National Insurance Contributions (Termination Awards and Sporting Testimonials) Bill

Baroness Kramer Excerpts

2nd reading (Hansard): House of Lords
Wednesday 26th June 2019 Lords Chamber

[Baroness Kramer (LD)]

My Lords, I intend to be very brief on the Bill and I certainly will not oppose it, but I want to pick up a couple of issues raised by the noble Lord, Lord Macpherson, from a slightly different angle. I follow the logic of keeping national insurance contributions so that, essentially, they track the pattern of income tax—though I am delighted by the Minister’s assurance that this is not mission creep and we will not very shortly see coming down the track an attempt to apply a national insurance tax on the employee. We are looking at employees at a fairly critical and difficult phase of their lives. That is one thing you can be fairly sure of when somebody’s employment ends, especially when it is an unexpected redundancy. That is the issue I want to raise.

Our tax system deals very badly with earnings that spike in one particular year. To give a redundancy example, somebody who is made redundant in one year and receives a substantial payment might then not be employed for the next three years. It makes you question whether applying the taxes we do was appropriate in the way that it was attached to that redundancy payment. We do not do things such as income averaging, which other countries use. As we look at the whole world of work and how it is changing—with changes in how people are employed and paid, and the mixed and portfolio lifestyles they have—we need to step back and look again at how we track both income tax and NICs. I have no problem bringing them into alignment if that can be workable, though the transition looks absolutely terrifying and near impossible. At some point, however, we have to look much more fundamentally at whether these systems actually work with the way people work and earn their living today.

With that exemption, and taking the Minister entirely at his word that there will be no move to suddenly apply NICs to the employee, I support this legislation. The Minister was kind enough to meet us earlier and clarified a couple of questions in his opening statement, but I want to know whether there is any further information on one issue: do we have any evidence that this was being abused? Logically, one could work out how it could be abused, but I am not quite sure how much evidence there is that anyone was abusing it. That is rather an interesting question when we look at this legislation today.