National Insurance Contributions (Secondary Class 1 Contributions) Bill

Lord Macpherson of Earl's Court Excerpts

Committee stage
Tuesday 21st January 2025 Grand Committee

[Lord Ahmad of Wimbledon (Con)]

My Lords, briefly, I agree with much of what the noble Baroness, Lady Kramer, said. But again, to dwell on the coalition, she and I served in the same Government, so agreeing with her is not unusual for me.

I wanted to make a brief point. Both previous speakers highlighted the impact on the hospitality industry. The figures are quite startling. There will be an impact of about £1 billion on the industry itself, thereby impacting 750,000 workers. As we have just heard from the noble Lord, Lord Londesborough, the impacts of this are already being felt by an industry which is already challenged. We should look at this again. Perhaps in a later group when we talk about the importance of impact assessments it will again be underlined that we do not just need reviews. Doing the work beforehand, consulting and working with the industry is an essential prerequisite to ensure that these changes are not detrimental and lead to a depression of growth, which I know ultimately was not the intention of the Government, as they stated.

[Lord Macpherson of Earl’s Court (CB)]

My Lords, usually I have a lot of sympathy and respect for the noble Baroness, Lady Kramer, and my noble friend Lord Londesborough. However, on this occasion I am going to disagree, first, because if you cut tax in one area, you are only going to have to raise it somewhere else. It might benefit the hospitality industry, but some other industry is going to suffer as a consequence.

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[Lord Macpherson of Earl’s Court (CB)]

My Lords, I will try to be extremely brief because no doubt I will be interrupted again. The point I was making was that if you cut tax in one area, you are going to have to raise it somewhere else. That is always problematic.

There are two other reasons why I have some reservations about this amendment. First, it is often thought—the Financial Secretary will remember this because we worked together on measures in the early 2000s—that part-time workers are poor. However, if you look at the poverty statistics, many part-time workers live in quite affluent households. My point is that as a measure to target people on low income, this is a very blunt instrument. It is far better to target them through tax credits, or universal credit as it is now called.

My final points relates to having worked on national insurance over three decades or more and is about the danger of creating steps in the system. I remember large numbers of workers bunching below the lower earnings limit, which was totally understandable as it was in their interest and their employer’s interest. By creating steps in the system, you discourage people from moving up the earnings ladder. In the short term, I could understand that cutting national insurance for the self-employed would genuinely incentivise the employment of part-time workers, but once in place, over time the existence of the step would trap many workers in this part-time zone because their employers would not want them to cross the step that resulted in higher national insurance. I warn against targeted measures such as this as they tend to cause difficulty and disappointment.

[Baroness Neville-Rolfe (Con)]

My Lords, I thank all noble Lords for their contributions, particularly the noble Baroness, Lady Kramer. I regret that the noble Lord, Lord Bruce, is not in his place and associate myself with the request for some information about Scotland.

The amendments address a matter of real importance, which is the impact of the measures on part-time and seasonal workers, SMEs, hospitality and tourism. The noble Baroness, Lady Kramer, is right about the importance of part-time working in tourism, pubs, restaurants and events. That sector is sometimes neglected in public policy-making, but it is vital to growth.