My Lords, I thank the noble Baroness, Lady Kramer, for raising this point, which reflects a recommendation by the Delegated Powers and Regulatory Reform Committee.
As background, Clause 3 ensures that the Government retain the flexibility to react to the economic realities of free ports and to protect the taxpayer, and it therefore contains a number of regulation-making powers, in subsections (3) and (4). Free ports are novel in the UK. The Government have undertaken an ambitious plan to invest in underdeveloped areas and level up the UK. So that the Government can continue to meet their international obligations and retain the power to exclude employers that seek to abuse this policy, they have taken a power to add, remove, or alter the conditions set out in Clause 2, which is contained in subsections (3) and (4) of Clause 3. A similar approach was taken with other free-port measures legislated for in the Finance Act 2021. My point is that there is a precedent here.
I turn to the substance of Amendment 2, tabled by the noble Baroness, Lady Kramer, and supported by the noble Lord, Lord Tunnicliffe. It seeks to limit the regulations that could be made under Clause 3(3) to those that would ensure compliance with the UK’s international obligations with respect to subsidy control. This is in response to the report of the DPRRC, which recommended that this power, which may amend Part 1
of the Bill and which is subject to the draft affirmative procedure, should be restricted to specified purposes only.
I would like to explain to noble Lords why the Government consider this amendment unnecessary, and will go into the reasons, as the Committee would expect me to. Examples of when this power could be used are provided in the department’s delegated powers memorandum of ensuring compliance with the UK’s international subsidy control obligations. The Government believe that this amendment would be overly restrictive and could result in primary legislation being needed in the near future. The subsidy control landscape in this case is complicated, uncertain and difficult to predict, and the power needs to be capable of dealing with a wide range of possibilities. The Government believe that it would be difficult to narrow it while at the same time allowing it to be flexible enough to deal with a wide range of possibilities within the subsidy control landscape.
I shall go further. It may help the Committee if I also explain what in the Government’s view is a clear precedent for this power, in Section 5(1)(b) of the National Insurance Contributions Act 2014. This measure provides a power exercisable by the Treasury to make regulations to add, reduce or modify the cases in which a person cannot qualify for an employment allowance or in which liabilities to pay secondary class 1 NICs are excluded liabilities. It enables the Treasury to make changes to Sections 2 and 3 and Schedule 1 of that Act. The Delegated Powers and Regulatory Reform Committee’s 18th report of Session 2013-14 considered the delegated powers in the NICs Act 2014 but, interestingly, did not comment on the power in Section 5(1)(b) of the Act.
The power in Section 5(1)(b) has so far been used three times, including to exclude companies with employer NICs over £100,000 to focus the relief on small businesses. This policy change was not foreseen when the power was introduced and, if there had been a similar restriction in the legislation on the use of the power, such a change would have subsequently required primary legislation. This could have risked a delay to implementing the policy as, unlike Finance Bills, NICs Bills are not guaranteed to be annual.
In view of the above, and that similar powers are also included in the Finance Act 2021, the Government believe that the draft affirmative procedure remains appropriate without further restrictions on the power. With this rather lengthy explanation, I hope that the noble Baroness will withdraw her amendment.