Clause 1

Debate between Ashley Fox and Gareth Davies

Monday 12th January 2026 Commons Chamber

[Gareth Davies]

I have great sympathy with what my right hon. Friend says. He is right that there is a point at which you overtax risk and enterprise, and people stop taking risk and stop being enterprising. The trick in the Treasury is to ensure that the Government can raise enough revenue from a broad base of different taxes to pay for public services. [Interruption.] They need to try to achieve growth, not overtax growth and growth activity. They should incentivise it through other means. I completely agree with him on that point.

I was talking about the increase in tax on dividend income and savings. Together, clauses 4 and 5 will have significant consequences, not just for those who take risks, but for household savers and pensioners, as well as investors in the companies that my right hon. Friend describes. In fact, Hargreaves Lansdown described clause 5 as a “shocking tax rise” for savers. The measures will combine with the Chancellor’s cut to the allowances for individual savings accounts—in the Bill, there is a double whammy tax on savers. It treats saving less like a virtue to be encouraged, and more like a habit to be discouraged. We believe that will have a big impact on savings culture and the financial reality of people across the country. That is why new clause 11 calls for the Chancellor to come to the House to make a statement setting out the impact that the onslaught of this savers’ tax hike will have on all British savers and pensioners.

It is not just savers who are impacted by the Bill. Small and medium-sized businesses are, as we were just discussing, the engine of growth up and down the country, in every constituency. They provide 60% of employment. They will feel the pain from these changes. Indeed, the Federation of Small Businesses has been clear that through clause 4, the Government continue to make investing in your own business one of the least tax-friendly things you can do with your money.

Many entrepreneurs and business owners choose to pay themselves part of their income in the form of dividends. For many years, dividend tax rates have been set below the main rate, not by accident or ideology, but to reflect the fact that dividend income is paid out of profits that have already been taxed through corporation tax. I am afraid that even the largest businesses, never mind small and medium-sized enterprises, are not safe. Literally as soon as the Chancellor announced the changes in clause 4, investment managers were warning that the change completely contradicts the Government’s stated desire to encourage more investors to hold UK equities—many of which, by the way, are pretty good income-paying stocks. International investors come to the UK to buy dividend-yielding stocks, yet these measures will discourage that even further.

[Sir Ashley Fox (Bridgwater) (Con)]

Does the shadow Minister agree that the overall thrust of these clauses is to discourage saving and enterprise, and to hit the people who do the right thing, all to fund more welfare spending? That is not a recipe for growth, is it?

[Gareth Davies]

My hon. Friend touches on an important point. What is this for? People know that they have to pay tax. We may disagree on who pays tax and how much, but ultimately, where is the money going? It is going to the surrender of the Chagos islands. It is used to pay public sector workers eyewatering sums, only for them go on strike again. The hard bit for the general public is understanding where on earth all the money that is being raised by record tax hikes is actually going. That is what the Minister needs to be held to account for today. No explanation has been made. We are not in covid times; we are not in times of great crisis. This money is being raised because Labour is in trouble and in the pocket of the unions. I am very grateful to my hon. Friend for his intervention.

New clause 10 includes further assessments specifically on domestic equity markets and institutional investors. This will have a negative drag effect on the international climate as it relates to getting more investment in UK equities from institutional investors.

Finally, clauses 6 to 8 and schedules 1 and 2 introduce new rates of income tax altogether, this time on property income. Again, those rates are to be set for the tax year 2027-28 at two percentage points higher than the main rate of income tax. Government Members may take great satisfaction in what could be described as a war on landlords, but we should pause and remind ourselves who many landlords are. They are not barons or vast landowners; they are ordinary people doing what we have encouraged them to do for decades: taking responsibility for their future. They are the couple—one parent works long hours in a steady job, and the other juggles work and family life—who save carefully and invest in a small property because they know that the state pension alone might not be enough when they retire. They are the retired couple who inherit a modest flat from their parents—a flat that is not a windfall, but a source of security in later life—and who rent it out to supplement a fixed income. These are not people gaming the system, as many Labour Members have tried to suggest in the past, but people responding to it. They are good people. Forty-four of them are Labour MPs.

This new tax does not just hit landlords, though; it hits renters, too. The British Property Federation and the Office for Budgetary Responsibility have both warned that this measure could restrict the supply of private rental properties, adding pressure to an already strained market. The Royal Institution of Chartered Surveyors and the National Residential Landlords Association both say that rents will rise faster as a direct result of the Bill. New clause 12 in my name seeks to force the Government not to rely on their stereotypes about landlords, but to assess the impact of their new renters’ tax on both the supply and cost of private rental properties.

In summary, these clauses represent a new front in Labour’s war on the middle class and aspirational households in Grantham and Bourne, Chipping Barnet and across the country. These clauses impose not one, not two but three income tax rises on the British public, totalling more than £5.5 billion. This is not a plan for change; it is a savers’ tax onslaught, carefully phrased, politely worded and deeply felt—the same old Labour.

[Dr Jeevun Sandher (Loughborough) (Lab)]

Before I speak, I draw attention to my entry in the Register of Members’ Financial Interests. It is a pleasure to speak in this packed Chamber, and to the millions of people no doubt watching at home.

I will speak to clause 4, but first I wish to thank the hon. Member for Mid Bedfordshire (Blake Stephenson). I seem to recall making a slight mistake last year in a debate on the Finance Act 2025 by not speaking to a specific clause. He very graciously saved me, callow youth that I was, and I thank him very much. I certainly remember that today.

Britain faces an affordability crisis, with record numbers unable to afford a decent living standard. On top of that, we face a military crisis; we have to defend our nation as we have not had to for almost a century. As a nation, we are deeply divided between those who can afford decent lives and those who cannot; because of that, we are unable to stand united as one nation to meet this moment and those challenges. That is why today I speak in favour of clause 4. Yes, it is a tax that hits the wealthiest, but it also ensures that we can help grow the economy, and it is easily implementable. I will cover why that is.

People in this country are deeply frustrated and angry about where this nation is. Record numbers of people cannot afford a decent standard of living; just one third feel comfortable with how much they can afford. That is lower than in the financial crisis, and lower than during austerity—it is the lowest rate in our lifetime. That is why we see such anger on our streets and screens. We constituency MPs feel it viscerally.

Meanwhile, we have also seen the wealth in this nation grow dramatically. We have seen wealth as a proportion of GDP double since the 1980s, the amount of dividends paid out more than doubling since 2010, and owner-managers able to reduce their tax liability by not drawing their income from earnings. That is why it is right that we rebalance the tax burden between earnings and income earned from elsewhere, and especially income earned from dividends.

Our taxation system has not kept up with how our economy has changed; wealth has become far more important in this nation, but it has not been taxed commensurately. While income tax and national insurance have increased as a share of GDP, the same has not happened for taxes on profits. While the amount of wealth as a proportion of GDP has doubled, the income tax from that wealth has increased by only 30%. The income taxes in this nation are being levied on earners, not those who get their income from wealth. That is why it is entirely right that, through this Budget and this clause, we tax dividends at a greater rate. I will set out how this measure will improve growth and ensure that we hit the richest, and will show that it is easily implementable. We know that it improves growth because, as we have seen in France, dividend taxation stops payments going out of companies, instead ensuring that money stays in and is invested. We know that it hits the wealthiest, because one fifth of those who gain dividends are in the top 1%. We know that it is an easily implementable tax, because we are seeing it implemented in this Bill.

Taxes

Debate between Ashley Fox and Gareth Davies

Wednesday 12th November 2025 Commons Chamber

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

I am grateful to be able to respond to the debate on behalf of His Majesty’s official Opposition.

Let me start by thanking everybody from both sides of the House for their contributions, but in particular those on my side of the House. My hon. and gallant Friend the Member for South Shropshire (Stuart Anderson) pointed out the impact of the family farm tax on his farms in Shropshire and that 6,000 farms across the country have closed. The hon. Member for Harlow (Chris Vince), who is sadly not in his place—probably on the phone to his mother—spoke well about Harlow and his mum. I particularly enjoyed the bromance emerging between him and the hon. Member for Runnymede and Weybridge (Dr Spencer).

My hon. Friend the Member for Gosport (Dame Caroline Dinenage) spoke well about the impact of the rise in national insurance contributions on the Gosport employment market. My hon. Friend the Member for Solihull West and Shirley (Dr Shastri-Hurst) said a good quote by Margaret Thatcher. As the MP for Grantham, I particularly appreciated it, but it still rings true today about spending other people’s money wisely.

My hon. Friend the Member for Farnham and Bordon (Gregory Stafford) rightly highlighted that not a single Liberal Democrat Back-Bench MP has turned up, which I agree is completely shameful. We did hear from the hon. Member for Witney (Charlie Maynard), who had the temerity to talk about our country’s reputation when it is his leader who is prancing about in a wetsuit falling off paddleboards—slightly ironic. Finally, my hon. Friend the Member for Broadland and Fakenham (Jerome Mayhew), who made a number of important interventions, pointed out that every Labour Member should ask themselves the same question every morning when they wake up, “Who voted for this?” None of them have a mandate for further tax rises, just as they did not have a mandate for last year’s jobs tax increase. They must know this. The proof is right in front of them. Labour has over 400 Members of Parliament and fewer than 10 have shown up. I was going to say that they have come to defend the indefensible, but they have not even done that. None tried to defend the indefensible; we just heard more and more speeches about the past, while their constituents are living in the present.

I think that Labour Members know that the upcoming Budget is surely the beginning of the end. The Government have lost control. Just when the Prime Minister should be focused on fixing their mistakes, he is instead having to oversee co-ordinated briefings against the apparent plots to depose him by his own Health Secretary. It is troubling, to say the least, that the Prime Minister seems more worried about the damage coming from inside his own Cabinet than about the damage already done outside it. The truth is that the Labour party will not be forgiven. Socialism has failed everywhere and every time it has ever been tried.

We should not forget that Labour won the last election because it promised not to be a socialist Labour Government. It said that it would not fiddle with the fiscal rules to borrow more money. It said that it would not increase national insurance, income tax or VAT. It said that it would not pursue ideologically driven policies that would push up energy bills—in fact, it said that it would cut those bills by £300. Unfortunately for the country, this has very much turned out to be a socialist Labour Government after all: higher taxes, fewer jobs, lower confidence, and an economy put into reverse—back to the 1970s. That is felt in every boardroom, every workshop, every pub and every place of work across this country. The best thing that the Government can do right now is take responsibility for their actions and show leadership. After just 16 months of Labour, inflation has doubled, taxes are heading for record highs, borrowing has risen rapidly and unemployment has surged to the highest level since the pandemic. And none of that takes into account what may yet be to come.

We know that the Chancellor deliberately picked the latest time possible for her upcoming Budget, in a last-ditch hope that someone, somewhere might come up with something that makes it all better. The date of 26 November is a highly unusual one for an autumn Budget. The last time we had a Budget this late, phones still had aerials, Mark Morrison was “returning the mack”, and we had to rewind VHS tapes before taking them back to Blockbuster. If only we could rewind the past 16 months; sadly, we cannot.

[Sir Ashley Fox]

Does my hon. Friend agree that this very long lead-in period for the Budget has caused enormous uncertainty for businesses, which have faced a string of briefings in the media about every possible tax rise, and that the very date that the Chancellor has chosen for her Budget is itself causing more uncertainty and delaying investment decisions?

[Gareth Davies]

I could not agree more. In fact, markets and investors have now endured week after week of reckless and irresponsible speculation, not about whether Labour will put up their taxes, but about which taxes will go up. The endless uncertainty that my hon. Friend mentions has caused relentless Treasury kite-flying that has damaged confidence. There are so many kites in the air but none of them is tied to an actual plan.

My hon. Friend the Member for Isle of Wight East (Joe Robertson) said it well: everyone seems to be looking over their shoulder to see who the Chancellor will come for next. That cannot be what Labour MPs want in the run-up to Christmas. They have a chance tonight to reaffirm the promises that they made to all their constituents. It should be their easiest vote this year. Their core manifesto commitment, which won them the election, is printed in black and white in the motion. To fail to support the motion is to confirm to each and every one of their constituents that Labour is content to betray their trust. Be in no doubt, the country is watching.