National Insurance Contributions (Secondary Class 1 Contributions) Bill

Baroness Neville-Rolfe Excerpts

2nd reading
Monday 6th January 2025 Lords Chamber

[Baroness Neville-Rolfe (Con)]

My Lords, I must start by thanking the noble Lord, Lord Livermore, for his clear explanation of this short and simple Bill, the context as he sees it, and the “happy new year” that we all hope to see, despite everything we will probably hear today.

I endorse the tribute from the noble Baroness, Lady Kramer, to Baroness Randerson: what a shock. I will come to the noble Baroness’s Motion later.

Despite the welcome increase in the employment allowance—effectively advocated by my friends at the Federation of Small Businesses—it is difficult to hide the fact that this Bill introduces a jobs tax right across the UK; it represents a £23.7 billion raid on employers. During the general election six months ago, the Labour Party claimed that, if it formed the next Government, the first priority would be to increase the rate of economic growth, and the Chancellor said that they would be the “most pro-business Government ever”—that was the promise. I attended the Times summit, and businesses were very reassured by everything the Chancellor said.

On taking office, the Government, notably the Prime Minister and Chancellor, relentlessly and consistently stressed the allegedly dire state of the national economy, constantly referring to their mythical black hole of £22 billion. I believe it would be true to state that no positive words on UK economic prospects ever passed their lips. But, as Keynes and many other eminent economists stressed long ago, economic success is in part a matter of morale. That discovery was, apparently, forgotten by the Prime Minister and Chancellor.

The Budget is the principal mechanism by which the new Government were able to give effect to their aspirations and objectives. Unfortunately, it was widely and correctly described as anti-business. It raised taxes substantially by placing large new burdens on business, most notably by way of increases in national insurance. The consequences of this pessimism at the top of government, and the extra burdens on business, are clear for all to see: a faltering economy, thought by some commentators even to be verging on depression, and an unpopular Government. That is quite an achievement when the Government are only six months old. Noble Lords will recall that in the first half of the year, the economy was growing strongly and inflation had reduced sharply from the highs created by Covid, Ukraine and the energy crisis. I suggest that gives a much more accurate summary of last year’s economics.

Sadly, the financial world is of a similar view. On 3 January, the critical measure of confidence, the 10-year gilts yield, was at 4.59%, which was higher than its peak after the Kwarteng Budget. In Germany, the bond yield rate at the end of December was 2.38%, and even in Italy it was only 3.52%. This morning, we had a stark warning from the British Chambers of Commerce that more than half of firms were planning to raise their prices in response to tax hikes announced by the Chancellor in October. Business confidence is at a two-year low.

The Government introduced several business-related measures in their Budget, and unfortunately, they were overwhelmingly negative. The increase in employer national insurance contributions, which I will come on to dissect, was accompanied by the partial removal of non-domestic business rate waivers dating back to Covid; a further increase in minimum wages; and an affirmation of plans to introduce costly new rigidities into the labour market. This was a quadruple hit on our hard-working businesses, and that is before accounting for the IHT changes that have so unsettled family businesses and our farming community.

The minimum wage is, of course, something we do not oppose, but it introduces further costs to businesses, especially small businesses, at a time when they are drowning in extra burdens. These businesses all play a crucial role in helping the British economy to grow, which is what we all want.

A number of sectors have released reports detailing the profound consequences these measures will have on their businesses, and this has highlighted the extent to which the Government fail to understand not only the private sector but how to promote and encourage a growing economy. The December growth figures from the ONS were very disappointing: down 0.1%, as were the OECD and IMF comparisons.

The noble Baroness, Lady Kramer, actually set out the Opposition’s position on the various sectors affected. However, her amendment is too kind to the Government; the NICs changes are a jobs tax on all business and not-for-profit sectors, not just a few. Passing it will have no effect on the Bill and do nothing for the groups mentioned. Instead, we need the Liberal Democrats to join us, on Wednesday, in opposing the Bill’s committal to Grand Committee. The Floor of the House is the revising Chamber that can be relied on to delve into vital detail and the perverse effects of such legislation. There is huge concern across the country and we should be debating this Bill, which can be amended—unlike money Bills—in Committee in this Chamber.

I turn to some individual sectors. The Government have angered businesses across retail. Over 70 businesses sent a letter to the Chancellor outlining their concerns. Big employers, including Tesco, Sainsbury and Next, said that:

“For any retailer, large or small, it will not be possible to absorb such significant cost increases over such a short timescale. The effect will be to increase inflation, slow pay growth, cause shop closures, and reduce jobs, especially at the entry level”.


We find it particularly concerning that the Government maintain a rhetoric that they are pro-growth and pro-business, without listening to the very businesses that can help them. If they did, they would realise that their plans have not been thought through and that they will have far-reaching consequences in closures and the prevention of growth.

The retail sector estimated that the measures introduced in the Budget will cost the sector up to £7 billion a year, and that these costs will be offset through a reduction in headcount, a freezing of wages and increased prices for the consumer. From my own retail experience and observations in recent weeks, I believe that we risk more insolvencies and empty shops on the high street. This is all too likely to have a multiplier effect on confidence and investment. Reports state that the Centre for Retail Research forecasts over 17,000 store closures in 2025, confirming my fears.

UK hospitality will also pay a high price in adapting to the new taxes. The sector indicated that it will pay at least £1 billion as a result of the increase in national insurance alone and that this will hit its far from buoyant profits. Take an example: a survey from the British Institute of Innkeeping indicates that 40% of independently operating pubs will have to reduce their opening hours as a result of this increase in national insurance contributions alongside the other harmful measures towards businesses included in the Budget. As a pub-goer, I know that turning up to a closed pub puts one off going to the pub again and that that has a multiplier effect.

The increase in NICs is unusual in causing pain to many not-for-profit sectors. They often get by, despite straitened circumstances, because of their workers’ passion and hard work. A good example is our wonderful hospices, as we heard during the PNQ. The charity, Together for Short Lives—a children’s hospice—estimated that this specific increase will put up the cost of providing such hospice care by £5 million across the sector. This will have a seriously detrimental impact on already underfunded hospices and will reduce the availability of lifeline care for children across the country. The Marie Curie charity concluded that the NICs changes will force it to reduce headcount and limit services, with more terminally ill patients staying in hospital, which is bad for them and the NHS, at a time when the debate on assisted dying has highlighted the inadequacy and unevenness of hospice provision. I hope that the Government are listening.

Regrettably, this is part of the wider picture of underfunding in social care, which has already been highlighted. The Nuffield Trust says that independent care providers will face £940 million in additional costs. That dwarfs the £600 million of support introduced in the Budget.

The Government are rightly trying to make more use of pharmacies to tackle waiting times, and yet Community Pharmacy England says that they will be hit by an extra £50 million a year. GPs are caught, as we heard: the Institute of General Practice Management estimates extra costs of about £20,000 a year for the average practice. Ironically, the BMA says that, as public authorities, they are unable to access support via the increased employment allowance. They look with envy and surprise at arrangements already made to protect the NHS and Civil Service from the NICs hikes.

Finally, there is the extraordinary impact on nurseries, where the last Government did so much to extend childcare and help more mothers into work, which boosted growth. The National Day Nurseries Association estimates that the combinations of NICs and salary increases will mean an extra £47,000 on average per nursery, and that those providing more than 50% government-funded childcare will also be deprived of the employment allowance.

I look forward to hearing from others in this debate about the effect of these changes and their unfairness and perverse impacts on so many sectors.

To conclude, we cannot support the key provisions of the Bill. It is a betrayal—yes, a betrayal—of the promise in the Labour manifesto that all reasonable people interpreted as a commitment not to increase national insurance. The stuff said about “working people’’ does not cut the mustard. Moreover, we know from the OBR that the national insurance changes alone will reduce labour supply by 0.2% and add 0.2% to inflation by 2029-30. Sadly, we are already seeing this in business recruitment plans.

We look forward to carrying out our scrutiny functions effectively as this important Bill progresses. It would be very helpful if the Government could update us with their latest view of the impact of the proposed changes on jobs, wages and prices. We are very much in favour of a proper evaluation of policies in the light of experience, and, accordingly, we will be tabling a proposed new clause requiring the Chancellor to publish an assessment of the NICs increases on the employment rate a year after the passing of the Bill. I know from my time as a Minister that such amendments are routinely resisted by the system but that they can be helpful down the road to a responsible Minister keen to do the right thing.

In short, our position is that, even if the Government thought it was right to raise many billions in taxation, this is the wrong way of doing it. The country will regret it.

National Insurance Contributions (Secondary Class 1 Contributions) Bill

Baroness Neville-Rolfe Excerpts

Committee stage
Tuesday 21st January 2025 Grand Committee

[Lord Blackwell (Con)]

In that case, I will address that amendment when we come to it.

[Baroness Neville-Rolfe (Con)]

My Lords, I thank the noble Lord, Lord Scriven, for tabling these amendments and others who have spoken, particularly my noble friend Lord Randall, who supported the amendments highlighting the damage to smaller businesses. I very much share his view.

This has been an interesting discussion and it has brought out how unjust the proposals in the Budget for national insurance were. The amendment rightly draws attention to the problems created across the health sector, all of which we will discuss again in detail on other groups. “Stark” was the rather good word used by the noble Lord, Lord Scriven. As we heard at Second Reading, there are appalling consequences for those dealing with some of the most tragic services, including hospices and the transport of those with special educational needs. There will also be an immense strain on care homes, GPs, dentists and pharmacies—mostly small operations employing a number of part-time and low-paid staff. That will seriously impact on the health of the NHS.

What is so unfair is that the public sector is being compensated for the extra costs. That is in contrast to those carrying out public good in the private sector, which, incidentally, we know is more productive. For example, I have been amazed by the industry of family-run pharmacies, which helped so much during Covid and are asked to do more and more year by year. They are having to deal with the treble whammy of NICs, the national minimum wage rises—especially for the young—and the prospect of the Deputy Prime Minister Angela Rayner’s proposals for new employment legislation.

As I highlighted at Second Reading, many in the health sector say that they will be forced to reduce services and limit headcount. For example, we heard from the noble Lord, Lord Scriven, about the increased cost of social care faced by the independent care providers—I think he talked about £900 million; I had a figure of £940 million—which simply dwarfs the £600 million support rightly included in the Budget to help the sector. If the Government recognise that this tax is not sustainable for the public sector, why are they unable to apply that same logic to sectors that provide public services? These are not big businesses. They provide a critical service for the people and, if they are unable to do so, that will add to the pressure on the NHS. The noble and learned Lord, Lord Hope, gave a good example of the Cyrenians in Scotland and my noble friend Lord Forsyth rightly mentioned hospices, as I think everybody will do throughout this Committee.

[Lord Forsyth of Drumlean (Con)]

Before my noble friend leaves this figure of £940 million for social care, something like one in seven of the beds in the NHS are occupied by people who are well and who could be discharged. If we are going to add a burden to the social care sector, that £940 million does not take account of the cost to the NHS of those beds being occupied by people who would otherwise be able to be in their own homes, not just saving the taxpayer money but also hugely improving their quality of life. So the £940 million —or the £900 million, as mentioned by the noble Lord, Lord Scriven—is a gross underestimate of the real costs that are being imposed by this policy, is it not?

[Baroness Neville-Rolfe (Con)]

My noble friend makes an excellent point. It is a question of the dynamics. I know, having once been a Treasury Minister, that dynamics always worry it. But the fact of the matter is that, if we can get things done and get people out of hospital quicker, as my noble friend suggests, that would make a real difference.

I feel that the proposals that we are faced with for hard-working businesspeople and for social enterprises are a huge slap in the face. They are being discussed on a day when unemployment is rising and job opportunities are falling. I believe that that reflects the impact of the £23.8 billion hit on employers’ national insurance. It is a veritable jobs tax and the gloom that the Government have admitted for the first six months of their tenure has not helped. That is why my noble friend Lord Forsyth was right to regret that we were debating this not on the Floor of the House but in Grand Committee. I hope that none the less we will attempt to give the Bill proper scrutiny here, because if we do not, that would be a big failing.

In that respect, one of the things that annoys me most is the lack of a proper impact assessment. We have a very inadequate impact note, which was published on 13 November. That gives a run of the yield to the Exchequer year by year but does not break it down into the three categories: the costs of the increase to 15%, the lowering of the threshold, which is extremely regressive, and the welcome benefit from the rise in the employment allowance—and indeed anything else included in the figure of £23.8 billion, which was by far the biggest change in the Budget and which is why so many people are here today worrying about the Bill.

There is also an unexpected dynamic effect highlighted by the OBR, which means that, following the reduction in wages, profits and employment, this tax will raise over £5 billion less than the Treasury forecast, raising £18.3 billion in 2025-26 and nearly £10 billion less than the forecast in 2026-27. So there is a great deal of pain for wealth creators and effective employers, but not a lot of gain.

I cannot see how we can scrutinise the Bill without proper impact information, and I look forward to a proper discussion during the debate on Amendment 13. However, I think the Committee would also like to have authoritative, disaggregated figures on the impact on the health and care sectors under discussion today. That is why I am raising this now, and I hope the Minister will consider what he can do to assist the Committee so that we can have proper understanding and proper scrutiny. We want to do the right thing here.

It is against that sombre background that I shall speak to my Amendments 38 and 42, which have been grouped with this amendment. They seek to increase the employment allowance in the primary care sector. My purpose is to probe the Government’s openness to helping the sector a bit more through an increase. Perhaps the Minister could clarify the facts. The BMA has said that, as public authorities, they are unable to access support via the increased allowance and the noble Lord, Lord Scriven, made a similar point in relation to dentists. The Committee needs to know whether that is true.

Mine is a probing amendment and the first of several relating to Clause 3. To reply to the noble Lord, Lord Eatwell, as someone who has tried to reform taxes in the past, originally with the help of my noble friend Lord Heseltine as part of the deregulation initiative, it is very difficult to get simplification of the tax system. That is one reason why I have tabled an amendment relating to the employment allowance, because it comes at the matter in a different way.

Primary care is vital to the Government’s plans to improve the NHS. My fear is that the NICs changes, especially the lowering of the threshold and with part-time working so common in primary care, will lead to further problems in GP surgeries, increasing chronic conditions and waiting times for appointments across the NHS, and having the perverse effect that I think we will come back to as this Committee progresses.

[The Financial Secretary to the Treasury (Lord Livermore) (Lab)]

My Lords, it is a great pleasure to respond to the debate on this first group of amendments, and I thank all noble Lords who have contributed so far. It is also a pleasure to see so many noble Lords in the Grand Committee. I know that some noble Lords are unhappy about being here, but the noble Baronesses, Lady Kramer and Lady Neville-Rolfe, in particular, and I know what it feels like to be in this Grand Committee on our own, so it is, at least, I have to say, nice to be popular.

Before I address each of the amendments in this group, I shall very briefly set out at the outset the context in which the Budget decisions contained in the Bill were taken. I would like to do so since this context is why we are here today and underpins the debates that we will have, not just on this group of amendments, but on all further groups. As noble Lords will know, the Government inherited three distinct challenges: the need to repair the public finances; the need to rebuild public services; and the need to protect working people.

The most pressing of these challenges was the need to repair the £22 billion black hole in the public finances as a result of a series of commitments made by the previous Government which they did not fund. The previous Government also made no provision for costs that they knew would materialise, including £11.8 billion to compensate victims of the infected blood scandal and £1.8 billion to compensate victims of the Post Office Horizon scandal. These pressures have to be funded, and it falls to this Government to do so.

Noble Lords will also know that the country inherited acute problems in public services, with NHS waiting lists at record levels, children in Portakabins as school roofs crumbled around them and rivers filled with polluted waste. Yet since 2021, there had been no spending review and no detailed plans for departmental spending were set out for beyond this year. Working people had also lived through a cost-of-living crisis, with inflation peaking at 11.1% and remaining above target for 33 consecutive months. Combined with the previous Government’s decision to freeze income tax thresholds—

--- Later in debate ---

[Baroness Neville-Rolfe (Con)]

I asked a question which, in relation to dentists, echoed by the noble Lord, Lord Scriven. It was about the definition of “public authorities” and how that affects payment of the employment allowance. I raised it at Second Reading as well. It would be helpful to have a judgment on that point.

[Lord Livermore (Lab)]

The definition is set as it was previously. We have no intention of changing that definition.

[Baroness Neville-Rolfe (Con)]

To be clear, that means these bodies will not have access to the employment allowance if they are public authorities. It would be helpful to know what the costings of that look like. I know that the Minister does not want to make any changes, but we are trying to understand what the numbers are here and in some minor areas, such as hospices. The Minister says that hospices will have extra money, but they will also have to pay a lot extra in national insurance. We are trying to understand all that to give him helpful feedback on the Bill; obviously, we are as keen as he is for it to succeed.

[Lord Livermore (Lab)]

I would be very happy to look into the specific point made by the noble Baroness. I will feed back in my responses on a subsequent group.

--- Later in debate ---

At present, as I understand it, there is still an exemption on NI contributions for veterans in their first job after they have left the Armed Forces. If I am indeed correct in that, can the Minister explain to the Committee how that is going to be dealt with in the current changes to the legislation? Will that simply be abolished by this general increase in national insurance contributions? In short, I should like at least to do what I have done, which is to raise the importance of supporting veterans back into employment. An attack on jobs through an increase in national insurance contributions is a general problem, but it is a particular problem for getting veterans back into employment. Specifically, is the NI contribution exemption for the first year still going to be in place under the Government’s new legislation?

[Baroness Neville-Rolfe (Con)]

I did not say I wanted the Bill to go through. I agree that that it is a jobs tax, as the noble Baroness said. What I accept is that the Government have a large majority in the other House, and what I am trying to do in this House is to have a proper discussion on the Bill with a view, perhaps, to amending it and persuading the Government that they have made some mistakes and that we can improve the Bill.

[Baroness Smith of Newnham (LD)]

The noble Baroness is trying to encourage the Liberal Democrats to be in agreement with the Conservatives, rather as her noble friend Lord Forsyth suggested at one point that he was in favour of the amendment from my noble friend Lord Scriven. We need to be a little bit careful not to agree with each other too often. But she is absolutely right. The Government have a large majority in the other place and it is not the business of this House to go against the Salisbury/Addison convention. However, I do not remember this being a manifesto commitment.

--- Later in debate ---

[Lord Livermore (Lab)]

My Lords, I am very grateful to all noble Lords who have spoken in this debate. I will address the amendments tabled by the noble Baronesses, Lady Smith of Newnham and Lady Kramer, and the noble Lord, Lord Randall of Uxbridge, which seek to exempt veteran salaries from the employer national insurance changes. These amendments would create a different employer national insurance rate and threshold set at the current levels for salaries of veterans. The Government of course recognise the huge contributions made by the UK Armed Forces and veterans in this country, and I completely understand the intention behind these amendments.

As some noble Lords have mentioned, there is already an employer national insurance relief available for the earnings of veterans, meaning that employers are not required to pay any national insurance contributions up to £50,270 for the first year of civilian employment. At the Budget, the Government decided to extend the national insurance contributions relief for employers who hire veterans to support veterans in their first year of civilian employment for a further year. Despite the challenging fiscal inheritance this Government face, this means we are maintaining this relief and it is not changing as a result of this Bill.

Further to this, we have more than doubled the employment allowance to £10,500, meaning that more than half of businesses with national insurance liabilities either gain or see no change next year. Businesses and charities will still be able to claim employer national insurance reliefs, including those for under-21s and under-25 apprentices, where eligible.

On veterans more widely, this Government have taken action to demonstrate our commitment to renew this nation’s contract with those who have served. We have awarded £3.7 million in veterans housing grants, veterans will be exempt from the local connection test for social housing in England and veteran cards are now accepted ID for elections. We are progressing veterans support programmes at pace, including a centralised referral pathway designed to support veterans who are homeless or at risk of homelessness, an NHS mental health specialist service designed to help veterans and their families in England and an NHS physical health specialist service designed to help veterans and their families in England.

Before I sit down, I shall also address the questions raised by the noble Baroness, Lady Neville-Rolfe, about dentists, which I was unable to answer during the debate on the previous group. As I said, the criteria have not changed, including the exclusion of those doing 50% of their work in the public sector. The eligibility is down to individual businesses, and the proportion of their work in the public sector may vary year to year. All charities can claim, including hospices.

[Baroness Neville-Rolfe (Con)]

My point was in relation to the points made by the BMA and the dentists. There are two separate points. It is not in this group, but it might be as well to have a discussion on this so that we can be clear about this and on the impact on these important areas for the future of health in the NHS.

[Baroness Smith of Newnham (LD)]

Can the Minister clarify something? I understood that the national insurance contributions relief for veterans had been extended for one year and that this Bill was not going to affect veterans. Surely at some point it cuts out. Is that correct, so that this would be valid only up to 2026?

--- Later in debate ---

[Lord Macpherson of Earl’s Court (CB)]

My Lords, I will try to be extremely brief because no doubt I will be interrupted again. The point I was making was that if you cut tax in one area, you are going to have to raise it somewhere else. That is always problematic.

There are two other reasons why I have some reservations about this amendment. First, it is often thought—the Financial Secretary will remember this because we worked together on measures in the early 2000s—that part-time workers are poor. However, if you look at the poverty statistics, many part-time workers live in quite affluent households. My point is that as a measure to target people on low income, this is a very blunt instrument. It is far better to target them through tax credits, or universal credit as it is now called.

My final points relates to having worked on national insurance over three decades or more and is about the danger of creating steps in the system. I remember large numbers of workers bunching below the lower earnings limit, which was totally understandable as it was in their interest and their employer’s interest. By creating steps in the system, you discourage people from moving up the earnings ladder. In the short term, I could understand that cutting national insurance for the self-employed would genuinely incentivise the employment of part-time workers, but once in place, over time the existence of the step would trap many workers in this part-time zone because their employers would not want them to cross the step that resulted in higher national insurance. I warn against targeted measures such as this as they tend to cause difficulty and disappointment.

[Baroness Neville-Rolfe (Con)]

My Lords, I thank all noble Lords for their contributions, particularly the noble Baroness, Lady Kramer. I regret that the noble Lord, Lord Bruce, is not in his place and associate myself with the request for some information about Scotland.

The amendments address a matter of real importance, which is the impact of the measures on part-time and seasonal workers, SMEs, hospitality and tourism. The noble Baroness, Lady Kramer, is right about the importance of part-time working in tourism, pubs, restaurants and events. That sector is sometimes neglected in public policy-making, but it is vital to growth.

--- Later in debate ---

[Baroness Neville-Rolfe (Con)]

My Lords, on growth, and indeed on the hospitality industry, it is particularly good to have the practical experience of the noble Lord, Lord Londesborough. I agree with him that it would be helpful to understand today’s employment decline a little better in the Committee.

According to the ONS, there are 8.4 million people working part-time in the UK, which is approximately one-quarter of the workforce. They work in large and small firms and include many young people, students and carers, as well as disproportionate numbers in hospitality, tourism and retail. I know from my days at Tesco how important part-time workers are to big employers as well as small employers, and, in particular, to 24/7 businesses—retail is a 24/7 business. That includes a lot of employment of elderly people. Also, as was said, part-time workers are not only the lowly paid—I had several part-time directors working for me—and good employers offer proper training to their part-time teams. It is an extremely important part of the economy.

While the rise in the national insurance rate to 15% will no doubt hit part-time workers, it is the huge reduction of the threshold to £5,000 from £9,100 that will have the most detrimental consequences for those who work part-time. It is yet another blow to the sector, alongside the increase in the minimum wage that comes into force in April.

As a result, a company that employs a part-time worker over the age of 21 who works just eight hours a week on the minimum wage—I think the noble Baroness, Lady Kramer, said it was down from 14 hours a week —will be hit with this jobs tax for the first time, and the hospitality sector will be disproportionately affected. I think Kate Nicholls used the word “eye-watering”. The industry has warned that the measures announced in the Bill will cost it £1 billion overall. My noble friend Lord Ahmad quoted that figure as well. He is right about the adverse consequences of this and the need for consultation on such changes. How can you adjust your business model and be ready if you do not know what is coming?

It is really difficult for these companies. For the first time, they will have to pay tax on the wages of thousands of part-time hospitality workers. UKHospitality has estimated that a company employing a part-time worker doing 15 hours a week will see a 73% increase in its national insurance bill. It goes without saying that business will have to make tough decisions, as employing part-time workers is soon to become much more expensive. The trouble is that part-time work provides a flexible form of employment for so many—I have mentioned students and carers, but parents are also affected. It can be very useful in juggling what families do. These are people who rely on the flexibility of part-time contracts and might not otherwise be able to work at all.

Can the Minister tell the Committee what assessment the Government have made of the effect of the changes enabled by the Bill on part-time workers? Perhaps he could also comment on the levels of employment within the hospitality sector and how he sees that panning out. How do the Government intend to support industries that will be most impacted by these changes to national insurance contributions? How can he give them hope and how can we be sure that they continue to play their part in growth? It is difficult and we need to try to find some comfort.

[Baroness Bennett of Manor Castle (GP)]

My Lords, I apologise for speaking after the Tory Front Bench, but I thought the noble Lord, Lord Londesborough, was continuing after the voting break.

I will speak briefly in favour of Amendments 58 and 59. In doing that, perhaps I should declare an interest. I was on the board of the Fawcett Society in 2010 when it brought a judicial review against the emergency Budget of that year for its failure to honour its legal duty under the Equality Act to do with gender impact assessment. In that case, although Fawcett lost the overall case on legal grounds, it was said that the gender impact assessment requirements applied to the Budget and should have been carried out on a couple of aspects of that Budget.

With that in mind, I draw attention to the final page of the policy paper of 13 November, which I think we are regarding as an impact assessment. Under the heading “Equalities Impacts”, in this five-page document that my sub-editor’s eye tells me is in 16-point, it states:

“Secondary Class 1 NICs are levied on employers rather than individuals. There are therefore no direct equalities impacts”.


I would like to question the Minister on how it can be claimed that there are no equalities impacts. Some figures have already been raised, but I point out that 74% of part-time workers are female, 57% of involuntary part-time workers are female, 6 million women are working part time and 10 million women are working full time. According to the Resolution Foundation’s analysis of ONS data, 63% of UK workers under the £9,100 threshold are female. We are seeing national insurance charges increasing the cost of employment by nearly £700 a year for someone working 15 hours a week on the minimum wage. An additional 600,000 women workers are being brought within scope of national insurance. As others have said, on the minimum wage you need to work fewer than eight hours a week to stay below the new threshold.

Analysis of this has suggested that women workers are particularly affected by this change. Some of them may want to raise their hours, so this might turn out positive. Some of them may have caring responsibilities that mean that they cannot lift their hours and may then have to leave employment because they are being offered more or nothing. It is also worth pointing out that the Women’s Budget Group has highlighted how the overall impacts of the national insurance changes are likely significantly to increase childcare costs. That is of immediate relevance to working women with direct childcare responsibilities, but, as the Women’s Budget Group pointed out, there are also issues around grandparents, very likely grandmothers, who may find themselves being pushed, and feeling obligated, to leave employment so that they can take up childcare responsibilities. I do not think that that equalities impact can be justified and would appreciate the Minister’s comments.

--- Later in debate ---

In light of the points I have made, I respectfully ask noble Lords not to press their amendments.

[Baroness Neville-Rolfe (Con)]

Before the noble Lord sits down, while no impact assessment is perfect, I think it is very difficult to call this note of 13 November detailed. The only numbers it gives are the global numbers, the £23.7 billion et cetera, and the run, and there are a few textual comments about equalities and things. What it does not do is even break down the costings into the different areas where different measures are being taken. It is not a detailed assessment; it is described, rightly, as an impact note. We will return to this, because we think that transparency and understanding the impact of policies is really helpful, including to His Majesty’s Government.

National Insurance Contributions (Secondary Class 1 Contributions) Bill

Baroness Neville-Rolfe Excerpts

Committee stage
Wednesday 29th January 2025 Grand Committee

Moved by

[Baroness Neville-Rolfe]

6: Clause 1, page 1, line 1, at end insert—
“(A1) In section 9(1A) of the Social Security Contributions and Benefits Act 1992, after paragraph (aa) insert—“(ab) if the employer is a specified employer under subsection (1B), the specified employer secondary percentage;”(A2) After section 9(1A) of that Act insert—“(1B) A “specified employer” means a business with an annual turnover of less than £1 million.(1C) For the purposes of this Act, the specified employer secondary percentage is 13.8%.””Member’s explanatory statement
This probing amendment would exempt the smallest businesses from the increase in national insurance contributions.

[Baroness Neville-Rolfe (Con)]

My Lords, I rise to move Amendment 6 in my name and to speak to my Amendments 23 and 48, all on small business—a subject dear to my heart, as noble Lords will recall from our debates on the Procurement Act in the last Parliament, mostly in this very Room.

Small business is at the entrepreneurial heart of the economy. We need a constant stream of start-ups for an economy that is dynamic. The amount of regulation on such businesses is already discouraging. My own findings are that the imposition of additional employer NICs is leading some businesses towards despair, with more closed shops on the high street and busy insolvency practitioners. Others are not setting up. Their customers are affected by the chill created by the Budget and the enormous NICs hit in particular, which has a multiplier effect on confidence.

I acknowledge that the increase in the employment allowance is helpful and I congratulate the Federation of Small Businesses on its work on this with the Treasury and DBT. However, more needs to be done to drive growth. I believe that easing the strain of NICs on SMEs could play an important part.

My Amendment 6 would exempt micro-businesses with an annual turnover of less than £1 million from this jobs tax. I have tabled this amendment because I want to understand whether the Government would consider an exemption that would have a relatively low impact on the revenue that the Treasury receives from this policy. To exempt such small businesses would not come at a great cost to the Treasury, yet it would have a big impact on the businesses that it would protect and on attitudes to the Government’s plans. The Financial Conduct Authority defines “small businesses” as companies with an annual turnover of less than £1 million—hence my choice for the threshold. I add that even many of these businesses may not survive recent tax rates. The Government will be failing in their promise, I fear, to be the most pro-business Government ever.

My proposal would be a modest step in the right direction and would reduce the negative knock-on effect of the NICs changes, in terms of jobs, shop and business closures and the higher prices that follow reduced competition. You see that effect, when a couple of coffee shops close, on the price of your latte.

I was interested to hear the Chancellor this morning saying that

“growth isn’t simply about lines on a graph. It’s about the pounds in people’s pockets. The vibrancy of our high streets”.

Chance would be a fine thing for the hard-working domestic SMEs that I am talking about.

Amendment 23 in my name seeks to increase the per-employer threshold at which employers begin paying national insurance on employees’ earnings, from £5,000 to £7,500—sort of halfway. We know that Clause 2 is the most punitive part of the Bill, hitting small businesses and social enterprises hardest. As the OBR acknowledges, this jobs tax will have the indirect effect of stifling wages, as employers look to offset these increased costs.

Amendment 48 would increase the employment allowance for small businesses to £20,000. The increase in the allowance is very welcome, as I have said, as is the lifting of the EU-based limit on eligibility—ironically, a new Brexit freedom, on which I congratulate the Minister. However, many small businesses have more than three or four people, or so, which means that the increase in the allowance will be less than the additional NICs charge. We should debate in Grand Committee, as we did on procurement, how to improve matters.

I would be delighted to be able to congratulate the Minister on an entrepreneurial step by increasing the allowance and removing the threat and hassle of NICs for more employers. I know that he shares my passion for easing barriers to growth and I see this as a new barrier that he could mitigate.

I very much look forward to hearing my noble friends Lady Noakes and Lord Londesborough and I am sorry that my noble friend Lord Ahmad of Wimbledon cannot be here this afternoon. We all feel the same way about the importance of cherishing the enterprise spirit and will welcome a constructive discussion on what more can be done to ease the pressure on small businesses. The Chancellor’s speech today and the long-term nature of most of her growth drivers strengthen the case for a concession on this now. I beg to move.

[Lord Londesborough (CB)]

My Lords, I shall speak to Amendments 22, 39 and 53 in my name in this group, to which the noble Baroness, Lady Kramer, and my noble friend Lady Neville-Rolfe have added their names. I shall also speak to Amendments 6 and 33, tabled by my noble friends Lady Neville-Rolfe and Lady Noakes respectively.

Rather than taking a sectoral approach, about which others spoke passionately last week, my three amendments focus on the size of businesses and organisations impacted by the measures in the Bill, specifically those categorised as small businesses, which means that they employ between 10 and 50 full-time staff. I should again declare my interests as set out in the register, as I advise and invest in a number of businesses of this size, predominantly start-ups and scale-ups. These are the companies that grow and create jobs at the fastest rate and, through their size and agility, seize the nettle of productivity. If I may mix my metaphors for a moment, these are the acorns that seek to become unicorns or, at the very least, sturdy oaks.

The Department for Business and Trade reports that there are some 220,000 businesses across the UK that employ between 10 and 50 staff—that is 4.3 million of the 28 million jobs in the private sector and they generate £780 billion in annual turnover. However, this group involves not just fast-growing early-stage start-ups but a huge swathe of family and local businesses spread across the country and, indeed, businesses that have been struggling to keep their heads above water in what have been five very difficult trading years.

While the Government have sought to protect the majority of our micro-businesses, those employing between one and nine staff, from rising NICs, they have left all other small businesses exposed to these sudden and dramatic increases. In terms of impact, the Government tell us that 250,000 employers will see their NICs decrease, 940,000 will see theirs increase, while about 800,000 employers will see no change. This has allowed the Government to claim that the majority of employers will see no increase. With respect, that is deeply misleading. The question that matters is what proportion of jobs will attract increased national insurance contributions. I ask the Minister that question. Can he confirm, if he does not have the numbers at hand, that in fact the number is close to 80%?

I turn to the financial impact of Clauses 1, 2 and 3 to small businesses. For businesses of 25 staff paying the national full-time median salary, which is put at £37,000 by the ONS, their NICs bill will rise from £90,000 to £110,000. That is an increase of more than 20%.

However, most small businesses, given their nature and stage of development, pay less than the median national average. For them, the increases get even steeper. For those employing 25 staff and paying an average salary of £25,000, as is common out in the regions, their NICs bill will rise by no less than 30%. For those employing 50 staff at that salary, they face an eye-watering 33% increase. As we know, the main culprit for those outsized increases is Clause 2: the brutal and, in my view, economically illiterate drop in the per-employee threshold from £9,100 to £5,000. Ironically, this hits the lowest-paid jobs the hardest. In short, it is a regressive tax.

Then we come to retail and hospitality, with thousands of outfits that rely on part-time shift workers. For those employing 20 part-timers, typically earning £300 per week, their NICs bill goes up by an extraordinary 70%. I will stop there with the examples but noble Lords, including the Minister, will be delighted to know that I have here all the spreadsheets to prove it; I will happily share them out later. In the interest of transparency, on the impact for 5 April, I strongly suggest that the Government have the honesty to publish these figures.

These increases are of course bad news for the working person, especially the 4 million of them who work in small businesses. They rather grate against Rachel Reeves’s statement this morning about kick-starting the economy. Let me turn to my Amendment 22, which seeks to address this in what I hope noble Lords will agree is a measured, proportionate way to help protect our small businesses. In short, the per-employee threshold would remain at £9,100 for those employing fewer than 25 staff, while those employing fewer than 50 but more than 25 staff would see their threshold reduced to £7,500. Somewhat reluctantly, I have left the £9,000 threshold for all businesses employing more than 50 staff.

By my calculations, the nominal cost to the Treasury of this key amendment would be less than £2 billion—that is, to support and sustain 4 million jobs and almost £800 billion in turnover. I humbly suggest that this amendment would more than pay for itself in economic growth and increased revenues to the Exchequer. Commencing Clause 2 without undertaking a full impact assessment on small businesses—addressed by Amendment 33 in the name of the noble Baroness, Lady Noakes, which I fully support—strikes me as reckless.

I turn now, much more briefly, to my Amendment 53, which addresses the increase in the employment allowance. Clause 3 is designed to soften the increase in NICs from Clauses 1 and 2. It offsets the costs but, having crunched the numbers, it does so only for those employing seven staff or fewer. My Amendment 53 would raise the employment allowance from £10,500 to £15,000 for all small businesses employing fewer than 25 staff. This would help around 200,000 businesses across the country. I estimate that the cost to the Treasury would be less than £1 billion. Again, I argue that such an amendment would more than pay for itself in the medium term.

I hope that the Minister will carefully consider the amendments in this group, given the severity of these increases to SMEs and the potential damage to both jobs and economic growth. I have spoken to Amendments 22, 39 and 53.

--- Later in debate ---

[Lord Forsyth of Drumlean (Con)]

I completely agree with my noble friend. Actually, it is worse than manufacturing going abroad. Just think of this: where are the sorts of areas of business, in terms of distribution or marketing, where people are employed who are not particularly well paid but on whom there will be a big impact from this national insurance cost on the employers? They are in places like call centres. Suddenly you find that you get a huge additional bill for running your call centre, which you may be required to do as a matter of government regulation or for all kinds of reasons—it may not be directly related to your product. So what will you do? You will outsource it to India or some other country. The jobs will go, because it will be much cheaper. The quality may not be the same, but it might be the difference between surviving and not. So, as the noble Lord, Lord Eatwell, pointed out, this national insurance thing has to be seen in the round. Then add all the other things that are going up: the energy costs, which are going up—

[Baroness Neville-Rolfe (Con)]

That is 10 minutes.

[Lord Forsyth of Drumlean (Con)]

It may be 10 minutes; I will sit down and then I will get up and make my speech again, if the noble Baroness likes. It is advisory.

There are energy costs that people are faced with, the impact of increasing regulatory burdens and the fact that people are just giving up. The lack of an impact statement, which seems to be becoming a habit for this Government, is a major criticism. They have already got into difficulty due to not doing this. They have had to revise the proposals they put forward for non-doms because they suddenly discovered that the impact of their policy would actually reduce revenue, so they had to change it. Had they done a proper impact statement, they would never have made that mistake—and there are other examples.

So these amendments are important, and I hope the Minister will take these arguments on board and think again.

--- Later in debate ---

[Baroness Lawlor (Con)]

My Lords, I come in just to endorse what my noble friend Lady Noakes said about small businesses and indeed to support these amendments generally. I will speak on my own set of amendments later on with respect to impact assessments.

I founded a small business. Yes, it was a not-for profit-business—Politeia, which is a think tank—but, in 1995, we went through the phase described so well by my noble friend Lord Forsyth of wondering how we would meet employer payroll at the end of every month. From a comfortable position now looking back, we are still not exactly in a rosy situation because, every time policy changes or there are external shocks such as Covid, we face more costs. It is difficult to see how any small business needing to make a profit can do so and expand.

In my case, as someone involved in running a small business, I would say that we have a done a lot of good. It is a not-for-profit charitably funded think tank, but we train graduates and even young people coming straight from school who are finding their place in the job market. We have always paid slightly over the minimum wage once they get on to the payroll, and they go on to do great things: they join the Civil Service; they join the public sector; or they get training contracts and continue working with us, because it helps them to pay the fees for the next phase. We will have to think about that model, because they are going to cost a great deal more. Some of the senior staff earn much more decent salaries than perhaps even the people who founded the organisation do, and we will have to rethink the senior and experienced team because of the enormous hit that we are taking. That is not to mention all the other costs in the Budget.

From the perspective of a very micro-business, this will have serious consequences. I speak as somebody still involved in running it and raising the money. Noble Lords will know that people’s spare money that goes to think tanks such as mine will cease and those people will have to cut their own jobs—that is where the funding comes from. I urge the Government to think again about the proposal from my noble friend Lady Noakes and all the other excellent proposals in this group of amendments.

[Baroness Neville-Rolfe (Con)]

My Lords, I thank all noble Lords who have contributed to this valuable debate, especially those such as my noble friend Lady Lawlor who have run small businesses. Having heard the concerns from noble Lords across the Committee and from across the sectors, I hope that the Minister will consider these amendments very seriously before we get to Report.

We know that this jobs tax will be bad for small businesses. The Government have not provided sufficient information in the light of all the calls from hard-pressed businesses, so more detailed information is necessary. SMEs are more vulnerable, as the noble Lord, Lord Sharkey, said. Even covenants are at risk, as we heard from my noble friend Lord Leigh. The noble Baroness, Lady Kramer, rightly talked about scale-ups being knocked back because of the problems that they are facing. I was particularly interested to hear from the noble Lord, Lord Londesborough, and to see his amendments. He had some very telling questions based on SMEs and on particular examples. I think that the Minister and the Treasury should properly examine some of his spreadsheets and, indeed, some of the other examples raised today, such as by my noble friend Lord Howard of Rising, who rightly talked about international competitiveness, and my noble friend Lord Blackwell, who made a telling comment about the lower-margin sectors, start-up and scale-up.

It was notable that, in her growth speech today, Rachel Reeves had little to say about small businesses and the difficulty that these NICs changes have placed on them. As my noble friend Lady Noakes said, we are imperilling their success—their survival, even, in some cases—and the scale-ups that we need for growth. I detected a good deal of support for her amendment, so I hope that the Minister will bear that in mind. As I have explained, the Chancellor’s speech strengthens the case for an exemption or a concession to help some or all of our smallest businesses to survive and to thrive. I very much hope that the Minister will be able to respond positively.

[The Financial Secretary to the Treasury (Lord Livermore) (Lab)]

My Lords, I am grateful to all noble Lords for their contributions during this debate. I turn first to the amendments tabled by the noble Baroness, Lady Neville-Rolfe, and the noble Lord, Lord Altrincham, which seek to exempt from the employer national insurance rate rise employers with an annual turnover of less than £1 million, and the amendments by the noble Lord, Lord Londesborough, the noble Baronesses, Lady Neville-Rolfe and Lady Kramer, seeking to limit or remove the reduction in the secondary threshold by business size. Clearly, these amendments would have cost implications for this Bill, necessitating either higher borrowing, lower spending or alternative revenue-raising measures.

I agree very much with the noble Baroness, Lady Neville-Rolfe, and the noble Lord, Lord Sharkey, that small businesses are the heart of our economy. The Government are aware of the pressures on small businesses, which is why we are taking action as part of this Bill to protect the smallest businesses by increasing employment allowance from £5,000 to £10,500. This means that, next year, 865,000 employers will pay no national insurance at all. More than half of employers will see no change or will gain overall from this package, and employers will be able to employ up to four full-time workers on the national living wage and pay no employer national insurance.

The Government have also taken steps to strengthen small businesses’ ability to invest and grow. This includes freezing the small business multiplier, permanently reducing business rates for retail, hospitality and leisure properties from 2026-27 and publishing the Corporate Tax Roadmap to provide stability and certainty within the tax system for businesses across the economy.

I should also note, as my noble friend Lord Eatwell said, that creating new thresholds or rates based on the size of a business would introduce distortion and additional complexity into the tax system, and could disincentivise small businesses from growing by creating a cliff edge in the tax system.

I turn now to the amendment tabled by the noble Baroness, Lady Neville-Rolfe, and the noble Lord, Lord Altrincham, seeking to limit the reduction in the secondary threshold to £7,500 rather than the proposed £5,000. A smaller reduction in the secondary threshold, as is proposed by this amendment, would not raise the level of revenue required to fix the foundations and invest in our public services. It would mean higher borrowing, lower spending or alternative revenue-raising measures.

I now turn to the amendment tabled by the noble Baronesses, Lady Noakes and Lady Neville-Rolfe, and the noble Lords, Lord Ahmad of Wimbledon and Lord Howard of Rising, which would prevent commencement until an impact assessment is published for small businesses of various sizes. The revenue raised from the measures in this Bill will enable the Government to repair the public finances while protecting working people and rebuilding our public services, including the NHS. Delaying commencement of this Bill would put this vital revenue at risk.

As I have already noted in the previous session of this Committee and, as the noble Baroness, Lady Noakes, mentioned, an assessment of the policy has already been published by HMRC in a tax information and impact note. As the noble Lord, Lord Londesborough, said, that assessment set out that employers’ national insurance changes

“will impact around 1.2 million employers. Around 250,000 employers will see their Secondary Class 1 NICs liability decrease and around 940,000 will see it increase. Around 820,000 employers will see no change. Overall, more than half of businesses with NICs liabilities next year will either gain or will see no change in their secondary Class 1 NICs liabilities”.

I listened carefully to the specific examples given by the noble Lord, Lord Londesborough. He asked for some specific figures, which I am afraid I am told are not available because the liability is on employers, not employees. As such, the data is not collected in the format that the noble Lord asked for.

Further, the OBR’s Economic and Fiscal Outlook sets out the expected macroeconomic impact of the changes to employer national insurance contributions on employment, growth and inflation. The Government and the OBR have, therefore, already set out the impacts of the policy change. This approach is in line with previous changes to national insurance and previous changes to taxation, and the Government do not intend to provide any further impact assessments.

After the previous session of the Committee, I looked back at comparable tax measures over the past 14 years to check that I was correct in saying that the assessment that we are providing is in line with what was provided on those previous occasions. I found four such measures of an equivalent size: the health and social care levy; the increase in the corporation tax main rate to 25%; the income tax threshold freezes of the previous Government; and the increase in the VAT main rate to 20%. I looked at all those and I am absolutely satisfied that what we are providing on this occasion is, in fact, more information than was provided on any of those occasions. In fact, on the occasion of the increase in VAT to 20%, no impact assessment was published at all.

Having studied those, I am very confident that what we are now providing is absolutely consistent with what previous Governments have provided, in terms of impact assessments, on all previous such equivalent occasions. I do not know whether noble Lords opposite, when they were in government, objected to the impact assessments that were put out on tax measures, but I am very confident that these are absolutely in line with what was put out in the past. As a result, the Government have no intention to provide any further impact assessments.

[Baroness Neville-Rolfe (Con)]

On impact assessments, I think I am well known for my requesting them—I even voted against my own Government on one occasion —because they are very important and helpful. I do not think that the Minister has yet answered, although he may go on to do so, the point that my noble friend Lady Noakes made about the effect of adding in the minimum wage to the impact note that was produced. That would probably increase the figures, as she suggested; and cost benefit and transparency are very helpful. We have another amendment on this, and we will return to the charge, but I am very disappointed that there is no willingness to look at the specific examples from the noble Lord, Lord Londesborough, on the technicalities, which seem to merit some attention from the Government. I think that the Government must share our concern that we minimise the effect on small businesses as far as we can, which is why I am trying to be constructive in today’s Committee.

[Lord Livermore (Lab)]

I will simply restate my point to the noble Baroness: the approach that we are taking is absolutely in line with the approach taken to previous changes in national insurance and previous changes to taxation, and the Government do not intend to provide further impact assessments.

--- Later in debate ---

[Lord Livermore (Lab)]

I disagree with the noble Lord. The previous Government’s health and social care levy is a very direct precedent.

[Baroness Neville-Rolfe (Con)]

I beg leave to withdraw the amendment.

Amendment 6 withdrawn.

--- Later in debate ---

The costs for farmers have gone up steadily in recent years, year on year, for fuel and fertilisers and so on. Feed goes up regularly, but the price of the end product tends to go down. Anyone who has watched Jeremy Clarkson’s programme on farming will have seen a graphic illustration of the difficulties that farmers face. Farming is, as much as anything, a way of life. To add this burden is unfair. I urge the Minister to carry out an impact assessment to assess properly whether agricultural employees should be exempted from this increase.

[Baroness Neville-Rolfe (Con)]

My Lords, I speak to Amendment 50 in my name, which would increase the employment allowance for farms from £10,500 to £20,000 and help to ease the very real cash-flow problems that many farmers now face. I would like to understand both the cost to the Exchequer and the plans that the Government have to ease pressures on the farming industry. This is vital to increasing self-sufficiency in food in these troubling international times.

I speak with some knowledge of the Wiltshire countryside, where I was brought up and retain a small and partial interest, set out in the register, in a couple of fields, let to a neighbour, on what was our family farm. My father’s business sadly went into insolvency in the 1960s. The farm was sold and the stock auctioned off—a very difficult day. I fear it is something that we may see more of again. As the noble Baroness, Lady Bakewell, said, farming is not a career choice for the faint-hearted.

I am grateful to my noble friend Lord Howard of Rising for tabling Amendment 36, which I fully support. It is intended to ensure that the Government publish a full impact assessment of the effect of this Bill on farms with regard to both the NICs costs and, separately, any offset for the increased employment allowance. Given the difficulties that farmers are facing on inheritance tax, fertiliser tax and the post-CAP changes to support, this is the least that the Government should do.

The noble Baroness, Lady Bakewell, in her compelling assessment of the squeeze on farmers, comes at the issue from a slightly different angle and suggests a review of the impact of the policy change, which is also worth considering. However, we would have to wait six months, by which time decisions on NICs, IHT and the fertiliser tax might be irreversible.

It has been made abundantly clear by now that this Government do not understand the importance of Britain’s farmers. The 2024 Labour Party manifesto claimed:

“Labour recognises that food security is national security”,


yet, since entering into Government, they have demonstrated the opposite. The Autumn Budget included a multitude of measures that will hammer farmers. The changes to agricultural property relief and business property relief could affect 33.5% of all farm holdings in the UK, according to the Treasury’s own figures. The vast majority in terms of numbers are small, family-run farms and, as we have discussed elsewhere, the Government need to think again about the right IHT thresholds.

The Government have also introduced carbon pricing on imported fertilisers through the UK carbon border adjustment mechanism, which will increase the cost of fertiliser that farms depend on to ensure adequate crop yields—up from approximately £25 a tonne to £75 a tonne. They have axed the rural services delivery grant introduced by the previous Government, meaning that rural councils will have less money to tackle the issues facing farms and rural communities. Given the already exorbitant costs facing farms, these measures could lead many to ruin. That goes back to my own experience in the 1960s and the excellent points made in the debate led by my noble friend Lord Leicester in December.

Above all, the proposals are putting a chill on rural communities, which are asking themselves why they elected so many Labour MPs and are writing to them, or getting on their tractors, to explore their discontent.

[Lord Livermore (Lab)]

My Lords, I am grateful to all noble Lords who have contributed to this debate. I will turn first to the amendments tabled by the noble Lord, Lord Howard of Rising, and the noble Baronesses, Lady Bakewell of Hardington Mandeville and Lady Kramer, which require impact assessments of this Bill on farms.

The Government, of course, recognise and greatly value the important role played by the farming sector. We carefully consider the impact of all policies, including the changes to employer national insurance. Indeed, as we have previously debated, an assessment of the policy has already been published by HMRC in the tax information and impact note, including impacts on the Exchequer, the economy, individuals, households, families, equalities, businesses including civil society organisations, and details of monitoring and evaluation. Further, the OBR’s Economic and Fiscal Outlook sets out the expected macroeconomic impact of the changes to employer national insurance contributions on employment, growth and inflation. The Government have, therefore, already set out the impacts of this policy change. This approach is in line with previous changes to national insurance and previous changes for taxation, and the Government do not intend to publish further impact assessments.

I now turn to the amendments tabled by the noble Baroness, Lady Bakewell of Hardington Mandeville and Lady Kramer, seeking to exempt the salaries of farmers from the increase in employer national insurance, and the amendments tabled by the noble Baroness, Lady Neville-Rolfe, and the noble Lord, Lord Altrincham, seeking to increase the employment allowance for persons employed on farms. This amendment would reduce the revenue raised from this Bill and require either higher borrowing, lower spending or alternative revenue-raising measures. I also note that creating new thresholds or rates based on the sector of a business would introduce distortion and additional complexity into the tax system.

Despite the difficult fiscal situation, the farming and countryside programme budget has been protected at £5 billion across the across the next two years. This includes the largest ever proportion of the Budget directed at sustainable food production and nature recovery in our country’s history. This will accelerate the transition to a more resilient and sustainable farming sector, support investment in farm businesses and boost Britain’s food security. The Secretary of State for Defra has also set out the Government’s long-term vision to make farming more profitable. This includes reforms such as using the Government’s purchasing power to buy British food, planning reforms to speed up the delivery of farm buildings and other infrastructure that support food production, and work to ensure supply chain fairness.

For the reasons that I have set out, I respectfully ask noble Lords to withdraw or not move their amendments.

--- Later in debate ---

Moved by

[Baroness Neville-Rolfe]

13: 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 jobs, wages, inflation and growth, whichever is later”
Member’s explanatory statement
This amendment would prevent commencement of this section until a full impact assessment is published, noting the impact note of this policy that was published on 13 November.

[Baroness Neville-Rolfe (Con)]

My Lords, I start by thanking the Minister for his clarification on the full availability of the employment allowance in respect of charities; he agreed to look into this on day 1 of Committee. The query also related to GPs and dentists, where they were mainly involved in public work; clearly, clarity on those would be helpful too.

In moving Amendment 13, I am particularly grateful for the support of my noble friends Lord Altrincham and Lady Lawlor. My amendment would require the Government to publish comprehensive impact assessments and reviews of the impact of the planned jobs tax. This is the Budget measure with much the most impact on business and the private sector. We know just how burdensome it is from the screams of business and charities. It is vital that the Government calculate and share the impact on jobs, wages, inflation and, above all, growth—the Government’s stated prime mission.

There are established procedures for impact assessments on Bills. Despite the Minister’s resistance, I believe that it is a dereliction of duty not to have provided fuller details of the Bill’s various impacts. When we debated the Bill at Second Reading, my noble friend Lady Sater, who has just left, asked the Government about plans to publish a full impact assessment. In response, the Minister said:

“The tax information and impact note was published on 13 November, alongside the legislation when it was introduced”.—[Official Report, 6/1/25; col. 602.]


I have to say, although it is now available to the Grand Committee, the Printed Paper Office had to do quite a lot of online research after Second Reading to find me a copy. Curiously, it did not seem to have been delivered to it in the normal Bill bundle.

I can understand why there was not a huge rush to make it available. I am afraid that it is a very limited document, to say the least. The note includes no detailed assessment of the impact of the national insurance charge on a number of very important areas—not even a split into three between the effect of the increase to 15%, the new threshold of £5,000 and the revenue cost of the rise in the employment allowance. There is no information on the bureaucratic costs in respect of new personnel for whom NICs will be payable. We must have more detail from the Government before this Bill is considered on Report.

I note that, in response to intense questioning from the Opposition, in a parliamentary reply the Government split the £23.7 billion cost of NICs in 2025-26 into £11.1 billion related to the rise to 15% and £17.2 billion from lowering the threshold to £5,000. This demonstrates that the biggest hit in the Budget relates to the lower paid and part-timers, groups they feign to care a lot about. That is exactly the concern of many of us, including the charities that were the focus of the last group. There is no figure given for the rise in the employment allowance, but I calculate from the available data that it will be £4.6 billion in the first year. Perhaps the Minister could confirm that, or correct me. Could he also put on record the three-way split for the five years addressed in the impact note—in a letter to the Committee, if need be?

My Amendments 13 and 26 call for an impact assessment of the Bill’s impact on jobs, wages and growth. My Amendments 62, 63 and 64 call for a separate review of the impact of this legislation on employment, as well as on jobs, wages and inflation, and another on economic growth. While the Government are leaving us in the dark on the detailed effects of their jobs tax, the Office for Budget Responsibility has said that the national insurance changes alone will reduce labour supply by 0.2% and add 0.2 percentage points to inflation by 2029-30. Does the Minister believe that this assessment is accurate, particularly in the light of subsequent developments and the extraordinarily negative response to the NICs changes across the country? If the Government do not accept the OBR’s figures, can the Minister tell the Committee what his own figures say about the specific impact on jobs and inflation?

At Second Reading, the Minister was also questioned about the impact on businesses. Rather than giving us a detailed answer, we heard the same line from the department that 940,000 employers will pay more in NICs contributions through the jobs tax. If the Committee is to make progress on the Bill, it would be helpful to know exactly which sectors the Treasury expects to be hit hardest and what proportion of employers in those sectors are expected to see their liabilities increase. That is what Amendment 61 requires.

The Government owe it to Parliament and employers and employees in different sectors to explain much more clearly what the effect of the jobs tax will be. Where will it bite, who will it bite, and which sectors will be worst affected? It is a long list—some have already been discussed today—but, looking forward, we are interested in GPs, dentists, social care providers, hospices, small businesses, early years care providers, universities, charities, farms, retail and hospitality. There may be others, but the NICs changes are a blunt instrument, and we need a review clause of the kind that we have seen in other Bills, because of their scale, importance and bluntness. I especially look forward to hearing from my noble friend Lady Lawlor on the employment aspects.

Finally, I draw the Committee’s attention to the Government’s own Guide to Making Legislation which states:

“The final impact assessment must be made available alongside bills published in draft for pre-legislative scrutiny or introduced to Parliament”.


I know that the Treasury has its own rules and does not like to be held to account on finance matters. However, given the enormous effect that the Bill will have on so many businesses, it seems inappropriate that the Government have not published a full assessment in this case, in the same way that they do with other Bills. The decision not to publish an impact assessment is hardly in line with the commitment made by the Leader of the House of Commons in a Written Answer of 17 January. This was a refreshing approach by the new Government, overtaking the practice of the previous Government. In that Answer, she wrote:

“The Government is committed to ensuring Parliament has the information it needs to hold the Government to account and to understand the impact of legislation”.


Transparency is the route to better government, and it is a pity that the full rules for impact assessment on Bills, with an independent Regulatory Policy Committee review, do not apply to the Treasury. I beg to move and look forward to other contributions.

[Baroness Lawlor (Con)]

My Lords, it is a great pleasure to follow my noble friend Lady Neville-Rolfe, and I support her amendment. My amendments in this group are Amendment 15 to Clause 1, on the increase in the rate of secondary class 1 contributions; Amendment 37 to Clause 2, on the lowering of the threshold for secondary class 1 contributions; and Amendment 57, on increasing employment allowances and removing the £100,000 cap. They are aimed at ensuring that an adequate impact assessment is made available to both Houses of Parliament for each of the proposed changes before the Act comes into force and after it has been in operation.

--- Later in debate ---

[Baroness Kramer (LD)]

My Lords, I shall be extremely brief. It must be galling for the Minister to sit here and be lectured by the Conservative Benches because he and I so often tried to obtain information and were consistently denied it. The noble Baroness, Lady Noakes, asked why there was not a greater outcry. Everybody just got so used to being denied information.

I am sure that the Minister will also be able to cite many economic crises when information was not provided—I have to say, the silence on the Conservative Benches in not calling out for that information was very loud, if I can put it that way. I am sure that, if the Conservatives were back in government again, we would get the same absence of transparency and limitations on information. There are perhaps two honourable exceptions—the noble Baronesses, Lady Noakes and Lady Neville-Rolfe—who stood out against their party when every other voice was one that co-operated in that silence.

That silence was part of the reason why there was so much mistrust of the Conservative Government in the end; it was part of their undermining. As the Minister and his Government start to look at reform, which they are looking at more generally—particularly in dealing with the Civil Service—looking for opportunities for transparency would be a really positive move. With information, we stand on more secure ground. Will he consider that? I have asked him that before.

It is realistic to understand that we are unlikely to get impact assessments ahead of the actions that the Government contemplate doing in the next few weeks, or just in the next couple of months, but post reviews are at least a place to begin. They shed light, and they help both the Government and Parliament to understand where things have been effective and where they have not. If the Minister feels that he cannot accept these kinds of requests for immediate impact assessments, will he consider seriously the various requests made in other groupings for post-facto analysis and review?

[Baroness Neville-Rolfe (Con)]

My Lords, I shall just say this briefly: we need more transparency on such a major policy change, but we are not getting it. There is a large negative impact on business and charities, which is—I agree with my noble friend Lady Noakes, a fellow-in-crime in asking for impact assessments—unprecedented. As my noble friend Lord Blackwell said, we are seeing a shift in jobs from the private sector to the public sector, which we fear is bad for jobs, productivity and growth. That is why we need to find a way of getting better assessment and having a process for review.

[Lord Livermore (Lab)]

I am grateful to all noble Lords who have contributed to this debate. The noble Baroness, Lady Neville-Rolfe, and the noble Lords, Lord Altrincham and Lord Londesborough, have tabled amendments that seek to delay the commencement of this Act until a further impact assessment is conducted on the economy. The noble Baroness, Lady Lawlor, has tabled an amendment that would delay commencement until a report is laid detailing the impacts on businesses of different sizes and on employment and wages.

As I have said previously, the revenue raised from the measures in this Bill will enable the Government to repair the public finances while protecting working people and rebuilding our public services, including the NHS. Delaying commencement of this Bill would put this vital revenue at risk and would require either more borrowing, lower spending or alternative revenue-raising measures. That is not the Government’s intention.

The Government do not believe that there is a need, as set out in these amendments, for further impact assessments on different sectors and economic indicators. As we have debated in previous groups today, as is the case with all tax policies, the Government have already published an assessment of the policy in the tax information and impact note. This includes impacts on the Exchequer; the economy; individuals; households and families; equalities; and businesses, including civil society organisations—as well as details on monitoring and evaluation. The tax information and impact note clearly sets out that around 250,000 employers will see their secondary class 1 national insurance contributions liability decrease, while around 940,000 will see it increase and around 820,000 employers will see no change.

The noble Baronesses, Lady Neville-Rolfe and Lady Lawlor, asked for specific additional detail. The noble Baroness, Lady Neville-Rolfe, asked in particular for a breakdown of the three lines of each of the three measures. My honourable friend the Exchequer Secretary to the Treasury has provided that information via various Written Answers. On 29 November, he published an estimate of the cost of the increase to the employment allowance at £3.6 billion. On 23 January, he published via a parliamentary Question the estimated revenue from increasing the rate at £12.4 billion and from reducing the secondary threshold at £18.6 billion. Beyond that, the Government have set out the impact analysis of this Bill that they intend to set out, in line with previous changes to taxation, and they do not intend to publish additional data or assessments.

[Baroness Neville-Rolfe (Con)]

It would be helpful if he could write to clarify these figures. There have been figures made available, but they have not been made available to the Committee. They were made available in the other place in answer to some questions. The least he could do is write to the Committee with what figures there are, explaining how the splits work and giving that helpful figure on the employment allowance.

[Lord Livermore (Lab)]

The noble Baroness says that it is the least that I can do; I have actually just read out the figures to the Committee. I think that is providing the information that she asked for. If she did not hear it, I am more than happy to set it out in a letter to her so that she can read it. As I say, they have been published in Written Answers and I have just read them out to the Committee, so I am not sure that her phrase “the least I can do” is appropriate in this instance.

As the noble Baroness, Lady Neville-Rolfe, also said, the OBR’s economic and fiscal outlook already sets out the expected macroeconomic impact of the changes to employer national insurance contributions on employment, growth and inflation. The Government and the OBR have therefore already set out the impacts of this policy change. The information provided is in line with other tax changes, and the Government do not intend to publish further impact assessments. Given the points that I have made, I respectfully ask noble Lords to withdraw or not to press their amendments.

[Baroness Neville-Rolfe (Con)]

I beg leave to withdraw my amendment.

Amendment 13 withdrawn.

--- Later in debate ---

[Baroness Neville-Rolfe (Con)]

My Lords, I also support Amendments 14 and 27, tabled so movingly by my noble friend Lady Monckton of Dallington Forest, and Amendment 67, spoken to by the right reverend Prelate the Bishop of Southwark, with additional and disturbing evidence on this vital issue. I am sorry that my noble friend, Lady Barran, who leads for the Opposition on education, is not able to be here. She is detained elsewhere. But I know she is concerned, as one would expect, about the thousands of SEND children who might be left without transport. The amendments concern transport providers for children with special educational needs and disabilities. The providers play a pivotal role in ensuring that children with special educational needs and disabilities can access education and other vital services.

A way must be found in the Bill or elsewhere to deal with the devastating impact on those transporting such children. Most of those drivers, as we have heard, work only 3.5 hours a day, according to the SEND group of the Licensed Private Hire Car Association. They will be caught by the lower NICs threshold, which we have been discussing in other amendments.

The potential impact is not a hypothetical concern; it is another good example of the perverse effects that we are seeing. Mencap, a charity that supports such individuals and families with these disabilities, has shown that the rise in national insurance contributions could force it to close at least 60 of its essential services. Those include running residential services for people with learning disabilities, offering advice on issues such as education and employment, as well as offering support for carers, a very important matter. This charity is facing an additional £5.3 million in annual costs due to the effects of the Budget.

I ask the Minister to look into the various points that have been made today, to undertake a proper assessment of the impact and cost to the sector, and to come forward with amendments or other concessions to ensure that transport providers are not put in a position where they can no longer meet the needs of these vulnerable children—that would be wrong.

National Insurance Contributions (Secondary Class 1 Contributions) Bill

Baroness Neville-Rolfe Excerpts

Committee stage
Tuesday 4th February 2025 Grand Committee

[Baroness Neville-Rolfe (Con)]

My Lords, I rise to support Amendments 18, 21 and 25 in the name of my noble friend Lady Noakes. I am particularly pleased to see my noble friend Lord Wolfson of Aspley Guise, who brings his unique knowledge of the difficulties that businesses are facing, especially in the retail sector. He runs one of Britain’s most admired companies—and has done so for 22 years, he tells us. I agree with everything that my noble friend Lord Leigh, and others, said about him and his business.

As always, my noble friend Lady Noakes stated the arguments very clearly and persuasively. My noble friend Lord Wolfson used a new phrase, for this Committee: he talked about a poll tax, rather than the “jobs tax” term that we have used before—that is always a warning. He said that the changes in national insurance could affect as many as 20 million jobs, which explains to some extent the huge reaction there has been to this measure right across business and, indeed, from many in work.

As he said, for relatively little cost, we could reduce the social and economic impacts of the changes. His spirit was very constructive. He acknowledged the productivity improvement that is needed, some of which is already in the pipeline, as he said, but also the difficulty of what I would call the shock tactic of the double whammy of the April changes. My noble friends Lord Swire and Lord Leigh gave us first-hand evidence of the loss of jobs which is taking place already, and which we have talked about before. My noble friend Lady Fraser evidenced the impact of that double whammy and brought out the point about the loss of skills: if people lose their jobs, we lose the skills in the industry. We had further estimates from my noble friend Lord Leigh, to add to those we had last week from the noble Lord, Lord Londesborough, which merit attention.

The amendment seeks to allow for a more gradual transition in the reduction of the secondary threshold. That would allow businesses time to adjust to the increase of a substantial new tax burden. It aims to be a small but important step in alleviating some of the burden on employers. The Government have to accept that they have placed considerable strain on business with their fiscal policies, and a phased introduction would provide a more manageable path forward.

Businesses are the backbone of the economy: they provide jobs, drive innovation and contribute to the prosperity of our communities right across the country. However, given the current pressures they are under, it is critical that we do not introduce changes that exacerbate their struggles. The sudden and sharp reduction in the secondary threshold will represent a huge burden, particularly for smaller employers, as we discussed last time, and for those grappling with rising costs and reduced cash flow. A gradual approach would ensure that the reduction was not a sudden shock to businesses and allow them to adjust their payroll and budgeting systems. It would be more predictable and manageable, and employers could plan and absorb the changes over time.

The IFS has found that the lowest salaries will be affected the most, with the lowest earners facing a larger than 4.5% increase in contribution, compared with less than 1.5% for the highest earners. It is partly because of the perverse effects and the adjustment issues that we are looking at today that the IFS has suggested that the Budget measure will—quite quickly—raise only £16 billion a year. My noble friend Lord Leigh has also modelled the impact of a 3% jobs cut, which he estimates would wipe out the revenue from the proposed changes.

We need to think again. My noble friends Lady Noakes and Lord Wolfson talked about the 10% to 13% increases coming in April, if you take NICs and the national minimum wage together; some delay or a reduction in the threshold would avoid the disaster, particularly on the high street, that I am so worried about.

I was talking to an excellent member of staff in the closing shop in Salisbury which I mentioned last week. She still does not have a job to go to. That has not been my experience of retail closures in the past; usually, the best employees are quickly snapped up by the competition. We have a bit of a problem here, and I would like to work with the Government to see whether anything can be done to alleviate the difficulties.

--- Later in debate ---

Moved by

[Baroness Neville-Rolfe]

28: 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 early years provision.”
Member's explanatory statement
This amendment would prevent commencement of this section until a full impact assessment is published for early years provision.

[Baroness Neville-Rolfe (Con)]

My Lords, in moving this amendment, I will speak also to my Amendment 40; both concern early years provision. I am afraid that this measure is another example of not protecting working people. The Budget will have a disastrous impact on the early years sector, and we need to consider this fully.

My Amendment 28 asks the Government to produce an appropriate impact assessment on the effect of this jobs tax on the early years sector. There have been calls from across the sector for the Government to acknowledge the impact this measure will have. The Early Years Alliance has estimated that this harsh tax will cost each nursery an additional £18,600 per year. Yet, despite these calls, the Government have not acknowledged the especially harsh impact this tax will have on the early years sector.

The chief executive of the National Day Nurseries Association has told us that, on average, 75% of a nursery’s expenditure is spent on staffing costs, and that, as a result of this tax raid, nurseries will have to find an additional 11% on top of the usual amount they spend on staff. Her view was that, following this Budget, the only realistic options facing nurseries are to pass the extra burden on to parents and/or to reduce the number of places they offer, in order to prevent them going out of business. Although I welcome the additional funding for early years introduced in the Budget, this sector is already under financial pressure, and this additional burden on a sector that provides such an integral service seems incredibly short-sighted.

In December, the Government published their funding rates for 2025-26, but they failed to include an uplift for this damaging tax, which they themselves are introducing. My Amendment 40 seeks to reduce the impact on early years by increasing the employment allowance in this labour-intensive sector. This is often made up of part-time workers whose employers are hit worst by the reduction in the threshold for NICs, as we just heard from my noble friend Lord Wolfson. I would like to understand the cost to the Exchequer. The Minister helpfully gave us a figure for the overall cost of the increase in the employment allowance last time. Can he give an estimate of how much will go to early years providers, so that we can understand the impact of doubling it?

--- Later in debate ---

[Lord Livermore (Lab)]

My Lords, I will address the amendment tabled by the noble Baroness, Lady Neville-Rolfe, which seeks to prevent commencement of this Bill until an impact assessment is published for the early years sector.

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, including the changes to employer national insurance. As I have stated previously in Committee, an assessment of the policy has been published by HMRC in its tax information and impact note, including impacts on the Exchequer, the economy, individuals, households and families, equalities and businesses, including civil society organisations, with details on monitoring and evaluation.

Further, the OBR’s economic and fiscal outlook sets out the expected macroeconomic impact of the changes to employer national insurance contributions on employment, growth and inflation. The Government and the OBR have therefore already set out the impacts of the policy change. This approach is in line with previous changes to national insurance and taxation, and the Government do not intend to provide further impact assessments.

Amendment 40, tabled by the noble Baroness, Lady Neville-Rolfe, and the noble Lord, Lord Altrincham, seeks to increase the employment allowance for early years providers. This would introduce new pressures which would have to be met by either more borrowing, lower spending or alternative revenue-raising measures. I also note that creating new thresholds or rates based on what sector a business is in would introduce distortion and additional complexity into the tax system.

The noble Baroness, Lady Neville-Rolfe, asked for some specific figures. The figures are not broken down in the way that she asks for.

Early years providers have a crucial role to play in driving economic growth and breaking down barriers to opportunity. We are committed to making childcare more affordable and accessible. That is why, in our manifesto, the Government committed to delivering the expansion of government-funded childcare for working parents and to opening 3,000 new or expanded nurseries through upgrading space in primary schools to support the expansion of the sector.

Despite the very challenging fiscal circumstances the Government inherited, at the Budget the Chancellor announced significant increases to the funding that early years providers are paid to deliver government-funded childcare places. This means that total funding will rise to more than £8 billion in 2025-26.

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

[Baroness Neville-Rolfe (Con)]

I thank the Minister for his response. I hope that in the light of what has been said today and on previous days, the Government will look at the impact of these NICs changes on our early years sector.

When we were in government, we took steps to support the early years sector, and we know that the national insurance increase is going to be a significant setback. My noble friend Lady Lawlor talked about the numbers of providers spread across the country, which play a huge part in the induction to the world of education and in helping young people to get the right kind of start in life. The very least the Government can do is to look at the impact note again and produce an assessment of the impact of the policy on the early years sector in particular, not just the overall economic impact. We have heard from the Minister on several occasions that they have produced a note, but it is a macroeconomic—an overall—note, while what we have here are very big changes in the economy affecting individual sectors, some of them very badly. There does not seem to be any readiness to look at the impact in those sectors and to find solutions, whether through national insurance changes or some other way. I suggested the employment allowance as another route.

The noble Lord will also recall that when in government we took steps to increase the supply of early years provision by expanding the childminding sector and encouraging the establishment of new nurseries alongside our expansion of the 30-hours free childcare policy. Without an assessment of the impact of these changes, how can the Government be sure that they will be able to deliver on the ambitious plans that the Minister set out to expand free childcare hours for hard-working families? I think there is a measure of agreement on objectives, but we need to find a way to get there.

These are important questions, and Ministers need to answer them before we get to Report. It is intolerable that we are pressing ahead with a jobs tax without a full assessment of the policy. We have had some macro figures, now broken down into three chunks, but it is very difficult for us to know what the individual effect is on different sectors. This is a serious matter. Working families across the country are very concerned. My worry is that the noise of concerns on something such as early years will increase as April comes and early years providers discover just what sort of hole they are in, but in the interests of time, I beg leave to withdraw my amendment.

Amendment 28 withdrawn.

--- Later in debate ---

[Lord Scriven (LD)]

My Lords, listening to noble Lords present the case for Amendment 29, I agreed with every single word that was said. However, the noble Baroness, Lady Monckton, said that an exemption was required. Amendment 29 does not ask for that exemption; it asks for an assessment to be done, and therefore it does not mean that an exemption would come, which is why, on day one in Committee, we on these Benches tabled an amendment to say that an exemption for hospices should apply. If we bring that back on Report, I hope that the noble Baroness will support us as we hold our ground.

I want to talk briefly to the other amendment in this group: Amendment 41, tabled by the noble Baroness, Lady Neville-Rolfe, regarding the increase in the employer allowance to £20,000 for hospices. Just as a matter of fact, the average number of staff per hospice is 81 full-time equivalent employees, and the average salary is £23,626. Therefore, the average total salary bill for a hospice is £1.863 million, so a £20,000 employment allowance will be absolutely useless because hospitals will still be clobbered by the national insurance contribution increase. That is why we put them down for an exemption, and we hold our ground on that.

[Baroness Neville-Rolfe (Con)]

My Lords, I will speak to my Amendment 41. I support Amendment 29 in the name of my noble friend Lady Monckton of Dallington Forest, who gave an extremely moving speech. She has made such a huge contribution to the charitable sector, as a supporter and a fundraiser. We must listen to her and the evidence that she has gathered in her work in the run-up to this discussion, which shows how important it is to find a way to match the compensation that NHS bodies are getting under the arrangements made for increasing national insurance and reducing the threshold.

That is the purpose of our series of amendments, some of which are probing, some of which we will pursue, because this is an important sector. Hospices are an essential part of our healthcare system, and the Bill will leave many unable to provide the services that they are currently offering. I was glad to have the support of my noble friend Lady Sater for both amendments, and that my noble friend Lord Swire was able to mention the fundraising for hospices which many have taken part in across this House. Indeed, hospices were one of my favourite charities of the year at Tesco, and one of the most moving with staff. We were talking about up to 300,000 people who were engaged in raising money for hospices. That taught us a lot about the difficulties and the wondrous jobs that they do.

My Amendment 41 seeks to increase the employment allowance for hospices, which would ease some of the financial pressures that they are facing at the hands of this Government. The noble Lord, Lord Scriven, intervened, and it was helpful, to say that an exemption would cost—£1.83 million or was it billion?

[Lord Scriven (LD)]

I was pointing out that the average salary bill of a hospice is £1.8 million.

[Baroness Neville-Rolfe (Con)]

That is the average salary bill, so the noble Lord is right that an increase in the employment allowance would not absorb all the extra costs.

[Baroness Kramer (LD)]

I think the term “rounding error” might apply.

[Baroness Neville-Rolfe (Con)]

Obviously, for smaller bodies, the employment allowance is, as the Minister has said on several occasions, helpful because it alleviates the cost of the changes. Therefore, looking at the employment allowance is another way of coming at the issue, which is one of the reasons why we have put it forward for discussion.

Despite the fact that many hospices provide functions that would otherwise need to be provided by the NHS or social care, the Government have failed to recognise their importance and are instead taxing the hospices that the country relies on. Although hospices do not charge for their services, they receive only one-third of their funding from the Government and rely on charitable donations for the remainder of their income. This will place unnecessary and costly additional pressures on their finances at a time when demand for hospice care is growing. The Government seem to be unaware of the great help hospices provide and the fact that they reduce pressure on the NHS by providing services in a more efficient and effective way. There is a saving there to offset any cost.

While I am aware that the Minister claims that the already published impact note is enough, I have not heard another noble Lord agree with that. Although I am sure he will respond in a similar manner, the current note is simply not sufficient and does not include any impact assessment on the very businesses it is being imposed on. That is very concerning for hospices which do so much work to support the NHS and could well be bankrupted by this Government’s decision to introduce the jobs charge. The charity for children’s hospices, Together for Short Lives, has estimated that this tax rate will cost an additional £133,966 for every children’s hospice. That is an extraordinarily high number for a sector that is not profit-orientated, and I am concerned about that impact. Although I welcome the £100 million in funding that the Government have announced for hospice improvements, that money will not help with the staffing costs that these hospices will now face.

As my noble friend Lady Monckton said, hospices are life affirming and give wide support beyond the patients in the hospices to the families in their grief. They are a vital part of the palliative care system, as I hope the Minister will agree. I think that the Government will be blamed if hospices go into a downward spiral as a result of these extra costs in April. They should look again at some way of helping them, whether it is an exemption, a delay, a change to the employment allowance or some form of compensation. It is an important matter that we should address in this Committee.

--- Later in debate ---

I very much hope that the Committee will take seriously the measures that we put forward last week that would not just keep the current status quo but halve employer NICs for part-time workers. I think it is time for that kind of focus and commitment to be given both to that workforce and to the companies that focus on employing that workforce.

[Baroness Neville-Rolfe (Con)]

My Lords, I shall speak to Amendment 51 and I support Amendment 30 in the name of my noble friend Lady Monckton, presented by my noble friend Lord Altrincham, who started by drawing attention to the very substantial number of people we are talking about in retail—hundreds of thousands of people—and the problems they are facing. As my noble friend Lady Lawlor said, jobs are being cut at the fastest rate since the financial crisis. This is a grim situation.

My Amendment 51 probes whether the Government would be willing to increase the employment allowance from £10,500 to £20,000 to offer support to the smallest businesses in the retail sector at a modest cost to the Exchequer. As my noble friend Lord Altrincham noted, our retail sector is invaluable in terms of the value it creates for our economy. In 2023, retail accounted for 4.7% of the UK’s total economic output, worth more than £110 billion. Much of this value added was in small shops, from barbers and hairdressers to farm shops. For every £1 spent in 2024, 30p was spent in food shops and 11p in clothing shops. Retail accounts for at least 50% of spending in Britain, but despite that, this Government—unlike the previous Labour Government, I have to say—appear not to understand the value that this sector provides to our economy and the jobs that it provides, particularly, as the noble Baroness, Lady Kramer, said, for part-time workers on low pay.

There have been warnings from a range of sources about the devastating impact of this tax raid on workers, who will face fewer pay rises or fewer working hours, and on businesses, which will be forced to raise prices in order to maintain their business. The British Chambers of Commerce warned that more than half of firms intended to raise prices in response to these tax hikes, and we have had a detailed analysis from the noble Lord, Lord Wolfson, a non-food retailer. He acknowledged that price rises or job losses in the food sector and food stores might be worse because of the lower margins in that part of the industry. I am glad that the noble Baroness, Lady Kramer, referenced the noble Lord, Lord Londesborough. It is good to see him back. He also tabled an amendment in a previous sitting which I very much supported.

There is further evidence that the Government have to think again, and there is an array of ways of doing so. I hope that, before Report, the Government will sit down, think about the devastating effects of these changes and consider whether there are ways, small or large, of alleviating their impact on many sectors of the economy and of social enterprise, which we will come on to discuss again.

[Lord Livermore (Lab)]

My Lords, Amendment 30, tabled by the noble Baroness, Lady Monckton of Dallington Forest, and moved by the noble Lord, Lord Altrincham, seeks to prevent commencement of the Bill until an impact assessment is published for the retail sector. 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, including the changes to employer national insurance.

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

Amendment 51, tabled by the noble Baroness, Lady Neville-Rolfe, and the noble Lord, Lord Altrincham, seeks to increase the employment allowance for those employed in the retail sectors. The Government are taking action as part of the Bill to protect the smallest businesses by increasing the employment allowance from £5,000 to £10,500. This means that next year, 865,000 employers will pay no national insurance at all, and more than half of employers will see no change or will gain overall from this package. This means that employers will be able to employ up to four full-time workers on the national living wage and pay no employer national insurance.

The Budget also set out further steps that the Government are taking to strengthen small businesses’ ability to invest and grow, including in the retail sector. This includes freezing the small business multiplier, permanently reducing business tax rates for retail, hospitality and leisure properties from 2026-27, and publishing the Corporate Tax Roadmap to provide stability and certainty within the tax system for businesses across the economy.

Increasing the employment allowance for specific sectors would add additional complexity to the tax system and, by adding further spending pressures, would require higher borrowing, lower spending or alternative revenue-raising measures. In light of the points I have made, I respectfully ask the noble Lord to withdraw his amendment and other noble Lords not to press their amendments.

--- Later in debate ---

[Lord Londesborough (CB)]

My Lords, I rise to briefly support Amendments 31 and 49 in relation to the hospitality sector. As we have already learned in the two previous days of Committee, there is great resistance to having the full impact assessments we are calling for, specifically in relation to these national insurance contribution increases. Perhaps that is not surprising when you look at the impact on the hospitality sector.

I will simply share one anecdote on the experience of one independent publican, who is employing 20 part-time workers. They typically work 20 hours of shifts at £15 per hour, therefore earning £300 per week on average. This publican’s bill for national insurance contributions will increase by 73%. As we know, the real problem here is dropping the threshold so severely as to create not just a punishing but an excessively regressive tax, hitting hospitality and SMEs at the margin during their delicate stages of growth or survival.

In this case, how is the publican going to respond? These are his choices: reduce the headcount; reduce the number of hours worked by the part-time workers; reduce the number of hours that his pub can remain open; and, where possible, increase prices. All of those are very damaging to the Government’s No.1 economic mission of growth, and potentially damaging for inflation, but particularly damaging to jobs and part-time workers who rely on those jobs. Typically, we are talking about the young and the old. I again support others in saying that this is a reckless act. To push these measures through without conducting a proper assessment strikes me as economically ruinous.

[Baroness Neville-Rolfe (Con)]

My Lords, I shall speak to my Amendment 49, and I support Amendment 31 in the name of my noble friend Lady Monckton of Dallington Forest. The fact is that, as we have also heard from the noble Lord, Lord Londesborough, we need an impact assessment here as well so that we can assess where to make changes and what impact this jobs tax is having.

My Amendment 49, along with others that I have tabled, would increase the employment allowance from £10,500 to £20,000. This sector, which is so important to our day-to-day life and to our tourist industry, is full of part-time workers and the lowest paid will suffer a tsunami from the NICs changes. We need to find a way of alleviating the pain, and my amendment is one such proposal.

It is a particular pleasure to welcome the noble Baroness, Lady Fleet, to the Committee and to hear her evidence of the impact on the arts. She is right that the creative industries and hospitality are integrally linked, but I was equally concerned to hear about the impact on museums, theatres and other aspects of the creative arts. She is also right that, on this evidence, the Government are no friend of the arts; that should be of concern to the Committee.

My noble friend Lady Monckton was right to talk of the spiral of price increases, the diversionary pressure on management, the impact on capital investment and the effect on jobs, especially the lowest level jobs. They are particularly hit by the double whammy, as I have said already today, of the changes in NICs and the national minimum wage, which will particularly bite younger people. For good reasons, the national minimum wage for younger people has been increased, but that is making a particular difficulty in terms of hiring them, which I fear we shall see in the results in the coming months.

I have further evidence about hospitality, which I think some local papers may be interested in, so I will run through it because it is important. There have been calls from across the sector about how damaging the tax will be. Restaurateur Tom Kerridge, despite backing Labour at the election, has expressed concern that this tax raid will have “a catastrophic effect”. He said that it would cost,

“£850 extra per member of staff per year”

and have a reaction into a negative process in terms of employment. He also said:

“This is a very difficult time for hospitality, because the next few weeks are particularly busy. They give a false sense of feeling that everything is okay … it’s going to have a catastrophic effect, moving into the new year”.


He said that just before Christmas, and things have got worse.

On top of that, UKHospitality said that the national insurance increase at the Budget will lead to business closures and job losses within a year. It said that

“the changes to the NICs threshold are not just unsustainable for our businesses, they are regressive in their impact on lower earners and will impact flexible working practices which many older workers and parents rely on. Unquestionably, they will lead to business closures and to job losses within a year”.

I was particularly pleased to hear from the noble Lord, Lord Londesborough, about his new evidence on pubs. The British Institute of Innkeeping, which has warned that the Budget will see 75% of pubs cut hours, thinks that 40% will reduce opening times and that one in three will make staff redundant. It said:

“The Budget, billed to support working people, will pull the rug out from under these already fragile small businesses and significantly reduce the employment opportunities they can provide. 75% will cut staff hours, 40% will reduce opening hours and 1-in-3 will make staff redundant”.


This will have an extraordinarily damaging impact on the sector and the economy.

More than 200 leading restaurant, pub and hotel companies including Stonegate, Greene King, Wetherspoons and Young’s wrote to the Chancellor warning that the Budget will cost the industry £3.4 billion a year. They said:

“As leaders of hospitality businesses, we are compelled to highlight our grave fears about the impact of the Budget, particularly relating to the Employer NICs threshold. Alongside the changes to the national minimum wage levels this will cost hospitality—at a conservative estimate—£3.4 billion a year”.


I would be grateful if the Minister would provide an actual number.

Finally, Simon Emeny, chief executive of Fuller’s, which owns about 400 pubs and hotels and employs almost 5,000 people, said he was “just utterly disappointed” by the Chancellor’s choices. He claimed they “disproportionately” impacted hospitality, which is a big employer of young people and part-time workers.

These are real impacts and the Government’s changes are disproportionately affecting mainly small and vibrant businesses such as these. The biggest hit is from the decrease in the threshold, which could be phased in. Alternatively, the Government could help smaller businesses by increasing the employment allowance, as I have also suggested. I simply urge the Government to act.

[Lord Livermore (Lab)]

My Lords, I will address the amendment tabled by the noble Baroness, Lady Monckton of Dallington Forest, which seeks to prevent commencement of this Bill until an impact assessment is published for the hospitality sector. Delaying commencement of this Bill would reduce the revenue generated from it and require either higher borrowing, lower public spending or alternative revenue-raising measures. The Government, of course, carefully consider the impacts of all policies, including the changes to employer national insurance.

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

I turn to the amendment tabled by the noble Lady, Baroness Neville-Rolfe, and the noble Lord, Lord Altrincham, which seeks to increase the employment allowance for those employed in the hospitality sectors. The Government are taking action as part of this Bill to protect the smallest businesses by increasing the employment allowance from £5,000 to £10,500. This means that next year, 865,000 employers will pay no employer national insurance at all; more than half of employers see no change, or gain overall, from this package. The specific data the noble Baroness requested is not broken down in the way she asks for.

Increasing the employment allowance for specific sectors would add additional complexity to the tax system, and adding further spending pressures would require higher borrowing, lower spending or alternative revenue-raising measures. In light of these points, I respectfully ask the noble Baroness to withdraw her amendment.

[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.

Amendment 31 withdrawn.

--- Later in debate ---

On all three issues, as we pointed out from these Benches on day one, it is not assessments or messing around with the employment allowance that will solve the problem but an exemption for these providers, which provide extremely important NHS care in our communities.

[Baroness Neville-Rolfe (Con)]

My Lords, I will speak to my Amendments 44, 45 and 46 and to Amendment 34 in the name of my noble friend Lord Jackson of Peterborough. I agree with everything that he said.

Primary care facilities have been hung out to dry. The Government have already acknowledged that the NHS should be exempted from the jobs tax. It is unfortunate that they have made the bizarre decision not to include other healthcare providers, such as GPs, pharmacies and dentists, which serve the same purpose as NHS providers.

We need to get to the bottom of two issues: first, why GPs, pharmacies and dental practices have not been included, as the NHS has, in the exemptions from the increase in employer national insurance contributions; and, secondly, why GPs, pharmacies and dentists will not benefit from any increase in the employment allowance.

The Chief Secretary to the Treasury told BBC “Question Time” in November:

“GP surgeries are privately-owned partnerships, they’re not part of the public sector”,


and

“they will therefore have to pay”.

However, GPs are recognised as public authorities in existing law, such as the Freedom of Information Act 2000. They may be privately owned partnerships, but that does not reflect how they operate. Not only that but because they are legally classed as public authorities, they will not be eligible for the increased employment allowance, so they will have to pay the full national insurance increase.

Section 2(1) of the National Insurance Contributions Act 2014 states:

“A person cannot qualify for an employment allowance for a tax year if, at any time in the tax year, the person is a public authority which is not a charity”.


Section 2(2) defines a public authority as

“any person whose activities involve, wholly or mainly, the performance of functions (whether or not in the United Kingdom) which are of a public nature”.

GP surgeries, whether they are privately owned partnerships or not, exclusively provide NHS services: their activities wholly involve the performance of public functions. The Minister confirmed last week that the employment allowance does not apply to charities, which my research confirms. Does he agree that the allowance should apply to these other vital services—pharmacies, dentists and GPs? That would be a simple change. Previous Conservative Governments recognised this. We fully funded and offset any increases in employment costs for GPs; this is acknowledged by the British Medical Association.

Given that the Institute of General Practice Management, which represents GP practice managers, estimates that the jobs tax will cost the average GP practice around £20,000 a year, it is all the more vital that we offset these costs by allowing GPs to receive the employment allowance, preferably at an increased rate of £20,000, as my amendment suggested. It may not be much but it might help with non-GP staff in surgeries, in pharmacies and in dentists. I am looking all the time at changes and concessions that might not cost the Government too much, but I do not get the feeling that the Government understand the difficulties that some of these sectors are in.

It is not just GPs that will suffer. Community Pharmacy England estimates the cost, as I think we already heard, at £50 million in total. That is part of the treble whammy that we heard about from my noble friend Lord Jackson. I am especially concerned about this because of the impact of these changes across the private-sector end of healthcare, because its work makes life easier for NHS services, reducing pressure on A&E and on other public health services.

I spoke to a local pharmacist yesterday. He is a worried man. He believes that when the new NICs charges come through, he will have too little left at the end of the period to invest in his shop and his vaccine services. So, he will be lacking the crucial application of capital to keep the business up to date and serviceable. He will also look to reduce hours. At present, he is open early and late, providing a superb service to the local community—indefatigable, as he was through Covid. I have to say that the pharmacy in my local Wiltshire village is already closing on Saturday, and it is a half-hour drive to another or to the local A&E. Multiply these types of decision by the hundreds of thousands of pharmacies, dentists and GP surgeries across the country, and you can see that the Government’s failure to compensate for the NICs increases is an act of self-harm. Can the Minister therefore confirm that, as a minimum, the Government will include GPs, pharmacies and dentists, who provide NHS services for the public benefit, in the employment allowance?

[Lord Scriven (LD)]

Just for absolute clarity, community pharmacists can claim the employment allowance. Of the other two services the noble Baroness mentioned, GPs cannot but dentists can if their NHS work is below 50%. It is important that we get that absolutely correct for the record.

[Baroness Neville-Rolfe (Con)]

I was actually asking the question about this, as we did on charities. The Minister confirmed the position very helpfully last time, and I am asking him to clarify the position and look positively at trying to extend this. I am delighted that some community pharmacies get the employment allowance and would like to see it increased to alleviate difficulties in the sorts of small chemists I was talking about. If we can find another way, I would be delighted as well, but this 50% rule seems a bit odd, and I wonder whether the Minister could clarify or have a look at it. Frankly, it was very good to hear from the noble Lord, Lord Scriven, in view of his role in community pharmacies, and, more worryingly, to learn from him just how many pharmacies are closing. When I was in retail and we had pharmacies, there was actually a battle to buy extra licences so that more pharmacies could be opened. If it is going in the other direction, that is not good news for our healthcare services, which we all care so much about.

I look forward to a positive response from the Minister on this important area, which is complicated.

[Lord Livermore (Lab)]

My Lords, I will address the amendment tabled by the noble Lord, Lord Jackson of Peterborough, which seeks to prevent commencement of the Bill until an impact assessment is published for community pharmacies. Delaying its commencement 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, including the changes to employer national insurance. As I have said before, an assessment of the policy has 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 to employer national insurance contributions. The Government and the OBR have therefore already set out the impacts of the policy change. This approach is in line with previous changes to national insurance and taxation and the Government do not intend to provide further impact assessments.

I turn to the amendments tabled by the noble Baroness, Lady Neville-Rolfe, and the noble Lord, Lord Altrincham, which seek to increase the employment allowance for those employed in primary care, including in GP surgeries, dentist surgeries and pharmacies. The distinction between those in the public sector who will be compensated and those who will not follows existing practice and is the same as the distinction that the previous Government used for their health and social care levy.

The noble Baroness, Lady Neville-Rolfe, asked specifically about eligibility for the employment allowance. Eligibility is not determined by sector but depends on the make-up of an individual business’s work. HMRC guidance explains that this is based on whether an organisation is doing 50% or more of its work in the public sector. It is therefore down to individual organisations to determine their eligibility for any given year. The employment allowance was introduced in 2014 by the previous Government. This Government have not changed the eligibility rules on the employment allowance in any way, beyond removing the £100,000 threshold.

The revenue raised from the measures in the Bill will play a critical role in restoring economic stability and funding the NHS. As a result of measures in the Bill and the wider Budget measures, the NHS will receive over £20 billion extra over two years to deliver 40,000 extra elective appointments a week. Primary care providers—in general practice, dentistry, pharmacy and eyecare—are important independent contractors which provide nearly £20 billion-worth of NHS services. Every year, the Government consult each sector about what services it provides, and what money it is entitled to in return under its contract. As in previous years, this will be dealt with as part of that process.

The Government have announced a proposed £889 million uplift for general practice in 2025-26 and have set out the proposed areas of reform which will help us to deliver on our manifesto commitments. This is the largest uplift to GP funding since the beginning of the five-year framework and means that we are reversing the recent trend, with a rising share of total NHS resources going to general practice. We have started consulting with the General Practitioners Committee England of the British Medical Association on the 2025-26 GP contract and will consider a range of proposed policy changes. These will be announced in the usual way, following the close of the consultation later this year.

The Department of Health has entered into consultation with Community Pharmacy England regarding the 2024-25 and 2025-26 funding contractual framework. The final funding settlement will be announced in the usual way following this consultation. The NHS in England invests around £3 billion on dentistry every year. NHS pharmaceutical, ophthalmic and dental allocations for integrated care systems for 2025-26 have been published alongside NHS planning guidance.

In light of these points, I respectfully ask noble Lords not to press their amendments.

--- Later in debate ---

[Baroness Neville-Rolfe (Con)]

It would be helpful if the Minister clarified that. I am concerned about this backward-lookingness that tends to be a feature of our discussions, because we are trying to look forward and make sure that growth stops flatlining, so that this economy grows in the coming months and years. Saying that a particular rule on employment was laid down in the past and therefore that the Government are not going to change it is a mistake.

In this area, there is a lot of evidence of a problem. The NHS has been compensated for these steep increases. The private sector part of the health services sector, which I know the Minister’s Secretary of State and his advisers think can play an important part in the future, is being sold down the river. That seems to be a pity; we should take this opportunity to try and do something to improve things.

I withdraw my amendment—no, I have not moved it. Forgive me.

[Lord Jackson of Peterborough (Con)]

People are withdrawing their amendments before even moving them.

If I could beg the indulgence of the Committee briefly, I wonder what the Liberal Democrats’ view on this policy is because I have a Liberal Democrat press release dated 16 December, entitled, “Liberal Democrats table amendment to exempt health and care providers from NICs hike”. Many Liberal Democrat MPs in the other place are quoted. I was not able to discern it in his remarks but is the noble Lord, Lord Scriven, against the whole policy with regard to community pharmacies and NICs, or just against the concept of doing a proper, thorough and robust empirical analysis and impact assessment?

National Insurance Contributions (Secondary Class 1 Contributions) Bill

Baroness Neville-Rolfe Excerpts

Committee stage
Thursday 6th February 2025 Grand Committee

Moved by

[Baroness Neville-Rolfe]

47: Clause 3, page 1, line 20, at end insert—
“(2A) After section 1(2), insert— “(2A) For an employer in the social care sector, the employment allowance for the tax year is—(a) £20,000, or(b) if less, an amount equal to the total amount of the liabilities mentioned in subsection (1)(b) which are not excluded liabilities.””Member's explanatory statement
This amendment, and another in the name of Baroness Neville-Rolfe to this Clause, would increase the employment allowance for employers in the social care sector from £10,500 to £20,000. This amendment seeks to probe the Government’s openness to supporting those providing social care and the cost of that to the Exchequer.

[Baroness Neville-Rolfe (Con)]

My Lords, I rise to move the amendment in my name and that of my noble friend Lord Altrincham, and to support the amendment tabled by my noble friend Lord Leigh of Hurley. These amendments are not merely technical adjustments; they represent a critical step in recognising and supporting the social care sector, which remains indispensable to our society.

Amendment 47 proposes an increase in the employment allowance available to employers in the social care sector, raising it from £10,500 to £20,000 per tax year. This increase is of profound importance. Our social care providers are grappling with rising operational costs, staffing challenges and the ever-present need to deliver high-quality care to some of our most vulnerable citizens. By enhancing the employment allowance, we are providing smaller employers with essential financial relief that will help to sustain their operations in the light of the brutal national insurance increases, retain skilled and valuable staff and invest in the quality improvements that our social care users so desperately need.

For too long, the funding constraints on social care providers have meant that many have had to make painful compromises, such as reducing staff numbers, cutting back on training or deferring vital infrastructure improvements. These compromises ultimately diminish the quality of care provided and place additional strain on an already overstretched system. Increasing the allowance would acknowledge that social care is not a peripheral service, but a core pillar of our public support system, deserving of the same robust backing as the NHS, which is being compensated for the additional NICs charges.

Moreover, this amendment recognises the unique cost structures within the social care sector. Unlike other industries, social care providers face significant regulatory and operational burdens. They must meet stringent care standards, invest in specialised training and often operate in environments where margins are exceptionally thin. They are the backbone of a sector that touches so many lives. The Local Government Association estimates that the NICs charges create £1.77 billion in additional costs for councils, with £637 million for directly employed staff and £1.13 billion through indirect costs, via commissioned providers, including £628 million for adult social care alone. These are big figures.

There is also an important symbolic dimension to these amendments. By focusing on the social care sector, we are sending a clear message that the care of our elderly, our disabled and our most vulnerable is a national priority. This sector has often been on the back foot, underfunded and overlooked. Today we are recognising its importance and taking concrete steps to bolster it. In doing so, we honour the dedication of countless social care workers who deliver care with compassion, often under extremely challenging circumstances.

In conclusion, these amendments will provide a much-needed boost to the employment allowance for social care providers and introduce a mechanism of accountability that will ensure that the measures are delivering the intended benefits. They are a testament to our commitment to support a sector that is foundational in the well-being of our communities. I urge my colleagues to join me in supporting these amendments, recognising that those struggling with disabilities and an ever-ageing community, partly thanks to the miracles of modern medicine, need our help. We need to invest in a stronger, fairer and more caring society.

[Lord Leigh of Hurley (Con)]

My Lords, I rise to support Amendment 47 and my own Amendment 65, which is yet another request for an impact assessment. I raised the issues that small businesses and charities will have at our last session, but I shall focus on the social care sector, for some of the reasons that my noble friend Lady Neville-Rolfe has explained. This sector faces particular challenges, and to apply a one-size-fits-all to every employer in the UK is in this instance simply heartless and smacks of a policy rushed through without proper consideration of the particular issues in the sector.

The recent Budget, while providing additional funding to social care, does not go far enough to meet the needs of a sector facing increased costs from the rising national living wage and employers’ NI contributions. There is the £600 million grant, which we assume is to be shared between adult and children’s social care, but it is far from sufficient to address the estimated £3.7 billion increase in costs facing providers due to the changes announced in the Budget, which represent the 10.6% increase in pay from April 2025.

We know of course that councils will be expected to fill much of this gap through council tax precepts and local revenue, but, even with the £600 million grant, there is still a £1.3 billion shortfall that local authorities have. That figure relates only to the basic costs of providing care, with no consideration of inflation, the resources required to address ongoing workforce challenges, or the increased capacity, as my noble friend Lady Neville-Rolfe mentioned, of a growing ageing population. Because of this, there are reasons to believe that the estimates of a £2.24 billion gap for older person residential care is a conservative figure. If this is added to the homecare deficit, reported to be £1.76 billion, and the unquantified gap for working-age adults, the total gap between the average fee paid by local authorities and the actual costs of providing care could be significantly higher than the £4 billion.

I appreciate that these figures are so large that it is possibly difficult to take them all in and relate to them. If I may, I shall look on a micro basis at organisations I happen to know about personally. I am sure that each of us has a connection with such an organisation locally. In my case, I have connections with Jewish Care, which is Anglo-Jewry’s leading health and social care charity for the Jewish community in London and the south-east. It touches the lives of 12,000 people every week—including, of course, Holocaust survivors.

Jewish Care operates nine care homes, which provide a range of services, including fabulous residential care and also dementia care, mental health care and nursing care. It manages four retirement living schemes and an assisted living scheme, nine community centres and three centres for people living with dementia. My interest is that I was a trustee of Jewish Care, and I am still a proud fundraiser for it. I have been a patron for more than 25 years. I am grateful to Jewish Care for sharing with me its concerns, which reflect those of the whole industry.

In context, Jewish Care raises some £20 million in revenue donations—voluntary gifts. The total increase in workforce costs as a result of this Budget is estimated by Jewish Care at £1.1 million. The increase in the percentage for NICs from 13.8% to 15% increases the workforce costs by £400,000 and the lowering of the threshold, which we all know about, results in a further £700,000—hence £1.1 million.

Of course, it is disproportionately affected because it is a large employer with very many part-time staff. The immediate impact is that carers’ salaries will not be raised, as would otherwise have been the case. It will also force the charity to make choices about how care homes are operated and, just as importantly, to divert investments in other community-focused services. One specific example is that, until the announcement of the NI increases, it was planning to open a much-needed dementia day centre. It was all planned and ready to go, but these additional costs have forced Jewish Care to put that on hold. This is real damage that the Government are causing to people’s lives, and it is particularly poignant because both Wes Streeting and the Prime Minister proclaimed themselves, as recently as last June, just before the election, to be huge supporters of this charity and its objectives.

--- Later in debate ---

[Lord Livermore (Lab)]

My Lords, I shall address the amendment tabled by the noble Baroness, Lady Neville-Rolfe, and the noble Lords, Lord Altrincham and Lord Leigh of Hurley, which seek to increase the value of the employment allowance for those providing social care, and the amendment tabled by the noble Lord, Lord Leigh of Hurley, which seeks to require the laying in Parliament of an impact assessment on social care providers 12 months after commencement and every 12 months subsequently.

As a result of the measures in this Bill, combined with wider Budget measures, the Government have provided a real-terms increase in core local government spending power of 3.5% in 2025-26, including £880 million of new grant funding provided to social care. This funding can be used to address the range of pressures facing the adult social care sector. Increasing the employment allowance for specific sectors would introduce new pressures that would require either higher borrowing, lower spending or alternative revenue-raising measures. It would also add complexity to the tax system.

The Government of course carefully consider the impacts of all policies, including the changes to employer national insurance. As I have said previously, an assessment of the policy has 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 to employer national insurance contributions. The Government and the OBR have therefore already set out the impacts of the policy change. This approach is in line with previous changes to national insurance and taxation, and the Government do not intend to provide further impact assessments. In light of those points, I respectfully ask noble Lords not to press their amendments.

[Baroness Neville-Rolfe (Con)]

My Lords, I thank the Minister for his response. I hope he will take away noble Lords’ concerns about the social care sector, because there seems to be agreement that we have a problem. I thank my noble friend Lord Leigh for his careful analysis and his examples of individual carers from Jewish Care, the Voluntary Organisations Disability Group and Age UK, whose work in Wales and Scotland he also mentioned.

There is a strong case for looking at this area again. The noble Baroness, Lady Kramer, may differ on how we should do it, but there is agreement on the problem. The Minister confirmed the figure that I used at Second Reading, explaining that the cost of NICs would outweigh the £800 million for social care—which we were very glad to see in the Budget. That is not a great net position.

The proposal for an annual assessment of the impact on social care is not a bureaucratic requirement, but a vital mechanism of accountability and continuous improvement. By compelling the Chancellor and the Secretary of State to publish and lay before Parliament an annual report detailing the impact of these provisions, we can ensure that there is an ongoing dialogue between policymakers and those on the front lines of care delivery.

It serves several key purposes. First, it provides transparency, which I think the House is increasingly interested in, and allows Parliament and, by extension, the public to understand how policy changes are affecting social care providers in real time. This level of openness is essential to maintaining public trust and ensuring that government policies are working as intended. Secondly, it creates a framework for evidence-based policy-making. By regularly reviewing the impact of the increased employment allowance, the Government can adjust their approach to ensure that their measures are effective. Finally, importantly, it signals to social care providers that the Government are committed to monitoring and supporting their performance through not just lip service but concrete measures. The challenges facing the social care sector are not only multifaceted but serious, and demographic changes mean that the demand for social care services is set to rise dramatically in the years ahead.

An annual impact assessment would ensure that we remain vigilant. It would provide a structured opportunity to evaluate the effectiveness of the allowance increase and other changes, to identify unintended consequences and to take corrective action if necessary. I have spoken at length but, in the circumstances, I beg leave to withdraw my amendment for today.

Amendment 47 withdrawn.

--- Later in debate ---

I make just a couple more brief points about the Government’s work in this area. I note that the Task Force on Climate-related Financial Disclosures guidance issued in December 2024 argues for the public sector incorporating climate related disclosures into annual reports. Surely, that is also an indication that we should incorporate them into major legislative changes. I note also a speech from Tony Juniper at the launch of Natural England’s first State of Natural Capital report in October 2024. I have some doubts about the accounting approach taken there but, none the less, the Government appear to be following this after the Dasgupta report. This is the Government doing a snapshot of the state of our natural assets. Surely, if they are then making decisions after that snapshot, they should be accounting for what impact those decisions will have on what accounts itself as natural capital. I beg to move.

[Baroness Neville-Rolfe (Con)]

My Lords, these two amendments require the Chancellor to prepare a report to consider the effects of the Government’s changes to employer national insurance contributions on the climate and on those with protected characteristics under the Equality Act 2010.

I will be brief. I come at the matter from a different perspective. The noble Baroness, Lady Bennett, is often arguing in favour of more tax and less growth, which obviously is not where I come from. Equalities are well looked after by the 2010 Act and we have equality assessments on nearly everything. I have suggested on some occasions to the Minister that a growth and productivity assessment would be a useful addition to getting delivery of his number one mission of growth.

The impacts of this Bill will be felt by employers and particular sectors, including part-timers, many of whom are women, as the noble Baroness has said. We have discussed that at great length. However, a review of the kind that she proposes is a huge stretch. It sounds bureaucratic and speculative. I also believe that it is inappropriate to try to improve work on climate change in this Bill by yet more bureaucratic processes on top of those which are already set out in the Environment Act. We need to focus instead on the impact of this brutal jobs tax on the sectors that are smarting under its prospect. That is what we are doing. I look forward to hearing how the Minister feels about these amendments.

--- Later in debate ---

[Baroness Kramer (LD)]

My Lords, I realise that I am very much in danger of becoming repetitive, but this is the last grouping that we will deal with today. If I may, I always feel like cheering on the noble Lord, Lord Porter, every time I hear him speak, which may put him in jeopardy, but it is probably reflected by voices across the Committee.

The issues being raised are crucial. I will not repeat the discussion that we had last Monday and Wednesday, which covered this same area in great detail. However, the amendments put forward then, which would basically exclude adult and child social care, housing associations, charities and others from the changes in the employers’ NICs threshold, would answer very many of the problems that local authorities are going to face. While I understand that this amendment seeks an impact assessment, we go for exclusion of these various necessary services and on that, once again, we stand our ground.

I thought that there might be some mention of town and parish councils in this group, which will get no protection at all from the increases in employers’ national insurance that they will face. We put forward an amendment last week that would exclude them from this. Once again, I ask that town and parish councils not be overlooked in the process of understanding that the public sector will be protected. With the changes that the Government are mooting in going to strategic authorities, town and parish councils will be the only real local government layer left, quite frankly, where somebody within a community knows that community, speaks to the people in it and acts on their behalf. Because they are funded purely through tax rather than through some government grant, the Government have not given them the off-set for the additional costs that they will have to carry. They amount to so little—£10 million a year. The Government would not even notice it. Without that, because they have no other sources of income, they will absolutely be required to increase their taxes by between 1.5% and 3.5%.

These councils should not be overlooked. They might be very small, but they are vital. For many people in this era, they are the connection to politics in a world where there is so much cynicism over politics and people do not feel the reality of it any more. I hope very much that the Conservatives, having made such strong statements on the effect of all these changes, will consider coming into the Lobbies with us on Report.

[Baroness Neville-Rolfe (Con)]

My Lords, I support Amendment 70. I am delighted that my noble friend Lord Fuller has joined the Committee today and spoken with such passion and eloquence, and I support his proposal for an impact assessment of the costs involved with this Act on local authorities. It was also good to hear from my noble friend Lord Porter; as a former civil servant many years ago, I was amused by his comment about policies hanging around in a drawer. I particularly remember that when I used to go to the Council in Brussels; there were a lot of proposals that used to hang around for a long time.

I agree that the jobs tax is the wrong approach, and I agree with my noble friend Lord Jackson that there are some tricky issues in parts of local government. I have to say that I have often been an admirer of local government, particularly councils, over a long career.

This week the Government confirmed £502 million of funding to help local authorities to cover the increased costs of directly employed staff due to the changes in the national insurance contributions. Ministers have also allocated £13 million separately to mayoral combined authorities, with some allocations to follow in due course. As we have heard, local authorities will need additional support in the face of the jobs tax. I welcome the fact that Ministers have brought this support forward, but we have heard from my noble friend Lord Fuller that that the allocation is totally inadequate. He called it a £1.226 billion headache, while my noble friend Lord Jamieson, also very experienced in this area, explained that it is just not possible to absorb these sorts of costs, for example, by reducing prices to suppliers. Services will inevitably have to be cut.

I shall highlight some examples where we believe the allocations will fall short. Hampshire County Council is facing a £10 million increase in costs due to the increase in NICs but the allocation it has received from the Government is just £7 million, leaving a £3 million shortfall, which I suspect is quite typical. My noble friend Lord Jackson talked of the likely demise of the lido in Peterborough and of libraries that are closing, although I am glad to say that, so far, we have kept our libraries open in Wiltshire. We are also hearing reports from Kensington and Chelsea and Harlow councils that they are facing a shortfall following the announcement of the allocations.

Clearly the Government’s additional allocations need to cover every penny of the increased cost to local authorities, otherwise they are going to have to cut services. It would therefore be helpful if the Minister could commit to engaging with MHCLG to seek assurances about what is happening and how that could be improved.

Councils, as we have heard from my noble friend Lord Fuller, have been treated a lot worse than sectors like the police, the Civil Service and the National Health Service. This is a case in point for the argument we have been making throughout Committee where the Government have failed to produce thorough and comprehensive impact assessments. Mistakes like this can be made. The new refusal of the Treasury to provide essential information in debates like this, when such major changes are taking place, is extremely disappointing, as my noble friend Lady Noakes said, in her usually trenchant way. The Minister needs to listen to the Opposition when we call for a proper assessment of the impact of this policy on our local authorities. We want to know about other sectors too, but local authorities are this particular group’s concern and we will be returning to the charge.

The truth is that the Bill is very damaging. It will have perverse effects that will reduce the expected national insurance and tax take, as we have heard from the OBR, and it will have a negative effect on jobs, prices and growth. I hope the Minister will think further in the light of these four days of debate before Report.

I should say that I have enjoyed this Committee because of the insights it has given into many sectors and their challenges. It has been an extraordinary cross-cutting debate, and I look forward to Report on 25 February after our much-needed winter break.

[Lord Livermore (Lab)]

My Lords, I am grateful to all noble Lords for their contributions to this debate and for the local government expertise that has been shared with the Committee. At the Budget and the recent local government finance settlement, the Government announced £2 billion for new grant funding for local Government in 2025-26. This includes £515 million to support councils with the increase in employer national insurance contributions.

The LGA figures set out by the noble Lord, Lord Fuller, are an external estimate rather the Government’s, and I cannot comment on those figures. However, the Treasury is of course engaging closely with HMCLG, as the noble Baroness, Lady Neville-Rolfe, asked. The Government have committed £4.7 billion next year to provide support for departments and other public sector employers for additional employer national insurance costs. This applies to those directly employed by the public sector, including local government. However, as the noble Lord, Lord Fuller, said, independent contractors, such as those services contracted out by local authorities, will not be supported with the costs of these changes. This is exactly the same definition as with the changes to employer national insurance rates, under the previous Government’s plans for the health and social care levy.