Finance Bill

Report stage
Monday 3rd March 2025 Commons Chamber

Consideration of Bill, not amended in the Committee and as amended in the Public Bill Committee

[Relevant document: Correspondence between the Joint Committee on Human Rights, the Chancellor of the Exchequer and the Exchequer Secretary to the Treasury, on the removal of the VAT exemption for independent school fees, reported to the House on 22 January and 29 January.]

New Clause 1

Review of impact of section 1 on recipients of the full rate of the new state pension

“(1) The Chancellor of the Exchequer must, within three months of this Act being passed, publish a review of the expected impact of section 1 of this Act on recipients of the full rate of the new state pension.

(2) The review must include analysis setting out, for the tax year 2025-26—

(a) the total number of people in receipt of the full rate of the new state pension paying tax under section 1 of this Act, and

(b) the tax liability of state pension income under section 1 of this Act of those in subsection (2)(a).

(3) For comparative purposes, the review must take account of equivalent projected figures for subsections (2)(a) and (2)(b) for the tax years 2026-27, 2027-28, 2028-29 and 2029-30.”—(James Wild.)

This new clause would require a review of how many people receiving the new state pension at the full rate are liable to pay income tax this year and in the next four tax years, and specifically what the tax liability of their state pension income will be.

Brought up, and read the First time.

17:30

[James Wild (North West Norfolk) (Con)]

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

[Madam Deputy Speaker]

With this it will be convenient to discuss the following:

New clause 2—Energy (oil and gas) profits levy: impact assessment of increase in rate—

“(1) The Chancellor of the Exchequer must, within six months of this Act coming into force, commission and publish an assessment of the expected impact of Sections 15 to 17 of this Act on—

(a) domestic energy production and investment;

(b) the UK’s energy security;

(c) energy prices, and;

(d) the UK economy.

(2) The assessment must examine the impact of provisions in this Act in comparison with what could have been expected had the energy (oil and gas) profits levy remained unchanged.”

This new clause would require the Chancellor to commission and publish an assessment of the expected impact of changes to the energy (oil and gas) profits levy on domestic energy production, the UK’s energy security, energy prices and the UK economy.

New clause 3—Review of impact of tax changes in this Act on households—

“(1) The Chancellor of the Exchequer must, within six months of this Act being passed, publish an assessment of the impact of the changes in this Act on household finances.

(2) The assessment in subsection (1) must consider how households at a range of different income levels are affected by these changes.”

This new clause requires the Chancellor to publish an assessment of the changes in this Act on the finances of households at a range of different income levels

New clause 4—Review of impact of Act on small and medium sized enterprises—

“(1) The Chancellor of the Exchequer must, within six months of the passing of this Act, lay before Parliament a report setting out the impact of the measures contained within this Act on small and medium sized enterprises.

(2) The report must include an assessment of the impact of the Act on the following matters—

(a) the number of people employed across the UK by small and medium enterprises;

(b) the number of small and medium sized enterprises ceasing to trade; and

(c) the number of new small and medium sized enterprises established.”

This new clause would require the Chancellor to conduct an impact assessment of the Act on small and medium enterprises.

New clause 5—Review of the Impact of Tax Changes on Household Finances—

“(1) The Chancellor of the Exchequer must, within six months of this Act being passed, publish an assessment of the impact of the tax changes introduced by this Act on household finances.

(2) The assessment must evaluate how households across different income levels are affected by these changes.”

This new clause requires the Chancellor to assess and publish a report on how the tax changes in this Act impact households at various income levels.

New clause 6—Report on fiscal effects: relief for investment expenditure—

“The Chancellor of the Exchequer must, within six months of the passing of this Act, lay before Parliament a report setting out the impact of the measures contained in clause 16 of this Act on tax revenue.”

This new clause would require the Government to produce a report setting out the fiscal impact of the Bill’s changes to the Energy Profits Levy investment expenditure relief.

New clause 7—Pupils with SEND without an Education Health and Care Plan: review of VAT provisions—

“(1) The Chancellor of the Exchequer must, within six months of the passing of this Act and every six months thereafter, lay before Parliament a review of the impact of the measures contained in sections 47 to 49 of this Act on pupils with special educational needs and disabilities.

(2) The review must consider in particular the impact of those measures on—

(a) children with special needs who do not have an education health and care plan (EHCP); and

(b) the number of children whose families have applied for an EHCP.”

This new clause would require the Government to produce an impact assessment of the effect of the VAT provisions in the Act on pupils who have special educational needs but do not have an Education Health and Care Plan.

New clause 8—Review of sections 63 and 64—

“(1) The Chancellor of the Exchequer must, within six months of the passing of this Act and every six months thereafter, review the impact of the measures contained in sections 63 and 64 of this Act.

(2) Each review must consider the impact of the measures on—

(a) Scotch whisky distilleries,

(b) small spirit distilleries,

(c) wine producers and wholesalers,

(d) the hospitality industry, and

(e) those operating in the night-time economy.

(3) Each review must include an estimate of administrative and operational costs for the preceding 12-month period for each of the sectors listed in subsection (2).

(4) Each review must consider the impact of the measures on the retail price for consumers of products subject to alcohol duty.

(5) Each review must also examine the expected effect of the measures on the domestic wine trade.

(6) A report setting out the findings of each review must be published and laid before both Houses of Parliament.”

This new clause would require the Government to produce an impact assessment of the measures on the Act on distilleries, wine producers and the hospitality industry.

Government amendments 1 to 17.

Amendment 67, page 53, line 30, leave out clause 47.

This amendment removes Clause 47, which removes the VAT exemption for private school fees.

Amendment 68, page 56, line 13, leave out clause 48.

This amendment removes Clause 48, which introduces anti-forestalling provisions.

Amendment 69, page 56, line 13, leave out clause 49.

This amendment removes Clause 49, which sets out the commencement date.

Government amendments 18 to 66.

[James Wild]

I will speak to new clauses 1 to 3, and amendments 67 to 69, tabled in my name. It is 124 days since the Chancellor delivered the first Labour Budget in 14 years—the so-called growth Budget—but it feels like longer. Inflation is up, taxes are up, borrowing is up, unemployment is up and energy bills are up. I could go on, but most tellingly of all, growth is down. The Bank of England has just cut its growth forecast for this year in half, to just 0.75%. Little wonder that business confidence has plummeted, with firms warning of fewer jobs, lower wages and higher prices. Instead of backing risk takers and supporting wealth creators, as the Conservatives do, this Finance Bill and the Budget attack enterprise and deliver lower growth, higher borrowing and higher taxes.

I turn to new clause 1, concerning pensioners. Millions of pensioners were left out in the cold this winter when the Government took away their winter fuel payments. Millions of people in receipt of only the state pension now face paying income tax on it.

[Dr Luke Evans (Hinckley and Bosworth) (Con)]

When the Government decided to take away the winter fuel payment, they said that people could apply for pension credit to try to get some support. The problem is that there are huge delays in getting pension credit. When the message was first put out, the delay was 84 days. Five hundred new staff have been brought in, but it is still 56 days, which is above the 50-day limit. Does my hon. Friend share my concern that people have now passed through winter and still do not have the funds to which they are entitled under this Government, and which are not there?

[James Wild]

I absolutely agree with my hon. Friend, who has done stellar work in drawing out of the Department the data on delays and waiting times. If everyone who is entitled to pension credit took it up, it would wipe out the savings that the Chancellor wanted, so the idea that she wanted all those people to take up pension credit is for the birds.

New clause 1 would require the Government to review how many people receiving the new state pension at the full rate will be liable to pay income tax in the coming years. At the general election, we were very clear that people in receipt of only the state pension should not pay income tax on it. However, recent forecasts suggest that an estimated 9 million pensioners will pay income tax on their state pension from April 2026. Pensioners cannot easily alter their financial situation, yet they were given just six months’ notice that they would lose their winter fuel allowance. They cannot be blindsided for a second time by the taxman.

In Committee, the Minister said that the relevant data was available, but I do not think that is correct, because the figures to which he referred do not break down the group we are talking about—recipients of the full rate of the new state pension. Will he commit to publishing data on how many people receiving the new state pension will pay income tax on it? This potential hit could not come at a worse time for pensioners, who have lost their winter fuel payments, because we learned last week that energy bills are going up yet again—a far cry from the £300 cut that they were all promised at the last election by the Labour party.

At the Budget, the Chancellor made much of her announcement that she would uprate the personal tax thresholds in line with inflation from 2028, but that is not legislated for in this Bill. The public are being asked to take the Government at face value, yet recent reports suggest that this promise may be dropped due to the impact of the Budget on growth and higher borrowing. Given the number of broken promises since the election, can the Minister reconfirm from the Dispatch Box the Government’s commitment to unfreezing those thresholds in 2028?

As well as pensioners, working people cannot afford the costs of this Labour Government. The Prime Minister promised at the election that he would not hit working people with higher taxes, and he then broke that promise with the £25 billion-a-year jobs tax.

[Tristan Osborne (Chatham and Aylesford) (Lab)]

Can the hon. Member confirm which Government left taxes at a 70-year high? Can he also confirm which Government led to interest rates and inflation being at record highs, which has stung so many mortgage holders?

[James Wild]

Well, the last Government had to deal with a global pandemic and an energy price shock. I am happy to enlighten the hon. Gentleman, who has obviously not read the Red Book: taxes are going up—they are going up to record high levels—under the Budget and the Finance Bill that he is supporting. If he is worried about the tax burden, he should not be voting for this Finance Bill today.

Households are facing financial challenges, and the measures in the Bill will only make things worse. The Office for Budget Responsibility predicts that real household disposable income will fall by 1.25% by the start of 2029, largely due to the measures in the Budget. New clause 3 would require the Chancellor to publish an assessment of the impact of the changes on household finances. The choices that this Chancellor and this Government have made mean that borrowing is increasing, so interest rates will be higher for longer and people’s mortgages will be higher, and hard-working families will be paying billions of pounds to pay off the debt interest. The Government inherited inflation at target, but since then inflation has gone up, meaning less money in people’s pockets.

While it is the Chancellor’s wider mishandling of the economy that is attracting the headlines, the measures in this Bill will have a direct role in squeezing households. Whether it is higher stamp duty, increased alcohol duty, air passenger duty, capital gains increases, vehicle excise duty, changes to the tax treatment of hybrid vehicles or many other measures, the costs of the Bill will be felt directly by households across the UK. When households are stretched, it is essential that we have transparency about what the Government’s actions are doing to incomes.

[Graham Stuart (Beverley and Holderness) (Con)]

Of course, the big tax-raising measure in the Budget, as my hon. Friend says, was the national insurance contributions rise, with its £25 billion impact on the economy, yet once we have taken off compensation for public services and the negative impact on activity, it nets only about £10 billion. It is a peculiarly ridiculous policy that nets only £10 billion or £11 billion, yet, according to the Office for Budget Responsibility’s numbers, will take £19 billion out of people’s pay packets. Does my hon. Friend agree that there has surely never been a more ridiculous measure that costs so much and delivers so little?

[James Wild]

My right hon. Friend makes the point that this measure may have been introduced by a Chancellor who did not actually understand the impact it was going to have. The Government should have stuck to the promise they made at the election not to increase national insurance at all.

New clause 2 concerns the Government’s plan to undermine our energy security by increasing the energy profits levy to 38%, bringing the headline rate on oil and gas activities to 78%, extending the tax by a year and removing investment allowances. The consequences are fairly predictable. Offshore Energies UK has said that the hike will choke off billions of pounds of investment in the North sea, putting 35,000 jobs at risk.

[Noah Law (St Austell and Newquay) (Lab)]

Does the hon. Member not agree that if such a rate is good enough for Norway, a clean energy superpower, it is good enough for the United Kingdom?

[James Wild]

In short, no, I do not, which is why we voted against that previously. We should be maximising our home-grown energy, not undermining domestic production and choosing to rely instead on importers with higher carbon emissions.

[Dr Luke Evans]

I agree entirely with the shadow Minister. Only today, the Prime Minister said at the Dispatch Box that our economy is security, and security starts with our defence and looking after ourselves—and that includes energy security. Is it not ridiculous not to use North sea oil—our own reserves—to ensure that security? It is the cleaner side of oil and gas. Using our own reserves also comes with jobs, and prevents us importing oil and gas in a volatile world.

[James Wild]

Absolutely. I wonder if, when the Prime Minister was in Washington last week, he had the opportunity to talk to President Trump about home-grown energy and the importance of supporting the domestic sector. That is what we on the Conservative Benches certainly support. This is a sector with 200,000 high-skilled jobs, so it is important that we have an up-to-date assessment of the impact of what the Government are doing on our domestic energy production, energy security, energy prices and the UK economy. Unfortunately, we already see some of that impact: the US firm Apache has said that it will end its operations in the North sea by the end of 2029, blaming the extension of the profits levy for making it uneconomic to stay beyond then.

[Graham Stuart]

This measure is vying with the national insurance contribution change to be the most absurd measure. I think that it wins by a head. The Prime Minister says that we must have energy security, and the Climate Change Committee that says we will still need oil and gas for 25% of our energy needs if we meet net zero in 2050, but the Government will have no more licences. We will lose tens of thousands of jobs, tens of billions of pounds in tax, and the engineering capability that we need for the transition. It is absurd on every single possible front.

[James Wild]

My hon. Friend is 100% correct. I think we all know that the architect of much of this is the Secretary of State for Energy Security and Net Zero, who takes a rather fundamentalist approach. He wants to cover farmland with solar farms, and wants to undermine our oil and gas sector. We on the Opposition Benches disagree. It was the previous Government who introduced the levy, but that was to tackle extraordinary profits at an extraordinary time. The revenue helped to keep energy bills lower for all our constituents, but now the Government are ratcheting up the levy and seem to want to tax North sea exploration out of existence. This is just a further example of the Government’s ill-conceived energy policy. GB Energy is a net zero vanity project that will not generate any energy or be an energy supplier. It certainly will not deliver £300 off bills.

Amendments 67 to 69, tabled in my name, would remove clause 47 and abolish Labour’s education tax. Since 1 January, independent school fees for education and vocational training have been subject to VAT at 20%. It is the first time education has been subject to VAT. Why is that? Because education is a public good, so we do not tax it. Putting VAT on independent schools particularly hurts those on the most modest incomes who have chosen to save and make sacrifices to send their children to a school that they think will serve them best.

[Jim Shannon (Strangford) (DUP)]

In Northern Ireland, we have a number of faith schools that will be impacted greatly by the measure. They have contacted me even at this late stage to ask whether the Government would reconsider. Does the shadow Minister agree that faith schools will be impacted, perhaps more than others, and that the impact on parents, and children in particular, will be gross?

[James Wild]

I agree with the hon. Gentleman. Everyone will have an opportunity, if the amendment is moved and selected for a Division, to vote to strip the measure out of the Bill. None of those parents on modest incomes are getting a tax break. They are also contributing to funding places in the state sector, whether or not their children take them up. Ultimately, this is a tax on aspiration, and we oppose it. In Committee, we raised concerns about the impact on certain groups, including children with special educational needs, small schools, faith schools and military families.

[Graham Stuart]

My hon. Friend is being very generous in giving way. He touches on the issue of children with special educational needs. This is not just about scrimping parents making a choice; this is about people with no choice, whose children have been bullied or who have special needs that have not been met in the state sector, and who have made a sacrifice to put their children in the private sector. People with children in particular need will pay the price of this ill-thought-through measure.

[James Wild]

My right hon. Friend is consistently absolutely right. There are more than 100,000 pupils in independent schools with special educational needs and disabilities who do not have an education, health and care plan. They will have to pay VAT on their school places—that is not covered by the Government.

[Tristan Osborne]

Is it not true, though, that special educational needs students are exempt from this proposal? It is not a surprise that while the Opposition are focused on the very small number who go to independent schools, we are focused on ensuring a good education for the large majority of our children in state schools.

[James Wild]

I am afraid that the hon. Gentleman is flat wrong. Children with SEND who go to an independent school but do not have an education, health and care plan will have to pay the 20% VAT—I would hope that people who are voting on this legislation might have understood that fairly fundamental point. That will make those places unaffordable for the parents of many, add pressures to the state system, with demand for places where there is no capacity, and squeeze council budgets. This is just another part of the Education Secretary’s ideological approach, which seeks to divide. We on the Conservative Benches care about all children. We simply believe that parents should be able to choose the school that is best for their child.

17:45

We are seeing the impact in real time. The Government’s own estimates suggested that 100 schools would close over the next three years; a school in the Prime Minister’s constituency has said it will close this summer due to the impact of VAT as well as the jobs tax. School closures, dedicated staff losing their jobs, children having their education disrupted—that is the effect of this policy. I therefore hope that Members will support our amendment.

We on the Conservative Benches welcome inward investment; we back wealth creators and risk takers. As this Government are chasing growth, one would think they might be sending a message that Britain is open for business. However, the plans for non-doms, including inheritance tax, have already caused a significant exodus of investors from the UK. Last year, more than 10,000 net millionaires left the country—a 157% increase on the year before. According to the Adam Smith Institute, that is equivalent to losing the income tax take of more than half a million average taxpayers. We discussed this in Committee.

At Davos, the Chancellor said that she would amend these proposals as they made the UK less attractive, but frankly, the damage has already been done. The Chartered Institute of Taxation has warned that, given the lack of proper consideration and consultation, the amended proposals still leave uncertainty, which will be counterproductive if it is the Government’s intention to encourage those people to stay and to allay the concerns of those looking to invest in the UK.

[Dr Luke Evans]

The shadow Minister is absolutely correct. At Davos, the Chancellor said she had listened to that community. Why would she make changes for that community, but not the farming community, the pensioner community, the pupils at private schools or the SEND community, or indeed working businesses such as pubs, restaurants and charities, who are all seeing tax increases? Why was that community listened to, when no others were? Does he have any idea why that could be the case?

[James Wild]

My hon. Friend invites me to get inside the head of the Chancellor, but I am not sure I would be able to do that. All I know is that the other groups that he mentions should also be listened to. The Chancellor has shown herself to be particularly tin-eared on the impact of these changes on family farms and businesses, hence there is, tomorrow, yet another protest. I read over the weekend that another brave Labour MP has come out and said he opposes the changes and wants to see reforms—perhaps some of the other Labour MPs are here to speak to say that they too stand with the farmers in their constituencies.

To conclude, the Prime Minister and Chancellor set growth as the mission for this Government. They inherited an economy growing at the fastest rate in the G7, but the choices they have taken in the Budget and in this Finance Bill have stopped growth stone dead. They have hiked taxes, undermined business confidence, pushed up inflation and hit working people and pensioners. Later this month, we will get the economic and fiscal forecasts, but what we can already see is a Labour Government committed to higher taxes, higher spending and higher borrowing, and we are all paying the price.

[Dr Jeevun Sandher (Loughborough) (Lab)]

Economic growth is the ability to produce more with less. It is the foundation of all human progress. It is why we are not all scratching around in the dirt, desperately hoping something will grow. However, there is no economic law that says that when the economy grows, all must share in it. In decades past, it has not been shared. Growth has gone to high earners over everyone else, to the old rather than the young, to capital over labour and to London over everywhere else. This is tearing our democracy apart, and it is tearing other democracies apart. That is why I am so proud to speak in favour of this Finance Bill, which will help to ensure that economic growth is shared among all people and all places.

I worked as an economist before entering this place. As Members may know, my PhD was on the causes and consequences of inequality and particularly why, since the 1980s, people and places have not shared equally in growth. In my adult life, I have never known a growing economy, and now my beard is turning grey—[Interruption.] I will soon look like Gandalf. I want to see the dotted line on the GDP chart finally go up, but that is not enough. We have to ask whether all are sharing in that growth. Growth for where, and growth for whom? The only way to ensure that all share in growth is for this Government to act. When people do not share in growth, when their incomes do not rise and when life becomes worse, hope turns to cynicism, happiness turns to anger and peace turns to riots.

There are four ways in which growth has not been shared by all, and we are fixing all four in this Budget. First, across high-income nations, top earners have seen their pay rise far faster than the rest. Technological change destroyed manufacturing jobs and led to a divided labour market of high-paid and low-paid jobs. High-paid workers benefited from new technology—computers, Excel and PowerPoint—and they saw their wages increase 50% faster than the average. We are fixing that in this Budget by investing in the skills of non-graduates, with more money for further education colleges and apprenticeships.

Secondly, older generations have benefited from cheaper homes, while younger renters cannot buy a home because we have failed to build enough houses in this country. Twenty years ago, house prices were three times the average wage. Today, they are more than eight times the average wage.

[Daisy Cooper (St Albans) (LD)]

Does the hon. Gentleman agree that one thing that could be done very quickly is that the Government could legislate so that all Airbnb properties need planning permission? That would release a lot of short-term lets back into the market as longer-term lets for younger people.

[Dr Sandher]

I am sure the Government will consider these measures in the round, but more broadly, of course, it is about building many more homes. Some 40% of 18 to 34-year-olds are living with mum and dad, and we are starting to fix that in this Budget, including by providing a 20% increase in the affordable homes programme, which is a stepping stone to building 1.5 million new homes.

[Dr Luke Evans]

I am grateful to my Leicestershire colleague for giving way. He will know that housing targets and housing numbers have gone up in Leicestershire—the figures in my patch are up by 59% and 73% respectively. However, the figures for Leicester city are dropping by 31%. Why is that happening when Leicester has brownfield sites and the best connections? If we need houses everywhere, should we not see them being built in cities as well, rather than just in the countryside?

[Dr Sandher]

The housing formula has rightly been changed to where the need is greatest. In my constituency, for example, planning permission has not been approved to replace derelict factories on brownfield sites with new homes. I have seen too few homes being built and too many things being rejected. I am proud of this Government’s aim to build new homes, and I have full faith in the formula. We need more homes everywhere, including in both of our constituencies.

[Matt Rodda (Reading Central) (Lab)]

My hon. Friend is making an excellent point and an excellent speech. He is right to highlight the importance of housing, in terms of both quality of life and labour mobility, as well as the many other benefits to the economy. I commend the good example of Reading, where many brownfield sites are being redeveloped. The hon. Member for Hinckley and Bosworth (Dr Evans) may wish to visit Berkshire to see how well we are rebuilding our town centres, as are many other cities and towns around the country.

[Dr Sandher]

I could not agree more. Perhaps we should all take a trip to see the great work being done in Reading, because we have to build a lot more homes. My generation is increasingly finding that working hard and getting a good job is no guarantee of owning a home in the end. That is what this Government are fixing with this Budget.

It is not only the young who are not sharing in growth. Growth has gone to capital over labour, and technological change means that machines can do tasks far more cheaply than humans. More payments to capital mean less for workers. The labour share of GDP has fallen by a sixth since deindustrialisation. Today, across the Atlantic, we see the dangers of Bidenomics—

[Madam Deputy Speaker (Caroline Nokes)]

Order. I remind the hon. Member that it is imperative he speaks to the Finance Bill and the amendments, rather than rehashing a Budget speech.

[Dr Sandher]

This Budget is investing in the future, and indeed changing this country. This is a Budget that is moving forward, but I want to cover the bits covered in the Finance Bill. It is a Budget, a Finance Bill, that is investing in labour-intensive sectors such as early years childcare and the warm homes plan.

[Blake Stephenson (Mid Bedfordshire) (Con)]

I am enjoying the hon. Member’s speech, and to give him a few moments to gather his thoughts, I remind him that new clause 1 would require a review of how many people receiving the new state pension at the full rate are liable to pay income tax this year and in the next four tax years, and specifically what the tax liability of state pension income will be. Would he care to provide the House with his thoughts on new clause 1?

[Dr Sandher]

I thank the hon. Member for his help and assistance. The aim is not only to improve pensioner incomes. On one side there is the tax change, and on the other side, the triple lock will ensure that the amount going to those pensioners increases by £400 from April. As Members on both sides of the House would agree, the triple lock has helped pensioners immeasurably.

It is right that I now draw my speech to a close. I thank all hon. Members for their help, and I also thank you, Madam Deputy Speaker.

[Madam Deputy Speaker (Caroline Nokes)]

I call the Liberal Democrat spokesperson.

[Daisy Cooper]

I rise to speak to new clauses 4 to 8, and I will make a few additional comments at the end.

New clause 4, tabled in my name, would review the Bill’s impact on small and medium-sized enterprises by requiring an impact assessment. In this House, we have rehearsed many times the impact of the Government’s Budget on small and medium-sized enterprises, including through the rise in national insurance contributions, the changes to business rates and, of course, the plans to change inheritance tax and business property relief. We are very concerned about the impact of the Budget as a whole on small and medium-sized enterprises, on our high streets and, of course, on family businesses. It is inconceivable that these changes are going ahead without an impact assessment, so we urge the Government to consider this amendment.

New clause 5 would require the Chancellor to assess and publish a report on how tax changes in this Bill affect households at various income levels. Of course, we all know that the cost of borrowing is at a 30-year high. After the misery of the mini-Budget, mortgage holders in particular will be deeply concerned.

Just as we are concerned about certain measures that are in the Finance Bill, we are also concerned about certain measures that are not in the Bill. As we outlined in our reasoned amendment on Second Reading, the Bill does not include measures to reverse the winter fuel payment cuts. More recently, we Liberal Democrats have also called for a social energy tariff, which I hope the Government will consider in due course.

18:09

New clause 6 would require the Government to produce a report setting out the fiscal impact of the Bill’s changes to the energy profits levy investment expenditure relief. As we have said in this House many times, the Liberal Democrats were the first to call for a windfall tax on the big oil and gas companies. It was introduced in the last Parliament, but seven months after we first called for it. It also included a very large loophole. Had it been introduced sooner and without the loophole, it would have raised significantly more money. That money could have been used for an emergency home insulation scheme to reduce people’s energy usage, which would have been better for the environment and for people’s pockets. The new clause would enable the Government to publish how much money they would raise through that measure. If it were to be passed, we would encourage them to look at how much money could have been raised had it been introduced when we first called for it.

New clause 7 would require the Government to produce an impact assessment of the effect of the Bill’s VAT provisions on pupils who have special educational needs but do not have an education, health and care plan. The Government have introduced an exception for children who do have an EHCP, but as Members will know, there are children who have diagnosed special educational needs—or in some cases are awaiting that diagnosis—but do not have an education, health and care plan.

In my constituency, we have a double whammy: the Conservative-led county administration has received the worst possible Ofsted rating for its SEND services and, at the same time, we have been severely disadvantaged by the very outdated funding formula, which puts Hertfordshire at a huge disadvantage. It would take us 15 years to catch up with neighbouring Buckinghamshire for money per pupil, even though Buckinghamshire joins us in the 40 worst funded councils in the country. Clearly, we want that funding formula to be fixed. We also want local service provision to be improved.

Fundamentally, many families are struggling with the SEND service. Like many Members, I have received a number of emails from constituents about this issue. They have recognised that in St Albans we are very lucky to be blessed with a number of high-performing, sometimes outstanding, state schools. Some families may have one or two children in a state school but choose to put one child in a private school because of their particular needs.

One example stood out to me: a family contacted me to say that they have other children in state schools, but one was not getting on well so they chose to put them into a private school. Only at that point did the private school contact the SEND department at the state school to find out whether any support had been put in place. It turns out that their child had completed a range of assessments, and had performed quite poorly—well below the acceptable levels for processing and comprehension—but even so, no additional support had been put in place apart from awarding extra time, because it was simply not possible.

[Nesil Caliskan (Barking) (Lab)]

Is that not precisely the point? Our state system does not have the capacity or the means to support children with special educational needs. The additional £1 billion investment, which in part will be raised by getting rid of the VAT exemption, will help deliver not only 6,500 new teachers but the additional support for special educational needs children in our state system.

[Daisy Cooper]

We disagree on this point. Fundamentally, Liberal Democrats have said that we should rise the tide for all children, not lower the tide for some. We had a very ambitious education agenda in last year’s general election manifesto. Some areas we had in common with the Labour party, and some not. Our very ambitious agenda for education included a ringfenced high needs budget. I have campaigned relentlessly on improving SEND provision for the past five or six years in this Chamber, in Westminster Hall debates and in various meetings. We do not think that this particular measure is needed to improve SEND funding. Other measures could be used. We have a difference of opinion about how to raise that money.

[Graham Stuart]

The hon. Lady’s response to that intervention is perfectly good in its own way, but her new clause simply asks to measure the impact and look at whether the damage is too great to justify it in that broader sense. I hope that the Government consider looking at it, take it seriously and follow the hon. Lady’s arguments.

[Daisy Cooper]

I am grateful to the right hon. Member for highlighting that the new clause is about an impact assessment. Labour colleagues will be aware that the VAT provision will come into effect very quickly, but it will not provide the instant support that many children need. If children’s education is disrupted, they immediately suffer disadvantages in their life. If the Government had really wanted to pursue this measure, I would have hoped at the very least that it would have happened in a few years’ time to allow for adjustment. But we are where we are. We do not support the measure, but at the very least we request an impact assessment, as the right hon. Member suggested.

New clause 8 on alcohol duties would require the Government to produce an impact assessment of the Bill’s measures on distilleries, wine producers and the hospitality industry. Since 2022, I have tabled numerous questions in the House and written letters to the Treasury with evidence of falling tax receipts and sales as a result of the measures that the Labour Government are now introducing. They will introduce huge amounts of red tape, which will be very complicated, very costly and, ultimately, will push up prices for consumers and the industry.

[Mr Angus MacDonald (Inverness, Skye and West Ross-shire) (LD)]

May I draw the attention of the House to my entry in the Register of Members’ Financial Interests? Let me voice my support for my hon. Friend’s new clause, which would require the Government to review the impact of alcohol duty increases on key sectors. Scotch whisky is one of Britain’s greatest industries, accounting for 22% of the whole of Britain’s food and drink exports and supporting tens of thousands of jobs. Yet despite repeated assurances from the Government, the industry continues to face sharply rising duty costs. Since the duty on Scotch and other spirits was—

[Madam Deputy Speaker (Caroline Nokes)]

Order. The hon. Member’s intervention is slightly too long. He is on the list to speak in due course, so perhaps he will make his point about the importance of Scotch whisky then.

[Daisy Cooper]

I am grateful to my hon. Friend for raising the plight of Scotch whisky. My husband is an Ayrshire boy who is certainly doing his bit to keep the Scotch whisky industry going.

Notwithstanding that, it would help if the Government did not pursue these particular duties. Near my constituency —it was in it before the boundary changes—is an importer of fine wines. One of its products is port—not the kind of drink that many people sit and glug as they might do with a cheaper form of alcohol. [Hon. Members: “Speak for yourself!”] For most families around the United Kingdom, port is a drink to buy for an occasion—a birthday, Christmas, a wedding or something of that kind. It is not typically the kind of drink that someone would glug—with the exception of a few people in the House—in such volumes as other alcoholic drinks. None the less, that business will be impacted by these measures. They will affect a huge amount of innovation in the industry, which is a prize to our economy.

[Jim Shannon]

I ask the hon. Lady to cast her mind back to Scotch whisky. I met representatives of the Irish whiskey industry just before Christmas. They told me of their deep concerns over jobs and employment and the future of their distilleries. In my constituency, the Hinch, Rademon and Echlinville distilleries all have those concerns. The hon. Lady is right to pursue this matter on their behalf.

[Daisy Cooper]

I am grateful to the hon. Member for adding his support. I hope that he will join us in the Lobby later.

Finally, I will touch briefly on the Government amendments. The Chartered Institute of Taxation has provided a comprehensive briefing to all MPs on the 57 amendments to part 2 of the Bill. It is fair to say that the Government’s proposals on non-doms have been a little hodgepodge. The chartered institute is now strongly advocating for proper consultation. It warns that “uncertainty” that has been introduced through these measures and that the drafting of some amendments may inadvertently achieve the opposite of what the Government seek. On that note, I encourage Ministers to meet the Chartered Institute of Taxation and heed its warnings to ensure that measures are properly drafted and that no uncertainty is introduced through them.

The Liberal Democrats have tabled a number of new clauses, and we hope that colleagues will join us as we press them to the vote.

[Jim Dickson (Dartford) (Lab)]

It is a pleasure to contribute once again to a debate on this important piece of legislation. A number of amendments have been tabled by hon. Members from across the House and, while I do not have time to cover them all, I will address the key ones.

As I said in Committee of the whole House, this is a crucial Bill that underpins the new Government’s aim of fixing a tax system that has become less fair and less sustainable over the last 14 years of Conservative government. I am conscious of the need to confine my remarks to the amendments rather than speaking to the Bill itself, but I remind everyone that the Bill was necessary because of the dire economic inheritance that the Government found on entering office last year.

[Graham Stuart]

The hon. Gentleman said that the tax system had become less fair over those 14 years. Does he oppose the increase in the tax burden paid by the higher paid? That is what happened over those 14 years. Does he not see it as fair that those on lower and average earnings saw their share of the tax take go down? Is he opposed to that? In what way precisely, from his deep understanding of the tax system, has he concluded that it has become less fair over the last 14 years?

[Jim Dickson]

When the last Government left office, taxes were at their highest level for 70 years. Thresholds have been frozen, bringing more workers into higher tax rates than was fair on them. The Labour Government are dedicated to trying to ensure that taxes are paid by those with the broadest shoulders and those best able to pay them.

[Graham Stuart]

rose—

[Jim Dickson]

If I might make a little progress before the right hon. Gentleman intervenes once more, that would be lovely.

Opposition Front-Benchers have tabled new clauses 1 to 8, which would require the Government to undertake a number of reviews of the impact of measures in the Bill, ranging from a requirement for the Chancellor to commission and publish an assessment of the expected impact of changes to energy, oil and gas profits levy on domestic energy production, the UK’s energy security, energy prices and the UK economy to a requirement on the Chancellor to publish an assessment of the impact of the changes in the Bill on the finances of households at a range of income levels. I gently remind Opposition Members that much of the information requested is already available. Details on tax liabilities are published by HMRC, the Department for Work and Pensions and the Office for Budget Responsibility, and the impacts of the changes set out in the autumn Budget are published in documents including the tax information and impact notes and the “Impact on households” report.

[Dr Luke Evans]

While we as politicians can read and scrutinise those real impacts, when pensioners who will have to pay tax on their state pension come to the hon. Gentleman’s surgeries—they will have to do a tax self-assessment or pay it back—how will he explain to them exactly what is going on? They will not have the technical ability—many will, but some will not—to understand why they are being taxed.

[Jim Dickson]

I thank the hon. Gentleman for his intervention. He seems remarkably well informed already about the impact of the changes in the Budget, and I imagine that hon. Members across the House will be similarly well informed.

The Leader of the Opposition has outlined her desire for a British equivalent of Elon Musk’s Department of Government Efficiency. I wonder how she can square that desire with the new clauses, which, if passed, would seem to duplicate work already done by the Government. That is hardly a model of efficiency—more like playing politics.

[Daisy Cooper]

In the Liberal Democrats’ new clause 8 on alcohol pricing, the hon. Member will see that we are asking not just for an impact assessment of the taxation raised, but for an assessment and estimation of the administrative and operational costs for the preceding 12 months already incurred by this fantastic part of our industry. Does he agree that an impact assessment of the red tape is important as well as the tax take for the Treasury?

18:15

[Jim Dickson]

I thank the hon. Member for that intervention. It seems to me that by writing to the Chancellor of the Exchequer and tabling parliamentary questions requesting that information, it would be more than possible for her to gain the data she requires and therefore, no doubt, make her case across the House.

New clause 2 refers to the Government’s changes to the oil and gas profits levy. Those crucial changes, which will see an increase in the rate of the levy to 38% from 35% and will raise in total £6 billion to underpin investment in delivering on our missions—getting the NHS back on its feet and supporting growth across the country—are laudable. I would not want to support any amendments that would put those benefits at risk.

New clause 4, tabled by the hon. Member for St Albans (Daisy Cooper), would require the Chancellor to conduct an impact assessment of the Bill on small and medium-sized enterprises. I am sympathetic to her desire to support small businesses, but I am unpersuaded that her new clause is the best way to do it. All the measures in the Budget had tax information and impact notes for them published with the Budget, and I remind everyone listening that it was a good Budget for small businesses.

As the Federation of Small Businesses said on the day,

“Against a challenging backdrop, today’s Budget shows a clear direction”—

[Madam Deputy Speaker (Caroline Nokes)]

Order. We are debating the Finance Bill and the amendments to it, not the Budget.

[Jim Dickson]

Thank you, Madam Deputy Speaker. I simply intend to illustrate why the changes proposed in the amendments do not help what the Government are attempting to achieve via the Finance Bill. The FSB said that the Budget

“shows a clear direction in business policy now for the whole of this Parliament to target support at small businesses, rather than big corporates”.

As hon. Members have stated, the Government are supporting SMEs by more than doubling the employment allowance, keeping the small profits rate stable, maintaining the annual investment allowance and freezing the small business rates multiplier. I ask hon. Members not to forget that this is an important piece of legislation underpinning measures announced at the Budget that will help fix the NHS, improve public services, incentivise capital investment and rebuild Britain.

[Sir Ashley Fox (Bridgwater) (Con)]

This Finance Bill implements the 2024 autumn Budget. That was a bad budget and this is a bad Bill. It punishes businesses, discourages entrepreneurship and raises taxes on those trying to make a living. It will lead to job losses, reduced investment and higher prices. It will lead to higher interest rates and higher Government debt, which will lead to lower growth. If we wanted to make a list of things that our economy did not need, this Finance Bill would be a good starting point.

The Bill is built on broken promises. The amendments tabled try to help the Government to keep their manifesto promises. During the election, Labour told the public that its plans were fully costed and fully funded. Its manifesto said that it would increase spending by £11 billion, so how can the Government now justify an increase in spending of £70 billion a year funded by an extra £40 billion in taxes and £30 billion in borrowing? Even if people believe the fairy story of the black hole told by Labour Members—I do not—£11 billion plus £22 billion does not equal £70 billion.

Is not the truth that the Labour party always planned a large increase in taxes and borrowing but did not have the courage to tell the British people in advance? The Chancellor and the Prime Minister insisted that working people would be protected, but it is now clear either that they were wrong or that they do not consider small business owners, publicans or farmers to be working people.

[Noah Law]

Does the hon. Member not recognise that one of the primary challenges faced by the sectors he mentions is that of workers’ inability to afford to live in the areas where they work, such as in Cornwall, and that the changes to stamp duty land tax will go a long way towards improving the ability of workers to be housed in what are currently, in so many cases in Cornwall, second homes? Does he not recognise the potential contribution of that to the workforce?

[Sir Ashley Fox]

I am sure that there are one or two good parts to this Finance Bill, but the hon. Gentleman was elected on a manifesto pledge to increase spending by £11 billion, and that was fully costed, yet this Finance Bill increases spending by £70 billion. I just wonder why he and his hon. Friends did not have the courage to put that before the British people at the election.

Small and medium-sized enterprises and the hard-working entrepreneurs who run them are the backbone of our economy, and they are the victims of this Finance Bill. In constituencies such as Bridgwater, where SMEs are key to local prosperity, the Government have imposed a huge national insurance hike that will make it more expensive to employ people. This rise, which breaks Labour’s manifesto commitment not to raise national insurance, will cost SMEs £732 more per year for every employee earning £20,000. This tax on jobs will stifle growth and lead to higher unemployment. The rise in national insurance is especially damaging to those in the healthcare sector, and the proposed amendments will help to assess the damage that that causes. Last week, representatives from the social care—

[Madam Deputy Speaker (Caroline Nokes)]

Order. In the interests of complete impartiality, I want to make sure that all Members are aware that they have to speak to the amendments as proposed in this Finance Bill, not any other amendments that they might wish had been proposed.

[Sir Ashley Fox]

I am grateful for your guidance, Madam Deputy Speaker.

People in the social care sector in Bridgwater were particularly concerned that the national insurance contributions rise had not been subject to an assessment. Assessing the damage that it and the other tax rises will do is therefore critical to the successful implementation of this Finance Bill.

[Joe Robertson (Isle of Wight East) (Con)]

I am grateful to my hon. Friend for giving way and for his assessment of the Finance Bill. Does he agree that the best way the Government can raise revenue is not to raise taxes but to grow the economy and increase the money taken through taxes in that way? Does he also agree that the national insurance contribution increases will deliver the very opposite of what the Government say? They will not grow the economy at all; they will stifle it, which is likely to lead to an increase in taxes in the future.

[Sir Ashley Fox]

I am grateful for my hon. Friend’s intervention. Indeed, combined with the rise in the minimum wage and Labour’s Employment Rights Bill, the contents of this Finance Bill seem to deliberately set out to harm small businesses.

The Labour Government’s plan to introduce inheritance tax on farmers and family businesses is more evidence, if it were needed, that they do not understand how farms and small businesses work. Under this Government, a family farm with land, buildings and machinery worth £5 million will incur inheritance tax of £400,000 when it passes to the next generation. That same farm might produce a return of 1%, or £50,000, in an average year, so the Government are proposing to take all that family’s income for the next eight years. I have a question for the Minister: how does he expect that family to live in the meantime? Labour’s response to our farmers has been to sneer at our rural communities. The Treasury offered a Minister to farming representatives, who then spent that time telling them that there was not a problem. This is bad not just for farmers but for rural economies and our nation’s food security.

This Finance Bill increases taxes, spending and borrowing. It makes our public sector larger and the private sector smaller. It does exactly the opposite of what is required. If we want a prosperous society, we need to encourage enterprise. We need low and simple taxes that incentivise people to work hard, to invest and to grow their businesses. This Finance Bill does exactly the opposite, and that is why we will oppose it this evening.

[Nesil Caliskan]

I want to thank the Members who have spoken so far. I have great enthusiasm for the Finance Bill, and I thank the hon. Member for North West Norfolk (James Wild) for his contributions, alongside the Minister at the time, over the several days I sat through the Bill’s Committee stage. I speak in favour of the Finance Bill as a member of the Committee. I recognise that it is part of the Government’s mission to turn the page on what was a period of decline for the country.

There are several aspects of the Bill that I would like to focus on. To begin with, I see the Government’s proposals on non-dom status as a crucial part of our agenda to ensure that we are delivering a fair approach to taxation in this country. Closing the non-dom loophole, alongside extending the levy on oil and gas companies and ending the VAT exemption for private schools through this Bill, will raise the necessary income to deliver what the Government are trying to do: achieve a balanced budget that will stabilise and then grow the economy.

[Graham Stuart]

If it turns out that the energy profits levy, lugged up to even higher levels, leads to a lower tax take than there would have been if it were at a lower level, would the hon. Lady think that that was a mistake and urge her colleagues to change course?

[Nesil Caliskan]

Ministers have provided an assurance of their assessment, and they do not believe that will be the case. The Government are taking a rounded approach to energy that, alongside our commitments to GB Energy and to a transfer to more renewable energy, will allow there to be a more mission-led approach. I take the right hon. Member’s point, but the Government have provided assurances that there will be constant monitoring and that if changes are required they will deliver them.

[Daisy Cooper]

The hon. Member will be aware that there is a mechanism within the Government’s energy profits levy, which will kick in in 2030, to ensure that if energy prices start to go down, the levy will cease to work. So there is an intrinsic link between the money that the energy companies pay and energy prices. Does she agree, given that energy prices have now gone up for the third time in a row and all our constituents are struggling with energy prices, that it is right that the big oil and gas companies should pay their fair share, but that when energy prices come down, the levy will stop?

[Nesil Caliskan]

I absolutely support the principle of being able to use a mechanism to intervene in a market that is not working, and I think the Government’s approach is right. There is an immediate issue with high pricing, certainly, but the truth is that the Government have to be able to take decisions for the long run. I am conscious that Madam Deputy Speaker might intervene and tell me to focus on the new clauses, but as I said earlier, a long-term approach to ensure that we have a just transition that sees energy stabilised for people across the country on a long-term basis is really important.

The Government’s approach to energy levies is the right one, our focus on maintaining particular clauses on VAT on private schools is important, and, as I have said, the proposals on non-dom status are crucial.

[Harriet Cross (Gordon and Buchan) (Con)]

The energy profits levy is expected to cause huge amounts of instability for North sea firms, driving away investment, driving down employment and driving businesses away from the North sea to invest abroad. Does that sound like stability, and if so, will it bring employment, economic growth and lower prices to the country, because it does not sound like the stability or investment environment that we are looking for?

18:31

[Nesil Caliskan]

The Government’s commitment on investment, whether through the wealth fund or the private sector combination of GB Energy, brings stability to the sector in the long term. The truth is there is an energy crisis that affects my constituents and people across the country. At this moment, efforts have to be taken to ensure that we do everything we can to bring down the prices people experience in their bills on a day-to-day-basis.

[Dave Doogan (Angus and Perthshire Glens) (SNP)]

Will the hon. Member give way?

[Nesil Caliskan]

I will make some progress and conclude in a moment.

Politics is full of choices. The Government have to balance the books and take a decision to ensure that we close the black hole, so the choices they have made feel like the fairest ones. A long-term commitment to ensuring that we have stability in the energy markets, while ensuring that people who need help right now can benefit, is the correct approach.

I am happy to support the Government’s position on the Bill. It is a Bill that sets out the right choices, as I have said, and it is the first important step to ensure that the country is back on the road to recovery after a dark period, where people were impacted not just through an economic crash, but in their day-to-day living through a cost of living crisis.

[Mr Paul Kohler (Wimbledon) (LD)]

I will speak to new clauses 7 and 8. As the MP for Wimbledon, I am proud to represent a constituency with such a rich and diverse educational offering, including fantastic primary and secondary schools in both the independent and state sectors. But recent Government decisions, including the increases in employer NI contributions on all schools, the removal of business rates relief and the imposition of VAT on school fees at independent schools, are pushing many in the state and private sectors to the brink. The changes to independent schools have caused considerable concern in my constituency, as can be clearly seen by the over 1,000 signatures from my constituents on the petition being debated today in Westminster Hall.

It is my belief and that of my party, as Liberals, that education should not be taxed and individuals should be able to freely make choices about how their children are educated. The ambition should be to reach a point where the state offering for schools is so high that no parent feels particularly compelled to send their children to independent schools. However, these ideologically driven policies of taxing education are not the solution. They simply put further strain on the state sector while financially hitting those who make what they believe to be the best choice for their child. These policies are a piece of red meat to show that the red flag is still fluttering on the Labour Benches.

Admittedly, the long-term impact that the changes will have on schools is still to be seen, but the early signs are not good. This academic year we have already seen a drop of 10,000 pupils at independent schools—three times higher than the Government estimated. Many believe that the change will not be a one-off event, but the start of a longer period, with more pupils expected to leave independent schools in the coming years, making any financial gains to improve the state sector illusory.

It is important to note that the cost per pupil is likely larger than the national average due to the sheer number of students in the independent sector who have special educational needs. The Independent Schools Council estimates that over 130,000 pupils in independent schools have special educational needs, with 90,000 of them receiving special educational needs and disabilities support with no education, health and care plan.

Independent schools in my constituency, such as the Hall school, Wimbledon high school and Donhead prep school, to name but three, do a huge amount to support children with special educational needs, and many parents choose to send their children there for that reason alone. I have spoken to many parents who have made tough financial sacrifices to send their children to those schools. They speak of the barriers to their children receiving the support they need in the state sector, including long waiting lists to receive an EHCP. The changes are already forcing many to reconsider their decision because they simply no longer can afford to use the private sector to relieve pressure on the state system.

As is well documented, there are huge issues around the provision of SEND support in state schools, with many children waiting years for support and many schools not being able to provide the support they would like to due to budgetary restraints. At a time when the Government and local councils are already struggling to support schools with the money they need for SEND support, avoiding further strain on state schools is vital—these decisions do the opposite.

Turning to new clause 8, I draw the House to my entry in the Register of Members’ Financial Interests. I will speak about the impact the Bill will have on the wine industry, the night-time economy and hospitality in general. Under the current wine easement, 85% of all wine sold in the UK is subject to the same rate of duty. With the alcohol duty now set to be linked to the volume of alcohol in each bottle of wine, that will be replaced by 30—yes, 30—different rates of duty. While I understand the Government’s broader intentions, the new regime is simply not workable in the context of wine. It fails to account for the fundamental difference between wine and other more manufactured drinks.

The alcohol by volume of wine cannot be predicted with precision before or during the wine-making process. The alcohol content is stable only at the point when the wine goes into the bottle. The ABV varies between different years and vats. Until bottling, we do not know the ABV of a particular bottle. It therefore creates huge uncertainty about price and profit margins for the industry if there are different rates of duty depending on the specific ABV, down to a gradation of 0.1%. That is particularly important with low-cost wines. This regime is utterly impractical for wine producers and merchants.

Hal Wilson, co-founder of Cambridge Wine Merchants, told me:

“In my business this feels like death by a thousand cuts, or even two thousand cuts. We sell over 2,000 different wines each year and from February will need to know the precise ABV of each and every one before being able to calculate their full cost. For each 0.1% ABV difference there is a different amount of tax to be paid.”

I wrote to the Minister about the matter and received a long and detailed response, for which I am grateful. He made the point that His Majesty’s Revenue and Customs will change its practice and accept the ABV on the label of the bottle to the nearest 0.5%, but that is current practice; it is not in the legislation as I understand it. It is still far too complex and much of my criticism still holds.

Secondly, the letter fundamentally misunderstands why people drink wine. Wine is consumed primarily for the taste, not the strength. The ABV affects the taste profile. Compare a light Beaujolais with a robust Rioja—it is all about taste, not whether it is stronger so one can get more drunk. That is not how people consume wine.

Turning briefly to hospitality and the night-time economy, the industry faces an existential crisis owing to the cost of living crisis, rising energy prices, inflation, labour shortages following Brexit, changes to commuting patterns and the more than doubling of business rates. The increase in alcohol duties will be yet another burden. Every incremental cost makes survival more difficult, as I know myself, and the Bill shows that the Government are still not taking the dangers seriously.

[Jim Shannon]

It is a pleasure to speak in the debate—is it the end? No, I am sure it is not. I thank you, Madam Deputy Speaker, for calling me so soon; I was just getting myself prepared. This is an opportunity to speak on this Bill one last time. I have spoken every time it has come to the Chamber, and I am pleased to do so again.

The shadow Minister, the hon. Member for North West Norfolk (James Wild), referred in his contribution, which was helpful for setting the tone and level of the debate on these important issues, to the impact of the inheritance tax changes on small and medium farms. That needs to be raised at every opportunity until the Government understand the devastation that it will wrought on farmers, causing them to sell their land and their future to pay the Government. I have sat beside the Minister and asked for the threshold to be increased. If the threshold were increased by £1 million to £5 million for farms, it would mean that many farms would not be penalised by the changes. The Government urgently need to promote food security in the United Kingdom of Great Britain and Northern Ireland. This decision beggars belief. If they are aiming the measures at those who abuse the system, they should design a scheme for them—not a scheme that affects many farmers across this great United Kingdom, including 70% of farmers in Northern Ireland.

The other major concern is that of the NI contributions. GP clinic and health centres are the latest to suggest that they will have reduced hours and capacity because of the constraints of their NI contributions. That must not be the case.

I support the Opposition’s new clause 2, on “Energy (oil and gas)”. The shadow Minister made the case for it extremely well, and others have spoken to it. I agree with them, and my party will support the new clause if it is pressed to a Division, as I understand it will be.

On new clause 8, the hon. Member for St Albans (Daisy Cooper), who spoke for the Lib Dems, referred to the whisky sector. I will make the case for Irish Whiskey Association, which was clear when I met it before Christmas that the measures will have a great impact on a sector that is already under pressure. Let us be honest: most Irish whiskey organisations’ trade is under pressure. They export most of their whiskeys to make their money, but the fact of the matter is that they find that extremely difficult to do. They tell me clearly that if they are taxed more heavily, it will lead to job losses and a reduction in what they are able to do. They do incredible work for the community. I have known the owners of three whiskey distilleries in my constituency—Rademon, Hinch and Echlinville distilleries—since they have had their businesses, and they are concerned about the impact of the measures.

[Daisy Cooper]

rose—

[Jim Shannon]

Whenever the hon. Lady pushes her new clause, we will support it. I give way.

[Daisy Cooper]

The hon. Member will be acutely aware that there are huge supply chains. Distillers are fantastic for attracting people, including in the tourism industry, to create strong local economies. There is huge innovation going on in that industry. It is essential that the Government carry out an impact assessment not just of how much the measures will cost and of the tax revenue to the Treasury, but of the operational costs and the red tape over the 12 months before the measure, which will cause havoc, comes in. Does he agree?

[Jim Shannon]

The hon. Lady makes her point succinctly. I hope that the Minister has heard her comments about the impact. Her concerns are certainly my concerns—indeed, the concerns of all Members on the Opposition Benches. She referred to the review of the impact on small and medium-sized enterprises. I understand that new clause 4 will not be pressed to a vote, but if it were, it is another that my party would support.

[Ben Lake (Ceredigion Preseli) (PC)]

Does the hon. Gentleman share my concern that there seems to be a disconnect between some of the statements made by the Government about the impact, or lack of impact, of the measures on small and medium-sized enterprises, and the fact that, week after week, small businesses and family businesses tell us, as constituency MPs, that they will have to reconsider much of their investment and recruitment plans for the coming year as a result of the measures in the Bill?

[Jim Shannon]

The hon. Gentleman is absolutely right. That is what my small and medium-sized enterprises tell me—and, I believe, everyone else on the Opposition Benches—about that.

Ultimately, whenever the national insurance contributions are passed on to businesses, they will pass it on again to the customers—the wee man and the wee woman. They are the people that the Labour party—the party of conscience—says that it represents, but it will penalise them.

[Joe Robertson]

Does the hon. Member agree that the national insurance contribution rise for small and medium-sized businesses is not only passed on to the consumer but is damaging for the economy as a whole, because it stifles growth? Growth, not increasing tax rates, is the way to increase the tax take for the Treasury.

[Jim Shannon]

The hon. Gentleman is right—he makes that point well. One business in my constituency employs 1,200 people. It told me just before the new year that those measures would cost it £1.1 million per year. I asked, “What are you going to do to address that extra cost?” It said, “We cannot absorb very much of it, so we will pass it on.” That is exactly what will happen. If we want to promote growth, we have to consider all the aspects and problems.

18:45

Let me turn to new clause 7, which I mentioned during my intervention on the shadow Minister, in relation to private schools—a last-ditch effort to highlight the plight of the independent school. It is not designed to help the wealthy elite. The families I know who send their children to independent faith schools are not the sort to drive a Rolls or have a massive palatial house; they are ordinary people who scrimp and save to send their children to those schools. They are not ones to demand that their children have access to a polo field or a swimming pool—although there is nothing wrong with that for parents who can afford it; I am not criticising anyone who can. My pleas are for small faith schools, and for international students who would be swallowed up by the mainstream system.

Let me outline one example. Bangor Independent Christian school seeks to provide a state standard of education within the sacrifice of that faith. The school provides standard GCSE English, but with a difference, as it lobbies for a greater selection of books to focus on—books that do not push the boat out in terms of language or relationship scenarios. Parents were and are happy to pay additionally towards that education to support that.

I will give the example of my parliamentary aide. She considered private school not because she thinks that her children are above anybody else, but because a case came through our office in Newtownards with an excerpt from a book that is highly offensive to the Christian, Muslim and Hindu faiths—indeed, to anyone of any faith. The parent was told that that book was used in the curriculum and that the school would not censor it. No one asked for censorship; they just asked for their child to be removed. That could not happen in mainstream schools. The parent was concerned that their child could be reading books that highlight the allures of pornography but not the problems of pornography. There is something seriously wrong when that happens in a school. In the end, that person settled for another school with the ethos of a welcoming Christian state school.

The Government will penalise those schools through VAT, to the extent that parents and their children will have to consider their future. They have been pushed towards an education system because they have concerns, but they do not have any protection in that system. The Minister knows that I put things forward in a constructive fashion, like other Members, and I try not to be aggressive, so I point out respectfully to the Government that the role of faith schools is imperative in giving a structured and good education. The VAT measures have the potential to push parents into debt or close schools. Homeschooling is great for parents who have the ability and the desire, but for those who do not, a high school education is a dangerous thing to attempt to provide without help.

It is for those parents and children that I urge the Government, at this last hour, to find a loophole for small faith schools and schools that focus on international pupils whose parents work here and know that their child needs smaller and more focused classes. For those children, I sincerely urge a rethink. The Minister could move the threshold to large schools, if that is what he is aiming for, or come up with a system that gives small faith schools a chance to survive. The Government must leave small schools and faith schools to educate children with a world view that has a nod towards parental values and moral concerns.

[Dave Doogan]

I will crack on with new clause 2, as it relates to the Government’s catastrophic management of the fiscal regime for Scotland’s oil and gas. In December, Norway’s sovereign wealth fund touched €1.7 trillion, but Scotland is no wealthier now in real terms than we were when North sea oil and gas was discovered in the 1970s. More than £400 billion has flowed from Scottish waters to the Treasury over the years, with very little coming back the other way. Rather than reverse that trend, the Labour party has chosen to accelerate it with an increase in the energy profits levy. The windfall tax was supposed to apply to the extraordinarily high profits from the high global oil price that preceded its introduction, but that level has long since gone. Through its changes to the EPL, the Labour party jeopardises investment and, in doing so, the future of our skilled offshore energy workforce and our ability to hit net zero.

Analysis from Offshore Energies UK shows that the increase to and extension of the EPL risk costing the economy £13 billion, which will in turn cost up to 35,000 jobs. The analysis also shows a reduction in viable capital investment offshore from £14.1 billion to £2.3 billion in the period 2025 to 2029 as a result of the changes that the Government are planning in the EPL. That loss of economic value impacts not only on the core sector itself but on the domestic onshore supply companies, many of which are in my constituency, and many of which will have a role to play in the just transition. That reflects a political choice by the Labour party to deprioritise investment in the decarbonisation agenda. Rather than allow a more valuable decarbonisation relief as the solitary positive by-product of its tax hike, Labour has ensured that there can be absolutely no silver lining to this policy cloud.

The simple truth is that the UK cannot meet the net zero targets or create green growth if the Labour party’s policies hack away at both investment and the domestic workforce that we need to deliver the energy transition. It is clear that the Labour party is abandoning Scotland’s existing energy sector, and putting at risk the just transition in the process. With those changes to the EPL, Labour will have created a worst-of-all-worlds scenario whereby it starves industry of investment, sacrifices the jobs that we need to deliver net zero, puts at risk our energy security, will not bring down energy bills, and harms the economy of Scotland, while failing to invest the money required to truly deliver the benefits that we all need to see from the just transition.

[Sir Gavin Williamson (Stone, Great Wyrley and Penkridge) (Con)]

Does the hon. Gentleman think that there is a real challenge in terms of the policies that the Government are encouraging? A much quicker retreat from the North sea will bring forward the decommissioning costs, which have not been taken into account by the Treasury and will add billions and billions of pounds in extra costs to the UK taxpayer.

[Dave Doogan]

The right hon. Gentleman is absolutely correct: wherever we look, the fiscal ambitions of the Labour Government on North sea oil and gas, or energy more generally, seem to be counterproductive. They are introducing a policy that anybody with a passing understanding of the industry realises will have precisely the opposite result of its stated aim, but the Government will not listen, much to my regret.

Analysis from OEUK shows that the oil and gas sector’s total tax yield will peak in 2026 under Labour’s increase in the EPL before declining, compared with the previous scenario, in which Treasury receipts continued to increase over the period. The analysis shows that while the expected tax take from UK oil and gas producers would increase in the very short term, ultimately it will result in a £12 billion net loss to tax receipts compared with the current regime. If the Labour party does not care about the jobs that the policy will cost, the harm it will do to the just transition or the damage to the economy of Scotland, surely Labour can accept that a tax increase that actually reduces the amount of tax received is, at best, counterproductive. That is why the SNP will support new clause 2 if it is pressed to a Division.

The SNP appreciates the many and varied reasons why parents choose to use private schools, but it is not fair or sustainable to treat private school fees differently from other discretionary spend for the purposes of VAT. The VAT exemption offered to private schools costs the UK taxpayer £1.6 billion annually—money that could be invested in other public services. However, the SNP also understands that for many parents whose children are enrolled in private schools the UK Government’s decision to remove that exemption will be extremely worrying.

The Scottish Government have sought to ensure that the distinctive nature of the Scottish education system is understood by the UK Government in this transition. In particular, the Scottish Government have raised concerns with the UK Government about the decision to include grant-aided special schools in the policy. In Scots law, they are not considered independent schools. In Scotland, there is a clear distinction in educational law between grant-aided special schools and independent schools, and the UK Government’s policy regrettably does not reflect that. I know the Minister studiously avoids almost everything that I say, but I hope that he heard that, and I would be very grateful if he could address it when he sums up.

On Scotch whisky, when the last Tory Government hiked whisky duty, the tax revenue raised from the industry fell by £300 million. That should have been a salutary lesson to any Government who came afterwards. The sensible option for both supporting Scotch whisky and Treasury receipts would have been to cut whisky duty. Instead, the Labour party is raising it again. On top of that, we now have a UK Government plan to grant a different definition of a single malt to English producers than that of Scottish single malts. The definition is entirely inconsistent with the global reputation of the quality of single malts, and seeks to tear up a well-established dictionary definition of a single malt while pulling the rug from underneath Scotch whisky producers. The Government must listen to warnings from the industry, the Scottish Government and those from across the political spectrum, and scrap the plans and duty hikes, which are an act of sabotage to Scotland’s world-class industry.

The industry already faces the risk of Trump tariffs, which cost over £600 million in exports the last time they were applied under his first presidential term. Rather than further damage from the UK Government, the industry needs support, starting with the reversal of the plans to hike duties still further. It is high time that Westminster finally listened to organisations such as the Scotch Whisky Association and stopped discriminating against Scotland’s national drink, which supports more than 40,000 jobs and delivers more than £7.1 billion to the London Treasury every year. The SNP will support new clause 8 if it is pressed.

I have spoken consistently about what is under debate in the Bill, but the wider context cannot be ignored. Labour has no cogent plan for reforming the economy. It seeks to reduce the deficit and not raise taxes, and it wants to stimulate growth with large investments. It is impossible to do all those things at once, and it is astonishing that the Government seem to persist with this wilful ignorance. A Government may increase spending to kick-start the economy and deliver growth and public services, but that requires tax increases and/or deficit spending, both of which the Labour Government are too scared to pursue because of their short-sighted election promises to abide by fiscal rules and not increase the highest-revenue sources. We are therefore stuck in the worst of all possible worlds, with insufficient growth—especially green growth—insufficient investment, a deficit causing a rising debt burden, and no way to increase revenue meaningfully. The UK Government are bizarrely persisting with gaslighting themselves in thinking that they are “fixing the foundations” and delivering growth. They are doing nothing of the sort, and if they stick with this Bill and the Budget on which it is predicated, they never will.

Finally, is it not astonishing that when farmers push back on agricultural property relief, family businesses push back on business property relief, pensioners push back on their winter fuel allowance, the Scotch whisky industry pushes back on duty hikes, the North sea oil and gas industry pushes back on the EPL, and when the Women Against State Pension Inequality Campaign pushes back, they are all told, “No. The situation is too bad. You’ve just got to suck it up,” but when the non-doms push back, they get swept right to the heart of the Treasury and the Chancellor, and they get whatever they want? That is the Labour Government.

[Sarah Olney (Richmond Park) (LD)]

I will speak in favour of new clause 4, tabled in the name of my hon. Friend the Member for St Albans (Daisy Cooper). The amendment would require the Government to carry out an impact assessment on the changes that the legislation would introduce for small and medium-sized businesses. Small businesses are the backbone of our economy and the heart of our local communities, and they create the jobs that we all rely on. I hear time and again from the small businesses across my constituency that they are struggling to keep up with soaring energy prices, business rates and the costs of exporting. The Chancellor is absolutely right to be focused on economic growth; however, my Liberal Democrat colleagues and I are deeply concerned about the impacts of the changes in the Bill on our high streets, and particularly on those in the hospitality industry, who are very concerned about the impact that duty rises on wine, beer and cider will have.

The wellbeing of small businesses acts as an indicator of the health of the economy as a whole. As such, the new clause would be a useful tool to allow us to understand the broader implications of the legislation on our economic prosperity. More broadly, an impact assessment would look at the combined effect on small businesses, both directly and indirectly, of all policies in the Bill to ensure that SMEs remain at the heart of the Government’s economic policy. It is crucial that the necessary tough spending decisions to clear up the mess that the previous Conservative Government left behind do not hit our small local businesses, which are vital to our economy.

To encourage growth for our small businesses, the Chancellor should be looking to reduce the burden on businesses through means such as cutting Brexit red tape, securing better trade deals with Europe and entering a customs union. The combination of the cost of hiring staff, the cost of additional red tape and higher business rates will be simply too much for many SMEs to absorb, which is why I urge the Minister to support our new clause and assess the impact of the legislation on local businesses.

19:08

I also wish to speak in favour of new clause 7, which would require the Government to produce an impact assessment of the effect of the VAT provisions in the Bill on pupils who have special educational needs but do not have an education, health and care plan. The Liberal Democrats do not support imposing VAT on private school fees, and we do not support treating independent schools differently to other education providers for VAT purposes. It is unnecessary, unfair and counterproductive.

Almost 100,000 privately educated pupils in the UK have special educational needs, yet do not have an EHCP. These children will face significant disruption to their education, as many parents will find that they cannot afford the sharp fee increase. The consequences of the Bill will include a steep rise in demand for local authorities to issue EHCPs and a rapid influx of pupils into the state system. Local authority resources for special educational needs and disabilities are already stretched to breaking point, and many state schools will struggle to cope with the additional demand.

New clause 7 demands transparency on the impact that the policy will have on pupils across the UK. This change will have a disproportionate impact on children with SEND, which will create not just hardship for those children and their parents, but enormous difficulties for the local authorities and state schools that will be required to provide alternative schooling. I urge the Government to back the new clause and reconsider this policy.

[Graham Stuart]

It is a pleasure to take part in tonight’s debate on the Finance Bill, and on the amendments and new clauses that have been tabled. The debate follows several remarkable days and this afternoon’s session when pretty much the whole House came together to congratulate the Prime Minister on his composure and leadership on Ukraine. The need to rebuild our military capability and our hard power as this decade goes on, if we are to ensure the security of Ukraine, Europe, including the UK, and the wider world, was made clear. The Finance Bill has been introduced in that context, because the only way to deliver that security is by having a strong economy and the economic growth that colleagues from across the House have discussed, yet this Budget is the most growth-destructive Budget imaginable.

As we look at the amendments and new clauses, it is worth going back over the context of the Bill, following the pandemic and the energy crisis, which continues in some ways. Thanks to the hard decisions made by the Conservatives, which did not always lead to our popularity and in fact contributed to our electoral disaster last July, inflation was back on target at 2% when the election came. We were the fastest growing economy in the G7 and some 4 million additional jobs had been created. That was the legacy. The incoming Labour Government, with their unprecedented majority and the good will to get on and do something, needed to hold their nerve and recognise that the key components for economic growth had been put in place, which was vital to meet the demands of the NHS, an ageing population and an ever more dangerous world. Instead, what we got from this Labour Government was the most disastrous economic suicide note in history, which has been devastating for the popularity of their party. Never has such a huge majority been squandered so quickly.

New clause 1 addresses the tax that will be taken from a state pension. The Labour Government propose that someone whose only income is the state pension could pay tax on that income. Forget the winter fuel payment being taken away as well—is that really what Labour Members came here hoping to do? I do not think they did, so new clause 1, which would ensure that we look at that, understand it and look for opportunities to change it, is sensible.

New clause 3 looks at the overall tax impact on households and sets our an approach that has to be right. My hon. Friend the Member for North West Norfolk (James Wild) gave a powerful speech at the beginning of the debate and I fully support the points he made.

We have heard powerful speeches from across the House on special educational needs. Again, I say to Labour Members, did they really get elected to come here and target children with special educational needs? Some 100,000 children who are in the private sector do not have an education, health and care plan, even though they are eligible for one. They will be forced out of their schools with no notice and no time to change and plan. It is a cruel policy that the Labour party should be ashamed of. I fully support amendments 67 to 69, which focus on VAT on private school, as well as new clause 7 proposed by the Liberal Democrats, which was spoken to powerfully by the hon. Member for St Albans (Daisy Cooper).

On non-doms, it is ironic that, as colleagues have said, the Government have not listened to pensioners, small businesses, farmers and all those with domestic interests. One might have thought that the Government would want to listen to them, reflect and make some changes to lower the negative impacts, but none of them has been listened to in the least. But non-doms in Davos? The Chancellor has gone off there and there is some change on non-doms, but let us not let the Government off entirely on that, because driving out the very rich, who bring us a massively disproportionate amount of revenue, is not sensible.

Socialists often put equality above all other values. As Churchill said:

“The inherent vice of capitalism is the unequal sharing of blessings. The inherent virtue of Socialism is the equal sharing of miseries.”—[Official Report, 22 October 1945; Vol. 414, c. 1703.]

One of the greatest ways of creating more equality in this country is to drive all the rich people out; drive all the people out who invest, give us jobs and take little from public services, but contribute enormously to them. That always goes down well with the union backers of the Labour party.

[Naushabah Khan (Gillingham and Rainham) (Lab)]

On that point, will the hon. Gentleman give way?

[Graham Stuart]

I promised I would not go on for too long, so I am going to sit down—[Interruption.]

[Hon. Members]

More!

[Graham Stuart]

I said I would speak for six minutes and I have now spoken for six minutes, but interestingly I have not talked about the main topic I was going to touch on: oil and gas. I made my point in an earlier intervention, but I appeal to the Government because putting up taxes on oil and gas in the North sea will mean that there will be tens of thousands of job losses, and a loss of engineering and other capacity in this country, which is vital to the transition to net zero. In response to my interaction with the hon. Member for Barking (Nesil Caliskan) earlier, no one expects the tax take from this sector to go up in the coming years as a result of the measure; the tax take will go down. The rate can be put up to such a level that it means there will be a lower tax take; the hon. Member for Angus and Perthshire Glens (Dave Doogan) spoke powerfully about that as well.

The hon. Member for Barking appeared to accept that point, and she seemed to have a belief in the Minister on the Front Bench that they would listen if it turned out that that was a short-sighted move. If it means that we import more oil and gas from abroad—by the way, that almost always has a higher embedded carbon content than domestically produced oil and gas—that does not benefit the environment, it certainly does not benefit all the jobs that we would have in this country, and it loses us tax revenue. It is truly a crazy policy.

I appeal to Labour Members, especially the new Members, on this point. We heard from the distinguished economist the hon. Member for Loughborough (Dr Sandher) earlier, who was retreading his speech for about the fourth time, little realising it was supposed to be focused on these particular amendments—[Interruption.] Anyway, he did it with great good humour. But I would ask him to take his finely honed mind and address these issues. If the oil and gas policy is as crazy as every expert witness says it is, then he and others should suggest that the Government change course. The hon. Member for Barking said that the Government should consider changing course if the policy did not deliver what it was supposed to deliver, so I ask Government Members to support the amendments that we have put down tonight and oppose this ridiculous Bill. I look forward to hearing from the Minister.

[The Exchequer Secretary to the Treasury (James Murray)]

At the heart of the Prime Minister’s plan for change is our mission to grow the economy to put more money in people’s pockets. We are determined to make people better off. We know that investment and growth depend on the essential foundations of economic stability, fiscal responsibility and public services being on a firm footing, but this Government inherited a challenging and unsustainable set of future spending plans based on unfunded commitments that had not been shared with the OBR or the British people.

No responsible Government could have let things carry on as they were. That is why at the autumn Budget, my right hon. Friend the Chancellor set out the Government’s plans to fix the foundations of the economy and deliver change—a plan to protect working people, fix public services, including the NHS, and rebuild Britain. That has meant taking difficult decisions on tax, spending and welfare to repair the public finances and support investment in public services, and the Government have done that while protecting people’s payslips. We have also ensured that the UK is one of the best places in the world to grow a business, with corporation tax capped at 25% and reforms that will support small businesses and the British high street. This Finance Bill represents the next step in delivering on the autumn Budget by legislating for several key manifesto commitments, supporting businesses to invest and implementing reforms to the tax system.

I thank all hon. Members for their contributions during the debate; before I turn to the individual amendments, I will briefly address some of the points that they made. I thank my hon. Friend the Member for Loughborough (Dr Sandher) for setting out the importance of growth and making people better off, and for his thorough analysis of all the amendments and new clauses to the Bill, which I seem to recall. Perhaps that was in fact my hon. Friend the Member for Dartford (Jim Dickson), who did go through all the new clauses—I thank him for his contribution. I also thank my hon. Friend the Member for Barking (Nesil Caliskan) for being on the Finance Bill Committee, although I note her description that she “sat through” it, rather than thoroughly enjoying the episode.

I also thank Opposition Members for their contributions to the debate. The hon. Member for Bridgwater (Sir Ashley Fox) recognised that even in his view, he could agree with a few points in our Bill, which I welcome.

[Sir Ashley Fox]

I invited the Minister to explain how the Budget would improve the lot of farmers. In particular, I gave the example of the £5 million family farm that would incur an inheritance charge of £400,000. How will that family pay that out of an annual income of about £50,000? That is eight years’ income, with nothing to live on.

[James Murray]

The debate on this Finance Bill has to focus on matters that are within the Bill and in the new clauses and amendments. As the hon. Gentleman will know, and as Madam Deputy Speaker reminded him, he strayed rather outside the ambit of the Finance Bill by referring to important changes to agricultural property relief that are not dealt with by the Bill or by any of the new clauses or amendments. I gently point out that any of his constituents, whatever industry they work in, will see that the income tax on their earnings does not go up as a result of this Government keeping their commitment in that regard.

[Dr Luke Evans]

The Minister is right to point to the amendments in front of us. New clause 3 looks at household income specifically. If he is so confident in the measures he and the Chancellor are putting forward, why will he not accept new clause 3, which has the ability to show just how fantastic the Budget and the Finance Bill are from the evidence base that we have?

[James Murray]

I was hoping that the hon. Gentleman would again leap to the defence of Liz Truss, as he did just last week. Sadly, that was not to be the case in his intervention. I will come on to the new clauses in a moment; I am only halfway through thanking people on his side of the House for intervening, so I would be grateful if he would let me make a little progress.

The hon. Member for Wimbledon (Mr Kohler) spoke about his concerns that things will be unworkable when the wine easement ends, but it ended over a month ago. Our early indications are that firms, warehouse keepers and HMRC have adapted well to the new system, although I and my officials will carefully monitor the situation.

[Mr Kohler]

Has the Minister actually spoken to people in the wine industry? They are absolutely at their wits’ end about this.

[James Murray]

I have been in routine contact with people from the wine industry throughout my time as Exchequer Secretary, and my officials are also in touch with the industry. As I said, the end of the wine easement happened at the beginning of February, and our early indications are that firms, warehouse keepers and HMRC have adapted well.

The hon. Member for Strangford (Jim Shannon) made a rare early speech during the debate, which rather took me by surprise. He raised his points with typical grace and forthrightness. I will address some of his points later in my remarks, but on the point about the impact of changes in the Finance Bill on some of the firms that export their spirits, I remind him that duty does not apply to exports. That part of the legislation would not be relevant to those considerations.

19:15

The hon. Member for Angus and Perthshire Glens (Dave Doogan) spoke about several topics; I will briefly address two of them. He spoke about the energy profits levy, which I will come on to more substantively in a moment. I briefly underscore the fact that the Government are committed to managing the energy transition in a way that supports jobs in existing and future industries, and GB Energy will of course be based in Aberdeen.

On the hon. Gentleman’s question about schooling in Scotland, if I understood it correctly, I should say that in line with the approach taken to special schools in the rest of the UK grant-aided special schools in Scotland will remain in scope of this policy. The block grants that the Scottish Government provide to grant-aided special schools fall outside the scope of VAT, as they are not pupil-specific. Funding that local authorities pay for individual pupils will be subject to VAT, but local authorities can reclaim that VAT via the section 33 VAT refund scheme. I hope that goes some way towards answering the hon. Gentleman’s questions.

The hon. Member for Richmond Park (Sarah Olney) spoke to the Lib Dem amendments, which I will turn to in one moment. I always enjoy the contributions of the right hon. Member for Beverley and Holderness (Graham Stuart), and I am always interested to hear what he has to say, but I note that he seems to have developed rather a blind spot when it comes to remembering the inheritance that we had from the previous Government, whom he supported.

I turn to the amendments tabled by the Government, then those tabled by the Opposition, on Report. As hon. Members will be aware, one measure that the Bill delivers is our commitment to remove the outdated concept of domicile status from the tax system. From 6 April 2025, it will be replaced by a new residence-based regime, ensuring that everyone who makes their home in the UK pays their taxes here, with our approach raising an additional £12.7 billion in revenue over the forecast period.

The Government are clear that our new residence-based regime will be internationally competitive and focused on attracting the best talent and investment to the UK. This is very complex legislation, so it was the Government’s expectation that amendments would be required during the parliamentary passage of the Bill to ensure that the drafting aligns with the policy intention. Accordingly, we are tabling minor technical changes and administrative easements that will ensure that the regime works as intended.

I turn first to the amendments relating to the new four-year foreign income and gains regime. The Government are making technical changes to the legislation that will ensure that any claims by individuals for relief on foreign income and gains are properly accounted for with regard to access to other forms of tax relief. Further amendments make changes to maintain the competitiveness of the new regime by ensuring equal treatment of gains in trusts that migrate to the UK, and those that do not, for the purposes of relief on those gains.

I turn to the amendments to clause 40 and schedule 9, which abolishes the remittance basis of taxation from 6 April. The amendments make changes to correct references to domicile found in other legislation, as well as ensuring that the rules around remittances of intangible assets work as intended. In addition, the amendments will ensure that individuals who have made remittances while non-resident for a long period will not be taxed if they use the amounts previously remitted after resuming their UK residence.

I turn to the amendments relating to the temporary repatriation facility, or the TRF. These changes were announced by my right hon. Friend the Chancellor in January and are intended to address specific concerns raised by non-doms and experts about the operation of the TRF. Together, these amendments will ensure that the legislation aligns with the policy intent and ultimately increase the amount of trust distributions that can be designated by addressing specific barriers to using the TRF. Further amendments address inconsistencies in clause 41, with the effect of making the TRF easier to use and ensuring that the new residence-based regime works as intended.

I turn to the amendments relating to the taxation of foreign income and gains arising in settlor-interested trusts. These changes will ensure that the legislation functions as intended, including by expanding the TRF to cover trust distributions as previously explained and by incorporating changes based on feedback from external stakeholders.

Finally, the Government have proposed 11 technical amendments to the new residence-based system for inheritance tax. These changes ensure that the new rules work as intended by addressing a mismatch between the new long-term UK residence test and the old inheritance tax rules for deemed domicile when it comes to operating within several of the UK’s double taxation agreements. The Government have also tabled several amendments to provide clarity on the treatment of existing excluded property trusts, while also relaxing the test for whether the inheritance tax carve-out applies. As a result, the property will only need to be offshore immediately before the transfer or the settlor’s death, rather than being kept offshore until that time. That easement will enable trusts to invest in the UK in the interim, thereby helping to grow the economy.

As I mentioned in my opening remarks, the Finance Bill not only delivers on our plan to repair the public finances, but supports the investment necessary for long-term economic growth. Such investment is, of course, crucial for clean energy, an area in which the Prime Minister’s plan for change makes clear that we are committed to securing the UK’s place as a global leader. [Interruption.] That is why we are supporting the repurposing of oil and gas assets for use in carbon capture, usage and storage by legislating to allow tax relief on payments made into decommissioning funds.

I will move on, Madam Deputy Speaker. I will perhaps not go into some of the amendments in as much depth as I had hoped, as I am getting very well attuned to the subtle signals from my hon. Friends.

[Graham Stuart]

Will the Minister give way before he moves on?

[James Murray]

One more time.

[Graham Stuart]

The Minister is gracious, if not always in the Whips’ best books. Does he expect pensioners who are solely reliant on the state pension to get drawn into tax and the need to produce a tax return? Has he made an assessment of that, and what kinds of numbers would there be?

[James Murray]

As the right hon. Gentleman will be aware, in the coming financial year 2025-26 the personal allowance will be above the level of the new state pension, so what he said should not apply when it is people’s sole income. However, there are already cases of individual pensioners who do owe tax; indeed, around two thirds of pensioners pay tax, because they also have private pensions. They pay via pay-as-you-earn or self-assessment.

I will not go into detail about the Government amendments to visual effects relief, because I assume they have the consent of the whole House. However, I will briefly speak to some of the amendments tabled by Opposition Members, as I feel I should address them. I will take together new clauses 1, 2, 3, 5, 6 and 8, which would require the Government to review the number of individuals receiving the full state pension and their income tax liabilities over the next four years, and to publish various impact assessments regarding the impact of changes to the energy profits levy, as well as the impact of the Bill on households, small and medium-sized enterprises, distilleries, wine producers and the hospitality industry.

The Government remain opposed to all of these new clauses, for the same reasons that I gave in Committee. First, the relevant information on those receiving the state pension and their tax liabilities is already published by HMRC, the Department for Work and Pensions and the OBR, and is publicly available.

[Daisy Cooper]

In new clause 8, which deals with alcohol pricing, we have made explicit that we are not just looking for an impact assessment of the tax that the Government intend to raise. It is about the estimate of administrative operational costs—that is, the red tape that is going to be put on the industry. Does the Minister agree that we need that impact assessment, and will he meet me to discuss how we can do it?

[James Murray]

The impacts of the changes to the alcohol duty and the energy profits levy have already been set out in the tax information and impact note that was published alongside the autumn Budget, so that information is already in the public domain. Information on the impact on households was also published alongside the autumn Budget in the “Impact on households” report, which demonstrated that households are on average better off in 2025-26 as a result of these decisions.

Finally, I will address the amendments tabled by the Opposition that deal with VAT on private school fees—several hon. Members have spoken about that matter. Amendments 67 to 69 would collectively remove clauses 47 to 49, which remove the VAT exemption for private schools and set out anti-forestalling provisions and the commencement date.

Ending the VAT tax break for private schools is a tough but necessary decision that will secure the additional funding needed to help deliver on our commitments, including those relating to education and young people. This policy took effect at the beginning of January, and I note that in his speech, the shadow Minister, the hon. Member for North West Norfolk (James Wild), did not say how his party would pay for its decision to reintroduce that tax break for private schools. The policy will raise £1.7 billion by the final year of this Parliament, so it is essential that the Opposition explain what they would cut from the schools budget, from education services, or from any other public services to pay for the reintroduction of that tax break. I will happily give way if the shadow Minister would like to make an intervention to place on record how he will pay for it. I do not see him leaping to his feet, so I will move on.

Finally in the debate we are having about VAT on private schools, the Government set out the expected impacts of this policy in the autumn Budget, so I do not believe that new clause 7—which would require the Government to make a regular statement on the impact of pupils with special educational needs and disabilities—is necessary. However, I take this opportunity to make clear that in developing this policy, the Government carefully considered the impact it would have, including on pupils with special educational needs and disabilities. I am sure that the hon. Member for St Albans (Daisy Cooper) and her colleagues will welcome the extra £1 billion next year for high needs funding that we have been able to announce thanks to our decisions on tax policy, including on private schools.

I hope I have set out why the Opposition amendments are unnecessary, and indeed why reintroducing the VAT tax break for private schools not only runs counter to the manifesto on which the Government were elected, but represents an unfunded tax cut from the Opposition—have they learned nothing? I therefore urge the House to reject those amendments, and I commend our amendments to the House. Again, I extend my thanks to all Members who have contributed to this debate.

[James Wild]

I beg to ask leave to withdraw the clause.

Clause, by leave, withdrawn.

New Clause 2

Energy (oil and gas) profits levy: impact assessment of increase in rate

“(1) The Chancellor of the Exchequer must, within six months of this Act coming into force, commission and publish an assessment of the expected impact of Sections 15 to 17 of this Act on—

(a) domestic energy production and investment;

(b) the UK’s energy security;

(c) energy prices, and;

(d) the UK economy.

(2) The assessment must examine the impact of provisions in this Act in comparison with what could have been expected had the energy (oil and gas) profits levy remained unchanged.”—(James Wild.)

This new clause would require the Chancellor to commission and publish an assessment of the expected impact of changes to the energy (oil and gas) profits levy on domestic energy production, the UK’s energy security, energy prices and the UK economy.

Brought up, and read the First time.

Question put, That the clause be read a Second time.

19:26

Division 109

Ayes: 113

Noes: 331

New Clause 8

Review of sections 63 and 64

“(1) The Chancellor of the Exchequer must, within six months of the passing of this Act and every six months thereafter, review the impact of the measures contained in sections 63 and 64 of this Act.

(2) Each review must consider the impact of the measures on—

(a) Scotch whisky distilleries,

(b) small spirit distilleries,

(c) wine producers and wholesalers,

(d) the hospitality industry, and

(e) those operating in the night-time economy.

(3) Each review must include an estimate of administrative and operational costs for the preceding 12-month period for each of the sectors listed in subsection (2).

(4) Each review must consider the impact of the measures on the retail price for consumers of products subject to alcohol duty.

(5) Each review must also examine the expected effect of the measures on the domestic wine trade.

(6) A report setting out the findings of each review must be published and laid before both Houses of Parliament.”—(Daisy Cooper.)

This new clause would require the Government to produce an impact assessment of the measures on the Act on distilleries, wine producers and the hospitality industry.

Brought up, and read the First time.

Question put, That the clause be read a Second time.

19:43

Division 110

Ayes: 176

Noes: 332

Clause 26

Films and television programmes: increased relief for visual effects

Amendments made: 1, page 17, line 32, leave out

“the Chapter 3 credit amount”

and insert

“the adjusted VFX portion of those credits”.

This amendment is consequential on Amendment 2.

Amendment 2, page 17, line 35, leave out from beginning to end of line 27 on page 18 and insert—

“(4) Take the following steps to determine the adjusted VFX portion of previously claimed Chapter 3 credits—

Step 1 (identify the total UK expenditure in the AVEC period)

Determine the total amount of the company’s relevant global expenditure (see section 1179CA(2)) that—

(a) is UK expenditure (see section 1179AB), and

(b) was incurred for accounting periods falling within the company’s AVEC period.

Step 2 (identify the amount of visual effects expenditure)

Determine how much of the result of Step 1 is relevant visual effects expenditure.

Step 3 (determine the extent to which the 80% cap applied)

Determine the amount (if any) of the excess to be deducted at Step 3 in section 1179CA(1) for the most recent accounting period for which a claim for Chapter 3 credit was made (which may be the claim period). If that amount is nil go to Step 4, otherwise go to Step 5.

Step 4 (where the 80% cap did not apply, calculate the adjusted VFX portion)

If this Step applies, the adjusted VFX portion is the amount given by multiplying—

(a) the sum of Chapter 3 credits claimed by the production company, by

(b) the amount given by dividing the result of Step 2 by the result of Step 1.

Step 5 (treat the 80% cap as affecting the VFX portion first)

Subtract the result of Step 3 from the result of Step 2. If the result is nil or less, the adjusted VFX portion is nil. If not, go to Step 6.

Step 6 (calculate the adjusted VFX portion, taking account of the 80% cap)

If this Step applies, the adjusted VFX portion is the amount given by multiplying the result of Step 5 by 0.34.”

This amendment clarifies, and corrects, the calculation of the relief.

Amendment 3, page 18, line 32, leave out “remainder” and insert

“result of Step 5 in that subsection”.

This amendment is consequential on Amendment 2.

Amendment 4, page 18, line 36, at end insert—

“a company’s “AVEC period” means the period beginning with the commencement of the first accounting period for which this Part applies further to the election by the company under section 1179B(1) and ending with the end of the claim period;”.—(James Murray.)

This amendment is consequential on Amendment 2.

Clause 37

Claim for relief on foreign income

Amendments made: 5, page 28, line 17, leave out “and” and insert “to”.

This amendment is consequential on Amendment 6.

Amendment 6, page 29, line 36, at end insert—

“845CA Effect of claim, foreign employment election or foreign gain claim: costs of dwelling-related loan

(1) This section applies where an individual—

(a) has a relievable amount for a tax year in respect of an overseas property business for the purposes of section 274A (reduction for individuals: entitlement), and

(b) makes a foreign income claim, a foreign employment election or a foreign gain claim for the tax year.

(2) The individual is not entitled to relief under section 274A for that tax year in respect of that relievable amount.

(3) For the purposes of section 274A, the individual’s brought-forward amount for the following tax year in respect of the overseas property business is nil.”

This amendment means that an individual who makes a foreign income claim, foreign employment election or foreign gain claim for a tax year is not entitled to relief under section 274A of ITTOIA 2005 for any relievable amount for that tax year in respect of an overseas property business.

Amendment 7, page 30, line 13, at end insert—

“845DA Effect of claim on relief for contributions to registered pension schemes

(1) Subsection (2) applies where—

(a) an individual makes a foreign income claim for a tax year,

(b) the individual is entitled to relief under section 188 of FA 2004 (relief for contributions) for that tax year, and

(c) the maximum amount of relief to which the individual is entitled under that section for that tax year is greater than the basic amount within the meaning of section 190(4) of that Act.

(2) The maximum amount of relief to which the individual is entitled under section 188 of that Act for that tax year is to be reduced by the lesser of—

(a) the relevant amount, and

(b) the amount that would reduce the maximum amount of relief to the basic amount.

(3) The “relevant amount” is the amount of the relief to which the individual is entitled under section 845A(2) of this Act as a result of making the foreign income claim, so far as that amount reflects relevant qualifying foreign income.

(4) An amount of qualifying foreign income is “relevant qualifying foreign income” if the income is relevant UK earnings within the meaning of section 189(2) of FA 2004.”

This amendment means that where an individual has made a foreign income claim, any relief for contributions to registered pension schemes to which the individual is entitled is reduced by the amount of the relief obtained as a result of the foreign income claim so far as the relief reflects income that is relevant UK earnings (but not below the basic amount).

Amendment 8, page 34, line 1, leave out “section 38” and insert “section 34”.—(James Murray.)

This amendment corrects a cross-reference.

Clause 38

Claim for relief on foreign employment income

Amendments made: 9, page 36, line 18, leave out “and” and insert “to”.

This amendment is consequential on Amendment 6.

Amendment 10, page 40, line 17, at end insert—

“41RA Effect of claim on relief for contributions to registered pension schemes

(1) This section applies where an individual who is an active member of a registered pension scheme for the purposes of section 188 of FA 2004 (relief for contributions) makes a foreign employment relief claim for a tax year.

(2) For the purposes of sections 189(1)(a) and 190 of that Act, references to the amount of the individual’s relevant UK earnings chargeable to income tax for that year are to be read as references to that amount minus the relieved amount.

(3) The “relieved amount” is the amount of the relief to which the individual is entitled under section 41P(2) of this Act as a result of making the foreign employment relief claim.”—(James Murray.)

This amendment means that where an individual has made a foreign employment claim, any relief for contributions to registered pension schemes to which the individual is entitled is reduced by the amount of relief obtained as a result of the foreign employment claim (but not below the basic amount).

Clause 39

Claim for relief on foreign gains

Amendments made: 11, page 46, line 1, leave out “section 87” and insert “sections 87 and 89(2)”.

This amendment is consequential on Amendment 12.

Amendment 12, page 46, line 4, after “87” insert “or 89(2)”.

This amendment secures that relief is available under the FIG regime for gains treated as accruing under section 89(2) of the Taxation of Chargeable Gains Act 1992 (migrating settlements).

Amendment 13, page 46, line 5, leave out “non-resident”.

This amendment is consequential on Amendment 12.

Amendment 14, page 46, line 15, leave out “and 87A” and insert “, 87A and 89(2)”.

This amendment is consequential on Amendment 12.

Amendment 15, page 46, line 34, leave out “and” and insert “to”.—(James Murray.)

This amendment is consequential on Amendment 6.

Clause 40

Remittance basis not available after tax year 2024-25

Amendments made: 16, page 49, line 3, leave out “subsection (5)” and insert “subsections (4A) and (5)”.

This amendment is consequential on Amendment 24.

Amendment 17, page 49, line 4, at end insert—

“(4A) Paragraph 5A (relief for amounts remitted again on becoming UK resident) is to be treated as having always had effect.”—(James Murray.)

This amendment is consequential on Amendment 24.

Clause 47

Removal of exemption for private school fees

Amendment proposed: 67, page 53, line 30, leave out clause 47.—(James Wild.)

This amendment removes Clause 47, which removes the VAT exemption for private school fees.

Question put, That the amendment be made.

19:58

Division 111

Ayes: 167

Noes: 347

Schedule 3

Payments into decommissioning funds

Amendments made: 18, page 116, line 30, leave out paragraph (a).

This amendment removes a condition that is now not needed as a result of the condition inserted by Amendment 19.

Amendment 19, page 117, line 4, leave out paragraph (c) and insert—

“(c) the payment has been certified in an approval notice given under section 30A(5)(b) or 30B(3)(b) of that Act.”

This amendment provides that a payment (direct or indirect) into a decommissioning fund must be certified by the Secretary of State in order for it to qualify as decommissioning expenditure.

Amendment 20, page 117, line 9, leave out sub-paragraph (3) and insert—

“(3) For the purposes of sub-paragraph (2), a payment to a licensed company under an agreement to pay a required amount for the purposes of payment into the decommissioning fund is to be regarded as a payment into that fund.

(3A) But the onward payment into the fund by that licensed company is not a qualifying payment.”—(James Murray.)

This amendment clarifies that an indirect payment into a decommissioning fund is capable of being a qualifying payment (provided it meets the conditions in paragraph 1(2) of Schedule 3 to the Bill).

Schedule 9

Income tax and capital gains tax: remittance basis and domicile

Amendments made: 21, page 214, line 11, leave out from “in” to end of line 13 and insert

“property situated outside the United Kingdom becoming situated in the United Kingdom.”

This amendment makes it clear that the new section 809(9A)(b) of ITA 2007 only applies where the situs of existing intangible property changes.

Amendment 22, page 214, line 13, at end insert—

“(9B) Sections 275 to 275C of TCGA 1992 (location of assets) apply for the purposes of subsection (9A)(b) as they apply for the purposes of TCGA 1992.

(9C) But subsection (9B) does not apply where the intangible property is a debt other than a judgment debt.”

This amendment means that the common law will determine where a debt (other than a judgment debt) is situated for the purposes of the new section 809L(9A)(b) of the Income Tax Act 2007.

Amendment 23, page 215, line 10, after “to” insert

“income tax or capital gains”.

This amendment is consequential on Amendment 24.

Amendment 24, page 215, line 10, at end insert—

“Relief for amounts remitted again on becoming UK resident

5A (1) This paragraph applies where—

(a) income or chargeable gains of an individual have been remitted to the United Kingdom during a period that exceeds 5 years—

(i) that ends before 6 April 2024, and

(ii) in which there was no period for which the individual was UK resident, and

(b) after the end of that period, but before 6 April 2025—

(i) the same, or part of the same, income or chargeable gains (“the repeated remitted amount”) were again remitted to the United Kingdom, and

(ii) a relevant charge has arisen in relation to that remittance.

(2) A “relevant charge” in relation to a remittance means—

(a) income tax becoming chargeable on that remittance, or

(b) a gain accruing under paragraph 1(2) of Schedule 1 to TCGA 1992 on that remittance.

(3) Any relevant charge that has arisen on the first occasion on which the repeated remitted amount is remitted in circumstances falling within sub-paragraph (1)(b) is to be treated as never having arisen.

(4) But a remittance that is not charged to income tax or capital gains tax as a result of sub-paragraph (3) is to be treated as if it were charged to income or capital gains tax (as the case may be) for the purposes of section 809P(12) of ITA 2007.

(5) This paragraph is to be treated as never having applied where—

(a) for either, or each, of the tax years 2024-25 and 2025-26, the individual is not UK resident, or

(b) either, or each, of those tax years is a split year as respects the individual.

(6) References in this paragraph to amounts being remitted to the United Kingdom are to be construed in accordance with Chapter A1 of Part 14 of ITA 2007 (see, in particular, sections 809L to 809O of that Act).”

This amendment gives relief to individuals who have remitted foreign income and gains during an extended period of non-residence, but remit them again on becoming UK resident before the end of tax year 2024-25.

Amendment 25, page 215, line 15, at end insert—

“Transferable tax allowance for married couples etc

6A In section 55C of ITA 2007 (election to reduce personal allowance), in subsection (3)(b), for “domiciled in the United Kingdom” substitute “not a qualifying new resident”.”

This amendment makes an amendment to the Income Tax Act 2007 that is consequential on the ending of the relevance of domicile for income tax purposes and the introduction of relief for qualifying new residents.

Amendment 26, page 218, leave out lines 34 and 35.

This amendment omits the repeal of section 174(6)(a) of the Finance Act 1993 because that provision has already been repealed by Schedule 41 of the Finance Act 1996.

Amendment 27, page 219, leave out lines 2 to 29 and insert—

“23 (1) In section 22 of F(No.2)A 1931 (Treasury power to issue securities with a FOTRA condition), in subsection (1)(b) for “neither domiciled nor” substitute “not”.

(2) In section 154 of FA 1996 (FOTRA securities), omit subsection (1).

(3) Any security issued with a FOTRA domicile condition is treated in relation to times on or after 6 April 2025 as if—

(a) it were a security issued with the post-1996 Act FOTRA conditions (and with no other FOTRA condition), and

(b) the post-1996 Act FOTRA conditions had been authorised in relation to the issue of that security by virtue of section 22 of F(No.2)A 1931.

(4) In sub-paragraph (3)—

“a FOTRA condition” means a condition about exemption from taxation authorised by section 22 of F(No.2)A 1931;

“a FOTRA domicile condition” , in relation to a security, means a FOTRA condition requiring the security to be in the beneficial ownership of persons who are not domiciled in the United Kingdom for an exemption from taxation to apply;

“the post-1996 Act FOTRA conditions” means the FOTRA conditions with which 7.25% Treasury Stock 2007 was first issued.”—(James Murray.)

This amendment ensures that FOTRA securities cannot be issued with conditions about tax exemption requiring any beneficial owners (whether or not they are individuals) to be non-UK domiciled. It also means that any FOTRA securities that were issued with such a condition will be treated as if they were not.

Schedule 10

Temporary repatriation facility

Amendments made: 28, page 221, line 14, leave out “or” and insert “and”.

This amendment corrects a minor error (incorrect conjunction).

Amendment 29, page 222, line 38, leave out paragraphs (b) and (c).

This amendment removes the possibility of designating foreign income and gains that are subject to section 279 of TCGA 1992 (delayed remittances) or section 842 of ITTOIA 2005 (unremittable income).

Amendment 30, page 223, line 11, after “87” insert “and 89 TCGA 1992”.

This amendment is consequential on Amendment 31.

Amendment 31, page 223, line 12, leave out paragraph 3 and insert—

“3 (1) This paragraph applies for the tax year 2025-26, 2026-27 or 2027-28 in relation to an individual if—

(a) chargeable gains are treated as accruing to the individual in that tax year as a result of section 87(2) or 89(2) of TCGA 1992 in relation to a capital payment from the trustees of a settlement for which the individual is a beneficiary, and

(b) the settlement has a section 1(3) amount that is greater than nil for one or more tax years before 2025-26.

(2) So much of the payment as is matched with section 1(3) amounts for tax years before 2025-26 is qualifying overseas capital.

(3) For the purposes of matching those amounts, apply section 87A of TCGA 1992 as if—

(a) the section 1(3) amount for each tax year after the tax year 2024-25 were nil, and

(b) the reference in Step 2 in subsection (2) of section 87A of that Act to the total amount of capital payments received by the beneficiaries were to the total amount of capital payments—

(i) received by the individual and other beneficiaries that are qualifying individuals for the relevant tax year, and

(ii) to which section 87(2) or 89(2) of that Act applies.

(4) For the purposes of this paragraph, ignore any reduction of a section 1(3) amount for the tax year 2024-25 or an earlier tax year resulting from the application of section 87 or 89(2) of TCGA 1992 in the tax year 2025-26 or any subsequent tax year.

(5) Sub-paragraph (6) applies where—

(a) an amount of a capital payment has been matched with a section 1(3) amount under sub-paragraph (2), and

(b) that amount is designated as designated qualifying overseas capital.

(6) The section 1(3) amount is to be taken to have been reduced (but not below nil) by so much of it as matches with the capital payment for the purposes of any subsequent application of this paragraph.

(7) This paragraph is not to be taken as affecting the application of section 87A of TCGA 1992 for any purpose other than for the purposes of this paragraph and paragraphs 3A and 4 (and no section 1(3) amounts or capital payments are to be taken to have been reduced as a result of the application of this paragraph for any other purpose).

(8) For the purposes of this paragraph—

(a) “section 1(3) amount” has the meaning is has in section 87 of TCGA 1992, and

(b) section 97 of TCGA 1992 (supplementary provisions) applies as it applies for the purposes of sections 86A to 96 of that Act.

(9) For the purposes of this paragraph, and paragraphs 3A and 4, an individual is a qualifying individual in a tax year if the individual—

(a) is UK resident for the purposes of income tax and capital gains tax for that tax year, and

(b) was subject to the remittance basis for at least one tax year (being a tax year before the tax year 2025-26).”

This amendment extends the previous paragraph 3 of Schedule 10 (temporary repatriation facility) to migrant settlements and secures that the calculation of qualifying overseas capital works as intended.

Amendment 32, page 223, line 32, at end insert—

“Capital payments made by settlement: offshore income gains cases

3A (1) This paragraph applies for the tax year 2025-26, 2026-27 or 2027-28 in relation to an individual if—

(a) chargeable gains are treated as accruing to the individual in that tax year as a result of section 87(2) of TCGA 1992, as it applies in relation to OIG amounts as a result of regulation 20 of the OFT Regulations, in relation to a capital payment from the trustees of a settlement for which the individual is a beneficiary, and

(b) the settlement has an OIG amount that is greater than nil for one or more tax years before 2025-26.

(2) So much of the payment as is matched with OIG amounts for tax years before 2025-26 is qualifying overseas capital.

(3) For the purposes of matching those amounts, apply section 87A of TCGA 1992 as if—

(a) the OIG amount for each tax year after the tax year 2024-25 were nil, and

(b) the reference in Step 2 in subsection (2) of 87A of that Act to the total amount of capital payments received by the beneficiaries were to the total amount of capital payments—

(i) received by the individual and other beneficiaries that are qualifying individuals for the relevant tax year, and

(ii) to which section 87(2) of that Act applies in relation to OIG amounts (as a result of regulation 20 of the OFT regulations).

(4) For the purposes of this paragraph, ignore any reduction of an OIG amount for the tax year 2024-25 or an earlier tax year resulting from the application of section 87 or 89(2) of TCGA 1992 in the tax year 2025-26 or any subsequent tax year.

(5) Sub-paragraph (6) applies where—

(a) an amount of a capital payment has been matched with an OIG amount under sub-paragraph (2), and

(b) that amount is designated as designated qualifying overseas capital.

(6) The OIG amount is to be taken to have been reduced (but not below nil) by so much of it as matches with the capital payment for the purposes of any subsequent application of this paragraph.

(7) This paragraph is not to be taken as affecting the application of section 87A of TCGA 1992 for any purpose other than for the purposes of this paragraph and paragraphs 3 and 4 (and no OIG amount or capital payments are to be taken to have been reduced as a result of the application of this paragraph for any other purpose).

(8) For the purposes of this paragraph—

(a) the “OFT Regulations” means the Offshore Funds (Tax) Regulations 2009,

(b) “OIG amount” is to be construed in accordance with the OFT Regulations, and

(c) section 97 of TCGA 1992 (supplementary provisions) applies as it applies for the purposes of sections 86A to 96 of that Act.”

This amendment applies the same treatment under paragraph 3 of Schedule 10 (temporary repatriation facility) in relation to offshore income gains (see regulation 20 of the Offshore Funds (Tax) Regulations 2009).

Amendment 33, page 223, line 34, leave out paragraph 4 and insert—

“4 (1) This paragraph applies for the tax year 2025-26, 2026-27 or 2027-28 in relation to an individual if—

(a) chargeable gains are treated as accruing to the individual in that tax year as a result of paragraph 8(1) of Schedule 4C to TCGA 1992 in relation to a capital payment from the trustees of a relevant settlement for which the individual is a beneficiary, and

(b) the section 1(3) amount in the Schedule 4C pool is greater than nil for one or more tax years before 2025-26.

(2) So much of the payment as is matched with section 1(3) amounts in the Schedule 4C pool for tax years before 2025-26 is qualifying overseas capital.

(3) For the purposes of matching those amounts, apply section 87A of TCGA 1992 as if—

(a) the section 1(3) amount in the Schedule 4C pool for each tax year after the tax year 2024-25 were nil, and

(b) the reference in Step 2 in subsection (2) of section 87A of that Act to the total amount of capital payments received by the beneficiaries were to the total amount of capital payments—

(i) received by the individual and other beneficiaries that are qualifying individuals for the relevant tax year, and

(ii) to which paragraph 8(1) of Schedule 4C to that Act applies in relation to section 1(3) amounts in the Schedule 4C pool.

(4) For the purposes of this paragraph, ignore any reduction of a section 1(3) amount in the Schedule 4C pool for the tax year 2024-25 or an earlier tax year resulting from the application of paragraph 8(1) of Schedule 4C to TCGA 1992 in the tax year 2025-26 or any subsequent tax year.

(5) Sub-paragraph (6) applies where—

(a) an amount of a capital payment has been matched with a section 1(3) amount in the Schedule 4C pool under sub-paragraph (2), and

(b) that amount is designated as designated qualifying overseas capital.

(6) The section 1(3) amount in the Schedule 4C pool is to be taken to have been reduced (but not below nil) by so much of it as matches with the capital payment for the purposes of any subsequent application of this paragraph.

(7) This paragraph is not to be taken as affecting the application of section 87A of TCGA 1992 for any purpose other than for the purposes of this paragraph and paragraphs 3 and 3A (and no section 1(3) amount in the Schedule 4C pool or capital payments are to be taken to have been reduced as a result of the application of this paragraph for any other purpose).

(8) For the purposes of this paragraph—

(a) “section 1(3) amount in the Schedule 4C pool” and “relevant settlement” are to be construed in accordance with Schedule 4C to TCGA 1992, and

(b) section 97 of TCGA 1992 (supplementary provisions) applies as it applies for the purposes of sections 86A to 96 of that Act.”

This amendment replaces paragraph 4 of Schedule 10 (temporary repatriation facility) in order to make it more consistent with paragraph 3 as amended by Amendment 31.

Amendment 34, page 225, line 2, at end insert—

“Deemed income under section 732 of ITA 2007 where pre-2025 gains available for matching

5 (1) Sub-paragraph (2) applies where—

(a) an individual is treated as having an amount of income for any of the tax years 2025-26, 2026-27 or 2027-28 as a result of section 732 of ITA 2007 (individuals receiving a benefit as a result of relevant transactions),

(b) the amount of income does not fall within paragraph 5(1)(c) , and

(c) the benefit by reference to which that income is treated as arising would, if it were not chargeable to income tax, be an amount of qualifying overseas capital of the individual by virtue of paragraph 3 or 4 (capital payments).

(2) The amount is to be treated as an amount of qualifying overseas capital of the individual.

(3) The amount may only be designated in a return for the tax year in which the income was treated as arising to the individual.”

This amendment allows income treated as arising in tax years 2025-26 to 2027-28 under section 732 of ITA 2007 to be matched against pre 2025-26 settlement gains.

Amendment 35, page 226, line 26, at end insert “and relief”.

This amendment is consequential on Amendment 36.

Amendment 36, page 226, line 29, leave out sub-paragraph (2) and insert—

“(2) No liability to income tax arises on an amount of income treated as qualifying overseas capital under paragraph 5 if the amount is designated.

(2A) But such an amount is to be treated for the purposes of section 97(1) of TCGA 1992 (capital payments not to include amounts chargeable to income tax) as if it were chargeable to income tax.

(2B) No liability to income tax arises on an amount of income treated as qualifying overseas capital under paragraph 5A if the amount is designated.

(2C) Accordingly the amount—

(a) will be a capital payment for the purposes of sections 86A to 96 of, and Schedule 4C to, TCGA 1992 (see section 97(1) of that Act), and

(b) will, as a result of paragraph 3 or 4 (or both), be qualifying overseas capital.

(2D) Any such qualifying overseas capital is to be treated as having been designated by the individual (under that paragraph or those paragraphs), but no liability to the TRF charge is to arise as a result of that deemed designation.

(2E) Sub-paragraph (2F) applies where—

(a) offshore income gains, within the meaning of the Offshore Funds (Tax) Regulations 2009, are treated as accruing to an individual in a tax year under section 87(2) of TCGA 1992 (as applied by regulation 20 of those regulations) as a result of a capital payment made to an individual, and

(b) an amount of that capital payment is qualifying overseas capital that has been designated by the individual.

(2F) The offshore income gains are to be reduced by the amount of that designated qualifying overseas capital.”

This amendment is consequential on amendments 34 and 32.

Amendment 37, page 226, line 32, at end insert—

“Income tax exemptions: application of transfer of assets abroad rules in future years

8A (1) This paragraph applies where an amount of income that is treated as arising to an individual under section 732 of ITA 2007 ("the deemed income") is exempt from income tax by virtue of paragraph 8.

(2) If the deemed income is qualifying overseas capital by virtue of paragraph 5(1)(c) , Chapter 2 of Part 13 of ITA 2007 has effect as though the deemed income had been charged to tax under section 731 of that Act.

(3) Accordingly—

(a) in the application of section 733(1) of ITA 2007 to the individual for subsequent tax years, the amount of the deemed income will be deducted at Step 2 and at paragraph (a) of Step 5, and

(b) in the application of section 733(1) of ITA 2007 to any other individual for subsequent tax years, the amount of the deemed income will be deducted at paragraph (b) of Step 5.

(4) If the deemed income is qualifying overseas capital by virtue of paragraph 5A, Chapter 2 of Part 13 of ITA 2007 has effect as though the benefit by reference to which the deemed income was treated as arising had never been provided.

(5) Accordingly, in the application of section 733(1) of ITA 2007 to any individual for subsequent tax years—

(a) that benefit will not be taken into account at Step 1,

(b) no deduction in respect of the deemed income will be made at Step 2 or Step 5, and

(c) the total untaxed benefits will not be reduced in respect of that benefit by virtue of section 734 (previous capital gains charge).”

This amendment sets out how the transfer of assets abroad rules will apply for future tax years if deemed income under those rules is exempt from tax under the TRF.

Amendment 38, page 227, line 4, after “87(2)” insert “or 89(2)”.

This amendment is consequential on Amendment 31.

Amendment 39, page 227, line 7, after “individual” insert “under paragraph 3”.

This amendment is consequential on Amendment 32.

Amendment 40, page 227, line 23, leave out “paragraph 3(1)(c)” and insert “paragraph 3(2)”.

This amendment is consequential on Amendment 31.

Amendment 41, page 227, line 28, leave out “paragraph 3(1)(c)” and insert “paragraph 3(2)”.

This amendment is consequential on Amendment 31.

Amendment 42, page 227, line 36, after “individual” insert “under paragraph 4”.

This amendment is consequential on Amendment 33.

Amendment 43, page 228, line 11, leave out “paragraph 4(1)(b)” and insert “paragraph 4(2)”.

This amendment is consequential on Amendment 33.

Amendment 44, page 228, line 17, leave out “paragraph 4(1)(b)” and insert “paragraph 4(2).

This amendment is consequential on Amendment 33.

Amendment 45, page 228, line 29, leave out from “individual” to end of line 30 and insert “if—”.

This amendment and Amendment 46 secure that the temporary relaxation of the nominated income and gains ordering rules does not apply where those rules have previously operated in relation to a taxpayer.

Amendment 46, page 228, line 31, leave out paragraphs (a) and (b) and insert—

“(a) the tax year is tax year 2025-26, 2026-27 or 2027-28,

(b) the individual—

(i) makes a designation of qualifying overseas capital for that tax year, or

(ii) the individual has made such a designation for a previous tax year, and

(c) that section has not applied in relation to that individual for the tax year 2024-25 or an earlier tax year.”

This amendment and Amendment 45 secure that the temporary relaxation of the nominated income and gains ordering rules does not apply where those rules have previously operated in relation to a taxpayer.

Amendment 47, page 234, line 13, leave out “at a relevant time”.

This amendment removes some unnecessary words.

Amendment 48, page 234, line 18, leave out “at a relevant time”.

This amendment removes some unnecessary words.

Amendment 49, page 239, line 37, at end insert—

“No tax credits for pre 2016-17 dividends etc

16A Sections 397 to 398 of ITTOIA 2005 (which have been repealed and only have effect in relation to distributions made before tax year 2016-17) do not apply in relation to any amount of designated qualifying overseas capital.”—(James Murray.)

This amendment prevents tax credits being claimed under the dividends etc tax credits regime repealed from tax year 2016-17, where a distribution (made before that tax year) is designated as qualifying overseas capital.

Schedule 12

Trusts: connected amendments, transitional provision etc

Amendments made: 50, page 253, line 36, at end insert—

“(2B) For the purposes of subsection (1), if in a tax year—

(a) income is treated as arising to an individual under section 732(2), and

(b) the income is identified as qualifying foreign income on a foreign income claim,

the income is treated for later tax years as not having been charged to income tax under section 731.

(2C) It follows from subsection (2B) that—

(a) in the application of subsection (1) to the individual for subsequent tax years, the amount of the income will be deducted at Step 2 and at paragraph (a) of Step 5, but

(b) in the application of subsection (1) to any other individual for subsequent tax years, the amount of the income will not be deducted at paragraph (b) of Step 5.

(2D) See paragraph 8A of Schedule 10 to FA 2025 (temporary repatriation facility) for special provision about income that is treated as arising under section 732 but that is exempt from income tax under that Schedule.”

This amendment ensures that, if a beneficiary obtains qualifying new resident relief in respect of a tax charge under the transfer of assets abroad rules, the pool of relevant income by reference to which other beneficiaries are taxed is not artificially depleted.

Amendment 51, page 260, line 16, leave out paragraph 49.

This amendment is consequential on Amendment 37, which makes equivalent (and more detailed) provision in Schedule 10.

Amendment 52, page 260, line 31, leave out“(2A)(a), omit “, 87K, 87L”” and insert “(2A), omit paragraph (a)”.

This amendment is consequential on paragraph 54 of Schedule 12.

Amendment 53, page 264, line 7, leave out “(7)(b), omit “, 87K, 87L”” and insert

“(7), omit paragraph (b) (but not the “and” after it)”.

This amendment is consequential on paragraph 54 of Schedule 12.

Amendment 54, page 264, line 8, leave out “(6)(c), omit “, 87K, 87L”” and insert “(6)—

(a) after paragraph (a) insert “and”;

(b) omit paragraph (c) and the “and” before it.”

This amendment is consequential on paragraph 54 of Schedule 12.

Amendment 55, page 265, line 27, leave out paragraph 71 and insert—

“71 (1) The amendments made by paragraphs 1 to 54, 56 to 65 and 68 to 70 have effect for the tax year 2025-26 and subsequent tax years.

(2) The amendment made by paragraph 55 to section 62 of TCGA 1992 (death: general provisions) has effect in relation to deaths occurring on or after 6 April 2025.

(3) The amendments made by paragraphs 66 and 67 to sections 279A and 279C of TCGA 1992 (deferred unascertainable consideration: election for treatment of loss) have effect in relation to disposals made on or after 6 April 2025 of rights to which section 279A of that Act applies.”—(James Murray.)

This amendment brings the commencement provision for Schedule 12 into line with the other income-tax- and capital-gains-tax-related provisions in the Bill about residence and domicile.

Schedule 13

Inheritance tax

Amendments made: 56, page 268, line 19, leave out

“at all times on and after 30 October 2024 and before the time when”

and insert “immediately before”.

This amendment relaxes the test for determining whether the exemption for existing excluded property trusts in new section 53(4A) of the Inheritance Tax Act 1984 applies. It provides that the property only needs to be invested offshore (or in an AUT or OEIC) immediately before the person’s interest comes to an end (as opposed to at all times after 30 October 2024).

Amendment 57, page 269, line 1, leave out

“at all times on and after 30 October 2024 and”

and insert “immediately”.

This amendment relaxes the test for determining whether the exemption for existing excluded property trusts in new section 54(2C) of the Inheritance Tax Act 1984 applies. It provides that the property only needs to be invested offshore (or in an AUT or OEIC) immediately before the person’s death (as opposed to at all times after 30 October 2024).

Amendment 58, page 275, line 4, at end insert—

“267ZF Double taxation conventions operating by reference to deemed domicile

(1) This section applies to a case in which the application of any arrangements having effect under section 158 (double taxation conventions) depends (to any extent) on whether a person is treated as domiciled in the United Kingdom for the purposes of inheritance tax.

(2) The person is treated as domiciled in the United Kingdom for the purposes of inheritance tax if they are a long-term UK resident.

(3) Sections 276ZC to 267ZE (persons treated as long-term resident by virtue of election) are to be disregarded in applying this section in relation to any arrangements that are specified in an Order in Council made under section 158 of IHTA 1984 before 17 July 2013 (other than by way of amendment by an Order made on or after that date).

(4) Nothing in this section affects the interpretation of any such arrangements as are mentioned in section 158(6) (certain pre-1975 arrangements).”

This amendment provides that, where existing double taxation arrangements operate by reference to whether the UK treats a person as domiciled in the UK for the purposes of inheritance tax, the person is treated as so domiciled if they are a long-term UK resident. It does not affect pre-1975 arrangements and, in relation to pre-2013 arrangements, provides for certain elections to be disregarded.

Amendment 59, page 276, line 13, leave out “gift” and insert

“disposal and remained settled property at all times after the disposal and before the relevant time”.

This amendment clarifies the exemption from the gifts with reservation rules for existing excluded property trusts. It ensures that the exemption only applies where the property has remained in the trust throughout.

Amendment 60, page 276, line 17, leave out

“at all times on and after 30 October 2024 and”

and insert “immediately”.

This amendment relaxes the test for determining whether the exemption from the gifts with reservation rules for existing excluded property trusts applies. It provides that the property only needs to be invested offshore (or in an AUT or OEIC) immediately before the relevant time (as opposed to at all times after 30 October 2024).

Amendment 61, page 276, line 29, at end insert—

“(7C) In subsection (7A)(c), “for the purposes of the 1984 Act” includes for the purposes only of Chapter 3 of Part 3 of that Act (ten-year anniversary charges etc) because of the operation of section 81 of that Act (property moving between settlements).”

This amendment ensures that the exemption from the gifts with reservation rules for existing excluded property trusts applies to property which was excluded property only under the relevant property rules in the Inheritance Tax Act 1984, because it was treated as comprised in a different settlement from that in which it was in fact comprised.

Amendment 62, page 279, line 22, leave out

“not been resident in the United Kingdom for any tax year”

and insert

“been resident in the United Kingdom for no tax year”.

This amendment is minor and technical and clarifies an ambiguity.

Amendment 63, page 279, line 26, leave out

“not resident in the United Kingdom for any”

and insert

“resident in the United Kingdom for none”.

This amendment is minor and technical and clarifies an ambiguity.

Amendment 64, page 279, line 28, leave out

“not resident in the United Kingdom for more than 14”

and insert

“resident in the United Kingdom for fewer than 15”.

This amendment is minor and technical and clarifies an ambiguity.

Amendment 65, page 280, line 12, leave out paragraph (b).

This amendment is consequential on Amendment 58.

Amendment 66, page 280, line 19, leave out sub-paragraph (3).—(James Murray.)

This amendment is consequential on Amendment 58.

Third Reading

20:09

[James Murray]

I beg to move, That the Bill be now read the Third time.

At the autumn Budget, my right hon. Friend the Chancellor laid the essential foundations for boosting investment and growth to put more money in people’s pockets, the No. 1 mission of the Government under the Prime Minister’s plan for change. The Budget was built on robust fiscal rules, rules that put a stop to day-to-day spending being funded through borrowing and to get net financial debt falling as a share of GDP.

The Finance Bill delivers on our manifesto commitments by removing the outdated concept of domicile status from the tax system, increasing the capital gains tax rate for carried interest, increasing the higher rates of stamp duty for additional dwellings, introducing the 20% standard rate of VAT on private school fees, and changing the energy profits levy by extending the period over which it applies and adjusting its rate by 3 percentage points.

As we know, my right hon. Friend the Chancellor set out at Budget how the fiscal inheritance was far worse than we had expected. The Opposition, when in government, let public spending plans become unsustainable. They did not share this with the OBR or the British people. It fell to us to fix that mess when we took office. That is why we had to make an increase to capital gains tax, changes to inheritance tax thresholds and a plan to close the tax gap by a record package of £6.5 billion of additional tax revenue by the end of the Parliament.

I thank right hon. and hon. Members from across the House for their often helpful and insightful contributions to the debates during the Bill’s passage. I would like to thank officials at the Treasury and in Parliament for their work on the policies and the legislation that have led to the Bill whose consideration we are now concluding. The Bill plays a key role in delivering economic stability, repairing the public finances and laying the essential foundations for growth. It is through that growth that we will put more money into the pockets of people across Britain, and I commend it to the House.

20:14

[James Wild]

I join the Minister in thanking hon. Members on both sides of the House who participated in the debates we have had so far on the Bill, which I do not intend to extend unduly. I join him in thanking the parliamentary staff and the hon. Members who chaired the Committee.

The driving mission of the Government, according to the Prime Minister, is growth, but despite inheriting the fastest growing economy in the G7, he and the Chancellor chose to talk down our economy. The impact of their words was to weaken confidence. Then, in the October Budget, the Government made choices and put in place a raft of measures in this and other Bills that have stopped growth stone dead: £40 billion a year of extra taxes; higher national insurance; increasing tax on investors; deterring the risk takers and the wealth creators we need; pushing up inflation; and hitting working people and pensioners.

In just the last two days, senior business leaders from the retail and hospitality sectors have warned about the damage the Budget and Labour’s costly employment laws will have. They are just the latest businesses sounding the alarm, but the Chancellor is not listening. For all the talk of growth, we can already see from their actions that we have a Government committed to higher taxes, higher spending, more borrowing and more regulation—the classic Labour approach. It does not work. The Government need to change course, otherwise we will all pay the price. That is why we will not be supporting the Bill this evening.

Question put, That the Bill be now read the Third time.

20:16

Division 112

Ayes: 339

Noes: 172

Bill read the Third time and passed.