All 3 Richard Thomson contributions to the National Insurance Contributions Act 2022

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Mon 14th Jun 2021
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National Insurance Contributions Bill
Commons Chamber

Consideration of Lords amendments & Consideration of Lords amendments

National Insurance Contributions Bill Debate

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Department: HM Treasury

National Insurance Contributions Bill

Richard Thomson Excerpts
2nd reading
Monday 14th June 2021

(2 years, 10 months ago)

Commons Chamber
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Richard Thomson Portrait Richard Thomson (Gordon) (SNP) [V]
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The Bill makes provision for NI exemptions in what we believe are a number of important and necessary areas. We are generally supportive on such matters, but there are issues in each area—both within and outwith the scope of the Bill—that require some attention and that we will likely seek to address or draw attention to as the Bill proceeds. For the moment, however, I shall confine my remarks to the general principles and the remedies offered in the Bill.

First, I made clear the SNP’s support for freeports during the debates on the Finance Bill. We feel strongly that, given the scale of financial support on offer in the Bill, in terms of the customs exemptions and NICs, it is important to make sure that other wider policy objectives —such as environmental obligations, the commitment to net zero and fair pay for those employed in freeports—are met. That is what the Scottish Government’s greenports aim to do, by marrying up all the incentives of a freeport with wider obligations to ensure the payment of the real living wage, the implementation of the Scottish business pledge and the making of contributions towards net zero emissions. All those objectives must be met before companies are able to benefit from the substantial tax status benefits that freeports offer. The fair and sustainable greenport model can be an exemplar of those values while adding value to goods, services and the country’s brand.

If the UK Government wish to take a more laissez-faire approach to the securing of such outcomes, that is a matter of choice as much as it is a matter of regret. However, it should not be allowed to become a matter that contributes to any further delay in allowing the Scottish Government to take their approach or in allowing those who wish to invest in Scotland under the conditions I have set out to do so. I urge the Minister to ensure that the UK Government move quickly to allow the model to proceed so that the bidding process can begin.

Let me turn to veterans. Those with experience of serving in our armed forces bring valuable life skills and experience to the workplace. The NICs exemptions are therefore a positive step, making it even more attractive to employers to hire ex-service personnel and bring their skills and experience into the workforce. We very much welcome that step on its own terms. It is important to provide every support possible to former service personnel as they transition to civilian life.

Anyone who is in contact with the veterans community will be all too aware of the gaps in the support available. The Scottish Government have sought to fill those gaps by funding the translation of military qualifications so that they can be fully recognised by civilian employers—another key step that can help to incentivise the employment of ex-service personnel; setting up the national veterans care network to ensure parity of access to specialist services; actively supporting attempts to improve access to employment for the spouses and partners of those serving in the military, through Can Do hubs and the Forces Families Jobs website; and setting up, in conjunction with the Welsh Government, the Capitalising on Military Family Talent initiative. All those things are key elements in making sure that we deliver the best for our service personnel, and they sit well beside the NICs exemptions.

However important the NICs step will be, it cannot and must not be seen as any kind of substitute or sticking plaster for what we believe is a planned 40% reduction in the budget of the Office for Veterans’ Affairs. That cut stands in stark contrast to the support that we should be offering and my party will continue to oppose it.

Let me turn to the treatment of self-isolation payments—another measure that we are happy to support fully. The purpose of the payments was clearly to incentivise people on low incomes who needed to self-isolate to do so, to help to prevent the spread of the virus without their having to suffer any adverse financial consequences. The intention was only ever to help people to make the right choices for the benefit of themselves and others, with the NICs consequences quite understandably something of an afterthought. The move to exempt the payments from NICs, thereby removing the administrative and cost burdens on local authorities and employers, is therefore a positive step. If the payments can be made exempt from NICs, it makes it harder to justify the continuation—apparently at UK ministerial insistence—of the situation whereby any past or future thank you payments made to NHS and care workers in Scotland remain liable to income tax.

Finally, we welcome the move to allow changes to the disclosure of tax avoidance schemes regime as it applies to NICs avoidance schemes. That may be a small step towards closing another area of potential abuse in the tax code, but it is necessary. However, what is really needed is a workable set of general anti-avoidance rules that tackle tax avoidance in all its forms; do not exempt existing and established abuse from action; include in their scope international tax abuse; give a tax authority the right to take action against tax avoidance, which it defines, in an objective fashion capable of being numerically assessed, without the consent of any unelected authority; and place the burden of proof on this issue on the taxpayer.

We are happy to see the Bill progress, and to address it in greater detail and attempt to improve it as it continues its passage through the House.

National Insurance Contributions Bill (First sitting) Debate

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Department: HM Treasury

National Insurance Contributions Bill (First sitting)

Richard Thomson Excerpts
Jesse Norman Portrait Jesse Norman
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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 Portrait Richard Thomson (Gordon) (SNP)
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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.

None Portrait The Chair
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With this it will be convenient to discuss the following:

Amendment 2, in clause 2, page 3, line 11, at end insert—

“(4A) For the purposes of subsection (1)(e), the living wage per hour—

(a) for the financial year 2020-21 is—

(i) £9.30 outside of London, and

(ii) £10.85 inside London; and

(b) for each year after the financial year 2020-21 is to be determined by the Living Wage Foundation.”

This amendment defines the living wage, payment of which is one of the conditions business would have to meet under Amendment 1.

Clause stand part.

Clause 3 stand part.

New clause 1—NIC relief for employers at freeports: review of commencement date—

(1) The Government must conduct a review of job creation in the 2021-22 financial year at each of the eight freeport tax sites.

(2) The review must assess the impact on decisions around job creation of the relief becoming available from April 2022 rather than April 2021.

(3) The review must be commenced by 30 April 2022.

(4) The review must be published and laid before Parliament by 31 July 2022.

This new clause will require the Government to assess the impact on job creation in freeports in 2021-22 as a result of NIC relief being available from April 2022 rather than April 2021.

New clause 2—NIC relief for employers at freeports: review of the conditions of eligibility—

(1) The Government must conduct a review of the conditions of eligibility for the National Insurance contributions relief introduced by section 1 of this Act.

(2) The review must take into account the number of freeport employees in 2022-23 who work at more than one freeport site and who earn less than the relevant upper secondary threshold set under the powers created by section 8.

(3) The review must consider the impact of the matter in subsection (4) on decisions by employers about job creation.

(4) The matter is the relief introduced by section 1 of this Act being available for employees who spend 60% or more of their working time in one freeport, and not for employees who spend 60% or more of their working time across more than one freeport but less than 60% in any one freeport.

(5) The review must be commenced by 30 September 2023.

(6) The review must be published and laid before Parliament by 31 December 2023.

This new clause will require the Government to evaluate the impact on job creation of the employers’ NIC relief not being available for employees who spend 60% or more of their time across more than one freeport, but less than 60% in any one freeport.

Richard Thomson Portrait Richard Thomson
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There is a pretty basic principle that lies behind this: that you shouldn’t get owt for nowt. In exchange for the substantial package of reliefs that are on offer through this Bill, we believe that businesses must offer something in return, beyond their presence and their baseline economic activity within the bounds of a freeport.

In this case that would include, through amendments 1 and 2, meeting local environmental obligations. Many freeports are built on sites that have environmental sensitivities. We believe there need to be some enhanced obligations around that. Activities in a freeport should contribute to wider environmental objectives, such as the commitments to net zero and climate targets. It is very important to protect workers’ rights, not only within the perimeter of a freeport but anywhere else that has any kind of economic relationship with the freeport. That means taking steps to actively ensure that we are preventing the exploitation of slave labour at any stage in the value chain and ensuring that a living wage, as defined, is paid to the workers in the freeport.

Those are all important objectives in policy terms and are a fair exchange for the public goods being consumed through the creation of the freeport. They are modest asks in the context of the relief being offered and are worthy of support.

James Murray Portrait James Murray
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Clause 2 sets out the conditions that employers must meet to qualify for the relief created by clause 1. Those conditions require that the freeport employment must begin between 6 April 2022 and 5 April 2026; the relief will apply for three years from the first day of each eligible employee’s employment; and the employee must spend 60% or more of their employed time in a single freeport tax site at which the employer has business premises.

We have a number of points to raise with the Minister on the details of the clause. First, as I mentioned on Second Reading, it is hard to understand why the relief is conditional on employment not commencing until 6 April 2022. As the Chartered Institute of Taxation pointed out, with freeports expected to start operating in 2021, that would surely hamper freeport employers this year, and perhaps even create perverse incentives to delay the start of an employee’s work. In her response to my raising this point on Second Reading, the Exchequer Secretary said:

“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.”—[Official Report, 14 June 2021; Vol. 697, c. 70.]

I found it hard to understand that the Minister’s point. Having a clear start date may well be a simple approach, but my question was not about whether the relief should have a clear start date, but why the Government had chosen a start date in 2022, rather than in 2021 when freeports are expected to start operating. To press Ministers on that, we suggest a simple review, as set out in new clause 1, which would require the Government to conduct a review of job creation in 2021-22 at each of the eight freeport tax sites. The review must assess the impact on job creation decisions of the relief becoming available from April 2022 rather than April 2021. I would be grateful if the Minister committed to carrying out such a review. If he is not willing to, perhaps he could explain why the Chartered Institute of Taxation is wrong to say that this choice of date could hamper freeport employers this year and perhaps create perverse incentives to delay the start of an employee’s work.

Alongside the start date for the relief, we want to raise questions about clause 2(1)(d), which states that at the time the qualifying period begins, a freeport employer must reasonably expect that the earner will spend 60% or more of their employed time in a single freeport tax site in which the freeport employer must also have business premises. That means that the relief introduced by clause 1 is available for employees who spend 60% or more of their working time in one freeport, but not for employees who spend 60% or more of their working time across more than one freeport, but less than 60% in any one freeport. If an employee splits their working time between two freeport sites, the employee may not qualify as a freeport employee, which might not be what is intended.

We have therefore proposed, in new clause 2, a review of the impact of that feature of the policy design on employers’ decisions about job creation. Again, I would again be grateful if the Minister committed to carrying out such a review. If he is not willing to, perhaps he could explain why he does not think that issue is likely to arise.

Finally, I would like to ask the Minister about clause 2(1)(a), which provides that the employed earner’s employment is a new employment commencing between 6 April 2022 and 5 April 2026. As the Chartered Institute of Taxation has pointed out, it is unclear whether an employee who is TUPE transferred from an existing employer to a new freeport business on or after 6 April 2022 qualifies for this relief.

Although clause 2(2) would prevent an employee from qualifying if the two businesses were connected, that would not always be the case—for instance, when a freeport business buys the trade of an unconnected business and commences that newly acquired trade at a freeport site. I would be grateful if the Minister could explain whether, in such a case, we can assume that the freeport business would be a “new” employer for the purposes of this relief, while recognising, of course, that its “new” employees would have continuity of employment for employment rights purposes.

Jesse Norman Portrait Jesse Norman
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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 Portrait Richard Thomson
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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.

--- Later in debate ---
Jesse Norman Portrait Jesse Norman
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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 Portrait Richard Thomson
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I beg to move, That the clause be read a Second time.

None Portrait The Chair
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With this it will be convenient to discuss new clause 7—Green manufacturing condition—

(1) The green manufacturing condition is that the employer is engaged in the manufacture of products within the categories designated under subsection (2).

(2) For the purposes of subsection (1), the Secretary of State must by regulations designate categories of products that in the opinion of the Secretary of State are manufactured with the aim increasing environmental standards. The categories of products designated must include—

(a) wind turbines, and

(b) electric vehicles.

This new clause is linked to NC6.

Richard Thomson Portrait Richard Thomson
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With your permission, Ms Nokes, I would like to speak to new clauses 6, 7 and 8, if that is possible. I will just wrap everything into one debate. I would like to add my own thanks to the Clerk and you, Ms Nokes.

None Portrait The Chair
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New clause 8 will be debated separately.

Richard Thomson Portrait Richard Thomson
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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 Portrait Jesse Norman
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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 Portrait Richard Thomson
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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 Portrait Richard Thomson
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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 Portrait Jesse Norman
- Hansard - - - Excerpts

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.

--- Later in debate ---
Richard Thomson Portrait Richard Thomson
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I think everything that needs to be said has been said. On that basis, I would like to move to a vote.

Question put, That the clause be read a Second time.

National Insurance Contributions Bill Debate

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Department: HM Treasury

National Insurance Contributions Bill

Richard Thomson Excerpts
James Murray Portrait James Murray (Ealing North) (Lab/Co-op)
- Parliament Live - Hansard - - - Excerpts

I thank the Minister for setting out the reasoning behind the Government’s amendments in the other place. Although we support many of the measures in this Bill, we cannot ignore the fact that we are discussing the Government’s plans for specific relief from NICs just one month before they raise national insurance for workers and businesses across the board. That is the crucial context for the Lords amendments we are being asked to consider.

Five weeks from today, a typical full-time worker will see their annual tax bill rise by £274. That will be the direct result of the Government’s decision to raise NI. It is the worst possible tax rise, at the worst possible time. We argued it was wrong last September, when the Government pushed this tax rise through Parliament. Since then, energy bills have begun to soar, making our case even stronger. Now, as we stand alongside the Ukrainian people, we know that that conflict will impact people here, with further price rises for petrol, energy and food. The Conservatives must think again. The impact of their NI hike is getting worse and worse. The Chancellor should finally do the right thing and scrap April’s tax rise on businesses and working people.

As we said when this Bill was being debated in the Commons last year, we support the intention behind many of its measures. However, throughout its passage, we and our colleagues in the other place have raised important questions with Ministers about some of the approaches the Government have decided to take. With that in mind, I turn to Lords amendments 2 and 4, which were successful in the other place and which we will be supporting here today. Lords amendment 2 seeks to add one further condition to those that already exist in the Bill for freeports. When it was introduced, this Bill included the conditions under which employers in a freeport could benefit from a zero rate of secondary class 1 NICs. This amendment adds one further condition to freeport employers’ relief. It would make sure this relief is available only if the freeport maintains a public record of the beneficial ownership of businesses operating within it. We, alongside right hon. and hon. Members from across the House, have long argued for transparency over the ownership of UK assets. In recent days, that has come to a head, with the Government finally admitting and accepting the urgent importance of establishing a public register of the overseas owners of UK property. Yesterday, when the Business Secretary made a statement to the House on “Corporate Transparency and Economic Crime”, no one could deny the damage caused by the Government’s failing to prioritise transparency of the overseas ownership of UK interests. As my hon. Friend the Member for Feltham and Heston (Seema Malhotra) told the House yesterday, although we clearly support the Government’s introducing a register of overseas owners of UK property, we are clear that:

“The UK would have been in a much stronger position to act with speed and our national security would have been better protected if the register had already been up and running.”—[Official Report, 28 February 2022; Vol. 709, c. 736.]

As my hon. Friend went on to say yesterday, we hope lessons will be learned for the future. The Government have a chance today to prove that they have learned those lessons. Let us avoid their pressing ahead today without that transparency condition, only to return to the matter in a rush at a later date when the opportunity for greatest impact may already have been missed. That is why we will support Lords amendment 2, and I urge Government Ministers and hon. Members on all sides to do likewise.

I turn now to Lords amendment 4, which was also successful in the other place and which we will support today. The Government’s Bill introduces a zero rate of national insurance contributions for employers of armed forces veterans for the period of one year beginning with the earner’s first day of civilian employment after leaving the armed forces. We believe it is crucial to ensure that all veterans get the support they need as they seek civilian employment.

Lords amendment 4 enables the Treasury to change the period of support offered if it is found to support employment. We believe it is a simple measure, giving the Government flexibility to adjust the operation of the relief if doing so might improve veterans’ ability to find long-term employment.

As the Financial Secretary may know, when the Bill was debated in the Commons last year we raised questions about the time period for which the relief would be available. When I discussed this Bill with her predecessor, the right hon. Member for Hereford and South Herefordshire (Jesse Norman), I asked him to explain in greater detail why the Government had chosen a period of one year for veterans’ employers. In response, he said that one year was appropriate because,

“the goal is to support a very specific process of transition”.

When we pressed him further on the importance of helping to maintain long-term employment, he acknowledged:

“If it were the case that veterans still had a serious problem of finding secure and stable employment, of course that would be a matter that the Government would wish to reflect on and consider.”

He assured me and several of my hon. Friends that he would,

“continue to reflect on this policy”,

and that those at the Treasury,

“already have in place processes of evaluation and assessment.”––[Official Report, National Insurance Contributions Public Bill Committee, 22 June 2021; c. 18-20.]

I am sure the right hon. and learned Member for South East Cambridgeshire (Lucy Frazer) will want to honour those commitments made by her predecessor.

Through Lords amendment 4, we seek simply to give the Government the power to change the period of relief, should their ongoing analysis conclude it is in the best interests of veterans to do so. On that basis, I urge the Financial Secretary and her colleagues to reconsider the Government’s position. I hope that Ministers and hon. Members on the Government Benches will see the value that Lords amendments 2 and 4 add to this Bill and that, even at this late stage, they might reconsider their position on them.

I end by urging Ministers to ensure that next time we are in this Chamber with national insurance on the Order Paper, it will be to agree to cancel the tax rise coming next month. The Chancellor has five weeks to do the right thing—five weeks to change his mind and avoid hitting working people and businesses with the worst possible tax rise at the worst possible time.

Richard Thomson Portrait Richard Thomson (Gordon) (SNP)
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I rise to support Lords amendments 2 and 4, but I will deal first with amendment 4.

As I said at earlier stages of this Bill, those who have experience of serving within the armed forces bring tremendous qualities to the workforce through both the skills they have learned while in uniform and their breadth of life experience. Despite our awareness of that and the best efforts of Governments and the third sector, for too many of our ex-servicemen who are leaving the services, the transition to civvy street is far more difficult than it often needs to be.

Having this exemption for national insurance contributions is therefore a very positive step as far as we are concerned, making it even more attractive to employers to hire those ex-service personnel and to bring their skills and experience into the workforce, helping to bring to fruition all the many economic and social benefits that can come from that. In that regard, we are attracted to Lords amendment 4 simply because it gives the Treasury that power to extend the eligibility period attached to the zero rate relief for armed forces personnel and veterans, should that be deemed desirable. That seems to us to be a perfectly reasonable addition to make to the Bill, giving the Treasury a degree of flexibility on how to implement the measure that would otherwise be lacking in the Bill as drafted.

On amendment 2, let me first place on record my satisfaction at the agreement that has eventually been reached by the Scottish Government and the UK Government over freeports, or green ports, of which two will now be established in Scotland, with the bidding process opening in spring this year and the first sites opening, hopefully, in spring 2023. I will go a little bit off piste here to say that that outcome was not always guaranteed, and at times, in at least some of the public discussions, there has been a bit more war-war than jaw-jaw, certainly on the part of individual Conservative politicians rather than between Ministers in Edinburgh and London. For example, the Scottish Business Minister, Ivan McKee, had to write six times to the UK Government to even try to get green port discussions under way in order to get them over the line. He said that the silence was deafening. That is a pretty damning account that rather sits at odds with the impression that we are often given from those on the Treasury Bench as to how they would like to work constructively with the Scottish Government.

The reason for holding out on the variation on the freeports option was quite simple. We felt very strongly that given the scale of the financial support that was on offer, it was vital to ensure that wider policy objectives such as environmental obligations, the commitment to net zero and fair play for those employed within freeport sites, were met. While it is up to the UK Government to decide how those objectives can be met in England, applicants for green port status in Scotland will be required to set out robust plans at the outset on how they plan to contribute to Scotland’s just transition to a net zero economy and how they will benefit the wider supply chain alongside embedding fair working practices such as at least paying the real living wage.

Freeports, it is fair to say, have had a somewhat mixed reception abroad, particularly as regards the relationship that they are perceived to have with criminality and tax evasion. While hardly the “Grand Theft Auto”-style dystopia that they have sometimes been portrayed as, the potential for criminality and non-compliance with taxation, employment rights, health and safety or environmental regulations and obligations is clear, as is the potential for broader economic displacement.

That brings me to the nub of amendment 2. In recent weeks, we have seen significantly increased demand from this House for scrutiny and visibility of financial transactions that take place in this country. We need to have that increased scrutiny over those who spend and invest in the UK, and also over where their money originates. It is very important when setting up freeports that we are able to answer the age-old question, “cui bono?” That is absolutely paramount. A requirement that the freeport deliverance body should be able to make reasonable efforts to verify who the beneficial owners of the business are and to ensure that that information is accessible not just to the relevant enforcement agencies but to the general public is the minimum amount of due diligence that we should expect in exchange for the status and the exemptions on offer.

I listened carefully to the Minister’s arguments about the beneficial register that will be in place and her view that as a third party under the local governance arrangements it would be inappropriate to release that information. Respectfully, I disagree with that. We all know how labyrinthine and byzantine corporate structures can be. Irrespective of any requirement in future legislation that may be coming into force, certainly on freeports, my party firmly believes that we should have transparency and accountability baked into the corporate structure and public reporting at the outset. On that basis, both Lords amendments have our support and we shall be voting accordingly.

Sarah Olney Portrait Sarah Olney (Richmond Park) (LD)
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I spoke on Second Reading and at other stages before the Bill went to the Lords, but it is fair to say that I now stand in a very different environment. Since the full-scale invasion of Ukraine last week, so many aspects of our economy, our international relations and our defence strategy have been cast in a new light.

In that spirit, I rise to support Lords amendment 2, which was introduced by my good friend and Richmond Park predecessor, Baroness Kramer. In the past week, we have had cause to look again not just at our defence spending and at the importance of our international relationships, but most importantly at how the UK— London in particular—has become a haven for Russian money, at what it has done to us as a nation and at how it has undermined our efforts to stand with the brave people of Ukraine.