National Insurance Contributions (Secondary Class 1 Contributions) Bill

Debate between Lord Londesborough and Baroness Neville-Rolfe

Consideration of Commons amendments and / or reasons
Monday 24th March 2025 Lords Chamber

[Lord Londesborough (CB)]

My Lords, it is with some regret that I do not insist on my Amendment 8 and its consequential amendments. I am disappointed that financial privilege has been invoked to prevent a full and proper debate in the other place on the potential damaging impact that reducing the class 2 secondary threshold by a brutal 45% will have on jobs and growth for small businesses and organisations employing fewer than 25 staff. I fear the Government will look back on 6 April, the day the new NICs regime kicks in, as a day of economic self-harm—a second April Fools’ Day, if you like.

I do propose to move Amendment 8B in lieu. In the spirit of pragmatism, my amendment, like that from the noble Lord, Lord Scriven, would simply bestow on the Treasury the power—through statutory instrument—to specify exemptions on the lowering of secondary class 1 thresholds for businesses, charities and, indeed, all organisations employing fewer than 25 people. We are talking about 10 million jobs across the UK that are not protected by Clause 3’s increase in the employment allowance, which offsets the NICs increases but, typically, only for those employing three or fewer staff. Given the potential damage to employment, wages and growth, why would the Government not want this weapon in their armoury in what will be a very difficult year ahead for small employers, who also face close to 7% increases in the national minimum wage and added compliance costs with the new Employment Rights Bill?

I support Amendments 1B and 5B in the name of the noble Lord, Lord Scriven, which strike me as an entirely sensible and pragmatic exemption tool to give to the Treasury given the very challenging circumstances facing care homes, hospices, pharmacies and other primary care providers.

Finally, I also support Amendment 21B in the name of the noble Baroness, Lady Neville-Rolfe, which seeks a review of the impact of NICs increases by sector. The impact note that came with the Bill was extraordinarily light on detail, especially when you consider that the Bill commits employers across these sectors to more than £5 billion per annum in additional NICs and impacts more than 10 million jobs.

I asked the Minister in Committee how many jobs in each sector would be impacted by the increase in NICs—a fairly basic question, one could argue, and yet no answer has been forthcoming. We heard on Report that such assessments would be

“econometrically impossible”.—[Official Report, 25/2/25; col. 1672.]

I respectfully disagree. We are asking for sectoral impact assessments that cover such key issues as the number of jobs impacted and the impact on vacancies, job creation, redundancies, labour activity and output, and wages. It was an entirely reasonable request and one the Treasury should readily embrace.

[Baroness Neville-Rolfe (Con)]

My Lords, the amendments in this group, including my Amendment 21B, address the very real negative impact of this jobs tax that the Government refuse to acknowledge. The Bill is the most important economic measure they have put forward so far and it makes significant changes to millions of businesses and social enterprises on a very short timescale. These businesses have raised concerns that are reflected in a flat-lining of growth, as worried owners seek to anticipate such a brutal change. Noble Lords from across the House have raised the consequences a number of times, yet the Government remain unreceptive.

At every stage of this Bill’s progression, we have raised the concerns of the healthcare sector about the effects on care homes, pharmacies, dentists, GP surgeries and hospices. It will have a real impact on people’s lives. I am particularly concerned about the hospice sector. The recent extra funding provided is capital funding and will not support day-to-day functions. Hospice UK has reported that the burden of the increase in employer NICs will be £44.3 million a year, which will not be covered by the £26 million of revenue funding for children and young people’s hospices, previously mentioned by the Minister. Last year, children’s hospices were provided with £25 million through the children and young people’s hospice grant. Can the Minister tell us how much of his £26 million is additional funding and how much is in fact recurring?

National Insurance Contributions (Secondary Class 1 Contributions) Bill

Debate between Lord Londesborough and Baroness Neville-Rolfe

3rd reading
Tuesday 4th March 2025 Lords Chamber

[Lord Londesborough (CB)]

I too have some thanks to give. I thank all noble Lords from across the House who voted for my exemption amendment on the 45% reduction in Clause 2’s secondary threshold for all organisations employing fewer than 25 staff. I particularly thank my supporters, the noble Baronesses, Lady Neville-Rolfe and Lady Kramer. I was delighted to have the support of both the Conservatives and the Liberal Democrats and, indeed, the majority of Cross-Benchers who were able to vote at that late hour.

I also thank the Public Bill Office for helping to draft an amendment that turned out to require five consequential amendments, the staff of the Whips’ Offices, and the Minister for at least listening and for his patient approach. I appreciate that he has a lot on his plate, but I hope that he and the Treasury appreciate that my amendment sits right behind their number one priority, which is to generate sustainable economic growth. That is why I tabled the amendment and I trust it will be given the full consideration and scrutiny it merits.

[Baroness Neville-Rolfe (Con)]

My Lords, in concluding for the Opposition, I thank the many Peers on my Benches who have made valuable contributions during the Bill’s passage. I cannot thank them all today as the list is too long but I thank particularly my noble friend Lord Altrincham—my comrade in arms—and our opposition research team.

I also thank noble Lords from across the House, because this has been a cross-party effort, reflecting the widespread damage this Bill will cause. I particularly thank the noble Lord, Lord Londesborough, for his amendments to protect small business, the noble Baroness, Lady Barker, for her amendments on health and social care, and the noble Baroness, Lady Kramer, for her support across the board, including for the amendment calling for a review of the impact of the Bill.

I will say a couple of things. We have consistently heard that this is a job tax, plain and simple. It is the most important economic measure the Government have introduced so far, and it will have wide-reaching damaging impacts across the whole economy. It is being brought in on a tight timescale, creating a cliff edge on 6 April with no staggering for those who may be hurt. It has not been accompanied by an adequate impact note. It has led to businesses losing confidence in the Government, and that, I believe, is very bad for growth, of which I am very supportive. Despite the Minister’s protests, Peers from all Benches have agreed that the short document the Government call an impact note is an affront to the House, and that the Government have failed to provide sufficient sectoral information to allow for the effective scrutiny we try to bring. That is why we must have the review of the impact on affected sectors.

Despite the importance of these measures, the Government have made no effort to engage constructively. This House therefore voted to exempt small charities, transport providers for children with special educational needs and disabilities, early years providers and, as I have already said, small businesses and health and social care providers that provide public services in the private sector.

Of course we understand that taxes should be simple, as the noble Lord, Lord Eatwell, has explained, but when the Government fail to recognise the egregious impact this Bill will have on real people, we believe that some rethinking is necessary. Some of our changes would be modest in cost terms, but I know they would earn the thanks of many right across society.

I end by encouraging the noble Lord to use all his charms to persuade the Chancellor to think again.

National Insurance Contributions (Secondary Class 1 Contributions) Bill

Debate between Lord Londesborough and Baroness Neville-Rolfe

Committee stage
Tuesday 4th February 2025 Grand Committee

[Lord Londesborough (CB)]

My Lords, I rise to briefly support Amendments 31 and 49 in relation to the hospitality sector. As we have already learned in the two previous days of Committee, there is great resistance to having the full impact assessments we are calling for, specifically in relation to these national insurance contribution increases. Perhaps that is not surprising when you look at the impact on the hospitality sector.

I will simply share one anecdote on the experience of one independent publican, who is employing 20 part-time workers. They typically work 20 hours of shifts at £15 per hour, therefore earning £300 per week on average. This publican’s bill for national insurance contributions will increase by 73%. As we know, the real problem here is dropping the threshold so severely as to create not just a punishing but an excessively regressive tax, hitting hospitality and SMEs at the margin during their delicate stages of growth or survival.

In this case, how is the publican going to respond? These are his choices: reduce the headcount; reduce the number of hours worked by the part-time workers; reduce the number of hours that his pub can remain open; and, where possible, increase prices. All of those are very damaging to the Government’s No.1 economic mission of growth, and potentially damaging for inflation, but particularly damaging to jobs and part-time workers who rely on those jobs. Typically, we are talking about the young and the old. I again support others in saying that this is a reckless act. To push these measures through without conducting a proper assessment strikes me as economically ruinous.

[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.

National Insurance Contributions (Secondary Class 1 Contributions) Bill

Debate between Lord Londesborough and Baroness Neville-Rolfe

Committee stage
Wednesday 29th January 2025 Grand Committee

[Baroness Neville-Rolfe (Con)]

My Lords, I rise to move Amendment 6 in my name and to speak to my Amendments 23 and 48, all on small business—a subject dear to my heart, as noble Lords will recall from our debates on the Procurement Act in the last Parliament, mostly in this very Room.

Small business is at the entrepreneurial heart of the economy. We need a constant stream of start-ups for an economy that is dynamic. The amount of regulation on such businesses is already discouraging. My own findings are that the imposition of additional employer NICs is leading some businesses towards despair, with more closed shops on the high street and busy insolvency practitioners. Others are not setting up. Their customers are affected by the chill created by the Budget and the enormous NICs hit in particular, which has a multiplier effect on confidence.

I acknowledge that the increase in the employment allowance is helpful and I congratulate the Federation of Small Businesses on its work on this with the Treasury and DBT. However, more needs to be done to drive growth. I believe that easing the strain of NICs on SMEs could play an important part.

My Amendment 6 would exempt micro-businesses with an annual turnover of less than £1 million from this jobs tax. I have tabled this amendment because I want to understand whether the Government would consider an exemption that would have a relatively low impact on the revenue that the Treasury receives from this policy. To exempt such small businesses would not come at a great cost to the Treasury, yet it would have a big impact on the businesses that it would protect and on attitudes to the Government’s plans. The Financial Conduct Authority defines “small businesses” as companies with an annual turnover of less than £1 million—hence my choice for the threshold. I add that even many of these businesses may not survive recent tax rates. The Government will be failing in their promise, I fear, to be the most pro-business Government ever.

My proposal would be a modest step in the right direction and would reduce the negative knock-on effect of the NICs changes, in terms of jobs, shop and business closures and the higher prices that follow reduced competition. You see that effect, when a couple of coffee shops close, on the price of your latte.

I was interested to hear the Chancellor this morning saying that

“growth isn’t simply about lines on a graph. It’s about the pounds in people’s pockets. The vibrancy of our high streets”.

Chance would be a fine thing for the hard-working domestic SMEs that I am talking about.

Amendment 23 in my name seeks to increase the per-employer threshold at which employers begin paying national insurance on employees’ earnings, from £5,000 to £7,500—sort of halfway. We know that Clause 2 is the most punitive part of the Bill, hitting small businesses and social enterprises hardest. As the OBR acknowledges, this jobs tax will have the indirect effect of stifling wages, as employers look to offset these increased costs.

Amendment 48 would increase the employment allowance for small businesses to £20,000. The increase in the allowance is very welcome, as I have said, as is the lifting of the EU-based limit on eligibility—ironically, a new Brexit freedom, on which I congratulate the Minister. However, many small businesses have more than three or four people, or so, which means that the increase in the allowance will be less than the additional NICs charge. We should debate in Grand Committee, as we did on procurement, how to improve matters.

I would be delighted to be able to congratulate the Minister on an entrepreneurial step by increasing the allowance and removing the threat and hassle of NICs for more employers. I know that he shares my passion for easing barriers to growth and I see this as a new barrier that he could mitigate.

I very much look forward to hearing my noble friends Lady Noakes and Lord Londesborough and I am sorry that my noble friend Lord Ahmad of Wimbledon cannot be here this afternoon. We all feel the same way about the importance of cherishing the enterprise spirit and will welcome a constructive discussion on what more can be done to ease the pressure on small businesses. The Chancellor’s speech today and the long-term nature of most of her growth drivers strengthen the case for a concession on this now. I beg to move.

[Lord Londesborough (CB)]

My Lords, I shall speak to Amendments 22, 39 and 53 in my name in this group, to which the noble Baroness, Lady Kramer, and my noble friend Lady Neville-Rolfe have added their names. I shall also speak to Amendments 6 and 33, tabled by my noble friends Lady Neville-Rolfe and Lady Noakes respectively.

Rather than taking a sectoral approach, about which others spoke passionately last week, my three amendments focus on the size of businesses and organisations impacted by the measures in the Bill, specifically those categorised as small businesses, which means that they employ between 10 and 50 full-time staff. I should again declare my interests as set out in the register, as I advise and invest in a number of businesses of this size, predominantly start-ups and scale-ups. These are the companies that grow and create jobs at the fastest rate and, through their size and agility, seize the nettle of productivity. If I may mix my metaphors for a moment, these are the acorns that seek to become unicorns or, at the very least, sturdy oaks.

The Department for Business and Trade reports that there are some 220,000 businesses across the UK that employ between 10 and 50 staff—that is 4.3 million of the 28 million jobs in the private sector and they generate £780 billion in annual turnover. However, this group involves not just fast-growing early-stage start-ups but a huge swathe of family and local businesses spread across the country and, indeed, businesses that have been struggling to keep their heads above water in what have been five very difficult trading years.

While the Government have sought to protect the majority of our micro-businesses, those employing between one and nine staff, from rising NICs, they have left all other small businesses exposed to these sudden and dramatic increases. In terms of impact, the Government tell us that 250,000 employers will see their NICs decrease, 940,000 will see theirs increase, while about 800,000 employers will see no change. This has allowed the Government to claim that the majority of employers will see no increase. With respect, that is deeply misleading. The question that matters is what proportion of jobs will attract increased national insurance contributions. I ask the Minister that question. Can he confirm, if he does not have the numbers at hand, that in fact the number is close to 80%?

I turn to the financial impact of Clauses 1, 2 and 3 to small businesses. For businesses of 25 staff paying the national full-time median salary, which is put at £37,000 by the ONS, their NICs bill will rise from £90,000 to £110,000. That is an increase of more than 20%.

However, most small businesses, given their nature and stage of development, pay less than the median national average. For them, the increases get even steeper. For those employing 25 staff and paying an average salary of £25,000, as is common out in the regions, their NICs bill will rise by no less than 30%. For those employing 50 staff at that salary, they face an eye-watering 33% increase. As we know, the main culprit for those outsized increases is Clause 2: the brutal and, in my view, economically illiterate drop in the per-employee threshold from £9,100 to £5,000. Ironically, this hits the lowest-paid jobs the hardest. In short, it is a regressive tax.

Then we come to retail and hospitality, with thousands of outfits that rely on part-time shift workers. For those employing 20 part-timers, typically earning £300 per week, their NICs bill goes up by an extraordinary 70%. I will stop there with the examples but noble Lords, including the Minister, will be delighted to know that I have here all the spreadsheets to prove it; I will happily share them out later. In the interest of transparency, on the impact for 5 April, I strongly suggest that the Government have the honesty to publish these figures.

These increases are of course bad news for the working person, especially the 4 million of them who work in small businesses. They rather grate against Rachel Reeves’s statement this morning about kick-starting the economy. Let me turn to my Amendment 22, which seeks to address this in what I hope noble Lords will agree is a measured, proportionate way to help protect our small businesses. In short, the per-employee threshold would remain at £9,100 for those employing fewer than 25 staff, while those employing fewer than 50 but more than 25 staff would see their threshold reduced to £7,500. Somewhat reluctantly, I have left the £9,000 threshold for all businesses employing more than 50 staff.

By my calculations, the nominal cost to the Treasury of this key amendment would be less than £2 billion—that is, to support and sustain 4 million jobs and almost £800 billion in turnover. I humbly suggest that this amendment would more than pay for itself in economic growth and increased revenues to the Exchequer. Commencing Clause 2 without undertaking a full impact assessment on small businesses—addressed by Amendment 33 in the name of the noble Baroness, Lady Noakes, which I fully support—strikes me as reckless.

I turn now, much more briefly, to my Amendment 53, which addresses the increase in the employment allowance. Clause 3 is designed to soften the increase in NICs from Clauses 1 and 2. It offsets the costs but, having crunched the numbers, it does so only for those employing seven staff or fewer. My Amendment 53 would raise the employment allowance from £10,500 to £15,000 for all small businesses employing fewer than 25 staff. This would help around 200,000 businesses across the country. I estimate that the cost to the Treasury would be less than £1 billion. Again, I argue that such an amendment would more than pay for itself in the medium term.

I hope that the Minister will carefully consider the amendments in this group, given the severity of these increases to SMEs and the potential damage to both jobs and economic growth. I have spoken to Amendments 22, 39 and 53.