National Insurance Contributions Bill

Lord Tunnicliffe Excerpts

Report stage
Monday 7th February 2022 Lords Chamber

[Baroness Kramer (LD)]

My Lords, this group of amendments includes government Amendments 13 and 14, which, as the Minister described, respectively change Clause 3(1) on freeports and Clause 6(6) on veterans, so that any extension to the zero rating of employers’ NICs in these schemes is subject to the affirmative, rather than the negative, resolution procedure. Changing negative to affirmative for both these clauses was an important recommendation of the Delegated Powers and Regulatory Reform Committee. The noble Lord, Lord Tunnicliffe, and I both asked for the changes that it recommended to be enacted, and I thank the Government for delivering them on Report.

As the Minister knows, I was particularly exercised by the original drafting of Clause 10, which designates that payments under certain “self-isolation support schemes” should not be included in computing NICs. I have no problem with the principle but, unamended, the clause would have allowed new schemes to be added without any change to the regulations or any reference to Parliament. The Delegated Powers Committee objected that this offered far too much leeway, and recommended that any designation under the relevant parts of Clause 10 should be “contained in regulations” and subject to the negative resolution procedure. Again, I thank the Minister for delivering on that.

I read the remaining amendments in this group as being technical, and we have no objection. The Delegated Powers Committee will not be fully satisfied by these amendments because certain recommendations have not been agreed by government—for example, the recommendation that the power to modify the criteria for the schemes in freeports should be affirmative, not negative. But we have made progress on some important points, and I hope that the Minister will make sure that the message goes back to those who draft Bills that it is important to take note of the appropriate constitutional balance. He has done so, and I thank him for it.

[Lord Tunnicliffe (Lab)]

My Lords, I am grateful to the Minister for bringing forward these amendments. As he outlined in his introduction, several of the texts clarify the upper secondary limit for the 2021-22 and 2022-23 tax years, with future amounts to be set in regulations. Given our proximity to the new tax year, it seems sensible to include these figures on the face of the Bill, rather than rush to lay regulations following Royal Assent. Oh, I should take my mask off; that is much better.

The remainder of the Minister’s amendments address three of the five recommendations put forward by the Delegated Powers and Regulatory Reform Committee. It is disappointing that the Government have chosen not to constrain the powers conferred by Clause 3(3), which the DPRRC labelled “inappropriate”. However, we have got quite a bit further than anticipated, following the Minister’s remarks in Committee. We thank him for this but, as a generality, we hope that the Government will get back to the convention of taking the DPRRC’s recommendations more seriously; I think that is a fair comment. However, the concession on Clause 10 is important, and I look forward to the short debates that will follow regulations made under Clause 3(1) and Clause 6(6).

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Amendment 2 would require that registers of beneficial ownership are not only held, verified and available to enforcement agencies but made public. This is not a time to step backwards in the work we do to try to bring an end to money laundering. If the Minister cannot accept this—it is beyond me why not—I will seek to divide the House.

[Lord Tunnicliffe (Lab)]

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

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

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

[Viscount Younger of Leckie (Con)]

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

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

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

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

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

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

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

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

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

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

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

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

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Moved by

[Lord Tunnicliffe]

5: Clause 6, page 4, line 35, at end insert—
“(3A) Relief under this section may apply in respect of any employment of an earner who meets the veteran conditions, irrespective of whether it has applied to a concurrent or previous employment of that earner.”Member’s explanatory statement
This amendment clarifies that employer zero-rate relief when employing veterans may apply to multiple employers, in cases where a veteran has more than one form of employment during the eligibility period.

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[Lord Tunnicliffe (Lab)]

My Lords, I will also speak to Amendment 6 in this group, which brings us to the issue of zero-rate relief for employers of new Armed Forces veterans. I am grateful to the noble Baroness, Lady Kramer, for her support on this issue at Committee, and for signing Amendment 6, which is in this group.

As we discussed in Grand Committee, many veterans make a smooth transition back to civilian life. They will find stable accommodation and a job within a year, becoming happy and productive members of society. However, while this applies to a clear majority of ex-service personnel, there are a sizeable number who struggle with the process of adaptation. The reasons for this are varied and complex. Some veterans simply are not adequately prepared for life outside the forces. This is an area where improvements have been made in recent years, but individual experiences of leaving active service suggest more needs to be done.

Others may find themselves contending with issues in their personal lives: living in temporary or sub-standard housing, facing difficulty reintegrating back into their family or friendship group, or dealing with mental or physical health issues. Any one of these would make the process of finding and holding down a job more difficult; a combination may make it impossible.

Many veterans will eventually settle, although they may not do so within 12 months. They may find that their first job or two do not suit them. These challenges cannot be fully addressed in the Bill—we know that. But we are generally supportive of the NIC relief being offered to employers of veterans. I continue to be of the view that if this policy helps just a single person, it will have been worth it.

The question before us today is whether—and how —we can make the relief work for as many veterans as possible. The Treasury’s policy note is clear that the relief can cover multiple periods of employment—concurrent or subsequent—within the qualifying period. However, as drafted, the Bill is silent on this point. I do not wish to be a cynic, but policy notes can change. Paragraphs of text can mysteriously disappear with no explanation. Amendment 5 has been tabled with this in mind, to protect that important point of clarification. I hope the Minister can accept the text. If the wording is not quite right, it can be addressed at Third Reading.

I also hope the Minister will feel able to accept Amendment 6, which would grant the Treasury the power to change the one-year period specified in Clause 7(1)(c) of the Bill. In Committee, we argued for three years of relief. This would have ensured consistency with the relief offered to employers in freeports, while affording veterans more time to adjust. The Treasury seems certain that a single year’s relief will do the job. We hope it does, but that will become apparent only with time. If it becomes clear that a longer period of 18 months, two years or perhaps longer would have a beneficial impact on the employment and retention of veterans, Amendment 6 would allow that change to be made quickly and simply, and—crucially—outside the Budget and Finance Bill cycle. The Government would not be compelled to use the power, but the option would be available to Ministers should the scheme be extended.

I hope that noble Lords—and the Minister—respond positively to these amendments. They are offered in a spirit of co-operation. We want to be helpful to the Government and we want the Government to be helpful to the men and women who have defended this great nation. It is our duty to serve the interests of those who have served us. I beg to move.

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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.

Amendment 5 withdrawn.

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Moved by

[Lord Tunnicliffe]

6: Clause 7, page 5, line 24, at end insert—
“(3) The Treasury may by regulations amend the period specified in subsection (1)(c) where it believes this will contribute to improved employment and retention rates among veterans.”Member’s explanatory statement
This amendment would grant the Treasury a power to extend the eligibility period attached to zero-rate relief for armed forces veterans, should that be deemed desirable to improve the ability of veterans to find long-term employment.

[Lord Tunnicliffe]

I beg to move.