National Insurance Contributions (Secondary Class 1 Contributions) Bill

Lord Livermore Excerpts

Report stage
Tuesday 25th February 2025 Lords Chamber

[Baroness Neville-Rolfe (Con)]

My Lords, I echo much of what has been said by the noble Baronesses, Lady Barker and Lady Kramer, what my noble friend Lord Ahmad said about it being a pity that the Minister had not engaged more with all those affected, and the plea for fairness from the noble Lord, Lord Leigh. This Bill is the most important economic measure the Government have put forward since they took office and, as has become apparent from our debates, especially the detailed examination in Committee, it is a misguided measure with numerous defects. It will hit hardest those sectors that employ more labour, such as care homes and hospices, but there will also be flow-through to SMEs and bigger businesses as they seek to cut costs and staff. We have seen this in action with big names such as Sainsbury’s shedding staff and the Federation of Small Businesses and the Chartered Institute of Personnel and Development recording collapsing confidence and planned headcount cuts in the surveys.

During our debate today, the Opposition are proposing amendments to reduce some of the Bill’s most egregious effects. That is the answer to the noble Lord, Lord Eatwell. We have to find a way to limit the impact of this ill-thought-out jobs tax. The tax system is not simple and we are where we are because of the choices the Government have made. The changes are having real impacts on real people in their everyday lives: on charities, small businesses, nursery schools, special needs drivers, pubs, young people and—the specific subject of this amendment—care homes, pharmacies, dentists, GP surgeries and hospices. That is why we are supporting the amendment from the noble Baroness, Lady Barker, and will be voting in favour.

At every stage throughout the progress of this Bill, we have raised the plight of these sectors because of the decisions the Government made in the Budget. They are facing these changes in a very short timescale, as the noble Baroness, Lady Barker, has rightly said. At every stage, the Government have remained unmoved. The Minister has been stony-faced and utterly unreceptive to the genuine and deeply felt concerns of millions of businesses and charity trustees across the country.

We have heard from the noble Lord, Lord Hope, about the Cyrenians, from my noble friend Lady Stedman- Scott about the sheer scale of the impact on charities, and from my noble friend Lady Fraser about the loss of jobs and skills and the difficulties of deciding what to do. These organisations and others are facing a financial cliff edge in April and that is thanks to the Government, who have chosen to put them in this position while at the same time choosing to give a £9.5 billion pay rise to their friends in the public sector, to pledge £8.3 billion to the amorphous GB Energy project and to increase day-to-day spending by £23 billion this year.

These were all choices, and it is hospices, charities, healthcare providers, early years settings and small businesses that will pay the price. That is what my noble friend Lord Clarke of Nottingham was saying: he felt that it was the wrong choice.

In November last year, the Nuffield Trust predicted that the Government’s jobs tax would cost the independent sector’s social care employers in the region of £940 million in 2025-26, and that is on top of around £1.85 billion more that they need to meet the new minimum wage rates from April. These are all relevant to this amendment.

I am particularly concerned about the hospice sector, and that is why I have tabled my own amendment with the support of my noble friends Lord Leigh of Hurley and Lord Howard of Lympne. Both my noble friends spoke with great eloquence, as did the noble Baroness, Lady Kramer, so I will not repeat any of that, but I will say that Hospice UK has confirmed to us that the sector is headed for a £60 million deficit this year. The Health Secretary announced £100 million to make sure we are protecting our hospices, but last week the Prime Minister was forced to admit that that is capital funding and will not have a direct impact on the day-to-day costs. Further to that, I understand from boring into the detail that the £26 million that the Minister mentioned in Committee on day 3 represents almost no new money at all; so, we have a big problem.

Finally, it was reported that the National Pharmacy Association has taken the unprecedented step of voting for collective action in protest at a £250 million hike in business costs that pharmacists face under the Government. If the Minister will not listen to the Official Opposition, perhaps he will listen to the experts, the GPs, the hospices and the charities, which are all telling us that the Government must think again. We agree with the noble Baroness, Lady Barker: the Government must act urgently to protect our health and care providers, our GPs and our hospices before it is too late. Should the noble Baroness choose to test the opinion of the House, we will be with her in the Lobby.

[The Financial Secretary to the Treasury (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 Barker and Lady Kramer, seeking to maintain the rates and thresholds at their current level for NHS commissioned services including GPs, dentists, social care providers and pharmacists. As noble Lords will know, as a result of the measures in this Bill and wider Budget measures, the NHS will receive an extra £22.6 billion over two years, helping to deliver an additional 40,000 elective appointments every week.

Primary care providers, general practice, dentistry, pharmacy and eyecare are important independent contractors who provide nearly £20 billion-worth of NHS services. Every year, the Government consult with these primary care sectors about what services they provide and what money they are entitled to in return under their contract; this continues to be the case this year.

The Government have announced an extra £899 million for general practice in 2025-26 and have set out the proposed areas of reform which will help to deliver on our manifesto commitments. This is the largest uplift in GP funding since the beginning of the five-year framework and reverses the recent declining trend in funding. As a result, a rising share of total NHS resources will now go to general practice. The Department of Health and Social Care is consulting with the General Practitioners Committee in England of the British Medical Association on the 2025-26 GP contract and will consider a range of proposed policy changes. These will be announced in the usual way following the close of the consultation later this year.

The Department of Health and Social Care has also entered into consultation with Community Pharmacy England regarding the 2024-25 and 2025-26 community pharmacy contractual framework, and the final funding settlement will be announced in the usual way following this consultation. The NHS in England invests around £3 billion in dentistry every year. NHS pharmaceutical, ophthalmic and dental allocations for integrated care systems 2025-26 were published alongside NHS planned guidance.

The noble Lords, Lord Howard and Lord Leigh, spoke about hospices. The Government recognise the vital role that hospices play in supporting people at the end of life and their families, and we recognise the range of cost pressures that the hospices sector has been facing over a number of years. As the noble Lords mentioned, we are supporting the hospice sector with a £100 million increase for adult and children’s hospices to ensure they have the best physical environment for care. We have also allocated an additional £26 million in revenue to support children and young people’s hospices. The £100 million investment will go towards helping hospices improve their buildings, equipment and accommodation, to ensure that patients continue to receive the best care possible.

Regarding social care, 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.

To answer the noble and learned Lord, Lord Hope, all charities can benefit from the employment allowance. As a result of this Bill, from April 2025 the threshold of £100,000 or less will be removed.

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The noble Lord, Lord Londesborough, has been indefatigable during the progress of this Bill and, for all the reasons he has given, I believe we should all support his amendment. The British Business Bank tells us there are 5.5 million small businesses in the UK. They employ 16 million people and—I hope the Minister will take this point well—they contribute massively to economic growth, which we know is the number one priority. That is something I think there is a wide measure of agreement on. So why will the Minister not roll up his sleeves and work with the noble Lord, Lord Londesborough, to protect smaller SMEs from the impact of this Bill? I believe that more can be done to fix this. We feel very strongly that the Government should consider further steps to support SMEs beyond the welcome, but very modest, employment allowance, and that is why we will support the noble Lord, Lord Londesborough, if he chooses to test the opinion of the House.

[Lord Livermore (Lab)]

My Lords, I am very grateful to all noble Lords who have spoken in this debate. I will address first the amendment tabled by the noble Baroness, Lady Kramer, and the noble Lord, Lord Bruce of Bennachie, which seeks to set a reduced rate of employer national insurance for part-time workers at 7.5%. As I have said before, the difficult decisions contained in this Bill were necessary both to repair the public finances and rebuild our public services. This amendment would reduce the revenue raised from this Bill, and therefore would reduce the Government’s ability to achieve these objectives. Reducing the rate of employer national insurance for part-time workers only would also create additional complexity in the tax system and, as my noble friend Lord Eatwell said, create distortions in the labour market. The Government have taken action to support those on lower pay by increasing the national living wage. Employers will also continue to benefit from employer national insurance reliefs, including for hiring under-21s and under-25 apprentices, where eligible.

I turn to the amendments tabled by the noble Lord, Lord Londesborough, and the noble Baronesses, Lady Kramer and Lady Neville-Rolfe, which together seek to maintain the current rates and thresholds for businesses employing fewer than 25 staff. These amendments would also have cost implications, again necessitating higher borrowing, lower spending or alternative revenue-raising measures. I stress that the Government are taking action as part of this Bill to protect the smallest businesses by increasing the employment allowance from £5,000 to £10,500. This means that, next year, 865,000 employers will pay no national insurance. More than half of employers will see no change or will gain overall from this package, and employers will be able to employ up to four full-time workers on the national living wage and pay no employer national insurance.

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

The new clause tabled by the noble Baroness, Lady Kramer, and the noble Lord, Lord Bruce of Bennachie, would require the Government to produce an impact assessment on the effect of the Bill on SMEs, hospitality, tourism and seasonal workers. The Government of course consider the impacts of all policies, including the changes to employer national insurance. As we discussed at length in Committee, an assessment of the policy has already been published by HMRC in a tax information and impact note.

The OBR’s Economic and Fiscal Outlook also sets out the expected macroeconomic impact of the changes to employer national insurance contributions on employment growth and inflation. The Government and the OBR have therefore already set out the impacts of this policy change. The information provided is in line with the approach taken for other similar changes, and the Government do not intend to publish additional assessments.

Finally, I turn to the amendment tabled by the noble Baroness, Lady Neville-Rolfe, that seeks to increase the employment allowance for farms. This amendment would again reduce the revenue raised from the Bill, necessitating either higher borrowing, lower public spending or new revenue-raising measures. The Government of course recognise and greatly appreciate the vitally important role of the farming sector. Despite the Government’s challenging fiscal inheritance, the farming and countryside programme budget has been protected at £5 billion across the next two years. This includes the largest ever proportion of the budget directed at sustainable food production and nature recovery in our country’s history. This will accelerate the transition to a more resilient and sustainable farming sector, supporting investment in farm businesses and boosting Britain’s food security.

Ultimately, this Bill is necessary to fix the public finances and to fund the public services. Many of the amendments in this group would reduce the Government’s ability to do these things, so I respectfully ask noble Lords not to press their amendments.

[Baroness Kramer (LD)]

My Lords, I will be extremely quick. This has been a short but very useful debate. On the impact assessment, I think I acknowledged that the noble Baroness, Lady Neville-Rolfe, has tabled Amendment 38, which covers the scope more effectively than the amendment we have tabled. That is one which I hope we will have an opportunity to support later on today.

I say to the noble Lord, Lord Eatwell, that there is already a cliff edge—the Minister has set it at three employees. The amendment tabled by the noble Lord, Lord Londesborough, moves this to a far more sensible 25 employees. That is a significant improvement that I hope the House will accept, and that we will certainly be supporting.

Returning to our Amendment 2 that deals with part-time workers, this is an issue which we are going to continue to pursue; we have begun to realise how significant the change is in the structure of the workforce. If the noble Lord, Lord Eatwell, were to look at that, I think he would be very surprised and begin to think rather differently over the kind of measures we are looking at here. Providing this additional support for part-time work is very much pro-growth. It ought to appeal to the Prime Minister; he has positioned himself as the pub champion. Of all the sectors that need the support of part-time workers, and that are going to be impacted by the way this increase in employer’s NICs has been drafted, it is going to be the pubs sector—it is already seeing six pubs close per week. I hope we can look to the Prime Minister for a champion who can try and provide us with some support around this issue.

Because of the importance of the sectors and the changing nature of the workforce, I wish to test the opinion of the House.

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[Baroness Neville-Rolfe (Con)]

Amendment 3 in the name of the noble Baroness, Lady Kramer, seeks to establish a relief for early years settings, universities, charities and small businesses. These are all important sectors; they will be hit hard by the Government’s jobs tax, so we agree with the sentiments that she expressed. However, we have concerns about the financial implication of relief for all these sectors in one amendment. We are instead promoting some modest and separate amendments, which I am afraid makes for a big group.

Amendments 4, 14, 21 and 28 in my name would exempt charities with an annual revenue of less than £1 million from the increase in employer national insurance contributions. My noble friend Lord Leigh spoke persuasively in favour of this proposal, following the pre-emption of his own amendments. My Amendment 35 proposes an increased level of employment allowance for charities.

Noble Lords across the House have been contacted by many charities which are facing tough financial decisions. We have had many worrying examples throughout the stages of this Bill. My noble friends Lady Sater and Lady Fraser made the case for action strongly. My latest example was L’Arche in the UK, which brings together people with and without learning disabilities in life-sharing communities. Again, they are facing hugely steep rises in employment costs. The most vulnerable people in our society will pay the price for Ministers’ misguided Budget decisions.

Amendment 5 seeks to protect children with special educational needs or disabilities. I know that the Licensed Private Hire Car Association SEND transport operators group has written to many noble Lords highlighting the issues that families who rely on these services are facing. It estimates that the associated local funding shortfall in the next tax year, 2025-26, in respect of the services it contracts out to private providers, will be £40 million. That is a relatively small number compared with the overall revenue expected from the jobs tax— £23 billion to £26 billion, depending on the year—but the impact on vulnerable children is wildly disproportionate to that revenue. Like my noble friend Lady Fraser, we feel very strongly that these vital services should be protected. Like the noble Baroness, Lady Bennett, we prefer our formulation on SEND.

Finally, my Amendment 33 addresses early years provision by seeking to increase the employment allowance for early years providers. In government, we took strong action to support the early years sector, while expanding the free childcare offer to all children under five in England last year. The Government are right to adopt our expansion plan in full. We are grateful for that. However, some providers are worried that they will not be able to access the employment allowance because of the public work they do. It would be good if the Minister could look at that again. We are seeing very big cost increases in early years provision, which is extremely worrying.

In conclusion, the Official Opposition feel that the Government must change their approach. We are not satisfied by the Minister’s responses so far and our current intention is to divide on Amendments 4, 5 and 33.

[Lord Livermore (Lab)]

My Lords, I am very grateful to all noble Lords who have spoken in this debate.

I will first address the amendment from the noble Baroness, Lady Neville-Rolfe, which seeks to increase the employment allowance for early years providers. The Government recognise that early years providers have a crucial role to play in driving economic growth and breaking down barriers to opportunity. We are committed to making childcare more affordable and accessible. That is why we committed in our manifesto to delivering the expansion of Government-funded childcare for working parents and to opening 3,000 new or expanded nurseries through upgrading space in primary schools to support the expansion of the sector. Despite the challenging fiscal circumstances the Government inherited, in the October Budget the Chancellor announced significant increases to the funding that early years providers are paid to deliver Government-funded childcare places. This means that total funding will rise to over £8 billion in 2025-26.

The amendment tabled by the noble Baroness, Lady Kramer, and the noble Lord, Lord Sharkey, would exempt providers of higher and further education from changes in the Bill. The Government of course recognise the great value of UK higher education in creating opportunity, as an engine for social mobility and growth in our economy and in supporting local communities. We will provide support for departments and other public sector employers for the additional employer national insurance contribution costs. This funding will be allocated to departments, with the Barnett formula applying in the usual way. In answer to the noble Lord, Lord Bruce, it is for devolved Governments to make their own decisions on how that money is allocated.

I say to the noble Lord, Lord Sharkey, that all additional cost pressures will be considered as part of the spending review. The Autumn Budget provided an additional £300 million of revenue funding for further education for the financial year 2025-26, to ensure that young people develop the skills this country needs. This funding will be distributed specifically to support 16 to 19 student participation. Approximately £50 million of this funding will be made available to general further education colleges and sixth-form colleges for the period April to July 2025. This one-off grant will enable colleges to respond to current priorities and challenges, including workforce recruitment and retention. The remaining £250 million of funding will be made available in 16 to 19 funding rates in the academic year 2025-26, with the aim of ensuring that all 16 to 19 providers are funded on an equitable basis from 2025 to 2026. Furthermore, the Budget provided £6.1 billion of support for core research and confirmed the Government’s commitment to the lifelong learning entitlement, a major reform to student finance which will expand access to high-quality flexible education and training for adults throughout their working lives.

I turn to the amendments tabled by the noble Baronesses, Lady Kramer, Lady Neville-Rolfe, Lady Bennett and Lady Sater, and the noble Lords, Lord Sharkey and Lord Leigh of Hurley, which seek to exempt charities from the changes in this Bill and increase the employment allowance for them. The Government of course recognise the important role that charities play in our society and the need to protect the smallest businesses and charities. That is why we have more than doubled the employment allowance to £10,500. This means that more than half of businesses, including charities, with national insurance liabilities will either gain or see no change next year.

As I have noted previously, it is important to recognise that all charities can benefit from the employment allowance. The Government also provide wider support for charities via the tax regime, with tax released for charities and their donors worth just over £6 billion for the tax year to April 2024. The noble Lord, Lord Leigh of Hurley, again asked me to cost his amendment; as I said in Committee, it is not for the Government to cost amendments that do not reflect government policy.

I turn to the amendments and proposed new clause tabled by the noble Baroness, Lady Neville-Rolfe, exempting providers of transport for special educational needs children to and from their place of education from the changes in this Bill and requiring the Government to publish an impact assessment on this topic. In the Budget and the recent provisional local government finance settlement, the Government announced £2 billion of new grant funding for local government in 2025-26, which includes £515 million to support councils with the increase in employer national insurance contributions. This additional funding has been determined based on a national assessment of the costs for directly employed staff across the public sector. However, this funding is not ring-fenced and it is for local authorities to determine how to use it across relevant services and responsibilities.

Furthermore, the Government are providing a real-terms increase in core local government spending power of 3.5% in 2025-26. To support social care authorities to deliver these key services, we announced in the provisional local government finance settlement a further £200 million for adult and children’s social care. This will be allocated via the social care grant, bringing the total increase of this grant in 2025-26 to £880 million. This means that up to £3.7 billion of additional funding will be provided to social care authorities in 2025-26.

On the amendment tabled by the noble Baroness, Lady Kramer, and the noble Lord, Lord Sharkey, seeking to exclude town and parish councils from the employer national insurance rate change, the Government have no direct role in funding parish and town councils and are therefore not providing further support to them for the employer national insurance changes.

Finally, on the proposed new clause tabled by the noble Lord, Lord Bruce of Bennachie, requiring the Government to publish an assessment of the impact of the Bill on the Scottish public sector, as I have set out previously, the Government have published an assessment of this policy in a tax information and impact note. This clearly sets out that around 250,000 employers will see their secondary class 1 national insurance liability decrease and around 940,000 will see it increase. Around 820,000 employers will see no change.

The OBR’s economic and fiscal outlook also sets out the expected macroeconomic impact of the changes to employer national insurance contributions on employment growth and inflation. The Government and the OBR have therefore already set out the impacts of this policy change. The information provided is in line with other, similar tax changes and the Government do not intend to publish additional assessments. We will of course continue to monitor the impact of these policies in the usual way.

In light of the points I have made, I respectfully ask noble Lords to withdraw their amendments.

[Lord Sharkey (LD)]

I thank all noble Lords who have spoken in this debate. I was particularly taken by Amendments 4 and 5 in the name of the noble Baroness, Lady Neville-Rolfe, and I am glad that she will divide the House. We will support her when she does. I was less taken by the Minister’s response, and still I note the lack of a definitive answer to my question on the percentage relief to FE funding.

Having listened to speeches from all parts of the House, rescuing vital and vulnerable sectors from the increase in employers’ national insurance contribution seems to me almost a duty. I would like to test the opinion of the House on Amendment 3.

National Insurance Contributions (Secondary Class 1 Contributions) Bill

Lord Livermore Excerpts

Report stage
Tuesday 25th February 2025 Lords Chamber

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

My Lords, I will briefly address the new clauses proposed by the noble Baronesses, Lady Neville-Rolfe, Lady Noakes and Lady Lawlor, requiring the Government to conduct assessments on the economic and sectoral impacts of this Bill. As we discussed extensively in Committee, the Government have published an assessment of this policy in HMRC’s tax information and impact note. This sets out that around 250,000 employers will see their secondary class 1 NICs liability decrease and around 940,000 will see it increase; around 820,000 employers will see no change. The OBR’s Economic and Fiscal Outlook sets out the expected macroeconomic impact of the changes to employer national insurance contributions on employment, on growth and on inflation. The Government and the OBR have, therefore, already set out the impacts of this policy change. The information provided is in line with other similar tax changes, and the Government do not intend to publish further assessments. The Government will, of course, continue to monitor the impact of these policies in the usual way. As a result, I respectfully ask noble Lords not to press their amendments.

[Baroness Neville-Rolfe (Con)]

I thank the Minister for his reply, but I am sorry that he does not feel able to go further. I am particularly grateful to my noble friends Lady Noakes, Lady Lawlor and Lord Hodgson, and the noble Lord, Lord Londesborough, for their support, and I agree with the noble Baroness, Lady Kramer, that the time has come to take a stand. I do not share the concern of the noble Lord, Lord Eatwell. This is the sort of assessment that we do in the private sector, and in some other departments, and it is possible for the Government to add to the amendment in the other House if they feel they need to do so. We heard earlier from my noble friend Lord Ahmad that the Treasury had failed to consult individual sectors on the proposals under discussion. I know how averse the Treasury can be to that, having been a Minister in a similar position in the Treasury. I also share the fascination of the noble Lord, Lord Davies with the state of the National Insurance Fund, but I think that is for another day.

The Government’s impact assessment has been woefully inadequate for a change on such a huge scale. It is in the interests of the public that we understand fully the impact of the Government’s jobs tax on individual sectors—albeit retrospectively—and the overall figures that we have received from the Minister, which have been helpful in themselves, are just not enough. So I intend to test the opinion of the House on my Amendment 38, but in the meantime I beg leave to withdraw my Amendment 37.

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[Lord Altrincham (Con)]

My Lords, I support Amendment 39 in the name of my noble friend Lady Noakes. I thank all noble Lords for their courage and grace in staying all the way through to group 7.

Amendment 39 would give the Treasury the power to exempt sectors that would suffer significantly under the Government’s national insurance rise. The amendment introduces a degree of flexibility that Ministers can use to protect the most vulnerable of British businesses; by allowing the Treasury to introducing specific exemptions when required, we can exempt them from the additional financial burden of the national insurance increase.

I am grateful to my noble friend for bringing forward Amendment 39. It is clear that we share many of the same concerns. The amendment in her name is closely aligned with those in the name of my noble friend Lady Neville-Rolfe that seek to exempt specific sectors, such as the social care or charity sectors. So many sectors need exemption from this policy, and we hope the Government will give the arguments thoughtful consideration.

[Lord Livermore (Lab)]

My Lords, Amendment 39, tabled by the noble Baroness, Lady Noakes, seeks to include powers as part of this Bill to exempt certain groups in future. As I have already set out, the revenues raised from the measures in this Bill play a critical role in repairing the public finances and rebuilding our public services. Clearly, any future changes that exempt certain groups from paying national insurance would have cost implications, necessitating either higher borrowing, lower spending or alternative revenue-raising measures. I would therefore respectfully ask the noble Baroness to withdraw her amendment.

[Baroness Noakes (Con)]

My Lords, I cannot make the Government accept a power that I have generously offered to be made a part of this Bill. I hope the Government do not regret at a later stage turning down this opportunity to allow them to save face in a simple, pain-free way. As I say, I cannot force the Government to accept a perfectly sensible measure that would allow them to repair some of the damage that this Bill will inevitably do. I beg leave to withdraw the amendment.

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[Lord Altrincham (Con)]

My Lords, I support my noble friend and thank him for his brief-ish words on local taxpayers and his update on the Great Reform Bill as well. I thank him for his amendment to ensure that the Government initiate a review into the impact of this tax on local authority finances.

As countless noble Lords have remarked, both in Committee and during this debate, local authorities already find themselves in a perilous financial position. As my noble friend Lord Jamieson said in Grand Committee, local government currently spends more than 70% of its funding on adult and children’s social care. The Local Government Association has estimated that this measure will cost local authorities a total of £1.7 billion. Some £1.2 billion of that is indirect costs. While the Government may have offset the direct costs of local authorities, they have not done so for the indirect costs they will face. They will have either to cut public services or to put up council tax.

Given this, a review of the impact on local authorities is surely the minimum we can expect from the Government. I urge the Minister to accept this amendment.

[Lord Livermore (Lab)]

My Lords, I will speak briefly to Amendment 43 tabled by the noble Lord, Lord Fuller, which would require the Government to publish an impact assessment of the Bill on local authorities within six months of its introduction. The noble Lord set out eloquently the damage the previous Government did over 14 years to public services and to the funding available to local government. He asked me the same questions as he did in Committee, and I give him the same answer as I did then: it is not for me to comment on the calculations made by other organisations.

On impact, as I have set out previously this evening and extensively in Committee, the Government have already published an assessment of this policy and a tax information and impact note. The OBR’s Economic and Fiscal Outlook also sets out the expected macroeconomic impact of the changes to employer national insurance contributions on employment, growth and inflation. The Government and the OBR have therefore already set out the impacts of this policy change. The information provided is in line with other tax changes, and the Government do not intend to publish further assessments.

The Government will of course continue to monitor the impact of these policies in the usual way. I therefore respectfully ask the noble Lord to withdraw his amendment.

National Insurance Contributions (Secondary Class 1 Contributions) Bill

Lord Livermore Excerpts

Committee stage
Tuesday 4th February 2025 Grand Committee

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

My Lords, I am grateful to all noble Lords for their contributions to this debate. I will address the amendments tabled by the noble Baronesses, Lady Noakes and Lady Neville-Rolfe, which would phase in the introduction of the secondary threshold cut to £6,760 in the next tax year and £5,000 from 2026-27.

I absolutely appreciate the concerns raised by noble Lords during this debate, and by businesses, about the impacts of the Bill. It was a privilege to hear the insights and expertise of the noble Lord, Lord Wolfson, and I greatly appreciate the constructive spirit of his contribution. However, as I have set out previously in this Committee, the Bill is necessary to repair the public finances, to protect working people and to invest in Britain’s future, including by providing more than £20 billion extra for the NHS over this year and next. This funding will reduce waiting times by supporting the NHS to deliver 40,000 extra elective appointments a week and will make progress towards the commitment that patients should expect to wait no longer than 18 weeks from referral to treatment. Reducing the threshold by less than that set out in the Bill would reduce the revenue generated by it and would therefore introduce new pressures, which would have to be met by more borrowing, lower spending or alternative revenue-raising measures.

Given these points, I respectfully ask the noble Baroness not to press her amendments.

[Lord Wolfson of Aspley Guise (Con)]

Before the Minister sits down, can he say how much this amendment and the resulting delay would cost the Government? That would help those of us on this side of the Committee to understand why this is not possible.

[Lord Livermore (Lab)]

The Government tend to cost the Government’s policies. It is not usual practice for the Government to cost Opposition policies.

[Lord Leigh of Hurley (Con)]

Before the Minister sits down, will he commit to having the Treasury look at the numbers I mooted? I will happily send him the spreadsheet if it helps to verify whether they are accurate.

[Lord Livermore (Lab)]

The noble Lord set out some figures that are based on his assumptions, not the Government’s assumptions. I have no reason to dispute his maths or the computing power of Microsoft Excel, but I do not think I can commit Treasury resources to checking the figures in his own spreadsheet.

[Baroness Noakes (Con)]

My Lords, first, I thank all my noble friends for taking part in this debate and supporting these amendments. They were put forward as a constructive way to deal with what could be some very damaging impacts caused by the Government’s legislation.

I was confused by the noble Baroness, Lady Kramer, saying that she is against the Bill, so she does not want to engage in ways of making things better. As His Majesty’s loyal Opposition, we believe that what we are here to do is try to make policies better, even though we disagree with virtually all the Bills the Government are putting forward at the moment. Our job is to engage constructively and, certainly, to try to avoid damaging aspects.

My noble friend Lord Wolfson spoke about being able to pass on price increases of 1%; he has an amazing luxury, because not all retailers can do that. At the weekend, I got talking to a local businessman who owns a number of shops. Most of his workforce are part-time staff. He employs quite a lot of people in and around our villages, and in the neighbouring villages, where he has other shops. He said that he does not know what to do. He cannot increase prices because the goods he sells do not lend themselves to significant price increases. The only thing he can do is to reduce hours or numbers. These measures means that our local economies—things that are really important to people—will be damaged by less income for local families. They are having really significant impacts, whether at the large end of business or the very smallest end.

I regret the Minister just saying again and again that he has to repair the finances and put more money into public services because he wants to protect working people. The one thing he is not doing with these changes is protecting working people. I sincerely hope that, between Committee and Report, the Government will think about whether they can find ways of making this Bill less damaging. We are not arguing that the Bill should not exist—we do not believe that that is our role, and we did not vote against it at Second Reading and certainly would not have done so—but there are many ways of softening its edges. I hope the Government will consider that between now and Report.

With that, I beg leave to withdraw the amendment.

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[Baroness Lawlor (Con)]

My Lords, I support these important amendments. Today, all three and four year-olds in England are entitled to free education before they start school full time at the age of five. In the year 2023-24, there were almost 23 children for every teacher—the highest ratio thus far. If we continue with this measure without amendment, we will see an even higher ratio, with the number of adults declining because of the costs, as we heard previously in Committee and again today. We have 3,100 nursery schools and 11,700 day nurseries, and they play an integral part in the induction of little people into the world of education. They are vital to the well-being of the child and, indeed, to parents being able to pay their way with confidence that their children are receiving an early years education. I urge the Minister to provide an exemption, or to ensure in one way or another that early years education and care providers, whether in a nursery school, a day nursery or another system—voluntary and independent, as well as public sector—are prevented from losing teachers due to the additional costs.

I echo what my noble friend Lady Neville-Rolfe said. I would be very happy with an increased employment allowance. We need an impact assessment, given the large number of people employed in this sector and the impact this measure will have on children’s education later in life. We are now paying the price of the Covid lockdown, with the children who passed through schooling at that age. Let us stop making things difficult for early years provision and try to improve it, not disimprove it by such a measure.

[Lord Livermore (Lab)]

My Lords, I will address the amendment tabled by the noble Baroness, Lady Neville-Rolfe, which seeks to prevent commencement of this Bill until an impact assessment is published for the early years sector.

Delaying commencement of the Bill would reduce the revenue generated from it and require either higher borrowing, lower public spending or alternative revenue-raising measures. The Government carefully consider the impacts of all policies, including the changes to employer national insurance. As I have stated previously in Committee, an assessment of the policy has been published by HMRC in its tax information and impact note, including impacts on the Exchequer, the economy, individuals, households and families, equalities and businesses, including civil society organisations, with details on monitoring and evaluation.

Further, the OBR’s economic and fiscal outlook sets out the expected macroeconomic impact of the changes to employer national insurance contributions on employment, growth and inflation. The Government 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.

Amendment 40, tabled by the noble Baroness, Lady Neville-Rolfe, and the noble Lord, Lord Altrincham, seeks to increase the employment allowance for early years providers. This would introduce new pressures which would have to be met by either more borrowing, lower spending or alternative revenue-raising measures. I also note that creating new thresholds or rates based on what sector a business is in would introduce distortion and additional complexity into the tax system.

The noble Baroness, Lady Neville-Rolfe, asked for some specific figures. The figures are not broken down in the way that she asks for.

Early years providers have a crucial role to play in driving economic growth and breaking down barriers to opportunity. We are committed to making childcare more affordable and accessible. That is why, in our manifesto, the Government committed to delivering the expansion of government-funded childcare for working parents and to opening 3,000 new or expanded nurseries through upgrading space in primary schools to support the expansion of the sector.

Despite the very challenging fiscal circumstances the Government inherited, at the Budget the Chancellor announced significant increases to the funding that early years providers are paid to deliver government-funded childcare places. This means that total funding will rise to more than £8 billion in 2025-26.

In light of these points, I respectfully ask the noble Baroness to withdraw her amendment.

[Baroness Neville-Rolfe (Con)]

I thank the Minister for his response. I hope that in the light of what has been said today and on previous days, the Government will look at the impact of these NICs changes on our early years sector.

When we were in government, we took steps to support the early years sector, and we know that the national insurance increase is going to be a significant setback. My noble friend Lady Lawlor talked about the numbers of providers spread across the country, which play a huge part in the induction to the world of education and in helping young people to get the right kind of start in life. The very least the Government can do is to look at the impact note again and produce an assessment of the impact of the policy on the early years sector in particular, not just the overall economic impact. We have heard from the Minister on several occasions that they have produced a note, but it is a macroeconomic—an overall—note, while what we have here are very big changes in the economy affecting individual sectors, some of them very badly. There does not seem to be any readiness to look at the impact in those sectors and to find solutions, whether through national insurance changes or some other way. I suggested the employment allowance as another route.

The noble Lord will also recall that when in government we took steps to increase the supply of early years provision by expanding the childminding sector and encouraging the establishment of new nurseries alongside our expansion of the 30-hours free childcare policy. Without an assessment of the impact of these changes, how can the Government be sure that they will be able to deliver on the ambitious plans that the Minister set out to expand free childcare hours for hard-working families? I think there is a measure of agreement on objectives, but we need to find a way to get there.

These are important questions, and Ministers need to answer them before we get to Report. It is intolerable that we are pressing ahead with a jobs tax without a full assessment of the policy. We have had some macro figures, now broken down into three chunks, but it is very difficult for us to know what the individual effect is on different sectors. This is a serious matter. Working families across the country are very concerned. My worry is that the noise of concerns on something such as early years will increase as April comes and early years providers discover just what sort of hole they are in, but in the interests of time, I beg leave to withdraw my amendment.

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[Lord Livermore (Lab)]

My Lords, I will address Amendments 29 and 41. I am grateful to all noble Lords for their contributions. I acknowledge the powerful contribution from the noble Baroness, Lady Monckton of Dallington Forest; I listened very carefully to all the points that she and other noble Lords made.

As I noted in a previous sitting of this Committee, it is important to recognise that all charities, including hospices, can benefit from the employment allowance, which this Bill more than doubles, from £5,000 to £10,500. This will benefit charities of all sizes, particularly the smallest ones. The Government also provide wider support for charities, including hospices, via the tax regime. This tax regime is among the most generous in the world, with tax reliefs for charities and their donors worth just over £6 billion for the tax year to April 2024.

On the specific point made by the noble Lord, Lord Leigh of Hurley, the situation whereby independent contractors, including primary care providers, social care providers, charities and nurseries, will not be supported with the costs arising from these changes is exactly the same as with the changes to employer national insurance rates under the previous Government’s plan for the health and social care levy.

This Government have provided a real-terms increase of 3.5% in core local government spending power for 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. We are also supporting the hospice sector with an increase in funding of £100 million for adult and children’s hospices to ensure that they have the best physical environment for care—

[Lord Scriven (LD)]

Can the Minister confirm that the £100 million is capital and cannot be used for revenue?

[Lord Livermore (Lab)]

We are also providing an additional £26 million of revenue to support children and young people’s hospices.

As I have said previously, delaying commencement of the Bill would reduce the revenue generated from it and require either higher borrowing, lower public spending or alternative revenue-raising measures. The Government carefully consider the impacts of all policies, of course, including the changes to employer national insurance. As I have also said previously, an assessment of the policy has already 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. The Government and the OBR have therefore already set out the impacts of this policy change. This approach is in line with previous changes to national insurance and to taxation. The Government do not intend to provide further impact assessments.

In the light of the points I have made, I respectfully ask the noble Baroness to withdraw her amendment.

[Baroness Monckton of Dallington Forest (Con)]

My Lords, I am grateful for the thoughtful contributions to this debate from my noble friends Lady Sater, Lord Leigh and Lord Swire. I note the contribution on Amendment 41 in the name of my noble friend Lady Neville-Rolfe. All I can say is that I urge the Minister to consider carefully the amendments we have been debating and to acknowledge the essential services provided by the hospice sector. However, for the moment, I beg leave to withdraw the amendment.

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[Baroness Neville-Rolfe (Con)]

My Lords, I shall speak to Amendment 51 and I support Amendment 30 in the name of my noble friend Lady Monckton, presented by my noble friend Lord Altrincham, who started by drawing attention to the very substantial number of people we are talking about in retail—hundreds of thousands of people—and the problems they are facing. As my noble friend Lady Lawlor said, jobs are being cut at the fastest rate since the financial crisis. This is a grim situation.

My Amendment 51 probes whether the Government would be willing to increase the employment allowance from £10,500 to £20,000 to offer support to the smallest businesses in the retail sector at a modest cost to the Exchequer. As my noble friend Lord Altrincham noted, our retail sector is invaluable in terms of the value it creates for our economy. In 2023, retail accounted for 4.7% of the UK’s total economic output, worth more than £110 billion. Much of this value added was in small shops, from barbers and hairdressers to farm shops. For every £1 spent in 2024, 30p was spent in food shops and 11p in clothing shops. Retail accounts for at least 50% of spending in Britain, but despite that, this Government—unlike the previous Labour Government, I have to say—appear not to understand the value that this sector provides to our economy and the jobs that it provides, particularly, as the noble Baroness, Lady Kramer, said, for part-time workers on low pay.

There have been warnings from a range of sources about the devastating impact of this tax raid on workers, who will face fewer pay rises or fewer working hours, and on businesses, which will be forced to raise prices in order to maintain their business. The British Chambers of Commerce warned that more than half of firms intended to raise prices in response to these tax hikes, and we have had a detailed analysis from the noble Lord, Lord Wolfson, a non-food retailer. He acknowledged that price rises or job losses in the food sector and food stores might be worse because of the lower margins in that part of the industry. I am glad that the noble Baroness, Lady Kramer, referenced the noble Lord, Lord Londesborough. It is good to see him back. He also tabled an amendment in a previous sitting which I very much supported.

There is further evidence that the Government have to think again, and there is an array of ways of doing so. I hope that, before Report, the Government will sit down, think about the devastating effects of these changes and consider whether there are ways, small or large, of alleviating their impact on many sectors of the economy and of social enterprise, which we will come on to discuss again.

[Lord Livermore (Lab)]

My Lords, Amendment 30, tabled by the noble Baroness, Lady Monckton of Dallington Forest, and moved by the noble Lord, Lord Altrincham, seeks to prevent commencement of the Bill until an impact assessment is published for the retail sector. Delaying commencement of the Bill would reduce the revenue generated from it and require either higher borrowing, lower public spending or alternative revenue-raising measures. The Government carefully consider the impacts of all policies, including the changes to employer national insurance.

As I have said previously, an impact 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 to taxation, and the Government do not intend to provide further impact assessments.

Amendment 51, tabled by the noble Baroness, Lady Neville-Rolfe, and the noble Lord, Lord Altrincham, seeks to increase the employment allowance for those employed in the retail sectors. The Government are taking action as part of the Bill to protect the smallest businesses by increasing the employment allowance from £5,000 to £10,500. This means that next year, 865,000 employers will pay no national insurance at all, and more than half of employers will see no change or will gain overall from this package. This means that employers will be able to employ up to four full-time workers on the national living wage and pay no employer national insurance.

The Budget also set out further steps that the Government are taking to strengthen small businesses’ ability to invest and grow, including in the retail sector. This includes freezing the small business multiplier, permanently reducing business tax rates for retail, hospitality and leisure properties from 2026-27, and publishing the Corporate Tax Roadmap to provide stability and certainty within the tax system for businesses across the economy.

Increasing the employment allowance for specific sectors would add additional complexity to the tax system and, by adding further spending pressures, would require higher borrowing, lower spending or alternative revenue-raising measures. In light of the points I have made, I respectfully ask the noble Lord to withdraw his amendment and other noble Lords not to press their amendments.

[Lord Leigh of Hurley (Con)]

The Minister helpfully said in his opening remarks that not doing this would mean that the Government would have to increase borrowing, reduce spending or increase taxes. Yesterday—I think—I tried to be helpful by suggesting to him that there is a way of raising further revenue by amending the digital services tax to make it effective and looking at VAT on imported goods below £135. Since then, the American Government have announced that they are looking to put import taxes on goods below £135 imported from China, and the Times reported that the digital services tax was being looked at again.

In this context, will my noble friend, or rather the Minister—I beg his pardon; as he knows, I already regard him as a noble friend—reconsider what other options there might be to replace the areas of taxation which noble Peers on this side of the Committee have expressed concerns about?

[Lord Livermore (Lab)]

I am grateful to the noble Lord for his comments and very happy to be his noble friend once again. As he knows, the Government keep all taxation under review, and I will take his submissions as representations on that matter.

[Lord Altrincham (Con)]

Perhaps we should not offer the Minister any more taxation ideas because we are trying to rein him in at the moment and, obviously, VAT is very much in scope and is coming next, so perhaps we should just hold back. But I thank him for his response and beg leave to withdraw my amendment.

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[Baroness Neville-Rolfe (Con)]

My Lords, I shall speak to my Amendment 49, and I support Amendment 31 in the name of my noble friend Lady Monckton of Dallington Forest. The fact is that, as we have also heard from the noble Lord, Lord Londesborough, we need an impact assessment here as well so that we can assess where to make changes and what impact this jobs tax is having.

My Amendment 49, along with others that I have tabled, would increase the employment allowance from £10,500 to £20,000. This sector, which is so important to our day-to-day life and to our tourist industry, is full of part-time workers and the lowest paid will suffer a tsunami from the NICs changes. We need to find a way of alleviating the pain, and my amendment is one such proposal.

It is a particular pleasure to welcome the noble Baroness, Lady Fleet, to the Committee and to hear her evidence of the impact on the arts. She is right that the creative industries and hospitality are integrally linked, but I was equally concerned to hear about the impact on museums, theatres and other aspects of the creative arts. She is also right that, on this evidence, the Government are no friend of the arts; that should be of concern to the Committee.

My noble friend Lady Monckton was right to talk of the spiral of price increases, the diversionary pressure on management, the impact on capital investment and the effect on jobs, especially the lowest level jobs. They are particularly hit by the double whammy, as I have said already today, of the changes in NICs and the national minimum wage, which will particularly bite younger people. For good reasons, the national minimum wage for younger people has been increased, but that is making a particular difficulty in terms of hiring them, which I fear we shall see in the results in the coming months.

I have further evidence about hospitality, which I think some local papers may be interested in, so I will run through it because it is important. There have been calls from across the sector about how damaging the tax will be. Restaurateur Tom Kerridge, despite backing Labour at the election, has expressed concern that this tax raid will have “a catastrophic effect”. He said that it would cost,

“£850 extra per member of staff per year”

and have a reaction into a negative process in terms of employment. He also said:

“This is a very difficult time for hospitality, because the next few weeks are particularly busy. They give a false sense of feeling that everything is okay … it’s going to have a catastrophic effect, moving into the new year”.


He said that just before Christmas, and things have got worse.

On top of that, UKHospitality said that the national insurance increase at the Budget will lead to business closures and job losses within a year. It said that

“the changes to the NICs threshold are not just unsustainable for our businesses, they are regressive in their impact on lower earners and will impact flexible working practices which many older workers and parents rely on. Unquestionably, they will lead to business closures and to job losses within a year”.

I was particularly pleased to hear from the noble Lord, Lord Londesborough, about his new evidence on pubs. The British Institute of Innkeeping, which has warned that the Budget will see 75% of pubs cut hours, thinks that 40% will reduce opening times and that one in three will make staff redundant. It said:

“The Budget, billed to support working people, will pull the rug out from under these already fragile small businesses and significantly reduce the employment opportunities they can provide. 75% will cut staff hours, 40% will reduce opening hours and 1-in-3 will make staff redundant”.


This will have an extraordinarily damaging impact on the sector and the economy.

More than 200 leading restaurant, pub and hotel companies including Stonegate, Greene King, Wetherspoons and Young’s wrote to the Chancellor warning that the Budget will cost the industry £3.4 billion a year. They said:

“As leaders of hospitality businesses, we are compelled to highlight our grave fears about the impact of the Budget, particularly relating to the Employer NICs threshold. Alongside the changes to the national minimum wage levels this will cost hospitality—at a conservative estimate—£3.4 billion a year”.


I would be grateful if the Minister would provide an actual number.

Finally, Simon Emeny, chief executive of Fuller’s, which owns about 400 pubs and hotels and employs almost 5,000 people, said he was “just utterly disappointed” by the Chancellor’s choices. He claimed they “disproportionately” impacted hospitality, which is a big employer of young people and part-time workers.

These are real impacts and the Government’s changes are disproportionately affecting mainly small and vibrant businesses such as these. The biggest hit is from the decrease in the threshold, which could be phased in. Alternatively, the Government could help smaller businesses by increasing the employment allowance, as I have also suggested. I simply urge the Government to act.

[Lord Livermore (Lab)]

My Lords, I will address the amendment tabled by the noble Baroness, Lady Monckton of Dallington Forest, which seeks to prevent commencement of this Bill until an impact assessment is published for the hospitality sector. Delaying commencement of this Bill would reduce the revenue generated from it and require either higher borrowing, lower public spending or alternative revenue-raising measures. The Government, of course, carefully consider the impacts of all policies, including the changes to employer national insurance.

As I have said before, 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 to taxation, and the Government do not intend to provide further impact assessments.

I turn to the amendment tabled by the noble Lady, Baroness Neville-Rolfe, and the noble Lord, Lord Altrincham, which seeks to increase the employment allowance for those employed in the hospitality sectors. The Government are taking action as part of this Bill to protect the smallest businesses by increasing the employment allowance from £5,000 to £10,500. This means that next year, 865,000 employers will pay no employer national insurance at all; more than half of employers see no change, or gain overall, from this package. The specific data the noble Baroness requested is not broken down in the way she asks for.

Increasing the employment allowance for specific sectors would add additional complexity to the tax system, and adding further spending pressures would require higher borrowing, lower spending or alternative revenue-raising measures. In light of these points, I respectfully ask the noble Baroness to withdraw her amendment.

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[Baroness Neville-Rolfe (Con)]

I was actually asking the question about this, as we did on charities. The Minister confirmed the position very helpfully last time, and I am asking him to clarify the position and look positively at trying to extend this. I am delighted that some community pharmacies get the employment allowance and would like to see it increased to alleviate difficulties in the sorts of small chemists I was talking about. If we can find another way, I would be delighted as well, but this 50% rule seems a bit odd, and I wonder whether the Minister could clarify or have a look at it. Frankly, it was very good to hear from the noble Lord, Lord Scriven, in view of his role in community pharmacies, and, more worryingly, to learn from him just how many pharmacies are closing. When I was in retail and we had pharmacies, there was actually a battle to buy extra licences so that more pharmacies could be opened. If it is going in the other direction, that is not good news for our healthcare services, which we all care so much about.

I look forward to a positive response from the Minister on this important area, which is complicated.

[Lord Livermore (Lab)]

My Lords, I will address the amendment tabled by the noble Lord, Lord Jackson of Peterborough, which seeks to prevent commencement of the Bill until an impact assessment is published for community pharmacies. Delaying its commencement would reduce the revenue generated from it and require either higher borrowing, lower public spending or alternative revenue-raising measures.

The Government carefully consider the impacts of all policies, including the changes to employer national insurance. As I have said before, 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.

I turn to the amendments tabled by the noble Baroness, Lady Neville-Rolfe, and the noble Lord, Lord Altrincham, which seek to increase the employment allowance for those employed in primary care, including in GP surgeries, dentist surgeries and pharmacies. The distinction between those in the public sector who will be compensated and those who will not follows existing practice and is the same as the distinction that the previous Government used for their health and social care levy.

The noble Baroness, Lady Neville-Rolfe, asked specifically about eligibility for the employment allowance. Eligibility is not determined by sector but depends on the make-up of an individual business’s work. HMRC guidance explains that this is based on whether an organisation is doing 50% or more of its work in the public sector. It is therefore down to individual organisations to determine their eligibility for any given year. The employment allowance was introduced in 2014 by the previous Government. This Government have not changed the eligibility rules on the employment allowance in any way, beyond removing the £100,000 threshold.

The revenue raised from the measures in the Bill will play a critical role in restoring economic stability and funding the NHS. As a result of measures in the Bill and the wider Budget measures, the NHS will receive over £20 billion extra over two years to deliver 40,000 extra elective appointments a week. Primary care providers—in general practice, dentistry, pharmacy and eyecare—are important independent contractors which provide nearly £20 billion-worth of NHS services. Every year, the Government consult each sector about what services it provides, and what money it is entitled to in return under its contract. As in previous years, this will be dealt with as part of that process.

The Government have announced a proposed £889 million uplift for general practice in 2025-26 and have set out the proposed areas of reform which will help us to deliver on our manifesto commitments. This is the largest uplift to GP funding since the beginning of the five-year framework and means that we are reversing the recent trend, with a rising share of total NHS resources going to general practice. We have started consulting with the General Practitioners Committee England of the British Medical Association on the 2025-26 GP contract and will consider a range of proposed policy changes. These will be announced in the usual way, following the close of the consultation later this year.

The Department of Health has entered into consultation with Community Pharmacy England regarding the 2024-25 and 2025-26 funding contractual framework. The final funding settlement will be announced in the usual way following this consultation. The NHS in England invests around £3 billion on dentistry every year. NHS pharmaceutical, ophthalmic and dental allocations for integrated care systems for 2025-26 have been published alongside NHS planning guidance.

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

[Lord Scriven (LD)]

Again, for the clarity of the record, the Minister has just said about GPs something which completely contradicts what it says on WWW.GOV.UK. It is about whether a GP practice can claim employment allowance. It says:

“There is no entitlement to the Employment Allowance, because the majority of the work done, is wholly or mainly of a public nature”.


Since it says on GOV.UK that GPs cannot claim the employment allowance, can the Minister write to the Committee to clarify the contradictions between the website and what he has just said in his answer?

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[Lord Livermore (Lab)]

I will happily write, because it is an important point and deserves clarification. Listening to what the noble Lord read out, I do not think the statements are contradictory, because the website is absolutely referring to the 50% or more point. I think it is drawing a conclusion from that, given that most of them are doing more than 50%, but I do not think they are contradictory.

[Lord Scriven (LD)]

I quote again exactly what it says, which is that

“there is no entitlement to the Employment Allowance”

for GPs. That is from “Eligibility for Employment Allowance: further employer guidance” on GOV.UK. It makes it clear that there is no entitlement to the employment allowance for GPs.

[Lord Livermore (Lab)]

As I said, I am more than happy to write to clarify that. What it goes on to say suggests it is consistent with that. Perhaps that first sentence is incorrect but I will write to the Committee to clarify.

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[Lord Scriven (LD)]

I understand that the noble Lord may have had other appointments on day one in Committee, but if he had been here then he would have seen that we are totally against it. We gave explanations of how extra taxes could have been done.

While I am on my feet, just to clarify for the Minister, I have looked a bit further at the website and what he said is absolutely correct. The 90% that I was referring to was a specific example of a number of people employed.

[Lord Livermore (Lab)]

I thank the noble Lord for that point. I am of course still happy to write, so that we have absolutely clarified the point.

[Lord Jackson of Peterborough (Con)]

We have established that an epistle will be oncoming from the Minister to the noble Lord, Lord Scriven. I am glad he has clarified that. I just think—

National Insurance Contributions (Secondary Class 1 Contributions) Bill

Lord Livermore Excerpts

Committee stage
Wednesday 29th January 2025 Grand Committee

[Baroness Neville-Rolfe (Con)]

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

[Baroness Neville-Rolfe (Con)]

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

[Lord Livermore (Lab)]

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

[Lord Forsyth of Drumlean (Con)]

I am most grateful to the Minister for giving way. I am slightly surprised, having listened to so many of his speeches since the general election, that he is holding up the practice of the previous Government as a standard by which he should be judged.

I asked specifically about the new proposals in the Budget for non-doms, which have turned out to be disastrous in terms of the number of people who have left, and which have forced the Chancellor to make changes. Does he not recognise that, had an impact statement been done, they might have discovered what the impact would have been? That is for the benefit not just of the Opposition but of the Government themselves. Accountability strengthens Governments; it does not weaken them. Can he not see that the idea of producing impact statements is absolutely central to the whole process of accountability and prevents the Government making disastrous mistakes of the kind that is proposed in this Bill?

[Lord Livermore (Lab)]

I dispute the noble Lord’s description of the non-dom policy and the impacts that it has had. A tax information and impact note was put out alongside that policy, so we actually did put out an assessment alongside it.

[Lord Forsyth of Drumlean (Con)]

I am of course very familiar with that, but it was wrong, was it not? It was not an effective impact statement; otherwise, it would not have been necessary to change the policy.

[Lord Livermore (Lab)]

We have not changed the policy; we have made the policy easier to use. The policy is absolutely as it was at the Budget, as is the amount of revenue that we are scoring from it. An impact assessment was put out alongside that. My point is that what we are doing on impact assessments, on all the taxes that the noble Lord mentioned, is absolutely in line with what all previous Governments have done on impact assessments. We are content that that is a sufficient amount of information, and we do not intend to put out any further impact assessments.

Finally, I turn to the amendments tabled by the noble Lords, Lord Londesborough and Lord Altrincham, and the noble Baroness, Lady Neville-Rolfe, which seek to increase the employment allowance for small businesses. Again, the proposals in these amendments would create additional costs, necessitating either higher borrowing, lower spending or alternative revenue-raising measures.

The Bill already seeks to protect the smallest businesses and is significantly increasing the employment allowance from £5,000 to £10,500. This means that, next year, 865,000 employers will pay no national insurance at all, and more than half of employers will see no change, or gain overall, from this package. For the reasons I have set out, I respectfully ask noble Lords not to press their amendments.

[Lord Londesborough (CB)]

I thank the Minister for his comments, but I am disappointed and, frankly, baffled that the Treasury can tell us specifically—he repeated these figures—how many employers are impacted by the national insurance increase, yet there is a curious resistance to answering my specific and fair question: what percentage of jobs will attract an increase in national insurance contributions?

In October, the Department for Business and Trade helpfully provided a sectoral breakdown, by company size and number of jobs, under each category. It is fairly simple maths to come out with a reasonable estimate. This is in the interests of transparency; I am not trying to nail the Government here. Everyone should be able to understand across our economy, as we all share an interest in trying to generate economic growth, how many jobs are impacted. “Working people” is a favourite phrase that we keep hearing; how many of their jobs will be impacted?

If the Minister cannot produce the figures today, which I would respect, I request just a few minutes of research between the Treasury and the Department for Business and Trade. I believe that these figures could be produced very simply and that they would be very helpful in looking at the impact of this Bill. I cannot understand the resistance to it.

[Lord Livermore (Lab)]

I am grateful to the noble Lord for his follow-up points. As I have said, we are not able to provide him with those figures and that remains the position.

[Lord Leigh of Hurley (Con)]

I asked for an impact assessment on the National Security and Investment Bill, and none was forthcoming, but this is in respect not to tax but to social security. Therefore, there are no precedents.

[Lord Livermore (Lab)]

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

[Baroness Neville-Rolfe (Con)]

I beg leave to withdraw the amendment.

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[Baroness Neville-Rolfe (Con)]

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

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

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

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

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

“Labour recognises that food security is national security”,


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

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

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

[Lord Livermore (Lab)]

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

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

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

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

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

[Baroness Bakewell of Hardington Mandeville (LD)]

My Lords, I thank the Minister for his response. The impact assessment needs to go further than farms and cover the supply chain. I am sure he will be aware of that in six months’ time. I thank noble Lords who have taken part in this short debate.

Amendment 36 of the noble Lord, Lord Howard of Rising, is also about making an assessment of the impact of the rise in national insurance. The noble Baroness, Lady Neville-Rolfe, talked about raising the employment allowance to £20,000. I have some sympathy with that.

I am disappointed that the Minister is unable to agree to my amendment, which would make a considerable difference to small farms. However, I can see that he is not going to change his mind, and I beg leave to withdraw the amendment.

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[Lord Blackwell (Con)]

My Lords, I want to add to the comments made by my noble friend Lord Altrincham in introducing these amendments. He spoke of a large number of young people who are not in economic activity, full-time education or training. Labour market statistics are notoriously difficult to interpret, as we know, but, if you take the unemployment rate he quoted—around 14%—we know that, in addition, a worryingly large number of people in this age group are also on long-term sickness benefits. All of them could be in productive work, with the right support and encouragement.

A number of Members of this Committee are also members of the House of Lords Economic Affairs Committee, which recently did a review of this area. Some of the evidence that we took made the point that, once a young person moves on to long-term benefits without ever having had meaningful employment experience, it becomes increasingly difficult for them to get work. They become stranded in a benefit life, which is not only wasteful for them but a huge cost to the taxpayer.

In stressing the importance of making it economically attractive for employers to take on young workers such as these, I wonder whether the Government should consider going further than these amendments: not just retain the existing levels of national insurance contributions for employers for this age group but reduce the national insurance contributions of young workers to give an additional incentive to help them, at this early stage in their lives, into a meaningful working career.

[Lord Livermore (Lab)]

My Lords, I am grateful to all noble Lords who have taken part in this debate. I will address the amendments tabled by the noble Lord, Lord Altrincham, and the noble Baroness, Lady Neville-Rolfe, which seek to exempt the salaries of young people from the increase in employer national insurance.

An employer national insurance relief is already available for the earnings of those aged under 21 and for apprentices aged under 25, meaning that employers are not required to pay national insurance contributions up to £50,270 for these groups. Despite the challenging fiscal inheritance that this Government faced, we are maintaining these important reliefs for under-21s and apprentices under 25; they are not changing as a result of this Bill. Creating other thresholds and rates based on the age of staff would add additional complexity to the tax system. These amendments would introduce new pressures that would have to be met by more borrowing, lower spending or alternative revenue-raising measures.

The noble Lord, Lord Altrincham, mentioned NEETs. I completely agree with him, but the situation that this Government inherited is completely unacceptable. That is why, at the Budget, the Government announced £240 million to fund 16 pilot projects across England and Wales in order to improve the support available to the economically inactive, the unemployed and people who want to develop their careers. This will include eight youth guarantee pilots to test new ways of supporting young people into employment or training.

It is also why, in the spring, the Government will bring forward a welfare reform Green Paper. I have read with interest the proposals mentioned by the noble Lord, Lord Blackwell, from the Economic Affairs Committee of your Lordships’ House; I hope that many of them will feature in that Green Paper. For now, given the points that I have set out, I respectfully ask the noble Lord to withdraw his amendment.

[Lord Altrincham (Con)]

I beg leave to withdraw my amendment.

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[Lord Altrincham (Con)]

This is an interesting set of amendments, given that, in essence, through this policy the Government are looking to take £1 billion out of the charity sector to fund public services, when the charity sector obviously provides public services—so it is a uniquely baffling government initiative. We on these Benches absolutely support the comments made by the noble Baroness, Lady Bennett, on Amendment 11A and by my noble friend Lady Sater on Amendment 32.

I speak to Amendment 52, in my name and that of my noble friend Lady Neville-Rolfe. This amendment would increase the employment allowance for charities from £10,500 to £20,000 to assist with the burden being placed upon charities. It is a probing amendment, and I would like to understand the cost that this would have for the Treasury and the plans the Government have to support the sector with the increased costs and the rise.

The remarkable comments made by the National Council for Voluntary Organisations, and its estimate that this will cost the sector £1.4 billion every year, has been referenced in this debate by my noble friend Lord Leigh and others. It would leave charities in a position where they are unable to absorb the costs and will, as a result, be forced to reduce the number of services they provide. In essence, as we talked about on day 1 in Committee, these services are public services. Charities in this country have become quasi-public service providers in the last 20 years, and it is most unlikely that, in pulling back services, those services would not have to be provided by the Government elsewhere. It is therefore most unlikely that the Government will not wear the costs of this change. It is naive to assume that charities provide some other service that is not a public service or a substitute for a public service.

The Government will be well aware of the severe issues that charities are facing, following the open letter from the NCVO to express concern that three out of four charities will have to withdraw from public service delivery or are considering doing so. This is an extraordinary way to treat a sector that would provide a public service. In fact, the Government have accepted the principle that the delivery of public services should not face this tax, following the exemption of both the Civil Service and the NHS. What justification does the Minister therefore have for the exemption of some providers of public services but not charities? Charities provide close to £17 billion in public services every single year, and the services they provide are invaluable to communities across the country, so a failure to protect them would be devastating.

I support my noble friend Lady Sater’s Amendment 32 and recognise the importance of the Government fully assessing the impact that this tax increase will have on the sector. The Government owe it to charities to fully consider the impact that this will have across the sector and, as such, I hope the Government will consider both Amendments 32 and 52 very carefully as we progress.

[Lord Livermore (Lab)]

My Lords, I am grateful to all noble Lords who have contributed to this debate. I will address the amendments tabled by the noble Baronesses, Lady Bennett of Manor Castle and Lady Neville-Rolfe, and the noble Lord, Lord Altrincham, which seek to maintain the rates of employer national insurance for charities at 13.8% and increase the employment allowance specifically for charities from £10,500 to £20,000. The Government of course greatly value the vital work that charities do in this country, and I have listened carefully to all the points that have been raised in this debate.

It is important to recognise that all charities benefit from the employment allowance, which the Bill more than doubles from £5,000 to £10,500. This will benefit charities of all sizes, particularly the smallest charities. The Government also provide wider support for charities via the tax—

[Baroness Kramer (LD)]

Is the Minister saying that there is a misunderstanding? Where charities are providing services to the public sector above 50% of their revenue, I think, they are ruled out of claiming employment allowance. I do not understand the intricacies of that, but there is something there.

[Lord Livermore (Lab)]

That would be a misunderstanding, yes. I just repeat that all charities benefit from the employment allowance, which this Bill more than doubles from £5,000 to £10,500.

The Government also provide wider support for charities via the tax regime. This tax regime is among the most generous in the world, with tax reliefs for charities and their donors worth just over £6 billion for the tax year to April 2024. Providing further relief for the sector would have additional cost implications and would require either more borrowing, lower spending or alternative revenue-raising measures.

--- Later in debate ---

[Baroness Neville-Rolfe (Con)]

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

[Lord Livermore (Lab)]

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

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

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

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

[Baroness Neville-Rolfe (Con)]

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

[Lord Livermore (Lab)]

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

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

[Baroness Neville-Rolfe (Con)]

I beg leave to withdraw my amendment.

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[Lord Livermore (Lab)]

My Lords, I am grateful to all noble Lords who contributed today. I have of course listened very carefully to all the points made.

I will address the amendments tabled by the noble Baronesses, Lady Monckton of Dallington Forest, Lady Neville-Rolfe and Lady Barran, and the right reverend Prelate the Bishop of Southwark about the impact of the Bill on persons who provide transport for children with special education needs and disabilities. I will endeavour to get the right reverend Prelate an answer to his letter as quickly as possible; I apologise to him for not having replied sooner.

The Government of course carefully consider the impact of their policies, including these changes to employer national insurance. As I noted previously, an assessment of the policy has already been published by HMRC in its tax information and impact note.

On the specific issue of the provision of transport for children with special educational needs and disabilities, the Government are committed to improving provision in mainstream state schools, while also ensuring that state special schools can cater to those with the most complex needs. At the Budget, the Government announced a £1 billion uplift in high-needs funding, and £740 million into creating more inclusive specialist places in mainstream schools and undertaking the adaptations that may be required in mainstream schools to make them more accessible. The aim is to reduce the cost of transport, because far too many children are being transported to other local authorities, over a large distance and time, as they cannot be educated locally.

There are several ways in which a local authority can fulfil its requirements to provide free school transport to eligible children, including those with special educational needs, disabilities or mobility problems. At the Budget and as part of the recent provisional local government finance settlement, the Government announced over £2 billion of new grant funding for local government in 2025-26. This includes £515 million to support councils with the increase in employer national insurance contributions.

This £515 million of additional funding has been determined based on a national assessment of the costs for directly employed staff across the public sector. However, this funding is unring-fenced, and it is for local authorities to determine how to use this funding across relevant services and responsibilities. This is part of an overall increase in additional grant funding for local authorities in 2025-26 of over £2 billion, resulting in an estimated 3.5% real-terms increase in core spending power.

Given the points I have set out, I respectfully ask noble Lords not to press their amendments.

[Baroness Monckton of Dallington Forest (Con)]

My Lords, I am grateful for all the thoughtful contributions to this debate, and I thank the Minister for his comments. I urge him to consider the amendments we have been debating and to understand the essential services provided by the SEND transport sector. It is wonderful that he is putting more money into the schools, but if these children cannot get there, it will not really work. However, for the moment, I beg leave to withdraw my amendment.

Inheritance Tax, National Insurance and VAT

Lord Livermore Excerpts

Monday 27th January 2025 Lords Chamber

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

[Baroness Neville-Rolfe (Con)]

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

[Lord Livermore (Lab)]

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

Economic Growth

Lord Livermore Excerpts

Thursday 23rd January 2025 Lords Chamber

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

My Lords, I thank the noble Lord, Lord Farmer, for securing this debate, and I congratulate him on his interesting and wide-ranging opening speech. I thank all noble Lords for their contributions today. It is of course a pleasure to respond to this debate, and a particular pleasure to hear from noble Lords in the party opposite about how to grow the economy. It is perhaps a pity that they did not take any of their own advice over the past 14 years.

We have heard in this debate from members of the previous Government about how to grow the economy, despite economic growth being one of their greatest failures. We have heard from some of the most prominent supporters of Brexit about how to grow the economy, despite their own disastrous Brexit deal permanently reducing GDP by 4%. We have also heard from some of the most enthusiastic acolytes of Liz Truss about how to grow the economy, despite the Liz Truss mini-Budget crashing it. What we did not hear during the debate, I am afraid, was a single word of humility. We did not even hear the slightest hint of self-awareness and we still have not heard the long-overdue apology to the British people for the previous Government’s record on the economy over the past 14 years.

The reality of the past 14 years is stark. First, there was austerity, which, as my noble friend Lord Davies of Brixton said, took demand out of the economy at exactly the wrong moment. Then a disastrous and tragically misjudged Brexit deal imposed new trade barriers, equivalent to a 13% increase in tariffs for manufacturing and a 20% increase in tariffs for services, reducing total trade intensity by 15%. Finally, as I have said, the Liz Truss mini-Budget crashed the economy and sent the typical mortgage soaring by £300 a month. The combined effect was devastating. Had the economy grown by the average of other OECD countries over the past 14 years, it would be more than £150 billion larger today.

The previous Parliament was the worst on record for living standards. Inflation hit 11.1% and was above target for 33 months in a row. The UK was the only G7 economy with private investment levels below 20% of GDP. Productivity had entirely stalled, with output per worker growing more slowly than in every other G7 country bar Italy. We were the only G7 country to have a lower employment rate and a higher inactivity rate compared to before the pandemic. Little wonder then that the previous Government, at the last election, suffered the worst defeat of any governing party in history. I say to noble Lords opposite that they were not rejected so comprehensively because the British people thought they had done a really good job of managing the economy.

It now falls to this Government to clear up the mess that we inherited and to grow the economy once again. The reality is, as my noble friend Lord Chandos said, that we inherited three distinct crises: a crisis in the public finances, a crisis in our public services and a crisis in the cost of living. As noble Lords including the noble Lord, Lord Farmer, and the noble Baroness, Lady Lea of Lymm, have reminded us today, in the public finances we inherited a £22 billion black hole—a series of commitments made by the previous Government which they did not fund and did not disclose. The previous Government 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. Those sums have to be funded.

It was not just broken public finances but broken public services, with NHS waiting lists at record levels, children in portakabins as school roofs crumbled, and rivers filled with polluted waste. Added to this was a cost of living crisis that had hit working people hard, with inflation at 11% but coupled with a decision by the previous Government to freeze income tax thresholds, costing working people some £30 billion.

This Government have made different choices. At the Budget, we took action to wipe the slate clean, repair the public finances, rebuild our public services after years of neglect and protect working people. This meant taking some very difficult decisions. These were not decisions we wanted to take but they were necessary. I recognise that that has involved asking some businesses to contribute more, but not acting was simply not an option. As a result of the decisions we have taken, we have created a foundation on which we are now able to take forward our agenda of growth and reform.

The noble Lord, Lord Agnew, spoke about living standards as a result of the Budget. The independent Office for Budget Responsibility has forecast that real household disposable income per capita will increase over the course of this Parliament. That compares to the previous Parliament, which was the worst on record for living standards.

The noble Lord, Lord Moynihan of Chelsea, spoke about employment. It is welcome that the number of people in employment is forecast to rise by 1.2 million over the course of this Parliament, but clearly there is more to do. Because of the inaction of the previous Government, the UK is the only major economy where economic inactivity has not returned to pre-pandemic levels. That is why the Government has announced a £240 million package to get Britain working and to tackle the root causes of inactivity, and why we will bring forward a Green Paper this year to reform the welfare system.

At the time of the Budget, the independent Office for Budget Responsibility revised up its growth forecast for the next two years. After the Budget, the Bank of England did the same. The OECD also revised up its forecasts, which now show the UK economy growing faster than the economies of Germany, France, Italy and Japan over the next three years. Last week, the IMF forecast that the UK will be the fastest-growing major European economy over the next two years. The UK was the only G7 economy, apart from the US, to have its growth forecast upgraded for this year. This week, in PwC’s annual survey of global CEOs, the UK has become the second most attractive country in the world for investment, below the US, for the first time. I am sure all these points will be welcomed by all noble Lords and will be the start of the optimistic narrative across this House that has been spoken about in today’s debate.

While the latest ONS figures for November show modest growth, I am under no illusion about the challenge facing us. That is why we need to go further and faster to achieve higher and more sustainable growth. It is why we need to continue to put forward the big ideas that the noble Lord, Lord Farmer, spoke about. It is why the Chancellor will continue to do just that in her forthcoming speech on growth, continuing our growth strategy, built on the three pillars of stability, investment and reform.

As my noble friend Lord Chandos said, stability is at the core of our approach. Here, I disagree with the noble Baroness, Lady Moyo. We cannot deliver growth without first stabilising the public finances and giving businesses the confidence that they need to invest. This Government have a stable majority, which creates political stability, and we respect the UK’s economic institutions, including the independent Bank of England and Office for Budget Responsibility, which instil confidence in our economy but were consistently undermined by the previous Government.

In the Budget we introduced tough new fiscal rules to ensure that day-to-day spending is balanced with tax receipts, while getting debt down as a share of GDP. As the Chancellor has made clear, meeting those fiscal rules is non-negotiable. As the noble Baroness, Lady Lea of Lymm, said, the independent Office for Budget Responsibility will produce an economic and fiscal forecast on 26 March. This will provide a clear assessment of the performance against those fiscal rules.

To reassure the noble Lord, Lord Horam, we have set a 2% productivity, efficiency and savings target for all departments. The noble Baroness, Lady Neville-Rolfe, asked about productivity assessments. I continue to look at that idea carefully.

The second pillar of our strategy is investment, which is the lifeblood of a growing economy. It is not acceptable that, under the previous Government, the UK was the only G7 economy where private investment stood below 20% of GDP. Neither is it acceptable that the previous Government consistently cut public investment to patch up holes in day-to-day spending. We are taking a different approach.

The Government’s international investment summit last year generated £64 billion of private investment, creating nearly 40,000 jobs across the UK. In the Budget, as my noble friend Lord Tunnicliffe said, we committed £100 billion of new public investment in roads, rail, hospitals and other significant growth projects—including investment in the energy transition, to answer the noble Lord, Lord Moynihan of Chelsea—to crowd in private investment, and create more jobs and opportunities in every corner of the UK. Our approach is supported by the IMF, which has said that it welcomed the Budget’s

“focus on boosting growth through a needed increase in public investment while addressing urgent pressures on public services”.

The noble Lord, Lord Swire, spoke about the importance of inward investment, which I agree with him on very much. Our investment approach will be guided by our modern industrial strategy and the new National Wealth Fund, which will catalyse £70 billion of private investment in high-value sectors. It has already created 8,600 jobs across the UK and secured almost £1.6 billion of private investment. It is why we must invest in innovation and R&D, which we have protected at record levels. We have the highest R&D tax relief in the G7, the importance of which was set out so well by my noble friend Lord Eatwell. As my noble friend said, access to finance is vital, which was an issue also mentioned by the noble Baronesses, Lady Moyo and Lady Swinburne.

The noble Lord, Lord Farmer, asked about investment in family hubs. The Government have increased investment in England in early years and family services to £8 billion in 2025-26; this includes £69 million on family hubs in phase one of the spending review.

The noble Baroness, Lady Lane-Fox of Soho, spoke about the urgency of the industrial strategy, and I agree with her absolutely. We have announced the members of the Industrial Strategy Advisory Council, which is chaired by Clare Barclay, CEO of Microsoft UK, and includes serial entrepreneurs and those with extensive SME experience. As the noble Lord, Lord Udny-Lister, rightly said, they are the backbone of our economy.

The noble Baroness, Lady Swinburne, rightly said that financial and professional services are a key part of the industrial strategy. She set out the huge contribution that they make to our economy and to growth—and I shall pass on her very kind comments to my honourable friend the Economic Secretary.

The industrial strategy also includes the creative industries, as mentioned by the noble Lord, Lord Horam. At the International Investment Summit, we published a Green Paper to inform the development of the industrial strategy. That consultation has closed and we are actively considering the responses. To reassure the noble Lord, Lord Fox, the industrial strategy will absolutely be developed in close co-ordination with all the industries in the sectors that he mentioned in his speech. We will then bring forward the full industrial strategy, including individual sector plans, which will provide all the detail that the noble Lord, Lord Fox, asked for and will be aligned with the multiyear spending review.

The final pillar of our strategy is reform to tackle barriers to investment and unlock the full growth potential of the UK economy, as mentioned by the noble Lord, Lord Horam, and the entrepreneurialism spoken about by the noble Lord, Lord Farmer. That is why we are unlocking £80 billion of investment through landmark reforms to create new pension mega-funds, as set out by my noble friend Lord Eatwell. I look forward to my honourable friend Torsten Bell, the new Pensions Minister, setting the answers to all the questions asked by the noble Lord, Lord Fox. It is why we will shortly set out a programme of welfare reform, as discussed by the noble Lord, Lord Desai.

My noble friend Lord Tunnicliffe, highlighted skills, and I agreed very much with what he said. We have established Skills England to bring together the fractured skills landscape and ensure that businesses have the right employees they need to grow. Again to reassure the noble Lord, Lord Fox, its work has absolutely begun—in particular, in part of the industrial strategy. It is itself represented on the Industrial Strategy Advisory Council, which he spoke about.

On planning reform, we are overhauling the system with the most significant programme of reform for a generation to speed up exactly the decisions that the noble Baroness, Lady Lane-Fox, spoke about. I assure her that the infrastructure projects that she mentioned are exactly why we want to speed up the system. The noble Lord, Lord Fox, asked about timescales here; the most pressing next step is to get the legislation through this Parliament and this House. Given what the noble Baroness, Lady Neville-Rolfe, said on that topic, I hope that we can now count on her support for that.

We are also working closely with regulators to ensure that we are doing everything possible to reduce the regulatory barriers to growth. As the noble Lord, Lord Farmer, mentioned—and the noble Baroness, Lady Neville-Rolfe, also touched on—the Government are determined to deliver a regulatory environment that champions innovation, attracts investment and drives economic growth. Before Christmas, the Prime Minister, Chancellor and Secretary of State for Business and Trade issued a joint letter to regulators, as several noble Lords have mentioned today, to generate bold pro-growth reforms that can be implemented in the coming year. Of course, that is not the full or sole extent of ensuring that reform is pro-growth, and we will bring forward further reforms in due course.

The noble Baroness, Lady Lane-Fox of Soho, asked about procurement. As she will know, the Procurement Act will go live in February, and ahead of that the Government will publish a new national procurement policy statement, setting out the policy objectives to which the Government expect public procure-ment to contribute. The Government are working closely with stakeholders on the design of this new statement.

The noble Lords, Lord Swire and Lord Horam, spoke about AI and the opportunities that it presents, and I agree with the sentiments that they expressed. The AI Opportunities Action Plan announced by the Prime Minister last week will help us to seize the benefits of this important technology. It takes forward all 50 recommendations set out by Matt Clifford to help transform the lives of working people and drive growth.

To reassure the noble Lord, Lord Agnew, we do of course have a Minister for Trade, and I discussed trade facilitation with him just yesterday. However, reform is needed in our relationship with the EU, as the noble Lord, Lord Fox, said. Following their meeting in Brussels on 2 October, the Prime Minister and President of the European Commission agreed to strengthen the relationship between the EU and UK, putting it on a more solid, stable footing. We will now work with the EU to identify areas where we can strengthen co-operation for mutual benefit, such as the economy, energy, security and resilience.

As the Prime Minister has made clear, we want to work with our European neighbours to reset relationships, rediscover our common interests and renew bonds of trust and friendship. That is why, last month, at a meeting of the Eurogroup meeting of EU Finance Ministers—the first to be attended by a UK Chancellor since Brexit—the Chancellor set out the need for a closer UK-EU economic relationship based on trust, mutual respect and pragmatism. That involves breaking down barriers to trade, creating opportunities to invest and helping our businesses to sell in each other’s markets. We recognise that delivering new agreements will take time, but we are ambitious, have clear priorities and want to move forward at pace.

The noble Lord, Lord Petitgas, spoke about the importance of trade with the US. The UK is of course an open trading economy, and we have over £300 billion in trade with the US. This trading relationship is important to both the UK and US economies, supporting millions of jobs. We will of course continue to make the case for free and open trade.

We have heard much from those in the party opposite about how to grow the economy, but so much of our agenda of stability, investment and reform they unfortunately oppose. They have shown no humility for the economic damage that they inflicted on this country over 14 years, they have come up with no alternative plan and they have provided no apology. It falls to this Government to clean up the mess that we inherited. We are doing that by restoring growth to our economy, rebuilding our public services and making working people better off.