National Insurance Contributions Bill (First sitting)

Debate between Jesse Norman and Richard Thomson

Committee stage
Tuesday 22nd June 2021 Public Bill Committees

[Jesse Norman]

I thank the hon. Gentleman for his question. I saw that he raised the issue on Second Reading and, if I may say so, it potentially reflects a slight misunderstanding.

As the Exchequer Secretary said, the decision has been taken to set the rate at £25,000, roughly the national average earnings. That is different from median earnings. I do not think it is right to suggest that the threshold has been set at a level that is approximate, because it is designed to be comprehensible and readily understandable. To make it more precise might affect that.

The overall generosity of the package of support that is being given to freeports, and the range of potential employees to which this applies, is very creditable to the Government, because it shows the intensity and strength of the intent to make the freeports policy work. This is an important part of that policy, but only one part of a set of policies that are designed to increase the attractiveness of freeports for growth and for employment as well.

The way in which this measure has been structured is focused towards longer-term employment, as the relief runs for three years, and therefore it allows the employment rights associated with longer-term employment to be vested in those employees. From that point of view, it reflects a commitment by the Government to create high-quality and stable longer-term employment.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clause 2

Freeport conditions

[Richard Thomson (Gordon) (SNP)]

I beg to move amendment 1, in clause 2, page 2, line 26, at end insert—

“(e) the employer pays, as a minimum, a living wage, to all staff it employs, and

(f) the businesses operating in the freeport in which the employer has business premises have collectively—

(i) put in place a strategy setting out how the freeport will contribute to the target for net UK emissions of greenhouse gases in 2050 as set out in the Climate Change Act 2008 as amended by the Climate Change Act (2050 Target Amendment) Order 2019,

(ii) put in place a strategy setting out how the businesses will ensure that no goods passing through the freeport are the products of slave labour, and

(iii) carried out an environmental impact assessment of the operation of the freeport.”

This amendment provides conditions to businesses in freeports. These include a strategy on how the freeport will contribute to the target for net UK greenhouse gases emissions, a strategy ensuring no goods passing through the freeport are products of slave labour, and an environmental impact assessment of the freeport.

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[Jesse Norman]

I am grateful to the hon. Members for Gordon and for Ealing North for their contributions. We have discussed already how clause 1 introduces a new rate of secondary class 1 national insurance contributions. If I may, I would like now to explain the freeport conditions that enable a freeport employer to qualify for the relief. That is set out in clause 2, and I will then discuss clause 3 and the amendments and new clauses that have been tabled.

Clause 2 has the following effect. It sets the conditions that an employment must meet to qualify for the freeport employer’s NICs relief. A freeport employer is an employer that has a business premises in the freeport tax site—business premises being defined as building or structure out of which the business is carried out. A freeport employee is an employee of a freeport employer who spends 60% of their working time in a freeport tax site and has not been employed by that employer in the previous 24 months. A freeport employer can apply the zero rate for 36 months on new hires from April 2022. The earnings of freeport employees hired before April 2026 will qualify for the zero rate for the full 36 months.

Clause 3 provides the Treasury with the power to legislate for the finer detail of the measure in secondary legislation. It provides a power to add, to amend and to remove certain conditions. The practical effect of that is to allow the Government to react to the economic realities of today, and also to give a degree of future-proofing to the measure against unintended policy outcomes.

The hon. Member for Ealing North raised the question of the starting date in 2022, and I understand that he is repeating the concern that he raised on Second Reading. It is adequately and properly met by the response that the Exchequer Secretary gave. It is a hypothetical matter as to when these freeports will begin to operate. We expect that to be soon, and we are pressing forward, but there are number of further steps to be undertaken before a freeport tax site can be designated and a freeport can go into operation. It is useful therefore to have a date certain for the operation of the policy.

The hon. Gentleman asked whether the 60% rule discriminates against people who work flexibly. It is important to understand that this is a place-based policy—that is to say, it is a policy designed to focus and operate from a very specific location. To meet the objective of encouraging new investment and economic activity, and to maintain the focus and the targeting of the policy overall, it is important to restrict reliefs to those whose jobs are based in a freeport tax site. The Government will do that by making it a requirement that eligible employees spend at least 60% of their working time in a tax site.

Opening up that relief to employees who did not meet that requirement would undermine the policy aim of supporting employment in the freeport area, because it would mean that employers could effectively claim relief on employees carrying out work outside a freeport area—indeed, in an area that may not be related to the freeport at all.

The hon. Gentleman raised the question about TUPE-ed employments. These are not regarded as new employments, and the employment is transferred but is not regarded as new, and therefore the employee would not be eligible for the reliefs offered in the Bill.

I turn now to the questions raised by the Scottish National party in the speech made by the hon. Member for Gordon. It is important to note that the SNP’s amendment would place additional eligibility criteria—with respect to employment rights, equalities and the environment —in the Bill. Of course, those would add complexity to what is a well-established and rapidly moving process, and they would create potential delay. For that reason, it is not an attractive amendment.

The Government are committed to reducing carbon emissions, which is why this country was the first major economy to implement a legally binding net zero greenhouse gas emissions target by 2050. Of course, it remains open to the Scottish Government to impose higher standards if they wish, either on freeports or on other ports that exist in Scotland, since environmental policy is a devolved area. The hon. Gentleman may want to take up his concern with the Scottish Government if he wishes to see higher standards in ports in Scotland. From the Government’s standpoint, we are also committed to supporting those in employment, which is why we introduced the national living wage in 2016. This month, workers have seen a pay increase to £8.91 an hour, which is a 2.2% pay rise.

The hon. Gentleman raises an important point about ensuring that goods passing through freeports should in no way be the products of slave labour. This is a global problem, and employers and freeports will need to meet the same high regulatory standards on slave labour that other businesses in the UK meet. That is to say that they must abide by the landmark transparency and supply chain provision in the Modern Slavery Act 2015, by which the UK became the first country in the world to require businesses to report on the steps they have taken to tackle modern slavery in their operations and global supply chains. With that said, I hope hon. Members will withdraw their new clauses and amendments.

[Richard Thomson]

I thank the Minister for his response. One of the things that we hear most often is that any amendment that may be desirable may add complexity, which seems to be a standard phrase that gets thrown in whenever the Government do not wish to proceed with something and cannot think of a better argument.

On the basis of what I have heard, I am unpersuaded that the suite of benefits and reliefs that are offered should make it easier to help achieve those objectives. I take what the Minister said about the obligations that already exist under the Modern Slavery Act 2015, but I still think that more can be done to embed the expectations that we have, and not just in Scotland. I take the Minister’s point that the Scottish Government have a certain latitude in this area, but the point is to ensure that the provision applies all over and that there is some kind of equality. On that basis, I will press the amendment to a vote.

Question put, That the amendment be made.

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[Jesse Norman]

If I may say so in a similar spirit, as I may not have the chance to do so after the conclusion of deliberations on the final provisions, let me also offer my thanks to you, Ms Nokes, to the Clerks, to my colleagues and also to the officials at the Treasury and HMRC for the work that they have done to prepare the Bill.

Question put and agreed to.

Clause 13 accordingly ordered to stand part of the Bill.

Clause 14 ordered to stand part of the Bill.

New Clause 6

Zero-rate contributions for employees of green manufacturing companies

(1) This section applies where—

(a) a secondary Class 1 contribution is payable as mentioned in section 6(1)(b) of the 1992 Act in respect of earnings paid in a tax week in respect of an employment,

(b) the green manufacturing condition is met, and

(c) the employer (or, if different, the secondary contributor) elects that this section is to apply in relation to the contribution for the purposes of section 9(1) of the 1992 Act instead of section 9(1A) of that Act or section 1 of this Act.

(2) For the purposes of section 9(1) of whichever of the 1992 Acts would otherwise apply—

(a) the relevant percentage in respect of any earnings paid in the tax week up to or at the upper secondary threshold is 0%, and

(b) the relevant percentage in respect of any earnings paid in the tax week above that threshold is the secondary percentage.

(3) The upper secondary threshold (or the prescribed equivalent in relation to earners paid otherwise than weekly) is the amount specified in regulations under section 8.

(4) For the purposes of the 1992 Acts a person is still to be regarded as being liable to pay a secondary Class 1 contribution even if the amount of the contribution is £0 as a result of this section.

(5) The Treasury may by regulations make provision about cases in which subsection (2) is to be treated as applying in relation to contributions payable in respect of a tax week in a given tax year only when—

(a) that tax year has ended, and

(b) all contributions payable in respect of a tax week in that tax year have been paid.

—(Richard Thomson)

This new clause provides NIC relief for businesses in freeports dealing with green manufacturing products.

Brought up, and read the First time.

[Richard Thomson]

I beg to move, That the clause be read a Second time.

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[Richard Thomson]

Okay. In that case, on new clauses 6 and 7, I simply seek to make the point that there is a strong appetite to find new ways to support the economy, especially in those sectors that can contribute to green recovery, beyond the covid recovery and into the future.

A key element in progressing that, along with the cost curve for new technologies, is driving competition and, through that, improvement. Providing exemptions on NICs and ensuring that they are targeted on businesses engaged solely in green manufacturing could do much to drive that innovation and improvement. That requires that incentives are targeted at enterprises that are engaged in green manufacturing and in driving that new green industrial revolution.

New clause 7 provides examples of two categories of products that clearly fall within that bracket, although there is certainly scope to expand beyond that, but I think that the principle stands. If that strategy is not to be achieved in that manner, it certainly should be achieved in other ways. I would welcome the Minister’s remarks on that. It is not my intention to push the new clause to a vote.

[Jesse Norman]

I thank the hon. Gentleman for his speech and his attention to the Bill. The new clauses tabled by the Scottish National party would create a new zero rate of secondary class 1 NICs for employers that are classed as “green manufacturing companies”, including those that produce wind turbines and electric vehicles. In considering such a measure, it is important for the Government to balance the different potential benefits and costs in a context that respects the requirement to manage public money and support public services.

A change to the tax system of this kind needs careful consideration and assessment of costs and benefits and goes far beyond what should be done via amendment in such a Bill. Designing a sector-focused relief is not straightforward and it adds complexity to the tax system. Having said that, the Government take supporting green manufacturing companies extremely seriously, and we have a raft of policies in place to do that. For example, since 2013, the Government have provided £150 million a year for the Aerospace Technology Institute, match-funded by industry to support the development of incremental improvements to existing aerospace technology, alongside zero-emission technology to protect and secure the sector. That includes £84.6 million of investment to develop zero-emission flights, and further support for other potential zero-emission aircraft concepts. There are many other areas, including support for the Advanced Propulsion Centre and the Faraday battery challenge, let alone all the work that has been done to subsidise the development of offshore wind, which attest to the importance the Government place on green manufacturing and green manufacturing jobs. 

I encourage the Committee to reject the new clause, but I acknowledge that the Government fully share the policy intent.

[Richard Thomson]

On the basis of the Minister’s remarks, the principle stands, but on this occasion, I will not seek to progress by moving to a vote. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 8

Scottish Government Covid payments: exemption from primary Class 1 contributions

(1) A primary Class 1 contribution is not to be payable in respect of any Scottish Government Covid payment.

(2) For the purposes of subsection (1), a ‘Scottish Government Covid payment’ means a payment of £500 pro rata to any NHS Scotland or social care worker in accordance with the announcement made by the Scottish Government on 30 November 2020.”—(Richard Thomson.)

This new clause provides exemptions for Scottish Government Covid payments to social care workers.

Brought up, and read the First time.

[Richard Thomson]

I beg to move, That the clause be read a Second time.

As this will be my penultimate contribution, I would like to offer my thanks to the Clerks and everyone who has helped the proceedings to move so smoothly, through your chairmanship, Ms Nokes, which has helped considerably with that objective.

On Second Reading, I remarked on the unfairness that was caused by the Treasury’s refusing to exempt income tax on the thank-you payment that the Scottish Government made to health and social care workers. It was in the form of a £500 thank-you bonus to reflect how health and social care workers were valued for their contribution during the incredibly challenging period that we have been through. The full benefits of that payment have been put at risk by the UK Government’s ability to tax us. Contrary to a number of assertions, the Scottish Government do not have the ability to get round that, other than by paying far more than the £500. It would therefore be far better to have the exemption in place.

Although an exemption for the bonus would be welcome, we recognise that the majority of welfare employment powers reside with the UK Government. We therefore want to press the new clause to ensure that clarity is provided and that any future payments for health and social care workers can be exempt from national insurance contributions.

[Jesse Norman]

I thank the hon. Gentleman for his comments and, again, his attention to the Bill. The Government recognise, as he does, that covid-19 is the biggest threat the UK has faced socially, economically and in many other respects for many decades. Key workers, including social care workers and workers in the NHS, have demonstrated an astonishing commitment to keeping the public safe in the fight against the disease. The Government massively value and appreciate those contributions. However, in this case, although I understand where the hon. Member is coming from, the Government do not believe that the new clause is appropriate or necessary. We fully recognise the hon. Member’s concern, but we do not believe the new clause is the appropriate way to proceed.

Under long-standing rules, any payments made in connection with an employment are chargeable to income tax and national insurance contributions. They also count as income for the purposes of calculating entitlement to certain benefits. The £500 payments made by the Scottish Government to health and social care workers function as a top-up to wages. We therefore consider that those payments are taxable as earnings under normal rules, as I think has been recognised by the Welsh Government.

The UK Government have provided more than £5.9 billion of additional funding for the Scottish Government this year through the Barnett formula. If the intention of the Government in Scotland is for health and social care workers to benefit by at least £500, it remains open to them to gross up the payment to take into account the tax and NICs liabilities, as the Welsh Government have done.

Contingencies Fund (No. 2) Bill

Debate between Jesse Norman and Richard Thomson

Committee of the whole House & Committee stage
Thursday 11th March 2021 Commons Chamber

[Richard Thomson (Gordon) (SNP) [V]]

I will be brief. The concerns of Scottish National party MPs over certain covid-related Government procurements are well known and on the record, and we will continue to hold the UK Government to account for them. Nevertheless, whether the new clause is viewed through that particular lens or not, the fact remains that taken on its own terms it would greatly improve scrutiny, oversight and accountability, without creating any disproportionate impact on the Government or the overall efficiency of the spending process. Trying to equate the improvement in process that would result with an attack on business, as we have heard today, is frankly nonsense. It smacks of desperation, and I am certain that that is exactly how it will be seen.

The SNP will be supporting this amendment. If the Government have any care at all for transparency on these matters, and for being able to demonstrate that there is proper stewardship of public funds, there is frankly no good reason for them not to support it as well.

[The Financial Secretary to the Treasury (Jesse Norman)]

As you will be aware, Mr Evans, clause 1 provides for an increase in capital for the Contingencies Fund. It raises the limit from the standard 2% to 12%, providing a sum of approximately £105 billion for the financial year 2021-22 only.

We are all agreed across the House on the central importance of accountability to Parliament, but it is the Government’s very firm view that new clause 1 is not needed in order to achieve accountability. It is important to say again that supply processes continue to be used in the usual way with expenditure still subject to parliamentary scrutiny and a vote. This Bill simply permits an advance on expenditure that will be included in the main or supply estimates.

Let me set out four points that make this quite clear. First, the Contingencies Fund is about ensuring cash flow, restricting it to urgent services in anticipation of parliamentary provision becoming available and temporary funds required for necessary working balances. It is not additional spending; it is simply a cash advance to be repaid. It does not in any way preclude the scrutiny by Parliament of additional provision sought by a Department through the supply estimates, nor does it preclude the Comptroller and Auditor General from expressing his view on the regularity of departmental expenditure.

Secondly, each and every departmental accounting officer remains fully accountable for expenditure; and, of course, that expenditure will be audited by the NAO in the usual way as part of the annual reports and accounts of each Department. Transparency arrangements for ministerial directions—where they are sought under the requirements of the doctrine of “Managing Public Money”—will also continue in the usual way. Accounting officers are already required to publish any direction that they receive as soon as possible, unless there is a broader public interest in keeping it confidential.

Thirdly, the House has seen throughout 2021 that Departments must notify Parliament by way of a ministerial statement agreed with the Treasury where a commitment will be or has been entered into in advance of supply. I would like to make it clear that the mandatory WMS wording agreed with Parliament and the NAO already distinguishes whether this advance is a new service, new expenditure or simply a cash requirement ahead of a supply estimate.

I remind hon. Members that the Contingencies Fund is not a tool—some hon. Members have made this point—that Ministers can choose to use; it is not discretionary. It is managed entirely by the Treasury, and the accounting officer must ensure that advances are given in line with strict rules agreed between Parliament, the NAO and the Treasury. These rules are set out clearly in the published estimates manual. Every Department makes an application outlining the urgency of their case and how they plan to meet the listed requirement. It is worth mentioning that the NAO also audits the Contingencies Fund accounts, and that includes a full list of advances.

Let me turn to a couple of the points raised by Members in the debate. I did ask for questions on the Bill, but the hon. Member for Luton North (Sarah Owen) somehow found that difficult. She raised another irrelevant issue about public spending. She asked me about my own link. I assure her that I had nothing to do with the awarding of any contracts. As my hon. Friend the Member for South Cambridgeshire (Anthony Browne) pointed out, this is true for Ministers across the Government, according to the NAO.

The hon. Member for Hackney South and Shoreditch (Meg Hillier), who chairs the Public Accounts Committee, made a speech, wonderfully—and I thank her for it—on the Bill. I am very grateful. She asked whether the Bill is rushed through. The answer to that question is no, it is not. It is important to do it, we think, before the beginning of the new financial year. The same Bill was put through in March last year, and so it is here. She asked about Treasury controls. We fully, strongly believe in them. She recommends Ghanaian principles of public finance, but I am not sure I can follow her in that direction.