Monday 14th June 2021
(3 years, 5 months ago)
Commons ChamberNational Insurance Contributions Act 2022 View all National Insurance Contributions Act 2022 Debates Read Hansard Text Watch Debate Read Debate Ministerial Extracts
The Financial Secretary to the Treasury (Jesse Norman)
I beg to move, That the Bill be now read a Second time.
The Bill before the House today is a short one, with just four measures: an employer’s national insurance contributions relief for employees in freeports; an employer’s NICs relief for employers of veterans; an exemption for Test and Trace support payments from self-employed NICs; and changes to the disclosure of tax avoidance schemes legislation with regard to national insurance contributions. The measures are all important, and I shall explain each of them in more detail.
I shall start with the employer’s NICs relief for employees in freeports. At the Budget, the Chancellor announced the locations of the first eight freeports. These sites, which range from Teesside to Tilbury, will become hubs for trade, innovation and commerce. They will attract new businesses and they will regenerate communities by creating jobs, boosting investment and spreading prosperity. Overall, freeports present an extraordinary opportunity to drive regional economic growth, and the Government want as many areas as possible to benefit.
An important part of the appeal of freeports for employers is undoubtedly the wide range and variety of tax reliefs that they provide. These include an enhanced 10% rate of structures and buildings allowance, an increased 100% capital allowance for companies investing in plant and machinery, and full relief from stamp duty on land or property purchases.
The employer’s NICs relief for workers in freeports contained in the Bill encourages employment while supporting regional growth. Under this measure, employers with premises in a freeport in Great Britain will be exempt from employer’s NICs on up to £25,000 of a new worker’s wages. This legislation applies to all new workers who spend 60% of their working time at a freeport tax site in the first three years of employment.
The relief will be available from April next year until at least April 2026. At that point, a sunset clause will require the Government to lay secondary legislation to extend the relief, if they wish, for up to a further five years to April 2031. Any decision to extend will only be taken upon review of the relief’s impact. However, even if the Government decided not to extend the relief, employers will be able to claim it for the full three years on new hires taken on before April 2026. While these measures relate to Great Britain, let me assure the House that it is the Government’s intention to legislate for this relief in Northern Ireland as soon as is practicable. Indeed, the Bill provides the Government with the power to set out the detail of employer NICs relief in Northern Ireland in secondary legislation once engagement with the Northern Ireland Executive is complete.
The second of our measures concerns NICs relief for employers of veterans. As colleagues will recall, this policy was announced at spring Budget 2020. It also fulfils a manifesto commitment to reduce employer NICs for a full year for every new employee who has left the armed forces. The House will know well that I am very closely connected to the astonishing work of special forces in Hereford, but the veterans of our armed forces across the United Kingdom give extraordinary service to this nation. We know that some face great challenges in obtaining secure and fulfilling employment, so it is only right that we should do all we can to change this situation. Under the Bill, employers will not pay employer NICs on earnings worth up to £50,270 in a veteran’s first full year of civilian employment. This amounts to a saving of up to £5,500 per hired veteran. I am sure that colleagues across the House will agree that this measure should give a real boost to veterans’ employment prospects, and should mean that many more businesses benefit from their often extraordinary skills and personal experience.
I now turn to the exemption of Test and Trace support payments from self-employed NICs. Last September, the Government announced the launch of a £500 support payment in England for low-income individuals who had been told to self-isolate but who could not work from home and would lose income as a result. Shortly afterwards, the Scottish and Welsh Governments announced similar schemes. These payments, which were provided by local authorities, would be subject to employee and employer class 1 and 1A and self-employed class 2 and class 4 NICs under long-standing legislation. Last year, however, the Government introduced secondary legislation to exempt payments under the support schemes from employee and employer class 1 and 1A NICs. The measure contained in the Bill will extend this exemption to the self-employed. It will ensure that these workers are treated consistently with their employed counterparts and do not have to pay NICs on support payments. The legislation will therefore retrospectively exempt Test and Trace support payments from class 2 and class 4 NICs for the 2020-21 tax year. It will also ensure that in future Test and Trace support payments will not be included in profit liable to class 2 and class 4 NICs.
The final measure in the Bill relates to changes in the disclosure of tax avoidance schemes—DOTAS—regime in relation to NICs. As colleagues will recall, the DOTAS legislation was introduced in 2004. It seeks to provide Her Majesty’s Revenue and Customs with early information about new tax avoidance schemes—information on how they work and about those who use them. The provisions in the Finance Act 2021 enhanced the operation of the DOTAS regime, and the Bill includes changes to an existing regulation-making power in the Social Security Administration Act 1992. This will ensure that HMRC can act decisively over a wider range of promoters and their supply chains if they fail to provide information on suspected avoidance schemes. It will also ensure that HMRC can warn taxpayers about suspected avoidance schemes at an earlier stage than at present. In addition, the Bill places responsibility for the obligations within DOTAS and for any failure to comply with them both on promoters of these schemes and their suppliers. I am sure all colleagues across the House will welcome these measures.
The Bill supports regional growth and, with it, the Government’s levelling-up agenda; boosts employment while helping to protect those on low incomes from the financial impacts of covid-19; and strengthens the Government’s powers to tackle promoters of avoidance schemes. For all those reasons, I commend it to the House.
James Murray (Ealing North) (Lab/Co-op)
Thank you, Madam Deputy Speaker, for the opportunity to speak about this Bill on behalf of the Opposition. We will not oppose the Bill on Second Reading. Indeed, we support the intention behind many of its measures. However, I would like to take this opportunity to raise important questions with Ministers about some of the approaches they have decided to take.
As we know, clauses 1 to 5 would introduce a new zero rate of secondary class 1 national insurance contributions for employers taking on employees in a freeport. The zero rate would apply from April 2022, and it would allow employers to claim relief on the earnings of eligible employees up to £25,000 per year for three years. As the House will recall from the Report stage of the recent Finance Bill, my hon. Friend the Member for Erith and Thamesmead (Abena Oppong-Asare) made it clear that we want every region and nation of the UK to succeed whether or not it has a freeport. We want secure new jobs with better pay to be created right across the country, and we want to support and protect British businesses and industries. Freeports may be part of the solution to increasing trade and investment across the UK, but we note that the International Trade Committee concluded in its recent report on UK freeports, published on 20 April, that
“it remains to be seen how successful freeports will be at achieving this objective.”
Kevin Hollinrake (Thirsk and Malton) (Con)
Just to clarify, the hon. Member says that freeports might be part of the solution—to levelling up, I guess—but does he therefore support freeports or does he agree with his colleague in the shadow Treasury team, the shadow Chief Secretary to the Treasury, the hon. Member for Houghton and Sunderland South (Bridget Phillipson), who has said that they are “economically illiterate”?
James Murray
I was awaiting the hon. Gentleman’s intervention—I was definitely expecting it given the recent debates we have had in this place—and if he will wait just one moment, I will get on to setting out our position on freeports in more detail.
We were concerned at the recent Report stage of the Finance Bill that the Government themselves seemed to show a lack of certainty by voting against our simple amendment to the Finance Bill that would have seen the success of each individual freeport transparently evaluated. As I am sure the hon. Gentleman will remember, we wanted each freeport to be judged against the key tests of whether, across the country, they lead to any net increase in jobs, deliver improvements in training and skills for local residents, produce tangible transport and infrastructure improvements beyond the port itself and will be adequately protected against the risks of tax evasion, smuggling and criminal activity. It is disappointing that the Government voted against the transparent evaluation of their proposed freeports. Not only would this have enabled us to judge their success, but some of the factors we highlighted in our tests would in fact make investment in freeports more attractive to businesses.
Indeed, in response to the Government’s own consultation on freeports last year, many respondents argued that
“although tax incentives can be a significant driver behind businesses investing within an area, they were not usually the sole determinant.”
The Government’s summary of responses went on to explain:
“Some respondents also indicated the success of tax incentives was partially dependent on local factors, especially the quality of transport infrastructure and the skills and availability of local labour.”
As we consider the tax relief before us today, it is therefore important to remind the Government not to ignore the other aspects of the operation of freeports that may be key to their success.
On this tax relief, I would like to ask Ministers to address three specific points that arise from the Bill. First, while relief to employer’s national insurance contributions may be a reasonable part of a tax incentive package along with other tax incentive measures, it is hard to understand why this relief is conditional on employment not commencing until 6 April 2022. As the Chartered Institute of Taxation has pointed out, with freeports expected to start operating in 2021, that would surely hamper freeport employers this year and perhaps create perverse incentives about delaying the start of an employee’s work. I would be grateful if the Exchequer Secretary set out in her response the Government’s reasoning behind this condition on accessing the relief.
Secondly, clause 8 of the Bill enables the Government to set an upper secondary threshold for employer class 1 national insurance contributions specifically in relation to freeport employees—and, indeed, for armed forces veterans, which I will turn to shortly. In practice, this means that employers do not need to pay NICs until an employee’s earnings pass that threshold. We note that the upper secondary threshold for freeport employees will, according to a policy paper published by the Government on 12 May, be set at £25,000 for 2022-23. That is substantially less than the equivalent thresholds for employers’ relief for under-21s and apprentices, which is £50,270 in 2021-22. Just to be clear, this means that employers do not need to pay any NICs for under-21s and apprentices earning up to just over £50,000 a year, but they will have to pay contributions for freeport employees next year if they earn more than £25,000. It would be helpful to understand the Government’s rationale for picking this figure. According to the Office for National Statistics, the median income in all those local authority areas where the eight freeport sites are located is greater than £25,000, with the figures ranging from £25,200 in Kingston upon Hull, within the Humber freeport, to £33,200 in Thurrock, within the Thames freeport. I therefore ask the Exchequer Secretary to explain why the relief for freeport employers is set below median pay in all freeport areas and why this rate is half of that for those employing under-21s and apprentices.
Thirdly, as the plans for freeports stand, businesses taking advantage of their tax incentives will still pay corporation tax. British businesses that pay their fair share of tax will find it very hard to understand why the Chancellor has been for so long so lukewarm about a new, global minimum corporate tax rate to stop large multinationals undercutting them by exploiting tax havens around the world. The Chancellor welcomed the rate being cut from the original 21% proposed by President Biden down to 15%, even though that would cost Britain £131 million a week and leave British businesses being undercut. When I have asked the Financial Secretary before about the Government’s position, he said he did not think
“it is appropriate for Ministers to comment on tax policy in flight”.—[Official Report, 28 April 2021; Vol. 693, c. 418.]
Now, however, the outcomes of the G7 Finance Ministers’ meeting and the Carbis Bay summit are public, so perhaps his colleague, the Exchequer Secretary, could explain why the UK Government’s position has been to back a rate of 15%.
Let me move on to other measures in the Bill. As we have heard, an important relief, covered by clauses 6 and 7—
Jesse Norman
I am happy to give the hon. Gentleman some satisfaction on that question. What is extraordinary is how the Labour party has continuously sought to pretend that things are other than they actually are in relation to this deal. Let us just talk about that for a second. In the first case, the G7 is a package—it is a process. Were we, as Labour would have had us do, to ignore the pillar 1 aspects, there would then have been no argument, no debate and no proper taxation of platforms in the areas where the new taxing rights will reside. That would have been a serious, serious deficit. The whole point of the package is to see it as a package, and it predated the Biden Administration. We have greatly benefited as a world from their additional support, but it is by no means up to them; it is an OECD process, of which they have been an important recent supporter.
James Murray
I thank the Minister for engaging on what has happened in the negotiations about the new global deal, but I notice that he did not address the issue about the headline rate. I have asked him on several occasions, perhaps three or four times in recent months in this place, to explain why the Government have been so lukewarm about an ambitious rate of 21%, as proposed by President Biden, and instead favoured its being cut to 15%, which is indeed what has happened. I note that when the right hon. Gentleman got to his feet a few moments ago, he did not address the headline rate. Labour Members continue to worry that we are missing out on a once-in-a-generation opportunity to strike a truly ambitious global deal to stop a few large multinationals avoiding paying their fair share of tax.
Hon. Members
James Murray
I tell you what, Madam Deputy Speaker, I will give way if the right hon. Gentleman addresses the specific point about 15% and 21%.
Jesse Norman
As the hon. Gentleman knows, it is completely inappropriate for a Minister to comment on confidential negotiations with allies and other nations around the world. He is ignoring that this is a package and the package involves two pillars, the second of which is a 15% rate, globally agreed, one that reconciles and acknowledges different countries around the world which have different tax regimes and different supports. The Government have been in no way lukewarm on pillar 2. What the Government have insisted on, in contradiction to the Labour party and against the ill-fated and ill-advised suggestions that it has made, is pillar 1, which is the crucial component of this that allows us to tax platforms. It is extraordinary that the hon. Gentleman refuses to acknowledge that under a Labour party Administration, there would have been no taxation of these platforms. What on earth does he say to that?
James Murray
As the right hon. Gentleman well knows, I have set out many times that we believe that there should be a deal on both pillar 1 and pillar 2. However, pillar 2 stands to generate a huge amount of revenue for British public services and to stop a few large multinationals avoiding paying their fair share of tax and thereby undercutting British businesses that are paying their fair share of tax.
The Minister keeps referring to the idea that it is inappropriate for him to comment on the British Government’s position. The position is there in public, following the G7 Finance Ministers’ meeting and the G7 summit over the weekend. People have a right to know what our Government were arguing for and we can arrive at no conclusion other than that the British Government were at least lukewarm and perhaps even against the tax rate being set at 21% because it has fallen to 15%, thereby losing out on £131 million a week, meaning that we are potentially missing a once-in-a-generation opportunity for a truly ambitious global tax deal.
James Murray
Certainly. I am conscious, Madam Deputy Speaker, that this is not all entirely within the frame of the Bill, but I give way to the hon. Gentleman.
Kevin Hollinrake
The hon. Gentleman does keep mentioning it. Just on the point about corporation tax, he seems to imply that somehow we are in favour of lower corporation tax, but he is aware that the Government are increasing corporation tax from 19% to 25%. On pillar 2 and pillar 1, I have heard him at the Dispatch Box on numerous occasions urging the Government to sign up to a deal that was only on pillar 2. It did not involve pillar 1, so how can he say now that he was in favour of a wider negotiated agreement? That is not what he was saying at all.
James Murray
I am surprised—because the hon. Gentleman always seems to be here when I am speaking at the Dispatch Box—that he does not seem to remember me advocating for a deal on pillar 1 and pillar 2. I will happily send him the reference in Hansard after this meeting so he can refresh his memory. The point here is that we have President Biden suggesting 21% in pillar 2 as an ambitious global deal. We had the British Government being at least lukewarm and potentially anti the proposal of 21%. We have now settled on a position where it has dropped to 15%, and we will not cease pushing the Government to be more ambitious in what they seek to achieve, because this will mean that Britain will lose out on £131 million a week that could be invested in our public services and British businesses will continue to be undercut by a few large multinationals that do not pay their fair share of tax.
I will move on to other measures in the Bill. As I was saying, there is an important relief, covered by clauses 6 and 7, that sets out to help service personnel leaving the armed forces back into work. This is a vital issue. Veterans deserve the full support of the Government as they seek civilian employment after their service to our country. It is crucial to make sure that all veterans get the support they need. I noted that the Government’s consultation document for this measure refers to an existing career transition package to service personnel leaving the armed forces and explains how 6% of veterans accessing the service remain unemployed for up to a year after leaving the armed forces. We believe that this relief on employers’ national insurance contributions is a positive step, and we hope it will particularly help the 6% of veterans who the Government acknowledge are not benefiting from the current service on offer.
We recognise that this measure may not, on its own, be enough to get everyone into work, so I would like to ask the Exchequer Secretary to set out what further help the Government are offering the 6% of veterans, in particular, who need greater support. We also want to make sure that the employers’ relief is as effective as possible, so I ask why the employers’ relief for veterans is 12 months, which is much less than the relief for employers in freeports, which is 36 months. Perhaps the Exchequer Secretary could explain the Government’s thinking in setting the relief for just one year rather than three years, in line with the approach taken for employers in freeports.
Moving on to further measures in the Bill, clause 10 provides a national insurance contributions exemption for payments made under a self-isolation support scheme. Ministers will know that we in the Opposition have been calling on the Government to expand eligibility for this scheme for some time. It is crucial that people who need support to self-isolate receive it, so we welcome any steps that make the system of self-isolation payments more effective and subject to less administrative burden.
We note that the Government introduced secondary legislation to exempt self-isolation support scheme payments from class 1 and 1A national insurance contributions in October 2020 for England and January 2021 for Scotland and Wales. We recognise that the measure in front of us, which exempts self-isolation support scheme payments from class 2 and class 4 national insurance contributions, will bring the treatment of the self-employed in line with the employed. We also recognise that it will be retrospective for the year 2020-21, and so can be reflected in the relevant tax returns.
Can the Minister explain, however, why the exemption for class 2 and class 4 contributions was not implemented earlier, in line with the exemption for class 1 contributions? If the class 2 and class 4 exemptions had been announced earlier, that could have given much-needed certainty to self-employed people at an earlier point in the outbreak. I would be grateful if the Exchequer Secretary explained why that did not happen.
Finally, clause 11 widens existing regulation-making powers so that regulations can be made for national insurance to mirror the amendments to the disclosure of tax avoidance schemes procedures in the Finance Act 2021. Under DOTAS, introduced by the Government in 2004, promoters of tax avoidance schemes are required to notify the tax authorities of any new scheme they are planning to offer taxpayers. The measure in clause 11 and its counterpart in the recent Finance Act aim to help HMRC obtain details earlier than it can now where promoters fail to provide information about their avoidance under DOTAS.
We welcome any measures that help HMRC track tax avoidance schemes, and we believe it is crucial that it targets the promoters of such schemes. I therefore want to use this opportunity to ask Ministers how effective they think the measures that flow from clause 11 will be. As they may know, the Chartered Institute of Taxation believes that there is a hard core of between 20 and 30 promoters, identified by HMRC, who clearly do not play by the rules. Do Ministers recognise that number? If so, I would be grateful if the Exchequer Secretary set out what goals HMRC has to clamp down on those 20 to 30 hard-core promoters. Are there any targets, and are there dates by which Ministers expect the number of hard-core promoters at large to fall substantially?
As I set out at the beginning of my remarks, we will not oppose this Bill today. Indeed, we support the intention behind many of its measures. As I have explained, however, we have a number of questions about the design of the measures in it, and I look forward to the Exchequer Secretary addressing them directly in her reply. We want to see effective measures in place to support British businesses, jobs in every part of this country and veterans seeking work. On this Second Reading and in later stages of the Bill, we will be pushing the Government to make sure that is the case.
Fay Jones (Brecon and Radnorshire) (Con)
I am not used to being called so early in the batting order, Madam Deputy Speaker. I am very grateful.
I made my maiden speech on a small but mighty Bill, and this is another. I very much welcome the contents of the Bill. These small but meaningful changes will make a real difference to many of my constituents.
There are two elements of the Bill on which I would like to focus. The first is what it would do for freeports. I was elected in 2019 on a manifesto that promised to create up to 10 freeports around the UK. They are a cornerstone of the Government’s levelling-up agenda, which recognises that talent is spread evenly across the country but opportunity is not. As someone who represents an often-forgotten part of the world, I am determined to see that agenda through.
We know that a freeport is an area within a country’s geographic border but outside its customs area, but there is no one model for freeports. That is their strength: they can be implemented in a number of ways.
Jim Shannon (Strangford) (DUP)
Does the hon. Lady share my interest in and my demand for having a freeport in Northern Ireland too? I understand that this legislation does not necessarily help that happen, but does she support us in our calls to have a freeport in Northern Ireland?
Fay Jones
As a Member of the Northern Ireland Affairs Committee, I certainly welcome that suggestion. I was greatly reassured by the Minister’s reference to that in his opening speech, and I hope that further details will come forward as soon as possible.
Freeports can be implemented in a number of ways. For example, manufacturing businesses operating in a freeport can benefit from tariff inversion, whereby tariffs from a finished products are lower than those on its component parts. Further tax and non-tax incentives, such as lower rates for corporation or even employment tax, which we are discussing this afternoon, as well as simplified customs processes can also be offered.
Although a freeport is a fairly new buzzword in our political discourse, it is important to remember that this is not a new idea. The UK used to operate a number of freeports. In fact, prior to the creation of the Welsh Assembly, now the Senedd, a freeport even operated in Cardiff.
Back in 2016, the then up-and-coming Member for Richmond (Yorks) (Rishi Sunak), now my right hon. Friend the Chancellor of the Exchequer, argued that freeports could turbocharge the UK’s post-Brexit economy. Free of the customs union and state aid rules, he argued that tens of thousands of jobs could be created with a successful freeports programme. He was right then, and he is right now.
In 2018, my hon. Friend the Member for Middlesbrough South and East Cleveland (Mr Clarke) highlighted in a Westminster Hall debate just how positive a freeport in the UK could be. He cited the example of the Jebel Ali Free Zone in the United Arab Emirates and explained how it has transformed Dubai. It now hosts 7,000 global companies, employs 145,000 people and accounts for around 40% of the UAE’s total direct foreign investment. That is a dramatic example, but there is no reason to believe that freeports in the UK cannot be just as successful as those around the world, perhaps even more so given our strong links with the United States, Europe and the Commonwealth.
I warmly welcome clause 1 of the Bill, which introduces a new zero-rate national insurance contribution for employers taking on employees in a freeport. The Government have already outlined the 10 areas of the UK where freeports will be created. Eight sites in England have been successful, and the Government have committed to creating one in Wales. I understand that the First Minister of Wales has expressed reservations and an unwillingness to work with the UK Government on a Welsh freeport, so may I urge the Minister, my close neighbour and friend across the border, who knows Wales extremely well, to press full steam ahead and work with his colleague the Secretary of State for Wales in setting up a Welsh freeport.
A rising tide lifts all boats—to continue with the maritime theme—and a freeport in Wales will create jobs and growth in all parts of Wales. That is especially important for me in mid-Wales, because, throughout the recent Senedd election, constituents told me that all they want is for their kids to have a future in Brecon and Radnorshire. They want them not to leave at 18 to go to university, only to come back 30 years later when they can afford to buy a home. They want them to have good jobs when they leave education. This is not part of the Welsh Government’s current plan for Mid Wales. We are forgotten about, but I am determined that that will not be the case. My constituents are determined that we will not be ignored and will not stand still.
The other clause that I want to focus on is clause 6, which makes a small but important change for our military community—employers who hire an armed forces veteran immediately after they leave the forces will be able to claim a new zero-rate national insurance contribution. Employers will be able to claim the relief from April ‘22, and transitional arrangements will allow a retrospective claim for the 2021-22 tax year. This is extremely close to my heart, and I declare an interest in that my partner is a serving member of the armed forces.
Brecon is a proud garrison town and, like the Minister, we have a number of military sites and personnel of whom we are very proud. The barracks and the infantry battle school, Sennybridge training area, are important military assets and I am fiercely proud of them. Although my campaign to save Brecon barracks from closure is a persistent thorn in the side of the Ministry of Defence, our support for veterans must go beyond maintaining high-quality sites and shiny silverware in the mess. We must look at a suite of policy instruments and make swift but sweeping changes to improve things for veterans once they leave active service.
The changes outlined in the Bill could save an employer, who employs a veteran, up to £5,500. This makes a veteran even more attractive to an employer, and the Minister should be commended for pursuing this, especially as we remember that our veterans are getting younger. The House of Commons Library estimates that the percentage of veterans of working age is projected to increase from 37% at the moment to 44% in 2028.
I am particularly pleased that the Bill covers veterans right across the United Kingdom equally. All four nations need to be comprehensive in the way that we look after our veterans. Wales is currently the only part of the United Kingdom not to have a dedicated veterans commissioner—someone on the side of veterans who can challenge local authorities and health boards to ensure that veterans can access the services that they need. Earlier this year, I called on the UK Government to address this imbalance and create a veterans commissioner for Wales, and I am extremely grateful to both the Secretary of State for Wales and the former Minister for veterans’ affairs, my hon. Friend the Member for Plymouth, Moor View (Johnny Mercer), for the work that led to the announcement on St David’s Day that they were actively considering creating such a post, but this needs to be done in co-operation with the Welsh Government, so that the postholder has oversight to challenge Welsh health and education services. May I take this opportunity to urge both sides to come together and create this role so that Welsh veterans can benefit from the protection that their colleagues have in England?
I am grateful for the opportunity to speak on this small, but important Bill and wish it swift passage through the House.
Richard Thomson (Gordon) (SNP) [V]
The Bill makes provision for NI exemptions in what we believe are a number of important and necessary areas. We are generally supportive on such matters, but there are issues in each area—both within and outwith the scope of the Bill—that require some attention and that we will likely seek to address or draw attention to as the Bill proceeds. For the moment, however, I shall confine my remarks to the general principles and the remedies offered in the Bill.
First, I made clear the SNP’s support for freeports during the debates on the Finance Bill. We feel strongly that, given the scale of financial support on offer in the Bill, in terms of the customs exemptions and NICs, it is important to make sure that other wider policy objectives —such as environmental obligations, the commitment to net zero and fair pay for those employed in freeports—are met. That is what the Scottish Government’s greenports aim to do, by marrying up all the incentives of a freeport with wider obligations to ensure the payment of the real living wage, the implementation of the Scottish business pledge and the making of contributions towards net zero emissions. All those objectives must be met before companies are able to benefit from the substantial tax status benefits that freeports offer. The fair and sustainable greenport model can be an exemplar of those values while adding value to goods, services and the country’s brand.
If the UK Government wish to take a more laissez-faire approach to the securing of such outcomes, that is a matter of choice as much as it is a matter of regret. However, it should not be allowed to become a matter that contributes to any further delay in allowing the Scottish Government to take their approach or in allowing those who wish to invest in Scotland under the conditions I have set out to do so. I urge the Minister to ensure that the UK Government move quickly to allow the model to proceed so that the bidding process can begin.
Let me turn to veterans. Those with experience of serving in our armed forces bring valuable life skills and experience to the workplace. The NICs exemptions are therefore a positive step, making it even more attractive to employers to hire ex-service personnel and bring their skills and experience into the workforce. We very much welcome that step on its own terms. It is important to provide every support possible to former service personnel as they transition to civilian life.
Anyone who is in contact with the veterans community will be all too aware of the gaps in the support available. The Scottish Government have sought to fill those gaps by funding the translation of military qualifications so that they can be fully recognised by civilian employers—another key step that can help to incentivise the employment of ex-service personnel; setting up the national veterans care network to ensure parity of access to specialist services; actively supporting attempts to improve access to employment for the spouses and partners of those serving in the military, through Can Do hubs and the Forces Families Jobs website; and setting up, in conjunction with the Welsh Government, the Capitalising on Military Family Talent initiative. All those things are key elements in making sure that we deliver the best for our service personnel, and they sit well beside the NICs exemptions.
However important the NICs step will be, it cannot and must not be seen as any kind of substitute or sticking plaster for what we believe is a planned 40% reduction in the budget of the Office for Veterans’ Affairs. That cut stands in stark contrast to the support that we should be offering and my party will continue to oppose it.
Let me turn to the treatment of self-isolation payments—another measure that we are happy to support fully. The purpose of the payments was clearly to incentivise people on low incomes who needed to self-isolate to do so, to help to prevent the spread of the virus without their having to suffer any adverse financial consequences. The intention was only ever to help people to make the right choices for the benefit of themselves and others, with the NICs consequences quite understandably something of an afterthought. The move to exempt the payments from NICs, thereby removing the administrative and cost burdens on local authorities and employers, is therefore a positive step. If the payments can be made exempt from NICs, it makes it harder to justify the continuation—apparently at UK ministerial insistence—of the situation whereby any past or future thank you payments made to NHS and care workers in Scotland remain liable to income tax.
Finally, we welcome the move to allow changes to the disclosure of tax avoidance schemes regime as it applies to NICs avoidance schemes. That may be a small step towards closing another area of potential abuse in the tax code, but it is necessary. However, what is really needed is a workable set of general anti-avoidance rules that tackle tax avoidance in all its forms; do not exempt existing and established abuse from action; include in their scope international tax abuse; give a tax authority the right to take action against tax avoidance, which it defines, in an objective fashion capable of being numerically assessed, without the consent of any unelected authority; and place the burden of proof on this issue on the taxpayer.
We are happy to see the Bill progress, and to address it in greater detail and attempt to improve it as it continues its passage through the House.
Kevin Hollinrake (Thirsk and Malton) (Con)
It is a pleasure to speak in this debate. When we talk about levelling up, we tend to think about things such as new railways or roads, or the dualling of carriageways such as the A64 in my constituency, which is long overdue, of course. It is absolutely right that we should think about those things—they are important—but they are just part of the picture.
Really, levelling up is about one very important thing: prosperity. We cannot achieve prosperity in some of the places that fall well behind the average income in this country without a combination of private sector and public sector investment. That is what the Bill is about—incentives for the private sector to invest.
Those are much needed, particularly in areas such as the north-east, which borders my constituency. In relative terms, the gap in productivity and economic output per person between London and the south-east, and the north-east, is as large as the gap between East Germany and West Germany prior to reunification. It took three decades and $2 trillion to narrow that gap, and it is still not fully narrowed, so this is a huge undertaking. To achieve what it has achieved so far, Germany required not just public sector investment—the roads and railways—but incentives for businesses to start up and scale up in East Germany.
Mark Littlewood, chief executive of the Institute of Economic Affairs, pointed that out in an interesting article in The Times a few months ago. He asked why, if prosperity is all about connectivity—roads and railways—Doncaster is not more prosperous. Doncaster, which you are obviously well aware of, Madam Deputy Speaker, is very well connected in terms of transport links, but in terms of prosperity it leaves much to be desired. That is what this is all about: freeports will create incentives for businesses, small and large, to relocate to those areas, or to start in those areas and grow.
That is why I am a little confused by some aspects of the Opposition’s approach. One of their shadow Treasury Ministers said that freeports are “economically illiterate”. Tell that to Teesside, which expects to create 18,000 jobs due to its freeport status. That is far from illiterate. The incentives are not just the waiving of national insurance contributions for employers, but things such as buildings allowances, capital allowances and stamp duty exemptions.
Of course, it required our leaving the EU to bring about this legislation, because the freeports that we are contemplating are far more comprehensive than the ones that could be delivered in the EU, particularly, as my hon. Friend the Member for Brecon and Radnorshire (Fay Jones) said, with things such as inverted tariffs, which are not an issue for us with freeports, and the very restrictive state aid regime in the EU.
Teesside freeport, my nearest, will be 4,500 acres. Ben Houchen, the very good Mayor of the Tees Valley, has established the South Tees Development Corporation. We heard the interesting news today that Northumberland Estates may be interested in bringing forward a bid for much of the Teesside freeport region on the back of these incentives. That is proof, if it were needed, that private sector capital will come in and invest in those regions. Of course, public sector capital is important, but Governments do not always have a great track record of allocating capital in the most efficient way, whereas those in the private sector are much more likely, because it is their money they are putting down, to allocate that capital reasonably. So I very much support the measures to exempt employers from paying national insurance contributions up to £25,000.
The other thing I would like to talk briefly about is in part 3 of the Bill. It covers the disclosure of issues around national insurance in relation to the arrangements for contribution avoidance for promoters of tax avoidance schemes. The Government have done much to clamp down on tax avoidance, with the digital services tax, the diverted profits tax and the recent negotiations at the G7 on minimum corporation tax, as well as a number of measures in the Finance Bill to clamp down on these tax avoidance promoters, which are absolutely key.
I draw the House’s attention to my entry in the Register of Members’ Financial Interests. In my own business background, the only time a tax avoidance scheme was ever discussed in our businesses was when our own advisers—our own accountants—came to us with a tax avoidance scheme. It looked pretty contrived, in our view, and it was not something for us at all. We were very clear about that. It is clear, I feel, that these advisers—these promoters—are the ones who are principally responsible for the number of schemes that are being used to avoid tax in the UK.
I know that the Government have done much on this, including in the Finance Bill, and that they are consulting on further changes. However, I am also an officer and vice-chair of the all-party parliamentary group on anti-corruption and responsible tax, along with the right hon. Member for Barking (Dame Margaret Hodge), my right hon. Friend the Member for Sutton Coldfield (Mr Mitchell) and my hon. Friend the Member for Amber Valley (Nigel Mills), and the Minister will have heard us talk a number of times about a double reasonable test for tax promoters and the schemes that they are promoting. Indeed, he was kind enough to attend a roundtable on the issue. It would work very simply, and I often use the loan charge as an example. At the moment, the requirement, as I understand it, is that a promoter considers a scheme reasonable. I could argue that I thought a scheme was reasonable, and someone else could do the same, and a court could decide whether it was reasonable or not, but if it was not reasonable, I could still argue that, in my judgment, I thought it was reasonable.
We are seeking to bring forward a change in the form of a double reasonable test: would a reasonable person have considered that scheme reasonable? A promoter might offer a highly contrived underlying scheme behind a loan charge, in which someone would move their money into an offshore jurisdiction and bring it back as a loan, on which they would pay no tax. That is a highly contrived scheme. I could argue that I thought it was reasonable, but a court could not possibly decide that a reasonable person would describe that scheme as reasonable. In that way, it would be far easier for HMRC to take forward prosecutions against promoters to stop this stuff happening in the first place. So I ask the Minister to consider that proposal again; I know that he is fully aware of it. On that note, I wish the Bill a quick and easy passage through the House.
John McDonnell (Hayes and Harlington) (Lab) [V]
I want to focus my remarks on the parts of the Bill that relate to freeports, as others have done. During the debate on the Finance Bill, I highlighted the corporate tax reliefs available and the lack of any projections of the impact on the Exchequer, or of any impact assessments on the areas where freeports will be located and on their neighbouring areas. I might be a bit old-fashioned, but I still believe in evidence-based policy making. Ministers seem to have come to Parliament asking MPs to sign a blank cheque and—apologies for the mixed metaphor—to take a leap in the dark on a policy that, in my experience, failed to deliver in the 1980s, when I was in local government, and in the 2010s, when I was an MP in Parliament.
I asked the Financial Secretary to the Treasury, the right hon. Member for Hereford and South Herefordshire (Jesse Norman), what estimate the Government had made of the cost to the Exchequer. The Minister could not answer, but insisted:
“The National Insurance contribution relief will be important in supporting the Government’s objectives for the Freeports programme, which includes regeneration through job creation.”
Given that the Government’s objective, as stated by the Financial Secretary, is job creation, I then asked him how many jobs would be created as a result of the national insurance contributions relief contained in this Bill. I received the answer to my written parliamentary question today, and it is a classic—worth framing. It states:
“The National Insurance contribution relief will be key in supporting the Government’s objectives for the Freeports programme, which includes regeneration through job creation. The Freeports tax sites have not yet been confirmed and so the Government is currently unable to give an accurate estimate of the number of employees that benefit in 2022-23 as this will depend on how many employers use the relief and will vary depending on a number of circumstances, including the location of the Freeport tax site.
The Government will publish an updated Tax Information and Impact Note (TIIN), when further information is available following confirmation of the tax sites.”
Can the Minister estimate when that will be published? Can he commit to publishing it during the passage of this Bill? I do believe in evidence-based policy making, and in recent months I have seen not just evidence-light policy making; we are now in a bizarre situation of non-existent-evidence-based policy making.
I just hope that the Government have learnt something from the failure of this policy under George Osborne. I remind the Minister that in May 2014 the Public Accounts Committee described the impact of George Osborne’s enterprise zones as “particularly underwhelming” and criticised the Government for “over optimistic” claims about job creation. The job numbers failed to materialise. The Centre for Cities, the think-tank, found that the jobs created were “overwhelmingly low skilled” and therefore low paid.
Despite their refusal to countenance in the Finance Bill the proposals that I put forward, just to get the information, I hope that the Government have reflected and will commit to publishing data annually on the impact of freeports on local and regional job creation; on tax revenues, locally and nationally; and on neighbouring economies. They failed to countenance that in the Finance Bill, but they could in this Bill.
This Bill is also a missed opportunity. The Government could have made provision for increasing the national insurance contributions paid by the highest earners. Currently, higher earners pay only 2% above the upper earnings limit. Raising that by just a small percentage would raise billions from those with the broadest shoulders. Instead, the Government are imposing a huge stealth tax on millions of low-income workers by freezing tax thresholds. They have imposed a pay cap or pay freeze on millions of public sector workers. In just a few months, shamefully, the Government are proposing to cut the incomes of some of the poorest families in the country by £20 a week. I have heard a lot of the Government’s claims to be levelling up. Instead, they seem to be keeping people down.
Sarah Olney (Richmond Park) (LD)
The Bill seeks to achieve a range of aims, but like most things that the Government are currently attempting, it misses the opportunity to achieve a great deal more.
The Liberal Democrats welcome the provisions that will enable a 0% rate of national insurance contributions to be paid by employers of former members of the armed forces. Glass Door, a charity in my constituency that provides shelters and outreach for homeless people and rough sleepers, has described to me how past trauma is a key risk factor in becoming homeless and how the two groups most at risk are survivors of childhood sexual abuse and armed forces veterans. Like many Members across the House, I am deeply concerned about how we care for our servicemen and women, and I support all measures to assist them in their post-service life. The Liberal Democrats unequivocally welcome an incentive for businesses to bring them into new employment.
We also welcome the straightening out of any unintended tax consequences that have arisen from covid payments in the past 18 months. The British public have been extraordinary in their response to the crisis and have willingly played their part in staying at home to protect the NHS and save lives. For many individuals, that will have had a direct financial consequence, and it is absolutely right that any payments made to mitigate such financial consequences should be free from tax and national insurance. There is no doubt that people would willingly have gone out and earned national insurance contribution income if the Government had not asked them not to. It is only fitting that their financial sacrifices be properly recognised in our tax and benefits system.
I support the comments made by the hon. Member for Thirsk and Malton (Kevin Hollinrake) about tax avoidance schemes and the extent to which they are being promoted. I support measures to clamp down on such schemes, particularly where vulnerable taxpayers are being targeted and potentially lured, dare I say it, into investing in schemes that would bring them into default in their tax affairs; we have seen that happening in relation to the loan charge, as he mentioned. I would like to see the Government doing more to clamp down on these schemes, and I welcome any measures to do so.
The Bill also makes provision for 0% national insurance contributions for employers in freeports. The Government have made a great deal of their plans for freeports; they appear to have great hopes for their abilities to bring economic revival to our country following Brexit and the pandemic. The extent to which that looks likely to be achieved remains uncertain. The Government have not yet published an assessment of the likely impact of this national insurance reduction, which leads me to believe that that uncertainty is continuing. If the Government are unable to say how much the Treasury will lose from the cut in national insurance, one can conclude only that they do not yet have any confidence in how much they expect freeports to boost employment.
What is certain is that the Government have not yet brought forward any other plans to boost economic growth following Brexit and the pandemic. I regret that they are missing the opportunity to boost growth in other sectors and in regions that are not lucky enough to benefit from a freeport.
The Exchequer Secretary to the Treasury (Kemi Badenoch)
The hon. Lady says that the Government do not have any additional plans for growth. We launched a plan for growth in the Budget with three pillars—infrastructure, innovation and skills—to tackle net zero post covid and take our opportunities for global Britain on leaving the EU, so she is quite wrong to say that we have not done anything to plan for growth.
Sarah Olney
I very much welcome the Exchequer Secretary’s intervention. I am happy to stand corrected, and I very much look forward to seeing the impacts of those plans right across the nation, because as far as I am concerned, the significant weakness of the plan for freeports is that it cherry-picks areas for investment while ignoring the needs of many other communities across the country. That is why I say that the Bill is a missed opportunity: because to target the national insurance cut just at areas that will have a freeport is to ignore the impact that such a cut could have across many sectors that could provide fantastic opportunities for employment as we come out of the pandemic. There is a very real danger that freeports will divert business activity from areas outside freeports, and that this measure will hit the public finances without any subsequent increase in economic activity.
I believe that the Government would make much better use of the national insurance contributions scheme by stimulating economic growth in ways proven to be effective. For example, an increase in the annual employment allowance to £16,000 could benefit every small and medium-sized enterprise. It would allow employers to take on up to five workers each without making contributions, which would be a substantial boost to communities across the country and would do much more to boost employment across the nation than these hand-picked benefits whose impact cannot be measured.
Madam Deputy Speaker (Dame Rosie Winterton)
As the next speaker has withdrawn, we will go straight to Jim Shannon.
Jim Shannon (Strangford) (DUP)
Thank you, Madam Deputy Speaker. When you are in the Chair, I always seem to get called earlier. I am not sure why that is, but thank you very much.
It is a pleasure to speak in this debate. I add my support for the Government proposals. A lot of hours have gone into them, so I will make some comments about them.
Broadly, the national insurance contributions that are raised in a year look after the benefits that are used in that year. They are therefore very important. We deal with an enormous number of people every day in our offices who have benefits issues, and we know that our contributions and everybody’s contributions make a difference. I have stated numerous times in this House over recent months that now is the time to ensure that the investments we have made through the furlough scheme and the coronavirus grants system to secure business pays off by having businesses repay their debt through tax and national insurance over many years of success.
The end must be clear: sustainable and expanding small and medium businesses. In my constituency and, I believe, in many other constituencies, small and medium businesses contribute to everyday life through employment and by creating the prosperity we wish to see. I want to see them encouraged on every possible occasion.
The Bill is one cog in that mechanism of growth, regrowth and enhanced growth. I welcome that the Government are completely committed to that. My attention was immediately drawn to a few components of the Bill. Of course, time prevents me from delving into them all, but I first highlight the proposed new zero rate of secondary class 1 national insurance contributions for employers who hire an armed forces veteran during their first year of civilian employment after leaving the armed forces. Employers will be able to claim relief on the earnings of an eligible employee up to the NICs upper secondary threshold from April 2022, and transitional arrangements will allow retrospective claims for the 2021-22 tax year. Like everyone, I really welcome that. I am pleased as punch to see it in the Bill. There is a clear commitment to our veterans, and here is one way of showing it.
I say gently to the Minister that many veterans are missed by the charities. I know some of them in Northern Ireland, and I deal with them regularly in my constituency. They seem to fall under the radar of the charitable organisations. I want to ensure that when the Treasury works to make the proposal happen, there is clear help, co-operation and co-ordination with the veterans’ charities, because they identify the people and then this system can help those people get the jobs. It is therefore logical to me that they work together. If they work together closely, they can bring the real benefit that I wish to see.
This is a fantastic step, and I thank the Minister and the Government for it. It is welcome that we will remember veterans in actions, not simply in prose. I congratulate the Government on proposing these steps to make it more attractive for a business to put its faith in a serving soldier, who may well be acclimatising to civilian life and the different burdens it entails. I have regularly met soldiers who come out of the forces after 20 or 25 years, or even fewer, and who find civilian life extremely difficult. Two weeks ago, I went to a horse charity, People for Horses, where June Burgess helps people who have served in the military or in the police or prison service in Northern Ireland to deal with their post-traumatic stress disorder through contact with horses. I believe that we can do the same thing here in a really important way.
The point that this provision flags up for this humble man is the fact that the Government have managed to extend it to the whole of the United Kingdom of Great Britain and Northern Ireland, and rightly so. I am truly grateful for that, because every regiment in our armed forces is made up of men and women from every corner of this great United Kingdom. That is right and proper, yet it does highlight that other armed forces promises do not similarly extend to each part of the UK. The ungenerous might highlight that such failings have perhaps made President Macron think it acceptable to comment that Northern Ireland is not part of this great nation; wow, does he need a lesson in geography. A mixed message may be seen by those who wish to push their own narrative, but I commend the Prime Minister and the Foreign Secretary for making it clear to President Macron that Northern Ireland is an integral part of the United Kingdom of Great Britain and Northern Ireland. For that reason, I again wish my Government to make abundantly clear the absolutely bedrock foundation that, in every aspect of life, without a successful border poll the six counties of Northern Ireland were, are and will be British.
This legislation regarding troops is for every serviceman and woman, regardless of their accent. Whether we have my very broad Northern Ireland accent, the Scots accent of my colleague on my right, the hon. Member for East Lothian (Kenny MacAskill), or a Welsh accent, we are all going to qualify for this, which is good.
We also welcome the Minister’s commitment to freeports. From reading the Library notes and listening to the Minister beforehand, it is clear that the commitment is not only to freeports here in the mainland but to freeports in Northern Ireland as well. That is really good news and I welcome it. There is some work for the Northern Ireland Assembly to do; there seems to be work for the Northern Ireland Assembly to do every day, and that is the way it should be. In this case it has clear job to do, and I want to make sure that that happens and that we all gain advantage.
I also noted that some of the correspondence on freeports in the notes referred to ensuring the incentives are not exploited for tax avoidance purposes. The Government have taken on the task of making those who pay tax accountable in their own country, as they should be, and I want to make sure of that and therefore ask the Minister to comment on it in summing up. Some correspondents pointed out that freeports had gained a negative reputation for enabling tax evasion through the storage of high-value goods, but the Government have proposed the creation of a tax site within any UK freeport to support and facilitate a robust system of monitoring and ensure that the available reliefs are claimed legitimately. I therefore think the Government have addressed this, but want to make sure that it is on the record. I also ask the Minister to indicate what discussions the Government have had with the Northern Ireland Assembly to ensure that the freeports issue continues to move forward for Northern Ireland.
I welcome as well the move to address tax avoidance in the form of a provision to allow changes to the disclosure of tax avoidance schemes regime as it applies to national insurance contribution avoidance schemes. I am informed that these changes also mirror amendments to the disclosure of tax avoidance schemes regime as it applies to other tax avoidance schemes made by provisions included in the Finance Act 2021.
When I speak to the ordinary businessman in the street—the self-employed trader, or the employer of five members of staff in a small shop—they talk about the fact that they cannot afford to hire a high-flying accountant who can find and use loopholes, and they watch on with increasing frustration as the big companies that could afford to pay any contributions get away with not paying. I believe that the Government are again setting the marker for those companies by ensuring they are accountable; they should pay tax in their own country and make sure that they pay the right amount as well.
Our businesses need a level playing field and help, and it is my hope that this Bill will enable those avoiding and evading tax to be brought into line. It is my hope that this Bill helps to ensure that those who can pay should pay and do pay. If we make that happen, we will be going in the right direction. If we all do the right thing—us here and those outside—we will all benefit.
Robin Millar (Aberconwy) (Con)
It is a pleasure to speak today and to follow the hon. Member for Strangford (Jim Shannon), and I take this opportunity to reiterate his unequivocal statement that Northern Ireland is indeed part of the United Kingdom.
I welcome this opportunity to make a few brief remarks in support of the Bill’s provisions on freeports and the benefits that it will represent for one in north Wales, in particular. But before I do, I note that the Bill demonstrates once again the Government’s commitment to levelling up. It is also set to reduce the tax avoidance that disadvantages our small and medium businesses, which cannot afford access to the specialist experience available on avoidance, as has been referred to. In addition, it seeks to offer the dignity of decent employment to our veterans, which, again, I welcome.
Freeports are a common feature of the world’s most ambitious free-trading nations and are used by many of our closest allies. They have propelled many previously impoverished nations to prosperity and have proved a valuable means of ensuring structured investment in export-led industry. The right hon. Member for Hayes and Harlington (John McDonnell) asked for evidence, and he might consider the words of the directors of the World Customs Organisation and the former director of the Swedish customs body, who noted that freeports create local supply chains beyond the facility, so long as firms have ease of access. In that way, freeports have the potential to boost investment and trade in the surrounding region. For an island nation such as Britain, with a rich history of trade across the globe trade—trade that, despite criticisms of it, has driven developments, innovations and improvements—investment in freeports is a signal to the world of the Government’s commitment to secure the UK’s place at the heart of global trade.
There has been speculation in the media in recent months as to what levelling up means. I speak as a representative of the region—north Wales—in which I grew up, and I have seen it change over the five decades I have known it. Indeed, I have spoken in this place before about how residents of north Wales have grown used under devolution to being overlooked and underfunded for much of the past two decades. However, I am also a Conservative, and it is a hallmark of conservatism to see constituencies such as mine not only in terms of handouts but in terms of their potential—to treat them according to their distinctiveness and not to mistake equal treatment as sameness. That is why I describe Aberconwy not solely in terms of needs or deprivation, for there are both, but also in terms of its potential, and that potential will be different for every other constituency across the UK—a point the hon. Member for Richmond Park (Sarah Olney) might consider.
The practical provisions set out in the Bill will help to realise that potential. Despite north Wales being one of the UK’s most under-invested regions, the British Private Equity & Venture Capital Association notes that it is also one of the fastest growing parts of Wales. North Wales is part of an expanding advanced manufacturing cluster worth more than £30 billion a year to the UK economy. We have world-beating green energy research in Ynys Môn and an industry-leading centre for 5G telecoms innovation at the University College of North Wales. Our Betsi Cadwaladr University Health Board has a vision for a best-in-class medical school and primary care underpinned by technology.
We also occupy a significant strategic location. The Romans may have built the first version of the A55 on ancient paths across our hills, Thomas Telford may have developed it, and Irish MPs may have driven the development of our road and rail links to ensure their smooth transport to this place, but today north Wales finds itself astride a trade route stretching from Dublin to Moscow. In its day, the tunnel carrying the A55 underneath the Conwy estuary was the largest construction project in Europe. Today, fully four fifths of our UK trade to Ireland passes through Wales, with most of it going through our Holyhead port in Ynys Môn.
That is potential, and it needs unlocking. A freeport offers a remarkable opportunity to build on those natural advantages and offer a site of structured relief for international investors. The practical provisions in this modest Bill will help to secure that; they are practical incentives for investors and employees, and I suggest that that that is at the heart of levelling up.
This Bill demonstrates how, beyond the provision of a simple designation as a freeport, supporting legislation and incentives such as those before us, can create an exciting opportunity for investors and an opportunity for co-operation with other parts of Government—even the Welsh Government in Cardiff. Indeed, I urge all parties to do what can be done to bring this opportunity to north Wales. Given the strategic importance of Holyhead to trade with Northern Ireland, such co-operation would also be an investment in our Union.
To conclude, it has been said that ports are the power cables to the UK economy. A Bill such as this, creating incentives by removing national insurance on workers, will help flick the switch, so I will be supporting the Bill.
Anthony Browne (South Cambridgeshire) (Con)
I know that the public like it when different political parties work together for the common good, and I notice that the National Insurance Contributions Bill, which we have been discussing this evening, has been subject to absolutely glutinous harmony. I have counted five different political parties expressing support for it, which means it must be doing something good, and I fully support the measures in it.
I am particularly keen on the freeports, which have been widely discussed, but I will keep my very brief comments to the national insurance contributions deductions for veterans. We all know, as various other Members have said, that veterans have amazing skills and great strengths, which they bring to many different jobs, including in this House. We have many Officers who are veterans and, indeed, Members of Parliament who are veterans, but we also know that veterans suffer from a veteran employment gap. They suffer higher unemployment than the national average. That is not just a UK thing; it applies to other countries and is a very big issue in the United States.
One thing we can do with national insurance is tilt the employment market in veterans’ favour. I say this from an economics background, but there is a market failure occasionally in the employment market, where the interests of wider society, employers and the state in terms of the Treasury are not always aligned. Making small adjustments to incentives through the national insurance system or otherwise can actually help align those incentives for the benefit of employees, employers and the Government.
I fully support the veterans measure, but the principle of it could be extended to other areas where there are structural issues around different groups and unemployment, particularly the long-term unemployed and the disabled. There is a particular issue. If someone has been unemployed for a year, they lose motivation and lose contacts. Employers start looking askance at them and do not want to take them on. If someone has been unemployed for two years, they are more likely to retire, never having worked again, than to ever find a job. There is a reason for that.
Say an employer has two candidates who are equally good in front of them. One is already working and one has been unemployed for two years. The employer will take the risk-averse approach and think, “There might be something about that long-term unemployed person. I will stick with the employed one.” That might be a rational decision for the employer—one might argue that it is not, but most employers would behave that way. It means that the Government will carry on paying the welfare bills of the long-term unemployed person. It means that the long-term unemployed person finds it even more difficult in future to find a job, and it is not good for society to have a cohort of people who are so detached from the labour market.
There is therefore a big economic rational argument for the Government to tilt the labour market in favour of long-term unemployed people. They could do that through national insurance—there are other ways of doing it—by having deductions for people who have been unemployed for a year or two years.
The second group I will mention is the disabled, and the same issues apply there. Somebody who is blind or severely visually impaired may be very good at a job, but a lot of employers would be worried about the adjustment costs, for example, or other things—they may just be nervous and have not had experience of it before. There is a huge societal and Treasury incentive to help disabled people to get into work rather than languishing in long-term unemployment. Again, there is a rational economic argument to create an incentive to align the interests of employers, the Government and the long-term unemployed to get the disabled or others into work.
I fully support this national insurance deduction for veterans precisely for that reason: it will be good for veterans, good for employers, good for society at large and good for the Treasury. I wish this Bill the swiftest and smoothest passage through this House.
Abena Oppong-Asare (Erith and Thamesmead) (Lab)
It is a pleasure to respond to this debate on behalf of the official Opposition. As my hon. Friend the Member for Ealing North (James Murray) said earlier, we will not be opposing this Bill today. We support the intention behind it and many measures within it.
I thank all hon. Members from across the House for their contributions to the debate. My right hon. Friend the Member for Hayes and Harlington (John McDonnell) spoke about his concerns about how freeports will operate, which were shared by the hon. Members for Gordon (Richard Thomson) and for Richmond Park (Sarah Olney).
I will now make a few brief points about the different elements of the Bill and echo the questions asked by my hon. Friend the Member for Ealing North in the hope that we can get some clear answers from the Minister. On freeports, which we debated at length over the course of the passage of the Finance Act 2021, we have consistently said that we support and protect British businesses and want every region in the nation of the UK to thrive. We have asked important questions about exactly how freeports will operate. On my hon. Friend’s specific questions about the national insurance relief being introduced for freeports, we need clarity on why the relief is conditional on employment beginning after April 2022 given that freeports are expected to begin operating in 2021, and why the level of the relief is set at £25,000, which is below both median pay in the freeport areas and the rate for those employing under-21s and apprentices.
My hon. Friend asked the Minister for some transparency about the Government’s approach to the global minimum corporation tax rate. Specifically, why did the Chancellor support the weakening of the proposals and the reduction from the 21% rate to the 15% rate? The Government must be ambitious and argue for a higher rate in order to level the playing field for British businesses and build a strong economic recovery.
I turn now to the measures related to veterans. I pay tribute to all those who have served in our armed forces and all those who currently do so. They make great sacrifices on behalf of this country and they deserve nothing but the best from this Government. Clearly, an important part of this is supporting veterans as they transition into civilian employment. We therefore welcome the new relief on employers’ national insurance contributions for veterans. I hope the Minister can answer my hon. Friend’s specific points about the length of the relief and why it is shorter than the freeport relief, and on what the upper secondary threshold for the veterans’ relief will be.
The second part of the Bill exempts self-isolation payments for national insurance contributions for the self-employed. Again, we welcome this measure. We have consistently called for the Government to do more to ensure that people do not have to choose between self-isolating and paying the bills. Recent figures show that still only about half the people who should be self-isolating are doing so. Clearly, this will not be about the financial element alone, but there is clear evidence that the system is not working as it should. First, only about one in eight of the workforce are eligible for the £500 payment. Of those who apply, only 30% succeed, and of those who apply for the discretionary scheme, only about 20% succeed. We urgently need some action from the Government to improve this. Although we welcome the small step in the Bill to reduce the administrative burden associated with self-isolation payments, will the Minister set out what more the Government intend to do to support people to self-isolate in the coming months?
We welcome the anti-tax avoidance measure in clause 11. My hon. Friend asked what action the Government will take to clamp down on the most active promoters of tax avoidance schemes, and I hope the Minister will address this.
We will not oppose the Bill today. We support the measures to boost jobs across the country, to help veterans to find employment, to ensure that people can self-isolate, and to tackle tax avoidance. We will of course use further stages of the Bill to seek to improve it. I hope the Minister can respond to the specific questions that I and other hon. Members have asked.
The Exchequer Secretary to the Treasury (Kemi Badenoch)
I would like to thank Members for their well-considered contributions to what has been a very productive debate, and I am very grateful for the support across the House on Second Reading. A range of perspectives has been presented here today, but I think we are all agreed that this is an important piece of legislation, which assists this country’s recovery from covid-19 and helps us prepare for a better future.
Before I address some of the specific points raised by Members today, I will briefly reiterate the Bill’s main measures and outline what they seek to achieve. First, this Bill supports the delivery of the Government’s freeports programme and boosts regional growth. It achieves this through the introduction of an employer national insurance contributions relief for businesses based in freeports that take on workers. This measure will play a major part in helping these new economic zones to create jobs, drive growth and revitalise local communities.
Secondly, this Bill delivers on a Conservative party manifesto commitment by introducing an employer national insurance contributions relief for organisations that recruit armed forces veterans. This will encourage firms to take on former services personnel, as so eloquently put by my hon. Friend the Member for South Cambridgeshire (Anthony Browne), boosting veterans’ employment prospects. On this point, the hon. Member for Strangford (Jim Shannon) raised an excellent point about working better with veterans charities, and I agree that this is something that employers and Government should do more of. In turn, this measure will allow even more businesses to benefit from veterans’ abilities, skills and experience, and I am sure Members would agree that this represents a valuable opportunity for firms up and down the country.
Thirdly, this Bill provides an exemption from self-employed national insurance contributions for test and trace support payments, which will apply retrospectively. This measure will ensure self-employed workers benefit from parity with their employed counterparts and are not penalised if they need to self-isolate and therefore submit a claim.
As I have outlined, the Bill supports workers and the wider economy, but it also contains measures targeted at those who threaten our country’s financial wellbeing. The final measure is the disclosure of tax avoidance schemes regime introduced by this Bill, which boosts HMRC’s powers to deal with the promoters of such unscrupulous arrangements. In addition, it will help ensure that taxpayers are better informed about the risks posed by avoidance schemes. This measure will deter the operators of such schemes and better protect consumers.
I will now move to the specific questions raised by Members. There were several questions from the Opposition Front Bench. The hon. Member for Ealing North (James Murray) asked why the self-employed national insurance contribution exemption was not legislated earlier. The answer is that class 1 NICs exemptions were made in regulations. However, the self-employed exemption requires primary legislation, and therefore is included in this Bill, as this is the earliest opportunity to legislate.
The hon. Gentleman asked about the upper secondary threshold for freeports and why, at £25,000, this is lower than for other reliefs and what the rationale was. The answer is that, unlike other NICs reliefs that are available to employers nationally and generally are targeted at specific groups of employees with particular characteristics, businesses operating in a freeport are likely to be able to claim the relief on almost all of their new hires. To balance generosity of support with the need to consider the public finances, this broader eligibility has been balanced by limiting the amount of salary that can be relieved. We have chosen to set this limit at £25,000 per annum, which is approximately the average salary in the UK. Employees with earnings at or below this limit will be eligible for full employer NICs relief, and employers will still be able to claim up to approximately £6,500 of relief on the salaries of employees earning more than this.
The hon. Gentleman asked why the relief was not starting until April 2022. The Government have been clear that this relief is only available on new hires from April 2022, and set this out in the “Freeports Bidding Prospectus” published in autumn 2020. The reason why is that having a clear start date is a simple approach that will support the freeport businesses. Further, a freeport tax site needs to be designated so that the location requirements can be met, otherwise there would be no reference in legislation for what geographical area constitutes a freeport tax site.
On the veterans scheme, I believe the hon. Gentleman asked why the relief was just for a year compared with that for freeports, and he said that it needed to be longer. The answer is that the relief provides employers with up to £5,500 in savings per veteran that they employ. The aim of that policy is to support veterans’ transition into civilian life through encouraging employers to hire veterans.
Finally, on corporation tax, the hon. Gentleman asked a question about the 15% rate. The reason the global rate of 15% was settled on is that, at that value, it will protect against multinational tax avoidance while leaving appropriate room for countries to use corporation tax as a lever to support their economic, fiscal and environmental objectives.
I now turn to some of the questions raised by the right hon. Member for Hayes and Harlington (John McDonnell), who asked why we are having freeports now, after they have not necessarily worked in the past. He has forgotten one thing: we have left the European Union. Leaving the EU means that we have an opportunity to do things differently. We have developed an ambitious new freeport model to ensure that towns and cities across the UK can benefit from fantastic new international trade opportunities. Freeports can attract new investment and employment in left-behind communities across the UK, and the further benefits include a simplified customs process. Our freeports will offer tax measures to incentivise private business investment, carefully considered planning reforms to facilitate much needed construction, and additional targeted funding for infrastructure improvements in freeport areas to level up communities and increase employment opportunities. This is therefore a much more ambitious policy than the previous freeports that the right hon. Gentleman referenced.
On the right hon. Gentleman’s question about evidence-based policy and the wider impact of freeports, we believe that the relief will significantly reduce the cost of taking on new employees and doing business in the freeport. That, along with other tax reliefs being offered as part of the wider package, will support businesses, but the Government have not yet agreed and finalised successful bidders’ tax site proposals. Any modelling that we have done to support the process remains sensitive to the locations chosen, and we will be in a better place to conduct more detailed modelling once tax sites have been agreed with the Government. The right hon. Gentleman asked whether that would be completed before the end of the passage of the Bill. That will not be done before we finish this Bill. However, the Government will outline the process for confirming tax sites in due course.
There were several questions about the Union. Freeports in Scotland, Wales and Northern Ireland were raised by my hon. Friend the Member for Brecon and Radnorshire (Fay Jones), the hon. Members for Gordon (Richard Thomson) and for Strangford, and my hon. Friend the Member for Aberconwy (Robin Millar). I say to all of them that we want to ensure that the whole of the UK can benefit. We are thrilled that there is demand for freeports across the United Kingdom, and we remain committed to establishing at least one freeport in Wales as soon as possible. Discussions about the best way to establish a freeport in countries outside England, such as Scotland, are complex. It would not be appropriate for me to elaborate on those private discussions. However, those are things that the Treasury is considering in detail.
On the point that the hon. Member for Strangford made about Northern Ireland, we are working with the Northern Ireland Executive to ensure that a suitable model for an NI freeport is developed. We will ensure that we meet our international legal obligations in Northern Ireland. It is appropriate that we take our time to ensure that the freeports model for Northern Ireland meets these obligations while delivering a competitive offer for the ports, businesses and communities in that country.
There was a question about displacement of economic activity from other local areas—I believe it was from the right hon. Member for Hayes and Harlington. That is something that we have considered. We still believe that this proposal will encourage new investment and create jobs in deprived communities, and will not cause harmful displacement.
I am very grateful for the opportunity to explain this Bill’s measures and the context behind them. To sum up, this Bill supports the regional growth that is integral to furthering our levelling-up agenda, and is part of our plan for growth, as I said to the hon. Member for Richmond Park (Sarah Olney). It plays a part in shielding self-employed people from the full financial impact of covid-19, while boosting our veterans’ employment prospects. It strengthens HMRC’s powers to tackle the organisers of tax avoidance schemes. There are clearly a number of points that we can expect to discuss at greater length when this legislation moves to Committee stage, but for the purposes of this debate I commend it to the House.
Question put and agreed to.
Bill accordingly read a Second time.
National Insurance Contributions Bill (Programme)
Motion made, and Question put forthwith (Standing Order No. 83A(7)),
That the following provisions shall apply to the National Insurance Contributions Bill:
Committal
(1) The Bill shall be committed to a Public Bill Committee.
Proceedings in Public Bill Committee
(2) Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Tuesday 22 June.
(3) The Public Bill Committee shall have leave to sit twice on the first day on which it meets.
Proceedings on Consideration and Third Reading
(4) Proceedings on Consideration shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which proceedings on Consideration are commenced.
(5) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.
(6) Standing Order No. 83B (Programming committees) shall not apply to proceedings on Consideration and Third Reading.
Other proceedings
(7) Any other proceedings on the Bill may be programmed.—(Michael Tomlinson.)
Question agreed to.
Thangam Debbonaire (Bristol West) (Lab)
On a point of order, Madam Deputy Speaker. Further to earlier points of order, as matters seem to have moved on, I seek urgent clarification on the process that we are in the middle of, given that Mr Speaker appeared to be deeply unhappy earlier and that we are now facing a wait of possibly up to two hours to hear from the Secretary of State for Health and Social Care on a matter that the Prime Minister has already addressed the press about.
We understand that the Prime Minister was not available at 3.30; we know that and that is reasonable. Since then, though, the Prime Minister has addressed the press. His comments are causing concern and confusion, but the House has to wait two hours more. This is treating the House with disdain. Parliament is sovereign. What is more, the Prime Minister himself ran on a campaign of Parliament being sovereign—sovereign, Madam Deputy Speaker. Our constituents deserve better.
I wonder whether those on the Treasury Bench have had time to reflect on the matter since the earlier points of order. Can you tell me, Madam Deputy Speaker, whether you or the House have had any word from No. 10 about coming here now to clear up the confusion and whether the Prime Minister is willing to face questions from Members of Parliament on behalf of our constituents? I seek your urgent clarification, because we feel that the Prime Minister is treating this House with contempt.
Madam Deputy Speaker (Dame Rosie Winterton)
I thank the hon. Lady for that point of order, and realise that she has set out the fact that the Prime Minister has made a statement to the press, not to the House. However, the best thing I can do is repeat what Mr Speaker said earlier:
“I have repeatedly made it clear how important it is that announcements should be made in this Chamber.”
He went on to say:
“The Secretary of State will be making a statement at 8.30 pm on covid. That will give Members of the House an opportunity to question him on the Government’s policy.”
He then went on to say:
“However, it is not what I would have expected, which is a statement to the House before an announcement to the press. It is not acceptable. The Government determine when Ministers make statements, but, in doing so, they must show respect to this House.”
That is what Mr Speaker said earlier, and I do not think that there is much more that I can add to that, but the hon. Lady wants to follow that up.
Thangam Debbonaire
Further to that point of order, Madam Deputy Speaker. Can we be absolutely clear that the Prime Minister has not made any attempt to contact Mr Speaker about making a statement and that there is literally nothing else to add at all? Given that Mr Speaker made it very clear in his ruling earlier that he was deeply unhappy, may I just check that there has been no response from those on the Treasury Bench or from No.10 about the Prime Minister coming to this House so that he, having made a speech to the press, can face questions from this House?
Madam Deputy Speaker
As I have said, the hon. Lady can rest assured that Mr Speaker will have made his views very clear. I am not aware of any discussions that have taken place, but I think we would know if the Prime Minister were shortly to arrive here. Instead, I suspect that the Secretary of State will make a statement at 8.30.
Chris Bryant (Rhondda) (Lab)
On a point of order, Madam Deputy Speaker. This is somewhat different. It relates to the fact that if the Government are extending the provisions in England in relation to the restrictions on people’s freedom because of covid beyond 21 June, that is also the date when matters change as to how we do our business here in Parliament.
It is actually quite difficult to get a rail ticket from Wales to London because of covid restrictions on trains. People have to book some time in advance. I just wonder when there will be a busines statement that will lay out exactly how we will be doing our business in a week’s time. There are perfectly sensible measures that could be put in place very quickly; I am sure that we would all want to assist in that, but it is important to get these things right. Sometimes, when the Government rush them or do not consult on them, we end up having to tidy them up afterwards.
Madam Deputy Speaker
I thank the hon. Gentleman for that point of order. I suspect that the shadow Leader of the House will be having discussions with the Leader of House about that issue, and it may be something that comes forward in a business statement at some point.
I am suspending the House until 8.30 pm.