National Insurance Contributions (Employer Pensions Contributions) Bill

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.

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.

I asked the Minister in Committee if there was any basis to the £2,000 limit other than the researchers’ suggestion to employers in the research commissioned by HM Revenue & Customs on attitudes to salary sacrifice, released in January 2024. Having reviewed the research, it appears that £2,000 is an arbitrary figure, if in some way linked to the median salary. The researchers contacted only 51 employers, of whom only 41 offered salary sacrifice. I believe that the total number of employers who offer salary sacrifice is around 290,000. Surely, only 51 employers is not a significant sample on which to base such an important change to the tax and pension systems.

Our amendment offers the Government a straightforward way out. By exempting basic rate taxpayers from the cap, we would align the policy with its stated objective. If the aim is to target higher earners, let us do precisely that. Let us not drag lower and middle earners into a measure that they were repeatedly told would not affect them. Lower savings today mean lower retirement incomes tomorrow, and lower retirement incomes tomorrow mean greater reliance on the state. That is neither fiscally prudent nor socially responsible.

This is closely related to another of my amendments in the group, Amendment 7, which would require that regulations made under Clauses 1 and 2 should explain the basis on which the Treasury considers certain employed earners to be higher earners for the purposes of the national insurance charge and how the contribution limit reflects that assessment in Great Britain and Northern Ireland. This amendment, which we also tabled in Committee, received a wholly inadequate response. I asked the Minister who in the Government’s view were higher earners. I asked for a number. Was it people on £50,000 a year or £60,000 a year? The Minister refused to give one. Indeed, he did not engage with the point at all. Remember, some basic rate taxpayers will be affected by this policy. They are not higher earners. The Government should be honest about that.

Amendment 7 seeks to ensure that when regulations are forthcoming—and there are a lot of them provided for in the Bill as it stands—the Treasury will do the right thing and explain how the regulations meet the policy intent of affecting only higher earners. It would not impose costs on the Treasury or affect how the policy works but would ensure that we get an explanation of how lower and medium-income workers are to be protected. That is the Government’s stated aim. If the Minister is confident that regulations will meet the Government’s own test, he should accept this amendment.

The final one of my amendments to which I wish to speak, Amendment 29, concerns SMEs and charities. Throughout the passage of this Bill, and in debates far beyond it, many of us have warned about the cumulative burden this Government are placing on smaller employers. Think about the Employment Rights Act, the minimum wage hikes, the spiralling business rates, U-turns and uncertainty, compliance and regulatory costs and, indeed, the previous NICs hike. The list goes on. Each item is a policy that damages small and medium-sized enterprises in our country. They include family firms, start-ups, local manufacturers, high-street shops, care providers and charity and community employers. They often do not have in-house tax teams or compliance departments. They do not have margins that allow them quietly to absorb new fiscal shocks. Many do not offer salary sacrifice, but some do and more may do so now that it is more in the public consciousness thanks to this change.

My amendment simply says that, where the employers are a small or medium-sized enterprise, or a charity or a social enterprise, the provisions of this clause should not apply. If the Government’s intent is to truly address behaviours concentrated in large corporates then they should have no difficulty accepting that smaller employers ought to be shielded.