Tax-free Shopping

Debate between Viscount Younger of Leckie and Lord Tunnicliffe

Thursday 15th December 2022 Lords Chamber

[Viscount Younger of Leckie (Con)]

I can go this far, which the House will take at face value: of course, all taxes remain under review. The estimated cost of introducing a new scheme was around £2 billion per year. Although this would have stimulated additional retail spending, which HMRC estimated to be around £2 billion to £2.5 billion, it is a substantial cost to UK taxpayers and the relief would subsidise a significant number of purchases that occur without any relief in place, as I mentioned earlier.

[Lord Tunnicliffe (Lab)]

My Lords, while it might not have been the primary driver of tourism into the UK, tax-free shopping certainly incentivised extra spending during people’s stays. It was right to scrap the chaotic mini-Budget, but can the Minister understand the frustration of retailers who have argued for years for the scheme’s return, only to have their reward taken away because the Conservative Party crashed the economy?

[Viscount Younger of Leckie (Con)]

As I said earlier, on a serious note I have some sympathy for retailers—we admit that they will see some falling off of business—but I have made it quite clear that this is very much focused on London and Bicester Village. Having said all that, I live near Bicester Village and the queues going in on Sunday were enormous. Evidence from VisitBritain continues to show that the key motivators are still not to do with shopping and much to do with coming to see our excellent sights around the country.

Pensions Tax Relief: Employment and Retention

Debate between Viscount Younger of Leckie and Lord Tunnicliffe

Tuesday 1st November 2022 Lords Chamber

[Viscount Younger of Leckie (Con)]

Indeed. The subject of the question was to do with higher earners, but I will broaden my response a little. Public service pensions are a key part of the overall renumeration in the public sector and I acknowledge that it is important to get this right for retention. Reference has been made to nurses. A typical NHS nurse will retire after 30 years with a pension worth over £24,000 per year in today’s money. This compares quite favourably to a private sector employee with similar earnings receiving less than £10,000. As I have said, there is more to do, and we will keep this under review.

[Lord Tunnicliffe (Lab)]

My Lords, it is no good the Minister trying to persuade us that this is an attractive package. We know that senior doctors are retiring early, and we should be pragmatic about this. These people represent a very expensive investment—they are assets, and we should sweat our assets. They should not be leaving at the age of 58, 59 or 60, when realistically they should continue into their mid-60s or later, yielding their skills to our society.

[Viscount Younger of Leckie (Con)]

Indeed, it is very important that we look after those at the senior end of the NHS; much has been made of that in the previous Question and this one. As the noble Lord has alluded to, tax relief offered on pension contributions is expensive, costing the Exchequer £67.3 billion in 2020-21, with around 58% relieved at the higher and additional rates. As I mentioned earlier, there are a number of other aspects on which we have taken action, and perhaps there is more to do to be sure that we can retain our very best doctors and senior clinicians.

Incomes and Prices

Debate between Viscount Younger of Leckie and Lord Tunnicliffe

Monday 31st October 2022 Lords Chamber

[Viscount Younger of Leckie (Con)]

Well, the figures vary, but if we look at the lowest-paid staff, particularly in the NHS, they are seeing a pay rise of 9.3%. It does vary enormously.

[Lord Tunnicliffe (Lab)]

My Lords, the energy price guarantee will reduce some inflationary pressures over the winter period. However, does the Minister acknowledge that the scaling back of support from April 2023 could have a detrimental impact on inflation from that point? The Bank does not expect to meet the 2% target for some two years. Where does that leave working people, whose incomes will have to continue to be stretched further and further?

[Viscount Younger of Leckie (Con)]

The noble Lord makes a good point because, as the House knows, we announced significant support worth over £37 billion for households this year, targeted at those who need it the most. However, we continue to keep the situation under review. The Chancellor has made it clear that, looking into next year, the Government will prioritise the needs of the most vulnerable and support those in need, while ensuring that we act in a fiscally responsible way.

Direct Tax and National Insurance Contributions

Debate between Viscount Younger of Leckie and Lord Tunnicliffe

Tuesday 25th October 2022 Lords Chamber

[Viscount Younger of Leckie (Con)]

The noble Lord may be aware that at Spring Budget 2021 the Government froze the capital gains tax annual exempt amount—the so-called AEA—at £12,300 until 2026. However, the Government keep the UK tax system under constant review, as I alluded to earlier, to ensure that it is fair and simple for all taxpayers.

[Lord Tunnicliffe (Lab)]

My Lords, next week’s fiscal event will, in the words of Jeremy Hunt, involve painful cuts to public spending. However, as part of his attempt to avoid calling a general election, the new Prime Minister has said that he is fully committed to delivering the 2019 Conservative Party manifesto. Does the Minister believe that these two positions can be reconciled, or are we about to see new tensions between 10 and 11 Downing Street?

[Viscount Younger of Leckie (Con)]

We all wish the new Prime Minister well. I personally congratulate him on his victory and, as he said himself, he has a hard task—and more. But to answer the noble Lord’s question, certainly on the non-dom side, they play a very important role in funding our public services, and the rules were changed on non-doms, to bring an end to permanent non-dom status.

Health and Social Care Levy (Repeal) Bill

Debate between Viscount Younger of Leckie and Lord Tunnicliffe

2nd reading & Committee negatived & 3rd reading
Monday 17th October 2022 Lords Chamber

[Viscount Younger of Leckie (Con)]

I do not believe the noble Lord and I will agree on this. It could be that we write a letter to spell out exactly what we mean by this, because I have spelled out the facts. To say a little more on this, cutting NICs from November will provide an average tax cut of around £135 for workers this year, and £330 next year. Taking into account the increase to NICs thresholds in July and the levy reversal, almost 30 million people will be better off by an average of over £500 in 2023-24. So, this directly affects lower economic groups rather than the higher ones. I think there is a lot more I could say in a letter because, as I say, I do not think that the noble Lord and I will end up agreeing on this particular matter.

[Lord Tunnicliffe (Lab)]

As this debate is getting increasingly interesting, will the Minister copy that letter to all who have participated?

[Viscount Younger of Leckie (Con)]

Absolutely; I am more than happy to do that for the noble Lord and for the whole House.

--- Later in debate ---

[Viscount Younger of Leckie (Con)]

That is another question which I shall add to the letter that I intend to write.

[Lord Tunnicliffe (Lab)]

It will be a long letter.

[Viscount Younger of Leckie (Con)]

I thank the noble Lord, Lord Tunnicliffe.

I will go into a deeper and important issue, which was raised by a few Peers but in particular the noble Lord, Lord Sikka, with regard to what we are doing to help the poorest. It is important to broaden the scope of this debate. As I said earlier, we understand that many people across the UK are very worried about the cost of living and are seeing their disposable income decrease as they spend more on the essentials, which of course include energy. That is why we have taken decisive action to get households and businesses through this winter and the next while ensuring that we act in a fiscally responsible way.

I will not go through everything because the House will know about the energy price guarantee, which means that a typical UK household will pay no more than £2,500 a year on its energy bill. That is in addition to the £400 discount already announced through the energy bills support scheme, and we also have the energy bill relief scheme, which will provide a discount on wholesale gas and electricity prices. In short, therefore, these measures will save the average household around £1,000 per year from October, so that protection is there in that respect.

The noble Lord, Lord Davies of Brixton, basically stated that the levy was not a tax cut and went on to say that the funding has not supported the HSC—health and social care—levy. However, it is a tax cut for people and businesses this year, who are already paying an extra 1.25%. The average saving for people is £135 this year, and I believe it has helped the NHS, particularly in helping it through the recovery from Covid.

I was grateful for the remarks the noble Lord, Lord Tunnicliffe, made. My remarks now also take into account the points raised by the noble Baroness, Lady Brinton, and, once again, the noble Lord, Lord Sikka. The comments were broader, on the capacity of the NHS, current Covid infections rising and waiting lists generally, as well as NHS recruitment and retention, which I touched on slightly earlier, and, crucially, the adult social care sector. The 2021 spending review allocated £188 billion in total to the Department of Health and Social Care, which includes helping to tackle elective backlogs in the NHS and plans to spend £8 billion by 2024-25; these were raised during the debate. That includes an 50,000 extra nurses in the NHS. The Government accept in full that this year’s recommendations from the independent NHS pay review bodies are in stone—a pay rise, that is, for over 1 million staff.

On the social care side, the Prime Minister and the Secretary of State for Health and Social Care announced a £500 million adult social care discharge fund; I have mentioned it at least twice in this debate, I think, but it is worth mentioning it again. This will bolster the social care workforce, which the noble Lord, Lord Tunnicliffe, raised as a concern. It will also help people out of hospitals and into crucial social care support.

In what was a rather downbeat speech, if I may say so, the noble Baroness, Lady Bennett of Manor Castle, raised issues including stability, businesses and individuals who are not able to make decisions, and spending cuts and austerity. As always, I listened to what she said. My response is that the Chancellor has taken swift action today precisely to ensure that the country’s economic stability is sound and to show commitment to sound public finances. That is very important. This matter will be discussed further when the Statement is made to the House. I say again that spending restraint is needed. Departments have been asked to find efficiencies. Priority will be given to those at the vulnerable end of society.

The noble Lord, Lord Tunnicliffe, spoke about fiscal sustainability. He asked whether I could outline how much higher the cost of borrowing is at present compared with in the weeks and month before—as he put it—the disastrous mini-Budget. The Government are taking action to assure the markets of their credibility and reduce the amount of borrowing needed. In his Statement today, the Chancellor made it clear that the UK’s public finances must be on a sustainable path in the medium term.

I will finish on this note: to state the obvious, as we all now know, the Chancellor will publish his medium-term fiscal plan, including a fully costed plan, on 31 October. I will leave it there. Once again, I thank noble Lords for taking part in this short debate.

Economic Situation

Debate between Viscount Younger of Leckie and Lord Tunnicliffe

Thursday 13th October 2022 Lords Chamber

[Lord Tunnicliffe (Lab)]

My Lords, it is hard to believe that so much damage has been caused in just 20 days. Rachel Reeves was right to refer to the mini-Budget, with its unfunded tax cuts, excessive borrowing and undermining of financial institutions as a bonfire. The Conservative Party have set it and our economy ablaze, with ordinary working people paying the price. Ultimately, this can be resolved only if the Government accept their role in creating this crisis, put the national interest before their pride and reverse the mini-Budget.

Overnight media reports suggest that the Prime Minister’s most senior advisers now agree with that assessment. When can we expect the Chancellor to complete the U-turn?

[Viscount Younger of Leckie (Con)]

The noble Lord will not expect me to agree with much, or any, of what he says, because it was right that the Government took a very rapid step to support those in the lowest socioeconomic groups, particularly on the energy costs. In terms of the tax reductions, this is part of the plan, in line with the growth plan that will be announced on 31 October, which will kickstart the economy. It is absolutely right that this happens, given that growth has been lagging, having been on average about 2.5% between 1949 and 2007, just before the financial crash. Therefore, it is right that we should look to make some changes. We believe that these are the right changes and that they will benefit all in the long run.

Public Spending: Borrowing Increase

Debate between Viscount Younger of Leckie and Lord Tunnicliffe

Thursday 13th October 2022 Lords Chamber

[Lord Tunnicliffe (Lab)]

My Lords, as somebody who spent much of their career in the public sector, I know that, at the shop-floor level, “efficiencies” is a euphemism for “cuts”; that is what we are effectively talking about. But let us get down to the nitty-gritty of this debate. Volatility in bond markets continues to feed through to the mortgage market, where the average two-year fixed interest rate has jumped by around half a percentage point in the last week alone. Can the Minister confirm whether the Government have conducted, or at least commissioned, any assessment of how many repossessions we are likely to see in the coming months? If not, will he commit to taking this back to the department?

[Viscount Younger of Leckie (Con)]

On the mortgage market, I am very aware of the pain that many people are suffering at the moment. Interest rates have been going up—this is not just a matter for the UK; it is a global issue, particularly among the developed countries—and interest rates link into mortgage rates. We very much hope that they will come down. This is very much a matter that the Bank of England is taking decisions on, and we are all aware of the announcements that have been made to stabilise the markets.

Transport for London: Funding

Debate between Viscount Younger of Leckie and Lord Tunnicliffe

Thursday 23rd June 2022 Lords Chamber

[Viscount Younger of Leckie (Con)]

I can give my noble friend—I think I can call him that—an update. The Government remain committed to supporting both the London Borough of Hammersmith and Fulham and TfL in the repair of Hammersmith Bridge. A first business case was approved, but there is another stage whereby a further business case that is compliant with Treasury rules has to be presented. It is important that we remain committed to the reopening of Hammersmith Bridge.

[Lord Tunnicliffe (Lab)]

My Lords, the situation we face is extremely serious. This is not just some transport issue; it is about London. London’s integrated public transport system is absolutely crucial. We are talking not just about domestic use but about London’s international reputation: it is why firms are willing to locate here in the financial district. I was involved in recovering London transport from the managed decline of the 1970s—it took three decades. This is not just about whether the mayor and Prime Minister can agree with each other; it is about recognising that we cannot be allowed to slip into that syndrome again. Can the Minister assure me that this is the central objective of government?

[Viscount Younger of Leckie (Con)]

I regret that I am not able to give an announcement on funding beyond tomorrow, but the noble Lord is right that investment in London benefits the economy and supply chain outside London. The Government recognise the need for certainty and stability in Transport for London’s capital investment programme, and remain committed to supporting London. But TfL’s income for 2021-22, including revenue from fares, road user charging, business rates and council tax—and our emergency support—is about the same as it was in the last year before the pandemic.

UK Infrastructure Bank Bill [HL]

Debate between Viscount Younger of Leckie and Lord Tunnicliffe

Committee stage & Lords Hansard - Part 2
Tuesday 14th June 2022 Lords Chamber

[Lord Tunnicliffe (Lab)]

My Lords, I am grateful to the noble Lord, Lord Sharkey, for tabling and introducing these three amendments on the important matter of parliamentary oversight. I am not inherently opposed to the Treasury’s power to amend the bank’s objectives or the definition of infrastructure. If, as things progress, it becomes obvious that tweaking these would be beneficial, there should be a relatively straightforward mechanism for doing so. However, Amendment 28 gives us the opportunity to probe exactly how the Treasury intends to use the power. Is it simply for the tweaking I have just mentioned, or could the Chancellor suddenly decide to drop the climate change objective altogether? That would be a very different matter, and making such a significant change via regulations—albeit an affirmative SI—would not be acceptable. The other amendments in this group raise related questions, and I look forward to hearing the Minister’s response in due course. It is not Parliament’s role to frustrate the operation of the bank. However, it should be Parliament’s role to debate these important matters as they arise.

[Viscount Younger of Leckie (Con)]

My Lords, these amendments are all connected to parliamentary scrutiny, particularly in cases where the Bill is creating delegated powers, as the noble Baroness, Lady Kramer, pointed out. I will come on to the specific amendments, but it is worth noting at the outset, bearing in mind her remarks, that the Delegated Powers and Regulatory Reform Committee has found no need to comment—in fact, there has been no comment whatever—on the four delegated powers taken in the Bill. Having said that, I will attempt to reassure her now that, along with previous pledges that a letter will be written on other matters, it may be that we can give more detailed reassurances in writing on these complex but important interrelationship issues concerning the bank and the framework document.

I believe that the intended purpose of Amendment 28 in the name of the noble Lord, Lord Sharkey, is to protect the operational independence of the bank and prevent the Treasury changing the bank’s focus in the future. There may, however, be instances where we need to update the definition of infrastructure or the bank’s functions to ensure that the bank can continue to fulfil its objectives as a long-lasting institution. Let me give an example in which the noble Baroness, Lady Bennett—I see she is in her place—may take some pleasure. New green infrastructure technologies may emerge in the future which we would want explicitly to include in the bank’s definition of infrastructure, to signal to the bank and the market that the bank can invest in these technologies.

Amendments 33 and 34 in the name of the noble Lord, Lord Sharkey, seek to strengthen parliamentary scrutiny of the bank’s strategic priorities and plans, which he outlined eloquently. Amendment 33 would require parliamentary approval for the strategic priorities of the bank, which the Treasury produces, before they come into effect. Although his amendment is certainly well intentioned—I listened very carefully to his remarks, as well as those of the noble Lord, Lord Vaux—I do not believe it is required as the Bill as drafted allows for parliamentary scrutiny of the bank’s strategic priorities by requiring a copy of the statement and any updates to be laid before Parliament.

There is a strong precedent for this already: the Bank of England Financial Policy Committee remit letter, the Financial Conduct Authority remit letter and the Ofwat strategic statements are all laid before, rather than approved by, Parliament. This is an appropriate level of oversight, particularly bearing in mind that the bank is a taxpayer-funded, government-backed institution.

Turning to Amendment 34, I would like to clarify the effect of the clause as drafted. It is necessary to read the clause as a whole, rather than just words in isolation, to interpret its effect:

“The Bank must secure that its articles of association provide for the Bank … to publish and act in accordance with strategic plans which reflect the Treasury’s statement”.


I listened very carefully to the remarks of the noble Lord, Lord Sharkey, and as he rightly said we had a detailed discussion of this issue outside this Chamber. However, in our opinion this is sufficient to ensure that the bank acts in accordance with Treasury steers. The bank’s articles must provide for it to do so, creating both the power and the expectation that it should, and being subject to the usual enforcement controls should it fail to do as provided by its articles. I realise that we may not entirely agree on this issue, but this is the response that I give today.

I listened carefully to the remarks from the noble Lord, Lord Davies of Brixton. I first apologise to him for the fact that I gather he has not had some answers to questions that he posed—I am rather mortified to hear that. I know that I have written a good few letters and I am sure my noble friend Lady Penn has as well, but may we look at which answers have not been given?

I will try to give the noble Lord a response anyway to the points that he raised, which were essentially asking what the bank’s relationship is to pension funds. The National Infrastructure Strategy, which announced the UKIB, also set out how there is a huge opportunity for pension funds to support the UK’s infrastructure ambitions. The bank’s policy design document—its blueprint, if you will—set out how the bank will help to structure deals to attract international investments and unlock capital from institutions such as pension finds. I hope that gives some sort of an answer but, again, I will read Hansard and get some further answers to the noble Lord, Lord Davies, if appropriate.

With that, I would be grateful if the noble Lord, Lord Sharkey, would feel able to withdraw his amendment.

BAE Systems: Type 26 Frigate

Debate between Viscount Younger of Leckie and Lord Tunnicliffe

Thursday 24th March 2022 Lords Chamber

[Viscount Younger of Leckie (Con)]

I start by saying that we have an improving picture in fleet availability, which is the result of targeted interventions to minimise support requirements, improve maintenance and generate ships faster. Perhaps to reassure my noble friend, in May 2021 there were 935 ship days at sea, the most since July 2014. May I also say, although I cannot of course give too much out, that, for example, there are at least 10 fully operational ships at sea now? That includes “HMS “Diamond” in the east Mediterranean, HMS “Northumberland”, from that TV series, which noble Lords may have watched, which is taking part in normal deployment, and many more.

[Lord Tunnicliffe (Lab)]

The Minister has an elegant way of saying no. The MoD confirmed funding last summer for the second batch of five Type 26 frigates. Given that the national shipbuilding strategy failed to commit to a British-built by default approach to procurement, can the Government confirm that this batch will be built in UK shipyards with UK steel?

[Viscount Younger of Leckie (Con)]

I am pleased to say that the steel aspect of HMS “Glasgow” comes up to about 50%. The noble Lord will know, however, that steel manufacture for ships has to be very precise and, at the moment, the UK is not capable of producing the type of thin steel for frigates—or, indeed, the thick steel for submarines, which is another matter. But I can reassure him that the £3.7 billion contract to manufacture the first batch of Type 26s, which was awarded in 2017, is on track.

National Insurance Contributions Bill

Debate between Viscount Younger of Leckie and Lord Tunnicliffe

Consideration of Commons amendments
Monday 14th March 2022 Lords Chamber

[Lord Tunnicliffe (Lab)]

My Lords, we need to move quickly to today’s main business, so I will be brief. During Prime Minister’s Questions on 9 February, the Conservative MP Stuart Anderson asked

“whether veterans will always be at the heart of this Government’s strategy and whether everything will be done to see that they always get what they need.”

The Prime Minister responded that

“we ensure that veterans receive particular support and encouragement in employment, and we encourage employers to take on veterans as well.”—[Official Report, Commons, 9/2/22; col. 940.]

The Minister knows that we welcome the new NICs relief for employers of veterans. Our amendment did not compel the Government to do anything. It merely gave Ministers the option of extending the 12-month relief, if that would have had a beneficial impact on veterans’ employment and retention. I struggle to understand why both the Prime Minister and Mr Anderson voted against that proposition, given their stated support for veterans. However, in a phrase I have heard throughout my career, we are where we are. Your Lordships’ House has fulfilled its role and, having done so, should now let this Bill pass.

[Viscount Younger of Leckie (Con)]

My Lords, I have some very brief return remarks to thank the noble Baroness and the noble Lord for their remarks. Of course, I listened carefully to the disappointment expressed by them both in terms of the outcome. However, perhaps I can give a little chink of light: I think we can look forward to continuing to debate some of the themes raised, perhaps more appropriately, as I mentioned earlier, during the course of the economic crime Bill. But with that, I beg to move.

National Insurance Contributions Bill

Debate between Viscount Younger of Leckie and Lord Tunnicliffe

Tuesday 22nd February 2022 Lords Chamber

[Viscount Younger of Leckie (Con)]

My Lords, in moving the Motion that this Bill do now pass, I take the opportunity to thank noble Lords from all sides of the House for their interest and contributions to the progress of the Bill. In particular, my thanks go to the noble Lord, Lord Tunnicliffe, and the noble Baroness, Lady Kramer, for their constructive engagement, thoughtful contributions and thorough consideration of this piece of legislation.

As ever, I am grateful to the House authorities and parliamentary staff for their hard work behind the scenes. I acknowledge the work of the officials who have worked so hard on the Bill for many months: the Bill team; the policy teams at HMRC and Her Majesty’s Treasury; the lawyers in both departments; the Office of the Parliamentary Counsel; the clerks in this place; and, finally, my noble friend Lady Scott.

I take this opportunity very briefly to recap the importance of this Bill. It introduces new measures to unleash the potential of our ports and regenerate left-behind communities by encouraging businesses from around the world to invest in our regions, spreading jobs and investment opportunities across the country. Specifically, it introduces two employer national insurance reliefs for workers in free ports and organisations that recruit Armed Forces veterans. In doing so, it supports the delivery of the Government’s free ports programme and boosts regional growth and the employment prospects of our extraordinary veterans. The Bill also provides an exemption from self-employed NICs for test and trace support payments, which will apply retrospectively from the 2020-21 tax year. Finally, the Bill introduces changes to the disclosure of tax avoidance schemes regime. I beg to move.

[Lord Tunnicliffe (Lab)]

My Lords, I join the Minister in his thanks, particularly to the Minister himself and his team. I commend their availability to interested parties and the many interesting Zoom meetings we have had. I also thank all Members who were involved in this Bill, particularly the noble Baroness, Lady Kramer. Between us, I think we produced an excellent speed-through and we have done the Bill a total service. Finally on the thanks side, I thank my team, which is one half of Dan Stevens, without whom I could not have carried this burden.

On the substance of the Bill, I note what the Minister has said. I hope that he shows equal enthusiasm for the two rather gentler amendments that we are sending to the Commons, and I hope that we see this Bill no more.

National Insurance Contributions Bill

Debate between Viscount Younger of Leckie and Lord Tunnicliffe

Report stage
Monday 7th February 2022 Lords Chamber

[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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[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.

National Insurance Contributions Bill

Debate between Viscount Younger of Leckie and Lord Tunnicliffe

Committee stage
Monday 10th January 2022 Grand Committee

[Lord Tunnicliffe (Lab)]

I start by reiterating the Labour Party’s position on the Bill, as originally stated at Second Reading. We have never understood the Government’s fanaticism over free ports and are sceptical that they will deliver the scale of economic benefit promised in recent years. Nevertheless, we do not intend to oppose the various measures, some on free ports and some on other issues, contained in the legislation. The Government will get their Bill through and it will be up to Ministers to prove that their way is the right way. If that proves not to be the case, they must own their failures of judgment.

As a general point, there are several important questions that the Government were unable to answer in the other place or at Second Reading. Today is an opportunity to explore some of those concerns in more detail. It is also a chance for me to record my thanks, along with those of the noble Baroness, Lady Kramer, to the Minister and his officials for their engagement between Second Reading and today. Not all our questions were answered, but I hope they will be addressed as the Minister responds to the nine amendments before us.

Amendment 1, tabled by the noble Baroness, Lady Kramer, has enabled a short debate on beneficial ownership. As she noted in her introduction, we have been waiting for quite some time for the Government to deliver on their numerous promises in this area. I am sure the Minister himself has delivered assurances on at least a few occasions. The case for stronger action has been made time and again. Light is cast on shady practices, yet despite stern warnings from the Chancellor, meaningful action never seems to materialise. I hope colleagues will forgive the slightly dry analogy, but as we are in January it is almost as if the Treasury and BEIS are treating this like a new year’s resolution. It sounds positive, and we are promised that the Government will follow through, but within weeks or months the ambition quietly falls away. Questions about beneficial ownership are not best dealt with in this Bill, but I appreciate the noble Baroness’s efforts to raise them. I doubt the Minister will be able to offer all the assurances that we seek, but I hope he can go some way to proving me wrong.

[Viscount Younger of Leckie (Con)]

My Lords, I start by thanking the noble Baroness, Lady Kramer, and the noble Lord, Lord Tunnicliffe, for raising these important points. I also found it useful to have a discussion prior to Committee on the points that both noble Lords raised, which are being taken forward today. Ensuring that the free-port tax reliefs are effectively targeted is a government priority, and this will be the general theme of my remarks.

Before I go into the detail of the specific amendment, I will provide a brief overview of what the Government are looking to achieve through free ports, and I hope this will be helpful to the noble Lord, Lord Tunnicliffe, in particular. It is, first, to establish national hubs for global trade and investment, intensifying the economic impact of our ports and generating increased economic activity across the UK. Secondly, it is to deliver jobs, sustainable economic growth and regeneration in the areas that need it most. Thirdly, it is to create centres of innovation that bring together innovators to develop and trial new ideas and technologies.

To these ends, each free port will contain specific tax sites where businesses can claim reliefs on new investment and jobs, including the national insurance contributions relief discussed here today and as part of this Bill. Each free port will also contain specific customs sites where importers, exporters and manufacturers can benefit from duty reliefs and simplified customs procedures. Also, each free port will receive a capital grant for infrastructure improvements, alongside planning flexibilities and trade, investment and innovation support.

Amendment 1 seeks to support the government’s commitment that only legitimate businesses operate in free ports. I can assure the House that the Government have taken steps to ensure that only those whom this policy is intended to benefit will benefit. Specific to this policy, the Government have included conditions requiring free-port employers to have a physical business premises in the free-port tax site, so that only employers that are investing in free ports can benefit from this relief. Next, employees are required to spend 60% of their working time in the free-port tax site. Both these conditions ensure that the relief is effectively targeted.

In relation to free ports more broadly and the specifics of the amendment, the Government have three stages before businesses can claim reliefs in tax sites. The noble Baroness, Lady Kramer, mentioned the bidding process. I am pleased that we have got to this point in the debate. The bidding process, run by the Department for Levelling Up, Housing and Communities, considered a wide range of criteria, including what steps the bidders would take to ensure that their free port would be secure against illicit activity. As I think the noble Baroness picked up, eight out of the 14 bids were taken forward, which means that six were not.

Secondly, each free port has to agree its proposed tax sites with HMT and HMRC, with consideration given to HMRC’s ability to enforce the conditions of the tax reliefs within each site. So far, three of the free ports have had a total of eight tax sites designated. Thirdly, each business within a tax site will need to submit a return to HMRC to claim this relief and demonstrate that it has met the relevant conditions. Compliance checks will be carried out to ensure that only those who are eligible for the relief benefit from it.

To support all this, as part of successful bids the Government have required free-port governance bodies to undertake rigorous efforts to verify the beneficial owner of businesses operating within the free-port tax site. This is a proportionate approach that means that the local area can take effective measures to ensure the security and propriety of operations within the free port. In practice, many free-port governance bodies are taking further steps to ensure that firms moving into tax sites will support delivery of the free ports’ overall objectives. Similarly, for the customs sites, there are three stages: first, the overall free-port bid process that I referred to earlier; secondly, HMRC approval of each customs site; and, thirdly, HMRC approval of each business operating within each customs site.

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[Lord Tunnicliffe (Lab)]

My Lords, I was pleased to add my name to Amendment 2 and several other amendments to be discussed later today, which aim to implement the recommendations of the Delegated Powers and Regulatory Reform Committee. It goes without saying that the Government and the DPRRC will not always see eye to eye on these matters. However, we have long trusted the committee to take a balanced approach to the scope of ministerial powers, so that the Government can meet their objectives while respecting the vital role of Parliament. I will pick up the noble Baroness’s challenge about the hazy days of summer when we are in power. I am old enough to remember when we were in power, and we almost always implemented the recommendations of the DPRRC or whatever was its equivalent at that time, so I am sure we will receive her approval in how we behave.

The power in Clause 3(3) does not appear to strike the appropriate balance. As the committee notes in its 11th report of the Session, the current draft is significantly broader than required to fulfil the indicative purposes listed in the Treasury’s memorandum. The noble Baroness, Lady Kramer, has adopted the terminology suggested by the DPRRC and we support that. Maybe there is some middle way, which will give the Treasury some but not all of the flexibility that it seeks.

I am grateful to the Minister for sending me a copy of his response to the committee, enabling us to have a more informed debate today than would have otherwise been the case. Sadly, like the noble Baroness, Lady Kramer, I was disappointed by his response, particularly in relation to the power in Clause 3(3). I continue to side with the committee in relation to the non-binding status of the Treasury’s memorandum. While the historic example of the 2014 Act was somewhat interesting, I am not sure that makes the argument persuasive. I hope that he can provide some further detail today, but what we will really need in the run-up to Report is a change in attitude from the Treasury.

It would be better if the department were to think again of its own accord but, if that is not possible, I would not be surprised to see a similar amendment tabled at a later stage of the Bill.

[Viscount Younger of Leckie (Con)]

My Lords, I thank the noble Baroness, Lady Kramer, for raising this point, which reflects a recommendation by the Delegated Powers and Regulatory Reform Committee.

As background, Clause 3 ensures that the Government retain the flexibility to react to the economic realities of free ports and to protect the taxpayer, and it therefore contains a number of regulation-making powers, in subsections (3) and (4). Free ports are novel in the UK. The Government have undertaken an ambitious plan to invest in underdeveloped areas and level up the UK. So that the Government can continue to meet their international obligations and retain the power to exclude employers that seek to abuse this policy, they have taken a power to add, remove, or alter the conditions set out in Clause 2, which is contained in subsections (3) and (4) of Clause 3. A similar approach was taken with other free-port measures legislated for in the Finance Act 2021. My point is that there is a precedent here.

I turn to the substance of Amendment 2, tabled by the noble Baroness, Lady Kramer, and supported by the noble Lord, Lord Tunnicliffe. It seeks to limit the regulations that could be made under Clause 3(3) to those that would ensure compliance with the UK’s international obligations with respect to subsidy control. This is in response to the report of the DPRRC, which recommended that this power, which may amend Part 1 of the Bill and which is subject to the draft affirmative procedure, should be restricted to specified purposes only.

I would like to explain to noble Lords why the Government consider this amendment unnecessary, and will go into the reasons, as the Committee would expect me to. Examples of when this power could be used are provided in the department’s delegated powers memorandum of ensuring compliance with the UK’s international subsidy control obligations. The Government believe that this amendment would be overly restrictive and could result in primary legislation being needed in the near future. The subsidy control landscape in this case is complicated, uncertain and difficult to predict, and the power needs to be capable of dealing with a wide range of possibilities. The Government believe that it would be difficult to narrow it while at the same time allowing it to be flexible enough to deal with a wide range of possibilities within the subsidy control landscape.

I shall go further. It may help the Committee if I also explain what in the Government’s view is a clear precedent for this power, in Section 5(1)(b) of the National Insurance Contributions Act 2014. This measure provides a power exercisable by the Treasury to make regulations to add, reduce or modify the cases in which a person cannot qualify for an employment allowance or in which liabilities to pay secondary class 1 NICs are excluded liabilities. It enables the Treasury to make changes to Sections 2 and 3 and Schedule 1 of that Act. The Delegated Powers and Regulatory Reform Committee’s 18th report of Session 2013-14 considered the delegated powers in the NICs Act 2014 but, interestingly, did not comment on the power in Section 5(1)(b) of the Act.

The power in Section 5(1)(b) has so far been used three times, including to exclude companies with employer NICs over £100,000 to focus the relief on small businesses. This policy change was not foreseen when the power was introduced and, if there had been a similar restriction in the legislation on the use of the power, such a change would have subsequently required primary legislation. This could have risked a delay to implementing the policy as, unlike Finance Bills, NICs Bills are not guaranteed to be annual.

In view of the above, and that similar powers are also included in the Finance Act 2021, the Government believe that the draft affirmative procedure remains appropriate without further restrictions on the power. With this rather lengthy explanation, I hope that the noble Baroness will withdraw her amendment.

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[Lord Tunnicliffe (Lab)]

My Lords, this is a very straightforward amendment, and one which mirrors the Labour Party’s text tabled at this stage in the House of Commons. I shall not detain the Committee with a lengthy contribution, as the case for a review of the NICs relief enabled by Clause 1 has already been well made. We may quibble over the timescale and precise details of any review, but it appears sensible that the Treasury outline whether the realities of this policy live up to the expectations. As stated earlier this afternoon, Ministers must own their decisions. An amendment along these lines would significantly increase the accountability attached to this tax break.

Although I am sure he will argue that such a review does not need statutory underpinning, I hope the Minister will respond positively to the proposal. A concrete commitment to a review along these lines would be of great comfort. Others, including the National Audit Office, will no doubt analyse the performance of free ports in the months and years to come but, in the interim, it would be a shame if the Treasury were not open about the successes or otherwise of its measures.

[Viscount Younger of Leckie (Con)]

My Lords, I in turn thank the noble Baroness again and the noble Lord, Lord Tunnicliffe, for raising these concerns. In particular, I will address the point she made about displacement slightly later in my remarks.

Amendment 3 would require the Government to conduct a review, six months from the date this Act receives Royal Assent, into the effectiveness of the policy. The Government acknowledge the importance of monitoring reliefs of this nature and evaluating ambitious programmes such as these free ports. It is for that reason that the Government have already committed to reviewing the use and effectiveness of this relief before deciding whether to extend it further. This review will look at the data available through HMRC’s systems.

More broadly, the Department for Levelling Up, Housing & Communities—the department responsible for delivery of free ports, as I mentioned during an earlier debate—is leading the monitoring. It will work closely and collaboratively across government to ensure a robust and rigorous evaluation. Given that the free ports policy is focused on generating long-term benefits to local areas, six months is unlikely to be an appropriate timescale for any review, as free ports will not have fully reached their operating potential within that six months. For example, ports will still be looking to attract additional investment and continuing to develop their sites. In addition, this policy relates to new employees. As I imagine the noble Baroness will understand, the hiring process can take a number of months, which would take us well beyond the six months she suggests.

The department for levelling up has committed to publishing its monitoring and evaluation strategy in spring 2022. This strategy will be in line with key principles and best practices from the Magenta Book, which provides guidance on evaluation within government, and will ensure a robust and rigorous evaluation of the free ports programme.

Furthermore, the Government have taken on board suggestions and feedback from stakeholders and the public as part of the consultation process to ensure that the UK has an ambitious and attractive offer for businesses. Our new free ports offer is far more ambitious than our previous one, including simplified customs processes, targeted tax measures to incentivise private business investment, carefully considered planning reforms and targeted funding for infrastructure. This new, ambitious free ports policy offer is already proving attractive to domestic and international investors looking to start or grow their UK operations.

Throughout the development and delivery of the free ports policy, the Government have taken steps to ensure that the tax, spending and policy levers deployed in free ports are used effectively. That takes us back to the first debate we had this afternoon. For example, to minimise displacement of economic activity, we required bidders to explain how their choice of tax locations would attract new economic activity to the area which would not have been possible without free ports. Subsequently, tax sites were not designated until the Government were confident that this had been successfully demonstrated. This approach has been recognised by the OBR in its Economic and Fiscal Outlook, which says that

“the Treasury has taken steps to try to reduce displacement through the bidding process, requiring bidders to demonstrate how they would generate additionality and minimise displacement from other locations.”

We are already seeing positive evidence of new investment at free ports. For example, DP World announced an investment of £300 million to support the Thames free port.

It is prudent to work within these existing frameworks so that we can get a holistic view of the success of free ports. We believe that conducting the review less than six months from when the relief comes into effect will produce an incomplete dataset and will not give a fair reflection of the policy. With this explanation and these reassurances, I hope that the noble Baroness will withdraw her amendment.

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[Viscount Younger of Leckie (Con)]

My Lords, Amendment 4, tabled by the noble Lord, Lord Tunnicliffe, and supported by the noble Baroness, Lady Kramer, seeks to extend the veterans relief from one to three years, as has been pointed out.

Stable and fulfilling employment is a vital part of a successful transition from the Armed Forces to civilian life. The Government provide an effective career transition package to service personnel leaving the Armed Forces, which, the latest figures indicate, supports 84% into employment. The training, experience and resources available to service personnel ensure that veterans have a valuable skill set to offer employers, as the noble Lord, Lord Tunnicliffe, described so eloquently. However, 7% of veterans using this service remain unemployed up to a year after leaving the Armed Forces.

The noble Lord and the noble Baroness both put it well. To an extent, their thoughts chime with mine. This relief has been introduced to support veterans as they transition into civilian life and to encourage employers to utilise the vast skill sets of veterans. Between 10,000 and 15,000 people leave the Regular Armed Forces each year; their employers will be able to benefit, in the 2021-22 tax year, from up to £5,500 worth of relief.

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”. The Government have also established an Office for Veterans’ Affairs and have launched initiatives including the Civil Service’s guaranteed interview scheme for veterans. In March 2021, the Government also announced the Op COURAGE service, creating a single point for veterans to access mental health services, and NHS England published Healthcare for the Armed Forces Community: A Forward View, which included commitments to help the transition to civilian life and to improve veterans’ and their families’ mental health.

Although the free port relief is available for three years, as is well known, employers of veterans have a higher threshold before they pay any NICs. These reliefs have been designed in this way because they serve fundamentally different purposes. The free port relief is part of the Government’s levelling-up agenda and is aimed at incentivising long-term investment and employment growth. By contrast, the veterans relief is aimed at reducing the barriers to employment that some veterans face when they leave the forces to transition into civilian life. Therefore, it provides a relief for a shorter duration but at a higher threshold, providing employers up to £5,500 in savings per veteran they employ, as was mentioned earlier.

The Government 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 this relief was a positive step towards supporting the recruitment of veterans and could break down the barriers and negative perceptions surrounding veterans. The cost savings were also welcomed by stakeholders, with the Federation of Small Businesses and X-Forces Enterprise jointly welcoming the announcement.

If such an amendment were passed by this House, it would reduce receipts into the National Insurance Fund and therefore create a cost to the Exchequer. Financial matters are normally the responsibility of the other place, as both the noble Lord and the noble Baroness will know. With those reassurances and broader explanation of why we see one year as appropriate as opposed to three years, I hope that he will withdraw his amendment.

[Lord Tunnicliffe (Lab)]

My Lords, I acknowledge that the Government have made some good progress in improving the services to veterans, but the noble Baroness, Lady Kramer, touched on an important point about the social form of support. We are not talking about a single firm; we are talking about a three-year period to adjust. It is all very well to say that many veterans leave the forces with attractive skills, but a rather important number of veterans leave with the skill of how to kill people, and there is not a great deal of call for that in civilian life. A very structured society under military laws has, in a lot of cases—not the majority, by any means—been good for people who come in with a difficult lifestyle and a certain waywardness; it works for them. But if they come into the civilian world and that falls away, without a specific set of skills they find it difficult.

We are talking about not just settling down but building up a CV in these three years. As I said, I conversed with some individuals, and a point made to me by one person—it was some time ago—was that his CV for employers was rather weak. He needed to prove not only that he was a good chap in the military but that he had been a good citizen in perhaps not particularly exciting jobs, which then allowed his career to progress. I would hate the Government to get into a position where they had to argue for this programme being, in a sense, underfunded—that they thought it generally speaking a good idea, but would look too mean and, in saving a little, would allow victory to escape. As ever, I beg leave to withdraw the amendment.

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[Lord Tunnicliffe (Lab)]

My Lords, I will not make much of a speech because it would dilute the excellence of the points made in the debate so far. It seems that we are on an edge here; if we do not do something about this, we will throw away these terms. They will become meaningless unless we preserve them.

There is a big debate about what I loosely call hypothecation, and so on; sometimes we wander into it and sometimes we do not. However, if you are going to wander into this area, you should keep it clean. The use of this fund in this way pollutes the concept and is a retrograde step. I hope that the Government will think twice about it. We do not object to what is being done in the Bill but, somehow or other, a device needs to be found to keep these terms clean. I support the amendment.

[Viscount Younger of Leckie (Con)]

My Lords, I thank the noble Lord, Lord Davies of Brixton, for raising these interesting points. I hope that I can provide for him, as I wish to do, a full and rounded answer.

This amendment seeks to ensure that the National Insurance Fund, or NIF, remains in good health by allowing a transfer of funds from the consolidated fund to account for the reduction in revenue as a result of the zero-rate relief in secondary Class 1 contributions as introduced by the Bill for employers of free ports employees and the employers of forces veterans. I would like to explain to noble Lords why the Government consider that such an amendment is unnecessary. However, to start with, it may be helpful to provide some background on how the National Insurance Fund operates. Obviously, this is for the benefit of the Committee; I am aware that the noble Lord, Lord Davies, will be well versed in this particular matter. I will not go into the history too much, but it may be helpful for the Committee.

The majority of NICs receipts are deposited into the NIF, which in turn funds most contributory benefits, including the state pension. The NIF is funded on a collective basis, meaning that today’s NICs receipts pay for the benefits being paid today. In 2021-22, the Government Actuary’s Department estimated that total NICs receipts in the NIF would equate to approximately £122 billion, exceeding the £112 billion in benefit payments and associated costs. The cost of the veterans and free ports reliefs are therefore small in comparison to the NIF’s surplus and will not impact on the NIF’s ability to pay out contributory benefits.

Furthermore, the Government already have an established process in place to ensure that the NIF always maintains a sufficient working balance to continue to pay out contributory benefits. It has been the practice since 1983 to maintain a balance of at least one-sixth of projected annual benefit expenditure—in broad terms, two-months’ worth of benefit expenditure—to be able to deal with unexpected contingencies. As the NIF has no borrowing powers, Section 2 of the Social Security Act 1993 permits the Treasury to pay a grant from the consolidated fund into the NIF up to a specified percentage, at almost 17%, of estimated benefit expenditure.

Before the start of each financial year, the Government use the information provided by the Government Actuary’s Department in its uprating report to determine a ceiling for the grant that may be paid in the following year which is then subject to approval by Parliament. For example, in the 2021-22 financial year, the Government legislated for a Treasury grant provision of 17%, although, given the current surplus of the NIF, this provision is not needed to be drawn upon. This secondary affirmative legislation was debated by noble Lords on 8 February 2021. Therefore, we feel that such a provision that the noble Lord has proposed is unnecessary as the Government already have the ability to top up the National Insurance Fund should they need to.

A wider point has been made, particularly by the noble Baroness and the noble Lord, Lord Davies, on the legitimacy of this. However, there are already reliefs in the NICs system with regard to the employment allowance, the under-21 relief and the under-25 apprentice relief. I therefore reassure the Committee that this policy and the thinking behind it is not new, and that obviously it is used for different purposes.

Finally, if such an amendment was passed by this House, it would likely engage the financial privilege of the other House.

With those assurances, I hope that the noble Lord will withdraw the amendment in his name.

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[Lord Tunnicliffe (Lab)]

My Lords, once again, I welcome the various amendments tabled by the noble Baroness, Lady Kramer. I am pleased to support them and remain disappointed that the Government are refusing to accept any of the DPRRC’s modest suggestions. As with the previous amendment on this topic, we will hear the Government’s defence arguments for these additional delegated powers. The Minister suggests that, in relation to Clauses 3(1) and 6(6), considering the extension of NICs relief beyond the original end dates is somehow not a worthwhile use of parliamentary time. I am not sure why the Minister feels able to speak on behalf of Parliament in this matter. I can assure him that I would find a debate on the opportunity cost of extending NICs reliefs for free ports far more worthy of debate than some of the very narrow debates we hold on Treasury instruments subject to the affirmative procedure. He may counter that I and the noble Baroness, Lady Kramer, would be welcome to table regret Motions, but this ignores the principle that Parliament should be afforded a proper scrutiny role when it comes to the use of public finances. I will not go through each of the other justifications in the Minister’s letter to the chair of the committee, but suffice it to say that I am yet to be dissuaded from backing the committee’s recommendations.

[Viscount Younger of Leckie (Con)]

My Lords, I thank the noble Baroness, Lady Kramer, who is back on her feet again, and the noble Lord, Lord Tunnicliffe, for their contributions. These amendments are in response to the Delegated Powers and Regulatory Reform Committee’s report. I am grateful for its report and sympathetic to its arguments for the importance of parliamentary scrutiny and consistent publication of primary and secondary legislation. However, the Government believe that the current procedures remain appropriate and that these amendments are therefore unnecessary. I have listened carefully to the remarks from the noble Baroness and the noble Lord and, as they would expect, would like to give some explanation for our reasons, at some length.

Amendment 6, tabled by the noble Baroness and the noble Lord, would make the power in Clause 10(2)(d) subject to the negative procedure, rather than no procedure. I will explain to noble Lords some of the context to this power. Lump sum payments of £500 are available to be claimed under separate schemes in England, Wales and Scotland for people who have been asked to self-isolate by the relevant authority, but who cannot work from home and will suffer financial consequences as a result. Of course, this is subject to the eligibility criteria of the relevant scheme. Payments are intended to provide additional financial support during periods of self-isolation.

Regulations have already been introduced under existing powers in Section 3 of the Social Security Contributions and Benefits Act 1992 to exempt these payments from NICs for employees and their employers. Therefore, all that Clauses 10(1) and 10(2)(a) to (c) do is specify that the schemes specified are also exempt from self-employed NICs, ensuring consistency. The Government believe that the power designating self-isolation support schemes to be exempt from self-employed NICs is narrowly drawn in that such schemes have to provide support for those who cannot work due to self-isolation. In addition, the Government’s intention is that they will use this power only where further regulations are made to exempt payments from possible similar future schemes from NICs for employees and their employers.

I want to pick up on that point, because the noble Baroness, Lady Kramer, asked how different such a designated scheme would be from those on the face of the Bill. I pick up on the word “similar”, which has been used to provide some flexibility as to the details of any future scheme. This is because the changing circumstances of the pandemic may mean that the detail of a scheme, for example its eligibility criteria, needs to be adapted to account for the latest situation faced by individuals required to self-isolate. Indeed, the three schemes specified on the face of the Bill have changed in their particular detail since introduction and are not identical to one another.

The Government are also of the view that, as the power to designate is necessary to be able to respond to the changing circumstances of the coronavirus pandemic as quickly as possible, the current parliamentary procedure is right given the current circumstances and means that the legislation can be introduced more quickly than the other side of the coin, which is a statutory instrument subject to the negative procedure.

Amendments 8 and 9, tabled by the noble Baroness, Lady Kramer, and supported by the noble Lord, Lord Tunnicliffe, would make the powers in Clauses 3(1) and 6(6) to extend the end dates of the free ports and veterans relief, and the power in Clause 3(2) to treat a condition of the free port relief as being met, all subject to the affirmative procedure. They are currently subject to the negative procedure. These amendments are also in response to the DPRRC’s report.

The powers in Clauses 3(1) and 6(6) provide flexibility for the Government to extend the reliefs past their current end date. In particular, the power relating to the free ports relief will allow the Government to extend the relief after a review into its effectiveness in meeting its policy intention in 2026, although any extension would be no further than 5 April 2031. Before they are extended, the Government will carry out an evaluation of the reliefs to ensure that they are effective. This takes us back to a previous debate. Once they have been evaluated, and should the Government’s view be that the reliefs should be extended, we believe that the negative procedure offers the opportunity for sufficient parliamentary scrutiny without using more of Parliament’s time than is necessary.

The Government believe that the powers in Clauses 3(1) and 6(6) should continue to be subject to the negative procedure. Both powers are wholly relieving and, as I set out, where this is the case, regulations are usually subject to the negative procedure. To be absolutely clear, the powers cannot be used to decrease the amount of relief that an employer can claim.

As to how the power in Clause 3(2) may be used, the department’s delegated powers memorandum gave an example of cases where people with certain protected characteristics are unable to meet the rule that, to be eligible for the relief, employees must spend at least 60% of their working time in the free port site. For example, a health condition or pregnancy may mean that an individual needs to work just from home for periods of time. The effect of these regulations would be to treat the 60% as being met so that the relief applies to employees who may not otherwise qualify.

In this case, the negative procedure also allows the Government to react much more quickly than if the affirmative procedure applied if external factors become apparent that would prevent employers qualifying for this relief. With that slightly extended response, I hope these reassurances will cause the noble Baroness to withdraw her amendment.

--- Later in debate ---

[Lord Tunnicliffe (Lab)]

My Lords, I welcome the tabling of this amendment and hope the brevity of my contribution is not taken as evidence to the contrary. Amendment 7 asks the Government to publish guidance relating to the operation of Clause 11. It is my understanding that such guidance will indeed be published later this year; I would be grateful if the Minister will confirm that and perhaps give us some idea of when this year. I hope that, with the guidance, there will be a more general update on the Treasury’s and HMRC’s work in this area.

[Viscount Younger of Leckie (Con)]

My Lords, I thank the noble Baroness, Lady Kramer, once again, for her contribution. I hope to persuade her, with the information that I am about to provide, that her amendment is unnecessary. On this occasion, my remarks will be relatively short.

I am pleased that the noble Baroness has raised this point, because communication is extremely important. HMRC will be publishing detailed guidance which will cover the changes to the DOTAS regime, explaining when HMRC can issue a notice requiring promoters or suppliers in the avoidance chain to provide information on suspected avoidance schemes. It will also explain what will happen if they do not provide information, or where they do and HMRC considers the scheme is notifiable, the issue of the scheme reference number—the so-called SRN—their right of appeal against the issue of the SRN, and their right to make representations before HMRC publishes details. Finally, the guidance will explain the obligations of the promoter or supplier if the SRN is not withdrawn.

I can say to the noble Lord, Lord Tunnicliffe, that the new guidance is anticipated for the end of February this year, but it will not adversely impact small businesses that do not participate in avoidance schemes.

I turn to a question from the noble Lord, Lord Sikka —and I appreciate his late intervention and contribution in Committee. First, he asked why NICs are not due on unearned income. He may know this, but national insurance contributions are part of the UK’s social security system, which is based around the long-standing contributory principle and centred around paid employment and self-employment, with employers, employees and the self-employed paying towards the protection of those who have been in the labour market. Payment of NICs builds an individual’s entitlement to claim contributory benefits, which then replace earnings in certain circumstances—for example, if someone is unable to work or, indeed, has retired. Unearned income is generally excluded from liability to NICs, as it is not derived from paid employment.

The noble Lord also asked about tackling the promoters of tax avoidance and what success had been had in that regard. I took note of his points about DOTAS and appreciate his raising this issue. HMRC has undertaken more than 500 compliance interventions on promoters and their supply chains—that takes account of the year 2020-21. However, there is no single approach that will force all promoters to leave the market, and it requires a multipronged approach. This includes HMRC prioritising the most active promoters and their supply chains, and vigorously challenging schemes and promoters under the disclosure of tax avoidance schemes, or DOTAS, as we are discussing today, the promoters of tax avoidance schemes, or POTAS, and the enablers regime. The Government have taken strong action to tackle tax avoidance and those who promote it, introducing a number of anti-avoidance regimes that have helped reduce the avoidance tax gap from £4.7 billion in 2005-06 to £1.5 billion in 2019-20.

I hope that, with those answers, the noble Baroness will withdraw her amendment.

Civil Partnership (Scotland) Act 2020 and Marriage and Civil Partnership (Scotland) Act 2014 (Consequential Modifications) Order 2022

Debate between Viscount Younger of Leckie and Lord Tunnicliffe

Tuesday 14th December 2021 Grand Committee

[Lord Tunnicliffe (Lab)]

My Lords, I am struggling in a sense with this Scottish stuff. I suppose it shows that I do not really understand the devolution settlement. My simple idea is that the settlement says, “Scotland can do what Scotland wants to do, except where powers are reserved to the United Kingdom as a whole”. It seems that what we have in this order means that, to achieve that, reserved law sometimes interferes at the edges. If one is respecting the devolution settlement, one should accede to the requests of the Scottish Government to change this stuff around the edge to meet what Scotland wants to do. Once again, I do not think it is really our business whether what Scotland wants to do is a good or bad idea.

I was not helped on this order because I did not have the training, mind or history of the noble and learned Lord, Lord Hope. I always enjoy him presenting his ideas on these occasions. Unfortunately, I did not really grasp the SI. I read it—no, let us be realistic. I read the Explanatory Memorandum several times, but I just could not keep up with the interrelationships.

Another thing I am sensitive about in the Scotland situation is that to blunder into such sensitive areas and make any comments on the substance of what the instrument is trying to achieve is probably unwise because one could, at the end of the day, create offence. Accordingly, I shall refrain from commenting on the substance. I have only one question: the Explanatory Memorandum says at its beginning that it is created by the Scotland Office, but it reads as if it is a consensus document between the Scotland Office and the Scottish Government. Who fundamentally created this statutory instrument? That is: whose ideas were they, and it is in fact a consensus document between the Scottish and UK Governments? If it is, I can see no way in which the SI adversely affects the UK-wide legislation, which I believe is the limit of our concerns. Accordingly, we support this statutory instrument.

[Viscount Younger of Leckie (Con)]

Again, I thank the noble Lord, Lord Tunnicliffe, and the noble and learned Lord, Lord Hope, for their support for this order. I also welcome the noble Lord, Lord Tunnicliffe, as I should have done before, into Scottish matters. I am sure he is being extremely humble and knows a lot more than he is giving out. As I come originally from north of the border and know that the noble and learned Lord, Lord Hope, does so too, we are reasonably well versed in this. However, the noble Lord is very welcome indeed.

I also say at the outset that I was very interested to hear the remarks of the noble and learned Lord. I am well aware of his experience, and it was very interesting to hear his real-life example. He spoke movingly about how, in that example, the issue revolved around and focused on how children are treated and cared for. He raised a question about children’s rights in this respect. I shall obviously have to write to him about the specific issue he raised, which is a legal issue, and I will copy in the noble Lord, Lord Tunnicliffe, rather than trying to cobble something together this afternoon.

I am not sure that I have all the statistics that the noble and learned Lord asked for. I have the statistics for the number of people in civil partnerships or marriages going through gender recognition, and I think that might have been part of what he was asking for. It is too soon to produce statistics which are available on the number of people in civil partnerships who obtain gender recognition. However, in 2020-21, the gender recognition panel granted 427 gender recognition certificates. Of those, 33 were granted to married people and 394 to single people. The gender recognition panel does not produce separate figures on the number of applications for gender recognition from Scotland. However, we estimate—and it is an estimate —that there are about 25 applications a year from Scotland. As I said earlier, it is too early to give definite figures, but that might give an indication.

I come to some points raised by the noble Lord, Lord Tunnicliffe, on the interrelationship between the UK Government and the Scottish Government. I mentioned earlier that the Scottish Government and the UK Government came together to produce this. It is a consensus document; I can definitely confirm that. I do not know who wrote it, but I think I am right to say that it was the UK Government. It is our job to take this through, but it is with the consensus of the Scottish Government. On the nuance of that, I will write in the same letter to confirm precisely how it came together. I can say that confirmation that the two Governments are working well together is clearly there.

I think I have answered the questions as far as I am able. In closing, I hope that we can now take this forward, and I therefore beg to move.

Consumer Scotland Act 2020 (Consequential Provisions and Modifications) Order 2022

Debate between Viscount Younger of Leckie and Lord Tunnicliffe

Tuesday 14th December 2021 Grand Committee

[Lord Tunnicliffe (Lab)]

My Lords, this is a bit of a maiden speech, in that I must have done at least 100 SIs over the past years, especially in that wonderful rush towards leaving the EU, but I have managed to avoid Scottish SIs until today. As a result, I found reading the SI and the Explanatory Memorandum something of a challenge. Everything I now say may be rubbish, because I might have got it wrong, but I do not really think that we are here to discuss the merits of Consumer Scotland.

It seems to me that the Scottish Government created Consumer Scotland, and as far as I can see that is their business, and they have to be accountable to their electorate over whether it is a good or a bad thing. To do its full job, as I understand it, it needs to take over responsibility of Citizens Advice Scotland with respect to energy, postal services and water, because they are not devolved areas, and therefore it is our responsibility to agree that these non-devolved areas shall be given to Consumer Scotland. As I said, to do this, it needs our authority, because those areas are not devolved. This oversight activity seems to have worked in the past with Citizens Advice Scotland, and I have no reason to believe that it will not work as well with Consumer Scotland. Our only interest should be whether those transfers will bring harm to those services in the rest of the UK—and, frankly, I do not see how it can possibly produce any harm.

As far as I can see, the other parts of the SI seem to be technical in nature, and we have no interest in whether Consumer Scotland is a good or a bad thing. That is the responsibility of the Scottish Government. I therefore fully support the draft instrument.

[Viscount Younger of Leckie (Con)]

I start by thanking both noble Lords for their general support for this order. Our amendments to the UK legislation made through this Scotland Act order will enable, as I hinted —or said—earlier, effective implementation of the Scottish Government’s decision to establish Consumer Scotland.

The few questions that arose were over the relationship and to do with the changes, and I hope that I can answer them. The noble and learned Lord, Lord Hope of Craighead, asked whether the advice function would continue to be performed in Consumer Scotland. I shall give the noble and learned Lord a little more detail on this. Consumer Scotland, as it will be called, will have five key functions. The first is a general function to provide consumer advocacy and advice—so the word “advice” is definitely in there. Secondly, it has a representative function to provide advice—again, it says “advice”—information and communication to other public bodies on consumer advocacy. Thirdly, it has a research and investigation function to research consumer matters and conduct investigations into consumer harm. Fourthly, it has an information function to provide public-facing consumer advice and information; and, finally, a recall of goods function, which will allow for the managing of records of recall of goods. As the noble and learned Lord will know, that is something that has been in England for some time.

I just add that Citizens Advice Scotland will still operate in Scotland. It will remain an important partner for Consumer Scotland and the Scottish Government in tackling consumer issues, providing advice to individuals and in a range of other areas, as I mentioned earlier, including social security and tackling poverty.

I shall try to answer a question from the noble Lord, Lord Tunnicliffe, on how the body might differ, and I shall perhaps add to what I have been saying. The 2020 Act created an independent consumer champion dedicated to representing the interests of consumers, so it will be a source of expertise, focused on advocating for change on issues that particularly affect people in Scotland. It will recognise Scotland’s distinct circumstances, such as its rural population and devolved industries. That would include matters of transportation, which I suspect will be of interest to the noble Lord, and the fact that there are particular specific issues in that respect for Scotland. I hope and believe that Consumer Scotland will create better outcomes for citizens in Scotland.

I hope that that gives a little bit more meat to the bones on the questions raised. To close, our support for the Scottish Government on the establishment of Consumer Scotland demonstrates Scotland’s two Governments working very well together, and the commitment of this Government to strengthen the devolution settlement. I hope that with those remarks, this order will be passed, and I commend the order to this Committee.

Solvency 2 (Group Supervision) (Amendment) Regulations 2021

Debate between Viscount Younger of Leckie and Lord Tunnicliffe

Tuesday 7th December 2021 Grand Committee

[Viscount Younger of Leckie (Con)]

My Lords, I beg to move that the Committee considers the Solvency 2 (Group Supervision) (Amendment) Regulations 2021. This instrument is being made to address deficiencies in retained EU law relating to the supervision of UK insurance groups under the insurance prudential regime known as Solvency II.

The onshoring of large amounts of EU legislation into domestic law was a vast, complex and time-pressured process. I hardly need remind your Lordships that over 60 statutory instruments were passed; one of these related to Solvency II. This was not an easy feat, since Solvency II is a particularly technical and complex regime, so it is unsurprising that, among the sheer volume of complicated work, there was an oversight that means a technical fix now needs to be made. By this instrument, we are taking action now to ensure that this oversight is addressed well before any potential issues materialise from 1 April 2022.

I will explain what the instrument does and why it prevents a cliff edge on 1 April 2022. The UK Government have made equivalence decisions which assess that the insurance group supervision regime in another country, a so-called third country, is equivalent to the UK. To date, Bermuda, Switzerland and the EEA countries have been determined to be equivalent to the UK for the purpose of insurance group supervision. This instrument will ensure that the UK Government’s equivalence decisions achieve in full the objective of avoiding unnecessary duplication of supervisory work.

I will give a practical example of the type of duplication this instrument seeks to remove. Where a waiver is granted by the PRA, a UK subgroup that is supervised at ultimate parent level by an equivalent supervisor will not need to submit quarterly and annual group reporting templates to the PRA, or prepare an annual report known as the “own risk and solvency assessment”, or publish an annual group report known as the “solvency and financial condition report”.

Using a typical large insurer as an example, I will illustrate how extensive these submissions are and the time and cost savings this instrument may achieve. The solvency financial and condition report of a large insurer can be over 100 pages long. It has qualitative and quantitative materials and sets out aspects of the insurer’s business and performance, system of governance, risk profile, valuation methods used for solvency purposes, and capital management practices. The production of such a report requires analysis and co-ordination by experts in multiple disciplines such as actuarial, finance, accounting, internal audit, IT and risk management, not to mention board and senior management input and review. I stress that this is only one example of the supervisory compliance materials that we are seeking to remove.

The costs of duplication would vary from firm to firm but comprise initial one-off costs as well as ongoing costs as high as £500,000 per annum. Without this instrument, the UK subgroup must duplicate these materials at the UK subgroup level, when its parent already produces equivalent materials for submission to the third country supervisory authorities. The advantages are: reduced regulatory compliance cost for the insurance groups; reduced supervisory cost for the PRA; and reduced need for co-ordination between third country supervisory authorities and the PRA where duplicative materials are being reviewed.

The statutory instrument affects UK insurance groups whose parent companies are domiciled in equivalent third countries. Such insurance groups are supervised at two levels: the UK insurance group level is supervised by the PRA, and the ultimate parent group level, the so-called worldwide group, is supervised by the supervisory authority in the relevant third country. Currently, a total of 11 insurance groups are expected to benefit from this instrument. Of the 11, five have parent companies in EEA countries and six have parent groups in Switzerland or Bermuda. Examples of such groups include AXA, Allianz, Ageas and Hiscox. To take Hiscox as an example, it has headquarters in Bermuda and is listed on the London Stock Exchange. With this instrument, the PRA may rely on the supervisory authority in Bermuda to conduct group supervision of the entire group, of which the UK subgroup of Hiscox is a subset.

I assure noble Lords that this is not a relaxation of prudential standards; the proposed changes aim to provide full effect to the Treasury’s equivalence determinations. Although the UK group supervisory requirements are waived, the main safeguard for UK policyholders remains. This main safeguard is the continued supervision of solo UK entities belonging to these UK subgroups. This supervisory work cannot be waived.

In addition to this main safeguard, UK policyholders are further protected via the requirement for UK subgroups to submit supervisory materials to the PRA, where necessary, beyond the reliance that the PRA may place on equivalent supervisors. For example, UK subgroups are still expected to submit the annual consolidated statutory accounts to the PRA. They also need to notify the PRA prior to taking certain actions, such as the acquisition or disposal of subsidiaries and changes to existing borrowing facilities. This ensures that the PRA is still able to protect UK policyholders while supervising the solo UK entities belonging to such groups in a proportionate manner.

The instrument enables the PRA, when certain conditions are met, to defer to third country supervisory authorities, if the UK has determined that the third countries are equivalent for the purposes of insurance group supervision. The conditions are: where compliance by firms would be overly burdensome; and where waiving the requirements does not adversely impact the PRA’s advancements of its objectives. In this circumstance, the PRA may disapply or modify regulatory requirements, which amounts to issuing waivers to UK insurance groups. In effect, the waivers exempt these UK insurance groups from demonstrating to the PRA compliance with Solvency II group supervision requirements at the UK subgroup level. This is in recognition that compliance at the UK subgroup level has already been supervised by virtue of being a subset of the ultimate group that is supervised by the equivalent third countries.

Pre-EU exit, the European Insurance and Occupational Pensions Authority issued guidelines to allow EEA supervisors to issue such waivers. It was under such guidelines that the PRA was able to issue waivers to affected UK insurance groups pre-EU exit. However, these guidelines ceased to have effect in the UK following EU exit. Consequently, existing waivers are due to expire on 31 March 2022, and this statutory instrument confers on the PRA the power to issue new waivers.

On 2 December 2021, in its 22nd report, the Secondary Legislation Scrutiny Committee listed this instrument as an “instrument of interest”. The report noted

“the absence of a level playing field”

in that

“while the UK has granted equivalence to the EU in relation to the supervision of insurance groups, the EU has not reciprocated.”

While that is true, I urge the Committee not to conflate two separate matters. Equivalence determinations are made by the UK and the EU unilaterally. One decision is within the power of the UK Government, and another is beyond the power of the UK Government. Where the UK Government have unilaterally determined equivalence, we have a duty to ensure that our decisions are meaningful and achieve their objectives in full. This instrument ensures that we do not undermine our own equivalence decisions with deficiencies in our domestic law. So, rejecting this instrument does not increase the probability of the EU reciprocating equivalence decisions. Conversely, it would penalise UK insurance groups and our regulator by increasing regulatory compliance and supervisory cost.

After that rather full explanation, I conclude by saying that the Treasury has worked closely with the PRA in drafting this instrument. It has also engaged with the UK insurance industry through its industry body, the Association of British Insurers—ABI. The ABI has informed the Treasury that the industry welcomes this statutory instrument and has no concerns with it. I beg to move.

[Lord Tunnicliffe (Lab)]

My Lords, I appreciate the Minister’s introduction of this second statutory instrument. It is a somewhat simpler SI than the previous one but will nevertheless be important in the day-to-day regulation and operation of insurance groups.

As the Minister outlined, the regulations make a series of changes to ease the regulatory burden on the Prudential Regulation Authority—PRA. This is intended to save costs for both the regulator and insurance groups themselves. Under the new arrangements, the PRA would be able to defer to the decisions of the regulatory body or bodies of relevant third countries in certain circumstances. In practice, this is likely to be EU bodies, although the provisions cover non-EU third countries too. Where third countries have been deemed a regulatory equivalent to the UK and happen to host the parent company of a PRA-regulated insurance group, the PRA may choose to defer to relevant decisions made in the other jurisdiction, avoiding unnecessary duplication of work and costs.

Customs Safety and Security Procedures (EU Exit) (No. 2) Regulations 2021

Debate between Viscount Younger of Leckie and Lord Tunnicliffe

Tuesday 7th December 2021 Grand Committee

[Viscount Younger of Leckie (Con)]

My Lords, we are here to discuss a statutory instrument related to the introduction of customs controls. I note that this instrument was included for information in the Secondary Legislation Scrutiny Committee’s 22nd report of the Session 2021-22, although it was not drawn to the attention of House. This instrument will also be debated in the other place tomorrow.

The instrument delays for a further six months the introduction of safety and security declarations on the movement of goods into Great Britain where they were not required before EU exit. The Government are introducing it as part of a programme of measures to phase in the introduction of border controls in order to provide relief to businesses given the unforeseeable and ongoing impact of Covid-19 on businesses and global supply chains. The waiver extension will provide more time for businesses that move goods into Great Britain from the EU to prepare for new customs requirements. This is to avoid potential disruption to UK supply chains and at our borders. With this extension, safety and security declarations on these imports will be required from 1 July 2022, instead of the start of next year.

I will now focus on the detail. The UK’s approach to safety and security requirements in its customs regime is governed by the overarching principles in the World Customs Organization’s SAFE framework of standards. The SAFE framework aims to support and facilitate secure supply chains and trade at a global level, while helping to tackle movement of illicit goods such as drugs and weapons. It requires customs authorities to collect and risk-assess data on the movement of goods before they arrive in or depart their customs territories. The data adds to other intelligence sources to keep borders secure. Business and traders are required to provide data in the form of safety and security declarations.

Since the transition period ended on 31 December last year, most traders moving goods from Great Britain to the EU have been required to submit safety and security data on their movements. This has contributed to the intelligence available to Border Force to help it target checks effectively. The EU also requires safety and security declarations on imports and exports. It is worth mentioning that, following the end of the transition period, Border Force and the Home Office continue to co-operate closely with EU authorities and other law enforcement partners overseas to protect our communities and keep our borders secure.

At the end of the transition period, safety and security declarations also became due on imports to Great Britain from the EU. However, the Government granted a temporary waiver, meaning that goods imported into Great Britain from the EU, and from other territories such as Norway, where declarations were not required previously, do not need safety and security declarations. This waiver was designed to give businesses more time to prepare for the introduction of new border controls, and was part of the so-called phased approach, introducing customs controls in stages.

I make it clear that there is no safety or security concern arising from this waiver. While safety and security declarations provide information used to help risk-assess goods entering and leaving Great Britain, they are not the only way we can manage these risks. Other forms of intelligence continue to be used to keep our borders secure, as they were before EU exit, when safety and security declarations were not required for these movements.

Safety and security declaration requirements for these movements were due to be introduced from 1 January 2022. However, as noble Lords will know, in September, the Government announced that we would grant an extension to the current waiver. This extension is due to last for six months. The waiver will now end on 30 June 2022, meaning that safety and security declarations will be required for these imports from 1 July 2022.

This measure does not have any impact on the safety and security declarations required on goods moved from the rest of the world, which are already being submitted.

The extension has been designed to support businesses facing challenges in preparing for this new declaration requirement due to the unprecedented disruption caused by the Covid-19 pandemic. It will benefit UK-based businesses, but we are thinking beyond our own borders. The additional time will be particularly helpful for smaller hauliers, who may not speak English as a first language and are likely to have suffered from a lack of resource. The pandemic has had longer-lasting impacts on businesses than many observers expected—both in the UK and around the world. Giving businesses more time to prepare for new customs requirements will help avoid potential disruption to our borders and supply chains, and protect UK manufacturers and consumers.

Safety and security declarations were not required for imports from the EU before exit day. As a result, this extension will not significantly increase security risks to the UK. Border Force will continue to use intelligence sources to risk-assess the movement of goods and to secure our borders in the same way as it does now.

This instrument does not affect safety and security requirements in Northern Ireland. Northern Ireland remains aligned with the EU’s safety and security zone, as governed by the terms of the Northern Ireland protocol. This means that there are no safety and security requirements for goods moved between Northern Ireland and the EU.

This instrument also has no effect on safety and security declaration requirements for goods imported from the rest of the world, for which these declarations will continue to be required.

In conclusion, this waiver on the requirement to submit safety and security declarations will allow us to support businesses affected by Covid-19 and related global supply chain issues. It will give them additional time to prepare for the new requirements. I beg to move.

[Lord Tunnicliffe (Lab)]

My Lords, I am grateful to the Minister for introducing this statutory instrument. It is the latest in a long line of postponements to the introduction of post-Brexit customs controls. I experienced a strong sense of déjà vu when I saw the original announcement of this extension back in September. That sensation returned upon seeing this statutory instrument listed in Forthcoming Business.

I believe this is the first time that the Minister has dealt with this issue, so he will no doubt find it a novel experience. This probably cannot be said for his officials. I am sure that, despite not being able to say so, they are frustrated that they are still dealing with this, rather than turning to other issues.

We are fast approaching a calendar year since the end of the transition period. It is considerably longer since the original withdrawal agreement and accompanying framework for the future relationship were agreed. It is more than six years since the referendum itself. During that time, the UK Government—whether led by Theresa May or Boris Johnson—were clear that the UK would exit the EU single market and customs union and that this would require a variety of new checks as goods entered and exited the country. While the finer points of detail were left until late in the negotiations led by the noble Lord, Lord Frost, on the EU-UK Trade and Cooperation Agreement, the general destination was clear. The Government knew enough to start their work ahead of time. We were told that work was in hand.

We have travelled so far in terms of time elapsed, yet Ministers do not seem to be making a huge amount of progress to deliver on their long-standing promises. HMRC’s justification for this extension is unchanged from the last time we debated this policy: it is to allow industry time to adjust, particularly in the light of the pressures caused by Covid-19 and the wider supply chain disruption.

I am completely in favour of supporting industry through challenging times, but even here the Government’s response has been lacking. Of course, this is just one part of a package, but that package has been criticised by various sectors, including agriculture and the road haulage industry. When we first debated waiving various import and export requirements in 2019, we were told that the powers were a contingency measure that would likely not be needed. But not only were they enacted, they were then extended. We as the Opposition probed the Government on their longer-term plans and ambitions but were supportive of the instrument. I feel that HMRC’s reasoning is beginning to wear thin, but it certainly has been an exceptional time for UK businesses.

My issue with this latest SI is not the Government’s decision to further extend this rather limited import declaration waiver but their complete lack of openness. Back in June, the Minister, the noble Lord, Lord Agnew, said very clearly:

“The Government do not plan to extend these waivers any further. Traders will need to comply with full safety and security declarations on exports from 1 October 2021 and on imports from 1 January 2022.”—[Official Report, 22/6/21; cols. GC 58-59.]


What went wrong? While we are now responding to the arrival of a new strain of Covid-19 with some modest measures, we have been free of curbs on business activity for several months. Although supply chain issues continue to bite, the Government have done what they can, or so we are told, to ease the pressures on business.

I appreciate that the Minister has not responded to previous debates on this topic but could he please provide a full, honest rationale for this new extension? Is it really related to the pandemic and wider supply chain issues, or is it actually about the readiness of new inland customs facilities or even the IT systems they rely on? Bearing in mind that the Government have been wrong on this before, does the Minister expect this to be the final extension, or is it possible that we will see the waiver run until September or December 2022?

[Viscount Younger of Leckie (Con)]

Well, my Lords, I have taken part in many debates since I entered the House in 2010 but this one represents a record in that there is only one other Peer here for me to address. I am extremely pleased that that happens to be the noble Lord, Lord Tunnicliffe, whom I thank for his remarks, and I hope I can fully answer his questions.

The instrument proposes a further six-month extension to the waiver on safety and security declaration requirements that would otherwise apply to imports to Great Britain from the EU. In 2020, the UK imported £301 billion worth of goods, from mechanical parts to fresh produce, from the EU. This was 50% of all UK imports. Given the disruption caused by the pandemic, we are keen to ensure that traders have time to prepare for new customs requirements, which will protect UK supply chains and consumers.

After those opening remarks, I shall seek to answer—I hope in full—the questions and observations raised by the noble Lord. He quite rightly noted that, during previous debates, the Government said that we would not extend this waiver and that traders would have to comply with full safety and security declaration requirements on all exports from 1 October 2021 and on imports from 1 January 2022, as I mentioned in my opening speech. However, I assure the noble Lord that traders have been complying with full safety and security declaration requirements on all exports since 1 October 2021, when that waiver ended. A huge amount of work went into ensuring that businesses were ready for those requirements, and they have been operating successfully, without disruption, since October.

National Insurance Contributions Bill

Debate between Viscount Younger of Leckie and Lord Tunnicliffe

2nd reading
Wednesday 1st December 2021 Lords Chamber

[Viscount Younger of Leckie (Con)]

I was not aware of the first part of the noble Baroness’s question but I will certainly look into that and write to her on the specific issue.

On the report of the Delegated Powers and Regulatory Reform Committee, which was mentioned by a couple of Peers, I repeat what I said earlier on this, which is very important. The Government are carefully considering the recommendations made by the committee and we are taking what it said with the degree of seriousness that it deserves. As I said earlier, we will write to the committee and keep the House informed on progress there.

[Lord Tunnicliffe (Lab)]

Will that response come in time for us to take account of it as the Bill goes through?

[Viscount Younger of Leckie (Con)]

I asked about that, so I will say yes; we want to get a response as soon as we can. I do not yet have the dates for Committee but I should press to say that we want to get this as soon as possible, and certainly well before Committee.

I will conclude by talking about a point that was raised by the noble Lord, Lord Bilimoria, about investment in the UK, which is a bigger issue that he raised. There are very many reasons to be positive about the UK economy. We have been talking about free ports and NICs relief, but both the OECD and the IMF are forecasting that the UK will have the highest annual growth in the G7 this year. Decisions this Government have taken have provided around £400 billion of direct support to the economy during this year and last year, and the Bill helps towards that.

I thank all noble Lords for their comments. As the noble Baroness, Lady Kramer, said, this was a short debate but it has been quite intense and extremely helpful. I greatly look forward—

House of Lords: Politically Exposed Persons

Debate between Viscount Younger of Leckie and Lord Tunnicliffe

Thursday 25th November 2021 Lords Chamber

[Viscount Younger of Leckie (Con)]

Although the guidelines were updated in 2017, as the noble Lord will know, clearly there is more work to be done on the proportionate way in which PEPs can be handled. As the noble Lord will know, from April 2018 the Financial Ombudsman Service has had jurisdiction to consider complaints about the treatment of PEPs. Since then, the ombudsman has received fewer than 10 complaints in this area, but I am not being complacent about this matter.

[Lord Tunnicliffe (Lab)]

My Lords, I think we are all asking the same question, but it is a question worth asking. Looking into this, I note that the legislation relating to it is the money laundering regulations 2017. I find SIs impenetrable but I find the Explanatory Memorandum more useful. Paragraph 7.16 of the Explanatory Memorandum is so clear:

“The Regulations require firms to assess the risk posed by individual PEPs on a case-by-case basis and tailor the extent of EDD”—


enhanced due diligence—

“accordingly.”


On the prior point, it states:

“Refusing to establish a business relationship or carry out a transaction with a person simply on the basis that they are a PEP is contrary to the letter and the spirit of the law.”


How do Her Majesty’s Government ensure that this requirement is met?

[Viscount Younger of Leckie (Con)]

To be upfront about it, the Treasury is responsible for the money laundering regulations but the regulations are not prescriptive in setting out how firms should carry out customer due diligence. Instead, they require firms to take a proportionate approach commensurate with their assessment of the risk. As I said earlier, clearly there is more work to be done. Customer due diligence allows firms to obtain reasonable satisfactions that customers are who they say they are and that there are no legal barriers, but clearly there is more work to be done on PEPs.

Climate Change Risk: National Audit Office Guidance

Debate between Viscount Younger of Leckie and Lord Tunnicliffe

Monday 25th October 2021 Lords Chamber

[Viscount Younger of Leckie (Con)]

The noble Baroness is right. I assure her that Managing Public Money and the Orange Book require the board of each central government organisation actively to recognise risks and direct the response to these risks, but it is for each accounting officer, supported by the board, to decide how. The board and the accounting officer should be supported by an audit and risk assurance committee to provide proactive support in advising. Regarding the question asked by the noble Baroness on the numbers involved, I will write to her.

[Lord Tunnicliffe (Lab)]

My Lords, I have been privileged to head a couple of nationalised industries and I have always believed that all public bodies have a general duty to enhance the general good. Surely there is no greater general good than the achievement of net zero. Does the Minister believe that the NAO guidance recognises this and, if so, where in the guidance is the cross-government co-operation sufficiently mandated?

[Viscount Younger of Leckie (Con)]

Notwithstanding the NAO guidance, the Government continue to publish their own guidance on climate change risk, including digital articles and blogs and cross-government insights, as well as updates to existing guidance. The Government remain alert to climate change risks when publishing new or updating existing guidance. I assure the noble Lord that the Treasury requires all departments to adhere to the Green Book guidance when providing a business case.

Council Tax

Debate between Viscount Younger of Leckie and Lord Tunnicliffe

Wednesday 15th September 2021 Lords Chamber

[Viscount Younger of Leckie (Con)]

I certainly recognise the wonderful work done. Each council provides council tax reduction schemes for working-age taxpayers. Councils have choices, as they should, about how to design their scheme, reflecting local circumstances. There is a variation in how councils deliver these schemes. For example, some councils offer 100% reductions on their criteria, while others request a contribution from everyone irrespective of income and savings.

[Lord Tunnicliffe (Lab)]

My Lords, earlier this year the Government hiked the amount by which local authorities can increase council tax bills without holding a referendum. This hit family incomes at a time when the Treasury should have been doing everything possible to encourage local spending and stimulate economic growth. With the autumn Budget and the 2021 spending review due shortly, does the Treasury accept the need to properly fund local government rather than placing an increasing burden on working people?

[Viscount Younger of Leckie (Con)]

I certainly cannot second-guess what the spending review would have in it, but I reiterate that local authorities have the flexibility to increase council tax bills in 2021-22 by up to 2%, as the noble Lord will know, without a referendum, and up to 3% for the adult social care precept for social care authorities. In addition, the police and crime commissioners can raise their bills by £15 per person per year.

Northern Ireland (Executive Formation) Bill

Debate between Viscount Younger of Leckie and Lord Tunnicliffe

Report stage (Hansard): House of Lords
Wednesday 17th July 2019 Lords Chamber

[Lord Tunnicliffe (Lab)]

My Lords, this is an example of the fact that a number of things which would normally be dealt with by the Executive have become sufficiently urgent to be considered. This seems to be a sensible idea—and, as I understand it, the Minister is going to produce appropriate warm words.

[Viscount Younger of Leckie (Con)]

My Lords, I thank the noble and learned Baroness, Lady Butler-Sloss, for her brief introduction, and other noble Lords for their remarks, particularly the noble Lord, Lord Dubs.

Ensuring that victims of human trafficking receive the support and care they require is an important issue, which this Government take seriously. It is important that the right safeguards and checks are in place to protect this group of people. This is also true in Northern Ireland, where independent guardians must be qualified social workers with at least five years’ post-qualifying experience of working with children and families, as the noble Lord, Lord Dubs, said. Our approach in this space needs to be guided by the principle of ensuring that we do not expose these vulnerable people, or the excellent individuals who care for them, to harm.

As I said in Committee, noble Lords will be aware that these are matters for which responsibility in Northern Ireland has been devolved, therefore falling outside the responsibilities and scope of the Secretary of State for Northern Ireland. In line with the principles of devolution, it is the Government’s view that those Northern Ireland departments charged with responsibility for these matters should be accountable not to Westminster but to the Northern Ireland Assembly. However, the Government acknowledge that if it is the will of Parliament that the Secretary of State should report on these issues, the Northern Ireland Office will engage with relevant Northern Ireland departments to ensure that she is able to do so, as far as possible, in a meaningful way, where information is available. I hope this provides a degree of reassurance for the noble and learned Baroness.

I also wish to advise on the limitations of the Secretary of State’s capacity to report comprehensively on matters of devolved competence, and to emphasise that it may not always be possible to make available the required information. We must approach these issues carefully, and with heightened sensitivity. Releasing information in relation to the number of children supported by an independent guardian could, given the very small number of individuals involved, compromise their identities. Clearly, this is not the intention of this amendment, but it is a risk we must be aware of and mitigate.

We can accept Amendment 4, on the introduction of a requirement to report on the work of independent guardians in Northern Ireland for victims of human trafficking, noting, as I said, the need to approach sensitively. We should not cut across devolved powers but, given the importance of this issue, it is reasonable for the Secretary of State to provide a report to Parliament. However, I ask the noble Lord not to press Amendment 10, on debating the report. I am happy to meet the noble and learned Baroness or the noble Lord to discuss the report when it is published. It would be most unusual for obligations to debate reports to be placed on the Government by primary legislation. As this is a devolved matter, I am happy to facilitate a meeting between the noble and learned Baroness and Northern Ireland’s Department of Health for a detailed discussion of its work in this area, as its staff are the experts in this devolved work. Based on that explanation and commitment, I hope the noble Lord and the noble and learned Baroness will feel unable to put this to a vote.

--- Later in debate ---

[Lord Tunnicliffe]

My Lords, I thank the noble Lord, Lord Empey, for bringing forward these amendments. There seems to be a consensus in the House on the importance of forming an Executive as soon as possible. The noble Lord serves that cause by illustrating the serious issues that have not been processed. We are 100% behind the re-forming of the Executive, and we hope that the people and the politicians of Northern Ireland see the wisdom of that. The amendments are interesting and useful, and I hope that the Government will be saying appropriate warm words.

[Viscount Younger of Leckie]

My Lords, the noble Lord, Lord Empey, has raised important issues and made some very valid points, and I add my name to those who have expressed their gratitude to him for doing so. My noble friend Lord Duncan has been keen to update the House on progress in establishing the RHI hardship unit, and I am very happy to accept the requirement to publish this report by 21 October or earlier. The reports that the noble Lord requests are on libel and suicide strategy.

I note the points made by the noble Earl, Lord Listowel, and the noble and right Reverend Lord, Lord Eames, and I have taken note of the tragic anecdotes that have been told. The issues of NHS waiting times and welfare mitigations were also raised. All are matters of great importance, as my noble friend Lord Duncan set out in Committee earlier this week, and we fully understand the reason for raising them in this place. We are without a sitting Assembly in Northern Ireland to debate these matters and to consider ways forward that serve all of the people of Northern Ireland.

These are all devolved matters. It is this Government’s fervent hope that Northern Ireland’s political leaders can see their way to agreeing to restore the devolved institutions. We have had some passionate speeches to this effect during this short debate. As these are devolved matters, I do not purport to be able to significantly enlighten the House on the substance of the important issues the noble Lord has raised. But in light of the great value of these amendments, I am happy to accept them today and to commit to one-off reports on the issues specified.

In conclusion, I will answer a question that was raised by the noble Lord, Lord Bruce of Bennachie, on what might happen upon the production of the reports. I say on behalf of the Government that it is our sincere hope that the incoming Ministers in Northern Ireland will draw from these reports to make progress on these important issues. They will be published and will therefore be public documents.

Offensive Weapons Bill

Debate between Viscount Younger of Leckie and Lord Tunnicliffe

2nd reading (Hansard): House of Lords
Monday 7th January 2019 Lords Chamber

[Lord Tunnicliffe]

My Lords, I join the Opposition Front Bench in asking the House to respect the tradition that the Government Chief Whip controls the business. The adjournment is appropriate; it is a matter of the business of the other House starting on time. The delay will not be a couple of hours, but exactly the delay advertised in today’s business.

[Viscount Younger of Leckie (Con)]

My Lords, I have just been given notice that the health Statement has now started in the Commons. We have a difficult decision to make. With the will of the House, we will continue the debate and finish it.