Farage claims the India trade deal 'undermines British workers' - is he right?

7 May 2025, 18:38 | Updated: 7 May 2025, 18:52

A row has broken out over the National Insurance element of the India trade deal agreed by Labour.

Reform UK, the Conservatives and the Liberal Democrats have claimed that British workers could be undercut by the deal, which gives some exemptions to Indian workers in the UK.

But the government has said that such criticisms are unfounded, and have sought to draw focus to the economic benefits of the deal -which ministers say will be substantial.

National Insurance is politically charged, as Labour increased the employers' component of the tax after coming to office.

So who is in the right - the government or the opposition parties?

Read more: It's a tricky compromise but Starmer's India trade deal is a post-Brexit win

Read more: What is in the India - UK trade deal?

James O'Brien dispels 'blatant lies' about UK-India trade deal

What does the National Insurance part of the deal mean?

The agreement includes the “double contribution convention” - meaning it is designed to stop workers and employers paying national insurance twice, once in each country.

If the deal is voted through by MPs, staff working for an Indian company who transferred to the UK for less than three years would pay into the Indian social security system rather than paying into both British and Indian systems as they do now.

Similarly, UK workers temporarily in India would remain subject to national insurance, but be exempt from Indian social security levies.

Indian staff seconded to the UK will still have to pay the immigration health surcharge - meaning they will contribute to NHS funding.

The government pointed out that the UK already has such "double contribution convention" deals with other countries - including an agreement with Chile signed under the Conservatives.

Nigel Farage insists the UK’s trade deal with India ‘discriminates against British workers’

What did Farage say?

Farage said that the deal makes it more cost-effective for British companies to hire Indian workers, because they would not have to pay national insurance.

"We are discriminating against British workers through the tax system, a two tier tax system for big employers and for individual employees. It is scandalous beyond belief," he told LBC's Nick Ferrari at Breakfast.

"The bloke running your local pub has just had a massive tax hike for all the staff that work for it."

But Indian workers permanently in the UK will still have to pay National Insurance - it's only temporary staff here for up to three years that will be exempt.

Watch Again: Nick Ferrari is joined by Secretary of State for Business and Trade Jonathan Reynolds

How did Starmer respond?

The Prime Minister furiously defended the deal - and claimed attacks on it were "incoherent nonsense".

Stung by criticism from Conservative leader Kemi Badenoch at Prime Minister's Questions Commons, the PM hit back by asking if she was planning to "tear up" deals with 50 other countries who had similar "double contribution convention" deals.

Describing the deal as a "huge win for working people in the country”, Sir Keir said: “Because of the work that we have done, we are a country that countries like India want to do deals with, because of the messages and the work that we have done.”

LBC callers are divided over the UK-India trade deal

So - who's right?

It's difficult to say with complete certainty how the trade deal will play out.

The government has not published an impact assessment on how much money the exchequer will miss out on in National Insurance payments.

But the government are confident that Reform and the Conservatives' assessment is wrong.

Business Secretary Jonathan Reynolds said that the overall impact of the deal would mean more tax revenue for the Treasury.

He also said he expected more UK workers to be seconded to India as a result of British companies gaining access to Indian government procurement contracts.

And trade expert Marley Morris said that he thought the deal was "far less controversial than critics fear", citing the similar agreements with other trade partners.

"The deal... only applies to a relatively narrow group of Indian workers, typically in high-paid work, rather than all Indians on work visas in the UK," he wrote on LBC. "Moreover, it extends a national insurance exemption that already exists for 12 months.

"Those opposing the deal did not appear to have any concerns about this existing exemption, or indeed about similar social security agreements the UK has negotiated with other countries.

"It is therefore not obvious why for them this new development is now a red line".