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.