Social Security (Class 2 National Insurance Contributions Increase of Threshold) Regulations 2022

Lord Tunnicliffe Excerpts

Tuesday 6th December 2022 Grand Committee

[Lord Davies of Brixton (Lab)]

My Lords, as a supporter and fan of national insurance, I did not want these regulations to pass unnoted. I am a believer in the national insurance system—I guess there are not many of us left—where people pay contributions and that provides entitlement to national insurance benefits.

It has been understood, from the beginning, that there are people in employment and people who are self-employed. For practical reasons, different sets of rules have to apply to each group of workers. Nevertheless, the objective should always be neutrality in the financial impact, otherwise it is bound to give rise to issues of financial arbitrage regarding being employed or self-employed. That is all well understood. I will avoid going off down the IR35 track; there will be plenty of other opportunities to pursue that.

On the face of it—I would be interested in the Minister’s views—this change might be seen as a move towards reducing inequality between the employed and self-employed. However, in practice, it increases the difference. The tell is the fact that there is a cost, in a normal year, of £100 million. In the context of the figures we have seen in recent Budgets, that is not an enormous sum, but it suggests that this is a move away from neutrality and that it further increases the advantages that people perceive in being self-employed as opposed to being employed, with all the problems that flow from that. The background to this is clearly the extent of the acknowledged problem of fake self-employment for financial reasons. Perhaps the Minister would indicate, in broad terms, quite how this change fits in with what I hope is an understanding that there should not be excessive financial advantages in being self-employed.

I heard what the Minister said about the changes to entitlement to benefits. I emphasise that, in achieving neutrality between employed and self-employed contributions, there should equally be neutrality between the benefits paid to people who have paid the different types of contribution.

[Lord Tunnicliffe (Lab)]

My Lords, I welcome the Minister’s introduction of these technical amendments by His Majesty’s Revenue & Customs. As she outlined, the practical impact is to implement the self-employment element of the Government’s commitment to align the trigger points for national insurance contributions with the income tax personal allowance. The SI will also ensure that individuals with profits at or above the existing small profits threshold but below the lower profits threshold are treated as if they have paid class 2 NICs. This will ensure that those individuals continue to be eligible for the contributory benefits, which is hugely important. We will not oppose the regulations, as they provide some much-needed help for self-employed people in the face of the current inflation crisis and probable recession.