National Insurance Contributions (Secondary Class 1 Contributions) Bill

Baroness Kramer Excerpts

Committee stage
Tuesday 21st January 2025 Grand Committee

[Lord Howard of Rising (Con)]

I just say, in relation to that and to the noble Lord’s arguments, that what he completely forgets is that manufacturing companies faced with this will simply move their production abroad. That is what he forgets.

[Baroness Kramer (LD)]

Maybe I can be helpful by using the Library note on this occasion and a quote that it has from the OBR. The paragraph is headed “Labour supply”:

“The OBR expects workers and firms, respectively, may reduce labour supply and demand in response to lower wages and higher employer costs.”


That is a reference to these changes, including the NICs.

“It anticipates the measures in the bill may reduce labour supply by around 0.2%, or a little over 50,000 on an average-hours equivalent … basis, by 2029/30”.


Perhaps that quote about the OBR is helpful in the context of the conversation going on at the moment.

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Moved by

[Baroness Kramer]

3: Clause 1, page 1, line 1, at end insert—
“(A1) The Social Security Contributions and Benefits Act 1992 is amended as follows.(A2) In section 9(1A), after paragraph (aa) insert—“(ab) if section 9AA applies to the earnings, the part-time worker secondary percentage;”(A3) After section 9A insert— “9AA Part-time worker secondary percentage(1) Where a secondary Class 1 contribution is payable as mentioned in section 6(1)(b), this section applies to the earnings paid in the tax week, in respect of the employment in question, where the earner is a part-time worker.(2) For the purposes of section 9(1A)(ab), the part-time worker secondary percentage is 7.5%.(3) For the purposes of this section, a “part-time worker” has the meaning given in Regulation 2 of the Part-time Workers (Prevention of Less Favourable Treatment) Regulations 2000.””Member’s explanatory statement
This amendment sets a new National Insurance Contributions rate for part-time workers.

[Baroness Kramer (LD)]

My Lords, all the amendments in this group are in my name. They break, essentially, into two parts. Amendments 3 and 12 relate to national insurance contribution rates for part-time workers. They are not a request for an exemption from the change but would establish a new rate for part-time workers of 7.5%, so this is a far more aggressive pair of amendments than those we discussed in previous groupings. Amendments 58, 59 and 60 are all about reviews. If I may, I will discuss part-time work first and then look at the reviews, to try to provide some clarity.

Why have we taken a more aggressive position as we look at the situation of part-time workers? It is because we think that we now need to focus on the most disadvantaged, who are finding work difficult to obtain and finding it hardest to earn in a reasonable way to promote their standard of living. We think that part-time workers need to be viewed through a different lens. Traditionally, they have been an add-on side group, and I think that in some people’s minds there is still the idea that people who work part-time either work for pin money or are extremely well paid and need to work only a limited number of hours. That is not the character of part-time work as it is today, and we want this special category to be identified and recognised.

Under the changes to the thresholds in the Bill, in many cases part-time work will be brought into employer NICs for the first time. Currently, a person could typically work 14 hours a week without incurring employer NICs, but that will be reduced to approximately eight hours. It is a dramatic difference. Very few people will be working fewer than eight hours in any meaningful way.

The number of people who engage in part-time work has grown significantly. Today, there are about 8.5 million people. That set of people is overwhelmingly made up of those who carry with them some recognised disadvantage: people with health issues, be they mental or physical; people with caring responsibilities who are trying to improve the family income, as well as get out of the house to some degree; and people recovering from periods of unemployment and trying to rebuild their confidence and work credentials.

For many young people, part-time work is the entry point. Some of them are students who could not remain in education if they did not have part-time work to go along with it, but it is also increasingly becoming a route to the first job and to getting some sort of credentials that will give you the ability to go on and develop a career in full-time work. With this growing sector, we are changing as a society and using part-time work far more.

The Government will be very aware that, as they look at their growth agenda, one of their primary goals is to get older people who have become economically inactive—typically, those aged over 50—back to work. I suggest that part-time work is by far the most likely route for those individuals, so making that attractive, and making them attractive to employers, who may not have thought of employing somebody older who will therefore retire in a certain number of years, may well be a very important part of that strategy.

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[Baroness Kramer (LD)]

My Lords, I just want to say a quick word to the noble Lord, Lord Macpherson—in a sense, the voice of the Treasury. This notion of part-time workers as very wealthy people who work only a few hours a week is totally dated. The collegiate group of part-time workers, if you like, is now hugely more varied and much more heavily represented by people in disadvantaged positions. We might have known that had we had a more effective impact assessment.

I have to say that I have some sympathy with the Minister, because I have been complaining for years—this involves the previous Government as well—about the inadequacy of impact assessments. As a former banker, if I had been presented with that document as a piece of analysis by somebody on a project that I was working on, that would have been the end of them working. We need to move to a world where we get proper information in an impact assessment. I do not think it would be to the Government’s disadvantage; it would lead to far better discussion because we would all be on much more secure ground.

With all that said, I am very pleased with the degree of discussion that we have had on an issue that is often overlooked. I beg leave to withdraw my amendment.

Amendment 3 withdrawn.

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Once again, I congratulate the Liberal Democrats on tabling these amendments. They are flawed, for the reasons I have indicated, but perfectly capable of amendment—to broaden the scope from universities, for example. The amendments point to real needs and real hardships that have been created by a Government who have not thought through the consequences of their policies in this and in other taxation.

[Baroness Kramer (LD)]

My Lords, I am standing in what would usually be a winding position, but I think Amendments 4 and 5 have been so thoroughly discussed and I am very much in support of most of the comments.

I say to the noble Viscount, Lord Chandos, that I think it is very dangerous to always worship at the altar of simplification. As the noble Lord, Lord Forsyth, said, if it was the precise phrase, you end up with so many hard cases as a consequence of that. The noble Earl, Lord Kinnoull, talked about a specific charity that is delivering warm spaces—and on a day like today, when we have had to bring additional heaters into this Room, boy, something like that comes home. It is now facing additional costs that it could not possibly have planned for, without the time to put any kind of scheme in place that would give it the breathing space to be able to deal with that kind of challenge. I just find it extraordinary.

However, I wanted primarily to speak to Amendment 8, which has been less discussed today. I thank the National Association of Local Councils for a briefing. Like many others, I was very shocked when the Government confirmed that the upper tier of local authorities would qualify for financial support to offset the increased cost of employer NICs, but parish and town councils were to be excluded because they do not receive funding through the local government finance scheme. Parish and town councils raise their funding via precept. Therefore, these councils will undoubtedly have to increase local taxes in order to cover the additional costs. They have nowhere else to go.

I am sure that that was not in Labour’s manifesto and that this is something Labour did not intend, but there really is no other route they can go down other than to increase council tax. Its calculation is that the NICs increase will cost English parish and town councils approximately £10 million each year, requiring an increase of something between 1.5% and 3% to cover the additional cost—that is £10 million each year, and £50 million over the life of a Parliament. It really is a rounding error. I just cannot understand why town and parish councils were excluded from the provision for upper tier councils.

Part of the argument is around fairness, but there is also an argument around democracy. Many people can relate to their town and parish councils, as others have said, in a way that they do not relate to higher tiers. It is at the parish and town level that money goes to projects that are specifically designed around the needs of a local community. They really are very different in the services that they provide. I am concerned, on a broader scale, about the centralisation of local government that we have been seeing: in essence, we are looking at unitary authorities with something like half a million people in them as the decision-making, strategic and implementation element of local government.

I very much fear that the difficulties that parish and town councils will face will turn them much more into agencies of that upper tier, rather than something at the level of local government with the capacity to respond to local needs and to underpin the character and nature of each individual community. The amount of money is so trifling that, in putting these councils on an equal basis with upper tier ones, there must be some other agenda at work here. I do not know what it is; perhaps the Minister could enlighten us.

This amendment is in my name, as are Amendments 4 and 5. I very much hope that the Government are listening because these are issues of significance.

[Baroness Bennett of Manor Castle (GP)]

My Lords, it is a great pleasure to follow the noble Baroness, Lady Kramer. I will be brief; I want specifically to speak in favour of Amendment 8, given that I raised this issue at Second Reading. I should declare my position as vice-president of the National Association of Local Councils.

I agree with everything that the noble Baroness, Lady Kramer, said. I have just one point to add. As the noble Baroness was speaking, I was thinking about a recent visit to Shropshire. A whole lot of town and parish council leaders and councillors were gathered in a room and talking about all the projects that their councils were running. One of the things I thought about were the photos and slides that were being shown, and how much volunteer effort was involved in the projects being displayed. The money is spent by town and parish councils because they are close to, and there in, the community. Often, it is a community effort to install the bug hotel in the allotments or to put up swift boxes around towns—all sorts of things that many people get involved in on a voluntary level. In taking money away from that, the multiplier effect is much greater. As the noble Baroness, Lady Kramer, said, we are talking about a tiny sum of money in central government terms but something that is hugely consequential in communities up and down the land.

I spoke at some length on charities earlier but there are two specific points that I want to make. I mentioned earlier—the Minister did not respond to me on this—the idea of having a one-year delay for charities so that they have time to work out both the budget and ways to deal with the rise in national insurance; this was something that both the noble Earl, Lord Kinnoull, and the noble Lord, Lord Randall, raised. It would be interesting to hear from the Minister about that point regarding a delay specifically for charities.

I wish to pick up the point from the noble Viscount, Lord Chandos, about complexity. An organisation either is or is not a charity. That would be a really simple way to see this, involving low paperwork. Complexity would be easy to introduce; for a small or medium-sized enterprise or something, it might be more complicated. I do not think, I am afraid, that anyone can compete with the Green Party on our views on simplification because we want to roll together income tax, national insurance and capital gains tax. If that were the case, the Green Minister would not be over there: we would be going through this in one day in the House—provided it was still constituted as it is now when we got to that stage.