National Insurance Contributions Bill

Kemi Badenoch Excerpts

2nd reading
Monday 14th June 2021 Commons Chamber

[Sarah Olney (Richmond Park) (LD)]

The Bill seeks to achieve a range of aims, but like most things that the Government are currently attempting, it misses the opportunity to achieve a great deal more.

The Liberal Democrats welcome the provisions that will enable a 0% rate of national insurance contributions to be paid by employers of former members of the armed forces. Glass Door, a charity in my constituency that provides shelters and outreach for homeless people and rough sleepers, has described to me how past trauma is a key risk factor in becoming homeless and how the two groups most at risk are survivors of childhood sexual abuse and armed forces veterans. Like many Members across the House, I am deeply concerned about how we care for our servicemen and women, and I support all measures to assist them in their post-service life. The Liberal Democrats unequivocally welcome an incentive for businesses to bring them into new employment.

We also welcome the straightening out of any unintended tax consequences that have arisen from covid payments in the past 18 months. The British public have been extraordinary in their response to the crisis and have willingly played their part in staying at home to protect the NHS and save lives. For many individuals, that will have had a direct financial consequence, and it is absolutely right that any payments made to mitigate such financial consequences should be free from tax and national insurance. There is no doubt that people would willingly have gone out and earned national insurance contribution income if the Government had not asked them not to. It is only fitting that their financial sacrifices be properly recognised in our tax and benefits system.

I support the comments made by the hon. Member for Thirsk and Malton (Kevin Hollinrake) about tax avoidance schemes and the extent to which they are being promoted. I support measures to clamp down on such schemes, particularly where vulnerable taxpayers are being targeted and potentially lured, dare I say it, into investing in schemes that would bring them into default in their tax affairs; we have seen that happening in relation to the loan charge, as he mentioned. I would like to see the Government doing more to clamp down on these schemes, and I welcome any measures to do so.

The Bill also makes provision for 0% national insurance contributions for employers in freeports. The Government have made a great deal of their plans for freeports; they appear to have great hopes for their abilities to bring economic revival to our country following Brexit and the pandemic. The extent to which that looks likely to be achieved remains uncertain. The Government have not yet published an assessment of the likely impact of this national insurance reduction, which leads me to believe that that uncertainty is continuing. If the Government are unable to say how much the Treasury will lose from the cut in national insurance, one can conclude only that they do not yet have any confidence in how much they expect freeports to boost employment.

What is certain is that the Government have not yet brought forward any other plans to boost economic growth following Brexit and the pandemic. I regret that they are missing the opportunity to boost growth in other sectors and in regions that are not lucky enough to benefit from a freeport.

[The Exchequer Secretary to the Treasury (Kemi Badenoch)]

The hon. Lady says that the Government do not have any additional plans for growth. We launched a plan for growth in the Budget with three pillars—infrastructure, innovation and skills—to tackle net zero post covid and take our opportunities for global Britain on leaving the EU, so she is quite wrong to say that we have not done anything to plan for growth.

[Sarah Olney]

I very much welcome the Exchequer Secretary’s intervention. I am happy to stand corrected, and I very much look forward to seeing the impacts of those plans right across the nation, because as far as I am concerned, the significant weakness of the plan for freeports is that it cherry-picks areas for investment while ignoring the needs of many other communities across the country. That is why I say that the Bill is a missed opportunity: because to target the national insurance cut just at areas that will have a freeport is to ignore the impact that such a cut could have across many sectors that could provide fantastic opportunities for employment as we come out of the pandemic. There is a very real danger that freeports will divert business activity from areas outside freeports, and that this measure will hit the public finances without any subsequent increase in economic activity.

I believe that the Government would make much better use of the national insurance contributions scheme by stimulating economic growth in ways proven to be effective. For example, an increase in the annual employment allowance to £16,000 could benefit every small and medium-sized enterprise. It would allow employers to take on up to five workers each without making contributions, which would be a substantial boost to communities across the country and would do much more to boost employment across the nation than these hand-picked benefits whose impact cannot be measured.

--- Later in debate ---

[The Exchequer Secretary to the Treasury (Kemi Badenoch)]

I would like to thank Members for their well-considered contributions to what has been a very productive debate, and I am very grateful for the support across the House on Second Reading. A range of perspectives has been presented here today, but I think we are all agreed that this is an important piece of legislation, which assists this country’s recovery from covid-19 and helps us prepare for a better future.

Before I address some of the specific points raised by Members today, I will briefly reiterate the Bill’s main measures and outline what they seek to achieve. First, this Bill supports the delivery of the Government’s freeports programme and boosts regional growth. It achieves this through the introduction of an employer national insurance contributions relief for businesses based in freeports that take on workers. This measure will play a major part in helping these new economic zones to create jobs, drive growth and revitalise local communities.

Secondly, this Bill delivers on a Conservative party manifesto commitment by introducing an employer national insurance contributions relief for organisations that recruit armed forces veterans. This will encourage firms to take on former services personnel, as so eloquently put by my hon. Friend the Member for South Cambridgeshire (Anthony Browne), boosting veterans’ employment prospects. On this point, the hon. Member for Strangford (Jim Shannon) raised an excellent point about working better with veterans charities, and I agree that this is something that employers and Government should do more of. In turn, this measure will allow even more businesses to benefit from veterans’ abilities, skills and experience, and I am sure Members would agree that this represents a valuable opportunity for firms up and down the country.

Thirdly, this Bill provides an exemption from self-employed national insurance contributions for test and trace support payments, which will apply retrospectively. This measure will ensure self-employed workers benefit from parity with their employed counterparts and are not penalised if they need to self-isolate and therefore submit a claim.

As I have outlined, the Bill supports workers and the wider economy, but it also contains measures targeted at those who threaten our country’s financial wellbeing. The final measure is the disclosure of tax avoidance schemes regime introduced by this Bill, which boosts HMRC’s powers to deal with the promoters of such unscrupulous arrangements. In addition, it will help ensure that taxpayers are better informed about the risks posed by avoidance schemes. This measure will deter the operators of such schemes and better protect consumers.

I will now move to the specific questions raised by Members. There were several questions from the Opposition Front Bench. The hon. Member for Ealing North (James Murray) asked why the self-employed national insurance contribution exemption was not legislated earlier. The answer is that class 1 NICs exemptions were made in regulations. However, the self-employed exemption requires primary legislation, and therefore is included in this Bill, as this is the earliest opportunity to legislate.

The hon. Gentleman asked about the upper secondary threshold for freeports and why, at £25,000, this is lower than for other reliefs and what the rationale was. The answer is that, unlike other NICs reliefs that are available to employers nationally and generally are targeted at specific groups of employees with particular characteristics, businesses operating in a freeport are likely to be able to claim the relief on almost all of their new hires. To balance generosity of support with the need to consider the public finances, this broader eligibility has been balanced by limiting the amount of salary that can be relieved. We have chosen to set this limit at £25,000 per annum, which is approximately the average salary in the UK. Employees with earnings at or below this limit will be eligible for full employer NICs relief, and employers will still be able to claim up to approximately £6,500 of relief on the salaries of employees earning more than this.

The hon. Gentleman asked why the relief was not starting until April 2022. The Government have been clear that this relief is only available on new hires from April 2022, and set this out in the “Freeports Bidding Prospectus” published in autumn 2020. The reason why is that having a clear start date is a simple approach that will support the freeport businesses. Further, a freeport tax site needs to be designated so that the location requirements can be met, otherwise there would be no reference in legislation for what geographical area constitutes a freeport tax site.

On the veterans scheme, I believe the hon. Gentleman asked why the relief was just for a year compared with that for freeports, and he said that it needed to be longer. The answer is that the relief provides employers with up to £5,500 in savings per veteran that they employ. The aim of that policy is to support veterans’ transition into civilian life through encouraging employers to hire veterans.

Finally, on corporation tax, the hon. Gentleman asked a question about the 15% rate. The reason the global rate of 15% was settled on is that, at that value, it will protect against multinational tax avoidance while leaving appropriate room for countries to use corporation tax as a lever to support their economic, fiscal and environmental objectives.

I now turn to some of the questions raised by the right hon. Member for Hayes and Harlington (John McDonnell), who asked why we are having freeports now, after they have not necessarily worked in the past. He has forgotten one thing: we have left the European Union. Leaving the EU means that we have an opportunity to do things differently. We have developed an ambitious new freeport model to ensure that towns and cities across the UK can benefit from fantastic new international trade opportunities. Freeports can attract new investment and employment in left-behind communities across the UK, and the further benefits include a simplified customs process. Our freeports will offer tax measures to incentivise private business investment, carefully considered planning reforms to facilitate much needed construction, and additional targeted funding for infrastructure improvements in freeport areas to level up communities and increase employment opportunities. This is therefore a much more ambitious policy than the previous freeports that the right hon. Gentleman referenced.

On the right hon. Gentleman’s question about evidence-based policy and the wider impact of freeports, we believe that the relief will significantly reduce the cost of taking on new employees and doing business in the freeport. That, along with other tax reliefs being offered as part of the wider package, will support businesses, but the Government have not yet agreed and finalised successful bidders’ tax site proposals. Any modelling that we have done to support the process remains sensitive to the locations chosen, and we will be in a better place to conduct more detailed modelling once tax sites have been agreed with the Government. The right hon. Gentleman asked whether that would be completed before the end of the passage of the Bill. That will not be done before we finish this Bill. However, the Government will outline the process for confirming tax sites in due course.

There were several questions about the Union. Freeports in Scotland, Wales and Northern Ireland were raised by my hon. Friend the Member for Brecon and Radnorshire (Fay Jones), the hon. Members for Gordon (Richard Thomson) and for Strangford, and my hon. Friend the Member for Aberconwy (Robin Millar). I say to all of them that we want to ensure that the whole of the UK can benefit. We are thrilled that there is demand for freeports across the United Kingdom, and we remain committed to establishing at least one freeport in Wales as soon as possible. Discussions about the best way to establish a freeport in countries outside England, such as Scotland, are complex. It would not be appropriate for me to elaborate on those private discussions. However, those are things that the Treasury is considering in detail.

On the point that the hon. Member for Strangford made about Northern Ireland, we are working with the Northern Ireland Executive to ensure that a suitable model for an NI freeport is developed. We will ensure that we meet our international legal obligations in Northern Ireland. It is appropriate that we take our time to ensure that the freeports model for Northern Ireland meets these obligations while delivering a competitive offer for the ports, businesses and communities in that country.

There was a question about displacement of economic activity from other local areas—I believe it was from the right hon. Member for Hayes and Harlington. That is something that we have considered. We still believe that this proposal will encourage new investment and create jobs in deprived communities, and will not cause harmful displacement.

I am very grateful for the opportunity to explain this Bill’s measures and the context behind them. To sum up, this Bill supports the regional growth that is integral to furthering our levelling-up agenda, and is part of our plan for growth, as I said to the hon. Member for Richmond Park (Sarah Olney). It plays a part in shielding self-employed people from the full financial impact of covid-19, while boosting our veterans’ employment prospects. It strengthens HMRC’s powers to tackle the organisers of tax avoidance schemes. There are clearly a number of points that we can expect to discuss at greater length when this legislation moves to Committee stage, but for the purposes of this debate I commend it to the House.

Question put and agreed to.

Bill accordingly read a Second time.

National Insurance Contributions Bill (Programme)

Motion made, and Question put forthwith (Standing Order No. 83A(7)),

That the following provisions shall apply to the National Insurance Contributions Bill:

Committal

(1) The Bill shall be committed to a Public Bill Committee.

Proceedings in Public Bill Committee

(2) Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Tuesday 22 June.

(3) The Public Bill Committee shall have leave to sit twice on the first day on which it meets.

Proceedings on Consideration and Third Reading

(4) Proceedings on Consideration shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which proceedings on Consideration are commenced.

(5) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.

(6) Standing Order No. 83B (Programming committees) shall not apply to proceedings on Consideration and Third Reading.

Other proceedings

(7) Any other proceedings on the Bill may be programmed.—(Michael Tomlinson.)

Question agreed to.

[Thangam Debbonaire (Bristol West) (Lab)]

On a point of order, Madam Deputy Speaker. Further to earlier points of order, as matters seem to have moved on, I seek urgent clarification on the process that we are in the middle of, given that Mr Speaker appeared to be deeply unhappy earlier and that we are now facing a wait of possibly up to two hours to hear from the Secretary of State for Health and Social Care on a matter that the Prime Minister has already addressed the press about.

We understand that the Prime Minister was not available at 3.30; we know that and that is reasonable. Since then, though, the Prime Minister has addressed the press. His comments are causing concern and confusion, but the House has to wait two hours more. This is treating the House with disdain. Parliament is sovereign. What is more, the Prime Minister himself ran on a campaign of Parliament being sovereign—sovereign, Madam Deputy Speaker. Our constituents deserve better.

I wonder whether those on the Treasury Bench have had time to reflect on the matter since the earlier points of order. Can you tell me, Madam Deputy Speaker, whether you or the House have had any word from No. 10 about coming here now to clear up the confusion and whether the Prime Minister is willing to face questions from Members of Parliament on behalf of our constituents? I seek your urgent clarification, because we feel that the Prime Minister is treating this House with contempt.