National Insurance Contributions (Secondary Class 1 Contributions) Bill

Baroness Smith of Newnham Excerpts

Committee stage
Tuesday 21st January 2025 Grand Committee

[Lord Forsyth of Drumlean (Con)]

Yes, but that that completely removes the private sector providing, for example, social care. A report on social care from the Economic Affairs Committee, which I chaired some time ago, was very much endorsed by the House as a whole—there was unanimous agreement across the House. It made clear what is happening in private care homes, for example. People who are paying their own fees, as opposed to them being paid by the local authority, are being charged up to 40% more to subsidise people who are in those homes as a result of the local authority. Here we have a situation where the burden is placed even more strongly on people providing care out of their own savings and resources.

It seems to me that a distinction is being made between the elements that are providing care. For example, in dentistry, every time I go to the dentist—I see him every six months, when he has me in a position of some vulnerability—he tells me that he is unable to take on NHS patients because if he does so, the amounts he is allowed to charge mean that he is making a loss. That loss occurs because of staff and other costs, which will increase as a result of these measures. That will mean that the problem of getting dental care in the NHS, which is acute at present and even more acute for people with particularly severe orthodontic conditions, will get worse. He tells me, for example, that people can wait until their teenage years before they get treatment, and then they have to show that they have had treatment for the previous few years. If they have not had that, they are no longer eligible. The result is that people do not get treatment at all. Everyone knows that NHS dentistry is in crisis. As the noble Lord, Lord Scriven, pointed out, this will make it even worse.

Then we have the issue of the hospices. The noble and learned Lord, Lord Hope, mentioned the case of Cyrenians and I would be remiss if I did not. My noble friend Lady Goldie asked me to mention the letter that she received from that organisation, and the noble and learned Lord highlighted the fact that this will mean £171,000 extra for a charity—not a big one—which is struggling. When I was Health Minister in Scotland a million years ago, I introduced pound-for-pound funding for hospices, whereby the Government would match the funding raised by the hospices. That was hugely successful but subsequently repealed by the Scottish Parliament when it came into action. Hospices are organisations that we should be supporting. We should not be thinking of new taxes on the people that they have to employ, although of course they benefit from many volunteers.

The whole Bill is deeply misguided and, as the noble Lord pointed out, will have a devastating effect, not just on private providers but on all providers and charities. I remind the noble Lord that had we had his excellent amendment on the Floor of the House, we could have divided on it and sought the opinion of the whole House, but because we are put in here, we are unable to do so. That is a great disservice. Of course, it means that the Liberals—

[Baroness Smith of Newnham (LD)]

And democrats.

[Lord Forsyth of Drumlean (Con)]

Well, I am not so sure about the “democrat”, but they are certainly called Liberal Democrats. They will be able to say, “We raised your concerns”, but they raised our concerns in a way that made it difficult to have the rules of engagement that would enable us to refine those amendments in Committee.

I hope that in considering his amendment, the noble Lord, if he takes it a stage further—I do not anticipate that the Government will accept it—may take account of the concern that it is not just about the public sector but the private sector. Bear in mind that this is just one measure on top of others—the increase in the minimum wage and the employment rights legislation—that will make it much more difficult for people to be flexible in their labour arrangements. All these things together are crushing these important public service organisations.

I support the amendment, but I hope that the noble Lord might think further on the contribution made by those private providers providing services to people who pay from their own pockets.

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Moved by

[Baroness Smith of Newnham]

2: Clause 1, page 1, line 1, at end insert—
“(A1) The Social Security Contributions and Benefits Act 1992 is amended as follows.(A2) In section 9(1A) after paragraph (aa) insert—“(ab) if section 9AA applies to the earnings, the veterans secondary percentage;”(A3) After section 9A insert—“9AA Veterans secondary percentage(1) Where a secondary Class 1 contribution is payable as mentioned in section 6(1)(b), this section applies to the earnings paid in the tax week, in respect of the employment in question, where the earner is a veteran.(2) For the purposes of section 9(1A)(ab), the veterans secondary percentage is 13.8%.(3) For the purposes of this section, a “veteran” means a former member of any of His Majesty’s forces.””Member’s explanatory statement
This amendment would exempt veterans’ salaries from NICs changes.

[Baroness Smith of Newnham (LD)]

My Lords, in moving Amendment 2, I will also speak to Amendments 17 and 20 in my name and those of my noble friend Lady Kramer and the noble Lord, Lord Randall of Uxbridge. I was not able to speak at Second Reading. The Grand Committee will be delighted to know that I do not intend to give a Second Reading speech, even though there appears to be a precedent this afternoon. Nor will I talk about the quantum of £X billion, although I will briefly explain why I was not at Second Reading.

I realise that it is not necessary to apologise, but I was detained up north waiting for a meeting associated with my father’s discharge from care, without which the NHS is paying for his care in a care home and has now done so for three months. Until it and social services are able to come to a resolution, the NHS is paying for his care, rather than either the local authority or, indeed, my father and his family. All the issues we heard about in the discussion on the first group of amendments are absolutely as acute as everybody said. We really need to deal with some of them, but whether they are best dealt with by increasing employers’ national insurance contributions I am not at all persuaded.

As we heard in the previous group, this is a tax on jobs. In concluding the group, the noble Baroness, Lady Neville-Rolfe, said something about our wishing this legislation through or hoping to see it pass. I am not looking forward to seeing this legislation pass, because it is undoubtedly a tax on jobs, and it is not clear how it will help growth or any of the ambitions that His Majesty’s Chancellor of the Exchequer seems to think are necessary for our economy to improve.

There is a serious issue at the moment. The specific issue on which my group of amendments focuses is veterans. I am aware that that sounds even more niche than health and social care or the voluntary sector, and that the noble Lord, Lord Eatwell, will be poised to jump up to say that this just adds yet more complexity. Why does a Liberal Democrat appear to be simply finding a way of adding to the complexity of the tax base? There are two reasons.

One is that the Government and this country have a commitment to our veterans, as part of the Armed Forces community. We have a very clear commitment to supporting our veterans, in particular by getting them back into work. As tabled, this set of amendments is rather broad and I am aware that if we were on Report, I would not have amendments quite as broad as they are at present. The detail of the amendment is, in form and structure, identical to that of those for health and social care and all the other Liberal Democrat groups of amendments, where we are essentially saying that we should keep the threshold and the percentages as they are, rather than increase the thresholds and tax rates.

The issue with veterans is that people who leave our Armed Forces are highly skilled and capable, yet not always seen as the most obvious people to employ. Larger employers may do so but it is not inevitable. A report by the Federation of Small Businesses back in 2019, A Force for Business, clearly highlighted the importance of bringing veterans back into the workforce. Its commitments to bringing veterans back into the workforce built on a report that highlighted that 12% of small businesses had employed veterans in the previous three years, and about 20% of manufacturers. It is important for veterans to be employed, but it is also important for small businesses to be able to employ them.

On the back of those proposals and the report from the Federation of Small Businesses, under the previous Government, as of the tax year April 2021-22, there was an exemption for newly employed veterans: not for all Armed Forces veterans, as the current amendments talk about, but for those who were in their first job after leaving the Armed Forces, however long the period between leaving the Armed Forces and having their first civilian job might have been.

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[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.

[Lord Randall of Uxbridge (Con)]

My Lords, I find myself again being somewhat like a bully standing behind the Lib Dems urging them on. But, of course, they are not bullying but providing a good service. I should also say, with regards to this Lib Dem-Conservative coalition, I was actually Deputy Chief Whip during the coalition period and I have to say that the Lib Dems, certainly in the Whips’ Office, were extremely good partners and very sensible. So I have great sympathy for the amendment.

I thank the noble Baroness, Lady Smith or Newnham, for her speech and express sympathy for the situation she finds herself in with her father. We all will have sympathy, even if we have not gone through similar things ourselves. As with the previous group, I can understand why the noble Lord, Lord Eatwell, said what he did, and I would prefer that we did not have all these exemptions. But the fact is that there are exemptions. That is what happens. I also say that, with regard to the veterans, the noble Baroness, Lady Smith of Newnham, has done us a great service in showing how many different sectors can be affected by this.

We all have a debt of gratitude to veterans. If there was an exemption, as put down in the amendment, that might be an inducement for employers to hire those people. There could be no greater service to those people, who have given everything. As the noble Baroness said, they are very skilled and have a lot to offer. One could go on down the exemption line, but I do not want to incur the ire of the noble Lord, Lord Eatwell, any further. One could apply this to people who have come out of prison, because we want to encourage rehabilitation, and so forth.

However, the point is—here I reiterate—that there must be alternative ways of raising this tax. I have not got them. I could, probably, upset most people in Committee today by saying that we should perhaps have looked at introducing national insurance contributions for those over the pension age. There may be quite a few people who would come into that category who could well afford it. There again, however, I will have to watch my back on the Metropolitan line on my way home today, in case I am taken out by a couple of sticks and so forth.

I understand the difficulties the Government face, but I reiterate that we are having a deleterious effect on some vulnerable sectors—we have not got on to charities yet, so I will hold my fire on that. However, this is something we should be taking very seriously.

With regard to the point about the large majority in the Commons, there is part of me—not the nice part or the Deputy Chief Whip part—that would be very keen to see some Labour Members vote against measures that will affect their local charities and veterans, and so on. We should do a service to the gallant men and women who have taken this up in the other place by making their lives a little easier.

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[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?

[Lord Livermore (Lab)]

The noble Lord, Lord Altrincham, set out in his speech that it was extended year by year under the previous Government. This Government have done the same thing and have extended it for a further year.

On the basis of what I have set out, I hope the noble Baroness will feel able to withdraw her amendment.

[Baroness Smith of Newnham (LD)]

I thank all noble Lords who have contributed to the group, and I beg leave to withdraw the amendment.

Amendment 2 withdrawn.