National Insurance Contributions (Secondary Class 1 Contributions) Bill

Lord Eatwell Excerpts

Report stage
Tuesday 25th February 2025 Lords Chamber

[Lord Howard of Lympne (Con)]

My Lords, I am afraid that I too was unable to be present at the earlier stages of the Bill, but I rise to support this amendment—in particular, the provisions relating to hospices. These would have the same effect as later amendments in the name of my noble friend Lady Neville-Rolfe, to which I have also put my name. I draw attention to my entry in the register as vice-president and past chairman of Hospice UK.

The added burden that the increased contributions will place on the hospice sector are considerable. The extra cost has been estimated at no less than £34 million a year. St Christopher’s Hospice in south London has said that it will face increased costs of around £450,000 a year—equivalent to the cost of nine specialist nurses. Dorothy House hospice in Wiltshire estimates additional costs of £422,000 a year. The Kirkwood Hospice has had to put 33 roles at risk of redundancy, citing the increased national insurance costs as one of the drivers. Nottinghamshire Hospice is also proposing redundancies, again citing these extra costs as one of the factors.

These are just some of the examples of the devastating effect that these measures will have on hospice care. This is all so short-sighted. We all know that one of the major challenges facing the NHS is bed-blocking. As I have told your Lordships before, hospices can make a huge contribution to overcoming this challenge by looking after patients in the community, either in hospices or looked after by hospices at home. To make that contribution, hospices need more resources, not fewer, so this change will add to the challenges facing the NHS, not only directly in respect of its own employees but indirectly by diminishing the capacity of hospices to help.

The Minister will no doubt refer to the Government’s recent announcement that £100 million would be made available to hospices, and that is indeed welcome. But that money is for capital projects. Not a penny of it is available to defray the extra costs of the increase in national insurance contributions, which we are debating today, so it will have little or no effect on the crisis in hospice care that I have described.

I urge the Government to think long and hard about this amendment and to come up with a constructive solution.

[Lord Eatwell (Lab)]

My Lords, I find some difficulty in addressing this group of amendments, specifically because these amendments are but a part of 38—out of the total of 44—amendments in the Marshalled List that are essentially all the same. The 38 amendments all propose exemptions to the changes proposed in the Bill, or variations in the various thresholds at which employers’ national insurance is charged. All the amendments have the same internal logic: they are designed to reduce revenue. All 38 are the same; they vary only in the individuals, firms or groups that are to be exempted. The House will, of course, deem many of the individuals and groups not just worthy but really deserving of support.

I wish to address the 38 amendments collectively because they are the same. The Liberal Democrat Benches, notably with amendments associated with the noble Baroness, Lady Kramer, seek to exempt providers of care homes or domiciliary care, primary care providers, dentists, pharmacists, charitable providers of healthcare, hospice care, carers and part-time workers. She adds providers of education or childcare to children under five years of age, universities, providers of further or higher education, registered charities, housing associations, small or micro businesses, town councils, parish councils and businesses in the hospitality sector.

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[Lord Hodgson of Astley Abbotts (Con)]

My Lords, I have not spoken on the Bill before but I add, very briefly, my support to the proposals from the noble Lord, Lord Londesborough. I have spent a lifetime in the city helping businesses grow—funding them, looking after them and developing them. They are vulnerable throughout, but they are particularly vulnerable in their early stages, which is the point of the noble Lord’s amendment.

With 25 people or fewer, it is easy to forget just how difficult it is, and how persistent an effort is needed, to get a business going, keep it going and to eventually grow it, hopefully, to a great size where it will employ people and increase the prosperity of the country. It is our feedstock—this is where I take issue with the noble Lord, Lord Eatwell, who served with me on a City regulatory body many years ago—and if you cut down the trees in any one year, those trees will never reappear. We shall have a smaller number of growing companies from the years when this proposal has its impact.

It is also surprising, when I hear debates in your Lordships’ House, how many Members cannot conceive of circumstances when the pay cheque will not turn up at the end of the month. A lifetime in public service insures you against that. But, if you run a business, you have to think every day about will happen at the end of the month. Will there be a call from the bank manager saying, “I’m very sorry, I’m not going to be able to meet your payroll”? When you have responsibility for other people, that ghastly pressure is increased by the sorts of measures the Government propose to take here.

I say to the Minister, very gently, that the phrase is: revenue is vanity, profit is stability, but cash is reality. In this Bill the Government are proposing to undermine the reality of the cash that is desperately needed by the very smallest among our companies.

[Lord Eatwell (Lab)]

My Lords, the amendments proposed by the noble Baroness, Lady Barker, are a classic example of how to distort a market. She wishes not only to exempt part-time employees from the measures in the Bill but to reduce the national insurance charge on part-time employees. She does not appear to have reflected on what would be the impact on full-time employees. How many full-time employees will, as a result of this measure, lose their jobs and be replaced by two or three part-time employees? How many companies will reach a cliff edge with respect to their employment policies that will ensure they develop only part-time employees, who often have fewer opportunities, and certainly fewer opportunities for promotion, than full-time employees? What has the noble Baroness got against full-time employment? We need an answer to that. Why is she so content to distort the labour market in this way?

With respect to the amendments proposed by the noble Lord, Lord Londesborough, I have greater sympathy with what he says, but he too is creating a cliff edge. The cliff edge is at 25 employees and it will considerably distort the operations of the market at that stage. It will discourage companies from growing above 25 employees. It will encourage the break-up of structures, so that units employ only 25 employees.

Most interestingly, the noble Lord asked for an impact assessment of the overall impact on employment of the measures in the Bill. There have been at least three—one by the National Institute of Economic and Social Research, another by the OBR and another by the Treasury. They all demonstrate that, taking the measures in the Budget as a whole, employment in the next year will increase, not diminish. The error which, I am afraid, the noble Lord made in his argument is that, yes indeed, because of higher employment costs, there may be a reduction in employment per unit output, but, because of the stimulation of aggregate demand in the Budget, there will be more units of output. So, not only will these measures encourage the growth of labour productivity by reducing the input of labour per unit output but the expenditure of these measures, through a technical device called a balanced budget multiplier, will increase the level of employment in the coming year. The impact assessment is there for all to see.

[Lord Blackwell (Con)]

My Lords, the noble Lord, Lord Eatwell, is a distinguished economist and I defer to his expertise, but I have to challenge him on the assertion that the measures in this Bill which raise national insurance are job creating. The Budget as a whole does not spend only the money raised through this tax; it spends another £40 billion a year, I believe—a total of £70 billion extra over each year of the course of the Parliament. Now, you have to assume that any measure that increases public spending by £70 billion a year will increase employment. It would be a strange measure that increased public expenditure without increasing employment. The difficulty is that all that employment increase will be in the public sector. The fact that this Government have to understand is that you have to earn wealth before you spend it and that compressing the wealth-creating part of the economy in order to spend on the public sector leads to financial disaster in the long run. So I do think his argument on that point needs to be challenged.