Labour Row Over “Brain Dead” NI Exemption for Indian Workers In Trade Deal
Prime Minister Narendra Modi, May 2025 in New Delhi, India (Credit: Sipa US/Alamy Live News)
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Labour MPs in Red Wall seats have privately expressed anger after the government announced a new "landmark" trade deal with India which includes a National Insurance exemption for Indian workers, PoliticsHome understands.
Under the ‘double contribution convention’ that forms part of the new UK-India agreement, Indian workers temporarily moved to the UK will not pay National Insurance contributions for three years. British workers in India will enjoy the same benefit.
It means the workers who are in Britain for a limited time, while seconded from a company based in India, avoid paying social security contributions in both India and the UK for the same work.
"This will make Indian service providers significantly more competitive in the UK," the Indian Ministry of Commerce and Industry said.
One Red Wall Labour MP reacted to the deal by saying it was "brain dead" and showed that ministers "don't have a grip" on the Treasury and Civil Service.
Another said the deal “seems bonkers”, but added that they had sympathy with the government’s position as it was a “very complex” situation.
At a private meeting of the Red Wall caucus on Tuesday evening, Labour MPs took the opportunity to "lash out", one attendee said.
PoliticsHome was told that the Home Office "has no idea" about the deal and was blindsided. The Guardian similarly reported that Home Secretary Yvette Cooper was not informed about the government's plans.
But trade minister Douglas Alexander claimed "colleagues in the Home Office have been part of that cross-Whitehall effort" to secure the trade deal with India.
A Home Office source told PoliticsHome that "on a trade deal of such breadth and complexity, you would expect wide-ranging discussions to have taken place right across government, with many departments, including the Home Office, involved".
Reacting to the announcement of the deal, shadow justice secretary Robert Jenrick said “British workers come last in Starmer’s Britain” and the Conservatives in power "refused to accept unfair and unreasonable visa demands" when negotiating with India.
"I did not sign this deal because I did not think the double taxation agreement was right for the UK," said Tory leader and former trade secretary Kemi Badenoch. "The numbers are lopsided."
Reform UK leader Nigel Farage said the deal showed "Labour have completely lost touch with working Britain".
A Labour spokesperson accused Tory leader Badenoch of pushing a "made-up row about a standard tax agreement that will benefit British workers abroad".
They added: “This deal will provide an annual £4.8bn boost for British businesses, create more jobs, raise wages by more than £2bn a year and bring down prices for hard-pressed consumers."
Free marketeer Conservatives did not join the criticism, however. Former MP Steve Baker said: “The tax issue will likely turn out to be a red herring. We should be celebrating that a Labour government has furthered free trade in the national interest outside the EU.”
Labour MP Mike Tapp also defended the government, telling PoliticsHome: "Don’t listen to cynical attempts at spin, the only story here is a positive one about a great trade deal. This is a standard tax agreement we already have with over 50 countries.
"It doesn’t apply to Indian nationals applying for UK jobs, doesn’t grant access to UK benefits, and doesn’t change immigration rules. The Tories offered visas and failed to get a deal, Labour has delivered one without compromising on control."
The UK has double contribution conventions with Chile, Japan and South Korea, and agreements for social security contributions and benefit entitlements with many other countries. It also already exempts all foreign temporary workers from one year of National Insurance contributions.
Health Secretary Wes Streeting celebrated the deal on social media, saying it would deliver “a big boost for Britain’s world leading life sciences sector, with manufacturers more easily able to sell UK made medical devices in a market of over 1.4 billion people”.
Under the trade deal, Indian tariffs will be cut, including whisky and gin tariffs halved from 150 per cent to 75 per cent, then reduced to 40 per cent by year 10, and automotive tariffs reduced from over 100 per cent to 10 per cent under a quota.
