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National Insurance Contributions Bill


These notes refer to the Lords Amendments to the National Insurance Contributions Bill, as brought from the House of Lords on 9th July 2008 [Bill 137]




1.     These explanatory notes relate to the Lords Amendments to the National Insurance Contributions Bill, as brought from the House of Lords on 9th July 2008. They have been prepared by the Treasury in order to assist the reader of the Bill and the Lords Amendments and to help inform debate on the Lords Amendments. They do not form part of the Bill and have not been endorsed by Parliament.

2.     These notes, like the Lords Amendments themselves, refer to HL Bill 28, the Bill as first printed for the Lords.

3.     These notes need to be read in conjunction with the Lords Amendments and the text of the Bill. They are not, and are not meant to be, a comprehensive description of the effect of the Lords Amendments.

4.     None of the Lords Amendments was in the name of the Minister and they were all opposed by the Government.


5.     National Insurance Contributions are a reserved matter in Scotland and Wales and an excepted matter in Northern Ireland. Lords Amendments 1 and 2 amend clause 1 of the Bill which relates to Great Britain. Lords Amendments 3 and 4 amend clause 2 which relates to Northern Ireland.

Bill 137—EN     54/3


Lords Amendments 1 and 2

6.     Clause 1 of the Bill as sent to the Lords removes the existing restriction on the power to set the upper earnings limit (“UEL”) by secondary legislation (which currently limits any increase to a maximum of 7.5 times the primary threshold), whilst adding a new restriction that any exercise of that power is to be subject to the affirmative resolution procedure for statutory instruments.

7.      These amendments would leave Clause 1 to take effect in that way for changes in the UEL for the 2009-10 tax year; thus the amendments would allow Treasury Ministers to set the level of the upper earnings limit at any level (subject to Parliamentary approval under the affirmative resolution procedure).

8.     These amendments, as well as requiring the exercise of the power to be approved by Parliament, would add a further restriction on exercise of the power for the tax year 2010-11 and beyond.

9.     If the retail prices index (“RPI”) for September were more than the RPI for the previous September, new section 5A of the Social Security Contributions and Benefits Act 1992 would apply. That section would restrict the power to change the UEL to increases only, and limit the maximum amount of such increases. The amount of the increase would be determined as follows:

Step 1: Increase the UEL for the previous tax year by the same percentage as the percentage increase in the RPI.

Step 2: Round the result of Step 1 up to the nearest whole pound (if it is not a whole pound).

Step3: The Secretary of State could add or deduct from the result of Step 2 an amount not exceeding £2 for the purposes of aligning the annualised weekly UEL with the sum of the income tax personal allowance and the income tax basic rate limit in the tax legislation.

Lords Amendments 3 and 4

10.     These amendments mirror Lords Amendments 1 and 2 in respect of Northern Ireland. The new restriction for Northern Ireland would be contained in new section 5A of the Social Security Contributions and Benefits (Northern Ireland) Act 1992.


11.     The UEL is currently reviewed around the time of the Pre Budget Report and set by regulations. The amendments would restrict any increase in the UEL to increases in the RPI from 2010-11. This could reduce income to the National Insurance Fund (depending on the UEL set for 2009-10, and the RPI and the primary threshold in future years) and could, accordingly, increase expenditure from the Consolidated Fund in future years.

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Prepared: 10 July 2008