National Insurance Contributions Bill

Debate between Kevin Hollinrake and James Murray

2nd reading
Monday 14th June 2021 Commons Chamber

[James Murray (Ealing North) (Lab/Co-op)]

Thank you, Madam Deputy Speaker, for the opportunity to speak about this Bill on behalf of the Opposition. We will not oppose the Bill on Second Reading. Indeed, we support the intention behind many of its measures. However, I would like to take this opportunity to raise important questions with Ministers about some of the approaches they have decided to take.

As we know, clauses 1 to 5 would introduce a new zero rate of secondary class 1 national insurance contributions for employers taking on employees in a freeport. The zero rate would apply from April 2022, and it would allow employers to claim relief on the earnings of eligible employees up to £25,000 per year for three years. As the House will recall from the Report stage of the recent Finance Bill, my hon. Friend the Member for Erith and Thamesmead (Abena Oppong-Asare) made it clear that we want every region and nation of the UK to succeed whether or not it has a freeport. We want secure new jobs with better pay to be created right across the country, and we want to support and protect British businesses and industries. Freeports may be part of the solution to increasing trade and investment across the UK, but we note that the International Trade Committee concluded in its recent report on UK freeports, published on 20 April, that

“it remains to be seen how successful freeports will be at achieving this objective.”

[Kevin Hollinrake (Thirsk and Malton) (Con)]

Just to clarify, the hon. Member says that freeports might be part of the solution—to levelling up, I guess—but does he therefore support freeports or does he agree with his colleague in the shadow Treasury team, the shadow Chief Secretary to the Treasury, the hon. Member for Houghton and Sunderland South (Bridget Phillipson), who has said that they are “economically illiterate”?

[James Murray]

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—

--- Later in debate ---

[James Murray]

As the right hon. Gentleman well knows, I have set out many times that we believe that there should be a deal on both pillar 1 and pillar 2. However, pillar 2 stands to generate a huge amount of revenue for British public services and to stop a few large multinationals avoiding paying their fair share of tax and thereby undercutting British businesses that are paying their fair share of tax.

The Minister keeps referring to the idea that it is inappropriate for him to comment on the British Government’s position. The position is there in public, following the G7 Finance Ministers’ meeting and the G7 summit over the weekend. People have a right to know what our Government were arguing for and we can arrive at no conclusion other than that the British Government were at least lukewarm and perhaps even against the tax rate being set at 21% because it has fallen to 15%, thereby losing out on £131 million a week, meaning that we are potentially missing a once-in-a-generation opportunity for a truly ambitious global tax deal.

[Kevin Hollinrake]

Will the hon. Gentleman give way?

[James Murray]

Certainly. I am conscious, Madam Deputy Speaker, that this is not all entirely within the frame of the Bill, but I give way to the hon. Gentleman.

[Kevin Hollinrake]

The hon. Gentleman does keep mentioning it. Just on the point about corporation tax, he seems to imply that somehow we are in favour of lower corporation tax, but he is aware that the Government are increasing corporation tax from 19% to 25%. On pillar 2 and pillar 1, I have heard him at the Dispatch Box on numerous occasions urging the Government to sign up to a deal that was only on pillar 2. It did not involve pillar 1, so how can he say now that he was in favour of a wider negotiated agreement? That is not what he was saying at all.

[James Murray]

I am surprised—because the hon. Gentleman always seems to be here when I am speaking at the Dispatch Box—that he does not seem to remember me advocating for a deal on pillar 1 and pillar 2. I will happily send him the reference in Hansard after this meeting so he can refresh his memory. The point here is that we have President Biden suggesting 21% in pillar 2 as an ambitious global deal. We had the British Government being at least lukewarm and potentially anti the proposal of 21%. We have now settled on a position where it has dropped to 15%, and we will not cease pushing the Government to be more ambitious in what they seek to achieve, because this will mean that Britain will lose out on £131 million a week that could be invested in our public services and British businesses will continue to be undercut by a few large multinationals that do not pay their fair share of tax.

I will move on to other measures in the Bill. As I was saying, there is an important relief, covered by clauses 6 and 7, that sets out to help service personnel leaving the armed forces back into work. This is a vital issue. Veterans deserve the full support of the Government as they seek civilian employment after their service to our country. It is crucial to make sure that all veterans get the support they need. I noted that the Government’s consultation document for this measure refers to an existing career transition package to service personnel leaving the armed forces and explains how 6% of veterans accessing the service remain unemployed for up to a year after leaving the armed forces. We believe that this relief on employers’ national insurance contributions is a positive step, and we hope it will particularly help the 6% of veterans who the Government acknowledge are not benefiting from the current service on offer.

We recognise that this measure may not, on its own, be enough to get everyone into work, so I would like to ask the Exchequer Secretary to set out what further help the Government are offering the 6% of veterans, in particular, who need greater support. We also want to make sure that the employers’ relief is as effective as possible, so I ask why the employers’ relief for veterans is 12 months, which is much less than the relief for employers in freeports, which is 36 months. Perhaps the Exchequer Secretary could explain the Government’s thinking in setting the relief for just one year rather than three years, in line with the approach taken for employers in freeports.

Moving on to further measures in the Bill, clause 10 provides a national insurance contributions exemption for payments made under a self-isolation support scheme. Ministers will know that we in the Opposition have been calling on the Government to expand eligibility for this scheme for some time. It is crucial that people who need support to self-isolate receive it, so we welcome any steps that make the system of self-isolation payments more effective and subject to less administrative burden.

We note that the Government introduced secondary legislation to exempt self-isolation support scheme payments from class 1 and 1A national insurance contributions in October 2020 for England and January 2021 for Scotland and Wales. We recognise that the measure in front of us, which exempts self-isolation support scheme payments from class 2 and class 4 national insurance contributions, will bring the treatment of the self-employed in line with the employed. We also recognise that it will be retrospective for the year 2020-21, and so can be reflected in the relevant tax returns.

Can the Minister explain, however, why the exemption for class 2 and class 4 contributions was not implemented earlier, in line with the exemption for class 1 contributions? If the class 2 and class 4 exemptions had been announced earlier, that could have given much-needed certainty to self-employed people at an earlier point in the outbreak. I would be grateful if the Exchequer Secretary explained why that did not happen.

Finally, clause 11 widens existing regulation-making powers so that regulations can be made for national insurance to mirror the amendments to the disclosure of tax avoidance schemes procedures in the Finance Act 2021. Under DOTAS, introduced by the Government in 2004, promoters of tax avoidance schemes are required to notify the tax authorities of any new scheme they are planning to offer taxpayers. The measure in clause 11 and its counterpart in the recent Finance Act aim to help HMRC obtain details earlier than it can now where promoters fail to provide information about their avoidance under DOTAS.

We welcome any measures that help HMRC track tax avoidance schemes, and we believe it is crucial that it targets the promoters of such schemes. I therefore want to use this opportunity to ask Ministers how effective they think the measures that flow from clause 11 will be. As they may know, the Chartered Institute of Taxation believes that there is a hard core of between 20 and 30 promoters, identified by HMRC, who clearly do not play by the rules. Do Ministers recognise that number? If so, I would be grateful if the Exchequer Secretary set out what goals HMRC has to clamp down on those 20 to 30 hard-core promoters. Are there any targets, and are there dates by which Ministers expect the number of hard-core promoters at large to fall substantially?

As I set out at the beginning of my remarks, we will not oppose this Bill today. Indeed, we support the intention behind many of its measures. As I have explained, however, we have a number of questions about the design of the measures in it, and I look forward to the Exchequer Secretary addressing them directly in her reply. We want to see effective measures in place to support British businesses, jobs in every part of this country and veterans seeking work. On this Second Reading and in later stages of the Bill, we will be pushing the Government to make sure that is the case.

Finance (No. 2) Bill

Debate between Kevin Hollinrake and James Murray

2nd reading
Tuesday 13th April 2021 Commons Chamber

[James Murray (Ealing North) (Lab/Co-op)]

I beg to move,

That this House declines to give a Second Reading to the Finance (No. 2) Bill because it derives from a Budget that failed to guarantee a pay rise for NHS workers after their unparalleled service over the last year; because it undermines the country’s economic recovery, targeting household finances by freezing income tax allowances before increasing the rate of corporation tax; because it does nothing to mitigate the effect on family finances of the sharp council tax rise in April; because it contains measures connected with a cut to social security later in the year; and because it fails to set out the ambitious plan for jobs and growth that is needed to help the country emerge strongly from the worst economic crisis of any major economy.

May I start by extending my deepest sympathies to Her Majesty the Queen and the royal family at this sad time? His Royal Highness the Duke of Edinburgh devoted his life to public service and, crucially, to his role as a supportive husband. My thoughts are particularly with the Queen as she mourns the loss of someone who has been at her side, or just behind her, for 73 years.

As this is my first time physically in the Chamber for well over a year, I would also like to put on record my thanks to Mr Speaker, the Deputy Speakers and the Speaker’s Office for doing so much to help all Members, particularly those of us like me with relevant medical circumstances, to take part virtually throughout the pandemic. Now, having recently had my second jab and having spoken to my doctor, I am glad to be here in person to speak today to this important Bill.

Like millions of others in this country, I feel so grateful to be benefiting from the brilliance of our NHS and GP staff, scientists, lab technicians, nurses and volunteers, but we know that the health crisis of covid-19 is very far from over and that the harm to jobs and the economy resulting from the outbreak is even further from being over. On the Chancellor’s watch, our country is enduring the worst economic crisis of any major economy, yet in his and the Government’s plan we lack the ambitious, confident modern approach we need to emerge from this crisis stronger.



The Budget in March and this Finance Bill should have been an opportunity to pull out all the stops to get the economy going. The Chancellor should have focused resolutely on supporting families, securing jobs and backing small businesses. The Government should have used this opportunity to make sure we invest in solutions to the problems that we have struggled with as a country for so long, from social care to the climate emergency and the housing crisis.

There are many missed opportunities in this Bill and the recent Budget to take on some of the big challenges to which our country is begging for a solution. Take high streets, for example. We are all acutely aware of the severe difficulties that high streets are facing because of covid and how well online delivery-based businesses have done during lockdown. We know that for years, high street businesses have struggled with business rates, while tech giants have paid very little tax by comparison, and we know that the outbreak has made that imbalance far worse. Now should have been the time to at the very least level the tax playing field for high street businesses and online firms, yet there was nothing on that in this Budget, no decisions were taken on the Government’s new tax day, and the Finance Bill is silent on this crucially important issue. That is just one example of how the Government have missed opportunities to support and shape our country for the better.

Instead, so much of what the Government have done will make the problems we face worse. This Government have the wrong priorities and the wrong values, and their Ministers are following failed approaches from the past that now lack much, if any, of the wider support they may once have claimed for them.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

I agree with the hon. Gentleman that we need to level the playing field between high street businesses and online businesses. That is a very tricky thing to do, particularly when talking about business rates. What is his solution to that?

[James Murray]

I am very glad to have the hon. Gentleman’s support for our push for a solution. As he knows, the Government have been promising for some time to come forward with proposals on business rates, but we have nothing. We had the new tax day, when we were supposed to hear lots of announcements—nothing. We want to see something to help high streets, and we have not had anything. We need the Government to step up and offer a solution to the problem, which has bedevilled high streets for so long.

[Kevin Hollinrake]

rose—

[James Murray]

I will make a bit of progress.

High streets are just one example of how the Government have missed those opportunities. Ministers have shown that they simply do not have it within themselves to offer solutions to the challenge we face.

First and most immediately, the Government are taking money from people’s pockets. Families in all their many forms are the target of tax rises from this Government. People will suffer and our economy will stall if families see money taken from them when they need it most. It is unfair and economically illiterate, yet it is exactly what this Government are doing. Half the country will pay more next year, thanks to the provisions in this Bill to freeze income tax personal allowances.

At the same time, the Bill does nothing to stop the sharp council tax rise that the Government are forcing councils to implement right now. It supports the Chancellor’s plan to cut £20 a week from social security this autumn for some of those who need that help most. It tells us everything we need to know about the Government’s priorities: they raise taxes and cut help for families immediately and without a second thought, years before an increase in corporation tax. At the same time, they are letting some of the world’s biggest companies stop paying tax altogether.

If that was not bad enough, the Government are also choosing in this year of all years to take money from the pockets of NHS workers. We now know how hollow those claps on the doorsteps of No. 10 and No. 11 must have echoed around Downing Street. The Government are cutting NHS workers’ pay. Ministers are breaking their promises, and the Conservatives are showing how little they have learned from the awful experience of the last year.

If we add that NHS workers’ pay cut to the personal allowance freeze, the council tax hike and the cut to universal credit, the scale of the impact of the Government’s decisions becomes clear. To give an example, a newly qualified nurse living with their partner and two children in rented accommodation will lose more than £1,100 a year. Rather than supporting families out of this crisis, the Government are prioritising tax breaks for tech giants.

That tax break is being handed to big businesses through the so-called super deduction—the £25 billion tax break for companies that the Chancellor and the Minister say represents

“the biggest two-year business tax cut in modern British history”,

and that forms our second key concern about this Bill. As the chief executive of the Resolution Foundation has made clear, investment incentives have been abused for tax avoidance purposes in the past, yet the Government have failed to say or do anything to address widespread concerns that the super deduction is open to fraud and abuse. Economists from the Institute for Fiscal Studies have said that the super deduction will

“create a risk of tax avoidance and even potentially fraud as companies essentially try to find ways to dress things up as plant and machinery investment”,

yet the Chancellor has done nothing to counter suggestions from industry consultants that the deduction could be used for luxury items, including jacuzzis.

The Government have also failed to address environmental concerns. With the deduction giving firms an incentive to buy new rather than existing assets, the Exchequer Secretary to the Treasury was recently unable to guarantee that the super deduction would be used to support green development. The Chancellor himself has seemed confused about the overall impact of the deduction, recently claiming that, as well as bringing investment forward,

“it will also increase the amount of investment”.—[Official Report, 9 March 2021; Vol. 690, c. 641.]

That claim comes despite the Office for Budget Responsibility revealing a week earlier that cumulative business investment over the next five years will be £8 billion lower following the Chancellor’s announcement of his new scheme than had been projected before.

Particularly with a tax cut of this size, it is crucial that we understand who it is helping and what it will achieve. The truth is, as we know, that companies can already benefit from the annual investment allowance, a 100% tax break on investment up to £1 million, which the Bill extends to the end of this year. The Treasury Committee concluded in its report “Tax after coronavirus” that the annual investment allowance

“appears well targeted to promote growth in small and medium-sized enterprises.”

With the existing allowance apparently well targeted at the growth of small and medium-sized businesses, and with such businesses standing to benefit only marginally from the new super deduction, we are left with an inescapable conclusion: the main beneficiaries of the Chancellor’s new scheme will be the big firms that need help least. No wonder TaxWatch has nicknamed this the “Amazon tax cut”—a giveaway from the Chancellor that could wipe out Amazon UK’s tax bill entirely.

--- Later in debate ---

[James Murray]

The hon. Gentleman is right to draw attention to the fact that the Bill does everything for the big businesses that need the help most but does not do what is necessary to protect small and medium-sized businesses. I am sure that the Ministers present heard his points, and I hope that the Exchequer Secretary will respond to them in her closing speech.

Aside from all the concerns about the super deduction—from its potential for fraud, abuse and misuse to the fact that it offers to wipe out Amazon’s UK tax bill—the fact that the Government’s only national policy for growth and investment relies almost entirely on this tax break brings us to our third key concern about the Bill and the profound lack of ambition in the Government’s approach. There is simply no plan from the Government to make sure that we invest in what is needed for the future. The Bill follows a Budget of cuts. The OBR has confirmed that the Government will cut departmental resource spending plans by £15 billion a year from 2022-23 onward, and rather than bringing forward capital spending to invest in the green recovery that we need now, the Government have cut capital plans for this year by half a billion pounds.

Far from charting a course for the future, the Bill lacks any mention of a plan to tackle the big problems that we have faced in this country for a decade or more and that have in so many cases been brought into sharp focus by the covid outbreak. It is clear that over the past decade under this Government, our country’s social care system has been underfunded, with its workers chronically underpaid. Our country’s response to climate change has stubbornly lacked the urgency, ambition and scale that it needs. Our country’s answer to the housing crisis has been left to developers and speculators, leaving an entire generation let down and left behind. Investing in better social care, new green infrastructure and the council housing that we need would create jobs, improve lives and finally start to tackle the problems that our country needs to resolve.

The Conservatives have had more than 10 years to stand up to the challenges I have outlined, yet they have failed to do so. With the recent Budget and this Bill, they have proved themselves again unable or unwilling to do so. The Government’s whole approach is being exposed as one of failure rooted in the past and an inability to rise to the future. In fact, Conservative Ministers are continuing on the course that began in 2010—one that brought us a decade in which UK growth was below the average of all major economies and business investment fell to the lowest rate in the G7.

Our country’s economy will be £300 billion smaller in 2026 than was forecast at the start of the previous decade. At times during that decade, Ministers may have benefited from some international cover for their misguided and harmful choice of cuts rather than investing in growth in response to the financial crisis, but no more: a new international consensus has rapidly been gaining strength. As the International Monetary Fund’s head of fiscal policy said, our Government and others should use fiscal policy to beat covid and to stimulate our economies by reducing unemployment and restoring economic growth. That focus on growth, investment and jobs is at the heart of the approach set out by the shadow Chancellor, my hon. Friend the Member for Oxford East (Anneliese Dodds). Our framework will meet the challenges of our times—it is a responsible approach in which a balanced current budget over the economic cycle would never prevent us from protecting people and businesses during a crisis or making critical investments in our future.

As the Bill progresses through the House, we will look at the detail in respect of the points I have outlined so far, as well as on other measures in the Bill such as those relating to freeports. We want to see good jobs and economic growth in every part of the country, irrespective of whether an area has a freeport. We need long-term, locally led investment in every region and nation, and freeports will in no way compensate for Ministers’ inexplicable decision to scrap their industrial strategy and disband their industrial council just when we need a long-term plan to support our critical industries. Furthermore, with freeports elsewhere in the world having become magnets for organised crime, tax evasion and smuggling, we fear that at a time when HMRC is already overstretched Britain is not well placed to manage such risks.

In Committee, we will challenge the Government over their approach to tax avoidance and tax evasion more widely, following up our long-standing concerns that Treasury Ministers continue to drag their feet on tackling these problems. Although the Bill contains measures to tackle the promoters of tax avoidance and change the system of penalties, there is a clear sense that those measures are extremely limited in scope, rather than the comprehensive action that we need. Indeed, those changes are not even included in the Budget report costings, suggesting that their financial impact must be minimal.

We will use the next stage of consideration of the Bill to go through the detail of the measures it contains that seek to address the problem of plastic pollution and to increase the use of recycled content. The principle of a plastic packaging tax is one that we support, and because we want it to be as effective as possible we will ask Ministers to consider the detail of its operation in Committee. Overall, however, we cannot support this Finance Bill. The Bill, and the Budget that it follows, should have seized the opportunity to help people who are struggling now; to invest in good new jobs in every part of the country; and to be ambitious in finally getting to grips with social care, housing and other challenges that our country has faced for so long without solving. In fact, rather than supporting families out of this crisis and setting an ambitious plan for the future, the Government are prioritising tax breaks for tech giants.

If this Bill had been presented by Conservative Ministers 10 years ago, it would have been the wrong solution then; a decade later, their approach has not changed but the rest of the world has moved on. No longer will they find allies for their approach in international institutions, and the politics of the United States shows that the consensus around the world is shifting. The Government are out of step with economic reality. They are taking decisions that will push up taxes for people across our country while helping Amazon to reduce its tax bill. They are choosing to cut NHS workers’ pay while failing to fix our system of social care, and they are deciding to continue a decade of cuts to public services when we urgently need to invest in the future.

[Kevin Hollinrake]

Will the hon. Gentleman give way?

[James Murray]

I have only a few moments. The hon. Gentleman may speak later.

We will vote for our amendment and against the Bill, to make it clear to people in our country that we understand that people need to be spared the Bill’s tax rises; that Amazon does not need any favours; that NHS workers deserve our support, that we need good new jobs in every region in the nation; that the economy will grow only through responsible investment; and that we need to fix social care, the climate emergency and the housing crisis. Above all, people in our country need a Government who are on their side, and it is absolutely clear from the choices that the Bill and their Budget make, and the problems that they choose to ignore, that this Government fail that test.