National Insurance Contributions (Secondary Class 1 Contributions) Bill

Debate between Lord Scriven and Baroness Neville-Rolfe

Committee stage
Tuesday 4th February 2025 Grand Committee

[Lord Scriven (LD)]

My Lords, listening to noble Lords present the case for Amendment 29, I agreed with every single word that was said. However, the noble Baroness, Lady Monckton, said that an exemption was required. Amendment 29 does not ask for that exemption; it asks for an assessment to be done, and therefore it does not mean that an exemption would come, which is why, on day one in Committee, we on these Benches tabled an amendment to say that an exemption for hospices should apply. If we bring that back on Report, I hope that the noble Baroness will support us as we hold our ground.

I want to talk briefly to the other amendment in this group: Amendment 41, tabled by the noble Baroness, Lady Neville-Rolfe, regarding the increase in the employer allowance to £20,000 for hospices. Just as a matter of fact, the average number of staff per hospice is 81 full-time equivalent employees, and the average salary is £23,626. Therefore, the average total salary bill for a hospice is £1.863 million, so a £20,000 employment allowance will be absolutely useless because hospitals will still be clobbered by the national insurance contribution increase. That is why we put them down for an exemption, and we hold our ground on that.

[Baroness Neville-Rolfe (Con)]

My Lords, I will speak to my Amendment 41. I support Amendment 29 in the name of my noble friend Lady Monckton of Dallington Forest, who gave an extremely moving speech. She has made such a huge contribution to the charitable sector, as a supporter and a fundraiser. We must listen to her and the evidence that she has gathered in her work in the run-up to this discussion, which shows how important it is to find a way to match the compensation that NHS bodies are getting under the arrangements made for increasing national insurance and reducing the threshold.

That is the purpose of our series of amendments, some of which are probing, some of which we will pursue, because this is an important sector. Hospices are an essential part of our healthcare system, and the Bill will leave many unable to provide the services that they are currently offering. I was glad to have the support of my noble friend Lady Sater for both amendments, and that my noble friend Lord Swire was able to mention the fundraising for hospices which many have taken part in across this House. Indeed, hospices were one of my favourite charities of the year at Tesco, and one of the most moving with staff. We were talking about up to 300,000 people who were engaged in raising money for hospices. That taught us a lot about the difficulties and the wondrous jobs that they do.

My Amendment 41 seeks to increase the employment allowance for hospices, which would ease some of the financial pressures that they are facing at the hands of this Government. The noble Lord, Lord Scriven, intervened, and it was helpful, to say that an exemption would cost—£1.83 million or was it billion?

[Lord Scriven (LD)]

I was pointing out that the average salary bill of a hospice is £1.8 million.

[Baroness Neville-Rolfe (Con)]

That is the average salary bill, so the noble Lord is right that an increase in the employment allowance would not absorb all the extra costs.

--- Later in debate ---

[Baroness Neville-Rolfe (Con)]

My Lords, I will speak to my Amendments 44, 45 and 46 and to Amendment 34 in the name of my noble friend Lord Jackson of Peterborough. I agree with everything that he said.

Primary care facilities have been hung out to dry. The Government have already acknowledged that the NHS should be exempted from the jobs tax. It is unfortunate that they have made the bizarre decision not to include other healthcare providers, such as GPs, pharmacies and dentists, which serve the same purpose as NHS providers.

We need to get to the bottom of two issues: first, why GPs, pharmacies and dental practices have not been included, as the NHS has, in the exemptions from the increase in employer national insurance contributions; and, secondly, why GPs, pharmacies and dentists will not benefit from any increase in the employment allowance.

The Chief Secretary to the Treasury told BBC “Question Time” in November:

“GP surgeries are privately-owned partnerships, they’re not part of the public sector”,


and

“they will therefore have to pay”.

However, GPs are recognised as public authorities in existing law, such as the Freedom of Information Act 2000. They may be privately owned partnerships, but that does not reflect how they operate. Not only that but because they are legally classed as public authorities, they will not be eligible for the increased employment allowance, so they will have to pay the full national insurance increase.

Section 2(1) of the National Insurance Contributions Act 2014 states:

“A person cannot qualify for an employment allowance for a tax year if, at any time in the tax year, the person is a public authority which is not a charity”.


Section 2(2) defines a public authority as

“any person whose activities involve, wholly or mainly, the performance of functions (whether or not in the United Kingdom) which are of a public nature”.

GP surgeries, whether they are privately owned partnerships or not, exclusively provide NHS services: their activities wholly involve the performance of public functions. The Minister confirmed last week that the employment allowance does not apply to charities, which my research confirms. Does he agree that the allowance should apply to these other vital services—pharmacies, dentists and GPs? That would be a simple change. Previous Conservative Governments recognised this. We fully funded and offset any increases in employment costs for GPs; this is acknowledged by the British Medical Association.

Given that the Institute of General Practice Management, which represents GP practice managers, estimates that the jobs tax will cost the average GP practice around £20,000 a year, it is all the more vital that we offset these costs by allowing GPs to receive the employment allowance, preferably at an increased rate of £20,000, as my amendment suggested. It may not be much but it might help with non-GP staff in surgeries, in pharmacies and in dentists. I am looking all the time at changes and concessions that might not cost the Government too much, but I do not get the feeling that the Government understand the difficulties that some of these sectors are in.

It is not just GPs that will suffer. Community Pharmacy England estimates the cost, as I think we already heard, at £50 million in total. That is part of the treble whammy that we heard about from my noble friend Lord Jackson. I am especially concerned about this because of the impact of these changes across the private-sector end of healthcare, because its work makes life easier for NHS services, reducing pressure on A&E and on other public health services.

I spoke to a local pharmacist yesterday. He is a worried man. He believes that when the new NICs charges come through, he will have too little left at the end of the period to invest in his shop and his vaccine services. So, he will be lacking the crucial application of capital to keep the business up to date and serviceable. He will also look to reduce hours. At present, he is open early and late, providing a superb service to the local community—indefatigable, as he was through Covid. I have to say that the pharmacy in my local Wiltshire village is already closing on Saturday, and it is a half-hour drive to another or to the local A&E. Multiply these types of decision by the hundreds of thousands of pharmacies, dentists and GP surgeries across the country, and you can see that the Government’s failure to compensate for the NICs increases is an act of self-harm. Can the Minister therefore confirm that, as a minimum, the Government will include GPs, pharmacies and dentists, who provide NHS services for the public benefit, in the employment allowance?

[Lord Scriven (LD)]

Just for absolute clarity, community pharmacists can claim the employment allowance. Of the other two services the noble Baroness mentioned, GPs cannot but dentists can if their NHS work is below 50%. It is important that we get that absolutely correct for the record.

[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.