National Insurance Contributions (Secondary Class 1 Contributions) Bill

Baroness Monckton of Dallington Forest Excerpts

2nd reading
Monday 6th January 2025 Lords Chamber

[Baroness Monckton of Dallington Forest (Con)]

My Lords, I declare my interests: as chairman of Team Domenica, a charity that looks after adults with learning disabilities; as a patron of the Acorns Children’s Hospice; and as a non-executive director of the Watches of Switzerland Group, a FTSE 250 company headquartered in Leicester.

To prepare for this debate, I have been in touch with several organisations across the sector to understand the devastating impact of the proposed legislation. To put my contribution into context, my career has been in luxury retail. In 1986, I opened Tiffany—the American jeweller—in this country in partnership with Tiffany’s in New York. This was a time when to be an entrepreneur was encouraged. The then-Chancellor proclaimed:

“It is the rediscovery of the enterprise culture … that will provide the only answer to the curse of unemployment, and the only true generator of new jobs”.


Little did I know at the time that this former Member of your Lordships’ House would become my father-in-law.

My noble friend Lord Forsyth of Drumlean is quite right in saying we need to reinvigorate the private sector. So, I started my research not in the luxury end of retail but in my local town in East Sussex. Heathfield Ironmongers, where I have shopped for the past 25 years, is closing on 31 January. Their website states:

“serving the local community since … 1919”.

It had suffered a drop in footfall after Covid, but the manager told me that the combination of the national insurance changes and the reduction of business rates relief was, as she put it, the final nail in the coffin.

Altus Group, the commercial real estate data provider, states that independent retailers are particularly expected to struggle this year. Around 85% of its predicted closures will be independents—that is 14,660 shops. Just think for a moment of the people who are currently employed there, and their families. What are they going to do?

I spoke to our immediate neighbour, who is a senior executive in a large insurance company. She told me that, partly because of this legislation, they will now be outsourcing most of their IT and project manager roles to India, Greece and Portugal. They are opening offices in these countries and making the UK roles redundant. They have accepted that, in order to do this, they will have to train people up to the level of competency that they have in the UK, but they say they have no choice, as their combined operating ratio—a measure of their underwriting profitability—would be too high if they retained their UK staff due to the changes in national insurance contributions.

One of the areas that is most affected—and we have heard this several times today—is the hospitality industry, in which Team Domenica plays a very small part. The group UKHospitality has calculated that the October Budget will deliver an increase to the annual tax bill of £3.4 billion, with a 10% rise in the cost of employment per person. The Institute for Fiscal Studies has said that businesses employing people on the national living wage will face the biggest hit from the increase. As an employer of 3.5 million people, hospitality is set to be the hardest hit. For example, it would cost an extra £1,140 to employ a student working 14 hours at the weekend. So, first-time workers will become unaffordable for hospitality businesses, thus removing valuable entry-level experience and training.

The overwhelming feedback I have received from across the sector is that this is just not sustainable. There were three particularly interesting points raised by the people I spoke to. First, all large businesses will be hit equally, but the Government should have considered the mix of labour costs on companies’ P&L and tiered the increase. Businesses with a high mix of labour will be hit harder and profitability will be wiped out. Secondly, businesses are significantly reducing the amount of capital they would have been spending in the year ahead as they cannot justify the level of returns, so growth will be stifled. Thirdly, inflation will accelerate as everyone is looking at increasing prices to mitigate.

On the charitable area, for my small charity alone the national insurance changes will add an extra £39,000 a year. However, for a charity like Mencap, which looks after 4,000 people with learning disabilities, the impact is huge, as my noble friend Lord Jackson of Peterborough has said. I spoke to Jon Sparkes, the CEO of Mencap, who told me that it has contracts with 80 local authorities, providing 650 different services. It has 5,000 staff, and large numbers of front-line care workers who are on the national minimum wage. Mencap’s income is £200 million a year. This is the bottom line, with no margin on the delivery of service. There is no way it can absorb these extra costs.

The impact of lowering the threshold will be £5 million, with a further £1 million due to increasing the headline rate to 15%. Jon told me that Mencap is having to give notice to 60 services and is working flat out to try to transfer them before 1 April to avoid the financial hit, but he does not think that it will be able to do that. Again, pause and think of the human cost of this: of the people who rely on these services, and of the families who thought they had found a safe haven for the people who they care most about and who are the most vulnerable. These are statutory services, so can the Minister give an undertaking that the public purse will pay for these public services?

Hospices are particularly impacted as most hospital charities have significant retail operations, employing many people close to the national living wage and people on short-term contracts. My colleague, Brian Duffy, CEO of the Watches of Switzerland Group, started the Watches of Switzerland Group Foundation. It supports a variety of charitable endeavours, most notably the King’s Trust and food banks. These organisations struggle to meet the demand for their services. They utilise volunteers where possible, but they also have permanent staffing and management costs. Brian told me that the message from the charities is that the increase in national insurance contributions can be funded only by cutting back on expenditure to those who need it most.

The outlook, frankly, is bleak. The optimistic entrepreneurial spirit will be stifled. Wealth creation will be stymied. This is a tax on employment, and the private sector is a sacrificial goat. Meanwhile, the state sector, which has decreasing rates of productivity, expands. Does the Minister agree that His Majesty’s Government should commit to the interests of wider society and not just the public sector?

During the election campaign, Keir Starmer declared:

“Small businesses are the beating heart of our economy, our communities and our high streets. Our Plan for Change will drive economic growth across the country so small businesses can thrive”.


How hollow that sounds now, and especially at Heathfield Ironmongers.

National Insurance Contributions (Secondary Class 1 Contributions) Bill

Baroness Monckton of Dallington Forest Excerpts

Committee stage
Wednesday 29th January 2025 Grand Committee

Moved by

[Baroness Monckton of Dallington Forest]

14: Clause 1, page 1, line 7, at end insert “or on the day after an impact assessment is published assessing the impact of the provisions in this section on persons who provide transport for children with special educational needs and disabilities, whichever is later”
Member’s explanatory statement
This amendment, and two others in the name of Baroness Monckton of Dallington Forest, would prevent commencement of this Act until an assessment of the impact of the policy on persons who provide transport for children with special educational needs and disabilities is published.

[Baroness Monckton of Dallington Forest (Con)]

My Lords, in moving Amendment 14, I will also speak to Amendment 27 in my name. I thank my noble friends Lady Neville-Rolfe and Lady Barran for their support.

These amendments would prevent commencement of this Act until an assessment of the impact of the policy on persons who provide transport for children with special educational needs is published. Those who provide transport for people with special educational needs provide a service that is very often not understood by those who are not in that position and do not have children who have a real problem getting to school. These companies that provide daily transport to children are now facing a rise in their employment costs. It is typical for drivers and their assistants to work for three and half hours a day, which brings them into this new threshold where the increased rate of employer national insurance will apply.

The sum of £515 million previously mentioned as being put aside for councils is to offset the national insurance contributions for their own employees. This sum would not offset the indirect costs of council services delivered by private providers. Councils have a statutory duty to provide these services. If private transport is no longer financially viable because of the new rules, the councils will have to re-tender thousands of contracts. I know at first hand, from my own experience of running a charity, how long it takes even to get a normal DBS check. We will be in a situation where some children will not be able to get to school until all these checks and balances have been done and the forms have been filled in.

This transport is an absolute lifeline—I know that is a hackneyed phrase—to parents. It enables them to continue working, as they do not have to drive the frequently very long distances that some of these children have to be taken to get to the nearest school that can accommodate their needs. Some parents who live near us in East Sussex told me of the enormous difference that it has made to them as a family. Before they had access to this transport, both parents worked, but one had to stop working in order to drive the child backwards and forwards to school. However, then they got access to the transport, and the father said to me that, for the first time, he did not have to worry about his child. He could go back to work and could become the person he was before he had a disabled child. That portion of his day spent in the office was absolutely invaluable to him.

My own daughter had somebody who drove her to school every day: Terry Heseltine. I spoke to him today because what I had not realised is that 90% of his work is spent driving children with acute and complex needs to school, along with an assistant. He said to me, “For many, this is the only way that they can get to school. Most of these parents do not have cars”. These children, who are often violent and display unruly behaviour, would have no other way of getting to school. We cannot let down this group of vulnerable people and their exhausted parents. These amendments are important because the increased cost of this policy on those who provide transport for children with special educational needs could result in job losses, reduced services and an unimaginable nightmare for these children and their families. I beg to move.

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[Lord Livermore (Lab)]

My Lords, I am grateful to all noble Lords who contributed today. I have of course listened very carefully to all the points made.

I will address the amendments tabled by the noble Baronesses, Lady Monckton of Dallington Forest, Lady Neville-Rolfe and Lady Barran, and the right reverend Prelate the Bishop of Southwark about the impact of the Bill on persons who provide transport for children with special education needs and disabilities. I will endeavour to get the right reverend Prelate an answer to his letter as quickly as possible; I apologise to him for not having replied sooner.

The Government of course carefully consider the impact of their policies, including these changes to employer national insurance. As I noted previously, an assessment of the policy has already been published by HMRC in its tax information and impact note.

On the specific issue of the provision of transport for children with special educational needs and disabilities, the Government are committed to improving provision in mainstream state schools, while also ensuring that state special schools can cater to those with the most complex needs. At the Budget, the Government announced a £1 billion uplift in high-needs funding, and £740 million into creating more inclusive specialist places in mainstream schools and undertaking the adaptations that may be required in mainstream schools to make them more accessible. The aim is to reduce the cost of transport, because far too many children are being transported to other local authorities, over a large distance and time, as they cannot be educated locally.

There are several ways in which a local authority can fulfil its requirements to provide free school transport to eligible children, including those with special educational needs, disabilities or mobility problems. At the Budget and as part of the recent provisional local government finance settlement, the Government announced over £2 billion of new grant funding for local government in 2025-26. This includes £515 million to support councils with the increase in employer national insurance contributions.

This £515 million of additional funding has been determined based on a national assessment of the costs for directly employed staff across the public sector. However, this funding is unring-fenced, and it is for local authorities to determine how to use this funding across relevant services and responsibilities. This is part of an overall increase in additional grant funding for local authorities in 2025-26 of over £2 billion, resulting in an estimated 3.5% real-terms increase in core spending power.

Given the points I have set out, I respectfully ask noble Lords not to press their amendments.

[Baroness Monckton of Dallington Forest (Con)]

My Lords, I am grateful for all the thoughtful contributions to this debate, and I thank the Minister for his comments. I urge him to consider the amendments we have been debating and to understand the essential services provided by the SEND transport sector. It is wonderful that he is putting more money into the schools, but if these children cannot get there, it will not really work. However, for the moment, I beg leave to withdraw my amendment.

Amendment 14 withdrawn.

National Insurance Contributions (Secondary Class 1 Contributions) Bill

Baroness Monckton of Dallington Forest Excerpts

Committee stage
Tuesday 4th February 2025 Grand Committee

Moved by

[Baroness Monckton of Dallington Forest]

29: Clause 2, page 1, line 16, leave out “2025-26” and insert “beginning after the tax year in which an impact assessment is published assessing the impact of the provisions in this section on hospices.”
Member’s explanatory statement
This amendment would prevent commencement of this section until a full impact assessment is published for hospices.

[Baroness Monckton of Dallington Forest (Con)]

My Lords, Amendment 29 is in my name and would prevent commencement of the Act until a full impact assessment is published for hospices. The NI announcement was a big blow for hospices already struggling with their budgets. There is also understandable frustration in hospices being told that this was for the benefit of an NHS that is already chronically underfunding most children’s and adult hospice services.

Sam Royston said:

“We project that over the coming 25 years the need for palliative care is going to rise by 25%, with around 150,000 more people needing”


end-of-life services. He said:

“We have no plan, no plan at all to address the scale of that challenge”.—[Official Report, Commons, Terminally Ill Adults (End of Life) Bill Committee, 29/1/25; col. 189.]


Hospices are particularly impacted as most have significant retail operations employing many people close to the minimum wage and many on part-time contracts. These are the employees where, typically, the impact of this tax is proportionally highest.

Many hospices already struggling with deficit budgets modelled the financial costs at between £150,000 and £450,000 in proportion to their turnover. For example, St Christopher’s Hospice in south London said that it will face increased costs of around £450,000 a year, which is equivalent to the cost of nine specialist nurses. Nationally, the hospice movement estimates that the cost to the sector will be £34 million for England and just under £40 million for the whole of the United Kingdom. Only this week, the Kirkwood hospice announced that it would be reducing its costs by £1.7 million a year, which will involve placing 33 roles at risk of redundancy.

We all know how important hospices are and the difference that they make. I got in touch with Rachel Street, who is the CEO of Heart of Kent Hospice. This is a hospice I know well: my mother was a founding patron, and I have seen the dedication of the frontline staff, their professionalism and their compassion. They make—and I use this phrase deliberately—a life-changing difference. I visit it every year to present colleague awards in my mother’s name, and I am always moved by their stories and by the kindness and tenderness that they show to those at the end of life’s journey.

As a charity, Heart of Kent Hospice has been hit with the double whammy that my noble friends Lady Noakes and Lady Fraser discussed earlier: increases to the national living wage and employers’ national insurance. Plus, as a charity employing doctors and nurses, it anticipates being impacted by any increases to the NHS Agenda for Change pay scales. It has more than 60 staff whose salaries will need to be uplifted to the national living wage, which is more than a third of its workforce. It now needs to look to reinstate differentials between roles, otherwise shop assistants and shop managers in its retail operation will be on the same salary. The ripple effects up through the organisation are huge, squeezing pay differentials throughout.

The retail teams are where hospices are seeing the cost pressure the most, drastically reducing the surplus made by their charity shops, which is an important part of their income for the delivery of palliative care services. For all hospices, the main costs of delivering vital services are wages and salaries, and, like other charities, they employ many colleagues on the national living wage, often in part-time roles, so they are all significantly impacted. For the Heart of Kent hospice alone, this change will cost it over £200,000 a year, on top of the £6.5 million it needs to raise, of which only 20% is funded by the integrated care board.

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[Lord Livermore (Lab)]

We are also providing an additional £26 million of revenue to support children and young people’s hospices.

As I have said previously, delaying commencement of the Bill 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, of course, including the changes to employer national insurance. As I have also said previously, an assessment of the policy has already 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. The Government and the OBR have therefore already set out the impacts of this policy change. This approach is in line with previous changes to national insurance and to taxation. The Government do not intend to provide further impact assessments.

In the light of the points I have made, I respectfully ask the noble Baroness to withdraw her amendment.

[Baroness Monckton of Dallington Forest (Con)]

My Lords, I am grateful for the thoughtful contributions to this debate from my noble friends Lady Sater, Lord Leigh and Lord Swire. I note the contribution on Amendment 41 in the name of my noble friend Lady Neville-Rolfe. All I can say is that I urge the Minister to consider carefully the amendments we have been debating and to acknowledge the essential services provided by the hospice sector. However, for the moment, I beg leave to withdraw the amendment.

Amendment 29 withdrawn.

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Moved by

[Baroness Monckton of Dallington Forest]

31: Clause 2, page 1, line 16, leave out “2025-26” and insert “beginning after the tax year in which an impact assessment is published assessing the impact of the provisions in this section on the hospitality sector.”
Member’s explanatory statement
This amendment would prevent commencement of this section until a full impact assessment is published for hospitality.

[Baroness Monckton of Dallington Forest (Con)]

My Lords, Amendment 31, in my name, would prevent commencement of this section until a full impact assessment is published for hospitality. I have spoken to several organisations in this sector and the message is clear: His Majesty’s Government have differentiated between larger and smaller businesses, making smaller businesses exempt, but larger businesses could have their profitability wiped out. As I said in the debate, the Government should have considered the mix of the labour bill on a company’s P&L and tiered the increase to relieve the pressure on high-labour, low-margin businesses, such as hospitality.

Companies are proposing to increase tariffs and pass on increases to their clients. This will bring its own problems. Bearing in mind that we have just managed to stabilise inflation, this will bring a cycle of increased prices. Companies are already getting signals from their supply chains that prices will increase due to the NI changes, so the spiral will continue. Meanwhile, growth plans are being reduced, new job opportunities are being cut and restructuring and redundancies are already under way. The people I spoke to saw no opportunity to grow their business and therefore the economy, and this is creating huge risk and pressure for businesses. They say that they are going to be so busy negotiating price increases and restructuring that they will have no time to address their strategic priorities. One business told me that it would significantly reduce the amount of capital it would have been spending in the year ahead, as it is unable now to justify the level of return. It is also reviewing labour costs to find efficiency savings to offset the cost increase. Prices for customers will increase, which will probably result in customers spending less, which will increase the pressure on businesses to reduce hours further to offset the volume decline. Entry level jobs, as we have heard already today, will simply disappear.

I had an email from someone who owns three hotels, and she gave me three examples of the effect that this will have. An over-21 year-old full-time kitchen porter having an increase of 50p per hour would mean that his salary would increase by £1,040 to £26,520 and the employer’s NI will increase by £818. A 21 year-old gardener with an increase of £1 an hour would increase his salary by £2,080 to £27,000, and his national insurance will also increase by £818. A part-time waitress over 21 with an increase of 50p an hour will have a total pay increase of £416 and the employer’s national insurance will increase by £690. So, across just three staff members, the extra salary is £3,536 and the extra national insurance is £2,477. When you consider that she employs 198 staff members across three hotels, the increase is huge. As she put it to me, “This is absolutely terrifying for us, as we simply cannot increase our prices to the same extent”.

I then spoke to James Chiavarini, who runs a long-established family restaurant in London, Il Portico. He said, “It is difficult to overstate how much hospitality helps our country by providing skills, training and employment to thousands of people, many of them neurodiverse, who want to work, want to contribute, but are not a natural fit for a 9 to 5 office job”. This is what we do at Team Domenica. We train people with a wide range of learning disabilities who want to work in this sector. With this new threshold, we know already that it will be so much harder to place them. James also said, “All the proposed increases will do is drive more businesses to close, create more unemployment and an even bigger benefit burden on the creaking state”. I will edit, for the sake of propriety and decency, his final sentence. “It’s a policy dreamt up by public servants who have never once in their lives taken on a risk to open a business, employ a struggling or vulnerable teen, or even work over a weekend”. Amendment 31 is important because jobs in the hospitality sector will disappear and restaurants, cafes and even hotels will be forced to close. I beg to move.

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[Baroness Monckton of Dallington Forest (Con)]

I am grateful for all the thoughtful contributions to this debate and, in particular, to my noble friend Lady Fleet for her impassioned defence of the arts sector, and to the noble Lord, Lord Londesborough, for standing up for pubs. In particular, I note the contribution on Amendment 49 in the name of my noble friend Lady Neville-Rolfe.

I urge the Minister to consider the amendments we have been debating and to understand the impact on the livelihoods provided by those in the hospitality industry. However, for the moment, I beg leave to withdraw the amendment.

[Baroness Neville-Rolfe (Con)]

I simply want to ask the Minister whether he had changed his view. The impact note came out in November. It was probably drafted based on data relating to before then, when it was far from clear what changes these national insurance measures would precipitate. What we have seen—we have heard from a working retailer today—is that this is having a depressing effect on confidence and jobs across the country. I hope that, before Report, the Minister will reflect on that and give us some assurance as to how the negative effects, which will affect his prime mission of growth, can be dealt with and alleviated.