National Insurance Contributions (Secondary Class 1 Contributions) Bill

Baroness Grender Excerpts

Report stage
Tuesday 25th February 2025 Lords Chamber

All those services will be thrown into turmoil because they cannot suddenly renegotiate the contracts. They are going to have to hand the contracts back, and that is really not acceptable. The noble Baroness, Lady Neville- Rolfe, has a stronger amendment than this later, and I hope we might put that to the vote. We really have to do something about SEND transport.

[Baroness Grender (LD)]

My Lords, I support Amendment 3, moved by my noble friend Lady Kramer and supported by my noble friend Lord Sharkey, and other amendments in this group, but I will not mention them so that we can speed through as quickly as possible and get to the vote. We discussed in some detail in Committee the plight of charities, with a view to moving an amendment of this nature at this point.

I have a plea around the simplification of the tax system. I think everyone would acknowledge that national insurance contributions will never be part of asking, “Would we start from here?”, and then simplifying the tax system. Perhaps there is culpability on these Benches: they were introduced by Lloyd George, but massively expanded by Clement Attlee, so I am looking at the Benches opposite to share a bit of the responsibility from some time ago.

Failure to retain charities at the current rate will cost the sector £1.4 billion in the next financial year according to the NCVO. This compounds levels of underfunding in the long term and threatens services for some of the most vulnerable in society. To take just one example, Homeless Link is a charity with 800 member organisations, all of which work on the front line of homelessness. It estimates that the national insurance changes alone could take between £50 million and £60 million out of the homelessness sector. That is peanuts when it comes to revenue raising but absolutely fundamental to services run by 800 different organisations.

Most charities do not function as profit-making businesses and cannot adapt to increased costs, as the private sector can, by putting up prices or recovering elsewhere. Instead, the increase in national insurance must be accounted for by cutting costs in staff, and therefore services to people in acute need, such as those who need a bed for the night. The Government’s very welcome objective to develop a cross-departmental homelessness strategy is undermined by this additional cost.

At Second Reading, the Minister defended the current UK tax regime for the charity sector, arguing that it is

“among the most generous of anywhere in the world”.—[Official Report, 6/1/25; col. 601.]

I ask the Minister to study with care the latest results of the Charities Aid Foundation’s World Giving Index, which has the UK now at number 22—its joint lowest position ever, having fallen out of the top 20 at the end of last year after a recent period of decline.

The charitable sector is a significant partner in many of this Government’s future plans. This change in national insurance directly harms charities and the people who they need to serve. We urge the Government to reconsider this additional financial burden.

[Lord Bruce of Bennachie (LD)]

My Lords, I will briefly speak to Amendment 40, which is in my name. It asks for an impact assessment of this Bill on Scotland, because of the differences that have been identified.

The Government have said that they will compensate the public sector, but we are all waiting for the detail of how they will do it. A figure of £4.7 billion as the global sum has been mentioned, but not the detail. There is a concern that the structure of the public sector in Scotland is significantly different from that in England and that it may not be sufficient to sustain public services at even the current level in Scotland, where they ae struggling, as they are everywhere else. My own health board, Grampian, has had to absorb a £20 million charge just for this Bill, on top of a £75 million deficit that it is currently running. It is in a substantial crisis.

I have questions for the Minister. He will have seen the Fraser of Allander review of the impact; it may not be definitive but it is independent. It suggests that the impact is something around £550 million in Scotland. If one applied the normal rules of the Barnett formula, £4.7 billion would presumably give Scotland something between £400 million and £450 million. However, government officials in Scotland tell us that the Treasury has said the Barnett formula will transmit £300 million, or just over that. How can the Minister justify a £300 million transfer through the Barnett formula against a £4.7 billion overall budget for compensation?

More to the point, how will the Government establish the criteria for what level of compensation they will give to which kind of public bodies? If they do that, can they ensure that the same conditions that apply in England will follow through in Scotland, and that the money will go with them? All I am asking for is equality of treatment, not special treatment.

As I have said before, there is quite a lot wrong with what is going on in Scotland. The Scottish Government are not known for their efficiency in management; I am not trying to defend them and I do not think the UK Government should compensate them for their incompetence. However, I do not think that the public sector and the people of Scotland should suffer because of that, when an additional measure brought by the UK Government has added insult to injury or misery to misery.

Will the Minister acknowledge that, if he is talking about compensation of just over £300 million, that falls a long way short of the comparable impact, pound for pound, in Scotland compared with England? What are the criteria? Will they be applied fairly and consistently across the UK?