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.
In relation to free ports more broadly and the specifics of the amendment, the Government have three stages before businesses can claim reliefs in tax sites. The noble Baroness, Lady Kramer, mentioned the bidding process. I am pleased that we have got to this point in the debate. The bidding process, run by the Department for Levelling Up, Housing and Communities, considered a wide range of criteria, including what steps the bidders would take to ensure that their free port would be secure against illicit activity. As I think the noble Baroness picked up, eight out of the 14 bids were taken forward, which means that six were not.
Secondly, each free port has to agree its proposed tax sites with HMT and HMRC, with consideration given to HMRC’s ability to enforce the conditions of the tax reliefs within each site. So far, three of the free ports have had a total of eight tax sites designated. Thirdly, each business within a tax site will need to submit a return to HMRC to claim this relief and demonstrate that it has met the relevant conditions. Compliance checks will be carried out to ensure that only those who are eligible for the relief benefit from it.
To support all this, as part of successful bids the Government have required free-port governance bodies to undertake rigorous efforts to verify the beneficial owner of businesses operating within the free-port tax site. This is a proportionate approach that means that the local area can take effective measures to ensure the security and propriety of operations within the free port. In practice, many free-port governance bodies are taking further steps to ensure that firms moving into tax sites will support delivery of the free ports’ overall objectives. Similarly, for the customs sites, there are three stages: first, the overall free-port bid process
that I referred to earlier; secondly, HMRC approval of each customs site; and, thirdly, HMRC approval of each business operating within each customs site.
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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.