National Insurance Contributions (Secondary Class 1 Contributions) Bill

Lord Eatwell Excerpts

2nd reading
Monday 6th January 2025 Lords Chamber

[Lord Eatwell (Lab)]

My Lords, consideration of the Bill poses two serious economic questions. Regrettably, as one might have anticipated, neither was addressed by the noble Baroness speaking from the Front Bench for the Opposition. The first serious question is: should taxes be raised at all? She told us nothing either way. Secondly, if overall taxes are to be raised, should the increase take the form of the changes to employers’ national insurance outlined in the Bill, or should there be increases in other taxes? She said there should be others but told us not what they should be. How might the impact of differing tax strategies be compared? We heard nothing about these two fundamental questions that the House should address with respect to the Bill.

The issue of whether taxation should have been raised in the Budget by £40 billion, of which the national insurance increases contribute a little over half, is a question of overall fiscal balance and of the composition of the expenditure that the taxes are designed to finance. Those who argue that taxes should not have been raised must tell us whether, instead, borrowing should be increased on this scale or whether the expenditure outlined in the Budget should be cut. We can call the increased borrowing option the Liz Truss option and we can call the option of cutting the budget the austerity option. I am sure noble Lords will agree that we have heard enough, and had enough, of both those policies from the previous Government.

As everyone in this House must be aware, the increased expenditure outlined in the Budget is needed to begin the necessary repair of national infrastructure, debilitated after 14 years of persistent Tory neglect. I am aware that the party opposite has some difficulty with the arithmetic required to identify the £22 billion of unfunded commitments that are the result of its recent fiscal incontinence. It displays a strange form of intellectual or psychological denial—perhaps they should take counselling from the OBR.

The black chasm of economic failure is undeniable and obvious to all. The failure is inherent in the ever-longer NHS waiting lists and a GP service that is virtually non-existent in many parts of the country. The neglect of hospital buildings means that many are now so dilapidated as to constitute a danger to the occupants. The Budget allocates £25 billion over the next two years to start repairing those years of neglect, with £13.6 billion to invest in new buildings, equipment and technology—the largest capital investment in the NHS for over 15 years. Noble Lords of the party opposite should tell us whether they support that investment or not.

To take another example of the result of Tory neglect, consider the report of the Defence Committee in another place. What it describes as the “hollowing out” of Britain’s Armed Forces since 2010 has undermined UK war-fighting resilience. The British Army’s Regular Forces—currently about 75,000 troops—would, we are told, struggle to field even one war-ready division. That is the result of Conservative neglect of our military. The Budget increased defence spending in real terms by £2.9 billion for next year. Of course that is not enough, but it is a start, to begin repairing the damage.

I could go on. There are school buildings that are dangerous, prisoners released early because of insufficient investment in the prisons estate, court buildings in serious disrepair, our roads defined by the number of potholes, and local council budgets cut through and beyond the bone. Underinvestment and neglect of the public sector have been bywords of economic policy for the last 14 years, with capital budgets raided to fund current needs—and there, sitting opposite, is the guilty party. As all serious commentators appreciate, there is no quick fix for these problems, but the Labour Government have made a positive start in the Budget by increasing capital budgets for 2025-26 and onwards. Which of these investments would noble Lords opposite oppose?

We have heard all the standard excuses—the pandemic, Ukraine—but that will not wash when we recognise that, over the 14 Tory years, the UK suffered not only persistent public sector neglect but the lowest rate of private sector business investment in the UK. That is no accident. The cheerleaders of austerity depressed business confidence and their persistent neglect of the public sector—and public sector investment—confirmed those depressed expectations. Living standards stagnated and, without investment, growth in productivity—the fundamental key to improving living standards—was negligible. The only Conservative growth strategy was uncontrolled immigration.

So the first question is: was the budgeted increase in taxation necessary to start the long task of repair? The answer is undoubtedly “Yes, it was”. But now to the second question: was employers’ national insurance the right tax to choose? There is the obvious issue of Labour’s manifesto commitment not to increase the taxation of workers’ income. But, given both the necessity of raising taxation and the Government’s overriding objective of economic growth, let us leave the manifesto commitments aside and focus on the merits of choosing employers’ national insurance.

The key variables to secure increased growth are: efficient use of national resources, a boost to public and private investment and sustained growth of productivity. No one likes tax increases, even essential ones, but the key to investment is the confident expansion of growth of demand in a stable financial environment. The overall fiscal balance in this Budget will increase overall demand with a public sector injection of £24 billion in the next financial year and will ensure financial stability. But what of the impact of employers’ national insurance on the efficient use of resources, business costs and productivity? Here, the detailed economic analysis of the OBR provides us with a firm starting point for debate.

As all noble Lords are aware, the Conservative Government pursued a cheap labour policy, neglecting investment in skills—look what has happened to further education colleges—and relying on mass immigration to meet labour needs. This cheap labour policy de-incentivised labour-saving investment, hitting productivity growth hard. If we examine the impact of the employers’ national insurance rise, we see that the effect is quite the opposite. The OBR, in estimating the impact, assesses that firms will pass on most, but not all, of their higher tax costs to employees. Once the labour market settles down, the OBR estimates that 76% of the total cost is passed on through lower wages—that is called lower costs to business, by the way—leaving 24% of the cost to be borne by employers. Overall, the OBR expects firms to reduce the demand for labour, as we have heard.

These results will have two major advantages. First, as noble Lords are aware, there is a significant labour shortage in the UK at the moment, due in no small part to the large post-Covid withdrawals from the labour force. More efficient use of labour is highly desirable, while the overall fiscal balance will sustain aggregate employment levels. Secondly, an increased cost of labour will encourage firms to look for ways to reduce overall labour costs, economising on a scarce resource and increasing productivity. Combined with new employment rights and a higher minimum wage, the increase in employers’ national insurance will encourage investment in training and equipment, boosting productivity, especially in labour-intensive services where higher productivity is most needed.

Let us compare these outcomes with an alternative, such as increasing employees’ national insurance, or increasing income tax. That would have a direct impact on demand, reducing profitability, and there would be a reduction—probably quite a small one—in the supply of labour. There would be no incentive to increase productivity.

When noble Lords opposite actually come clean and tell us what their alternative proposals might be, they should compare them with the measures in this Bill, which will result in a relatively small increase in business costs, as the OBR points out, a more efficient use of labour and an increase in productivity.

In the face of 14 years of serious underinvestment in the foundations of economic growth—the health of the workforce, education and skills, transport, criminal justice and defence—increased taxation is a regrettable necessity. That the Chancellor has managed both to provide a fiscal boost and to stabilise government finances is to be applauded. That she has, by the measures outlined in this Bill, chosen a taxation strategy that will enhance the efficient use of labour and produce vital increases in productivity deserves not just high praise but the total support of this House.

National Insurance Contributions (Secondary Class 1 Contributions) Bill

Lord Eatwell Excerpts

Committee stage
Tuesday 21st January 2025 Grand Committee

[Lord Forsyth of Drumlean (Con)]

I would agree, but it would not provide for the costs of private patients, who are already paying over and above the odds because of the local authorities. I am not criticising the local authorities—in fairness to them, they simply do not have the money. More than three-quarters of councils’ budgets are going on social care, and the costs are going up. This is extending the cost, and therefore it will mean a greater burden on those people paying out of their own pockets.

[Lord Eatwell (Lab)]

When the noble Lord, Lord Forsyth, raised the issue of our meeting in Grand Committee—when the proposal was being discussed—and argued that votes could not be taken, I intervened and said that he was incorrect because I had won a vote in a Grand Committee many years ago. After a little research, I discovered that the noble Lord, Lord Forsyth, was right and I was wrong. The reason is that the Committee in which I won a vote was a Special Public Bill Committee. For those of your Lordships who have not encountered such a thing, a Special Public Bill Committee is exactly the same as a Grand Committee, except you have votes. It is designed to deal with Law Commission Bills. I apologise to the Committee for that error, and especially to the noble Lord, Lord Forsyth.

[Lord Forsyth of Drumlean (Con)]

The noble Lord was kind enough to write to me and apologise, and we always very much respect the courteous way in which he handles debates in our House.

[Lord Eatwell (Lab)]

That is very kind.

I turn to the amendment. One of the major failings of the UK tax system is its complexity. That complexity is a major source of tax avoidance—that is, the use of legal loopholes, often in ways totally unintended by the policymaker—to avoid tax. The real problem is the large number of exemptions—exemptions which riddle our taxation system and make it so susceptible to tax avoidance.

Increasing exemptions to a particular tax is the wrong way to deal with the perhaps real problems described by the noble Lords, Lord Scriven and Lord Forsyth. The right way is for the Government to target direct subsidy to those services that they wish to have funded. These proposals increase the number of exemptions in the tax system. I can assure the proposers that they will be gamed and will result in tax avoidance, which is totally outwith the intention of the proposers of the amendments. Several other amendments would also add exemptions to the tax system. We should not do it. It makes our tax system worse and more complex and it increases avoidance. The approach embodied in the amendments is a very bad idea.

[Lord Forsyth of Drumlean (Con)]

Before the noble Lord sits down, does not the Bill itself extend extensions, by changing the secondary threshold for class 1 contributions?

[Lord Eatwell (Lab)]

I agree, but adding more exemptions is adding to the pile. What we desperately need is a reform of our tax system that removes exemptions and forces Governments to make policy by deciding which goods and services they are going to subsidise.

[Baroness Noakes (Con)]

My Lords, I agree with the noble Lord, Lord Eatwell, on simplification of the tax system; indeed, I have made many speeches on that subject in the past. I also agree that as a matter of principle it is not good to layer exemptions on to any taxes, but we have to see here that the Government have chosen to use a very blunt instrument to raise taxes, so we are faced with a problem. Do we just accept this blunt instrument bludgeoning whole sectors of our community or do we try to make it a bit better? I think that, on grounds of public policy, it is reasonable to make exceptions in order to ameliorate the effect of a dangerously wide imposition of these additional taxes on employment.

--- Later in debate ---

[Lord Davies of Brixton (Lab)]

My Lords, this is such a contrast to previous years’ versions of this debate, when there would be myself and the noble Baroness, Lady Kramer, sat over there, and a handful on this side. It is really quite enjoyable to have a debate like this, but whether it is actually productive in any way I am not sure.

The problem we have is that veterans are like motherhood and apple pie. How can anyone oppose measures to assist veterans? Well, I can. There is a strange sense of déjà vu, because we had this debate in this Room two or three years ago when the last Government put forward proposals to exempt veterans. I cannot remember the details—you cannot remember everything we talk about here. However, we had the debate and discussion, and I expressed reservations about special measures for veterans. Do we have any information about what impact this has? I suspect it is a bit of tokenism.

[Lord Eatwell (Lab)]

My Lords, I wonder whether noble Lords who have been referring to national insurance growth as a jobs tax have actually read the OBR assessment of the impact of the Budget on employment. If they have not, I will quote it here. It states:

“The … boost to output from this Budget reduces the unemployment rate by 0.3 percentage points, equivalent to around 90,000 people, on average in 2025 and 2026. Compared to our March forecast, the unemployment rate is lower across most of the forecast, but is in line with its unchanged estimated structural rate by the forecast horizon”.


Why is it that the OBR, having considered carefully the impact of the increase in national insurance, has told us that the level of unemployment is going to fall, in its estimation?

The reason was spelled out beautifully by the noble Lord, Lord Layard, at Second Reading. Perhaps nobody listened carefully to a distinguished professor of economics setting out why the characterisation of the national insurance rise as a jobs tax is seriously misleading in economic terms.

I hope the Committee will forgive me if I repeat the argument of the noble Lord, Lord Layard. The cost to an employer of the increase in national insurance determines the choices that the employer will make with respect to the input of labour in the output that he or she can sell. The increase in national insurance will indeed tend to encourage employers to lower the labour input per unit of output: that is, it will increase productivity. The level of employment then depends on the amount of output.

The amount of output—the overall level of employment—is determined, as the OBR points out clearly in the piece I quoted, is determined by the overall fiscal balance, and this Budget injects £26 billion of extra spending into the economy. Therefore, the economies in employment made by individual employers are significantly offset by the overall level of demand in the economy, because it is that overall level that determines employment, not the individual decisions.

That is what Keynes taught us in 1936, which is why this characterisation of the national insurance charge as a jobs tax that will cause unemployment actually misses out the vital issue of what the revenues from the tax are used for. If they are used, as they are in this Budget, to increase expenditure, as my noble friend Lord Livermore pointed out in his scene-setting discussion, then employment may rise or fall depending on the fiscal balance—and the fiscal balance of this Budget, as the OBR points out, will reduce unemployment.

[Lord Forsyth of Drumlean (Con)]

That is a very ingenious argument, and I hesitate to argue with such a distinguished economist, but just think of what the noble Lord said. He said that the increase in the labour cost as a result of this tax being imposed will force employers to improve productivity, and the way you improve productivity is by sacking the worker and replacing them with a machine, or AI or some other system. It is a bit of sophistry to suggest that it is not a jobs tax because it will only mean that some people will lose their jobs and that the improved productivity may have an effect. As for basing his argument on the predictions of the OBR, I think unemployment went up today.

[Lord Eatwell (Lab)]

It did not. The level of employment went down, but unemployment is not measured by that.

[Lord Forsyth of Drumlean (Con)]

Indeed, but let us not get into that argument. What is the biggest problem facing the country? It is that more than 9 million people who are of working age and capable of working are not working. An argument that suggests that by making it more expensive to take people on, and then add to that—I am not making a Second Reading speech —employment protection, that this will not result in job losses and therefore is not a tax on employment is, even by the standards of great economists, stretching the argument too far. The consequence of this will be, as the noble Lord acknowledged, that some people will surely lose their jobs because employing them will become too expensive.

--- Later in debate ---

[Lord Forsyth of Drumlean (Con)]

My Lords, it is a great pleasure to follow the noble Viscount, Lord Chandos, who is very wise and diligent. For many years, we were together on the Economic Affairs Committee. I agree with him about the simplification of the tax system. Indeed, the Office of Tax Simplification was a recommendation from the tax commission that I chaired back in 2006 to George Osborne and David Cameron. It was implemented and, somehow, the Treasury managed to bog it down in a way that prevented it doing an effective job.

I agree entirely with the noble Lord, Lord Eatwell, that we need a simpler, fairer tax system. The simplest way of dealing with that would be not to have this increase at all because then there would not be the need to have these exemptions. This is a problem that has been created by the Chancellor and the Government. I must say, in speaking to these amendments, that Amendments 4, 5 and 8—

[Lord Eatwell (Lab)]

Okay, let us say that we do not have this measure at all. Is the noble Lord going to cover the expenditure by borrowing or is he not going to spend on the health service, care services and the areas set out by the Minister in his scene-setting remarks?

National Insurance Contributions (Secondary Class 1 Contributions) Bill

Lord Eatwell Excerpts

Committee stage
Wednesday 29th January 2025 Grand Committee

We need a lot of questions answered about what is happening in those segments of the business community. If the Government have that sort of analysis, they really ought to share it with Parliament. Indeed, if they have the analysis, and if they get their skates on and publish it fairly promptly, my amendment would not even delay the implementation of the national insurance changes. If they cannot provide the analysis, however, the Government need to ask themselves whether they are right to pursue this policy choice without understanding the detailed impacts—and Parliament needs to consider whether the Bill should come into effect in an information void.

[Lord Eatwell (Lab)]

My Lords, with respect to all the amendments in this group, with the exception of that of the noble Baroness, Lady Noakes, I repeat what I said last time: these amendments are designed to increase the complexity of the system and that is a very bad idea. I can assure noble Lords that, right now, tax-avoidance accountants are sharpening their pencils with glee at the possibility of more complexity being introduced into this structure. It is a very bad idea and we should not be doing it.

If we want to support small business, we should do it directly by deciding what subsidies or benefits should be given. Playing around with the tax system or, in this case, the national insurance system, is a bad idea. I will not say this again, because we have a series of other attempts to increase complexity coming in later amendments—so, please, let us not do this. It is bad for the tax system, bad for the national insurance system and a bad way to achieve the goals set out.

I now turn to the important amendment from the noble Baroness, Lady Noakes. The problem with it is that it is seriously underspecified. She does not say whether the examination of the effects of the national insurance changes should take place in the context of the pre-government Budget situation, or should take account of some measures in the Budget or of the Budget as a whole. If we take the Budget as a whole, the examination by the OBR shows that employment will increase over the relevant period. What the noble Baroness is doing is taking just one part of the actual economic package represented by the Budget and saying, “Let us look at this in isolation, even though this part funds the other part”—the expenditure decisions of the £26 billion injection of demand into the economy in the next fiscal year.

In that context, this amendment is seriously under- specified and impractical. We need to understand whether she wishes to look at just one side of the equation, how revenue is raised, or the other, how revenue is spent. Surely the correct thing to do is to put both together to see the overall impact of the policy represented by the Budget. I am afraid that the amendment is unsatisfactory, in that it is seriously underspecified.

[Baroness Noakes (Con)]

I will briefly respond to that. I am asking for an impact assessment of the Bill. The Bill does not incorporate the whole Budget; it incorporates one policy decision, which is the focus of my amendment. It is clear that I am open to drafting suggestions. I have already spent some time with the noble Lord today in another committee on drafting improvements and I am sure that, between us, we could come up with some better words.

National Insurance Contributions (Secondary Class 1 Contributions) Bill

Lord Eatwell Excerpts

Report stage
Tuesday 25th February 2025 Lords Chamber

[Lord Howard of Lympne (Con)]

My Lords, I am afraid that I too was unable to be present at the earlier stages of the Bill, but I rise to support this amendment—in particular, the provisions relating to hospices. These would have the same effect as later amendments in the name of my noble friend Lady Neville-Rolfe, to which I have also put my name. I draw attention to my entry in the register as vice-president and past chairman of Hospice UK.

The added burden that the increased contributions will place on the hospice sector are considerable. The extra cost has been estimated at no less than £34 million a year. St Christopher’s Hospice in south London has said that it will face increased costs of around £450,000 a year—equivalent to the cost of nine specialist nurses. Dorothy House hospice in Wiltshire estimates additional costs of £422,000 a year. The Kirkwood Hospice has had to put 33 roles at risk of redundancy, citing the increased national insurance costs as one of the drivers. Nottinghamshire Hospice is also proposing redundancies, again citing these extra costs as one of the factors.

These are just some of the examples of the devastating effect that these measures will have on hospice care. This is all so short-sighted. We all know that one of the major challenges facing the NHS is bed-blocking. As I have told your Lordships before, hospices can make a huge contribution to overcoming this challenge by looking after patients in the community, either in hospices or looked after by hospices at home. To make that contribution, hospices need more resources, not fewer, so this change will add to the challenges facing the NHS, not only directly in respect of its own employees but indirectly by diminishing the capacity of hospices to help.

The Minister will no doubt refer to the Government’s recent announcement that £100 million would be made available to hospices, and that is indeed welcome. But that money is for capital projects. Not a penny of it is available to defray the extra costs of the increase in national insurance contributions, which we are debating today, so it will have little or no effect on the crisis in hospice care that I have described.

I urge the Government to think long and hard about this amendment and to come up with a constructive solution.

[Lord Eatwell (Lab)]

My Lords, I find some difficulty in addressing this group of amendments, specifically because these amendments are but a part of 38—out of the total of 44—amendments in the Marshalled List that are essentially all the same. The 38 amendments all propose exemptions to the changes proposed in the Bill, or variations in the various thresholds at which employers’ national insurance is charged. All the amendments have the same internal logic: they are designed to reduce revenue. All 38 are the same; they vary only in the individuals, firms or groups that are to be exempted. The House will, of course, deem many of the individuals and groups not just worthy but really deserving of support.

I wish to address the 38 amendments collectively because they are the same. The Liberal Democrat Benches, notably with amendments associated with the noble Baroness, Lady Kramer, seek to exempt providers of care homes or domiciliary care, primary care providers, dentists, pharmacists, charitable providers of healthcare, hospice care, carers and part-time workers. She adds providers of education or childcare to children under five years of age, universities, providers of further or higher education, registered charities, housing associations, small or micro businesses, town councils, parish councils and businesses in the hospitality sector.

--- Later in debate ---

[Lord Hodgson of Astley Abbotts (Con)]

My Lords, I have not spoken on the Bill before but I add, very briefly, my support to the proposals from the noble Lord, Lord Londesborough. I have spent a lifetime in the city helping businesses grow—funding them, looking after them and developing them. They are vulnerable throughout, but they are particularly vulnerable in their early stages, which is the point of the noble Lord’s amendment.

With 25 people or fewer, it is easy to forget just how difficult it is, and how persistent an effort is needed, to get a business going, keep it going and to eventually grow it, hopefully, to a great size where it will employ people and increase the prosperity of the country. It is our feedstock—this is where I take issue with the noble Lord, Lord Eatwell, who served with me on a City regulatory body many years ago—and if you cut down the trees in any one year, those trees will never reappear. We shall have a smaller number of growing companies from the years when this proposal has its impact.

It is also surprising, when I hear debates in your Lordships’ House, how many Members cannot conceive of circumstances when the pay cheque will not turn up at the end of the month. A lifetime in public service insures you against that. But, if you run a business, you have to think every day about will happen at the end of the month. Will there be a call from the bank manager saying, “I’m very sorry, I’m not going to be able to meet your payroll”? When you have responsibility for other people, that ghastly pressure is increased by the sorts of measures the Government propose to take here.

I say to the Minister, very gently, that the phrase is: revenue is vanity, profit is stability, but cash is reality. In this Bill the Government are proposing to undermine the reality of the cash that is desperately needed by the very smallest among our companies.

[Lord Eatwell (Lab)]

My Lords, the amendments proposed by the noble Baroness, Lady Barker, are a classic example of how to distort a market. She wishes not only to exempt part-time employees from the measures in the Bill but to reduce the national insurance charge on part-time employees. She does not appear to have reflected on what would be the impact on full-time employees. How many full-time employees will, as a result of this measure, lose their jobs and be replaced by two or three part-time employees? How many companies will reach a cliff edge with respect to their employment policies that will ensure they develop only part-time employees, who often have fewer opportunities, and certainly fewer opportunities for promotion, than full-time employees? What has the noble Baroness got against full-time employment? We need an answer to that. Why is she so content to distort the labour market in this way?

With respect to the amendments proposed by the noble Lord, Lord Londesborough, I have greater sympathy with what he says, but he too is creating a cliff edge. The cliff edge is at 25 employees and it will considerably distort the operations of the market at that stage. It will discourage companies from growing above 25 employees. It will encourage the break-up of structures, so that units employ only 25 employees.

Most interestingly, the noble Lord asked for an impact assessment of the overall impact on employment of the measures in the Bill. There have been at least three—one by the National Institute of Economic and Social Research, another by the OBR and another by the Treasury. They all demonstrate that, taking the measures in the Budget as a whole, employment in the next year will increase, not diminish. The error which, I am afraid, the noble Lord made in his argument is that, yes indeed, because of higher employment costs, there may be a reduction in employment per unit output, but, because of the stimulation of aggregate demand in the Budget, there will be more units of output. So, not only will these measures encourage the growth of labour productivity by reducing the input of labour per unit output but the expenditure of these measures, through a technical device called a balanced budget multiplier, will increase the level of employment in the coming year. The impact assessment is there for all to see.

[Lord Blackwell (Con)]

My Lords, the noble Lord, Lord Eatwell, is a distinguished economist and I defer to his expertise, but I have to challenge him on the assertion that the measures in this Bill which raise national insurance are job creating. The Budget as a whole does not spend only the money raised through this tax; it spends another £40 billion a year, I believe—a total of £70 billion extra over each year of the course of the Parliament. Now, you have to assume that any measure that increases public spending by £70 billion a year will increase employment. It would be a strange measure that increased public expenditure without increasing employment. The difficulty is that all that employment increase will be in the public sector. The fact that this Government have to understand is that you have to earn wealth before you spend it and that compressing the wealth-creating part of the economy in order to spend on the public sector leads to financial disaster in the long run. So I do think his argument on that point needs to be challenged.

National Insurance Contributions (Secondary Class 1 Contributions) Bill

Lord Eatwell Excerpts

Report stage
Tuesday 25th February 2025 Lords Chamber

[Baroness Lawlor (Con)]

My Lords, I support my noble friend Lady Neville-Rolfe and will say a few words about my Amendment 42 on reviewing the impact of the Act one year on in respect of the different categories of employers in the business sector—small, medium and large.

This is needed given the worsening outlook for the UK economy and employment, which has been going from bad to worse month by month since, and in response to, the Budget. Unemployment figures are up. In the quarter ending December 2024, 1.56 million people of working age were unemployed and the UK unemployment rate was 4.4%. Unemployment levels have increased by 210,000 over the last year. Economic inactivity is also up. At the end of the last quarter of 2024, 9.29 million people aged 16 to 64 were economically inactive; the inactivity rate was 21.5%.

Jobs are being cut, as this month’s figures from S&P Global indicate. Data reveals that the decline in staffing numbers in February was the sharpest since November 2020. The chief business economist at S&P Global Market Intelligence explained that the data revealed that

“business activity remained largely stalled for a fourth successive month, with job losses mounting amid falling sales and rising costs … One in three companies reporting lower staffing levels directly linked the reduction to policies announced in last October’s Budget”.

The number of vacancies fell in the last quarter too, although they remain slightly above pandemic levels.

We want the Government to take responsibility for their actions and face up to the costs they have imposed on growth, productivity and employment and the impact on businesses, be they small, medium or large. I echo the comments of my noble friends throughout Committee that what we had on 14 November and the figures presented at the time of the Budget were inadequate in detailing the sort of impact this country is already facing. Employees’ lives and livelihoods are at stake.

[Lord Eatwell (Lab)]

My Lords, Amendment 38, as written, is econometrically impossible. This cannot be done unless we have further specification of what is to be done. For example, are we to look at the effect of these changes assuming that the Budget had not changed or to look at their effect taking into account the consequential effects of the Budget which were also dependent on the national insurance changes?

Then, there were other tax changes that took place at the time which were also dependent on the national insurance changes. Are they to be taken into account or not? At the moment, the amendment does not tell us. Any serious economist faced with this would say, “Sorry, I can’t do this unless you tell me what I have to take as the underlying conditions”.

Amendment 38 is seriously defective and cannot really be taken seriously as it stands because it simply does not specify the underlying circumstances within which the particular consequences of the changes in this Bill are to be assessed. Without that framework, it is simply not possible to do in any way—or, if you like, anybody could produce any result they like by assuming different background circumstances. So, I am afraid that Amendment 38 is underspecified and, as a piece of serious econometrics, impossible, because the framework is not specified for the amount of information required to perform the studies.

On Amendment 42, I was very struck by the request of the noble Baroness, Lady Lawlor, that the Government face up to their responsibilities. It would be really helpful if the Conservative Party faced up to the damage it has done to the British economy over the past 14 years and to the disaster it has inflicted on the British people, which the Labour Party is now desperately trying to repair in very difficult circumstances indeed.

Once again, the issue of the impact of employment and productivity depends on a whole series of other factors. Are they to be taken into account or not? How is the particular effect of the national insurance change to be examined? If they were independent, then you could do that by saying that the national insurance change has no relationship to other changes taking place in the economy and therefore we can isolate it. But that is not true; the national insurance change has direct effects on the other components of the Budget and has effects which are interdependent. Without specifying the framework in which this amendment is to be considered, it is a false exercise. You could sit down, make any assumptions you like and get any result you like, to be frank.

Although it would be very interesting to perform this exercise, I am afraid that these amendments are so defective that they cannot actually give the guidance as to the exercise to be performed. Therefore, it is entirely inappropriate for amendments such as these to be in the Bill.

[Lord Davies of Brixton (Lab)]

I have to confess a smidgen of support for the amendments in this group—but not nearly enough to make me vote for them. I am going to complain about a different lack of information that has been presented to this House in relation to the Bill.

The point is that it is a contribution Bill—a contribution to the National Insurance Fund. I pursue a somewhat quixotic and lonely quest to persuade people of the importance of the National Insurance Fund, the whole point of which is that it receives contributions, has reserves and pays benefits. Somewhat oddly, simultaneous to discussions of the money coming in, in the earlier stages of Report, there was a discussion in Grand Committee of the money going out. My complaint is that there has been no discussion of the state of the National Insurance Fund. I am very much in favour of such a discussion because it is a crucial element of our welfare state.

The problem is that the information is available. I have it in my hand: the Report by the Government Actuary on: The Draft Social Security Benefits Up-rating Order 2025; and The Draft Social Security (Contributions) (Rates, Limits and Thresholds Amendments, National Insurance Funds Payments and Extension of Veteran’s Relief) Regulations 2025. Noble Lords might ask, “What’s that got to do with the Bill?” It says on page 7:

“This report also includes the expected effect on the Fund of the National Insurance Contributions (Secondary Class 1 Contributions) Bill”.


This is information germane to our current discussions, but at no stage—I am sorry to complain to my noble friend the Minister—has this been adequately, or in any sense, discussed as part of an overall consideration about the state of the National Insurance Fund. That is my complaint, and I have got it off my chest.