Lord Sharkey:

Moved by Lord Sharkey

3: Clause 1, page 1, line 1, at end insert—“(A1) In section 9(1A) of the Social Security Contributions and Benefits Act 1992, after paragraph (aa) insert—“(ab) if the employer is a specified employer under subsection (1B), the specified employer secondary percentage;”.(A2) After section 9(1A) of that Act insert—“(1B) A “specified employer” means—(a) a provider of education or childcare to children under five years of age—(i) registered in England in the early years register maintained by the Office for Standards in Education, Children’s Services and Skills,(ii) registered in Wales with Care Inspectorate Wales, or(iii) registered in Scotland with the Scottish Care Inspectorate;(b) a university;(c) a provider of further or higher education;(d) a registered charity;(e) a housing association;(f) a small or micro business, as defined by section 33 of the Small Business, Enterprise and Employment Act 2015; (g) a town council;(h) a parish council;(i) a business in the hospitality sector.(1C) For the purposes of this Act, the specified employer secondary percentage is 13.8%.””Member's explanatory statementThis amendment provides that certain specified employers would continue to pay contributions at the current rates. The specified employers include early years settings, universities, charities, and small businesses.

My Lords, this amendment, in the names of my noble friend Lady Kramer and myself, adds to the list of exemptions from the proposed increase in employer national insurance contributions. I thought I would make that clear at the outset, although I see that the noble Lord, Lord Eatwell, is temporarily not in his place.

The arguments in favour of the nine proposed exemptions in this amendment were discussed in some detail in Committee. What the nine exemptions have in common is that they protect services that are vital to community life and are likely to suffer grave damage if the higher employer NIC is introduced. These services include early years education, charities, housing associations and town and parish councils. Each of these organisations makes a vital contribution to our communal life, and they also have in common the fact that most have no—or no significant—money. The proposed ENIC increase will inevitably reduce the critical services they provide, in many cases to the most disadvantaged in our communities.

The list of exemptions in our amendment also includes further and higher education, and I declare an interest as a member of council at UCL. Both our FE and HE institutions are in grave financial difficulties. This has been true for many years for our somewhat neglected FE sector and is now also obviously true for our higher education sector. The country’s future prosperity and its prospects for growth depend very largely upon these sectors being properly and sustainably funded. If we want a skilled and upskilled workforce, then FE colleges have a vital and irreplaceable role to play, but to play that role they need adequate funding.

I did ask, in Committee, about the funding arrangements for the FE sector. The Minister replied last week. He noted, by way of preamble, that the Government would

“provide support for departments and other public sector employers for additional employer national insurance contributions”.

He does not say what “support” means. He does say that the Autumn Budget provided an additional £300 million in revenue for funding for FEs for the financial year 2025-26

“to ensure young people are developing the skills this country needs”.

He does not say to what extent this will mitigate the imposition of the higher employer national insurance contribution. Could I therefore ask him again to tell us, when he replies: what percentage of the increase in the employer national insurance contribution will be mitigated by the allocation of funds from this £300 million, both in the short term from April to July this year and in the academic year 2025-26?

The Minister’s reply to my Committee stage question also includes a mention of the rise of £285 per annum in student fees chargeable by HEIs from the academic year 2025-26. This will not be enough to sustain our higher education sector. As I mentioned in Committee, our universities are already showing signs of deep financial distress. I noted then that nearly three quarters of institutions are expected to run deficits in the next academic year, and 40% have less than a month’s liquidity. I also noted that three Russell group research-intensive universities—Cardiff, Durham and Newcastle—had joined the long list of universities cutting jobs and costs. Now, Edinburgh has joined them in also announcing cuts, and I hear that at least one eminent university is close to breaching its banking covenants, with all the usual consequences. It is no surprise that it is estimated that 10,000 jobs will go this year.

This is a genuine crisis and it is made worse by the proposed increase in employer national insurance contributions. This new ENIC levy completely wipes out and more any net increase arising from the increase in student fees. The UK has four of the world’s top 10 universities and 16 of the world’s top 100 universities. We absolutely need to have our universities prosper and to be sustainably funded if we are to continue to be a world-class centre for education and research and to contribute to the growth that we so obviously need. Our amendment would, at least, prevent the already perilous situation from getting worse while the Government devise a new and sustainable funding arrangement.

Our amendment also excludes any SMEs and the hospitality sector from the rise in ENICs. SMEs are the wellspring of our economy and of its future. Some 60% of all jobs are provided by SMEs and these companies, almost by definition, are those that will have most difficulty absorbing the proposed rise in the ENIC rates. Significant job losses are inevitable. This matters not only because any job lost is regrettable but because SMEs are the engines of growth, renewal and innovation in our economy, and they create the jobs. Large corporations may be easier for government and Whitehall to deal with, but they are, and have been for a long time, net destroyers of jobs.

Many of the jobs created by SMEs will, of course, be in the hospitality sector, which this amendment also excludes from the proposed rise in contributions. Many of those jobs in the hospitality sector—currently around 350,000—are held by people under 25. For many, this will be their first job and the first step on a career ladder. To keep all these young people in employment after the proposed ENIC rise would nearly double the employers’ costs from £82 million to £153 million. We should protect these young entry-level employees from job losses by exempting their employers from the proposed NIC rise. I beg to move.

My Lords, I will speak to Amendment 8 in my name and Amendment 41 in my name and that of the noble Lord, Lord Alton of Liverpool. This is the first time I have taken part on Report but I sat and listened carefully to the entire debate on the first group, which covered a lot of the issues that relate particularly to Amendment 8.

Amendment 8 has a very simple and clear purpose, even though the technicalities are quite technical. It aims to delay for one year the introduction of the raised level of national insurance for all registered charities. Other amendments in this group deal with smaller charities and others with groups of organisations, many of which may be charities, but this is an exemption for one year for all charities.

I want to take on a couple of points made by the noble Lord, Lord Eatwell. I am not quite sure which amendments he was counting in his 38, but I strongly assert that neither Amendment 8 nor Amendment 41 could in any way be described as a wrecking amendment, because they do not affect the Government’s long-term economic policy or plans. They mean that for one year the Government would not receive, in their own estimate, £1.4 billion.

I tabled the same amendment in Committee and did not get an answer from the Minister to my question; I would be interested to hear any response tonight. It was on a point raised in the first group of amendments. If charities go under or are forced to slash their services, how much are the Government going to have to fund through other means—through social care, government provision or whatever mechanisms? I do not have the capacity to put a figure on that, but it seems likely that there may not be very much difference between those two figures.

I tabled this in Committee because of the CEO of a fairly large charity with whom I happened to be having dinner. We were not having a deeply political, detailed discussion. She simply said to me, “If I just had one year to sort this out, I would have half a chance”. It is interesting that the noble Lord, Lord Clarke of Nottingham, who is not currently in his place, said in the debate on the first group that so many organisations— I think he was specifically referring to charities—were encountering this unexpected expense. It is the suddenness and the lack of a chance to think, “Can we shift some money into fundraising to increase the funding stream so that we can cope with this down the track?”. That is what this amendment seeks to do.

I find myself in quite an unusual position as a Green, saying that I have put forward this really moderate, reasonable amendment that is quite small in scale compared with some of the other things we are discussing here. But it is a really practical step to attempt to protect charities and all the essential services.

We heard so much passion from people who are directly involved in delivering these services from charities. I am not going to repeat that long list now, but I will just raise one point—I do not think it has been raised up to now—on the place of charity shops on our high streets. They are already struggling. We are already seeing significant closures of charity shops, faced with rising energy costs and—no one is complaining—rising staff costs due to the increase in the minimum wage. If we further hollow out our high streets by losing those charity shops, that too will have all sorts of costs that in one way or another the Government are going to have to pick up.

So that is Amendment 8. I gave notice that I was going to see how this evening went. I am currently feeling inclined to test the opinion of your Lordships’ House on it.

Amendment 41 is slightly different because it addresses issues that I know a number of noble Lords will pick up with stronger, more radical amendments. It is about transport for children with special educational needs. As I said, Amendment 41 is also backed by the noble Lord, Lord Alton, and it has a pedigree. It was put forward in Committee by the right reverend Prelate the Bishop of Southwark and co-signed by the noble Lord, Lord Forsyth.

The right reverend Prelate first raised concerns at Second Reading about the impact of the Bill on the ability of children with special educational needs or disabilities to get to school. The noble Lords, Lord Udny-Lister, Lord Forsyth and Lord Frost, also expressed concern about this issue. I also have to mention the noble Lord, Lord Wigley, who is not currently in his place, who also expressed strong concern.

I have revised the right reverend Prelate’s amendment to reflect the passage of time and the fact that the Bill is now likely to reach the statute book less than a month before the provisions take effect. Consequently, this proposed new clause would impose a duty on the Chancellor of the Exchequer to conduct, within one week of the measure receiving Royal Assent, a review of the Bill’s impact on the ability of local authorities to meet their statutory duties in respect of supplying school transport services, either directly or through private providers, for children with special educational needs and disabilities in the tax year 2025-26. The duties to review regarding 2026-27 and 2027-28, while still urgent, allow a month for these reviews so that they can feed into Treasury thinking well ahead of the well-advertised conclusion of phase 2 of the spending review in early June.

I have a great deal of detail here, but I will cut it short given the time and the desire of your Lordships’ House. I suspect that many of these issues may be mentioned later. I am going to really stress what this amendment is about. Let us remember who the real victims are here. We are here in your Lordships’ House but we are talking about children, out there in communities up and down the land, who risk losing known, reliable, trusted services. Many of these services will have been caring for these children, looking after them and taking them to school for many years.

I had a meeting and a long discussion about this with the SEND transport operators group of the Licensed Private Hire Car Association. I heard a couple of tales of what these services do. A driver and a carer transported a child who was non-verbal, and off their own bat they decided to learn sign language so that they could communicate with the child. They were not funded for this; it was just something they did. Imagine that child having those people wrenched away from them because the service cannot be afforded any more. The other story was about a girl who was really stressed because, through no fault of anyone, she was going to be 15 minutes late for school. She was really stressed about getting into school at that point, so the carer said, “It’s okay—you’re not going in on your own; I’ll come in with you”. Again, it was not in the contract but was people going that extra mile.

All those services will be thrown into turmoil because they cannot suddenly renegotiate the contracts. They are going to have to hand the contracts back, and that is really not acceptable. The noble Baroness, Lady Neville- Rolfe, has a stronger amendment than this later, and I hope we might put that to the vote. We really have to do something about SEND transport.

My Lords, I support Amendment 3, moved by my noble friend Lady Kramer and supported by my noble friend Lord Sharkey, and other amendments in this group, but I will not mention them so that we can speed through as quickly as possible and get to the vote. We discussed in some detail in Committee the plight of charities, with a view to moving an amendment of this nature at this point.

I have a plea around the simplification of the tax system. I think everyone would acknowledge that national insurance contributions will never be part of asking, “Would we start from here?”, and then simplifying the tax system. Perhaps there is culpability on these Benches: they were introduced by Lloyd George, but massively expanded by Clement Attlee, so I am looking at the Benches opposite to share a bit of the responsibility from some time ago.

Failure to retain charities at the current rate will cost the sector £1.4 billion in the next financial year according to the NCVO. This compounds levels of underfunding in the long term and threatens services for some of the most vulnerable in society. To take just one example, Homeless Link is a charity with 800 member organisations, all of which work on the front line of homelessness. It estimates that the national insurance changes alone could take between £50 million and £60 million out of the homelessness sector. That is peanuts when it comes to revenue raising but absolutely fundamental to services run by 800 different organisations.

Most charities do not function as profit-making businesses and cannot adapt to increased costs, as the private sector can, by putting up prices or recovering elsewhere. Instead, the increase in national insurance must be accounted for by cutting costs in staff, and therefore services to people in acute need, such as those who need a bed for the night. The Government’s very welcome objective to develop a cross-departmental homelessness strategy is undermined by this additional cost.

At Second Reading, the Minister defended the current UK tax regime for the charity sector, arguing that it is

“among the most generous of anywhere in the world

I ask the Minister to study with care the latest results of the Charities Aid Foundation’s World Giving Index, which has the UK now at number 22—its joint lowest position ever, having fallen out of the top 20 at the end of last year after a recent period of decline.

The charitable sector is a significant partner in many of this Government’s future plans. This change in national insurance directly harms charities and the people who they need to serve. We urge the Government to reconsider this additional financial burden.

My Lords, I will briefly speak to Amendment 40, which is in my name. It asks for an impact assessment of this Bill on Scotland, because of the differences that have been identified.

The Government have said that they will compensate the public sector, but we are all waiting for the detail of how they will do it. A figure of £4.7 billion as the global sum has been mentioned, but not the detail. There is a concern that the structure of the public sector in Scotland is significantly different from that in England and that it may not be sufficient to sustain public services at even the current level in Scotland, where they ae struggling, as they are everywhere else. My own health board, Grampian, has had to absorb a £20 million charge just for this Bill, on top of a £75 million deficit that it is currently running. It is in a substantial crisis.

I have questions for the Minister. He will have seen the Fraser of Allander review of the impact; it may not be definitive but it is independent. It suggests that the impact is something around £550 million in Scotland. If one applied the normal rules of the Barnett formula, £4.7 billion would presumably give Scotland something between £400 million and £450 million. However, government officials in Scotland tell us that the Treasury has said the Barnett formula will transmit £300 million, or just over that. How can the Minister justify a £300 million transfer through the Barnett formula against a £4.7 billion overall budget for compensation?

More to the point, how will the Government establish the criteria for what level of compensation they will give to which kind of public bodies? If they do that, can they ensure that the same conditions that apply in England will follow through in Scotland, and that the money will go with them? All I am asking for is equality of treatment, not special treatment.

As I have said before, there is quite a lot wrong with what is going on in Scotland. The Scottish Government are not known for their efficiency in management; I am not trying to defend them and I do not think the UK Government should compensate them for their incompetence. However, I do not think that the public sector and the people of Scotland should suffer because of that, when an additional measure brought by the UK Government has added insult to injury or misery to misery.

Will the Minister acknowledge that, if he is talking about compensation of just over £300 million, that falls a long way short of the comparable impact, pound for pound, in Scotland compared with England? What are the criteria? Will they be applied fairly and consistently across the UK?

My Lords, I will speak to Amendment 9, which is in my name. I suspect that it may have been subject to pre-emption, along with Amendment 8. If the noble Baroness, Lady Bennett of Manor Castle, is surprised, I am equally surprised that I think I agree with all of her remarks. That means that I would like to focus on Amendment 4, dealing with charity revenues of less than £1 million, which I believe is not subject to pre-emption.

According to the Charity Commission website, there are about 170,000 charities in the UK, with about £100 billion of income in aggregate and 1.3 million employees. My noble friend Lady Neville-Rolfe wants us to concentrate on those charities with an annual revenue of below £1 million.

There is different terminology that can be used by the Charity Commission, because it talks about gross income. On average, charities’ donations and legacies are about one-third of their total income, as was the case with the Thames Hospice, which I described earlier. The rest of the income is grants, investments and so on. A charity with £1 million of revenue will probably raise only some £350,000 in donations. I calculate from the available information that the sums raised by charities with revenues of less than £1 million total some £12 billion, which is 12% of total charity income. But there are 162,000 charities with an income of under £1 million, which means that we are talking about 95% of all UK charities.

As for their spend on national insurance, it is hard to determine, because we do not know exactly how much they spend on employment. We do know how much they spend on total expenditure, which is some £12 billion. If we assume that 50% of that—it is a very generous assumption—is on employee costs, and if we assume a salary of around £25,000, because it is a low-paid sector, then my noble friend Lady Neville-Rolfe’s amendment would impact only 240,000 people.

To try to answer the criticisms from the noble Lord, Lord Eatwell, I calculated that my noble friend’s amendment would cost the Government around £480 million—half a billion pounds. Is the Minister going to tell us that he is not prepared to protect 95% of charities for just £500 million? Does he recognise my figure? If not, what is the cost of the amendment? I invite him to join us in pausing the hike until we work out what it is, so that we can then have a meaningful discussion.

I remind the Minister that in a speech to the civil society summit last year, hosted by Pro Bono Economics, Sir Keir Starmer promised to reset the relationship between civil society and government. Is this what he meant? He said that

“for too long, your voice has been ignored”.

I have read the full speech, and he also said,

“we know it’s people on the ground, people with skin in the game, who understand the problems best and have the best answers”.

He continued in his speech to civil society leaders, which largely rubbished Tory policies, by saying,

“let’s be honest, for too long, your voice has been ignored between the shouts of the market and the state”.

Are the Prime Minister and his Ministers listening now? Those leaders are calling for this national insurance hike to be dropped.

Why would the Government want to penalise 162,000 charities, where our fellow citizens give so much of their time freely, and in many cases their cash, simply for the betterment of fellow citizens at home and abroad? It is a shameful imposition.

My Lords, on a point of clarification, I have received information that my Amendment 8 has not been pre-empted and still stands.

My Lords, I shall speak to Amendment 9, to which I have added my name, and to Amendment 4. I declare my interest as set out in the register and as a trustee of the Dartington Hall Trust.

My contribution today will be short, as so much as already been said during the passage of the Bill. We have heard many passionate statements today. I have already spoken of my concern about the impact of the increases in national insurance contributions on the future of the charity sector and its ability to continue to deliver much-needed services and support. Along with many others, I believe that we have put forward compelling and passionate reasons why the charitable sector should not be subject to the Government’s national insurance contribution increases.

At both previous stages of the Bill, I have respectfully asked for the impact assessment of this tax on the sector. The Minister and his Government have not, to date, reconsidered their position or produced the impact assessment, which other noble Lords have again asked for today. It seems extraordinarily unfair that the Government indirectly exempt the public sector but decline to exempt or reimburse the charity sector. I cannot understand it.

At the risk of repetition, let me say that the National Council for Voluntary Organisations estimates that the increased cost of this tax to the sector is £1.4 billion. It has raised its concerns to the Treasury. Together with the Association of Chief Executives of Voluntary Organisations and the Charity Finance Group, they perfectly summed up this situation when they wrote that

“the knock-on impact it will have on individuals, communities and local economies who rely on us will be devastating”.

Those are voices from the sector, who represent so many charities across the country.

I am sure that the Minister has heard many calls for help himself from across the charity sector. I hope that he recognises that this tax will have a long-lasting impact on the sector’s ability to deliver many of the vital services on which government and so many others rely. Let me put to your Lordships this: if a charity approached you for support for a good cause, I have little doubt that you would be generous to the extent that you could afford; if the same charity asked you for a donation not to do good works but so that it could pay the increased taxes to the Government, I suspect that you and I would not feel inclined to put our hand in our pockets. The charity sector should not be a cash cow for the Government.

Sadly, unless the Government reconsider this tax on our charities, they will greatly diminish, and the majority will need, at best, to shrink the number of people they employ and the services they provide. In the worst scenarios, charities will close. We have already heard from charities, including from my noble friend Lady Fraser, of staff reductions, redundancies and potential closures. Fundraising and costs management is difficult enough for charities; the future of the sector is looking very bleak. Many of them help the most vulnerable in society, do wonderful work across many other areas—I will not list them today—and are the backbone of our civil society. I hope that the Minister will reconsider his position and listen to what is said today.

My Lords, I rise to thank my colleagues. As the chief executive of a charity, I know that the sector is watching and listening to what we are doing here and urging us on to do everything we can to mitigate this disastrous policy.

The noble Lord, Lord Bruce of Bennachie, mentioned Scotland. In an earlier debate, it became apparent that the drafting of some of the amendments perhaps did not cover Scotland. Any charity in Scotland of any size has to be registered by the Office of the Scottish Charity Regulator and I would want to be reassured that exemptions covered the entire sector. It amounts to 5% of Scotland’s workforce, and with an increasing number of redundancies and the struggle to recruit volunteers, the workforce is already under strain and potentially limited in its capacity to deliver services.

The Minister spoke earlier about the Government’s increased funding to various sectors, some of which are covered by the charity sector. However, he did not outline how that might help those not in receipt of public sector funding but who are delivering services which support public sector delivery.

Finally, as chief executive of Cerebral Palsy Scotland, SEND transport is an issue firmly in my bag. We already know that the SEND system is under immense strain. We already know of children who cannot go to the school it has been assessed they should attend because of transport issues. This is very complex: transport is provided mostly by private providers. There is already a limited choice of schools. Many children need specialist vehicles to get from A to B. As the noble Baroness, Lady Bennett, said, many firms will be forced to hand back contracts.

I look forward with interest to the Minister’s response to these challenges.

Amendment 3 in the name of the noble Baroness, Lady Kramer, seeks to establish a relief for early years settings, universities, charities and small businesses. These are all important sectors; they will be hit hard by the Government’s jobs tax, so we agree with the sentiments that she expressed. However, we have concerns about the financial implication of relief for all these sectors in one amendment. We are instead promoting some modest and separate amendments, which I am afraid makes for a big group.

Amendments 4, 14, 21 and 28 in my name would exempt charities with an annual revenue of less than £1 million from the increase in employer national insurance contributions. My noble friend Lord Leigh spoke persuasively in favour of this proposal, following the pre-emption of his own amendments. My Amendment 35 proposes an increased level of employment allowance for charities.

Noble Lords across the House have been contacted by many charities which are facing tough financial decisions. We have had many worrying examples throughout the stages of this Bill. My noble friends Lady Sater and Lady Fraser made the case for action strongly. My latest example was L’Arche in the UK, which brings together people with and without learning disabilities in life-sharing communities. Again, they are facing hugely steep rises in employment costs. The most vulnerable people in our society will pay the price for Ministers’ misguided Budget decisions.

Amendment 5 seeks to protect children with special educational needs or disabilities. I know that the Licensed Private Hire Car Association SEND transport operators group has written to many noble Lords highlighting the issues that families who rely on these services are facing. It estimates that the associated local funding shortfall in the next tax year, 2025-26, in respect of the services it contracts out to private providers, will be £40 million. That is a relatively small number compared with the overall revenue expected from the jobs tax— £23 billion to £26 billion, depending on the year—but the impact on vulnerable children is wildly disproportionate to that revenue. Like my noble friend Lady Fraser, we feel very strongly that these vital services should be protected. Like the noble Baroness, Lady Bennett, we prefer our formulation on SEND.

Finally, my Amendment 33 addresses early years provision by seeking to increase the employment allowance for early years providers. In government, we took strong action to support the early years sector, while expanding the free childcare offer to all children under five in England last year. The Government are right to adopt our expansion plan in full. We are grateful for that. However, some providers are worried that they will not be able to access the employment allowance because of the public work they do. It would be good if the Minister could look at that again. We are seeing very big cost increases in early years provision, which is extremely worrying.

In conclusion, the Official Opposition feel that the Government must change their approach. We are not satisfied by the Minister’s responses so far and our current intention is to divide on Amendments 4, 5 and 33.

My Lords, I am very grateful to all noble Lords who have spoken in this debate.

I will first address the amendment from the noble Baroness, Lady Neville-Rolfe, which seeks to increase the employment allowance for early years providers. The Government recognise that early years providers have a crucial role to play in driving economic growth and breaking down barriers to opportunity. We are committed to making childcare more affordable and accessible. That is why we committed in our manifesto to delivering the expansion of Government-funded childcare for working parents and to opening 3,000 new or expanded nurseries through upgrading space in primary schools to support the expansion of the sector. Despite the challenging fiscal circumstances the Government inherited, in the October Budget the Chancellor announced significant increases to the funding that early years providers are paid to deliver Government-funded childcare places. This means that total funding will rise to over £8 billion in 2025-26.

The amendment tabled by the noble Baroness, Lady Kramer, and the noble Lord, Lord Sharkey, would exempt providers of higher and further education from changes in the Bill. The Government of course recognise the great value of UK higher education in creating opportunity, as an engine for social mobility and growth in our economy and in supporting local communities. We will provide support for departments and other public sector employers for the additional employer national insurance contribution costs. This funding will be allocated to departments, with the Barnett formula applying in the usual way. In answer to the noble Lord, Lord Bruce, it is for devolved Governments to make their own decisions on how that money is allocated.

I say to the noble Lord, Lord Sharkey, that all additional cost pressures will be considered as part of the spending review. The Autumn Budget provided an additional £300 million of revenue funding for further education for the financial year 2025-26, to ensure that young people develop the skills this country needs. This funding will be distributed specifically to support 16 to 19 student participation. Approximately £50 million of this funding will be made available to general further education colleges and sixth-form colleges for the period April to July 2025. This one-off grant will enable colleges to respond to current priorities and challenges, including workforce recruitment and retention. The remaining £250 million of funding will be made available in 16 to 19 funding rates in the academic year 2025-26, with the aim of ensuring that all 16 to 19 providers are funded on an equitable basis from 2025 to 2026. Furthermore, the Budget provided £6.1 billion of support for core research and confirmed the Government’s commitment to the lifelong learning entitlement, a major reform to student finance which will expand access to high-quality flexible education and training for adults throughout their working lives.

I turn to the amendments tabled by the noble Baronesses, Lady Kramer, Lady Neville-Rolfe, Lady Bennett and Lady Sater, and the noble Lords, Lord Sharkey and Lord Leigh of Hurley, which seek to exempt charities from the changes in this Bill and increase the employment allowance for them. The Government of course recognise the important role that charities play in our society and the need to protect the smallest businesses and charities. That is why we have more than doubled the employment allowance to £10,500. This means that more than half of businesses, including charities, with national insurance liabilities will either gain or see no change next year.

As I have noted previously, it is important to recognise that all charities can benefit from the employment allowance. The Government also provide wider support for charities via the tax regime, with tax released for charities and their donors worth just over £6 billion for the tax year to April 2024. The noble Lord, Lord Leigh of Hurley, again asked me to cost his amendment; as I said in Committee, it is not for the Government to cost amendments that do not reflect government policy.

I turn to the amendments and proposed new clause tabled by the noble Baroness, Lady Neville-Rolfe, exempting providers of transport for special educational needs children to and from their place of education from the changes in this Bill and requiring the Government to publish an impact assessment on this topic. In the Budget and the recent provisional local government finance settlement, the Government announced £2 billion of new grant funding for local government in 2025-26, which includes £515 million to support councils with the increase in employer national insurance contributions. This additional funding has been determined based on a national assessment of the costs for directly employed staff across the public sector. However, this funding is not ring-fenced and it is for local authorities to determine how to use it across relevant services and responsibilities.

Furthermore, the Government are providing a real-terms increase in core local government spending power of 3.5% in 2025-26. To support social care authorities to deliver these key services, we announced in the provisional local government finance settlement a further £200 million for adult and children’s social care. This will be allocated via the social care grant, bringing the total increase of this grant in 2025-26 to £880 million. This means that up to £3.7 billion of additional funding will be provided to social care authorities in 2025-26.

On the amendment tabled by the noble Baroness, Lady Kramer, and the noble Lord, Lord Sharkey, seeking to exclude town and parish councils from the employer national insurance rate change, the Government have no direct role in funding parish and town councils and are therefore not providing further support to them for the employer national insurance changes.

Finally, on the proposed new clause tabled by the noble Lord, Lord Bruce of Bennachie, requiring the Government to publish an assessment of the impact of the Bill on the Scottish public sector, as I have set out previously, the Government have published an assessment of this policy in a tax information and impact note. This clearly sets out that around 250,000 employers will see their secondary class 1 national insurance liability decrease and around 940,000 will see it increase. Around 820,000 employers will see no change.

The OBR’s economic and fiscal outlook also sets out the expected macroeconomic impact of the changes to employer national insurance contributions on employment growth and inflation. The Government and the OBR have therefore already set out the impacts of this policy change. The information provided is in line with other, similar tax changes and the Government do not intend to publish additional assessments. We will of course continue to monitor the impact of these policies in the usual way.

In light of the points I have made, I respectfully ask noble Lords to withdraw their amendments.

I thank all noble Lords who have spoken in this debate. I was particularly taken by Amendments 4 and 5 in the name of the noble Baroness, Lady Neville-Rolfe, and I am glad that she will divide the House. We will support her when she does. I was less taken by the Minister’s response, and still I note the lack of a definitive answer to my question on the percentage relief to FE funding.

Having listened to speeches from all parts of the House, rescuing vital and vulnerable sectors from the increase in employers’ national insurance contribution seems to me almost a duty. I would like to test the opinion of the House on Amendment 3.

Ayes 77, Noes 153.

Amendment 3 disagreed.