Taxation: Small and Medium-sized Enterprises

Angus MacDonald Excerpts

Tuesday 3rd February 2026 Westminster Hall

[Gregory Stafford]

My hon. Friend is absolutely right. One perverse outcome of the many taxes that the Government have put on is that although the NHS is, rightly, exempt from some of these tax rises, those who operate around the NHS—for example, care homes, hospices and other charitable institutions—are being hit. Even GP surgeries are being hit. This is the nonsense that we are seeing from this Government: people taking policy off the shelf from Treasury civil servants without understanding the real-world impact that it will have on businesses, the charitable sector and, in general, our constituents.

As my hon. Friend suggests, these are taxes on the NHS by another name. Extended producer responsibility sits alongside the VPAG—voluntary scheme for branded medicines pricing, access and growth—levy, which takes 10% to 35% of NHS sales from manufacturers. If the measures are taken together, the Government are heavily taxing lifesaving medicine, often at higher rates than in comparable systems overseas, with clear implications for supply and sustainability.

In my November debate on alcohol duty—which I am sure you read in detail in Hansard, Mr Dowd—I was disappointed by the Exchequer Secretary’s dismissal of the impact of tax rises on hospitality. Since October 2024, 90,000 hospitality jobs have disappeared. If that many jobs had gone from a car plant or an oil refinery, the House would be in uproar, but because it is pubs and cafés, Ministers look the other way. That is a scandal.

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

The Scottish Affairs Committee is doing an inquiry into the viability of high streets. We heard from a professor at Glasgow University who specialises in the subject, and he made an extraordinarily convincing case that Amazon is basically being subsidised by the high street—that Amazon is being hugely undertaxed and the high street is being overtaxed. Would the hon. Gentleman support me in asking the Minister to look into that subject and the cost of whether it is actually killing the high street?

[Gregory Stafford]

The hon. Gentleman makes an interesting point. It would be fairer to see some equity between the online providers and the retailers that are physically on the high street and that have to pay things like business rates. I can see the Minister has heard his point and, I am sure, will respond to it; whether the hon. Gentleman will get the answer that he wants, I am less certain.

To go back to my point, because it is pubs and cafés that jobs are being lost from, Ministers look the other way, which is a scandal. I urge Treasury Ministers to review the cumulative burden placed on small and medium-sized enterprises through tax and regulation. I will take any response from the Minister today directly to the hospitality roundtable that I am hosting this Friday with publicans, restaurateurs and café owners.

I will return to where I began. The Prime Minister talks about growth, but refuses to show the backbone required to deliver it. The Government’s failure on business and enterprise is not abstract; it is written into higher taxes, lost jobs and boarded-up high streets. If Ministers continue to ignore that, we really could spend all day listing the consequences.

With the spending review now replaced by an Office for Budget Responsibility forecast, the Government have eight or perhaps nine months before the next autumn Budget. I urge them to use that time wisely. Boost business; do not blight it. Support SMEs; do not punish them, because when local businesses fail, communities pay the price.

[The Exchequer Secretary to the Treasury (Dan Tomlinson)]

It is a pleasure to serve under your chairship, Mr Dowd. I am grateful to the hon. Member for Farnham and Bordon (Gregory Stafford) for securing the debate. I believe it is the second debate of his that I have had the pleasure of responding to in Westminster Hall and I look forward to many more in my time as Exchequer Secretary. I am grateful for his contribution, and I am sure the businesses in his constituency will be grateful to him for representing them in this place; it sounds like he has a fantastic set of small and medium-sized enterprises in his constituency.

On the broader point of the impact of this Government on the economy, I believe the hon. Member was being too downbeat and gloomy. We have seen six interest rate cuts since this Government took office because of the stability that we have brought back. That is bringing down borrowing costs for businesses and improving the cost of living for families up and down the country. That means hundreds if not thousands of extra pounds in their bank account rather than going on their mortgage. Economic growth has increased—we outperformed the OBR forecast by 50% last year—and wages have increased across the economy faster in the first year of this Government than in the first 10 years under the Conservatives. Higher wages and better living standards for people in our communities, in his constituency and in mine, mean that there is more money to spend in the shops to support our high streets.

The hon. Member raised a range of policies. I would gently say that some of them were implemented by his Government. For example, the extended producer responsibility for packaging was, I believe, a Michael Gove initiative. The Labour party in opposition learned the lessons of rubbishing the record of a previous Labour Government, and once we stopped doing that we found ourselves re-elected because people put their trust in us. I gently suggest that the Conservatives be careful what they wish for when they criticise policies that the Conservative Government introduced.

The debate follows two Budgets in which the Government did have to ask businesses and individuals to contribute more to support our public services. But we did all we could, particularly in the last Budget, which I was closely involved with in the Treasury, to keep the contribution we were asking for as low as possible by pursuing fair reforms to our tax system that were long overdue. I am happy to go through them in detail, but I will not do so for the sake of time and because it is slightly off topic. Those changes allowed us to provide support for businesses, for example in the business rates system. The main ask of the public was keeping income tax thresholds frozen at the end of the decade for a further three years in addition to the seven years for which the Conservatives decided they would be frozen.

This Government do back and value small and medium-sized enterprises. They are at the heart of so many communities; I am sure they are at the heart of your constituency, Mr Dowd, and those of all Members in this room. We value such businesses, their contribution and the hard work and graft that the people who set them up do to grow them, to expand to multiple premises, and to hire more people. The work that they do is fantastic, really valued and vital to the culture, life and vibrancy of our high streets and communities. Sometimes these small businesses are the only business in a village or a rural community, whether it be a pub, post office or café. We know how important they are to rural and coastal communities.

[Mr Angus MacDonald]

I have spent a great deal of my life looking at small businesses. There are 4.1 million sole traders or self-employed people in the UK and that £90,000 VAT restriction is a block on building businesses. Were it increased to, say, £250,000 and 10% of those businesses employed people, that would mean 400,000 youngsters in work, and the modelling that I have done shows that His Majesty’s Revenue and Customs would get a lot more money. I would be delighted to go through it with the Minister. If we want real growth from UK micro-organisations, I would really appreciate a chance to meet him to discuss this.

[Dan Tomlinson]

We do have one of the highest VAT thresholds among large economies in Europe and of course the Government keep all tax policy thresholds, rates and so on under review. I would be interested in the analysis that the hon. Member has carried out, though my understanding is that significantly increasing the threshold would not be revenue generating but would cost revenue for the Exchequer.

This goes to a point that the hon. Member for Farnham and Bordon raised. He suggested that we should almost halve the rate of VAT for some businesses. The challenge and trade-offs that we must grapple with in government are not grappled with by those who want to see such significant cuts to VAT, because we have to make sure we maintain revenue to fund the NHS in the hon Member’s constituency, and fund local councils to fill in the potholes and provide the social care that constituents need.

--- Later in debate ---

[Mr MacDonald]

I met the Institute of Chartered Accountants in England and Wales this morning and am meeting the Federation of Small Businesses later. We have done all the modelling and I assure the Minister that our numbers are being checked out by all the experts. I think that the Government might be missing a trick on this one.

[Dan Tomlinson]

I am always happy to receive representations from Members on both sides of the House. I will look out for correspondence from the hon. Member in my very large weekend correspondence box, which I always enjoy on a Sunday evening.

Rural Fuel Duty Relief

Angus MacDonald Excerpts

Wednesday 7th January 2026 Westminster Hall

[Ian Roome]

I know there are various apps that do that. There should be more awareness of them among members of the public.

Fuel duty is only part of the expense of running a vehicle, but many who fill up in areas impacted by the scheme have simply no transport alternatives. In my constituency, the households that benefit are 20 miles from their nearest train station, and bus passengers receive only the most limited bus service. Every January, those passengers are also hit by annual price increases from bus companies, which put extra strain on the cost of living.

The scheme is not particularly expensive. In the published list of non-structural tax reliefs, the Treasury estimates that the rural fuel duty relief scheme costs only around £5 million per year, and its uncertainty rating is considered low, yet during the past decade the scheme has been a roaring success. Barbrook filling station in my constituency tells me that this tax relief has made a massive difference to the viability of its business, keeping open an essential local service for many rural residents, local farmers and tourists.

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

In my constituency, the price per litre of unleaded is 160p. When I was in Northern Ireland over Christmas, places were selling at 125p. We have a 35% premium on the cost of living where I live, and fuel is major part of it. In my constituency, there is a big question as to whether the 5p is actually getting to the customer or being kept, and I hope that the Minister will address that.

[Ian Roome]

Fifteen years ago, Barbrook in my constituency was officially one of the most expensive places to fill up in England, but thanks to the scheme it has stayed competitive on price, as a small business that employs four people all year round, in an area where employment can be highly seasonal. During the summer, Barbrook’s fuel deliveries increase to several tankers per week because of extra demand, driven mainly by tourists visiting Exmoor national park and the famous North Devon coast on holiday.

I am also told that Barbrook filling station rescues many of those visitors—people who do not understand the extra challenge of driving long distances on small rural roads, or who do not plan for the extra fuel consumption of their journey. Many rural communities already suffer from very sparse public services, and fuel for transport is an important part of anyone reaching essential healthcare, such as their local hospital or dentist. As I know from speaking to chemotherapy patients at North Devon district hospital, where I worked before I was elected to this House, access itself is half the battle.

My Liberal Democrat colleagues and I—including my right hon. Friend the Member for Orkney and Shetland (Mr Carmichael), my hon. Friend the Member for Westmorland and Lonsdale (Tim Farron) and others—champion the real needs of rural communities, as do colleagues who are here today. We have argued for the rural fuel duty relief scheme’s importance and for extending it to many more rural parts of the country.

However, support for the scheme should really be cross-party. By my count, at least 11 directly impacted rural constituencies are represented by MPs from Labour, the Conservatives, the Liberal Democrats and the Scottish National party. There are also many neighbouring rural constituencies with villages that rely on a filling station just over the border that is supported by this tax relief.

Since 2011, it has become a feature of Budgets under successive Governments that fuel duty will be frozen. That has benefited motorists across Britain, yet in March 2022, a further 5p cut in fuel duty was introduced and then held in place, even as the value of the rural fuel duty relief scheme continued falling in real terms. That means that in recent years we have gone backwards: many of our most rural taxpayers have effectively increased their support to motorists in some of the best connected parts of the country. Motorists in urban communities not only benefit from having more public transport alternatives but often have numerous filling stations to choose from—all competing on price, to the benefit of local people. By contrast, many of my constituents count themselves lucky to have even one filling station in their area.

The Government have stated that economic growth across the country is their top priority for this Parliament. In parts of the country that are distant from major infrastructure projects, such schemes are an important measure, supporting small businesses, farming and tourism, helping young people to access opportunities, and helping patients to access essential healthcare. At a time when the Government are increasingly under fire for their policies towards rural and farming communities, updating the rural fuel duty relief scheme would be one way for them to demonstrate their concern about those families who live in rural areas and the problems they face in their daily lives.

Community Helipads: Rural Access

Angus MacDonald Excerpts

Wednesday 15th October 2025 Westminster Hall

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

I beg to move,

That this House has considered access to community helipads in rural areas.

It is a pleasure to serve under your chairship, Ms McVey. I am delighted to be speaking on an issue that impacts not just my constituents, but pretty well the whole of rural Britain.

I spoke in this Chamber earlier this year during the debate secured by my right hon. Friend the Member for Orkney and Shetland (Mr Carmichael) on coastguard helicopter services. At that time, I pointed out that search and rescue helicopters are an extremely valued facility; I think everybody who has had any dealings with them would respect the quality of people involved. I have personal gratitude to them, because my wife was going along a ridge and fell off and was scraped up by Arrochar mountain rescue team and flown to Glasgow hospital, where they fixed her up—which was good news, she tells me. In addition, my father was involved in the Glencoe mountain rescue team for the whole of my youth. He said the search and rescue helicopters were probably the biggest positive change for saving people’s lives in the mountains, so this is a very important debate.

[Jim Shannon (Strangford) (DUP)]

I commend the hon. Gentleman for securing this debate. Representing a rural community, I, like him, understand how important this is. We are very blessed to have an air ambulance available for our communities in Strangford and Northern Ireland. It truly has been the difference between life and death for so many. However, there is a definite issue with safely landing and taking off. Does he agree that there must be access for that purpose alone? It is sometimes possible to land near where an accident takes place, but they must also be sure not to interfere with telephone lines or traffic, and safety must be paramount.

[Mr MacDonald]

The hon. Gentleman makes a very valid point. Safety is at the bottom of it all, but I will be talking about over-safety in one particular instance.

I am always pleased to recognise the dedication of the helicopter crews, but there is one specific case I want to talk about, in Portree on the Isle of Skye. The Portree and Braes Community Trust manage the helipad, not NHS Highland or anybody else. The helipad is a community venture; the trust raised the money and built it. It was set up 30 years ago and has been refurbished in conjunction with the coastguard, NHS Highland and other bodies, so it is very much an approved helipad. The ambulance can drive right up beside it; there are lights that can be turned on from the helicopter; it has windsocks; it is fenced off; it has special paint demarking the H—it has every facility one could want from a helipad.

Despite that, members of the community trust tell me that the helicopter is not allowed to land on that H. It has to land on the boggy, wet hillside beside it. It is not allowed to use that helipad. That sounds quite extraordinary; I am sure everybody here is wondering why, so let me inform them. The aviation regulations have been updated, meaning that the helipad is no longer functioning for search and rescue. It is being used by air ambulance and other helicopters, but not by the Bristow search and rescue helicopters. Understandably, that is causing a lot of confusion and irritation for mountain rescue, the community trust and the wider Portree community.

What is behind this? In March 2022, a lady attending an appointment at Derriford hospital in Devon was knocked over by a downwash from a helicopter and died tragically from a head injury shortly thereafter. Following that tragic incident, safety guidance was tightened—but in practice the new approach has gone too far, and has created a fear of litigation rather than a focus on safety.

In April 2024, the Civil Aviation Authority published the third edition of its guidelines, “CAP1264: Standards for helicopter landing areas at hospitals”, which some Members may have read. In August 2024, following the CAA’s publication, Bristow helicopters undertook a thorough review of all helicopter landing sites and helipads that may be used for hospital purposes, to assess their compliance. The review highlighted that the majority of those sites were not compliant with the new guidance, and so Bristow withdrew from operating on the non-compliant helipads. Out of fear of litigation after the Derriford tragedy, Bristow insists that it needs legal authority to operate from sites that are not CAP1264 compliant. The problem is not the quality of Portree helipad; it is the red tape around liability and the ownership of risk.

[Torcuil Crichton (Na h-Eileanan an Iar) (Lab)]

I thank the hon. Member for raising this issue. His situation is not unique; we have a similar one in the Western Isles, at the Stornoway hospital. The Scottish air ambulance helicopter is perfectly free to land at the hospital helipad, but the health board has had to set up an alternative site for the search and rescue helicopter, some distance from the hospital. It should not be beyond the wit of Government or legality to close that gap, by giving a derogation and some assurance to the search and rescue operators—currently Bristow—that they will be able to land at designated helipads for hospitals, not just in Portree and Stornoway, but across Scotland, where I understand that this problem affects some 23 sites. It would be good if the Minister could find a way of bringing two helipads into one space.

[Mr MacDonald]

The hon. Gentleman has hit the nail on the head, as usual. I have met all the interested parties, apart from the Health and Safety Executive, which we will come back to. The CAA has made it clear that the new guidance does not prevent Bristow helicopters from landing in Portree. Its guidance is non-mandatory. In any case, helicopter operators can land anywhere if they carry out what is known as a dynamic risk assessment, a real-time safety judgment that allows them to land wherever conditions permit and it is deemed necessary to do so.

One would think that clarification was a cover-all, but the Health and Safety Executive’s rules have led to an overly heavy-handed approach. It now treats every landing site as a shared workplace—those are the key words. It is piling on paperwork and bureaucracy. By contrast, a boggy hillside or the King George V play area in Portree are not shared workplaces, so Bristow can land at such sites. That is ridiculous; Bristow is not allowed to use a helipad, but it is allowed to land in a play area, which it does occasionally.

I ask the Minister to consider whether there is a problem of health and safety over-regulation. The coastguard, Bristow Helicopters, the CAA and the Department of Transport all have a responsibility to make sure that whatever actions they take in the name of health and safety do not hinder helipad sites. I know that the CAA does not wish for its guidance to close helipads; that is why it did not make its guidance mandatory. That was also the sentiment of the family of the Derriford victim, who agreed that they did not want the CAA’s guidance to negatively impact helicopters’ being able to land and pick up people.

I have a brief anecdote, which is true—a real incident in Portree recently. A woman was suffering from a suspected heart attack. An ambulance was called and took her to the bit of land adjacent to the helipad. The ambulance crew could not get a wheelchair or stretcher to take her to the helicopter. Instead, despite thinking that she was having a heart attack, she had to walk across the boggy ground to get to the helicopter. She could have taken the ambulance right to the helipad, but that was not available, so she had to walk across a very rough bit of ground—I have done that walk myself. One could not make it up.

[Sarah Dyke (Glastonbury and Somerton) (LD)]

I thank my hon. Friend for giving way and for securing this important debate. South Western Ambulance Service covers 10,000 square miles. However, due to the large rural areas in the region—different from, but similar to those in his constituency—the response times are three times slower than the NHS target. Dorset and Somerset Air Ambulance, which is based in Henstridge in my constituency, provides a vital service to support the ambulance service. They carry out 3,000 missions a year, covering the isolated rural and coastal areas where demand is highest. Does he recognise, as I do, the importance of helipads in rural areas, which enable the air ambulance crews to get to isolated areas, so that they can provide exceptional care and get severely injured patients to hospitals within the crucial golden hour after an incident?

[Mr MacDonald]

I thank my hon. Friend very much. I do not think that many people in urban Britain know how important the ambulance services are to remote and rural areas, so her point is bang-on.

Had that lady in Portree had a heart attack while walking to that helicopter, would we not all be shouting at the Health and Safety Executive, asking, “Why wouldn’t you allow the use of the purpose-built helipad?” We would all be saying that. We would have had another Derriford-type inquiry, because a helicopter landed on a boggy hillside rather than on the perfect helipad on the other side of the fence.

I hope that I have articulated the reason behind my application for this debate, which was to shine a light on what I consider to be a bewildering anomaly of over-regulation. I have great respect for the CAA, the coastguard, Bristow and the Department for Transport, all of which have been incredibly responsible and helpful. However, I ask the Minister to meet me in person to discuss in more detail the issue that I have raised today, so that, hopefully, we can move to a position where it is resolved once and for all.

[Edward Morello (West Dorset) (LD)]

I thank my hon. Friend for giving way and I want to use this opportunity to beg a favour of him, although I appreciate that the issue I want to address might not be the responsibility of this Minister. My hon. Friend has rightly highlighted the issue of the collection of patients. However, there is also the issue of the delivery of patients. Far too many hospital helipads do not operate 24 hours a day, especially at children’s specialist trauma hospitals, which results in helicopters having to land elsewhere before the patient is moved by ambulance. If he meets the Minister, can he also press the Department of Health to properly fund 24-hour helipads at specialist children’s hospitals?

[Mr MacDonald]

I thank my hon. Friend. That is a point I did not know, but I will certainly bring it up should I get a meeting.

Rescue helicopters are vital for rural communities, as are organisations such as mountain rescue, which are voluntarily staffed. It is imperative that we do not over-legislate and create red tape that hampers the amazing work that these crews carry out right across the United Kingdom.

VAT Registration Threshold: SMEs

Angus MacDonald Excerpts

Tuesday 24th June 2025 Westminster Hall

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

Thank you for allowing me to speak, Mr Vickers, after I turned up late.

Few people can speak about VAT with such excitement as I can. I was UK entrepreneur of the year, I have lectured on entrepreneurship for 20 years, and I have mentored many early-stage businesses. I have concluded that the one thing we can do that could transform the small business community is to increase the VAT registration threshold to allow microbusinesses to scale up.

Has anyone tried to get hold of a tradesman recently—a plumber, a decorator or an electrician? I will use the collective word plumber, to make it easier for people of my mentality to understand. There is an army of plumbers —mostly men who work alone—who seem incredibly hard to get hold of. They tend to be older, they learned on the tools or at a technical college, and they are happy to limit their income to squeeze below the £90,000 VAT restriction. There are many who, looking for a bit of holiday money, might do a job on the side for cash.

There is a real shortage of plumbers, joiners and electricians, in part due to the closing down of technical colleges, and the young pursuing non-vocational degrees while loading themselves with student debt. Historically and internationally, skilled tradespeople have been held in great esteem, although not so much in today’s Britain. We all know good tradespeople with a great client list and reputation, all of whom make excellent money and are their own boss. An early learn for all those people is that the VAT registration threshold is essential: they need to pay 20% beyond that £90,000. My key point is that these sole traders will not take on an apprentice or an assistant, because that would take them over the VAT starting point.

Not being VAT-registered is a fantastic advantage for a person. He or she has a 20% advantage over competitors who have several staff. In addition, the sort of person who likes being on the tools is not the sort of person who would relish the additional paperwork of being VAT-registered. It is not only doing the VAT paperwork that puts sole traders off growing their business; it is the real burden of hiring people, the payroll, the contracts of employment and the HR responsibilities. We need to make it worth their while, so an increase of a few tens of thousands will not do the job. There are 4.4 million self-employed people in the UK; just think what a catapult forward for our economy we would see if only 10% of them were to hire a couple of people.

I propose that the VAT starting level be increased from £90,000 to £250,000 for all businesses. If that happened, I predict that a massive number of microbusinesses would hire an apprentice or two, creating a pool of young plumbers getting trained. As the availability of plumbers increased, householders would get work done quicker, there would be more competition and therefore lower charges, and clients would be happier. Small businesses, having built up a bit of a scale with three employees, might then grow into a proper business with 100 or more employees, like Pimlico Plumbers.

It is believed that my proposal would cost the Treasury perhaps £2 billion in lost VAT, but I am sure that HMRC would win out overall. It would get income tax and national insurance from the newly-hired and well-paid staff, and the bigger companies would start paying corporation tax. It would also reduce the tax-avoidance cash economy. In my opinion, the 20% difference in the change from £90,000 to £250,000 would be easily made up.

Arguments are made that we should drop the threshold to zero and make all sales subject to VAT, but that would be a massive disincentive to people starting a business. The results of my proposed VAT change would be more people in well-paid employment, a gateway for the young into an excellent career, a solution to skilled trade shortages, a stimulant to the economy, and higher tax collected by the Exchequer—a win-win. Why would we want to incentivise millions of people not to hire youngsters, not to grow their businesses and not to pay more tax?

--- Later in debate ---

[Gareth Davies (Grantham and Bourne) (Con)]

It is always a pleasure to see you in the Chair, Mr Vickers. First, I congratulate my hon. Friend the Member for Mid Leicestershire (Mr Bedford) on securing this excellent debate. We arguably do not spend enough time in this place discussing small and medium-sized businesses, which account for some three fifths of employment and half of all turnover in the entire private sector.

The good thing about having a debate on this subject is that we have the Government in the room, rather than behind their keyboards. That is important, because I noticed while preparing for this debate that it comes hot on the heels of a written question on the same subject, which I am afraid to say received a textbook non-answer from the Treasury. My hon. Friend the Member for Mid Leicestershire asked a perfectly reasonable question: will the Chancellor make an assessment of the growth impact of increasing the VAT registration threshold? That was a pretty direct question, yet the Minister’s response completely ignored the point about growth and instead merely stated that the threshold was £90,000. While we are very grateful for the answer, this is something that I am sure my hon. Friend already knew. As my hon. Friend is in this Chamber, I gently suggest that the Minister provide him with a fuller answer.

In some senses, raising the VAT threshold on SMEs would be a tax cut, so there is cause for optimism, given the Government’s newfound enthusiasm for cutting taxes—for those who live in Mauritius. If the Labour party is happy to take 80% of Mauritian workers out of income tax altogether as part of their £30 billion Chagos surrender deal, I am pretty sure they will be sympathetic to taking British SMEs out of VAT registration.

Surely the Minister will remember that last year, when we were in government, the Conservatives raised the VAT registration threshold to the current £90,000. That took 28,000 businesses out of registration, which helped them to compete and grow, and it reduced their administrative burden. We also introduced policies such as business rate relief and full expensing to reduce costs and encourage investment in our country. Put simply, we backed British businesses to drive economic growth. Contrast that with Labour’s approach—it is trying but failing to balance the books on the back of British businesses. In its very first year in office, Labour has introduced the £25 billion hike, and the reduction in the secondary threshold of employer national insurance contributions; the rise in business rates, which the party had promised to abolish, by the way; the £5 billion-a-year burden of the Employment Rights Bill; and, let us not forget, the inheritance tax raid on family businesses.

[Mr MacDonald]

The hon. Gentleman mentioned the increase in the registration threshold from £85,000 to £90,000, which came after many years of it not being increased and is far below inflation. In your time in office, you did no favours for small businesses, as far as VAT is concerned. Would you agree with that?

[Gareth Davies]

I think the hon. Gentleman is accusing you, Mr Vickers, rather than me. I simply say to him that increasing the threshold made a big difference to the 28,000 businesses that were taken out of registration. I encourage him to speak to businesses in his constituency that benefited from what is essentially a tax cut, in addition to all the other measures that I mentioned that we introduced.

The contrast between what the Conservatives did in office and the approach of the Labour Government in their first year is quite stark, and the consequences are even starker. Insolvency rates are at a 15-year high, new registrations have fallen at the fastest rate since the financial crisis, payroll employment is falling, and inflation is well above target and will be higher for longer. It is no wonder that only 14% of companies with fewer than 10 employees have confidence in the Chancellor’s growth plans. According to one survey, just 29% of UK small businesses are now predicting growth this year. Meanwhile, the Federation of Small Businesses reported that its members now view the tax burden as their second biggest barrier to growth.

Here we see very clearly the vicious cycle that Labour has fallen into, just as it did in the 1970s: higher taxes and higher inflation, leading to lower growth and lower revenues, leading to still higher taxation. That is why, even though the Chancellor promised British businesses that she would not be back for more, she is now refusing to rule out even more taxes and tax rises in the autumn Budget. That is no wonder, because the National Institute of Economic and Social Research forecasts a £60 billion shortfall in the public finances—and that was before we had Labour MPs in open revolt about the slightly tiny welfare reforms and an unfunded commitment to increase defence spending by £40 billion.

In that worrying context, I hope the Minister can stand up and provide some certainty to SMEs by giving his assurance that the next Budget will not see a reduction in the registration threshold, or indeed an increase in the rate of VAT. I would like him to stand up and rule those out right now, for all of us to hear. I know that these assurances will fall short of the increase in the registration threshold that my hon. Friend the Member for Mid Leicestershire and other Members are looking for today, but it will provide more certainty if the Minister rules those things out.

I would also be grateful for an update on the so-called new business growth service, which the Government promised would be a “one-stop shop” for advice and support. That was supposed to launch in the first half of this year, but the Government’s industrial strategy has apparently now had to push that back to later this summer. Perhaps one reason for the delay is that the best advice a business growth service could possibly give anybody is “Do not vote Labour”. That is clear for us all to see.

SMEs probably have quite a lot of advice of their own for the Government, but unfortunately the going rate for speaking to a Labour Minister is apparently £55,000, and one has to endure the inevitable gloom of the Labour party conference. In the spirit of this debate, perhaps the Minister could confirm whether the price tag for meeting him is before or after VAT. Either way, like most Labour policies, I expect it will bring in less revenue than was first hoped.

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[James Murray]

I think the hon. Gentleman must be forgetting the recent history of this country’s economy when his party was in charge, because the many small businesses that I have met are not clamouring for a return to the economic chaos that we saw under Liz Truss or the 14 years of economic stagnation that his party presided over. The stability that we restored to the public finances and to the economy is an essential prerequisite for investment and growth; indeed, it is the foundation on which economic growth can succeed.

[Mr Angus MacDonald]

I am reluctant to come in on the side of the Opposition on this issue, but I can tell the Minister that my constituency has never suffered as much in my whole business career as it has since the Budget last year. National insurance increases and related increases have absolutely crucified business up there. If the Government cared to come up to the highlands and come round local businesses with me, they would be in for a real shock, but I strongly recommend that they do so.

[James Murray]

I do not recall the hon. Gentleman ever opposing extra investment in the national health service during his interventions in the main Chamber, because, of course, the decisions that we took around employer’s national insurance contributions were taken to stabilise the public finances and put our public services back on their feet. We acknowledged at the Budget last year, when we took those difficult decisions, that they would have consequences. However, we also acknowledged that no responsible Government could have let things continue as they were, or taken what we inherited from the previous Government without putting public finances back on a firm footing.

That is exactly what we have done from our first day in office. Alongside that essential work to steady the public finances, we have been removing barriers to growth by overhauling the planning system, launching a new National Wealth Fund and reforming our pension system to unlock billions of pounds. At the spending review earlier this month, we saw the Chancellor marking a key step in our growth mission by allocating substantial new capital investment to ensure that growth is felt across the country.

That investment will be further bolstered in the coming months by other reforms, including the industrial strategy published yesterday, and the 10-year infrastructure strategy published last week. A rising economic tide lifts all boats, big and small, and this Government believe that that should be the most important priority for supporting small businesses.

Business Rates Relief: High-street Businesses

Angus MacDonald Excerpts

Wednesday 4th June 2025 Westminster Hall

[Lewis Cocking (Broxbourne) (Con)]

It is a pleasure to serve under your chairmanship, Ms Jardine. I congratulate my right hon. Friend the Member for Stone, Great Wyrley and Penkridge (Sir Gavin Williamson) on securing the debate.

There are 1,400 small businesses with a rateable value of less than £50,000 across my constituency. Today, we are discussing only the changes in business rates, but a lot of other Government decisions—particularly on employers’ national insurance and on energy costs not coming down—will affect our high streets as well. The cumulative impact of all that is devastating for our high streets.

Lots of businesses I speak to in my constituency are horrified that rates relief dropped from 75% to 40%. When I go out and about across Broxbourne and speak to business owners, a lot of them now say, “What’s the point? What’s the point in me coming to work, trying to run a small business in the town centre, creating growth and employing people?” A Minister told me from the Dispatch Box that it is the Government that create growth. Well, let me tell the Government that it is not the Government that create growth; the Government’s job is to create the right environment for entrepreneurs and businesses to create growth.

Business owners go to work day in, day out, and work incredibly long hours. The Government should try to derisk that process. If we want people to open shops on our high streets, the Government should cushion them from some of the risks. When someone starts their own business at home—from a desk, garage or whatever—upscaling that business is incredibly difficult, and lots of risks are involved. Given that the Government are changing business rates relief and slapping more taxes on businesses, particularly in our town centres, why would someone do that?

A couple of weeks ago, I went to a secondary school in my constituency to speak to A-level students who are doing a business T-level. They all want to become entrepreneurs and create businesses, but we are not creating the right environment for people to become entrepreneurs. In the general election campaign, we heard a lot about how Labour would be the most pro-business Government ever to take power in the United Kingdom, but every decision the Government have made since being in office has slammed down growth and made it harder for businesses.

My constituency has the business improvement districts Love Hoddesdon, Love Cheshunt and Love Waltham Cross, and business owners constantly tell me that, whichever way they turn, things are incredibly difficult and the Government are not making them easy. Even when they go through the business rates appeals process, they have to pay the higher bills while the process takes place, and that process takes months. They do not get any response from the Treasury, and it is difficult for them to appeal and submit information. That is simply not good enough.

As I said, lots of people are starting to wonder, “What is the point in me doing this?” We should be pro-growth in this country. The best form of welfare is a well-paid job, but we are not allowing entrepreneurs to go out there, invest in their businesses, create job opportunities and keep our high streets afloat. We all want to see successful high streets up and down the United Kingdom, but this Government’s policies are killing the high street. They are absolutely killing it.

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

I suggest that England is in an extraordinarily lucky position, because in Scotland we are not getting business rates relief. There is none for retail or leisure; there is some for hospitality, but only up to a point. The hon. Member should thank the Lord he lives in England.

[Lewis Cocking]

The SNP needs to come up with some relief, because things are hard enough in England, even without what the hon. Gentleman has just outlined in Scotland.

The OECD has today downgraded its growth predictions for the United Kingdom. The Government need to start acting on their rhetoric from before the general election. They said they would be pro-growth, but no policies have come forward to support our high streets or promote growth. The Government really should stop trying to kill our high streets.

Finance Bill

Angus MacDonald Excerpts

Report stage
Monday 3rd March 2025 Commons Chamber

[Daisy Cooper]

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

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

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

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

[Madam Deputy Speaker (Caroline Nokes)]

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

Finance Bill (Third sitting)

Angus MacDonald Excerpts

Committee stage
Thursday 30th January 2025 Public Bill Committees

[James Murray]

I applaud the hon. Gentleman’s theatre in delivering his response, and welcome his support.

Question put and agreed to.

Clause 62 accordingly ordered to stand part of the Bill.

Clause 63

Rates of alcohol duty

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

I beg to move amendment 66, in clause 63, page 68, line 10, leave out “£32.79” and insert “£31.64”.

[The Chair]

With this it will be convenient to discuss the following:

Clause stand part.

Clause 64 stand part.

New clause 2—Review of sections 63 and 64—

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

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

(a) Scotch whisky distilleries,

(b) small spirit distilleries,

(c) wine producers and wholesalers,

(d) the hospitality industry, and

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

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

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

New clause 4—Statements on increasing alcohol duty—

“(1) The Chancellor of the Exchequer must, within six months of this Act being passed, make a statement to Parliament about the increase to alcohol duty introduced by section 63 of this Act.

(2) The statement under subsection (1) must include details of the impact on—

(a) hospitality sector,

(b) pubs, and

(c) UK wine sector.”

This new clause requires the Secretary of State to make a statement about the impact of increasing alcohol duty.

[Mr MacDonald]

The amendment would mean the relevant rate of duty would be unchanged from last year. I am one of the few MPs from Scotland on the Committee, but I am sure I am not alone in understanding the vital importance of the Scotch whisky industry not just to Scotland but to the UK economy. However, it bears repeating just how significant the industry is, and I would like to highlight a few key statistics.

Scotland is home to the production of 70% of UK spirits—whisky, gin and vodka. In 2023, Scotch whisky accounted for 74% of Scotland’s food and drink exports, and the industry employed 41,000 people in Scotland and an additional 25,000 throughout the UK. The Prime Minister himself recognised the importance of the industry. He went to the InchDairnie distillery in November 2023, and afterwards tweeted:

“Labour will put growth at the heart of our government and back Scotch producers to the hilt.”

The hon. Member for West Dunbartonshire (Douglas McAllister) echoed this sentiment when he co-signed a letter to the Chancellor prior to the Budget, urging her to:

“Back one of our great industries, undo the damage of last year’s duty increase, and allow Scotch Whisky to deliver for the economy.”

Despite those commitments, the 2024 autumn Budget fails to deliver the support that the Scotch whisky industry so urgently needs.

A new survey reveals that 43% of 18 to 34-year-olds have given up drinking alcohol entirely. The share prices of the biggest two spirit companies halved over the past year. The Bill proposes 1p off a pint of beer, which I think we can all agree is a bit of a stunt, while increasing the tax on spirits by 32p, with a related VAT increase of 6p. That means that the duty is £9.18 on a standard bottle of vodka, gin or Scotch whisky.

Over the past 16 years, the duty on spirits has doubled. I am concerned, and so are many others, that we are plucking the golden goose one time too many. UK alcohol duty is the highest in the G7. A double measure of spirits is taxed four times more than the average-strength pint of cider in pubs, even when the cider contains more alcohol. Effectively, we are taxing whisky, gin and vodka four times as much.

What is worse, this punitive duty does not even deliver more revenue for the Treasury. This is an important point. Last year, the previous Government increased the duty on spirits by 10.1%, but according to HMRC the revenue from the duty fell by £237 million in the following 17 months. That clearly demonstrates that higher taxes on Scotch and spirits do not lead to higher revenue. The increase was forecast to bring in £800 million. Revenue from the duty has therefore fallen dramatically.

I understand that in recent years alcohol duty has risen in line with inflation under the new system. However, freezing it in this Budget would send a clear message that the Government stand behind one of our greatest industries. The troubled hospitality industry and the Scotch whisky industry do not need hollow words of support: they need meaningful action. I urge the Government to freeze alcohol duty on Scotch whisky and other spirits, and keep their promise. The Prime Minister said that we need to

“back Scotch producers to the hilt.”

Let us give this industry the angels’ share that it deserves.

[The Chair]

Does the shadow Minister wish to speak?

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

I apologise for the confusion on our side, Ms Vaz. The Committee will be pleased to know that I have lots to say on this clause, so we can all settle in for a while.

Clause 63 increases the headline rate of alcohol duty in line with the retail price index, provides a reduction to the rates for draught alcoholic products and cuts to the rates paid by eligible small producers. The Government have also chosen not to extend the temporary easement for certain wine products. I say at the outset that His Majesty’s Opposition is a strong supporter of the broader alcohol sector, and we have some concerns about the impact that some of the provisions will have on important sectors. As well as speaking to clauses 63 and 64, I will speak to new clause 4, which stands in my name and that of my hon. Friend the Member for Grantham and Bourne.

In 2023, the previous Government introduced a progressive strength-based duty system following the alcohol duty review, which was the biggest review of alcohol duties for more than 140 years. The new and simplified alcohol duty rates system was based on the common-sense principle of taxing alcohol by strength, with the aim of modernising the existing duties, supporting businesses and meeting our public health objectives. That was the first time that public health objectives had been inserted into the alcohol duty system. The reforms also introduced two new reliefs: the draught relief to reduce the duty burden on draught products sold at on-trade venues, and small producer relief.

At the autumn statement 2023, the previous Government froze alcohol duty rates until August 2024, and that was extended until February 2025 at the following Budget. According to the OBR, alcohol duty receipts are expected to raise £12.4 billion this year, falling by 0.6% compared with last year as the rates remain frozen, but receipts are then forecast to increase by 5% a year on average, to reach £15.9 billion by the end of the Parliament.

Pubs make a huge contribution to our culture, economy and communities. When the Conservatives were in government, we recognised that and introduced a raft of supportive measures, including draught relief, small producer relief and the Brexit pubs guarantee, which I am sure all hon. Members remember and welcome. I therefore welcome the increased draught relief from February, from 9.2% to 13.9%, and the fact that the relative value of small producer relief will be maintained. Although we welcome the inclusion of both reliefs, the increase to draught relief will mean that beer duty on a 5% pint of beer is reduced from 54p to 53p—a 1p saving. I fear that drinkers will not be toasting the Exchequer Secretary over that.

Turning to whisky—although it is a little early in the day for me—as the hon. Member for Inverness, Skye and West Ross-shire set out, Scotch whisky is one of our most iconic and successful industries. Some 43 bottles of scotch whisky are exported per second and the industry supports more than 66,000 jobs across the UK, many of which are in rural areas. The decision to uprate duty rates by RPI has been met with deep concern by the industry—indeed, the Scotch Whisky Association said that it represents a broken commitment, after the Prime Minister claimed last year that his Government’s trade strategy would

“back Scotch producers to the hilt.”

That sounds rather like the promise that he gave to farmers, which Labour’s family farm tax has broken. The managing director of Diageo said:

“This betrayal will leave a bitter taste for drinkers and pubs, while jeopardising jobs and investment across Scotland.”

I would be interested to hear the Minister’s response to those comments. Have the Government calculated the risk to jobs in the sector more widely?

A similar picture is painted by the cider industry, which supports more than 11,500 jobs and attracts more than 1 million tourists each year. The National Association of Cider Makers has raised fears that raising the headline rate, alongside the national insurance increases and the family farm tax, could put elements of the UK cider industry at risk. Has the Minister calculated the cumulative impact that these tax rises will have on the sector?

At this point, we should consider the wider context in which we are discussing these increases. Time and again we hear about the Budget placing a range of cost pressures on the hospitality industry, which is a key contributor to the UK economy. According to UKHospitality:

“In the past six years, hospitality has increased its annual economic contribution by £20 billion to £93 billion.”

The tax rises in the Budget, including the £25 billion a year jobs tax, will make it much harder for the industry to succeed. Just look at the impact of recent measures. Colliers, a professional property services company, reported that cutting the hospitality business rate relief from 75% to 40% means that restaurants will face a bill of, on average, over £13,000 a year, up from £5,500.

[Mr MacDonald]

Will the Minister comment on whether, when the Government fix all these additional taxes, they take into account what happens in Scotland, where many in the hospitality industry do not get business rate relief? We are getting it twice on exactly the same issue.

[James Wild]

The hon. Gentleman makes an important point that I am sure the Minister will want to cover when he responds.

The average bill for pubs will go from £4,000 to £9,642 a year. Any hon. Member who talks to hospitality businesses in their constituency will know the real-world challenges they are facing. As it happens, my favourite pub in my constituency closed its doors on Sunday, in part due to the increased costs and taxes the sector is facing. Have the Government considered the impact of the combination of these tax rises on pubs and the wider sector?

Turning to wine, as part of our reforms we introduced a wine easement for 18 months until February 2025. The Minister will be aware of the concerns of some in the sector that because that easement is coming to an end, duty will increase by 98p in just over 18 months. While we support the transition to the new regime and the end of the easement, I would be grateful if the Minister clarified what engagement he has had to understand how prepared the industry is for the new system.

We have many incredible wineries here in the UK. In 2023, sales rose 10% to reach nearly 9 million bottles. Supporting domestic wine producers should be a priority. In my constituency, I am fortunate to have Burn Valley winery, Cobble Hill winery and others. They are producing great products, proving very popular and helping to improve the rural economy and employment. However, growers have higher production and establishment costs, which will be made more challenging by the tax rises in these clauses and the wider Budget.

To support the industry, WineGB has proposed the introduction of a cellar door duty relief scheme modelled on the Australian scheme, to promote wine tourism, which a VisitBritain survey demonstrated could attract 16 million visitors. The Government have an ambitious target to increase annual visits to the UK to 50 million by 2030—up from 38 million last year. In the spirit of trying to help the Government lift their foot off the growth brake lever, perhaps the Minister will have a look at that idea and consider whether introducing it has any merit.

It is because of the challenges facing producers and the hospitality sector that we have tabled new clause 4, which would require the Chancellor, within six months of the Bill being passed, to make a statement to Parliament about the impact on various sectors of the increases in alcohol duties. As we have heard, increases to duty rates place significant additional costs on hospitality, pubs, whisky, spirits, wine, cider and other sectors, and we are concerned that this could inhibit growth and business investment. The previous Government recognised the significant contribution made by those sectors and saw an increase in business investment in the hospitality sector. Given the headwinds facing alcohol producers and hospitality businesses, which support so many jobs, it is only right that the Government report back to Parliament on the impact of their choices.

Clause 64 abolishes the duty stamps scheme for spirit drinks from 1 May 2025, fulfilling a commitment made by the Conservative Government in the spring Budget. We welcome this. The scheme was important when it was introduced, but it became an increasingly diminishing part of HMRC’s compliance response. Unnecessary regulation should of course be removed where possible, and I welcome this Government’s apparent commitment to deregulation, as set out in the Chancellor’s speech, though it would have more credibility if the Government were not also bringing forward the unemployment Bill that will add £4.5 billion to business costs.

As I set out, we support this change to reduce administrative burdens. I look forward to the Minister’s response to the concerns I have raised on behalf of the sector and producers in relation to these clauses.

--- Later in debate ---

[James Murray]

I will attempt to address the points raised by the Opposition parties. Let me make it clear that clause 63 makes changes to the alcohol duty rates from 1 February 2025. Alcohol duty rates for products qualifying for draft relief will be cut by 1.7% to take a penny of duty off an average-strength pint, while rates of all other products will increase by the retail price index.

[Mr MacDonald]

May I intervene?

[The Chair]

You can respond to the debate at the end. Would you still like to make an intervention?

[Mr MacDonald]

In that case, I will not, Ms Vaz.

[James Murray]

As I was saying, the clause also increases the relative value of small producer relief for both draught and non-draught products, and clause 64 ends the alcohol duty stamps scheme. To reassure Members, in consideration of what position to take at the autumn Budget, I had meetings and officials had further meetings with representatives from the wine, beer, spirits and cider industries, as well as with public health people, to understand the full range of opinions and how we could carefully calibrate our policy response.

[James Murray]

The association is included under “spirits”.

As we know, alcohol duty is frozen until 1 February. The OBR’s baseline, reflected in its forecast, is that alcohol duty will be uprated by RPI inflation each year. The Government have decided to maintain the value of alcohol duty for non-draught products by uprating it from 1 February. At the same time we are recognising the social and economic importance of pubs, as well as the fact that they promote more responsible drinking, by cutting duty for draught products, which account for the majority of alcohol sold in pubs.

A progressive strength-based duty system was introduced on 1 August 2023 by the previous Government following the alcohol duty review. The reforms introduced two new reliefs: a draught relief to reduce the duty burden on draught products sold in on-trade venues, and small producer relief that replaced the previous small brewers relief. The clause increases the generosity of both reliefs.

The alcohol duty stamps scheme is an anti-fraud measure applied to larger containers of high-strength alcoholic products, typically spirits. It requires the mandatory stamping of certain retail containers with a duty stamp. In 2022, HMRC was commissioned to review the effectiveness of the scheme. It found that it is outdated, susceptible to being undermined and now plays a diminished compliance role, and concluded that the cost and administrative burdens imposed on the spirits industry could no longer be justified. The previous Government announced the end of the scheme at spring Budget 2024. That is a decision that this Government will implement from 1 May 2025. That date was chosen after consultation with businesses, which requested sufficient time to prepare.

Clause 63 makes four changes. First, it increases the rates of alcohol duty for non-draught products to reflect RPI inflation. Secondly, it reduces the rates of alcohol duty on draught products by 1.7%. Thirdly, it amends the tables in schedule 9 to the Finance (No. 2) Act 2023 that are used by small producers to calculate their duty discount under small producer relief. This increases the value of small producer relief for both draught and non-draught products in relation to the main rates for these products.

In cash terms, the current cash discount given to small producers for draught products is maintained, while the discount provided to small producers for non-draught products is increased. Small producer relief provides the same relative discount, irrespective of whether a product also qualifies for draught relief. As a consequence of the RPI increase in non-draught rates, it increases the simplified rates in schedule 2 to the Travellers’ Allowances Order 1994, which is used for calculating duty on alcoholic products brought into Great Britain.

Some hon. Members raised questions about the impact of these measures on pubs and the hospitality industry. To support the hospitality industry, particularly recognising the role that pubs play in local communities, the Government have announced a reduction in the alcohol duty rates paid on draught products. This reduces businesses’ total duty bill by up to £100 million a year and increases the duty differential between draught and non-draught products from 9.2% to 13.9% for qualifying beer and cider.

As we have mentioned a couple of times in this debate, the reduction to draught relief rates will also result in the average alcoholic strength pint at 4.58% ABV paying 1% less in duty. Draught relief provides a reduced rate of duty on draught products below 8.5% ABV packaged in containers of at least 20 litres designed to connect to a qualifying system for dispensing drinks.

Clause 64 ends the alcohol duty stamps scheme from 1 May this year, removing the provisions in the Finance (No. 2) Act 2023 and the secondary legislation in the Duty Stamps Regulations 2006. It also makes consequential changes and removes references to the scheme where they appear elsewhere in legislation.

Amendment 66 would freeze alcohol duty for alcoholic products above 22% ABV. That is contrary to the Chancellor’s decision at the autumn Budget to increase those duty rates to reflect inflation, and would cost the Exchequer £150 million a year.

Specifically in relation to the Scotch whisky industry, I would like to set out that the overall alcohol package balances commercial pressures on the alcohol industry with the need to raise revenue for our vital public services and reduce alcohol-related harms. Consumers and brewers in Scotland will benefit in line with the rest of the UK, with consumption and production patterns roughly equal nationwide. Of course, 90% of Scotch whisky is exported, which means it pays no duty. The Scotch Whisky Association’s own figures show the health of the industry. The Budget offers support to the Scotch whisky industry by removing the alcohol duty stamps scheme, which we have just considered, and through investment in the spirit drinks verification scheme by reducing fees for geographical verification.

New clauses 2 and 4, which were also tabled by Opposition Members, would require the Chancellor to make additional statements about the impact of the alcohol duty measures. The Government do not believe further statements to be necessary. As usual, a tax information and impact note was published at the autumn Budget, outlining the anticipated impacts of the measures on alcohol producers and the hospitality sector. Alcohol duty, like other taxes, will be reviewed in future Budgets.

New clause 2 also requires a review of the impact on trade, but UK alcohol duty is, of course, not charged on exports. Some hon. Members raised the impact of the changes to business rates on the hospitality sector in Scotland, but business rates are, of course, devolved. The Scottish Government are accountable to the Scottish Parliament on devolved areas.

Hon. Members also raised questions around the wine easement and why it had not been extended or made permanent. I remind them that the wine easement was intended as a transitional arrangement to give the wine industry time to adapt to the strength-based duty calculation for wine. The revised alcohol duty system simplified and reduced differences between categories of alcohol. Making the wine easement permanent would introduce a new differential into the system and add to the complexity of that system. It would further lead to a duty regime in which stronger ABV wines pay less in proportion to their alcohol content than lower ABV wines. Making the wine easement permanent would, therefore, undermine the simplification and public health objectives of the revised alcohol duty system.

In conclusion, the changes to the alcohol duty balance public health objectives, fiscal pressures, cost of living pressures and the economic and social importance of pubs, while also supporting small producers by increasing the generosity of small producer relief. Furthermore, the end of the alcohol duty stamps scheme will simplify procedures for approximately 3,500 registered alcohol importers and producers, reducing overall costs on the spirits industry by an estimated £7 million a year. I therefore commend the clause to the Committee, and urge it to reject amendment 66 and new clauses 2 and 4.

[Mr MacDonald]

I do not have a great deal to add. I did miss out, when we declared our interests earlier, the fact that I own a pub, which hon. Members are very welcome to visit when they are next in Fort William—do not all rush at once. It never rains there.

I want to come back, briefly, to the 1p a pint reduction that we were promised. The whole hospitality industry and beer industry have come together to agree that that is a stunt, and that that 1p will not be passed on to the customer. It is just not relative at all, because the reduction in business property relief and the national insurance and minimum wage increases effectively mean that the cost to the hospitality industry is going through the roof. The Minister knows that perfectly well, but he still continues to trot out his line.

On the whisky industry, I am not sure that account has been taken of the potential tariffs. We talk about exports being very strong, but they are not actually very strong at the moment.

Lastly, on tax overall, when I make a submission to Scottish Government Ministers about the tax on hospitality, the whisky industry and so on, they all blame Westminster, but when I speak to Westminster Ministers about it, they all blame Scotland. The net result is that industries such as hospitality in Scotland are suffering from both sides, and that is simply not fair.

[Gregor Poynton (Livingston) (Lab)]

On business rates, they are clearly devolved to the Scottish Government, so it fully sits within their remit to help the hospitality industry. If we are talking about standing behind the whisky industry, one of the first things that the Secretary of State for Business and Trade did was go to Brazil to work out that protected status for the Scotch whisky industry, which will mean millions of pounds extra in exports to Brazil.

We are also discussing clause 64, which deals with the abolition of duty stamps for alcoholic products, and that will also help the whisky industry. The Government are doing a number of things to support the whisky industry and stand behind it, including the provisions on its tax status and the Secretary of State’s efforts to increase exports. The hon. Member should perhaps reflect that in his comments.

[Mr MacDonald]

I have finished my remarks.

[The Chair]

Would you like to press the amendment to a vote?

[Mr MacDonald]

Yes.

Question put, That the amendment be made.

Finance Bill (First sitting)

Angus MacDonald Excerpts

Committee stage
Tuesday 28th January 2025 Public Bill Committees

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

Did the Minister consider the different legislation in Scotland, where we have short-term letting licences, visitor tax and a whole load of extra legislation coming in, which is making it difficult and reducing the amount of holiday letting available? How relevant is the proposal for Scotland?

[James Murray]

The hon. Gentleman’s question goes slightly beyond the ambit of the tax measures we are discussing. As I understand, he is talking about the wider regulation and the approach to lettings in Scotland. To echo my response to the hon. Member for Gordon and Buchan, the measures really relate to the tax treatment of FHLs in comparison to standard property lettings, making them more equal. It does not make them entirely equal—VAT remains a point of difference—but it is about levelling the playing field between FHL landlords and the landlords of standard lettings in the tax system.

[Mr MacDonald]

My point was really about the cumulative effect of many different taxes and restrictions making it more and more difficult for people in the letting business, which is crucial to the economy of tourist areas.

[James Murray]

We know that in any local area there needs to be a balance between visitor accommodation and long-term accommodation. I am sure that the hon. Member and others recognise the tension inherent in getting that balance right. We need to ensure not only that we are supporting our visitor economy, but that the tax system supports long-term accommodation for people who live in those areas—not least because those who work in the tourism sector need somewhere to live near their place of work. It is about the balance between supporting visitor economies and long-term residential lets. We agree with the previous Government, who introduced the reform, on this point. The tax treatment of FHL landlords is better if brought more in line with standard residential lets.

I will briefly mention the anti-forestalling rule, which is also introduced as part of the Bill. It will prevent the obtaining of a tax advantage through the use of conditional contracts to receive capital gains relief under the current FHL rules. That rule applies from 6 March 2024.

In summary, the changes made by the provisions will make the tax system fairer by eliminating tax advantages for landlords who let out their properties as short-term furnished holiday lets compared with those who let out properties for longer periods. FHL landlords will now be treated the same as other residential landlords for the purposes of income tax, corporation tax and capital gains tax. We are grateful to all the stakeholders who have already fed in following the publication of the draft legislation and supporting documents.

High Streets: Autumn Budget 2024

Angus MacDonald Excerpts

Thursday 23rd January 2025 Commons Chamber

[Victoria Collins]

That is one of the main topics that came up. Businesses shared with me that after facing the impact of Brexit, closures during covid, cuts to local infrastructure following Conservative cuts to local government and the soaring costs from the cost of living crisis, the combination of measures in the autumn Budget, which includes the rise in national insurance contributions, the change in business rates that was just mentioned and the increase in the minimum wage, as well as proposed changes that could impact family businesses, means that they are now reaching crisis point.

Businesses that I speak to are largely supportive of an increase in the minimum wage. I want to highlight that because they want to support their staff. However, it is the combination of all those factors, after such a difficult time, that is devastating. The knock-on impact of that combination has also seen pre-emptive cost rises across supply chains and worries about consumer confidence, as consumers ultimately spend less on our high streets. Although the GfK consumer confidence index in the UK rose by one point last December, confidence levels remain subdued and retail sales in the UK unexpectedly declined 0.3% month-on-month last December, in a moment in the calendar that is often the most critical time for retail and hospitality on our high streets.

Coming back to national insurance contributions for employers, this is a pre-profit cost increase. Not only does that need to be managed, but for businesses that are just about breaking even or making a loss, it will tip them over the edge and drastically cut the cash flow that is often key to investment. The well-loved local Lussmans restaurants in Hertfordshire have been serving local people for 22 years and face around £250,000 off the bottom line, leading to reduced investment in our local area. Temptation Gifts will see similar, if not higher, costs and says that for the first time in 42 years, it will be shortening opening hours as part of its cost-saving measures. It is having to make difficult staffing decisions in a business that the family has built over decades.

My constituent, Charlotte, managing director of the oldest family-run jewellers in the UK, says that the mix of higher national insurance contributions and higher minimum wage costs means that they will not hire any more staff, and that anyone who leaves will not be replaced. Almar in Tring, where Carolyn and her husband already work long days, says that the national insurance contributions will be a big issue in their running costs and that they do not know how they will cope working even longer days.

Chiltern Opticians in Tring highlights the barriers that small businesses face in hiring staff. It says that it is very different for big corporations, which have large human resources teams to handle staffing issues, and that

“we just don’t have the budget for it”.

These are resilient businesses—or they have been—and they want to continue to build those businesses and to employ local people. Indeed, I see their pride in supporting local staff, often calling them “family”. Jordan from G. Grace & Son in Tring says:

“We are more like a community centre at times, providing essential services to the community.”

In that, I hear my mum’s voice who so often did the same. Our pubs, restaurants and cafés in Harpenden and Berkhamsted cover 197 hospitality venues that employ more than 6,000 people and generate nearly £143 million in revenue. These businesses are the backbone of our economy and community.

The Government say that they are protecting small businesses, but these are the small businesses of which they talk. Indeed, the official definition of a small or medium-sized enterprise is a company with fewer than 250 employees. They are growing, local, often family-run businesses that are nowhere close to being the international giants that have started to dominate retail or hospitality. These local businesses are happy to pay their way. Andrei says:

“I have no issue with tax rises, but these are positioned poorly. The vast majority of the high street are SMEs and they will be hit the hardest.”

Sadly, the desperation is clear. These small businesses are worried that the Budget will be the final straw. Participants in my local survey said:

“What is the point of a small business? The high street is dying.”

Therefore, when it comes to national insurance contributions, will the Government consider mitigations to support the local businesses on our high streets? These could include a lower rate of NICs for earnings of between £5,000 and the £9,100 threshold, or a lower rate for lower earning taxpayers who work part time—perhaps fewer than 20 hours per week. As we have heard from many local businesses, this would help get more people working and support our local economy. At the very least, will the Government consider delaying implementation to give businesses time to adjust and consider their own mitigation?

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

I wonder whether the Minister will consider what I am about to say. I have been asked to go to the Isle of Skye on Saturday for a crisis meeting. There is a group of hotels, which are family-run businesses, not big multinationals, and they face an awful combination of increases across the board, including heating price increases. Their No. 1 issue is national insurance contributions and minimum wage costs. They think that, on average, their costs will go up by between £40,000 and £70,000. They are in a very poor state indeed. Can the Minister give me any encouragement that I could pass on to them on her behalf?

[Madam Deputy Speaker (Ms Nusrat Ghani)]

Mr MacDonald, your intervention was on the Member, so the question goes to her, and she can insist on the Minister responding.

--- Later in debate ---

[The Economic Secretary to the Treasury (Emma Reynolds)]

I congratulate the hon. Member for Harpenden and Berkhamsted (Victoria Collins) on securing the debate and thank her for sharing her story of working in her mum’s gift shop. It was very moving to hear that she has had direct experience of working in a shop on the high street. I also thank her for her survey of local small businesses on her seven high streets, which is an impressive number. She outlined very well the importance of the businesses there; I think she said that there are 197 retail, hospitality and leisure businesses, employing some 6,000 people. I thank her for sharing those statistics, and the feedback from those businesses.

I share the hon. Member’s passion for the regeneration of our high streets. I think it is a concern for Members across the House. High streets are focal points of economic activity, but most importantly—she said this in her speech—they are often a key part of the unique character of our communities. We know that high street businesses are contending with a range of challenges. She listed some of them, but I will list a couple: changing consumer shopping habits and the rise of online shopping, and a series of economic headwinds, including the pandemic, which we know was particularly difficult for small, independent businesses on the high street.

The Government are committed to reforming Britain’s economy to bring about a decade of national renewal. Creating an environment in which our high streets are able to flourish is critical to that commitment. In her speech, the hon. Member recognised the Government’s dire economic inheritance from the Conservatives, none of whom are in the Chamber. We had some very difficult decisions to make in the Budget, but it was necessary to wipe the slate clean to deliver the economic stability that high street businesses need.

[Mr MacDonald]

Will the Minister say why taxes were put on poor, struggling organisations, such as high-street shops and hotels, rather than the massive online businesses that are emptying our high streets? Why did she not consider imposing a higher rate of corporation tax or income tax, rather than hitting the poorest businesses in our society?

[Emma Reynolds]

The hon. Member pre-empts my next sentence, so I thank him for that. We have committed to reforming business rates, because we need a fairer system, fit for the 21st century. That important part of our reforms and plans will, I hope, benefit the businesses that the hon. Member for Harpenden and Berkhamsted spoke about.

Agricultural and Business Property Relief

Angus MacDonald Excerpts

Tuesday 14th January 2025 Westminster Hall

[Graham Stuart]

I had better make some progress. The hon. Member for Penrith and Solway may have been scolded behind closed doors for doing that, but he will have regained the trust of voters who put their trust in him. As devastating as the proposed changes to APR and BPR could be on our farmers, the impact of the changes on family-owned businesses more widely could be even greater, and perhaps that deserves more attention.

A recent report by Adriana Curca at the CBI laid bare the potential fallout. Far from raising £1.4 billion, as forecast by the Treasury, the Chancellor can expect a £1.2 billion decrease in tax revenue from family-owned businesses. Instead of helping the Government to fulfil their pledge to be pro-business and pro-worker, it could lead to the loss of more than 125,000 jobs over the next four years.

Rachel from accounts obviously never got a new abacus for Christmas. Maple Garage, Beverley Travel, Beverley Camera Centre, Oh My Dog—great place—Flowerstyle, Vivienne Rose Wallpaper and Interiors, the Beverley Card Company, Islay Bloom, the Monkey Tree Café, Trent Galleries, Hull Aero Club—those are all businesses that I have spoken to since the Budget. The overwhelming sentiment was exactly the same, regardless of the type of business: disappointment in a Government who do not understand business. None of the Cabinet has ever run one, and it shows.

When the Prime Minister promised that wealth creation would be his party’s No. 1 priority—do hon. Members remember that?—more than 120 business leaders believed him, from the founder of Wikipedia, Jimmy Wales, to Andrew Higginson, the chair of JD Sports. The Prime Minister convinced them that he had a plan to kick-start our economy. Now, six months into the reality of a Labour Government, they are lacing up their trainers and running for the hills.

It does not have to be that way. Instead of tinkering with who is and who is not eligible for inheritance tax relief, we could consider following Sweden’s example, where, having tried heavy inheritance tax charges—

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

Will the hon. Gentleman give way?

[Graham Stuart]

I will have to press on. Sweden ended up with even, I think, the communists voting to abolish it entirely. Since Sweden scrapped inheritance tax in 2004, entrepreneurship has flourished. Some 8,000 wealthy individuals moved their assets back to the country. Its tax revenues increased by £19.5 billion in a decade.

The planned changes to APR and BPR hurt everyone and help no one. Scrapping inheritance tax may not be a silver bullet, but the evidence suggests it is a policy worth examining.

I return to the saying that trust takes forever to repair. The Prime Minister will not take my word for it, but he should listen to his voters, and recent polls show that 66% of voters believe that Labour does not respect rural communities, and 77% do not trust Labour to manage the economy effectively, or remain unconvinced.

Newer MPs may grandstand and say that it will all blow over—although their appetite to do so seems to be diminishing by the day—and that by 2029, it will be a bad memory for farmers and entrepreneurs. Perhaps they could ask some of their colleagues in the Liberal Democrats how that story ends. After all, in 2010, it took them less than six months to break their promise to students not to raise tuition fees, and it still came up in last summer’s TV debates. Farmers and businessmen, like students, have long memories.

I am a firm believer that we reap what we sow. In the past six months, the Government have sown a dangerous thing—seeds of doubt, and an idea that they cannot be trusted. I had better let the Minister have a short period to respond. However, on behalf of colleagues right across this side of the House—and I think, by their absence, quite a number of colleagues on that side of the House—we ask the Minister, who is a thoughtful and decent man, to go back to the Chancellor and the Prime Minister, and persuade them to change course.

--- Later in debate ---

[James Murray]

I am just about to come on to the details of the reforms that we have made to agricultural property relief and business property relief. If the hon. Gentleman waits a moment, he will see some of the reasoning behind the decisions that we took.

The Government recognise the role that the reliefs play, particularly in supporting farms and small businesses, and under our reforms that will continue. The case for reform is underlined by the fact that the full unlimited exemption, which was introduced in 1992, had become unsustainable. Under the current system, the benefit of the 100% relief on business and agricultural assets has become heavily skewed towards the wealthiest estates. According to the latest data from HMRC, 40% of agricultural property relief benefits the top 7% of estates making claims. That is 117 estates claiming £219 million of relief.

It is a similar picture for business property relief. More than 50% of business property relief is claimed by just 4% of estates making claims. That equates to 158 estates claiming £558 million in tax relief.

[Mr Angus MacDonald]

Will the Minister give way?

[James Murray]

I have only a few moments, so I will make progress.

The Leader of the Opposition has made it clear that she would prioritise that tax break within the public finances, but we do not believe it is fair or sustainable to maintain such a large tax break for such a small number of the wealthiest claimants, given the wider pressures on the public finances. It is for those reasons that the Government are changing how we target agricultural property relief and business property relief from April 2026. We are doing so in a way that maintains a significant tax relief for estates, including for small farms and businesses, while repairing the public finances fairly.

Let me be clear that individuals will still benefit from 100% relief for the first £1 million of combined business and agricultural assets. On top of that, as we know, there will be a 50% relief, which means that inheritance tax will be paid at a reduced effective rate of up to 20%, rather than the standard 40%. Importantly, those reliefs sit on top of the existing spousal exemptions and nil-rate bands. Depending on individual circumstances, a couple can pass on up to £3 million to their children or grandchildren free of inheritance tax.