The business and trade secretary has defended the UK-India free trade deal, saying critics are “confused” to think that the agreement “undercuts” British workers and employers because Indian individuals and companies will not have to pay national insurance contributions (NICs) in the UK.
Jonathan Reynolds alleged that the Conservatives and Reform UK were “unable to accept” that Labour had got the deal over the line when the last government could not. He told the BBC he would never tolerate British workers being undercut because of a trade agreement.
The free trade agreement, the biggest since Brexit, will result in Indian taxes on British exports such as whisky and cars falling by up to 90%. It is expected to boost trade between the UK and India by around 40% and increase GDP by £5bn by 2040.
National insurance
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Alongside agreement, the UK and India have undertaken a reciprocal “double contributions convention” (DCC), which will operate in a similar way to agreements with the EU, Canada, Japan and South Korea.
The DCC means employees moving between the UK and India, and their employers, will only be liable to pay social security contributions in one country at a time.
It will also ensure that employees temporarily working in the other country for up to three years will continue paying social security contributions in their home country, “preventing the fragmentation of their social security record”, according to the Department for Business and Trade.
It will not affect employees’ rights to access benefits from the country in which they pay social security contributions, or the requirement to pay the UK immigration health surcharge.
Conservative leader Kemi Badenoch said she had refused a similar deal when she was business secretary, because the trade-off contains “two-tier taxes”, which would cost the UK “hundreds of millions”.
Nigel Farage, Reform UK’s leader, described it as “appalling” and claimed the government was making it 20% cheaper to employ an Indian worker than a British worker.
Reynolds told Times Radio: “We have agreements of this kind with 50 other countries. This is not something new… It means our people pay into our system. India’s people pay into their system. And the overall impact of this deal is hundreds of millions of pounds of additional revenue to the exchequer because of the increase in economic growth.”
Brendan Chilton, chief executive of Independent Business Network, tweeted: “Extraordinary to see so-called Brexiteers attacking a free trade deal between the UK and the biggest economy in the Commonwealth. The NIC thing is reciprocal. What we are seeing is Reform stirring up racism against Indian workers here in the UK and it is disgusting.”
In 2012, the Conservative and Liberal-Democrat coalition government signed a similar DCC deal with Chile that lasts five years, but critics of Labour’s deal say the size of India’s economy is incomparable to Chile’s.
However, Allie Renison, a former trade policy adviser to the government, tweeted: “People cannot come unless their company has sent them to do specific work overseas for a time-limited period. Not looking for work to apply to in the first place. If only people would read rather than thinking everything is a grand conspiracy.”
‘Grown-ups in the room’
Marley Morris, associate director for trade at the Institute for Public Policy Research, said: “After three prime ministers failed to get a trade deal with India over the line, this is a major win for Starmer – especially at a time when Trump’s tariffs are making international trade even more fraught.
“This deal will cut tariffs, boost growth and create jobs. It shows that even in a tough global economic climate, the UK can be the grown-ups in the room and turn uncertainty into opportunity, in stark contrast to Trump’s approach.
“Crucially, the deal was possible by negotiating a social security pact for Indian workers alongside the free trade agreement. This demonstrates the value of international diplomacy and compromise for unlocking economic growth.”
Rain Newton-Smith, chief executive of the CBI, said: “The UK Government should be commended for its commitment to delivering a trade deal which safeguards our national interests, protects high standards, and delivers market access for UK firms. The CBI looks forward to working with the government to ensure firms are able to make the most of this deal going forward.”
Rohan Malik, government and public sector managing partner at EY, said: “This agreement is poised to accelerate an economic partnership that is already thriving, with the value of total trade between the UK and India having more than doubled from £16.6bn to £40bn over the last decade.
“British businesses stand to benefit substantially from enhanced access to one of the world’s largest export markets and a skills pool that can fuel strategically important UK sectors, including professional services and emerging industries based around data and AI.”
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