National Insurance Contributions (Secondary Class 1 Contributions) Bill

Baroness Sater Excerpts

2nd reading
Monday 6th January 2025 Lords Chamber

[Baroness Sater (Con)]

My Lords, charities of every kind are seeing massive increases in demand for their services. Many provide essential support and vital services to all parts of our society—to the vulnerable, the elderly and the homeless, and for children’s services, medical research and many other needs. I declare my interest as a trustee of the Dartington Hall Trust.

The increases in employers’ national insurance contributions, the living wage and the cost of utilities, goods and services have added huge financial burdens to charities’ budgets. Many have had no option but to cut costs, which means that services will be cut. Today, I add my voice to their concerns.

Delivering almost £17 billion worth of public services every year, many charities also provide support when public services fall short, without receiving any public funding. According to the National Council for Voluntary Organisations, the NCVO, charities employ almost 1 million people and raise money to provide services that would otherwise need to be commissioned by government. The NCVO and the Association of Chief Executives of Voluntary Organisations, the ACEVO, recently issued a letter to the Chancellor outlining their concerns for a sector that was already under considerable strain. The NCVO’s initial estimates have found that the employer national insurance contribution increases will place an annual additional bill of £1.4 billion on charities. The letter goes on to say:

“The harsh reality is that many organisations may be forced to reduce staff, cut salaries, and most importantly, scale back services for the very people they strive to support”.


By way of an example, and as my noble friend Lord Forsyth mentioned, Marie Curie needs to find an extra £3 million each year to meet the increase. Essex & Herts Air Ambulance has reported that the change will cost it an additional £100,000 that would otherwise be directed towards other missions. Bridge Support, a charity devoted to providing essential mental health and recovery services, reported that its stretched budgets will have to absorb these additional costs, while its counterparts in the NHS and other statutory services will remain exempt.

These charities provide essential services: life-saving interventions that are not just nice-to-haves but must-haves. NCVO researchers have found that almost three out of four charities are withdrawing from public service delivery or are considering doing so, and most are reducing their services to reduce costs. It is a perfect storm of cost escalation while funding is in decline.

My noble friend Lady Fraser is extremely sorry not to be able to attend this important debate. She is CEO of the charity Cerebral Palsy Scotland and is having to deal with the practical implications of this policy at the coalface. She is conducting meetings about where and how to cut staff, and therefore services, to fund the increased tax burden. Anna Fowlie, the chief executive of the Scottish Council for Voluntary Organisations, wrote that many charities

“have already had to subsidise public services with their own funds, and increasingly we are hearing of organisations having to close their doors”.

I am very worried about the future, as to me it makes little sense for the Government to hamper the ability of those picking up the slack to do so. Have the Government made provision to fill the gaps in essential services that charities provide when they are unable to do so? How will the Government fund the services presently provided by the voluntary sector? As the NCVO and the ACEVO have asked, why can the Government not commit to reimbursing or exempting voluntary organisations’ increased employer national insurance contributions in the same way as they will for the public sector? After all, the biggest assets in charities are people, the largest costs are people, and employing people has just got significantly more expensive.

With all that in mind, I ask the Minister when the impact statement for the Bill will be published. I intend to seek an amendment to the Bill in Committee to ensure that the Government provide an impact statement, unless the Minister can tell us today when it will be published.

The Government have launched their civil society covenant, which talks about resetting their relationship with the voluntary sector. It talks of the essential role of working as partners with the sector, which is welcome, but the Bill does not strengthen the foundations of a stronger civil society. Rather than taxing, we should be supporting or, at the very least, exempting.

I know the Government and the Minister want our charities to thrive, but I fear that the Bill will hurt them. So many are feeling desperate. The Government must find a way to protect and support them. Doing so would demonstrate that they mean what they say and would illustrate that they truly want a productive relationship with the voluntary and charity sector.

--- Later in debate ---

[Lord Sharkey (LD)]

My Lords, this is an unsatisfactory Bill, not because it raises taxes—that was, and is, an obvious necessity—but because it does so in a way that exacerbates existing unresolved and urgent problems or, as in the case of social care, in effect ignores them entirely.

The provisions of this Bill will probably not help with growth, the Government’s chief objective. I say “probably not help”, but that may be a little bit generous. Many noble Lords who have spoken this evening have felt strongly that the Bill will have negative consequences for growth. Arguably, two of the most important engines of growth, or what have been and should continue to be engines of growth, are our SMEs and our higher education sector. This Bill has damaging consequences for both. I will speak a little later about our university sector, but I want here to make some points about SMEs.

My colleague in the Commons, Christine Jardine, asked the Minister at Second Reading:

“How does it help morale and positivity among small businesses, which will be vital to economic growth, if some of them see their salary bills double?”


The Minister replied by saying:

“I urge her to understand that what we are doing on national insurance is taking a tough decision to fix the public finances, while at the same time providing the stability that businesses need to invest and grow””.—[Official Report, Commons, 3/12/24; cols. 202-03.]


It is the last bit of that, frequently repeated as an explanation of or an excuse for government proposals, that is the problem.

No convincing case has been made for the proposition that the measures in the Bill will provide stability. Indeed, it is hardly surprising that many see the Bill’s measures as actually reducing stability and creating further uncertainty. In a recent survey, 44% of UK SMEs said that the NI increases would negatively affect them. As Todd Davison of Purbeck Personal Guarantee Insurance, an important operator in the SME arena, noted:

“The increase in employer National Insurance contributions … could prove to be a fatal blow to thousands of small businesses, despite the increase in the Employment Allowance”.


He went on to say:

“There will be thousands of business people who have put their home and life savings on the line by signing a personal guarantee for a business loan who will now be facing some very difficult choices”.


I note in passing that, in trying to justify the national insurance rise, the Government have pointed to the increasing availability of funds for the NHS. This is, of course, welcome, but the extra funding is being raised in the wrong way and on the wrong people—and what about carers and the care sector? Will we have to wait until 2008 and beyond for any significant progress? In the meantime, what additional support will be available to offset increased costs? What about the additional payroll cost to GP practices? The Institute of General Practice Management estimates that the NI rise will mean that the average GP surgery tax bill will rise by around £20,000 a year. How is this to be mitigated? Second Reading in the Commons did not produce an answer to any of these questions. I would be grateful if the Minister could address the issues about SMEs, the care sector and GPs when he replies.

I now turn to another critical factor in growing our economy: our higher education sector. I declare an interest as a member of council at UCL. Our university sector has a very strong international reputation, very high academic standards and world-class research output and influence. This is despite the UK spending significantly less on R&D than our rivals. We spend 1.7%, China 2.2%, the US 2.8% and Germany 3.1%. However, in the last QS worldwide ranking, the UK had four universities in the top 10 and 16 in the top 100.

The Government explicitly acknowledge the importance of the sector. The Secretary of State for Education wrote to vice-chancellors on 4 November last. She started her letter by saying:

“The institutions which you lead make a vital contribution, as education and research institutions, to our economy, to society, and to industry and innovation. They contribute to productivity growth; play a crucial civic role in their communities; and have a key role to play in enhancing the UK’s reputation across the globe. I also passionately believe in education for education’s sake: a more educated society is happier, healthier, more cohesive, and socially and culturally richer”.


She went on to say:

“I am clear that we need to put our world-leading higher education sector on a secure footing”.


She went on to speak of student numbers, international students and the financial status of the sector. This financial status is in need of very urgent attention.

The main leader in last Thursday’s Times was critical of the very large travel and expenses costs of some vice-chancellors at a time when the sector is under critical financial pressure. The leader’s chief point concerned this financial pressure. It said:

“There is no doubt that higher education is experiencing extreme financial difficulties”.


It pointed out that these extreme difficulties will be made worse by the increase in employers’ NI. The small but welcome increase in student fees will increase revenue by around £370 million. The increase in national insurance will cost universities around £450 million.

The Times went on to note that, according to the OfS, the combination of lower revenues from both home and overseas students means that nearly three-quarters of our universities will be running a deficit by the end of this academic year. Some 40% already have less than a month’s cash in the bank and 10,000 jobs are expected to be lost in this academic year. This is a genuine and pressing crisis.

If we want to maintain our large and very high-quality university sector, if we want to remain among the global leaders in the life sciences, if we want to continue to create the IP that forms the basis of new and innovative commercial ventures, and if we want our towns, cities and regions to continue to benefit from their universities, we must act. Increasing the national insurance burden is to act completely in the wrong direction.

In the absence of a coherent plan for our universities, the Government have, in an almost cavalier way, significantly worsened their already extreme financial difficulties. There is a pattern here. There is no sign of a meaningful intervention to relieve social care of the increased costs imposed by the Bill. There is no sign of a meaningful plan for social care before 2028. There is no proposal for providing significant help to SMEs. There is no proposal for helping GP surgeries to mitigate the effects of this Bill.

There are plenty of indicators and predictions about the damage that these NI changes will bring to critical parts of our economy and society, but no indication of how this damage may be mitigated or avoided and nothing positive for growth—but plenty in the negative.

There is much to regret in how and on whom the Government are imposing this significant tax, and much to regret in the effect of this tax increase on carers, on SMEs, on GP surgeries and on our universities. I strongly support the regret amendment from my noble friend Lady Kramer. If she chooses to divide the House, as I hope she will, these Benches will support her.

[Baroness Sater (Con)]

I thank the noble Lord for allowing me to make a small intervention. The noble Lord is arguing passionately against the Government’s job cuts and the damage that will be done to care providers, charities and others. Does he therefore agree with me that this Bill must be scrutinised in a Committee on the Floor of the House? Does he also agree that it is in the interests of the charitable sector for this Bill to be scrutinised as fully as possible?

[Lord Sharkey (LD)]

I think there were three questions there, so perhaps I can answer very quickly: no, no and no.

National Insurance Contributions (Secondary Class 1 Contributions) Bill

Baroness Sater Excerpts

Committee stage
Wednesday 29th January 2025 Grand Committee

[Baroness Bennett of Manor Castle (GP)]

My Lords, I tabled my Amendment 11A after our extensive discussion, on the previous day of Committee, about the impact of the national insurance rise on charities. As I prefaced in my presentation last time, it started with a CEO of a significant charity, who came to me and said, “If we could have one year to sort things out first, we would just about be able to cope with this, but the speed with which this increase in costs is happening is more than we can cope with”.

I apologise that there is no Member’s explanatory statement on this amendment—that is entirely my fault—but I lay out for clarity that it is intended to delay, for charities, the increase in the employers’ national insurance contribution by one year.

It is interesting that, earlier today, I was hosting an event launching a report on debanking in Muslim charities and its impact on charitable activities. There was much discussion at this event about the many difficulties that charities currently face, but the top one that was listed—after the issue under discussion—was the national insurance rise and the speed with which it is hitting charities.

I note some of the figures around this. The sector has said that the cost to charities will be about £1.4 billion. Research from 400 charities by the Charity Finance Group shows that 87% are concerned about being able to afford this increase. Some 27% of organisations running charity shops say that this increase is likely to result in closures of charity shops; those are the Charity Retail Association’s figures. We are often concerned about what is happening on our high streets, and there is perhaps concern about the dominance of charity shops, but if they close, we will just have even more empty shops on our high streets—as well as the loss to charities in terms of the services they provide and the funds raised.

Let me give one example of this, which was reported by ITV. The CEO of the Little Miracles charity, which helps 50,000 families that have children with life-limiting disabilities, said that this measure will cost that charity a minimum of £24,000. It is a small local charity with about 670 volunteers, so finding that sum of money is a really big challenge for that organisation.

It is worth noting that one of the reports from the West Lothian Voluntary Sector Gateway told the local council:

“This wholly unexpected cost will inevitably place additional financial pressures on already stretched Third Sector and social enterprises locally”.


That unexpected, sudden arrival is really the issue there. The National Council for Voluntary Organisations wrote to the Chancellor. In response to its suggestion that charities should be exempted, Rachel Reeves said:

“The government has committed to provide support for … public sector employers”,


given the rising costs, but for no one other than the public sector. It is worth considering that the combination of austerity and ideology has meant that, for many services, the slack in much of the provision that used to be picked up by public services has now been picked up by the charitable sector. It is then being hit again with this cost.

This amendment is quite moderate and small-scale. I do not have the capacity but perhaps the Minister could tell us what the one-year cost would be. I note what the cost will be if charities have to deal with this sudden increase in costs when they are facing so many other pressures. I beg to move.

[Baroness Sater (Con)]

My Lords, I rise to speak to my Amendment 32. I refer your Lordships to my registered interests, in particular my roles with charities. The purpose of my amendment is to deal with the huge concerns we are hearing from across the sector and elsewhere, as the noble Baroness just mentioned, as well as the impact of the increase in employers’ national insurance on both the charity and voluntary sectors and the services that they deliver.

The sector is telling us that these increases will force many to reduce staff, cut salaries, scale back their services and, in some cases, consider closure. The increases will adversely affect the support that they give to people and their communities, which is why my amendment asks for the much-needed impact assessment. Had the Government already prepared the impact assessment—and I do not accept that the impact note to which the Minister has referred provides the evidence needed—they might already have accepted the need to make exceptions to the charitable sector.

Many noble Lords have spoken with passion about the negative effect of the increases in national insurance on the charitable sector. I am very aware that the Government have not been able to move on any of the requests at the moment. At the risk of repetition, up and down the country the voluntary sector is feeling the strain. Its representatives, such as the National Council of Voluntary Organisations, the NCVO, have already voiced concerns in their open letter to the Chancellor, highlighting that this increase will add an additional £1.4 billion in unwelcome and unsustainable costs, as the noble Baroness, Lady Bennett of Manor Castle, said.

--- Later in debate ---

[Lord Leigh of Hurley (Con)]

My Lords, I support all the amendments in this group. I spoke in respect of small businesses and, as the Minister will have detected, I was upset about the effect that the NI increases will have on small businesses. I would not say that I am upset about the effect that it will have on charities: I am angry and disappointed. The Labour Government have dramatically let down charities and they should know better. The total increased cost of employers’ NIC is estimated at £1.4 billion a year to the charity sector alone. Those are not my figures; they are from the highly respected aforementioned NCVO, with which I have worked in the past.

I have done a lot of work in the charity sector. I formed the committee to look at fundraising abuses, working with the NCVO, from which the fundraising regulator came about. I chair four charities in the United Kingdom. I work for a number of other charities, as indeed do other noble Lords in this Room.

For example, every year I run 10 miles for WaterAid. One of the noble Lords present in this Room supports me, for which I am grateful. Every year, I raise £50,000. I have raised £0.5 million for WaterAid in total. The entire benefit of my fundraising for WaterAid has been wiped out by the national insurance increase. The whole purpose of the fundraising for so many people is wasted, gone, because the money has gone to the Government for the purpose of raising revenue, which I understand is perfectly reasonable. But surely the Government could be more intelligent and sympathetic to charities in seeking to raise revenue. I know that the Minister is driven by empirical statistics.

[Baroness Sater (Con)]

Can I just follow up the point that my noble friend raised about fundraising? When we start to lose staff and people in the charity sector, and in charities as a whole—charities are people, after all—we will not have the ability to raise the funds that were assisting the Government to provide services. So it is a double whammy: charities will not only lose money through paying increased national insurance but lose money that they would fundraise to help support them.

[Lord Leigh of Hurley (Con)]

I am most grateful to my noble friend Lady Sater for underlining my point. It is exactly that. People will turn to me and ask, “Well, why should I give to you, Lord Leigh, and your fundraising efforts, because the Government are going to take away much more?”

According to the Charity Commission website, there are 5,435 charities with an income between £0.5 million and £1 million. On average, they make a surplus of just over £13,000 and employ about 12 people. So the increased cost caused by the raise in the NI for people on the minimum living wage, which is a large proportion of such people, will be £997. There are some heroic assumptions in this, but it is not unreasonable to say that the cost to these charities, on average, will be just over £12,000, which wipes out almost their entire surplus.

I accept that those charities will receive employment benefits, so let us look at some of the larger charities. There are 6,000 charities in the £1 million to £5 million range. Interestingly, they raise a total of £13 billion and spend a total of £12 billion, most of which is on salaries. On average, they employ some 35 people and the surplus is just over £19,000. The extra cost to them will be £35,000, which will not just wipe out their entire surplus but push them into deficit.

There are only 1,200 charities with income in the £5 million to £10 million range, and they employ an average of 104 people, so the extra cost to them of the NI burden is £103,000. Their average surplus is £47,900. Once again, their surplus will be completely wiped out and, thanks to the imposition of these extra costs, they will make a loss.

As my noble friend Lady Sater said, the NCVO wrote to the Chancellor, and I note that its letter was signed not just by the NCVO but by 7,360 charities. It employs over 1 million people. Charities deliver benefits to the public sector of some £17 billion a year, so this is distressing, to say the least. My noble friend raised a number of specific charities; she mentioned a local Age UK, with which I do not have any connection. Age UK states:

“This particularly impacts organisations that employ significant numbers of low paid staff … Local Age UKs are warning that these changes will significantly impact their ability to provide essential services to vulnerable older people, particularly in underserved areas”.


In turn, this will have

“a knock-on effect on older people’s health and wellbeing, increasing demands on our already hard-pressed health and social care services”.

I made the point earlier—it was a political point—that the Labour Front Bench does not have as much business experience as it might, although it has many other attributes and qualities. It has a strong and close connection and experience with the charitable sector; there is a good relationship. So why on earth would the Government not accept these amendments to help the charitable sector and save it from these disastrous costs?

--- Later in debate ---

[Baroness Bennett of Manor Castle (GP)]

In responding to the noble Lord, I can only applaud the increase in the national minimum wage—indeed, I would encourage it to be significantly higher. None the less, the noble Lord’s point about the situation for charities is entirely accurate.

The noble Lord, Lord Jackson, said something earlier—and the noble Baroness, Lady Lawlor, backed this up—about how many ideas the Government end up delivering actually start with small, campaigning charities. They save the Government having to do the work because, when there is a problem and something really needs to be done about it, they do all the work on what needs to be done about it.

Obviously, I will withdraw my amendment at this stage, but it is clear that we will come back to this issue on Report. I am still quite dedicated to the idea of at least delaying the measure, which would not interfere with the Government’s long-term economic plans but would give charities time to adjust. On the £1.4 billion, the Government could save that much in the extra spending that they will have to make if they insist on collecting that money, so it all balances out.

[Baroness Sater (Con)]

I totally agree, but there will be charities going bust in the next six months. I know that we want to delay it, but there is an urgency in saying, “This is going to be really detrimental, and that knock-on effect is going to be huge”. That is why I cannot quite understand why we have not had a detailed assessment statement—and why I am asking for it—because surely this would come through in that detailed statement.

[Baroness Bennett of Manor Castle (GP)]

I agree with the noble Baroness and support her amendment. I have already reflected on the lack of a proper impact statement in many different areas; I would entirely back the noble Baroness’s approach. We need to understand what is happening, but we have two things here: giving charities time to deal with it, and understanding what we are doing. We may well end up coming back to both of those things on Report, but in the meantime I beg leave to withdraw my amendment.

National Insurance Contributions (Secondary Class 1 Contributions) Bill

Baroness Sater Excerpts

Committee stage
Tuesday 4th February 2025 Grand Committee

I served on Gordon Brown’s committee to commemorate the life of Diana, Princess of Wales, and launched the Diana nurses, paediatric palliative care nurses who went out into the community. I visited them all, accompanied them on visits and saw the profound difference that this makes. Family service teams are a vital part of palliative care. Surely, His Majesty’s Government could show an element of humanity on this issue and allow an exemption. Amendment 29 is important because the increased cost of this policy to hospices, which, as I have outlined, are already struggling, would be catastrophic. I beg to move.

[Baroness Sater (Con)]

I rise in support of my noble friend, who made an excellent and passionate speech about hospices and the dire need for support they will have if the NICs changes go through. They will affect, as we have heard already, redundancies and the level of staffing. The burden that will be put on hospices will be extraordinary and the figures are unbelievable if we consider how much they will have to raise if they have to find that money in the future. As I have said previously, it is imperative that we have an impact assessment whereby we can understand these individual sectors and the absolute devastation that will happen if we do not know what will happen, going forward. So I plead with and urge the Minister to reconsider and support my noble friend on this important sector. It is important that we know a little more about what will happen if these insurance rises take place.

[Lord Leigh of Hurley (Con)]

My Lords, I support my noble friend Lady Monckton of Dallington Forest in much the same way. If all goes to plan, I will speak on Thursday in respect of social care homes, particularly adult social care homes, where many of the same issues arise. I cannot imagine the response if a Conservative Government had decided to put national insurance rises on such institutions; can noble Lords begin to see the headlines that would be against us?

This House is a revising Chamber; it allows the Government the opportunity to pause, rethink and consider, and if ever there was a case to do so, this is it. Before the Government have the acute embarrassment of urging Peers to go through the Division Lobby to penalise care homes and hospices in such a way, I very much hope that they will take advantage of the gap between Committee and Report to reflect on the arguments.

National Insurance Contributions (Secondary Class 1 Contributions) Bill

Baroness Sater Excerpts

Report stage
Tuesday 25th February 2025 Lords Chamber

[Baroness Sater (Con)]

My Lords, I shall speak to Amendment 9, to which I have added my name, and to Amendment 4. I declare my interest as set out in the register and as a trustee of the Dartington Hall Trust.

My contribution today will be short, as so much as already been said during the passage of the Bill. We have heard many passionate statements today. I have already spoken of my concern about the impact of the increases in national insurance contributions on the future of the charity sector and its ability to continue to deliver much-needed services and support. Along with many others, I believe that we have put forward compelling and passionate reasons why the charitable sector should not be subject to the Government’s national insurance contribution increases.

At both previous stages of the Bill, I have respectfully asked for the impact assessment of this tax on the sector. The Minister and his Government have not, to date, reconsidered their position or produced the impact assessment, which other noble Lords have again asked for today. It seems extraordinarily unfair that the Government indirectly exempt the public sector but decline to exempt or reimburse the charity sector. I cannot understand it.

At the risk of repetition, let me say that the National Council for Voluntary Organisations estimates that the increased cost of this tax to the sector is £1.4 billion. It has raised its concerns to the Treasury. Together with the Association of Chief Executives of Voluntary Organisations and the Charity Finance Group, they perfectly summed up this situation when they wrote that

“the knock-on impact it will have on individuals, communities and local economies who rely on us will be devastating”.

Those are voices from the sector, who represent so many charities across the country.

I am sure that the Minister has heard many calls for help himself from across the charity sector. I hope that he recognises that this tax will have a long-lasting impact on the sector’s ability to deliver many of the vital services on which government and so many others rely. Let me put to your Lordships this: if a charity approached you for support for a good cause, I have little doubt that you would be generous to the extent that you could afford; if the same charity asked you for a donation not to do good works but so that it could pay the increased taxes to the Government, I suspect that you and I would not feel inclined to put our hand in our pockets. The charity sector should not be a cash cow for the Government.

Sadly, unless the Government reconsider this tax on our charities, they will greatly diminish, and the majority will need, at best, to shrink the number of people they employ and the services they provide. In the worst scenarios, charities will close. We have already heard from charities, including from my noble friend Lady Fraser, of staff reductions, redundancies and potential closures. Fundraising and costs management is difficult enough for charities; the future of the sector is looking very bleak. Many of them help the most vulnerable in society, do wonderful work across many other areas—I will not list them today—and are the backbone of our civil society. I hope that the Minister will reconsider his position and listen to what is said today.

[Baroness Fraser of Craigmaddie (Con)]

My Lords, I rise to thank my colleagues. As the chief executive of a charity, I know that the sector is watching and listening to what we are doing here and urging us on to do everything we can to mitigate this disastrous policy.

The noble Lord, Lord Bruce of Bennachie, mentioned Scotland. In an earlier debate, it became apparent that the drafting of some of the amendments perhaps did not cover Scotland. Any charity in Scotland of any size has to be registered by the Office of the Scottish Charity Regulator and I would want to be reassured that exemptions covered the entire sector. It amounts to 5% of Scotland’s workforce, and with an increasing number of redundancies and the struggle to recruit volunteers, the workforce is already under strain and potentially limited in its capacity to deliver services.

The Minister spoke earlier about the Government’s increased funding to various sectors, some of which are covered by the charity sector. However, he did not outline how that might help those not in receipt of public sector funding but who are delivering services which support public sector delivery.

Finally, as chief executive of Cerebral Palsy Scotland, SEND transport is an issue firmly in my bag. We already know that the SEND system is under immense strain. We already know of children who cannot go to the school it has been assessed they should attend because of transport issues. This is very complex: transport is provided mostly by private providers. There is already a limited choice of schools. Many children need specialist vehicles to get from A to B. As the noble Baroness, Lady Bennett, said, many firms will be forced to hand back contracts.

I look forward with interest to the Minister’s response to these challenges.