National Insurance Contributions (Employer Pensions Contributions) Bill

Lord Fuller Excerpts

Wednesday 4th February 2026 Lords Chamber

[Lord Fuller (Con)]

My Lords, it is not just a capitalist economy that runs on incentives; it is human nature to calibrate actions through the lens of what is in it for us. Encouraging people to work hard, succeed, earn their place in the world, and deliver safety and security for themselves and their families, while generating the taxes that sustain public services, is the right thing. But get that balance wrong by destroying the incentives to do the right thing, or set tax rates too high, and that leads to no tax at all. It is the Laffer curve in action, and Britain is being subjected to a whole-economy experiment on the Laffer curve. At every level, incentives to advance in the UK are being weakened, just as incentives in other countries become more attractive.

Behaviours do change. A close school friend and a substantial British taxpayer has just gone to live in Dubai. Someone in my electoral ward is buying a ranch in Montana, and expensively trained newly qualified doctors and nurses are moving to Australia. Our problem is so bad that, earlier this evening in your Lordships’ House, we had an emergency debate on emergency legislation.

What is the effect of this Bill on those who are left behind? First, it creates a glass ceiling on aspiration—on salaries approaching £100,000. But, as we have heard this evening, it is not just those salaries but middle-class professions that are affected, such as those found in the other place, and mechanics, timber merchants, solicitors and accountants—a whole raft of middle-class aspirational professions.

I am sure the Minister will talk about those with the broadest shoulders, but I will give the example of my daughter’s boyfriend, who works in the West End. He was so proud to come and tell us he had been awarded a £17,000 bonus from his business for having worked so hard and become so valuable to his firm, but I was astonished when he told us that he got to keep only just over £6,000 of that tidy sum. He is paying not 60% but nearly 70% because of the student loan. Why did he bother to work so hard? He has the broadest shoulders only in the sense that he plays rugby at the weekend, but he is no fat cat. He is 28 and at the start of his career. He lives in a flatshare with people he does not know in Brixton—perhaps the noble Lord, Lord Davies, could go round and knock on his door. He is just a young man working hard for long hours, trying to save for a deposit to climb the ladder and better himself.

But at least that option or incentive has been opened to my daughter’s boyfriend to sacrifice some of that bonus to salt away some money into his pension, well over 30 years away, so that one day he might be able to reduce his reliance on the state—and, yes, perhaps look after my daughter—but that option will be slammed shut by this Bill. Earning £17,000 to get around £6,000; that is not right. I say to the noble Lord, Lord Davies: that is what has been overcooked. How much more can the man be expected to give for having worked so hard? Of course, let us not forget his company, which will have had to chip in another £2,500 in its own NIC. It is not right for him, it is not right to drive the brightest and best overseas, and it is not right for our economy or the Exchequer in the long term.

I know that salary sacrifice is not for everyone, but it is for many. As we have heard, it incentivises people who are doing well at the start of their career to invest in themselves, with a second long-term return for the state by reducing their reliance on the taxpayer in later years—both the individual and the state co-investing in our collective future.

We know that limiting salary sacrifice will affect basic rate taxpayers more, pound for pound, than higher rate taxpayers, although I accept that the sums are larger for the higher earners. We have heard, and I confirm, that employers will withdraw pension salary sacrifice as an option altogether. It is going to complicate pensions and HR in companies that are already burdened with extra costs and onerous duties, and will potentially encourage undesirable optional remuneration agreements and avoidance schemes. Further, we will see few practical details around how that £2,000 limit will be applied to weekly and monthly paid employees, and those with multiple years.

Taken together, this Bill is just another example of bureaucratic, counterproductive, anti-growth, incentive-sapping policies: more taxes on employment, inexplicable investment-sapping taxes on private rather than public businesses, existential taxes on pubs, crippling carbon taxes on our heavy industries, discriminatory taxes on private, not public, pensions and—astonishingly—even new taxes on tomatoes that will disproportionately affect those with the smallest means. Now, with this Bill, there are new taxes to discourage people from doing the right thing. This insanity will impoverish us all and the Minister is creating a fresh black hole in his name. The Government will drive tax revenues down into the dirt and impoverish our nation.