6 September 2021
National Insurance Contributions Bill

Jesse Norman, Financial Secretary to the Treasury, responds to amendments and moves the Third Reading of the National Insurance Contributions Bill.

Report Stage

The Financial Secretary to the Treasury (Jesse Norman)

I am sorry that the hon. Member for Ealing North (James Murray) was not able to revisit his greatest hits from Committee or other previous stages of the Bill, but unfortunately he is required to speak to the new clauses and amendments before us, which is what I will do.

The Scottish National party has tabled new clauses that would create a new zero rate of secondary class 1 NICs for employers classed as “green manufacturing companies”, including those that produce wind turbines and electric vehicles. As the House will know, the Government take support for the green economy extremely seriously. For example, since 2013 the Government have provided £150 million per annum to the Aerospace Technology Institute—investment match-funded by industry—including £84.6 million of investment to develop zero-emission flights and further support for other potential zero-emission aircraft concepts.

In addition, the Government are to spend nearly £500 million in the next four years to support the UK’s electric vehicle manufacturing industry as part of our commitment to provide up to £1 billion for the development and mass production of electric vehicle batteries and the associated supply chains. The funding is available UK-wide and will boost investment in the UK’s strong manufacturing base.

Of course, the Government have also stated their ambition to deploy 40 GW of offshore wind capacity by 2030, alongside a commitment to invest £160 million in ports and manufacturing infrastructure. The goal of that investment will be to encourage up to £20 billion of much-needed private investment in coastal areas and to support up to 60,000 green manufacturing jobs by 2030. The Government’s commitment to support green manufacturing is therefore quite clear.

Unfortunately, new clause 1 would introduce a major change to the tax system of a magnitude that would require the careful consideration of costs and benefits and, in fact, goes far beyond what should be included via amendment in a Bill such as this one. The design of a sector-focused tax relief is not straightforward and would add complexity to the tax system. By contrast, there has been no consultation on, costing of or impact assessment made in relation to the measure proposed in new clause 1. For those reasons, I urge the House to reject it.

On new clause 3, covid-19 has proven to be the biggest health and economic threat faced by the UK in decades. Key workers, including NHS staff and social care workers, have done extraordinary things, as the House recognises, to keep the public safe in the continuing fight against the virus. For their part, the Government hugely value and appreciate such important contributions to the covid-19 response. However, as I will explain, the Government do not believe that the new clause is appropriate or necessary. Under long-standing rules, any payments made in connection with an employment incur income tax and national insurance contributions. Such payments also count as income for the purposes of calculating entitlement to certain benefits.

Jim Shannon (Strangford) (DUP)

In Northern Ireland, we have done something just a wee bit different. It is a £500 bonus, and if the 20% of tax and the national insurance at 12% are added in, that means that the Northern Ireland Executive is paying £735 per individual. Is the Minister aware of that, and would he replicate it in the rest of the UK?

Jesse Norman 

I think the hon. Gentleman knows that the £500 payment has been offered across devolved Administrations. It is important that he has made that point, and I recognise it, but that does not really affect the point at issue in relation to the new clause, which is about the £500 payments that the Scottish Government are making to health and social care workers, which they are using to function as a top-up to wages. We therefore consider that these payments are taxable as earnings under the normal rules.


I will also, if I may, highlight the fact that 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 Scottish Government had intended health and social care workers to benefit by at least £500, they were entirely free to gross up the payments perhaps to £735, as has been done in Wales, in order to take into account the tax and NICs liabilities. Indeed, the Scottish Government remain able to do so if they really believe that the higher figure is appropriate.

New clause 4 has been proposed by the Liberal Democrats and would increase the employment allowance from £4,000 to £16,000 for two years and would also require the Chancellor of the Exchequer to lay before Parliament a review of the effect of this policy on employment, on the performance of small businesses, and on GDP growth by September 2023. Very surprisingly for a Liberal Democrat amendment, there is no mention on how this increase would be paid for. Such a policy change would be expensive and unnecessary. The Government have already taken significant actions to support small businesses through the employment allowance in its current form. In fact, businesses and charities up and down this country have benefited from the allowance since it was introduced in 2014. As a result, more than 1 million employers are reducing their annual national insurance contributions bills, and around 650,000 have been taken out of NICs altogether.

The new clause talks about further increasing the allowance. On that point, let me remind the House that the Government only recently raised the allowance from £3,000 to £4,000 in April of last year in order to help small businesses and boost employment levels. Members should also not forget the NICs reliefs that have been included elsewhere in this Bill. There is also the question of affordability. The current cost of the employment allowance is estimated to stand at around £2.3 billion a year. There is significant support for businesses within the NICs system already. Increasing the employment allowance in this way would be an extremely costly use of taxpayers’ money and, again, a measure wholly out of keeping with the Report stage of this Bill, let alone that it is not consulted on, costed, or accompanied by any impact assessment. For all those reasons, the new clause should be resisted.

The SNP has already tabled amendments, but not spoken to them, in respect of clause 2, which places additional eligibility criteria on freeports in relation to employment rights, equalities and the environment. [Interruption.] I am sorry, the hon. Member for Gordon (Richard Thomson) has spoken to them. These criteria would add complexity and potential delay. By singling out freeports for these measures, they would also be burdening an important source of business growth. Let us take greenhouse gas emissions for example. The Government are already committed to reducing carbon emissions. That is why this country became the first major economy to implement a legally binding net zero greenhouse gas emissions target by 2050. That target is reflected in the UK’s high regulatory standards—standards that apply across the economy including for businesses operating in freeports. Indeed, the bidding prospectus for freeports in England embedded net zero ambitions as part of the assessment of bids.

As regards amendment 1 on the living wage, the Government are already committed to supporting that in employment, which is precisely why they introduced the national living wage in 2016. It is of course vital to ensure that no goods passing through freeports are the product of slave labour. Slavery is a global problem, which is why employers in freeports will need to meet the same high regulatory standards on slave labour as other businesses in the UK. For all these reasons, I urge the House to resist this amendment.

Finally, I turn to Government amendment 3. The policy intent here is that the veterans’ measure should apply to the whole United Kingdom. This amendment corrects a small drafting error by replacing reference to the Social Security Contributions and Benefits Act 1992 with a reference to that Act and the Social Security Contributions and Benefits (Northern Ireland) Act 1992, reflecting the original policy intent. I trust that Members will agree that this is a minor and technical amendment and should be included as part of the Bill.


Third Reading

Jesse Norman 

I beg to move, That the Bill be now read the Third time.

Mr Deputy Speaker, I must say that I too am delighted that this Bill has been the occasion for our return to proper voting procedures in this House.

I am very grateful to all hon. and right hon. Members who have participated in the passage of this legislation, particularly in Committee. I also thank the Committee’s Chairs, my right hon. Friend the Member for Romsey and Southampton North (Caroline Nokes) and the hon. Member for Makerfield (Yvonne Fovargue), for helping the Committee to take the Bill through its scrutiny so effectively.

I begin by reminding the House of the Bill’s provisions and overarching goals. It contains four measures: an employer NICs relief for employees in freeports; an employer NICs relief for employers of veterans; an exemption for Test and Trace support payments from self-employed NICs; and changes to disclosure of tax avoidance schemes legislation with regard to NICs. In addition to those measures, the Government tabled a minor technical amendment to ensure that the policy intent is met in the Bill.

As you will be aware from your intimate scrutiny of the Bill, Mr Deputy Speaker, the employer NICs relief applies to employees in freeports. The measure will support the delivery of the Government’s freeports programme. In so doing, it will help to attract new businesses to freeports and regenerate communities by creating jobs, boosting investment and spreading prosperity. It is the Government’s intention to designate freeports in all four devolved nations. Therefore, while the legislation currently provides for a relief in England, Wales and Scotland, it is the Government’s intention to legislate for this relief in Northern Ireland as soon as it is practicable. In fact, the Bill gives the Government the power to set out the detail of the employer NICs relief in Northern Ireland in secondary legislation once engagement with the Northern Ireland Executive is complete.

Secondly, the Bill contains an employer NICs relief for employers of veterans. I do not need to tell you, Mr Deputy Speaker, that our veterans provide an extraordinary national service, as recent events have reminded us, but we know that some of them face difficulties in obtaining secure and fulfilling employment. It is only right that we do all we can to change this situation. This measure provides full employer NICs relief on earnings up to £50,270 in a veteran’s first full year of civilian employment. 

It amounts to a saving of up to £5,500 per hired veteran and it will constitute a real boost to their employment prospects.

Thirdly, there is the exemption for test and trace support payments for self-employed NICs. As Members will recall, and as we have recapitulated already, last September the Government announced a £500 support payment for low-income individuals told to self-isolate but who could not work from home and would lose income as a result. Shortly afterwards, the Scottish and Welsh Governments announced similar schemes. Last year we introduced regulations to exempt payments under support schemes from employee and employer class 1 and class 1A NICs. This Bill will extend the exemption to the self-employed. It will ensure that these workers are treated consistently with their employed counterparts and that they do not have to pay NICs on support payments. It will retrospectively exempt test and trace support payments from class 2 and class 4 NICs to the 2021-22 tax year and it will ensure that in future these test and trace support payments will not be included in profits liable to class 2 and class 4 NICs.

Finally, the Bill includes a measure that makes changes to the disclosure of tax avoidance schemes regime for NICs. Legislation in the Finance Act 2021 enhanced the operation of the DOTAS regime, and the Bill includes changes to an existing regulation-making power in the Social Security Administration Act 1992. This will ensure that HMRC can act decisively when promoters fail to provide information on suspected avoidance schemes. It will also enable HMRC to warn taxpayers about suspected avoidance schemes at an earlier stage than at present.

As I have outlined, this Bill contains a range of relatively small yet significant measures that will advance this Government’s policy objectives. It supports the levelling-up agenda and regional growth, it boosts the prospects of our armed services veterans, and it strengthens the Government’s powers to tackle promoters of avoidance schemes. I reiterate my very strong and sincere thanks to Members who have engaged in the series of stimulating discussions and debates that we have had on these measures over the past few weeks. On that note, I commend the Bill to the House.