Lords committee scrutinises NICs Bill over four days of debate

The Bill proposes raising employers’ NICs to 15%, lowering the secondary threshold to £5,000, and increasing the employment allowance to £10,500. 

Bills that are not committed to a Committee of the Whole House in the Lords are usually debated in Grand Committee instead. The proceedings are identical to those in a Committee of the Whole House – including that any peer may attend and speak – except that voting is not allowed. Since no divisions take place, any amendment that does not have unanimous consent must be withdrawn. If a peer wishes to press an amendment to a vote, they must bring it back at Report Stage in the main chamber of the House of Lords, where divisions can take place.

The Bill therefore completed its committee stage unamended, with all amendments withdrawn.

Below you can read a summary of the four days of debate.

Day One - Tuesday 21 January 2025

The impact of the NICs increases on health and education providers, veterans, part-time workers, charities and housing associations was highlighted during the first day of committee stage.

Lord Scriven (Lib Dem), a Lib Dem health spokesperson, proposed amendment 1, which called for health providers, including GPs, commissioned pharmacists, and dentists, to be exempt from employers' NICs. He suggested that these services are “under immense financial pressure.”

Lib Dem defence spokesperson Baroness Smith of Newnham put forward amendment 2, which would exempt veterans’ salaries from the NICs changes. She emphasised the importance of bringing veterans back into the workforce – in particular for small businesses being able to employ them.

Lib Dem Treasury spokesperson Baroness Kramer proposed amendment 3 which would have set a new NICs rate for part-time workers. She, suggested that part-time work is an “entry point” for many young people and is important to make it more ‘attractive’.

However, Lord Macpherson of Earl's Court (CB), a former Treasury Permanent Secretary, was sceptical of the case for separating out part-time work, He observed: “it is often thought… that part-time workers are poor. However, if you look at the poverty statistics, many part-time workers live in quite affluent households. It is far better to target them [people on low income] through tax credits, or universal credit as it is now called”. Additionally, the Crossbench peer warned against “creating steps” in the system saying that while cutting national insurance for the self-employed may initially encourage part-time employment, it risks trapping workers in low hours as employers avoid crossing the step that results in higher national insurance.

Lib Dem education spokesperson Lord Storey put forward amendment 4 which sought to allow early years settings and universities to continue to pay contributions at current rates.

Proposing amendment 5, which asked to retain the original rate of employer secondary percentage at 13.8% for both charities and housing associations, Baroness Grender (Lib Dem) said that for some housing associations, the increase would “wipe out” much of the additional revenue generated from the government’s proposed five-year rent settlement.

Responding to the proposed amendments, Financial Secretary Lord Livermore said that the government has announced a £889 million uplift for general practice in 2025-26 and provided the extra £22.6 billion for the NHS. He continued that there is already an employer national insurance relief available for the earnings of veterans, meaning that employers are not required to pay any national insurance contributions up to £50,270 for the first year of civilian employment. 

Lord Livermore argued that reducing the rate of employer national insurance for part-time workers would create additional ‘complexity’ in the tax system and distortions in the labour market. In response to amendment 4 he said despite the “very challenging circumstances” in the Budget the Chancellor announced ‘significant’ increases to the funding that early-years providers as well as providing £6.1 billion of support for core research for universities.

“The government also provide wider support for charities via the tax regime” said the minister who also suggested that the government has announced “major steps” towards delivering a “once-in-a-generation increase” in social housing, including supporting the housing associations.

Day Two: Wednesday 29 January 2025

Day two of committee stage saw the spotlight put on the impact of the NICs increase on micro-businesses, farmers, young people, charities (again) and children with special educational needs and disabilities (SEND).

Baroness Neville-Rolfe, a Conservative shadow Treasury minister, put forward amendment 6 which would exempt micro-businesses with an annual turnover of less than £1 million from the increase. She suggested that the amendment would reduce the “negative knock-on effect” of the NICs' changes on jobs and businesses.

Lib Dem food and rural affairs spokesperson Baroness Bakewell of Hardington Mandeville explained that her amendment 7 would provide that farms would continue to pay contributions at current rates. Baroness Neville-Rolfe, meanwhile, put forward amendment 50 to increase the employment allowance for farms from £10,500 to £20,000. She said this would help to ease the real cash-flow problems that many farmers face.

Amendment 9 would ensure that employers would continue to pay the current rate of NI for staff under the age of 21, said its proposer Lord Altrincham, another Conservative shadow Treasury minister. He suggested that it would support young people to gain the experience they need to start their careers.

Baroness Bennett of Manor Castle (Green) expressed charity sector concerns about the employers’ NICs increase and quoted a CEO of a charity who told her: “The speed with which this increase in costs is happening is more than we can cope with”. She then highlighted her amendment 11A which would have delayed the NICs increase by one year for charities.

Baroness Monckton of Dallington Forest (Con) put forward amendment 14 to prevent the commencement of this Bill until an assessment of the impact of the policy on persons who provide transport for SEND children has been published. She considered this amendment important because the increased cost of the policy on those who provide transport for children with special educational needs could result in “job losses, reduced services and an unimaginable nightmare for these children and their families”.

Supporting amendment 14, The Lord Bishop of Southwark also proposed his amendment 67 which would have required the government to review and estimate the impact on the SEND transport sector in each of three tax years, and to state what remedy might be applied.

Responding to the opposition proposals, the Financial Secretary claimed that the government has taken steps to “strengthen small businesses’ ability to invest and grow” and said that more than half of employers will see no change from this Bill. In relation to amendment 7, he said creating new thresholds or rates based on the sector of a business would introduce “distortion and additional complexity” into the tax system.

The minister argued that an employer NI relief is already available for the earnings of those aged under 21 and for apprentices aged under 25, meaning that employers are not required to pay NICs up to £50,270 for these groups. He recognised the vital work that charities do but said that they benefit from the employment allowance, which the Bill more than doubled from £5,000 to £10,500.

In regards to the SEND transport amendments, the minister said there are several ways in which a local authority can fulfil its requirements to provide free school transport to eligible children, including those with special educational needs, disabilities or mobility problems. He continued that at the Budget the government announced over £2 billion of new grant funding for local government in 2025-26. This includes £515 million to support councils with the increase in employer NICs.

Day Three: Tuesday 4 February 2025

The third day of committee stage debate saw peers consider a phased introduction of reductions to the NICs threshold as well as impact assessments for employers in hospitality, hospice care, pharmacies and the retail sector.

Baroness Noakes (Con), a former president of ICAEW, explained that her amendments including amendment 18 do not change the overall approach of raising the rate and lowering the secondary earnings threshold instead, “they seek to phase in the secondary threshold reduction over two years”.

Shadow minister Baroness Neville-Rolfe accused the government of not listening to concerns raised and said: “The Early Years Alliance has estimated that this harsh tax will cost each nursery an additional £18,600 per year”. She put forward amendment 28 which asks the government to produce an impact assessment of the effect of the tax on the early years sector.

Another Conservative peer, Baroness Monckton of Dallington Forest, proposed amendments 29 and 31 which would prevent the commencement of the Bill until a full impact assessment is published for hospices and hospitality respectively. She cited the hospice movement which suggests that nationally the cost to the sector will be £34 million for England and just under £40 million for the whole of the United Kingdom. 

Shadow minister Lord Altrincham proposed amendment 30 which would have delayed the commencement of Clause 2 until an impact assessment had been published to fully assess the impact the tax increase will have on the retail sector.

Lord Jackson of Peterborough (Con) put forward amendment 34 which would have prevented the commencement of this Bill until a full impact assessment is published for community pharmacies. He quoted Community Pharmacy England, who have suggested that these changes alone will “generate an extra burden, an extra encumbrance, on community pharmacies of approximately £50 million, even with the changes in the employment allowance”.

In response to peers’ concerns, the minister, Lord Livermore, explained that reducing the threshold by less than that set out in the Bill would reduce the revenue generated by it and would introduce new pressures. He said that the government and the Office of Budget Responsibility have already set out the impacts of the policy change and the government does not intend to provide further impact assessments.

The minister reiterated that the government provide wider support for charities, including hospices, via the tax regime.

Day Four: Thursday 6 February 2025

Shadow minister Lord Altrincham urged the government to “pause and consider” the impact of the NICs rise on schools and universities, putting forward amendment 35 which would have delayed the threshold reduction until an impact assessment had been published to fully assess the impact that the change would have on them. He also spoke to his party’s amendment 43 which would have increased the employment allowance to £20,000 for universities.

Another Conservative shadow minister, Baroness Neville-Rolfe, proposed amendment 47 which sought to increase the employment allowance available to employers in the social care sector to £20,000 per tax year. “By enhancing the employment allowance, we are providing smaller employers with essential financial relief that will help to sustain their operations in the light of the brutal national insurance increases, retain skilled and valuable staff and invest in the quality improvements that our social care users so desperately need,” she stated.

Baroness Noakes (Con) put forward amendment 54 which would have created a £20,000 level of employment allowance for public authorities. She suggested that this would reduce complexity.

Lord Leigh of Hurley (Con) proposed amendment 65 which would have the effect of requiring an annual assessment of the impact of the threshold reduction on the social care sector. He voiced concern about the challenges the sector faces, saying: “to apply a one-size-fits-all to every employer in the UK is in this instance simply heartless and smacks of a policy rushed through without proper consideration of the particular issues in the sector”.

Baroness Bennett of Manor Castle (Green Party) introduced amendment 68 which called for a review of the impact of the NICs increase on people with protected characteristics under the Equality Act 2010. She suggested that part-time and casual workers who could be influenced by the change are more likely to be from minority communities. She added: “If we look at the discrimination and unequal outcomes for disabled people, they are much worse; we can take, for example, the employment rate of 54.2% in December 2023 for disabled people, which compares with an employment rate for non-disabled people of 82%”.

Lord Fuller (Con) proposed amendment 70 which seeks to respond to concerns about increased costs for local authorities by requiring an impact assessment of this. He warned: “The minister should know that this tax is not just a free hit on the man from the council”.

Responding to these proposals, the Financial Secretary, Lord Livermore, repeated that increasing the employment allowance for specific sectors would introduce new pressures that would require either higher borrowing or lower spending; adding the government does not intend to provide any further assessments.

The minister concluded that the Treasury is engaging closely with the Ministry of Housing, Communities and Local Government, and the government has committed £4.7 billion next year to provide support for departments and other public sector employers for additional employer national insurance costs, including local government.

Report stage debate on the Bill will take place on 25 February.