Taxation (Energy and Vehicles) Bill

Dan Tomlinson Excerpts

2nd reading & Committee of the whole House
Wednesday 1st July 2026 Commons Chamber

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

Today’s debate is progressing rapidly—so rapidly, in fact, that I am yet to turn to the speech in my folder. It is a privilege to close this rapid debate on behalf of the Government, and I thank Members for their contributions, as well as the Economic Secretary to the Treasury for opening the Government’s arguments. She was right to point out that the conflict in the middle east has imposed additional costs on the British people, which is why the Chancellor and the Prime Minister have been careful throughout the conflict—from the beginning, when other parties took a different approach—to tread carefully, be cautious and not rush to entangle ourselves in a foreign conflict, risking national security and potentially further harming our economic security.

The measures we are considering are an example of how the Government have responded in a proactive and positive way to the impact of the conflict in the middle east on households, families and businesses. Reasonable people can disagree about how the Government could have best responded to the conflict as it played out. It is this Government’s judgment that we have taken the right approach to ensure that we support those families and businesses that most need it. We have been there for them with the changes in this Bill and others—either already passed or making their way through the House via instruments of some form—such as continuing the freeze in fuel duty.

We wanted to ensure that our response was proportionate and targeted so that we could continue on the path that this Government have set out to bring down the deficit and bring down borrowing sustainably over the course of this Parliament. This year, for the first time since the 2000s, we have a lower deficit than the G7 average—something that the Conservatives never managed to achieve, despite all their talk about wanting to manage the public finances well.

I will not run through the measures in detail, as my hon. Friend the Economic Secretary to the Treasury has already done so. Instead, I will take the chance to respond to the questions asked by Opposition spokespeople.

I can confirm that the consultation on the electricity generator levy will come before the end of this year. It is being worked on at the moment by officials in the Department for Energy Security and Net Zero. We will ensure that we consult on this at the end of the year. Questions such as auction allocation and details of the way the wholesale contracts for difference will work will, I am sure, be raised in the consultation or elsewhere in engagement.

[James Wild]

Given that the levy kicks in from today and the Minister said that the consultation will be published before the end of the year, six months henceforth, and then legislation will have to go through, are the Government considering any backdating provision? If a company generator wanted to go into one of these wholesale CfDs, doing so would allow it to have that backdated; at the moment, it would not have the option to go into the wholesale and will just be hit with the higher levy.

[Dan Tomlinson]

No. If prices are slightly above the threshold set in the electricity generator levy, as they are at the moment, I believe, those taxes will be due now, from 1 July, whether or not businesses make decisions down the line after the consultation, after engagement and after the detail of the wholesale contract for difference policy has been set out by the DESNZ Secretary of State.

Both the shadow Exchequer Secretary and the hon. Member for St Albans (Daisy Cooper) asked how much revenue will be raised by this and other measures. It is a good tradition—a tradition set in place, in fact, by the Conservatives and Liberal Democrats—that the Office for Budget Responsibility set out the costings of policy decisions when they are made. That is important. This Government and this Chancellor have been keen to protect the independence and integrity of the OBR, rather than throwing it under the bus and causing market turmoil, as Liz Truss did. At the Budget later this year, the OBR will, in the usual way, confirm the costings of the changes announced by the Chancellor and included in the Bill.

The shadow Exchequer Secretary is right that the costings the OBR put out initially on the EGL ended up being very different from the revenue that it has pulled in. That is why it is right that we have an independent forecaster, so that even if things materialise differently than was forecast, we have forecasts that are robust to the information at the time and can be relied on by all.

The hon. Gentleman questions whether the Government have provided sufficient support more broadly. I would just mention that we have taken the decision to extend the fuel duty freeze. Going into the general election, the previous Government’s plan, as set out by the OBR, which we have already talked about, was for fuel duty to continue to rise and for the 5p cut to unwind. I believe that motorists would be paying a further 11p of fuel duty if it was not for their choice in 2024 to elect a Labour Government and not go ahead with the plans that the Conservatives set out.

A couple more points have been raised. The shadow Minister mentions a review of indexation. We will, of course, keep the mileage rates under review. The Chancellor announced a few weeks back that we will have a review. We have somewhat pre-empted that with this 10p increase, because we wanted to respond to the conflict in the middle east and the impact on households, but that review is still ongoing and will report if further changes are to be made to the policy at the Budget.

The Liberal Democrat spokesperson made the important point that many care workers and people who drive for work may be working for an employer who does not provide a mileage rate. It is not compulsory for employers to set the rate at the HMRC rates. We have increased rates from 45p per mile to 55p per mile up to 10,000 miles, and I encourage employers across the country to adopt that higher rate.

For employees who work for an employer who does not do so or who persists in having a significantly lower rate, as I am aware that some do, it is possible to claim back marginal tax up to that amount, so 55p per mile now. A basic rate taxpayer can in effect get 20% back on that. It was a pleasure to meet care workers and members of Unison, the trade union, a couple of weeks ago at No. 11 Downing Street. Some questions were raised about whether that process could be made any easier for workers to navigate, and that is something I certainly want to look at with my officials. This is a complex area of policy. I encourage Members to inform care workers and others who drive for work and who do not have mileage rates provided by their employer that they can claim the tax back from HMRC.

I hope that responds to many of the points made.

[James Wild]

I think the Minister might be coming to a conclusion, and I would not want him to miss the opportunity to refer to the House of Lords Constitution Committee and the presumption that fast-tracked legislation should include sunset clauses. Could he explain why the Government have chosen not to follow that guidance in this case?

[Dan Tomlinson]

There is a very sensible policy rationale when it comes to the electricity generator levy, which I think is the clause the hon. Member is referring to. We want to ensure that the ending of the EGL and the future decisions made on it are made in the light of the decisions that will be made on the wholesale contracts for difference, which, as I have said, are coming forward. It would not have been the right decision to pick a future end date without considering how it would interact with the decisions that the Government will make and will be consulting on later this year on the detail of the wholesale contracts for difference.

I hope that that has responded to many, if not all, of the points that have been raised by Opposition Members. I encourage Members to support the Bill.

Question put and agreed to.

Bill accordingly read a Second time.

Taxation (Energy and Vehicles) Bill

Dan Tomlinson Excerpts

3rd reading
Wednesday 1st July 2026 Commons Chamber

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

I will open this debate in Committee of the whole House by reminding the House—though I am sure Members know what is in this Bill—of the purpose of the Bill, which is to respond to increases in costs for families and businesses in the UK because of the conflict in the middle east. Even though we have just completed Second Reading, as we are now in Committee, I will address the clauses of the Bill in turn—Members will be relieved to know that there are only four clauses, so it should not take too long. I will address the amendments that have been tabled in my closing speech, which, with the leave of the House, I intend to make.

Clause 1 makes changes to ensure that the electricity generator levy rate will rise from 45% to 55% from today, 1 July. As my hon. Friend the Economic Secretary to the Treasury set out, in the UK the majority of our electricity is generated from renewables. Despite that, when the crisis in the middle east pushed up international gas prices, the cost of electricity, and so the cost of living, rose too, because electricity prices are still largely set by the price of gas. The changes made by this clause will ensure that a greater proportion of any exceptional revenue that many non-gas generators may receive because of the conflict in the middle east is available to Government to support businesses and households where appropriate.

As we have discussed, the Government also announced back in April that we are acting to de-link electricity prices from gas prices through new voluntary long-term fixed contracts being offered to existing low-carbon generators. As we have discussed, these are known as wholesale contracts for difference, and the changes made by clause 1, increasing the rate from 45% to 55%, will encourage participation at a competitive price in these WCfDs.

Clause 2 makes changes to increase the generosity of mileage rates for 2026-27 for employees and self-employed individuals who use their car or van for work from 45p to 55p for the first 10,000 miles and 25p thereafter, with effect from 6 April 2026. I forgot to respond to the shadow Exchequer Secretary asking me earlier why we have not increased the rates above 10,000 miles. I did respond to that point in the Ways and Means debate last week and think the Government have got the balance right here. We are supporting all drivers, noting that of course for a driver who drives 10,001 miles, almost all of their miles will be covered by the higher rates, and it is still open to employers with employees who drive many more miles to set their own rates if they wish. I would just note that the Conservative party had many opportunities to uprate these mileage rates after 2011, when they did do so, but they demurred from that choice for 13 years in a row, and I am very glad to be part of a Government who have introduced the largest increase in a very long time, if not ever.

The changes made by clause 2 will provide immediate support for both employees and the self-employed, and this is on top of the universal support announced in May, including the freeze on fuel duty, which will save motorists 11p per litre compared to previous plans, or £120 for the average car, or £250 for the average van. This clause represents the largest ever increase to these mileage rates, benefiting around 2 million employees and 1 million self-employed individuals, saving over £120 a year for a worker doing 6,000 business miles.

Clause 3 reduces the vehicle excise duty liability for the majority of heavy goods vehicles to £1 for 12 months for licences taken out from today until 30 June 2027. The changes made by this clause are in recognition of the key role that the road haulage sector plays in transporting goods across the UK and its disproportionate exposure to fuel costs.

Fuel costs make up a substantial proportion of HGV operating costs, and this action will help prevent cost pressures from the conflict in the middle east from spreading across the economy. The shadow Exchequer Secretary is right to point out that this measure on its own is not a silver bullet in helping the haulage sector, but I hope that it will provide some assistance, and it does show very clearly by our reducing this rate down to £1, saving HGVs £600 a year, that this is a sector that we do want to support and see grow and weather the storm from the conflicts in the middle east. We also want to do all we can to reduce costs in the supply chain, to keep prices in the shops for everyday families as low as possible. The decisions taken since the 2024 general election to freeze fuel duty will save the average HGV over £2,000.

With that, having taken the Committee through the three clauses, I look forward to hearing the contributions from other Members.

[The First Deputy Chairman of Ways and Means (Judith Cummins)]

I call the shadow Minister.

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[Daisy Cooper (St Albans) (LD)]

I rise to speak to new clauses 1 to 3. New clause 1 would require the Chancellor to publish a report on the use of additional receipts arising from the increase in the electricity generator levy from 45% to 55%. New clause 2 would require the Chancellor to review the adequacy of the approved mileage allowance payment rate set under clause 2 in respect of care workers using a personal vehicle in connection with their employment. New clause 3 would require the Chancellor to publish an assessment of the combined impact on haulage costs and consumer prices of the temporary vehicle excise duty rates for goods vehicles.

As I indicated on Second Reading, we support what the Government are trying to do with these measures. However, it is really important for trust in politics that when Ministers stand at the Dispatch Box and say that the intention is to use the levy to supporting households and businesses with the cost of living, there is a report to demonstrate to the public that the money does, in fact, go towards measures that do just that, rather than the money disappearing into Treasury coffers. I urge the Exchequer Secretary to accept new clause 1, which would provide transparency to Parliament and the public.

Let me turn to new clause 2. Some Members will know that I have spoken repeatedly in this House about the extraordinary work carried out by our care workers. The salary of our care workers, and the status they are given, is nowhere near big enough to recognise the extraordinary work that they do. I have spent several hours with Abbots Care in my constituency, watching how their care workers work. They have an enormous emotional investment in every single client; they observe their habits and personality, and they know when something is slightly out of whack or not quite right. A care worker’s routine can suddenly change if there an emergency with another client. There may be something wrong with the client’s medication and they have to make phone calls that they had not expected to make. They are experts on their client and on people, but they are not experts on tax.

I was very heartened that the Exchequer Secretary said on Second Reading that employees who do not receive the mileage allowance can claim back an equivalent amount. I was also heartened to hear him say that he would look into ways to make it easier for care workers. Could he outline what those measures might look like? We owe care workers so much thanks for the work that they do. It is diligent, hard work to make sure that our loved ones are cared for and can live with dignity. We should make the system as simple as possible for them. It might be a case of care organisations and providers sending letters to care workers to tell them what they are entitled to, or it might be a case of requiring HMRC to proactively write to them, but we must bend over backwards to make sure that care workers can benefit from this particular measure.

As I said on Second Reading, we welcome the measure, but we urge Ministers to think very carefully and to go as far as they can to make sure that every care worker who is entitled to this benefit understands that it is there for them. It must be made as simple as possible for care workers, and we must make it clear that it will not end up in a drawn-out dispute with HMRC; I urge the Exchequer Secretary to think about a dedicated hotline for care workers, in case we need one down the line. Finally, new clause 3 requires a report on this particular measure.

Our three new clauses are all transparency measures, and I hope that the Government will look favourably on them.

[Dan Tomlinson]

I thank the shadow Exchequer Secretary, the hon. Member for North West Norfolk (James Wild), and the hon. Member for St Albans (Daisy Cooper), for their scrutiny and attention to the measures contained in this short Bill. I am proud that, as the shadow Exchequer Secretary said, we removed three taxes, and I am glad to say that, on a temporary basis at least, one tax is being put down to £1 as a result of the legislative changes that the House is about to vote on. It is a privilege to close this brief debate on behalf of the Government.

Let me turn to each amendment. New clause 2 would require a report to the House of Commons on the approved mileage allowance payments system, including the adequacy of the rate for care workers. The hon. Member for St Albans spoke powerfully about the work done by care workers in her constituency, who she has the honour of representing. I think that all Members will know—from personal experience of family members who have either worked in the sector or been cared for by those who work in the sector—just how valuable care workers’ time, effort and care is.

I am glad that the hon. Lady is now aware that care workers can claim back the tax. They cannot claim back the whole amount—it is not fully equivalent—but they can claim back the tax relief, as it were, on the amount. I want to look at whether we can make that process simpler and easier to use. As the Department does so, I would be happy to provide further updates—if not at the Budget, then beforehand. We have said that the Government’s review of the rates is not over. We came forward with the 10p increase, and we are continuing the review and will update the House further at the Budget. I therefore urge Members to reject this new clause.

New clause 3 would require a report to the House on the impact of haulage costs and consumer prices, including the operating costs for and overall tax burden on goods vehicle operators. As I am sure the shadow Exchequer Secretary and the Liberal Democrat spokesperson will know, the Government have already published a tax impact and information note setting out the expected impact of the measure. The costing for it will be subject to scrutiny by the Office for Budget Responsibility and set out at a future fiscal event. It is therefore the Government’s view that the new clause is unnecessary.

New clause 4 would require the Treasury to review the impact of the EGL rate rise, including on investment, electricity prices and energy security, and to report to Parliament by 31 March 2028. The EGL was carefully designed to avoid disincentivising renewable generation, which means that since its introduction in 2023 it has had no adverse effect on energy security or new investment; in fact, we are having record levels of new investment in renewables under this Government. It is worth noting that new investments made since 2023 are exempt from the EGL and will continue to be so.

The Government have published a tax information and impact note on this measure, too, which sets out clearly that the Government’s view is that this rate rise is not expected to have an impact on electricity prices or investment in renewable generation going forward. The note also explains the rationale for the new EGL, which we have discussed. I will be consistent in reminding the Committee that, of course, the Government keep all taxes under review and monitor and evaluate tax policy changes on an ongoing basis, and that, unless responding to international conflict, in order to be there for households and businesses, tax policy decisions are usually best made by Chancellors at the Budget in the usual way.

--- Later in debate ---

[James Wild]

I am happy to clarify that for the Minister. My point was rather that if the Government are to introduce a higher levy rate on the basis that it will incentivise people to move into wholesale contracts for difference, it might be as well to have the policy for those wholesale contracts for difference ready.

[Dan Tomlinson]

I thank the shadow Exchequer Secretary for that. As I said, we are consulting on that policy before the end of the year. It was the Chancellor’s and this Government’s decision that the better thing to do for the country—for businesses and for households—was to respond to the conflict in the middle east with pace and appropriate responsiveness rather than waiting until the next fiscal event, which is scheduled for the autumn.

I turn to new clause 5, which would require a report to the House of Commons on the impact of the measure on UK public finances, the competitiveness of the UK freight and logistics sector and the contribution of the temporary VED rate to efficient supply chains, and whether the measure remains appropriate beyond the next 12 months. As always, taxes and reliefs will be looked at ahead of the next fiscal event in the context of the public finances. Consistent with the Chancellor’s approach, this is a targeted and time-limited intervention in response to the conflict in the middle east, in recognition of the key role that the road haulage sector plays in transporting goods—including food—across the UK and its disproportionate exposure to fuel costs. The Government will continue to monitor the situation and consider further action as and if that may be necessary. As on other measures, the Government have already published a tax impact and information note, and the costing for the measure will be subject to scrutiny by the Office for Budget Responsibility.

Finally, the shadow Exchequer Secretary talked of this measure as a short-term fix. I hope he is aware of and has seen the impact of the long-term decisions that the Government have made over our time in office to ensure that we can have higher economic growth, as we have had, and higher living standards—rather than their falling by 2%, as they did in the previous Parliament, they have already risen so far by 2% in this Parliament—in part because we have brought back economic stability and had wages rising faster than inflation in every single month since we took office. That has supported stability in the economy which has delivered six interest rate cuts. We have made sure that we are increasing capital investment and that we work with the private sector to get growth up and to invest in our public services and important infrastructure. We have done that in a way, along with investing in our NHS, that has enabled us to manage the public finances well and get borrowing falling in every year of this forecast, with the deficit lower than the G7 average, which the previous Conservative Government never achieved, despite how much they talked about it. They talked a good game on the public finances, but they were never able to deliver that. I therefore ask the Committee to reject the new clause.

For the reasons that I have set out, I urge hon. Members to reject the amendments tabled by the Opposition. I commend the clauses in this short and well-formed Bill to the Committee.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clauses 2 to 4 ordered to stand part of the Bill.

New Clause 2

Approved mileage allowance payments: review of rate for care workers

“(1) Within six months of the passing of this Act, the Chancellor of the Exchequer must lay before the House of Commons a review of the adequacy of the approved mileage allowance payment rate set under section 2 in respect of care workers using a personal vehicle in connection with their employment.

(2) The review under subsection (1) must consider—

(a) whether the rate of 55 pence per mile adequately reflects the costs incurred by paid care workers when travelling between the homes of those for whom they provide care;

(b) the merits of setting a higher approved rate for paid care workers who are required to transport specialist equipment, medication or mobility aids in connection with their caring responsibilities;

(c) the merits of setting a higher approved rate for paid care workers who make three or more separate care visits in a single day; and

(d) the interaction between mileage reimbursement practices in the social care sector and the effective hourly rate received by paid care workers relative to the National Living Wage.

(3) In preparing the review under subsection (1), the Chancellor of the Exchequer must consult—

(a) representatives of paid care workers;

(b) representatives of employers in the social care sector; and

(c) such other persons as the Chancellor considers appropriate.

(4) In this section “care worker” means a person employed to provide personal care to individuals in their own homes, whether employed directly or through a domiciliary care agency.”—(Daisy Cooper.)

Brought up, and read the First time.

Question put, That the clause be read a Second time.

--- Later in debate ---

[Dan Tomlinson]

I beg to move, That the Bill be now read the Third time.

I am grateful for the discussion that we have had today on a Bill that responds directly to the pressures placed on people and businesses across the UK by the conflict in the middle east. In respect of energy, rising gas prices have driven up electricity prices, and non-gas generators stand to benefit significantly as a result. The electricity generator levy ensures that a share of this exceptional revenue is redirected to the public, and we are increasing that share by raising the rate of the levy from 45% to 55%. As for fuel costs, we are uprating mileage rates for the first time in 15 years, providing relief for millions. We are also introducing a 12-month vehicle excise duty holiday for the majority of heavy goods vehicles, supporting those who drive for work and the transport of goods across the UK. Those three measures are the right measures at the right time, and I commend the Bill to the House.

--- Later in debate ---

[Dan Tomlinson]

I ask that the House gives the Bill its Third Reading.

Question put and agreed to.

Bill accordingly read the Third time and passed.