National Insurance Contributions (Secondary Class 1 Contributions) Bill

Lord Elliott of Mickle Fell Excerpts

2nd reading
Monday 6th January 2025 Lords Chamber

[Lord Elliott of Mickle Fell (Con)]

My Lords, I will focus on the impact of the Bill on employment and job creation. This is of particular concern to me in my role as president of the Jobs Foundation, as noted in the register.

Before the general election, the Government committed themselves to raising the employment rate to 80%, which, as the Minister knows from previous debates, I very much support and am keen to see achieved. This commitment to getting 2 million people into work was reaffirmed in December, in the Get Britain Working White Paper. I was encouraged when the Prime Minister said that:

“Getting Britain back to work is at the heart of my mission to grow the economy”.


Given that there are roughly 800,000 job vacancies at the moment, an additional 1.2 million new jobs need to be created to achieve this objective. It seems clear, however, that increasing national insurance contributions for employers will make it immensely more difficult for us to achieve this important target. This is not just my opinion; it seems to be the growing consensus.

The former chair of John Lewis, Sharon White, who is reputedly on the shortlist to be the next Cabinet Secretary, said that these measures

“will obviously affect jobs and wages”.

The research director of the Resolution Foundation, James Smith, said that:

“This is definitely a tax on working people, let’s be very clear about that”.


The restaurateur Tom Kerridge, one of 120 business leaders to back the Labour Party ahead of the general election, said on Sky News that the NIC changes would lead to

“a huge amount of closures”.

Toby Dicker, founder of the Salon Employers Association, said:

“I am angry and sad and shell-shocked. Our industry is totally done. We can’t afford it”.


Finally, James Reed, the CEO of recruitment firm Reed—a company already mentioned by my noble friend Lady Bray—said, “We’re going to cut hiring, we’re going to make people redundant, we’re not going to invest, we’re going to offshore jobs”.

Is it any wonder then that the most recent employment index from S&P Global UK showed that, excluding the hit from Covid, we have just seen the largest fall in UK hiring since 2009? This confirmed the OBR forecast that the measures in the Budget would reduce the employment rate.

The Bill therefore seems completely at odds with the Get Britain Working White Paper and the Government’s commitment to achieving an 80% employment rate. In light of these conflicting signals, will the Minister give us some clarity on whether the Government remain committed to achieving the 80% employment rate?

I conclude with an analogy shared with me by a business leader to whom I was talking shortly before Christmas. I was talking to him about the Get Britain Working White Paper, and he was enthusiastic to do his bit to help get 2 million people from welfare into work. He suggested that this national objective requires a new Dunkirk: that a huge flotilla of businesses is needed to come together to create the new jobs, provide the training and give people a much-needed step-up in life. I know that businesses across the UK are willing to be part of such a flotilla. Business leaders want to help the Government achieve their employment target, but the Government need to support a new business environment that will help businesses thrive and create these 1.2 million extra jobs.

The business leader then concluded his Dunkirk analogy by saying, “With the Budget and the increase in national insurance, it feels like the Government have smashed our rudders and blown up our motors”. I agree with him. The Bill does not help the national effort to get people back to work, which is why I hope the Government will reconsider these measures and instead prioritise getting Britain working.

National Insurance Contributions (Secondary Class 1 Contributions) Bill

Lord Elliott of Mickle Fell Excerpts

Report stage
Tuesday 25th February 2025 Lords Chamber

[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.

[Lord Elliott of Mickle Fell (Con)]

My Lords, I strongly support the amendments tabled by the noble Lord, Lord Londesborough, to protect small businesses with fewer than 25 employees from the increase in national insurance. Before I begin, I should declare my chairmanship of a small fintech company, as declared in the register.

I am particularly concerned about the impact of the national insurance rise on SMEs because they are the main vehicle for job creation. A 2022 report by the Ewing Marion Kauffman Foundation looked at the United States and found that, in 2019, companies in their first year created, on average, five jobs each, while companies older than that created, on average, just one new job every two years. A similar pattern can be found in the UK. Analysis by Santander of ONS data in 2018 showed that employment growth in SMEs was three times faster than in larger businesses in percentage terms.

The Government’s ambition in their Get Britain Working White Paper to increase the employment rate to 80% is laudable, and I very much support this objective as the president of the Jobs Foundation, again as declared in the register, but achieving this objective requires moving 2 million people from welfare into work. There are currently around 800,000 job vacancies in the economy, according to the ONS, so we need to create an additional 1.2 million jobs to achieve this target, and that will be very difficult with the employer NI rises. SMEs employ 16.6 million people in the economy, and small businesses, those which have between zero and 49 employees, provide 13 million jobs in the economy.

We should seize the national mission to get the employment rate back to pre-Covid levels. This target cannot be achieved if SMEs are not thriving. Therefore, I very much support the amendments to exempt smaller businesses from the increase in NI to enable them to fulfil their role as the biggest engine of job creation and, even more importantly, the biggest mechanism for poverty alleviation here in the UK.

[Baroness Neville-Rolfe (Con)]

My Lords, this has been a good debate and I rise to speak briefly. I listened carefully to the arguments put forward by the noble Baroness, Lady Kramer, for Amendment 2, and I commend the noble Baroness for championing part-time workers, as she has done during the passage of this Bill, much as my noble friend Lord Altrincham has been championing youth employment, which is also so important. She is right to raise the impact that the policy will have on jobs. We know that part-time workers are likely to be more at risk of losing their jobs or missing out on future opportunities as a result of this Bill, particularly as a result of the drop in the threshold, which is one of the proposals.

I also support the noble Baroness’s call for more information on the Government’s assessment of the impact of the Bill. I have tabled a review clause, which is in a later group, that goes wider than Amendment 36 and seeks to correct the Government’s failure to produce a proper impact assessment.

I should add that I have tabled Amendment 34—it has been put into this group—to increase the employment allowance available to farmers. Our farmers are hurting. “Starmer Farmer Harmer” signs are now a common sight on the country lanes of England, although I doubt many Ministers have seen them, but we will not press that amendment to a Division. We tabled that amendment to call on the Government, once again, to support our farmers and reverse the family farm tax, which is undermining, unfortunately, the long-term viability of British farming.