00:00 - divided: - Ayes: 80 / Noes: 281 - Question accordingly negatived.
15:49 - The Committee divided: - Ayes: 173 / Noes: 282 - Question accordingly negatived.
16:01 - The House divided: - Ayes: 177 / Noes: 308 - Question accordingly negatived.
The Exchequer Secretary to the Treasury (Dan Tomlinson)
I will open this debate in Committee of the whole House by reminding the House—though I am sure Members know what is in this Bill—of the purpose of the Bill, which is to respond to increases in costs for families and businesses in the UK because of the conflict in the middle east. Even though we have just completed Second Reading, as we are now in Committee, I will address the clauses of the Bill in turn—Members will be relieved to know that there are only four clauses, so it should not take too long. I will address the amendments that have been tabled in my closing speech, which, with the leave of the House, I intend to make.
Clause 1 makes changes to ensure that the electricity generator levy rate will rise from 45% to 55% from today, 1 July. As my hon. Friend the Economic Secretary to the Treasury set out, in the UK the majority of our electricity is generated from renewables. Despite that, when the crisis in the middle east pushed up international gas prices, the cost of electricity, and so the cost of living, rose too, because electricity prices are still largely set by the price of gas. The changes made by this clause will ensure that a greater proportion of any exceptional revenue that many non-gas generators may receive because of the conflict in the middle east is available to Government to support businesses and households where appropriate.
As we have discussed, the Government also announced back in April that we are acting to de-link electricity prices from gas prices through new voluntary long-term fixed contracts being offered to existing low-carbon generators. As we have discussed, these are known as wholesale contracts for difference, and the changes made by clause 1, increasing the rate from 45% to 55%, will encourage participation at a competitive price in these WCfDs.
Clause 2 makes changes to increase the generosity of mileage rates for 2026-27 for employees and self-employed individuals who use their car or van for work from 45p to 55p for the first 10,000 miles and 25p thereafter, with effect from 6 April 2026. I forgot to respond to the shadow Exchequer Secretary asking me earlier why we have not increased the rates above 10,000 miles. I did respond to that point in the Ways and Means debate last week and think the Government have got the balance right here. We are supporting all drivers, noting that of course for a driver who drives 10,001 miles, almost all of their miles will be covered by the higher rates, and it is still open to employers with employees who drive many more miles to set their own rates if they wish. I would just note that the Conservative party had many opportunities to uprate these mileage rates after 2011, when they did do so, but they demurred from that choice for 13 years in a row, and I am very glad to be part of a Government who have introduced the largest increase in a very long time, if not ever.
The changes made by clause 2 will provide immediate support for both employees and the self-employed, and this is on top of the universal support announced in May, including the freeze on fuel duty, which will save motorists 11p per litre compared to previous plans, or £120 for the average car, or £250 for the average van. This clause represents the largest ever increase to these mileage rates, benefiting around 2 million employees and 1 million self-employed individuals, saving over £120 a year for a worker doing 6,000 business miles.
Clause 3 reduces the vehicle excise duty liability for the majority of heavy goods vehicles to £1 for 12 months for licences taken out from today until 30 June 2027. The changes made by this clause are in recognition of the key role that the road haulage sector plays in transporting goods across the UK and its disproportionate exposure to fuel costs.
Fuel costs make up a substantial proportion of HGV operating costs, and this action will help prevent cost pressures from the conflict in the middle east from spreading across the economy. The shadow Exchequer Secretary is right to point out that this measure on its own is not a silver bullet in helping the haulage sector, but I hope that it will provide some assistance, and it does show very clearly by our reducing this rate down to £1, saving HGVs £600 a year, that this is a sector that we do want to support and see grow and weather the storm from the conflicts in the middle east. We also want to do all we can to reduce costs in the supply chain, to keep prices in the shops for everyday families as low as possible. The decisions taken since the 2024 general election to freeze fuel duty will save the average HGV over £2,000.
With that, having taken the Committee through the three clauses, I look forward to hearing the contributions from other Members.
The First Deputy Chairman of Ways and Means (Judith Cummins)
I call the shadow Minister.
Daisy Cooper (St Albans) (LD)
I rise to speak to new clauses 1 to 3. New clause 1 would require the Chancellor to publish a report on the use of additional receipts arising from the increase in the electricity generator levy from 45% to 55%. New clause 2 would require the Chancellor to review the adequacy of the approved mileage allowance payment rate set under clause 2 in respect of care workers using a personal vehicle in connection with their employment. New clause 3 would require the Chancellor to publish an assessment of the combined impact on haulage costs and consumer prices of the temporary vehicle excise duty rates for goods vehicles.
As I indicated on Second Reading, we support what the Government are trying to do with these measures. However, it is really important for trust in politics that when Ministers stand at the Dispatch Box and say that the intention is to use the levy to supporting households and businesses with the cost of living, there is a report to demonstrate to the public that the money does, in fact, go towards measures that do just that, rather than the money disappearing into Treasury coffers. I urge the Exchequer Secretary to accept new clause 1, which would provide transparency to Parliament and the public.
Let me turn to new clause 2. Some Members will know that I have spoken repeatedly in this House about the extraordinary work carried out by our care workers. The salary of our care workers, and the status they are given, is nowhere near big enough to recognise the extraordinary work that they do. I have spent several hours with Abbots Care in my constituency, watching how their care workers work. They have an enormous emotional investment in every single client; they observe their habits and personality, and they know when something is slightly out of whack or not quite right. A care worker’s routine can suddenly change if there an emergency with another client. There may be something wrong with the client’s medication and they have to make phone calls that they had not expected to make. They are experts on their client and on people, but they are not experts on tax.
I was very heartened that the Exchequer Secretary said on Second Reading that employees who do not receive the mileage allowance can claim back an equivalent amount. I was also heartened to hear him say that he would look into ways to make it easier for care workers. Could he outline what those measures might look like? We owe care workers so much thanks for the work that they do. It is diligent, hard work to make sure that our loved ones are cared for and can live with dignity. We should make the system as simple as possible for them. It might be a case of care organisations and providers sending letters to care workers to tell them what they are entitled to, or it might be a case of requiring HMRC to proactively write to them, but we must bend over backwards to make sure that care workers can benefit from this particular measure.
As I said on Second Reading, we welcome the measure, but we urge Ministers to think very carefully and to go as far as they can to make sure that every care worker who is entitled to this benefit understands that it is there for them. It must be made as simple as possible for care workers, and we must make it clear that it will not end up in a drawn-out dispute with HMRC; I urge the Exchequer Secretary to think about a dedicated hotline for care workers, in case we need one down the line. Finally, new clause 3 requires a report on this particular measure.
Our three new clauses are all transparency measures, and I hope that the Government will look favourably on them.
Dan Tomlinson
I thank the shadow Exchequer Secretary, the hon. Member for North West Norfolk (James Wild), and the hon. Member for St Albans (Daisy Cooper), for their scrutiny and attention to the measures contained in this short Bill. I am proud that, as the shadow Exchequer Secretary said, we removed three taxes, and I am glad to say that, on a temporary basis at least, one tax is being put down to £1 as a result of the legislative changes that the House is about to vote on. It is a privilege to close this brief debate on behalf of the Government.
Let me turn to each amendment. New clause 2 would require a report to the House of Commons on the approved mileage allowance payments system, including the adequacy of the rate for care workers. The hon. Member for St Albans spoke powerfully about the work done by care workers in her constituency, who she has the honour of representing. I think that all Members will know—from personal experience of family members who have either worked in the sector or been cared for by those who work in the sector—just how valuable care workers’ time, effort and care is.
I am glad that the hon. Lady is now aware that care workers can claim back the tax. They cannot claim back the whole amount—it is not fully equivalent—but they can claim back the tax relief, as it were, on the amount. I want to look at whether we can make that process simpler and easier to use. As the Department does so, I would be happy to provide further updates—if not at the Budget, then beforehand. We have said that the Government’s review of the rates is not over. We came forward with the 10p increase, and we are continuing the review and will update the House further at the Budget. I therefore urge Members to reject this new clause.
New clause 3 would require a report to the House on the impact of haulage costs and consumer prices, including the operating costs for and overall tax burden on goods vehicle operators. As I am sure the shadow Exchequer Secretary and the Liberal Democrat spokesperson will know, the Government have already published a tax impact and information note setting out the expected impact of the measure. The costing for it will be subject to scrutiny by the Office for Budget Responsibility and set out at a future fiscal event. It is therefore the Government’s view that the new clause is unnecessary.
New clause 4 would require the Treasury to review the impact of the EGL rate rise, including on investment, electricity prices and energy security, and to report to Parliament by 31 March 2028. The EGL was carefully designed to avoid disincentivising renewable generation, which means that since its introduction in 2023 it has had no adverse effect on energy security or new investment; in fact, we are having record levels of new investment in renewables under this Government. It is worth noting that new investments made since 2023 are exempt from the EGL and will continue to be so.
The Government have published a tax information and impact note on this measure, too, which sets out clearly that the Government’s view is that this rate rise is not expected to have an impact on electricity prices or investment in renewable generation going forward. The note also explains the rationale for the new EGL, which we have discussed. I will be consistent in reminding the Committee that, of course, the Government keep all taxes under review and monitor and evaluate tax policy changes on an ongoing basis, and that, unless responding to international conflict, in order to be there for households and businesses, tax policy decisions are usually best made by Chancellors at the Budget in the usual way.
James Wild
I am happy to clarify that for the Minister. My point was rather that if the Government are to introduce a higher levy rate on the basis that it will incentivise people to move into wholesale contracts for difference, it might be as well to have the policy for those wholesale contracts for difference ready.
Dan Tomlinson
I thank the shadow Exchequer Secretary for that. As I said, we are consulting on that policy before the end of the year. It was the Chancellor’s and this Government’s decision that the better thing to do for the country—for businesses and for households—was to respond to the conflict in the middle east with pace and appropriate responsiveness rather than waiting until the next fiscal event, which is scheduled for the autumn.
I turn to new clause 5, which would require a report to the House of Commons on the impact of the measure on UK public finances, the competitiveness of the UK freight and logistics sector and the contribution of the temporary VED rate to efficient supply chains, and whether the measure remains appropriate beyond the next 12 months. As always, taxes and reliefs will be looked at ahead of the next fiscal event in the context of the public finances. Consistent with the Chancellor’s approach, this is a targeted and time-limited intervention in response to the conflict in the middle east, in recognition of the key role that the road haulage sector plays in transporting goods—including food—across the UK and its disproportionate exposure to fuel costs. The Government will continue to monitor the situation and consider further action as and if that may be necessary. As on other measures, the Government have already published a tax impact and information note, and the costing for the measure will be subject to scrutiny by the Office for Budget Responsibility.
Finally, the shadow Exchequer Secretary talked of this measure as a short-term fix. I hope he is aware of and has seen the impact of the long-term decisions that the Government have made over our time in office to ensure that we can have higher economic growth, as we have had, and higher living standards—rather than their falling by 2%, as they did in the previous Parliament, they have already risen so far by 2% in this Parliament—in part because we have brought back economic stability and had wages rising faster than inflation in every single month since we took office. That has supported stability in the economy which has delivered six interest rate cuts. We have made sure that we are increasing capital investment and that we work with the private sector to get growth up and to invest in our public services and important infrastructure. We have done that in a way, along with investing in our NHS, that has enabled us to manage the public finances well and get borrowing falling in every year of this forecast, with the deficit lower than the G7 average, which the previous Conservative Government never achieved, despite how much they talked about it. They talked a good game on the public finances, but they were never able to deliver that. I therefore ask the Committee to reject the new clause.
For the reasons that I have set out, I urge hon. Members to reject the amendments tabled by the Opposition. I commend the clauses in this short and well-formed Bill to the Committee.
Question put and agreed to.
Clause 1 accordingly ordered to stand part of the Bill.
Clauses 2 to 4 ordered to stand part of the Bill.
New Clause 2
Approved mileage allowance payments: review of rate for care workers
“(1) Within six months of the passing of this Act, the Chancellor of the Exchequer must lay before the House of Commons a review of the adequacy of the approved mileage allowance payment rate set under section 2 in respect of care workers using a personal vehicle in connection with their employment.
(2) The review under subsection (1) must consider—
(a) whether the rate of 55 pence per mile adequately reflects the costs incurred by paid care workers when travelling between the homes of those for whom they provide care;
(b) the merits of setting a higher approved rate for paid care workers who are required to transport specialist equipment, medication or mobility aids in connection with their caring responsibilities;
(c) the merits of setting a higher approved rate for paid care workers who make three or more separate care visits in a single day; and
(d) the interaction between mileage reimbursement practices in the social care sector and the effective hourly rate received by paid care workers relative to the National Living Wage.
(3) In preparing the review under subsection (1), the Chancellor of the Exchequer must consult—
(a) representatives of paid care workers;
(b) representatives of employers in the social care sector; and
(c) such other persons as the Chancellor considers appropriate.
(4) In this section “care worker” means a person employed to provide personal care to individuals in their own homes, whether employed directly or through a domiciliary care agency.”—(Daisy Cooper.)
Brought up, and read the First time.
Question put, That the clause be read a Second time.
Dan Tomlinson
I beg to move, That the Bill be now read the Third time.
I am grateful for the discussion that we have had today on a Bill that responds directly to the pressures placed on people and businesses across the UK by the conflict in the middle east. In respect of energy, rising gas prices have driven up electricity prices, and non-gas generators stand to benefit significantly as a result. The electricity generator levy ensures that a share of this exceptional revenue is redirected to the public, and we are increasing that share by raising the rate of the levy from 45% to 55%. As for fuel costs, we are uprating mileage rates for the first time in 15 years, providing relief for millions. We are also introducing a 12-month vehicle excise duty holiday for the majority of heavy goods vehicles, supporting those who drive for work and the transport of goods across the UK. Those three measures are the right measures at the right time, and I commend the Bill to the House.
Dan Tomlinson
I ask that the House gives the Bill its Third Reading.
Question put and agreed to.
Bill accordingly read the Third time and passed.