National Insurance Contributions Bill

Lucy Frazer Excerpts

Consideration of Lords amendments
Tuesday 1st March 2022 Commons Chamber

[Madam Deputy Speaker (Dame Rosie Winterton)]

I must draw the House’s attention to the fact that financial privilege is engaged by all of the Lords amendments 2, 4, 1, 3, 5, 6, 7, 8, 9, 10, 11 and 12. If any of the Lords amendments are agreed to, I will cause the customary entry waiving Commons financial privilege to be entered in the Journal.

Clause 2

Freeport conditions

5.51 pm

[The Financial Secretary to the Treasury (Lucy Frazer)]

I beg to move, That this House disagrees with Lords amendment 2.

[Madam Deputy Speaker]

With this it will be convenient to discuss the following:

Lords amendment 4, and Government motion to disagree.

Lords amendments 1, 3 and 5 to 12.

[Lucy Frazer]

I welcome this small but important Bill on its return to this House and I am pleased to speak to it for the first time. I pay tribute to my ministerial colleague, Viscount Younger of Leckie, for his work on it in the other place, and to my right hon. Friend the Member for Hereford and South Herefordshire (Jesse Norman), who so capably led it when it was first before the House.

There are 12 Lords amendments for our consideration today and I will first address Lords amendments 2 and 4, which, as Madam Deputy Speaker has highlighted, engage the financial privilege of this House. The Government ask the House to reject them for the reasons that I will set out. Lords amendment 2 is the first of two amendments on which the other place voted to make changes to the Bill. It adds an additional condition whereby freeport national insurance contribution relief would be available only if the freeport governance body maintained a public record of beneficial ownership of businesses operating in the freeport tax site.

The Government believe that the Lords amendment, which was made by the other place, is unnecessary and should not be accepted. Throughout the bidding prospectus and subsequent business case processes, prospective freeports were required to set out how they will manage the risk of illicit activity. Those plans were scrutinised by officials in the Border Force, Her Majesty’s Revenue and Customs, the National Crime Agency and others.

Additionally, the freeports bidding prospectus set out that each freeport must agree a governance structure with the Government. While each port can design its own governance structure to meet the local needs of the port, it must meet the criteria set out by the Government in the freeports bidding guidance. That means that the Government already require each freeport governance body to undertake reasonable efforts to verify the beneficial ownership of businesses operating within the freeport tax site and to make that information available to HMRC, law enforcement agencies and other relevant public bodies. It is therefore a condition of being granted freeport status that there is an appropriate level of oversight.

That is a proportionate approach, which means that the local area and law enforcement can take effective measures to ensure the security and propriety of operations within the freeport. The difference between the amendment and the existing requirement on freeport governance bodies is simply a requirement for the freeport governance body to make its record of beneficial ownership available to the general public, as well as to law enforcement.

Given the nature of the information, we do not think it would be appropriate for the freeport governance body to release this information publicly. This is because the freeport governance board is a third party, and therefore does not have the locus to release such information about a business to the public. The second reason is that such a requirement would also partially duplicate the People with Significant Control register at Companies House where there is already an onus on the company itself to provide information.

However, hon. Members will also be aware that, as a Government, we are bringing in a number of measures to ensure that we have transparency. Last week, the Prime Minister announced the Economic Crime (Transparency and Enforcement) Bill to further crack down on dirty money and maintain the UK’s position as a world leader in corporate transparency, and we have heard much of that in this House today. That Bill will introduce a register of overseas entities beneficial ownership of UK property to crack down on foreign criminals using UK property to launder money. It will reform our unexplained wealth orders regime to help target more corrupt elites and it will strengthen the Treasury’s ability to take action against sanction breaches.

We will also publish details of the planned fundamental reform of Companies House, which is designed to clamp down on money laundering and illicit finance. Once the register of overseas entities is implemented, it will be the first of its kind in the world. That is good news for the UK, enhancing our strong reputation as an honest and trusted place in which to do business. I hope that, with these assurances, this House will reject Lords amendment 2.

Lords amendment 4 is the second amendment on which the other place voted to make changes to the Bill. It provides the Treasury with the power to amend the eligibility period attached to zero-rate relief for armed forces veterans. The Government believe that this amendment made by the other place is not necessary and should not be accepted. I will explain to this House why that is the case. The Government have considered this measure in detail and consulted extensively on the relief. It included a policy consultation that ran from July to October 2020 and a technical consultation that ran from January to March 2021. A significant number of respondents agreed that the relief is a positive step forward towards supporting the recruitment of veterans and could help 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. Members should also be aware 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. It is also one part of the Government’s broader strategy to support veterans.

The Government recently published the veterans’ strategy action plan for 2022 to2024. That contains more than 60 policy commitments worth more than £70 million in a diverse range of areas, reflecting the varied streams of Government support on offer.

Furthermore, at the 2021 Budget and spending review, £10 million was provided to support mental health via charities provisions and £5 million to the health innovation fund, providing cutting-edge treatment for veterans. In August 2021, £2.7 million was provided to strengthen veteran health support further, including facilitating the expansion of Op Courage, and a further £5 million was provided in September 2021 for those struggling after the Afghanistan withdrawal. The Bill already contains other levers to increase the generosity of this relief, if needed, such as increasing the threshold that employers of veterans start paying NICs and extending the overall period of the relief. These proposed additional powers are therefore not necessary. With these reassurances, I hope that the House will reject Lords amendment 4.

The remaining 10 Lords amendments were tabled by the Government and I hope that this House will support them. Lords amendments 1, 3 and 5 to 9 legislate for the threshold at which employers that qualify for these reliefs start to pay NICs. The amendments set the threshold for the 2022-23 tax year for freeport employers and for the 2021-22 and 2022-23 tax year for the employers of veterans. These thresholds have been set at £25,000 per annum for freeport employers and £50,270 for employers of veterans. Both those figures have been publicly communicated during the Bill’s passage. These thresholds are normally set through regulations, but due to the timing of this Bill they are being set in primary legislation.

--- Later in debate ---

Now is the time. Now is the opportunity to put provisions in place not just to prevent money laundering in freeports, but to send a clear message that as a nation we are cleaning up our act. That would show that we have looked at the issue, have acknowledged it as a problem and are not just clearing up the current mess, but guarding against future abuses of our financial system and against the use of our economy, our businesses and our financial system for money laundering. That is why it is so important to support Lords amendment 2 and oppose the Government’s motion to disagree.

[Lucy Frazer]

With the leave of the House, I will make a few comments in response to hon. Members.

The hon. Member for Ealing North (James Murray) mentioned tax rises and national insurance contributions. The Government recognise the impact that they will have on those to whom they are applied, but it is vital that we tackle social care—we cannot avoid taking it on. He will know, because we have debated them many times, the measures that the Government are taking to ensure that those on the lowest incomes get the protection that they need. For example, we are increasing the national living wage and cutting tax for low-income families in relation to universal credit.

This, however, is a debate about some other measures, and one of the important measures that have been raised relates to transparency. The hon. Member for Ealing North suggested that we had been slow to act, while the hon. Member for Richmond Park (Sarah Olney) rightly said that we should pause and look again. Let me emphasise that we have not been slow to act, in the sense that we were the first country in the G20 to create a free, fully public beneficial ownership register, and on that register we have 5.6 million names and more than 4.4 million UK companies. We have not been slow to act, and we have looked again, because we are introducing a register of beneficial owners of overseas entities, we are introducing further powers in relation to unexplained wealth orders, and we are introducing further powers to sanction for the Office of Financial Sanctions Implementation.

Moreover, today the Government are publishing a detailed White Paper that will upgrade the powers in relation to Companies House. For example, anyone setting up, running, owning or controlling a company in the UK will need to verify their identity with Companies House. Companies House will be given the power to challenge information that appears dubious, and will be empowered to inform security agencies of potential wrongdoing. Company agents from overseas will no longer be able to create companies in the UK. So we are taking measures now, and we have reflected before taking those steps.

The hon. Member for Gordon (Richard Thomson) raised the issue of veterans, and I too am proud that we are introducing measures to make it easier to employ them. We have set out our reasons for keeping the measure in relation to the 12-month period, and I highlighted them in my opening speech, but, as Members will know, we will review that policy in 2023. I am also pleased that, as the hon. Member for Gordon said, the UK and Scottish Governments announced the establishment of two freeports earlier this month.

For those reasons, I hope that the House will agree with the points that I have made.

Question put, That this House disagrees with Lords amendment 2.