National Insurance Contributions (Secondary Class 1 Contributions) Bill

Commons Amendments

Motion A

That this House do not insist on its Amendment 1, to which the Commons have disagreed for their Reason 1A.

1A: Because the Lords Amendment interferes with the public revenue, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

My Lords, in moving Motion A, I will speak also to Motions E, E1, H, H1, W and W1. Before I address these Motions directly, I will briefly set out why the Bill before your Lordships’ House is necessary.

Upon taking office, this Government inherited three distinct crises: a crisis in the public finances; a crisis in our public services; and a crisis in the cost of living. That included a £22 billion black hole in the public finances, public services at breaking point, NHS waiting lists at record levels, and working people suffering the worst cost of living crisis in a generation, with inflation having reached over 11%. Faced with this reality, any responsible Government would need to act. That is why we took action in the Budget to wipe the slate clean, to repair the public services, to protect working people and to invest in Britain. That included an historic investment of an additional £25.7 billion for the NHS, which is helping to bring down waiting lists more quickly and put an end to over a decade of underinvestment and neglect.

We took this action in the fairest way possible, by keeping our manifesto promises to working people not to increase their income tax, national insurance or VAT. However, we needed to take some very difficult decisions elsewhere on tax, including the changes to employer national insurance contributions contained in this Bill. Following this change, more than half of businesses with national insurance liabilities will see no change or will see their liabilities decrease, and 865,000 employers will now not pay any national insurance at all next year.

We have consistently acknowledged that some businesses will now contribute more and that the impacts will be felt beyond businesses. This was a difficult decision, but it was the right decision, because not acting was simply not an option. As a result of the decision, and others, taken in the Budget, we have created a foundation of stability on which we are now taking forward our agenda of growth and reform.

I now turn specifically to Amendments 1B and 5B, tabled by the noble Lord, Lord Scriven, and Amendment 8B, tabled by the noble Lord, Lord Londesborough. These amendments seek to include powers as part of this Bill to exempt certain groups from the changes to the employer national insurance rate and threshold in future. This includes powers to exempt from changes to the employer national insurance rate and threshold: care providers; NHS GP practices; NHS-commissioned dentists and pharmacists; charitable providers of health and care; and those providing hospice care. It includes powers to exempt businesses or organisations with fewer than 25 full-time employees from the change to the employer national insurance threshold.

The revenue raised from the measures in this Bill will play a critical role in repairing the public finances and rebuilding our public services. Clearly, any future changes which exempt certain groups from paying national insurance would have cost implications, necessitating either higher borrowing, lower spending, or alternative revenue-raising measures. For this reason, I respectfully ask noble Lords to withdraw Amendments 1B, 5B and 8B.

Amendment 21B, tabled by the noble Baroness, Lady Neville-Rolfe, seeks to require the Government to lay before Parliament a review of the impact of measures in this Bill on a number of sectors. The Government carefully consider the impacts of all policies, including the changes to employer national insurance. As I have said previously, an assessment of this policy has been published by HMRC in its tax information and impact note. The independent OBR’s Economic and Fiscal Outlook also sets out the expected macroeconomic impact of the changes to employer national insurance contributions. The Government and the OBR have therefore already outlined the impacts of this policy change. This approach is in line with previous changes to national insurance and previous similar changes to taxation, and the Government do not intend to provide further impact assessments. For this reason, I respectfully ask the noble Baroness not to press this amendment. I beg to move.

Motion A1 (as an amendment to Motion A)

At end insert “, and do propose Amendment 1B in lieu—

1B: After Clause 1, insert the following new Clause— “Exemptions from the changes made by section 1: NHS and social care (1) The Treasury may by regulations made by statutory instrument specify that certain categories of persons are exempted from the changes to the rate of secondary Class 1 contributions made by section 1 of this Act. (2) The categories of persons any of whom may be specified under subsection (1) are— (a) a person providing a care home service or a domiciliary support service who is regulated under— (i) Part 1 of the Health and Social Care Act 2008, or (ii) Part 1 of the Regulation and Inspection of Social Care (Wales) Act 2016; (b) a person providing a service who is regulated under section 47(1)(a) or (b) of the Public Services Reform (Scotland) Act 2010; (c) a person providing a care home service or domiciliary support service regulated under the Health and Personal Social Services (Quality, Improvement and Regulation) (Northern Ireland) Order 2003; (d) a person contracted to provide primary care under the provisions of— (i) Part 4 of the National Health Service Act 2006, (ii) Part 4 of the National Health Service (Wales) Act 2006, or (iii) sections 17J to 17O of the National Health Service (Scotland) Act 1978; (e) a person providing primary medical services through contractual arrangements with a Health and Social Services Board; (f) a person contracted to provide general dental services under the provisions of Part 2 of the National Health Service (General Dental Services) Regulations 1992; (g) a person providing general dental services under Part 2 of the General Dental Services (Northern Ireland) Regulations 1993; (h) a person contracted to provide pharmacy services under the provisions of— (i) Part 7 of the National Health Service Act 2006, or (ii) Part 8 of the NHS (Pharmaceutical and Local Pharmaceutical Services) Regulations 2013; (i) a person providing pharmaceutical services under Part 2 of the Pharmaceutical Services Regulations (Northern Ireland) 1997; (j) a charitable provider of health and care; (k) a provider of health and care registered as a charity by the Charity Commission for Northern Ireland; (l) a person providing hospice care whether in a hospice or elsewhere; (m) a carer to whom section 2(3A) of the National Insurance Contributions Act 2014 applies. (3) A statutory instrument containing regulations under this section may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.””

My Lords, on Report, this House passed Lords Amendment 1 and a number of consequential amendments to exempt NHS services and social care from the Government’s hike in employer national insurance contributions. I am grateful that the House agreed with these Benches that such a rise will have potentially devastating consequences for those that form the backbone of community healthcare and the people they serve. Despite the immense financial pressure that these vital services already face, and despite the clearly expressed views by this House, the Government have chosen to overturn our amendments in the Commons. We accept the Commons reasons that these amendments engage Commons financial privilege, and we will not seek to break with convention today by asking the House to look at alternative amendments that would produce the same response.

This brings me to Motion A1 in my name, which seeks to introduce Amendment 1B in lieu, and Motion E1, which seeks to introduce Amendment 5B in lieu. They look complicated, but they really are very simple. These amendments would introduce a regulation-making power to allow the Government, at a later stage, to exempt social care, pharmacists and other NHS services included in my original amendment. Noble Lords will know that I do not propose this lightly. We on these Benches are naturally suspicious of giving any Government such powers without full scrutiny provided in primary legislation, but we are so profoundly worried about the impact of the Bill on the NHS and social care.

My amendment seeks to address the deeply concerning implications of the national insurance contribution increases for our vital health and social care providers, NHS dentists, community pharmacists, hospices, GPs and social care organisations. The Government’s current approach to reimbursement, embedded in next year’s financial contract negotiations, will not solve the financial cliff edge and cash-flow issues many providers face. It is a damaging policy that will only exacerbate the existing financial crisis these sectors already face.

My Lords, it is with some regret that I do not insist on my Amendment 8 and its consequential amendments. I am disappointed that financial privilege has been invoked to prevent a full and proper debate in the other place on the potential damaging impact that reducing the class 2 secondary threshold by a brutal 45% will have on jobs and growth for small businesses and organisations employing fewer than 25 staff. I fear the Government will look back on 6 April, the day the new NICs regime kicks in, as a day of economic self-harm—a second April Fools’ Day, if you like.

I do propose to move Amendment 8B in lieu. In the spirit of pragmatism, my amendment, like that from the noble Lord, Lord Scriven, would simply bestow on the Treasury the power—through statutory instrument—to specify exemptions on the lowering of secondary class 1 thresholds for businesses, charities and, indeed, all organisations employing fewer than 25 people. We are talking about 10 million jobs across the UK that are not protected by Clause 3’s increase in the employment allowance, which offsets the NICs increases but, typically, only for those employing three or fewer staff. Given the potential damage to employment, wages and growth, why would the Government not want this weapon in their armoury in what will be a very difficult year ahead for small employers, who also face close to 7% increases in the national minimum wage and added compliance costs with the new Employment Rights Bill?

I support Amendments 1B and 5B in the name of the noble Lord, Lord Scriven, which strike me as an entirely sensible and pragmatic exemption tool to give to the Treasury given the very challenging circumstances facing care homes, hospices, pharmacies and other primary care providers.

Finally, I also support Amendment 21B in the name of the noble Baroness, Lady Neville-Rolfe, which seeks a review of the impact of NICs increases by sector. The impact note that came with the Bill was extraordinarily light on detail, especially when you consider that the Bill commits employers across these sectors to more than £5 billion per annum in additional NICs and impacts more than 10 million jobs.

My Lords, the amendments in this group, including my Amendment 21B, address the very real negative impact of this jobs tax that the Government refuse to acknowledge. The Bill is the most important economic measure they have put forward so far and it makes significant changes to millions of businesses and social enterprises on a very short timescale. These businesses have raised concerns that are reflected in a flat-lining of growth, as worried owners seek to anticipate such a brutal change. Noble Lords from across the House have raised the consequences a number of times, yet the Government remain unreceptive.

At every stage of this Bill’s progression, we have raised the concerns of the healthcare sector about the effects on care homes, pharmacies, dentists, GP surgeries and hospices. It will have a real impact on people’s lives. I am particularly concerned about the hospice sector. The recent extra funding provided is capital funding and will not support day-to-day functions. Hospice UK has reported that the burden of the increase in employer NICs will be £44.3 million a year, which will not be covered by the £26 million of revenue funding for children and young people’s hospices, previously mentioned by the Minister. Last year, children’s hospices were provided with £25 million through the children and young people’s hospice grant. Can the Minister tell us how much of his £26 million is additional funding and how much is in fact recurring?

I am certain that there will be a number of hospices that are unable to absorb this cost. They will be left struggling, with more people dying in needless pain and anguish. As such, the amendment from the noble Lord, Lord Scriven—it is good to see him back in his place—is important to ensure that hospice care can be provided for anyone who needs it: the flexibility that he spoke of.

I also support the amendment on small businesses in the name of the noble Lord, Lord Londesborough, wholeheartedly. I cannot understand why the Government do not recognise the essential role that these entrepreneurial businesses play in supporting economic growth. I mentioned on Report the large number of small businesses that exist in the UK: a great strength. It is 5.5 million. This is an important group of people. The noble Lord’s well-judged amendment would allow the Treasury to protect them from this damaging measure if the need arose.

The Government have also rejected the calls from many of us to publish a full impact assessment, stating, as the Minister has done again today, that they had already published such an assessment. I would be grateful if the Minister could point me to those figures, because, as it stands, the impact note published on 13 November 2024 fails to mention a single one of the sectors in the review amendment. It does not refer a single time to charities with an annual revenue of less than £1 million, early years providers, hospices, the hospitality sector, pharmacies, small businesses, social care or transport for children with special educational needs or disabilities. Yet we know from multiple surveys by charities and business organisations about the negative impact of these changes on headcount and costs—and that is before they have even come into effect.