Lords give way on NICs Bill exemptions allowing legislation to pass

[The original report (28/3/25) was updated 4/4/25 to reflect further stages of the bill]

This legislation, introduced following the Autumn 2024 Budget, raises employers’ national insurance contributions (NICs) to 15%, lowering the secondary threshold to £5,000, and increasing the employment allowance to £10,500. It takes effect on 6 April 2025.

The House of Lords inflicted a series of defeats on the government at report stage of the bill. These included amending the bill to create exemptions from the increase for health and care providers, for charities with annual revenue of less than £1 million, for employers employing fewer than 25 staff and for employers providing transport for children with special educational needs and disabilities. Further amendments increased the employment allowance for employers in the early years sector and required a review of the impact of measures in the bill on certain sectors.

These amendments were rejected by the House of Commons on 19 March with MPs returning the bill to the Lords in its previous form.

However, on 24 March members of the Lords renewed their efforts to shield some groups from the government’s plans. Rather than seeking to reinstate their previous amendments – which might have caused the bill as a whole to fall if insisted upon – opposition peers proposed and passed three alternative amendments. These would allow ministers to introduce exemptions in the future for healthcare providers and companies with small workforces. An amendment requiring the government to review the impact of these measures on various sectors was also passed.

The following day, the House of Commons held a debate on the Lords’ amendments, during which MPs once again voted against them, sending the bill back to the Lords in its original form, for peers to debate on Monday 31 March. At that debate peers chose not to 'insist on' their amendments, allowing the bill to pass unamended.

Below you can find summaries of the final debates on the bill. A list of House of Lords amendments can be found here.

House of Lords Consideration of Commons Amendments debate – 24 March 2025

Lord Scriven (Lib Dem) introduced amendments to include regulation-making powers in the bill to exempt certain groups from the changes in the future. He said that: “We on these Benches are naturally suspicious of giving any government such powers… but we are so profoundly worried about the impact of the bill on the NHS and social care”.

The Liberal Democrat peer believed that the government’s current approach to reimbursement, embedded in next year’s financial contract negotiations, will not “solve the financial cliff edge and cash-flow issues” many providers face. He considered it a “damaging policy” and urged the government to listen to the concerns raised and “abandon their rigid adherence to self-imposed rules”.

Crossbench peer Lord Londesborough moved an amendment to give the Treasury the power to specify exemptions for businesses, charities and all organisations employing fewer than 25 people. He asked: “why would the government not want this weapon in their armoury in what will be a very difficult year ahead for small employers”.

The shadow Treasury minister, Baroness Neville-Rolfe, supported the amendments tabled and expressed concerns about the impact of the measure on healthcare providers, in particular the hospice sector.

She proposed an amendment to require the government to lay before Parliament a review of the impact of measures in this bill on a number of sectors. She observed that the impact note published on 13 November 2024 fails to mention “a single one of the sectors in the review amendment”.

A number of the peers who contributed to the debate, including Baroness Fox of Buckley (Non-Afl), Lord Weir of Ballyholme (DUP) and Conservative peers such as Lord Ashcombe, Baroness Monckton of Dallington Forest and Lord Leigh of Hurley, expressed their support for these amendments. Baroness Fox appealed to the minister to “accept that these amendments are modest and give the government an opportunity to review whether the NICs increases will do the damage that is alleged”.

Baroness Noakes (Con) claimed that “the Treasury refused point blank to give the information that we requested in order to scrutinise this bill properly” while considering Baroness Neville-Rolfe's amendment as “reasonable”. The Liberal Democrat spokesperson, Baroness Kramer, expressed concern about what will happen with the health sector and small businesses. She added: “It is very unusual from these Benches for us to be willing to provide what is, in effect, a Henry VIII power to the government, and that we do so reflects our deep anxiety.”

The Financial Secretary to the Treasury, Lord Livermore, rejected the proposed amendments. He repeated that any future changes which exempt certain groups from paying national insurance would have “cost implications, necessitating either higher borrowing, lower spending, or alternative revenue-raising measures”. He urged peers not to press their motions.

Lord Scriven’s motion was agreed by 271 votes to 173. Lord Londesborough’s motion was agreed 276-165. Baroness Neville-Rolfe’s motion was passed 273-172.

House of Commons Consideration of Lords Message debate – 25 March 2025

The following day, the House of Commons considered the new amendments proposed by the Lords.

The Exchequer Secretary to the Treasury, James Murray, defended the government's decision to reject the Lords' amendments by arguing that the amendments “put at risk” the funding that the bill seeks to raise. He suggested that supporting the amendment is supporting higher borrowing or “other tax rises”.

The minister explained a number of measures that the government has taken to support the hospice sector and charities, and added that as a result of measures in the bill, around 250,000 employers will see their secondary class 1 NICs liability decrease, and around 940,000 employers will see it increase. He suggested that measures in the bill will play a “crucial role” in fixing the public finances and getting public services back on their feet.

Several MPs, including Gregory Stafford (Con), Sammy Wilson (DUP), Jerome Mayhew (Con) challenged the government’s approach, asking why the government think that the NHS, under the banner of NHS England, should be exempt from national insurance contributions, but that other parts of the NHS, such as GP surgeries, dentists and hospice care, should not.

Likewise, the Shadow Financial Secretary, Gareth Davies, expressed concern and suggested that the policy will cost hospices up to £30 million next year alone. He believed that the bill “will create black holes in the finances of hospices, GP practices… and businesses of all shapes and sizes, but especially the very smallest.” The shadow minister urged the government to “change course”, emphasising that “It is incumbent on all of us in this place to work to protect and support the most vulnerable in our society”.

Daisy Cooper, Liberal Democrat Treasury spokesperson, expressed similar concerns and urged the government to support the Lords' amendment which gives the government the power to choose if and when they want to exempt health and care providers from the NI rise. She also expressed her support for the Lords’ other amendments, saying that “this tax hammers the very providers of the neighbourhood community services on which the NHS relies”.

Dave Doogan (SNP) criticised the government, suggested that to raise revenue, they could apply Scottish income tax thresholds to the whole of the UK or raise £40 billion from a 1% wealth tax on assets over £10 million. He stated: “They [Labour] do not want to support, in particular, Lords amendment 21B, because they would rather continue to cloak the effect that the bill will have on care services and contractor elements of the national health service up and down these islands, and the effect that it will have on the real economy, which Labour is a stranger to.”

The minister acknowledged the concerns of opposition MPs but said “that the approach we are taking in government to compensate the public sector for changes in employer national insurance contributions is the same one that the previous government took with the health and social care levy”.

The government rejected the Lords amendments in four divisions, sending the bill back to the Lords for further consideration on 31 March.

House of Lords debate - 31 March 2025

At this debate opposition and crossbench peers chose not to pursue their amendments, allowing the government to proceed with the bill in its preferred form.

Baroness Neville-Rolfe (Conservative), shadow Treasury minister, said: “There is a strong feeling… that the bill is not the best way to meet the challenges that the country faces”, adding that it will endanger the growth the country needs. However, she continued: “As a responsible Opposition, we will not seek to defeat this bill, no matter how deeply we feel about it”, acknowledging the right of the Commons to set tax policy.

The Liberal Democrat spokesperson, Baroness Kramer, referenced a meeting she had had with the insolvency and restructuring professionals’ body, where she was told that small businesses are going into voluntary insolvency because of the increasing costs. Nevertheless, she said, “we recognise that we have come to end the of the road on this bill and we will not press for any further amendments”. She recognised that the government is facing ‘very difficult’ times, however, she hoped that they would look at evaluating the bill and its impacts.

For the government, the Financial Secretary to the Treasury, Lord Livermore, emphasised the government’s commitment to continually monitoring and assessing the impacts of the policies. With regard to special educational needs and disability, he acknowledged that change is ‘urgently’ needed and said: “I can commit that all these issues will be fully considered as part of the forthcoming spending review”.

Royal Assent was granted on 3 April.