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.