National Insurance Contributions (Employer Pensions Contributions) Bill

Lord Leigh of Hurley Excerpts

Wednesday 4th February 2026 Lords Chamber

[Lord Leigh of Hurley (Con)]

My Lords, it is always a pleasure and a challenge to follow the noble Lord, Lord Davies of Brixton, but I welcome his remarks.

This is the second attempt by the Government to raise money by stealth through national insurance—first on workers, now on savers. Your Lordships will recall the disaster of the last Bill to try to do this and its wrecking effect on the UK economy, so let us have a look at these proposals and the impact they may have.

We are, of course, aware of the Government’s need for cash, not least for their out-of-control welfare bill. Spending on health and disability benefits alone is forecast to reach nearly £100 billion by 2030, and the CSJ shows that around 6.2 million full-time workers—roughly one in four—would now be financially better off on benefits than in work, when you take tax into account. It is a shame that the PM could not stand up to his Back-Bench colleagues and deliver the necessary reform on welfare. As a result, the Government are scrapping around with initiatives such as this, which will have a potentially disastrous effect on people’s desire and ability to save for their pension. It is not just the numbers; it is the message.

This Bill simply punishes people who are trying to do the right thing. We were told by Labour that it would not raise taxes on working people, so perhaps the Minister can explain how this fits in with that commitment, given that the NI will come straight out of people’s salaries, including the salaries of people who are, frankly, on quite modest incomes.

The Bill hits the regular taxpayer very hard. It follows the retrospective tax changes on pensions whereby this Government applied inheritance tax on private pensions. Needless to say, the main group of people not affected by those changes are, of course, those who work in the public sector and, in particular, the Civil Service. The Minister used the word “fair” a lot in his opening remarks, but does he not see how unfair this Bill is? While civil servants’ pensions are protected for life—and, indeed, often for their spouses—the Bill does not impact them at all. It is only those working in the private sector—typically, by the way, much more so on middle incomes than higher incomes—who get attacked by the Bill.

Why are the Government making it so much harder for private sector employers to contribute to the pensions of their employees? Does the Minister recognise that it is the private sector employee who will have to fund the unfunded £1.5 trillion liability of public sector pensions? Perhaps it is because there is so little private sector expertise on the Front Bench, with the notable exception of both Ministers sitting there tonight. The amount raised by the Bill peaks at £4.845 billion in 2029-30 but then, according to the Red Book, falls to £2.585 billion in the following year.

We are told that this is due to behavioural changes. However, I cannot find any explanation as to what this might mean. Could the Minister please elaborate: what behavioural changes? In his opening remarks, I think he referred to no changes in savings behaviour, so how is this extremely dramatic fall explained? Is it a coincidence that the amount generated peaks in 2029-30, which is the year that counts for the Chancellor’s fiscal rule and possibly the year of an election? Do the Government realise that taxpayers will feel that they are taking money out of their pockets just at that moment?

I commend to the Minister the representation from the Chartered Institute of Taxation, of which I am a qualified member. I do not have time to go through it all, but it is clear that the Bill does not explain what is meant by—as the noble Lord, Lord Davies of Brixton, mentioned—“optional remuneration arrangements”. In particular, greater clarity is needed as to which conversations between employer and employees regarding pay and pension provisions could give rise to optional remuneration arrangements.

As noble Lords may well be aware, there are two types of optional arrangements: type A, which the Bill clearly covers, and type B, which it does not. Is the Bill intended to cover type B optional payments, which new subsection (6A) sort of implies? This is a big subject and needs much more work before Committee so that we can all understand what the Government’s intentions are.

Likewise, insufficient thought has gone into how the ridiculous annual £2,000 limit would be applied to employees paid weekly or monthly and those with multiple employments. Has thought been given to the likely impact on some employees where employers might withdraw pension salary sacrifice schemes as an option? What do they do?

Finally, as the Minister knows, I am always happy to be of assistance to the Government and, in this respect, I am happy to discuss other ways of raising revenue in this area, as I have done, for example, in VAT. I would like to understand from the Minister what assessment has been made of the effect of a national insurance charge levied on self-employed and LLP partners, which seems to me to be fair and would raise substantial amounts of revenue. I do not expect an answer on that tonight. We had a debate on it in an Oral Question a few weeks ago. A noble Lord who is a KC suggested that doing so might frighten off the legal profession to other parts of the world. I am not convinced that that is a fair argument, and I would like to see the Treasury’s assessment, perhaps in writing at a later date.

In the meantime, I look forward to the answers to the questions I have raised and a detailed discussion of these issues in Committee, and I just hope the public are made aware of the real effects that the Bill will have on them.