Spring Forecast Statement

Baroness Kramer Excerpts

Tuesday 17th March 2026 Lords Chamber

[Baroness Kramer (LD)]

My Lords, I join the tributes to the noble Lord, Lord St John of Bletso. We do not often get to speak in the same debate, so I am delighted that he could not speak in the space debate and has joined us today. His speech was both gracious and extremely profound, and his is a voice that we are very much going to miss in this House. I thank the noble Lord and wish him all the best from all on these Benches.

This has to be one of the most frustrating debates I have participated in—I say that despite there being so many good speeches. We are talking about the Finance (No. 2) Bill, but of course we cannot amend it, and today the Chancellor made her Mais speech setting out political strategy, but too late for us to do any significant analysis of it. I did pick up one thing, which I will raise with the Minister: the Chancellor apparently told graduates burdened with a crisis in student loans that they were going to be at the back of the queue for a rescue. If that is true, it is frankly a bad decision. It is a different scheme, and the noble Lord, Lord Wilson, should go back and look.

Then we are left with the Spring Statement. We cannot blame the Chancellor for the fact that the Iran war broke out on that day, but it has obviously thrown a wrench into the programme that she tried to lay out in her Spring Statement. I am going to do my best in starting with the Spring Statement, because we might as well deal with the world as it was prior to the Iran war—we have no clue what it is going to look like as that works its way through.

The OBR’s downgrading—I am not the first to raise this; the noble Lord, Lord Skidelsky, mentioned it—of the growth numbers to 1.1% in 2026 is obviously bad news for us all. What leapt out from the numbers was the medium-term growth in real GDP per capita. The noble Lord, Lord Hintze, talked about the importance of per capita. That is growing at 1.1% a year and depends on recovery from persistently low productivity growth, which the OBR confirms is a very uncertain premise. We are now looking at the weakest sustained growth in a century if we exclude crises such as World War II and Covid.

As the noble Lord, Lord Skidelsky, said, unemployment is at 5%, but it is the 1 million young people who are NEETs—not in education, employment or training—who have us all very concerned. Older people—the economically inactive group at the older end—are returning to the workforce, but that is not happening with younger people. I have talked—as I suspect the noble Lord, Lord Skidelsky, has, because he raised this point—with businesses about the youth guarantee scheme and the other schemes, and the answer is always that they are too small to deal with the problem and not sufficiently sustained to provide the long-term support that people who have been trapped in this particular case need. Much more individual support is needed to get them to the relevant skills, and it can take years.

To pick up a point made by the noble Lord, Lord Davies of Brixton, net migration is weaker than the previous forecast, because of both a drop in immigration and a rise in the numbers emigrating—and, as the noble Lord said, it could be pushed lower by the new skilled migration regime. I recognise that that drop in migration is great news to the political right, as it may be to this Government’s Home Office, but to the rest of us trying to focus on the fact that we have an ageing population, when we look at the demographics, that drop in migration is a serious barrier to medium and long-term growth.

Even the good news in the Spring Statement is fragile. Lower inflation and interest rates are vulnerable to any kind of systemic shock. Here we are, right in the middle of the Iran war with its impact on oil prices, so we can see that the impact is already beginning to work its way through. I was more concerned that much of the additional headroom—I was glad at first to see that there was additional headroom—came from higher than expected tax receipts, largely due to a rise in equity prices leading to higher capital gains tax. As surveys have shown, that is very likely to be temporary.

In the more recent period, we have had a steep loss in business confidence. The Federation of Small Businesses is warning that SMEs, the bedrock of our economy, are saying that

“cost burdens have already started reducing growth plans, cashflow and job creation in our local communities”.

Business is in real fear of the surge of new burdens that are going to land in April, and of death by a thousand cuts. This is a warning sign, and we have to respond.

We continue to face fundamental uncertainties. Can we meet the target of raising defence spending to 3.5% by the end of this Parliament? If we continue the current spending trajectory on the NHS, which we have no choice but to do because productivity is very slow to rise, what will happen to the unprotected public sector departments and local government services, and how will people feel? Many of the tax rises that are now locked in will continue to increase the tax take, even with no improvement to living standards, and people will notice it.

The noble Lord, Lord Sikka, talked about the freezing of income tax and other thresholds, which is a major player in this additional tax take that has been built in. The Government need take no action; it is now part of an impact that people will learn about the hard way. My colleague in the other place, Daisy Cooper, pointed out that 600,000 pensioners on state pensions who are currently not paying income tax are in for a big shock when they discover that they have been captured. I say to the Government that telling people that they are better off and that the poorest will have £1,000 more in their pockets is not washing. People’s expectations are not being met.

To pick up a point made by the noble Lord, Lord Lamont, middle-income families are feeling the stress as well as people who might before have been the group on which we could exclusively focus because they were at the poorest end. We now know from the OBR forecast that any improvement in living standards—there have been improvements that have come from wage growth and the lifting of the two-child cap—will be temporary and followed by a period of stagnation and even falling living standards.

Family farmers have lived with a year of anguish after the original Budget announcement of changes to inheritance tax relief for agriculture. Thankfully, they have been partly rolled back.

The noble Lord, Lord Leigh, made the point that many people who saved through pensions now feel really stupid as they realise that 73% of their savings will go to the Treasury unless they quickly give away the contingency pot that they set aside for a care home. Women in particular have followed that behaviour. They have kept assets in case they needed to be in a care home, with the thought that they could pass those assets on to the next generation if they did not. Many of my friends have been in this situation, and I can tell the House that the advice to them is to give that money away and let the state take care of you when you need a care home. That is a place where none of us wants to see this ending up. When the Minister argues that £1 million is sheltered from inheritance tax, he assumes that everyone is in a couple and owns a home, but many are not in this advantageous position.

The tax rises in the Bill will mean that investing in your own business will become one of the least tax-friendly decisions you can make, and property price tax rises will price on to rents. Someone, somehow, has to get a grip on the Treasury, because it seems completely incapable of aligning its choices with the strategy for growth, with the industrial strategy or with pension building.

That is why my party has called for a department for growth to counterweight the Treasury and make driving the economy forward the main focus. We accept that the Government will need more money to achieve all their programmes, but frankly it makes us furious when we can see that setting up a UK-EU customs union would deliver £25 billion more a year to the Treasury, and that it is within reach. It is a prize to be grabbed, and it is more than just the reset.

There are many small reliefs that the Government could enact to deal with the worst of the administrative horrors. The noble Lord, Lord Liddle, and the noble Baroness, Lady Fairhead, talked about those administrative horrors. My colleagues in the other place tried, even on Report, to amend the finance Bill to assist bereaved families dealing with the sheer administrative challenge of new inheritance tax rules, to protect family businesses and farms from being hit with the loss of inheritance tax reliefs multiple times within 10 years—that is a real possibility—and to at least assess the cumulative impact, including the increase in alcohol duty, of the Bill on the already beleaguered hospitality sector. The Government should recognise that this sector is in an emergency condition. We call again for a temporary cut in VAT to get this sector through, at this time of extraordinary pressure.

Ultimately, we need to hear what the Government will do to cushion families if we do not soon see a de-escalation in the Iran war. The Government’s announcement yesterday on heating oil is welcome, but it is far from the proper cap that we have called for. I say to the Government that a strategy of wait and watch really is not sufficient when energy prices could surge after June, and we are in a situation where many family budgets are already close to breaking.

National Insurance Contributions (Employer Pensions Contributions) Bill

Baroness Kramer Excerpts

3rd reading
Thursday 12th March 2026 Lords Chamber

[Baroness Neville-Rolfe (Con)]

My Lords, as we said at Second Reading, in Committee and again on Report, this is a poorly conceived Bill, because it prioritises the hope of short-term tax gain over the far more important task of sustaining a system that encourages and rewards responsible pension saving. Throughout the Bill’s passage, we have sought to examine it line by line to see what the Government’s policy will actually mean in practice, and what has become clear is deeply troubling.

This measure risks deterring pension savings. It will hit those on lower and middle incomes, including some earning under £30,000 a year. It will impose yet more compliance, payroll and administrative burdens on business, particularly on small businesses and charities that are already under considerable strain. It will particularly penalise those who are repaying student loans.

Against that background, I am proud of the scrutiny that the House has brought to the Bill. Your Lordships have approached it with care, expertise and determination to improve it where we can. As a result, with unusual speed, good order and good humour, the House agreed five amendments last week which seek to limit some of the Bill’s most damaging consequences.

First, our Conservative amendments ensure that basic rate taxpayers, those on the lowest incomes, are protected from the NICs charge. If the Government insist that this policy is directed at higher earners, not those on modest incomes trying to save for their retirement, this should be explicit in the Bill.

Secondly, we proposed an exemption for small and medium-sized enterprises and small charities. These organisations are the backbone of our economy and our communities, and they should not be burdened with yet more payroll, compliance and administrative costs as a result of this policy. We have all seen the impact on them of last year’s £25 billion hit.

Thirdly, we proposed that most of the regulations under the Bill should be subject to the affirmative procedure. Given the uncertainty that surrounds how these provisions will apply, it is only right that Parliament has the opportunity to scrutinise those regulations properly.

Fourthly, my noble friend Lord Leigh of Hurley successfully secured an amendment to limit the impact of the Bill on those repaying student loans, who would be hardest hit by the measure.

Finally, the amendment by the noble Baroness, Lady Kramer, raised the cap to £5,000, helping to mitigate some of the worst impacts of the Bill on those least able to bear them.

In recognition of the seriousness of the issues raised by the Bill and the progress made here, I shall take a moment to thank a number of noble Lords for the diligence with which they have scrutinised it. I am particularly grateful to my noble friends Lord Leigh of Hurley, Lord Fuller, Lord Ashcombe and Lord Mackinlay of Richborough, and the noble Baroness, Lady Altmann. They have worked tirelessly, both with me and my noble friend Lord Altrincham, and their amendments have prompted important debates. I am also grateful to our Whips’ Office team, especially my adviser Oliver Bramley, for their unstinting and effective support, and I thank the noble Baroness, Lady Kramer, for the constructive way in which she has engaged with us during the course of the Bill. Hers has been a powerful voice in holding the Government to account.

More broadly, I thank other noble Lords across the House, including the noble Lords, Lord de Clifford, Lord Londesborough and Lord Freyberg, for their thoughtful contributions in scrutinising the legislation. Finally, it would be remiss of me not to thank the Minister for the way in which he has engaged with the House during the passage of the Bill. I am particularly grateful to him and his officials for their response to the letter I sent following Committee. It addressed a number of the questions raised during our debates and was both timely and informative.

I hope that, as the Bill proceeds, the Government will reflect carefully on the points raised and show a willingness to move on the issues that have united so many across this House.

[Baroness Kramer (LD)]

My Lords, this was a very short Bill but, frankly, I do not know how it got through the House of Commons and came to this House without clarity on the fundamental issue of whether we were talking about a cap that was per employee or per employment. I thank the noble Lord, Lord Livermore, for seeking the answers to that and making sure we were informed on Report. We were looking at two different Bills, not knowing which one we were working on, until we reached that point in the conversation, so I thank him.

I also join in saying that this was a collaborative effort, not in opposition to the Government but because we were of common mind across the Conservative Benches, my Benches and the Cross Benches—the noble Lords, Lord Londesborough, Lord de Clifford and Lord Freyberg, as the noble Baroness, Lady Neville-Rolfe, mentioned, all played a crucial role in this. I particularly congratulate my Benches on taking a vow of omertà not to speak on many occasions on the Bill so that we moved it rapidly through the House. I think the whole House was grateful that, on Thursday, when we finally came to vote, we were done in less than two hours rather than delaying everyone from departing on a Thursday. I thank my team very much for their discipline. I also thank Ulysse Abbate in our Whips’ office, who is new to this kind of work, but my goodness is he good at content and co-ordination.

This was a good example of people, having realised they are taking the same position, working together to make sure that it is effective. I very much hope that the Commons will appreciate the significance of the amendments passed to the Bill. Of all the Bills I have ever seen, this contains so many unintended consequences that, even if you believed in the fundamentals behind it, you would need to make substantial change for it to be in any way workable and not ending up targeting unintended groups, such as those on basic incomes. It would be devastating for people repaying student loans, which has to be fixed, and very difficult for SMEs. We chose different routes to try to make those changes and ended up with a very solid group of amendments. I thank the House for co-operating on this issue.

[Lord Livermore (Lab)]

My Lords, I am very grateful to the noble Baronesses, Lady Neville-Rolfe and Lady Kramer. I beg to move.

National Insurance Contributions (Employer Pensions Contributions) Bill

Baroness Kramer Excerpts

Committee stage
Tuesday 24th February 2026 Grand Committee

I am grateful to the noble Lord, Lord Leigh of Hurley, for identifying so clearly in his Amendment 3 the adverse effects on those with a student loan, but this Bill perpetuates other forms of intergenerational unfairness. It is already harder for employers to pay good pensions to youngsters on defined contribution schemes when they are shovelling cash into addressing the deficits on defined benefits schemes for older employees, those schemes being closed to new entrants. It risks removing salary sacrifice as a thing for many employers, which will damage the opportunities for them to get the best staff, because it just becomes too complicated, for reasons that we will dwell on in the next group. It is important that this slim Bill is challenged, because it makes it harder for youngsters to get on. The tail needs to be pinned on the donkey. The Government are not on the side of the youngsters—we need to be saying that—and this Bill proves it.

[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?

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[Lord Davies of Brixton (Lab)]

Yes; I thank the noble Lord for his advice. As I said, I have operated the system myself, and so he is really just making my point: the structures are there to deal with multiple employments. It is not being introduced to the issue by this particular measure. Obviously it would be more complicated with this measure—I accept that, and I look forward to my noble friend the Minister’s response on that issue—but it is not a new issue.

[Baroness Kramer (LD)]

My Lords, as with the previous group, the noble Lord, Lord Davies of Brixton, made a comment on what he thought was Lib Dem policy; it might be—I am just not sure. We have discussed simply kicking out all this complexity and having a flat rate of relief on pensions. After listening to the last debate, I think that that has probably accumulated a lot of votes from around this Room, because the complexity that we have had described under this group of amendments is absolutely extraordinary. The noble Baroness, Lady Altmann, referred to the banana skins, and I think the noble Lord, Lord Leigh, talked about it being a nightmare. I am troubled that all of this is being left to consultation with the industry and to future regulation and future guidance, as if it can all be absolutely sorted with a bit of quiet attention. But we have heard the problems of how you deal with the many cases where people have multiple employers.

The noble Lord, Lord Mackinlay, made it clear that it is a relatively small handful of people who at present have to be dealt with through the Department of Work and Pensions to make sure that there is not a complexity. However, this would now apply to all kinds of people across a very wide range of activities and income. Trying to deal with the complexity of all these measures and delaying that has got us very disturbed. It is a bad principle for legislation. It is not that there is not a role for regulation and guidance, but that essentially should just be doing the finesse on a policy that has been clarified, whether it is in primary legislation, through evidence put before Parliament or through Statements made by the Ministers.

I think we have a real concern that this is going to turn out to be absolutely unworkable. The consequences of that, both for public finances and for individual decisions made by people, probably means that this legislation will collapse at some point. We ask the Minister to go back to the department and make it clear that clarity is absolutely necessary. If there are problems here that can never be reasonably and sensibly resolved, they should be recognised at this stage.

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[Lord Livermore (Lab)]

I am grateful to the noble Lord for his further thoughts. The carryover feature—

[Baroness Kramer (LD)]

I do not want to be problematic here, but I wonder whether the Minister can understand that we are looking at a very different Bill and very different implications if the £2,000 contribution limit is per individual across a range of employments, or per job, and perhaps they have three or four. It is a fundamental difference, and while the details of how things would be done in the future and the operational issues may well have to wait for regulation, guidance and consultation, it seems to me that that core issue defines this Bill, and we should know that before we complete its passage.

[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.

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[Baroness Altmann (Non-Afl)]

I will speak in support of my Amendment 9, as well as the amendments to which I have added my name, Amendments 7 and 20.

I have proposed my amendment so that—if we are to go through this exercise, which I hope we will not—no basic rate taxpayers would be likely to be caught by the measure. If the minimum contribution on which they can have national insurance relief is £10,000 a year, they are unlikely to be caught, unless they get a very large bonus. I hope that we will be able to deal with some of these issues.

The reason for suggesting a £10,000 per year pension contribution is based on the minimum amount that the very top earners are able to contribute to pensions. Under the tapered annual allowance, for example, £10,000 seems considered to be, if you like, an acceptable level of pension that is not egregious in some way.

My preference would be that, if we are to go down the route of capping the national insurance reliefs available to anyone who is paying into a pension, we do that in the way that I have just suggested, which is the same as one does with tax relief. If you pay in more than £60,000 a year, you do not get any extra tax relief; but if you pay in, for example, more than £10,000 a year, you do not get any national insurance relief on the amounts on top of that. That would be so much simpler.

I stress to the Committee that I believe that the Government and the Minister have not realised the complexity—the sheer scale of the administrative tasks—that will be involved if the Bill proceeds as it is. I liked the idea suggested by my noble friend Lord Leigh to put this on hold and do the work that we are trying to get the Government to do straight after the Bill passes before we finish and finalise the legislation, so that we have a better idea of what we are doing.

I also have a lot of sympathy with the approach that the noble Lord, Lord de Clifford, has outlined. We all seem to be trying to make the Bill operate in practice in a rather less difficult, complicated and costly administrative manner. The amendments tabled by the noble Baroness, Lady Kramer, to which I added my name, on £5,000 are just another way of trying to square this circle. I look forward to hearing the Minister’s thoughts.

I must confess that the idea of inflation linking this limit, if we were to get it, each year would probably just add to the complexity of an already incredibly complex set of changes that we are thinking of making to the Bill. We would not know, from one year to the next, what the new limit will be, because it will not be £2,000 or £10,000—I hope we will not end up there. I hope the Minister understands the spirit in which I am trying to suggest the £10,000 figure and the people I am trying to help: the basic rate taxpayers. I really do fear that they will have a much worse pension outcome if this goes ahead.

[Baroness Kramer (LD)]

My Lords, this is the group of amendments on which I have been the most focused. I will not repeat my Second Reading speech, in which I talked about the importance of growing pension savings to fuel the growth agenda, but the Government must realise that this policy just does not align with that. However, I hope that the Government are beginning to understand that life today is long and it is not easy to put aside enough from the working years to achieve a decent retirement without depending on the state. According to the Resolution Foundation, changes made under the Bill will hit at least half of those who use salary sacrifice, affecting a large number and a wide range of households.

Different noble Lords, as we see in the amendments here, have proposed different increases to the contributions limit. Amendments 7, 10, 11, 20, 22 and 23 are in my name, and I thank the noble Baroness, Lady Altmann, and the noble Lord, Lord Londesborough, for signing some of them. The core of my amendments would increase the contributions limit from £2,000 to £5,000, preferably with a further annual increase linked to RPI. I confess that there is not a lot of science behind my choice of £5,000, but running it past people who deal with pensions, I began to think I had hit a sweet spot with that figure. The response was that it would support people making the rather difficult choice of what to do with their money and provide a little more of an incentive to save in a pension rather than to spend.

As part of this process, my colleagues in the other place were able to obtain some research from the Commons Library, using PolicyEngine and its interactive dashboard. That work is not definitive but it provides a useful picture of the distributional effects of raising the contribution limit. An uplift of £5,000 would give the greatest gains to the two top income deciles—we would all expect that. But just a shave behind those two deciles, the next highest gainers are the second decile, which is not, I expect, the result that the Government would have predicted. This group would have within it a cohort of young people, probably in their early to mid-20s, perhaps one pay rise into their careers, still willing to live in shared accommodation and to live quite frugally, and not yet trying to pay off student loans, get a mortgage or support children. Surely this is the group that any Government should target to get into saving for a pension in a big way.

Early investment enables a pension pot to grow, but it is a narrow window. As people move into the age of families and mortgages, they cut or even stop pension savings, and women are even more affected if they reduce work to care for children. Only later in life do people return to significant savings and by then it is very late in the day. Frankly, we should make sure that they also have strong incentives to save at this point in their lives to avoid sharp drops in living standards in old age. I think the Government have looked at earners as if they belong to fixed blocks: low earners, middle earners and high earners. In reality, most people’s profiles as earners and savers change as they go through life, and the incentives therefore have to be shaped to maximise and to meet that profile.

Some of my amendments would increase the £5,000 contribution limit annually by RPI. The noble Baroness, Lady Neville-Rolfe, discussed increasing the £2,000 limit by CPI. I know that the noble Baroness, Lady Altmann, considers this an additional complication but, frankly, we have to tackle this issue of frozen thresholds, which in eras of inflation have just such a negative impact.

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[Baroness Kramer (LD)]

My Lords, as we discussed at Second Reading, the Federation of Small Businesses has warned that the impact of the Bill could meaningfully disadvantage small businesses. In a way, I look at social enterprises and charities as, essentially, a subset of the SME sector. Big businesses can often devise ways and perks to reward people that are simply not available to SMEs, so they can dampen the impact of the Bill on their workforces and widen that competitive gap.

As a consequence of that, I thank the noble Lord, Lord de Clifford, for signing Amendment 27 in my name, and the noble Lord, Lord Londesborough, for saying that he would have signed it. Frankly, when these noble Lords give warnings on what will happen and what is happening in the small business sector, I really hope that the Government are listening because, unfortunately for our economy, their track record has a real history of being correct, and those warnings need to be taken seriously.

As other noble Lords have said, SMEs are already under pressure. I am not going to repeat the saga of the burdens on them, but we have to recognise that this is a time when we absolutely need small businesses to accelerate their hiring, especially of young people, and make serious investment in productivity and growth. Once again, this is another measure where I can see no alignment between the Bill and the Government’s industrial strategy or growth policy. It seems to pull in completely the wrong direction.

Amendments 12 and 24 would straightforwardly exempt SMEs. Amendment 27 in my name would give the Government a chance to make their case, in a sense, because it would require a detailed review within 12 months of the Act being signed, which is obviously long before the Act will come into force. The review would target the two issues that we have said are so critical—SME recruitment and retention—and would also look at this matter in the context of the cumulative impact, particularly of NICs changes since this is a NICs Bill. It seems wise to encompass a look at these two NICs changes as being linked and entangled in the way they impact on small businesses.

I do not want to take up much more of the Committee’s time, but it is important to stress that this is not the time for uninformed decision-making; that has been echoed through group after group of amendments. I am not rejecting the other amendments but Amendment 27 would be a relatively modest way for the Government at least to do something that begins to put evidence before Ministers and Parliament.

[Lord Livermore (Lab)]

My Lords, I am grateful to all noble Lords who have spoken in this debate. First, I will address Amendments 18 and 24 in the names of the noble Baronesses, Lady Neville-Rolfe and Lady Altmann, and the noble Lord, Lord Altrincham, which would exempt small and medium-sized enterprises, charities and social enterprises from the Bill.

The Government agree on the importance of supporting small businesses and ensuring that they are not unduly impacted by these changes. Small and medium-sized enterprises are far less likely to offer pension salary sacrifice than larger businesses. According to Nest Insight, around 33% of small businesses offer pension salary sacrifice to their employees, compared with 83% of large businesses. In addition, employees of small and medium-sized enterprises are far less likely to have contributions exceeding the £2,000 cap; only 10% of employees in SMEs have pension contributions through salary sacrifice exceeding the cap. Exempting small and medium-sized enterprises in the way suggested by the amendment would therefore introduce significant additional complexity into the tax system and would be disproportionate given the limited impact that this policy is expected to have on these businesses. The Government are engaging with employers and other industry stakeholders ahead of these changes coming in.

Similarly, Amendments 26 and 27 in the names of the noble Baronesses, Lady Neville-Rolfe and Lady Kramer, and the noble Lords, Lord Altrincham, Lord Londesborough and Lord de Clifford, would require a review of the impact of the Act on small and medium-sized enterprises. As I have already said, the Government agree about the importance of supporting small businesses. The changes in the Bill will mainly impact larger employers, which are much more likely to use salary sacrifice and to have employees who are contributing above the £2,000 cap.

More widely, the Government are delivering the most comprehensive package of support for small and medium-sized businesses in a generation through the small business strategy, unlocking billions of pounds in finance to support businesses to invest and removing unnecessary red tape. Ahead of the cap coming into operation, the Government will continue to work closely with employers, payroll administrators and other stakeholders to ensure that the changes are implemented in the least burdensome way for businesses of all sizes currently using salary sacrifice.

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

[Baroness Kramer]

28: After Clause 2, insert the following new Clause—
“Calculation and publication of lifetime pension values(1) The Secretary of State must calculate and publish illustrative projections of the lifetime value of pension savings before and after the changes made by this Act.(2) For the purposes of this section, “lifetime value” means the total pension income an individual is expected to receive over their lifetime.(3) Projections must—(a) be based on clearly stated assumptions, and(b) include examples covering a range of income levels and pension entitlements.”Member’s explanatory statement
This amendment seeks to require the publication of illustrative lifetime pension outcomes.

[Baroness Kramer (LD)]

My Lords, I will try to be speedy. The amendments in this group in various ways would require that the work to assess the impact of the Bill on pension savings and pension incomes is done and put before Parliament. My Amendment 28 would make this a responsibility of the Government. Amendments 29 and 30 in the names of the noble Baronesses, Lady Altmann and Lady Neville-Rolfe, would require an independent review. These three amendments have different degrees of detail and emphasis, but I suspect they can easily be redrafted to cover all the key elements.

It seems to me that behind all these amendments sits a basic question: did the Government do their homework? If they had, they could pretty much hand us everything we have requested tomorrow morning. I fear that this has been another off-the-hoof policy where the Government poorly understand the consequences, and I think that needs to be exposed and dealt with. It is true that implementation of the policy is not until 2029, probably the other side of another general election, but, frankly, that is not an excuse for doing this wrong, for not having the evidence and for not making it available. That is what I think every amendment in this group seeks to achieve in a different way. I beg to move.

[Lord Altrincham (Con)]

My Lords, Amendment 30 has a simple purpose: to ensure that before the Act is commenced there is an independent review of its impact on pensions adequacy—which we have been talking about again and again through this Committee—saving behaviour and on those repaying student loans, and that Parliament must see the findings before the provisions take effect.

Pensions adequacy is one of the central long-term economic challenges facing this country, and under the Government it is set to get far worse. The Institute for Fiscal Studies’ report Adequacy of Future Retirement Incomes: New Evidence for Private Sector Employees could not be clearer. On current trends, around four in 10 private sector employees saving into defined contribution schemes are projected to undershoot the Pension Commission’s replacement rate targets. Even using a far more modest minimum living standard benchmark, a substantial minority are not on track to reach it.

The IFS also makes a crucial point that, since the Pensions Commission report 20 years ago, lower returns on saving and longer life expectancy mean that the savings rates required to hit adequacy benchmarks are higher than previously thought. In other words, the adequacy challenge has intensified, not diminished. Yet what are the Government doing in the Bill? They are altering one of the key mechanisms through which many working people build their retirement savings without any independent assessment of what that will mean for adequacy.

--- Later in debate ---

[Lord Livermore (Lab)]

My Lords, I am grateful to all noble Lords for their contributions to this debate.

I turn first to Amendment 28, tabled by the noble Baroness, Lady Kramer, which seeks the publication of illustrative projections of lifetime pension saving values before and after this change. The Government do not agree that this amendment is necessary to provide the required information on personal pension saving outcomes. The impacts of the measures in the Bill, including on employees and employers, are already set out in the tax information and impact note published alongside the Bill’s introduction.

Additionally, the Government published a policy costing note, which includes detail on the tax base and static costing as well as a summary of the behavioural responses expected by individuals and employers. The Office for Budget Responsibility has set out impacts in its economic and fiscal outlook, making it clear that it does not expect a material impact on savings behaviour as a result of the tax changes made in the Budget. Similarly, there are already a number of existing tools and services that individuals can use to understand their personal financial position and estimate their potential retirement income.

Amendments 29 and 30, tabled by the noble Baronesses, Lady Altmann and Lady Neville-Rolfe, and the noble Lords, Lord Altrincham and Lord de Clifford, would require the Government to take advice examining the impact of this change on employers, pension adequacy and workers’ pay. They also seek to make commencement of the Act conditional on the publication of an independent review of its effects, including on pension adequacy. The impacts of this measure have already been set out across the range of usual publications for changes to national insurance; these include the published tax information and impact note and policy costings note, as well as the Office for Budget Responsibility’s economic and fiscal outlook.

These amendments raise a wider point about the role of salary sacrifice in the pension salary saving system, particularly in relation to incentivising saving and improving pension adequacy. It is important to place this measure in context. Salary sacrifice existed in the 2000s and early 2010s, yet, during this period, there were falls in private sector pension saving. The key factor that has led to an increase in saving in recent years, as many noble Lords have noted in this debate, is automatic enrolment. As a result of automatic enrolment, more than 22 million workers across the UK are now saving each month.

Although all of us here share a commitment to improving pension adequacy, many groups at higher risk of under-saving—including the self-employed, low earners and women—are not the most likely to benefit from salary sacrifice. Only one in five self-employed people save into a pension, but they are entirely excluded from salary sacrifice. Low earners are most likely not to be saving, but higher earners are more likely to be using salary sacrifice. Many women are under-saving for retirement, but many more men use pension salary sacrifice.

The pensions tax relief system remains hugely generous, and there remain significant incentives to save into a pension. The £70 billion of income tax and national insurance contribution relief that the Government currently provide on pensions each year will be entirely unaffected by these changes.

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

[Baroness Kramer (LD)]

I beg leave to withdraw my amendment.

Amendment 28 withdrawn.

--- Later in debate ---

[Baroness Neville-Rolfe (Con)]

My Lords, my amendment in this group seeks to make the commencement of this Act conditional upon the publication of an independent review of its impact on employers.

The Government’s decision to cap national insurance relief on salary sacrifice pension contributions at £2,000 per year has been presented as a measure targeted at higher earners, but the reality, as those of us who have spoken to businesses up and down the country know, is rather more complicated than that. This is not simply a matter of adjusting the tax affairs of a few well-paid executives. This measure hits employers directly and in ways that Ministers have not thus far adequately costed or explained. For small and medium-sized enterprises in particular, the costs are not trivial. Many have structured their entire remuneration and pensions offerings around salary sacrifice arrangements. They have done so because it is administratively straightforward, it benefits their staff, and it has had the backing of the previous Government as a sensible way to encourage workplace pension saving. Those businesses now face not only higher employer national insurance costs but also the compliance burden of unpicking arrangements that may have been in place for years.

Let us be plain about what this means for a small business. We are talking about firms with perhaps 20 or 30 staff, businesses that do not have large HR departments or in-house tax teams. They will need to review every employment contract, revisit their payroll systems and, in many cases, seek professional advice to understand their new obligations. What is particularly troubling is that we have not seen from the Government anything approaching a comprehensive assessment of these impacts. We know that HMRC consulted last year, but it got a dusty answer. The OBR has produced some high-level revenue estimates, which do not reassure us, and we know from the Treasury note that it expects this measure to raise several billion pounds by the end of the Parliament. But what we have not seen, and what employers and employees alike are entitled to expect, is a proper independent analysis of what this means in practice, especially for SMEs and middle-income employees.

There has been no serious attempt to model the indirect costs, the effect on employer pension contributions, the likelihood that firms will scale back their own contributions to compensate for higher tax costs, or the impact on workforce retention where salary sacrifice has been used as a recruitment and benefits tool. The OBR itself has acknowledged significant uncertainty in its projections, noting that revenue yields are highly sensitive to behavioural change—a very important point—and yet the Government press ahead without the evidence base one would expect for a measure of this scale.

My concern—which is shared by a range of voices in the pensions industry and in business groups and among those who have looked carefully at the measure— is that, in restricting salary sacrifice without proper analysis, the Government risk undermining the very pension-saving behaviours they claim in other contexts to support. As the ABI has put it, savers and the pension system need stability. What we should not be doing is swapping pension stability for short-term revenue raisers.

The Minister has cited a number of statistics on the numbers whom HMT anticipates will be affected, but these fail to recognise that the Government have almost no idea of how employers and, therefore, employees would respond and be affected by those changes. As I have already mentioned, the OBR has said that there is a high level of uncertainty over the size of the behavioural response. If an employer stops offering a salary sacrifice because of the compliance costs and complexity, as many of them have warned they will, then every one of their employees will be affected. So how can the Minister say that 74% of basic rate taxpayers will be left unaffected when HMT has no idea how the organisations employing them will react to the Bill? Indeed, the detail is still unclear. The point many noble Lords have raised stands: the Bill brings a great deal of uncertainty, and the Treasury does not understand the wider effects of what it is proposing—thus my wish to delay commencement until we have a clearer view.

I welcome Amendment 32 in the name of the noble Baroness, Lady Kramer, which references the OBR’s supplementary forecasts. I do not want to steal her thunder, but the issues this forecast raises are numerous. Of particular concern are the behavioural changes that it anticipates. The OBR estimates that behaviour reduces the 2030-31 yield by around 48% compared with the static figure. Employers are assumed to redirect pay growth into employer contributions, employees are assumed to shift into relief at source or net pay arrangements, and there are additional pass-through effects into wages and profits. In other words, nearly half the static yield depends on assumptions about how employers and employees respond. The options open to employees and employers are numerous, and they have three years to think about it.

Another serious concern highlighted is that HMRC does not hold comprehensive data on salary sacrifice usage. As we understand it, the modelling used by the OBR relies heavily on ASHE survey data and historic APSS 107 returns to estimate bonus sacrifice behaviour. The OBR therefore assigns this measure a medium-high uncertainty rating with particular uncertainty around behavioural responses and the size of the bonus sacrifice base. This policy is uncertain. How will it affect savings, how will it affect behaviour and, significantly, how much will it raise and for how long?

I know others may have questions for the Minister, but the new arrangements come into operation in 2029-30 and, as we have all been saying, there is time for more questions to be asked and answered and for more work to be done. I hope the Minister will look at these various amendments positively. I thank the Deputy Chairman for his clarification on timing, and I beg to move.

[Baroness Kramer (LD)]

My Lords, the noble Baroness, Lady Neville-Rolfe, has relieved me of the burden of trying to explain the primary clause within my amendment, which would require a formal review and report on the OBR supplementary forecast information release. As she said, this came out on 5 February, I understand in response to an FoI request, which, frankly, is no way to provide information to Parliament. As she said, it concludes that behavioural response to the measure—and that is key to the impact that this Bill will have—is highly uncertain. The further detail that she provided is so similar to what I would have provided that I am not going to repeat it. I thank the noble Lord, Lord de Clifford, for also signing this.

The other part of the review would cover the operational remuneration arrangements and the impact on pension adequacy and salaries. I know the Minister thought he covered this issue, but I think he could tell that in the Room uncertainty continues. Further clarification is needed around this issue because employers are going to be looking for that. This is an opportunity to provide it.

I have to say that I do not think I have ever seen an OBR report that is so filled with the word “uncertainty”. Obviously, it stands behind what it has written, but it does not feel like a report that has been written with a great deal of confidence. That confidence needs to be in place for Parliament to act on legislation.

[Lord de Clifford (CB)]

I have the pleasure of supporting the amendment from the noble Baroness, Lady Kramer. At Second Reading, I raised behavioural change and the OBR’s forecast about the drop in income is essential. Employers will look to find the most tax efficient way to make pension payments, and therefore we need the OBR to make sure that it accounts for these payments. As an employer, although it will increase administration, if there is a saving to be made, we will look for opportunities to pay pension payments in alternative ways. We covered that earlier, and the Minister gave a little reassurance that employer pension contributions may be acceptable and will not be counted as a salary sacrifice. As an employer, that would be welcome.

National Insurance Contributions (Employer Pensions Contributions) Bill

Baroness Kramer Excerpts

2nd reading
Wednesday 4th February 2026 Lords Chamber

[Baroness Kramer (LD)]

My Lords, I do not enjoy the same pension expertise as virtually every other speaker tonight; I also do not think, ideologically, that I fit well with the last two speakers, who take a position that is different from mine. However, even I can see that this Bill is another example of the Treasury’s inability to align taxes with its stated economic and industrial goals, including its plans for growth. I note the points made by the noble Baroness, Lady Altmann, and the noble Lord, Lord Ashcombe, that you have one department trying to encourage people to increase their savings and pensions because of pension inadequacy—“push me, pull you” as the noble Baroness described it—and then the Treasury working, it seems, in completely the opposite direction.

On that general growth objective, I guarantee to the Government that capping salary sacrifice NICs exemptions will not add a single penny to the amount that working people save and invest. Yet savings and investments are the key drivers of the prosperity we seek. Some 3.3 million people, which is 44% of those who save through salary sacrifice, will be hit by this change.

Others have made this point, but I particularly noticed that the recent report from the Pensions Policy Institute warned in the strongest terms that people are not sufficiently building their pension during their higher earning years, which is exactly when salary sacrifice comes into play. For many people—this probably particularly affects women who take time out for childcare—higher earnings are typically for only a period of someone’s working life. Therefore, it is during that period that they need to be able to put aside that money for later life and pensions. This capping change works exactly in the opposite direction of letting them push down on the accelerator during that relatively limited period of higher earnings, when they can set money aside.

We are not talking about multi-millionaires, as people have said; this is about incentivising millions of ordinary people to put more aside during those years when their income is just sufficient to allow them to do so. I regret that the Government, rather than encouraging that approach through this Bill, are now discouraging it.

For individual workers, this change comes in the context of frozen income tax thresholds, as well as eye-watering increases in the cost of living. Many who diligently choose to live more frugally and save through pensions have already faced the changes in inheritance tax, and now they have this. The two have to be seen together as changing the psychology of many who are trying to make a decision about what to do with their money. Many will now reduce their saving for old age. How anyone thinks this will help with the demands on or the cost of social care—two of the biggest burdens that we carry as taxpayers—I simply do not know.

For businesses, especially small businesses—the noble Baroness, Lady Maclean, spoke as a living example of someone with a small business, as is the noble Lord, Lord de Clifford—this is just another tax rise at a time when so many other costs have been thrown on to businesses. We debated business rate changes just last week.

While larger businesses may find other ways to help their employees—it has certainly been clear from some of our speakers that there are mechanisms that they can turn to—most small businesses do not have that capacity. The cost of both employee and employer NICs, especially in small businesses, tends to fall on the workers in the end. It creates a real differential between being employed by a big firm or a small one. The Federation of Small Businesses has looked at this Bill and warned of the impact on staff retention. I just wonder: does no one in the Treasury understand that an expanding small business sector is the backbone of the economy, our major source of new jobs, the underpinning of communities and the birthing ground for key industries of the future?

Then we have the investment impact of curtailing pension savings. Only yesterday, in Committee on the Pension Schemes Bill, we were dealing with the Government's concern to direct pension savings into investment in the UK economy, from private equity into infrastructure—absolutely core and key to their growth agenda. How on earth does this Bill help that? In fact, how does it not hinder it? The Mansion House Accord, on which so much of the Pension Schemes Bill rests, applies only to a small part of the pension world: auto-enrolment by low earners. If the Government are seriously looking for a step change in investment into the UK economy and into the riskier parts of the UK economy, it is exactly the money that goes into salary sacrifice schemes that they require to undertake those kinds of ventures.

The noble Lord, Lord Londesborough, talked about the timing of the Bill and the potential for front-loading salary sacrifice schemes over the next few years. That is a point that the Government need to address. The timing of when this comes in is truly weird. I cannot work out whether the change that takes place in 2029 is essentially an actual change or an attempt to game the fiscal rules. We are past the point where any of us want to accept the gaming of fiscal rules anymore. We know what it did under the last Government, and we do not want to see it repeated here.

I give way to others who talked about the practical impacts: what do you do with someone who changes jobs? How do you deal with the paperwork and the systems? I am very conscious that those things that get brushed aside often turn out to be huge stumbling blocks. We need to hear more from the Government on that.

The prize for any Government when it comes to pensions is to get people to save in their times of higher earnings as much as they reasonably can. That is what reduces demand on the taxpayer for social care and benefits in old age. Frankly, with our ageing population, it is increasingly vital, not less vital. This Bill simply pushes in the opposite direction. We need to address that through serious amendment.

Business Rates

Baroness Kramer Excerpts

Thursday 29th January 2026 Lords Chamber

[Baroness Neville-Rolfe (Con)]

My Lords, here we are again, discussing yet another U-turn when the Government conclude, after public outrage at an announcement that they have made and after some tardy reflection, that perhaps they did not get matters right first time. What is offered here is not merely tardy but inadequate. It fails to grapple with the pressures now bearing down on small businesses across the country, especially from business rates.

It is essential that we look beyond the Treasury’s abstractions and confront the real-world consequences of the changes announced in the Budget, which remain even after this U-turn. Tina McKenzie of the Federation of Small Businesses has warned, following this latest announcement, that it simply proves that

“the Government repeatedly fails to recognise the difficulty that these businesses are in”.

I could not echo that more strongly. Andrew Goodacre, the chief executive of the British Independent Retailers Association, went further, describing the change as a “half-baked U-turn” and warning that independent retail is being “flushed down the U-bend”. He added, tellingly, that he could not recall a worse policy decision, cautioning that this poor decision was based on poor reasoning that will inevitably lead to more shop closures—and so on.

The Minister has said that he wishes to work with businesses but, in the face of this negative and consistent feedback from businesses themselves, especially from SMEs, it seems he has been unsuccessful in that aim. It is abundantly clear that the Statement addresses only a small fraction of the economic damage inflicted on businesses since the Government took office.

The inadequacy is not merely one of scale. The relief announced is, by the Government’s own design, temporary, so it is a sticking plaster applied to a deep and structural wound. One of the most persistent economic misunderstandings that this Government have displayed since assuming office is a failure to grasp what businesses actually need: clarity, consistency and certainty. Businesses do not want U-turns, short-lived reliefs, or promises trailed in briefings only to be withdrawn or reannounced days later, as we all saw before the Budget. This announcement exemplifies that failure in its entirety.

Worse still, everyone in the sector is saying that it is inadequate. If the Minister will not listen to His Majesty’s Opposition, perhaps he might listen to Labour Back- Benchers. Jim McMahon and Stella Creasy made the point that I am making in the other place just this week. When Parliament, publicans, business leaders and his own Back-Benchers are urging a reconsideration, what more is the Minister waiting for?

This is ultimately a question of credibility. Businesses do not measure that by press releases or promises of future strategies; they measure it by whether they can plan, invest and survive. What has been announced does not provide that certainty. It is limited in scope and temporary by design, and arrived only after external pressure became unsustainable. That is not how stable tax policy is made or how confidence is restored.

The truth is that confidence in hospitality and retail is fragile. We heard only this morning from Charlie Nunn, CEO of Lloyds Bank, that the sectors in question were having a challenging time. What assessment has the Treasury made of the number of such businesses that have already cancelled investment, reduced staffing or decided to close since the Budget because the Government have failed to provide clarity about their intentions?

If the Government truly wish to work with businesses, they must move beyond reactive concessions and bring forward a coherent, durable approach that treats the whole high street fairly and gives enterprises the certainty they need in order to grow. Until that happens, I fear this week’s announcement will be seen not as a solution but as an admission of failure.

The modest action on pubs is, of course, welcome, and a promise has been made to look at hotels, but will the Minister agree to look at rates for the wider retail, hospitality and leisure sectors before the next Budget? Thousands of shops, cafés, hotels, nightclubs, cinemas and theatres are still facing huge increases. The combination of higher taxes and rates, extra regulation and energy prices for business—four times those in the United States—is crippling these very sectors, and I hope the Minister will be able to promise some relief.

[Baroness Kramer (LD)]

My Lords, I start with perhaps a modicum of welcome because the combined impact of the Budget and the business rates revaluation prior to this announcement, frankly, left the pub industry on the verge of a crisis, with up to 50% of pubs under the threat of closure. Some relief has now been offered for many pubs, and I am glad that this lifeline has been extended to live music venues, which are the birthing ground of our very important music industry.

Do the Government recognise that the relief that they have just announced amounts roughly to only £1,650 per pub, which will still leave many in a critical financial hole? Do they recognise that pubs with a rateable value of over £100,000 are, in effect, not eligible, and that restaurants, cafés and soft-play areas—so many of those hospitality and leisure operations that lie at the heart of our high streets and communities—will get no relief from these changes whatsoever?

The chaos that has surrounded the announcement of the review—the change and uncertainty that has gone with it and the impact on the sector—surely points to the fact that we need to stop trying to fix the business rates system at the fringes. We need to take a proper step back and review the whole way in which business rates are structured, which, I would say, should head in the direction of land value. There is so much to be done around this area. It is time that the Government see that, rather than get into continuous messes by attempting to ameliorate a system that, frankly, is broken.

Do the Government also accept that the chaotic process that we have seen deeply underscores the need to include hospitality in the industrial strategy? At the very least, one would hope that the effect of that would be to force the Treasury to align tax policy with the economic goal of strengthening our high streets and our hospitality and leisure sectors, and to determine that they are a source of growth, not of constant crisis and constraint. Does the Minister accept that, until the Treasury gets aligned with that agenda, we will have constant issues like that? Frankly, that is not the best way to go.

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

I am very grateful to the noble Baronesses, Lady Neville-Rolfe and Lady Kramer, for their comments and questions, and for their cautious welcome of what we have announced.

The noble Baroness, Lady Neville-Rolfe, ignored what we announced in the Budget: the £4.3 billion of support for those experiencing increases in business rates. As she knows, the previous valuation was based on property values during the Covid pandemic, which meant that rateable values were much lower. As a result of that valuation, some businesses, including the retail, hospitality and leisure venues that we are discussing, are now seeing an increase.

At the Budget, we announced three elements of support at a cost £4.3 billion, which neither noble Baroness mentioned in their comments. We are implementing transitional relief that will cap increases at 5% for the smallest properties and at up to 30% for the largest. For any business whose value increase has meant that they are no longer eligible for small business rates relief, we are capping their increase. We have expanded the supporting small business relief scheme, to provide specific support to those who are currently eligible for the 40% RHL relief.

The noble Baroness, Lady Kramer, said that the wider system needs reform; we absolutely agree on that and have begun that. We are reforming the business rates system by introducing permanently lower tax rates for over 750,000 retail, hospitality and leisure properties. The noble Baroness, Lady Neville-Rolfe, said that what we are doing is temporary, but those new lower rates are permanent—unlike what the previous Government did—and they will be funded by higher rates on the most valuable properties, including those of online giants.

I remind the noble Baroness, Lady Neville-Rolfe, that the previous Government’s plans were to scrap entirely the temporary Covid-era retail, hospitality and leisure relief in 2025—but she now says that more support should be offered. If they had won the last election, their plans clearly show that they would have removed it overnight in April last year. They now claim that they would extend it, so why did they not say so or include that in their forecasts or projections?

I am grateful to the noble Baroness, Lady Kramer, for what she described as her cautious welcome of what has been announced. We have of course been listening to the industry. We have announced that, from April, every pub in England will get 15% off its new business rates bill, on top of the support announced at the Budget. Their bills will then be frozen in real terms for a further two years. The noble Baroness noted that the support will be worth £1,650 for the average pub next year, but that means that three-quarters of pubs will see their bills either fall or stay flat next year. This decision will also mean that the amount of business rates paid by the pub sector as a whole will be 8% lower in 2028-29 than it is today.

The noble Baroness, Lady Kramer, said that pubs with ratable values of over £100,000 would not benefit, but we are clear that this will apply to all pubs. I am grateful for what she said about this applying to music venues too. Many live music venues are valued as pubs, and many pubs are grass-roots live music venues, so it would not be right to seek to draw the line so tightly as to include some but not others.

The noble Baroness, Lady Neville-Rolfe, also talked about the structural issues that many of these businesses are facing, and she will know that the sector has raised concerns about the way that they are valued. The Government agree that this needs to be looked at. We are therefore launching a review that will examine how pubs are valued for business rates, and we will set out more detail on that in due course.

The noble Baroness, Lady Neville-Rolfe, spent a lot of her statement telling us about what businesses need. What they need most is stability; they did not need the previous Government, with the Liz Truss mini-Budget, Brexit and austerity, and all the consequences that they had. The noble Baroness commented on what we are doing for business. She will know that, under the previous Government, business investment was the lowest in the entire G7, and that, since the election, business investment has increased faster in this country than in any other G7 country. I am more than happy to compare her record with ours.

The noble Baroness will know that we are pressing ahead with wider regulatory reforms to help businesses, as well as carrying out licensing reform, and that we are looking at loosening planning rules to benefit pubs more generally. She will also know that we are doubling the hospitality support fund with £10 million of funding over three years.

The noble Baroness, Lady Kramer, talked about the importance of the sector for growth, and the noble Baroness, Lady Neville-Rolfe, talked about the challenges faced by the wider sector. I understand the challenges that many other retail, hospitality and leisure companies are facing. We have already taken significant steps to support businesses, including, as I said, the £4.3 billion of business rates support.

As we all know, consumers have changed their habits over the past decade and are increasingly working from home and shopping online. Combined with the pandemic and the increase in energy costs since Russia’s invasion of Ukraine, these trends have continued to make it harder for high street businesses. Therefore, later this year the Government will bring forward a high street strategy, and we will work with businesses and representative bodies to look at what more the Government can do to support our high streets.

Business Rates: Retail, Hospitality and Leisure

Baroness Kramer Excerpts

Tuesday 20th January 2026 Lords Chamber

[Lord Livermore (Lab)]

I agree with a great deal of what the noble Baroness says. HMRC has announced substantial measures to crack down on some of the businesses she mentioned, and I think she will have seen several of them closing in recent months. She is quite right that more needs to be done. She is absolutely right to talk about the importance of the hospitality industry, and we completely recognise that. It plays an incredibly important role in the UK economy, employing more than 2 million people. It is vital to the life of high streets across the UK, and we will do what we can to support it.

[Baroness Kramer (LD)]

My Lords, I will repeat the adage I used formerly: measure twice, cut once. Does the Minister understand that there is real urgency to get response and relief now within the hospitality industry and for pubs, as they face uncertainty? Many, believing that the blows had ended, went ahead and hired or invested and are now unsure whether they are economically viable. Has the Minister looked at the impact of this uncertainty, particularly on the independents, which I understand are disproportionately affected?

Public Sector Productivity

Baroness Kramer Excerpts

Wednesday 7th January 2026 Lords Chamber

[Lord Leigh of Hurley (Con)]

My Lords—

[Baroness Kramer (LD)]

My Lords, this Question caused me to take a look at how the Government measure productivity. It strikes me as extraordinarily quantitative, taking into consideration almost no issue of quality. I am concerned that if AI is trained on these existing models, we are going to dig ourselves into a worse hole rather than make things better. Are the Government looking at how productivity is measured to give us something far more useful and valuable?

[Lord Livermore (Lab)]

I agree with a great deal of what the noble Baroness said. I noticed the noble Lord, Lord Leigh, who is very interested in this point as well, was on his feet. We have discussed it before in previous debates. We recognise the challenges in measuring public sector productivity, given the diversity of inputs and outputs in public services. The ONS recently published a review of its metrics. It has done a wide-ranging review into how productivity is measured and set out improvements that are now under way in many areas, such as healthcare, education and social security administration. It has included new quality adjustments, which better account for outcomes. I will take back to the Treasury the point the noble Baroness makes about the future adoption of AI.

Agricultural Property Relief and Business Property Relief

Baroness Kramer Excerpts

Tuesday 6th January 2026 Lords Chamber

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

I am grateful to the noble Baroness. May I first take this opportunity to wish her a belated happy birthday for the weekend just past?

I am grateful to the noble Baroness for her support for the measures that we announced shortly before Christmas. It is absolutely right that, following the reforms to the reliefs that we announced in the Budget in 2024, the Government consulted about the reforms with the farming community, as she says, and with family businesses. We have now carefully considered this feedback and have acted, and that was the right thing to do. We have acted to protect more family farms and family-owned businesses, while maintaining a core principle that more valuable agricultural and business assets should make a greater contribution.

[Baroness Kramer (LD)]

My Lords, I recommend a carpenter’s rule to the Government: “Measure twice, cut once”. Can the Government tell us their assessment of the serious harm that was done to our vital family farming sector by the devastating mistake of their original tax policy? I am glad that they have recognised that and have at least made some change. However, would it not benefit the economy more to abandon this tax policy altogether—it will now raise next to nothing—close the tax loopholes exploited by private equity, which were never actually touched by the policy in the first place, and focus on rebuilding trust and revitalising our critical agricultural sector?

[Lord Livermore (Lab)]

No, I do not agree with the points the noble Baroness makes. She says this will raise next to nothing; it will still raise about £300 million for our public services. I do not know whether she thinks that is next to nothing—I do not—and I do not know where she would get that money from if she wishes to cut this. There is also an important core principle that we have maintained: that more valuable agricultural and business assets should not receive unlimited relief. There is, I believe, a need to reform agricultural property relief and business property relief; I think she is saying that she does not agree with that. However, the status quo is not sustainable, because a very small number of claimants currently benefit from a very significant amount of agricultural property relief and business property relief. The top 7%, the largest 117 claims in 2021-22, accounted for 40% of the total Exchequer cost of agricultural property relief, and the top 4% of claims, the largest 158 claims, accounted for 53% of the Exchequer cost of business property relief. We are now getting the balance right between protecting those farms and those businesses, supporting the public finances and supporting our public services.

OBR: Resignation of Chair

Baroness Kramer Excerpts

Monday 8th December 2025 Lords Chamber

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

I am grateful to the noble Baroness for her question and the points that she made. I should say very clearly that we take the Budget process extremely seriously and put the utmost weight on Budget secrecy. She will know that a leak inquiry is now under way, with the full support of the Chancellor and the whole Treasury team. She will also know that the Permanent Secretary to the Treasury will conduct a review of the Treasury’s security processes to inform future fiscal events. We will, of course, also work closely with the OBR to ensure that robust security arrangements are in place before the spring forecast and for all future forecasts. On the other points that the noble Baroness raises, she will be aware that the FCA has now written to the Treasury Select Committee confirming that it has not commenced an enforcement investigation.

[Baroness Kramer (LD)]

My Lords, the Minister will be aware from things I have said previously that it would be worth taking a look at the Swedish approach and that of some other countries to an open Budget process that gets away from the kind of shenanigans that we saw in the past weeks. He did not answer me when I raised that before. Will he now commit to taking it back for the Treasury to look at and think about?

Focusing on the OBR, the more I look at this episode, the more I ask myself whether any digital-based data can be truly secure. It is almost like a cat-and-mouse game at the moment, with fists being put into dykes to try to stem leaks, but nothing is reliably effective, and AI will surely be a game-changer that aggravates this. Will the Government consider an open dialogue with the public, the media and, in the case of sensitive financial reports, the financial markets, to consider how we handle data in this changed world, so that we no longer have this environment of leaks and secrecy but find a better way forward?

[Lord Livermore (Lab)]

I am grateful to the noble Baroness. She raised her suggestion about the Swedish model before. I think I said then that I do not think that we had any intention of taking that forward, and I say the same thing again today.

It is important to say that we remain absolutely committed to the independence of the OBR. That is incredibly important to the fiscal framework and to our commitment to economic stability. Clearly, it is important that the information it has is treated with the utmost secrecy. That is why it is important that, as I have said, we will work closely with the OBR to ensure that it has robust security arrangements in place for how it treats information.

On the next steps that we intend to take, the OBR has rightly conducted its initial investigation as quickly as possible, and we should now take the time, as I think I have said to the noble Baroness before, to consider its findings and the report in greater detail. The report into the OBR also made the point that it

“could not, in the time available, carry out deeper forensic examination”

of other recent economic and fiscal outlook events and recommended that such an event takes place. We have committed to doing that with the National Cyber Security Centre, as I think the noble Baroness alluded to, although it is important that we note that the report found no evidence of hostile cyber activity.

Autumn Budget 2025

Baroness Kramer Excerpts

Thursday 4th December 2025 Lords Chamber

[Baroness Kramer (LD)]

My Lords, as the first of the winding speakers, let me repeat the welcome to the right reverend Prelate the Bishop of Portsmouth and say how much we enjoyed his excellent maiden speech, which I will refer to later.

To the Government, let me say that I am not quite in the “Apocalypse Now” camp that I hear from the noble Lord, Lord Bridges, and some of his colleagues, but I really thought this was going to be—and needed to be—a Budget for growth. When we were in that period of endless announcements, U-turns, leaks, chaos, et cetera, I thought there would be a real surprise on Budget Day, that we would get that project, programme and vision that would drive forward growth. I was wrong.

As others have said, the OBR makes it clear that trend productivity growth is down, and we have no proper road map for dealing with it—the noble Lord, Lord Willetts, was eloquent on that point. The OECD has predicted that the UK will face headwinds from the Budget and will have the highest inflation rates in the G7. The noble Lord, Lord Rosenfield, spoke extensively on this issue. The Budget contained no compelling argument for investing in UK business. I wish the Government had listened to the noble Viscount, Lord Stansgate, who was calling for a real step change at this point, which is exactly what we need.

I agree that there were marginal but important measures in here that support upscaling—they were described by the noble Baronesses, Lady Moyo and Lady Penn, and, to some degree, by the noble Lord, Lord Ranger—focusing on AI.

These are not easy times for growth. Global headwinds are reducing global trade forecasts, which is not good news for the UK economy. That is exactly why my party is urging the Government to go immediately beyond their lackadaisical reset with the EU and push for a bespoke customs union. Those who do not think that Brexit is a blow that is battering our economy should go and talk extensively to business. It is not just the economists; it is the people on the ground daily who are dealing with the consequences. Of all times, this is not a time when we can indulge in the glow of insularity and exceptionalism.

My party, using work from Frontier Economics and the Commons Library, calculated that joining a customs union with the EU would deliver £25 billion in additional money to the Treasury. Frankly, that dwarfs every tax-raising measure in the Budget and off-sets far more than any spending cut that the Conservatives propose.

We heard concern about Brexit from the noble Lords, Lord Hollick, Lord Tyrie and Lord Brook of Alverthorpe. My noble friend Lord Razzall referred the Government to the Private Member’s Bill being brought forward by the honourable Member for Surrey Heath, which will give an opportunity to capture these issues.

I and my party strongly take the view—as my noble friends Lord Razzall and Lord Mohammed of Tinsley said—that the Government are absolutely right to lift the two-child benefit cap. I say to the noble Baroness, Lady Deech, and the noble Lords, Lord Bailey and Lord Massey, if a safety net is not for children, who is it for? We take the strong position that poverty undermines children, it does not raise them.

Similar views were expressed by the right reverend Prelates, the Bishop of Portsmouth and the Bishop of Manchester. I pick up the question introduced by the right reverend Prelate the Bishop of Portsmouth on where the funding will come from to guarantee SEND provision when it shifts from local authorities to central government. The noble Baroness, Lady Barran, raised that issue, and my noble friend Lord Mohammed of Tinsley stressed its importance. That means that we must have an important and strong answer on this from the Minister.

The decision to remove £150 from energy bills is welcome, but, as my noble friend Lord Razzall says, it is less adequate than the Lib Dem proposal. I say to the noble Baroness, Lady Griffin of Princethorpe, that we would not have been partly funding that by cutting programmes to tackle climate change, as the Government have chosen to do. We would have fully replaced that from central government resources.

When I first heard the Budget, like others—and the noble Lord, Lord Bilimoria, has just said this—I thought that huge relief would be given to the hospitality industry through the business rates system. We in our party have proposed a VAT cut, and some people implied that this was going to be the equivalent. But UKHospitality estimates that an average pub will pay £12,900 more in business rates over three years.

The noble Lord, Lord Freyberg, stressed similar pressures on grass-roots venues. This is a serious problem and I want to hear a proper answer from the Minister. In our case, we would have paid for the cuts in energy bills and VAT by pursuing the proposals of the IPPR for attacks on the windfall that major banks are making, not from their efforts but from the technicalities of QE and the reserves that they are keeping at the central bank. Why the Government have not seized that opportunity is beyond me. However, I give them credit for seizing the proposals pushed over and over by the noble Lord, Lord Foster, for a remote gambling tax, which has not just fundraising but moral outcomes.

Why have the Government not raised the digital tax from 2% to 10%? It applies to the mega seven digital companies. Frankly, I just do not understand. These are serial tax avoiders par excellence. Our own UK digital companies are disadvantaged by their gaming of the tax system. That absolutely matters if we push on digital and AI.

Let me address the main proposals in the Budget, which raised most of the additional £26 billion in taxation and take tax levels in this country to unprecedented highs. Taxes will have gone up by £67 billion since the first freezing of tax thresholds. Labour is responsible for £13 billion of those taxes and, oh my, the Conservatives are responsible for £54 billion of those taxes. When I hear them talking as though they are a low-tax party, I wish that they would go back and look at what they did. Freezing thresholds is one of the worst ways to increase taxes on ordinary people. The noble Baroness, Lady Thornton, raised the question of the impact on women, and I hope that the Government will answer that.

It is true that many people do not realise what is happening until it is too late, a point made by the noble Lord, Lord Burns. However, we now face the extraordinary prospect that a quarter of employees will be in the high-rate tax bracket by 2030-31, not because they have become more prosperous but simply because their wages are rising just to cover inflation. The OBR forecast relies on inflation staying higher for longer, as the noble Baroness, Lady Neville-Rolfe, said. The Government hope, because their additional spending is front-loaded and the tax increases are back-loaded, that people will have not caught on that, by 2030-31, they will be paying some £1,400 more in tax. We will have had nine years of threshold freezing.

The other major tax-raiser comes from changes to the salary sacrifice scheme of some £4.7 billion. I am concerned, and I heard the same concern from the noble Lord, Lord Hollick, that, combined with the changes to pensions in the last Budget, we are going to see a move away from pension saving and long-term investment by the wage-earning middle. The consequences of that are not good for growth. I ask the Government to get a grip on this issue. They are trying to get more auto-enrolled pensions—which is a very small part of the market covered by the Mansion House compact—into UK investing, but the big part of the market is now essentially being discouraged.

I refer to the comments made by my noble friend Lady Bowles on government procurement of innovation. That is a serious issue and I hope the Government take it on board. It is much wider than the narrow issue that it is sometimes treated as.

The so-called mansion tax will raise only £400 million and likely much less, but in London the revaluation of bands F, G and H will hit social housing. The mansion tax does not but the revaluation does. Can the Minister confirm that? The answer is that the whole of council tax needs a complete rethink—I agree with the noble Lord, Lord Campbell-Savours, on that.

The timing of the taxing per mile of EVs seems perverse, when we need to accelerate the switch from petrol to diesel. I assume, along with the noble Lord, Lord Young, that this is the beginning of an evolution into road pricing. Why on earth were we not given a tax road map on this issue? Without that map, we will begin to see people become inhibited about buying EVs, perhaps unnecessarily. A road map should have accompanied a significant change on this scale.

I have one small comment—perhaps it is not so small—on the loan charge. I thought that the Government’s seeming acceptance of the McCann review, even if it did not deal with pre-2010 and already settled cases, would largely provide a resolution to this appalling mire. Then I realised that the discount that the Government are now going to use is capped at £70,000, leaving some 20% of those with open cases still absolutely in the mire. These are people who might once have been high earners but now typically are retired on modest incomes. So little more was needed for this nightmare to be resolved. I do not understand why the Government did not take that next step.

Lastly, the Government, as necessary, increased the fiscal headroom to £21.7 billion. We called loudly for such a change. I am slightly taken aback that one-third of the increase in the headroom relies on public sector efficiency savings on, frankly, a heroic scale. The noble Lords, Lord Willetts, Lord Wood and Lord Eatwell, and the noble Baroness, Lady Shawcross-Wolfson, talked about how questionable future public sector savings are, particularly on the scale included in the forecast. The markets have calmed for now, but they will not stay calm if we do not see that efficiency come through and if we do not see growth.

Meanwhile, as I wind and finish, the public sector and local government are still on their knees. Ordinary people are still struggling every day with the cost of living. Businesses’ appetite to invest is still muted. There really is only one way to make a step change out of this mess, and I am going to go back to where I started: will the Government please now accelerate the process of resurrecting a bespoke EU customs union relationship so that we can look forward to a future with resource and choice, and without facing the kinds of constraints that are evident in this Budget?