Draft Bank for International Settlements (Immunities and Privileges) Order 2021
(3 years, 2 months ago)
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The Chair
Before we begin, I would like to remind Members to observe social distancing; I think everyone is sitting where ticks indicate availability. Mr Speaker has stated that masks must be worn when Members are not speaking. All notes should be sent to Hansardnotes@parliament.uk.
The Parliamentary Under-Secretary of State for Foreign, Commonwealth and Development Affairs (James Duddridge)
I beg to move,
That the Committee has considered the draft Bank for International Settlements (Immunities and Privileges) Order 2021.
The Order has been negotiated as part of a host country agreement to support the establishment of the new Bank for International Settlements Innovation Hub in London. The order is required so that the United Kingdom can fully comply with its obligations as host country under the host country agreement.
In 2020, it was announced that the Bank of England was successful in its bid to host the hub in the UK. It will conduct research on the emerging trends in financial technology and help the global central banking community ensure that innovation does not negatively impact on consumers and the stability of the financial system. Of course the UK is a leader in FinTech, and the sector is worth more than £11 billion annually to the UK. It is a success and that is largely based on the UK’s policy and regulatory expertise on innovation in the financial sector and FinTech. London’s selection very much reflects that success.
The order includes limited immunity for legal processes in respect of staff in relation to their official acts and certain tax exemptions. Those immunities ensure that public funds supporting international financial institutions, such as the Bank for International Settlements, are spent purely on the delivery of their work, and do not simply add to the tax revenue of the country. They were part of a bid condition to host the Bank for International Settlements. Our hosting of the BIS hub is good news for the UK, and to host this beneficial organisation is a success for the UK.
The order simply sets out the logistics to allow the Bank for International Settlements to establish itself in London, and I commend the order to the Committee.
Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)
It is a pleasure to see you in the Chair, Dr Huq.
As the Minister said, the order is simply designed to put in place the standard diplomatic immunities and privileges that go with the establishment of any international institution in the UK. The Opposition will not vote against it, but I have a number of questions.
The UK is a global leader in financial innovation and technology, and the Bank of England’s success in bidding to host the Bank for International Settlements Innovation Hub reflects our continued high standing. Technology is of course changing all aspects of the global economy, including in the global south, and technology will play a crucial role in ensuring that financial systems are effective, resilient and inclusive. It is also crucial to our economy, and we are at the forefront of many FinTech innovations. The establishment of the UK hub will allow us to collaborate with many others to innovate through research and other technical means.
The Bank for International Settlements is one of the world’s oldest financial institutions. It has played a significant role as the bank to central banks for more 90 years, from the central banks gold pool co-ordination during the early days of the Bretton Woods system through to supporting monetary co-operation among European Community central banks. It has also played a supportive role in many active financial co-operation initiatives and continues to do so, including working on new opportunities presented by environmentally friendly and green investment technologies. The Opposition are very happy to see the Bank for International Settlements establish a hub in the UK, and support the granting of the appropriate immunities and privileges.
We have seen some issues in the past associated with diplomatic status in the UK being abused or not used appropriately. Some examples have related to very serious cases, and others have related to the payment of parking charges and the congestion charge in London. How will the new immunities work? I note that the order contains an exemption relating to traffic penalties, but what is the Government’s standard on all such institutions? London is a hub, and we host many international bodies, including the International Maritime Organisation just across the river from us, so what is the Government’s policy on immunities?
The order allows for the exercise for the first time of the powers in section 12 of the International Development Act 2002. Can the Minister confirm whether any further regulations will be invoked under those powers? Can the Minister confirm that the host country agreement is similar to those put in place wherever the BIS has opened hubs around the world? Are we doing anything different from those other locations where it has established hubs or offices? Will any specific funding or resources be provided to the BIS by the UK Government, for example the use of property or any grant funding? Will any of that be earmarked as official development assistance spending? How will the activities of the London hub be made transparent and accountable, so that we understand the type of work it carries out? I am sure that there is much that we will want to welcome, but many questions surround some of the more negative aspects of international financial technology. We have heard some lively debates in the past few days about crypto currencies and trading based on Reddit tips and so on. I am assuming that the BIS hub will look at the positive ways in which innovation in FinTech can be used for the benefit not just of this country but globally, including those countries currently excluded from many financial processes. How will the hub balance those positive and potential negative aspects of FinTech?
The past three decades have seen the significant internationalisation of the BIS from its original European focus, but Europeans still account for 50% of its membership. Of the rest of the world, the number of countries with central banks and monetary authorities stands at five from South America, three from Africa and two from Oceania. The majority of the developing world across the global south is simply not represented. Will the UK as a member organisation of the BIS and as a host of the hub push for greater global representation to ensure that the work of the bank is fully inclusive?
We support the order and the standard process it represents, but I would appreciate some answers from the Minister to my questions.
James Duddridge
I thank the hon. Gentleman for his constructive approach, and his helpful questions.
On abuse of diplomatic status, the immunities provided would not include parking charges. The immunities and privileges relate to the organisation in pursuit of its activities, not to individuals nor their families.
There is no cross-over between the terms of this limited order and any plans relating to ODA or IDA in any way, shape or form.
In terms of other BIS hubs, the only difference in terms of immunities and privileges is that we have tightened the terms of the order, given recent cases. I am aware of no other differences.
The flow of money to the BIS hub is through the Bank of England, but certainly we will not spend ODA on that hub, so there should be no confusion whatsoever about that: I am leading on this statutory instrument because it is an immunities and privileges order. In terms of the accountability of FinTech, its impact is largely positive although I acknowledge that there are some negative aspects. I will pass on the hon. Gentleman’s comments in that respect to Her Majesty’s Treasury, which leads on this in a departmental sense, although the Bank of England is the member organisation of the BIS.
The hon. Gentleman made a very good point about wider membership of the BIS. As I said earlier, the hub will have an effect on the developing communities, which in many ways operate in less of a regulatory environment but are moving at faster pace, so the more countries we can bring into the BIS, the better.
Question put and agreed to.
Draft Social Security (Contributions) (Rates, Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations 2021
Draft Tax Credits, Child Benefit and Guardian’s Allowance Up-rating Regulations 2021
(3 years, 2 months ago)
General CommitteesRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Chair
Before we begin, I remind Members to observe social distancing and only to sit in the places clearly marked. I also remind Members that Mr Speaker has stated that masks should be worn in Committee when Members are not speaking. Hansard colleagues would be grateful if Members can send their speaking notes to hansardnotes@parliament.uk.
The Financial Secretary to the Treasury (Jesse Norman)
I beg to move,
That the Committee has considered the draft Social Security (Contributions) (Rates, Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations 2021.
The Chair
With this it will be convenient to consider the draft Tax Credits, Child Benefit and Guardian’s Allowance Up-rating Regulations 2021.
Jesse Norman
The draft regulations set the national insurance contributions limits and thresholds, as well as the rates for a number of national insurance contributions for the 2021-22 tax year. They make provision for a Treasury grant to be paid into the national insurance fund, if required.
As right hon. and hon. Members will be aware, national insurance contributions, or NICs, are a key element of the nation’s welfare safety net, helping to support workers through ill health, unemployment and old age. They allow people to make contributions when they are in work in order to receive contributory benefits when they are not working. NICs receipts go towards funding contributory benefits, as well as to the NHS.
As announced in November and in line with previous years, the Government are using the September consumer prices index, or CPI, figure of 0.5% as the basis for setting all national insurance limits and thresholds, and the rates of classes 2 and 3 national insurance contributions for 2021-22. If I may, I will first outline the specific changes to the class 1 primary threshold and the class 4 lower profits limit.
The primary threshold and lower profits limit indicate the point at which employees and the self-employed start to pay class 1 and class 4 national insurance contributions, respectively. Those thresholds will rise from £9,500 to £9,568 per year. The rates of classes 1 and 4 NICs are unchanged by the draft regulations.
Increases to the primary threshold and lower profits limit do not affect eligibility for state pension. That is determined by the lower earnings limit for employees, which will remain at £6,240 in 2021-22, and payment of class 2 NICs for the self-employed, to which I will come shortly.
The upper earnings limit, the point at which the main rate of employee NICs drop to 2%, is aligned with the higher rate threshold for income tax. The upper earnings limit threshold will increase from £50,000 to £50,270 per year. Similarly, the upper profits limit is the point at which the main rate of class 4 NICs drops to 2%. That will also increase from £50,000 to £50,270 per year.
As well as class 4 NICs, the self-employed also pay class 2 NICs. The rate of class 2 NICs will remain at the weekly rate of £3.05, due to the rounding rules that require the calculation of the CPI increase to be rounded to the nearest five pence. The small profits threshold is the point above which the self-employed must pay class 2 NICs. That will increase from £6,475 to £6,515 per year.
Class 3 NICS allow people voluntarily to top up their national insurance record. The rate of class 3 will increase in line with inflation, from £15.30 to £15.40 per week.
The secondary threshold is the point at which employers start paying employer NICs on their employees’ salary. That threshold will increase from £8,788 to £8,840 per year. The threshold at which employers of people under 21, and of apprentices under 25, start to pay employer NICs on those employees’ salary will increase from £50,000 to £50,270 per year. The rate of employer NICs is unchanged by the regulations.
The regulations also make provision for a Treasury grant of up to 17% of forecasted annual benefit expenditure to be paid into the national insurance fund, if needed, during 2021-22. A similar provision will be made in respect of the Northern Ireland national insurance fund. The report by the Government Actuary’s Department, or GAD, laid alongside the re-rating regulations, forecasts that a Treasury grant will not be required in 2021-22. However, in view of the economic challenges created by the covid-19 pandemic, the Government consider it prudent to make the maximum provision at this stage.
I trust that that is a useful overview of the changes we are making to adjust contributions to the Exchequer in line with inflation, and I commend the draft regulations to the Committee.
The Committee is also considering the Tax Credits, Child Benefit and Guardian’s Allowance Regulations 2021. As hon. Members know, the Government are committed to delivering a welfare system that is fair for claimants and taxpayers alike, while providing a strong safety net for those who need it most. The regulations will ensure that tax credits, child benefit and guardian’s allowance increase in line with the consumer prices index, which had inflation at 0.5% in the year to September 2020.
Overall, this proposed legislation makes changes to the rates, limits and thresholds for national insurance contributions, and provision for a Treasury grant, and also increases the rates of tax credits and guardian’s allowance in line with prices. These are important and necessary steps, and I hope that colleagues will join me in supporting the regulations.
Abena Oppong-Asare (Erith and Thamesmead) (Lab)
I am grateful to the Minister for his explanation of the draft regulations. I will first address the draft Social Security (Contributions) (Rates, Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations 2021, which give effect to the annual re-rating of the various national insurance contribution rates, limits and thresholds, as the Minister has just said.
The Opposition will not contest the regulations. However, we are concerned about the lack of targeting of the regulations and the lack of a cost-benefit analysis in relation to other measures. The lower earnings limit is a level of earnings at which employees start to gain access to certain contributory benefits. From April 2021—so, in just two months’ time—the lower earnings limit will be increased in line with the CPI. However, due to the rounding rules when calculating the lower earnings limit, this has resulted in no change occurring in cash terms, meaning that the lower earnings limit will remain at £120 per week. Does the Minister intend to continue raising the lower earnings limit in line with inflation? Does he feel that it is sufficient, given the current crisis that we face? And are additional measures needed to ensure that people can contribute towards the social security that they might need, which will all depend on the lower earnings limit?
The draft Tax Credits, Child Benefit and Guardian’s Allowance Up-rating Regulations 2021 relate to tax credits, child benefit and guardian’s allowance, and enact increases that had previously been announced in a written ministerial statement in November 2020. As with the previous regulations, these regulations are generally linked to the CPI. Again, the Opposition will not oppose them.
As the explanatory memorandum notes, the Coronavirus Act 2020 increased basic working tax credits from £1,995 to £3,040 for the 2020-21 tax year only. This £20 per week increase to the basic rate of working tax credit does not apply for the purposes of the annual review, and the annual rates for consideration will therefore be £1,995. Given that the economic situation is still dire for many families across our country, which I see in the cases that I get in my constituency as a local MP, we have also seen the worst recession in the G7 and one of the highest death rates in Europe.
In those circumstances, can the Minister say whether the Treasury is considering a review of its approach to tax credit uplift as part of the upcoming Budget? The Secretary of State for Work and Pensions refused to make her position clear on whether the uplift ought to be removed in the middle of the pandemic when facing questions from the Work and Pensions Committee last week. Can the Minister update us any further?
What has become grimly clear in the last 11 months is that the UK social security safety net is severely inadequate. However, I must emphasise again that the major omission from this debate is clarity over the proposed withdrawal of the £20 a week uplift to universal credit that is due to take place in April 2021. The Opposition believe that it is deeply irresponsible for the Chancellor to be winding down the support for families with his cut to universal credit, which will leave unemployment support at a 30-year low in the middle of an economic crisis. The Government should do the right thing and secure our economy by cancelling the cuts to universal credit. It is discriminatory and unfair that the £20-a-week uplift was never extended to people on legacy benefits, many of whom are carers or disabled.
Although we do not oppose either of the instruments presented to us today, we remain concerned about the Government’s approach to ensuring social security for the people of Britain, and about the lack of adequate support for so many families who are struggling to get through this crisis.
Jesse Norman
I am very grateful to the hon. Lady for her comments, and I am grateful to the Opposition for supporting these measures. I think it would be worth making a couple of points in response. The first is that there is a difference between the process we are going through now, which is the standard upratings that are part of the normal fiscal cycle, and policy interventions that may be added or adopted on top of that. At the moment, we are involved in the process of the plumbing, rather than the specific policy interventions. As you will know, Mr Mundell, those policy interventions come through fiscal events; they certainly do not come in secondary legislation, for reasons that you might understand.
In relation to universal credit, on which the Government have received many petitions and inquiries, as the hon. Lady will be aware, the statutory uprating is separate from the uplift that the Chancellor has previously given. It is part of the normal review of underlying tax credit rates, which has to be undertaken every year—it is a normal part of the process—to assess whether they have retained their value in relation to prices. By upgrading them, we will ensure that they retain their real value. Again, it is separate from policy interventions, and the Chancellor and the Treasury keep all taxes under review. We will continue to do so in relation to both the benefits and the tax side of the equation.
Question put and agreed to.
Draft Tax Credits, Child Benefit and Guardian’s Allowance Up-rating Regulations 2021
Resolved,
That the Committee has considered the draft Tax Credits, Child Benefit and Guardian’s Allowance Up-rating Regulations 2021.—(Jesse Norman.)