National Insurance Contributions Bill — House of Lords, 2021-12-01
Topic: Macroeconomics
Susan Kramer (Liberal Democrats, Centre to centre-left): My Lords, this may have been a short debate but, my goodness, it has been a full one. I feel rather privileged to be one of the winders I want to open with a point made by the noble Lords, Lord Davies and Lord Sikka, on the integrity of the national insurance contributions fund. Like them, I am troubled. The fund was created primarily to pay the state pension; that is its primary role. Compared to most other developed countries, the basic state pension in the UK is very low. Pensioners will face a particularly harsh 2022 because increases have been detached from earnings growth. It adds to my concern that the Government are now choosing to use that fund as a piggy bank for all kinds of other purposes. There will be a new NICs levy to fund the NHS and perhaps, eventually, social care; I suspect that we will see that money constantly having to go to the NHS so we will have to think again about social care, but so be it. This money for the NHS and social care should have been raised through income tax for a whole variety of reasons that I will not reiterate here but which we have discussed in this House before I also become increasingly concerned when I see NICs holidays to support niche activities, such as free ports, while at the same time the NICs burden for SMEs—the noble Lord, Lord Bilimoria, raised this issue—is increasing across the country. Again, like the noble Lords, Lord Sikka and Lord Davies, I very much hope that the Minister will finally tell us exactly how much the NICs relief for free ports will cost in forgone revenues because I cannot tease it out of any of the figures that we have been presented with in the Red Book or by the OBR Free ports are, by definition, free trade zones. I know that the Chancellor has a particular passion for them but he is making a serious mistake. Even those who are fans of free ports admit that, as free trade zones, they create new jobs only in countries where tariffs on intermediate goods are normally high. The United States is a good example of a country with high intermediate tariffs, which is why free ports have been popular—and, some would argue, successful—there. In the UK, tariffs on intermediate goods are either non-existent or tiny. The savings on duties are negligible. Indeed, these tiny savings will be completely wiped out by the new costs of trading with the EU. Can the Minister confirm that the port operators were correct when they recently told the European Affairs Committee that the costs of the new port infrastructure needed for the new checks as a consequence of Brexit will all fall on port operators? Are the free port operators going to pick up their share of their charges, or will they be exempt and their share picked up by other operators There are no meaningful benefits to removing duties, which is normally the essence of a free port. Of course, that is why the Government are now offering a raft of various other tax reliefs, including NICs holidays; it is really an attempt to salvage the free port project. The primary effect will be to favour the initial free port locations —of which there are eight so far—thus cannibalising the prospects of similar or even more disadvantaged areas. During the coalition—I do not hesitate to criticise things that the coalition Government did not get right—the Treasury created enterprise zones; as proposed, the free ports are barely different from enterprise zones. Only a quarter of the predicted jobs were created and, of those, a third came as a result of displacement; I take my information from a study by the Centre for Cities, which is a good and respectable source Overwhelmingly, the jobs created were low-skilled jobs. Indeed, interestingly, the NICs relief in this Bill is for low-paid jobs only, as others have pointed out. That tells you everything about the true expectations of this project. It will be a low-skill, low-job set of operations. Again, I will not repeat the OBR quotes mentioned by the noble Lords, Lord Sikka and Lord Davies, but, as far I can tell, essentially it says that it considers that the return from the free port investment will be so small and negligible that it is not even worth putting it into its forecast numbers The Government’s free port package promises users a vague array of benefits other than tax release, but I noticed one especially, which is deregulation. It is not yet specified how that deregulation will work. The UK is already a hub for money laundering and free ports of all kinds are notorious for their appeal to cheating and crime, not least because the absence of tax and duties enables the ownership of goods to be concealed. It is virtually impossible for enforcement agencies to be effective in a free port, which is one of the reasons why free port legislation was allowed to die on the vine, in the UK. The Government say that the absence of rules will lead to innovation. I am all in favour of innovation, but not in tax avoidance, money laundering, substandard products or the transfer of stolen assets In looking at other parts of the Bill, I support the proposal for NICs relief for ex-services personnel, but I join others in asking whether 12 months is long enough to encourage hiring sufficiently. I pick up the point of the noble Lord, Lord Davies, that this should be part of a holistic programme to help ex-servicemen to achieve that change into civilian life and not just one isolated measure hanging there alone. I also fully support the exclusion from NICs of income for the test and trace self-isolation support system However, I would like to ask some questions about the implications of extending the disclosure of tax avoidance schemes—DOTAS—to cover NICs. I take the Minister at his word, because it makes sense, that this is intended to be targeted at the promoters of wrongful avoidance schemes. I am delighted if they are being tackled more effectively. As the noble Lord, Lord Sikka, said, there are 20 or 30 promoters still out there, which the regulators have completely failed to lay their hands on in any way. Anything that can be done to tackle the promotion of wrongful avoidance schemes has to be positive I just want to be sure that this does not have implications for small businesses that hire freelance contactors and that no new burdens will be placed on the freelancers themselves. We have so many questions surrounding IR35 and this issue can be woven and caught up in parts of that, particularly for freelancers who work through personal services companies. I have put that question to HMRC; I do not know whether it reached the Minister and suggested that he might mention it. I hope at some point to hear from HMRC, but the Minister might be able to give me more immediate enlightenment I close by saying that I am convinced by the Delegated Powers and Regulatory Reform Committee’s assessment of the Bill and the need, in Committee, to deal with Henry VIII and other powers in ways that provide more parliamentary scrutiny. I very much hope that the Minister’s statement that the Government are taking that report seriously and will potentially come forward with proposals meets the test that we are all looking to satisfy.