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.

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[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.

Crown Estate Bill [Lords]

Angus MacDonald Excerpts

2nd reading
Tuesday 7th January 2025 Commons Chamber

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

I will speak about the Crown Estate’s borrowing powers and the broadening of its investment scope. These changes are intended to enhance the Crown Estate’s capacity to support our ambitious goals for renewable energy, nature recovery and economic growth. The Bill is undoubtedly a significant step forward in enabling the Crown Estate to play a greater role in the transition towards net zero. I fully support its efforts and ambitions.

The partnership between the Crown Estate and Great British Energy to develop offshore wind projects is exciting. Many of us have been trying to get Great British Energy to include community benefits and community ownership within its reach, but we have failed to do so. [Interruption.] It does? Okay—we have tried hard. A measure is to be considered in the other House on 13 January to try to get it to do that, so perhaps Labour Members know something that I do not. Anyway, that is good news.

I want to focus on a critical element that is close to my heart, and perhaps even more familiar to my colleagues, as I bang on about it. That subject is, of course, community benefits. Those of us in remote and rural Britain pay far more for energy than those who can access mains gas, and we also have a much higher level of poverty; especially fuel poverty. Communities hosting renewable energy projects, and particularly those overlooking offshore wind farms, deserve to see tangible benefits from those developments. The Bill presents an opportunity to ensure that offshore wind farm projects—indeed, all renewable energy projects—not only meet our national and global ambitions but provide meaningful real-world advantages to the people most impacted by them.

There are numerous examples from overseas of where community benefits have become significant. One such example is from Germany, where in the North sea archipelago of Heligoland three offshore wind farms generated €22 million in 2016. These are massive amounts of money. While the Bill’s focus is on increasing borrowing powers and investment flexibility, there is no mention of how communities will benefit from these developments, although perhaps Labour Members know something that I do not.

[Melanie Onn]

Is the hon. Member aware of the example of Ørsted, which has just given £1 million to the Horizon Youth Zone to support all young people across the Great Grimsby and Cleethorpes constituency and further afield with new activities and free mentoring and support outside school hours? Not only that; it sponsors local fun runs. RWE, another company operating in my constituency, is supporting education activities. Both those companies are not only employing masses of people but engaging with schools to support young people to have the skills and talents to come and work for them. That is the reality of community benefit.

[Mr MacDonald]

Funnily enough, as a Highland councillor, it is a subject that I have spent many years working on. Highland council—I know this does not relate to the Crown Estate in England and Wales—had £9.1 million of community benefits and Scotland as a whole had £23 million. This is an industry worth hundreds of billions of pounds across the whole of Britain, so we should have, say, 5% of that as community benefits, which would be transformational for Cornwall, Devon, Pembrokeshire and indeed Scotland. I encourage the House to consider how the Bill could establish a robust framework for community benefits that could serve as a model for renewable energy projects across the whole of the UK, working closely with the Scottish Crown Estate.

The Bill represents a vital step forward in enabling the UK to meet its net zero targets and enhance energy security. However, it is equally vital that we legislate to include statutory powers for the Crown Estate in England and Wales, and indeed in Scotland, to ensure that these transformative projects see their fair share of community benefits for communities.

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[Melanie Onn (Great Grimsby and Cleethorpes) (Lab)]

I welcome the Government’s proposed powers to enable the Crown Estate to drive greater investment in the country’s future to boost energy security, nature recovery and economic growth. It should be allowed to access private sector funding to expand and get the greatest benefit possible from its access to financing, and not retreat to markets having to survive on their own and not delivering, or recourse to the public sector for critical funding to grow industries.

I want to focus on clause 3, which deals with sustainable development, and to pick up some of the comments that were made in Committee in the House of Lords. My constituency is at the forefront of the delivery of practical skills in the day-to-day operations and continued maintenance of the offshore wind sector, and my constituents benefit from apprenticeships, introductory training, continuous professional development and, critically, long-term, well-paid employment in the sector. The Bill has the potential to open up possibilities for broader community engagement through the promotion of various educational opportunities in numerous workstreams.

Having worked with the Crown Estate in a previous role before returning to this place, I must say that I have had a slightly different experience from my hon. Friend the Member for Mid and South Pembrokeshire (Henry Tufnell). I know that in recent years the Crown Estate has sought to expand the areas of work in which it actively engages, and has provided immense support for the renewables sector. We should bear in mind that there has been a collective understanding—not just within our Government—that for energy security purposes we must, as a minimum, look at renewable energy sources to supplement our other energy sources as we progress, and as we view the global economics and the changing impact of the energy industry and the way in which others are maximising this change to encourage wealth into their countries.

We know that not just the present Government but Governments around the world, and previous Governments in this place, have recognised that we should accept and embrace this move, seeing it not as something divisive or prohibitive to other sectors but as something that will be the mainstay of this country. Simply objecting to it and saying no will not help to move things forward. We should be working together, as I think the renewables sector has been endeavouring to do and has been enabled to do in a much stronger way through the partnership that the Crown Estate has facilitated, to unite the many different relevant parties in seeking appropriate solutions to some of the most testing and challenging issues that the industry faces, including people and skills, environmental impacts and derogations, the unlocking of the UK supply chain, spatial squeeze, offshore asset security—which has not been discussed today—and aviation impact, which has not been referred to either. The Crown Estate has played a critical role in ensuring that the voices are heard in each of the areas where this new industry is having an impact—and it is having an impact, as I think the industry itself recognises—in the knowledge that this must be done in collaboration and co-operation with the other existing organisations, industries and operators in those sectors.

Through the evidence and change programmes, it became clear to everyone involved, including those who might have been less than happy that a new industry was making things different and challenging in certain circumstances, that the earlier these issues were considered as part of the Crown Estate’s planning and scoping, the easier it was to fulfil the existing and basic expectations of both the Crown Estate and the renewables sector from a Government perspective. Earlier consultation and partnership working on common difficulties and challenges meant that agreeable solutions were found earlier, and it was then possible to build acceptable frameworks for future use. Some of that is in evidence now, in the context of the Celtic sea developments and the fishing communities in those areas.

The right hon. Member for Orkney and Shetland (Mr Carmichael), who is my co-chair on the all-party parliamentary group on fisheries, rightly raised the issues and concerns that the fishing communities will have. However, in Committee in the Lords, there was a conversation about the regional wealth funds that the Bill will create. It seems to me that there is a prize opportunity for support and training for the fishing industry, to make it work alongside the renewables sector and to look at the opportunities that will come from the decarbonisation happening in that sector when it comes to offshore vessels and flexibility of service, so that a fishing vessel is not just a fishing vessel. Can it be used for multiple purposes? Can it be used for surveys? It can, because fishing vessels are already being used for surveys. There is an opportunity for the Bill to support those other industries, and we should not lose sight of that.

With these new ways of working, there is a great opportunity to expand the level of knowledge and understanding of the sector, to be able to teach the next generation of young people about how things really work in practice. To date, that has been a bit more experimental, I think it is fair to say, but because the sector is maturing and all the organisations involved have become more experienced, there is much more collective learning, and there are clearer lines of guidance that the Crown Estate has a definitive interest in ensuring a wide and common understanding.

I would like to focus on the people and skills area of work, which the Crown Estate has had some engagement in. There is an acceptance that the workforce will grow and needs to grow substantially. For areas such as mine and other coastal communities, ensuring that we have a skilled workforce ready to go is imperative. It is much more effective to ensure that people have the skills to get the jobs to earn their own way and have some pride in their life, working in an industry they are proud to be working in, than to simply rely on other community benefits that may well be short-lived and do not have the long-term impact that growing a brand-new industry around the country delivers. We know that the workforce will need more than three times its current numbers—I had written in my speech “over the next decade”, but I do not think that is true; actually, it is over the next half a decade, which is hardly anything at all—to meet the needs of the industry, and that is across all the different areas I mentioned such as environmental impact and aviation.

[Mr Angus MacDonald]

May I come back to the community benefits, which the hon. Member brought up in her intervention on me? The community benefits will be hundreds of millions for 25 years or the life of the project. It will be absolutely transformational to the most rural parts of Britain; it is not just something that will come and go.

[Melanie Onn]

I thank the hon. Member for that comment. It is about how we view community benefits and how embedded in communities they are. The hon. Member for South Cambridgeshire (Pippa Heylings) talked about things being done with communities, not to them. This is about what will best benefit a community and having that discussion at an early stage, which is what I have been advocating.

The traditional understanding of community benefit is payment for a local football team’s shirts or things like that, but that is not what I see this industry or this Bill unlocking. It needs to be about transforming local communities, which, critically, comes through skills, through the supply chain and through delivering industrial benefits that local people have access to. That is the thrust of what I am trying to say—clearly I have not been successful, if the hon. Member for Inverness, Skye and West Ross-shire (Mr MacDonald) did not see that, but I will persevere, which I am sure he will be delighted to know.

Interestingly, the Crown Estate has recently supported a community project in my constituency called Projekt Renewables—it has a “k”, giving it a slightly Nordic slant on things. It is a box park construction next to the Grimsby Fishing Heritage Centre, bringing together the old and the new, and the past, present and future. It provides community education, and it is a space to bring together schools, businesses and visitors to learn about the renewables sector in Grimsby, including its history, its importance and the possibilities for the future. The community education piece is incredibly important, and we do not talk about it enough.

The Crown Estate recognised that there is a need for wider understanding of activities, some of which are significant or significantly disruptive in local areas, so that residents can better understand what is happening in their place. I keep talking about opportunity, because some Members have not seen this Bill as an opportunity for expansion, investment, growth and long-term change. The Bill actually unlocks quite a lot of that. There is an opportunity not only for greater expansion of public information and education, but to have a single standard of available materials and off-the-shelf information to support local areas. That would help provide a general understanding that would stop individual companies producing their own bespoke education programmes. We should have something that is uniform and that provides the facts, and then companies can build on that if they want. It would be a much stronger offer, and more beneficial to collective understanding because of the uniformity.

However, there are further steps that the Crown Estate could take to provide local people with skills, to guarantee sustainable development. In my area, the freeport is already undertaking some work on skills. Under the new devolution plans, there is provision for skills to be a key strand of mayoral responsibility, but how can the Crown Estate fit into that model? I believe that it really must do so to maximise the benefit of all the organisations, and to have a common theme and common objectives. Arguably, the Crown Estate has a lot more to lose if the skills are not there for offshore deployment and long-term maintenance support.

New projects such as the Able quay, which is just outside my constituency, will make offshore wind ambitions deliverable. It will open up the supply chain investment opportunities that we have been waiting for—frankly, for far too long—and enable the Crown Estate to generate significant revenue and value for the UK. The Crown Estate could do so currently but, under the new proposals in the Bill, has an even greater opportunity to invest in infrastructure such as the Able quay. Port facilities are holding back the sector and the core skills that are currently in shortage in the industry, as well as those that we know will become a critical blockage in the future once the newly consented projects get under way.

If we really want to maximise the value of projects and see the UK get the biggest bang for its buck, it is essential to use every arm of every organisation to actively support them in overcoming the challenges. I know that the Crown Estate is willing—and I have seen it in action, so I know that it is also able—but I wonder whether this Bill needs to say explicitly that it has a duty to focus on infrastructure and skills, which are so critical. Not having those prerequisites in place could make projects undeliverable, and no developer or supply chain company can oversupply or invest ahead of decisions, because the Crown Estate makes so many of the final decisions, alongside the Government. No one can invest until those decisions are made.

Devolution and the creation of GB Energy—two great leaps in structural change in this country—give a great opportunity for new public institutions to be created in order to intervene in skills. In the Humber region, I would like to see an arrangement or organisation that brings together the Crown Estate, the new devolved authorities, the freeport and the Humber Energy Board. With support from the likes of GB Energy and central Government, it could back a coherent approach to supporting skills and avoiding their becoming a barrier to project delivery, as well as reduce costs by supplying enough talent for the whole sector, rather than each project chasing the same small pool of people.

We should use the Bill to catalyse substantial and lasting change, providing employment opportunities for generations to come. I understand that Crown Estate Scotland is already carrying out similar efforts, actively promoting skills and job opportunities through initiatives such as community capacity grants, which support social enterprise projects and training courses, and land-based skills education, so I do not think that is beyond the scope of the Bill.

National Insurance Contributions (Secondary Class 1 Contributions) Bill

Angus MacDonald Excerpts

2nd reading
Tuesday 3rd December 2024 Commons Chamber

[James Murray]

I will make some progress, and take more interventions shortly. For me, keeping the promises on income tax, employee national insurance and VAT is crucial, but making those decisions and needing to get our country back on track has meant that other tough decisions in the tax system have been necessary. That is why, at the Budget, we took the decision to increase national insurance contributions from employers, while, as I mentioned to my hon. Friend the Member for Bradford East (Imran Hussain), increasing protections for small businesses and charities. It is those measures that the Bill seeks to introduce.

I will set out the detail of how the Bill seeks to achieve that. First, it increases the main rate of employer secondary class 1 national insurance contributions from 13.8% to 15%. It decreases the secondary threshold for employers—the threshold above which employers begin to pay employer national insurance contributions on their employees’ salary—from £9,100 to £5,000. At the same time, as I have mentioned to hon. Members, the Bill increases the protection for small businesses by more than doubling the employment allowance from £5,000 to £10,500. That increase in the employment allowance, alongside the removal of the £100,000 eligibility threshold, means that all eligible businesses will be able to employ four full-time workers on the national living wage without paying any national insurance contributions.

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

Is the Minister aware of the complete disaster this will cause for Scottish hospitality businesses? We do not have business rates relief, as businesses do in England Wales. We have a very large number of young people in the hospitality sector. For example, for someone working part-time for 25 hours a week on the minimum wage, their salary is £15,912, and the national insurance has just gone up by 74%. This is wiping out the hospitality industry in Scotland.

[James Murray]

I recognise that the decision we are taking will have impacts, and in some cases it will mean that employers have to take difficult decisions. We are, however, reforming business rates to help retail, hospitality and leisure on the high street, so I would suggest that the hon. Member speaks to the Scottish Government about their doing something to support businesses in the same way; I cannot speak on their behalf.

Taken together, the measures, should the Bill pass, will mean that 865,000 employers pay no national insurance at all next year, with over 1 million—more than a half of all employers—paying the same or less than they did previously. I have been clear, however, that I recognise that there will be impacts on some employers as a result of the changes. While many small businesses and charities will be protected through the employment allowance increase, others will have to contribute more.

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[Luke Murphy (Basingstoke) (Lab)]

For too long, this country has suffered from irresponsible and short-sighted fiscal management from Conservatives, saddling working people with the bill for their broken promises, incompetence and chaotic approach to governing. They hiked taxes for working people to record rates and left behind a £22 billion black hole in the public finances. Then, to add insult to injury, the Conservatives spend their first few months in opposition washing their hands of 14 years of failure in power. That changed on 30 October when my right hon. Friend the Chancellor of the Exchequer gave a historic Budget, which led to this Bill. The Budget delivers the swift action needed to repair the immediate fiscal crisis and a long-term plan to repair our public finances, while also laying the foundations for a decade of national renewal.

We heard a lot from the shadow Minister, the hon. Member for North Bedfordshire (Richard Fuller), and no doubt we will hear much from Opposition Members, about the Bill. But really, the gist of their argument is that they want all the benefits of the Budget, but have no idea how to pay for it. Boris Johnson may no longer be the leader of the Conservative party, but his belief in cakeism lives on. On cake, they are pro having it and pro eating it.

The right hon. Member for Richmond and Northallerton (Rishi Sunak) attempted at first to wean the party off its cakeism addiction. Running in the first leadership context, he told his party not to believe in

“comforting fairytales that might make us feel better in the moment, but will leave our children worse off tomorrow”.

But under his leadership, the Conservatives once again succumbed to the fairytale of cakeism. That is why they lost the general election. The hon. Member for North Bedfordshire spoke of polls, but he will remember that they lost an election just a few months ago because they could no longer handle the challenges of the world as it is. They ducked the hard choices and, in opposition, they continue to duck them and to drift away from reality.

Back in the real world, let me remind the House what this Government are delivering, funded in large part by the Bill. They are delivering £25.6 billion in increased NHS funding, ensuring that our health service can meet rising demand and creating 40,000 more elective appointments every week. They are delivering more teachers, and investing £1 billion in special educational needs provision. They are investing billions in surgical hubs and diagnostic scanners. There is a further £1.5 billion to rebuild crumbling schools and ensure that every child learns in a safe environment. Those are investments that Conservative Members must surely support.

[Mr Angus MacDonald]

Does the hon. Gentleman not agree that the impact of this measure is hitting the most vulnerable businesses and the most vulnerable charities throughout the United Kingdom? Surely a much better way of raising the money—which I can understand is needed—would be to raise corporation tax, or to increase taxes on, for instance, social media or the very largest companies.

[Luke Murphy]

The Bill, and the Budget, protect the smallest businesses, as the Minister has already explained. It is disappointing to hear the hon. Member sharing the Conservative party’s cakeism. Opposition Members must surely support the investments that the Bill will deliver, but if they oppose the Bill, how do they propose to fund them? Turning up at the supermarket with a long shopping list but no means to pay does not work in real life, and it does not work in government either.

The Conservatives have clearly learnt nothing from their kamikaze mini-Budget of 2022. Perhaps they believe that cakeism has just not been tried properly. This Government, by contrast, have taken the tough but fair decisions to protect working people, invest in our NHS and rebuild our public services. For too long the burden of tax has fallen on working people, but under this Government, larger businesses and the richest will pay a little more in tax to help fund the NHS and other public services on which working people rely. Where the Conservatives would either cut public services or pick the pockets of working people, this Government are asking those with the broadest shoulders to pay a bit more to help repair our broken public services—broken over the last 14 years. This Bill will help to deliver on the priorities of my constituents in Basingstoke, who will be able to see a doctor when they need one, and schools will be able to deliver the best—

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[Dr Sandher]

I politely suggest that the right hon. Gentleman should not set up a polling company, as that is not an effective sampling strategy. Deary me. Where do I start?

Anyway, we are insulating our homes and hiring more nurses and teachers—and yes, we will pay those nurses and teachers enough money to keep them, because that is what responsible Governments do. All that investment needs to be paid for. That is why we are raising national insurance contributions for the largest employers, with £3 out of every £4 raised coming from the largest 2% of businesses. That will raise some £23 billion of investment that every family and business will benefit from. Crucially, we are raising that money while protecting the smallest businesses.

[Mr Angus MacDonald]

The hon. Gentleman keeps talking about the largest businesses, but the Government are completely wiping out small and medium-sized businesses across the whole hospitality and retail sector. This is a catastrophic piece of legislation. He talks about a kamikaze Budget; we are considering a kamikaze Budget right here, today.

[Dr Sandher]

Not only are we protecting the smallest businesses by raising the employment allowance, but there will be business rates relief for the hospitality businesses to which the hon. Gentleman refers.