National Insurance Contributions (Employer Pensions Contributions) Bill

Lord Leigh of Hurley Excerpts

2nd reading
Wednesday 4th February 2026 Lords Chamber

[Lord Leigh of Hurley (Con)]

My Lords, it is always a pleasure and a challenge to follow the noble Lord, Lord Davies of Brixton, but I welcome his remarks.

This is the second attempt by the Government to raise money by stealth through national insurance—first on workers, now on savers. Your Lordships will recall the disaster of the last Bill to try to do this and its wrecking effect on the UK economy, so let us have a look at these proposals and the impact they may have.

We are, of course, aware of the Government’s need for cash, not least for their out-of-control welfare bill. Spending on health and disability benefits alone is forecast to reach nearly £100 billion by 2030, and the CSJ shows that around 6.2 million full-time workers—roughly one in four—would now be financially better off on benefits than in work, when you take tax into account. It is a shame that the PM could not stand up to his Back-Bench colleagues and deliver the necessary reform on welfare. As a result, the Government are scrapping around with initiatives such as this, which will have a potentially disastrous effect on people’s desire and ability to save for their pension. It is not just the numbers; it is the message.

This Bill simply punishes people who are trying to do the right thing. We were told by Labour that it would not raise taxes on working people, so perhaps the Minister can explain how this fits in with that commitment, given that the NI will come straight out of people’s salaries, including the salaries of people who are, frankly, on quite modest incomes.

The Bill hits the regular taxpayer very hard. It follows the retrospective tax changes on pensions whereby this Government applied inheritance tax on private pensions. Needless to say, the main group of people not affected by those changes are, of course, those who work in the public sector and, in particular, the Civil Service. The Minister used the word “fair” a lot in his opening remarks, but does he not see how unfair this Bill is? While civil servants’ pensions are protected for life—and, indeed, often for their spouses—the Bill does not impact them at all. It is only those working in the private sector—typically, by the way, much more so on middle incomes than higher incomes—who get attacked by the Bill.

Why are the Government making it so much harder for private sector employers to contribute to the pensions of their employees? Does the Minister recognise that it is the private sector employee who will have to fund the unfunded £1.5 trillion liability of public sector pensions? Perhaps it is because there is so little private sector expertise on the Front Bench, with the notable exception of both Ministers sitting there tonight. The amount raised by the Bill peaks at £4.845 billion in 2029-30 but then, according to the Red Book, falls to £2.585 billion in the following year.

We are told that this is due to behavioural changes. However, I cannot find any explanation as to what this might mean. Could the Minister please elaborate: what behavioural changes? In his opening remarks, I think he referred to no changes in savings behaviour, so how is this extremely dramatic fall explained? Is it a coincidence that the amount generated peaks in 2029-30, which is the year that counts for the Chancellor’s fiscal rule and possibly the year of an election? Do the Government realise that taxpayers will feel that they are taking money out of their pockets just at that moment?

I commend to the Minister the representation from the Chartered Institute of Taxation, of which I am a qualified member. I do not have time to go through it all, but it is clear that the Bill does not explain what is meant by—as the noble Lord, Lord Davies of Brixton, mentioned—“optional remuneration arrangements”. In particular, greater clarity is needed as to which conversations between employer and employees regarding pay and pension provisions could give rise to optional remuneration arrangements.

As noble Lords may well be aware, there are two types of optional arrangements: type A, which the Bill clearly covers, and type B, which it does not. Is the Bill intended to cover type B optional payments, which new subsection (6A) sort of implies? This is a big subject and needs much more work before Committee so that we can all understand what the Government’s intentions are.

Likewise, insufficient thought has gone into how the ridiculous annual £2,000 limit would be applied to employees paid weekly or monthly and those with multiple employments. Has thought been given to the likely impact on some employees where employers might withdraw pension salary sacrifice schemes as an option? What do they do?

Finally, as the Minister knows, I am always happy to be of assistance to the Government and, in this respect, I am happy to discuss other ways of raising revenue in this area, as I have done, for example, in VAT. I would like to understand from the Minister what assessment has been made of the effect of a national insurance charge levied on self-employed and LLP partners, which seems to me to be fair and would raise substantial amounts of revenue. I do not expect an answer on that tonight. We had a debate on it in an Oral Question a few weeks ago. A noble Lord who is a KC suggested that doing so might frighten off the legal profession to other parts of the world. I am not convinced that that is a fair argument, and I would like to see the Treasury’s assessment, perhaps in writing at a later date.

In the meantime, I look forward to the answers to the questions I have raised and a detailed discussion of these issues in Committee, and I just hope the public are made aware of the real effects that the Bill will have on them.

National Insurance Contributions (Employer Pensions Contributions) Bill

Lord Leigh of Hurley Excerpts

Committee stage
Tuesday 24th February 2026 Grand Committee

[Baroness Neville-Rolfe (Con)]

My Lords, I am delighted to open proceedings with my noble friend Lord Altrincham on our first day in Committee and to be joined in this group by my noble friend Lord Leigh and the noble Baroness, Lady Altmann.

This is not a Bill we welcome. Contributors to research done by HMRC published last year were critical of all the hypothetical scenarios put forward by the Government, including the £2,000 cap, which I believe was seen as the most complicated option presented. This proposal will add to administrative burdens on business, as will become clear when we debate later amendments, especially where people have multiple jobs, start or change employment or vary what they do seasonally.

We are also greatly concerned that it will limit incentives to save, punish normal working people for making prudent and sensible decisions, and reduce pension adequacy. Pensions adequacy is one of the central long-term economic challenges facing this country and, under this Government, it is only set to get far worse. Today we are looking at another small nail in the coffin of such adequacy. Of course, the proposal was not in the Labour manifesto, which I think promised not to raise taxes on working people.

The research by HMRC has shown that employers were seriously concerned that

“changing the pension system could inevitably cause confusion and risk people becoming more disengaged with pensions”.

Against this unsatisfactory background, Amendments 1 and 14 make a simple but very important clarification, which is to exempt basic rate taxpayers from the £2,000 cap. According to the Society of Pension Professionals, one-quarter of the people who enjoy salary sacrifice, and who will be hit by the changes that this Bill will bring in, are basic rate taxpayers. Around 850,000 basic rate taxpayers will be affected by the cap, with possibly greater numbers joining them, as the cap is not indexed. The Minister might dispute those specific numbers, but even he conceded at Second Reading that people earning under £30,000 would be affected by this change.

Not only does this contrast starkly with the Government’s stated ambition, as set out in the Explanatory Notes and by the Minister at Second Reading, to affect only higher earners; it also disproportionately affects lower-paid workers. Salary sacrifice, as we know, allows an employee to give up a portion of their pay so that it is paid directly into their pension. That does not just attract income tax relief, as all pension contributions do; it also enables national insurance contributions to be saved on the amount transferred. So it is the contribution that working people pay every month that lies at the heart of this issue. Higher rate taxpayers continue to benefit from relief related to their tax rate of 40%. Basic rate taxpayers benefit less, since their tax rate is only 20%. We are talking, on Treasury estimates, about 850,000 basic rate taxpayers.

For a basic rate taxpayer, the 8% national insurance loss amounts to two-fifths of the value of their income tax relief. In absolute terms, the marginal cost of this policy is four times higher for lower-paid workers than for those on higher incomes. The problem goes further: this is a harsher blow to certain groups of savers than many had anticipated, particularly those repaying student loans. That is why I very much support Amendment 3 in the name of my noble friend Lord Leigh, which would prevent those repaying student loans from being hit by a double whammy. I will leave it to him to explain the detail.

Graduates begin repaying their loans once earnings exceed £28,745, at a rate of 9% if they are on the plan 2 scheme. If the Bill is unamended, graduates using salary sacrifice will no longer see that 9% effectively redirected into their pension via salary sacrifice once they exceed the £2,000 cap. For those individuals, the effective loss is not just 8% in national insurance but 17% at the margin.

This comes at a time when the newspapers are full of furious comment about the high interest rates—inflation plus a huge 3%—payable on plan 2 loans. The announcement over the weekend by Kemi Badenoch to support a cut in the rate of interest charged on some student loans issued in the decade up to 2023 is therefore most welcome and is a clear step toward addressing this problem, which the Government, distressingly, seem content to live with.

The interaction between that major issue of public concern today and this Bill on salary sacrifice comes through clearly in a comment from the director of the Chartered Institute of Taxation. She said:

“The change will disproportionately affect basic rate taxpayers because they will pay at 8% NIC on contributions over the £2,000 cap, compared with a 2% charge on higher earners. It will also disproportionately impact those with student loans who earn above the repayment threshold, as they will have incurred an extra 9% student loan deduction from their pay”.


At a time when we are urging people to do the right thing—to save, to plan ahead and to take responsibility for their retirement—the Government are choosing to hit lower-paid workers harder. That is the unavoidable consequence of how this policy operates in practice.

Worse still, it falls most heavily on a younger generation who already face higher housing costs, who paid for their university education and who now find work taxed more heavily under this Government’s jobs tax—last year’s £25 billion NICs changes, which we discussed in this Room and which we rightly warned would devastate youth employment. Because that prediction has proved accurate, especially for young people, the Government would be wise to listen to the concerns aired today and outside and make changes to this Bill. It is ironic in a way that we are considering this at the same time as the Pension Schemes Bill, which is designed to improve pension saving and the incentive to save. We are doing the opposite here: making pension saving harder, less attractive and less fair.

Our amendments provide a simple solution for the Minister. By exempting basic rate taxpayers from coming under the cap, we would ensure that the Government’s stated aim is achieved and that we modify what is in effect a regressive tax. Our amendment offers a simple, targeted means of mitigating the harm that this policy will cause to some of the more financially vulnerable people in our society and I urge the Minister to accept it. If he cannot, he should explain to the Committee why his Government are choosing to disincentivise people from taking responsibility for their own future at precisely the moment when state pensions are under significant strain, which is set to intensify in the years ahead. Lower savings today means lower retirement income tomorrow and greater reliance on the state for future needs.

I turn to my Amendments 2 and 15, which ask the Minister a very simple question. What precisely does the Treasury mean by a “higher earner”? Throughout the passage of this Bill, the Government have repeatedly justified this policy on the basis that it is targeted at higher earners. At Second Reading, the noble Lord, Lord Livermore, described the reforms as “fair and balanced” and said that they,

“protect lower and middle earners”.—[Official Report, 4/2/26; col. 1684.]

Similarly, the Explanatory Notes state plainly that the Bill

“limits the NICs relief available to higher earners”.

Those are the Government’s words, but nowhere in the Bill, in the Explanatory Notes or in the Minister’s speech is the term “higher earner” actually defined.

That is a serious matter, because the practical effect of this policy suggests that it reaches well beyond any intuitive understanding of what a “higher earner” might be. The Minister has already acknowledged that individuals earning £30,000 and below will be affected. Industry experts have warned that those earning between £30,000 and £60,000 are likely to feel the impact most acutely. Median earnings in the UK are around £37,000 and, in London, they are £10,000 greater. Given this, who are these “higher earners” to whom the Treasury refers?

Since the election, we have heard a succession of phrases from the Treasury: working people, ordinary earners, higher earners. The language shifts, but what has remained constant is the refusal to define these terms. When this House considered the national insurance Bill last year, we warned that the burden would ultimately fall on working people. That proved correct; and the same risk arises here that rhetoric about protecting lower and middle earners does not align with the actual distributional impact of the policy, and the Government are allowed to get away with it because they never set the goalposts in the first place. If the Government’s objective is generally to protect those on lower and middle incomes, that objective must be capable of scrutiny. Scrutiny requires definition. Without definition, we cannot assess whether the Government are meeting their own stated aims. That seems a basic requirement of transparency in fiscal policy-making. I look forward to the debate, and I beg to move.

[Lord Leigh of Hurley (Con)]

My Lords, I shall congratulate my noble friends Lady Neville-Rolfe and Lord Altrincham and the noble Baroness, Lady Altmann, on Amendments 1 and 2, then I will speak to my Amendments 3 and 16.

This Bill has a number of disadvantages to the economy and society, as it penalises pension saving and retirement security while, of course, leading to higher costs and a higher administrative burden for employers. It may also lead to some employers reducing pension generosity or even scrapping salary sacrifice schemes altogether, so it may well discourage and disincentivise good behaviour. One has to question whether the limited expected tax yield justifies the cost, particularly as we know that behavioural response will reduce the amount of tax generated, and it simply is not fair for many people, disproportionately affecting certain groups such as savers and lower-income earners.

However, the Government cannot argue that it was in their manifesto, because it was not. In fact, it was the reverse—the manifesto pledged no increases in tax, including national insurance. We can argue that it is important that we have a very good look at certain aspects of this Bill and try to point out its shortcomings, together with making some constructive and, I hope, helpful amendments. After all, it looks like some 44% of employees using salary sacrifice for pensions will be impacted by this measure. It is important that we look at the Bill in detail, as the Society of Pension Professionals—SPP—has warned the Government that planned restrictions to salary sacrifice could reduce retirement saving and increase costs for hundreds of thousands of employers and millions of workers. The SPP has warned that the changes are likely to reduce pension savings at a time when government figures already show that 15 million people are not saving enough for adequate retirement; that rises to 25 million if the state pension triple lock is removed.

The Reward and Employee Benefits Association has warned that this Bill will put strain on businesses and push millions of people into poorer retirement. In a survey it undertook, an overwhelming 99% of businesses said the organisation would be affected by the cap and 70% said this Bill would increase the administrative burden. Furthermore, a third of businesses expect the change will make it difficult for them to attract and retain talent. It has been described as a change from sleepwalking into a retirement crisis into speedwalking into one.

I appreciate that all I have said is somewhat of a preamble, but it needs to be said, and it will be said by me only once, although it applies to all the amendments we will discuss today and possibly on Thursday—although I gather the plan now is to curtail debate today if at all practical. Is the noble Lord waving at me? Does he not know either? Fair enough. I always pay attention to Government Whips waving at me.

I turn to Amendments 3 and 16—parallel amendments because of Northern Ireland—in my name and that of the noble Baroness, Lady Altmann. They deal with the complications this Bill brings in respect of student loans. I appreciate this is a little technical and complicated and may not be best resolved by debate in this Committee so much as by discussion between all relevant parties before Report. I thank my noble friend Lady Neville-Rolfe for setting me up to explain it all. I will do my best but, as I say, this may be a difficult format in which so to do.

--- Later in debate ---

[Baroness Kramer (LD)]

My Lords, I made my views on this Bill fairly clear at Second Reading, so I am going to try to observe the discipline of not repeating my Second Reading speech. I am sure that I will not be absolutely 100% on that, but I am going to try.

I want to look first at this group of amendments. Amendments 1, 2, 14 and 15 put forward by the noble Baroness, Lady Neville-Rolfe, are particularly relevant because I do not think that at Second Reading we came away with a clear understanding that basic rate taxpayers were going to be significantly caught by the changes in this Bill. The focus on higher earners— I agree very much that we need “higher earners” to be properly defined—leaves us with a mistaken impression. I hope very much that the Government will provide some degree of clarity—the noble Baroness, Lady Coffey, called for the evidence—on who is impacted and how they are impacted. We ought to have that information in front of us. I will be troubled if this captures people on basic rate tax, given the pressures that they already face.

I would like to focus much more strongly on Amendments 3 and 16, because I do not think that at any point at Second Reading we addressed the impact on graduates repaying student loans and the impact on their take-home pay. I want to thank a gentleman called Tim Camfield who did some calculations and forwarded them to me because, as I worked through his calculations, it seemed to me that he had to be right. He wrote in the context of reading a response from the OBR to what I understand was an FOI in which it said that it did not believe that the Bill had any impact on student loans. It seems to me that very evidently it does and we need to know that. If the Government do not intend it and are going to have a workaround that will prevent it, then frankly we need to know that as well.

We all know that students have been under extraordinary pressure and that the Government openly have frozen the starting repayment threshold, but this, in effect, if Tim Camfield and others are right, would be a backdoor, further blow to this group. Whenever people say “student loans” and you are a Liberal Democrat, it is important to say—and I do not want to give a speech on our new policy—that my party recognises its role in creating the student loan repayment scheme. But frankly, the scheme is so changed, and graduates are under such pressure, that we now recognise that it is broken. I will not go through our policies—they are extensive—to completely reform that system.

I look now to the Minister to give us some real clarity, both on who is impacted and how extensively—how a normal person might read that as being an ordinary worker on a relatively modest income, rather than just a higher earner—and on the issue of student loans. I have some information on the distributional analysis that I will use in group 3 but, on the principle of trying not to repeat myself constantly, I will wait until then.

[Lord Leigh of Hurley (Con)]

My Lords, prompted as I am by my noble friend Lord Mackinlay, may I just take a moment to remind the Committee that I am a member by qualification of the Chartered Institute of Taxation and have received very helpful briefings from it?

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

My Lords, it is a great pleasure to respond to the debate on this first group of amendments. I thank all noble Lords who have contributed.

This first set of amendments, in the names of the noble Baronesses, Lady Neville-Rolfe and Lady Altmann, and the noble Lord, Lord Altrincham, seeks to exempt basic rate taxpayers from the Bill. I have listened closely to the points raised and the concerns expressed during this debate. The Government have ensured that the measures in the Bill do not affect the majority of basic rate taxpayers. Around 74% of basic rate taxpayers currently using salary sacrifice will be protected by the £2,000 cap, and almost all—95%—of those earning £30,000 or less will be protected. The small number of basic rate taxpayers with contributions above £2,000 will continue to benefit from employee national insurance relief, worth £160 a year, in addition to the full income tax relief that they receive on their pension contributions. Of the small number basic rate taxpayers who are impacted, half will face an annual additional national insurance contributions liability of less than £50.

While we recognise the intention behind the amendments laid by the noble Baronesses, Lady Neville-Rolfe and Lady Altmann, and the noble Lord, Lord Altrincham, exempting basic rate taxpayers would, in practice, be operationally challenging and add significant further complexity to the tax system. That is because the tax system can confirm which band an individual is in only at the end of a tax year, when reconciliation of their income tax liabilities has taken place. Adding complexity to the system would also likely lead to an increase in costs for employers, as they would be required to bear the burden of identifying the full extent of their employees’ potentially multiple sources of income.

This leads me to the amendments in the names of the noble Baroness, Lady Neville-Rolfe, and the noble Lord, Lord Altrincham, which seek clarity on the basis on which the Government consider certain employed earners to be “higher earners” for the purposes of the national insurance charge, as well as how the contributions limit reflects that assessment. The Explanatory Notes set out that the policy rationale is to limit

“the NICs relief available to higher earners on employer pension contributions made through salary sacrifice arrangements whilst protecting lower earning pension savers by introducing a £2,000 threshold. Most employees and their employers who make typical pensions contributions via salary sacrifice will be unaffected”.

This is indeed the effect of the Bill. Some 87% of pension contributions made via salary sacrifice above £2,000 are forecast to come from higher and additional rate taxpayers. Some 74% of basic rate taxpayers using salary sacrifice will be protected by the £2,000 cap, and almost all—95%—of those earning £30,000 or less will be protected.

Let me turn lastly to the amendments in this grouping tabled by the noble Lord, Lord Leigh of Hurley, and the noble Baroness, Lady Altmann. They seek to exempt salary sacrificed pension contributions over the limit from being included in student loan repayments definitions to employees making student loan repayments. The salary sacrifice changes made through the Bill equalise the national insurance contributions treatment of salary sacrifice above the cap with other types of employee pension contribution, which are counted as earnings when calculating student loan repayments.

There may or may not be good arguments for or against that, but we do not consider this Bill an appropriate vehicle through which to amend the basis of student loan repayments. The basis of calculating income from student loan repayments is set out in separate regulations, and we do not believe that this Bill should seek to vary that. It is also the case that, of employees making contributions via salary sacrifice, younger people are much more likely to be fully protected by the £2,000 cap than those over the age of 30. Some 76% of those in their 20s who use salary sacrifice are protected by the cap, compared to half of those aged 30 and above.

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

--- Later in debate ---

Moved by

[Lord Leigh of Hurley]

4: Clause 1, page 2, line 14, at end insert—
“(6DA) Contributions to pensions where employees are not offered alternative compensation are not to be treated as optional remuneration arrangements.”Member’s explanatory statement
Where an employee has the option of a cash allowance or additional pension contribution, that would be an optional remuneration arrangement. But where no cash alternative is offered then there is clearly no optional arrangement and this amendment would therefore make it exempt.

[Lord Leigh of Hurley (Con)]

The purpose of the Bill is to catch salary sacrifice schemes. As we discussed in the previous group, this is where an optional remuneration arrangement has been made, but there are instances when an increased pension could be offered to an employee and no option is offered for the cash increase in salary. That is the area that I am exploring in my amendments.

In these circumstances—according to the Labour Party’s manifesto, the drafting of the Bill and all the Explanatory Notes—I do not think there is an intention to change the national insurance treatment. Indeed, this is clarified in the policy background sections of the Explanatory Notes on the Bill issued by the Government. This amendment, tabled by me and the noble Baroness, Lady Altmann, seeks to make that clear and cannot be seen as controversial.

Amendment 4 is easier to explain than Amendment 3, so let me have a go. I accept that Amendment 3 is not easy to understand, and I am not sure I understood the Minister’s response to it. It would be very helpful if, before Report, he could clarify whether he agrees that, as I suggest in Amendment 3, the definition of earnings will be affected by the Bill, and whether the Government will address that issue.

The Bill is predicated on the definitions of optional remuneration arrangements. They can include company cars and—as the noble Baroness, Lady Coffey, said—assisted places in nursery, medical insurance and other areas, but the Bill makes it clear that we are focusing here on salary sacrifice. The reason for my amendment is that there may be some people who achieve an increase in pension contributions but not through salary sacrifice. In my view, an optional remuneration arrangement has not been properly scoped or defined for the purpose of the Bill.

Perhaps it is easiest to understand this concept when thinking about a new employee. Such a person will be negotiating their compensation with a potential employer. Let us say they are offered a salary of £50,000 and a £5,000 pension contribution. They might feel that this is insufficient payment and seek a higher salary. The employer could refuse that on the basis that all people of that rank in their organisation receive a sum of £50,000 and they have no flexibility—but they may offer an increased pension of £10,000 rather than £5,000 to reach an agreement. How is that negotiated figure of £10,000, which was previously £5,000, to be treated? What if the employer said, “I will reduce the salary to £45,000 and give you £15,000 in pension”? Is this an optional remuneration arrangement, particularly with a prospective, rather than actual, employee?

Similarly, let us look at termination settlements. An employee may receive a lump sum in lieu of any other claim and might be offered an excess amount over the normal £30,000 to be paid directly to the pension scheme. Is that an optional remuneration arrangement?

Let us consider something perhaps closer to home for the Minister: cases where collective bargaining takes place. There might be two offers on the table: one is for a 5% increase in pay but will keep employer pension contributions at 8%, and the other is for a 4% increase with an increased employer pension contribution of 10%. If the collective bargaining unions agree on the latter, are we to assume that this is an optional remuneration agreement? I would assume not, but it is not clear.

In the negotiations of remuneration, what if a person agrees with an employer that they will not take any increase in salary but they want a greater pension payment? That is not salary sacrifice—which is in the heading of the Bill and peppered throughout the definitions used in the Bill and the Explanatory Notes—but does it qualify as an optional remuneration arrangement?

This is a probing amendment to try to get some clarity into the Bill. Clarity is needed because there is so much in the Bill that, frankly, does not seem to have been considered as it relates to people’s working lives.

Amendment 33, in my name and that of the noble Baroness, Lady Altmann—and, yes, in this group—deals with the very difficult situation where a person has a number of employments. It seems a bit disappointing that the Bill does not address this obvious problem. Perhaps the draftsman had only one job—I do not know. National insurance contributions are typically calculated weekly or monthly for most employees, and calculated separately by different employers, assuming such employees are not part of the same group; if it is all one group company, it is done by one head office, typically.

The question arises: how will the £2,000 limit be applied across different periods and employments? This could be covered in regulation later, I suppose, which seems the Government’s favourite approach to much of legislation, but it is right to discuss this in Committee and encourage the Government to put their thinking cap on now to try to get it right so that there can be proper consultation and scrutiny before the legislation is enacted.

Where employees are paid monthly, should that employer apply 1/12th of the £2,000 to each month’s salary-sacrificed earnings or wait until the month in the year in which that amount has exceeded £2,000? Likewise, as the noble Lord, Lord Londesborough, questioned, what happens when an annual bonus is paid? Does that distort the £2,000, which I assume is for the year to 5 April? The bonus could be paid in May or June, completely distorting all the figures. If an employee changes employment part way through the year, how does that work in practice? Does the amount sacrificed in the old employment carry over to the new employment, or should the employee benefit from two separate caps, which will be the requirement for information to be passed from one employer to another? How will HMRC cope with this? Currently, no information exchanges are available.

Then, of course, there are a number of us—I include myself—who hold down more than one job at a time. I declare that interest, although I am not caught by the Bill. Will the £2,000 annual cap be split between each employment, or can employees benefit from two separate caps so that each employer can offer £2,000—which might encourage some slightly unexpected behaviour of people taking lots of jobs, or with subsidiaries or associates, as a clever avoidance trick? There is already incentive within the NI system to do this, as separate allowances exist for separate employers.

We also have to think about financial privacy here, as information would need to be shared across different employers. I raised earlier the problems facing us where an employee does not actually sacrifice salary but still makes a pension contribution, and it is not clear what happens if an employee enters into a bonus waiver in exchange for an increased employer pension contribution. It is complicated, because the employee has no legal rights to the bonus, so there is nothing to sacrifice. What is the Government’s view in these circumstances?

All in all, one can see an administrative nightmare all around. It would be extremely helpful if these issues could be addressed by the Treasury in guidance, setting out the basis on which the Treasury considers how the Bill will apply before it comes into force, hence my amendment.

While on my feet, I support the amendments tabled by the noble Lord, Lord Fuller, which seem pretty clever to me. I am somewhat annoyed I did not think of them myself, because it is pretty obvious when you read his amendments that it must be right—I am supposed be the chartered accountant—that there should be some spreading to allow for circumstances where one year was not a good year and another was. That seems only fair. I beg to move.

[Lord Fuller (Con)]

My Lords, I rise to speak to my Amendments 4A, 4B, 17A and 17B, and the associated review clause, Clause 29A. I will also speak to support Amendment 33 in the name of the noble Lord, Lord Leigh of Hurley.

Taken together, these amendments try to address the practical workability of proposals for employers with employees who have multiple employments and fluctuating income, and to ensure consistency with other parts of the taxation system while being consistent across Great Britian and Northern Ireland.

How easy it must be for the huddles of Ministers and civil servants sitting in their little meeting pods in that ground floor cafe at 1 Horse Guards—or perhaps dialling in from home, having taken the dog for a walk—to tinker with their spreadsheets and to come up with policies viewed through the lens of their personal experiences but which do not stand up in the real world. We have new tax policies that have damaged the national economy and growth. This Bill in particular, however, damages incentives for individual employees and companies for which they work; these are incentives to work hard, to climb the ladder, to improve yourself and to save for a secure retirement, and incentives for employers to attract the best talent.

As we have heard, it is not just the people on 100 grand that this policy affects—although it raises their marginal tax rate to 70% if they are paying off a student loan—it affects a whole raft of people. With the minimum wage now set at over £26,000, millions of ordinary hard-working people—the sort of people this Government say would escape higher taxation—will now be snared in this net, as the Daily Telegraph has reported. It amounts to a new tax on workers; this much we know. But my amendment focuses on the potential unfairness to a particular type of hard-working employee that makes it nearly impossible for their employers to administer it: an employee juggling several jobs.

How do the Government intend to deal with this and make fair the practical unintended consequences and perverse outcomes? Let us take the example of the employee who works several jobs. How will her employer know when or if she has maximally sacrificed her two salaries without reference to the other? That point was made very ably by the noble Lord, Lord Leigh of Hurley. The noble Lord also identified the privacy issues that come with this—which I wish I would have thought of.

Let us take another example, of an employee engaged in seasonal work who wants to save monthly into a pension on salary sacrifice. How does he set his regular contribution at the start of the year without knowing whether he will bust his allowance later on? In his winding on the previous group, the Minister said that you will never know the band until the end of the tax year--well, quite.

What about the employer who wants to do the right thing by his graduate employees and knows how difficult the job market is for them right now? Let us say he wants to attract the best talent by offering accelerated repayments of student loans by way of a salary sacrifice opportunity. We have a colleague in this House who is a graduate, and his graduate loan is running away; he is paying off £400 a month and still the debt is getting larger. We must help these people.

What about the youngster saving for a pension? As I said at Second Reading, my daughter’s boyfriend is no fat cat; he is living in a flat share with people he does not know in Brixton—I do not know whether the noble Lord, Lord Davies of Brixton, ever knocked on his door as I invited him to do at Second Reading. But ask his opinion on this and he will say that instead of improving his own financial security—and perhaps that of my daughter in due course—by reducing his dependence on the state in later life, his ability to save for his future and to progress now is weakened. These are practical and personal examples; each of them damages that incentive to work hard and save hard. That is bad enough.

However, this Bill further discriminates against the private sector worker who needs to save for his own retirement under the direct contribution system, when public sector employees have the taxpayer pitching in another 20% to their pot. The ham-fisted way this Bill ignores the real-life complexities for these real-life people and their real-life examples that exist outside the comfortable, monthly-paid final salary pension world shows how the Treasury views these things through its own particular lens.

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[Lord Livermore]

Obviously, I hear what the noble Baroness says.

The carryover feature of the pensions annual allowance, referenced in the justification for the amendments tabled by the noble Lord, Lord Fuller, sets the maximum amount of tax-relieved pension savings an individual can build up in a tax year without triggering a tax charge, which for most people is £60,000. The carryover feature is intended to accommodate one-off irregular spikes in pension saving or defined benefit accrual. The annual allowance carry-forward requires individuals to hold or obtain accurate records to track usage and eligibility and is not intended for day-to-day retirement planning. The Government do not consider it suitable to introduce a similar mechanism in the context of the cap on national insurance contribution-free pension saving in the Bill.

Before the detailed regulations that support the introduction of this change are finalised, HMRC will work closely with employers, payroll providers and software developers to ensure the policy operates smoothly for businesses and individuals. This engagement is not a formality. It is a necessary step to ensure that we collaboratively identify the best and most workable way to apply the £2,000 national insurance contributions-free limit, minimise administrative burdens and avoid unintended consequences, particularly for those whose earnings are spread across more than one employment.

Taking the time to engage properly and test implementation options is the best way to ensure that the policy works as intended from the outset. That is why the Government have committed sufficient time to work with stakeholders, up to and including the preparation of the important guidance for operation that the noble Lord, Lord Fuller, has raised in Amendment 29A.

On Amendment 29A, which proposes a reporting provision on the administrative cost borne by employers, I note that, upon the introduction of the Bill to Parliament, a tax information and impact note was published by the Government, setting out the impact of this policy’s operationalisation on employees and their employers. Supporting those who will implement this change within their organisations is vital, but we do not agree that that support should take the form of additional reporting requirements.

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

[Lord Leigh of Hurley (Con)]

My Lords, this debate has been very helpful because it has sort of blown a hole in the Bill. The noble Baroness, Lady Altmann, summed it up rightly: what has happened is that the Government started with the answer and then tried to find the question. In other words, they were desperately looking to find £4 billion from somewhere and came up with this random salary sacrifice idea. Why salary sacrifice? Why not say that NI on pensions does not apply over X amount and limit it that way? I am afraid that the Bill just does not work.

For example, in the case I raised about a new employee where an employer is negotiating over X amount of salary or Y amount of pension, is that a salary sacrifice? The Minister could not answer that. On the £2,000 cap, the Minister could not answer. He could not answer on the collective bargaining point or whether a bonus applies. On how we deal with multiple employments, I do not think that was satisfactorily answered. I also think that the spreading point was not satisfactorily answered.

I take the point that this provision is not scheduled to come in until April 2029. I respectfully make the point that we might all be busy then on other matters but, given that the earliest is April 2029, is it not right now to pause the Bill, work constructively with us and many others who have much greater knowledge, certainly than people on this Bench, and to think through how we might find a constructive way forward? Just hoping that we might get it right in regulation is bypassing democracy. It is the purpose of the House of Lords to examine Bills, make constructive suggestions, identify and highlight holes and issues, and seek to amend them. It is fair enough that this is what the Government want to do, but they have to be clear as to how it works before the Bill goes through.

I suspect the Government will find fierce opposition to the Bill as it is on Report from a large number of people in the House, so one would hope that the Government will pause, reflect, consider and consult—on the Bill, not in regulations—to enable us to get this right. The Minister is very good at putting himself in our shoes and has done so to some extent, and I hope that he will do so again in respect of these amendments. I particularly hope that Amendment 29A comes in, so that a future Chancellor can produce a report. I beg leave to withdraw Amendment 4.

Amendment 4 withdrawn.

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[Lord Leigh of Hurley (Con)]

My Lords, it is worth reminding ourselves that this legislation was prompted by a document published in May last year with this eye-catching title: Understanding the Attitudes and Behaviours of Employers Towards Salary Sacrifice for Pensions. It concluded:

“All the hypothetical scenarios explored in this research”,


including the £2,000 cap, were “viewed negatively” by those interviewed. It said that the changes would cause confusion, reduce benefits for employees and disincentivise saving for a pension. The report came to the conclusion that, of the three proposed hypothetical options for change, the £2,000 cap was no more than the least bad option.

As has been discussed here, even the OBR has stated that, in the first year in which this measure bites, there will be an estimated revenue of £4.48 billion from the Bill, but it will drop in the next year to £2.6 billion. That is a massive fall in revenue. Should HM Treasury not be worried about this? Should it not be asking itself, “How can we bring in something that leads to a drop in revenue of 50% in year 1?”? The taxpayer wants to know. Could an assessment be done of whether this is likely to be the case in some of the scenarios set out in these amendments—in particular, the £5,000 and the £10,000? I do not know this, because I do not have the resources to do that, but I suspect that, although bringing the cap in at £5,000 and £10,000 would not lead to the £4.48 billion in year 1, it would lead to a much more consistent figure in the subsequent years, for the long-term benefit of the country. As my noble friend Lord Mackinlay said, it will be a bit of a sugar rush and will force people to make most unfortunate changes in their patterns of savings, which the Government cannot be keen to see happen.

[Lord Livermore (Lab)]

My Lords, I am grateful to noble Lords who have spoken in this debate.

First, I will address Amendments 6, 10, 11, 13, 19, 22, 23 and 25 in the names of by the noble Baronesses, Lady Neville-Rolfe and Lady Kramer, and the noble Lords, Lord Altrincham and Lord Londesborough. These amendments seek to uprate the cap by the percentage change in the consumer prices index or the retail prices index. The Government agree on the need to keep the level of the cap under review to ensure that it continues to meet its policy objective: keeping the cost of salary sacrifice tax reliefs on a fiscally sustainable footing while protecting ordinary workers. However, we disagree with the approach set out in these amendments because it would be inconsistent with the approach taken in respect of other pension tax reliefs, which are not routinely indexed with inflation.

For example, in 2023, when the previous Government made changes to the annual allowance, they increased it by a set amount rather than indexing it; the annual allowance was otherwise not routinely uprated or index-linked. The Government are taking a pragmatic, balanced approach to ensuring that the cost of tax relief on salary sacrifice pension contributions remains fiscally sustainable. The future level of the cap in the next decade and beyond is for future Budgets in those decades.

This leads me on to Amendments 7 to 9, 20 and 21 in the names of the noble Baronesses, Lady Neville-Rolfe, Lady Kramer and Lady Altmann, and the noble Lords, Lord de Clifford and Lord Londesborough. These amendments seek to increase the cap beyond £2,000. It is important to consider the level of the cap in the wider context of the objectives of this change, which are about keeping the tax system on a sustainable footing while protecting ordinary workers. Without reform, the cost of this tax relief is now set to almost treble in cost, from £2.8 billion to £8 billion, with the vast majority of the benefit going to higher earners because around 62% of salary sacrifice contributions come from the top 20% of earners. Although some tax experts have called for pension salary sacrifice to be abolished entirely, the Government are taking a more measured and pragmatic approach.

As I said earlier this afternoon, the £2,000 cap protects 74% of basic rate taxpayers using salary sacrifice. This means that three-quarters of those earning up to £50,270 a year who use salary sacrifice will be protected by the cap. Almost all—95%—of those earning £30,000 or less who use salary sacrifice will be entirely unaffected by the changes. Some 87% of salary sacrifice contributions above the cap are forecast to be made by higher and additional rate taxpayers. Increasing the level of the cap in the way proposed by these amendments would cost additional money and would undermine the objective of putting this tax relief on a sustainable footing for the future. Such changes should also be considered in the wider context of pension tax relief, which amounts to more than £70 billion each year; that spend will be entirely unaffected by this legislation.

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

National Insurance Contributions (Employer Pensions Contributions) Bill

Lord Leigh of Hurley Excerpts

Report stage
Thursday 5th March 2026 Lords Chamber

For the sake of brevity, there are some amendments in this large group which I have not spoken to, such as that in the names of the noble Baroness, Lady Altmann, and the noble Lord, Lord de Clifford. I thank them for their engagement with the Bill throughout its stages and for their proposals today, all of which speak to the same concerns. The Minister has left a lot to be desired after Committee. We shall be listening carefully to his reply today. I beg to move.

[Lord Leigh of Hurley (Con)]

My Lords, I will speak to my amendment in this first group. Needless to say, I agree with everything my noble friend Lady Neville-Rolfe said from the Front Bench. This Bill is a most unfortunate Bill. It clearly has come about because the Chancellor has said to her officials, “I need £5 billion, can you find it now?”, and out of the bottom drawer has come a Bill which has been rejected by so many others. I do not think it was in the manifesto; it is just an opportunistic grab of people’s savings.

The Bill has most unfortunate side effects. As we will show in later amendments, it will not raise the £5 billion that the OBR has been led to believe it will. It will fall far short of that. Proof of that, of course, is in the fact that even the OBR recognises that that £5 billion will fall by half the following year, as people work out what is going on and take evasive action. The reason it will not raise £5 billion is that people will work out, well in advance of it coming into 2029, that there are simple ways round this Bill that already have been identified, and therefore will take pre-emptive action. We are stuck with a Bill that does not work, is not needed and, workers having been penalised by the national insurance increase, penalises savers. In particular, for some bizarre reason, it penalises students who have taken out loans. This is not a good time to be making these proposals.

The Minister, a few minutes ago, suggested that the Chancellor believes that people will be £1,000 a year better off by the time of the next election. Will they really? The Joseph Rowntree Foundation—no friends of mine—has said that when housing costs from rent and mortgage payments were factored into those figures, total disposable income would have risen by just £40 a year. No pandemic to rely on, no Brexit, no nothing—that is just what it is: £40 a year.

This is not the time to impose further hardship on people, in particular students. One benefit of a pension salary sacrifice can be to reduce earnings liable to national insurance for student loan repayment purposes, as the liability to repay student loans is, for employees, based on their earnings liable to national insurance. Frankly, there remains a lack of clarity about how the policy interacts with student loan repayment calculations, which are based on national insurance definitions of earnings. If salary sacrifice pension contributions above the cap are treated as earnings for NIC purposes, this will have knock-on effects for graduate repayment levels. It will mean higher effective repayments for some borrowers, reduced disposable income and a further distortion of incentives around pension savings. The Government have not yet provided sufficient clarity. My amendments seek to address that situation.

I am grateful to the national press, in particular the Times, for its support of this amendment. I hope later to be able to test the opinion of the House on it, unless the Government feel inclined to agree to it.

[Lord Ashcombe (Con)]

My Lords, this is a very large group with a number of issues to address. First, I support my noble friends Lady Neville-Rolfe and Lord Altrincham in Amendment 1 in this group. I remind the House that the Department for Work and Pensions has acknowledged that, as of 2025, around 14.6 million working-age people are undersaving for retirement. Many of these individuals will be basic rate taxpayers, though certainly not all, and some will not have access to salary sacrifice arrangements. This amendment would ensure that only higher taxpayers are affected by the proposed £2,000 cap on salary sacrifice schemes. As a result, no basic rate taxpayer would be drawn into what might only be described as a new trap.

In Committee, the noble Lord stated more than once that 74% of employees who pay only the basic rate of tax—currently applicable up to £50,270—and who benefit from a salary sacrifice scheme would be unaffected by the £2,000 limit before the national insurance becomes payable. However, this necessarily means that 26% would be affected, and no figure has been provided for how many people that represents. Percentages alone can be extremely misleading without the underlying numbers. Therefore, I would be grateful if the minister could inform the House how many employees fall within that 26%, so that we may properly understand the scale of those who stand to be impacted.

This brings me directly to Amendment 7, in asking the Government what the definition of a high earner is. The answer given in Committee was totally noncommittal. May I therefore ask the Minister, as my noble friend Lady Neville-Rolfe has, to be transparent and provide a clear number? Is the threshold £30,000, £50,000, or is it some other number? I do not think this is too much to ask.

As for Amendment 5 in the name of my noble friend Lord Leigh of Hurley and others, there are already many students—including my sons—caught by the student loans repayment scheme. To fleece this cohort of individuals even harder seems extraordinary if salary sacrifice payments are considered as part of their income. They will never have a sufficient pension and, no doubt, some future Government will have to pick up the pieces.

Next, I would like to address the size of the cap, which currently would be £2,000. As I have mentioned, the proposed limitation is simply too low. Moreover, it fails to take account of those employees who may, on occasion, receive an unexpected windfall which they wish to contribute to their pension through a salary sacrifice arrangement. Amendment 12 from the noble Baroness, Lady Kramer, provides for a £5,000 cap, which would give employees the opportunity not only to save more towards their retirement but also to avoid a substantial national insurance liability on such a windfall. Provided inflation remains under control, this is a far more realistic and workable figure. While I would prefer the figure to be £10,000, as in amendments in the name of the noble Baroness, Lady Altmann, I fear that that is a step too far.

The amendments in the name of the noble Lord, Lord de Clifford, and those in the names of my noble friends Lady Neville-Rolfe and Lord Altrincham both address another issue: the quiet but persistent impact of fiscal drag. This is one of the most insidious ways in which Governments raise revenue without taking any overt action. With such a modest cap set out in the Bill, it risks being rapidly eroded by inflation, placing an unnecessary burden on basic rate taxpayers—precisely the group for whom pension saving is the most vital to support. I very much support those amendments.

Finally, Amendments 16 and 27 concern the SME and charity sectors. Last week in Committee, I mentioned many recent legislative changes that these entities have had to face, including the cost of energy, which now appears to be heading even further in the wrong direction. Between Committee stage and now, this has become very personal, as one of my children working in the retail industry was made redundant yesterday due to all these excessive costs. This Bill has not yet hit. I truly wonder if the company will survive. The Bill is, surely, another nail in the coffin for many more employees and, I suspect, a number of companies and charities themselves. They simply do not have the wherewithal to weather these storms, yet this Government insist on piling on ever more expenses, not only through greater national insurance payments but substantial additional associated administration costs. They will need to hire external resources to handle this difficult and pernicious legislation. It will not surprise noble Lords to know that I very much support these amendments.

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[Lord Livermore (Lab)]

I think it does make the system fairer. We discussed this extensively at Second Reading and in Committee. The Government intend to make the system both fiscally sustainable and fairer, and I think that is exactly what we are doing with this legislation.

As I have said, the Government do not believe this Bill is the appropriate vehicle through which to amend the basis of student loan repayments. As the Prime Minister said last week, the Government inherited from the previous Government a broken student loan system, and we will look at ways to make that fairer.

I turn, finally, to Amendments 12, 13, 14, 15—

[Lord Leigh of Hurley (Con)]

With respect, that is exactly what the noble Baroness, Lady Kramer, has asked. The Minister has said that he did not say that, but he has just read it out.

[Lord Livermore (Lab)]

I was asked whether I was today saying we would do anything to this legislation; no, we will not. Will we look at how to make the system fairer? Yes, we will. I think those two things are perfectly consistent.

[Lord Leigh of Hurley (Con)]

With respect, at either Second Reading or in Committee—I think in Committee—there was a statement that there would not be in this legislation, but other legislation, changes to the definition of earnings for students to get around the problem in this Bill.

[Lord Livermore (Lab)]

That was not a commitment I gave. What I said in Committee, and say again today, is this is not the right Bill to change the student loan repayment system. We will, however, look at ways to make the system we inherited from the previous Government fairer. That remains the position.

I turn, finally, to Amendments 12, 13, 14, 15, 26, 27, and 28, tabled by the noble Baronesses, Lady Neville-Rolfe, Lady Altmann, and Lady Kramer, and the noble Lords, Lord Altrincham, Lord Londesborough and Lord de Clifford. These amendments seek to increase the value of the cap or to uprate the cap by the percentage change in the consumer prices index or retail prices index. The purpose of the Bill is to cap an unchecked relief which predominantly benefits higher and additional rate taxpayers while protecting ordinary workers using salary sacrifice to make pension contributions. All employees using salary sacrifice will still benefit from national insurance contributions relief on £2,000 of contributions made via salary sacrifice. For a basic rate taxpayer, this is an additional £160 of relief relative to employees who do not use salary sacrifice.

The Government will keep the level of the cap under review, but we do not agree with the approach set out in these amendments, which seeks to uprate the cap in line with inflation. Automatic indexation of the cap would introduce a mechanism inconsistent with the treatment of other major pension tax reliefs, which are not routinely indexed. The Government’s view remains that the future level of the cap in the next decade and beyond is for Budgets in those decades. In light of the positions I have set out, I hope noble Lords may feel able not to press their amendments.

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[Lord Mackinlay of Richborough (Con)]

My Lords, I am pleased to support my noble friend Lord Fuller, who has similarly reciprocated his enthusiasm for one of my amendments. Quite a few things come to mind in the amendment from my noble friend. One is the normality across other parts of the tax system. It is very normal, because life does not fit into a timeline of 6 April to 5 April every year. We could have a discussion about why we on earth we have 6 April to 5 April, but life does not fit within those dates completely cleanly. It changes on an annual basis: one might have a good year, then one might have a bad year. That is reflected in pension contributions for tax purposes. One is allowed to carry forward three years’ worth of unused allowance. Currently, £60,000 of pension contribution is allowable if relevant earnings are sufficient. In year 4, one could technically pay £240,000. It seems very normal, therefore, that we should apply a similar carry-forward of unused prior-year benefits, as my noble friend Lord Fuller has explained so eloquently.

The reason I have laid my Amendment 6 and Amendment 22, which is the mirror for Northern Ireland, is the total ambiguity that we heard in Committee last week. If this legislation has some flagship numbers and ideas, £2,000 comes to light as a key one. After the Minister was unable last week to assure the Committee whether this £2,000 was per employment or per employee, to manage for themselves, I have laid a very simple “beyond doubt” amendment so that we can perhaps flush out from the Minister what is intended. It will not be sufficient today merely to say that it will be sorted through regulation, advice and guidance in the future. We need this on the face of this Bill, because it is what the Bill is all about.

There are numerous thresholds in the national insurance regulations. We have the primary threshold; we have then the secondary thresholds; we have upper earnings limits; we have special thresholds for under-21s, for apprentices up to 25, for employees in freeports and for employers and employees in investment zones, and special exemptions for veterans. The employee need not worry about the complexity of those arrangements because they are all worked out by the employer on a per-employment basis. If an employee is in multiple employments, which is not uncommon these days—the circumstances might be, for example, that one was getting paid at the lower limit—the accumulation of benefits of national insurance payments, even though they may be at 0%, would apply across each of those employments, so, technically, no national insurance might be paid in certain circumstances. Surely, then, something similar will need to apply for these regulations and the £2,000 threshold. If it does not, we will have some extreme complications, which the Minister explained and said he wanted to avoid in respect of Amendment 1 on which we have just voted in favour. In opposing that amendment, his claim was about the complexity across employments and the employer not knowing whether the employee in question would be a basic rate taxpayer or a higher rate taxpayer. Similar complexity seems to be an ambiguity within this Bill, which I am now trying to solve. It surely must be per employment.

There is also an issue of GDPR. Why should a primary, secondary or tertiary employer have the right to know what an employee is earning elsewhere? That is a matter of secrecy, of privacy, of confidentiality and certainly of GDPR. If the idea within this legislation is that this is £2,000 per employee, I struggle to understand how the confidentiality that the employee is entitled to can possibly be allowed to stand. Perhaps this will come out in the rules and guidance later.

My amendment is one of ease, of getting this into the open now so that the complexity that would apply across multiple employments does not come to pass. We may otherwise be left with the grave fear that national insurance is going to become yet another tax. Many of us have thought for a long time that it really is a little bit of another tax, but its operation is very different, which makes it not a tax. We need to get this rounded down, because otherwise we will start to wonder whether the next stage, across all those different rates that I have described within the national insurance administration rules, is then going to apply for multiple employments, so national insurance becomes cumulative, a little bit like tax. That will be the fear: that to take national insurance as a new tax is the Government’s new plan.

As a chartered accountant and chartered tax adviser who is still practising, I could go on about this for some time. In brief, however, this legislation is a sledgehammer to crack a nut that does not even exist. As was so ably mentioned by the noble Lord, Lord Altrincham, why are we considering this today, on the basis of 51 replies out of 250,000 employers? Surely leave this a year or so, get a better sample—rather more than 51—so that we can base government ideas on some facts rather than on guesswork.

[Lord Leigh of Hurley (Con)]

My Lords, I shall speak principally to my Amendment 20 in respect of optional alternative arrangements. I thank the Minister for his letter of last night setting out the position on optional remuneration arrangements. I think it is fair to say that was already in the public domain and raises questions on second reading. The letter does not provide any illumination on interpretation of what an optional remuneration arrangement is in certain scenarios; we have discussed those scenarios at previous readings. Perhaps the one to highlight is collective bargaining. It is disappointing that there are not many Labour Peers here with a union background as there were earlier this afternoon.

Imagine a collective bargaining situation where there are two options on the table. First, a 5% pay increase with employer pension contributions staying at 8%, and, secondly, a 4% pay increase—lower than 5%—but with an increased employer pension contribution of 10%. If the workers take the latter option, is this an optional remuneration arrangement? I think, by the definitions given, that it is. Are the unions ready for this? Be assured that, if the Bill goes through, we will pursue this, and unions will find, to their horror, that their members are paying national insurance, which they did not think would be the case.

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[Lord Livermore (Lab)]

It sounds to me, although I realise it is an odd phrase to use because you are negotiating with yourself, that that is established as a negotiated contract and, therefore, that is not an option that arises for you after that contract is negotiated. I think that in the example the noble Lord gives it would not be, but obviously that will be set out very clearly in guidance going forward.

The Government’s view is that the Bill already draws the appropriate and proportionate boundary. It addresses arrangements involving a choice between cash and pension provision, while leaving ordinary, non-optional employer pension contributions wholly outside scope.

[Lord Leigh of Hurley (Con)]

Will the Minister clarify my question on collective bargaining? In view of his earlier comments, will he clarify the situation where a person moves company within a group, which is quite common? Is that a new employment for this purpose?

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Moved by

[Lord Leigh of Hurley]

5: Clause 1, page 2, line 14, at end insert—
“(6DA) In cases where the contribution limit is exceeded, regulations must make provisions for such amounts not be treated as earnings by virtue of the Education (Student Loans) (Repayment) Regulations 2009 (S.I. 2009/470), Part 4, Regulation 41.”Member's explanatory statement
Income for student loan purposes is defined on an NI basis. This amendment exempts salary sacrificed pension contributions over the limit from being included in student loan repayments definitions, and so aligns with other benefits in kind.

[Lord Leigh of Hurley (Con)]

I wish to test the opinion of the House because I do not think students can wait for subsequent legislation to be brought forward to this House, and there is a risk it might not be. Students need absolute clarity that they are not going to be punished unfairly by this Bill.

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Moved by

[Lord Leigh of Hurley]

21: Clause 2, page 3, line 26, at end insert—
“(6DA) In cases where the contribution limit is exceeded, regulations must make provisions for such amounts not be treated as earnings by virtue of the Education (Student Loans) (Repayment) Regulations 2009 (S.I. 2009/470), Part 4, Regulation 41.”Member's explanatory statement
Income for student loan purposes is defined on an NI basis. This amendment exempts salary sacrificed pension contributions over the limit from being included in student loan repayments definitions, and so aligns with other benefits in kind.

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[Lord Freyberg (CB)]

My Lords, I rise to support Amendment 31. It is of particular relevance to the creative industries and would require an independent review of the Act’s impact on small and medium-sized enterprises within 12 months of its passing. It would specifically require that review to examine the impact on those with “irregular remuneration”, “seasonal working patterns”, or “multiple employments”.

That language almost exactly describes the working pattern of a freelance editor, a set designer or an editor moving between short-term contracts across a year. Many of the production companies, commercial houses and independent studios that engage those workers are themselves SMEs. Amendment 31 would ensure that Parliament receives evidence of how the Act operates in practice for both the workers and the businesses that depend on them. I therefore urge the House to support it.

[Lord Leigh of Hurley (Con)]

My Lords, I support these amendments. I declare an interest in that I am involved with a number of small and medium-sized enterprises. These amendments mirror amendments that we tabled to the then Employment Rights Bill, because we thought that the Government wanted to help and protect small and medium-sized businesses. That turned out not to be the case, which was very disappointing. Representations were made, and have been made in this instance, by the bodies that represent such small businesses that they do not welcome this.