Finance Bill

Lord Livermore Excerpts

2nd reading & Committee negatived & 3rd reading
Wednesday 19th March 2025 Lords Chamber

Moved by

[Lord Livermore]

That the Bill be now read a second time.

[The Financial Secretary to the Treasury (Lord Livermore) (Lab)]

My Lords, it is a pleasure to open this Second Reading debate on the Finance Bill. I take this opportunity to warmly welcome my noble friend Lady Caine of Kentish Town to your Lordships’ House, and I very much look forward to her maiden speech.

The Bill before your Lordships’ House legislates for tax changes announced in the Budget last October, many of which come into effect this financial year. That was a once-in-a-generation Budget, on a scale commensurate with the challenging inheritance that this Government faced, an inheritance consisting of three distinct crises: a crisis in the public finances, a crisis in our public services and a crisis in the cost of living.

In the public finances, as noble Lords may have heard me say before, this Government inherited a £22 billion black hole—a series of commitments made by the previous Government that they did not fund and did not disclose. The OBR has established that the previous Government concealed £9.5 billion and

“did not provide the OBR with all information available”.

As we now know, during the five months they had left in office, the previous Government continued to amass unfunded commitments that they did not disclose. By the Spring Budget, Treasury records show that these had reached £16.3 billion; by July, they had reached £22 billion.

The Treasury has published a line-by-line breakdown of these unfunded commitments: 260 separate pressures that the previous Government did not fund and did not disclose. The previous Government also failed to budget for costs they knew would materialise, including £11.8 billion to compensate victims of the infected blood scandal and £1.8 billion to compensate victims of the Post Office Horizon scandal.

Of course, this Government inherited not just broken public finances but broken public services, with NHS waiting lists at record levels, children in portakabins as school roofs crumbled and rivers filled with polluted waste. Added to this was a cost of living crisis that had hit working people hard, with inflation peaking at over 11%. This was the reality we inherited. Faced with this reality, any responsible Government would need to act.

That is why this Government took action in the Budget to wipe the slate clean, repair the public services, protect working people and invest in Britain. That included a historic investment of an additional £25.7 billion for the NHS, which is helping to bring down waiting lists more quickly and put an end to over a decade of under- investment and neglect. We took this action in the fairest way possible, by keeping the promise we made to working people in our manifesto not to increase their income tax, national insurance or VAT.

The Government did, however, need to take some very difficult decisions elsewhere in relation to tax—difficult decisions, but the right decisions. We have always been clear that there are costs to responsibility and that the increase in employers’ national insurance contributions will have consequences for businesses and beyond, but the costs of irresponsibility would have been far greater. As a result of the decisions we have taken, we have created a foundation of stability on which we are now taking forward our agenda of growth and reform.

The Bill before your Lordships’ House is wide ranging, and I will speak to the measures within it in three distinct categories: first, the measures the Government have taken to deliver on the specific commitments made in our manifesto; secondly, measures to put the tax system on a fairer and more sustainable footing; and thirdly, measures to improve health outcomes and support the clean energy transition in line with our growth strategy.

On the first of these, our manifesto included a commitment, which is being delivered through this Bill, to remove the outdated concept of domicile status from the tax system and ensure that everyone who is a long-term resident in the UK pays their taxes here. In its place, the Bill introduces a new residence-based regime from April this year. This new regime will be internationally competitive and focused on attracting the best talent and investment into the UK. The new rules mean that anyone who has been tax resident in the UK for more than four years will pay UK tax on their foreign income and gains, as is the case for other UK residents. That is a much simpler and clearer test than exists under the current regime.

The independent Office for Budget Responsibility has confirmed that these reforms will raise a total of £33.8 billion over the five-year forecast period. This includes £21.1 billion from the previous Government’s reform and £12.7 billion from the further reforms announced at the Budget. This will help to fund vital public services and provide stability in the public finances. Reflecting our continued engagement with stakeholders to ensure the reforms operate as intended, the Chancellor recently announced that we are making elements of these reforms simpler to use and more attractive, while retaining the structures announced at the Budget.

Our manifesto also pledged to

“end the VAT exemption … for private schools to invest in our state schools”.

This Bill delivers on that commitment too. Some 94% of children in this country attend state schools. However, too many children do not get the opportunities they deserve because too often these schools are held back by a lack of investment. That is why we introduced VAT on private school fees from 1 January this year to secure the additional funding needed to improve educational outcomes across the UK. Together with our changes to business rates, this measure will raise around £1.8 billion a year by 2029-30 and just under £500 million in this year alone.

The Government published a tax impact and information note setting out the impacts of this policy at the time of the Budget. The Government’s costings, set out in a detailed costings note, have been certified by the OBR. The evidence to date supports these assessments, and we remain very confident in them. Private schools have continued to open in England. Pupil movements remain in line with expectations. Many private schools are partially or fully absorbing costs, instead of passing on higher fees. More pupils are receiving their first choice of school than they did last year.

A final key manifesto commitment relates to the energy profits levy on oil and gas companies. The Bill before your Lordships’ House fulfils our promise to increase the rate of the levy by three percentage points to 38%. It also extends the levy by one year and removes an investment allowance for the oil and gas industry that was not available to any other sector. While oil and gas will continue to play an important role in the energy mix during the transition, we must drive public and private investment towards cleaner energy.

The money raised from these changes will help finance our clean energy transition, enhance energy security and create new jobs. To support these objectives, the Bill maintains 100% first-year allowances in the energy profits levy regime, along with a targeted decarbonisation allowance to help the sector reduce its emissions.

The Bill also contains a range of measures to make the tax system fairer and more sustainable and to restore stability to the public finances. The Bill takes a balanced approach towards capital gains tax, which is paid by fewer than 1% of adults each year. The higher main rate will increase from 18% to 24%, ensuring that the system remains internationally competitive, with the UK retaining the lowest rate of any European G7 economy. The new headline top rate will also remain lower than it was from 2010 to 2016. We are maintaining business asset disposal relief, with its £1 million lifetime limit, and increasing the rates of capital gains tax applied to this relief and investors’ relief in a phased way to give businesses time to adjust.

On inheritance tax, the Bill will ensure that wealthy estates contribute their fair share by extending the freeze in inheritance tax thresholds by a further two years to 5 April 2030. To support home ownership, the Bill also increases the higher rates of stamp duty land tax, so that those looking to move home or purchase their first property have a greater advantage over second home buyers, landlords and companies purchasing residential property.

Putting the tax system on a fairer and more sustainable footing also requires addressing the tax gap—the difference between the amount of tax that is owed and the amount that is collected. The measures set out by the Chancellor in the Budget last October represent the most ambitious package ever to close the tax gap and ensure that everyone who should be paying their taxes is doing so.

Overall, our package is expected to raise £6.5 billion per year by 2029-30. We will achieve that by investing £1.9 billion in HMRC staff and modernised IT systems, including recruiting an additional 5,000 compliance staff, and we will remove loopholes used to reduce tax liabilities. For example, the Bill introduces capital gains on liquidation of a limited liability partnership, changing the way capital gains are taxed and closing a route used for avoidance.

The third and final set of measures in the Bill seek to reduce health-related harms, support the clean energy transition and fund our vital public services. As our growth strategy makes clear, improving health outcomes is essential for delivering resilient, long-term growth. The Bill renews the tobacco duty escalator at RPI plus 2% and increases duty by a further 10% on hand-rolling tobacco this year. The soft drinks industry levy is being reviewed and uprated to maintain incentives for manufacturers to reduce their sugar contents. Alcohol duty is uprated in line with RPI, except for draught products in pubs, recognising the unique role that pubs have in communities.

To support our net-zero commitments, we are introducing new powers to allow for the introduction of the carbon border adjustment mechanism, which will place a carbon price on emissions-intensive goods imported into the UK. We are supporting the take-up of electric vehicles by increasing incentives for zero-emission vehicles in the vehicle excise duty first-year rates.

This Bill delivers on the Government’s manifesto commitments, puts the tax system on a fairer and more sustainable footing, supports the transition to clean energy and improves health outcomes. It is also a Bill to fix the foundations of our economy by repairing the £22 billion black hole in the public finances that we inherited.

The measures contained within the Bill reflect responsible choices. The Government have always been clear that there are costs to this responsibility, but the costs of irresponsibility would have been far greater. As a result of these choices, we have now created a foundation of stability in the public finances on which we will drive forward our agenda of growth and reform. We have set out a clear strategy for achieving our growth mission, but we are not satisfied. That is why we are going further and faster to put Britain on a better path and to deliver for the British people. I beg to move.

--- Later in debate ---

[Lord Livermore (Lab)]

My Lords, it is a pleasure to close this Second Reading debate on the Finance Bill. I am grateful to all noble Lords for their contributions and questions. I join others in warmly congratulating my noble friend Lady Caine of Kentish Town on her fascinating maiden speech. My noble friend brings a wealth of experience to your Lordships’ House, particularly in the creative industries that she spoke about with great expertise today. I am very pleased that she chose the table that she did and I very much look forward to working with her, and to her further contributions in debates such as this.

Upon taking office, this Government inherited three distinct crises: a crisis in the public finances; a crisis in our public services; and a crisis in the cost of living. As my noble friend Lord Eatwell said, that included a £22 billion black hole in the public finances, public services at breaking point, with NHS waiting lists at record levels, and working people suffering the worst cost of living crisis in a generation, inflation having reached over 11%. Faced with this reality, any responsible Government would have needed to act. That is why we took action in the Budget to wipe the slate clean, to repair the public services, to protect working people and to invest in Britain. We did so in the fairest way possible by, contrary to what the noble Baroness, Lady Neville-Rolfe, said, keeping our promises to working people not to increase their income tax, national insurance or VAT.

However, we needed to take some very difficult decisions elsewhere on tax, including some of those contained in the Bill. They were difficult decisions but they were the right ones, because not acting was simply not an option. As a result of those decisions, as my noble friend Lord Eatwell also said, we have created a foundation of stability on which we are now taking forward our agenda of growth and reform. It is notable that during the many debates on this subject since the Autumn Budget, including today, we have not heard any alternative put forward by the party opposite: no alternative for dealing with the challenges we face or for restoring economic stability, and therefore no plan for driving economic growth. They have shown no humility for the economic damage they inflicted on this country over 14 years, they have come up with no alternative plan and they have provided no apology. It falls to this Government to clean up the mess that we inherited.

The noble Baronesses, Lady Neville-Rolfe and Lady Lawlor, and the noble Lord, Lord Altringham, spoke about economic growth. As my noble friend Lord Hain said, there was, of course, no bigger failure by the previous Government than their failure on growth. The combined effect of their austerity, their disastrous Brexit deal and their Liz Truss mini-Budget was devastating. Had the economy grown by the average of other OECD countries over the past 14 years, it would be more than £150 billion larger today. The OECD’s interim economic outlook, published on Monday, shows that in a changing world, as the noble Baroness, Lady Kramer, observed, increased global headwinds are affecting all G7 economies. Although the UK is forecast to be Europe’s fastest-growing G7 economy over the coming years, second only to the US, the structural problems in our economy run deep. That is why the Government are going further and faster to protect our country, reform our public services and boost growth.

Our strategy consists of three key elements: stability, investment and reform. It recognises that, first and foremost, it is businesses, investors and entrepreneurs that drive growth, as many have said today, alongside a Government who systematically remove the barriers that they face. It includes launching the biggest sustained increase in defence spending since the Cold War; fundamentally reshaping the British state to deliver for working people and their families; and taking on the blockers to get Britain building again.

The noble Baronesses, Lady Neville-Rolfe and Lady Kramer, spoke about the changes to employer national insurance contributions, which are being legislated for separately in the national insurance contributions Bill. We have always been clear that there are costs to responsibility, and the increase in employers’ national insurance contributions will have consequences for businesses and beyond. But the consequences of irresponsibility, for the economy and for working people, would have been far greater. We saw that with the Liz Truss mini-Budget, which crashed the economy and saw typical mortgage payments increase by some £300 a month.

The noble Baroness, Lady Penn, asked about the Spring Statement. I am happy to confirm that there will continue to be only one fiscal event a year: the Budget every autumn. She will have to wait, I am afraid, as will my noble friend Lord Davies of Brixton, until next Wednesday to hear what the Chancellor has to say.

The Bill before your Lordships’ House spans three distinct categories: first, the measures the Government have taken to deliver on the specific commitments made in our manifesto; secondly, measures to put the tax system on a fairer and more sustainable footing; and thirdly, measures to improve health outcomes and support the clean energy transition, in line with our growth strategy.

The Government made a series of commitments in our manifesto that are being delivered through the Bill. They include our commitment to remove the outdated concept of domicile status from the tax system and ensure that everyone who is a long-term resident in the UK pays their taxes here. This was focused on by the noble Lords, Lord Markham, Lord Leigh of Hurley and Lord Altringham. In its place, the Bill introduces a new residence-based regime from April. This new regime will be internationally competitive and focused on attracting the best talent and investment to the UK.

During the passage of the Bill, as mentioned by the noble Baroness, Lady Neville-Rolfe, the Government tabled a number of minor technical changes and administrative easements to ensure that the new regime works as intended. As part of this, we have made changes to ensure that no tax will be due in any past or future tax year for taxpayers in circumstances where they were previously UK-resident and taxed on the remittance basis; they remitted foreign income or gains during a period of long-term non-residence before 6 April 2025; and they have enjoyed or continue to enjoy the benefits of the remitted foreign income and gains after resuming their UK residence. These changes provide certainty for taxpayers and ensure that no tax will be due in these circumstances. The existing remittance rules will continue to apply in circumstances not covered by this amendment so that, where a non-taxable remittance has been made prior to 6 April 2025, a second remittance of the same income or gains remains taxable.

The noble Lords, Lord Markham and Lord Leigh of Hurley, asked about the impact of these changes. We are confident that our new regime will remain internationally competitive and focused on attracting the best talent and investment to the UK. Evidence from the previous Government’s reforms to the non-dom regime in 2017 show that the vast majority of former non-doms who became liable for tax on their worldwide income and gains remained UK-resident and continued to contribute to the UK economy. The new regime will also be more competitive for new arrivals over their first four years of UK residence than the current rules. The noble Lord, Lord Leigh of Hurley, and the noble Baroness, Lady Lawlor, asked about the amount raised, which we remain confident of. The OBR has certified that the non-dom reforms the Government are legislating will raise £33.8 billion over the forecast period.

The noble Lord, Lord Markham, raised concerns about changes being made to the transfer of assets abroad rules in relation to the reforms to non-domicile status. The transfer of assets abroad legislation is a wide-ranging anti-avoidance provision aimed at preventing individuals who are UK resident avoiding a tax liability by transferring assets to a person abroad. I reassure the noble Lord that the changes to these rules will not displace the effect of the old remittance basis rules for the years in which they had effect, such that a tax charge will continue to arise only at the point of remittance. The noble Lord, Lord Markham, also raised a concern that the introduction of the temporary repatriation facility—the TRF—could lead to retrospective taxation if the Government choose to change the rates of tax charged in the future. The rates of the TRF charge are set out in the Bill and will be set at 12% for the tax years 2025-26 and 2026-27, and at 15% for 2027-28.

Our manifesto also pledged to

“end the VAT exemption … for private schools to invest in our state schools”.

The Bill delivers on that commitment, as focused on by the noble Baroness, Lady Kramer. Some 94% of children in this country attend state schools; however, too many children do not get the opportunities they deserve because these schools are too often held back by a lack of investment. That is why we introduced VAT on private school fees from 1 January this year, to secure the additional funding needed to improve educational outcomes across the UK. Despite what the noble Baroness, Lady Neville-Rolfe, seemed to suggest, the evidence to date supports the assessments we have made and we remain confident in them.

Another key manifesto commitment relates to the energy profits levy on oil and gas companies, mentioned by the noble Baroness, Lady Neville-Rolfe. The Bill fulfils our promise to increase the rate of the levy by three percentage points to 38%. It also extends the levy by one year and removes the 29% investment allowance. Although oil and gas will continue to have a role in the energy mix during the transition, we must drive public and private investment towards cleaner energy. The Government recognise that oil and gas will continue to have an important role. The sector continues to benefit from £84 of tax relief for every £100 of private investment. It will also continue to benefit from a decarbonisation allowance at a similar value of relief as it received prior to the increase in the rate of the energy profits levy.

The noble Baroness, Lady Penn, and the noble Lord, Lord Altrincham, asked about the impact on jobs and investment as a result of this change. The Government are committed to managing the energy transition in a way that supports jobs in existing and future industries. That is why, beyond the abolition of the investment allowance in the energy profits levy regime, we have not made any additional reductions to the level of tax relief that the sector can claim. We are also taking steps to give the sector and its investors long-term certainty by publishing a consultation looking at how the fiscal regime will respond to oil and gas price spikes after the energy profits levy ends. An impact assessment was also published at the time of the Budget.

The Bill also contains a range of measures to make the tax system fairer and more sustainable and to restore stability to the public finances. The noble Baronesses, Lady Neville-Rolfe and Lady Coffey, and the noble Lord, Lord Fuller, spoke about the reforms to agricultural property relief and business property relief, which will be legislated for separately. Under the current system, 100% relief on business and agricultural assets is heavily skewed towards the wealthiest estates. According to the latest data from HMRC, 40% of agricultural property relief is claimed by just 7% of estates making claims. That amounts to just 117 estates claiming £219 million of relief. It is neither fair nor sustainable to maintain such a large tax break for such a small number of claimants, given the wider pressure on the public finances. The new system, which will apply from April next year, maintains significant tax reliefs for estates while supporting the public finances in a fair way.

The reliefs sit on top of existing spousal exemptions and nil-rate bands. Therefore, a couple with agricultural or business assets will typically be able to pass on up to £3 million-worth of assets without paying any inheritance tax. I am pleased to say that I did hear the noble Baroness, Lady Penn, clearly on this occasion with her question. The reforms to APR and BPR from April 2026 are expected to raise £520 million in 2029-30. This is a combined policy across the reliefs, rather than separate policies for each relief, so a breakdown of the revenue between them is not available.

The noble Baroness, Lady Coffey, asked about double-cab pick-ups. The change announced at the Autumn Budget 2024 will be implemented in April 2025, and HMRC has put in place extensive transitional arrangements for businesses which purchase, lease or order a double-cab pick-up prior to this. As a result, the charge will not impact the capital allowance’s treatment of anyone who already owns a double-cab pick-up or who purchases one before April 2025. For employers and employees with a benefit-in-kind currently or who purchase, lease or order a DCPU before 6 April 2025, the existing treatment will continue to apply until the earlier of the disposal lease expiry or 5 April 2029. There are alternative vehicles with the same off-road and haulage capabilities that are still treated as goods vehicles, such as single-cab pick-ups.

The noble Baroness, Lady Neville-Rolfe, asked about the digital services tax. The UK’s objective has always been to ensure that all businesses pay their fair amount of UK tax on the value they derive from the UK market. The UK remains committed to removing a digital services tax once the pillar 1 global solution on international tax is in place. The Government are looking forward to working with the new US Administration to understand their concerns regarding the DST and to consider how these can be addressed in a way that preserves the DST’s policy objectives.

The noble Lord, Lord Leigh of Hurley, and the noble Baroness, Lady Kramer, asked about the position of the US Government on pillar 2. The UK and the US continue to enjoy a strong relationship, as the Prime Minister’s recent visit to Washington demonstrated. We recognise that the US Administration have concerns about pillar 2, and the Government are looking forward to engaging with the US to work through these concerns, alongside other members of the inclusive framework.

My noble friend Lord Davies of Brixton asked about the rationale for requiring administrators of UK-registered pension schemes to be UK residents. Under existing rules for such schemes, the scheme administrator can be resident in the EEA, which can make enforcement of tax debts from the scheme difficult and costly for HMRC. This requirement will support HMRC’s enforcement activities, as there will be a UK resident for it to engage with.

The third and final set of measures in the Bill seek to reduce health-related harm, support the clean energy transition and fund our vital public services. As our growth strategy makes clear, improving health outcomes is essential for delivering resilient long-term growth. Transitioning to net zero is central to this mission, and that is why the Government are capitalising on new opportunities and investment in clean energy industries right across the UK.

The noble Baroness, Lady Kramer, spoke about the impact of alcohol duty changes on pubs. Alcohol duty rates on non-draft products increased in line with RPI from February this year. However, nearly two-thirds of alcoholic drinks sold in pubs are served on draft. Therefore, instead of uprating these products in line with inflation, the Government are cutting draft duty by 1.7%, which means a penny off a pint in the pub. Overall, this change will reduce the total duty bill for eligible businesses by up to £100 million a year.

The noble Baroness, Lady Coffey, spoke about the soft-drinks levy. Based on evidence of the soft-drinks levy’s impact to date, the Government anticipate further product reformulation as a result of this measure, and this is reflected in the OBR-certified costing. This announcement will protect the real-terms value of the SDIL and maintain the incentives for manufacturers to reduce sugar content. This is not a retrospective tax: the new rates will apply only from 1 April. Historic tax rates and treatment will not change.

The noble Lord, Lord Moynihan, spoke powerfully about the importance of school sports and about childhood obesity. As I understand it, revenues from the soft-drinks levy are not formally allocated to any individual spending programmes. However, since the introduction of the SDIL, the Government have helped schools support healthier and more active lifestyles through expanded investment in the PE and sport premium, and this will continue.

This Bill delivers on the Government’s manifesto, puts the tax system on a fairer and more sustainable footing, supports the transition to clean energy and improves health outcomes. It is a Bill to fix the foundations of our economy by repairing the £22 billion black hole in the public finances that we inherited. That has involved making difficult but responsible choices to wipe the slate clean, repair public services, protect working people and invest in Britain. These decisions have been taken in the fairest way possible, by keeping our promises to working people not to increase their national insurance, VAT or income tax. As a result of these decisions, we have created a foundation of stability on which we are now taking forward our agenda of growth and reform. Low growth is not our destiny, but growth will not come without a fight. That is exactly why the Government are going further and faster to unlock the full potential of the economy.

Bill read a second time. Committee negatived. Standing Order 44 having been dispensed with, the Bill was read a third time and passed.

Independent School Fees: VAT

Lord Livermore Excerpts

Thursday 13th March 2025 Lords Chamber

[The Financial Secretary to the Treasury (Lord Livermore) (Lab)]

My Lords, the result of imposing VAT on school fees has been to help raise revenue to fund the Government’s objective that every child has access to high-quality education, including the 94% of children who are educated in the state sector. The Government have published a tax impact and information note setting out an analysis of the impacts of this policy. The Government’s costings, set out in a detailed costings note, have been certified by the independent Office for Budget Responsibility. We remain confident in those assessments but will of course continue to monitor the impact of the reforms.

[Lord Lexden (Con)]

My Lords, what are the Government to say to the mother of a child with special needs whose independent school is closing because of their education tax? She writes to me: “Shell-shocked does not cover it. My child is autistic. State secondary was an utter disaster. She felt safe and happy. Her heart is now broken”. What are they to say to the head of a small independent school in Derbyshire with 120 pupils, who writes to me: “I am battling to save my life’s work”? How would members of the Government feel if they were forced to move their child to a new school in the middle of an academic year, particularly if exams were in the offing? How should the sudden imposition of an unprecedented education tax on 1 January, after a rushed consultation last summer when schools were on holiday, be described? One word does it: cruel.

[Lord Livermore (Lab)]

I am grateful to the noble Lord for his question, and I pay tribute to his involvement in this sector. As he will know, probably better than me, there has historically been a significant turnover within the private school sector, with around 3% of private schools—roughly 75 in the UK—opening and closing each year, with the overall number of private schools remaining stable. Since this policy was announced in July, private schools have continued to open in England in line with historic trends.

[Baroness Bull (CB)]

My Lords, I thank the Minister and the Government for their recognition of the unique role that the Music and Dance Scheme schools play in enabling talented young dancers and musicians to pursue their dreams, whatever their background. Is the Minister aware of the recent demonstration of the success of that scheme in the outstanding achievements of Jakob Wheway Hughes, who is a student on the scheme at Tring Park School for the Performing Arts? He won not one but three of the prizes at the prestigious international ballet competition, the Prix de Lausanne. Will the Minister join me not only in congratulating Jakob on his success but in noting the role that the Music and Dance Scheme has played in achieving that success?

[Lord Livermore (Lab)]

I am grateful to the noble Baroness for her question. Of course, I will join her in congratulating Jakob. As she knows far better than I do, the Music and Dance Scheme provides grants and help with fees at eight schools and 20 centres for advanced training. The Department for Education has decided to adjust its Music and Dance Scheme bursary contribution for families with a relevant income below £45,000 a year to account for the VAT that will be applied to fees, ensuring that the total parental fee contribution for families with below-average relevant incomes remains unchanged for the rest of this academic year.

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

My Lords—

--- Later in debate ---

[Lord Addington (LD)]

I am not a Tory, thank you. I remind the House of my declared interests in this field. Special educational needs is one of the big sectors where the private system has been used by the state system to reinforce its own effectiveness. You get support only if you have an EHC plan. These are agreed by everybody as being extremely expensive and difficult to implement. Why are the Government giving support only to those with special educational needs who ask for such plans to be imposed on the state system and encouraging people who do not have them in the private sector to take them out?

[Lord Livermore (Lab)]

The policy remains as it was. It will not impact pupils with the most acute additional needs. Where pupils’ places in private schools are funded by local authorities in England, Scotland and Wales because their needs can be met only in a private school, local authorities will be able to reclaim that VAT. In terms of those without one of those systems in place, on average, the Government expect private school fees to increase by around 10% as a result of this measure.

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

My Lords, I am not a Tory either. Does my noble friend the Minister agree that the scare stories coming from opposite, like many of their scare stories, have been proven to be wrong? The Press Association’s review of schools has shown that there has not been a major transfer from the private sector to the public sector. In fact, in the public sector in England, more pupils have got their first choice of school this year than last year. The private schools that are closing are doing so for reasons other than the increase in fees. The noble Lord, Lord Lexden, is shaking his head, but he is wrong.

[Lord Livermore (Lab)]

As always, I agree with everything that my noble friend says. All the comments that we have heard to date about the Government’s assessments being incorrect have been proven to be wrong. On the number of pupils who would move from one sector to another, that is absolutely in line with what the Government’s assessment said. On the amount of VAT that would pass through to the fees that parents pay, that is absolutely in line with what the Government said. On the number of schools that would close, that is absolutely in line with what the Government said. As my noble friend said, many councils now say that there has been no obvious impact from the addition of VAT on private school fees, and more pupils are receiving their first choice of school than they did last year.

[The Earl of Clancarty (CB)]

My Lords—

--- Later in debate ---

[The Earl of Clancarty (CB)]

My Lords, while I welcome any relief for the music and dance schools, does the Minister accept that the £45,000 cut-off point for a whole family is too low? When will that be reviewed? Should not the Government do everything possible to encourage UK students into our creative schools, including the Yehudi Menuhin School, whose remarkable students we had the privilege of hearing in the Lords last week?

[Lord Livermore (Lab)]

I am grateful to the noble Earl for his question. I agree with the second part of it that we should encourage people into those schools. In terms of what the Government can do, the Department for Education has already acted and adjusted its scheme, and it will continue to maintain that for the rest of the academic year.

[Baroness Goldie (Con)]

Many of our Armed Forces educate their children privately because that is the only way they can ensure continuous provision of education because of the extraordinary lives we ask them to lead and the sacrifices they make for the safety of our nation. While the MoD pays a continuity of education allowance, that covers only a proportion of the parental cost. The imposition of VAT on private school fees has added to the expense of the balance which Armed Forces personnel are paying, magnified if they have more than one child being educated. Is this really the best we can do for our Armed Forces personnel?

[Lord Livermore (Lab)]

I agree with much of the sentiment that the noble Baroness expresses. The Government greatly value the contribution of our diplomatic staff and our serving military personnel. The continuity of education allowance provides clearly defined financial support to ensure that the need for frequent mobility, which often involves an overseas posting, does not interfere with the education of their children. As the noble Baroness will know, the Ministry of Defence and the Foreign Office have both increased the funding allocated to that allowance to account for the impact of any private school fee increases on the proportion of fees covered. The noble Baroness raises the proportion of the fees paid by the parents. As she will know, on average, the Government expect private school fees to increase by around 10% as a result of this measure, but many schools, as we have seen so far, have fully or partially absorbed VAT costs. How individual schools fund this additional cost is a commercial decision for them.

[Lord Blunkett (Lab)]

Does my noble friend agree that, although this is a critical area, it should be confined to those serving overseas and should not include those spending a substantial amount of time in the UK but still having their fees subsidised by either the MoD or the Foreign Office?

[Lord Livermore (Lab)]

I am grateful to my noble friend for his question. As I have said, the continuity of education allowance is designed to provide clearly defined financial support to ensure that the need for frequent mobility, often involving overseas postings, does not interfere with the education of the children involved.

[Baroness Neville-Rolfe (Con)]

My Lords, VAT on independent school fees is an unpleasant, class-based change of the kind sometimes adopted by the party opposite. This increased private school fees by 12.7% this January, according to the ONS. We will debate this matter next week with the Finance Bill, but does the Minister not feel rather embarrassed that his Government are the first one to tax education?

[Lord Livermore (Lab)]

If the noble Baroness wants to talk about what she is embarrassed about, I am very happy to talk about the previous Government’s record over the past 14 years. This was a necessary decision that will generate additional funding to help improve public services, including for the 94% of pupils who are in the state sector.

Capital Investment and Share Ownership

Lord Livermore Excerpts

Thursday 13th March 2025 Lords Chamber

[Lord Brooke of Alverthorpe]

To ask His Majesty’s Government what consideration they have given to implementing an updated public-private partnership model to attract capital investment and to open share ownership to more people.

[The Financial Secretary to the Treasury (Lord Livermore) (Lab)]

My Lords, the Government are committed to working in partnership with the private sector to deliver the infrastructure that our country desperately needs. We will set out our approach to unlocking greater private investment in UK infrastructure in the 10-year infrastructure strategy, which will be published alongside the spending review in June.

[Lord Brooke of Alverthorpe (Lab)]

My Lords, I am grateful for that response. I wonder whether I can persuade the Minister to move rather faster with the suggestion, which some of us have been pursuing, that we need to review the structure of the PPPs that we had under the previous Labour Government. We need to extend it so that we have wider participation of not just government departments but cities and mayors. On the other side of the fence, we need to extend the private side and give individual citizens the right to shares in these new ventures. Is the Minister prepared to meet a small group of us to talk in advance of the review?

[Lord Livermore (Lab)]

I am grateful to my noble friend for his question. As I say, the Government will publish a cross-cutting 10-year strategy for the UK’s social, economic and housing infrastructure in June, alongside the spending review. It will help to drive growth, deliver net zero and support improved public services by providing more coherence across different types of infrastructure than has been the case in the past. Of course, I am more than happy to meet my noble friend and the group he mentioned.

[Lord Fox (LD)]

My Lords, some public/private partnerships have worked very well. The contract for difference system has been very good at getting a huge amount of private sector investment into the offshore wind sector. Others have proved far less successful. For example, there have been crippling costs for schools that have had long-term, low-quality, high-cost maintenance programmes. It would be helpful if the Minister could tell your Lordships’ House how the Treasury is learning from this. How is it involving the private sector in developing the right risk and reward structures for the right projects? How is it involving local authorities, which often end up picking up the cost of these public/private partnerships

[Lord Livermore (Lab)]

The noble Lord is absolutely right in much of what he says. The private finance initiative was a specific public/private partnership model that was developed 20 years ago. The Government are actively managing the legacy PFI portfolio and learning lessons from that. The Infrastructure and Projects Authority believes that there is an opportunity for the public and private sectors to reset relationships, improve performance and deliver high-quality public facilities and services. Of course, lessons have been learned from the past. On 24 March the National Audit Office will publish a report called:

“Lessons learned: Private finance for infrastructure”.

[Lord Tyrie (Non-Afl)]

The PFI has been a very mixed bag, but parts of it have been highly successful. Unfortunately, the Treasury’s approach to negotiating run-off in PFI has led a large number of top-flight managers in these good PFI projects to leave the industry altogether and seek work elsewhere. What steps are the Government taking to make sure that there is no further attrition?

[Lord Livermore (Lab)]

As the noble Lord says, many of the private finance initiative contracts are coming to an end within the next decade. It is important to prepare early for a seamless transition to the public sector to protect taxpayers’ money. The Infrastructure and Projects Authority is responsible on the Treasury’s behalf, providing oversight and support to the portfolio of operational PFIs. It carries out regular health checks and, to date, around 215 expiry health checks have already taken place.

[Baroness McIntosh of Pickering (Con)]

My Lords, a variety of Governments have tried to introduce private sector investment into water sector projects. The Pickering Slow the Flow pilot scheme that I was involved in at a later stage was hugely successful in factoring in a number of public partnerships. Can the Minister look at this to open up, for example, supermarket involvement and farmers contributing to flood resilience in catchment areas?

[Lord Livermore (Lab)]

I am very interested in what the noble Baroness says, and I will look at that further. As I say, the 10-year infrastructure strategy will be the point at which we set out the Government’s approach to private investment in infrastructure. I cannot say more than that at this point.

[Lord Macpherson of Earl’s Court (CB)]

My Lords, does the Financial Secretary agree that, generally, the quality of PFI projects has improved over time, with an increasing number transferring risk successfully to the private sector and the projects being delivered on budget and on time? Given that the ONS now classifies pretty much all PFI projects as being on balance sheet, can he encourage the Treasury to provide sufficient expenditure cover in the spending review to support innovative public/private partnership proposals?

--- Later in debate ---

[Lord Livermore (Lab)]

As the noble Lord describes, there have of course been positive examples of PFI projects. For example, more than 100 hospitals were built by the previous Labour Government’s PPP programme. The Government are absolutely committed to harnessing private investment and restoring growth. On the latter part of his question, as I said before, the 10-year infrastructure strategy will be the point at which we set out the Government’s view of that, and it will be published alongside the spending review in June.

[Baroness Neville-Rolfe (Con)]

My Lords, does the Minister agree that we should be wary, not least because of the experience with PPI in things such as schools and hospitals, which several noble Lords have mentioned, about the establishment of public/private partnerships? Can I encourage him to be a little more forthcoming? What does he see as the risks? How will the Government assess value for money for the new schemes, perhaps with the help of the Infrastructure and Projects Authority, which he mentioned, whose work I respect?

[Lord Livermore (Lab)]

I am afraid the noble Baroness cannot encourage me to be more forthcoming. As I have said, the 10-year infrastructure strategy will be the point at which we set out the Government’s approach to private investment in infrastructure. I think she will agree with me that private investment is vital for the country’s infrastructure. The Chancellor has established the British Infrastructure Taskforce, made up of some of the UK’s biggest financial companies. That will support the Government’s infrastructure goal and ensure that the strategy is credible and deliverable.

[Lord Reid of Cardowan (Lab)]

My Lords, of course the public/private partnerships and PFIs had risks, and of course there were failures. That is almost inevitable in any new experimental and radical approach to funding services. But the truth is that over the last 20-odd years, the level of services to people in Britain has been much higher because of our engagement with the private sector. Can I therefore encourage my noble friend the Minister and his colleagues not to be deterred when it comes to infrastructure? There is no doubt in my mind that huge added value is possible if we are prepared to be bold in public/private partnerships.

[Lord Livermore (Lab)]

I am grateful to my noble friend for those words, and I agree with much of what he said. The Government remain absolutely committed to harnessing private investment and restoring growth. We will work in partnership with the private sector while ensuring that projects provide value for money for taxpayers, now and in the future, and that appropriate lessons are learned from the past.

[Lord Forsyth of Drumlean (Con)]

My Lords, is not the key to a successful private finance initiative the appropriate transfer of risk? To ensure that happens, it is important to have the people in the Treasury or elsewhere with the necessary skills to negotiate the appropriate contracts. In wishing the Government well in taking this forward, I ask them to give consideration as to how they will achieve that.

--- Later in debate ---

[Lord Livermore (Lab)]

The noble Lord is right. He is far more expert in these matters than I am, but I absolutely agree with him. Clearly, the public sector needs to be an intelligent client when it is negotiating with the private sector. That skill set is vital both within the Civil Service and in the skills we can draw on. As I mentioned, the Chancellor has established the British Infrastructure Taskforce to try to help with skills and advice. It is made up of some of the UK’s biggest financial companies, and it will support the Government’s infrastructure goals and ensure that the strategy is credible and deliverable.

[Baroness Bennett of Manor Castle (GP)]

My Lords, the Minister referred to the disastrous Blair PFI NHS hospitals scheme. I do not think there is much awareness that about half the money is still to be paid off. The noble Lord, Lord Fox, referred to the cost to local government. The Minister is probably aware of the National Institute of Economic and Social Research figure: local government is paying £13.5 billion. The institute also found that £1 billion had been made in pre-tax profit by a handful of companies, often registered in Guernsey and Jersey. Is PFI not simply a benefit to the financial sector?

[Lord Livermore (Lab)]

I think it was probably a benefit to the people who were able to be treated in the 100 hospitals that were built as a result of it. As I say, the private finance initiative was a specific public/private partnership model that was developed 20 years ago. The Government are actively managing the legacy PFI portfolio, and we are learning lessons from that.

Carbon Border Taxes

Lord Livermore Excerpts

Wednesday 12th March 2025 Lords Chamber

[Lord Fuller]

To ask His Majesty’s Government, further to the proposals by the European Union to exempt 80 per cent of eligible EU companies from new carbon border taxes, what plans they have to ensure that equivalent businesses in the United Kingdom are treated similarly.

[The Financial Secretary to the Treasury (Lord Livermore) (Lab)]

My Lords, this is already the case. To ensure that the costs of complying with the UK carbon border adjustment mechanism are proportionate, it will apply only to those firms importing CBAM goods valued at £50,000 or more over a rolling 12-month period. The Government estimate that this will exclude 80% of CBAM-eligible firms while retaining more than 99% of imported emissions within the scope of the tax.

[Lord Fuller (Con)]

My Lords, the carbon border adjustment mechanism is a tariff by any other name. I am involved in an industry affected by CBAM, so I know more than most about the astonishingly divergent way in which the UK Government plan to introduce this tax. It will damage competitiveness, be complex to administer and drive growing inflationary pressures. There are even proposals to levy the tax to protect industries that do not even exist anymore. The EU has worked out for itself—

[Lord Fuller (Con)]

I am just about to ask the question. The EU has worked out for itself that building a walled garden around the economy will damage its own competitiveness. The Prime Minister said today in PMQs that all options were on the table in so far as tariffs are concerned. Does the Minister agree that the whole UK proposal needs a fresh look, or is he prepared to see us sleepwalk into a trade war with our friends and allies in the United States while damaging trade with our close EU partners?

[Lord Livermore (Lab)]

I am grateful to the noble Lord for his question. However, the answer is no, I do not agree with him. Reducing the UK’s carbon emissions is necessary to meet our emissions targets, and the emissions trading scheme and the carbon border adjustment mechanism are necessary tools to do that. Our approach is very similar to that of the EU. As the noble Lord said in his Question, we are doing exactly what the EU is doing—in fact, I think it has followed us, rather than the other way around, so our approaches are extremely similar. The US Administration have made no public comment on the UK CBAM, and I am not going to speculate on a hypothetical.

[Earl Russell (LD)]

My Lords, does the Minister agree that the UK and the EU running separate carbon markets only adds regulatory burdens and damages our energy transition and national industries? Is it time to work with our EU partners and look at relinking carbon markets to help to make our industries more competitive and drive down our energy bills?

[Lord Livermore (Lab)]

I absolutely agree with the noble Earl that alignment is helpful to UK competitiveness. We recognise that alignment with existing regimes can reduce administration burdens, so we will align where appropriate and we will follow developments on the EU CBAM very closely. We also continue to explore all options to improve trade and investment with the EU, which includes the UK and EU giving serious consideration to linking our emissions trading schemes.

[The Earl of Devon (CB)]

My Lords, given that we now produce no nitrogen fertiliser at all in the United Kingdom, and all of it is imported, have the Government calculated the impact of the carbon border tax on the price of food grown in the UK?

[Lord Livermore (Lab)]

Fertiliser production in the UK is subject to carbon pricing under the UK Emissions Trading Scheme. A UK CBAM will ensure that fertiliser produced overseas faces a comparable carbon price to equivalent goods produced in the UK. Most UK agricultural prices are a function of a range of international factors and the Government do not expect a CBAM on fertiliser to put UK farmers at a competitive disadvantage.

[Lord Bellingham (Con)]

My Lords, I declare an interest in this subject. Further to the question asked by the noble Earl, Lord Devon, can the Minister say whether the Government have made any assessment at all of the impact that this could have on our balance of payments?

[Lord Livermore (Lab)]

I do not think that that is relevant to this policy. Most of our trade in food is with the EU, and the EU has a similar scheme to ours.

[Lord Watts (Lab)]

My Lords, is not this another example of the mess that has been left by the previous Government? Does my noble friend agree that they did nothing to negotiate this, which is now causing problems to our industry?

[Lord Livermore (Lab)]

I am very tempted to agree with my noble friend. I think that what he says is absolutely the case.

[Baroness Neville-Rolfe (Con)]

My Lords, UK energy prices are far too high, notably for industrial uses such as steel, cement and ceramics, and for manufacturing, which are vital to the UK economy. Does the Minister agree that the arrangements for a carbon tax here and any border mechanisms must always be considered against the need to reduce energy costs for users and, as has been foreshadowed, to keep prices down, especially for hard-pressed consumers?

[Lord Livermore (Lab)]

Yes—I agree with the noble Baroness that energy prices are too high. I just wonder what the previous Government did to tackle that over 14 years. This Government have invested in CCUS, for example, which the previous Government did not. I do not know whether the noble Baroness agrees with our investments in that; she opposes the revenue-raising measures that we have taken to raise the funds to invest in those measures. It is an interesting question, but I of course agree with her. That is why the tax is designed in exactly the way that it is.

[Lord Hannan of Kingsclere (Con)]

My Lords, to return to my noble friend Lord Fuller’s question, how is this different from a tariff? One effect of a tariff is that it results in the outsourcing of manufacturing. People will take car-making or whatever to places that are not affected by this additional levy. Have the Government made any assessment of how much deindustrialisation there will be as a consequence of imposing what is, in effect, a tariff on ourselves?

[Lord Livermore (Lab)]

As I understand it, the noble Lord likes market-led approaches. The UK Emissions Trading Scheme is a market-led approach whereby those domestic firms and industries that are able to decarbonise quickly do so first, while technological solutions are found for those where it is more difficult. To maintain the integrity of the UK’s decarbonisation efforts through the emissions trading scheme, we must mitigate the risk of carbon leakage, which means that we must have a carbon border adjustment mechanism.

Supply and Appropriation (Anticipation and Adjustments) Bill

Lord Livermore Excerpts

2nd reading & 3rd reading & Committee negatived
Tuesday 11th March 2025 Lords Chamber

Moved by

[Lord Livermore]

That the Bill be now read a second time.

Bill read a second time. Committee negatived. Standing Order 44 having been dispensed with, the Bill was read a third time and passed.

Child Benefit and Guardian’s Allowance Up-rating Order 2025

Lord Livermore Excerpts

Wednesday 5th March 2025 Lords Chamber

Moved by

[Lord Livermore]

That the draft Order and Regulations laid before the House on 15 January be approved.

Considered in Grand Committee on 3 March.

Motions agreed.

Crown Estate Bill [HL]

Lord Livermore Excerpts

Consideration of Commons amendments and / or reasons
Tuesday 4th March 2025 Lords Chamber

Moved by

[Lord Livermore]

That this House do agree with the Commons in their Amendment 1.

1: After Clause 4, insert the following Clause—
“Territorial seabed
After section 3A of the Crown Estate Act 1961 (inserted by section 1 of this Act) insert—
“3AA Restriction on permanently disposing of interest in seabed etc
(1) The Commissioners may not without the consent of the Treasury permanently dispose of—
(a) any part of the territorial seabed, or
(b) any interest, right or privilege over or in relation to the territorial seabed,
which forms part of the Crown Estate.
(2) Accordingly, without that consent, any purported disposal of a kind mentioned in subsection (1) is void.
(3) In subsection (1), “territorial seabed” means the seabed and subsoil within the seaward limits of the United Kingdom territorial waters.””

[The Financial Secretary to the Treasury (Lord Livermore) (Lab)]

My Lords, with the leave of the House, I will also speak to Amendments 2, 2A and 3. It is a pleasure to present the amended Crown Estate Bill to your Lordships’ House following its passage through the other place. As noble Lords will recall, this Bill focuses on removing existing limitations that hamper the Crown Estate’s ability to compete and invest as a commercial business, ensuring it has a sustainable financial future for years to come. In doing so, the Bill supports the Crown Estate to build on its strong track record of creating long-term shared prosperity for the nation.

Two main changes were made to this Bill in the other place. The first was the addition of a clause on the territorial seabed. I am very grateful to the noble Baroness, Lady Vere, for bringing this important issue to the Government’s attention. As noble Lords may remember, this issue relates to the ability of the Crown Estate to dispose of the seabed, given that it is a unique national asset.

As I noted on Report, the law on the seabed is complex. I committed to explore the matter further and, if required, bring forward a legislative provision to restrict the Crown Estate’s ability to permanently sell the seabed. I am grateful to the noble Baroness, Lady Vere, and the noble Earl, Lord Russell, for their support for proceeding in this way.

Clause 5, as inserted in the other place, delivers on this commitment and seeks to address the legitimate concerns raised by the noble Baroness, Lady Vere. It puts special protections in place for the seabed by requiring the Crown Estate commissioners to obtain consent from the Treasury before they permanently dispose of any part of, or the Crown Estate’s interest in, or rights or privileges in relation to, the territorial seabed.

To be clear, this does not mean that the Crown Estate could never be permitted to dispose of seabed. It may be that national or local interests would be best served by such a sale—including, for example, by the sale to another part of the public sector to enable local infrastructure development—but any such sale could take place only with the agreement of Ministers, and it is right that they are the decision-makers on such sales.

This clause would not fetter the Crown Estate’s existing right to agree licences or leases in relation to the seabed that, by definition, do not represent a permanent disposal of the asset. The ability to agree long-term licences and leases for use of the seabed will continue to be an important feature for the Crown Estate to attract the significant investment needed for offshore clean energy developments. I believe this fulfils my commitments to your Lordships’ House and addresses the important points raised.

The second change made to the Bill in the other place was, I am afraid, the removal of Clause 5, introduced by the noble Lord, Lord Forsyth, on Report, which would require the Crown Estate commissioners to assess the environmental impact and animal welfare standards of salmon farms on the Crown Estate on an ongoing basis. I thank the noble Lord, Lord Forsyth, for raising this important issue during the passage of the Bill, and for our constructive engagement on the subject since. As I said on Report, I wholeheartedly support the objectives behind his amendment, but I regret that the Government are still unable to support it. It remains the Government’s position that this amendment would duplicate protections that already exist in legislation or that are required by regulators as part of the licensing process for aquaculture.

As I also noted on Report, fisheries policy is the responsibility of the devolved Governments in Scotland, Wales and Northern Ireland. All fish farming in England is regulated to ensure it is carried out in a responsible manner that respects the environment and protects consumer health and animal welfare. At present, virtually all salmon aquaculture in the UK takes place in Scotland, where the management of the Crown Estate in Scotland is a devolved matter.

However, as this House has previously heard from my noble friend Lady Hayman of Ullock on 12 September 2024, according to the International Union for Conservation of Nature’s red-list criteria, Atlantic salmon are now endangered in Great Britain and near threatened globally. To provide further reassurance to noble Lords, I have spoken to the Crown Estate and the Government are now prepared to go further. I can make two commitments to the noble Lord, Lord Forsyth, should he choose not to push his amendment to a vote.

First, on auditing standards, the noble Lord’s amendment on Report provided for Crown Estate commissioners to assess the environmental impact and animal welfare standards of salmon farms on the Crown Estate. Today, I can say to the noble Lord that the Crown Estate will undertake an audit to ensure that all salmon farms leasing land on the Crown Estate in England, Wales and Northern Ireland comply with all relevant regulations on salmon farming in England, Wales and Northern Ireland. The outcome of this audit would be set out in its 2024-25 annual report, which will be published in June. If this audit were to find that salmon farms are not complying with their legal obligations and regulatory requirements, the Crown Estate will ensure these practices are corrected. In extreme cases this may involve exercising forfeiture rights, in the event of non-compliance of covenants.

Secondly, the relationship between the Crown Estate and the Treasury is governed by the framework document. The Government will amend this document to ensure that the environmental impact and animal welfare standards of salmon farms is considered at all times. The updated framework document will be amended to read: “The Crown Estate will continue to keep under review the environmental impact and animal welfare standards of salmon farms on its estate”. This amended framework document will be published on Royal Assent. I trust that these two commitments go some way to resolving the noble Lord’s concerns on this matter, and I hope he feels able not to press his amendment.

In addition to these substantive amendments, a procedural amendment was made in the other place. In line with existing convention, every Bill that begins in your Lordships’ House that requires a money resolution in the other place has an additional clause added to it that indicates that nothing in the Bill shall impose any charge on public funds. Once the Bill has been considered by the other place and authorised by a money resolution, this redundant clause is then removed.

I reassure noble Lords that the removal of the privilege amendment does not alter the position I previously set out on borrowing controls. To be clear, the Crown Estate will be able to borrow only with the consent of the Treasury and in line with the parameters set out in the memorandum of understanding that I have previously made available in draft. This includes that borrowing is not to exceed more than 25% of a net debt to asset value ratio.

Pre-appointment scrutiny was another important issue raised by noble Lords during the passage of the Bill in your Lordships’ House. In Committee, I committed to work with the Cabinet Office to ensure that pre-appointment scrutiny applied to the role of chair of the Crown Estate. I take this opportunity to confirm that the role of chair has now been formally designated as a public appointment for which parliamentary pre-appointment scrutiny now applies. The Government announced on 23 December that their preferred candidate would face pre-appointment scrutiny by the Treasury Committee in the other place. This hearing is set to take place on 19 March, with the committee’s report expected to follow shortly after. I am grateful for the opportunity to update your Lordships’ House on all these issues, and I beg to move.

--- Later in debate ---

[Baroness Neville-Rolfe (Con)]

I very much take my noble friend’s point. I was thinking, in clarification, that problems in Scotland would be addressed by the measure that the Minister has very helpfully brought forward today, so that this is looked at in the round wherever the salmon may be. I think that my noble friend and I are at one about this.

Government Amendment 1 seeks to restrict the permanent disposal of interest in the seabed. It would ensure that the commissioners may not dispose of the seabed without the consent of the Treasury. In Committee and on Report, noble Lords across the House, including, as has been said, my noble friends Lord Holmes of Richmond and Lady Vere of Norbiton, raised concerns about the disposal of the Crown Estate’s assets and emphasised the duty of the commissioners to protect the seabed. As stewards of our seabed, the Crown Estate and its commissioners bear a profound and unique responsibility to ensure its protection. It is not merely an asset; it is actually the foundation of our oceans and a vital natural resource that supports marine life and holds cultural and ecological significance. In a spirit of compromise, we can accept the Government’s amendment and reformulation.

In conclusion, I warmly thank the Minister for his efforts to meet our concerns on the Bill. That includes what he has not mentioned, the important 25% cap on borrowing that will be in the framework document, and it includes the agreement on pre-appointment scrutiny. I thank all noble Lords across the House—it has been a cross-party effort—who have taken part in the scrutiny of the Bill. I particularly thank my noble friend Lord Forsyth of Drumlean again for his persistence in this matter, and success. Above all, I thank my predecessor and noble friend Lady Vere of Norbiton, and my noble friend Lord Roborough, for their work on the Bill.

[Lord Livermore (Lab)]

My Lords, I thank all noble Lords who have spoken today. I am very grateful to the noble Lord, Lord Forsyth, for what he said and his agreement on the way forward. As the noble Baroness, Lady Neville-Rolfe, knows, the Crown Estate is devolved to Scotland, so the measures I have set out will not apply to Scotland and I cannot ensure that they will.

In answer to the noble Lord, Lord Wigley, as the Crown Estate is not devolved to Wales, the audit that the Crown Estate will conduct will apply to England, Wales and Northern Ireland. However, I do not believe that there is a salmon farm in Wales, so I do not know whether the audit will apply, but, clearly, all salmon farms on Crown Estate land in England, Wales and Northern Ireland will be looked at.

In answer to the noble Lord, Lord Bellingham, the outcome of the audit will be set out in the Crown Estate’s annual report, which will be published in June, giving an opportunity for scrutiny. In answer to the noble Earl, Lord Russell, in terms of the seabed, the Crown Estate is limited to 150-year leases.

I am glad that we have been able to agree to the changes made by the other place to this Bill. Once again, I thank all noble Lords for their efforts on the Bill since last July.

Motion on Amendment 1 agreed.

Motion on Amendment 2

[Lord Livermore]

Moved by

That this House do agree with the Commons in their Amendment 2.

2: Clause 5, page 2, line 29, leave out Clause 5

--- Later in debate ---

Motion on Amendment 3

[Lord Livermore]

Moved by

That this House do agree with the Commons in their Amendment 3.

3: Clause 7, page 4, line 4, leave out subsection (4)

National Insurance Contributions (Secondary Class 1 Contributions) Bill

Lord Livermore Excerpts

3rd reading
Tuesday 4th March 2025 Lords Chamber

Moved by

[Lord Livermore]

That the Bill be now read a third time.

Clause 1: Rate of secondary Class 1 contributions

Amendment 1

Moved by

--- Later in debate ---

[Baroness Neville-Rolfe (Con)]

My Lords, I am concluding for the Opposition on this amendment. We are content with the amendment, which we see as a technical, tidying-up amendment.

[The Financial Secretary to the Treasury (Lord Livermore) (Lab)]

My Lords, the amendment tabled by the noble and learned Lord, Lord Wallace, seeks to make a minor adjustment to the Bill to more accurately define care workers in Scotland. While the amendment does not change the fundamental principles or objectives of the Bill, it enhances the clarity and precision of the text. I am therefore happy to accept this amendment.

[Lord Wallace of Tankerness (LD)]

My Lords, I thank the noble Lords and noble Baronesses who have participated in this debate. In particular, I thank my noble friend Lady Kramer for accepting the spirit of the amendment to what was originally her and my noble friend Lady Barker’s amendment. I also thank the Minister for the spirit in which he has accepted the amendment.

The noble Lord, Lord Eatwell, has been very consistent; he said much the same last week. The noble Lord, Lord Leigh, as well as the noble and learned Lord, Lord Hope of Craighead, made the point that, if the increase in national insurance contributions from bodies in the charitable sector should lead to diminution of services, it will be the people in receipt of the services who will suffer. That, in turn, could put a burden on government, possibly greater than the cost of being consistent with this amendment.

With that, and with thanks also to the noble Baroness, Lady Fraser, I am pleased to move this amendment.

--- Later in debate ---

Moved by

[Lord Livermore]

That the Bill do now pass.

[Lord Livermore (Lab)]

My Lords, it was this Government’s duty in October last year to repair the public finances and rebuild the public services. We did so in the fairest way possible, by keeping our promises to working people not to increase their national insurance, VAT or income tax. The Government did, however, need to take some very difficult decisions, including some of the measures contained in this Bill. As a result of those decisions, we have now wiped the slate clean, creating a platform of stability and enabling us to make significant additional investment in the NHS.

I thank all noble Lords who have given their time and expertise to scrutinise the Bill during its passage through your Lordships’ House. Specifically, I thank the noble Baronesses, Lady Neville-Rolfe and Lady Kramer, for their constructive engagement and scrutiny.

While I acknowledge the commitment of your Lordships’ House to the scrutiny of the Bill, the Government have not found themselves in agreement with the amendments proposed. We believe that the Bill in its original form provides the right way in difficult circumstances of raising the revenue needed to repair the public finances and rebuild public services.

I thank my noble friends Lord Eatwell and Lord Chandos for their supportive contributions and thank my officials who worked hard to bring this Bill before your Lordships’ House, including Joe Oakes, Isabelle Urban, Alex Nevitte, Henry Lodge, Hannah Bewley and Will Smith. I beg to move.

[Baroness Kramer (LD)]

I am sorry to disrupt the House, but it is common to use do now pass to say thank you and I certainly have thank yous to say.

I thank the House for passing a number of amendments that will substantially reduce the damage and harm being done by this Bill. The noble Lord, Lord Londesborough, took the lead on small businesses, the Conservative Benches took the lead on charities and transport for special needs children, and my own party took the lead on community health and social care. Those are all exceedingly important and I hope the Government will take the issues very seriously. I do not think we have ever heard better debates, frankly, than those in this House that talked about real-life experience to convey the significance of the impact of the original Bill.

I thank the Minister. He and his team were unable to give us any concessions but they said no in the nicest of ways. I thank all the other Benches. We worked closely together—Cross Benches, Conservatives and our party—because we all felt in an almost non-political way that it was really necessary to try to come to the rescue of the damage that we could see was going to occur.

There is one amendment that I did not mention and which I think is important because it may survive some of this process and that is from the Conservatives on an impact assessment. That is becoming a recognised vehicle for important assessment of Bills such as this and has historically not been adequate. Perhaps we could now change that for the future.

Lastly, I thank my own Benches. I thank my noble friends Lady Barker and Lord Scriven and the others who led on various areas within this. I also thank Elizabeth Plummer of our Whips’ Office who did so much of the heavy lifting. She will have my eternal thanks. It is so good to have somebody covering one’s back when trying to deal with complex issues. I thank the House in general for taking this issue so seriously and recognising its significance to so many people.

[Baroness Neville-Rolfe (Con)]

My Lords, in concluding for the Opposition, I thank the many Peers on my Benches who have made valuable contributions during the Bill’s passage. I cannot thank them all today as the list is too long but I thank particularly my noble friend Lord Altrincham—my comrade in arms—and our opposition research team.

I also thank noble Lords from across the House, because this has been a cross-party effort, reflecting the widespread damage this Bill will cause. I particularly thank the noble Lord, Lord Londesborough, for his amendments to protect small business, the noble Baroness, Lady Barker, for her amendments on health and social care, and the noble Baroness, Lady Kramer, for her support across the board, including for the amendment calling for a review of the impact of the Bill.

I will say a couple of things. We have consistently heard that this is a job tax, plain and simple. It is the most important economic measure the Government have introduced so far, and it will have wide-reaching damaging impacts across the whole economy. It is being brought in on a tight timescale, creating a cliff edge on 6 April with no staggering for those who may be hurt. It has not been accompanied by an adequate impact note. It has led to businesses losing confidence in the Government, and that, I believe, is very bad for growth, of which I am very supportive. Despite the Minister’s protests, Peers from all Benches have agreed that the short document the Government call an impact note is an affront to the House, and that the Government have failed to provide sufficient sectoral information to allow for the effective scrutiny we try to bring. That is why we must have the review of the impact on affected sectors.

Despite the importance of these measures, the Government have made no effort to engage constructively. This House therefore voted to exempt small charities, transport providers for children with special educational needs and disabilities, early years providers and, as I have already said, small businesses and health and social care providers that provide public services in the private sector.

Of course we understand that taxes should be simple, as the noble Lord, Lord Eatwell, has explained, but when the Government fail to recognise the egregious impact this Bill will have on real people, we believe that some rethinking is necessary. Some of our changes would be modest in cost terms, but I know they would earn the thanks of many right across society.

I end by encouraging the noble Lord to use all his charms to persuade the Chancellor to think again.

[Lord Livermore (Lab)]

My Lords, I once again thank all noble Lords for their efforts on this Bill. I beg to move.

Bill passed and returned to the Commons with amendments.

Child Benefit and Guardian’s Allowance Up-rating Order 2025

Lord Livermore Excerpts

Monday 3rd March 2025 Grand Committee

Moved by

[Lord Livermore]

That the Grand Committee do consider the Child Benefit and Guardian’s Allowance Up-rating Order 2025.

Motion agreed.

Social Security (Contributions) (Rates, Limits and Thresholds Amendments, National Insurance Funds Payments and Extension of Veteran’s Relief) Regulations 2025

Lord Livermore Excerpts

Monday 3rd March 2025 Grand Committee

Moved by

[Lord Livermore]

That the Grand Committee do consider the Social Security (Contributions) (Rates, Limits and Thresholds Amendments, National Insurance Funds Payments and Extension of Veteran’s Relief) Regulations 2025.

[The Financial Secretary to the Treasury (Lord Livermore) (Lab)]

My Lords, I beg to move that the Committee approves these regulations, which are made each year to set national insurance contributions rates, limits and thresholds; and to uprate child benefit and the guardian’s allowance.

First, the Social Security (Contributions) (Rates, Limits and Thresholds Amendments, National Insurance Funds Payments and Extension of Veteran’s Relief) Regulations 2025 set the national insurance contributions —NICs—limits and thresholds of a number of national insurance contributions classes for the 2025-26 tax year. The lower earnings limit, the small profits threshold, the rate of class 2 and the rate of class 3 will all be uprated by the September CPI of 1.7%, while the other limits and thresholds that these regulations cover will remain fixed at their existing level.

The regulations also make provision for a Treasury grant to be paid into the National Insurance Fund if required for the same tax year, which is a transfer of wider government funds to the National Insurance Fund, and for the veterans’ employer NICs relief to be extended for a year until April 2026. The scope of the regulations under discussion today is limited to the 2025-26 tax year.

National insurance contributions are social security contributions, paid when individuals are in work to receive contributory benefits when they are not working—for example, after they have retired or if they become unemployed. NICs receipts fund these contributory benefits, as well as helping to fund the NHS.

The primary threshold and lower profits limit are the points at which employees and the self-employed start paying employee class 1 and self-employed class 4 NICs respectively. The primary threshold and lower profits limit have been frozen by the previous Government at £12,570 until April 2028. However, the level of these thresholds does not affect people’s ability to build up entitlement towards contributory benefits, such as the state pension. For employees, this entitlement is determined by their earnings being above the lower earnings limit, which these regulations will uprate from £123 per week in 2024-25 to £125 per week for 2025-26. That is equivalent to an uprating from £6,396 to £6,500 per annum. For self-employed people, their entitlement is determined by their earnings being above the small profits threshold, which these regulations will uprate from £6,725 in 2024-25 to £6,845 for 2025-26.

Uprating the lower earnings limit and small profits threshold maintains the real level of income where someone gains entitlement to contributory benefits and is the standard approach that has been taken by Governments in most years since 1999 for the for the relevant thresholds. Wage growth is currently higher than inflation, which means that, following the uprating by CPI, there will be a reduction in the number of hours that someone who has received a typical wage increase needs to work to gain entitlement compared to last year.

The upper earnings limit, the point at which the main rate of employee NICs drops to 2%, and the upper profits limit, the point at which the main rate of self-employed NICs drops to 2%, are aligned with the higher rate threshold for income tax at £50,270 per annum. The previous Government also froze those thresholds until April 2028.

Self-employed people earning below the small profits threshold of £6,845 may pay class 2 NICs voluntarily to protect their entitlement to certain contributory benefits. The flat cash rate of class 2 NICs will increase from £3.45 in 2024-25 to £3.50 in 2025-26, in line with September CPI of 1.7%. Class 3 NICs allow people to voluntarily top up their national insurance record. The rate for class 3 will increase in line with inflation from £17.45 a week in 2024-25 to £17.75 a week in 2025-26.

On thresholds for employer NICs reliefs, noble Lords will be aware that the Government have had to make difficult decisions to fix the public finances. One of the toughest decisions that we faced was to increase the rate of employer NICs and reduce the secondary threshold. Although those changes are contained in the National Insurance Contributions (Secondary Class 1 Contributions) Bill, and not the regulations before us, they are the context in which our decision to maintain other targeted NICs reliefs is so important. Those employer NICs reliefs include those for under-21s, under-25 apprentices, veterans and new employees in freeports and investment zones. The regulations that we are debating set these thresholds in line with other personal tax thresholds or maintain the existing level.

The regulations also make provision for the NICs relief for employers of veterans to be extended for another year until April 2026. This measure means that next year businesses will continue to pay no employer NICs on salaries up to the veterans’ upper secondary threshold of £50,270 for the first year of a qualifying veteran’s employment in a civilian role. The continuation of this relief is part of the Government’s commitment to support our veterans. It is intended to further incentivise employers to take advantage of the wide range of skills and experience that ex-military personnel offer; it supports those who have given so much to our country, and it helps make sure that our country further benefits from the skills and potential of our service leavers.

I will now move on to the Treasury grant and National Insurance Fund, which is where the majority of NICs are paid, and which is used to pay the state pension and other contributory benefits. The National Insurance Fund is generally self-financing, with NICs receipts paying for contributory benefits. However, the Treasury has the ability to transfer funds from wider government revenues into the National Insurance Fund in the event that the balance of the National Insurance Fund falls below one sixth of estimated annual benefit expenditure. The regulations before us make provision for a transfer of this kind—known as a Treasury grant—of up to 5% of forecasted annual benefit expenditure to be paid into the National Insurance Fund, if needed, during 2025-26. A similar provision will be made in respect of the Northern Ireland National Insurance Fund.

It is important to note that the Government Actuary’s Department report laid alongside these regulations forecasts that a Treasury grant will not be required in 2025-26, but, as a precautionary measure, the Government consider it prudent to make a provision at this stage for a Treasury grant, which is consistent with previous years.

--- Later in debate ---

[Baroness Neville-Rolfe (Con)]

My Lords, I thank the Minister for clearly outlining the essence of these two SIs, and the noble Baroness, Lady Kramer, for her comments. We had substantial discussions about national insurance in this House last week, on the national insurance contributions Bill, during which significant amendments were made. If carried through the whole legislative process, the changes agreed would result in significant changes to declared government policy. But from those political highs, we move to today’s debate, which is at a much more technical level and, as the Minister said, does not impinge directly on the proposed changes in the Bill.

I note in passing that I read with great interest the Government Actuary’s report, the existence of which I confess I was previously unaware. It provides first-rate briefing across the whole complex of social security benefits, and I thank the Government for it. Reflecting on the references to the National Insurance Fund, already mentioned by the noble Baroness, Lady Kramer —and, sadly, in the absence of the noble Lord, Lord Davies of Brixton—I ask the Minister whether the Government have any plans to put matters on a more realistic basis. The fund does not do what it says on the label.

In particular, the projections in the report indicate that the estimated 2025-26 end-year fund balance of £81.6 billion is only 53% of the estimated benefit expenditure of £152.9 billion. This is another factor in the case for reform of the welfare system, which we in the Conservative Party have called for to incentivise work, cut costs and fraud, and raise productivity. This is not least because of the significant long-term demographic changes which, as the last quinquennial review published in 2022 shows, are projected to exhaust the fund before 2085. There is a big challenge ahead.

Finally, on the measures in these two orders, the Minister will be glad to know that we are also broadly content. I welcome especially the rollover of support for Armed Forces veterans entering the civilian workforce, which we introduced in April 2021. The truth is that readjusting to civilian life is a major problem for many, and this measure is an imaginative incentive to employers to give them a chance and take advantage of their skills and experience, as the Minister pointed out in his opening remarks. Incidentally, the arrangement also shows that exemptions from the standard national insurance rules are possible.

[Lord Livermore (Lab)]

My Lords, I am very grateful for the support from the noble Baronesses, Lady Kramer and Lady Neville-Rolfe, for the measures I outlined.

The noble Baroness, Lady Kramer, asked some questions about the National Insurance Fund and the review. The noble Baroness, Lady Neville-Rolfe, also touched on the Government Actuary’s Department report and the National Insurance Fund. The next quinquennial review of the fund will provide an update of these longer-term issues and projections over the period starting April 2025, so perhaps we will return to debate some of these issues at that point.

The noble Baroness, Lady Neville-Rolfe, also talked about reform of the welfare system. She will know that we are coming forward very shortly with a Green Paper to achieve exactly the things that she set out. I know we tend to be less political in this Room, but I will say that they were in power for 14 years and did not do those things. However, I hope that we will be doing those things very shortly to ensure that the welfare system incentivises work in the way the noble Baroness described.

I am very grateful to both noble Baronesses for their support of the extension of the veterans’ relief, which I totally acknowledge the previous Government introduced. The relief is part of the Government’s commitment to make the UK the best place in the world to be a veteran. It is intended to further incentivise employers to take advantage of the wide range of skills and experience that ex-military personnel offer. I totally take the points that the noble Baroness, Lady Kramer, made: you see homeless veterans across London and the transport network, and of course we need to do more work across government to support them in their efforts to get back into work and to eliminate that homelessness.

Finally, I take the point made by the noble Baroness, Lady Kramer, around CPI for child benefit. The noble Baroness, Lady Sherlock, in the previous debate very eloquently made the point that some of those smaller upratings compound previous upratings when CPI has been so much higher. I echo the words she said. I hope I have covered the points made by both noble Baronesses.

Motion agreed.