National Insurance Contributions (Secondary Class 1 Contributions) Bill

Viscount Chandos Excerpts

Committee stage
Tuesday 21st January 2025 Grand Committee

[Lord Randall of Uxbridge (Con)]

My Lords, I support Amendments 4 and 5, to both of which I have added my name. I echo the excellent words of the noble Lord, Lord Storey, who introduced the issue of the childcare sector. I do not particularly need to add to those words, or indeed to what the noble Lord, Lord Sharkey, said about universities, except to say that I have a university that I can remember being built in my back garden, effectively—it is not really my back garden but I could see it rise. That is Brunel University, which is excellent and, like every other such institution, it has its problems. A few years ago, I suggested that it changed the name to “Uxbridge University”, hoping that some benefactors from across the United States might get confused with Uxbridge and Oxbridge and send lots of money across. Like so many of my cunning plans, that was rejected out of hand.

I also want to speak particularly to Amendment 5 about charities, although housing associations are an important issue, too. But the issue of charities is the one we should probably be most aware of. I have to declare that I am a trustee of several charities. I have stood down from a few more in the past year or so but a lot of these charities have approached me and told me of the huge costs. Although for some of the smaller ones the costs may not be the same, in relative terms they are just as difficult.

Earlier today, I wanted to get in on a Question about the National Trust, and there were many people on both sides, but particularly on the government and Liberal Democrat sides, saying that the National Trust is a great organisation, and I would echo that. But I wonder how many people who pay their subscriptions want to see them going not towards the landscape or the historic houses, or whatever, but being swallowed up by these increases.

One charity where I was a member of the council—a trustee—until earlier this year was the RSPB and it was the same thing. It was a huge amount; we are talking about it having to pay out a couple of million. The thing with charities—I think this was mentioned by the noble Earl, Lord Kinnoull, but I would like to reiterate it—is that it is not a matter of putting any prices up because they are supplying stuff. Their funding comes from either organisations, such as foundations or whatever, or individual donations. Charities are not charging for their services. They are performing lots of things which the state would otherwise have to pick up.

One thing which struck me when these organisations approached me, having seen that I put my name down to amendments, is when they told me how much they were going to have to pay they were reticent about me disclosing that, which I will stick to. I thought first, “Why are they so reticent? Is it that they do not want to upset the Government because they want to keep on-side?”. That is a perfectly logical position at this early stage of a Government. After a while, most organisations start to hate the Government rather than the political party who form that Government. Then I thought, “Maybe they do not want to because they have to rely on donations”. Whether it is somebody giving just a few pounds to the Dogs Trust or in a charity shop, if they think that that money is effectively going to the Treasury and not to the good cause that they want to support, they might be less keen. People sometimes do not need much of an excuse.

I am sure many noble Lords here today will have heard the excuse when people do not want to give to charities. They say, “Oh, it is not going to go directly to what I want it to go to”. This is something that charities will be nervous about saying publicly. I am sure that the Minister will have had representations from many charities, because they are extremely worried. This has really upset the whole sector, and it should be reconsidered.

As the noble Earl, Lord Kinnoull, said, there is another possibility. I do not want to give the Minister too many let-outs, but one possibility would be to delay it. Most of these organisations, particularly by this time of the year, have made their budgets. They have put in applications for funding from other organisations and put various amounts in. To suddenly find an increased cost that they were not expecting makes it very difficult for those budgets to be met. Although I have raised the point on other sectors, to me it is the charitable sector which is the most vulnerable. We should really be considering whether we want to impose this on it.

[Viscount Chandos (Lab)]

My Lords, I shall speak briefly on this group, particularly Amendments 4 and 5, but the arguments that I make really apply to many of these early groups because each one is a special plea. My noble friend Lord Davies of Brixton asked, “How can you speak out against an exemption in favour of veterans?”. The same could be said for small animals or whatever tugs at our heartstrings, but it comes back to the argument that my noble friend Lord Eatwell made so powerfully, which is that in an already complicated tax and national insurance system, we should avoid any further complexity if we can, and I think that the price which that may impose on different organisations is a price worth paying.

The noble Baroness, Lady Neville-Rolfe, talked about her involvement in attempts to achieve tax simplification when she was in government. It was the Conservative Government who introduced the Office of Tax Simplification and then abolished it, perhaps because it came up with the inconvenient truth that the agricultural and business relief regime should be reviewed and, implicitly, abolished.

At Second Reading, I made a declaration of interests which include being a trustee of two charities. One of them is a higher education institution, so it is covered doubly by Amendment 4 and Amendment 5. Many noble Lords who have spoken have referred to their personal experience of charities or different organisations. I have to say that I am struck by the fact that the organisations of which I am a trustee have, without any input from me, taken this philosophically as a cost that they must cope with. No increase in cost is welcome. Energy-led inflation was not. The insurance inflation that we are all suffering from, the wage inflation that we have seen and the overall increase in the cost of living are unwelcome costs for any organisation, large or small, to bear.

As I suggested at Second Reading, there is an understanding in many organisations, including commercial ones—I cited the comments of Mr James Daunt, as chief executive of Waterstones and his eponymous chain of bookshops—that the purpose of this revenue-raising from the changes to NI feeds into supporting the community from which organisations draw their employees, customers and donors. For this reason, although I do not welcome the increase in the cases of the organisations with which I am associated and of the many others that are similarly affected, I believe in the simplicity of applying the same rate to pretty much all organisations in the private and voluntary sectors. The arguments for simplicity outweigh those of the individual challenges that this measure will give organisations.

[Lord Forsyth of Drumlean (Con)]

My Lords, it is a great pleasure to follow the noble Viscount, Lord Chandos, who is very wise and diligent. For many years, we were together on the Economic Affairs Committee. I agree with him about the simplification of the tax system. Indeed, the Office of Tax Simplification was a recommendation from the tax commission that I chaired back in 2006 to George Osborne and David Cameron. It was implemented and, somehow, the Treasury managed to bog it down in a way that prevented it doing an effective job.

I agree entirely with the noble Lord, Lord Eatwell, that we need a simpler, fairer tax system. The simplest way of dealing with that would be not to have this increase at all because then there would not be the need to have these exemptions. This is a problem that has been created by the Chancellor and the Government. I must say, in speaking to these amendments, that Amendments 4, 5 and 8—

National Insurance Contributions (Secondary Class 1 Contributions) Bill

Viscount Chandos Excerpts

2nd reading
Monday 6th January 2025 Lords Chamber

[Viscount Chandos (Lab)]

It is a pleasure to follow the noble Baroness, Lady Bray, for the first time. I would suggest that she look back at the speech of the noble Lord, Lord Macpherson, who set out some notable former Conservative Chancellors who raised taxes early in their term of office. I should declare the interests set out in the register where I am a director or trustee of organisations that are in some cases losers and in other cases winners from these changes.

I support the Bill and thank my noble friend the Minister for his cogent introduction of it. I say that I support the Bill, rather than welcome it, because, unlike my good friend, the noble Lord, Lord Desai, who I am sorry is not speaking today, I am not in favour of increasing taxes unless absolutely necessary. Unfortunately, it was perfectly clear by the time my right honourable friend the Chancellor came to deliver her first Budget in October that tax rises were needed to restore credibility and stability to the public finances and to fund public services at a sustainable level—even if every department will still need increases beyond the level currently proposed, as soon as economic growth and resulting tax revenues increase.

I will not dwell on the black hole or debate its size, but I will repeat the quotation that I included in my contribution to the Budget debate two months ago, because it is worth repeating. It was the evidence given earlier last year by the chair of the OBR to the Economic Affairs Committee on the forecasts made by the previous Government. He said:

“Some people have referred to that as a work of fiction. That is probably generous, given that someone has bothered to write a work of fiction, whereas the Government have not even bothered to write down their departmental spending plans”.


The Labour Government have had to restore the integrity of the budgeting process and propose plans based on independently compiled and reviewed figures and assumptions. Tax rises were an inevitable consequence of that process, and the increase in employer NI contributions represents the largest part of these. I believe that it is the fairest and most constructive way of raising the necessary revenue, particularly in light of the point made by the noble Lord, Lord Macpherson, that it offsets the reduction in employee national insurance introduced by the last Government.

In election campaigns of the past few decades, an arms race has developed of ruling out specific tax increases over the life of the subsequent Parliament. Like the right reverend Prelate the Bishop of Southwark, I regret that, but, in the world in which politics is now conducted, I recognise that it is naive to think that that is likely to change.

Had my party not made the commitments that it did, would the Chancellor necessarily have chosen to increase employer NI rather than, as some economists and the noble Lord, Lord Macpherson, have argued, reverse the employee NI cuts introduced by the last Government in a desperate and vain attempt to curry favour with the electorate? Perhaps not, but, as I said in the Budget debate, there is a strong case for asking companies to make an increased contribution to the funding of public services on which the resilience of both their customers and employees is dependent.

During the dark days of the pandemic, my noble friend Lord Eatwell and I argued that the corporate sector could afford to pay for increased resilience not only in their own supply chains and operations but in society more widely. Over the past 30 or more years, the share of GDP attributable to corporate profits has significantly increased, which I largely celebrate where it has not been at the expense of labour’s reasonable share. That general increase in profitability gives the corporate sector the ability to contribute to a more resilient society, to say nothing of paying back some part of the furlough and other support provided by the Government during the pandemic.

I regret that many in the business community have been so critical of these measures, suggesting, like Chief Vitalstatistix in Asterix the Gaul, that the sky will fall in tomorrow. It was therefore heartening to read in the Financial Times today that James Daunt—whose turnaround of the bookselling industry here and in the US, in the teeth of Amazon’s ferocious competition, is a retailing case study—said that pay inflation was “really significant” for the business, but that he backed the UK Government’s move to increase national insurance costs. I am sure that the noble Baroness, Lady Neville-Rolfe, with her deep experience of retailing, would agree that this is a significant counter to the complaints of other, perhaps less dynamic, retailers.

As a brief digression, Mr Daunt also said that, in relation to the UK, another factor remains the biggest pain, adds to the cost and complexity and makes our labour situation worse. Would any noble Lords on the Benches opposite like to guess what that other factor is?

Of course, not all employers are profitable, or even for profit, and I recognise that, for those—if they are of a size that means the increase in the employment allowance does not offset the increase in the NI rate and the lowering of the threshold—this measure is harder to absorb than for profitable corporate employers. Other noble Lords, led by the noble Baroness, Lady Kramer, in her regret amendment, have highlighted the particular impact on health and social care providers. I am glad that there have not been many arguments—the noble Lord, Lord Scriven, I think was an exception—for exempting different categories of employers from the rise. The tax system is complicated enough without new distortions. However, I hope that the Government and, in the case of charities, donors will be open to targeted financial support where necessary. The grant-making foundation of which I used to be a trustee made an additional tranche of grants two years ago to support charities at the time of the inflationary spike.

The noble Lord, Lord Blackwell, suggested that the left does not understand how tax affects business. I have to say I find that both patronising and wrong. My noble friend Lord Eatwell this afternoon gave a more compelling analysis of how this measure raises necessary revenue while driving productivity improvements, and hence growth, than anything I have heard from the Benches opposite.

I end by strongly endorsing the advocacy by the noble Lord, Lord Macpherson, of a more fundamental review of the relationship between national insurance and income tax. In so doing, I join the noble Lord, Lord Forsyth, in the belief that the pretence of NI being anything other than a tax while quacking like a tax is long overdue for dissolution.

As the noble Lord, Lord Macpherson, demonstrated so well, the path to radical reform is long and rocky, with the noble Lord, Lord Hammond of Runnymede, bearing the scars of trying and failing to enact even quite a modest change. But it is hard to reconcile with fairness the partners of a Magic Circle law firm, earning on average £2 million a year, not only paying a lower rate of self-employed national insurance than employees would but, as partnerships, not being subject to any employer’s NI, saving £300,000 a year for every partner. That is neither fair nor a loss of revenue—hundreds of millions a year from that sector alone—that the country can afford. Will the Minister consider urgently establishing a task force to examine how income tax and national insurance can be integrated and all types of workers, employed and self-employed, equitably taxed?

Autumn Budget 2024

Viscount Chandos Excerpts

Monday 11th November 2024 Lords Chamber

[Viscount Chandos (Lab)]

My Lords, there was much comment about the new Government’s first Budget not being delivered until 117 days after they took office—one of the longest intervals in recent history. George Frideric Handel may, famously, have written “Messiah” in 24 days, without much sleep or even food—which I am sure my noble friend the Minister will recognise—but for a Budget of this importance and complexity, with the accompanying new fiscal framework, the time taken and the preparations before the election are justified and have been well-spent. I pay tribute to my noble friend the Minister for the important part he has played, along with my right honourable friend the Chancellor, as well as for introducing today’s debate with such authority.

I am the first speaker from these Benches to have the opportunity to congratulate the noble Lord, Lord Booth-Smith, on his outstanding maiden speech. He may not be the youngest of the recent appointments to this House, but for many of us he still feels extremely young, and he has packed an extraordinary amount of public service and experience into his career so far.

I welcome the new fiscal framework, like the noble Lord, Lord O’Neill of Gatley, and the adoption of public sector net financial debt as the primary measurement, which brings sensible changes to the treatment of at least some government investment. The obstacles to productive public investment presented by irrational fiscal rules and their erratic interpretation seem to have prevailed throughout my adult life. I well remember, though not, I suspect, as vividly as the noble Lord, Lord Howell of Guildford, the collapse of the important gas-gathering pipeline project in the North Sea over 40 years ago, because the proposed guarantee by HMG was going to be included within the PSBR, which was the fetish of the then Prime Minister.

Operating within this new framework, the Government have introduced a well-judged package of measures, balancing the need to fund public services, reintroduce honest financial discipline and support and encourage investment. The incremental increase in employers’ national insurance to a level that the last Government previously imposed is a fair and reasonable ask for larger employers to contribute to the improved resilience of the society from which their employees and customers are drawn and will be to the ultimate benefit of their own businesses.

The noble Lords opposite express outrage at the idea that their Government left a financial black hole. The Economic Affairs Committee report on the sustainability of public debt, to which the committee’s chair, the noble Lord, Lord Bridges, has already referred, referred to two numbers provided to the OBR by the then Government: total current spending and total capital spending. Richard Hughes, the chair of the OBR, gave evidence to the committee and said:

“Some people have referred to that as a work of fiction. That is probably generous, given that someone has bothered to write a work of fiction, whereas the Government have not even bothered to write down their departmental spending plans”.


Is it surprising that the new Government inherited a black hole from the old Government?

I come finally to the increases in inheritance tax on agricultural land and private company shares, including those traded on AIM, albeit to only half the rate applied to other assets. The noble Lord, Lord Johnson of Lainston, in his intemperate and dishonest remarks from the Opposition Front Bench, concentrated on the issue of agricultural land, but as a former investment manager, he will be even more familiar with aggressive promotion of IHT-avoiding AIM portfolios by members of the industry of which he was a member. He may, none the less, have forgotten that the Office of Tax Simplification, created by the then Conservative Government, recommended the abolition of the distorting allowances lying behind these avoidance schemes. Of course, the then Conservative Government ignored the recommendations and abolished the Office of Tax Simplification, demonstrating perhaps once again the prioritisation of vested interests over professional, independent advice.

Budget Responsibility Bill

Viscount Chandos Excerpts

2nd reading & Committee negatived & 3rd reading
Monday 9th September 2024 Lords Chamber

[Viscount Chandos (Lab)]

My Lords, this is a short Bill, which, as it is—in my view, rightly—designated as a money Bill, your Lordships’ House cannot amend. I propose to speak briefly. I add my voice in support of the Bill and of the persuasive reasoning set out by my noble friend the Minister in his opening remarks.

More unusually, I find myself in a position of agreeing with the noble Lord, Lord Frost. Yes, there is a political aspect to the Bill’s introduction. Ben Zaranko from the Institute for Fiscal Studies wrote that it

“is broadly sensible but largely performative … rather theatrical … some future Chancellor determined to misbehave”—

this sounds familiar—

“could almost certainly find a way to get around it”.

He concludes, however,

“but it nonetheless serves as a welcome commitment to fiscal transparency”.

That commitment should not have needed to be codified but the reasons that it is in fact necessary and welcome lie not just in the debacle of the Truss-Kwarteng fiscal event—that mini-budget, self-immolation or whatever—but in the persistent indifference, arguably contempt, shown by the last four Conservative Governments towards the principles of good governance and towards the institutions of the state, old and new.

Restoration of confidence in the professionalism of government and the stability of the UK economy is needed; this Bill is a useful contribution to that. Forecasting, to paraphrase Professor Niels Bohr—or Yogi Berra—is difficult, particularly about the future. Criticisms from some quarters of the OBR’s track record are not, however, well founded, so not a reason for dismissing the validity and importance of its assessment of any proposed large fiscal event.

The Bill increases fiscal transparency, rather than delegating decision-making to an unelected body. Extraordinarily, the shadow Exchequer Secretary, traumatised perhaps by his membership of the previous Government, lamented in the House of Commons in July that

“nowhere in the Bill … is the OBR empowered to prevent a Government from taking fiscally significant action of any kind”.—[Official Report, Commons, 30/7/24; col. 1215.]

The newly elected Labour Government face many challenges in the direction of the UK economy, arising from both the legacy of the Conservative Governments and geopolitical, demographic and technological trends. They are not abdicating responsibility for those decisions but seeking to ensure that those decisions are taken—and can be judged—in the context of the best possible independent analysis. This Bill is an important symbol and insurer of this, and I look forward to its passing all stages in this House and receiving Royal Assent—the first Bill to be enacted by this Government.