National Insurance Contributions (Secondary Class 1 Contributions) Bill

Lord Ahmad of Wimbledon Excerpts

2nd reading
Monday 6th January 2025 Lords Chamber

[Lord Ahmad of Wimbledon (Con)]

My Lords, I first seek your Lordships’ indulgence in paying my personal tribute to the noble Baroness, Lady Randerson. As we have already heard, she was always constructive in her engagement in the Chamber but also, importantly, outside it. I know so: I worked with her on legislation during my tenure as a Transport Minister. I was also very much on the receiving end of her very insightful and quite pointed questions. She was a pleasure to work with, and, as noble Lords from across your Lordships’ House have said, she will be remembered with love and affection. Our prayers go to her friends and family, and to our colleagues on the Liberal Democrat Benches. She represented her party, her sector and, indeed, your Lordships’ House with great dedication and devotion.

We return after Christmas—the season of good will—and the celebrations of the new year with hopes in our hearts for the year ahead. Yet regrettably, as we come together for the first substantial debate in your Lordships’ House, for many across our country the words “good will” and “celebration” ring somewhat hollow. We have now had six months of a Labour Government and, despite the assurances which were given, the report card makes for disappointing reading: broken promises and, indeed, betrayals.

On education, this Government’s ill-judged education tax, which comes into play today, is shrouded in a narrative of taxing those who are more affluent to raise more for schools in the state sector. Of course we want state sector schools to improve, but, as we have heard already, this ignores the pleas of those children with special educational needs, the small independent sector schools that I know have had to close, including some in my area, and the extra burden on local authorities with no school places. It also—I emphasise this point—taxes the aspirations of hard-working parents. I say to the Minister that yes, those who choose to send their children to private school, often by making great sacrifices and using their savings, are hard-working people as well. Most significantly, this action has disrupted the education of our most important asset for the future: the next generation, our children. If, as reports suggest, there is only a 10% to 15% migration to the state sector, that means no extra revenue for the Exchequer, and yes, they will also be hit by the Government’s proposals on national insurance—the subject of today’s debate.

Sadly and tragically, Labour has also betrayed many pensioners with another broken promise over winter fuel payments at a time when those among the most vulnerable need it most—those who have worked hard and contributed to our great country’s wealth and prosperity over the years. They deserve our compassion and care, yet their pleas have also not been heard. So the message we are hearing in many sectors across society is: if you are at the start of your life in education or a pensioner seeking peace in retirement, Labour is not working; Labour is not working for you.

The national insurance hikes are having a detrimental and damaging effect on the very engines of growth that the Government claimed they supported and which fuel the economy and productivity: our private sector, our charitable sectors and, in particular, small and medium-sized enterprises—the backbone of the British economy. In the Budget, the Chancellor of the Exchequer, Rachel Reeves, said that the changes to employer NICs were necessary

“to raise the revenues required to fund our public services and restore economic stability”.—[Official Report, Commons, 30/10/24; col. 818.]

At best the jury is out on whether this will raise the necessary funds for our public services, and we are already seeing that economic stability has not been achieved. We have heard about gilt prices. Five-year gilt prices have been trading above the threshold set by the OBR itself since November. Costs of borrowing are up—points already so clearly flagged by several of my noble friends, including my noble friends Lady Noakes, Lord Forsyth and, of course, Lord Frost. Growth has stalled. Interest rates, which seek to stimulate demand and ease the burden on business and working people, have stood still. This has also meant that fiscal headroom has shrunk, so what will the Chancellor of the Exchequer do now? Will there be another tax hike?

Businesses are suffering. We can use all the rhetoric we like, but that is the bottom line. As we have already heard, the number of businesses planning to raise prices in the coming months has jumped sharply as increases in the UK Budget in tax and wage costs caused confidence to slump. The British Chambers of Commerce has confirmed this. About 55% of companies said they were planning to increase prices in the next three months—my noble friend Lady Neville-Rolfe referred to that. Prices are going up—inflation.

As my noble friend Lord Forsyth so eloquently highlighted, the cost to businesses is rising, with an increase of £800 per employee—that is the bottom line. The noble Baroness who spoke just now, who I respect greatly, talked about the overall impact on businesses, but I too read that report and it is marginal. About 200,000 businesses or so will benefit and I agree that about 800,000 will remain the same, but close to a million—900,000-odd—will see their bill increase. They will pay more across the board. That is not me as a Conservative Peer saying it; that is what HMRC is saying: they are the Government’s own figures.

The CBI warns that two-thirds of firms are looking to cut their hiring plans. It said:

“Our survey showed half are now looking to reduce headcount. And almost two-thirds are looking to cut their plans to hire”.


So, along with inflation, we now have prospects of unemployment as well. I ask the Minister for a response. These are facts; this is what business and HMRC are saying. People are suffering. You do not need to be an economist to understand that you do not get growth if you tax the people who are the very engines of growth.

On the rhetoric of a fictional black hole and a poor inheritance, which we have heard repeatedly, I say to the Minister: we are a mature House. We have reasoned, balanced debates, so less of that and more on substance. People are seeing through it. Let us get serious. People are suffering. We are dealing with real people, real businesses and real lives.

I had the privilege before Christmas to attend a dinner celebrating the success of British Asian business. I say to my noble friend Lord Forsyth that there were plenty of billionaires in that room. Indeed, there was £165 billion-worth of business at that reception. But sadly, the conversations were not about what is next and the prospects for their next steps in terms of expansion; they were about the Government’s approach to taxing what they saw as aspiration—taxing success. I know: I am part of that generation. Many who came to this country made Britain their home and became part of those very economic engines that fuel our economy today. They were talking the language of relocation and moving to other jurisdictions where aspiration and business success would be celebrated.

I commend the speech of my noble friend Lord Blackwell. I listened to his thoughtful and insightful remarks on the necessary public sector reform, which is an important element in ensuring that we move forward as a successful country and should not be forgotten.

Not a single Peer in your Lordships’ House would not agree with the sentiments I am about to express. We all love our country, the opportunities it affords and the success of our people, and we want to see our country prosper and grow. To ensure that prosperity and growth happen, we need to feed the very backbone of our economic growth—our businesses across all sectors, and SMEs in particular. They are truly the wealth creators and need to be given tools and support to survive, prosper and grow. Yet today, as many have said to me quite directly, they face daunting costs. The prospects for some are that their sheer survival is on the brink. The Government must listen and, as others have said, think again.

National Insurance Contributions (Secondary Class 1 Contributions) Bill

Lord Ahmad of Wimbledon Excerpts

Committee stage
Tuesday 21st January 2025 Grand Committee

[Lord Londesborough (CB)]

My Lords, I will speak to Amendments 3, 12 and 59, to which I have added my name. I declare my interests as an investor in SMEs, including those employing part-time workers.

In the interests of economic growth and especially flexibility in the labour market, which is so crucial for sectors such as hospitality and retail, the time has come, to use the words of the noble Baroness, Lady Kramer, to aggressively restructure an employer’s NICs scheme rather than subject all employers to one set rate of contributions and, indeed, thresholds, on which I will speak later in group five. Indeed, by dropping the threshold from £9,100 to £5,000, Clause 2 is disproportionately hitting employers who, frankly, have no choice but to employ part-time workers, often on a shift basis. Without introducing a lower secondary percentage, such as the 7.5% proposed in Amendment 3, part-time work will be on the retreat, hitting those very workers who are dependent on such employment and who cannot work full-time, including students, parents and family carers.

As we have heard, the numbers published today of payrolled employees have dropped by 47,000 during December alone. That is the biggest fall since November 2020. It would be interesting to receive a breakdown of those figures and to see how many of those departing roles were part-time employees. It would be equally interesting to see whether the OBR will revise its forecast.

The NI threshold cliff edge discriminates against part-time jobs, raising costs disproportionately for sectors already having to absorb huge increases in the national minimum wage. It does not fit with the world of flexible, part-time or temporary labour. Remember, we are talking about 8.4 million people who are part-time employed. That is one quarter of our workforce. Amendments 3 and 12 would go some way to softening the blow of the new threshold cliff edge contained in Clause 2 and help protect these vital jobs, let alone the working people.

[Lord Ahmad of Wimbledon (Con)]

My Lords, briefly, I agree with much of what the noble Baroness, Lady Kramer, said. But again, to dwell on the coalition, she and I served in the same Government, so agreeing with her is not unusual for me.

I wanted to make a brief point. Both previous speakers highlighted the impact on the hospitality industry. The figures are quite startling. There will be an impact of about £1 billion on the industry itself, thereby impacting 750,000 workers. As we have just heard from the noble Lord, Lord Londesborough, the impacts of this are already being felt by an industry which is already challenged. We should look at this again. Perhaps in a later group when we talk about the importance of impact assessments it will again be underlined that we do not just need reviews. Doing the work beforehand, consulting and working with the industry is an essential prerequisite to ensure that these changes are not detrimental and lead to a depression of growth, which I know ultimately was not the intention of the Government, as they stated.

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

My Lords, usually I have a lot of sympathy and respect for the noble Baroness, Lady Kramer, and my noble friend Lord Londesborough. However, on this occasion I am going to disagree, first, because if you cut tax in one area, you are only going to have to raise it somewhere else. It might benefit the hospitality industry, but some other industry is going to suffer as a consequence.

--- Later in debate ---

[Lord Livermore (Lab)]

HMRC has provided a tax information note, as it does for all similar policy changes. The Government have no intention of publishing additional assessments.

[Lord Ahmad of Wimbledon (Con)]

My Lords, just to confirm, does the Minister honestly feel that that note is sufficient, given the importance of the issue we are debating?

[Lord Livermore (Lab)]

I believe that that note is in line with what we have done for similar policy changes.

National Insurance Contributions (Secondary Class 1 Contributions) Bill

Lord Ahmad of Wimbledon Excerpts

Committee stage
Wednesday 29th January 2025 Grand Committee

[Lord Ahmad of Wimbledon (Con)]

My Lords, I support my noble friend’s amendment and will speak briefly.

The Minister in the other place said that the Department for Education made an assessment of the impact of the rise in NICs on special educational needs. Bearing in mind the debate that we have already had on the lack of impact assessments, if an assessment has been made, it should be shared. We have already seen the disproportionate impact of VAT on independent schools and the impact that it is having on children with special educational needs. Again, this is tantamount to a double whammy. These children are among the most vulnerable in society.

I reflect on my time as a councillor in my local authority many years ago: the vital link and lifeline that these drivers provide, as my noble friend Lady Monckton has articulated so passionately and poignantly, are essential. I also reflect on the statement made by the Chief Secretary in the other place, which said that, when we are pursuing economic growth, these changes must permeate every element of society—I paraphrase—and every part of our country. How can impacting the most vulnerable contribute to any kind of sensible understanding of growth?

I was a Minister for a long time; perhaps that is why I am not counted alongside the dynamic duo, on my side of the Committee, of my noble friends Lady Neville-Rolfe and Lady Noakes. I say this to the Minister: one thing that Ministers in your Lordships’ House do is listen—the Minister is doing that—but that listening also turns into action. Many vulnerable groups, including those highlighted by my noble friend, are being impacted. As a minimum, surely we need engagement at this stage. After all, that is what we are all about: scrutiny, listening, reviewing and ensuring that, when it leaves the House, legislation is in a better state than when it got here. I appeal to the Minister, as a minimum, to engage and listen to some of these groups that my noble friend highlighted. Perhaps, through his intervention, the Government will think again.

[Viscount Goschen (Con)]

My Lords, the Committee is very much in the debt of my noble friend Lady Monckton for her having raised this important issue this afternoon, because it presents a microcosm of all the arguments around the Bill. It is a narrowly focused amendment that draws the Committee’s attention to one narrow measure—one small, but very important, part of our national life. It is therefore incumbent on the Minister to give a substantive answer, not just “We don’t do further impact assessments”, because I am not sure that there is widespread belief in the country about the impact assessment that the Treasury notes has been made. I do not believe that that gives sufficient confidence. It is a short, high-level note and, at the bottom of the electronic page, it asks, “Did you find this page helpful: yes or no?” I think that most Members of the Committee would reply in the negative.

It is important for the Minister to listen to an illustration of the effect that this Bill will have, as we have heard in previous groups of amendments, on the wider growth of our economy as well as on extremely vulnerable people, as was illustrated by my noble friend’s amendments. I very much look forward to the Minister’s detailed and substantive answer.

National Insurance Contributions (Secondary Class 1 Contributions) Bill

Lord Ahmad of Wimbledon Excerpts

Committee stage
Thursday 6th February 2025 Grand Committee

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

My Lords, the Government recognise the great value of UK higher education in creating opportunity and social mobility, as an engine for growth in our economy and in supporting local communities. The Budget provided £6.1 billion of support for core research and confirmed the Government’s commitment to the lifelong learning entitlement, a major reform to student finance that will expand access to high-quality, flexible education and training for adults throughout their working lives.

The Secretary of State for Education has also confirmed that maximum fees will rise in the academic year 2025-26 for the first time since 2017, from £9,250 to £9,535 for a standard full-time undergraduate course. This was a difficult decision that demonstrates that the Government are serious about the need to put our world-leading higher education sector on a secure footing. The noble Lord, Lord Sharkey, asked for some specific figures in terms of the additional funding; I will happily write to him with those.

This amendment would, however, introduce new pressures that would have to be met by either higher borrowing, lower spending or alternative revenue-raising measures. In addition, creating new thresholds or rates based on what sector a business is in would introduce distortion and additional complexity into the tax system. Likewise, delaying commencement of this Bill would reduce the revenue generated from it and, as with the previous amendment, would therefore require either higher borrowing, lower public spending or alternative revenue-raising measures.

The Government carefully consider the impacts of all policies, of course, including the changes to employer national insurance. As I have said in previous days of this Committee, 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 previous changes to taxation, and the Government do not intend to provide further impact assessments.

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

[Lord Ahmad of Wimbledon (Con)]

My Lords, before he sits down, would the Minister care to comment on the impact—indeed, the double whammy—of taxation for the independent school sector? After assessing the imposition of that, it is now going to be impacted by national insurance too. Can he also comment on the impact on the teachers in terms of pension provision?

[Lord Livermore (Lab)]

I apologise—I did not catch the start of the noble Lord’s question. I am not quite sure what the question is.

[Lord Ahmad of Wimbledon (Con)]

The Minister did not comment on the impact on the independent schools sector, which is already reeling from the impact of the VAT that has been imposed on it and the assessments that have been made, including independent schools talking about pension provisions for teachers.

[Lord Livermore (Lab)]

I am not sure that I would share that characterisation from the noble Lord of the VAT policy. We have published an impact assessment for both that policy and this policy. We have no intention of publishing further impact assessments.

National Insurance Contributions (Secondary Class 1 Contributions) Bill

Lord Ahmad of Wimbledon Excerpts

Report stage
Tuesday 25th February 2025 Lords Chamber

[Baroness Fraser of Craigmaddie (Con)]

My Lords, I am not an economist, but I run a small Scottish charity that provides health services. I want to come back on some of the points raised.

I wish the noble Lord, Lord Eatwell, the noble Viscount, Lord Chandos, and even the noble Lord, Lord Macpherson, had had the recess that I have just had—looking at our employees, some of whom have been with us for over 20 years and are highly trained clinical specialists, and telling them that their roles are under threat of redundancy. As I said at an earlier stage of this Bill, I have not been able to participate in it as much as I would have wished because of its effects on my organisation, which are that people will lose their jobs and organisations will lose skill. Those are very difficult things to build up again.

Like the noble and learned Lord, Lord Wallace, I have been in touch with the Coalition of Care and Support Providers in Scotland. I am slightly concerned that these amendments do not cover health and social care services in Scotland. If he is to bring back an amendment at Third Reading, I will happily work with him on it.

I would love a simpler tax regime and would absolutely support it. The way to have one is not to have this national insurance increase—that would be very simple. The lists covered by these amendments are all of organisations that support public services and the public sector. These are services that many government agencies are required to provide by law, yet they are farmed out to organisations such as ours, as well as to CrossReach, Ark and others.

Frustratingly, this demonstrates a huge lack of understanding by this Government of how these measures will affect vulnerable people—the people who these organisations support. My organisation, Cerebral Palsy Scotland, is a regulated, registered charity, so we cannot put up prices. Our raison d’être is to make our services available to the most vulnerable who cannot pay for them, and so we cannot put up our prices. Yes, we may have benefitted last year from paying slightly less employers’ or employee national insurance, but all our providers—the people who clean our centres, help us with IT, empty our sanitary bins, and things like that—employ people and they are all putting up their costs. Our costs are rising, our national insurance is rising, and because of the minimum wage increases at the same time, it is becoming more and more expensive for us to employ people. The only thing we can therefore do is to cut our cloth and employ fewer people.

I do not understand these measures. I support having lists of different sectors, because these are the sectors that are delivering support that gives people choice, quality of life and control over their lives, and that support the NHS and the social care sector, which would otherwise be stuck. This is a measure that will not save public services, as the Minister has told us it has been put in place to do, but that will, I am afraid, crush them.

[Lord Ahmad of Wimbledon (Con)]

My Lords, briefly, I support the amendment so ably tabled by the noble Baroness, Lady Barker. I pay tribute to her for her attentive nature during Committee. I say to the noble Lord, Lord Eatwell, that the fact there is this extensive list demonstrates once again the lack of an impact assessment, on which I implored the Minister in Committee.

I was a Minister for over 12 years. One thing you learn as a Minister is that, when taking a Bill through, you must consult with and speak to the sectors—you must talk to them and understand their challenges and then address those issues. Unfortunately, that had not been done. Take adult social care, where the impact is close to £1 billion. We may hear from the Minister that this has been addressed in the Budget, but it has not. The Nuffield Trust has said as much: the actual measures put forward in the Budget will be dwarfed by these contributions, and that is just in adult social care. Talk to community pharmacies and they will make a desperate plea, akin to what we have just heard from my noble friend, and say that they will have to shut. Why? Because they cannot afford to keep their employees.

Even at this late stage, I implore the Minister to listen, connect and communicate, and, I hope, to take on board some of the challenges and important concerns being put across in this House on behalf of the many different community services that will so desperately be impacted by these national insurance increases.

[Lord Leigh of Hurley (Con)]

My Lords, I am somewhat amazed by some of the arguments I have heard in this debate. The Bill is before us and we are a revising House. Our purpose is to debate the Bill, put forward amendments, debate the amendments and vote on them. The idea that we should not be changing this because we should not change the Budget is absurd; it defeats the whole purpose of having the House of Lords. We are a revising Chamber; we bring with us expertise and experience, which many of us would like to think assist the Government in their decisions, particularly when they make bad decisions—of which this is one.

The noble Lord, Lord Eatwell, talked about Adam Smith’s desire for simplicity, but he also wanted fairness. What has happened here is not fair. If the noble Lord consults the organisations with which I know he has been connected in the charitable and university sector, they will all say that this is a very unfair imposition on their modus operandi.

There is a reason why there are so many amendments. The first amendment is excellent, and passing it will deal with all the issues in one go. If it is not successful, other amendments will follow that will detail the sectors on which laws can focus their attention.

The noble Lords, Lord Eatwell and Lord Macpherson of Earl’s Court, and others may not have heard me in Committee, where I attempted to cost the various types of amendments, as well as the whole effect of the Bill, on the charitable sector. We have made attempts to detail them, and in other groups of amendments I will discuss those numbers and invite the Government to comment on them. The absolute total that the charitable sector itself has said that this would impact will be £1.4 billion, out of the alleged £22 billion black hole that the Government claim. We have made suggestions about how this may be recouped in other areas.

In Committee, I talked about the enormous damage that the Government are about to impact on the adult social care sector. It is utterly demotivating for the very many people, including me and others in this Chamber, who go out fundraising for such charities, doing our best to help those in need, only now to see the Government snatch it away in such a heartless manner.

In Committee, we discussed some of the big numbers. At that stage, I focused on social care and, as an example, the cost that Jewish Care faces—£1.1 million, which it does not have—to pay for this increase in national insurance. This time, I will discuss hospices, because I do not want to repeat what was said in Committee—albeit it was in Grand Committee and so did not allow us the opportunity to vote, which was extremely disappointing.

I will look at one hospice: Thames Hospice, which is close to Hurley. I was introduced to it by my then local MP, who is now my noble friend Lady May of your Lordships’ House. Its excellent CEO, Dr Rachael de Caux, is reported as explaining that it will now have to post a £1 million deficit and that the NI increases, together with the national minimum wage increases, will cost it £650,000. This is a charity that raises some £4 million from its fundraising, so that is a very material sum. As she herself memorably put it:

“The NHS is supposed to be from cradle to grave and what we have is from cradle to a few months before”


the grave.

Yes, a £100 million for the sector was announced before Christmas, but, as my noble friend Lord Howard of Lympne explained, it is a one-off spend over two years—actually, it is largely back-ended, with most of it in the second year—and restricted to capital sums. In fact, it is spread over 170 hospices, so it is a bit of an insult to claim that that is proper compensation.

Thames Hospice is looking to try to serve 400 people, mainly in their homes. I was very pleased to see that, in the amendment, proposed new paragraph (f) specifically covers those who are being cared for at home. As a charity, it is dependent on the local community for its generosity and financial support. The Government cover only about 30% of its costs, and the hospice has to raise £34,000 a day to provide all its services. The Government know that the demand for these sorts of services will grow. It is estimated that, in Thames Hospice’s catchment area alone, the overall demand for palliative and end-of-life care is expected to grow by at least 9% by 2030, with the number of deaths rising to 4,150 in 2030.

Perhaps the Minister can explain to Thames Hospice what it is expected to do, following this attack on hospices by the Government. Is it supposed to turn away people? Will it have to offer less care? It will see more people die in pain and agony, as it cannot offer the palliative care that it wishes to provide. I am sorry to be so graphic, but that is the choice for your Lordships’ House today. How can anyone hold their head up high if they walk through the Division Lobby seeking to cause such damage to the hospice sector?