National Insurance Contributions Bill

Committee

Clause 1: Zero-rate contributions for employees at freeport tax sites: Great Britain

Amendment 1

1: Clause 1, page 1, line 9, at end insert “and other than an employer who has not declared the beneficial owner of any goods or assets stored or present in the freeport” Member’s explanatory statement This amendment would ensure employers have declared the beneficial ownership of goods or assets in the freeport before being eligible for zero-rate contributions under this Bill.

My Lords, I shall try not to add too much to the hot air in the Room so that we can crack through all of this.

Free ports have historically been a magnet for illicit activity, including, and these days almost especially, money laundering. Some of the UN reports give people a sense of how large the scope of money laundering is; the reports reckon that something like $800 billion up to $2 trillion a year—2% to 5% of the world’s GDP—is put through the laundry machine. In May 2020, RUSI’s Centre for Financial Crime and Security Studies said in written evidence to the International Trade Committee of the other place:

“there is evidence of criminal activity taking place in multiple freeports around the world. It often involves trade in counterfeit goods, drug trafficking, smuggling of untaxed goods or trade-based money laundering”.

By definition, free ports do not require declarations that are associated with customs, excise or tax, which are the principal ways in which transparency as to the nature of imported items, their origins, destinations and ownership, is achieved. When extensive processing of those imports is also available in the free port site, especially when, as in this case, the processing is granted all kinds of fiscal favours, including the waiver of national insurance contributions, the lure for criminals and money launderers is very much magnified. Obviously, the more processed the illicit product, the harder it is to trace or track and the harder it is for enforcement. Exploring safeguards against illicit behaviour is the motive behind Amendment 1, which I recognise is very much a probing amendment.

I thank the Minister and his office for taking this issue seriously in our meeting last Thursday. It was a very useful meeting, and we appreciate it. The follow-up information provided has alleviated some of my concerns, because, as the email from the Treasury explained, some relevant measures were included in the freeports bidding prospectus, which says:

I start by reiterating the Labour Party’s position on the Bill, as originally stated at Second Reading. We have never understood the Government’s fanaticism over free ports and are sceptical that they will deliver the scale of economic benefit promised in recent years. Nevertheless, we do not intend to oppose the various measures, some on free ports and some on other issues, contained in the legislation. The Government will get their Bill through and it will be up to Ministers to prove that their way is the right way. If that proves not to be the case, they must own their failures of judgment.

As a general point, there are several important questions that the Government were unable to answer in the other place or at Second Reading. Today is an opportunity to explore some of those concerns in more detail. It is also a chance for me to record my thanks, along with those of the noble Baroness, Lady Kramer, to the Minister and his officials for their engagement between Second Reading and today. Not all our questions were answered, but I hope they will be addressed as the Minister responds to the nine amendments before us.

Amendment 1, tabled by the noble Baroness, Lady Kramer, has enabled a short debate on beneficial ownership. As she noted in her introduction, we have been waiting for quite some time for the Government to deliver on their numerous promises in this area. I am sure the Minister himself has delivered assurances on at least a few occasions. The case for stronger action has been made time and again. Light is cast on shady practices, yet despite stern warnings from the Chancellor, meaningful action never seems to materialise. I hope colleagues will forgive the slightly dry analogy, but as we are in January it is almost as if the Treasury and BEIS are treating this like a new year’s resolution. It sounds positive, and we are promised that the Government will follow through, but within weeks or months the ambition quietly falls away. Questions about beneficial ownership are not best dealt with in this Bill, but I appreciate the noble Baroness’s efforts to raise them. I doubt the Minister will be able to offer all the assurances that we seek, but I hope he can go some way to proving me wrong.

My Lords, I start by thanking the noble Baroness, Lady Kramer, and the noble Lord, Lord Tunnicliffe, for raising these important points. I also found it useful to have a discussion prior to Committee on the points that both noble Lords raised, which are being taken forward today. Ensuring that the free-port tax reliefs are effectively targeted is a government priority, and this will be the general theme of my remarks.

Before I go into the detail of the specific amendment, I will provide a brief overview of what the Government are looking to achieve through free ports, and I hope this will be helpful to the noble Lord, Lord Tunnicliffe, in particular. It is, first, to establish national hubs for global trade and investment, intensifying the economic impact of our ports and generating increased economic activity across the UK. Secondly, it is to deliver jobs, sustainable economic growth and regeneration in the areas that need it most. Thirdly, it is to create centres of innovation that bring together innovators to develop and trial new ideas and technologies.

To these ends, each free port will contain specific tax sites where businesses can claim reliefs on new investment and jobs, including the national insurance contributions relief discussed here today and as part of this Bill. Each free port will also contain specific customs sites where importers, exporters and manufacturers can benefit from duty reliefs and simplified customs procedures. Also, each free port will receive a capital grant for infrastructure improvements, alongside planning flexibilities and trade, investment and innovation support.

Amendment 1 seeks to support the government’s commitment that only legitimate businesses operate in free ports. I can assure the House that the Government have taken steps to ensure that only those whom this policy is intended to benefit will benefit. Specific to this policy, the Government have included conditions requiring free-port employers to have a physical business premises in the free-port tax site, so that only employers that are investing in free ports can benefit from this relief. Next, employees are required to spend 60% of their working time in the free-port tax site. Both these conditions ensure that the relief is effectively targeted.

Having gone into that detail, I will say more about government action more generally on money laundering —a very important point raised by the noble Baroness in particular. The Government are committed to investigating individuals or professionals who launder the proceeds of tax crimes and other organised criminality. I took note of the figures produced by the noble Baroness. Of course, I will need to check them out, but they sound extraordinarily large and rather sobering. In the last three years, we have recovered over £550 million from the proceeds of crime, charged over 100 people with money-laundering offences, and seen over 75 people convicted for money laundering. We have secured 27 convictions in the last year alone—that is, 2020-21.

I will go a little further before I conclude on how we the Government are ensuring that free ports are secure and mitigate the risk of them becoming hotbeds for money laundering, art fraud, piracy, and any other illicit activity. The UK plays a key role in tackling cross-border illegal activity and this will not change. Free ports are commonly used across the globe, as the noble Baroness said, and we have learned from these examples to build upon our current expertise to ensure that cross-border illegal activity is thwarted. Free ports will have to adhere to the OECD code of conduct for clean free trade zones and must maintain the current obligations on free ports as set out in the UK’s Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017. Free-port operators and businesses will be authorised by HMRC and Border Force and must meet robust security requirements to mitigate risks. HMRC and Border Force will continue to conduct compliance checks on goods within the free port. This means that operators of free ports will need to put appropriate measures in place to ensure the security of the site and the control of access of goods and people in and out of the free port.

I hope that the measures that I have outlined and the money-laundering issues in relation to free ports and more broadly will reassure the Committee, and I hope that the noble Baroness will withdraw her amendment.

My Lords, I will indeed withdraw the amendment, but I put the Minister on notice that when every opportunity occurs I will keep pressing, as I suspect will others in this Room, for public, not just private, registers of beneficial interest. I am convinced that until we do that we will not crack this problem. I beg leave to withdraw the amendment.

Amendment 1 withdrawn.

Clause 1 agreed.

Clause 2 agreed.

Clause 3: Freeport conditions: supplementary

Amendment 2