House of Lords

Tuesday 18th March 2025 Lords Chamber

Tuesday 18 March 2025

14:30

Prayers—read by the Lord Bishop of London.

Soft Drinks Industry Levy

Tuesday 18th March 2025 Lords Chamber

Question

14:36

Asked by

[Lord Rennard]

To ask His Majesty’s Government what assessment they have made of the success of the Soft Drinks Industry Levy in comparison to voluntary sugar, salt and calorie reduction and reformulation measures.

[The Parliamentary Under-Secretary of State, Department of Health and Social Care (Baroness Merron) (Lab)]

My Lords, the soft drinks industry levy has nearly halved the sugar in soft drinks. By uprating the levy, as was announced in the Budget, we will ensure it remains fit for purpose and drives further restrictions. The voluntary programme has delivered meaningful product change and learning on what more is possible. We continue to drive reformulation through promotion and advertising restrictions, which are showing promising results. We will continue this momentum to create a healthier generation.

[Lord Rennard (LD)]

My Lords, the levy has reduced considerably the number of children who would otherwise have been admitted to hospital for dental extractions. Two-thirds of the public support an expansion of the principle of this levy to other high-sugar foods, with revenue raised funding children’s health programmes. Will the Minister commit to supporting the Recipe for Change campaign, which is backed by over 50 health charities and medical colleges, given that if the proposed sugar and salt levy in Henry Dimbleby’s National Food Strategy was implemented it could avoid more than 320,000 cases of type 2 diabetes over the next 25 years?

[Baroness Merron (Lab)]

I understand why the noble Lord raises this: he, like me, wishes to reduce obesity rates. Although the soft drinks industry levy is showing success, it is much harder, as he will be aware, to apply the same in respect of food, simply because of its formulation: there is no other sugar in soft drinks beforehand, whereas there is in food. Although I understand the pressure to do this, and we continue to do more, it is not quite as straightforward to draw the direct comparisons, as I know he understands.

[Lord Rooker (Lab)]

I remind my noble friend that the voluntary system for the reduction of salt, which was organised by the Food Standards Agency before I joined it, was so successful that the World Health Organization held its international conference in London in 2010 because it had been so successful on a voluntary basis. Of course, this was before the noble Lord, Lord Lansley, removed nutrition from the Food Standards Agency. The voluntary system can work substantially.

[Baroness Merron (Lab)]

My noble friend is right: voluntary schemes can indeed work well. In addition to crediting my noble friend for his work with the Food Standards Agency, I can tell your Lordships’ House that voluntary reformulation has encouraged sugar reduction by around 15% in cereals, 13% in yoghurts and 29% in milk-based drinks, and contributed to a reduction in salt intake. Of course more can be done to improve everyday food and drink, and we continue to work by whatever means necessary and within all sectors of industry to do just that.

[Baroness Manzoor (Con)]

My Lords, the Minister will know that sugar has been substituted with glycerol in slushy drinks—these are iced drinks that are particularly for children. This is having an adverse health impact, particularly on young children. According to recent press announcements, a number have been admitted to hospital. Can the Minister say what the Government are doing to educate parents and to address this issue?

[Baroness Merron (Lab)]

I thank the noble Baroness for raising this very important point. The Food Standards Agency is considering very carefully the findings of the review mentioned in the media, to which she referred. In the meantime, parents are strongly encouraged to follow the advice that slushy drinks should not be given to children under four years old. Retailers are also advised to make adults fully aware of this guidance if they seek to buy them for children. In addition, although the symptoms of intake are usually mild, it is important that parents are aware of the risks, particularly at high levels of consumption. I thank the noble Baroness for shining a light on this matter.

[Baroness Bennett of Manor Castle (GP)]

My Lords, research by the First Steps Nutrition Trust shows that parents believe that baby foods are strongly regulated. In fact, there is no legal threshold for the amount of sugar in baby foods in the UK; there is only a threshold for the amount of added sugar. If a large quantity of concentrated fruit juice is added, we end up with baby foods that have implicit labels on them suggesting that they are healthy but they contain more sugar than Coca-Cola. In the UK, 61% of two to five year-olds’ energy comes from ultra-processed foods. Will the Government look to get significant, important regulation for baby foods?

[Baroness Merron (Lab)]

I understand the point that the noble Baroness raises. This is one of the areas that we are looking at. She also raised ultra-processed foods. As she may be aware, the Scientific Advisory Committee on Nutrition has reviewed evidence and stated that further research is needed as to whether ultra-processed foods are unhealthy due to processing or to an unhealthy nutrient content. We have discovered that we need to separate the two. That will also assist on the point that she raised about baby foods.

[Lord Kamall (Con)]

My Lords, although sugar taxes and levies are examples of top-down state solutions to tackle obesity, I will ask the Minister about grass-roots, bottom-up solutions. She will know of non-state local civil society projects that work in communities to encourage healthier lifestyles, such as BRITE Box in south London, which offers recipes, ingredients and budgeting advice to help low-income families cook and eat more healthily. Can she tell your Lordships how the department works with such local projects to tackle obesity and how that best practice has spread to other communities? Could she also write to me with a list of some of the projects that her department is aware of, so that all noble Lords could learn a bit more?

[Baroness Merron (Lab)]

I would be very pleased to write further to the noble Lord on this matter. I pay tribute to all of those community third sector organisations that work in line with government direction to reduce obesity. There are many aspects to this: it is not just about what community organisations can do but, for example, about implementing TV and online advertising restrictions for less healthy food. In all these ways, we will be able to make progress to reduce obesity.

[The Lord Bishop of London]

My Lords, we know well that diet and nutrition, and the infrastructure from which we can access the food that we eat, determine our health. These things continue to be unequal. The proportion of household income required to afford to follow the Eatwell Guide is 11% in the least deprived areas and 45% in the most deprived areas. What consideration will be given in the NHS plan to these wider issues—including the merits of reformulation policies—to improve the critical determinants of health?

[Baroness Merron (Lab)]

The right reverend Prelate is right to speak about the additional levels of ill health and obesity; a child of 11 in the most deprived areas is twice as likely to be obese as those in the least deprived areas. I can certainly assure her that the 10-year plan, which is soon to be made available, will take account of inequalities in all their aspects, including nutrition and food.

[Lord Bird (CB)]

Is the Minister aware that, according to the BMA, 50% of people who suffer from cardiac arrest actually suffer from food poverty in the first instance?

[Baroness Merron (Lab)]

I thank the noble Lord for that point. He will know that the Defra-led food strategy will assist us across government in tackling this.

[Baroness Walmsley (LD)]

My Lords, I will follow up on the question from the noble Baroness, Lady Bennett of Manor Castle, about the regulation of foods for babies and toddlers. Is the Minister aware that some of the fruit and vegetable pouches marketed for babies from four months onwards—despite the advice that they should not be weaned until they are six months old—contain more sugar per 100 millilitres than Coca-Cola? Some toddlers’ teeth are being rotted as they emerge from their gums. When will the Minister take action on this?

[Baroness Merron (Lab)]

The noble Baroness reminds us that one of the major causes of children having to report to A&E is dental decay. That is why I am glad that we have announced plans for over 700,000 urgent dental appointments, as well as for supervised tooth-brushing. To the specific point that the noble Baroness makes, she is indeed right about the progress that needs to be made. We have recently responded to the House of Lords Select Committee inquiry into food, diet and obesity, as I know she is well aware. We will have a debate on that formal response on 28 March.

Great British Railways: Industrial Action

Tuesday 18th March 2025 Lords Chamber

Question

14:47

Asked by

[Lord Moylan]

To ask His Majesty’s Government what role Great British Railways will have in resolving industrial action on the railways.

[The Minister of State, Department for Transport (Lord Hendy of Richmond Hill) (Lab)]

My Lords, when Great British Railways takes over, it will be responsible for the industrial relations of the railway. Its establishment depends, of course, on the passage of the forthcoming railways Bill through Parliament. In the meantime, as each train operation comes into public ownership, the transfer of undertakings regulations will apply, and thus the existing negotiating arrangements will apply for these operators and, of course, for Network Rail. There is currently no new industrial action on the railway network except for a projected eight-week strike on Hull Trains, which is an open-access operator and therefore not the responsibility of the Government.

[Lord Moylan (Con)]

My Lords, we know from what we saw only a few months ago that, under the current departmental management, the Department for Transport is very good at giving out public money to ASLEF and the RMT without securing any improvements in working practices in exchange. Why will this be different when GBR is managing the railways? What additional tools will it have that will secure the improvement in working practices on the railways that all of us want to see?

[Lord Hendy of Richmond Hill (Lab)]

The answer to the noble Lord’s point is that it will have competent long-term management. The longest dispute in recent history on the national railway network was the one which was solved with an additional 2% pay offer last summer. That dispute lost an estimated £850 million-worth of revenue over the two years that it took place. Significantly, there were no productivity measures on the table at the time when the dispute was settled, simply because there had been a long-standing dispute between the employers—the owning groups of the train operating companies—and the department about the share of the revenue savings that they would get if productivity was applied. That meant that, in several train companies, there were no proposals whatever extant that could be implemented. Any sensible employer has in their mind the things that they need to do to make their operation more efficient and a negotiating strategy with their employees to achieve it. That was not the case last summer, but it will be the case in future.

[Baroness Pidgeon (LD)]

My Lords, what steps will Great British Railways take to minimise disruption to passengers during periods of industrial action? What compensation mechanisms will be put in place to ensure that passengers are not unfairly disadvantaged when their journeys are disrupted?

[Lord Hendy of Richmond Hill (Lab)]

The primary activity that needs to take place is good industrial relations, so that the instances of disputes that affect the train service are much reduced. A feature of good industrial relations is dialogue between the employees, their representatives and the employer, which is very much in the mind of the Government as we go forward with Great British Railways. In addition, as I have said to the House before, I want to see managers at route and train operating company level who can co-ordinate how the railway behaves and how it serves customers. By those means we will offer a better service and have less industrial action.

[Lord Barber of Ainsdale (Lab)]

My Lords, I welcome the focus that the Question from the noble Lord, Lord Moylan, has put on the negotiating arrangements in the railway sector. This was highlighted in the dispute that has been referred to before the general election, in which a point was reached where, after very intense and prolonged negotiations, a potential settlement had emerged that the negotiators were prepared to support from all sides. Unfortunately, that settlement was not approved because the Government Ministers decided to veto the possibility of that agreement being reached, bringing into serious concern the integrity of the whole process. Let me now turn—

[Noble Lords]

Oh!

[Lord Barber of Ainsdale (Lab)]

Let me now turn more directly to my question that arises from that. It is of course absolutely right—

[Noble Lords]

Question!

[Lord Barber of Ainsdale (Lab)]

May I ask the Minister whether he agrees that, yes indeed, careful attention needs to be paid to producing the right negotiating machinery as GBR takes shape? Can I also ask him—

[Noble Lords]

Oh!

[Lord Barber of Ainsdale (Lab)]

Does he agree that it would be better at the same time to reset relations with the workforce and the trade unions?

[Lord Hendy of Richmond Hill (Lab)]

I agree with my noble friend, but I will add one point. The Government are responsible for the cost of the railways to the taxpayer and, because of that, Governments need to make clear before the commencement of negotiations what the envelope is for the employers to negotiate. It is most unhelpful for a Government to intervene part or nearly all of the way through.

[Captain of the Honourable Corps of Gentlemen-at-Arms and Chief Whip (Lord Kennedy of Southwark) (Lab Co-op)]

My Lords, I remind all noble Lords that questions should consist of up to 100 words and no more than two points.

[Lord Young of Cookham (Con)]

My Lords, further to my noble friend’s Question, does the Minister recall a speech that he made on 27 April 2022, when he was chairman of Network Rail, to the Rail Industry Association? He said:

“The industry will not back away from its modernisation and cost reduction drive despite the threat of strike action”.


Does that remain his policy?

[Lord Hendy of Richmond Hill (Lab)]

I was wondering what I had said in April 2022. When I spoke to the Rail Industry Association, it was in respect of industrial relations in Network Rail, which I had the privilege to chair for nine years with 30,000-odd employees. What was very successfully concluded in the summer of 2023 was a ground-breaking deal with extensive productivity in a public sector corporation. It was not widely celebrated by the Government of the time because they did not welcome that progress, but it was very much in line with what I said in April 2022.

[Lord Katz (Lab)]

My Lords, I draw your Lordships’ attention to my register of interests. Does my noble friend not agree that the lamentable record of the previous Government when it comes to industrial relations on the railway demonstrates the need for an independent guiding mind in the form of GBR, which we will hopefully legislate for soon? Does it not demonstrate the need to have an organisation that can take the heat and the fire—and, I might say, in some cases, the ideological approach—out of industrial relations on the railway and set a positive, modern and long-term framework for workforce relations in that sector?

[Lord Hendy of Richmond Hill (Lab)]

Not only do I completely agree with my noble friend, but the noble Lord, Lord Moylan, might recall that, when he was deputy chair of Transport for London and I was the commissioner, we went to the ends of the earth to keep industrial relations matters away from the political leadership of the mayor and within the organisation. The right way of concluding both wages and conditions is for the employer to negotiate with the recognised trade unions of the employees, and political influence does not help much in those relationships.

[Baroness McIntosh of Pickering (Con)]

Can the Minister give the House an assurance that the weekend roster has been sorted, particularly for stations along the east coast main line route, and that the excuse that there is no crew available will not be used over weekends this summer?

[Lord Hendy of Richmond Hill (Lab)]

So far as the long-distance operator on the east coast main line is concerned, I can very happily give that assurance: LNER is top of the performance league and is actually very popular with passengers—I hope it remains so. In respect of Northern, I just looked at it today. Northern was taken into public ownership in March 2020 because the previous owners had failed. At that time, it had a dispute about the role of the guard. That dispute was already running then and is still running after the remainder of its term of ownership under the previous Government. It is a very long-standing dispute that involves Sunday rostering, and we are working very hard to fix it. This Government inherited that dispute; it could have been resolved in any of the years from 2020 to 2024 if the Government at the time had so chosen.

[Baroness Deech (CB)]

My Lords, will GBR have a better plan than Network Rail for fixing the terrible damage done to Oxford by about four years of Network Rail cutting the city in two—with damage to the people, businesses and residents—or will the transition make things even worse and slower?

[Lord Hendy of Richmond Hill (Lab)]

I have apologised to the noble Baroness for the disruption at Botley Road bridge in Oxford already, and I am happy to do that again. What I am quite clear about is that the disruption caused by the bridge replacement and the associated difficulties of rebuilding the road will be finished before GBR comes into effect.

Scotland: New Nuclear Power Generation

Tuesday 18th March 2025 Lords Chamber

Question

14:58

Asked by

[Lord Foulkes of Cumnock]

To ask His Majesty’s Government what discussions they plan to have with the Scottish Government regarding the extension of new nuclear power generation to Scotland.

[The Minister of State, Department for Energy Security and Net Zero (Lord Hunt of Kings Heath) (Lab)]

My Lords, Scotland’s policy on new nuclear energy projects is a matter for the Scottish Government. We remain open to discussions with the Scottish Government on nuclear energy’s future in Scotland. In the meantime, we welcome EDF’s recent decision to extend Torness’s operation to March 2030.

[Lord Foulkes of Cumnock (Lab Co-op)]

My Lords, I agree that we should respect the role of the Scottish Government, but surely now is the time to stop pussyfooting around, when the Scottish Government say that they are quite willing to accept in the future electricity generated by nuclear in England. Given that energy is a reserved area, surely we should look at ways of stopping the blockers in Scotland, as well as in the rest of the United Kingdom. Will the Minister have a look at it?

[Lord Hunt of Kings Heath (Lab)]

My Lords, my noble friend knows that on powers relating to nuclear the issue is that, in Scotland, nationally significant infrastructure projects, including nuclear, are broadly reserved. However, Scottish Ministers have devolved executive competence for planning decisions for improving applications to build, operate or modify electricity-generating stations with capacities exceeding 50 megawatts in Scotland. We are not in a position to make a change to that. Scotland has a rich nuclear heritage, and the work being done at Torness is extremely valuable in providing clean energy to Scotland. As I have said already, we very much support EDF’s decision to extend the life of Torness by a couple of years.

[The Earl of Kinnoull (CB)]

The Net Zero, Energy and Climate Change Interministerial Group met on 6 March and the communiqué came out yesterday. It has a section in it about what was discussed, and nuclear power is not mentioned. The interministerial group met in October and March last year, and nuclear power is not mentioned in either of those two communiqués. Can the Minister assure us that nuclear power will be on the agenda of the next meeting of the interministerial group?

[Lord Hunt of Kings Heath (Lab)]

My Lords, we are always open to discussing nuclear power in that group, and with the Scottish Government. However, it is very difficult to make progress in view of the current Scottish Government’s position on nuclear. I can say that, on 6 February in the Scottish Parliament, Anas Sarwar, the leader of the Scottish Labour Party, called on John Swinney, the First Minister, to drop his ideological opposition to nuclear power in Scotland.

[Lord Offord of Garvel (Con)]

My Lords, the GMB came out and said that the Scottish economy is losing out to the tune of £1 billion because of the Scottish Government’s ideological indifference to nuclear. Am I right that, last week, the noble and learned Baroness the Advocate-General said that there had been a fundamental reset in the relationship between the UK and Scottish Governments? I ask the Minister if this is not the time to demonstrate that reset. Can we please have a joined-up, holistic strategy for nuclear that does not stop at the Tweed?

[Lord Hunt of Kings Heath (Lab)]

My Lords, there has been a reset and we have been in close discussions with the Scottish Government on a number of energy matters, but the fact is that the Scottish Government are opposed to new nuclear development. I agree with the noble Lord—and Anas Sarwar said it too—that the refusal to allow new nuclear power plants is costing Scotland billions in investment and thousands of jobs, which will go to England and Wales instead. I agree with that, but the fact is that we are dealing with the Scottish Government, who, at this stage, are not prepared to go for new nuclear.

[Lord Wigley (PC)]

My Lords, in view of the difference of opinion on nuclear power in Scotland, demonstrated by both the Minister and the noble Lord, Lord Foulkes, will the Minister accept that, in Wales, there is a widespread wish to see the former nuclear power stations of Wylfa and Trawsfynydd being used? That brings together the Labour Government in Cardiff and the Plaid Cymru-run local governments in Anglesey and Gwynedd. Given the strong feeling that this should happen, not least in the context of medical isotopes, can the Government give particular attention to bringing investment to those two sites?

[Lord Hunt of Kings Heath (Lab)]

My Lords, the department rejoices in the approach of the Welsh Government, and indeed of the noble Lord. I well understand the potential for new nuclear developments in Wales and think it is a tragedy that the proposals in Wylfa did not go ahead. The noble Lord knows that, in the siting policy currently in play, Wylfa is listed as a site of great potential. The new siting policy is more flexible, but, undoubtedly, Wylfa in particular still has great potential.

[Earl Russell (LD)]

My Lords, last year, Scotland met 113% of its national power needs from renewable sources alone. This is set to radically increase, providing much-needed clean power to the rest of the UK. I welcome the expansion of the £150 warm home discount to more homes in Scotland. Does the Minister agree that the SNP Government must take urgent action on energy efficiency? Their decision to scrap their own green heating plans for heat pumps in new homes will leave Scottish citizens poorer and colder.

[Lord Hunt of Kings Heath (Lab)]

My Lords, the noble Earl is not going to draw me into commenting on what the Scottish Government have done on these matters. However, it is worth making the point that, in 2023, 19.3% of electricity generated in Scotland came from nuclear. That indicates that, in clean power, nuclear has a huge amount to offer Scotland, Wales and England.

[Lord Spellar (Lab)]

My Lords, would the Government’s hand not be greatly strengthened in dealing with the Scottish Government if they themselves moved ahead on a decision on small modular nuclear reactors? When do they expect to announce the outcome, and can we have something slightly more definitive than “soon”?

[Lord Hunt of Kings Heath (Lab)]

My Lords, I absolutely agree with my noble friend on the importance of the small modular reactor programme. He knows that Great British Nuclear is going through a selection process at the moment. We expect important announcements to be made in the spring.

[Lord Forsyth of Drumlean (Con)]

My Lords, power devolved is power retained. If the Scottish Government are not acting in the interests of the United Kingdom, with their opposition to nuclear power and to oil and gas, that will create great difficulties for the rest of the United Kingdom. Has the Minister considered taking back the power for them to prevent the appropriate infrastructure needs of the country as a whole?

[Lord Hunt of Kings Heath (Lab)]

My Lords, I do not think it is the case that we should reopen the devolution settlement, and the noble Lord would not really expect me from the Dispatch Box to say that we should. I think it is clear that, overall, new nuclear has a huge role to play, in the baseload that it can provide and in clean power. The move towards the final investment decision on Sizewell, progress on Hinkley Point C, the SMR programme and the potential of advanced modular reactors will give us a hugely important foundation for clean power for Great Britain as a whole.

[Baroness Curran (Lab)]

My Lords, I speak as a former planning Minister in the Scottish Government. Does the Minister agree that the best way to address this case is not more conflict with the Scottish Government but promoting the argument for nuclear power in a positive way—and, perhaps, working hard so that Anas Sarwar becomes First Minister of Scotland and we can resolve this problem?

[Lord Hunt of Kings Heath (Lab)]

My Lords, those are very wise words from my noble friend.

[Lord Watts (Lab)]

My Lords, if the Scottish Government do not want nuclear power but are willing to use electricity that it has generated, should there not be a reflection of that in the price they pay?

[Lord Hunt of Kings Heath (Lab)]

My Lords, we are looking at the whole issue of zonal pricing, but I do not think we would go quite that far. It is interesting, though, that the Scottish Government were in favour of the extension to the current plant in Torness. I agree with my noble friend Lady Curran that we should work on that and be constructive in our approach. We have had fruitful discussions on some of the difficult issues around Grangemouth and the North Sea transition. We should build on the reset that the Prime Minister and the First Minister have taken forward, and we should articulate the advantage that nuclear power gives to all countries in Great Britain.

US Tariffs on EU Goods

Tuesday 18th March 2025 Lords Chamber

Question

15:08

Asked by

[Baroness Ritchie of Downpatrick]

To ask His Majesty’s Government what assessment they have made of the implications of tariffs imposed by the United States of America on EU goods for trade in Northern Ireland, having regard to the Windsor Framework.

[The Parliamentary Under-Secretary of State, Department for Business and Trade and Department for Science, Information and Technology (Baroness Jones of Whitchurch) (Lab)]

My Lords, I am grateful to my noble friend for raising this issue. Northern Ireland is part of the United Kingdom customs territory and internal market. Northern Ireland exporters will not be impacted by these new US tariffs any more than exporters from elsewhere in the UK. We are looking closely at the retaliatory tariffs announced by the EU and any impact that they might have on Northern Ireland businesses. Under the Windsor agreement, where US imports into Northern Ireland do not subsequently enter the EU, traders can reclaim any additional duties through the duty reimbursement scheme.

[Baroness Ritchie of Downpatrick (Lab)]

My Lords, I thank my noble friend the Minister for her response. Bearing in mind that the Windsor Framework is a device to protect delicate trading relationships in Northern Ireland in the post-Brexit era, can she outline what work is being done with regard to potential tariffs imposed on EU goods by the USA, which could impact on Northern Ireland? What will be the impact on the most vulnerable products and markets? What discussions have taken place with the EU and the American Administration regarding mitigations to protect businesses?

[Baroness Jones of Whitchurch (Lab)]

I would like to reassure my noble friend that we will always act in the best interests of all UK businesses, which of course includes those in Northern Ireland. We continue to look closely at the details of the retaliatory tariffs announced by the EU and any impact they might have on businesses. We are in regular contact with our partners in the US and the EU, as well as businesses in the UK. An important mitigation is already in place under the Windsor agreement. Where goods do not subsequently enter the EU, the duty reimbursement scheme enables traders to reclaim EU applicable duties in full without any limit on total claims. The customs duty waiver scheme also allows duties to be waived entirely, subject to an overall limit.

[Lord Carlile of Berriew (CB)]

My Lords, bearing in mind that the issues raised by the noble Baroness are seen by Northern Ireland business as raising huge complexities, will the Minister consider the practical step of issuing a weekly bulletin in Northern Ireland so that tariffs and other regulations appear to business- people to be less like an anarchic board game?

[Baroness Jones of Whitchurch (Lab)]

Comprehensive guidance is available on GOV.UK and businesses can contact HMRC for more information about the reimbursement schemes. I will take back the noble Lord’s general comment about how we can improve those communications.

[Lord Dodds of Duncairn (DUP)]

My Lords, the fundamental problem is that part of the United Kingdom, Northern Ireland, is forced to impose tariffs on US imports in a situation where the rest of the UK may not. That is without any reference to the UK Government, this Parliament, the Northern Ireland Government or the Northern Ireland legislature, so that colonial set-up has to be rectified. In the absence of a rectification of the fundamental problem, the Minister referred to the tariff reimbursement scheme, but the head of Manufacturing NI said in the Financial Times that the scheme is “nonsense” and full of red tape, and that

“few companies have been able to successfully navigate it”.

He knows about business. Is he right, or do the Government know better?

[Baroness Jones of Whitchurch (Lab)]

The duty reimbursement scheme is an established scheme that businesses have been using to make successful claims since 30 June 2023. As I have said, comprehensive guidance is available on GOV.UK and businesses can contact HMRC if they need more information to support their claims.

[Baroness Foster of Aghadrumsee (Non-Afl)]

My Lords, I refer to my interest as chair of InterTrade UK. Paragraph 47 of Safeguarding the Union says that the United Kingdom is not just a political union but an economic union. Given that, and bearing in mind what other noble Lords have said, how can we deal with the economic problems of tariffs coming from either the European Union or the United States of America? How do we make it simpler? The Minister said that it is an established scheme, but it has been in place for less than two years and has not had to be activated until these tariffs have come to fruition. We need to find a way to make it easier for companies and to deal with it proactively.

[Baroness Jones of Whitchurch (Lab)]

This is all predicated on the Windsor Framework, which removes unnecessary checks, paperwork and duties and fixes a lot of the problems for parcels and medicines applying across the whole of the UK. It also enables important democratic scrutiny through the Stormont brake. There are those protections in place, and we are continuing to look at the operation of the Windsor Framework as we go forward.

[Lord Caine (Con)]

My Lords, last week, at the St Patrick’s celebrations in Washington, the Northern Ireland Secretary restated the Government’s commitment to reaching a trade agreement with the United States, which we strongly welcome. At the weekend, however, former House Speaker Nancy Pelosi threatened that Congress would veto any trade deal that does not respect the 1998 Belfast agreement. Given that the 1998 agreement upholds Northern Ireland’s position as an integral part of the United Kingdom and the fact that the United States is the largest market for Northern Ireland goods outside Great Britain and Ireland, can the Minister confirm that it is the Government’s intention that any US trade agreement will benefit Northern Ireland in exactly the same ways and on the same terms as all other parts of our country?

[Baroness Jones of Whitchurch (Lab)]

My Lords, as noble Lords will know, we are working to find a new relationship with the US and to build on the strong economic relationship we have, which is fair, balanced and reciprocal. Of course, that will have to take into account the interests of Northern Ireland as well.

[Lord Purvis of Tweed (LD)]

My Lords, given that all parts of the UK economy are so integrated with that of the European single market already, and that the tariffs from the Trump Administration are economic coercion and not based on any trade policy, I have two questions for the Minister. First, have we triggered the enhanced co-ordination mechanism within the Windsor Framework process, to ensure that any retaliatory action is co-ordinated across the European Union and the United Kingdom? Secondly, considering that this is economic coercion and illegal under WTO rules, what instructions have our Ministers given to our representative at the WTO to complain against the Trump Administration’s practice?

[Baroness Jones of Whitchurch (Lab)]

My Lords, it is of course disappointing that the US has imposed global trade tariffs. We are determined to support UK businesses across the sector. The Government are working with the affected businesses but, as noble Lords will know, standing up for industry means finding solutions to the global challenges we face. That means working closely and pragmatically with the US to press the case for UK business interests.

[Lord Empey (UUP)]

My Lords, the review of the trade and co-operation agreement between the European Union and the United Kingdom will take place next year, 2026. If the Minister thinks that things are working smoothly, or that it is easy for businesses to operate, she is under a misapprehension. Have the Government started work on what the review should deal with? Do we have a policy? What consultation will the Government undertake as they prepare their negotiating position?

[Baroness Jones of Whitchurch (Lab)]

My Lords, the Government are seeking to strengthen and reset the relationship between the EU and the UK. Taking forward our manifesto commitments on that relationship will carry tangible benefits for businesses in Northern Ireland and the UK. The Government are committed to abiding by commitments in international agreements, including working to the Windsor Framework in good faith. That will include new negotiations going forward.

[Lord Elliott of Ballinamallard (UUP)]

My Lords, I hear the Minister say that there will be a reset of relationships between the UK and the EU but, if that happens, it may mean that those extra tariffs from the US will impact more on the United Kingdom as a whole. At some stage, the UK Government might have to choose between being closer to the USA and closer to the EU. Which is it?

[Baroness Jones of Whitchurch (Lab)]

My Lords, we will always ensure that we protect the interests of all UK businesses, including those in Northern Ireland.

[Lord Watts (Lab)]

Does the present position not demonstrate that Britain is being left behind in the negotiations between all the different partners in America and Europe? This is a reflection of our decision to leave Europe, and leave ourselves exposed to these measures.

[Baroness Jones of Whitchurch (Lab)]

My noble friend is right that we need to strengthen and reset our relationship with the EU, and that is exactly what we are attempting to do now.

Gaza: Ceasefire

Tuesday 18th March 2025 Lords Chamber

Private Notice Question

15:19

Asked by

[The Lord Bishop of Gloucester]

The Lord Bishop of Gloucester to ask His Majesty’s Government what assessment they have made of the durability of the ceasefire in Gaza.

[The Parliamentary Under-Secretary of State, Foreign, Commonwealth and Development Office (Lord Collins of Highbury) (Lab)]

My Lords, our position is clear. We do not want to see a return to fighting. The reported civilian casualties resulting from these strikes are appalling. Our priority is urging all parties to return urgently to dialogue and to ensure that the ceasefire agreement is implemented in full and becomes permanent. The fighting must stop; hostages must be released, and civilians must be protected, including those who have returned home during the ceasefire.

[The Lord Bishop of Gloucester]

I am grateful to the Minister for that reply. We on these Benches find the recent airstrikes on Gaza deeply shocking and abhorrent, as we do the continued cruel holding of hostages. Following the Foreign Secretary’s comments yesterday that Israel was breaking international law by cutting aid to Gaza, what steps are being taken to ensure that the Government of Israel abide by their international obligations as the occupying power to ensure unhindered provision of humanitarian assistance to the people of Gaza? What consideration has been given to introducing targeted sanctions should the Government of Israel persist with this culture of impunity?

[Lord Collins of Highbury (Lab)]

The Foreign Secretary’s and the Government’s position remains that Israel’s action in Gaza is at a clear risk of breaching international humanitarian law. Our international humanitarian law assessments have raised concerns about possible breaches of IHL in the areas of humanitarian access and the treatment of detainees, and we took decisive action on 2 September, suspending all licences for the IDF. We have also been clear that the Government are not an international court, and we therefore could not arbitrate on whether Israel has breached international humanitarian law.

However, I can be clear to the right reverend Prelate that humanitarian aid should never be used as a political tool. Israel must restart the flow of aid immediately. The Prime Minister and the Foreign Secretary have both made it clear that we are appalled by Israel blocking aid when it is needed at greater volume and speed than ever before. Blocking goods, supplies and power entering Gaza risks breaching international humanitarian law and should not be happening. We are doing everything we can to alleviate the situation. It is disappointing to hear reports that the Rafah crossing has now closed to medical evacuations. This is a desperate situation, and we urge all parties to return to the table.

[Lord Callanan (Con)]

My Lords, as we speak, the APPG on UK-Israel is launching the 7 October Parliamentary Commission Report, chaired by the noble Lord, Lord Roberts of Belgravia. That report systematically documents the appalling abuses of that day—the rapes, the mutilations and the slaughter. In the midst of this terrible situation, there is one incontrovertible truism: Hamas is still holding dozens of those hostages who they abducted on that day and who have now been in captivity for well over a year. Does the Minister agree that the entire international community should be united in calling for the immediate release of those hostages, and that that will help to bring this terrible situation to an end?

[Lord Collins of Highbury (Lab)]

I believe the international community is united. I thank Qatar, Egypt and the US for their support in bringing those individuals who have been released back to their families. Our thoughts are very much with those still waiting to be reunited with their loved ones, including the family of the UK-linked hostage, Avinatan Or. The simple fact is that release of the hostages is a vital component of the ceasefire deal, and it is the ceasefire deal that we have to be focused on to ensure that the hostages are released, that there is peace back in Gaza and that we get humanitarian aid in there, which is essential.

[Lord Purvis of Tweed (LD)]

My Lords, given the unacceptable civilian casualties, the withholding of life-sustaining aid and the comments by the Hostages and Missing Families Forum, representing the Israeli hostages’ families, who said that they were “shocked” by the strikes and

“the deliberate disruption of the process to return our loved ones”,

it looks as if there is little chance that there will be the next stage of the ceasefire. Given that the Government believe that there is a very strong possibility of IHL being breached, is this not now the time to enact the precautionary principle and for there to be targeted actions against the extremist members of the Israeli Government who have rejoined the cabinet and must have been given an element of impunity by the United States? We must act unilaterally in this country and use the precautionary principle.

[Lord Collins of Highbury (Lab)]

I think the noble Lord knows my position very clearly. All our diplomatic efforts are engaged with neighbouring countries, the US and all others to ensure that the parties to the ceasefire return to the table and implement the commitments they made. That is essential. That is how we will see the release of the hostages and see aid get back into Gaza. That is our priority. The noble Lord is fully aware that I am not going to comment on any possible future sanctions or actions; we do not do that. It is important that we focus diplomatically on ensuring a return to the ceasefire agreement and then at least we can get the aid into Gaza.

[Lord Pannick (CB)]

My Lords—

[Lord Grocott (Lab)]

My Lords—

[Captain of the Honourable Corps of Gentlemen-at-Arms and Chief Whip (Lord Kennedy of Southwark) (Lab Co-op)]

We will hear from the noble Lord, Lord Pannick, next and then from my noble friend Lord Grocott.

[Lord Pannick (CB)]

My Lords, does the Minister agree that the tragedy of Gaza is going to continue until Hamas is removed from power? Can he explain what he wants to say on this subject to Ayelet Epstein, who is watching these proceedings and whose son Netta was murdered by Hamas on 7 October when he successfully shielded his fiancée from a grenade?

[Lord Collins of Highbury (Lab)]

As I have repeatedly said to the noble Lord in this Chamber, we are committed to building a future where the Palestinian Authority is the authority for all Occupied Territories and it is defended and protected to do its job. There is no role for Hamas in the future of Gaza.

[Lord Grocott (Lab)]

My Lords, is not the overwhelming natural reaction to the news that we have heard today to ask: how much longer must this slaughter continue? Let us add the 400 deaths reported so far to the 48,000 that have already taken place—including 11,000 children and several hundred children under the age of 12 months, who presumably were not members of Hamas. If this does not include serious breaches of international humanitarian law, then it is time that someone started rewriting the humanitarian law law book.

[Lord Collins of Highbury (Lab)]

I think my noble friend knows that we have considered the risk of breach of humanitarian law and have taken action to mitigate that risk. I also want to stress how we have worked with allies. On 5 March, together with France and Germany, we expressed our deep concern at Israel’s halt on aid to Gaza and urged it to lift restrictions. The Foreign Secretary also made this clear to the Israeli Foreign Minister during their call on 5 March. On 28 January, the then Minister for Development announced a further £17 million of healthcare aid. The situation is no doubt dire. We cannot see the return to the violence we have seen before. We want this ceasefire to hold. We want to see the return of hostages and we are doing everything we can with our allies to ensure that that is the case.

[Lord Singh of Wimbledon (CB)]

My Lords—

[Baroness Morris of Bolton (Con)]

My Lords—

[Lord Kennedy of Southwark (Lab Co-op)]

My Lords, we will hear from the noble Baroness, Lady Morris.

[Baroness Morris of Bolton (Con)]

My Lords, I declare my interests as set out in the register. Given the horrifying events of the last 24 hours, there is an inescapable irony in uttering the words “durability” and “ceasefire in Gaza” in the same breath. The Minister talked about diplomatic efforts. What are the Government specifically doing to engage our allies across the Arab world, especially Saudi Arabia, in helping to bring this nightmare to an end?

[Lord Collins of Highbury (Lab)]

Let me reassure the noble Baroness that we are doing precisely that: we are working with all our allies. One thing is very clear: if anyone was listening to the “Today” programme this morning, they will certainly have heard former Israeli ambassadors express deep concern that these actions will impact on the possibility of relationships with Arab countries. We actually saw some positive signs of a rapprochement with Saudi Arabia; all of this risks that. We should focus much more on ensuring that unity of diplomatic effort to get the ceasefire back on course and have further, longer peace talks so that we can both defend Israel and protect Palestine.

[Lord Sahota (Lab)]

My Lords—

[Baroness Foster of Oxton (Con)]

My Lords—

[Lord Kennedy of Southwark (Lab Co-op)]

My Lords, we will hear from the noble Lord, Lord Sahota, next and then the noble Baroness, Lady Foster.

[Lord Sahota (Lab)]

My Lords, last year the EU representative for the Middle East said on TV that “before 7 October, Gaza was an open prison and after 7 October it became an open graveyard”. What does the Minister make of that statement?

[Lord Collins of Highbury (Lab)]

My noble friend highlights many comments that we have heard on previous occasions in this Chamber. The situation in Gaza has been horrific, but there is no doubt that the events that caused those hostages to be taken were also horrific. We have also got to think about the levels of sexual violence that those hostages were put to. There is no escaping the fact that we have to focus on the future. We have to ensure that we get proper aid and support into the Occupied Territories and Gaza and we have to focus on a much longer-term solution, which this ceasefire agreement gave. There were stages and we knew it was not going to be easy, but all our diplomatic efforts are going to be focused on that.

[Baroness Foster of Oxton (Con)]

My Lords, those who are really guilty of breaching this ceasefire numerous times and continuing to do so are the Hamas terrorists and their cohorts, with many psychopaths in Gaza. These people are guilty of war crimes, breaching Geneva conventions and many other crimes that they perpetrated on 7 October and since then. Does the Minister agree that the only solution here is to release these hostages? There are still 58 of them: half of them, we believe, are deceased. Many of the people have been murdered in cold blood. They have been tortured and starved and they are still in underground tunnels. Would that not go some way in resolving this appalling situation, and maybe some way to a solution?

[Lord Collins of Highbury (Lab)]

There is no doubt that the ceasefire agreement provided for exactly that. We have renewed our call to all parties to return urgently to dialogue and to ensure that the ceasefire agreement is implemented in full, most notably through hostage releases and the humanitarian scale-up becoming permanent. As I have said, it is ultimately in everyone’s interest for this deal to hold. The Prime Minister has made it clear that we are appalled by Israel blocking aid, which is needed in greater volume and spend than ever before. But I repeat that there is a solution: return to the ceasefire agreement, release the hostages and let aid into Gaza.

[Lord Turnberg (Lab)]

My Lords—

[Lord Singh of Wimbledon (CB)]

My Lords—

[Lord Kennedy of Southwark (Lab Co-op)]

My Lords, we will hear from the noble Lord, Lord Turnberg, next and then from the noble Lord, Lord Singh.

[Lord Turnberg (Lab)]

I am afraid it is the case that Hamas is busily redigging its tunnels, rearming and preparing to attack Israel again. It makes that very clear and at the same time it has 58 or 59 men, women and children held hostage in terrible conditions, as we have heard from the report that we will receive later today. Should we not be pressing Qatar and Egypt to impress on Hamas that it really must come to the table? We must have some peace and some resolution and it is Hamas that is preventing it. Can we not press them to ensure that Hamas will agree to release hostages and cease its aggressive actions?

[Lord Collins of Highbury (Lab)]

I agree with my noble friend. I must sound like I am constantly repeating myself, but I think this is worth repeating. We had on the table an agreement that provided for the release of hostages and for there to be a return to full aid going into Gaza. That is the solution: get back to the table and implement the ceasefire agreement. I stress that we are in diplomatic contact with all our allies in the region and we are certainly urging them to ensure that all sides, particularly Hamas, deliver on their commitments in that ceasefire agreement.

[Lord Singh of Wimbledon (CB)]

My Lords, with all the reservations we have heard about the excesses of Israel in Gaza in this House, from the Foreign Secretary and in many other parts of the world, why are we still supplying arms to Israel?

[Lord Collins of Highbury (Lab)]

I think the noble Lord knows full well that we took decisive actions in terms of arms supplies to the IDF that might be used in Gaza. We followed our own international humanitarian guidelines in that respect. We took decisive action when we felt that there was a risk to international humanitarian law being applied. So the simple answer to the noble Lord is that we have acted.

Digital Markets, Competition and Consumers Act 2024 (Consequential Amendments) Regulations 2025

Tuesday 18th March 2025 Lords Chamber

National Minimum Wage (Amendment) Regulations 2025

Motions to Approve

15:36

Moved by

[Baroness Gustafsson]

That the draft Regulations laid before the House on 18 December 2024 and 4 February be approved.

Considered in Grand Committee on 17 March.

Motions agreed.

Immigration (Biometric Information etc.) (Amendment) Regulations 2025

Tuesday 18th March 2025 Lords Chamber

Motion to Approve

15:37

Moved by

[Lord Hanson of Flint]

That the draft Regulations laid before the House on 21 January be approved.

Relevant document: 16th Report from the Secondary Legislation Scrutiny Committee (special attention drawn to the instrument). Considered in Grand Committee on 17 March.

Motion agreed.

Non-Domestic Rating (Multipliers and Private Schools) Bill

Report stage
Tuesday 18th March 2025 Lords Chamber

Report

15:37

Clause 3: Application of multipliers

Amendment 1

Moved by

[Baroness Pinnock]

1: Clause 3, page 3, line 26, after “hereditament” insert “other than a qualifying healthcare hereditament”
Member’s explanatory statement
This amendment, together with Baroness Pinnock’s amendments to page 3, line 37, page 4, line 6, and page 4, line 17, would have the effect of retaining the standard multiplier for hospitals, medical and dental schools, or any other healthcare setting to be determined by regulations.

[Baroness Pinnock (LD)]

My Lords, I remind the House of my relevant local government interests, in particular that I am a councillor in Kirklees. At the outset, I wish to express my thanks to the Minister and his officials for their time in discussions on the details of the Bill. I had assurances at those meetings that the measures in the Bill are not designed to increase business rates revenue, although that ignores the consequence of the Bill that, for RHL—retail, hospitality and leisure—businesses, Covid relief disappears, and the difference is partly funded by those businesses. Importantly, the Minister also confirmed that local government funding in totality would not be affected and that, “as far as is practicable”, no individual council would find itself worse off as a result.

What is unfortunate, though, is that the Government have been unable to share the basic assessment that must have taken place to provide the assurances given. Thus there is no clarity about the impact of these changes on individual properties—hence Amendment 1 and consequential Amendments 9, 10 and 17 in my name and that of my noble friend Lord Fox, which seek to understand the impact of the changes on the NHS.

The useful information shared by the Minister from the Valuation Office Agency shows that 290 NHS hospitals will be caught by the new £500,000 threshold. Given that the standard multiplier is currently 0.546, or 54.6 pence, in the pound and the Bill enables the multiplier to increase to 0.646, or 64.6 pence, in the pound, for these higher-band properties, this will cost those hospitals dearly.

I warned the Minister that his failure to provide examples would mean that I did the calculations. For example, the Great Ormond Street Hospital for Children has a rateable value of £5.9 million, and its business rates costs will rise from £3.2 million to £3.8 million, an additional burden of £600,000 per year on business rates alone. The John Radcliffe Hospital in Oxford has a potential business rates increase from £3.4 million to £4.1 million. Going further north to my own county of Yorkshire, the Hull Royal Infirmary could see its bill rising from £1.8 million to £2.1 million. Those are typical figures for hospitals across the country. I do not believe that it is the Government’s intention to reduce hospitals’ ability to drive down waiting lists, yet that will be the impact of these changes and the consequent higher charges.

Amendment 1 seeks to exclude hospitals from the higher threshold multiplier to prevent a further burden of taxation falling on the NHS. The Minister will, I am sure, want to comment on the fact that, while NHS hospitals will see a huge rise in their rates, about one-third of private hospitals have charitable relief of 80% of their rates. He will no doubt say in his reply that it is not possible to allow exclusions to the Government’s scheme, but that just demonstrates that the whole business rates system is no longer fit for purpose, because the rateable values on which it depends are inevitably higher in cities and urban areas, while distribution warehouses benefit in rateable terms from being out of town. The whole system is topsy-turvy.

The Government’s express purpose was to tax those fulfilment warehouses more to help save our high streets—in their words. They failed to say that this will also clobber our NHS. That will not do. Hospitals must be excluded from the higher multiplier. I beg to move.

[Baroness Scott of Bybrook (Con)]

My Lords, first, I declare my interest as a vice-president of the Local Government Association. The amendments in the name of the noble Baroness, Lady Pinnock, seek to retain the standard multiplier for healthcare hereditaments. They address the unintended consequences of the Bill, as we have heard very strongly from the noble Baroness.

As mentioned in Committee, I understand the desire for a reformed business rate system and, indeed, if such a system were proposed, I would be more inclined to support it. But despite the Government’s manifesto commitment to level the playing field between the high street and the online giants, the Bill does not deliver on that. I understand that this is only the first step in the Government’s plans, as I am sure the Minister will point out, but it is not a step in the right direction.

15:45

A number of sectors will be negatively affected by the changes proposed in the Bill, including anchor stores, which we will debate shortly. The Liberal Democrats are seeking to protect our hospitals and our health sector, as we have heard. The Government are doing the opposite by giving to the NHS with one hand and taking away with the other. I hope the Minister will look favourably on these amendments, but if the Liberal Democrats choose to divide on this issue, we will support them.

[The Parliamentary Under-Secretary of State, Ministry of Housing, Communities and Local Government (Lord Khan of Burnley) (Lab)]

My Lords, these amendments seek to remove healthcare hereditaments, including medical and dental schools, from the higher multiplier.

Throughout the passage of the Bill, the Government have explained the importance of taking a sector-agnostic approach with regard to the application of the higher multiplier. This is the fairest approach to ensure that the Government can sustainably fund the lower multipliers. In Committee I set out that of the 16,780 properties at or above the £500,000 threshold, based on the current rating list, only 350 are in the health sub-sector. Of these, 290 are NHS hospitals and only 30 are doctors’ surgeries or health centres. These numbers are rounded to the nearest 10.

This Government fully support the healthcare sector. Our great National Health Service, which has delivered universal healthcare for nearly 80 years, is something the Government are extremely proud of. We recognise that the NHS needs support and reform to ensure that it can continue to deliver world-class healthcare to all for the next 80 years and beyond. The noble Baroness may feel that I do not appreciate her point, but I assure her that I do. This Government want to create an environment in which the healthcare sector can thrive. As I have set out, the impact on this sector is limited and where it does apply, much falls to the public sector.

The noble Baroness will be aware that phase 2 of the spending review is currently under way, following the fixing of the spending envelope at the Autumn Budget. As part of setting departmental budgets at the spending review, the Government will consider the full range of priorities and pressures facing departments. This includes considering any impact of the higher multiplier.

I am sure noble Lords appreciate that I cannot pre-empt the outcome of the spending review, but I reassure them that the impact of the higher multiplier on the public sector is an active consideration. The immunity of the Crown from business rates was removed 25 years ago and since then all of the public sector has been on the same footing as business. The Government are not going to reverse this position, which was intended to drive fairness between the public and private sectors and the most efficient use of property in the public sector. For these reasons, I cannot accept the noble Baroness’s amendment and I respectfully ask her to withdraw it.

[Baroness Pinnock (LD)]

My Lords, I thank the Minister for his response, which, I am afraid, was much as predicted. I really do not know how a Labour Minister can say that the Government are agnostic about our NHS. You can be agnostic in approach, but surely not about the NHS. The Minister said that they are taking an agnostic approach to the sector, but that includes agreeing that our NHS will be clobbered by even higher rates bills than it has now, while some private hospitals have the 80% charitable relief. That will not create the level playing field that he talked about.

On these Benches, we are determined to support our NHS to enable it to push down waiting lists. Given that the Minister was unable to give me any hope that there will be a change of heart, I beg leave to test the opinion of the House.

15:50

Division 1

Ayes: 272

Noes: 157

16:00

Amendment 2

Moved by

[The Earl of Lytton]

2: Clause 3, page 3, line 26, after “hereditament” insert “other than a qualifying retail, hospitality or leisure hereditament”
Member's explanatory statement
This, together with another amendment in the name of the Earl of Lytton, would have the effect of leaving large RHL properties paying the standard multiplier rather than the supplement, consistent with previously stated policy intentions.

[The Earl of Lytton (CB)]

My Lords, as this is the first time I have spoken at this stage of the Bill, I declare an interest as a chartered surveyor, a member of the Rating Surveyors’ Association, and a member of the Institute of Revenues, Rating and Valuation. In fact, these are the three bodies referred to in Amendment 32, which is in this group, under the name of the noble Lord, Lord Thurlow.

I thank the Minister for his willingness to engage and for yesterday’s meeting—I appreciate that very much. If it is any comfort to him, that is at least part of the reason why I felt that I should not press these amendments today, most principally because they go to the heart of the philosophy of how the financial backcloth of rating is dealt with. That would be a very diffuse target at which to try to aim at this stage in the Bill.

Before dealing with Amendment 2 and speaking to Amendment 11, which is also in my name in this group, I remind your Lordships how we got here. During our deliberations in Grand Committee, the Minister referred to the 2024 Budget, in which the Chancellor set out a Budget to “fix the foundations” and to take

“difficult but necessary decisions on tax, spending and welfare to repair public finances, to increase investment in public services and the economy … Part of that agenda included transformation of the non-domestic rating or business rates system, including delivering on the Government’s manifesto pledge to support the high street”.

The Government’s manifesto pledge did a good deal more than just support the high street: it talked about dealing with the online giants. That is why Amendment 1, which we just voted on, in the name of the noble Baroness, Lady Pinnock, causes me to remind your Lordships of what I reminded them of at an earlier stage of the Bill: the very large number of non-target species that are swept up by this particular Bill. I enumerated a significant number of them—not all, I might add—of which hospitals were one.

The Minister went on to say that the Government intended to provide

“a permanent tax cut for qualifying retail hospitality and leisure properties and, in doing so, better ensure the ongoing vibrancy of high streets up and down the country”.

He then referred to this whole

“challenging fiscal position that the Government inherited”.

We can fairly say that business ratepayers have been subject to an unsatisfactory means of levying this particular tax for a very long time. I have been on my feet on innumerable cases during the two periods that I have been in this House challenging that perception and showing how this is very negative in its effects on business confidence.

The Minister said that the system

“should work in a sustainable way”.

There are two bits of sustainability: whether the Treasury can balance the books and find the most convenient shortcut through in dealing with its affairs, and what you might call the politically most expedient way. The other way is the one that looks at how businesses make decisions and how the prospect of a surcharge impacts on what businesses do. I have said many times in this House that it is a poor tax that itself starts shifting the dial for people trying to get away from its effects.

The Minister said that

“the Government are asking those with the most valuable 1% of properties to pay more to support the viability of high streets”.

I find it difficult to relate the benefit to the high street by the means shown in this particular Bill. The Minister also said that the process that the Government has alighted on would be equitable and would

“capture the majority of large distribution warehouses, including those used by online giants”.—[Official Report, 24/2/25; cols. GC 444-45.]

Fair enough, but it catches an awful lot else besides, so it is very poorly targeted.

On 17 March, in the other place, in a Written Answer to a Written Question from the shadow Secretary of State for Levelling Up, the Exchequer Secretary commented first on the Valuation Office Agency publishing its official statistics detailing the number of non-domestic properties in England with a rateable value of £500,000 and over, broken down by sector. He then went on to say:

“There is no special category code for ‘internet retail warehouses’. You may find the data for ‘retail warehouses and food stores’, and ‘large distribution warehouses’ helpful”.


I do not find that in the least bit helpful. These are charging people who are not part of the target species. It appears that the Government have no idea how many large warehouses are occupied by the online giants that they claim to be targeting in the first place.

There are lots of questions here, some of which have already been put on previous occasions by the noble Baroness, Lady Pinnock. Why was this threshold set at £500,000? What is the metric? How are the Government able to justify this figure? The manifesto said that the reforms would

“raise the same revenue … in a fairer way”.

When the Government are planning to raise an additional £2.65 billion by making businesses pay for the retail, hospitality and leisure relief and discounts, which up to now have been funded centrally, that makes me wonder precisely what the business of raising the same revenue in a fairer way amounts to.

If the intention was really to charge more to online giants, one would have to ask why the 90% of hereditaments to which the supplement might apply—the £500,000 rateable value and above—are dealing also with warehousing and other things that are clearly outside that. Some 90% of what they propose to charge does not fall within the category of online giants. It goes on from there. I have already raised the question as to why we cannot get to a more comprehensive reform of business rates—already referred to by the noble Baroness, Lady Pinnock—because this is starting to be an active disincentive to businesses.

That question is not answered by saying that other variable cost elements for businesses are better in this country than elsewhere. This is a direct, in-your-face fixed cost that businesses have to deal with. I cannot see that this is consistent with a growth agenda that intends to attract inward investment.

My interrelated Amendments 2 and 11 are aimed at not worsening the situation for the large retail, hospitality and leisure properties, the inclusion of which in the supplement cannot be justified on property terms. I would prefer the discounts to be applied to all such RHL properties, but this would be even less acceptable to the Government. However, it involves the removal of less than 25% of the total rateable value to which the Bill proposes to apply the supplement. When one looks at the mathematics of this, it really does not stack up. Even at the maximum level of potential supplement, it is substantially less than the extra revenue that the Government will raise from shifting the costs of the RHL relief from the Exchequer to the business rate payer—so it is not very large beer.

I said yesterday in a meeting with the Minister, and I say again, that I and a lot of rating practitioners, and certainly business rate payers, would be a great deal happier if we could have an assurance that the Government will move at reasonable pace to remedy the deficiencies of the current business rate system by whatever means. There needs to be comprehensive thought about this whole process so that we do not simply drift on and create more and more division and less and less confidence. Even at this late stage in the process, can the Minister give a reassurance that this is forthcoming within the current Government, for the better achievement of their aims on investment and growth? I beg to move.

[Lord Shipley (LD)]

My Lords, I remind the House that I am a vice-president of the Local Government Association. I have great sympathy with the contribution of the noble Earl, Lord Lytton, and agree with the conclusions that he has so carefully reached. I know that these Benches would support his amendments.

Amendment 32, tabled by the noble Lord, Lord Thurlow, concerns an important issue. The Government promised in their manifesto to make the payment of business rates fairer and more balanced between retail distribution warehouses and high street shops. Indeed, the Chancellor said in the last Budget that she wanted to shift the burden. Yet all the signs are that nothing will happen until next year at the earliest. I hope that the Minister can give us an update on the timing for the outcome of the review that the Government apparently are undertaking. I say that because this is, as the noble Earl made clear, an urgent matter. Business rates are a major burden on retail high street shops. Sainsbury’s said a few months ago that half of its total tax bill is for business rates.

The system needs urgent reform. One step would be to accept the proposals in this group of amendments. In particular, Amendment 32 sets deadlines for when the Government must have acted. I hope that, if there is an opportunity, we on these Benches can support the amendments in this group.

[Lord Thurlow (CB)]

My Lords, I do not wish to talk for more than a moment, as I have Amendment 32 coming in the next group.

[Noble Lords]

It is in this group.

[Lord Thurlow (CB)]

I apologise. In that case, let me just consult my notes.

My proposal is not dramatic and does not involve tax; it tries to define a very difficult aspect of non-domestic rates: the effect on retailers. I thank the Minister for his time last night, when we discussed my proposal at length. However, subject to his comments in a few minutes, I will decide whether to press my amendment later.

16:15

The onslaught of internet-based retailing is not going to cease; it is going to grow. We cannot prevent that, but we can try to help our high streets cope, survive and grow, with fairness and a level playing field. Non-domestic rates in the retail arena are the first step of that process.

I am anxious not to repeat comments made in Committee. I also want to stress that my amendment refers to the large, Amazon generic type of retailer that is not represented on the high street. I am not focusing my amendment on the Marks & Spencers of this world, which have a huge and vital high street presence but also have fulfilment centres in warehouse locations that deal with their internet retailing and supplies; they are very different beasts. The Marks & Spencers of this world provide the cohesion, the glue and a lot of the attraction to the high street for local communities. They are not the target of the definition for a new use class that I would like to see constructed for the warehouse retailing giants.

My proposal suggests that, within three months of the Bill becoming an Act, a committee must be formed that must respond with its recommendations within three more months. That committee would be made up of experts and professionals in their field: chartered surveyors, rating surveyors and others who have been practising in the field for a long time. I would be delighted if the VOA and the Treasury were represented too—I see no reason why not. We are trying to achieve fairness and a level playing field.

Even announcing this inquiry would bring so much cheer to the high street. Shops, in particular small retailers, are going bust every week, and rates are the third-highest cost to a high street retailer. I did a little bit of research and asked Colliers—a nationwide firm of surveyors—for some help. I asked for both the high street rental value and the rental value of warehouses in Burnley. I was intrigued to learn that high street rents, which are constructed using a complicated formula, represent only 25% of what a warehouse in Burnley would cost on a floor-area basis. However, the warehouse in Burnley, if it is for a guerilla retailer, will produce far more in profits per square foot than anyone on the high street. My example refers to the prime pitch in Burnley high street and the latest pre-let of a big warehouse on the edge of Burnley.

The numbers themselves explain the unfairness of the current system. I am talking not about the £500,000 threshold that is being proposed but about the simple rates burden. All I seek is an inquiry; it would report in a year and would not be lost in the long grass.

[Baroness Pinnock (LD)]

My Lords, the noble Earl, Lord Lytton, is right to challenge the Government’s intentions in relation to saving our high street. The Government are in a quandary: retail, hospitality and leisure businesses have continued to benefit from Covid-related relief, which is currently at a rate of 75% but will fall to 40% from April and not exist in the following year. The challenge for the Government then will be to square the circle of the commitments made.

The slogan of saving the high street depends on ensuring that businesses at the heart of the high street are not priced out of financial viability by large changes in business rates—hence the Bill. However, the evidence from Wales and Scotland—which have and have used the right to alter the Covid rate relief in a previous year—is that the effect of the reduction in Covid relief was a rise in business closures above what would normally be anticipated.

As will be debated in the next group of amendments, large retail stores are an essential ingredient for a thriving shopping centre in a city, large town or retail park. It is already clear that retailers are moving more and more of their business online, partly in response to consumers but also as a consequence of the rising costs of bricks and mortar retailing—our high street that the Government intend to save. The high street will not be saved unless these larger stores are classified with all other RHL properties and charged the lower multiplier. A failure to do so simply underlines the Government’s inability to appreciate the rising taxation burden imposed on high street retailers.

Amendment 32 in the name of the noble Lord, Lord Thurlow, seeks to push the Government into wider reform of the system to fulfil the promises made about charging more to fulfilment warehouses—the Amazons of this world—to help level the playing field with traditional retailers. As the Minister knows, I have regularly provided evidence of the iniquity—I should have said inequity, but it is probably iniquity as well—of the business rating system, which has failed to be radically changed in the face of the online revolution. If the noble Lord, Lord Thurlow, wishes to test the opinion of the House on his proposals to push the Government into making deeper and lasting reform of the property taxation issue, we on these Benches will support him.

[Lord Jamieson (Con)]

My Lords, I declare my interest as a councillor in Central Bedfordshire. I will speak to the amendments in the names of the noble Earl, Lord Lytton, and the noble Lord, Lord Thurlow.

Amendments 2 and 11 are broad amendments that seek to retain the standard multiplier for all retail, hospitality and leisure hereditaments, rather than them facing higher business taxes. The noble Earl, Lord Lytton, is right to raise the issue of higher taxes on RHL businesses above the £500,000 threshold, as the Government’s stated policy intentions are not reflected in the reality of this Bill. We share similar concerns about the impact that this will have on high streets, which is why my noble friend Lady Scott of Bybrook has tabled an amendment to protect anchor stores and I have tabled an amendment on the cliff-edge effects of the £500,000 threshold.

Amendment 32 in the name of the noble Lord, Lord Thurlow, seeks to introduce a review of the introduction of a specific use class that targets businesses that operate solely out of fulfilment warehouses—the Amazon tax. The Bill does not deliver on the Government’s manifesto commitment to ensure that online giants are paying their fair share of business rates. Indeed, we expected this Amazon tax to be introduced through this Bill, and it is disappointing that the Government have not delivered anything close to such a reform in this legislation. As such, we will support the amendment from the noble Lord, Lord Thurlow, should he choose to press it.

[Lord Khan of Burnley (Lab)]

My Lords, I thank the noble Lord, Lord Thurlow, and the noble Earl, Lord Lytton, for a very constructive and positive meeting yesterday. This group of amendments seeks to amend the approach taken in the Bill regarding the targeting of the higher multiplier. They would require the removal of qualifying retail, hospitality and leisure from the higher multiplier and commit the Government to undertake a review of the merits of creating an additional multiplier and use class for fulfilment centres of retailers that do not have a material presence on our high streets. As set out at the Budget, the Government intend to introduce a permanent tax cut for qualifying RHL properties from 2026-27 by introducing two lower RHL multipliers for these properties that have a rateable value below £500,000. The Bill makes provision to enable this through secondary legislation.

In consideration of the challenging fiscal environment that this Government face, it is important that the permanent tax cut is funded sustainably, which is why the Government intend to introduce a higher multiplier to fund the tax cut from within the business rates system. It is the Government’s intention for the higher multiplier to apply to all properties with a rateable value of £500,000 and above. This ensures that sufficient funding is raised to enable the Government to provide that permanent tax cut for RHL properties with rateable value below £500,000. I thank noble Lords here today for their contributions on this topic.

The Government recognise that a small number of RHL properties fall above the £500,000 threshold. However, the helpful information published by the Valuation Office Agency shows that this is comparatively small. As per the current rating list, of the 16,700 properties in England with a rateable value at or above the £500,000 threshold, a little over 3,000 fall into the shops subsector. There is more behind this: of those falling into this subsector, around 72% are supermarkets, large food stores or retail warehouses. That leaves fewer than 1,000 stores, of which around 600 are located in London and the south-east. For most other regions, the number of shops affected is fewer than 50.

A similar pattern is present when looking at hospitality and leisure sectors. That data also shows that 670 hereditaments fall into the assembly and leisure subsector, of which 380 are located in London and the south-east. Only 550 fall into the hotels, guest and boarding, and self-catering subsector, of which 450 are located in London and the south-east. So the impact is not widespread when it is considered that there are over 450,000 shops; over 80,000 hotels, guest and boarding, and self-catering properties; and over 180,000 assembly and leisure properties with a rateable value below the £500,000 threshold. It is imperative that any tax cut is funded sustainably, so the Government do not intend to remove any properties from the higher multiplier.

Against the challenging fiscal environment, the Government have to take tough decisions. This is the fairest approach that ensures a sustainable solution to ensuring that the permanent tax cut for RHL properties can be funded from within the business rates system. For these reasons I cannot accept the amendments from the noble Earl, Lord Lytton, and I respectfully ask him not to press them.

I turn to Amendment 32 from the noble Lord, Lord Thurlow, and I appreciate his interest in Burnley warehouses. This amendment also concerns the new multipliers and how we might target online retailers that operate from large distribution warehouses and tend not to have a presence on the high street. This matter has attracted interest not just during the passage of the Bill but in the course of several reviews of business rates over recent years.

16:30

The noble Lord has brought a fresh perspective and idea to this familiar question, and I welcome that. He has raised an interesting suggestion about how we might in the future isolate those warehouses used by the online giants from those otherwise very similar warehouses used by, for example, supermarkets or high street retailers.

As I have said, this Bill is just one part of our plans to reform business rates. In relation to this Bill, the object of the higher multiplier is to ensure that the lower multipliers for RHL properties can be sustainably funded. The higher multiplier will affect fewer than 1% of properties. Targeting only online warehouses or even just warehouses more generally would cut the potential funding for the lower multipliers, so, in relation to the measures in this Bill, we do not see the need for different categories of property within the warehouse sector. For this reason, we are unable to accept the amendment.

However, improving the knowledge and data we hold on properties and ratepayers is an important part of our wider reforms. In the Transforming Business Rates discussion paper published at the time of the Budget, the Treasury confirmed its intention to deliver a system of digitalising business rates by March 2028. That project will allow us to match property-level data with HMRC business-level tax data. This will help us improve the way we target business rates and secure the type of data that the noble Lord is seeking through his amendment.

I understand that the noble Lord is concerned that the existing project may take too long and cover all business rates. I have looked at whether his amendment could be a faster route to the data. However, the business rates system covers more than 2 million properties and is operated by several parts of government and more than 300 local authorities. It is therefore vital that we adopt a systematic and digital solution in reaching this data on the warehouse sector. This is what the digitalising business rates project will do.

In addition, the noble Lord’s amendment does not just ask for a review but seeks recommendations and commits the Government to implementing those recommendations without knowing what they will be. I hope that the House will understand that this is not something that the Government can reasonably agree to do. However, as I said, I have looked further at this. I have asked my officials to take away the substance of the noble Lord’s amendment and explore how the information that he is seeking to prise out of the system can be found through the digitalising business rates project and how his suggestion can support that.

The noble Lord has previously mentioned professional bodies and the expert knowledge that they can bring on business rates. I agree. I assure the noble Lord that the digitalising business rates project is being developed in consultation with representatives of local government and the rating surveyors profession and that we will ensure that the RICS, IRRV and RSA continue to be consulted during its development, including on the definitional issues he identifies in his amendment.

On the question asked by the noble Lord, Lord Shipley, in relation to the timescale for further reform of the business rates system, the Government are creating a fairer business rates system that protects the high street, supports investment and is fit for the 21st century. Transforming the business rates system is a multiyear process and reforms will be phased over the course of the Parliament to provide certainty for businesses and local government finance. On 17 February, the Government published Business Rates: Forward Look on GOV.UK, setting out the timetable for further reform.

I hope that, with the explanation and assurances that I have given to noble Lords, the noble Earl will feel able to withdraw his amendment.

[Baroness Pinnock (LD)]

Before the Minister sits down, at the beginning of his response to the amendment moved by the noble Earl, Lord Lytton, he said that there would be a permanent business rates cut for RHL businesses. Yet, the House of Commons Library briefing states that the British Property Federation said in written evidence to the Public Bill Committee that there would be an increase in total business rates liability of £2.6 billion. Can the Minister explain that?

[Lord Khan of Burnley (Lab)]

My Lords, yes, I can explain that, because we are talking in particular about the retail, hospitality and leisure sector. The point is very clear. We cannot have a system where every year businesses do not know what their business rates bill is going to be. Over the years—I accept that there has been Covid—we have not had a long-term approach to this. This is part of a wider reform of the whole business rates system. I am sure that the noble Baroness will understand that having a multiyear approach to this will provide more certainty and stability for businesses, which will know what their bills will be. The higher £500,000 threshold properties, which amount to 1%, are supporting the retail, hospitality and leisure sector, in particular, across the country.

[The Earl of Lytton (CB)]

My Lords, I am grateful to all noble Lords who have spoken to this group—and in particular my colleague on these Benches, my noble friend Lord Thurlow, for introducing his amendment.

I appreciate that the Minister has effectively gone as far as his brief permits, but I hope he realises that there is a serious job of work that needs to be done. A reforming Government who come in with a manifesto commitment need to do something better than shuffle the chairs on the deck of a ship that appears to have a very large hole in it, as far as I am concerned.

Before I conclude, I will make three or four comments. If the full 10% supplement is applied on top of—I paraphrase —a 55p in the pound multiplier, that is getting on for 20%. Maybe it is 18%—I have not done the maths—but it is a very substantial proportionate increase. On the Minister’s own admission, it serves to disadvantage what he regards as a “very few”, for the uncertain and, indeed, undetermined benefit of what we take to be numerous smaller fry.

We do not know how that is going to work out, as we have explored in previous stages of this his Bill. It does not target the high street; it does not target it with that benefit, at least not obviously so. For all the hospitals, police stations, theme parks, offices and manufacturing units, along with the distribution network of large warehouses serving conventional retail, it will just result in higher costs to consumers, including, indirectly, via local authorities owning leisure centres and installations of that sort.

So the problem does not go away just because the Government have found the least painful strategy for dealing with these things. I think we will be seeing the ill-effects of this for some time to come, not least in the attrition of confidence of which I spoke earlier. However, with that said, I do appreciate what the Minister has done and his willingness to engage and again thank all noble Lords for their contributions. I beg leave to withdraw Amendment 2.

Amendment 2 withdrawn.

Amendment 3

Moved by

[Baroness Scott of Bybrook]

3: Clause 3, page 3, line 27, after “more,” insert “and is not an “anchor store”,”
Member’s explanatory statement
This amendment, along with others in the name of Baroness Scott of Bybrook, seeks to exempt anchor stores because of their role in increasing footfall on the high street.

[Baroness Scott of Bybrook (Con)]

My Lords, I rise to move Amendment 3 in my name and to speak to its consequential Amendments 8, 12 and 16.

These amendments seek to retain the standard multiplier for anchor stores, given their ability to drive business on our high streets. Throughout Committee, there were several noble Lords who acknowledged the importance of these stores and the role they play in the commercial ecosystem of our high streets up and down this country. I thank the noble Lord, Lord Thurlow, and the noble Baroness, Lady Pinnock, for their support on this matter.

As anyone who has worked in local government will know, when you get an anchor store such as a large Tesco, M&S or Primark—or one of those rare but well-loved independent department stores—on the high street, it allows the high street to flourish. I can certainly attest to that from my experience. The importance of these stores absolutely cannot be overstated. Without them, many high streets would seriously suffer due to the reduced footfall.

It is those very shops that draw people to the high street, and their presence encourages people to spend in the smaller, independent businesses. So the reason that these anchor stores should not be subject to the changes in the Bill is due to their role in aiding those small businesses. The Government claim that the Bill helps small businesses because it will leave them with reduced business rates, but if the anchor stores move away from the high street, they will not be able to sustain themselves at all. The Minister has many times continued to state that there are only a few of these stores in number, but if it is your high street that contains one of these, or if you want to bring one into your high street, then it is very important to you.

Not only will this push current stores away from the high street, but it will also mean that in future, when businesses are evaluating where to open new branches, they will be increasingly likely to choose locations out of town, where property costs less and where they will not be forced to pay the new higher multiplier. Large businesses will leave town centres, and I am concerned about the impact that that will have on the future of our high streets and the reduction in footfall that it will cause.

If the Government continue to increase costs on businesses in the same way as they have begun, there will not be any businesses left on our high streets to tax. The combination of the minimum wage, which we support, and the increase in employers’ national insurance has already led to many businesses increasing their costs or reducing their head count. This may well not be the most costly tax they face, but it could end up being the straw that breaks the camel’s back.

My amendments would give the Treasury the power to define specifically what an anchor store is. I am sure we are all aware that it is not the easiest term to specify, as the Minister mentioned in Committee. I understand that it might be difficult but, with the input of or indeed the discretion for local authorities included, I am sure the definition can easily be reached.

In order to safeguard our high streets, we must protect the businesses that allow them to thrive. We understand the need to create a more fair and equitable system, but that is not what the Bill promotes. As such, we are highly concerned about the consequences, whether intentional or not, that it will have.

I look forward to hearing from the noble Lord, Lord Fox, on the topic of manufacturing. It is a sector of huge importance and must be protected.

I hope the Minister will recognise the importance of exempting these stores and will accept these amendments. If he does not, I intend to test the opinion of the House.

[Lord Shipley (LD)]

My Lords, I support the amendment by the noble Baroness, Lady Scott of Bybrook. The issue of anchor stores seems fundamental in increasing footfall into traditional shopping centres, and it is right that there should be a power to exempt those anchor stores from higher rates.

One note of caution that I want to mention is that a Government would need to ensure that there was not a tendency by landlords to try to increase rents in the face of lower business rates. I am sure there are ways in which that can be done. Where councils are the landlord then they would have control of that, but when the landlord is in the private sector we need a mechanism to ensure that that can be done—and it should be done. If the noble Baroness decides to test the opinion of the House, I am sure she will have the support of these Benches.

The noble Baroness, Lady Scott, mentioned Amendment 4 on manufacturing. My noble friend Fox is in another meeting in the House at this very minute, so I will be saying a few things about that amendment. It is important that something is done to support the manufacturing sector. There has been a drop in confidence in the sector since the autumn. There is a big increase in manufacturers’ costs. Reductions in markets, making business development more difficult, have become very clear. Orders in general are reported to be smaller in size. The Brexit impact urgently requires a reset with the European Union. Manufacturing industry has high energy costs, and there are now concerns surrounding tariffs which are affecting confidence.

16:45

It may well be that something will be done about this in the Spring Statement, but at the moment, in the absence of an industrial strategy, it is important that the Government maintain the capacity to opt to apply a lower multiplier for manufacturing industries. There was a recent report by Barclays Bank which concluded that the words “Made in Britain” were worth an additional £3.5 billion to UK exporters. I hope very much that the Minister may be able to reassure us that the Government are aware of the stresses on the manufacturing sector, that the drop in confidence that has occurred since the autumn needs to be reversed and that one way of doing that is to give the Government the power to keep open the option of applying a lower multiplier in business rates. That is the purpose of Amendment 4, and I hope we will hear some positive words from the Minister when he comes to reply.

[Baroness Pinnock (LD)]

My noble friend Lord Shipley has just made a powerful case for the disaggregation of manufacturing from the standard multiplier and for those businesses to benefit from the lower multiplier. The economic case is a strong one, as my noble friend has just said, and the Government’s go-for-growth strategy, especially in the context of world events, will fundamentally depend on British manufacturing. More encouragement needs to be provided to the sector to invest and to innovate, and a government decision to reduce the rate burden will be one such indicator that the Government are showing they are determined to support those businesses that produce the wealth on which our public services rely.

The noble Baroness, Lady Scott of Bybrook, has led this group with the case for the Government to take especial notice of so-called anchor stores, on which the viability, as she rightly argues, of our high street absolutely depends. I urge the Government to accept Amendment 4, in my name and that of my noble friend Lord Fox, to show that the importance of manufacturing will be recognised. If the Minister seeks to ignore that argument, then we on this side will test the opinion of the House.

[Lord Thurlow (CB)]

My Lords, I add my support to the important comments from the noble Baroness, Lady Scott of Bybrook. The importance of anchors cannot be overemphasised, particularly in smaller towns. We all know a shopping centre near where we live, and not a brick of development for that shopping centre would have been laid if it was not for a pre-let to an anchor.

It is important to explain that. They do not just create the footfall for the retailers generally—which of course they do—but they also catalyse the funding for the developer to build it. They are the anchor. They are the golden goose for the high street. Taxing them more simply risks losing them. The damage to society locally in losing them will be difficult to restore, and social cohesion will suffer. I strongly support the amendment from the noble Baroness, Lady Scott, and will support it if it goes to the vote.

[Lord Khan of Burnley (Lab)]

My Lords, these amendments seek to remove anchor stores from the higher multiplier. They also seek to expand the cohort of hereditaments that qualify for the lower multipliers by bringing manufacturing properties into scope alongside qualifying retail, hospitality and leisure.

As set out at the Budget, the Government intend to introduce a permanent tax cut for qualifying RHL properties from 2026-27 by introducing two lower RHL multipliers. The Bill makes provision to enable this through secondary legislation. In consideration of the challenging fiscal environment that this Government face, it is important that the permanent tax cut is funded sustainably, which is why we intend to introduce a higher multiplier to fund the tax cut from within the business rates system. It is the Government’s intention for the higher multiplier to apply to all properties with a rateable value of £500,000 and above. This ensures that sufficient funding is raised to enable the Government to provide that permanent tax cut for RHL properties with rateable values below £500,000.

I thank noble Lords for their contributions on this topic. As she did in Committee, the noble Baroness has set out the important role that anchor stores play on our nation’s high streets. We have heard that they are a linchpin, that they drive footfall and that they help support the broader high street ecosystem by attracting other businesses. The Government recognise this and the information published by the Valuation Office Agency shows that a relatively small number of shops fall above the £500,000 threshold. In my response to the debate on the previous group, I set out that the impact on shops is not widespread. I will not repeat those numbers here.

Furthermore, anchor stores are often part of large retail chains that will also have a number of properties with a rateable value below £500,000 and, in the case of those properties, will benefit from the lower RHL multipliers. Moreover, whereas RHL relief is currently limited to a cash cap of £110,000 per business, the Government intend to have no such limit on the new RHL multipliers to better ensure more widespread support for the high street.

On the amendments tabled by the noble Lord, Lord Fox, the impact of this Bill on the manufacturing sector has been a recurrent theme throughout its passage. In the other place, the Government heard calls for manufacturing to be included in the cohort qualifying for the lower multipliers, citing the threat of tariffs, our isolation from our neighbours and growing competition from other countries. These amendments would bring manufacturing properties with a rateable value below £500,000 into scope of the lower RHL multipliers.

Noble Lords are aware of the difficult task that this Government face. The current fiscal backdrop is challenging and, in this context, I hope they understand that widening the scope of the properties qualifying for the lower multipliers, as well as taking properties out of scope of the higher multipliers, as these amendments seek to do, is likely to dilute the support that the Government are able to provide to RHL properties with a rateable value below £500,000.

Throughout the passage of the Bill, the Government have emphasised our desire to ensure that we move to a fairer, rebalanced and sustainable business rates system. We have been clear that any tax cut must be sustainably funded. To expand the cohort and number of properties qualifying for the lower multipliers while reducing those to which the higher multiplier will apply risks this policy no longer being sustainable—a key principle that the Government have stated throughout the Bill’s passage.

As I said, against the challenging fiscal environment, the Government have to take tough decisions. This is the fairest approach, which ensures a sustainable solution so that the permanent tax cut for RHL can be funded from within the business rates system. Of course, noble Lords have made sensible points. Anchor stores are part of high streets, as is light manufacturing in some areas, a point made by the noble Lord, Lord Fox, in Committee.

The Government are committed to ensuring the longevity and survival of our vibrant and diverse town centres, and there are many ways in which we are pursuing that endeavour. In December, we introduced high street rental auctions, a new power which allows local authorities to auction off the lease of persistently vacant commercial units. The new regulations will make town centre tenancies more accessible and affordable for businesses and community groups, while helping to tackle vacancy on our high streets.

Through the English devolution Bill, we will also introduce a strong new right to buy for valued community assets, which will help this Government safeguard our high streets. This measure will empower local communities to reclaim and revitalise empty shops, pubs, and community spaces, helping to revamp our high streets, increase footfall and eliminate the blight of vacant premises.

Furthermore, at the Autumn Budget, the small business multiplier for properties with a rateable value of under £51,000 was frozen at 49.9p, meaning that, together with small business rate relief, over 1 million properties will be protected from a 1.6% inflationary increase. Alongside this, the Government continue to support our valuable manufacturing sector through other means.

The noble Lord, Lord Shipley, asked what in particular we are doing. At the Autumn Budget, the Government announced £975 million for the aerospace sector over five years, over £2 billion for the automotive sector over the same period, and up to £520 million for a new life sciences and innovative manufacturing fund. The Budget also saw two key programmes extended, promoting innovation across UK regions and manufacturing. The innovation accelerator programme will continue for another year, focusing on high-potential clusters across the UK. Meanwhile, the Made Smarter innovation programme will continue to be funded, empowering manufacturers to adopt digital technologies and enhancing productivity and sustainability by connecting digital solutions providers with industry.

I hope that it is clear to noble Lords why the Government cannot accept these amendments. The permanent tax cut for RHL properties must be funded sustainably. Furthermore, the Government fully recognise the importance of the British manufacturing industry, but we are supporting that sector through other avenues. It is for those reasons that I cannot accept the amendments in the name of the noble Baroness, Lady Scott, and the noble Lord, Lord Fox, and I respectfully ask them not to press them.

[Baroness Scott of Bybrook (Con)]

My Lords, I thank noble Lords for contributing to this debate and for their support. I would like to say something about Amendment 4, on manufacturing. It is a sector of great importance to our economy, as the noble Lord, Lord Shipley, said. He is correct that in January GDP fell by 0.1%, which was attributed largely to a 1.1% fall in manufacturing output. Not only did manufacturing fall in January but, as the noble Lord said, it fell in the three months to January. Since it was the largest contributor to GDP shrinkage, the importance of this sector cannot be ignored by the Government. If the Liberal Democrats divide the House, we will vote with them.

Anchor stores are incredibly important to businesses on the high street, as we have heard. To lose them would be highly detrimental to the economic viability of most high street businesses. As the noble Lord, Lord Thurlow, said, it will also stop any future new anchor stores being given permission. I am not satisfied with the Minister’s response. Therefore, I wish to test the opinion of the House.

16:58

Division 2

Ayes: 283

Noes: 177

17:09

Amendment 4

Moved by

[Baroness Pinnock]

4: Clause 3, page 3, line 31, after “hospitality” insert “, manufacturing”
Member’s explanatory statement
This amendment seeks to include the manufacturing industry in the types of business that can qualify for the lower multiplier.

[Baroness Pinnock (LD)]

My Lords, manufacturing is at the heart of what this country does. We need to support it, and we can through the Bill by reducing the burden of business rates on those businesses. I therefore beg to test the opinion of the House.

17:10

Division 3

Ayes: 271

Noes: 179

17:21

Amendment 5

Moved by

[Lord Jamieson]

5: Clause 3, page 3, line 34, at end insert—
“(9BA) The Secretary of State must by regulations increase the figure in subsection (9B)(b) on 1 April 2029 in line with the average aggregate change in rateable values, as recorded by the Valuation Office Agency for three tax years preceding 1 April 2029.”

[Lord Jamieson (Con)]

My Lords, in moving Amendment 5, which is in the name of my noble friend Lady Scott, I shall speak to Amendments 18 and 20, which are consequential. The amendments seek to introduce an increase in the threshold for the higher multiple, in line with the average aggregate increase in rateable values in the three years preceding the re-evaluation of the business rate multipliers. I am concerned that the Bill will introduce a stealth tax that will result in more and more businesses being subject to the higher multiple, if the higher multiple is fixed at £500,000 and does not increase with rateable values.

I listened to the points raised by the Minister in Committee and adjusted the amendment so that it considers the re-evaluation that will take place in 2029. Although the Minister claims that an alternative system will be introduced, this is uncertain. As such, it makes sense to introduce protection in the Bill.

Amendments 7, 15 and 19 seek to introduce into the Bill the definition provided for the RHL relief, which seems unnecessary given that the definition already exists in government guidance.

I look forward to the response from the Minister on the issues that have been raised. I beg to move.

[Baroness Pinnock (LD)]

My Lords, Amendment 7 and consequential Amendments 15, 19 and 22 probe the Government on the definition of retail, hospitality and leisure businesses. This is absolutely critical because those businesses currently receive 75% relief, which will fall to 40% in April, and the relief will be non-existent by April 2026. The Bill introduces the lower multiplier by way of reducing the impact of the removal of the Covid relief. It then becomes crucial for businesses to know which multiplier will apply to them.

The House of Commons Library’s detailed briefing stated that there is currently

“no definition in law of ‘retail, hospitality and leisure’ properties”.

It would be really helpful if the Minister confirmed that this essential definition will be determined in secondary legislation.

Throughout deliberations on the Bill, the Minister has repeated that RHL properties in the new regime are identical to those that received Covid relief. If that is so, surely the legal definition must already exist and can be shared in our debates on this group of amendments.

During the debate in the other place, Daisy Cooper MP wanted to know whether large RHL businesses that currently have a £110,000 cap on the Covid relief received will have that cap removed and benefit from the lower multiplier. If that is the case and they get the cap on their relief removed but also benefit from the lower multiplier, it will mean that smaller businesses end up subsidising the larger chain stores within this definition of RHL. Again, I feel sure that it is not the Government’s intention to let small shops subsidise larger ones. If that is not the case, can the Minister explain what is going on?

Can the Minister confirm that the new rating system being introduced in April 2026 will be fixed for three years, as he stated in earlier debates on the Bill, and that the small business relief will be uplifted in line with inflation? That is very important for small shops in villages and small towns. Currently, rateable values of less than £12,500 receive 100% business rates relief, and then a sliding scale exists. It is therefore critical that the rateable values are revised upwards to reflect property values. Otherwise, ever fewer businesses will qualify—fiscal drag for business rates. This is also the argument made by the noble Baroness, Lady Scott, in relation to the higher threshold being introduced. Failure to increase the £500,000 threshold results in pulling more businesses into the higher rate.

In the end, as we have heard from across the House this afternoon, tinkering with the system fails to address the fundamental problem that businesses are not what they were 100 or even 20 years ago, and property taxation must change to create a fairer, more equitable approach that does not penalise traditional businesses, which end up providing a larger portion of the tax take than is justified.

[Lord Khan of Burnley (Lab)]

My Lords, the amendments in this group touch on a few different areas in the Bill, so I will speak to each topic in turn.

Amendments 5, 18 and 20 in the name of the noble Baroness, Lady Scott of Bybrook, would require the £500,000 threshold for the higher multiplier to be increased at the 2029 revaluation in line with the average aggregate change in rateable value for the preceding three years. In Committee we similarly discussed whether the £500,000 threshold should be uprated over time. The amendments we considered in Committee would have uprated the threshold in line with annual inflation, and I explained—and I think the Committee recognised—why that was not appropriate.

Amendments 5, 18 and 20 are closer to the more appropriate considerations for changes to the threshold. As I said in Committee, the 2029 revaluation will be the next logical moment to consider whether the £500,000 threshold remains appropriate for the new higher multiplier, and at that time we will consider whether the threshold in the regulations continues to be appropriate. I can assure the noble Baroness, Lady Scott, that the total change in the rateable value at the 2029 revaluation will form part of those considerations. But it will not be, and should not be, the only consideration.

As well as the movement in all rateable values, we may want to look at the movement in rateable value for the cohort of properties near or above the threshold. We will need to consider in 2029 the level of continued support that we should provide to qualifying RHL and, in turn, the revenue needed from the higher multiplier to fund that support. That should form part of the considerations of the threshold on the higher multiplier.

17:30

I hope, therefore, that the noble Baroness and the House will acknowledge that there is a multitude of factors that the Government should consider when defining the appropriate threshold and not just those in her amendments. Equally, I hope I have assured her that the movement in rateable values at the 2029 revaluation will be one of those considerations.

Amendments 7, 15 and 19, tabled by the noble Baroness, Lady Pinnock, seek to define retail, hospitality and leisure in the Bill. These amendments would remove the power in the Bill that enables the Treasury to define qualifying retail, hospitality and leisure through secondary legislation—a question she asked. Amendment 22 would require the Government to produce an assessment of the expected impact of Clauses 1 to 4 on RHL businesses, and to provide a comparison of the expected amount of non-domestic rates paid by these businesses since 1 April 2020.

Throughout the passage of the Bill in this House and the other place, the Government have been clear that the precise definition of qualifying RHL will be set out in secondary legislation later this year. However, as has been set out many times before, it is the Government’s intention for the definition of qualifying retail, hospitality and leisure to broadly follow the definition that is used for the current retail, hospitality and leisure relief. Providing a power to enable the definition of qualifying retail, hospitality and leisure to be set through secondary legislation—as opposed to having it set out in the Bill, as these amendments seek—provides greater flexibility for the Government to react to changing economic conditions in the future.

At this time, it is our intention to broadly follow the definition which is currently in use for RHL relief. However, in the future, the Government may need to amend that definition to bring in new property types that may emerge as the economy grows and evolves. This is a common practice when using definitions in business rates. To accept the amendment would limit flexibility in the Bill’s provisions that is important to their longevity. For these simple reasons, I cannot accept Amendments 7, 15 and 19.

On Amendment 22, tabled by the noble Baroness, Lady Pinnock, I appreciate that she is seeking to understand how the introduction from 2026-27 of the RHL multipliers will affect those businesses currently receiving RHL relief. I will discuss in more detail the Government’s approach to analysis and the information already published on business rates during the debate on the next group.

The noble Baroness will appreciate that we do not yet know the impact, as the tax rates for the new multipliers are not yet set, and nor has the 2026 revaluation progressed sufficiently. The Treasury has committed to producing, once that information is in place, an analysis of the new multipliers. It will do that when the tax rates are set at the Budget later this year. We have given that commitment. The Bill includes sensible parameters on the setting of the new multipliers and sets out that the new lower RHL multipliers cannot be set more than 20p below the small business multiplier.

I hope that I have given the noble Baroness, Lady Pinnock, and the House, a clear assurance that we intend broadly to follow the definition that we currently use for RHL relief. That should give those businesses the assurances that they need. Similarly, I hope that noble Lords appreciate why we cannot provide the analysis that the noble Baroness seeks at this time. That analysis of the new multipliers will be available once they have been set. Having set out that information, I respectfully ask the noble Baroness, Lady Scott, to withdraw her amendment.

[Baroness Scott of Bybrook (Con)]

Before the Minister sits down, I heard for the first time the Minister say “near or above” the higher multipliers. Why would that be? Are the Government assuming the amount of money that they are going to get in future years? It seems to be a new context to this debate that he used those words.

[Lord Khan of Burnley (Lab)]

I alluded to this point in Committee. The review with stakeholders and businesses is currently taking place. We will come back as we look at the reform of business rates. In the context of the business rates review and reform, consideration is being given to hereditaments that are near, above or within a small distance of the £500,000 threshold.

[Lord Jamieson (Con)]

My Lords, I thank the Minister for his response. Although we remain concerned regarding the increased business taxes as a result of the impact of fiscal drag, having reflected on the Minister’s assurances we will not be pressing Amendment 5.

Amendment 5 withdrawn.

Amendment 6

Moved by

[Baroness Pinnock]

6: Clause 3, page 3, line 35, after “hospitality” insert “, manufacturing”
Member's explanatory statement
This amendment seeks to include the manufacturing industry in the types of business that can qualify for the lower multiplier.

Amendment 6 agreed.

Amendment 7 not moved.

Amendment 8

Moved by

[Baroness Scott of Bybrook]

8: Clause 3, page 3, line 36, leave out “has such meaning” and insert “and “anchor store” have such meanings”
Member's explanatory statement
This amendment, along with others in the name of Baroness Scott of Bybrook, seeks to exempt anchor stores because of their role in increasing footfall on the high street.

Amendment 8 agreed.

Amendments 9 and 10

Moved by

[Baroness Pinnock]

9: Clause 3, page 3, line 37, at end insert—
“(9D) In sub-paragraph (9B), “qualifying healthcare hereditament” includes hospitals, medical and dental schools, and any other healthcare settings as may be prescribed by the Treasury in regulations.”;” Member's explanatory statement
This amendment, together with Baroness Pinnock’s amendments to page 3, line 26, page 4, line 6, and page 4, line 17 would have the effect of retaining the standard multiplier for hospitals, medical and dental schools, or any other healthcare setting to be determined by regulations.

10: Clause 3, page 4, line 6, after “hereditament” insert “other than a qualifying healthcare hereditament”
Member's explanatory statement
This amendment, together with Baroness Pinnock’s amendments to page 3, line 26, page 3, line 37, and page 4, line 17, would have the effect of retaining the standard multiplier for hospitals, medical and dental schools, or any other healthcare setting to be determined by regulations.

Amendments 9 and 10 agreed.

Amendment 11 not moved.

Amendment 12

Moved by

[Baroness Scott of Bybrook]

12: Clause 3, page 4, line 7, after “more,” insert “and is not an “anchor store”,”
Member's explanatory statement
This amendment, along with others in the name of Baroness Scott of Bybrook, seeks to exempt anchor stores because of their role in increasing footfall on the high street.

Amendment 12 agreed.

Amendments 13 and 14

Moved by

[Baroness Pinnock]

13: Clause 3, page 4, line 11, after “hospitality” insert “, manufacturing”
Member's explanatory statement
This amendment seeks to include the manufacturing industry in the types of business that can qualify for the lower multiplier.

14: Clause 3, page 4, line 15, after “hospitality” insert “, manufacturing”
Member's explanatory statement
This amendment seeks to include the manufacturing industry in the types of business that can qualify for the lower multiplier.

Amendments 13 and 14 agreed.

Amendment 15 not moved.

Amendment 16

Moved by

[Baroness Scott of Bybrook]

16: Clause 3, page 4, line 16, leave out “has such meaning” and insert “and “anchor store” have such meanings”
Member's explanatory statement
This amendment, along with others in the name of Baroness Scott of Bybrook, seeks to exempt anchor stores because of their role in increasing footfall on the high street.

Amendment 16 agreed.

Amendment 17

Moved by

[Baroness Pinnock]

17: Clause 3, page 4, line 17, at end insert—
“(6C) In sub-paragraph (6A), “qualifying healthcare hereditament” includes hospitals, medical and dental schools, and any other healthcare settings as may be prescribed by the Treasury in regulations.”;” Member's explanatory statement
This amendment, together with Baroness Pinnock’s amendments to page 3, line 26, page 3, line 37, and page 4, line 6, would have the effect of retaining the standard multiplier for hospitals, medical and dental schools, or any other healthcare setting to be determined by regulations.

Amendment 17 agreed.

Amendments 18 to 20 not moved.

Amendment 21

Moved by

[Lord Fox]

21: After Clause 4, insert the following new Clause—
“Impact assessment(1) The Secretary of State must publish and lay before Parliament an assessment of the impact of sections 1 to 4 of this Act on—(a) businesses,(b) high streets, and(c) economic growth.(2) An impact assessment under subsection (1) must consider—(a) the impact on different types of businesses, including small businesses; (b) the impact on businesses operating mainly or solely on high streets;(c) whether the provisions will have a measurable impact on economic growth.”Member's explanatory statement
This amendment, together with another in the name of Lord Fox to Clause 6, would require the Secretary of State to publish an impact assessment on sections 1 to 4 of the Act before they come into force.

[Lord Fox (LD)]

My Lords, all the amendments in this group provide for reviews of different aspects of the Bill. In moving Amendment 21, I will speak to Amendment 33 in my name and that of the noble Baroness, Lady Pinnock.

It is very clear from everything that we have heard in Committee and on Report that we are still very much in the dark as to how this Bill, when it becomes an Act, will affect our high streets. It was billed from the beginning as a measure that would save our high streets—that was clearly how it was marketed in the Commons. However, without the details that we seek, and without the context of those details, we really do not understand.

The differences between these several amendments are, more or less, on the timing of when the review would happen. In our Amendment 21, the timing is that, before the Act comes into force:

“The Secretary of State must publish and lay before Parliament an assessment of the impact of sections 1 to 4 of this Act on businesses, high streets, and economic growth”.


If the Government are serious about their assertion that they are going to save our high streets, they need to be able to support that. Nothing the Minister has said at any point has underpinned that this will save our high streets.

An impact assessment must consider the impact on different types of businesses, including small ones, and the impact on businesses operating mainly or solely on high streets, and whether the provisions will have a measurable impact on economic growth. That is the key because, from everything my noble friend and others have said, it seems that at the end of this process most businesses will be paying more in rates than they are currently paying—and how that delivers any kind of economic growth is something of a mystery to me.

So that is the nature of Amendment 21. We also support the other amendments in this group. Amendment 24 in particular requires the Secretary of State to review the impact on

“businesses whose rateable value is close to £500,000”.

That of course brings us to the plateau issue. I will leave the noble Baroness on the Conservative Benches to speak to that, but in the event that she decides to push the amendment to a vote, we on these Benches will support it. I beg to move.

[Lord Jamieson (Con)]

My Lords, I rise to speak to Amendment 23, in the name of my noble friend Lady Scott, and Amendments 24 and 34 in my name. Amendment 23 seeks to include a review of the impact of this Bill on businesses. The lack of any kind of assessment of the impact that this policy will have on businesses needs to be addressed—hence this amendment.

Amendments 24 and 34 seek to include a requirement for a report on the impact that the £500,000 threshold will have on businesses. I am particularly concerned about the cliff-edge nature of the £500,000 threshold and its impact on business decisions. A business crossing the threshold, even by £1, will see an almost 20% increase in business rates payable. This is bad enough for most businesses, but a business in the retail, hospitality and leisure sector will see a near doubling. For instance, an RHL business with a hereditament of £495,000 that invested in its property just enough to push it over the threshold would potentially see an increase in rates from around £175,000 to £325,000 as a result of the Bill. This is meaningful in terms of business decision-making.

Not only is this unfair but it is a distorting tax. This Government say their priority is growth, but think about all those businesses up and down the country facing this dilemma and the impact on their individual decision-making. I thank the Minister for his engagement on this and I appreciate that this is being driven by the Treasury and its simple spreadsheet analysis. However, these are real decisions with real-world impacts, not simply numbers on a spreadsheet.

This Bill was initially presented as one that would increase the tax share of out-of-town warehouses, dubbed the “Amazon tax”, but that is not the Bill we have been presented with. As the Minister has said previously, only around 10% of businesses paying the higher tax will be warehouses. This Bill will actively encourage businesses to stop investing in their property to avoid paying a hefty increase in business rates. We want to develop our high streets. We want to encourage businesses to invest. This not only disincentivises that critical investment but creates a perverse incentive at the margin.

17:45

My consequential Amendment 34 seeks to require that this review be published at least three months before the new business rates begin. If the Government are going to change the business rates system in this way, it is important that we know what the impact of the change is likely to be. This concern is shared across the House, as evidenced by the amendment from the noble Lord, Lord Fox—I appreciate that he will be supporting this—which calls for an impact assessment. This is an important amendment and I hope noble Lords will understand why the cliff-edge threshold will likely have negative impacts on investments. I look forward to the Minister’s response and I hope he will accept it: if he does not, I intend to test the opinion of the House.

[Lord Khan of Burnley (Lab)]

My Lords, these amendments would require the Government to undertake various forms of impact assessment or review, either ahead of Clauses 1 to 4 coming into effect in April 2026 or shortly following their implementation. Throughout the passage of this Bill, noble Lords have raised valid questions. What properties would be subject to the higher multiplier? What properties will qualify for the lower retail, hospitality and leisure multipliers? What will be the impact on the public sector, anchor stores or manufacturing? Throughout the Bill’s passage, the Government have sought to be as clear as possible. I appreciate that noble Lords may feel otherwise, but this does not detract from the fact that the Government have done what they can to provide as much information as possible.

I will reiterate two key points on the application of the new multipliers. With respect to the higher multiplier, it is the Government’s intention that this will apply to all properties with a rateable value of £500,000 and above. The VOA last month helpfully published an ad hoc data release, providing further detail on the number of properties and their rateable value that would fall above this threshold, broken down by region and by subsector, so noble Lords can see further details on the make-up of the fewer than 1% of properties that fall above the threshold. This is based on the current 2023 rating list, because the 2026 rating list is still being prepared and is not yet available.

The lower multipliers will apply to qualifying RHL properties, with the Government’s intention being to introduce one multiplier for qualifying RHL properties with a rateable value below £51,000 and one for qualifying RHL properties with a rateable value between £51,000 and £499,999. Noble Lords want to know who will qualify. We have been very clear on this, previously and today: the definition of qualifying RHL will broadly follow that currently in use for the existing RHL relief and will be set out later this year. With regards to the proposed amendments for various impact assessments or analysis, as I have explained previously in the House, tax is not subject to the requirement to undertake an impact assessment, and that has been the case for many years. However, the Treasury has committed, and remains committed, to producing analysis of the impact of the new multipliers at the Budget when the tax rates are set and when the outcome of the 2026 revaluation is clearer.

Furthermore, as I set out in Committee, my department already has established and detailed processes in place to collect and publicly report on the business rates collected by local government. My department produces annual forecasts for the coming year, called NNDR 1 returns, and then on the actual amounts collected by local government, called NNDR 3 returns. These are published on the department’s website at both national and local authority level. From the 2026-27 NNDR 1 onwards, these will reflect the new multipliers that the Bill makes provision to introduce. It would not be appropriate or prudent to pre-empt the Budget or the outcomes of the 2026 revaluation, but I hope that, in reiterating the commitments already made and setting out the information that my department already reports on as a matter of course, I will reassure noble Lords.

I note that the amendments tabled by the noble Baroness, Lady Scott of Bybrook, and the noble Lord, Lord Jamieson, also seek to investigate how the £500,000 threshold the Government intend to introduce with the higher multiplier will impact on businesses that have a rateable value around that threshold. I am aware that the interest here is in particular with regard to how that may affect business behaviour around investment. I will make a couple of points on that more specific area.

As acknowledged in the Transforming Business Rates discussion paper published at the Autumn Budget, the Government are aware that some stakeholders have argued that cliff edges in the business rates system may disincentivise investment. In that paper, the Government committed to exploring options for reform in this space. We have recently completed an initial stage of engagement to understand stakeholder views and areas of interest for reform and we are open to receiving written representations in response to the priority areas for reform, until the end of March 2025.

Your Lordships will understand that transforming the business rates system is a multiyear process, and that reforms taken forward will be phased over the course of the Parliament, but I hope noble Lords are reassured that the Government have publicly set out that an announcement on reforms will be made later.

I know that noble Lords have repeatedly raised how any evaluation or analysis should consider the impact of the new multipliers on economic growth and the viability of our high streets. What is being described is what the Government do as a matter of course and as Governments have done for centuries: if a policy is not having the desired effect, it will be changed. Your Lordships should rest assured that the Government will be keeping all this under review, as we do with all tax policy. I respectfully ask the noble Lord to withdraw his amendment.

[Lord Fox (LD)]

My Lords, I thank the Minister for his answer and for reminding us of the central purpose of Clauses 1 to 4. However, I do not think that he addressed the point made by the noble Lord, Lord Jamieson, in any sense. The investment and growth effect from, literally, a £1 difference in a property’s rateable value will obviously be an issue. Without that, we cannot really understand how the Act will affect our high streets. On that note, however, I beg leave to withdraw Amendment 21.

Amendment 21 withdrawn.

Amendments 22 and 23 not moved.

Amendment 24

Moved by

[Lord Jamieson]

24: After Clause 4, insert the following new Clause—
“Review: threshold effect(1) The Secretary of State must undertake a review of how the provisions in this Act may affect businesses whose rateable value is close to £500,000.(2) The Secretary of State must lay the review under subsection (1) before Parliament.”

[Lord Jamieson (Con)]

I beg to move.

17:52

Division 4

Ayes: 255

Noes: 165

18:03

Clause 5: Removal of relief

Amendment 25

Moved by

[Lord Lexden]

25: Clause 5, page 5, line 39, leave out “for whom an EHC plan is maintained” and insert “with special educational needs and disabilities, as defined in the Children and Families Act 2014”
Member's explanatory statement
This amendment seeks to expand the exemption of schools beyond those catering for EHCP pupils, to all those wholly or mainly organised for SEND education.

[Lord Lexden (Con)]

My Lords, Amendment 25 has the support of my noble friend Lord Black of Brentwood. We are both profoundly conscious of the importance of the contribution the independent sector of education makes to providing for children with special educational needs and disabilities. I hope the Government also recognise this important contribution and will join us today in paying tribute to it.

One-fifth of pupils in independent schools receive SEND support—a significantly higher proportion than in the state sector. The small schools, which are so numerous in the independent sector of education, are ideal places for such pupils. They thrive under the careful, compassionate supervision of their dedicated teachers and the staff who support them. Many of these schools, cherished by pupils and parents alike, are members of the Independent Schools Association, of which I am president, giving me an interest, which I declare.

The continued success of these schools needs to be safeguarded at a time when SEND provision in the state sector is in crisis—a crisis which will not be relieved for some time through the plans for significant improvement that the Government are quite rightly making. Everyone hopes that the Government’s plans will eventually succeed, but arrangements are needed of the kind for which this amendment provides.

Amendment 25 would help safeguard the future of independent schools that specialise in SEND provision, which are so badly needed in our country today. Under this amendment, an independent school that has 50% or more pupils with a registered SEND need would retain its charitable rate relief. The Government say that such relief must be confined to schools with some 50% of pupils with education, health and care plans. That is the wrong dividing line. There are nearly 100,000 pupils with a registered SEND need in independent schools whose parents do not want or, in many cases, have been unable to get an EHCP, which is notoriously difficult to acquire, since a long and often expensive obstacle course awaits those who apply for it.

In Committee, the Minister was at pains to stress that the majority of children with special educational needs have those needs met in state schools. Of course that is so, but it is wrong to neglect or diminish the crucial extent to which independent schools supplement the state’s provision, working in the spirit of partnership which is the predominant characteristic of the independent education sector today.

Without this amendment, invaluable SEND schools can be expected to find themselves in grave difficulty or will be forced to close. I beg to move.

[Lord Black of Brentwood (Con)]

My Lords, I will speak to Amendment 26, in the name of my noble friend Lady Barran, to which I have added my name. I support all the amendments in this group, especially Amendment 25 from my noble friend Lord Lexden, who put his case so powerfully. It is shameful that the Government refuse to recognise the extraordinary role that independent schools play in the care of those with special educational needs. If, even at this late stage, they do not agree to the modest suggestions put forward by my noble friend, they will stand charged with putting the interests of party dogma ahead of the needs of some of the most vulnerable in our society.

I declare my interest as chairman of governors at Brentwood School, president of the Boarding Schools’ Association and Institute of Boarding, and, for this group, chairman of the Royal College of Music.

When I spoke in Committee on the issue of gifted arts students, I made one simple point: in an economy that is flatlining, the creative economy is one of the few areas of sustained economic growth with unlimited potential to expand even further. It provides hundreds of thousands of jobs, is part of a huge export market and contributes billions in revenue. We should nurture it, not attack it. Music, as well as being a huge British success story in its own right, powers it by supporting so much of its rich tapestry, including film, television, computer games, drama, advertising and so on. In turn, its future depends absolutely on first-class music education in schools, conservatoires and universities, providing a pipeline of talent into the sector. Without that continuing education, and new musicians and new teachers entering the profession, music dies. It is as simple as that: no pipeline, no music.

But music education—where it all starts—is in real crisis. I acknowledge that this began under the last Government, but we have yet to see any signs of change, despite the new Government having been in office nearly 10 months. From primary schools right the way through to the end of full-time education, music remains under threat as never before.

With music education already in such crisis, why on earth would the Government want to make matters even worse by jeopardising the very real achievement of specialist music, dance, choral and drama teaching in independent schools? The amendment from my noble friend reflects the success and importance of the Music and Dance Scheme schools and their unique contribution, and that of our leading choir schools, to artistic life in this country. Nearly 1,500 pupils—the stars of tomorrow—receive means-tested bursary support to attend renowned specialist performing arts schools which are the envy of the world. Their position is already under threat because most parents are now charged VAT on their fee contributions, with only a small number receiving increased funding to offset it. That is bad enough, and we should not pour fuel on the fire.

This amendment is based on a proposition that is very simple for even the most dogmatic of minds to understand. The future of these schools, which are already facing such pressure, and their continuing ability to provide world-class teaching can be made more secure if they are protected from full business rates. The Government say that their entire agenda is focused on growth, yet here we have a policy that is absolutely anti-growth. Even on the number one item on their agenda for this Parliament, their opposition to independent education is so all-consuming that they are prepared to jeopardise it on the altar of ideology. I hope that even now the Government will see the strength of these arguments and accept my noble friend’s amendment.

[Lord Moynihan (Con)]

My Lords, I rise to speak to Amendments 27 and 29 in my name, and I declare my interests in sport as set out in the register. I thank the Minister for his sympathetic response to my amendments in Committee, our subsequent conversation and the clear personal priority that he attaches to sport, particularly for disadvantaged communities, and the way it can bring them hope and opportunity in life.

There was a time when this Chamber had many contributors to any debate that impacted the world of sports policy. One notable absentee, who retired from the House three years ago, is my noble friend Lord Coe, and I am sure that the whole House will want to take this opportunity to wish him well as he seeks election on Thursday to become the first British president of the International Olympic Committee.

I made my case for these amendments in Committee. Both amendments highlight the lifeline received by many of our top sports men and women who have benefited from the sports bursaries and scholarship policies of independent schools. Today I also make the case for the widespread community use of the many outstanding sports facilities of independent schools, the expertise of their coaches, their support staff and the groundsmen and groundswomen who coach and support their pupils and offer their facilities and services to local communities through dual-use campaigns. Amendments 27 and 29 would provide protection for schools where 10% or more of students receive sports scholarships or bursaries and separately would discount all sports facilities from schools’ business rates.

These proposals reflect the commitment of independent schools to spreading opportunities in sport through fee assistance schemes and public benefit partnerships, including sharing facilities and coaching staff. Sporting opportunities are a key focus for some independent schools, and sports awards form part of the £1 billion in fee assistance delivered by independent schools in the last academic year. What is really important is that more than half the money is means tested, ensuring that support is targeted where it is most helpful, yet the imposition of VAT and the increase in the minimum wage and national insurance contributions are now compounded by the proposed imposition of business rates. Schools will inevitably have to cut back to balance their budgets, and the casualties will be the opportunities for sport and recreational activity for many dual-use local community clubs after school hours.

In moving the first of my two amendments, I drew the Committee’s attention to the contribution that independent schools make to elite sport as well. At the Olympic Games in Paris last year, 33% of Team GB’s medallists attended independent schools. At Tokyo in 2021, 40% of Team GB’s medallists attended independent schools. At Rio in 2016, it was 31%. At London 2012, it was 36%. Yet only 7% of our children go to independent schools, so top Olympians and Paralympians are more than four times more likely to have been privately educated than the UK population overall because of the bursary and scholarship policies on offer.

Let me give the specific example of Millfield, which delivered 13 of the 14 Millfield-educated and trained British athletes on Team GB through its means-tested financial support mechanism. The school funded 13 of the 14 Millfield-educated and trained British athletes on Team GB for the Paris Olympic Games, who between them brought home seven Olympic medals and one Paralympic medal: four gold, three silver and one bronze. All received means-tested financial support from the school during their time at Millfield, but how can that continue? Where will the money come from when the Government themselves predict a significant fall in children going to independent schools and urge those independent schools to make major cuts to their budgets? Where will the scholarships and bursaries be paid from?

18:15

For me, and I am sure for the Minister, the tragedy behind the figures I have just given is the reality that there are so many talented young people in our state schools who are capable of representing the country at national and international level, but whose talent is never recognised or developed and who have no access to good sports facilities and good coaching and thus miss the opportunities that every country in the western world that we compete against provides. This is not a party-political point. The role of sport has dropped down the political agenda over recent years. We continue to lose playing fields, and on 10 March the Government announced that Sport England will be removed from the list of statutory consultees on planning applications that impact playing fields as part of a broader overhaul of the planning system, raising additional concerns about the impact on sport and physical activity in the communities at large.

It is a tragedy that more than half of children aged between 16 and 18 are now estimated to be doing no school sport. Swimming is in crisis: 30% of children cannot swim 25 metres unaided when they leave primary school, a 7% increase from 2017-18. More than 400 public swimming pools have closed since 2010, and a third of primary schools now deliver 10 or fewer swimming lessons to pupils before they leave. The many children who have accessed independent schools’ facilities at the cost of those independent schools will now find that those independent schools have to make significant savings. I agree wholeheartedly with the Prime Minister, who last year bemoaned the fact that children were being locked out of emulating their heroes due to the lack of PE provision.

I fully appreciate the Minister’s genuine commitment to helping sport wherever he can. He has urged me not to push my amendments to a vote, and I will not do that this evening because I hope that the House will at least bear in mind the arguments that I have made when we come to the next group, when I hope that colleagues from across the Chamber will seek to remove Clause 5 and protect the likes of Millfield and all independent schools that are putting their facilities to good use through bursaries, scholarships and community use of their sports facilities, which otherwise would be threatened by further cuts.

[Lord Storey (LD)]

My Lords, I will speak briefly on these two amendments. I come from the Blair school of thought on this matter, in that if we make our state schools as good as they possibly can be, private schools will be considerably less and parents may choose, for all the reasons that have been given, to go to a state school—but the noble Lords, Lord Moynihan and Lord Lexden, both had wise words.

I remind the noble Lord, Lord Lexden, that several years ago he asked me to visit a school in Shropshire. It was a very special school that helped, supported and taught children with severe dyslexic problems. Interestingly, it was so good that local authorities paid for children to go to that school. I think there were probably about 300 or 400 pupils there and a particular programme. I was absolutely amazed. I contrast that to what is happening currently with special educational needs. We have a crisis, as we know, in special educational needs. We have parents having to go to arbitration, where 98% of those parents win their case and are put on an education, health and care plan. We know that schools are not able to cope. We know that local authorities are not able to cope. Are we seriously suggesting that we aggravate that problem by ensuring that more and more children and young people from private schools go into that system? I think we have to get our system right first, before we burden the state system with even more children with special educational needs when we cannot cope.

I was interested in the noble Lord’s comments about sport and swimming in school. He is absolutely right: it is shameful currently. We seem to be football obsessed, but we are not obsessed with other sports. In Liverpool, you can find plenty of football pitches, and we have a 50-metre swimming pool, but if you try to find netball courts, hockey fields, or a place to play lacrosse, for example, it just does not happen. We need to be able to cater for all children. I remind the noble Lord, Lord Moynihan, that Katarina Johnson-Thompson won a gold medal in the youth Olympics as well as in the world championships, and she came from a state school.

[Lord Weir of Ballyholme (DUP)]

My Lords, I shall speak briefly on these amendments. The best way forward is probably Amendment 30 in the next group, which is a cleaner way of dealing with this. I would sit a little uncomfortably with the idea of placing additional financial burdens on schools, although I understand the rationale that the Government have put forward for these changes.

The concern is that any analysis that has been done, particularly from the financial point of view, might suggest that this is perhaps a more minor element of the changes that are proposed as regards independent schools. However, there is a grave concern that the cumulative effect of this change, along with the national insurance and particularly the VAT contributions, is likely to lead to the closure of a number of schools. This is not unprecedented; I have seen it happen through various changes in other parts of the United Kingdom. As such, while this is perhaps the smallest element of those three changes, it could potentially become the tipping point for a range of schools.

Let us deal specifically with the two main amendments in this group: Amendment 25, from the noble Lord, Lord Lexden, and the amendment on sport in the name of the noble Lord, Lord Moynihan. There has been an explosion in the number of young people diagnosed with special educational needs throughout the United Kingdom, and there is much greater pressure, sometimes for very virtuous reasons. For example, we see that some children with particular physical disabilities, who many years ago would, sadly, have had a very low life expectancy, are now able to live into adulthood and, indeed, live a full life. That is something for us all to celebrate. However, there has been a massive increase in the number of children with special educational needs.

For many years, my part of the United Kingdom, Northern Ireland, has tended to have much higher levels of special educational needs, and there may be an argument that other parts of the country are almost playing catch-up with Northern Ireland. But I can give your Lordships an indication that we should not be naive and believe that we will reach a plateau as regards those with needs that have to be catered for. Even in Northern Ireland over the last five, 10 or 15 years, those numbers have gone up and up, and there is no doubt that that situation will be replicated in the different parts of the United Kingdom.

With this comes increasing pressure to find appropriate educational settings for those many children. Again, judging from my experience, within the state sector that creates increasing pressures, where schools that perhaps have not been doing so before are having to provide specialist classes. The local authorities—in Northern Ireland’s case, the Education Authority—are having to scramble around to try to find where they can provide additional facilities.

In the Northern Ireland context, there is not a sizeable independent sector, but particularly in England the independent sector plays an important role in providing a level of specialist support for many of those children with special educational needs. It provides a certain level of safety valve in reducing the pressure within the system. I doubt this is the Government’s intention, but if we inadvertently create a situation where a number of these schools are forced to close, that will ratchet up further pressure within the state system at a time when we are already facing a tsunami of pressures, as has been identified by a number of noble Lords. The VAT exemption put forward by the noble Lord, Lord Lexdenm seems to be a sensible way forward, because the placing of that additional burden, which will almost inevitably lead to further closures, will be counterproductive to our young people as regards special educational needs.

Similarly, although the case is perhaps a little less acute as regards sport, accusations can be made of Governments of different political persuasions, over many years and decades, who have not been able to provide the level of sporting facilities in this country that our young people merit. We all glory in the great sporting triumphs of this nation, but, quite often, such triumphs have occurred in spite of the facilities in place rather than because of them.

Going back many years to Prime Minister John Major, he spoke of the need to open up fields and sporting facilities, but there was not the level of success that we should perhaps have seen. It strikes me that, if we do not have some level of exemption for our sports fields when it comes to rating purposes, we are simply accelerating the process by which many of those facilities will become no longer viable.

When schools find themselves in financial difficulty, it is about seeing what assets they have and what they can get rid of. Sport, unfortunately, is quite often seen as an extra and as an easy thing to cut, but that has a detrimental impact. What particularly persuades me towards the amendment from the noble Lord, Lord Moynihan, is that it ties this in with community use. These facilities should not be castles shining on the hill, to which no one can gain admission. The partnership that should always be there between schools and the community must be at the heart of what we seek to do, no more so than in the issue of sport.

As such, whatever the Government’s intentions in relation to these changes, without some level of amendment, either through this group or the group beginning with Amendment 30, we will be taking a retrograde step, for both sports and special educational needs.

[Baroness Barran (Con)]

My Lords, I will speak to my Amendments 26 and 28 in this group. I also support Amendment 25. in the names of my noble friends Lord Lexden and Lord Black of Brentwood, and Amendments 27 and 29, in the name of my noble friend Lord Moynihan.

Amendment 26, in my name and that of my noble friend Lord Black, raises again the issue of schools that are wholly or mainly concerned with providing full-time education for gifted arts students, such as those who are part of the Government’s Music and Dance Scheme. My noble friend rightly pointed out the importance of this group of students for our economic growth. They are students who attend an independent school based solely on their natural talents, and whose parents, where they are on a lower income, are means tested.

This was debated at length in relation to the imposition of VAT on these schools. The Government need to show, first, that they understand the issues that face such schools and their pupils, and, secondly, that they want to preserve these globally respected and admired institutions, without which our country would be much the poorer.

In his letter to me, for which I thank him, the Minister pointed out that there will be no impact from the increase of VAT on the fees paid by parents. To be clear, my understanding is that that is just for this academic year; if I have misunderstood, perhaps the Minister could clarify when he comes to speak.

I believe that my point still stands: the parents of gifted children whose income is means tested will pay more in future for their children’s education because of the VAT changes beyond this academic year and because of the changes proposed in the Bill. That risks excluding some of our most gifted children from the education that they need to realise their potential.

18:30

Amendment 28 tries simply to bring consistency to the way that nursery schools, including those with charitable status, are treated for business rates purposes. I confess to being confused by what the Minister wrote in his letter to me on this point, so maybe he could clarify this. As I understand it, the Bill specifically excludes nursery schools from the definition of private schools in new sub-paragraph (4)(a)(iii) in Clause 5(2). In Committee, the Minister said:

“For clarity, private nurseries that are on their own hereditament are not within scope of the Bill definition, and where they are charities they will retain charitable relief”.—[Official Report, 27/2/25; cols. GC 550-51.]

However, in his letter of 17 March he writes:

“The government’s view is that it would not be proportionate to exempt parts of hereditaments within private schools used as nurseries in this way because standalone nurseries—whether they are charities or not—do not currently receive the same benefit, and the government does not intend to introduce a general exemption for early years provision”.

I hope he can see why I am confused. Those two statements appear to conflict with each other. If he is not able to clarify that now—and I appreciate his position—then maybe he could clarify it again in writing.

When reading the Bill, I had assumed that in this case the Government were concerned about nursery school and childcare capacity, hence the carve-out for stand-alone nursery schools, but this carve-out does not apply if the nursery school is part of a wider independent school. I respectfully suggest that that neither meets the common-sense test of consistency in applying this legislation nor shows any understanding of parental preferences. Clearly, if you have older children in a school, you would ideally send your child to a nursery in the same school, for practical reasons. Can the Minister clarify whether stand-alone nurseries, with and without charitable status, will be subject to business rates, and whether those with charitable status will retain charitable relief? If the answer to the first of those is no but the second is yes, my amendment retains its merit and should be addressed by the Government.

Amendment 25, in the name of my noble friend Lord Lexden, seeks to amend the Bill so that schools that provide education for children with special educational needs, as opposed to just those with an education, health and care plan, will still receive charitable rate relief. As the Minister knows, this issue has been raised at every stage of the Bill, and the points have again been put eloquently today by my noble friend and the noble Lords, Lord Storey and Lord Weir.

Amendments 27 and 29 are in the name of my noble friend Lord Moynihan. Again, my noble friend very strongly put the case for dual use, both by the community and through the provision of bursaries, to allow our most talented athletes to train in what are currently the best school facilities. I ask the Minister to think again about why the Government, rather than urging independent schools to do more in terms of community work and the provision of bursaries, are choosing to pull the rug. I hope he will say that he is going to think again on these issues.

[Lord Khan of Burnley (Lab)]

My Lords, these amendments seek to amend the definition of a private school so as to require different types of private school to be carved out of the Bill measure, or to require parts of private school hereditaments to be exempt from rating valuations. I thank the noble Lords, Lord Lexden and Lord Moynihan, and the noble Baroness, Lady Barran, for their contributions.

I shall speak first to Amendments 25, 26 and 27. Amendment 25 would result in the exemption of a private school if that private school catered wholly or mainly to pupils who had special educational needs, as defined under the Children and Families Act 2014, regardless of whether those pupils had an EHCP. Amendments 26 and 27 would carve out private schools that provided full-time education wholly or mainly to gifted arts students or persons in receipt of bursaries or scholarships for sporting excellence.

The Government are aware of the concerns raised in respect of pupils with special educational needs in private schools that may lose their charitable relief because the school is not concerned wholly or mainly with providing full-time education to persons for whom an EHCP is maintained. Similarly, the Government have listened carefully to representations made by all interested stakeholders more broadly with regard to the design of the policy to remove charitable relief from private schools. The view was reached that, with the exception of the existing carve-out in the Bill for private schools concerned wholly or mainly with full-time education for pupils with ECHPs, no other private schools would be carved out of the measure. That is the fairest approach, as it ensures that the impact on pupils with the most acute needs is minimised.

The Bill provides that private schools that are charities that are concerned wholly or mainly with providing full-time education for persons with an EHCP remain eligible for charitable rate relief. In practice, the Government believe this will ensure that most private special schools will not be affected by the Bill measure. In fact, we expect any private special school losing charitable relief to be the exception—potentially, in single figures. In addition, private schools that currently benefit from the existing rates exemption for properties that are used wholly for the training or welfare of disabled people will continue to do so. This general exemption means that they do not pay any rates at all.

I know that some concerns have been raised about the possibility that some mainstream private schools may be just under the 50% threshold for the EHCP carve-out within the Bill. In private schools, including private special schools, just 5.7% of pupils have an EHCP, with the majority of those pupils in private special schools. We therefore expect there to be very few mainstream private schools near the 50% threshold. The majority of children with a special educational need, with or without an EHCP, are provided for in the state sector. If an EHCP assessment concludes that a child can be supported only in a private school, the local authority funds the child’s place. The approach chosen in the Bill is targeted to ensure that the impact on pupils with the most acute needs is limited. This Government are committed to reforming England’s SEND provision to improve outcomes and are providing an almost £1 billion uplift in high-needs funding in the 2025-26 financial year.

I shall speak in more detail to Amendments 26 and 27, tabled by the noble Baroness, Lady Barran, and the noble Lord, Lord Moynihan. I set out in Committee the changes that the Government are making to the Music and Dance Scheme, which supports pupils from lower-income families to attend one of eight specialist arts schools. On the question that the noble Baroness asked, no decision has been made on the future of the scheme. I acknowledge that the scheme is not available for every private performing arts school in England, but I am aware that many performing arts schools, as well as specialist sports schools and private schools more broadly, choose to provide fee assistance as part of their business model.

Providing means-tested fee assistance is one way that charitable private schools can demonstrate public benefit, a requirement that accompanies charitable status. The Bill does not remove the charitable status of private schools, and the Government expect private schools to continue to demonstrate public benefit. It is a commercial decision for individual schools to determine how they meet any additional costs as a result of the Bill measure, but the Government do not expect activity demonstrating public benefit, such as providing fee assistance, to significantly reduce.

Amendments 28 and 29 are concerned with requiring parts of private school hereditaments to be exempt from the rateable value of that hereditament. Amendment 28 would require parts of private school hereditaments wholly or mainly used as nursery facilities, or areas primarily used by nurseries, to be exempt, while Amendment 29 would require private school sporting facilities, or areas used primarily for sport, to be exempt if those facilities are also made available more broadly to the community.

The Government have decided that where private schools provide for compulsory school-age children and have nursery classes within the school on the same hereditament, the presence of nursery-age children should not remove the school from the business rates measure. This approach best ensures consistency with the policy intent. The allocation of any additional costs as a result of the Bill measure in private schools that also provide nursery classes is a matter for those schools.

I acknowledge that the noble Baroness, Lady Barran, has sought to find a middle ground following the Committee debate, but to exempt parts of hereditaments is challenging. This is also applicable to the amendment from the noble Lord, Lord Moynihan, that seeks to exempt sporting facilities. My remarks are applicable to both circumstances.

Noble Lords will recall that I said in Committee that I would take away the question of exempting parts of private school hereditaments, particularly in the context of sport. I have done that, so I hope noble Lords present will acknowledge that this has been looked at carefully. There are a very limited number of circumstances in rating where part of a property is exempted entirely. These exemptions are the most generous forms of support in business rates and are currently reserved for cases such as agricultural land, places of public religious worship and property wholly used for the training or welfare of disabled people.

To exempt—to totally remove from rating—parts of hereditaments within private schools used as nurseries or for sports would not be proportionate. Stand-alone nurseries and sports facilities, whether they are charities or not, do not currently receive the same benefit, so to exempt them when present in these particular private schools would create a broader inconsistency in the rating system.

Furthermore, whether part of a hereditament can be rated differently is not straightforward and depends on the facts on the ground. The key principle is that a property at the same site, in the same occupation and used for the same broad purpose is treated as one hereditament. That is why nursery classes and sports facilities on the same site as a private school, and operated by that school, do not have their own rates bill. The Government have carefully considered this and are of the view that to treat separately parts of private school hereditaments used as nurseries or for sports would not be merited in this case.

Business rates are a property tax and, to clarify the position for the noble Lord, Lord Weir, are applicable only to England, as devolved Administrations have their own approach to business rates. Where a property is being used as a private school, even if that school may have nursery classes or sports facilities, it remains a private school property. Amending the basis on which fee-paying schools can retain their charitable rate relief in the way these amendments propose would undermine the Government’s intention to remove tax breaks for private schools in order to raise funds to support the more than 90% of pupils who attend state- funded schools.

Before I finish, I want to echo the words of the noble Lord, Lord Moynihan, and give my best wishes to Lord Coe in his bid to be elected the first British president of the International Olympic Committee.

I hope I have reassured noble Lords regarding the reasons why I cannot accept the amendments in the names of the noble Baroness, Lady Barran, and the noble Lords, Lord Lexden and Lord Moynihan. I hope they can take from my remarks that the Government have considered the cases they made carefully, and I respectfully ask them not to press their amendments.

[Lord Lexden (Con)]

My Lords, in accordance with the custom, I thank all those who have spoken in favour of the amendments in this group. A powerful case has been made for exempting independent schools with charitable status in respect of certain parts of the valuable work they do, such as special needs education, music and sport. It is an utter tragedy that the Government cannot see that case.

I note that, in the course of his remarks, the Minister said not one word of appreciation for and thanks to the independent schools for the enormous role they play in the education system. It may be 7%, but it is a very important contribution. With that, I beg leave to withdraw my amendment.

Amendment 25 withdrawn.

Amendments 26 to 29 not moved.

18:45

Amendment 30

Moved by

[Baroness Barran]

30: Leave out Clause 5

[Baroness Barran (Con)]

My Lords, I rise to speak to Amendment 30 in my name and that of the noble Lord, Lord Storey; I also support Amendment 31 in the names of my noble friends Lord Black of Brentwood and Lord Lexden, which seeks to include a review on the effect that this Bill will have across the education sector.

I think it is safe to say that both the noble Lord, Lord Storey, and I do not believe that the long-standing tradition that education should be free from taxation should be broken. Clearly, the Government do not agree with us, and we have seen this with the egregious introduction of VAT on independent school fees and now with the proposed change in this Bill to the exemption from business rates relief for independent schools with charitable status, not to mention the impact of the proposed employer national insurance contribution increases.

As the Minister knows, the majority of independent schools are small and run on tight margins. As he will remember from my speech in Committee, I believe it is a poor precedent for the Government to set to create a two-tier charity system and there has been no answer from the Government about this principle that all charities should be treated equally. This feels like a rather political move and charities, of all organisations, should be free from such moves.

I assume that the noble Lord is going to argue that there has been no sign that pupil numbers are dropping significantly following the introduction of VAT in January and that this Bill will similarly have a limited impact. But I say to the Minister that, first, the point that the principle that education should never be taxed still stands and, secondly, I do not think anyone really expected the impact on independent schools from the imposition of VAT would happen so quickly.

I am sure the noble Lord has received letters from parents, just as I have. They will go to great lengths to avoid disrupting their children’s education and I would be surprised if we see much change before the start of the new school year, and then from a reduced uptake in year 7. Indeed, the latest data from the Independent Schools Council shows a drop of 4.6% in applicants in year 7 and 3.9% in reception—and that was before the imposition of VAT.

I look forward to hearing the insights from other noble Lords and to hearing the Minister’s response, but at this point I am minded to test the opinion of the House.

[Lord Black of Brentwood (Con)]

My Lords, I will speak to Amendment 31 in my name. I am grateful, as always, to my noble friend Lord Lexden for his support. I also strongly support Amendment 30 from my noble friend Lady Barran. I refer noble Lords to my previous declaration of interests.

Let me explain why this amendment is important. Throughout all the debates on independent education that we have had in this House, as indeed they have had in the other place, the Government have shown themselves seemingly impervious to rational argument. Frankly, they have buried their head in the sand, wilfully refused properly to engage with the independent sector and ignored the strength of feeling in this House and the opinion of experts in the field.

The unpalatable truth that they will not acknowledge is that their policies, of which the measures in this Bill are one central strand, simply will not end up benefiting the state sector in any meaningful or visible way. The 6,500 teachers promised are likely to be a fantasy and will end up being just another broken promise. But the policies will end up profoundly impacting the independent sector and the lives of tens of thousands of pupils and their hard-working parents, and that will have far-reaching consequences not just for the schools themselves but in countless other areas.

Heartbreakingly, as we heard in the debate on the previous group, it will impact on the way in which our society cares for vulnerable children, those with special needs and disabilities, and their carers and families. It will impact on local communities that currently benefit from thriving and imaginative partnerships with state schools, on faith communities and on military families. It will impact on gifted children who benefit from bursaries, something that many independent schools are cruelly being forced now to review, and of course it will impact on jobs at independent schools, especially when closures of schools inevitably and tragically happen.

It is crucial that all this is rigorously scrutinised and that Parliament has an opportunity to examine the consequences of the policies contained in the Bill, taken alongside the other tax changes being made on VAT and on national insurance—a combination of measures that the Government’s impact assessment failed to do, as it related only to business rates. That is what we, particularly in this House, are here for: to scrutinise, examine and challenge. But we need a comprehensive assessment of the facts, undertaken by the Government themselves, to be able to do that, and that is what this amendment would deliver. The Independent Schools Council, which does such an exceptional job in championing the sector, and the other associations that form part of it will conduct their own analysis. Ultimately, however, it is the Government who are responsible for the delivery of public policy in these areas and who must be held accountable by Parliament and the electorate.

The Government say that their measures, including those in Clause 5, will raise a certain amount of money to be invested in state education. I doubt it will raise anything like that, but let us see. They say they will be able to recruit additional teachers. I very much doubt it, but let us see. They say there will be no consequences for children with special needs and those in faith schools—let us see. If they are really confident that their policies can deliver what they say without damaging consequences elsewhere, why would they not want to have a review of them to prove the point? What are they fearful of?

Perhaps it is just possible that they might be wrong and will end up undermining and weakening the independent sector, which is the envy of the world, without delivering for the state sector—which means, of course, that they would have to think again. We need answers to that. That is why I believe they must commit to a thorough review of their policies, then Parliament, including our House, can scrutinise it, debate it and make recommendations for change.

[Lord Shipley (LD)]

My Lords, I agree with both amendments in this group. If you believe in “education, education, education”, you should not tax independent schools in the way that the Government have decided they want to. The Government have argued that taxing independent schools will increase the number of teachers in state schools, but the Government’s own figures show that they reached only 62% of their postgraduate secondary ITT recruitment target in 2024, so there will be pressure to increase the pay of existing teachers rather than to appoint new ones. In any case, most of the extra £1.5 billion estimated to come per year from this clause will go on special educational needs.

I suggest, very much in line with Amendment 25 from the noble Lord, Lord Lexden, that the Government’s priority should be to cut the backlog in assessments for education, health and care plans, rather than taxing parents who want the best for their child with special needs and think it can be delivered only in the independent sector. There is a very basic issue of principle here: the right of a parent to opt out of a state system where they believe their child would benefit from that. When they have paid their share of general taxation and foregone a place in the state system, thus saving the state money, then paid additionally for their child’s schooling, I submit that it is wrong in principle to tax them yet again for that decision to send their child to an independent school.

I have concluded that Clause 5 is a distraction. It will fail to deliver the Government’s ambitions for the state sector, and it is better for our education system as a whole to remove Clause 5.

[Lord Weir of Ballyholme (DUP)]

My Lords, again, I support the amendments in this group. Perhaps I should clarify for the Minister that I do so, to paraphrase something said in a different context, on the basis of being without a directly selfish economic or strategic interest in the issue. Let me highlight why I say that, in coming from a background of education in Northern Ireland.

This provision does not affect Northern Ireland, as the Minister rightly pointed out; it is an English-only matter, because all these aspects are devolved issues. Consequently, from that point of view, it will not impact on any of my former constituents in that regard, nor indeed on Northern Ireland. We have a strange patchwork of school types across the United Kingdom in our delivery of education. Northern Ireland’s background is largely one in which the independent sector is extremely small. Indeed, you could make an argument, particularly at post-primary level, that on the definition of what most people would regard as independent schools, there is perhaps one independent school in Northern Ireland that is directly akin to those in England.

I am trying to look at this as objectively as possible, but from that point of view there are three main reasons why these amendments need to be supported. First, the prospect of imposing additional burdens and taxation on schools sits deeply uncomfortably with me. The idea of penalising parents by saying, “Because of the educational choice that you are making, we are going to single out your schools for an additional financial burden to tax education” is fundamentally wrong.

Secondly, there is at least a perception—I am sure the Government would deny it—that this is a highly ideologically driven proposal and part of a wider set of seeming attacks on independent schools, as seen particularly by the changes in VAT. As such, there is a concern that, rather than looking at what is of educational benefit, this is some red meat being thrown out to some ideological Labour supporters. It is an easy target to go after.

The third reason is that of unintended consequences. We are asked to look at different figures and projections as to the impact that these various changes will make. As I highlighted in the previous group, this is perhaps a less significant change than the changes to VAT, but again, it will have a level of tipping impact and lead to the closure of schools. This is not mere theory.

If I may draw on an example of relatively recent history in Northern Ireland, roughly 12 years ago, the then Minister of Education, who was a member of Sinn Féin, made changes to a level of funding that was available to preparatory schools in Northern Ireland. In those circumstances, the vast majority of fees were paid by parents and the schools were largely supported directly by them; it was at least 70%-plus. The state paid a small proportion of what would normally go to support children in state schools. There was a significant cut made to that. It was not completely wiped off the face of it, for the reason that the then Minister would have had to bring it to get executive approval had it done so. The arguments used were that it was some sort of financial benefit, which could then be ploughed back into state education, so it was an egalitarian move.

What was the ultimate impact of that? For many of those schools which were already under a level of financial burden, it became the final nail in their financial coffin, with the end result that, 12 years on, the number of prep schools in Northern Ireland has gone down by just over a third and the number of pupils going to those prep schools is down by more than 40%. That single move made a number of those schools unsustainable.

19:00

Instead of the state contributing around 30% of the costs, for those pupils who then transferred into the state system, the state was then picking up 100% of the costs, wiping out—indeed, more than wiping out—the impact. It was not something that happened overnight but, over a period, that is what developed. It seems clear to me that this will have an impact on parents; it will have an impact on schools, and it will, inevitably, take a number of those schools to the wall.

If we are to look at this from an egalitarian point of view, we all know that within our society the very richest and wealthiest will always be able to find a way to afford some form of private education. It will not be the Etons or the Harrows of this world that will go to the wall; it will be the smaller independent schools—those that, for example, specialise in SEN—that will be most dramatically hit. That is probably not the intention of the Government, but that will be the net impact.

There is a real risk, drawn out by practical experience, that instead of creating a windfall for the state sector, we end up creating an additional financial burden on the state sector, while destroying the educational opportunities for many of our children. This is a much more clear-cut way of dealing with it, and I urge the House to back Amendments 30 and 31.

[Lord Shinkwin (Con)]

My Lords, I support Amendment 30 in the name of my noble friend Lady Barran and the noble Lord, Lord Storey. In doing so, I should explain that leaving Clause 5 out of the Bill is the only way to protect all pupils with SEND who attend independent schools, like those I attended, where the proportion of children with SEND is much lower than 50%. I understand the Government argue that protecting only schools where a majority of pupils have education, health and care plans, or EHCPs, is adequate—as if they can ignore the inconvenient truth that almost 100,000 pupils receive SEND support in independent schools without an EHCP.

I wonder whether the Government have joined the dots and thought of the impression that this gives. The sad fact is that, in the Government’s eyes, the damage to many of these children’s life chances seems to be a price worth paying. They are expendable, immaterial, inconsequential, collateral damage, caught in the crossfire of what appears to be an ideological obsession with punishing anyone they perceive as rich. Yet many of these children’s families, as we have already heard from across the House, are not rich and the Government know it, but they seem not to care. They seem not to care that this is a deeply damaging and wholly disproportionate measure which, as we have already heard, will not raise significant revenue but will harm schools and particularly pupils with SEND who, as I did, come from modest backgrounds. Their life chances will be badly affected by its implementation. They seem not to care, but schools could close because of it. They seem not to care about the incomprehensible incompatibility of putting, as we have already heard, even more pressure on an already overstretched state sector, which the Government know and the National Audit Office has shown, is already failing to meet demand. They seem not to care, incredibly, about the mental health of pupils with SEND, which will undoubtedly be hurt by the impact of this measure unless Clause 5 is left out of the Bill. I say again to the Minister that I refuse to believe that this is the Government’s intention, but it is definitely the impression given.

So I fear that we have lost sight of the people who matter most: the almost 100,000 children with SEND who receive SEND support in independent schools without an EHCP. This amendment gives us the opportunity to send a clear message as a House that we stand with them in solidarity and with their families. That is why I urge noble Lords on all sides of the House to support it and to remove Clause 5 from the Bill.

[The Earl of Lytton (CB)]

My Lords, I had not originally intended to intervene on this amendment, but I cannot help but see a wider point of principle that is involved with Clause 5 of the Bill.

I should explain that rating law serves to exempt premises used by charities and occupied for their charitable purposes, with 80% mandatory relief and 20% discretionary relief given by the billing authority. There is also some discretion for billing authorities to give similar treatment to local not for profit or community enterprises. I hope I have got that right.

What disturbs me is that, clearly, the Government think that some charities are more deserving than others. This throws up a wider issue of an arguably discriminatory policy on which a wider debate across the country is warranted. What might be more or less meritorious when considering organisations concerned with human disease, animals, wildlife or conservation, building preservation and so on? But education is the very basis of what we leave and pass on to future generations in knowledge, citizenship and values. I fail to comprehend what this clause in the Bill is, and that is why I feel compelled to support these two amendments. If we do not secure its complete removal, we should certainly have the review advocated by the noble Lord, Lord Black.

I will illustrate some of the consequences of this. I recently visited my old school as part of the Learn with the Lords programme. I ascertained that this Bill, along with other measures introduced by the Government, will cost it an additional £1 million per year and that this is likely to be reflected principally in staff reductions. I happen to know that this school has a very firm commitment to its staff, as it does to its pupils.

So Clause 5 is more than unfortunate; it is retrograde and, I feel, discriminatory. The Government ought to think again about the purpose and formulation of this particular clause of the Bill.

[Baroness Barran (Con)]

My Lords, the Minister has heard three very strong arguments from across the House. The first is that the principle of not taxing education should be respected and upheld. Secondly, there is the principle that charities should not be subject to any kind of political overreach. Thirdly, the Government should not introduce a two-tier system, punishing charities that do not conform to their views. I think we have heard across the House that this sets a very unfortunate precedent.

Finally, there is the point that this policy will not deliver but rather will impact children, particularly vulnerable children, who attend some of the small schools that serve them and their communities all around the country. I would like to test the opinion of the House.

[Lord Khan of Burnley (Lab)]

My Lords, we have a right of reply.

Amendment 30 would remove Clause 5 from the Bill, and therefore the measure that removes the eligibility for charitable rate relief from private schools that are charities. Amendment 31 would require the Government to undertake an assessment of the expected and observed impact of Clause 5. Furthermore, that amendment seeks to ensure that any assessment has regard to impacts owing to any other tax change that have affected private schools since 1 January 2025, effectively seeking to create an all-encompassing review of the Budget tax changes and their effect on private schools, and the resulting impact on the state sector. I am unable to accept these amendments.

This Government committed in their manifesto to raise school standards for every child, to break down barriers to opportunity and to ensure that every child has the best start in life, no matter where they come from or their financial background. As part of that, the Government committed to removing the VAT and business rates charitable relief tax breaks for private schools, to help to raise revenue to help to deliver on their commitments to education and young people.

The Government carefully considered their approach in designing the policy to remove charitable rate relief from private schools. On 29 July, they published a technical note on removing the VAT and business rates charitable relief tax breaks for private schools. The Government received over 17,000 responses to this note, from a range of tax specialists, private schools, bodies that represent private schools and others. A detailed government response to this was published at the Autumn Budget. Furthermore, at the introduction of this Bill, the Government published a note setting out analysis of the impact of the business rates measure. This is available on the Bill page. A tax information and impact note was published in relation to the VAT change at the Budget and is available on GOV.UK.

The removal of business rates charitable relief from private schools that are charities will apply to all charitable private schools, with the exception of where a private school is wholly or mainly concerned with providing full-time education to persons for whom an education, health and care plan is maintained. As I set out in a debate on an earlier group today, under the carve-out in the Bill, the Government believe that this will ensure that most private special schools will not be affected by the Bill measure.

At the Budget, the Government announced a real-terms increase in per pupil funding, with a £2.3 billion increase to the core schools budget for the financial year 2025-26, including an almost £1 billion uplift in high-needs funding. This funding increase needs to be paid for; to help to do that, the Government are ending tax breaks for private schools, including, as this Bill delivers, ending charitable rate relief for those private schools in England that are charities. Taken together with the policy to remove the VAT exemption, these measures will raise around £1.8 billion a year by 2029-30.

I know that there have been concerns with regards the impact on the state sector caused by this policy. The impact note that I mentioned set out that, in the long run—by 2030—the Government estimate an increase of 2,900 pupils in the state sector. Based on average 2024-25 per pupil spending in England, the Government expect the revenue costs of pupils entering the state sector as a result of the business rates measure in England to steadily increase to a peak of around £20 million per annum, after several years. Overall, the expected revenue from the measure will substantially outweigh the additional cost pressures.

The Government have undertaken analysis of the policy and provided that publicly. Furthermore, they undertake a range of monitoring, data collection and publication of data as part of usual processes, and will continue to do so when the Bill measure comes into effect. For example, the Department for Education monitors place demand and capacity as a matter of course, and works closely with local authorities to meet any demand pressures to ensure that there are sufficient school places for children who need them. All children of compulsory school age are entitled to a state-funded school place.

Pupil numbers in schools fluctuate regularly for a number of reasons, and the school funding system in England is already set up to manage that. For individual schools, the Government therefore expect changes in pupil numbers caused by these changes to be managed in the usual way. Data on the number of school pupils is published every summer, providing information on the number of pupils at different types of schools, so anyone can see how pupil numbers in both state and private schools have changed.

Part of the assessment that the amendment would require seeks to understand any impact on partnership working between private and state schools, as well as the capacity of private schools to provide fee assistance. I understand that there is concern that private schools will reduce these activities. We understand from data published by the Independent Schools Council that a lot of private-state sector partnerships relate to the hosting of joint events or providing access to facilities used by private school pupils. In many of these partnerships, the activity undertaken benefits the pupils that attend private schools, so it would not be in the interest of the private schools to stop this activity either.

19:15

Furthermore, in the provision of facilities to non-pupils, this is not universally undertaken free of charge by private schools. It will be for individual private schools to determine how they meet any additional costs as a result of the Bill measure. However, the Government expect private schools to continue to demonstrate public benefit, with partnership working, sharing of facilities and providing fee assistance as common ways in which these schools do that. Demonstrating public benefit is a requirement of the charitable status, and the Government do not expect partnership activity, provision of facilities to non-pupils or fee-assistance to decrease significantly.

With regards to the other areas highlighted for examination in the amendment, local authorities can place looked-after children at private schools when it is in the child’s interests. We do not expect placements funded by local authorities to be impacted by the tax changes. As with partnerships, we do not expect charitable schools to stop supporting these pupils as part of their demonstration of public benefit.

The Government recognise that some parents want their children to be educated in a school with a particular faith ethos. Pupils who follow a particular faith can be accommodated in the state sector. As I have said, all children of compulsory school age are entitled to a state-funded school place if they need one, and all schools must comply with their obligations under the Equality Act 2010. In addition, schools are expected to promote fundamental British values, including the values of mutual respect and tolerance for those with different faiths and beliefs.

As part of the monitoring and data that the Department for Education already undertakes as part of its usual processes, the department collects information on the number of teachers in private schools. This data is published annually. The Government do not anticipate that private schools will substantially reduce staff as a result of the business rates measure.

The Government are committed to breaking down barriers to opportunity, delivering for all children and improving the state sector, and are prepared to take the tough but necessary decisions to deliver on those bold commitments.

I thank the noble Baroness, Lady Barran, for all her contributions today and throughout the passage of the Bill through this House. She has brought great expertise and scrutiny to the process. However, I cannot accept her amendment, as the Government must proceed with delivering on their manifesto commitments.

I give many thanks to the noble Lord, Lord Black of Brentwood, for his amendment. I appreciate that there is a desire to commit the Government to undertake a detailed review. However, they already undertake a wide range of monitoring as part of business-as-usual processes, and make data available so that all can see how various factors change year to year.

I extend my gratitude to all noble Lords for their engagement during the passage of this Bill and for their thoughtful expertise, skills and knowledge, in meeting me, as well as in debate on the Bill. I hope that I have been able to reassure noble Lords here today of the work that the Government have already done and will continue to do in this space. I hope that the noble Baroness is able to withdraw her amendment.

[Baroness Barran (Con)]

My Lords, I apologise to the House, and particularly to the Minister, for jumping the gun with my closing remarks.

It is fair to say that, of the three points that I raised —the principle of taxing education, the differential treatment of charities and the impact of the Bill— I did not hear the first two addressed directly, and on the third I think that the Minister and I have to agree to differ. With that, I am afraid that I have to tell the Minister that I still wish to test the opinion of the House.

19:18

Division 5

Ayes: 232

Noes: 141

19:29

Amendment 31 not moved.

Amendment 32

Moved by

[Lord Thurlow]

32: After Clause 5, insert the following new Clause—
“Use Class for retail services from fulfilment warehouses(1) Within three months of the day on which this Act is passed, the Secretary of State must instigate a review of the merits of a separate Use Class and associated multiplier for retail services provided by fulfilment warehouses that do not have a material presence on local high streets, to apply in England.(2) Experts in the sector must be consulted to inform the review, including but not limited to—(a) the Royal Institute of Chartered Surveyors;(b) the Institute of Revenues, Rating and Valuation;(c) the Rating Surveyors’ Association. (3) The Secretary of State must publish a report of their conclusions and recommendations within three months of the review being instigated, and lay that report before Parliament.(4) The Secretary of State must implement any recommended changes indicated by the findings of their review within six months of the date on which the report is published.(5) The Secretary of State may make provision to carry out subsection (4) by regulations made by statutory instrument.(6) A statutory instrument containing regulations under subsection (5) is subject to annulment in pursuance of a resolution of either House of Parliament.”Member’s explanatory statement
This amendment seeks to recalibrate the share of non-domestic rates paid by retailers not on the high street through a review informed by expert advice, to be implemented within one year of the passing of this Act.

[Lord Thurlow (CB)]

My Lords, we debated this amendment two or three hours ago. It would level the playing field between internet warehousing and high street shops. I am grateful to noble Lords who took part in that debate and to the Minister for his helpful and constructive suggestions, but I am afraid that they were too vague. The wait will be too long and the crisis for high street shops is pressing, so I would like to divide the House.

19:30

Division 6

Ayes: 196

Noes: 135

19:41

Clause 6: Commencement

Amendment 33 not moved.

Amendment 34

Moved by

[Lord Jamieson]

34: Clause 6, page 6, line 21, at beginning insert “Subject to the review required under section (Review: threshold effect) having been laid before Parliament three months before the start of the financial year,”

Amendment 34 agreed.

Sustainable Farming Incentive

Tuesday 18th March 2025 Lords Chamber

Statement

The following Statement was made in the House of Commons on Wednesday 12 March.

“With your permission, Mr Speaker, I would like to update the House on the sustainable farming incentive.

We stand on the edge of an unprecedented global transition for British farming. From leaving the European Union to the challenges of climate change and geopolitical events, we are asking more of farmers than ever before: to continue to produce the food that feeds the nation and to protect the environment on which our long-term food security depends. We are determined to create the conditions for farm businesses to be profitable and succeed. We are proud to have secured £5 billion for farming over two years: the largest budget for sustainable food production in our country’s history. That is £1.8 billion for customers already in agreements, £1 billion for farmers now in SFI agreements and a further £150 million for farmers in the SFI pilot.

Labour has got that money out of the door and into farmers’ pockets. We have invested it to bring thousands more farmers into environmental land management schemes, which were vastly underspent by the previous Government, to make a record number of capital items available for the coming year to help farmers carry out actions under the SFI and Countryside Stewardship, with £600 million available for productivity, animal health and welfare innovation, and other measures to support agricultural productivity, as well as 50 landscape recovery projects across the country. We have responded directly to calls from the sector to roll out a new higher- tier scheme, and to increase payment rates so that higher- level stewardship agreement holders—many of them upland farmers—are fairly rewarded for their work.

More than half of all farmers are now in schemes, with 37,000 live SFI agreements and 50,000 farmers in ELM agreements. Under the SFI, 800,000 hectares of arable land are being farmed without insecticides, 300,000 hectares of low-input grassland are managed sustainably, and 75,000 kilometres of hedgerows are being protected and restored, which is a huge success for nature. I thank all farmers involved and reassure them that all existing SFI agreements will be honoured.

Farmers will continue to be paid under the terms of their agreement for its duration. If they entered into a three-year SFI agreement earlier this year, they will be paid until 2028. If they submitted an SFI application but this has not yet started, that will also be honoured. All farmers who took part in the SFI pilot will be able to apply for an agreement.

With the high uptake of the scheme, however, the fact is that it is now fully subscribed. This Government inherited SFI with no spending cap, despite a finite farming budget, and that cannot continue. We will continue to support farmers to transition to more sustainable farming models, including through the thousands of existing SFI agreements over the coming years and a revamped SFI offer. But this is an opportunity to improve how we do that under a fair and just farming transition, which supports farms to be profitable businesses in their own right through fairer supply chains, better regulation and greater market access, and directs public funding in a fair and orderly way towards the priorities that we have set out on food, farming and nature. We will be strategic in how we design our schemes, and responsible within the available budget. This is about using public money in a way that supports food production, restores nature and respects farmers as the businesspeople they are.

SFI can and must work better for all farms and for nature, and I will set out the details of the revised SFI offer following the spending review, including when it will open for applications. We will work closely with the sector to design an improved scheme so that it can tell us what works best for its businesses. We will also put in place strong budgetary controls so that SFI is affordable to the public purse. The revised offer will align with our land use framework to better target SFI actions fairly and effectively, focusing on helping less productive land contribute to our priorities for food, farming and nature.

The underlying problem facing the sector, however, is that farmers do not make enough money. The Government are changing that. [Interruption.] Opposition Members may laugh but businesses do need to make money; they might need to know that. We announced a new set of policies at the National Farmers’ Union conference last month aimed at improving farm profitability, securing our food security, and protecting nature. Through our farming road map, we are creating the conditions for farmers to run profitable businesses that can withstand future challenges.

This decision is about investing in long-term stability. It is about a future where farmers are supported to run profitable businesses, and where public money is used in a better way to better restore nature and to secure long-term food security”.

19:42

[Lord Roborough (Con)]

My Lords, I first declare my interests as set out in the register, in particular as a dairy farmer. I thank the Minister for repeating this Statement in your Lordships’ House and for allowing an opportunity to scrutinise the decision to cap sustainable farming incentives in this manner.

We on these Benches are proud of the Environment Act 2021 and of the transition in farming support payments to environmental land management schemes. ELMS is a crucial step in fulfilling our legally binding commitment to achieve a 30% recovery in nature by 2030, as well as ensuring that farming payments are for public goods. To cap the sustainable farming incentives with no notice, despite the Government’s own website informing that up to six weeks’ notice would be given for withdrawal of SFIs, is a betrayal of our farmers and our natural environment. Many were already facing unexpected financial hardship from the massive reduction in delinked payments, planning for the reduction in IHT reliefs, the increased minimum wage and national insurance contributions. This adds more pressure to those who were expecting to transition to SFIs this year but had not yet applied. Fewer than half of farm holdings that were in the basic payment scheme have SFIs.

The NFU’s farmer confidence survey shows farmer confidence in England and Wales at its lowest level ever. Some 88% of farmers believe the phase-out of direct payments will negatively affect their business, and 51% of farmers were planning to use ELMS to mitigate that phase-out. These dramatic changes in government support with no notice upset any attempt at budgeting, with costs already largely set for this year based on revenue projections that have now been dramatically cut. This will cause significant further hardship and heartache.

What assessment has been made of the impact of the SFI announcement on the financial viability of the farming industry? How many farms are likely to be pushed beyond breaking point this year? Has the estimated £400 million being cut from delinked payments been fully reallocated to the environmental land management schemes? Do the Government still intend to open the Countryside Stewardship higher tier this summer as previously committed to? In regard to the environment, what impact will the SFI decision have on compliance with the legally binding commitment delivered in our Environment Act to deliver improvements in biodiversity and nature recovery, given the central importance of farmers and land managers in achieving this?

Government messaging about the timing of new SFIs has been muddled, mentioning both 2026 and 2025 and it being potentially contingent on the finalisation of the land use framework. Please could the Minister be clear today on exactly when farmers will be given access to new SFIs and how their emphasis will differ from existing SFIs? Can the Minister also confirm that the £5 billion budget settlement for farming remains intact and will be fully distributed over the years ending in 2025 and 2026?

Given this Government’s disappointing financial decisions relating to farming and the wider rural economy, it would also be helpful if the Minister could enable us to understand what role she sees for private sector finance in replacing the public purse in land management. ELMS is an important segue into that, identifying valuable natural capital activities in land management, which in turn can morph into quantified public goods. In order for the private sector to step in, we need to see financial incentives. What financial incentives would the Government consider appropriate to deliver this investment? Will the woodland carbon code and peatland carbon code be admitted into the emissions trading scheme, creating real market demand? Will tax incentives be considered, or public bidding rules? Finally, could the water industry play a greater role in financing nature-based projects for reducing peak flow rates and flood events, and improving water quality?

The farming community needs help to plan after so many blows; I hope that the Minister can help with her answers.

[Baroness Grender (LD)]

My Lords, I thank the Government for the Statement. They will no doubt by now be aware of the significant disappointment and dismay the sudden closure of this scheme, without consultation or warning, has caused. What analysis did the Government do before this announcement to establish the likely impact on smaller farmers such as family farmers and those on significantly less than the minimum wage? Were there impact assessments in respect of farmers losing their basic payment this year with the immediate removal of SFI, and without, as yet, any clear replacement scheme?

Can the Minister please share with us the expenditure implications? It is our understanding on these Benches that if the BPS cuts this year are taken into account, more than £400 million of the £2.5 billion farming budget will remain unspent. Given that this was a budget intended to reward farmers for nature restoration and sustainable food production, can the Minister reassure us that this will not damage both? Can she explain how the Government will ensure that key environmental work is rewarded, and carried out by farmers who can no longer get access to this funding?

Does the Minister accept that there is a danger that the larger landowners, the ones that are more corporate, are highly likely to have already taken up the SFI and be part of the 6,100 new entrants this year? What advice does she have for the smaller operators, some of Britain’s poorest farmers, who are now left behind? Is she further aware that only 40 hill farms were new entrants this year, and that the previous Government failed to provide sufficient support for hill farmers, which in turn led to an over 40% drop in hill farm incomes in just five years? Is there any plan to help the small farms, upland farmers and commoners affected by this sudden change?

Can the Minister share with the House any discussions with farming stakeholders in advance of this change? Stakeholders tell us there were none, and the NFU said that it had just 30 minutes’ notice.

Finally, will the Minister please share what steps the Government will now take to increase the farming budget to reflect the Government’s nature and climate targets? We would be very happy to share the suggestions in our own manifesto if that would be in any way helpful. These targets, we would argue, have been greatly damaged by this cut in SFI.

[The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Baroness Hayman of Ullock) (Lab)]

My Lords, I thank noble Lords for their interest and questions on the Statement.

Twice before, the SFI system has been paused when the funding had been used up from the applications and started up again. Although applications for the SFI 2024 scheme have closed, I want to reassure noble Lords that we plan to reopen the SFI application service once we have a reformed SFI offer in place. Ongoing ELM schemes are supporting farm businesses to remain viable as they adjust to the reduction of farm subsidies that noble Lords have referred to. The new figures published recently showed that the proportion of commercial farms with income from agri-environment schemes rose from 49% in 2021 to 70% in 2023-24. There is a success rate here.

The noble Lord, Lord Roborough, asked about funding from the delinked payments reductions. The money released from the reductions to subsidies is being reinvested through our other schemes for farmers and land managers. Every penny is staying within the sector.

Details of how the £5 billion for 2024-25 and 2025-26, which was secured in the last spending review as being spent, were published on our farming blog on 12 March, for noble Lords who are interested. This includes £1.05 billion on SFI and £350 million on other ELM schemes.

The noble Lord asked about the Countryside Stewardship higher tier. That is being rolled out in a controlled way by invitation, so that everyone will get the right level of support. Invited applicants will be asked to submit applications from this summer.

On the environment and environmental targets, which the noble Lords asked about, closing SFI for new applications will not have any impact on the environmental benefits that we are getting from the 37,000 SFI agreements that are already live, nor affect the outcomes we are getting from other agri-environment schemes. The Government are still committed to delivering on these environmental outcomes.

Some 4.3 million hectares of land are now in SFI agreements, which means that 800,000 hectares of arable land are being farmed without insecticides. We want to move further on this. This reduces harm to pollinators and improves soil health. Some 300,000 hectares of low-input grassland is being managed sustainably, which will help biodiversity and improve water quality. Some 75,000 kilometres of hedgerows are being protected and restored, and this provides essential habitats for wildlife, improves carbon storage and strengthens our natural flood defences.

Regarding the timing of the reformed SFI, we plan to reopen the online application process once we have finalised the offer. On the issue around small farms, upland farmers and commoners, we need to make it fit for purpose as it moves forward, so that we are talking to the right people and allowing the right kind of farms and communities to apply. We are considering what it needs to look like, taking those issues into consideration. Clearly, the spending review is also important. We expect to publish more information as to what it will look like and when it will come into play after that. We will work with stakeholders and farmers to review the scheme, to ensure that we are directing funding towards the actions that are most appropriate and have the strongest case for that investment.

We also want to align the SFI with our work on the land use framework and the 25-year farming road map that my colleague, the Farming Minister, is working on. We need to protect the most productive land and boost food security while we deliver for the environment and nature.

We are evolving the SFI offer and exploring ways to better target the money towards smaller farmers and the least productive land. We need to ensure that we get the outcomes that we need.

To confirm, the farming budget remains at £5 billion for this year and next year, as we previously announced. We are on track to spend all the funding that is available.

On private sector funding, which the noble Lord, Lord Roborough, asked about, the Government are committed to significantly increasing private investment in nature’s recovery. This will not only help us meet our environmental targets but will create opportunities for farmers and land managers to diversify their business revenues through the sale of services around nature and the environment. Those markets are small, but they are growing. We are going to consult on what additional action we need to take to strengthen those markets in the weeks ahead. In the recent land use framework publication, we announced a call for evidence to seek views on how we can better incentivise private investment in nature from the sectors that impact and depend on our shared natural capital. We intend to publish that later this year.

The noble Lord, Lord Roborough, asked specifically about the Woodland Carbon Code and the Peatland Code. The Government have launched a consultation on integrating greenhouse gas removals in the UK Emissions Trading Scheme—as the noble Lord knows, that was last summer. This included exploring the inclusion of the Woodland Carbon Code in the UK Emissions Trading Scheme. We are going to look at that consultation and respond in due course.

We are also exploring opportunities for expanding private investment in woodland creation. A few weeks ago, we launched the timber in construction road map, and we have an upcoming call for evidence on private investment for nature recovery. We also recently launched a tender to modernise the Woodland Carbon Code’s operations and the upcoming voluntary carbon and nature markets consultation, so there is quite a lot going on in that area.

On the water industry, we are aware of a number of water companies that are working to develop nature-based solutions and exploring actions to improve water quality and manage flooding. We are working with the industry to understand how we can promote the different benefits that come from this and to promote blended funding approaches. Through Ofwat, the Government are also supporting water companies to develop nature-based solutions—we have discussed this in other debates. It is an important focus for us. Mainstreaming nature-based solutions to deliver greater value is something we now have a grant to look at, so we can bring together multi- sectoral expertise and leadership, which is what we are going to need to facilitate and enable the proper, true transition to nature-based solutions.

I hope I have covered most things, but I will check and get back to noble Lords if I have not.

19:57

[Lord Cromwell (CB)]

My Lords, the Minister in the Commons told the House of Commons that he knew for five years that the money was going to run out, but he said nothing. Instead, he waited until the money ran out and slammed the door— overnight—on more than half of English agricultural holdings, in breach of the six-week notice period that was cynically, overnight, airbrushed off the Defra website. His only reason for this was that there might otherwise have been a rush of applications. His only advice to farmers was to apply immediately for any new SFI that is opened, which is surely itself a recipe for a precipitous rush. It also ignores that inquiries to Defra by farmers seeking to get their applications right take months to get a reply. It took me three years to get answers, and those were still incomplete when the scheme was shut in the face of my family farm.

Finally, the Minister then tells hard-pressed rural communities that his department running out of money should be “a cause for celebration”. I cannot help but recall the rustic expression, “Don’t piddle down my back and tell me that it’s raining”. Can the Minister tell the House what lessons have been learned from this latest disaster for so many family farms?

[Baroness Hayman of Ullock (Lab)]

As I mentioned earlier, this is not the first time that SFI has been paused. The way the scheme operates is that it opens for applications and, when the funding is used up, it is then paused until we look at the next round of SFI funding. It is difficult to judge when that is likely to come to an end. In response to the noble Lord’s final question, we are aware that the SFI scheme needs reforming, which is what we are now looking at doing. We need to get it right and we need it to work better for farmers and for the environment. That is why, as I mentioned, we will be talking to stakeholders, including those who use the scheme and those who we would like to use it but who perhaps find it difficult to apply to at the moment. I am particularly talking about smaller farms and upland farms; we need to be much more targeted on them. We are aware that we need to reform it, and we are working on that at the moment.

[The Earl of Leicester (Con)]

My Lords, I refer the House to my register of interests. It is somewhat disingenuous of the Minister to say that the SFI scheme has been paused twice. The previous two occasions were actually pilot schemes, which were then rolled forward, so I do not accept that. Following on from the question from the noble Lord, Lord Cromwell, what assessment has been made of whether Defra has sufficient resources and staff to deliver commitments across the environment and food security, and what is the Minister’s assessment of the Rural Payments Agency’s ability to handle the change?

[Baroness Hayman of Ullock (Lab)]

As I said, we need to reform the system and we are working on that; we want it to work as effectively as it possibly can, both to support farmers and to deliver the environmental targets that we need. I have visited the RPA offices in Carlisle, and the staff there work incredibly hard. We are looking at how we can improve the digital support they get, for example, because we need to ensure that the RPA is fit for the future and able to support farmers as best as it can in the way that it needs to.

[Baroness Ritchie of Downpatrick (Lab)]

My Lords, I thank my noble friend the Minister for her Statement today. On the sustainable farming incentive, I know that she visits Northern Ireland and the other devolved nations fairly regularly, examining agricultural and environmental issues. When she next visits Northern Ireland, could she discuss with the Minister for Agriculture there the impact of the withdrawal of APR and business property relief? They were essential to sustainable farming in Northern Ireland, where an acre sells for about £25,000. The level of investment and money needs to be investigated by the Government and the Treasury again.

[Baroness Hayman of Ullock (Lab)]

I thank my noble friend for those questions. The last time I visited Northern Ireland, I went on a visit with the Ulster Farmers’ Union to a farm to look at the specific differences between farming in Northern Ireland and in England, and to listen carefully to their concerns about some of the issues that my noble friend has raised. I can confirm that I am going to Northern Ireland on Thursday. I will be spending two days there, and I have already asked for an agenda item with Minister Muir, who my noble friend referred to, to discuss exactly these issues. It is really important that Northern Ireland farmers are listened to, just as it is important for farmers in the rest of the UK.

[The Lord Bishop of Manchester]

My Lords, I do not know whether I have an interest to declare. I am not a farmer but the Church Commissioners, who pay my stipend and working costs, are one of the largest landowners of tenanted farms in the UK, so I declare that.

We have had a couple of brief references so far to food security, but might I tempt the Minister to say a little bit more on that subject, particularly given the geopolitical situation we are in at the moment? In addition, has any assessment been made of the impact that these changes and the announcement last week are likely to have on the UK’s food security?

[Baroness Hayman of Ullock (Lab)]

On food security, as I mentioned earlier, we currently have 37,000 farmers in the SFI scheme, which equates to about 50% of farmland. The purpose of that is to support them to produce food sustainably while also delivering for nature. The SFI agreements last for three years, so, although we have closed the new applications, the live agreements—the 37,000—remain unaffected and can continue to support sustainable food production.

We are committed to improving food security and are aware that SFI is a major tool that we need to use to support that. We are also looking to boost food security with other tangible measures. For example, we recently committed to ensure wherever possible that half of food supplied into the public sector is produced locally or certified to high environmental standards. We have also announced a five-year extension to the seasonal workers visa route and we are looking at reform to the planning system so that farmers can put the necessary infrastructure in place that they need in order to continue to produce food sustainably.

[Lord Bellingham (Con)]

My Lords, further to the question from the noble Lord, Lord Cromwell, is the Minister aware that, speaking in the House of Commons before the election, the then shadow Defra Minister, Danny Zeichner, said that farmers in the UK needed complete certainty and stability on the SFI? He went on to say that an incoming Labour Government would provide exactly that. Is this the Minister’s idea of complete certainty and stability?

[Baroness Hayman of Ullock (Lab)]

I completely understand that the closure so quickly and unexpectedly has caused difficulties and concern—I just want to say that. However, it is important that, looking to the 25-year farming road map that we are developing, part of the reasoning behind that is to try to give that kind of security. It is also important that, when we look at opening the SFI scheme next time, all this is taken into consideration, so that our reforms produce a more stable scheme. He is absolutely right that farmers need certainty and security, because farming is looking at long-term investments and farmers need to be able to know how to make those investments. So I take his point.

[Lord Carrington (CB)]

My Lords, I declare my farming interests are set out in the register and that I am likely to be affected by the withdrawal of SFI 24. I want to just probe a little further on the two questions that were asked by the noble Lord, Lord Cromwell, and the noble Earl, Lord Leicester. The Government claim that the promised six-week warning of closure was not given due to the potential spike in applications causing budget overspend. Surely, Defra has been monitoring this spending versus budget and advising Ministers accordingly. Please can the Minister confirm that she is satisfied with the efficacy of the Defra review process and, if so, why the Government did not take early action to avoid this serial blow to farming and the environment?

[Baroness Hayman of Ullock (Lab)]

My Lords, as I said, I am very aware that the sudden closure, when farmers were expecting more notice, has not been easy and that, for many people who were intending to put in applications, as the noble Lord said about himself, that has caused difficulties. I have friends who are in that boat, so I am very aware that difficulties were caused. I will take the concerns of the House back to the Farming Minister and explain that the unexpected pause and its impacts are felt very strongly by this House. I am happy to commit to do that, because it is important.

[The Duke of Wellington (CB)]

My Lords, I declare my agricultural interests as in the register. My noble friend Lady Batters very much wanted to be here this evening, but as a working farmer she is having to carry out TB testing today.

Following on from some of the earlier questions, can the Minister give a bit more detail of the advice that the new Ministers were given when they came into the department last July, when presumably the officials were already aware that there might be pressures on the fund? It seems astonishing to everyone in the Chamber that not even the Ministers gave any indication that the funds were running out. Can the Minister give a bit more explanation? The great concern now is that the details of the new scheme may not be announced in the very near future. Can she indicate when the new revised scheme is likely to be announced?

[Baroness Hayman of Ullock (Lab)]

On the detail of the new scheme, as I mentioned earlier, we will consult with stakeholders on how it needs to be reformed to work better for farmers and the environment. We do not want a repeat of problems for farmers, so we need to get it right. We must also look at budgets through the spending review. I cannot give specifics of when it will start up again, but we will start it up again. The current system will last for three years, so we need to look at how to get the next system in place as soon as practically possible, having taken those steps.

On the six weeks’ notice, the SFI scheme was set up as a demand-led scheme. Our aim was to allow as many farmers to join as possible before it was paused. We were not able to give any advance notice of the need to close, because we were concerned that, if we said that we would be closing it, we would suddenly have a lot of extra demand without the funding to manage that demand. I know that this is not what noble Lords want to hear, but that was the reasoning behind it. We must be able to afford to give the funding to support the applications that come in, and budget constraints are very difficult at the moment.

While we aim to give notice and are clearly aware that the website mentioned six weeks, there is no requirement in the scheme to do that. I appreciate that it did say six weeks. As part of reforming it, we want there to be much more sophisticated, effective budget controls around this. As the noble Lord mentioned, farmers need certainty. To give them certainty, we need to ensure that we can assess the scheme in such a way that we can provide that.

[Baroness Hoey (Non-Afl)]

My Lords—

[Baroness Coffey (Con)]

My Lords—

[Lord in Waiting/Government Whip (Lord Leong) (Lab)]

We will hear from the noble Baroness, Lady Hoey, and then from the noble Baroness, Lady Coffey.

[Baroness Hoey (Non-Afl)]

I thank the noble Lord for that.

No matter what is said in justification, this will still be seen as an attack on farming, particularly on small farms. Does the Minister agree that the most important job for farmers is to produce good-quality food, and that all funding going into farming should have that as the priority? Why are we allowing so many solar farms to be put on good agricultural land, with other land being used for things other than farming? Surely that must be a priority if we genuinely care about food security?

[Baroness Hayman of Ullock (Lab)]

The noble Baroness’s question references a lot of the longer-term work that Defra is doing to get these things right. Regarding solar farms, the land-use framework is designed to look at things such as where we put energy, where the best-quality agricultural land is, where we put housing and so on. The land-use framework looks to address much of that.

Regarding what farmers should be doing, whether their first priority is to produce food and so on, we are developing the food strategy and the 25-year road map for farming. Both are looking at how we address this and how we ensure that we have high-quality, sustainable food production in this country for us to become as self-sufficient as is practically possible. These are important long-term pieces of work that the department is doing. We wanted to move away from short-term decision-making that did not deliver in the long run. A big criticism of what has happened with the sustainable farming initiative is that it was too short-term. Taking that bigger picture view, to give farmers certainty for the future, is a really important piece of work that the department is doing.

[Baroness Coffey (Con)]

My Lords, I know that the Minister is a friend of farmers and recognise her experience in Cumbria and her previous time as a Member of Parliament. She will know that farmers are disappointed. The money that is available through SFI was always intended to increase over the five years of the agricultural transition, so it is no surprise that more and more farms have come in. A record 65,000 are now in agri-agreements. I am really worried in a different way about the intensification of food production, which will actually hamper the progress that had been made in getting farmers signed up to nature. Let us be candid: the ambitious but practical nature targets can be achieved only with the help of farmers and landowners across our country.

[Baroness Hayman of Ullock (Lab)]

The noble Baroness makes a really good point about the increasing intensification of farming, and that is something we do not want to see. Our focus has to be on high-quality sustainable food that we can buy locally, and on farmers being able to support the country. We said in our manifesto,

“food security is national security”

and that is very true. It is incumbent on us as the Government to look at how we deliver on that promise.

[Baroness Boycott (CB)]

My Lords, what seems to get missed in this is how little money every farmer in Britain makes out of food. In some instances, especially in dairy, they are making as little as a penny out of what we spend. Are the Government in their food strategy going to ask the supermarkets to be completely transparent about the amount of profits that they make and the supply chains that they operate? Will they ask them to start to implement much more local sourcing and a different kind of supply chain so that farmers, whom we are asking so much of, actually get paid for growing food for us?

[Baroness Hayman of Ullock (Lab)]

Fairness within the agricultural supply chain has to be a key priority for the Government, because we know that farmers have suffered under different pricing regimes, if you like, for many years. If we do not get it right, we will not be able to get the food security that we want as well, because if farmers are going to produce the food that we are asking them to produce, they have to know that they will be paid fairly for that food.

We are going to use powers in the Agriculture Act 2020 to introduce “fair dealing” regulations that will apply to businesses when purchasing agricultural products from farmers. There have also been new rules for the pig sector introduced to Parliament which ensure that contracts clearly set out expectations and that changes can be made only if agreed by all parties. This continues on from the work that the previous Government were doing, and I am sure that noble Lords opposite will be very supportive of it. Following on from that work on pigs, we are committed to bringing in regulations for eggs and fresh produce sectors, as previously proposed by the Government. If we need to intervene with other sectors, then we certainly need to look at that and see what needs to be done. As I said right at the beginning, we do recognise that this has been an issue for farmers, but we also need to look at how best we can support farmers to create that secure food sector that we so badly need as a country.

Welfare Reform

Tuesday 18th March 2025 Lords Chamber

Statement

20:19

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Sherlock) (Lab)]

My Lords, with the leave of the House, I shall repeat a Statement made earlier today in the other place by my right honourable friend the Secretary of State for Work and Pensions. The Statement is as follows:

“Mr Speaker, this Government are ambitious for our people and our country, and we believe that unleashing the talents of the British people is the key to our future success. But the social security system we inherited from the Conservatives is failing the very people it is supposed to help and is holding our country back.

The facts speak for themselves. One in 10 people of working age are now claiming a sickness or disability benefit. Almost 1 million young people are not in education, employment or training—that is one in eight of all our young people. Some 2.8 million are out of work due to long term sickness, and the number of people claiming personal independence payments is set to double this decade from 2 million to 4.3 million, with the growth in claims rising faster among young people and those with mental health conditions. Claims are up to four times higher in parts of the Midlands, Wales and the north where economic demand is weakest. These places were decimated in the 1980s and 1990s, written off for years by successive Tory Governments and never given the chances that they deserved.

The consequences of this failure are there for all to see. Millions of people who could work are trapped on benefits, denied the income, hope, dignity and self-respect that we know good work brings. Taxpayers are paying millions more for the cost of failure, with spending on working-age sickness and disability benefits up £20 billion since the pandemic and set to rise by a further £18 billion by the end of this Parliament to £70 billion a year. It is not like this in most other comparable countries, where spending on these benefits since the pandemic is either stable or falling, while ours continues to inexorably rise. This is the legacy of 14 years of Tory failure.

Today we say, ‘No more’. Since we were elected, we have hit the ground running to get more people into good work through our plan for change. We are investing an extra £26 billion into the NHS to drive down waiting lists and get people back to health and back to work. We are improving the quality of work and making work pay with our landmark employment rights legislation and increases in the national living wage; we are creating more good jobs in every part of the country in clean energy and through our modern industrial strategy; and we are introducing the biggest reforms to employment support in a generation, with our £240 million Get Britain Working plan. Today, our Pathways to Work Green Paper sets out decisive action to fix the broken benefits system, creating a more proactive, pro-work system for those who can work and so protecting those who cannot work, now and for the long term.

As a constituency MP for 14 years, I know that there will always be people who can never work because of the severity of their disability or illness. Under this Government, the social security system will always be there for people in genuine need. That is a principle we will never compromise on. But disabled people and people with health conditions who can work should have the same rights, choices and chances to work as everybody else. That principle of equality is vital too, because, far from what Members opposite would have you believe, many sick and disabled people want to work, with the right help and support. Unlike the Conservatives, that is what we will deliver.

Our first aim is to secure a decisive shift towards prevention and early intervention. Almost 4 million people are in work with a work-limiting health condition, and around 300,000 fall out of work every year, so we have to do far more to help people stay in work and get back to work quickly—because your chances of returning are five times higher in the first year. Our plans to give statutory sick pay to 1 million of the lowest-paid workers and more rights to flexible working will help keep more people in work.

The WorkWell programme is trialling new approaches, such as GPs referring people to employment advisers instead of signing them off as sick. Our “Keep Britain Working” review, led by former John Lewis boss Sir Charlie Mayfield, will set out what government and employers can do together to create healthier, more inclusive workplaces. So we will help more employers offer opportunities for disabled people, including through measures such as reasonable readjustments, alongside our Green Paper consultation on reforming Access to Work so it is fit for the future.

Today I can announce another step: our Green Paper will consult on a major reform of contributory benefits, merging contributions-based jobseeker’s allowance and employment support allowance into a new, time-limited unemployment insurance, paid at a higher rate, without having to prove you cannot work in order to get it. So if you have paid into the system, you will get stronger income protection while we help you get back on track.

Our second objective is to restore trust and fairness in the benefits system by fixing the broken assessment process and tackling the perverse incentives that drive people into welfare dependency. Members on this side of the House have long argued that the work capability assessment is not fit for purpose. Going through the WCA is complex, time-consuming and often stressful for claimants, especially if they also have to go through the PIP assessment. More fundamentally, it is based on a binary can/cannot work divide, when we know the truth is that many people’s physical and mental health conditions fluctuate.

The consultation on the Conservatives’ discredited WCA proposals was ruled unlawful by the courts, so today I can announce that we will not go ahead with their proposals. Instead, we will scrap the WCA in 2028.

In future, extra financial support for health conditions in universal credit will be available solely through the PIP assessment, so extra income is based on the impact of someone’s health condition or disability, not on their capacity to work—reducing the number of assessments that people have to go through and a vital step towards derisking work.

We will do more by legislating for a right to try, guaranteeing that work in and of itself will never lead to a benefit reassessment, giving people the confidence to take the plunge and try work without the fear that this will put their benefits at risk.

We will also tackle the perverse financial incentives that the party opposite created, which actively encourage people into welfare dependency. The Tories ran down the value of the universal credit standard allowance. As a result, the health top-up is now worth double the standard allowance, at more than £400 a month. In 2017, they took away extra financial help for the group of people who could prepare for work, so we are left with a binary assessment of can or cannot work and a clear financial incentive to define yourself as incapable of work—something the OBR, IFS and others say is a likely factor driving people on to incapacity benefits.

Today, we tackle this problem head on. We will legislate to rebalance the payments in universal credit from April next year, holding the value of the health top-up fixed in cash terms for existing claimants and reducing it for new claimants, with an additional premium for people with severe, lifelong conditions that mean they will never work, so to give them the financial security they deserve.

Alongside this, we will bring in a permanent, above-inflation rise to the standard allowance in universal credit, for the first time ever—a £775 annual increase, in cash terms, by 2029-30, and a decisive step to tackle the perverse incentives in the system.

We will also fix the failing system of reassessments. The Conservatives failed to switch reassessments back on after the pandemic, so they are down by more than two-thirds, with face-to-face assessments going from seven in 10 to only one in 10. We will turn these reassessments back on at scale and shift the focus back to doing more face to face, and we will ensure that they are recorded as standard to give confidence to claimants and taxpayers that they are being done properly.

I can also announce that, for people on universal credit with the most severe disabilities and health conditions that will never improve, we want to ensure that they are never reassessed, to give them the confidence and dignity they deserve. We will fundamentally overhaul the DWP’s safeguarding approach to make sure that all our processes and training are of the highest quality, so we protect and support the most vulnerable people.

Alongside these changes, we will also reform disability benefits so that they focus support on those in greatest need, and to ensure that the social security system lasts for the long term, into the future.

Social and demographic change means that more people are now living with a disability, but the increase in disability benefits is double the rate of increasing prevalence of working-age disability in the country, with claims among young people up 150%; for mental health conditions up 190%; and for learning difficulties up over 400%—according to the IFS. Every day, there are more than 1,000 new PIP awards. That is the equivalent of adding a population the size of Leicester every single year.

That is not sustainable in the long term, above all for the people who depend on this support, but the Tories had no proper plan to deal with it, just yet more ill-thought-through consultations. So today I can announce that this Government will not bring in the Tory proposals for vouchers, because disabled people should have choice and control over their lives. We will not means-test PIP, because disabled people deserve extra support, whatever their income, and I confirm that we will not freeze PIP either.

Instead, our reforms will focus support on those with the greatest needs. We will legislate for a change in PIP so that people will need to score a minimum of four points in at least one activity to qualify for the daily living element of PIP from November 2026. This will not affect the mobility component of PIP and relates only to the daily living element.

Alongside this, we will launch a review of the PIP assessment, led by my right honourable friend the Minister for Social Security and Disability, in close consultation with disabled people, the organisations that represent them and other experts, so we make sure that PIP and the assessment process are fit for purpose now and into the future. This significant reform package is expected to save over £5 billion in 2029-30, and the OBR will set out its final assessment of the costings next week.

Our third and final objective is to deliver personalised support to sick and disabled people who can work to get the jobs they need and deserve. We know from the last Labour Government and our new deal for disabled people, young people and the long-term unemployed the difference that proper employment support can make. More recent evidence from the Work Choice programme and additional work coach time shows that support can make a significant difference in the number of people getting and keeping work and improving their mental health and well-being.

This Labour Government believe that an active state can transform people’s lives. We know this because we have done it before. So today I can announce that we will invest an additional £1 billion a year in employment support, with the aim of guaranteeing high-quality, tailored and personalised support to help people on a pathway to work—the largest ever investment in opportunities to work for sick and disabled people. Alongside this, for those on the UC health top-up, we will bring in an expectation to engage and a new support conversation to talk about people’s goals and aspirations, combined with an offer of personalised health, skills and employment support.

Because being out of work or training when you are young is so damaging to your future prospects, we will go further. In addition to funding our youth guarantee through the £240 million Get Britain Working plan, we will consult on delaying access to the health top-up in universal credit until someone is aged 22, with the savings reinvested into work support and training opportunities, so that every young person is earning or learning and on a pathway to success.

The Conservatives left a broken benefits system that is failing the people who depend on it and our country as a whole. The status quo is unacceptable, but it is not inevitable. We were elected on a mandate for change: to end the sticking-plaster approach and tackle the root causes of problems in this country that have been ignored for too long. We believe in the value and potential of every single person and that we all have something positive to contribute and can make a difference, whether that is in paid work, in our families or in our communities alongside our neighbours and friends. We will unleash this potential in every corner of the land, because we are as ambitious for the British people as they are for themselves. Today we take decisive action, and I commend this Statement to the House.”

20:33

[Viscount Younger of Leckie (Con)]

My Lords, I thank the Minister for repeating the Statement on these long- awaited and much-trumpeted welfare reforms. I say at the outset that the Government are right to look at our growing welfare bill, which is far too high—I think we agree on that. Without action, it will rise to £100 billion by the end of the decade. We need to increase the number of reassessments and hold more in-person assessments to ensure that only those who are eligible for welfare payments receive them.

In government, up until July, we extended employment support, and Ministers are right to continue with our Conservative legacy in the form of the tailored pathway. My first question to the Minister is: how will the £1 billion earmarked for this be measured in terms of success and meaningful results?

Above all else, we welcome the reannouncement of a host of projects and initiatives that we, the previous Government, were already undertaking, such as changing work capability assessments and creating a single assessment; merging new-style jobseeker’s allowance and employment and support allowance into a new, time-limited higher rate; and, of course, I should remind the Benches opposite, providing support for WorkWell. The Labour Party’s slow conversion to the idea that our country needs everybody who can work to do so should be welcomed today.

However, after eight months of dither and delay, the taxpayer has forked out £7 billion in extra sickness benefits, while nearly half a million more people have been signed off sick. On that note, or perhaps I should say fit notes, there is considerable surprise that the Government have scrapped them. It remains the case that there is a 94% sign-off rate, and this sits at the heart of the sickness benefit epidemic. Where is the action on people being signed off sick for the everyday ups and downs of life? Where are the steps that we need to take to bring down the number of people who are leaving work every single day? Currently, it stands at 2,000 people a day, and Ministers need to tackle this urgently. We do not blame the doctors, who are so busy. Can the Minister spell out what, after today’s announcement, the process is for assessing whether someone is fit to undertake work of any sort—while recognising, of course, that this is a key challenge for any Government?

Today’s announcement leaves more questions than it provides answers, and on the areas the Government have finally acted on, they need to be tougher. I have to say that £5 billion in savings is a drop in the ocean compared to the explosion in disability benefits, which, as I said earlier, are set to rise to nearly £100 billion by 2029. Do the Government think that this saving is sufficient, and enough to fill their fiscal black hole, which is the real reason why they are expected to take emergency budgetary steps next week? We on these Benches are unclear whether this small saving is net of the costs and commitments to extra expenditure in today’s Statement. Can the Minister tell us whether the savings announced today include the £5 billion the previous Government had already agreed with the OBR for reforming the work capability assessment? If so, today’s announcement will mean no real savings at all for the Government.

Turning to the plans to change PIP, they leave us with yet more uncertainty and will leave those most concerned about the speculation in recent weeks still in the dark. Will the Minister say why there have been so many leaks, semi-announcements and prolonged rumours over several weeks, which have caused genuine anxiety for those most vulnerable? I hope that a post-mortem is going on in the department, or even in No. 10, about this. The proposal to require individuals to score a minimum of four points raises crucial questions. Who decides how these points will be awarded, and thus is ultimate arbiter of who is deserving of the state’s support? Will there be an appeals tribunal process, with an even longer backlog? Ministers say they will consult on this. Can the Minister confirm exactly when this consultation will be completed and when she expects the new assessment system to be operational? Why did the Government cancel our PIP consultation? What is the difference between this one—the Minister referred to a review—and the previous Government’s, apart from an at least eight-month delay?

On the “right to try” initiative, can the Minister give us some more information about how this will work? For example, if someone goes on to the scheme but after, say, two weeks, they say the role is not for them, can they go straight back on benefits? What is the catch, if any? It would be very helpful to have an explanation. With today’s announcements being linked to the Green Paper, I am not clear what happens next. Is there a White Paper or is this the end of the process, but for these announcements?

There is clearly much anecdotal evidence of fraud in the benefit system. The Minister will cite the upcoming fraud Bill, which focuses, as she knows, on interventions by banks, but it is not clear whether the Bill tackles the malicious websites that direct those inclined to abuse the benefit system. Will the Minister give her view on this?

This was a chance to seize the moment and to choose work over a life on benefits, but the Government have fallen short. Our country needs everybody who can work to do so. That principle should be at the heart of our welfare system. Yet still, the fundamental question of how many people will be helped back into work, and by when, remains unanswered by this announcement.

I remind the Benches opposite that, under Parliaments going back to 2010, successive Conservative Governments helped 4 million more people into work, and we will continue to champion work as a means to bring dignity, purpose and security for individuals and their families.

I finish by acknowledging the large number of questions that I have posed to the Minister. I have great respect for the Minister; she knows that. She will know that the tone of my questions is not directed so much at her personally but is a riposte to the overtly and rather unnecessary political stance taken earlier in the other place by the right honourable Secretary of State for Work and Pensions.

[Lord Palmer of Childs Hill (LD)]

My Lords, these welfare reforms aim to reduce benefit spending while encouraging greater workforce participation. I thank the Minister for reading the Statement and the noble Viscount for the useful questions that he has raised. I have respect for both of them, as they know.

From these Benches, we want to see more people in work, including those with disabilities. While the need for reform is clear, the Liberal Democrats are concerned that the current proposals risk worsening the very issues that they intend to address. We all want to see a more efficient welfare system, but that cannot come at the expense of the most vulnerable in society, particularly those with disabilities or health conditions. Instead of focusing on short-term cuts, we must reform the system in a way that is fair and compassionate and ensures dignity for all.

Does the Minister agree that one of the main aims of this reform package is, as the Statement says, to save £5 billion—often at the expense of the vulnerable in society?

One key area of concern are the proposed cuts to benefits for people with disabilities, which could push many into poverty and greater dependence on social care. The chief executive of Citizens Advice has warned that these changes could have “serious long-term consequences”, and we on these Benches passionately agree. For individuals with severe disabilities or health conditions, this reform package may well create further barriers to employment rather than removing them. The Government’s proposal to freeze the health top- up in universal credit for existing claimants, while reducing it for new ones, will only add to the pressure on disabled individuals, undermining their ability to achieve independence and security. Why are new claimants considered less vulnerable than existing claimants? Of course, that is nonsense and worthy of Ebenezer Scrooge.

These Benches welcome the idea of merging contributory benefits and creating a new unemployment insurance, but the fact remains that we are still waiting for an overdue comprehensive overhaul of the Department for Work and Pensions. Until the Government get serious about fixing health and social care—systems that are intrinsically linked to people’s ability to work—the welfare system will continue to struggle. The social care review’s three-year timeline is hugely disappointing and highlights the lack of urgency in addressing these critical issues. If the Government truly want to cut benefit spending, they must first address the root causes, not just apply superficial, short-term fixes borne by those least able to object.

These Benches remain committed to supporting people with disabilities into employment. We agree whole- heartedly with the Government’s aim to provide a right to try to work without the risk of losing benefits. However, from history, I have a sneaking premonition that it will be more difficult, and slow, to get back on to the benefits ladder once you have tried to work. That is what has happened in the past.

The wider changes, including delays in the health top-up for young people and increasing reassessments, must be approached with caution. We need to ensure that any reforms we make are sustainable and focused on long-term support for those who are most in need. Does the Minister agree that a balanced approach is needed—one that addresses the root causes of welfare dependency and puts people’s dignity and well-being at the heart of its reforms?

[Baroness Sherlock (Lab)]

My Lords, I thank both noble Lords for their comments and questions. Maybe we can start by agreeing that we all have great respect for each other, which is both genuinely true and one of the joys of this House. We are able to have conversations and respect one another while disagreeing.

Having got that out of the way, I probably need to start by saying it is possible that some of what we are trying to do has been misunderstood. So let me summarise in my own words what we are trying to do here. First, we need to recognise that the UK has a near-record number of people who are economically inactive on health grounds. The numbers on incapacity and disability benefits are rising at an unsustainable rate, and that is not just down to worsening health. The figures and the evidence show that there are more people who say they have a disability or a long-term health condition affecting their daily lives, but the number going on disability and health benefits is going up twice as fast. So it is not just about health; there is something about the way our system works.

If those numbers keep going up, as more people are driven into the system, fewer people are left to sustain it. One in 10 working-age people now gets a sickness or disability benefit. Before the pandemic, we spent £30 billion a year on those benefits; the figure is now over £50 billion and by the end of the decade it will be £70 billion on working-age benefits. That is not sustainable. So I say to the noble Lord, Lord Palmer, that I absolutely know where he is coming from but, if we cannot get the system on to a sustainable footing, it will not be there for the people who need it in the next generation and the one after that. We have to get the system working.

As well as being unsustainable, the system is failing those that it serves. The current system, as my right honourable friend described in the Statement, divides people into artificial binary categories: can and cannot work. Those who are deemed able to work are put out there, given support, encouraged to get a job and paid a standard allowance. Those who cannot are paid more money, left alone and given no help—the system disengages. We know that that is not the reality for most people. We know that 200,000 people on incapacity and disability benefits say they could work right now with the right support and the right job, but the system does not encourage them to do that; it actually discourages them.

Social security provides a vital safety net for those who rely on it, but we need it to be there for the future as well. Our Green Paper sets out how we will refocus the social security system towards empowering people to find work, while protecting those who most need help by supercharging the employment support with an extra £1 billion and a focus on early intervention, and by separating the link between the capability to work and extra financial support, so that everyone can work and not risk their benefits.

The noble Lord, Lord Palmer, suggested that this was simply a cost-cutting measure. I hope I have explained to him why the measure is trying to do two things. It is trying to place the whole system on a more sustainable footing and it is trying to reform it to make sure that it can support all those who can work to be able to go out there and get a job, to develop in it and to build a life in it, while absolutely guaranteeing to support those who are never going to be able to work or who have the most severe needs.

The estimate—we will get the details when the OBR does the figures for the Spring Statement next week—is that this package will save £5 billion in 2029-30. When the figures come out, I encourage the noble Viscount to have a look at them and compare them with what his Government had in mind, and we can then have a conversation about them. However, even with these changes, we are not reducing spending on disability and sickness benefits. We are spending less to try to make the system sustainable, but the numbers will keep on going up.

The noble Lord mentioned the question of people being put into poverty. One thing to stress is that anyone who is getting benefits at the moment—if they are getting PIP or the universal credit health element at the moment—will keep those benefits unless and until they have a reassessment and their eligibility changes, so this is a system for the future.

The noble Lord asks why it is different for those coming in afresh. The answer is that we have to make the system sustainable and that is the best way to do it. However, we want to support people in transition. Of course, some people will end up losing entitlement, but we want to look into how we can best support them, including possibly with transitional support to make the adjustment to the new regime.

The noble Lord asked about the DWP. One of the things that has worried us as we came into government is the lack of trust and confidence in the system, and we are really determined to address that. It is one of the reasons that we say in the Green Paper that we are going to develop a new safeguarding system for DWP to try to rebuild trust and confidence in the system. That is why, for example, we are going to move to recording all assessments by default, so that people can be clear and have confidence in the process when that is happening.

Crucially, for those on the universal credit health system who have the most severe lifelong health conditions which have no prospect of improvement, so they are never going to work, we are going to look at providing an additional premium to protect them so that they are secure. For people in that group, with both new and existing claims, we will guarantee that they will never face a full reassessment in the future.

The noble Viscount asked about WCA. I think he is aware that not only were the previous Government’s proposals to reform WCA, I am sorry to say, poorly thought out, but their consultation was so bad it was actually ruled illegal by the courts, which made it simply impossible. We had a manifesto commitment to either reform or scrap the work capability assessment. We have come to the conclusion that it cannot be reformed; we are therefore going to scrap it. Apart from anything else, that will mean that people will not have to go through two separate assessments. We think that is the way forward.

I probably have to take on the noble Viscount’s challenge here that the Government were going to do lots of things. I fully accept that, when his party were in government, they had lots of ideas, but they did have 14 years to do them. We, at this point, are nine months in. We have already made some announcements, we have a detailed Green Paper for reform, we are engaged in consultations and we are going to change the system. I understand this is hard. I know change is hard, but the system has been tinkered with for far too long. We need reform and we are doing it now.

It was of course Beveridge himself who identified the establishment of comprehensive health and rehabilitation and maintenance of employment as necessary conditions of success in social security. We need more than tinkering. We need a system that will be sustainable and will support people into work, but will protect those with the highest needs who can never work. We can do both. I welcome the contributions from both noble Lords and look forward to carrying on the conversation. We all need this change to work.

20:52

[Lord Vaux of Harrowden (CB)]

My Lords, I think we all applaud the desire to get people off benefits and into work, but to do that we need jobs and we need employers who are willing to take those people. I hope the noble Baroness will not mind my quoting from the impact assessment that accompanies the Employment Rights Bill in relation to day 1 unfair dismissal rights. It states that

“there is evidence that the policy could negatively impact on hiring rates. For example, employers may be slower to take on workers due to the liability and increased protections”—

and I stress this last bit—

“particularly for those that are seen as riskier hires”.

Does the noble Baroness agree that that seems to be in direct conflict with the desire to bring people into work, and does she think it is a good idea?

[Baroness Sherlock (Lab)]

I thank the noble Lord for that question. I have real confidence in this. The noble Lord may know that in January we published the terms of reference for the Keep Britain Working review, a review headed by the former chair of John Lewis, Sir Charlie Mayfield, who is looking at ways in which we can make workplaces more receptive and more able to take on people who have health conditions and disabilities. It could include all kinds of ways in which we can support them. We want to remove the barriers to employers doing that.

We already know that this is the case: reasonable adjustments are often talked about as a way of doing it. The noble Lord may think that these difficult hires. In fact, it is estimated that, on average, employers could save between £5,000 and £11,000 for every employee they prevent from falling out of work. So having an inclusive workplace is not a “nice to have”: it is not an extra. It is a way of making sure that we protect those who are currently working. There are significant numbers of people at the moment who are working but have a condition, and hundreds of thousands of them fall out of work every year. Our system is trying to work with employers to protect those who are already in work, but we have lots of employers really engaged with us in jobcentres, in the work we are doing and in building relationships. People want to do this. We can do this.

[Baroness Browning (Con)]

My Lords, I refer to my interest in the register. When we talk about getting people back into work, perhaps the Minister could reflect on that group of people who have never been in work. I am thinking not just of school or college leavers but people who are now in their 40s and 50s and have never been in work, but actually still want to. She will not be surprised to know that I am referring particularly to the autism community. In the 32 years that I have worked in this building, the employment rate for the autism community has gone up from 17% to just 23%. These people have lived through many Conservative and Labour Governments, not forgetting a coalition Government. To get them into work will require something really different from what has been applied before. They are a discrete but important group. Given the Green Paper and the Statement that we have heard today, is the Minister going to get autistic people into work?

[Baroness Sherlock (Lab)]

My Lords, I am really grateful to the noble Baroness for raising that question and, as she so often does, reminding us of the challenges in this area. Let me say a couple of things. To reassure those who may be worried, as I have said before, anyone currently receiving benefits will carry on getting them unless there is a reassessment and their eligibility changes. However, that is not the limit of our ambition. One of the reasons we want at least to have a supportive conversation, rather than abandon people who are simply getting those benefits, is to begin to understand what more we could do to support them.

There are some people who will find it very difficult to get into work but maybe they could, with the right support, begin to do some voluntary work. Perhaps they could begin to reach out and get some fresh kinds of support or connect with the local community. The biggest challenge for us, as in the noble Baroness’s words to us today, is how we challenge employers to take this on. We are planning, as part of the consultation on the Green Paper, to not only invite people—I expect very many responses—but to hold events for the public and round tables, to hold discussions both in person and elsewhere. I would be really grateful if she would be willing to talk to us about addressing this as part of that consultation.

[Baroness Lister of Burtersett (Lab)]

My Lords, parts of this package are very welcome; for example, the right to try paid work, the strengthening of contributory benefit for unemployed people, the increase in the UC standard rate—albeit very modest—and the commitment to consult disabled people on at least some of the changes. But overhanging them is the £5 billion cut from a social security system which, according to CPAG, suffered £50 billion a year in cuts thanks to the Tories. The Joseph Rowntree Foundation warns that this is the biggest cut in disability benefits since 2010, yet disabled people are at disproportionate risk of poverty.

What assessment have the Government made of the future impact of the cuts on poverty, not mentioned in the Statement, and reliance on food banks, which is of great concern to Trussell? What will happen to entitlement to carer’s allowance, for which PIP is one of the most common qualifying benefits? When the Green Paper says that it represents a “start”—a welcome start—of the rebalancing of UC payment levels and of addressing “the basic adequacy” of UC, can we look forward to a proper review of its inadequacy?

[Baroness Sherlock (Lab)]

My Lords, my noble friend raises some interesting points and I am grateful for the welcome she has given to some elements of our reforms. On the question of adequacy, it may be—in her words—modest but this is actually a significant above-inflation cash increase in the standard allowance of universal credit. It means that by the end of this Parliament, people will be £14 a week, or £775 a year, better off. That might be modest proportionally; it is significant and will make a difference to people’s lives. But the real way that we will make a difference to people’s lives, in so many cases, is by helping them to move into work.

There is only so much that the benefit system can do. There are those who cannot work and have severe needs, and the benefit system must always be there to support them. But for those who can, there is so much more out there that we could be doing and we simply have not been doing it. That is really one of my hopes. We will deal with poverty in other ways. Just so my noble friend knows, the impact and equality assessments will be published next week alongside the Spring Statement. In the long run, this is not about simply tinkering around the sides of a system. We are not just doing blanket cuts. We are doing two things: trying to put this system on a sustainable basis, so it will still be there for the future, but, much more than that, trying to reform it so that people genuinely can get into work who previously have been given no help and been abandoned. That way, we can really make a difference to people’s lives.

[The Lord Bishop of London]

My Lords, I welcome the Government’s focus on and increased investment in supporting people back into good work, and the proposed safeguards through the right to try guarantee. However, I am intrinsically wary of attempts to address the drivers of ill health through the social security system, rather than tackling root causes. We do not know yet the content of the NHS plan. Supporting people who are currently claiming incapacity benefits into work will put considerable pressure on an already stressed health system. What steps is the Minister’s department taking to work with the Department of Health and Social Care to ensure that the right support is available for people with physical and mental health needs?

[Baroness Sherlock (Lab)]

I thank the right reverend Prelate the Bishop of London for that important question. I mentioned earlier that the prevalence of disability has increased. I have to correct that: the rate of prevalence has increased. Again, the rate of the increase of disability benefits has gone up by twice as much. If I have got that wrong, they will correct me again and I will read it out next time I get up.

On the question of health, crucially, we have invested almost £26 billion extra in the NHS, but change will take time. We intend to implement our reforms to PIP in November 2026, subject to parliamentary approval. To reassure the right reverend Prelate and anyone listening, everyone claiming PIP will continue to receive it until they are reassessed and their eligibility changes. We will always seek to protect the most severely disabled.

In the meantime, we are looking to do a couple of different things. We are trying to get early intervention to stop people falling out of work, and we are about to launch our health accelerators, which will support efforts to tackle economic inactivity through getting the NHS to shift to prevention. We are trialling in some of our pilot areas how exactly we can bring together the NHS and employment support to address that.

The right reverend Prelate raises an important point. One of the challenges for us is that there are things that will need the NHS to be sorted out. There are other areas where a range of different types of support could enable people, even now, to get into work. We are determined to do both.

[Baroness Fraser of Craigmaddie (Con)]

My Lords, I declare my interests in the register. There is much in this Statement to be welcomed, apart from the bit that says it is all the Conservatives’ fault. I particularly welcome the emphasis on getting disabled people back into work. At Cerebral Palsy Scotland, where I work, we are dealing with a devolved social security system. Adult disability payment, ADP, is replacing PIP and DLA in Scotland. It is similar, but it has a different application and renewal process. We are finding that there are people caught between DWP and Social Security Scotland. Apparently, there are about 80,000 people in Scotland still on PIP. Can the Minister assure me that, in the process of all these reviews and all this change, those on the devolved benefits systems will not get left behind or be negatively affected?

[Baroness Sherlock (Lab)]

I thank the noble Baroness and commend her for her work with Cerebral Palsy Scotland. She raises a really important point. To be clear, the proposals in the Green Paper would apply directly only to UK Government areas of responsibility. We are working through the areas of interaction between reserved and devolved benefits, with the Scottish Government in particular. The noble Baroness described one area, and there are others. As she mentioned, the Scottish Government’s adult disability payment replaced PIP. Therefore, the proposals on PIP will apply only to those areas we control. I encourage her to speak to the Scottish Government. In the end, it will be for the Scottish Government to work out how they will make their system sustainable. From our side, we can make sure that, as far as possible, the systems align. It is an important point and one we are very aware of. We will certainly make sure we address it specifically in our discussions with the devolved Administrations.

[Baroness Primarolo (Lab)]

My Lords, I would like to ask the Minister a question on the right to try, which I am sure we would all agree is a principle that is crucially important. How can we make sure that people can take the risk to try paid employment, without the fear that is currently in the system that their benefits will be put at risk?

[Baroness Sherlock (Lab)]

I thank my noble friend for the question. Of course, she has a great deal of experience in this area; she knows only too well how the system works and how it has worked in the past.

This is one of the real problems with the current system. When people have been put through that binary judgment that they either can or cannot work, if they get into the “can’t work” category, the risks are so great that, if they try to work and fail, we will then come and say, “Ha, so you can work after all”, and then it will be taken away.

We are going to do a couple of things. First, there is a linking rule already there, which we will make sure that everybody is aware of, so that if you try a job and come back on to benefits within six months, you will be able to go back to your old benefits. That touches on a point raised by the noble Viscount as well. But we are going to go further: we are going to legislate to make it very clear that work in and of its own right will never be a reason for triggering a reassessment. It is really important that people know that. In the long run, we will break the connection between can and cannot work and support, because in the long run it is the PIP assessment and your abilities and needs that will determine how much support you get, not whether you can or cannot work. I hope that reassures my noble friend that we are determined to tackle this.

[Baroness Neville-Rolfe (Con)]

My Lords, I am speaking from the Back Benches today because I am very concerned about the sustainability of the benefits system, with an ageing population and the ranks of the inactive and people on disability benefits, as the Minister described. I am sure that it is right to focus on getting people back into work—and I am absolutely delighted that Charlie Mayfield is helping the Government. He comes from retail, as I do, and retail is detail. That sort of person is very helpful in trying to make things work.

I have a couple of questions. First, I have done some work on fraud in the past, including trying to use AI to reduce the cost of fraud. I was very concerned to hear that only one in 10 assessments is face to face. What does the Minister feel the opportunity is in tackling fraud?

Secondly, on timing, the Minister mentioned that there would be a change in PIP in November 2026 and in the work capacity assessment in 2028. Given the scale of the problem, can she give me any reassurance about timing and getting on with those changes?

[Baroness Sherlock (Lab)]

Those are two great questions, and I thank the noble Baroness for them—and also for the phrase “retail is detail”, which I shall now deploy as though it were my own whenever the opportunity presents itself.

I am sorry for not picking up the question of fraud, because the noble Viscount asked about that as well. We have a fraud Bill coming to this House, which is making its way through the other place at the moment, so we are absolutely determined to crack down on fraud and will use a whole range of means for doing that. We will have an opportunity to discuss that in detail when the Bill arrives here.

We are thrilled that Charlie Mayfield is leading this review for us. We know that if we cannot get the relationship with employers right and create a system that works for employers and employees, we will not be able to get the jobs we need, especially for people who find it difficult.

To reassure the noble Baroness, if she looks at annexe A of the Green Paper, there is a table on Green Paper measures that gives timings on everything coming in. However, the real reassurance is that we have already started. For example, the changes to universal credit, assuming they get parliamentary approval, will start to come in from next April. But the work has already begun on supporting people into work. The Secretary of State has already announced an extra 1,000 work coaches to work with people who are sick or disabled to help them get into work. We know from past evidence that sometimes somebody simply spending a bit of time with somebody and encouraging them in can make all the difference straightaway. So we are starting on that already—we are not waiting for it to happen. We are already piloting around the country, as I said to the right reverend Prelate, trailblazers for young people and for the wider population on how we work with local councils. Sometimes, whether someone can get into work is not just about what we do; whether someone can get a job in Manchester might be about what the childcare is like, how the buses run between where the jobs are and where the homes are, and what the local labour market is like. We are working with metropolitan authorities and engaging locally to try to turn the system around and get everybody pointing in the same direction.

Finally, I really share the noble Baroness’s concern about the sustainability of the system, but I want to make sure that we are doing it to keep the system there for the future—because I believe passionately that we need a safety net there for those who struggle and who cannot work. We have to make sure that it works, and we are committed to making sure that everybody who has the most severe needs or will never be able to work will always get the support they need under this Government.

[Baroness Pitkeathley (Lab)]

My Lords, the noble Baroness, Lady Lister, mentioned carer’s allowance. The Minister will know that many carers have disabilities and long-term conditions themselves, and caring itself is a risk factor for having to give up work. In their consultation on the Green Paper, therefore, will the Government commit to doing more for unpaid carers, particularly around enabling them to remain part of the workforce where they want to do so? So many of them do, as the noble Baroness knows.

[Baroness Sherlock (Lab)]

My Lords, I am grateful to my noble friend for raising that question and I apologise to my noble friend Lady Lister for having forgotten to deal with it in my response to her. I commend my noble friend Lady Pitkeathley for all that she does in this space. First, she knows more than anyone that we are investing in carers: we have just significantly raised the amount of money that somebody can earn before they will lose their carer’s allowance. We have also launched an independent review of carer’s allowance to make sure that the system works. The eligibility change will benefit 60,000 carers-plus by 2029-30.

My noble friend makes the excellent point that the overlap between caring and disability is sometimes more intertwined than we realise. Again, I reassure her that if somebody is on PIP, neither the carer nor the person being cared for will lose that money unless and until there is a reassessment and their eligibility is found to have changed. More than that, we made a specific commitment in the Green Paper to look carefully when considering the consultation responses at how we can support any unpaid carers who find they are affected by the changes that we are proposing. In light of that, I strongly encourage anyone such as her or people she may know to respond to the consultation, to engage with us and to make sure that we understand any unforeseen consequences and can think about how we deal with them.

[Lord Young of Cookham (Con)]

The noble Baroness has announced a wide range of reforms. Can she say which require primary legislation and which can be done by secondary legislation? Can she outline the implications for those who work in her department of the reforms she has just touched on?

[Baroness Sherlock (Lab)]

With parliamentary approval, we will use primary legislation to address the changes in universal credit and PIP eligibility. Assuming that we have parliamentary approval and that time is found for Bills by whoever makes these decisions, we will bring forward legislation on those. Some of the other aspects of the reforms that we are consulting on in the Green Paper, if taken forward, will also need primary legislation, but of course they are the subject of consultation, so, as the noble Lord will understand, I would not commit to doing them at this stage; it depends on the result of the consultation. Some of those will need consultation, and primary legislation for them, with parliamentary approval, would have to be done in a subsequent Session.

On the impact on people in my department, we have looked carefully and have been working with colleagues across the department to make sure that the changes that we want to make are deliverable—that has been very much at the forefront. Somebody asked me recently what the biggest difference is between being in opposition and being in government. It is that, when you are in opposition, your primary concern is policy; when you are in government, one of your concerns is how you can actually deliver things. We are very conscious that we have to make sure not only that the system has the right elements to it but that it is deliverable, and we are determined to do that.

House adjourned at 9.12 pm.