National Insurance Contributions Bill

Before we begin debating the new clauses and amendments to the Bill that have been selected, I want to remind the House that the scope of this debate is limited to whether or not the Bill should be altered or added to by any or all of those amendments and new clauses. This is not an opportunity to debate the Bill as a whole or the national insurance fund in general, and still less to discuss how to fund the NHS or adult social care. I expect that the House will have the chance later in the week to hear from Ministers, if and when they have any new policies to announce with regard to what I have talked about.

New Clause 1

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 (see section [Green manufacturing condition]), 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.)

I beg to move, That the clause be read a Second time.

With this it will be convenient to discuss the following:

New clause 2—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 of increasing environmental standards.

(3) The categories of products designated must include—

(a) wind turbines, and

(b) electric vehicles.’

New clause 3—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.’

New clause 4—Employment allowance for national insurance contributions—

‘(1) In section 1(2)(a)(1) of the National Insurance Contributions Act 2014 (employment allowance for national insurance contributions), for “£4,000” substitute “£16,000”.

I rise to support amendments 1 and 2 and new clauses 1 to 3 in my name.

I went over the reasoning for these amendments in some detail on Second Reading and in Committee, so I am sure the House will be relieved to hear that I do not intend to go into quite that level of detail again. The arguments I made then still stand, that the Government should not forgo tax revenues or give advantages to some businesses that are not available to others in terms of national insurance exemptions without securing meaningful commitments in return and in advance.

For that reason, we believe reciprocal benefits should be baked in from the start, both in the strategic economic objectives that we presume are being sought and in ensuring the very best employer behaviour, so that we are incentivising the kind of corporate behaviour that we want to see and encouraging future manufacturing to develop in that way.

We particularly wish to see greenports evolve—greenports are the Scottish Government’s model for freeports—to help tackle the climate crisis and to ensure the protection of workers’ rights. SNP amendments 1 and 2 would help to ensure that freeports and greenports do not end up contributing to a race to the bottom on workers’ rights and broader standards.

New clauses 1 and 2 get to the heart of the matter, by ensuring that employers within the designated freeports pay, as a minimum, a living wage to all staff they employ; by setting out how businesses can ensure that no goods passing through freeports are in any way the product of, or have benefited from the contribution of, slave labour; by setting out how freeports can contribute towards achieving legally binding climate change commitments; and by ensuring that the environmental impact of freeports is properly considered in each case, so that they can be seen as an exemplar, rather than simply being compliant with existing legislation.

I understand the purpose behind the new clause, but new clause 1 refers to “green manufacturing companies”, whereas new clause 2 talks about manufacturing products that “include” wind turbines and electric vehicles. So could those companies not undertake all kinds of very polluting activities within their business but still qualify for the exemption for all their employees if they make some wind turbines and electric vehicles? That is how this seems to be drafted.

I thank the hon. Gentleman for that intervention, but I do not believe that is the outcome. If we are looking to incentivise, these are a substantial set of incentives, and they have to be for the promotion of what I have described. A phrase that may be familiar in his Thirsk and Malton constituency is, “You shouldn’t get owt for nowt”. That is simply the intention here: to make sure we are getting these objectives that are being sought.

They say that the road to hell is paved with good intentions. The intention may be something different, but the way the new clauses are drafted and the fact that new clause 2 says “include” means that so long as a company does some of those things, it could burn coal to produce electricity and still qualify under the new clause. That is the position as far as I can ascertain, but the hon. Gentleman may be able to explain the difference.

As I say, the hon. Gentleman and I will have to agree to disagree on that. If the Minister or the Government do not believe the new clause can meet the objectives in the way I have set out, it is open to them to try to achieve those objectives in some other way. I have no huge expectation of this new clause making it into the Bill, but the intention is clear, the new clause is clear and the Government should be using this incentive to drive exactly the sort of outcome I have set out.

On new clause 3, the Scottish Government are to be commended for the way in which they have sought to recognise the contribution of our health and social care heroes and how they have responded magnificently throughout the pandemic. It remains a source of great disappointment that the UK Government have not followed suit or supported that by allowing one-off payments to be made free of tax and national insurance, instead treating them as a top-up to wages rather than as a bonus. Rather than having the Scottish Government gross up those payments, as the Minister has previously argued should happen, surely it would be better if the UK Government were simply to exempt the payments from NI. I am certain that if that power was devolved to the Scottish Government to exercise, that is exactly what the Scottish Government would do. This shows the limitations of the current devolved fiscal settlement and the requirement to operate within what are, in essence, fixed budgets, which would make it impossible for the Scottish Government to make those payments net without impacting on other spending lines.

That sets out clearly the intentions of our provisions. As I say, I do not intend to go on overly long about them, but they are worthy of support. I have no huge expectation that the Government will change their mind, having listened to those arguments and rejected them at previous stages. Nevertheless, they are important arguments of principle as to what we should be trying to get out of this to match the good intentions, which are clearly there on freeports, in order to achieve positive social and economic outcomes.

As a final plea, I encourage the Minister, once again, as I have at previous stages, to ensure that the UK Government are working at all stages with the Scottish Government to make sure that we can bring forward a form of freeports in Scotland that meets these objectives.

I rise to speak to my new clause 4, which would quadruple the employment allowance from £4,000 to £16,000 for two years. I tabled it for several reasons. The Government’s Bill rightly identifies that changes to national insurance contributions for both employees and employers have a role to play in stimulating economic activity. That is why they wish to have special NI provisions for freeports and, elsewhere in the Bill, for veterans, to help them back into work and stimulate economic activity in freeports. Interestingly, the Government are indicating in this Bill that they see a role that national insurance contributions can play in stimulating economic activity. I will not labour the point, because Madam Deputy Speaker has made the rules clear on that, but we expect to see further announcements later in the week on NICs, which I think will contradict what this Bill is seeking to do.

NICs have an important role to play in stimulating economic activity, and I wish to speak particularly about our small and medium-sized enterprises. So many of them have been hit badly by the pandemic, especially those in our retail, hospitality and tourism sectors. One thing that many of us here can agree on is that as we come out of the pandemic we expect to see some big changes to the way business operates. We expect possibly to see more online working and more working from home, and we may well see new businesses come in to replace old businesses that did not survive the pandemic to deliver the new services that will support new ways of working and perhaps new ways of living. People will live further away from town centres. What new opportunities will there be in suburban constituencies such as mine, and even rural constituencies, to deliver services for people who would not previously have spent as much time there? So this is an interesting time, but I believe the Government should, above all, be prioritising economic growth and most particularly employment at this stage.

What assessment has the hon. Lady made of the cost to the Exchequer of her new clause?

I have not made an assessment of the cost, but that is partly because it would be difficult to manage that against the extent to which my proposal could, as I said just a minute ago, stimulate the economy, which is what we should prioritise at this time, particularly for small and medium-sized enterprises. If we can, we should stimulate SME growth, particularly in new sectors that may well benefit from changes in the way we do business in this country. The hon. Member for Gordon (Richard Thomson) commented in particular on businesses that pursue carbon-free ways to deliver goods and services, which are such a priority. These are big areas for growth and we should be pursuing them.

In particular, we should support employment in new industries. In the past few weeks we have seen a great deal about skills shortages. We really need to improve skills development in existing industries—we have seen massive skills shortages in respect of drivers of heavy goods vehicle and care workers—but there are also lots of opportunities in the new industries and particularly in the green economy. We really need to support employment and encourage people to develop the skills they need to take their place in what I think will be the new, future economy.

I would like to make some progress, if that is okay.

We should at this time pursue economic growth and job creation above all other concerns, because we face an uncertain few months in our economy. We could face a wave of closures and redundancies as the various support schemes that the Government introduced to get us through the pandemic come to an end. There could well be lots of redundancies as the furlough scheme closes. Business rates exemptions and deferred VAT payments are coming to an end, so if we can reduce the pressure on businesses by relieving them of some of their national insurance payments, that will help them to ride out the coming period when they will need to repay some of the costs. VAT on hospitality is going back to 12.5% from the end of this month. All such financial pressures are coming at a time when we think prices will rise and the universal credit cut may well hit household incomes and suppress demand.

I propose new clause 4 because instead of a selected NICs cut for companies in freeports, I would prefer that we target the cut at SMEs, at this urgent time when we want to stimulate economic growth and support employment.

I am grateful for the opportunity to speak on Report on behalf of the Opposition. As we have made clear throughout the passage of this legislation through the House, we will not oppose the Bill. We have, however, used the opportunity of the debates we have had so far to raise important questions with Ministers about some of the approaches they have decided to take.

As we know, clauses 1 to 5 introduce a new zero rate of secondary class 1 national insurance contributions for employers who take on employees in a freeport. The zero rate will apply from April 2022 and allow employers to claim relief on the earnings of eligible employees of up to £25,000 per year for three years. Clauses 6 and 7 also introduce a new zero rate of secondary class 1 national insurance contributions, in this case for employers of armed forces veterans.