National Insurance Contributions (Employer Pensions Contributions) Bill

Lord Fuller Excerpts

Committee stage
Tuesday 24th February 2026 Grand Committee

[Lord Davies of Brixton (Lab)]

I support the Bill. It is an eminently reasonable approach to the difficult financial situation in which we found ourselves when the Labour Government took office. No one likes increases in taxation—it is easy to say “No, no, no”—but given the outcome of the election, some increase in taxation was required.

I listened to the debate with interest, including the points raised on student loans in relation to Amendments 3 and 16. I do not understand it, but I hope that my noble friend the Minister does and that he can give a satisfactory response.

I am a bit concerned when people talk about the Bill “penalising” people. Taking away an advantage struggles to be a penalty. The idea of salary sacrifice makes no sense; it is regulatory arbitrage and a sort of kludge that has no real justification. It is also unnecessary. The idea that the pension system will suffer greatly from the removal of this particular tax relief is fanciful. Some people regard the golden age of pensions as having been 10, 20 or 30 years ago; virtually no one then had salary sacrifice and yet schemes boomed and people saved for retirement. We cannot sustain an argument that providing an adequate pension for most people requires this form of salary sacrifice, particularly when £2,000 is being allowed.

As I said at Second Reading, I disagree with the idea that this is, in some way, a mortal blow to pensions— I may exaggerate slightly, but there was continual suggestion that this was a severe blow to people’s attempt to provide themselves with a decent pension. It is interesting that people who are arguing to keep this salary sacrifice are those who, at the same time, oppose the triple lock, and yet the triple lock is doing far more than this would do for people on low incomes to secure an adequate income in the future, so I do not accept that argument about impact.

The important issue is that this bit of tax relief on pensions should be seen in the context of the overall tax relief on pensions. What is the right level overall of providing relief through the tax system for pension provision? We all know it is substantial; it is enormous. If you count all the different forms it could take, it comes to about £90 billion. When the scheme has matured, this will take away £2.5 billion. That is why I said at Second Reading that it is marginal; it is not crucial for the future of pensions.

The issue of tax relief on pensions is controversial. Think tanks love a report on tax relief on pensions. None of them is proposing an increase in tax relief on pensions, yet this is the way that we are heading. The Government’s figures—which no one has disputed—suggests that more and more people will seek more and more salary sacrifice to get more and more tax relief on pensions. Yet when the think tanks look at these issues, they say, “Well, no, it should be targeted towards the lower paid”. If anyone thinks that this will cause problems—I am looking at the noble Baroness, Lady Kramer; I think the Liberal Democrats have supported, or toyed with, the idea of having a flat-rate tax relief on pensions—I suggest that moving to a flat-rate tax relief on pension contributions will cause an absolute nightmare.

There is one point here that I accept. My noble friend the Minister can take it as a helpful suggestion rather than a criticism, but the use of the term “higher earner” could have been judged better. Noble Lords will be pleased to know that I have a spreadsheet, which calculates the impact that people suggest this measure is going to have. Of course, the 2% and 8% feature means that there is a kink in the line of the relief that you get from salary sacrifice because, up to a certain level, you pay 8% contributions through national insurance and you are getting the relief at 8%. Then, after that, it is 2%. It is not that the Government are seeking out people to charge more money; it is the structure of the system.

Let us look at the figures. I sometimes have problems in these debates when other speakers quote figures because it is difficult to understand them without seeing them in writing with some explanation. I think that, in general, there should be a ban on quoting figures in these sorts of debate. However, I am going to quote some figures. The median level of contributions to a pension scheme is 5%—that is, between 4% and 6%—on median earnings below £40,000. Now let us take the higher figures: someone paying employee contributions of 6% with earnings of £40,000. They are using salaries in full on their contributions. For them, the change will be an extra £32 a year. Those are the figures we are talking about for those on median earnings and those on median contributions.

As has been mentioned, bonus sacrifice is clearly a separate issue. This is where the legislation is required. It is being exploited in these circumstances. The bonus should be enough. The bonus is of great value. Some people in the City get vast bonuses. The idea of using that money to exploit this illogical tax relief through salary sacrifice is abhorrent.

I support the legislation. The term “higher earnings” could have been handled better but the whole issue—people on median earnings paying very little more and complicating the system in order to remove basic rate taxpayers; perhaps my noble friend the Minister can tell us about the impact it would have on income—has been over-egged; that was, I think, the phrase I used before. This is an eminently reasonable measure to address the country’s financial problems.

[Lord Fuller (Con)]

My Lords, the noble Lord said that he cannot see the sense in this. Why do we have this incentive in the tax system? The answer is that it is the role of government to incentivise good behaviours, which include saving for your retirement, trying to climb the ladder and trying to do better for yourself, not least because, in so doing, you reduce your reliance on the state in later life. That is the sense of the salary sacrifice process.

This Government have perpetrated a series of attacks on youngsters at the start of their careers, graduates and people making a start in their working lives. The Renters’ Rights Act has driven up rents. The Employment Rights Act has made it harder for businesses to take a chance on somebody who may be unqualified or changing role. The Government are putting youngsters into unemployment with the jobs tax. Now this slim Bill will add many more cases—I am going to list them in a minute—of intergenerational unfairness. Let nobody say that Labour is on the side of the youngsters who want to get on.

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[Lord Leigh of Hurley (Con)]

The purpose of the Bill is to catch salary sacrifice schemes. As we discussed in the previous group, this is where an optional remuneration arrangement has been made, but there are instances when an increased pension could be offered to an employee and no option is offered for the cash increase in salary. That is the area that I am exploring in my amendments.

In these circumstances—according to the Labour Party’s manifesto, the drafting of the Bill and all the Explanatory Notes—I do not think there is an intention to change the national insurance treatment. Indeed, this is clarified in the policy background sections of the Explanatory Notes on the Bill issued by the Government. This amendment, tabled by me and the noble Baroness, Lady Altmann, seeks to make that clear and cannot be seen as controversial.

Amendment 4 is easier to explain than Amendment 3, so let me have a go. I accept that Amendment 3 is not easy to understand, and I am not sure I understood the Minister’s response to it. It would be very helpful if, before Report, he could clarify whether he agrees that, as I suggest in Amendment 3, the definition of earnings will be affected by the Bill, and whether the Government will address that issue.

The Bill is predicated on the definitions of optional remuneration arrangements. They can include company cars and—as the noble Baroness, Lady Coffey, said—assisted places in nursery, medical insurance and other areas, but the Bill makes it clear that we are focusing here on salary sacrifice. The reason for my amendment is that there may be some people who achieve an increase in pension contributions but not through salary sacrifice. In my view, an optional remuneration arrangement has not been properly scoped or defined for the purpose of the Bill.

Perhaps it is easiest to understand this concept when thinking about a new employee. Such a person will be negotiating their compensation with a potential employer. Let us say they are offered a salary of £50,000 and a £5,000 pension contribution. They might feel that this is insufficient payment and seek a higher salary. The employer could refuse that on the basis that all people of that rank in their organisation receive a sum of £50,000 and they have no flexibility—but they may offer an increased pension of £10,000 rather than £5,000 to reach an agreement. How is that negotiated figure of £10,000, which was previously £5,000, to be treated? What if the employer said, “I will reduce the salary to £45,000 and give you £15,000 in pension”? Is this an optional remuneration arrangement, particularly with a prospective, rather than actual, employee?

Similarly, let us look at termination settlements. An employee may receive a lump sum in lieu of any other claim and might be offered an excess amount over the normal £30,000 to be paid directly to the pension scheme. Is that an optional remuneration arrangement?

Let us consider something perhaps closer to home for the Minister: cases where collective bargaining takes place. There might be two offers on the table: one is for a 5% increase in pay but will keep employer pension contributions at 8%, and the other is for a 4% increase with an increased employer pension contribution of 10%. If the collective bargaining unions agree on the latter, are we to assume that this is an optional remuneration agreement? I would assume not, but it is not clear.

In the negotiations of remuneration, what if a person agrees with an employer that they will not take any increase in salary but they want a greater pension payment? That is not salary sacrifice—which is in the heading of the Bill and peppered throughout the definitions used in the Bill and the Explanatory Notes—but does it qualify as an optional remuneration arrangement?

This is a probing amendment to try to get some clarity into the Bill. Clarity is needed because there is so much in the Bill that, frankly, does not seem to have been considered as it relates to people’s working lives.

Amendment 33, in my name and that of the noble Baroness, Lady Altmann—and, yes, in this group—deals with the very difficult situation where a person has a number of employments. It seems a bit disappointing that the Bill does not address this obvious problem. Perhaps the draftsman had only one job—I do not know. National insurance contributions are typically calculated weekly or monthly for most employees, and calculated separately by different employers, assuming such employees are not part of the same group; if it is all one group company, it is done by one head office, typically.

The question arises: how will the £2,000 limit be applied across different periods and employments? This could be covered in regulation later, I suppose, which seems the Government’s favourite approach to much of legislation, but it is right to discuss this in Committee and encourage the Government to put their thinking cap on now to try to get it right so that there can be proper consultation and scrutiny before the legislation is enacted.

Where employees are paid monthly, should that employer apply 1/12th of the £2,000 to each month’s salary-sacrificed earnings or wait until the month in the year in which that amount has exceeded £2,000? Likewise, as the noble Lord, Lord Londesborough, questioned, what happens when an annual bonus is paid? Does that distort the £2,000, which I assume is for the year to 5 April? The bonus could be paid in May or June, completely distorting all the figures. If an employee changes employment part way through the year, how does that work in practice? Does the amount sacrificed in the old employment carry over to the new employment, or should the employee benefit from two separate caps, which will be the requirement for information to be passed from one employer to another? How will HMRC cope with this? Currently, no information exchanges are available.

Then, of course, there are a number of us—I include myself—who hold down more than one job at a time. I declare that interest, although I am not caught by the Bill. Will the £2,000 annual cap be split between each employment, or can employees benefit from two separate caps so that each employer can offer £2,000—which might encourage some slightly unexpected behaviour of people taking lots of jobs, or with subsidiaries or associates, as a clever avoidance trick? There is already incentive within the NI system to do this, as separate allowances exist for separate employers.

We also have to think about financial privacy here, as information would need to be shared across different employers. I raised earlier the problems facing us where an employee does not actually sacrifice salary but still makes a pension contribution, and it is not clear what happens if an employee enters into a bonus waiver in exchange for an increased employer pension contribution. It is complicated, because the employee has no legal rights to the bonus, so there is nothing to sacrifice. What is the Government’s view in these circumstances?

All in all, one can see an administrative nightmare all around. It would be extremely helpful if these issues could be addressed by the Treasury in guidance, setting out the basis on which the Treasury considers how the Bill will apply before it comes into force, hence my amendment.

While on my feet, I support the amendments tabled by the noble Lord, Lord Fuller, which seem pretty clever to me. I am somewhat annoyed I did not think of them myself, because it is pretty obvious when you read his amendments that it must be right—I am supposed be the chartered accountant—that there should be some spreading to allow for circumstances where one year was not a good year and another was. That seems only fair. I beg to move.

[Lord Fuller (Con)]

My Lords, I rise to speak to my Amendments 4A, 4B, 17A and 17B, and the associated review clause, Clause 29A. I will also speak to support Amendment 33 in the name of the noble Lord, Lord Leigh of Hurley.

Taken together, these amendments try to address the practical workability of proposals for employers with employees who have multiple employments and fluctuating income, and to ensure consistency with other parts of the taxation system while being consistent across Great Britian and Northern Ireland.

How easy it must be for the huddles of Ministers and civil servants sitting in their little meeting pods in that ground floor cafe at 1 Horse Guards—or perhaps dialling in from home, having taken the dog for a walk—to tinker with their spreadsheets and to come up with policies viewed through the lens of their personal experiences but which do not stand up in the real world. We have new tax policies that have damaged the national economy and growth. This Bill in particular, however, damages incentives for individual employees and companies for which they work; these are incentives to work hard, to climb the ladder, to improve yourself and to save for a secure retirement, and incentives for employers to attract the best talent.

As we have heard, it is not just the people on 100 grand that this policy affects—although it raises their marginal tax rate to 70% if they are paying off a student loan—it affects a whole raft of people. With the minimum wage now set at over £26,000, millions of ordinary hard-working people—the sort of people this Government say would escape higher taxation—will now be snared in this net, as the Daily Telegraph has reported. It amounts to a new tax on workers; this much we know. But my amendment focuses on the potential unfairness to a particular type of hard-working employee that makes it nearly impossible for their employers to administer it: an employee juggling several jobs.

How do the Government intend to deal with this and make fair the practical unintended consequences and perverse outcomes? Let us take the example of the employee who works several jobs. How will her employer know when or if she has maximally sacrificed her two salaries without reference to the other? That point was made very ably by the noble Lord, Lord Leigh of Hurley. The noble Lord also identified the privacy issues that come with this—which I wish I would have thought of.

Let us take another example, of an employee engaged in seasonal work who wants to save monthly into a pension on salary sacrifice. How does he set his regular contribution at the start of the year without knowing whether he will bust his allowance later on? In his winding on the previous group, the Minister said that you will never know the band until the end of the tax year--well, quite.

What about the employer who wants to do the right thing by his graduate employees and knows how difficult the job market is for them right now? Let us say he wants to attract the best talent by offering accelerated repayments of student loans by way of a salary sacrifice opportunity. We have a colleague in this House who is a graduate, and his graduate loan is running away; he is paying off £400 a month and still the debt is getting larger. We must help these people.

What about the youngster saving for a pension? As I said at Second Reading, my daughter’s boyfriend is no fat cat; he is living in a flat share with people he does not know in Brixton—I do not know whether the noble Lord, Lord Davies of Brixton, ever knocked on his door as I invited him to do at Second Reading. But ask his opinion on this and he will say that instead of improving his own financial security—and perhaps that of my daughter in due course—by reducing his dependence on the state in later life, his ability to save for his future and to progress now is weakened. These are practical and personal examples; each of them damages that incentive to work hard and save hard. That is bad enough.

However, this Bill further discriminates against the private sector worker who needs to save for his own retirement under the direct contribution system, when public sector employees have the taxpayer pitching in another 20% to their pot. The ham-fisted way this Bill ignores the real-life complexities for these real-life people and their real-life examples that exist outside the comfortable, monthly-paid final salary pension world shows how the Treasury views these things through its own particular lens.

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[Lord Davies of Brixton (Lab)]

I spend most of my time in these debates about tax relief on pensions defending the existing system, because the people I tend to mix with regard that tax relief as grossly unfair. It obviously gives far more to the higher paid than the lower paid, and that is why there is widespread discussion of having flat-rate tax relief on pensions. If we were starting from scratch, I think we could do that, but we are not. We have to start from where we are.

Where we are is in having extremely high levels of, effectively, government subsidy for people to save for retirement, but that begs the question: what is the right level of tax relief for pensions? Does it just happen to be that we have alighted at the correct level, or is that an issue we are not allowed to discuss? Putting words into the mouth of the noble Lord, Lord Fuller, he seems to be adopting the argument: “The more the merrier—let’s increase it by even more”. No, there is a genuine question here. What is the right level of tax relief to encourage people to save for their retirements? It is a reasonably practical debate and, on this side, we have come to the conclusion, possibly as an interim measure, that it should be a bit lower than it is currently. That certainly does not justify the doom and gloom about this particular change—I have made my point several times.

I am no longer a small business person, but for 30 years I was and I employed people who had multiple jobs. It is not a new issue. There is nothing new about the idea of employers having to cope with the complications of the national insurance system for people who have multiple jobs, particularly where, even with two jobs, their total income is more than the £1,250 that it is at present. It is not a new issue that employers are going to have to deal with. In principle, there is an additional complication; they have to sort out where the £2,000 limit applies. However, it is reasonable to expect employers to undertake those tasks. To be honest, I do not think that an ice-cream salesman is really a genuine example, but I may be wrong.

[Lord Fuller (Con)]

I take my territorial designation from Gorleston-on-Sea. When I was a boy, there was nothing better when the sun was out than going down to Della Spina’s, the ice-cream place. It is not just about ice cream; there are stately homes and all sorts of things that work with the weather. That is why I chose the example of the umbrella salesman or the ice-cream vendor. There is a whole part of the UK economy that depends on the weather. We have the most unpredictable weather, there are the most turbulent income and costs associated with that, and that boils down into variable emoluments. It is not just the market gardener or the farmer; it is the people involved in hospitality or whatever. To say that it is trivial demeans the pubs, the restaurants, the stately homes and that wider part of the visitor economy, which is particularly visited on the coast and in coastal communities. I wonder whether the noble Lord would like to reflect on the somewhat dismissive way in which he put that huge part to one side. Millions of people work in these sectors; they would be disadvantaged by the Bill and that needs to be recognised.

[Lord Davies of Brixton (Lab)]

I accept the noble Lord’s reprimand. I was actually making another point, which is about how many ice-cream salespeople are operating salary sacrifice arrangements. That may not be immediately germane. In fact, the remarks that the noble Lord just made support my point. Those part-time employees and part-time employers are already having to cope with the problems that arise from multiple employments and how the national insurance system is not, in truth, tailored very well for those circumstances. I accept that.

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[Baroness Neville-Rolfe (Con)]

Before the Minister moves on, would he consider making an affirmative regulation on the very first occasion? The discussions that we have had this evening show that there is quite a bit of complexity here, and that has compliance costs for employers and employees. It seems odd to take the precedent of the social security Act on something new and difficult. I wonder whether that would be worth considering. Perhaps the Delegated Powers and Regulatory Reform Committee did not have the benefit of the experts here who have explained some of the problems. I am sure the Minister cannot say anything today, but could he at least have a look at whether the first such regulations could be by affirmative resolution, which is a practice that I have encountered with lots of other Bills that we probably worked on together?

[Lord Fuller (Con)]

If I may interject, especially with such a load of—

[Lord in Waiting/Government Whip (Lord Wilson of Sedgefield) (Lab)]

Can we just let the Minister reply to that?

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[Lord Livermore (Lab)]

That intention will be set out in the regulations once we have fully consulted relevant employers.

[Lord Fuller (Con)]

There is a transfer of risk, of prejudice, from the individual, who is responsible under the current arrangements, to the employer. That has not been fleshed out at all. If you have a salary sacrifice that is processed by the employer, all of a sudden that employer trespasses on the duty at the end of the tax year for the employee to put in his tax return. There has been a muddying of the water here between the employee and the employer. I know we are going to come back on Report, and I hope we will get it done in a day, but the Government should lay out their approach to this and state where the liability sits and where the penalties may be applied for honest mistakes made in that interface between the employer and the employee. That is not at all clear, and it should be.

[Lord Livermore (Lab)]

I am grateful to the noble Lord for his further thoughts. The carryover feature—

Local Government Finance Act 1988 (Prescription of Non-Domestic Rating Multipliers) (England) Regulations 2026

Lord Fuller Excerpts

Tuesday 10th February 2026 Grand Committee

[Lord Watson of Wyre Forest (Lab)]

My Lords, I declare my interest, as in the register, as the proud outgoing chair of UK Music, the umbrella body for the British music industry. I am sure I do not have to tell my noble friend that the United Kingdom is one of only three countries in the world that remain net exporters of commercial music. That is not an accident; it is the result of a delicate and highly successful ecosystem. After two terms and six years chairing UK Music, I have spent a great deal of time reflecting on what makes this country so distinctive in the breadth and quality of its music, and its renowned commercial success. There is no single explanation, but there are four essential pieces to that jigsaw.

The first is our songwriters. They are unique, special and precious. They are often contrarian, usually very clever, and sometimes fragile and tender, much like the songs they write. The second is our performers—the artists who wear their heart on their sleeve night after night, festival after festival. Last week, it was a pleasure to see British artists Lola Young and Olivia Dean win acclaim on the world stage at the Grammys. The third is our musicians. They are technically gifted, are often poorly paid and frequently struggle to make ends meet. Yet, for them, music is often not just a job but a vocation.

The fourth piece of that jigsaw, and often one of the most overlooked, is our producers and their recording studios. A few are famous, such as AIR Studios, founded by Sir George Martin, which still has trailblazing engineers such as Olga FitzRoy, who helped to give the London 2012 Olympic Games their music; she has also worked with Coldplay and my personal hero, George Michael. Then there is Mickie Most, the founder of RAK Studios, who worked with artists including Herman’s Hermits, The Animals and Jeff Beck.

However, there is also a generation of producers who are perhaps less well known but still highly regarded around the world. They include: Manon Grandjean, a leading figure from the grime scene, who has worked with Stormzy and Dave; Paul Epworth, a producer for both Adele and Florence and the Machine and the owner of the Eurythmics’ former studio; Catherine Marks, an award-winning producer who has worked with Alanis Morissette and Wolf Alice; and the great Cameron Craig, a mixer and producer for Grace Jones and Annie Lennox, with multiple Grammy awards to his name.

Together, these producers and studios shape the sound of modern Britain and underpin our global success. That is why I am extremely grateful to the noble Lord, Lord Clement-Jones, for bringing this important report from the Secondary Legislation Scrutiny Committee to the attention of the Committee.

One of the reasons given for excluding recording studios from this measure is that, unlike music venues, they are not accessible to the public. With respect, that suggests a misunderstanding at the Treasury of what recording studios are and the role they play in the music ecosystem. Recording studios are not private; they are not private members’ clubs. They are working spaces. They are social and cultural. Anyone can hire them—artists, musicians, producers and engineers do so every day. Some of them even have bars. The sector spans everything from a small studio on an industrial estate to large facilities capable of hosting orchestras, as well as landmark studios that are part of our national cultural heritage.

This matters far beyond London, too. A brief example illustrates the point. Habitat Studio, a short walk from Manchester Piccadilly station, hosts between 120 and 150 bands every month, around 80% of whom are grass-roots artists. Alongside this, it works with established touring acts, charities and universities. Facilities such as this operate seven days a week, with small teams providing professional, affordable and reliable spaces for recording and rehearsals, and food and drink. They are not marginal operations. They are busy, productive and deeply embedded in their local music economies and cultural scenes.

What concerns me most is the logic underpinning their exclusion. First, there is an economic inconsistency. Studios face the same pressures as venues, including high energy costs, specialist premises and skilled staff. Supporting one part of the supply chain while excluding another risks distorting behaviour and, over time, pushing recording activity overseas. Secondly, studios act as regional anchors. They sustain skilled employment, support freelancers and help create creative clusters in towns and cities across the country. Thirdly, studios are not peripheral. They are upstream infrastructure. Without studios, there is no recorded music. Without recorded music, there is no touring product. Without touring, there is no export success.

Britain’s music industry is one of the country’s great success stories. It depends on an ecosystem in which every part matters, from the songwriters to the performer, from the musician to the producer and the studio that brings that work to life. If we value that ecosystem, our tax and rating policies should reflect how it functions. To borrow a lyric from a song recorded by the Korgis at Crescent Studios in early 1980, I say to the Minister:

“Change your heart, look around you”.


Recording studios are not an optional extra. They are essential cultural and economic infrastructure and our policy should recognise them as such.

[Lord Fuller (Con)]

My Lords, having heard from the Deputy Chairman of Committees that we were going to the first Motion first, we have the second Motion first. I want to go back. I do not want to talk about studios. It is not that I do not know anything about recording studios; it is that I have nothing to add to what noble Lords have said.

I want to raise a wider point about what happens when you make changes in the business rates system. It is important that the business rates system has the right incentives and is fair to small businesses, particularly those on the high street that make such a cultural contribution to our nation. We have seen in the newspapers as well as in these regulations what happens when you make alterations to the business rates that pertain to pubs, hotels, restaurants, between retail and industrial, and to large businesses versus small. It is one of those truths that the winners tend to keep quiet, but it can be existential for losers. That is partly because the amount of money that is raised by business rates is fixed and, as you give a relief in one place, it pops up as additional burdens elsewhere. That is just the way the system works.

However, for local government, stability and buoyancy in the system are important. When you change the system, there are downstream consequences, because business rates very largely pay for the delivery of local government services. Yes, there is redistribution within the nation of the money that is raised. For example, we are in Westminster, which raises nearly £1 in every £12 raised in business rates in our nation, and that £2 billion or so is redistributed to Redcar, Redruth, Wroxham and all around the country with a complicated process of ceilings and floors. There are also systems within county areas, as they tend to be, so that all the councils can pool together to grow the economy. That is important, because the system is designed with powerful incentives for councils to grow the economy on the simple truth that the more you grow the economy, the more you keep. Of course, resets happen every now and again and they are a disincentive to grow. All that effort is wasted as the business rates baseline is washed away. That is the context within which I wish to make my subsequent remarks.

In the past few weeks, there have been technical changes in the way that baselines and pooling are done that would have had material effects on district councils. For most councils, about 10% of their net budget would have been swept away, badly impacting on homelessness, recycling, building and all the things that we need to get the economy going. That is especially germane because district councils outside the M25 and the urban metropolitan centres tend to be the planning authorities that get growth going.

I know that the District Councils’ Network and, more widely, the local government family are grateful that the technical changes that could have caused that 10% disaster have been fixed for the coming year, but for one year only. As we look at business rates more generally and at altering the application of business rates, we need to make sure that the Treasury and the local government department are better aligned in future years so that we avoid the perverse outcomes that we might have seen.

It is not fair on councils to have the uncertainty. It is certainly not the right thing for the economy, because confidence and long-term stability provide that central alignment between central and local government to generate wealth in these islands. It is incumbent on the national Government to ensure that they do not accidentally damage that delicate balance that keeps the economy growing, people in work and taxes paid.

[Lord Parkinson of Whitley Bay (Con)]

My Lords, I add my name in support of all the noble Lords who have spoken in favour of the take-note Motion of the noble Lord, Lord Clement-Jones. I am grateful to him and to the members of the Secondary Legislation Scrutiny Committee for drawing our particular attention to the regulations before the Grand Committee.

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[Lord Livermore (Lab)]

As I said, I cannot commit to introducing any specific targeted relief, but we keep all taxes under review.

[Lord Fuller (Con)]

I raised the issue that this year there was a misalignment between the Treasury and MHCLG regarding some of the changes that were made to the business rates. Will the Minister commit to at least having advanced discussions between MHCLG and the Treasury in future years? There has been a temporary sticking plaster—I might characterise it as that—and the sector is very grateful for that, but it is for one year only. Having got out of the fire this year, can we be clear that we will not accidentally stumble back in on a future occasion, otherwise we will be standing here in 12 months’ time having the same debate?

[Lord Livermore (Lab)]

I listened carefully to the noble Lord’s remarks and do not think he asked a specific question, which is why I did not give him a specific answer. Of course, the Treasury and MHCLG talk regularly on all matters and will continue to do so.

National Insurance Contributions (Employer Pensions Contributions) Bill

Lord Fuller Excerpts

2nd reading
Wednesday 4th February 2026 Lords Chamber

[Lord Fuller (Con)]

My Lords, it is not just a capitalist economy that runs on incentives; it is human nature to calibrate actions through the lens of what is in it for us. Encouraging people to work hard, succeed, earn their place in the world, and deliver safety and security for themselves and their families, while generating the taxes that sustain public services, is the right thing. But get that balance wrong by destroying the incentives to do the right thing, or set tax rates too high, and that leads to no tax at all. It is the Laffer curve in action, and Britain is being subjected to a whole-economy experiment on the Laffer curve. At every level, incentives to advance in the UK are being weakened, just as incentives in other countries become more attractive.

Behaviours do change. A close school friend and a substantial British taxpayer has just gone to live in Dubai. Someone in my electoral ward is buying a ranch in Montana, and expensively trained newly qualified doctors and nurses are moving to Australia. Our problem is so bad that, earlier this evening in your Lordships’ House, we had an emergency debate on emergency legislation.

What is the effect of this Bill on those who are left behind? First, it creates a glass ceiling on aspiration—on salaries approaching £100,000. But, as we have heard this evening, it is not just those salaries but middle-class professions that are affected, such as those found in the other place, and mechanics, timber merchants, solicitors and accountants—a whole raft of middle-class aspirational professions.

I am sure the Minister will talk about those with the broadest shoulders, but I will give the example of my daughter’s boyfriend, who works in the West End. He was so proud to come and tell us he had been awarded a £17,000 bonus from his business for having worked so hard and become so valuable to his firm, but I was astonished when he told us that he got to keep only just over £6,000 of that tidy sum. He is paying not 60% but nearly 70% because of the student loan. Why did he bother to work so hard? He has the broadest shoulders only in the sense that he plays rugby at the weekend, but he is no fat cat. He is 28 and at the start of his career. He lives in a flatshare with people he does not know in Brixton—perhaps the noble Lord, Lord Davies, could go round and knock on his door. He is just a young man working hard for long hours, trying to save for a deposit to climb the ladder and better himself.

But at least that option or incentive has been opened to my daughter’s boyfriend to sacrifice some of that bonus to salt away some money into his pension, well over 30 years away, so that one day he might be able to reduce his reliance on the state—and, yes, perhaps look after my daughter—but that option will be slammed shut by this Bill. Earning £17,000 to get around £6,000; that is not right. I say to the noble Lord, Lord Davies: that is what has been overcooked. How much more can the man be expected to give for having worked so hard? Of course, let us not forget his company, which will have had to chip in another £2,500 in its own NIC. It is not right for him, it is not right to drive the brightest and best overseas, and it is not right for our economy or the Exchequer in the long term.

I know that salary sacrifice is not for everyone, but it is for many. As we have heard, it incentivises people who are doing well at the start of their career to invest in themselves, with a second long-term return for the state by reducing their reliance on the taxpayer in later years—both the individual and the state co-investing in our collective future.

We know that limiting salary sacrifice will affect basic rate taxpayers more, pound for pound, than higher rate taxpayers, although I accept that the sums are larger for the higher earners. We have heard, and I confirm, that employers will withdraw pension salary sacrifice as an option altogether. It is going to complicate pensions and HR in companies that are already burdened with extra costs and onerous duties, and will potentially encourage undesirable optional remuneration agreements and avoidance schemes. Further, we will see few practical details around how that £2,000 limit will be applied to weekly and monthly paid employees, and those with multiple years.

Taken together, this Bill is just another example of bureaucratic, counterproductive, anti-growth, incentive-sapping policies: more taxes on employment, inexplicable investment-sapping taxes on private rather than public businesses, existential taxes on pubs, crippling carbon taxes on our heavy industries, discriminatory taxes on private, not public, pensions and—astonishingly—even new taxes on tomatoes that will disproportionately affect those with the smallest means. Now, with this Bill, there are new taxes to discourage people from doing the right thing. This insanity will impoverish us all and the Minister is creating a fresh black hole in his name. The Government will drive tax revenues down into the dirt and impoverish our nation.

Finance Bill

Lord Fuller Excerpts

2nd reading & Committee negatived & 3rd reading
Wednesday 19th March 2025 Lords Chamber

[Lord Fuller (Con)]

My Lords, I want to reflect for a moment on the impossibility of achieving the economic growth our country needs when the family-owned businesses, which are some of our most innovative, entrepreneurial and successful enterprises, will be hobbled. The changes to business property relief announced in the Budget place a material uncertainty over the future of family-owned enterprises; as a result, the growth ambitions of the Government and our nation will be damaged.

I should declare an interest. I have managed to make a career in a number of family businesses, and, in some way, it is my role to speak for them in this place. I know there is no such thing as unearned income when someone puts the whole of their family’s wealth on the line to provide good jobs and secure careers for those who work alongside them. Family businesses have an eye to the long-term thinking that builds generational wealth in our islands. They spend money locally, and they enjoy the services of local employees for decades. Those sorts of businesses comprise nearly 90% of all firms in our nation. They employ 14 million people—51% of all private sector employment—and represent the spirit of enterprise and aspiration that we see in the trading estates that surround every market town. These are the people who pay their taxes on honest profits.

McKinsey tells us that family businesses

“focus on purpose beyond profits”,

with

“a long-term view and emphasis on reinvesting in the business”,

combined with

“a conservative and cautious stance on finances”.

That resonates with me. My grandfather, an Olympic sprinter, told me that nothing less than running 110 yards to everybody else’s 100 would do in our family business. I have combined his hunger for business with my strong work ethic to stand beside loyal friends who have worked alongside our shareholder families for over 40 years. Nothing has pleased me recently more than the son of one of our long-term employees, Curtis, joining us in business.

Tim Rix, of the Rix Group in Hull and Montrose, tells us in the Times how the chilling effect of the changes in business property relief has already caused him to stop doing deals, trim back on investment and shelve staff growth. I know Tim’s business well; his family has built it up over six generations. It is a shining example of what patient capital can achieve. But he warns that enterprises crafted over generations can be easily dispersed and lost. Labour’s Budget plans carelessly and recklessly place businesses like his in danger.

For a Government apparently fixated on growth since the Chancellor’s damascene conversion at a car factory in Oxford in January, it is odd that they imperil growth in this way. The effect of the BPR plans is to starve businesses of working capital—the lifeblood of next year’s profits and corporation tax receipts—while at the same time put an arbitrary £80,000-a year aspiration cap on profit, because that is the level at which the EBITDA multiplier gets you to a £1 million valuation. It will see diverting cash to less productive uses—unless you are in the life insurance business—and damage incentives to grow and innovate. It amounts to an asset-stripping of that part of the economy with the greatest growth potential.

Most businesses are not rich in cash terms. In my own, we reinvest all our money into growing that business. These plans will result in a pivot away from profit. They will drive new core activities to offset future tax liabilities and the preparation of different succession plans. In many cases, these will involve selling assets, diverting investment, cutting hiring or, terribly, doing something completely different entirely.

It all exposes how Labour fundamentally misunderstands how business works, whether through the effect on VAT in schools hollowing out rural market towns, stifling innovation by restricting APR relief to schemes run by the Government and not by others, and killing off the country pub. At its heart, we see that Labour does not understand the relationship between profit and loss and the balance sheet, and between revenue and capital, and that today’s working capital drives tomorrow’s profits. To Labour it is just money and, “We’ll have that”.

History will show that the plans laid out in the Budget will slowly start to strangle private businesses and instead show a preference for large, debt-fuelled corporations that reshore profit and taxes elsewhere. It is generational investment, long-term thinking and, yes, business property relief, that have helped private business make Britain the world’s sixth-largest economy in GDP terms. BPR is not a loophole, it is a feature. Britain is already poorer as a result of this Budget, but damaging the bedrock of family businesses will impoverish us even further by killing the geese that lay the golden eggs.

Carbon Border Taxes

Lord Fuller Excerpts

Wednesday 12th March 2025 Lords Chamber

Asked by

[Lord Fuller]

To ask His Majesty’s Government, further to the proposals by the European Union to exempt 80 per cent of eligible EU companies from new carbon border taxes, what plans they have to ensure that equivalent businesses in the United Kingdom are treated similarly.

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

My Lords, this is already the case. To ensure that the costs of complying with the UK carbon border adjustment mechanism are proportionate, it will apply only to those firms importing CBAM goods valued at £50,000 or more over a rolling 12-month period. The Government estimate that this will exclude 80% of CBAM-eligible firms while retaining more than 99% of imported emissions within the scope of the tax.

[Lord Fuller (Con)]

My Lords, the carbon border adjustment mechanism is a tariff by any other name. I am involved in an industry affected by CBAM, so I know more than most about the astonishingly divergent way in which the UK Government plan to introduce this tax. It will damage competitiveness, be complex to administer and drive growing inflationary pressures. There are even proposals to levy the tax to protect industries that do not even exist anymore. The EU has worked out for itself—

[Noble Lords]

Question!

[Lord Fuller (Con)]

I am just about to ask the question. The EU has worked out for itself that building a walled garden around the economy will damage its own competitiveness. The Prime Minister said today in PMQs that all options were on the table in so far as tariffs are concerned. Does the Minister agree that the whole UK proposal needs a fresh look, or is he prepared to see us sleepwalk into a trade war with our friends and allies in the United States while damaging trade with our close EU partners?

[Lord Livermore (Lab)]

I am grateful to the noble Lord for his question. However, the answer is no, I do not agree with him. Reducing the UK’s carbon emissions is necessary to meet our emissions targets, and the emissions trading scheme and the carbon border adjustment mechanism are necessary tools to do that. Our approach is very similar to that of the EU. As the noble Lord said in his Question, we are doing exactly what the EU is doing—in fact, I think it has followed us, rather than the other way around, so our approaches are extremely similar. The US Administration have made no public comment on the UK CBAM, and I am not going to speculate on a hypothetical.

National Insurance Contributions (Secondary Class 1 Contributions) Bill

Lord Fuller Excerpts

Committee stage
Thursday 6th February 2025 Grand Committee

Moved by

[Lord Fuller]

70: After Clause 3, insert the following new Clause—
“Impact of this Act on local authoritiesThe Secretary of State must, within six months of the day on which this Act is passed, lay before Parliament an impact assessment of the cost of the provisions of this Act on local authorities.”Member’s explanatory statement
This probing amendment seeks to respond to concerns about increased costs for local authorities.

[Lord Fuller (Con)]

My Lords, since the Great Reform Act of 1832, local authorities have been an integral part of our nation. Joseph Chamberlain unleashed the powers of municipal entrepreneurialism in the 1800s, bringing gas and clean water to the growing metropolis of Birmingham. A new council in Stevenage was created for the first new town, complete with a traffic-free zone opened by Her Majesty the Queen; I know that the noble Baroness, Lady Taylor of Stevenage, has done her bit to shape that town since. To bring us right up to date, the leader of Cornwall Council—another Taylor: my friend Linda Taylor, who has announced that she is stepping down in May—has championed a space port in her county. I congratulate her on those efforts and thank her for her service to the local government family. All those activities are about the 140 things that local authorities do for every family in every street and in every neighbourhood.

For the past 14 years, I have been a vice-chairman of the Local Government Association’s economy and resources panel. Alongside the noble Baroness, Lady Taylor, I led all the district councils in England for our respective parties during Covid, and I remain a councillor, so I know that council finances in England are under pressure like never before. Reductions in grant funding, increases in the scale and complexity of service demand, and the recent spike in inflation and wage costs have created the perfect storm for our town halls.

The fundamental challenge facing the sector is that cost and demand pressures are rising faster than funding. Although inflation has fallen steadily since its peak in 2022-23, significant cost and demand pressures remain in the system in council services. In essence, council revenues tend to grow linearly with the growth in the wider economy; lately, however, costs have grown geometrically in councils, with the demands from homelessness, children’s social care, adult social care and home-to-school transport growing fast and likely to get even worse. The Covid overlay is, of course, a further aggravation.

There comes a moment where the lines of income and demand diverge so much that the gap becomes unbridgeable. That moment was already upon us before the national insurance announcements, and I want to explain its serious and consequential effects. Of the 140 activities undertaken by councils, three are responsible for nearly two-thirds of all the cost: social care in adults and children, and special educational needs. These pressures have seen the greatest increase in cost.

We should get some numbers on the record for the Minister. Increases in cost and demand in adult social care have risen by £3.7 billion—that is, 18%—in the five years since 2019. Spending on children’s social care has increased by 25.7% in real terms in the five years from 2019 to the current year. Growing numbers of children with education, health and care plans mean that money spent on home-to-school transport has risen by 62.7% in the five years to this year. Taken together, the increased demand for services for children with special educational needs and disabilities results in an unexpected current account deficit of £5 billion this year for those services.

--- Later in debate ---

The Government carefully consider the impact of all policies, including the changes to employer national insurance contributions. I know that it will disappoint noble Lords, but for one last time in this Committee, as I have said previously, an assessment of the policy has already been published by HMRC in its tax information and impact note. Furthermore, the OBR’s Economic and Fiscal Outlook sets out the expected macroeconomic impact of those changes. The Government and the OBR have therefore already set out the impacts of the policy change. The Government do not intent to provide further impact assessments. In light of these points, I respectfully ask the noble Lord to withdraw his amendment.

[Lord Fuller (Con)]

My Lords, so often councils and other organisations indulge in special pleading for an exceptional case here or a particular need there. This small debate on my Amendment 70 has shown the gravity of the situation that councils find themselves in. It is the cumulative impacts of this exceptionally damaging proposal which will harm the most vulnerable and those in greatest need. The debate has also shone a light on the efficiencies that councils have taken in aggregate since 2010. Over £24 billion-worth of annual savings have been made by councils, if one takes into account inflation in that period. It has allowed them to keep the wheels on the wagon while suffering a 22.2% reduction in core spending power.

However, there comes a moment when you cannot keep trimming the fat—there is no more fat to trim. This £1.227 billion additional burden on council-tax payers, who are paying their council tax out of their own taxed income, is a real number. I do not dismiss it, as the Minister suggests when he says that it is just an external number and that the Government do not believe anything that does not come out of the Treasury. We heard that argument on the agricultural property relief, for example. “Just trust us on this” is not something that we want to do.

We cannot keep hollowing out local government. I proposed a remedy. Through the Section 34 mechanism, this assessment can and should be made. We can then have a debate, not just for this year but in those following the comprehensive spending review, on what the additional burdens will be. We need to get down to real numbers. I mention Harlow, simply because my noble friend Lady Neville-Rolfe did so. Harlow’s increase in national insurance contributions this year on a £10 million or £11 million budget is over £1 million—and the Government have just given them £198,000. That is the quantum of the shortfall. Not only has that cost been made but their core spending grant has been cut by 21%.

I will not say much more, but we have placed a marker on this point. I am disappointed that we have not answers to all the points. Not having an answer to those questions which I and my noble friends asked invites representations on Report. I expect my noble friends and I will return at that point. In the meantime, I beg leave to withdraw the amendment.

Amendment 70 withdrawn.