UK-India trade talks hit old snag as social security back on agenda

Mon 12 Feb 2024
Posted by: Danielle Keen
Trade News
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The UK-India trade deal appears to be hitting another stumbling block ahead of imminent national elections for both countries in 2024, with a once-quashed social security agreement now being pushed again by New Delhi.

Talk of a stalemate comes after Labour shadow ministers visited New Delhi last week, with Tories accusing Labour of holding discussions obstructive to the deal. 

Social security

One sticking point which has reemerged during this round of talks is the social security contributions of Indian workers in the UK.

The UK is against the inclusion of a social security agreement within the FTA to prevent these contributions returning to New Delhi, while the Indian government has objected to its workers being required to make national insurance contributions despite not being eligible for the pensions or welfare provisions they fund.

It would prefer that a social security agreement is put in place to protect its workers from double-payments, similar to those that the UK has with Canada, France and Australia.

The FT reports that allies close to Kemi Badenoch have said she doesn’t want to concede on such a “sensitive issue”, and notes that Moore Kingston Smith, a business consultancy that works closely with Indian clients, estimates a social security deal could see as much as £200m lost from UK coffers.

The issue is also complicated by the significant benefit a social security deal would bring to Infosys, the IT company founded by Narayana Murthy, prime minister Rishi Sunak’s father-in-law. Sunak’s wife, Akshata Murty, is estimated to own shares in the company worth £700m.

Labour in India

Tory officials have claimed that Labour talks in India have “reignited” the issue of social security, after shadow secretary for business and trade Jonathan Reynolds and shadow foreign secretary David Lammy visited India last week.

Reynolds met with India’s commerce minister Piyush Goyal in New Delhi last week (6 February) to discuss the countries’ trade and business relations.

He dismissed the Tory accusations as “ridiculous”, stating that the talks hadn’t involved negotiations.

Government sources claim that the Indian government has used the Labour meetings to “put pressure [on them] domestically” and to push the UK to agree a diluted deal, according to the Times.

Historic blockers

The UK government aims to ensure easier access to Indian markets for goods such as scotch whisky and cars, where existing tariffs often run as high as 150%.

India’s also reluctant to grant the UK’s desired level of access to its services market, with UK negotiators pushing for fewer restrictions for its legal and accountancy firms.

The UK is already the world’s second-largest exporter of services after the US and the negotiations could grant it better access to the world’s most populous market.

However, issues relating to the movement of people have been particularly complex to navigate and the number of UK worker visas to granted to highly-skilled Indian workers has also been a point of contention.