National Insurance Contributions Bill — House of Commons, 2021-06-14
Topic: Mixed Topics
James Stewart Murray (Labour, Centre-left): I was awaiting the hon. Gentleman’s intervention—I was definitely expecting it given the recent debates we have had in this place—and if he will wait just one moment, I will get on to setting out our position on freeports in more detail We were concerned at the recent Report stage of the Finance Bill that the Government themselves seemed to show a lack of certainty by voting against our simple amendment to the Finance Bill that would have seen the success of each individual freeport transparently evaluated. As I am sure the hon. Gentleman will remember, we wanted each freeport to be judged against the key tests of whether, across the country, they lead to any net increase in jobs, deliver improvements in training and skills for local residents, produce tangible transport and infrastructure improvements beyond the port itself and will be adequately protected against the risks of tax evasion, smuggling and criminal activity. It is disappointing that the Government voted against the transparent evaluation of their proposed freeports. Not only would this have enabled us to judge their success, but some of the factors we highlighted in our tests would in fact make investment in freeports more attractive to businesses Indeed, in response to the Government’s own consultation on freeports last year, many respondents argued that "although tax incentives can be a significant driver behind businesses investing within an area, they were not usually the sole determinant." The Government’s summary of responses went on to explain: "Some respondents also indicated the success of tax incentives was partially dependent on local factors, especially the quality of transport infrastructure and the skills and availability of local labour." As we consider the tax relief before us today, it is therefore important to remind the Government not to ignore the other aspects of the operation of freeports that may be key to their success On this tax relief, I would like to ask Ministers to address three specific points that arise from the Bill. First, while relief to employer’s national insurance contributions may be a reasonable part of a tax incentive package along with other tax incentive measures, it is hard to understand why this relief is conditional on employment not commencing until 6 April 2022. As the Chartered Institute of Taxation has pointed out, with freeports expected to start operating in 2021, that would surely hamper freeport employers this year and perhaps create perverse incentives about delaying the start of an employee’s work. I would be grateful if the Exchequer Secretary set out in her response the Government’s reasoning behind this condition on accessing the relief Secondly, clause 8 of the Bill enables the Government to set an upper secondary threshold for employer class 1 national insurance contributions specifically in relation to freeport employees—and, indeed, for armed forces veterans, which I will turn to shortly. In practice, this means that employers do not need to pay NICs until an employee’s earnings pass that threshold. We note that the upper secondary threshold for freeport employees will, according to a policy paper published by the Government on 12 May, be set at £25,000 for 2022-23. That is substantially less than the equivalent thresholds for employers’ relief for under-21s and apprentices, which is £50,270 in 2021-22. Just to be clear, this means that employers do not need to pay any NICs for under-21s and apprentices earning up to just over £50,000 a year, but they will have to pay contributions for freeport employees next year if they earn more than £25,000. It would be helpful to understand the Government’s rationale for picking this figure. According to the Office for National Statistics, the median income in all those local authority areas where the eight freeport sites are located is greater than £25,000, with the figures ranging from £25,200 in Kingston upon Hull, within the Humber freeport, to £33,200 in Thurrock, within the Thames freeport. I therefore ask the Exchequer Secretary to explain why the relief for freeport employers is set below median pay in all freeport areas and why this rate is half of that for those employing under-21s and apprentices Thirdly, as the plans for freeports stand, businesses taking advantage of their tax incentives will still pay corporation tax. British businesses that pay their fair share of tax will find it very hard to understand why the Chancellor has been for so long so lukewarm about a new, global minimum corporate tax rate to stop large multinationals undercutting them by exploiting tax havens around the world. The Chancellor welcomed the rate being cut from the original 21% proposed by President Biden down to 15%, even though that would cost Britain £131 million a week and leave British businesses being undercut. When I have asked the Financial Secretary before about the Government’s position, he said he did not think "it is appropriate for Ministers to comment on tax policy in flight".—[Official Report, 28 April 2021; Vol. 693, c. 418.] Now, however, the outcomes of the G7 Finance Ministers’ meeting and the Carbis Bay summit are public, so perhaps his colleague, the Exchequer Secretary, could explain why the UK Government’s position has been to back a rate of 15% Let me move on to other measures in the Bill. As we have heard, an important relief, covered by clauses 6 and 7—