My Lords, this has been a short but interesting debate. There has been a heavy focus on the Government’s policy on free ports, the first of which has now opened on Teesside. Seven more are due to follow, after sites were confirmed in the Spring Budget. Perhaps the Minister could provide an update on the status of these sites today. It will be interesting to see how free ports operate in practice. There is no doubt that they have potential benefits in jobs, economic activity and infrastructure improvement. However, it is unclear to what extent they are merely displacement benefits and there are certainly risks, as the noble Baroness, Lady Kramer, pointed out, of tax evasion, smuggling and other forms of criminal activity.
In the other place, the Government opposed a sensible Labour amendment to the Finance Bill, which would have required transparent evaluation of the success or otherwise of each individual site. That would have given us a clear picture of exactly where benefits are being derived and the extent to which they exist. It would also have given the Government much needed data to inform any tweaks to policy in the months and years ahead. Can the Minister inform your Lordships’ House of exactly how the ongoing balance of opportunity and risk will be reviewed and reported on? Will Parliament be given information and, if so, at what frequency and in what form? If not, why not?
Turning to the Bill, Clauses 1 to 5 introduce NICs relief for employers based in free-port tax sites. Such relief lasts for three years but, presumably for reasons of expediency, applies only to employment commencing from April 2022. With the Teesside site now operational and others due on stream soon, does the Minister not think that it is counterproductive to exclude these key early months? Does he foresee a situation in which employers delay recruitment?
Clauses 6 and 7 introduce a one-year period of NICs relief for employers of Armed Forces veterans to assist ex-service personnel in their transition back to civilian life. It is no secret that I believe the Government have a range of duties towards our service personnel and veterans. Supporting veterans into lasting work is one of those. The relief forms one part of that duty but its time-limited nature is a cause for concern. In the Commons, Sir Mike Penning observed that the first 12 months outside the forces is the most challenging period for former service men or women. In many senses, it is a case of sink or swim. That may be true and we welcome the temporary NICs relief, but the Government have thus far been unable to justify why free-port firms should enjoy three years of relief—the Minister hinted at a longer period—compared to those hiring ex-service personnel. Would the noble Lord the Minister care to have a go today?
The changes made in Clauses 10 and 11, bringing the self-employed into NICs relief for test and trace support scheme payments and extending the disclosure of tax avoidance schemes rules to NICs avoidance, are welcome. As I have made clear on several occasions, we do not feel that the Government do nearly enough to tackle or otherwise disincentivise tax avoidance, which deprives our public services of much needed funds. This measure provides HMRC with a further tool, which is positive, but can the Minister comment on what gains are expected from this change in each tax year? Some in the sector have expressed concern that the Government’s actions on tax avoidance are limited in scope and ambition, and have reached the point where they are achieving diminishing returns. The Bill may not be the right vehicle to discuss the ways forward but I hope that the Treasury and HMRC are able to broaden their horizons.
Indeed, the recently leaked Pandora papers once again highlighted the sheer number and complexity of tax avoidance arrangements. Those revelations arguably strengthen the case for a change of approach. In response to the emergence of those documents, Mr Sunak pledged that the Government would look through them,
“to see if there’s anything we can learn.”
That does not relate directly to NICs, so I will not ask the Minister to comment now but will he be kind enough to provide a written update on that project?
We did not oppose the Bill in the Commons and have no intention of doing so here. It has already had a long gestation period, having trundled through the other place over the course of many months. While there are areas where we would like clarification from the Minister, it is not the role of your Lordships’ House to unduly hold these measures up. I hope, however, that the Government will engage meaningfully with
the Delegated Powers and Regulatory Reform Committee, which has made several modest recommendations. I look forward to the Minister’s response on the range of issues raised throughout this debate and would appreciate correspondence on any topics he is unable to cover in his winding speech.
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