National Insurance Contributions Bill

Viscount Younger of Leckie Excerpts

Report stage
Monday 7th February 2022 Lords Chamber

Moved by

[Viscount Younger of Leckie]

1: Clause 1, page 1, line 22, leave out “regulations under” and insert “, or in regulations under,”
Member’s explanatory statement
See the explanatory statement for the first amendment tabled in the Minister’s name to Clause 8.

[Viscount Younger of Leckie (Con)]

My Lords, this group of government amendments in my name responds to the recommendations of the Delegated Powers and Regulatory Reform Committee report and sets the upper secondary threshold, the so-called UST.

I thank the committee for its diligent care in scrutinising the Bill and noble Lords for their thoughtful comments in Grand Committee. The Government have further reflected on these views and have tabled Amendments 12, 13 and 14 in response to the report of the DPRRC and noble Lords’ comments in Committee.

Clause 10 provides an exemption from self-employed NICs in respect of self-isolation payments provided to support those on low incomes so that they can self-isolate and help stop the spread of coronavirus. Clause 10(2)(d) currently provides that the Treasury may, in relation to any part of the United Kingdom, designate new schemes that are corresponding or similar to the schemes specified in Clause 10(2)(a) to 10(2)(c). Payments under schemes designated in that way will benefit from the exemption in Clause 10(1) and will not be taken into account for the purposes of computing the amount of profits in respect of which class 4 and 2 contributions are payable. The committee recommended that the power in Clause 10(2)(d) be subject to the negative procedure rather than no procedure. The amendment in my name to Clause 10 makes this change.

Secondly, Clauses 3(1) and 6(6) allow the Government to extend the period for which the freeport and veterans relief are available. The committee recommended that the power to extend the relief for freeport employers and employers of veterans should be subject to the affirmative procedure rather than the negative procedure. The Government have taken on board the DPRRC’s recommendation and agree that it is appropriate that these powers are subject to the draft affirmative procedure. The two amendments to Clause 12 make these changes. In summary, the Government take the work of the DPRRC very seriously, and Amendments 12, 13 and 14 go a long way towards accepting its recommendations.

I turn to the amendments that set the upper secondary threshold for these measures. Government Amendments 1, 4 and 7 to 11 simply put on the face of the Bill what secondary legislation is out of time to do. This is not new policy or a change to public expectation. Ordinarily, rates and thresholds are set annually through a rerating exercise, which involves the Government of the day laying affirmative regulations. The debates for the 2022-23 rates and threshold will take place in this House on 23 February. However, due to the timing of this Bill and to ensure that the thresholds are in place for 6 April, the upper secondary thresholds for these measures need to be set in primary legislation.

I will now explain what an upper secondary threshold is. It is the threshold up to which employers can claim a zero rate of NICs. After this point, employers will be liable to secondary class 1 NICs at the standard rate. Without an upper secondary threshold, employers would be eligible for unlimited relief. There is a threshold for freeport employers and a separate threshold for employers of veterans.

The upper secondary threshold for the freeport measure is £25,000 per annum and was first announced in the Freeports Bidding Prospectus published in November 2020. The upper secondary threshold for the veteran measure is £50,270 per annum and was first announced when the policy was consulted on in July 2020. Both these figures have been reconfirmed by Ministers in this House and in the other place during the passage of this Bill. The Chancellor also confirmed these thresholds at the Autumn Budget 2021.

There are justified policy reasons for the different thresholds. The freeport measure has been designed to support growth in underdeveloped areas, so general support is required. The veteran measure has been designed to support veterans as they transition into civilian life, and therefore a targeted, more generous annual threshold is required to help them to overcome the barriers to employment.

I trust that noble Lords will recognise that this is a formality and will vote in favour of this amendment. I beg to move.

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[Viscount Younger of Leckie (Con)]

My Lords, I will reply very briefly to the comments of the noble Lord, Lord Tunnicliffe, and the noble Baroness, Lady Kramer. I simply say that I am grateful for their support for our amendments. Perhaps more than that, I thank them and others who contributed, particularly in Committee, on these amendments. I also thank the DPRRC; the comments that I made in my opening remarks say it all in terms of my view on it.

Amendment 1 agreed.

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[Lord Tunnicliffe (Lab)]

My Lords, we welcome the tabling of these amendments by the noble Baroness, Lady Kramer. It is fair to say that there is huge scepticism around the Government’s freeports policy. This was reflected at Second Reading. There is no need to go over these arguments again. Sites are coming on stream and time will tell whether the many promised benefits are realised. I was very pleased to sign Amendment 2, and I hope the Minister will respond positively in his remarks.

The topic has taken on additional significance in recent weeks but these concerns are by no means new. Promises of increased transparency have been made year after year. Some limited reforms have come but the level of ambition has been low. We are all aware of the risks involved in freeports. If the Government are serious about mitigating these risks and moving towards a public register of beneficial ownership in a wider sense, why not start here? It feels like an easy win. If the Minister is unable to give the noble Baroness, Lady Kramer, the assurances she seeks, we will join her in any Division she calls.

We are also supportive in principle of the review clause, which would enable us to see the practical impacts of freeport tax relief. Freeports are a leap of faith. The Government hope that they will bring both local and national benefits, but we cannot be sure on either front. The Government will no doubt be keeping all these things under review—to do otherwise would be inconceivable—but can the Minister assure us today that we will get to see the data? I am sure that he will want to shout from the rooftops if their predictions on job and wealth creation are correct, but what if they are not? Sadly, we cannot always expect transparency and honesty from this Administration. If the Prime Minister is serious about turning over a new leaf, perhaps we can start here.

[Viscount Younger of Leckie (Con)]

My Lords, I start by directly addressing Amendment 2, which seeks to create an additional condition whereby freeports relief would be available only where the freeport maintained a public record of the beneficial ownership of the businesses operating on the freeport site. I thank the noble Baroness, Lady Kramer, for raising this important issue. Before I go any further, I would like to broaden the debate, as the House will be aware of the considerable interest that continues to be shown in related matters—as the noble Baroness touched on—taking account of the register of overseas entities’ beneficial ownership, economic crime in general, illicit finance and money laundering. Because of this, I hope that the House will forgive me if I give a full and considered response to the noble Baroness and, indeed, the noble Lord, Lord Tunnicliffe.

The Government are taking firm and co-ordinated action to crack down on economic crime and are determined to go further. We will not tolerate criminals profiting from illicit money and will do whatever is necessary to bring these criminals to justice. The Home Office and the Treasury lead the policy response for government. We have well-established governance structures that oversee activity across the system, building on the landmark Economic Crime Plan, which brought the public and private sectors together to tackle economic crime.

The ever-evolving nature of economic crime means that it cannot be combated by law enforcement alone; the capabilities, resources and experience of a wide range of partners from across justice agencies, government departments, regulatory bodies and, of course, the private sector, are required. The Government are bringing forward significant investment to tackle these crimes, including through legislating for the Economic Crime (Anti-Money Laundering) Levy. The upcoming fraud action plan and second Economic Crime Plan this year will further enhance the public and private sector’s response in cracking down on economic crime and fraud.

In recent years we have taken important actions to strengthen our fight against economic crime. Let me give noble Lords some examples. The first was the creation of the new National Economic Crime Centre to co-ordinate the law enforcement response to economic crime. The second was the establishment of the Office for Professional Body Anti-Money Laundering Supervision to improve oversight of anti-money laundering compliance in the legal and accountancy sectors. The third was the Criminal Finances Act 2017, which introduced new powers, including unexplained wealth orders and account freezing orders. Finally, we introduced a global human rights sanctions regime.

The UK is fully committed to coming down firmly on entities which contravene the UK’s robust counter-illicit finance regime, as demonstrated by the actions of our anti-money laundering supervisors. This is apparent in the FCA’s recent success in securing its first criminal prosecution against NatWest bank under the money laundering regulations. NatWest pleaded guilty to three offences of breaching the regulations, resulting in a £268.4 million fine. Similarly, in April 2019 the FCA fined Standard Chartered bank £102.2 million, which was the second largest financial penalty ever imposed by the FCA for anti-money laundering control failings.

The noble Baroness touched on Russia, as I thought she might. The UK has also taken decisive action to tackle Russian illicit finance. We have acted, in unison with our key partners, most notably the European Union and the United States, against Russia directly on issues that have arisen in areas such as anti-corruption. We have introduced the global anti-corruption sanctions regime and have already sanctioned 14 individuals involved with the $230 million tax fraud in Russia, perpetrated by organised crime groups and uncovered by the brave Sergei Magnitsky. The Government are also bringing forward investment to tackle economic crime. The combination of this year’s spending review settlement and private sector contributions through the economic crime levy, as mentioned earlier, will provide funding to tackle economic crime totalling around £400 million over the spending review period.

Let me now return to corporate transparency. The UK is a global leader in beneficial ownership transparency. The Financial Action Task Force’s 2018 assessment recognised this: the UK is one of only five advanced economies to have achieved a pass mark for beneficial ownership transparency. The UK is the only G20 country with a free, fully public and easily accessible beneficial ownership register. The people with significant control register—the so-called PSC—at Companies House has more than 5.6 million names of people with significant control over nearly 4.4 million UK-registered companies. As well as the PSC, the Government intend to implement a register of beneficial owners of overseas entities that own or buy property in the UK. This register will be one of the first of its type in the world and will go further to bring transparency to the UK property market. This, in turn, will make it easier for regulators, legitimate businesses and the general public to know who the true owners of UK property are, and enable law-enforcement agencies to carry out effective investigations.

We are also committed to leading international reform efforts on beneficial ownership. Last year, under the UK’s leadership, all G7 countries committed to strengthening and implementing beneficial ownership registers. This builds on discussions we are driving forward at the Financial Action Task Force to bolster wider international standards on company beneficial ownership. Our actions are helping to ensure there are no weak links in the global financial system. The Government’s proposed reforms to Companies House will further strengthen our position as a world leader in corporate transparency, therefore enabling us to tackle economic crime and protect the UK from hostile actors, thereby enhancing the attractiveness of the UK as a place to invest.

The Companies House reforms will deliver more reliable information on the companies register via verification of the identity of people who manage, control or set up companies; greater powers for Companies House to query and challenge the information submitted to it; and the removal of technological and legal barriers to allowing enhanced cross-checks on corporate data with other public and private sector bodies. To ensure that these changes can be delivered as swiftly as possible, at last year’s spending review the Government committed to an additional £63 million to facilitate Companies House reform. These reforms require primary legislation and, as noble Lords will have heard from the Prime Minister last week, we are committed to bringing this legislation forward. However, in anticipation of any questions on this, I am not in a position, I am afraid, to announce timings or refer to any Queen’s Speech.

I turn now to freeports, which are really the subject of the remarks of both the noble Baroness, Lady Kramer, and the noble Lord, Lord Tunnicliffe. We have gone further: throughout the bidding process and subsequent business case processes, prospective freeports have been required to set out how they will manage the risk of illicit activity, with those plans being scrutinised by officials in the Border Force, HMRC, the National Crime Agency and others.

On beneficial ownership specifically, I start with a reminder that the freeports bidding prospectus stipulated that each freeport must agree a governance structure with the Government. The precise governance structure is tailored to each freeport’s needs but it must be consistent with the requirements set out in the publicly available freeports bidding prospectus.

The Government already require each freeport governance body to undertake reasonable efforts to verify the beneficial owner of businesses operating within the freeport tax site and to make this information available to not only HMRC but law enforcement agencies and other relevant public bodies. This is a condition of freeport status. It is a proportionate approach which means that local area law enforcement can take effective measures to ensure the security and propriety of operations within the freeport.

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Moved by

[Viscount Younger of Leckie]

4: Clause 6, page 4, line 34, leave out “regulations under” and insert “, or in regulations under,”
Member’s explanatory statement
See the explanatory statement for the first amendment tabled in the Minister’s name to Clause 8.

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[Baroness Kramer (LD)]

My Lords, we on these Benches fully support these Labour-led amendments. The noble Lord, Lord Tunnicliffe, has made the arguments in powerful terms, and I will not repeat what has been said so well. Most service men and women return smoothly to civilian life, but it is often those who have experienced the most trauma on our behalf who find themselves in a difficult place. Nothing would be more frustrating than putting in place a scheme such as that proposed in the Bill and then finding that, in many cases, the support does not last long enough as life events throw people temporarily off course. Frankly, the cost of providing a longer employment incentive for this group would cost the Treasury next to nothing, so we find it a privilege to support these amendments.

[Viscount Younger of Leckie (Con)]

My Lords, the veterans’ relief legislated for in the Bill and consulted on publicly has been introduced to support veterans as they transition into civilian life, and to encourage employers to utilise the considerable and often formidable skill sets of veterans. Between 10,000 and 15,000 leave the regular Armed Forces each year, whose employers will be able to benefit from this measure. This measure fulfils the Government’s 2019 manifesto commitment and builds on the UK-wide Strategy for our Veterans launched in November 2018, which includes specific commitments to support veterans to “enter appropriate employment”.

Amendment 5 tabled by the noble Lord, Lord Tunnicliffe, seeks to clarify that multiple employers can claim that relief on behalf of the same veteran. However, the amendment is not necessary as this is already the policy intent, and the legislation, as drafted, supports this. It may be helpful to explain exactly how the relief works. Any employer can claim the relief during a veterans’ first 12 months in civilian employment. That period is calculated by taking the veteran’s first day of civilian employment after leaving the Armed Forces and adding 12 months. Concurrent and subsequent employers can claim the relief in that period. That approach ensures that a veteran does not use up access to the relief if they take on a temporary role immediately after leaving the Armed Forces. Where the first day of civilian employment is before 6 April 2021, the period for which an employer can claim the relief will be from 6 April 2021 to 12 months after the first day of civilian employment.

It may help the House if I provide it with an example. Veteran A starts their first civilian employment on 30 August 2022. On 30 November 2022, veteran A enters into a separate employment with employer B. Employer B will also qualify for this relief, and both employers can continue to claim this relief until 29 August 2023. That approach has been communicated publicly to employers in the Government’s response, published on 11 January 2021, to the policy consultation; in the tax impact and information note that accompanies the Bill; in guidance for employers published ahead of this measure being available from 6 April 2021; and in speeches made by Ministers in both this House and the other place. I hope that the noble Lord is reassured about the policy and withdraws his amendment.

Amendment 6, tabled by the noble Lord and supported by the noble Baroness, Lady Kramer, gives the Treasury a power to extend the qualifying period of this relief, as defined at Clause 7(1). The Government have considered this measure in detail and consulted extensively on the relief, including a policy consultation which ran from July to October 2020 and a technical consultation which ran from January to March 2021. A significant number of respondents agreed that the relief is a positive step towards supporting the recruitment of veterans and could help to break down the barriers and negative perceptions surrounding veterans. After considering the responses, we felt that a 12-month qualifying period struck the right balance between supporting veterans as they transitioned to civilian life and wider taxpayers’ interests. Noble Lords may want to note that employer representatives such as the Federation of Small Businesses welcomed the 12-month relief when it was announced.

This policy provides employers in the 2021-22 tax year with up to £5,500 of relief and is one part of the Government’s broader strategy to support veterans. The Government recently published the veterans’ strategy action plan for 2022-24, which contains over 60 policy commitments worth over £70 million in a diverse range of areas, reflecting the varied streams of government support offered. Furthermore, at the 2021 Budget and spending review, £10 million was provided to support mental health via charity provision and £5 million to the Health Innovation Fund. In August 2021, £2.7 million was provided to further strengthen veteran health support, including facilitating the expansion of Op COURAGE, and a further £5 million in September 2021 for those struggling after the Afghanistan withdrawal.

Furthermore, the Bill already contains other levers to increase the generosity of this relief if needed, such as increasing the upper secondary threshold, as debated earlier, and extending the overall period of the relief. These proposed additional powers are therefore not necessary. With these reassurances, I hope that the noble Lord and noble Baroness will not press their amendments.

[Lord Tunnicliffe (Lab)]

My Lords, I thank the noble Lord for his response. I hope that I am wise in not pressing Amendment 5 any further. I will, however, be pressing Amendment 6 to a Division. The Government believe that this process is good, and we agree. There is consensus that the NICs relief is a benign piece of legislation and, if it is successful and cost effective, it may need to be extended. This amendment permits extension without further primary legislation. It is entirely within the control of government. It can do no harm and may do some good. I commend Amendment 6 to the House. In the meantime, I beg to withdraw Amendment 5.

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Moved by

[Viscount Younger of Leckie]

7: Clause 8, page 5, line 26, at end insert—
“(A1) For the purposes of section 1, for the tax year beginning with 6 April 2022—(a) the upper secondary threshold is £481, and(b) the prescribed equivalent for earners paid otherwise than weekly is—(i) where the earnings period is a month, £2,083;(ii) where the earnings period is a year, £25,000;(iii) where the earnings period is a multiple of a week, £25,000 divided by 52 and multiplied by the multiple;(iv) where the earnings period is a multiple of a month, £25,000 divided by 12 and multiplied by the multiple;(v) in any other case, £25,000 divided by 365 and multiplied by the number of days in the earnings period.(A2) For the purposes of section 6, for the tax years beginning with 6 April 2021 and 6 April 2022—(a) the upper secondary threshold is £967, and(b) the prescribed equivalent for earners paid otherwise than weekly is—(i) where the earnings period is a month, £4,189;(ii) where the earnings period is a year, £50,270;(iii) where the earnings period is a multiple of a week, £50,270 divided by 52 and multiplied by the multiple;(iv) where the earnings period is a multiple of a month, £50,270 divided by 12 and multiplied by the multiple;(v) in any other case, £50,270 divided by 365 and multiplied by the number of days in the earnings period.(A3) Amounts determined in accordance with—(a) subsection (A1)(b)(iii) or (iv), or subsection (A2)(b)(iii) or (iv), if not whole pounds, are to be rounded up to the next whole pound;(b) subsection (A1)(b)(v) or (A2)(b)(v) are to be calculated to the nearest penny, and any amount of a halfpenny or less is to be disregarded.”Member’s explanatory statement
This amendment, together with the other amendments tabled in the Minister’s name to Clause 8, and the amendments tabled in the Minister’s name to Clauses 1 and 6, set upper secondary thresholds and prescribed equivalents for the purposes of Clause 1, in relation to the tax year 2022-23, and Clause 6, in relation to the tax years 2021-22 and 2022-23, and make consequential amendments.

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Moved by

[Viscount Younger of Leckie]

12: Clause 10, page 6, line 24, after “paragraph” insert “in regulations made”
Member’s explanatory statement
This amendment provides for the designation of schemes for the purposes of Clause 10 to be by regulations.

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Moved by

[Viscount Younger of Leckie]

13: Clause 12, page 7, line 8, at end insert—
“(za) section 3(1);”Member’s explanatory statement
This amendment provides for regulations under Clause 3(1) to be subject to the draft affirmative procedure.