National Insurance Contributions (Employer Pensions Contributions) Bill

Ashley Fox Excerpts

Committee of the whole House
Wednesday 21st January 2026 Commons Chamber

[Torsten Bell]

I am listening to every word of your strictures, Ms Nokes. This Bill is also pragmatic by providing time to adjust and by ensuring that saving into a pension remains hugely tax-advantaged. I say gently to Members who do not agree with the detail of this Bill that they should be careful not to give the impression to savers or those not saving that there is not already a strong financial incentive to continue pension saving in exactly the way people have been doing. Clause 1 provides for that pragmatic approach in Great Britain. Clause 2 does the same for Northern Ireland, and clause 3 provides for the territorial extent and start date of these measures.

I will turn more substantively to the amendments tabled by the shadow Minister and the hon. Member for Witney. At one level, I was glad to see amendments 5 and 6 tabled by the shadow Minister, which aim to exempt basic rate taxpayers. It shows the Opposition, as part of the secret plan that I mentioned earlier, accepting the inevitability of change and instead grappling with what the right pragmatic version of that looks like. In many ways, the amendments aim to deliver the same objective as the £2,000 cap, which, as I said, will mean that 95% of those earning less than £30,000 are unaffected, as are the vast majority of basic rate taxpayers.

[Sir Ashley Fox (Bridgwater) (Con)]

Can the Minister explain what is pragmatic about withdrawing a 2p in the pound tax relief from a higher rate taxpayer without a student loan, while withdrawing a 17p in the pound tax relief from a basic rate taxpayer who happens to have a student loan?

[Torsten Bell]

The pragmatic approach is to allow people to continue with salary sacrifice up to £2,000 and to not bring in the measure for four years, so that people have time to adjust. Opposition Members will need to justify wanting to spend more than is being spent on the Royal Air Force on that—I sat through Prime Minister’s questions today, and I heard people calling for more defence spending—while not being able to live up to what that requires, which is taking seriously that we spend tax reliefs effectively. For everybody, there will still be a strong tax incentive to save into their pension.

Taking the approach that the Opposition propose, rather than our proposed cap, would likely be impossible to implement in practice and add unnecessary complexity. That is not least because employers would in many cases not know which employees would end up being basic rate taxpayers. They certainly would not know for sure until the end of the financial year, or at least late on into it.

Amendments 7 and 8 would uprate the cap by inflation. The Government have set out our policy intent for a £2,000 cap to be introduced in April 2029, with the timing driven by the desire to give everyone time to adjust. In that context, it does not make sense to index that cap ahead of 2029. Our view is that the future level of the cap in the next decade and beyond is for Budgets in those decades—or at least significantly closer to them. I know that Members are keen to start debating the 2031 Budget, but having heard from Ms Nokes, I think we should leave that for another day.

Our approach is consistent with the one that this House has taken under Governments of all three main parties, which is to have key elements of the pension tax system that are not routinely indexed, including the annual allowance. It is of course right that this and all Governments will want to keep the cap under review to ensure that it continues to meet the objectives we have set out today.

Several of the new clauses probe at the impact of the changes. The Government have published a tax information and impact note alongside the Bill. It sets out the impact of the policy on the Exchequer, the economy and individuals and businesses. It also provides an overview of the equality impacts.

New clauses 1 and 2 focus on SMEs. I have heard suggestions—this has been gently hinted at today—that SMEs are more likely to be affected. The opposite is true. Only 39% of employers offer pension salary sacrifices, and small businesses are less likely to do so than larger businesses. Indeed, the status quo puts SMEs at a disadvantage relative to their larger competitors, which is the opposite of the point that the hon. Member for Witney wanted to make.

New clause 3 focuses on marginal tax rates, but the changes in the Bill do not directly affect a person’s marginal tax. Those wanting to make pension contributions to keep their taxable income below a certain level can continue to do so, and I have read much misleading commentary on that point.

New clause 4 proposes an impact assessment of the changes before they take effect and five years after. I again commend the hon. Member for Wyre Forest, who is showing admirable zeal for supporting the argument that I made on Second Reading that any responsible Government should keep the £500 billion of tax reliefs under review to ensure that they are delivering efficiently on their objectives. That is the exact thought pattern that identified this relief as needing reform. I look forward to the shadow Minister changing his mind and supporting our measures. The Government should and will continue to keep this and all taxes and tax reliefs under review, rather than singling this particular relief out via primary legislation.

I turn briefly to new clauses 5 and 6, which focus on the impact on pension savings. I can reassure the Committee that the Office for Budget Responsibility has set out that it does not expect any material impact on savings as a result of the Budget 2025 tax changes. I hope that these remarks reassure Members on the points that their amendments have raised. I commend the Bill to the Committee.

Question put, That the amendment be made.

National Insurance Contributions (Employer Pensions Contributions) Bill

Ashley Fox Excerpts

Consideration of Lords amendments
Monday 23rd March 2026 Commons Chamber

[Torsten Bell]

As always, I thank my hon. Friend for his remarks. He was pretending that the competition is about who is the better MP, but we know it is really about the volume of speaking in this Chamber. The two of them are running it close, but never testing the patience of this House. It is amazing that you have allowed them both in this early in the debate, Madam Deputy Speaker, because that is what the closing minutes of every debate in this House should be about. It is important to have traditions, and they both deliver admirably, but I will make some progress before we get sidetracked entirely.

I was talking about the pragmatic approach we are taking to this change. As I have said, there will be no change until 2029, and the £2,000 cap means that salary sacrifice contributions can continue. That recognises the fact that that has become an established process in several companies and for individuals, so we are giving people time to adjust. The hon. Member for Strangford (Jim Shannon) raised that, and I have responded by saying that this is pragmatic because pension tax relief continues in its entirety. It is important to remember that relief is available to all savers, not just to the minority who have salary sacrifice available to them.

With that in mind—and I am sure that the hon. Member for Wyre Forest (Mark Garnier) for the Conservatives will have decided to support the Bill in its entirety having listened to those powerful arguments—I turn first to Lords amendments 1 and 7, which would exempt basic rate taxpayers from the operation of the Bill, and Lords amendments 5 and 11, which would increase the contributions limit to £5,000. The Government’s balanced and pragmatic approach, with the £2,000 cap, means that 74% of basic taxpayers using salary sacrifice will be entirely unaffected. The small proportion of basic rate taxpayers with contributions above the cap will still be getting the national insurance contributions relief on the first £2,000 of contributions made via salary sacrifice, in addition to the full income tax relief that is available to all employee pension contributions.

Exempting basic rate taxpayers in the manner proposed would be incredibly difficult to operate. An individual’s tax band is not knowable until the end of the tax year, which means employers would be required to carry out complicated calculations at the end of the year to reconcile the figures, and they would need to know their employees’ other sources of income, which I do not think anyone would believe is a good idea.

[Sir Ashley Fox (Bridgwater) (Con)]

The Lords amendments might not be perfect, but do they not set out the principled objection to the Government taxing some basic rate taxpayers more for choosing to save for their pension and at the same time using that money to increase welfare spending?

[Torsten Bell]

No, that is not what is going on. What will happen is that everybody will still have a strong tax relief incentive to save for their pension, and by taking a sensible approach to reforming that, we will avoid seeing the cost of the tax relief rise to the same level as the cost of the RAF. I listen to Opposition Members day in, day out calling for more defence spending. There are consequences for that. One of them is that we have to do our job of looking carefully at the quality of our tax reliefs, and that is what we are doing today. Hon. Members should support us in doing that.

[Sir Ashley Fox]

Rather than raising taxes, could the Minister perhaps not send £36 billion to the Government of Mauritius to rent back an airbase that we already own?

[Torsten Bell]

That is a question the hon. Gentleman should put to his Front Benchers, who opened the negotiations with Mauritius in the first place. Opposition Members come to the House making cheap points, because they used to take seriously the job of government and they have given up entirely. I will make some progress now, having engaged with the hon. Member who obviously gave up on the job of serious government some time ago.

A world where 95% of those earning £30,000 or less and contributing via a salary sacrifice are unaffected makes the case for the £2,000 cap I have set out, but the Government agree with the sentiment raised in the Lords about keeping it under review. The Bill allows for that to take place in future.

That leads me to Lords amendments 2 and 8, which would exempt salary sacrifice pension contributions over the £2,000 cap from the calculation of student loan repayments. It is right that we focus on the outcomes for younger generations too often let down by the failures of the previous Government. I gently remind Conservative Members—there are only two of them here, but there are some Liberal Democrats who deserve some of the “credit” too—of their track record on this matter: trebling tuition fees, raising interest rates, scrapping maintenance grants and the rest. And that is before I get to not allowing anything to be built. That is what younger generations are being let down by.

On the specific proposal, it is worth noting that while salary sacrifice arrangements can reduce the student loan repayments made, they do not reduce the total amount due for repayment. Much more important is the fact that the £2,000 cap means that young graduates are broadly unaffected. In fact—these are new figures that were not available for the discussion in the Lords, but as this issue has been raised and brought to the Commons, I will provide them—the £2,000 cap means that 90% of graduates under the age of 30 repaying student loans who are saving into a pension will be unaffected, in the sense that 90% of them save less than £2,000 a year. I hope that provides some reassurance to Members who have raised that point.

Lords amendments 3, 4, 9 and 10 would make the regulation-making powers in the Bill subject to the affirmative procedure, except for those which solely increase the contributions limit. The Government agree on the importance of maintaining strong parliamentary scrutiny, particularly where changes could affect individuals’ national insurance liabilities. However, the Bill already contains a series of safeguards and the legislative approach taken follows long-standing precedence for national insurance legislation. In addition, the Delegated Powers and Regulatory Reform Committee has carefully scrutinised the powers in the Bill, including the proposed level of parliamentary scrutiny, and concluded that there is nothing in the Bill that it wishes to draw to the special attention of the House.

Lords amendments 6 and 12 seek to exempt small and medium-sized enterprises, alongside smaller charities and social enterprises, from the Bill’s provisions. Again, the Government agree on the importance of supporting small businesses—I am sure that that is a matter of cross-party support—but small businesses are much less likely to use salary sacrifice than larger businesses. Furthermore, the £2,000 cap means that 90% of employees in SMEs making pension contributions through salary sacrifice will be entirely unaffected. Indeed, the largest benefits from uncapped salary sacrifice accrue to larger businesses, not smaller ones. In practice, the changes in the Bill will help to level the playing field between small businesses and their larger competitors. Those wanting to see support for small businesses should support the measures in the Bill. The Government are engaging with employers, payroll professionals and software developers to ensure that the changes are implemented in the least burdensome way possible for employers of all sizes.

I hope that right hon. and hon. Members will understand why it would not be right to support the amendments from the other place, even though we recognise the valuable objectives that have in many cases motivated them. As I said, the Government spend over £500 billion each year on various tax reliefs within the tax system. That is more than double the entire annual NHS budget. The size of the spend means that the Government must always keep the effectiveness and the value for money of those reliefs under review. These are necessary, pragmatic and fair reforms that protect ordinary workers while ensuring that public finances are kept on a sustainable footing. I respectfully propose that this House disagrees with the amendments.

--- Later in debate ---

[Torsten Bell]

I am grateful to the shadow Minister, the hon. Member for Wyre Forest (Mark Garnier), and the Liberal Democrat spokesperson, the hon. Member for Witney (Charlie Maynard), for their contributions. I will not reiterate the arguments for the Bill as a whole, but I will try to respond directly to the points that they have made.

The hon. Member for Wyre Forest explained that the Conservatives are opposed entirely to these changes, but of course he did not explain at all which bits of the NHS services they would cut, since they obviously do not support the revenue being raised from this sensible—[Interruption.] Which bit of the benefits system would they like to change then?

[Sir Ashley Fox]

The two-child benefit cap. [Hon. Members: “Hear, hear.”]

[Torsten Bell]

Here we have it again: when the Conservatives are faced with any difficult choice, the answer is higher child poverty. It is the answer to every question they are ever faced with. They stand up day in, day out and say that what they want to see is higher child poverty—and they cheered enthusiastically for it just then.

I will move on. Not only can the hon. Member for Wyre Forest not say which bit of the NHS he would like to cut because he opposes these changes, but he cannot even explain why the Conservatives were planning to implement exactly these kinds of changes when they were in government—before their whole giving up on being serious people thing.