s first State of Natural Capital report in October 2024. I have some doubts about the accounting approach taken there but, none the less, the Government appear to be following this after the Dasgupta report. This is the Government doing a snapshot of the state of our natural assets. Surely, if they are then making decisions after that snapshot, they should be accounting for what impact those decisions will have on what accounts itself as natural capital. I beg to move.

[Baroness Neville-Rolfe (Con)]

My Lords, these two amendments require the Chancellor to prepare a report to consider the effects of the Government’s changes to employer national insurance contributions on the climate and on those with protected characteristics under the Equality Act 2010.

I will be brief. I come at the matter from a different perspective. The noble Baroness, Lady Bennett, is often arguing in favour of more tax and less growth, which obviously is not where I come from. Equalities are well looked after by the 2010 Act and we have equality assessments on nearly everything. I have suggested on some occasions to the Minister that a growth and productivity assessment would be a useful addition to getting delivery of his number one mission of growth.

The impacts of this Bill will be felt by employers and particular sectors, including part-timers, many of whom are women, as the noble Baroness has said. We have discussed that at great length. However, a review of the kind that she proposes is a huge stretch. It sounds bureaucratic and speculative. I also believe that it is inappropriate to try to improve work on climate change in this Bill by yet more bureaucratic processes on top of those which are already set out in the Environment Act. We need to focus instead on the impact of this brutal jobs tax on the sectors that are smarting under its prospect. That is what we are doing. I look forward to hearing how the Minister feels about these amendments.

--- Later in debate ---

[Baroness Kramer (LD)]

My Lords, I realise that I am very much in danger of becoming repetitive, but this is the last grouping that we will deal with today. If I may, I always feel like cheering on the noble Lord, Lord Porter, every time I hear him speak, which may put him in jeopardy, but it is probably reflected by voices across the Committee.

The issues being raised are crucial. I will not repeat the discussion that we had last Monday and Wednesday, which covered this same area in great detail. However, the amendments put forward then, which would basically exclude adult and child social care, housing associations, charities and others from the changes in the employers’ NICs threshold, would answer very many of the problems that local authorities are going to face. While I understand that this amendment seeks an impact assessment, we go for exclusion of these various necessary services and on that, once again, we stand our ground.

I thought that there might be some mention of town and parish councils in this group, which will get no protection at all from the increases in employers’ national insurance that they will face. We put forward an amendment last week that would exclude them from this. Once again, I ask that town and parish councils not be overlooked in the process of understanding that the public sector will be protected. With the changes that the Government are mooting in going to strategic authorities, town and parish councils will be the only real local government layer left, quite frankly, where somebody within a community knows that community, speaks to the people in it and acts on their behalf. Because they are funded purely through tax rather than through some government grant, the Government have not given them the off-set for the additional costs that they will have to carry. They amount to so little—£10 million a year. The Government would not even notice it. Without that, because they have no other sources of income, they will absolutely be required to increase their taxes by between 1.5% and 3.5%.

These councils should not be overlooked. They might be very small, but they are vital. For many people in this era, they are the connection to politics in a world where there is so much cynicism over politics and people do not feel the reality of it any more. I hope very much that the Conservatives, having made such strong statements on the effect of all these changes, will consider coming into the Lobbies with us on Report.

[Baroness Neville-Rolfe (Con)]

My Lords, I support Amendment 70. I am delighted that my noble friend Lord Fuller has joined the Committee today and spoken with such passion and eloquence, and I support his proposal for an impact assessment of the costs involved with this Act on local authorities. It was also good to hear from my noble friend Lord Porter; as a former civil servant many years ago, I was amused by his comment about policies hanging around in a drawer. I particularly remember that when I used to go to the Council in Brussels; there were a lot of proposals that used to hang around for a long time.

I agree that the jobs tax is the wrong approach, and I agree with my noble friend Lord Jackson that there are some tricky issues in parts of local government. I have to say that I have often been an admirer of local government, particularly councils, over a long career.

This week the Government confirmed £502 million of funding to help local authorities to cover the increased costs of directly employed staff due to the changes in the national insurance contributions. Ministers have also allocated £13 million separately to mayoral combined authorities, with some allocations to follow in due course. As we have heard, local authorities will need additional support in the face of the jobs tax. I welcome the fact that Ministers have brought this support forward, but we have heard from my noble friend Lord Fuller that that the allocation is totally inadequate. He called it a £1.226 billion headache, while my noble friend Lord Jamieson, also very experienced in this area, explained that it is just not possible to absorb these sorts of costs, for example, by reducing prices to suppliers. Services will inevitably have to be cut.

I shall highlight some examples where we believe the allocations will fall short. Hampshire County Council is facing a £10 million increase in costs due to the increase in NICs but the allocation it has received from the Government is just £7 million, leaving a £3 million shortfall, which I suspect is quite typical. My noble friend Lord Jackson talked of the likely demise of the lido in Peterborough and of libraries that are closing, although I am glad to say that, so far, we have kept our libraries open in Wiltshire. We are also hearing reports from Kensington and Chelsea and Harlow councils that they are facing a shortfall following the announcement of the allocations.

Clearly the Government’s additional allocations need to cover every penny of the increased cost to local authorities, otherwise they are going to have to cut services. It would therefore be helpful if the Minister could commit to engaging with MHCLG to seek assurances about what is happening and how that could be improved.

Councils, as we have heard from my noble friend Lord Fuller, have been treated a lot worse than sectors like the police, the Civil Service and the National Health Service. This is a case in point for the argument we have been making throughout Committee where the Government have failed to produce thorough and comprehensive impact assessments. Mistakes like this can be made. The new refusal of the Treasury to provide essential information in debates like this, when such major changes are taking place, is extremely disappointing, as my noble friend Lady Noakes said, in her usually trenchant way. The Minister needs to listen to the Opposition when we call for a proper assessment of the impact of this policy on our local authorities. We want to know about other sectors too, but local authorities are this particular group’s concern and we will be returning to the charge.

The truth is that the Bill is very damaging. It will have perverse effects that will reduce the expected national insurance and tax take, as we have heard from the OBR, and it will have a negative effect on jobs, prices and growth. I hope the Minister will think further in the light of these four days of debate before Report.

I should say that I have enjoyed this Committee because of the insights it has given into many sectors and their challenges. It has been an extraordinary cross-cutting debate, and I look forward to Report on 25 February after our much-needed winter break.

[Lord Livermore (Lab)]

My Lords, I am grateful to all noble Lords for their contributions to this debate and for the local government expertise that has been shared with the Committee. At the Budget and the recent local government finance settlement, the Government announced £2 billion for new grant funding for local Government in 2025-26. This includes £515 million to support councils with the increase in employer national insurance contributions.

The LGA figures set out by the noble Lord, Lord Fuller, are an external estimate rather the Government’s, and I cannot comment on those figures. However, the Treasury is of course engaging closely with HMCLG, as the noble Baroness, Lady Neville-Rolfe, asked. The Government have committed £4.7 billion next year to provide support for departments and other public sector employers for additional employer national insurance costs. This applies to those directly employed by the public sector, including local government. However, as the noble Lord, Lord Fuller, said, independent contractors, such as those services contracted out by local authorities, will not be supported with the costs of these changes. This is exactly the same definition as with the changes to employer national insurance rates, under the previous Government’s plans for the health and social care levy.

Covid Counter-Fraud Commissioner

Baroness Neville-Rolfe Excerpts

Wednesday 5th February 2025 Lords Chamber

[Lord Livermore (Lab)]

My noble friend clearly knows more yacht owners than I do—I have not discussed this matter with any yacht owners—but I absolutely understand the point he is making about the amount of fraud and abuse that was rampant in the system. The fact that the previous Government decided not to pursue so many of those contracts is not acceptable, which is exactly why we have set up these systems.

[Baroness Neville-Rolfe (Con)]

My Lords, more seriously, wherever there is fraud in public life, it should be rooted out and punished. Does the Minister agree, therefore, that the best and wisest course is to wait for the outcome of the commissioner’s report, including any recommendations on whistleblowing? A lot was done in a hurry during Covid—some good, some less good. But the worst thing would have been to extend the lockdown for months, as favoured by Sir Keir Starmer.

[Lord Livermore (Lab)]

The commissioner has clearly set out his programme of work. He will work in three phases: first, an assessment of the recovery efforts to date; secondly, a plan for further activity to drive additional recoveries; and thirdly, a consideration of lessons learned and recommendations for future government schemes. The noble Baroness says that we should wait for the outcome of his report; that is perfectly fair, but what I do not understand is why we inherited a recommendation from the previous Government that any attempt to reclaim money should be abandoned. That is surely unacceptable.

Pension Fund Reliefs

Baroness Neville-Rolfe Excerpts

Tuesday 4th February 2025 Lords Chamber

[Lord Livermore (Lab)]

I am aware of the issue that the noble Baroness raises, mainly because of her campaigning on it. I pay tribute to her and to the noble Baroness, Lady Altmann, for their campaigning on this issue and for their Private Members’ Bills when we were in opposition, which I found extremely persuasive. I think we have made some progress since we have been in government. I regret that we are not able to go as far as the noble Baroness set out in her recent Private Member’s Bill right now, but we continue to review these issues and I thank her again for her campaigning.

[Baroness Neville-Rolfe (Con)]

My Lords, it is all very well to talk and review, but we face problems now. Do the Government intend to introduce extra incentives to encourage pension funds to invest in UK-listed shares and in domestic infrastructure?

[Lord Livermore (Lab)]

The noble Baroness talks of a sense of urgency, but, of course, she had 14 years to do something about this and did not. The previous Government never legislated for the reforms they brought forward. We are legislating for them. As I said, we are absolutely concerned that UK pension funds are investing less in the domestic economy, which is exactly why the pensions review is looking at the issue.

UK–China Economic and Financial Strategy Dialogue

Baroness Neville-Rolfe Excerpts

Tuesday 4th February 2025 Lords Chamber

[Lord Livermore (Lab)]

The Government are committed to attracting investment into the UK to support our world-leading energy ambitions. Investment in the energy sector is subject to the highest levels of national security scrutiny, and we will not hesitate to use our powers to protect national security wherever we identify concerns.

[Baroness Neville-Rolfe (Con)]

My Lords, did His Majesty’s Government discuss with the Chinese authorities the imposition of 10% tariffs on Chinese exports by the United States?

[Lord Livermore (Lab)]

It is not for the UK to comment on US-China relations.

Growing the UK Economy

Baroness Neville-Rolfe Excerpts

Monday 3rd February 2025 Lords Chamber

[Baroness Neville-Rolfe (Con)]

My Lords, the Government have told us that growth is their number one mission. That is the promise they have repeated again and again, and, given the difficult circumstances the country faces, that is sensible. That being the case, I am afraid that the Government’s statements—both that of the Chief Secretary to the Treasury to Parliament and the speech given by the Chancellor—do not measure up to the scale of what is required.

Above all, we need a recognition that the first steps of this Government—spreading pessimism; rewarding recalcitrant unions with large pay increases without them being tied to productivity increases; increasing stifling regulation, particularly on employment and renting; and increasing taxes—are precisely what should be avoided. Instead, we need an optimistic mindset—seizing the issue, and shaking up those who are not contributing and could do more—and a determination to make real progress, not a flabby wish list with no indication of how it will be achieved in practice.

Last week, Lloyds Bank announced 1,600 job cuts after the CBI warned of a “significant fall” in business activity in the private sector, and the normally robust supermarkets announced large job losses. This is before we start to feel the effects of the Government’s most burdensome measures, which come into force in April. Businesses are fearful, and consumers are showing caution in case they lose their jobs or face price rises that affect their families.

That does not mean to say the Government’s proposals are not welcome, up to a point, if they contribute to stability and growth as we hope. The expansion of Heathrow seems to be central to the Government’s plans to “unlock further growth”, but this will take well over a decade to come to fruition and seems to be highly contentious in the Cabinet. Will the present proposal outlive the Chancellor? It seems doubtful.

The Chancellor highlighted the importance of the life sciences sector and referenced AstraZeneca. It must have been embarrassing for the Government to hear of its decision not to go ahead with the much-needed new vaccine manufacturing plant in Speke—a £450 billion investment. I know that the value for money rules are not straightforward, but could matters not have been managed to secure a better outcome?

Having studied the discussion in the other place, I would be interested to know more about how the growth package will help Northern Ireland and how the Office for Investment will provide a line of sight to opportunities across the country.

We agree with the Chancellor that we must focus on removing barriers to growth, and that that means cutting regulation. It also means reversing the way in which the public sector has started to crowd out the more productive private sector since its necessary expansion to a wartime footing during Covid, yet the Government seem determined to do the opposite. Can the Minister explain what assessment the Government have made of the impact of their extra regulations on economic growth?

I am particularly concerned about energy. History shows that cheap energy is vital to growth. Our businesses in the UK already have to cope with the highest energy prices in the developed world, and that is set to get only worse. That is terrible news for industries such as steel, cement and ceramics. I am sure the Government will come to regret their decision not to support the Rosebank field and the punitive tax on oil and gas, alongside the delays in nuclear rollout and grid connections. I would not want to be the Energy Minister when the lights start to go out.

This is not a debate about welfare, but it is clear that more needs to be done to get people off welfare and into work as part of the growth mission.

Perhaps I could end on some positives. I am glad to see the plans for new investment in reservoirs. Successive Governments have been slow to meet that need. The Thames Tideway tunnel has been an early success in the water area, on time and largely on budget, in an impressive partnership with the private sector.

The Government are right to press ahead with more housing and to lift some of the regulatory constraints, although they should be doing more in the London area, where the pressure of population is worst. I am particularly pleased to see the new focus on building around railway stations, a recommendation of the Meeting Housing Demand report by the Lords Built Environment Committee, which I chaired at the time. How do the Government propose to report progress in this area?

[Lord Fox (LD)]

My Lords, I thank the Minister for sharing the Statement.

In a Janus-like switch from the gloomiest person in Whitehall, the Chancellor was all smiles last week. To cap that change in mood, she gave her much-heralded growth speech. The most notable feature, as far as I was concerned, was what was not in the speech.

We all know that committing the UK to a genuinely closer and more efficient trading relationship with the EU would be the quickest and most effective way of driving growth. That is why the Liberal Democrats have suggested a customs union as the most significant route to growth. If the Government do not believe us, they should commission the Office for Budget Responsibility to analyse the impact that a customs union with the EU would have on the economy and public finances, and then we could discuss the numbers.

Instead, the Statement was, in essence, a list of projects—some of them interesting, some of them less so. I believe they were intended to communicate as much a mood as actual projects. To cap the message was an exclamation mark: the announcement on Heathrow. I suppose the point of that was to suggest that the Chancellor and the PM were such growth ultras that they would even allow Heathrow an extra runway. Even though that is patently the wrong thing to do, seemingly the Chancellor was using Heathrow as a badge of her serious intent on growth. However, as we discussed just now in the previous Question, it is so far into the distance that it is growth window dressing. The numbers that are used are highly selective, and the estimated timings hopelessly defy reality when it comes to projects of that scale.

I think it was the former Chancellor George Osborne who coined the phrase “shovel-ready”, implying that some projects could start immediately. This is rarely the case, so it would be good to get an idea of the start time for some of the projects that the Chancellor listed. For example, when will we get the announcements on Gatwick and Luton, and how shovel-ready are they? When does the Minister expect those expansions to have any effect on our economy? Similarly, the suggestions that talks may be reopened regarding Doncaster Sheffield Airport are welcome, but is that idea backed by any central government investment or is it just talks with cash-strapped local authorities?

With such a heavy emphasis on air travel in the Statement, it was inevitable that, by way of some sort of offset, the Chancellor would talk about sustainable aviation fuel. Can the Minister tell your Lordships’ House the Treasury’s estimate for what the percentage and volume of SAF used for air travel departing the UK will be by 2030? How effective will its implementation be?

Finally, on the Oxford-Cambridge growth corridor, I can understand how some would see this as a great idea, but how will the idea be made flesh? The noble Lord, Lord Vallance, is to be the champion, but what is he championing? Your Lordships will be aware that the journey between the two university sites passes through many local authorities. Each, I am sure, will have their own idea and vision of what this corridor would or could be. Will the ministerial champion have any powers to compel a joined-up plan? Will he have any money to cajole authorities to bend to his will, or is this corridor a possible railway link for some time in the future, with a few road works?

Meanwhile, the bird has flown. As we just heard, AstraZeneca, Britain’s biggest public company, has pulled out of its proposed £450 million investment in a new vaccines plant, reportedly after “protracted discussions” with the Government. It is now no longer pursuing its plan for Speke. The implication is that the Government not only reduced the money on the table but did so very slowly. I do not want to hear from the Minister that the previous Government had not funded the offer. We know that they did not fund the offer; they funded virtually none of it. What I want to know is what thinking in the Treasury stopped the present Government funding this project? While having a Chancellor announcing airport expansions might make the odd headline, what delivers an effective message to future investors in this country is an announcement of the start-up of a project such as that.

As a result of this failure, can the Minister tell your Lordships’ House that he now recognises that it is the job of politicians much more positively to drive negotiations such as those? It is politicians who have to step in and remove administrative barriers, and it is up to them to make projects like this happen.

Low and No-Tax Jurisdictions

Baroness Neville-Rolfe Excerpts

Thursday 30th January 2025 Lords Chamber

[Baroness Neville-Rolfe (Con)]

My Lords, I begin by congratulating my noble friend Lady Coffey on her excellent speech. I eagerly look forward to working with her and taking advantage of both her ministerial and business experience. It is not every day that one speaks after a former Deputy Prime Minister, and I share her love of culture, racing and music. I was pleased to hear her refer to our own noble friend Lady Stedman-Scott and to her time at the DWP, where I undertook a review of the state pension age, which, at the time, was quite widely welcomed. I always wondered who was behind that amusing judgment on Jaffa cakes—now we all know.

I also agree with my noble friend that where companies are headquartered is very important. In my own experience, there are pluses, such as R&D centres and community outreach, which are usually lost when companies move abroad. We need a Government who promote investor confidence and certainty, as my noble friend explained, in order to keep our innovative companies in the UK and attract new ones.

As the noble Baroness, Lady Kramer, did, I thank the noble Lord, Lord Sikka, for initiating this debate. He and I sometimes agree on what the Government are doing wrong, although our philosophies are different. He has set out a coherent set of principles from a left-wing perspective. I think differently, not least because I believe in the importance of the private sector and innovative companies in driving growth, but that does not detract from his consistency and persistence.

For decades, some multinational corporations have funnelled billions of pounds in profits to minimise tax, especially to lower their exposure to corporation tax. This is achieved by various methods. For example, a company may sell intellectual property to a subsidiary in a low-tax country and pay the subsidiary for the use of that intellectual property, or goods and services may be traded between subsidiaries at manipulated prices to allocate profits to the tax haven entity. We have heard examples from the noble Viscount, Lord Hanworth, including the reports this week about the arrangements for the Abramovich yachts. What is the Government’s attitude to that arrangement? That said, it is imperative that businesses and their capital should be able to move freely so that there is international investment and the benefits of comparative advantage are realised.

The previous Government made significant progress in tackling the transfer of businesses’ profits to low-tax and no-tax locations. We constantly stressed our commitment to combating tax avoidance and pledged to raise an additional £6 billion annually. In 2018, we announced a digital services tax to ensure that digital businesses paid tax that reflected the value they derived from UK users, as an interim measure, pending an international agreement to reform the corporate tax framework. I supported it in this House, drawing on my own experience in the retail sector, where the tech giants held an unfair advantage because they did not pay much VAT and had much lower business rates. That reality has not changed. The noble Baroness, Lady Kramer, said that it was the sector of most concern to her.

Then, in 2022, as we have already heard, we confirmed that we would implement the OECD pillar 2 rules for a global minimum corporate tax rate, for accounting periods beginning after 2023. Pillar 2 applies a “global minimum tax” of 15% to the profits of multinational groups whose revenue exceeds €750 million per year. Provision to this effect was included in the Finance Act 2023 and further provisions were included in the Finance Bill 2023-24. As a result, the OBR estimated that the implementation of these reforms could raise £2.8 billion in 2028-29.

Due largely to measures taken by the previous Government, as my noble friend Lord Leigh of Hurley said, the UK has one of the most robust anti-base erosion and profit shifting regimes in the world.

That was the position until very recently. But the US has always been unenthusiastic about this whole process and this attitude is most marked in the Republican Party. The US has very recently withdrawn from the OECD deal in full. This is explosive stuff. US firms are some of the most prominent among those whose activities have caused the problems to which I have referred. The US announcement upends all plans and expectations. There are strong hints that UK interests might be adversely affected as a consequence. For example, our digital services tax and the undertaxed profits rule might be in the present Administration’s sights. The Minister may be able to confirm the sums involved. As I understand it, DST was forecast by the NAO in 2022 to raise £862 million by 2024-25. UTPR is only just beginning to take effect but is due to raise £550 million by 2029-30, according to the HMRC policy paper of last October on multinational top-up tax.

In short, the path along which we were proceeding now looks to be full of problems. An alternative to sticking to these taxes is the risk of costly tariffs if an accommodation cannot be found with the Trump Administration; in other words, the world has changed and we need to reflect how best to respond to this change. What is the Government’s assessment of all this—including my noble friend Lord Leigh’s question about the impact of the future lack of information sharing? How will they respond and, most importantly, how will they protect UK interests? I look forward to hearing the Minister’s thoughts on this extremely important issue.

The disadvantages of corporations shifting profits to low-tax or non-tax jurisdictions are well known; there is no need for me to go on about them, except to say that they represent a serious problem for UK economic interests. These disadvantages apply whatever the US Administration might do, but we now need a fundamental rethink about how we can best deal with these disadvantages in the world as it now is and tackle the problems that we jointly see.

My noble friend Lord Leigh of Hurley has come forward with various alternative proposals on VAT and its enforcement. In 2021, the Conservative Government introduced changes to limit profit shifting, from which the OBR then scored substantial revenue. If there is good reason to believe that these have not been as effective as they should have been, as my noble friend suggested, I would encourage Ministers to look at them again. I believe that his points merit serious consideration.

I had intended to end by outlining how the Government’s recent actions have damaged the economy. It remains true that, by talking the economy down, making large increases in employment taxes and crushing companies under new employment regulations, the Government are making fundamentally wrong and anti-growth choices. The consequence is a flat economy killed stone dead by the Budget—even Tesco followed Sainsbury’s with job cuts this week—and a potentially chilling effect on investment from overseas.

Yet these actions—foolish as they were—are only marginally relevant to today’s subject. It is well-run businesses in a thriving public sector that create jobs and wealth. They rely on the Government of the day to deal with the complexities of international tax and negotiate arrangements that are effective and fair to UK plc. The Trump challenge on tax is serious and I look forward to hearing how the Government plan to address it.

Agricultural and Business Property Reliefs: OBR Costing

Baroness Neville-Rolfe Excerpts

Monday 27th January 2025 Lords Chamber

[Baroness Neville-Rolfe (Con)]

My Lords, I refer to my register of interests: a third share in two small Wiltshire fields—what is left of the marginal family farm of my childhood.

I am not surprised that the increases in agricultural and business property taxes in the Budget have proved to be friendless, except in some deeply urban areas. This was demonstrated in last week’s debate on this Question about costs in the other place.

The truth is, the Government have miscalculated. They expected a vindictive tax grab on large estates to be welcomed by those of an envious disposition. Instead, the difficulties faced by the working family farms which produce so much of our food have been noticed, even by the supermarkets. Elderly farmers are especially desperate.

The Government have the ghastly choice of brazening the matter out or making some sensible concessions. There are already whisperings about the latter. Will the Minister help to ensure that the Government reduce the harm to agricultural investment and food security of this misguided policy?

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

My Lords, I am grateful to the noble Baroness for her question. I do, however, totally dispute her characterisation of this policy. At the Budget, we had to take some very difficult decisions on welfare spending and tax that were necessary to fix the public finances and support our public services. We had to do that to address the mess that we inherited from the previous Government. We took those decisions in a way that makes the tax system fairer and more sustainable.

As a result of the measures we are taking, individuals will continue to be able to claim 100% relief for the first £1 million of combined business and agricultural assets, and 50% thereafter. Given the nil-rate bands, that means a couple can pass on up to £3 million between them to a direct descendant inheritance tax-free. In answer to the noble Baroness’s question, the measures will go ahead as planned.

National Insurance Contributions (Secondary Class 1 Contributions) Bill

Baroness Neville-Rolfe Excerpts

Committee stage
Tuesday 21st January 2025 Grand Committee

[Lord Blackwell (Con)]

In that case, I will address that amendment when we come to it.

[Baroness Neville-Rolfe (Con)]

My Lords, I thank the noble Lord, Lord Scriven, for tabling these amendments and others who have spoken, particularly my noble friend Lord Randall, who supported the amendments highlighting the damage to smaller businesses. I very much share his view.

This has been an interesting discussion and it has brought out how unjust the proposals in the Budget for national insurance were. The amendment rightly draws attention to the problems created across the health sector, all of which we will discuss again in detail on other groups. “Stark” was the rather good word used by the noble Lord, Lord Scriven. As we heard at Second Reading, there are appalling consequences for those dealing with some of the most tragic services, including hospices and the transport of those with special educational needs. There will also be an immense strain on care homes, GPs, dentists and pharmacies—mostly small operations employing a number of part-time and low-paid staff. That will seriously impact on the health of the NHS.

What is so unfair is that the public sector is being compensated for the extra costs. That is in contrast to those carrying out public good in the private sector, which, incidentally, we know is more productive. For example, I have been amazed by the industry of family-run pharmacies, which helped so much during Covid and are asked to do more and more year by year. They are having to deal with the treble whammy of NICs, the national minimum wage rises—especially for the young—and the prospect of the Deputy Prime Minister Angela Rayner’s proposals for new employment legislation.

As I highlighted at Second Reading, many in the health sector say that they will be forced to reduce services and limit headcount. For example, we heard from the noble Lord, Lord Scriven, about the increased cost of social care faced by the independent care providers—I think he talked about £900 million; I had a figure of £940 million—which simply dwarfs the £600 million support rightly included in the Budget to help the sector. If the Government recognise that this tax is not sustainable for the public sector, why are they unable to apply that same logic to sectors that provide public services? These are not big businesses. They provide a critical service for the people and, if they are unable to do so, that will add to the pressure on the NHS. The noble and learned Lord, Lord Hope, gave a good example of the Cyrenians in Scotland and my noble friend Lord Forsyth rightly mentioned hospices, as I think everybody will do throughout this Committee.

[Lord Forsyth of Drumlean (Con)]

Before my noble friend leaves this figure of £940 million for social care, something like one in seven of the beds in the NHS are occupied by people who are well and who could be discharged. If we are going to add a burden to the social care sector, that £940 million does not take account of the cost to the NHS of those beds being occupied by people who would otherwise be able to be in their own homes, not just saving the taxpayer money but also hugely improving their quality of life. So the £940 million —or the £900 million, as mentioned by the noble Lord, Lord Scriven—is a gross underestimate of the real costs that are being imposed by this policy, is it not?

[Baroness Neville-Rolfe (Con)]

My noble friend makes an excellent point. It is a question of the dynamics. I know, having once been a Treasury Minister, that dynamics always worry it. But the fact of the matter is that, if we can get things done and get people out of hospital quicker, as my noble friend suggests, that would make a real difference.

I feel that the proposals that we are faced with for hard-working businesspeople and for social enterprises are a huge slap in the face. They are being discussed on a day when unemployment is rising and job opportunities are falling. I believe that that reflects the impact of the £23.8 billion hit on employers’ national insurance. It is a veritable jobs tax and the gloom that the Government have admitted for the first six months of their tenure has not helped. That is why my noble friend Lord Forsyth was right to regret that we were debating this not on the Floor of the House but in Grand Committee. I hope that none the less we will attempt to give the Bill proper scrutiny here, because if we do not, that would be a big failing.

In that respect, one of the things that annoys me most is the lack of a proper impact assessment. We have a very inadequate impact note, which was published on 13 November. That gives a run of the yield to the Exchequer year by year but does not break it down into the three categories: the costs of the increase to 15%, the lowering of the threshold, which is extremely regressive, and the welcome benefit from the rise in the employment allowance—and indeed anything else included in the figure of £23.8 billion, which was by far the biggest change in the Budget and which is why so many people are here today worrying about the Bill.

There is also an unexpected dynamic effect highlighted by the OBR, which means that, following the reduction in wages, profits and employment, this tax will raise over £5 billion less than the Treasury forecast, raising £18.3 billion in 2025-26 and nearly £10 billion less than the forecast in 2026-27. So there is a great deal of pain for wealth creators and effective employers, but not a lot of gain.

I cannot see how we can scrutinise the Bill without proper impact information, and I look forward to a proper discussion during the debate on Amendment 13. However, I think the Committee would also like to have authoritative, disaggregated figures on the impact on the health and care sectors under discussion today. That is why I am raising this now, and I hope the Minister will consider what he can do to assist the Committee so that we can have proper understanding and proper scrutiny. We want to do the right thing here.

It is against that sombre background that I shall speak to my Amendments 38 and 42, which have been grouped with this amendment. They seek to increase the employment allowance in the primary care sector. My purpose is to probe the Government’s openness to helping the sector a bit more through an increase. Perhaps the Minister could clarify the facts. The BMA has said that, as public authorities, they are unable to access support via the increased allowance and the noble Lord, Lord Scriven, made a similar point in relation to dentists. The Committee needs to know whether that is true.

Mine is a probing amendment and the first of several relating to Clause 3. To reply to the noble Lord, Lord Eatwell, as someone who has tried to reform taxes in the past, originally with the help of my noble friend Lord Heseltine as part of the deregulation initiative, it is very difficult to get simplification of the tax system. That is one reason why I have tabled an amendment relating to the employment allowance, because it comes at the matter in a different way.

Primary care is vital to the Government’s plans to improve the NHS. My fear is that the NICs changes, especially the lowering of the threshold and with part-time working so common in primary care, will lead to further problems in GP surgeries, increasing chronic conditions and waiting times for appointments across the NHS, and having the perverse effect that I think we will come back to as this Committee progresses.

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

My Lords, it is a great pleasure to respond to the debate on this first group of amendments, and I thank all noble Lords who have contributed so far. It is also a pleasure to see so many noble Lords in the Grand Committee. I know that some noble Lords are unhappy about being here, but the noble Baronesses, Lady Kramer and Lady Neville-Rolfe, in particular, and I know what it feels like to be in this Grand Committee on our own, so it is, at least, I have to say, nice to be popular.

Before I address each of the amendments in this group, I shall very briefly set out at the outset the context in which the Budget decisions contained in the Bill were taken. I would like to do so since this context is why we are here today and underpins the debates that we will have, not just on this group of amendments, but on all further groups. As noble Lords will know, the Government inherited three distinct challenges: the need to repair the public finances; the need to rebuild public services; and the need to protect working people.

The most pressing of these challenges was the need to repair the £22 billion black hole in the public finances as a result of a series of commitments made by the previous Government which they did not fund. The previous Government also made no provision for costs that they knew would materialise, including £11.8 billion to compensate victims of the infected blood scandal and £1.8 billion to compensate victims of the Post Office Horizon scandal. These pressures have to be funded, and it falls to this Government to do so.

Noble Lords will also know that the country inherited acute problems in public services, with NHS waiting lists at record levels, children in Portakabins as school roofs crumbled around them and rivers filled with polluted waste. Yet since 2021, there had been no spending review and no detailed plans for departmental spending were set out for beyond this year. Working people had also lived through a cost-of-living crisis, with inflation peaking at 11.1% and remaining above target for 33 consecutive months. Combined with the previous Government’s decision to freeze income tax thresholds—

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[Baroness Neville-Rolfe (Con)]

I asked a question which, in relation to dentists, echoed by the noble Lord, Lord Scriven. It was about the definition of “public authorities” and how that affects payment of the employment allowance. I raised it at Second Reading as well. It would be helpful to have a judgment on that point.

[Lord Livermore (Lab)]

The definition is set as it was previously. We have no intention of changing that definition.

[Baroness Neville-Rolfe (Con)]

To be clear, that means these bodies will not have access to the employment allowance if they are public authorities. It would be helpful to know what the costings of that look like. I know that the Minister does not want to make any changes, but we are trying to understand what the numbers are here and in some minor areas, such as hospices. The Minister says that hospices will have extra money, but they will also have to pay a lot extra in national insurance. We are trying to understand all that to give him helpful feedback on the Bill; obviously, we are as keen as he is for it to succeed.

[Lord Livermore (Lab)]

I would be very happy to look into the specific point made by the noble Baroness. I will feed back in my responses on a subsequent group.

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At present, as I understand it, there is still an exemption on NI contributions for veterans in their first job after they have left the Armed Forces. If I am indeed correct in that, can the Minister explain to the Committee how that is going to be dealt with in the current changes to the legislation? Will that simply be abolished by this general increase in national insurance contributions? In short, I should like at least to do what I have done, which is to raise the importance of supporting veterans back into employment. An attack on jobs through an increase in national insurance contributions is a general problem, but it is a particular problem for getting veterans back into employment. Specifically, is the NI contribution exemption for the first year still going to be in place under the Government’s new legislation?

[Baroness Neville-Rolfe (Con)]

I did not say I wanted the Bill to go through. I agree that that it is a jobs tax, as the noble Baroness said. What I accept is that the Government have a large majority in the other House, and what I am trying to do in this House is to have a proper discussion on the Bill with a view, perhaps, to amending it and persuading the Government that they have made some mistakes and that we can improve the Bill.

[Baroness Smith of Newnham (LD)]

The noble Baroness is trying to encourage the Liberal Democrats to be in agreement with the Conservatives, rather as her noble friend Lord Forsyth suggested at one point that he was in favour of the amendment from my noble friend Lord Scriven. We need to be a little bit careful not to agree with each other too often. But she is absolutely right. The Government have a large majority in the other place and it is not the business of this House to go against the Salisbury/Addison convention. However, I do not remember this being a manifesto commitment.

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[Lord Livermore (Lab)]

My Lords, I am very grateful to all noble Lords who have spoken in this debate. I will address the amendments tabled by the noble Baronesses, Lady Smith of Newnham and Lady Kramer, and the noble Lord, Lord Randall of Uxbridge, which seek to exempt veteran salaries from the employer national insurance changes. These amendments would create a different employer national insurance rate and threshold set at the current levels for salaries of veterans. The Government of course recognise the huge contributions made by the UK Armed Forces and veterans in this country, and I completely understand the intention behind these amendments.

As some noble Lords have mentioned, there is already an employer national insurance relief available for the earnings of veterans, meaning that employers are not required to pay any national insurance contributions up to £50,270 for the first year of civilian employment. At the Budget, the Government decided to extend the national insurance contributions relief for employers who hire veterans to support veterans in their first year of civilian employment for a further year. Despite the challenging fiscal inheritance this Government face, this means we are maintaining this relief and it is not changing as a result of this Bill.

Further to this, we have more than doubled the employment allowance to £10,500, meaning that more than half of businesses with national insurance liabilities either gain or see no change next year. Businesses and charities will still be able to claim employer national insurance reliefs, including those for under-21s and under-25 apprentices, where eligible.

On veterans more widely, this Government have taken action to demonstrate our commitment to renew this nation’s contract with those who have served. We have awarded £3.7 million in veterans housing grants, veterans will be exempt from the local connection test for social housing in England and veteran cards are now accepted ID for elections. We are progressing veterans support programmes at pace, including a centralised referral pathway designed to support veterans who are homeless or at risk of homelessness, an NHS mental health specialist service designed to help veterans and their families in England and an NHS physical health specialist service designed to help veterans and their families in England.

Before I sit down, I shall also address the questions raised by the noble Baroness, Lady Neville-Rolfe, about dentists, which I was unable to answer during the debate on the previous group. As I said, the criteria have not changed, including the exclusion of those doing 50% of their work in the public sector. The eligibility is down to individual businesses, and the proportion of their work in the public sector may vary year to year. All charities can claim, including hospices.

[Baroness Neville-Rolfe (Con)]

My point was in relation to the points made by the BMA and the dentists. There are two separate points. It is not in this group, but it might be as well to have a discussion on this so that we can be clear about this and on the impact on these important areas for the future of health in the NHS.

[Baroness Smith of Newnham (LD)]

Can the Minister clarify something? I understood that the national insurance contributions relief for veterans had been extended for one year and that this Bill was not going to affect veterans. Surely at some point it cuts out. Is that correct, so that this would be valid only up to 2026?

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[Lord Macpherson of Earl’s Court (CB)]

My Lords, I will try to be extremely brief because no doubt I will be interrupted again. The point I was making was that if you cut tax in one area, you are going to have to raise it somewhere else. That is always problematic.

There are two other reasons why I have some reservations about this amendment. First, it is often thought—the Financial Secretary will remember this because we worked together on measures in the early 2000s—that part-time workers are poor. However, if you look at the poverty statistics, many part-time workers live in quite affluent households. My point is that as a measure to target people on low income, this is a very blunt instrument. It is far better to target them through tax credits, or universal credit as it is now called.

My final points relates to having worked on national insurance over three decades or more and is about the danger of creating steps in the system. I remember large numbers of workers bunching below the lower earnings limit, which was totally understandable as it was in their interest and their employer’s interest. By creating steps in the system, you discourage people from moving up the earnings ladder. In the short term, I could understand that cutting national insurance for the self-employed would genuinely incentivise the employment of part-time workers, but once in place, over time the existence of the step would trap many workers in this part-time zone because their employers would not want them to cross the step that resulted in higher national insurance. I warn against targeted measures such as this as they tend to cause difficulty and disappointment.

[Baroness Neville-Rolfe (Con)]

My Lords, I thank all noble Lords for their contributions, particularly the noble Baroness, Lady Kramer. I regret that the noble Lord, Lord Bruce, is not in his place and associate myself with the request for some information about Scotland.

The amendments address a matter of real importance, which is the impact of the measures on part-time and seasonal workers, SMEs, hospitality and tourism. The noble Baroness, Lady Kramer, is right about the importance of part-time working in tourism, pubs, restaurants and events. That sector is sometimes neglected in public policy-making, but it is vital to growth.

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[Baroness Neville-Rolfe (Con)]

My Lords, on growth, and indeed on the hospitality industry, it is particularly good to have the practical experience of the noble Lord, Lord Londesborough. I agree with him that it would be helpful to understand today’s employment decline a little better in the Committee.

According to the ONS, there are 8.4 million people working part-time in the UK, which is approximately one-quarter of the workforce. They work in large and small firms and include many young people, students and carers, as well as disproportionate numbers in hospitality, tourism and retail. I know from my days at Tesco how important part-time workers are to big employers as well as small employers, and, in particular, to 24/7 businesses—retail is a 24/7 business. That includes a lot of employment of elderly people. Also, as was said, part-time workers are not only the lowly paid—I had several part-time directors working for me—and good employers offer proper training to their part-time teams. It is an extremely important part of the economy.

While the rise in the national insurance rate to 15% will no doubt hit part-time workers, it is the huge reduction of the threshold to £5,000 from £9,100 that will have the most detrimental consequences for those who work part-time. It is yet another blow to the sector, alongside the increase in the minimum wage that comes into force in April.

As a result, a company that employs a part-time worker over the age of 21 who works just eight hours a week on the minimum wage—I think the noble Baroness, Lady Kramer, said it was down from 14 hours a week —will be hit with this jobs tax for the first time, and the hospitality sector will be disproportionately affected. I think Kate Nicholls used the word “eye-watering”. The industry has warned that the measures announced in the Bill will cost it £1 billion overall. My noble friend Lord Ahmad quoted that figure as well. He is right about the adverse consequences of this and the need for consultation on such changes. How can you adjust your business model and be ready if you do not know what is coming?

It is really difficult for these companies. For the first time, they will have to pay tax on the wages of thousands of part-time hospitality workers. UKHospitality has estimated that a company employing a part-time worker doing 15 hours a week will see a 73% increase in its national insurance bill. It goes without saying that business will have to make tough decisions, as employing part-time workers is soon to become much more expensive. The trouble is that part-time work provides a flexible form of employment for so many—I have mentioned students and carers, but parents are also affected. It can be very useful in juggling what families do. These are people who rely on the flexibility of part-time contracts and might not otherwise be able to work at all.

Can the Minister tell the Committee what assessment the Government have made of the effect of the changes enabled by the Bill on part-time workers? Perhaps he could also comment on the levels of employment within the hospitality sector and how he sees that panning out. How do the Government intend to support industries that will be most impacted by these changes to national insurance contributions? How can he give them hope and how can we be sure that they continue to play their part in growth? It is difficult and we need to try to find some comfort.

[Baroness Bennett of Manor Castle (GP)]

My Lords, I apologise for speaking after the Tory Front Bench, but I thought the noble Lord, Lord Londesborough, was continuing after the voting break.

I will speak briefly in favour of Amendments 58 and 59. In doing that, perhaps I should declare an interest. I was on the board of the Fawcett Society in 2010 when it brought a judicial review against the emergency Budget of that year for its failure to honour its legal duty under the Equality Act to do with gender impact assessment. In that case, although Fawcett lost the overall case on legal grounds, it was said that the gender impact assessment requirements applied to the Budget and should have been carried out on a couple of aspects of that Budget.

With that in mind, I draw attention to the final page of the policy paper of 13 November, which I think we are regarding as an impact assessment. Under the heading “Equalities Impacts”, in this five-page document that my sub-editor’s eye tells me is in 16-point, it states:

“Secondary Class 1 NICs are levied on employers rather than individuals. There are therefore no direct equalities impacts”.


I would like to question the Minister on how it can be claimed that there are no equalities impacts. Some figures have already been raised, but I point out that 74% of part-time workers are female, 57% of involuntary part-time workers are female, 6 million women are working part time and 10 million women are working full time. According to the Resolution Foundation’s analysis of ONS data, 63% of UK workers under the £9,100 threshold are female. We are seeing national insurance charges increasing the cost of employment by nearly £700 a year for someone working 15 hours a week on the minimum wage. An additional 600,000 women workers are being brought within scope of national insurance. As others have said, on the minimum wage you need to work fewer than eight hours a week to stay below the new threshold.

Analysis of this has suggested that women workers are particularly affected by this change. Some of them may want to raise their hours, so this might turn out positive. Some of them may have caring responsibilities that mean that they cannot lift their hours and may then have to leave employment because they are being offered more or nothing. It is also worth pointing out that the Women’s Budget Group has highlighted how the overall impacts of the national insurance changes are likely significantly to increase childcare costs. That is of immediate relevance to working women with direct childcare responsibilities, but, as the Women’s Budget Group pointed out, there are also issues around grandparents, very likely grandmothers, who may find themselves being pushed, and feeling obligated, to leave employment so that they can take up childcare responsibilities. I do not think that that equalities impact can be justified and would appreciate the Minister’s comments.

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In light of the points I have made, I respectfully ask noble Lords not to press their amendments.

[Baroness Neville-Rolfe (Con)]

Before the noble Lord sits down, while no impact assessment is perfect, I think it is very difficult to call this note of 13 November detailed. The only numbers it gives are the global numbers, the £23.7 billion et cetera, and the run, and there are a few textual comments about equalities and things. What it does not do is even break down the costings into the different areas where different measures are being taken. It is not a detailed assessment; it is described, rightly, as an impact note. We will return to this, because we think that transparency and understanding the impact of policies is really helpful, including to His Majesty’s Government.