Clause 1
Dan Tomlinson Excerpts(3 days, 14 hours ago)
Commons ChamberRead Full debate Read Hansard Text Watch Debate Read Debate Ministerial Extracts
The Exchequer Secretary to the Treasury (Dan Tomlinson)
It is a pleasure to open this first day of Committee debate on the Finance (No. 2) Bill. This was set to be the biggest economic moment of the day, but my moment in the limelight has sadly been blown off course by the riveting news that the former Member for Stratford-on-Avon has defected to Reform UK. This star signing is clearly a great loss to the Conservative party. Conservative Members may hope that it will allow them to start to expunge the history of the Truss mini-Budget from the nation’s collective memory, although I cannot help but feel that it is a case of shutting the heated stable door after the horse has bolted. He said he wanted to join Reform UK to fix a broken system, but as with the Conservative party, no one will believe that he can do it. In fact, he ran the system, broke the system and left us all sorting out with the taxman how to pay for the mess he left behind.
I return to the topic at hand. My right hon. Friend the Chancellor delivered her second Budget at the Dispatch Box a few weeks ago. It was a Budget to build strong foundations and a secure future for our country. Reflecting historical underperformance, the Office for Budget Responsibility has revised down its productivity forecast. In isolation, this reduces the amount of revenue that the OBR expects the Government to collect by around £16 billion in 2029-30. The Government are determined to outperform this forecast by continuing our plans to grow the economy, protecting public services and cutting borrowing, but it is right to plan on the independent forecaster’s judgments, meaning that despite Britain’s progress, the Government need to strengthen the public finances.
The choice at the Budget was austerity and decline or investment and renewal, and this Labour Government have rejected austerity and repeating the mistakes of the Conservative party. All those who are quick to promise that they will cut taxes must set out where they would credibly raise that money, what they would cut or by how much they would increase borrowing, as they enjoyed doing so much in recent years. The Budget made fair and necessary choices that deliver on the public’s priorities and bring about the change that this Government promised. We have chosen to cut the cost of living by delivering £150 off energy bills and freezing train fares and prescription charges. The Government have chosen to focus on cutting waiting lists by delivering 5.2 million more appointments and opening 250 new neighbourhood health centres. All this would be threatened by the Conservatives, who do not support the taxes—including those we will debate in these clauses—that are needed to fund decent public services.
Sir Julian Lewis (New Forest East) (Con)
I am very impressed by the Minister’s opening speech and his lightness of touch, but can he explain to the Committee how he reconciles the litany of good effects with the number of U-turns carried out since the Budget was put forward?
Dan Tomlinson
I thank the right hon. Member for giving me time to top up my glass of water—and for his intervention. The Government have been very clear in our approach since we took office. We needed to raise revenue to fund public services, and we have been consistent in our objectives in that regard. We also needed to get borrowing down, and borrowing is falling in every single year of this forecast because of the decisions we have taken. I believe it is the fastest reduction in borrowing in the G7, bringing back economic stability and allowing the Bank of England the space to cut interest rates, as it has already done six times since the general election.
The Finance (No. 2) Bill will deliver on the choices that the Government have made, and we will renew public services. We have taken the decision to lift hundreds of thousands of children out of poverty, to get more people into work and, crucially for our long-term growth prospects, to maintain the highest level of public investment for 40 years, all while keeping borrowing this year as a share of GDP to its lowest level in six years and doubling our headroom against our fiscal rules.
Jim Shannon (Strangford) (DUP)
I thank the Minister for what he is putting forward. The OBR has said that some £55.5 billion will be raised, but the money is not coming from millionaires. It is coming from lower and middle-income families, which means that some 4.8 million more individuals will be paying the higher rate and some 600,000 more individuals will move into the additional rate band. How, in all honesty, can we help those in the lower and the middle brackets? The millionaires can afford it; the others cannot.
Dan Tomlinson
One way we are seeking to support everyday working people and families across the country is by making the decisions—many of them have been opposed by the Opposition, I must say—to raise taxes on those with the very largest estates and the very highest wealth. In fact, over this Parliament, as a result of the decisions made in the Budget in 2025 and the Budget in 2024, we will be raising an additional £10 billion of revenue from wealth and from those with the greatest wealth, which enables us to minimise our ask of everyday families when it comes to the topic we will be debating later in this sitting.
Turning in detail to the clauses we are debating, clauses 1 to 3 are on income tax, which is the largest source of Government revenue and helps to fund the UK’s schools, hospitals and the other essential services we rely on. In the coming year, it is expected to raise £359 billion. Each year, the Government have to legislate to charge and to set the rates of income tax. The rates of income tax are not being changed by this Bill; we are confirming that they will remain the same.
Clause 1 imposes an income tax charge for the coming financial year. Clause 2 sets the main rates of income tax at 20%, 40% and 45%. These will apply to non-savings, non-dividend income taxpayers in England and Northern Ireland. Income tax rates in Scotland and Wales are set by their respective Parliaments. Clause 3 sets the default rates at the same levels as the main rates—namely 20%, 40% and 45%. These rates apply to the non-savings, non-dividend income of taxpayers who are not subject to the main rates of income tax, the Welsh rates of income tax or the Scottish rate of income tax. Income tax is a vital revenue stream for our public services, and clauses 1 to 3 ensure that it will continue to be so in the year ahead—2026-27.
Kit Malthouse (North West Hampshire) (Con)
Just for the elucidation of the public, who the Minister knows will be glued to our proceedings this evening, I want to make a couple of points. First, he said that debt is falling. Will he confirm that it is levelling off as a share of GDP and may possibly fall slightly by the end of the forecast period, but is rising in absolute terms? Secondly, when he says that income tax rates are not changing in this Bill, he is technically correct, but fiscal drag means that, for hundreds of thousands of people, the tax rate on their marginal earnings will actually change very significantly in the years to come.
Dan Tomlinson
It is right to be precise, and I was being precise about the rates themselves, which are not changing. The right hon. Member raises the effective tax rate, which is a point I understand. On the specifics of what I said, I was talking about borrowing rather than debt, and borrowing is falling significantly over the course of the forecast. It is the fastest reduction in the G7, as far as I am aware, on the latest data. He is right that debt is broadly stable, but is falling, in the year that the fiscal rules are relevant, as a share of GDP, which is the traditional and I think more economically relevant way of assessing the stock of Government debt as a share of the economy. One of the ways our country was able to reduce the debt we took on after the second world war was through growing our economy and the debt becoming a smaller share of GDP, and that is something this Government will seek to do through continuing to beat the forecast when it comes to economic growth.
Clauses 4 to 8 will raise the tax rates for property, savings and dividend income to ensure that income from assets is taxed more fairly. Those with property, savings or dividend income currently pay lower rates of tax than those whose income comes from employment as they do not pay national insurance contributions. It is not fair that the tax system treats these types of income so differently. For example, it is not fair that a renter pays a higher rate of tax on their income than the landlord from whom they are renting their property.
Mr Joshua Reynolds (Maidenhead) (LD)
Has the Treasury done any analysis of the amount of that tax increase that will be passed on to renters, and if it has, what has it come out with?
Dan Tomlinson
The main drivers of rental prices in the UK are supply and demand. The Government are seeking to do all we can to reform and improve our planning system to increase the number of homes being built. If Liberal Democrat Members are keen on making sure that we support households with the cost of living, I hope they will change their approach to their votes in this place on our planning reforms, which are vital for supporting families with the cost of living and for lowering the cost of renting and owning their own home.
As I was saying, this change will narrow the gap between the tax paid on work and the tax paid on income from assets.
Dan Tomlinson
If I may, I will make a little more progress.
Those with small amounts of income from assets will continue to be protected by tax-free allowances, and income from savings and investments held in individual savings accounts will continue to be tax-free. The vast majority of UK taxpayers are unaffected by these changes as they do not have taxable property, dividend or savings income. Changes to savings and dividend income will apply UK-wide, and the Government have engaged closely with the devolved Governments of Scotland and Wales to provide them with the ability to set property income rates in line with the current income tax powers in their fiscal frameworks.
Clause 4 will increase the tax rates applicable to dividend income by 2 percentage points for the 2026-27 tax year. Clause 5 will increase the tax rates applicable to savings income by the same amount. Clauses 6 and 7 will create separate tax rates for property income, which will apply from the 2027-28 tax year. The property basic, higher and additional rates will be set at 22%, 42% and 47%, respectively, for the 2027-28 tax year. Clause 6 will also make changes to the income tax calculation so that general reliefs and allowances will be applied to property income, savings and dividend income only after they have been applied to other sources of income.
Clause 8 will make provision for the Scottish Parliament and the Senedd to set devolved property income tax rates. This power will be commenced by the Treasury if the Scottish and Welsh Governments agree—individually, of course—to take the power, which is the typical process to protect the powers and responsibilities of devolved Governments.
These changes will still ensure that those with the broadest shoulders contribute more. In 2029-30, around two thirds of the revenue from the increases to the dividend, property and savings tax rates is expected to come from the top 20% of households. Taken together, these measures are projected to yield £2.2 billion in additional tax revenue by 2029-30.
This Finance Bill is about delivering on choices—choices to protect ordinary workers; choices to cut their energy bills, freeze train fares and prescription charges; and choices to focus on reducing inflation to push down mortgage costs. It delivers the Government’s commitment to this country to build a stronger and fairer economy where living standards rise and child poverty falls, and to ensure that public services are improved, with every measure in the Bill geared towards those high-level goals. The choice at the Budget was austerity and decline or investment and renewal, and this Labour Government back investment and renewal.
The Second Deputy Chairman of Ways and Means (Caroline Nokes)
I call the shadow Minister.
Daisy Cooper (St Albans) (LD)
I will speak to clauses 1 to 8 and schedules 1 and 2. Overall, the tax changes increase complexity, raise the tax burden on small businesses and savers, and raise the risk of serious unintended consequences on the property market. They all have the hallmarks of a Treasury tax grab without proper the consideration of the broader consequences.
When taken together, clauses 4 to 8 add more complexity, and concerns have been raised by the Chartered Institute of Taxation and the Association of Taxation Technicians, which highlighted that the new property rates add five new income tax rates. They are: the property basic rate of 22%; the property higher rate of 42%; the property additional rate of 47%; the property trust rate of 47%; and the savings trust rate of 47%. Rates will apply differently to investment returns and to savings. Basic and higher dividend rates have been changed, but additional dividend rates have not, and no explanation has been given as to the policy intent behind that. It would be helpful if the Minister could set that out on the record.
The long and short of it is that the Government say that they want to simplify tax, but their tax changes are making things more complicated. The Making Tax Digital forms will need to updated, and more individuals and small businesses will likely make more calls to His Majesty’s Revenue and Customs. Recent research by the House of Commons Library, commissioned by Liberal Democrats including my hon. Friend the Member for Maidenhead (Mr Reynolds), shows that HMRC failed to pick up one in five taxpayer calls over the last decade, with the tax service leaving the best part of a hundred million calls unanswered in the last 10 years. HMRC has failed to pick up 83 million calls from Brits in the last 10 years—6 million in just the last year. That is why we have been calling for a new HMRC hotline dedicated to supporting pensioners. It would help those who are among the likeliest to seek tax information over the phone while freeing up capacity for the tax service to deal with other queries—something that is imminent, given that the tax changes will result in more phone calls.
More broadly, the Federation of Small Businesses said:
“Hikes to dividend tax mean the Government continues to make investing in your own business one of the least tax-friendly things you can do with your money.”
Will the Minister listen to our small businesses, which are suffering under a mounting tax burden, not least from the Government’s business rates bombshell, and finally give them some respite?
With new clause 2, the Liberal Democrats call for a review of the impact of section 7 on rent prices. As many hon. Members have highlighted, the new clause would require the Chancellor of the Exchequer to lay before the House a proper assessment of the impact of the Bill’s tax changes on rent prices. Countless renters across the country will be worried that the higher property income tax will simply get passed on to them, making things even worse during the cost of living crisis. We cannot afford to ignore the unintended consequences of any tax policy.
The new clause would require the Government to update the House on some crucial details about the broader impacts of this measure. What proportion of the tax rise will get passed on to renters, according to the Treasury’s estimates? Which income groups are most likely to be affected by the tax rise? Which parts of the country will bear the brunt of it? I hope the Minister will agree that that information is essential.
Dan Tomlinson
I thank Members across the Committee, particularly those on the Labour Benches, for their contributions today. I believe that other things going on in the Palace today have drawn other Labour Members to Committee Rooms, but I am very glad that my hon. Friend the Member for Loughborough (Dr Sandher) chose to prioritise speaking in this important Finance (No. 2) Bill debate. I thank him for that.
I will respond to the points that have been raised in this all-too-brief debate on this group of important clauses. It is always a pleasure to stand at the Dispatch Box opposite the shadow Financial Secretary, the hon. Member for Grantham and Bourne (Gareth Davies). It was enjoyable to hear a history lesson rather than a selection of poetry or literary references, which I often get when I am opposite the shadow Chancellor, the right hon. Member for Central Devon (Sir Mel Stride). The shadow Financial Secretary noted correctly that income tax was originally introduced as a temporary measure. Running through my mind are the taxes introduced by the 2010-2024 Government that were initially announced as temporary but are still with us—but I will not comment on those, for reasons he may understand.
The shadow Financial Secretary mentioned my constituency, and I thank him for giving me a chance to talk about Chipping Barnet. He questioned what the tax rises are for. I can tell him that in the area that I know best NHS waiting lists are falling for the first time in a very long time, and the number of police officers is increasing after having been cut significantly. We are also opening breakfast clubs in primary schools. Those changes happening in my patch are happening across the country. That investment in our public services has been enabled by the tax changes that this Government have made. We are raising revenue in a sustainable and fair way in order to ensure that we can fund our public services and keep borrowing on a downward trajectory.
The shadow Financial Secretary raised the change landlord income tax—the two percentage point increase. I fully understand, as does he, that there are many reasons why people end up becoming landlords. We want to make sure that the taxation is fair and reasonable, which is why landlords do not pay national insurance in the way that their tenants do, and it is why we have taken steps to reduce—but not close in full—the gap in tax treatment, with the two percentage point increase. Landlords will still typically pay a lower rate of tax than their tenants, but the gap will be reduced following the measures set out today.
The shadow Financial Secretary, and other Members in interventions, mentioned the changes on dividend taxation. The main takeaway from the Office for Budget Responsibility is that it does not expect the changes to dividend taxation announced at the Budget a few short weeks ago to have a significant impact on business investment. Business investment is forecast to continue to grow over the course of the OBR’s five-year forecast horizon.
That is good news, because one thing that we know we need to do in this country is turn around the long-term weakness in investment—by both public and private sector—that has driven our long-term productivity and growth underperformance. That under-investment over the last 30 years is an issue that both major parties—and the Liberal Democrats for their time in the first five years of the coalition Government—should take responsibility for. I believe that in 24 of the last 30 years—that stat may now be one year out of date; I will have to update it for next time—the UK had the lowest rate of investment of any G7 economy. Until we can start to turn that around through higher public and private sector investment, our economy will not be able to fire on all cylinders, as this Government would like it to.
Let me turn to new clauses 2 and 12. New clause 2 would require the Government, within three months of the Act coming into force, to lay before the House of Commons an assessment of the impact of the implementation of section 7 of the Act on rent prices. New clause 12 seeks to require the Government, within six months of the Act coming into force, to publish an assessment of the impact of the changes introduced by sections 6, 7 and 8 on the private rental sector in England, Wales, Scotland and Northern Ireland.
As hon. Members will be aware, the Office for Budget Responsibility engages closely with the Treasury on the potential impacts of policy measures as part of standard Budget processes, and the OBR does not expect that the reform to property income will have a significant impact on rental prices in the forecast horizon. As I said, the economic literature points to rental prices being determined by the balance of supply and demand in the market, not just the cost facing landlords. The housing market proved to be more resilient than expected in 2025, and as interest rates fall further we hope that will reduce costs for landlords, too.
Dan Tomlinson
Maybe later.
I turn to the contribution of my hon. Friend the Member for Loughborough. His speech—I had hoped it would be even longer; I am somewhat disappointed not to have heard more from him—provided a clear exposition of the benefits of the modest changes the Government are setting out in this group of clauses, which are being considered by the Committee of the whole House.
Dr Sandher
Was my hon. Friend surprised that Opposition Members spoke about the complexity of implementing clause 4 when it is simply a measure changing the rates of dividend taxation and does not lead to any more burden when filing taxes?
Dan Tomlinson
I thank my hon. Friend for that intervention, which gives me a chance to repeat clearly that these changes are a 2 percentage point increase. The tax rates will increase from 20% to 22%, from 40% to 42% and from 45% to 47%. That does not add a significant—or any real—complication to the tax system. We are changing the rates in a way that is fair, closing the difference in taxation treatment between those who receive their income from employment and those who receive their income from assets.
My hon. Friend’s speech was really helpful in bringing comparative evidence to the debate. I hope he will send that my way for review. Opposition Members who asked about changes made in other countries may be interested in reading that evidence, too. He also provided a helpful exposition on the economic theory sitting behind some of these changes and the need to ensure that our taxation system incentivises people to make investments and good decisions for the long-term health of our economy. He touched on the crucial point—it is worth making this clearly—repeatedly pointed out by many tax experts and tax commentators that one challenge in the UK’s taxation system is that we treat income received from different sources very differently, which can lead to distortions. It is better to ensure that we do what we can to reduce the gaps between the tax treatment of different sorts of income. [Interruption.]
I am happy to refer to Opposition Members’ utterances —they have been shouting out the word “risk.” I make the point that there is still an incentive in the system as taxation levels have not closed completely. [Interruption.] Yes, it is smaller—hon. Members gesture as such, and they are correct that the gap has closed—but there are still significant incentives for people to set up their businesses and income streams in certain ways to increase their income.
Let me now turn to the contribution from the hon. Member for St Albans (Daisy Cooper), who helpfully mentioned the performance of HMRC, the Department for which I am the Minister with responsibility. She is right to say that we need to have a laser focus on customer service. The performance in terms of missed calls—that is, calls that are not picked up because someone hangs up before they are answered—is improving under this Government. I think that is progress—[Interruption.] The hon. Member for St Albans specifically raised the performance of HMRC in her remarks, and it is only right and proper for me to mention that. The hon. Member also raised the impact of these changes on rents; of course the Government will continue to monitor the impact of taxation changes on the rental market. One crucial thing we can do to support private renters is to increase the supply of housing to push down the price of rents in the long term.
To begin to conclude—[Hon. Members: “Hear, hear!”] To begin to conclude—[Interruption.] Did someone say they wanted to intervene? No? In that case, I hope I have been able to—
Dr Sandher
I have no doubt that Conservative Members would also like to intervene after I have made my intervention!
Does the Minister agree that we in this House prize the contribution of business people and that we are here to work productively to ensure that workers and businesses contribute to the prosperity of this nation? I am really proud of what business people do. I come from a family of business people who have invested, who have created a nation and who have created employment. On the other side, we must ensure that the benefits are paid both to them and to our wider economy.
Dan Tomlinson
I thank my hon. Friend for that intervention and for giving me the chance to reiterate this Government’s focus on economic growth and on providing economic stability. Last year, the OBR forecast that the economy would grow by 1% but it then revised that up to 1.5%. That is a 50% increase in our growth forecast. Of course, we need to continue to redouble our efforts as a Government, going further and faster when it comes to supporting economic growth, so that we can see rising living standards in every single part of the country. That is core to our plan. We do not want to see people continuing to suffer.
The last Parliament was the worst on record for living standards, and it is no surprise that the British people decided to boot out the Conservatives and replace them with a Government who are laser-focused on improving the cost of living and improving living standards, both through the changes we are making—including in the Finance Bill to support our public finances—and, as my hon. Friend mentions, through continuing to partner with business to unlock private sector investment and increase economic growth. The changes that we are making to planning do not just support more houses being built and more residential development, which of course we need for the reasons we have discussed; they should also make it easier for us to build large infrastructure projects to support economic growth—including new nuclear power stations, which the Conservatives continually did not invest in—and to get our long-term growth and productivity rates up.
By keeping the clauses in the Bill unchanged, we will raise additional revenue from those who are undertaxed relative to most employees. As I have said, the changes on dividend savings and property income will raise an additional £2.2 billion in the coming years, which will help us to repair and improve our public finances. The changes will also enable us to reduce the contribution that we are asking of working people through the threshold freezes. By making changes such as the introduction of the electric vehicle excise duty and the reduction in relief for those who are selling their businesses to employee ownership trusts, we are making it possible to reduce the ask of working people. That is in sharp contrast to the position set out by the shadow Chancellor, the right hon. Member for Central Devon, who said that if he was in Labour’s position, he would be increasing the rates of income tax. Rather than doing that, we will ensure that this Government stay true to their manifesto commitments on tax and the public finances, with borrowing falling in every year of the OBR’s forecast.
I therefore urge the Committee to reject new clause 2 and new clauses 10 to 12, and to support the inclusion in the Bill of clauses 1 to 6, schedule 1, clauses 7 and 8 and schedule 2.
Question put and agreed to.
Clause 1 accordingly ordered to stand part of the Bill.
Clauses 2 to 6 ordered to stand part of the Bill.
Schedule 1 agreed to.
Clauses 7 and 8 ordered to stand part of the Bill.
Schedule 2 agreed to.
New Clause 12
“(1) The Chancellor of the Exchequer must, within six months of this Act being passed, publish an assessment of the impact of the changes introduced by sections 6, 7, and 8 of this Act on the private rental sector in England, Wales, Scotland, and Northern Ireland.
(2) The assessment made under subsection (1) must consider -
(a) the effects of the provisions of sections 6, 7, and 8 on the cost of private rent in each region within England, Wales, Scotland, and Northern Ireland,
(b) the effects of the provisions of sections 6, 7, and 8 on the supply of private rental properties in each region within England, Wales, Scotland, and Northern Ireland,
(c) any other implications of the changes introduced by sections 6, 7, and 8 of this Act.”—(Gareth Davies.)
This new clause requires the Secretary of State to publish an assessment of the impact of imposing new rates of income tax on property income.
Brought up, and read the First time.
Question put, That the clause be read a Second time.
The First Deputy Chairman of Ways and Means (Judith Cummins)
With this it will be convenient to discuss the following:
Clause 10 stand part.
Clause 69 stand part.
New clause 3—Notification of taxpayers affected by frozen thresholds—
“(1) HM Revenue and Customs must take reasonable steps to identify individuals who, as a result of—
(a) the freezing of the starting rate limit for savings under section 9 of this Act, or
(b) the freezing of the personal allowance or the basic rate limit under section 10 of this Act, will—
(i) become liable to income tax for the first time, or
(ii) become liable to income tax at a higher rate than in the previous tax year.
(2) HM Revenue and Customs must ensure that each individual identified under subsection (1) is provided with a written notification before the start of the relevant tax year.
(3) A notification under subsection (2) must—
(a) explain that the individual’s tax liability is affected by the freezing of income tax thresholds,
(b) state whether the individual will pay income tax for the first time or move into a higher tax band, and
(c) provide information on where the individual can obtain further guidance about their tax position.
(4) HM Revenue and Customs must publish, no later than six months after the end of each affected tax year, a report setting out—
(a) the number of individuals notified under this section,
(b) the number of individuals who became income taxpayers for the first time as a result of sections 9 and 10, and
(c) the number of individuals who moved into a higher tax band as a result of those sections.
(5) In this section ‘written notification’ includes electronic communication.”
This new clause would require HM Revenue and Customs to notify individuals who, as a result of the freezing of income tax thresholds in the Act, will pay income tax for the first time or move into a higher tax band.
New clause 4—Review of the impact of tax changes on household finances—
“(1) The Chancellor of the Exchequer must, within six months of this Act being passed, publish an assessment of the impact of changes introduced by sections 9,10 and 69 on household finances.
(2) The assessment must evaluate how households across different income levels are affected by these changes.”
This new clause requires the Chancellor of the Exchequer to assess and publish a report on how the freezing of tax thresholds to 2030-31 impacts households at various income levels.
New clause 5—Report on impact of sections 9, 10 and 69—
“Within three months of this Act being passed, the Chancellor of the Exchequer must lay before the House of Commons a report setting out—
(a) the number of taxpayers who will pay income tax at each rate during each tax year between 2026-27 and 2030-31 under sections 9, 10 and 69,
(b) the number of those taxpayers who are pensioners or are of State Pension Age,
(c) comparative figures for each tax year since 2020-21,
(d) comparative projected figures for each tax year to 2034-35, and
(e) comparative figures with a scenario under which normal uprating policy had been implemented for financial years 2020-21 through 2030-31.”
This new clause requires the Chancellor of the Exchequer to assess how many people will be in each income tax bracket from 2026-27 through to 2030-31, together with comparative figures before and after that period.
New clause 13—Assessment of the impact of changes to the basic rate limit and personal allowance for tax years 2028-29 to 2030-31—
“The Chancellor of the Exchequer must, within three months of this Act being passed, publish an assessment of the expected impact on an average earner of the provisions of section 10.”
This new clause requires the Secretary of State to publish an assessment of the impact on the average earner of extending the freeze on the basic rate limit and personal allowance for the tax years 2028-29, 2029-30, and 2030-31.
New clause 14—Assessment of the impact of the freezing of the personal allowance on those in receipt of the state pension for the tax years 2027-28 to 2030-31—
“(1) The Chancellor of the Exchequer must, before the start of the tax year 2027-28, publish an assessment of the impact of the freezing of the personal allowance on those in receipt of the state pension for the tax years 2027-28 to 2030-31.
(2) The assessment made under subsection (1) must include details on the estimated total income from tax receipts received in each tax year from individuals whose only income is the state pension.”
This new clause requires the Secretary of State to publish an assessment of the impact of the personal allowance on those pensioners whose only income is the state pension for the tax years 2027-28, 2028-29, 2029-30, and 2030-31.
New clause 15—Assessment of the impact of exempting from income tax pensioners whose sole income is the basic or new State Pension—
The Chancellor of the Exchequer must, within three months of this Act being passed, publish an assessment of the fiscal impacts of exempting pensioners whose sole income is the basic or new State Pension (without any increments) from paying small amounts of income tax.”
Dan Tomlinson
In opening debate on this second group of clauses, I want to reflect on why we are making changes to the tax system. I am looking forward to no interventions at all on this speech from Opposition Members—their interventions seemed to dry up in my last speech, so maybe they have now finished with them. Of course, we make these changes to modernise the tax system, to make it fair and fit for purpose and to adapt to a changing world, but we also make these changes so that we can raise the revenue to fund our public services. Yes, the Bill holds thresholds constant till the end of the decade, but in doing so contributes to our being able to renew our public services while maintaining the highest levels of public investment in four decades to stimulate economic growth and ensure that those with the broadest shoulders pay their fair share.
Dan Tomlinson
This Government have stuck to their manifesto commitments. We were very clear about not wanting to change the rates of income tax. I have been in discussions with Opposition Members about the wording of our manifesto; I am glad that Conservative Members have taken such interest in it. We are sticking to our commitments. The tax changes that we are discussing now, and others, will allow us to do things such as lift 550,000 children out of poverty this Parliament, by removing the two-child limit and expanding free breakfast clubs and free school meal eligibility. They allow us to cut waiting lists and cut the cost of living by delivering £150 off energy bills. All that would be threatened by Opposition Members, who do not support the taxes needed to fund decent public services.
Steve Darling (Torbay) (LD)
Can the Minister explain why there are £300 million-worth of cuts in Devon this year to our NHS—to hospital trusts, our partnership trust that looks after mental health and our integrated care board?
Dan Tomlinson
I am not able to comment on the specific figures that the hon. Gentleman raised, but overall the Government are spending significantly more on the NHS in this Parliament each year. That is enabled by the changes to taxation that we announced at this and previous Budgets. One of the challenges that the national health service has today is a result of under-investment in capital for too long, meaning that day-to-day spending is having to take more of the strain. So often in recent years capital budgets have been raided, including when, I should mention, the Conservatives and Liberal Democrats were in coalition. Cutting the capital budgets has left us in the difficult situation that we are in now, and this Government are seeking to turn that around.
Dan Tomlinson
I will give way to the right hon. Member for East Antrim (Sammy Wilson) and come back to the right hon. Member for Gainsborough (Sir Edward Leigh).
Sammy Wilson
The Minister is putting on a brave face because a manifesto commitment has been broken. People are going to pay more in income tax despite the promises that were made. Does he recognise that, for many people, this is not money to renew public services, but money squandered on giving compensation to foreign Governments for land that we owned—the Chagos islands—and are now paying for; money that will be spent on an ID system that is totally unnecessary and will not serve the purpose it is meant to; and money spent on net zero commitments that have destroyed our economy and added little in benefits to the public?
Dan Tomlinson
The right hon. Gentleman is welcome to express his views on a range of policies. On the final issue that he raises—net zero and our transition to a cleaner and greener economy—independent analysis, the Government’s Climate Change Committee and the long-term fiscal risk report of the Office for Budget Responsibility have set out clearly that not making that transition, both in the UK and internationally, comes with larger long-term costs for the public finances because of the growing costs of adapting to climate change. It is clear that we need to make that change, for the environment and for the long-term health of our public finances. The OBR’s fiscal risks report is always a good read; I hope that he is, like me, looking forward to the next edition in the summer.
Dan Tomlinson
I will give way, but then I should make progress given that we have another group of clauses to address after this one.
Sir Edward Leigh
Even more important than the point made by the right hon. Member for East Antrim (Sammy Wilson) is the fact that, as I read recently, the average family is paying £12,000 in tax to cover the benefits bill. That is important, because we are taxing entrepreneurial people more, and they will perhaps decide to work a little less hard, so we will all get poorer. I just pray that the Government will have the guts to return to their original proposals—which the Chancellor dropped in the light of pressure—to encourage people back into work, which will mean cutting the benefits bill. I encourage the Government to be true to their original word.
Dan Tomlinson
I agree with the right hon. Gentleman on one point: the welfare system that we inherited was failing. Our Government need to correct the mistakes that meant welfare spending was running out of control, as it was when the shadow Chancellor, the right hon. Member for Central Devon (Sir Mel Stride), was Secretary of State for Work and Pensions. We must carefully consider the welfare system and make reforms that support people into work and ensure that the forecast budget increases are sustainable for the public finances. I agree with the right hon. Member for Gainsborough on that point.
I have not heard the £12,000 statistic before, but I would caution against such statistics, which often appear in the press. Many welfare claimants up and down the country are pensioners who receive the state pension. I do not know whether that figure includes the state pension—Members of all parties, with the exception of the shadow Chancellor, support the triple lock—or the many welfare payments for families with someone in work. We are trying to reduce the need to support working families with welfare payments, through increases to the national living wage and steps to boost productivity. I would say that that figure is a misrepresentation—not that I would accuse the right hon. Member for Gainsborough of misrepresenting the facts—because it uses the word “welfare” as a catch-all, when many people who receive support from the state need that support and benefit from it in a reasonable way, including those who lose their jobs, whom we support through jobseeker’s allowance, for example.
Mr Reynolds
I will be brief—the Minister might even be able to give me a one-word answer. In 2024, the Chancellor said that she had come to the conclusion that extending the threshold freeze would hurt working people. Does the Minister agree, then, that he is proposing to hurt working people?
Dan Tomlinson
I encourage the hon. Member to listen back to what I said earlier in my speech. I and this Government are not shying away from the fact that at the end of the decade, we are freezing income tax thresholds for a further three years, after the seven years—if I recall correctly—that they were frozen under the previous Government. That decision enables us to raise more revenue—the amount set out by the OBR—at the end of the decade and in a way that means that we can stick to our clear manifesto commitment not to increase the rate of tax. We have looked across the tax system. I am sure that the Opposition Front Benchers will enjoy line-by-line scrutiny in the Bill Committee, when we will go through the other changes we have made to the tax system to reduce our ask of working people via the extension of the threshold freeze at the end of the decade.
Clause 9 maintains the starting rate for the savings limit at its current level of £5,000 from the 2026-27 tax year until 6 April 2031. The starting rate for savings must be legislated for each year to confirm the band of savings income to which it applies. In addition to the starting rate for savings—eligible individuals can earn up to £5,000 in savings income, free of tax—savers are supported by the personal savings allowance, which provides up to £1,000 of tax-free savings income for basic rate taxpayers. Savers will also continue to benefit from the annual ISA allowance of £20,000. As a result of those measures, in 2025-26, around 85% of savers pay no tax whatsoever on their savings income.
Dan Tomlinson
I will make a little progress, if I may. I have already taken two interventions on this exact point.
We know that there will be a broad-based effect, but as I have said, we are making other changes so that we ask as little as possible of those who will be affected by the change. We are making lots of changes to ensure that those with the broadest shoulders pay their fair share. I think that that is a fair and necessary decision to raise tax revenue in order to fund public services and restore economic stability.
Neil Duncan-Jordan
I have been contacted—as has the Minister, I am sure—by a number of pensioners who are worried that they will pay tax on their state pension for the very first time. Which pensioners will be affected by the freeze in allowances, and how will any exemptions apply?
Dan Tomlinson
The Chancellor was clear about that very soon after the Budget, in her interview with Martin Lewis, which I am sure my hon. Friend saw. Those whose only income is the basic state pension will not pay tax on it during this Parliament.
The changes to the personal allowance will apply to the whole of the UK. The changes to the basic rate limit and the higher rate threshold will apply to non-property, non-savings and non-dividend income in England, Wales and Northern Ireland. The Scottish Parliament sets income tax rates and limits for Scottish taxpayers. Alongside maintaining the national insurance contribution thresholds for the same period, that will raise £7.8 billion in 2029-30, helping to fund public services and restore economic stability.
Clause 69 provides that the inheritance tax nil rate bands will continue at current levels in 2030-31. There are two nil rate bands for inheritance tax. The nil rate band has been £325,000, as Opposition Members will know, since 2009-10. The residence nil rate band has been £175,000 since 2021. Subject to reliefs and exceptions, inheritance tax is payable if the net value of an estate exceeds those thresholds. The previous Government froze those thresholds until April 2028. We fixed them at those levels for a further two years at the autumn Budget in 2024. We have fixed the nil rate threshold for a further year, until 2031, consistent with the decisions to maintain other personal tax thresholds until April 2031.
The clauses are fair, necessary and fiscally responsible, and will raise the revenue needed to fix the public finances and fund public services such as our NHS, schools and police force. They will fund vital changes to bring half a million children out of poverty.
Calum Miller (Bicester and Woodstock) (LD)
I am extremely grateful to the Minister for giving way. He is trying to make the case that freezing thresholds is progressive, but what he has not mentioned, understandably, is the freezing of student loan thresholds. There is strong evidence that it will result in lower-earning graduates having to pay much more back over the duration of their loan period. Why is the Treasury taking the £6 billion benefit to the asset balance sheet in 2026-27 from this measure, and can the Minister convince me and my constituents that this is in any way fair and progressive?
Dan Tomlinson
The hon. Member mentions the change to student loan thresholds that was announced at the Budget. The Government have looked at our taxation system in the round, and at our benefits system—for example, there are the changes to Motability—to ensure that we are raising the revenue that we need in a proportionate and reasonable way, and the measures that we are debating tonight enable us to do that. I will not let Opposition Members, who repeatedly voted to freeze thresholds until 2028 when they were in government, try to rewrite history as we debate these clauses.
The First Deputy Chairman of Ways and Means (Judith Cummins)
I call the shadow Minister.
Clive Jones (Wokingham) (LD)
I rise to speak to clause 10. It is utterly unfair and shameful that this Government are raising taxes on struggling families by freezing or continuing the freeze of income tax thresholds, which was started by the Conservatives. The Conservative Government spent years hitting people with stealth taxes, and Labour, sadly, has decided to continue to do the same. Clause 10 freezes the basic rate limit for income tax at £37,700, and it freezes the amount of personal allowance at £12,570 until 2030-31. This extension of the Tories’ stealth tax will hit ordinary families, people on low incomes and pensioners whose only income is the state pension. The Government have again turned their back on some of the most vulnerable for the sake of another short-sighted tax grab. Does the Minister really think that is fair?
Let me once again offer some advice. The best way to balance the books is to grow our economy, and the quickest way to do that is to repair the damage of the Conservatives’ terrible Brexit deal by negotiating a bespoke EU-UK customs union. A better trade deal like that would raise more than £25 billion for the Exchequer, which would be a huge boost for the public finances. It is suggested nearly every week in this place by Liberal Democrats. When will the Minister and his colleagues start to listen?
Dan Tomlinson
I was listening to the speeches made by Members on the Opposition Benches so intently that I am not in the right place in my notes to start my speech.
I extend my thanks to the various Members who have spoken today. I will be very brief in winding up— [Interruption.] Yes, I know some Members in particular will enjoy that. The Conservatives’ new clause 15 asks the Government, within three months of this legislation coming into force, to publish an assessment of the impact of exempting pensioners whose sole income is the basic or new state pension from income tax. That issue was raised by the Opposition spokesperson, the hon. Member for Grantham and Bourne (Gareth Davies), as well as by the hon. Members for Hinckley and Bosworth (Dr Evans) and for Mid Dorset and North Poole (Vikki Slade), and others.
The new clause refers to the Chancellor’s announcement that those whose only income is the basic or new state pension without any increments will not have to pay income tax over this Parliament. I know that some Members are particularly impatient and energetic on this point, but more details will be set out later in the year. As the details of the policy have not yet been announced, it would be premature for us to set out the impacts at this stage.
Several hon. Members rose—
Dan Tomlinson
Many Members wish to intervene. I will happily give way to the hon. Member for Kingswinford and South Staffordshire (Mike Wood).
Mike Wood (Kingswinford and South Staffordshire) (Con)
The Minister says that pensioners who only receive the new state pension will not have to pay income tax. Can he say whether pensioners paid the old basic state pension, but who were contracted out and have alternative provision that brings them up to the same level as the new state pension, will have to pay income tax?
Dan Tomlinson
As the Chancellor has set out—more detail will follow later this year—those whose only income is the basic or new state pension, without any increments, will not have to pay income tax over this Parliament. I am aware that Members would like to see more detail, but it would be premature for us to set out the impacts of the policy at this stage, because the details will be forthcoming later this year. I therefore say that new clause 15 should be rejected.
Several hon. Members rose—
Dan Tomlinson
It is so wonderful to see so many Members on the Opposition Benches wishing to intervene. They were much less forthcoming in my previous closing remarks. I have given way to one Conservative, so I will give way to a Liberal Democrat.
Daisy Cooper
The Minister will have heard a number of colleagues asking for more detail about how the pension provisions will affect pensioners. The Minister has just said that further information is to come. Will he please give us an indication of the date when we can expect that guidance to be published, so that he can then come back and clarify some points?
Dan Tomlinson
That information will be forthcoming in due course.
In conclusion, I hope that Members will see how the amendments that have been tabled are not necessary. We have set out the impact of our tax changes in numerous tax impact and information notes, which Members can read online at their leisure. This Government and I will not let Opposition Members who repeatedly voted to freeze thresholds until 2028 when they were in government to rewrite history. This Labour Government reject the Conservatives’ austerity measures, which got our country and public services into this sorry state. We inherited a mess at the 2024 general election, and the measures we are considering now, and those elsewhere in the Finance Bill, enable us to rebuild our public finances, to fund our public services for the long term and to get borrowing over the course of this Parliament to continue to fall. I therefore, urge the Committee to reject new clauses 3 to 5 and 13 to 15 and to support the inclusion of clauses 9, 10 and 69.
Question put and agreed to.
Clause 9 accordingly ordered to stand part of the Bill.
Clause 10
Basic rate limit and personal allowance for tax years 2028-29 to 2030-31
Question put, That the clause stand part of the Bill.
The First Deputy Chairman of Ways and Means (Judith Cummins)
With this it will be convenient to consider the following:
Amendment 42, in schedule 12, page 443, line 13, leave out from “and” to end of line 16 and insert—
“(c) either—
(i) is attributable to property that has been owned by the transferor for at least 10 years as part of a business that is actively operated by the transferor or a member of their family, or
(ii) if the value does not fall within (i), does not exceed the amount of the 100% relief allowance available in relation to that chargeable transfer (see section 124D),”
This amendment would maintain 100% business relief where the property has been owned by the transferor for at least 10 years as part of a business that is actively operated by the transferor or a member of their family.
Amendment 45, page 443, line 13, leave out from “and” to end of line 16, and insert—
“(c) either—
(i) is attributable to property acquired before 31 March 2026, or
(ii) if the value does not fall within (i), does not exceed the amount of the 100% relief allowance available in relation to that chargeable transfer (see section 124D),”
This amendment would apply 100% business property trust relief where the property was acquired before 31 March 2026.
Amendment 43, page 443, line 22, leave out from “and” to end of line 25 and insert—
“(c) either—
(i) is attributable to property that has been owned by the transferor for at least 10 years as part of a business that is actively operated by the transferor or a member of their family, or
(ii) if the value does not fall within (i), does not exceed the amount of the 100% trust relief allowance available in relation to that occasion (see sections 124G to 124K),”
This amendment would maintain 100% business relief where the property has been owned by the transferor for at least 10 years as part of a business that is actively operated by the transferor or a member of their family.
Amendment 46, page 443, line 22, leave out from “and” to end of line 25 and insert—
“(c) either—
(i) is attributable to property acquired before 31 March 2026, or
(ii) if the value does not fall within (i), does not exceed the amount of the 100% trust relief allowance available in relation to that occasion (see sections 124G to 124K),”
This amendment would apply 100% business property trust relief where the property was acquired before 31 March 2026.
Amendment 44, page 443, line 37, leave out from “and” to end of line 3 on page 444 and insert—
“(b) either—
(i) is attributable to property that has been owned by the transferor for at least 10 years as part of a business that is actively operated by the transferor or a member of their family, or
(ii) if the value does not fall within (i), does not exceed the amount of the 100% relief allowance available in relation to that chargeable transfer (see section 124D),”
This amendment would apply 100% agricultural property trust relief where the property has been owned by the transferor for at least 10 years as part of a business that is actively operated by the transferor or a member of their family.
Amendment 47, page 443, line 37, leave out from “and” to end of line 3 on page 444 and insert—
“(b) either—
(i) is attributable to property acquired before 31 March 2026, or
(ii) if the value does not fall within (i), does not exceed the amount of the 100% relief allowance available in relation to that chargeable transfer (see section 124D),””
This amendment would apply 100% business property trust relief where the property was acquired before 31 March 2026.
Amendment 48, page 444, line 15, at end insert—
“(1D) Where the whole or part of the value transferred is treated as reduced by 50% under subsection (1), the resulting inheritance tax liability is chargeable only if, within 10 years of the relevant transfer, the agricultural land giving rise to the charge is either—
(a) sold (and the owner has not purchased agricultural land elsewhere), or
(b) ceased to be used for farming.”
Government amendments 24 to 26.
Amendment 3, in schedule 12, page 451, line 22, leave out “30 October 2024” and insert “1 March 2027”.
This amendment, along with amendments 4 to 23 would remove the transition period in respect of the changes to agricultural property and business property relief and delay the implementation date so that the changes would take effect for transfers made after 1 March 2027.
Amendment 31, page 451, line 22, leave out “30 October 2024” and insert “6 April 2026”.
This amendment, with Amendments 32 to 36, would remove the transition period in respect of the changes to agricultural property and business property relief so that the changes take effect for transfers made from 6 April 2026.
Amendment 4, page 452, line 3, leave out “30 October 2024” and insert “1 March 2027”
See explanatory statement for Amendment 3.
Amendment 32, page 452, line 3, leave out “30 October 2024” and insert “6 April 2026”
See explanatory statement for Amendment 31.
Government amendments 27 to 29.
Amendment 5, in schedule 12, page 454, line 17, leave out “30 October 2024” and insert “1 March 2027”
See explanatory statement for Amendment 3.
Amendment 33, page 454, line 17, leave out “30 October 2024” and insert “6 April 2026”
See explanatory statement for Amendment 31.
Amendment 40, page 455, line 31, leave out “2031” and insert “2027”
This amendment would begin indexation in 2027 rather than 2031.
Amendment 41, page 455, line 33, at end insert—
“(2A) If the Treasury estimates that the value of agricultural land has increased by more than the percentage increase in the consumer prices index during the same period, then it must instead make an order by statutory instrument amending each relief allowance amount relating to agricultural property by the percentage increase in the value of agricultural land.”
Amendment 6, page 461, line 2, leave out “6 April 2026” and insert “1 March 2027”
See explanatory statement for Amendment 3.
Amendment 7, page 461, line 3, leave out sub-paragraphs (2) and (3)
See explanatory statement for Amendment 3.
Amendment 34, page 461, line 3, leave out sub-paragraphs (2) to (4)
See explanatory statement for Amendment 31.
Amendment 8, page 461, line 17, leave out “sub-paragraph (3) will not apply” and insert
“the transfer will prove to be an exempt transfer”.
See explanatory statement for Amendment 3.
Amendment 9, page 461, line 21, leave out from “paragraph” to end of paragraph 17(5)(b) and insert
“comes into force on 1 March 2027”
See explanatory statement for Amendment 3.
Amendment 35, page 461, line 21, leave out from “paragraph” to end of paragraph 17(5)(b) and insert
“comes into force on 6 April 2026”
See explanatory statement for Amendment 31.
Amendment 10, page 461, line 28, leave out “30 October 2024” and insert “1 March 2027”
See explanatory statement for Amendment 3.
Amendment 36, page 461, line 28, leave out “30 October 2024” and insert “6 April 2026”
See explanatory statement for Amendment 31.
Amendment 11, page 461, line 31, leave out “6 April 2026” and insert “1 March 2027”
See explanatory statement for Amendment 3.
Amendment 12, page 461, line 33, leave out “6 April 2026” and insert “1 March 2027”
See explanatory statement for Amendment 3.
Amendment 13, page 461, line 36, leave out “6 April 2026” and insert "1 March 2027”
See explanatory statement for Amendment 3.
Amendment 14, page 461, line 38, leave out “6 April 2026” and insert “1 March 2027”
See explanatory statement for Amendment 3.
Amendment 15, page 462, line 3, leave out “6 April 2026” and insert “1 March 2027”
See explanatory statement for Amendment 3.
Amendment 16, page 462, line 7, leave out “6 April 2026” and insert “1 March 2027”
See explanatory statement for Amendment 3.
Amendment 17, page 462, line 15, leave out “6 April 2026” and insert “1 March 2027”
See explanatory statement for Amendment 3.
Amendment 18, page 462, line 19, leave out “6 April 2026” and insert “1 March 2027”
See explanatory statement for Amendment 3.
Amendment 19, page 462, line 30, leave out “6 April 2026” and insert “1 March 2027”
See explanatory statement for Amendment 3.
Amendment 20, page 462, line 35, leave out “6 April 2026” and insert “1 March 2027”
See explanatory statement for Amendment 3.
Amendment 21, page 464, line 14, leave out “6 April 2026” and insert “1 March 2027”
See explanatory statement for Amendment 3.
Amendment 22, page 464, line 21, leave out “6 April 2026” and insert “1 March 2027”
See explanatory statement for Amendment 3.
Amendment 23, page 464, line 27, leave out “6 April 2026” and insert “1 March 2027”
See explanatory statement for Amendment 3.
Schedule 12.
New clause 1—Section 62: application in Northern Ireland—
“(1) The Chancellor of the Exchequer must, within six months of this Act coming into force, publish an assessment of the effects of the measures in section 62 as they apply in Northern Ireland.
(2) The assessment must consider—
(a) the number of estates in Northern Ireland expected to be subject to the reduction in agricultural property relief made under this Act,
(b) the potential benefits to farmers in Northern Ireland of exempting land used for agricultural purposes from the changes to agricultural property relief made under this Act,
(c) the potential costs to the Exchequer of exempting land used for agricultural purposes from the changes to agricultural property relief made under this Act,
(d) the impact of the measures on farm succession, land retention, and the viability of agricultural businesses in Northern Ireland, including any potential implications for the resilience and security of the UK’s food supply, and
(e) any other matters that the Chancellor of Exchequer deems appropriate.
(3) In subsection (2), “land used for agricultural purposes” does not include land that falls within the Financial Conduct Authority’s definition of a land-banking investment scheme.
(4) In carrying out the assessment, the Chancellor of the Exchequer must have regard to—
(a) the average farm size and land valuation profile in Northern Ireland,
(b) the prevalence of intergenerational family farming in Northern Ireland,
(c) the interaction between agricultural property relief and devolved agricultural support schemes, and
(d) any disproportionate impact on rural communities in Northern Ireland.
(5) The assessment must be carried out following meaningful consultation with—
(a) the Department of Agriculture, Environment and Rural Affairs in Northern Ireland,
(b) representatives of farmers and land-based businesses in Northern Ireland, and
(c) such other persons as the Chancellor of the Exchequer considers appropriate.
(6) The Chancellor of the Exchequer must, within three months of publishing the assessment, lay before Parliament a statement setting out the steps the Government intends to take in response to the assessment’s findings.
(7) The Chancellor of the Exchequer must keep the operation of the measures in section 62 under review in light of the assessment and publish a further assessment within 18 months of this Act coming into force.”
New clause 6—Impact assessment of section 62 prior to implementation—
“(1) The Chancellor of the Exchequer must, within three months of the passing of this Act, lay before the House of Commons an assessment of the impact of implementation of section 62 on family-owned farms and businesses.
(2) The assessment made under subsection (1) must consider potential impacts on—
(a) business continuity,
(b) land use, and
(c) rural employment.”
New clause 7—Uprating of allowance amounts for agricultural property—
“The Chancellor of the Exchequer must, within six months of the passing of this Act, undertake and publish an assessment of the potential merits of uprating annually the relief allowance amount for agricultural property by the change in the value of agricultural land.”
New clause 17—Review of anti-forestalling provisions relating to Agricultural Property Relief—
“(1) The Treasury must conduct a review of the effects of the anti-forestalling provisions relating to Agricultural Property Relief.
(2) The review must, in particular, consider the effects of those provisions on—
(a) succession planning and intergenerational transfer of agricultural land and businesses,
(b) the viability and continuity of family-run farms,
(c) food security and domestic agricultural production,
(d) land management, environmental stewardship, and the condition of the countryside, and
(e) the availability of agricultural land for active farming.
(3) In conducting the review, the Treasury must consult such persons as it considers appropriate, including representatives of the agricultural sector.
(4) The Treasury must lay before the House of Commons a copy of the report within 12 months of the coming into force of the anti-forestalling provisions under this Act.”
Dan Tomlinson
As we come to the final group in today’s Committee stage on the Bill, I am pleased to open this important debate on clause 62, schedule 12 and the many associated amendments. As reiterated throughout the day, the Bill delivers on the choices made at this Government’s two Budgets. It delivers fair and necessary reforms that strengthen the foundations of our economy and provide a secure future for our country. The choice at those two Budgets was austerity and decline or investment and renewal, and on both occasions the Labour Government rejected austerity and chose renewal.
Clause 62, schedule 12 and Government amendments 24 to 29 make changes to agricultural property relief and business property relief in order to target them more fairly, contribute to the sustainability of public finances and fund public services. Under the current system, the 100% relief on business and agricultural assets is heavily skewed towards the wealthiest estates. According to HMRC data for 2021-22, 40% of agricultural property relief across the UK was claimed by just 7% of the estates making claims. That is £219 million in tax relieved from just 117 of the largest estates in the country, and it is a similar picture for business property relief: more than 50% of BPR was claimed by just 4% of the estates making claims. That is a striking £558 million in tax relieved from just 158 estates.
That contributes to the very largest estates paying lower average effective inheritance tax rates than the smaller estates, and significantly lower average effective inheritance tax rates than most people who end up paying IHT will pay. That is the status quo that those seeking to reverse the Government’s reforms in full wish to perpetuate. It is not sustainable and, in the Government’s view, it is certainly not fair to maintain such a large tax break for such a small number of claimants, especially in the context of the wider pressures on the public finances and public services.
Ms Julie Minns (Carlisle) (Lab)
I very much welcome the fact that, from next year, an estimated 85% of farms will pay no more inheritance tax on their farming and business assets. I agree with the Minister that it is a proportionate measure that aims to prevent the wealthy from abusing APR, and I know that he is mindful of the profitability of our small and medium-sized farms. Will he undertake to work with colleagues in the Department for Environment, Food and Rural Affairs to make sure that we get the definition right for the new sustainable farming incentive, so that as many of those small and medium-sized farms as possible are eligible for it?
Dan Tomlinson
I thank my hon. Friend for her continued interest in this area; she is a strong representative for the rural communities that she represents in the north-west of our country. I am sure that colleagues in DEFRA, including the Secretary of State and others, will be working hard to make sure that the funds that this Government have allocated for farming and farming businesses are spent in full, rather than leaving hundreds of millions of pounds underspent, as the previous Government did. We will make sure that the money gets to the farms that will benefit from it, to support them with the initiatives that they and we know would be good for them to pursue, because they are good for the environment and for those businesses.
Jamie Stone (Caithness, Sutherland and Easter Ross) (LD)
I thank the Minister for giving way; he is very courteous. As Members will understand, I represent a very remote constituency in the north of Scotland where crofting—very marginal farming and hill farming—is fundamental not just to the economy of the highlands, but to the social structure. The great curse in the past was de-population, and various safeguards were enacted in the 19th and 20th centuries to ensure that crofting continued. Crofters are asset-rich, but their income is very poor indeed. I welcome what the Government have done so far. Could I please ask the Minister, with my hand on my heart, to keep an eye on this particular sector? Anything that would discourage people could be fatal for the community I represent.
Dan Tomlinson
I thank the hon. Member for raising the crofting sector and the rural communities that he represents. The Government will continue to do all we can to support different types of farmers, and to make sure that we can support tenant farmers too. I thank him for raising that point and for the representation that he provides to his constituents.
The changes made by clause 62, schedule 12 and Government amendments 24 to 29 will reform how we target agricultural property relief and business property relief from 6 April this year.
Harriet Cross (Gordon and Buchan) (Con)
It has been many, many months since the agricultural property relief and business property relief changes were first announced by this Government. In that time, they have had so many representations from farmers, the farming industry, small business groups, family business groups, Members of this House, industry sectors, the National Farmers Union Scotland, the Country Land and Business Association, Scottish Land & Estates, Labour Back Benchers, Opposition Back Benchers and the public at large. Everyone was telling the Government that this was a bad policy. Why did it take them so long to change it?
Dan Tomlinson
Conservative Members keep repeating, “14 months”. I should use that as an opportunity to remind people of the 14 wasted years that their party put farmers and rural communities through; of the trade deals that they implemented, which made life worse for our farmers and farming communities; and of the hundreds of millions of pounds that went underspent in the farming budgets over 14 years, and which could have benefited rural communities and farmers.
After continued engagement from Ministers across the Government, including in the Treasury and the Department for Environment, Food and Rural Affairs, as well as the Prime Minister’s engagement with important representatives in this space, the Government made a change—the change that the Government amendments will enable this Committee to legislate for, if it wishes, and I do hope it does. This change will strengthen the public purse by around £300 million.
Robin Swann (South Antrim) (UUP)
I want to take the Minister back to his earlier commitment on Scotland. Will the Government give the same commitment to farmers in Northern Ireland? We have a very different family farm structure from that in the rest of the United Kingdom, and the engagement of and representations by the Ulster Farmers’ Union and the Young Farmers’ Clubs of Ulster should bring this Government to a realisation that their last proposals did not sit well with farmers across this United Kingdom.
Dan Tomlinson
A few weeks back, I had the pleasure of attending a Westminster Hall debate focused on farming and farmers in Northern Ireland. It was a good, productive debate, and I took away many of the points raised. The hon. Member will know that the Government have made a change to increase the threshold.
Carla Lockhart
I thank the Minister for attending that debate. He noted during it that he might meet the Ulster Farmers’ Union, but, sadly, that has not happened. The Government have been tone deaf for the last 14 months on this issue, and when the Ulster Farmers’ Union and each of the unions across this United Kingdom told them of the wrong that they were doing, they did not listen. In the wake of all this, would he meet the Ulster Farmers’ Union to discuss its outworkings?
Dan Tomlinson
I am sure that Environment Ministers will continue to engage with farming unions and farming representatives. Both in the run-up to the Budget and subsequently, Treasury Ministers and those from other Departments have engaged with farmers, and we will continue to do so, to support farmers in a way that the previous Government never did.
Individuals will still benefit from 100% relief for the first £2.5 million of combined business and agricultural assets, and the figure will be fixed at that level until April 2031, alongside other inheritance tax thresholds, as we have been debating. Any unused allowance can be transferred to a surviving spouse or civil partner, including where the first death is before 6 April 2026. On top of that amount, there will be a 50% relief, which means that inheritance tax will be paid at a reduced effective rate of up to 20%. We are also reducing the maximum rate of business property relief available from 100% to 50% for shares designated as not listed on the markets of registered stock exchanges. The reliefs sit alongside other exemptions and nil rate bands. This means that a couple will now be able to pass on up to £5 million of agricultural or business assets tax-free between them. That is on top of existing allowances, such as the nil rate band.
Where inheritance tax is due, those liable for a charge can pay any liability on the relevant assets over 10 annual instalments, interest-free. This benefit is not seen elsewhere in the inheritance tax system, and it means that the relief continues to be more generous than it was for the vast majority of the 20th century. In fact, from April 2026, the reliefs will be more generous than they ever were under, for example, Margaret Thatcher’s Government.
Our reforms are expected to result in a total of up to 1,100 estates across the UK paying more inheritance tax in 2026-27. Only up to 185 estates across the UK claiming APR, including those also claiming BPR, are expected to pay more in the next tax year. This means that around 85% of such estates will not pay any more tax as a result of the changes in 2026-27. Excluding estates holding shares designated as not listed on the market of registered stock exchanges, only up to 220 estates across the UK only claiming business property relief are expected to pay more.
Dan Tomlinson
Go on, then. I will give way, but I was trying to make progress so that other Members could speak.
Simon Hoare
I hate to interrupt the Minister, but the Chancellor in effect told the House and the country when this policy was first introduced that people need not really worry a huge amount, because not a vast number of farms would fall into this trap. The welcome but limited announcement made just before Christmas will of course reduce still further the number of people who will fall into this trap. He has just set out to the Committee a very complicated set of checklists, including this, that and the other. Would it not make more sense to scrap this whole damned stupid idea, and give a big tick of confidence to our food-security-bringing, environment-protecting, job-creating farming sector, which is so vital to UK plc?
Dan Tomlinson
The Government do support the farming sector and the farming industry. We will continue to do so through the funds that we will make available via DEFRA—funds that were not fully spent under the previous Government. We have listened to farming communities and business representatives, and raised the threshold from £1 million to £2.5 million as a result of that listening and engagement. The Government do not think it would be right to abolish the policy in full, because then we would forgo £300 million of revenue from the very largest estates. [Interruption.] The hon. Member for North Dorset (Simon Hoare) may say that £300 million is a rounding error, but it is important to raise revenue from a broad range of taxes, and from those with the largest-value estates in the country. As I said earlier, hundreds of millions of pounds in tax is relieved from the very largest estates in the country. If Opposition Members want that to continue to be the case, that is of course their right, but we Government Members think that our reforms are fair, and raise proportionate revenue from the very largest estates.
Robbie Moore (Keighley and Ilkley) (Con)
Can the Minister explain how we ended up in the bizarre scenario in which two estates—I use the term “estates”, because they need not necessarily be farming businesses; they could be any kind of family business estate—valued at £5 million could generate different amounts of tax for the Treasury, depending on the ownership structure? Secondly, can he explain, because I cannot see this in the amendments that have been tabled, why there is no indexation link to any increase? Obviously, land values will increase over time. Thirdly, when he was last at the Dispatch Box, he said that interest would not be charged, so can he clarify whether, when inheritance tax liability is triggered, interest is or is not triggered in that 10-year period?
Dan Tomlinson
There were some forensic questions in that not brief intervention, but of course I appreciate it, and I look forward to trying to go through—[Interruption.] I am trying to answer the questions, okay? [Interruption.] It is a bit difficult when Opposition Front Benchers continue to barrack me while I am trying to answer the questions that a Back-Bencher has asked. If the right hon. Member for Louth and Horncastle (Victoria Atkins) wishes to continue to hector me from a sedentary position, she may, but we will not have any time for me to answer questions.
On the points raised by the hon. Member for Keighley and Ilkley (Robbie Moore)—let me dial down the temperature; congratulations for getting to me—and on how the spousal transfer is used in the inheritance tax system, we are replicating that in the treatment of the spousal transfer for APR and BPR. That is the way the transfer is set out in the inheritance tax system. We are not doing anything different or novel here. We just debated the thresholds, which will be set at current levels and will not be uprated in line with the changes that we are making to other taxes. The hon. Gentleman also asked about interest. As I said, where inheritance tax is due, those liable for a charge can pay any liability on the relevant assets over 10 annual instalments, if they like, and that will be interest-free. I have been through the numbers. Only 185 additional estates claiming APR are expected to pay more in 2026.
To conclude, the reforms get the balance right between supporting farms and businesses, fixing the public finances, and funding our public services.
Ben Maguire (North Cornwall) (LD)
I would like to pick up on the point raised by the hon. Member for Keighley and Ilkley (Robbie Moore) about the ludicrous situation where a farm that is worth £5 million if it is owned under a certain ownership model will not be subject to tax, but a farm worth less than that could be subject to tax. Graham, a farmer from my constituency, visited my surgery on Friday. He is in that exact situation. He is a sole trader slightly over the £2.5 million mark. We ended up discussing for more than 10 minutes whether he should marry his long-term partner to get away from this tax. Does that not illustrate just how ludicrous the situation is, Minister?
Dan Tomlinson
This is the normal way that inheritance tax assets are taxed. There is not just APR and BPR, and the changes coming in in April; other assets are passed on through inheritance. We are applying the same treatment here; this is the standard way that inheritance tax is set for various assets.
As I was saying, these reforms get the balance right between supporting farms and businesses, fixing the public finances and funding public services. They reduce the inheritance tax advantages available to some owners of agricultural and business assets, but those assets will still be taxed at a much lower effective rate than most other assets—a £6 million estate owned by a couple, for example, could have an effective tax rate of just 1.2%, which can be paid, interest-free, over 10 years.
Those opposing these reforms in full will be voting for a status quo in which the very largest estates pay a lower average effective inheritance tax rate than the smallest estates—a status quo where the Exchequer sees £219 million in tax relieved from just 117 estates claiming APR, and £558 million in tax relieved from just 158 estates claiming BPR. That is not sustainable, and it is certainly not fair. I therefore commend clause 62, schedule 12 and Government amendments 24 to 29 to the Committee.
The Chairman of Ways and Means (Ms Nusrat Ghani)
I call the shadow Minister.
Olly Glover (Didcot and Wantage) (LD)
I stand to speak in favour of various Lib Dem amendments and in particular new clause 7. Farmers in this country continue to be hammered, as they were under the previous Government, by the current one. From poor funding of rural public services to botched trade deals that undercut British farmers, rural communities have been left behind, despite the industry being vital to delivering our food supply and a key pillar in our fight against climate change. Food is not some luxury or niche commodity but an essential, and an important part of our heritage and culture. In an increasingly volatile world, it is important that we recognise the value of domestic production.
Many speakers this evening have discussed problems with the Labour Government’s changes to agricultural and business property tax relief, and it is welcome that the Government have to some extent listened to that. However, in my constituency, the key thing I hear when speaking with farmers is that the proposed changes, in their original form, were the final straw for them on top of so many other challenges and headwinds. That is why the reaction has been so strong. They face the uncertainty and impact of Brexit; trade deals based on proving the so-called benefits of Brexit, no matter the impact on our farmers; constantly changing Government incentive and payment regimes; the impact of recent worldwide inflation on fertiliser prices and equipment costs; labour shortages, also partly as a result of Brexit; and the dominance of large supermarkets seeking ever lower prices.
Our farmers also face rural crime, which, as the hon. Member for Lagan Valley (Sorcha Eastwood) rightly stated, has a significant impact on their mental health and wellbeing. Even with Thames Valley police’s best efforts, farms’ remoteness makes them easy targets for theft or hare coursing. Flooding has also affected many farms across my constituency, such as George Gale’s Manor farm in Appleford or Paul Cauldwell’s Dropshort farm in Drayton. Increased rainfall and a lack of river maintenance are both contributing factors to wider flooding incidents, plus run-off from new developments.
The National Farmers’ Union hustings were by far the toughest of the general election campaign, but I have also been warmly welcomed by farmers who have been very patient and generous in explaining their trade to someone who could not have less of an agricultural background. They include Matt Lane of Grange farm, David Christensen of Lockinge estate and Alan and Richard Binnings, who put so much work into Truckfest, which, as well as being an amazing concert experience on their land, raises tens of thousands of pounds for local charities each year.
I want to talk in particular about Ben Smith from Manor Road farm near Wantage. When I met him last winter to hear his challenges, he explained that he is a third-generation arable farmer. At that time, his mother was 90 years of age. She owns the farm. Ben’s big concern was that when she dies, he and his family will be significantly hit by the inheritance tax, with revenues from their arable farming barely able to cover the liabilities. At that time, his mother was saying that she would rather die than leave Ben and his sister to deal with the situation later. Ben wants his son and daughter to have the farm, but he will be in a financial mess. He might need to lose six or seven staff, some of whom have worked for him for between 10 and 45 years. Inheritance tax is a big worry to him, but he has also been hit by other increases in tax and national insurance.
All the farmers I have met have been welcoming, tolerant of my agricultural ignorance, forgiving of my vegetarianism, patient in educating me about their work and profoundly passionate about what they do. I have been surprised to find parallels between my experience of working in railways before coming to this place and farming. Both are subject to the stop-and-start whims of Government policy and the decisions of people who have little knowledge or experience of the sectors concerned and often do not take the time to listen and learn.
In contrast, the Liberal Democrats are proud of our advocacy for farmers and are calling for the farming budget to be raised by £1 billion, for a renegotiation of trade agreements to protect British farmers in line with our objectives for health, environmental and animal welfare standards, and for strengthening of the Groceries Code Adjudicator to ensure that farmers can keep farming in fair circumstances.
It is welcome that the Government have started to listen, but we must always remember that we need food, we need countryside and our farmers do so much to look after both. They deserve our support.
Dan Tomlinson
I extend my thanks to hon. Members for their thoughtful contributions during this session in particular, which I appreciate has been a topic of discussion in public and in this place over a number of months. As I have said, the Government have been listening carefully to feedback from the farming community, family businesses and their representatives. The Government are proud to represent the national interest, with strong representation for rural, semi-rural and urban constituencies. It is a fantastic vote of confidence in our Prime Minister and in this Government that there are pretty much as many Labour MPs who represent rural constituencies as there are Conservative MPs in total.
The Government are going further to protect more farms and businesses while maintaining the core principle that more valuable agricultural and business assets should not receive unlimited relief. That is why we have tabled an amendment that will increase the allowance for the 100% rate of relief from £1 million to £2.5 million.
Robbie Moore
I hope that the Minister will answer my question, which I have asked twice in this debate, about indexation and the scenario in which two estates valued at £5 million are subject to different IHT liabilities depending on their ownership structures. Given that this issue is so important, not only to our farming community but to family businesses more broadly, why on earth did the Chancellor not announce this change at the Budget? It seems very peculiar to make a big fiscal change outside of a Budget announcement.
Dan Tomlinson
I will come shortly to the questions that the hon. Gentleman asked.
The Liberal Democrat spokesperson, the hon. Member for Witney (Charlie Maynard), mentioned the costs of administrating the tax changes. Those costs were published in a tax impact and information note, alongside the changes: £9.2 million is the figure that the Government published. On the sustainable farming incentive, which he and others mentioned, he may have missed the update that Secretary of State for Environment, Food and Rural Affairs provided last week, which the NFU said showed
“real ambition for a thriving agriculture industry”.
The hon. Members for Keighley and Ilkley (Robbie Moore), for Upper Bann (Carla Lockhart), and others, mentioned that the allowance is only transferrable between spouses. That is in line with the long-standing approach to inheritance tax. The inheritance tax nil rate band and the residence nil rate band are also only transferrable between spouses and civil partners.
Dan Tomlinson
I am just going to respond to this point. For siblings, and for co-owners who are not spouses but who jointly own a farm—the example raised and that set out on the Government website—it is still the case that each individual has a £2.5 million allowance that they can use. That means that a farm that is jointly owned, even if not by spouses, cannot be transferred between spouses but can still be passed on, on an individual basis, up to £2.5 million.
A range of Opposition Members raised the question of whether the Government should set different thresholds for different parts of the country. I say gently, particularly to Conservative Members, that there are very different property prices across the country, yet in the 14 years they were in power, they did not set different inheritance thresholds for different parts of the country.
I look forward to further contributions on this topic during the passage of the Bill. Overall, the Bill, including the clauses debated today, is an essential part of the Government’s broader economic plan to manage our public finances well, to bring down borrowing in every year, to fund our public services, and to provide the underpinnings for higher growth and living standards across the country. We have the right plan for the country, and this Bill helps us to deliver it. I therefore urge the Committee to reject amendments 3 to 23, 31 to 36, 40 to 48, and new clauses 1, 6, 7 and 17, and I urge it to support clause 62, schedule 12 and Government amendments 24 to 29.
Question put, That the clause stand part of the Bill.
Global Minimum Tax System
Dan Tomlinson Excerpts(1 week, 1 day ago)
Written StatementsRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Exchequer Secretary to the Treasury (Dan Tomlinson)
The UK has reached agreement with more than 140 members of the G20-OECD inclusive framework on a package of reforms to the pillar 2 global minimum tax system.
The reforms deliver on the June 2025 G7 statement, and subsequent G20 commitments, to address how the pillar 2 system should interact with US minimum tax rules, alongside an evidence-based stocktake process to ensure that a level playing field is maintained for all inclusive framework members. Further, the reforms provide an important first step on simplification measures for UK businesses, and make wider changes to the design of the framework to support its long-term stability.
The Government welcome the certainty and stability that this agreement brings, and the protection from retaliatory measures that it provides to UK businesses. This agreement underlines the continued commitment of the UK and others to tackle aggressive tax planning by multinational enterprises and preserve the level playing field.
Measures to implement this agreement in UK law will be subject to technical consultation and then brought forward in the next Finance Bill. They will apply for accounting periods beginning on or after 1 January 2026.
Details of the package as agreed by the inclusive framework are set out here: https://www.oecd.org/content/dam/oecd/en/topics/policy-sub-issues/global-minimum-tax/side-by-side-package.pdf
[HCWS1224]
Rural Fuel Duty Relief
Dan Tomlinson Excerpts(1 week, 1 day ago)
Westminster HallRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Westminster Hall is an alternative Chamber for MPs to hold debates, named after the adjoining Westminster Hall.
Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
The Exchequer Secretary to the Treasury (Dan Tomlinson)
It is a pleasure to speak under your chairship, Ms Furniss. I am grateful to the hon. Member for North Devon (Ian Roome) for securing this debate and speaking so passionately in support of rural communities and the people in his constituency, who I know he has much honour in representing. I thank him for securing the debate and giving Members on both sides of the House the chance to contribute on this very important topic.
This Government recognise the importance of rural areas for the UK economy, and will continue to consider how they can best support those who live and work rurally. Although my Barnet constituency, which is in the very north of London, lacks the beaches and moors of the hon. Gentleman’s, it does contain 14 farms and have some rural areas, because of the large bit of green belt that extends into north London. Like all Ministers, I am fully committed to ensuring that the tax system works for everyone, whether they are in rural or more urban parts of the country.
Fuel duty is an important source of Government revenue and provides vital funding for public services and infrastructure. It raised £24.4 billion in 2024-25; as has been mentioned, fuel duty rates have been frozen since 2011, with a further, temporary 5p cut introduced in 2022. Fuel duty rates are therefore now, in real terms, about 40% lower than they were in 2011. Pump prices are at their lowest level since 2021, before Russia’s illegal invasion of Ukraine led to soaring prices and the introduction of the temporary 5p cut.
At the Budget, therefore, the Chancellor announced that the 5p cut would first be extended until the end of August, with rates then rising gradually, returning to March 2022 levels by March 2027. As well as that extension to the freeze, the planned increase in line with inflation for the coming financial year will not take place. Those decisions on fuel duty will save the average car driver across the country £49 in the coming financial year, compared with previous plans.
The Government also recognise the importance of competition between retailers in the road fuels market. Liberal Democrat Members, including the hon. Members for North Cornwall (Ben Maguire) and for Newton Abbot (Martin Wrigley) and others, mentioned a pumpwatch scheme. Sadly, that reveals that we need to communicate even better about some of the ideas put forward by Government: at the Budget, the Chancellor confirmed that from spring 2026, UK consumers will be able to compare prices more easily through the Government’s new open-data fuel finder scheme, which I believe will achieve aims similar to those of the pumpwatch proposal. It will help to encourage competitive pricing among retailers and is expected to result in further savings for drivers of potentially up to £40 a year.
The Government, however, are well aware that fuel costs can be higher in certain more remote areas, so the rural fuel duty relief scheme provides a 5p per litre reduction to benefit motorists buying fuel in those areas. The areas included in the scheme demonstrate certain characteristics, such as pump prices being much higher than the UK average, remoteness leading to high fuel transport costs from refinery to filling station, and relatively low sales meaning that retailers cannot benefit from bulk discounts.
As mentioned by many Members, the scheme provides about £5 million in support per year, with about 165 fuel retailers registered with His Majesty’s Revenue and Customs to claim the relief. The hon. Member for St Ives (Andrew George) mentioned the administrative costs, and I am interested to hear more from him and from any businesses that have ideas about how I, as Minister with responsibility for HMRC, can seek to reduce any of the administrative burdens that those 165 retailers may face.
One area included in the scheme is the EX35 postcode, which is part of Exmoor national park and in the constituency of the hon. Member for North Devon, who secured the debate. I confirm that the scheme in fact covers not just 11 or 12 constituencies, but 16—some of the postcodes sneakily cross over constituency boundaries, so that 16 Members of the House of Commons represent constituencies of which at least some elements are covered by the relief.
Andrew George
The Minister raised the issue of the administrative burden. I was referring to an occasion when an operator of the scheme was late in his submission to HMRC, in which case he was refused the rebate, which he had been taking. In such circumstances, he had to appeal. I was simply demonstrating the rigidity and lack of humour, as it were, in the system. We are talking about extremely small businesses that find the additional administrative burden quite onerous.
Dan Tomlinson
I note, as I am sure others in the Chamber will, just how forensic is the hon. Member’s understanding of some of the small businesses in his constituency. That is to be very much commended. If he would like to write to me on that point, I would certainly like to raise it with HMRC. Of course, it is not appropriate for me as a tax Minister to get involved in individual tax affairs. That said, the general point is about administration, and the extent to which we are getting the balance right between ensuring that we stick to the rules as set out, and having an appropriate level of flexibility. That is something that I would happily raise with the Department, if he were willing to write to me.
The hon. Member for North Devon and many others have suggested that the Government should increase the rural fuel duty relief in line with inflation. As I set out earlier, since the relief’s introduction, it has remained at 5p, but the main fuel duty rate has also remained at the same level—or, more recently, has fallen. I am aware that there are differences across the country, and there may have been differentials in the increase in fuel prices in some areas. However, the fuel costs are broadly the same as they were in 2011, if not slightly higher; it was roughly 130p for a litre then, compared with around 135p now.
Brendan O’Hara
The hon. Member for Na h-Eileanan an Iar (Torcuil Crichton) made the point that getting this rebate was one of the few successes of the coalition Government. The reason there was no political reward for it was that, at £1.60 a litre in rural Argyll, Bute and South Lochaber, it does not feel like a benefit. If the Minister will not make it index-linked, can he tell us what mechanism the Government have put in place to check that this rebate—albeit scant—is actually reaching the consumer? It does not feel as though it is for people living in rural communities.
Dan Tomlinson
Other Members, including the hon. Member for Strangford (Jim Shannon), have asked the same question; I was going to come on to it, but I will happily do so now. As a Department, HMRC requires retailers to keep records evidencing that the 5p saving is being passed on to customers, but I would be happy to look in more detail at how that is done. Maybe we can catch a word in the Tea Room to discuss it in more detail, because the Government want to make sure that that is happening and that the 5p cut—although we can debate whether it should be higher—is passed on to consumers in full.
The Members who spoke in the debate have deep knowledge of their constituencies and have often talked about their trust in their small local businesses, many of which will be running the garages or forecourts in the more rural areas, such as the middle of the moors. I must say that the hon. Member for Strangford is doing a very honourable thing in going to more expensive garages to support the local businesses. That is a very commendable act; I must say that it is not one I always engage in, as I like to find a good price, but I commend him on it.
While fuel duty costs are broadly the same, I admit that they are slightly higher than they were in 2011. However, as foreshadowed by the Opposition spokesperson, the hon. Member for North West Norfolk (James Wild), the Chancellor keeps all taxes under review; decisions on future fuel duty rates and rural fuel duty reliefs will always be made in the round and in the context of the public finances. That said, I have noted with interest all the points made today and again thank the hon. Member for North Devon for securing this debate and giving me the chance, as the Minister with responsibility, to reflect on these important issues.
A number of Members have also suggested that the Government should increase the number of areas in scope of a rural fuel duty relief—I can sense a potential Liberal Democrat local election campaign, although I would not possibly want to comment. I was going to say that neither I nor my predecessor, my right hon. Friend the Member for Ealing North (James Murray)—I checked—had received any formal representations to expand the coverage of the relief since the start of this Parliament, but of course I have received some comments on that during the debate. There are no current plans to amend the list of eligible locations but, if Members strongly feel that their constituencies fall into the categories in the scheme’s rules, I will always welcome representations, and they should feel free to write to me.
Richard Foord
If the Minister will not consider the geographical expansion of the rural fuel duty relief scheme, with a view to the Government’s introduction of the electric vehicle excise duty in April 2018, might he consider a duty relief for the existing areas, but applying to the electric fuel duty?
Dan Tomlinson
That is not something that we are actively considering. That said, the details of the eVED scheme are to be consulted on in detail. We are still a number of years from its introduction, and there will be many fine decisions that need to be made in the coming months ahead of its implementation, and I note the representation that the hon. Gentleman has made today.
Dan Tomlinson
I will happily do so, although I am sure that hon. Members would like me to make some progress, too.
Andrew George
On the question of geographical coverage, and given the Minister’s comment that he has not received representations about further areas for inclusion, I urge the Government to review the scheme and to take an objective measure themselves of where else it might extend to, rather than inviting us to form an orderly queue in pleading for our own areas, which could result in a system based not on need, but on political advantage.
Dan Tomlinson
I am always glad to take interventions. The hon. Member’s point is noted and I acknowledge his request. I ask Members to get in touch if they believe that an area meets the criteria. As the hon. Member has noted, there are not hard and fast rules here—there are not specific criteria within each of the categories that are considered in the round—and the Government do not intend to change to having hard and fast rules. I would be worried that that might lead to more complexity and change within the system, meaning that if one area’s prices tipped slightly above or below, we might get into contestation of whether the additional costs of transporting fuel to certain places tips over or above the threshold. I hope that Members who have views on where relief should be extended to will bear with the current, less-rigid process.
I was going to say, in a slightly light-hearted way, that the hon. Member for Witney (Charlie Maynard) suffers somewhat in tax policy debates, in that I know his constituency well, having been born and brought up in west Oxfordshire. As part of my joyful travelling to and from seeing my family there, I often fill up in his constituency, which is often cheaper than doing so in north London. I noted that the hon. Member was magnanimous in calling for the scheme to be extended not to west Oxfordshire, but instead to other areas represented by his Liberal Democrat colleagues.
I should mention the important speech made by my hon. Friend the Member for Na h-Eileanan an Iar (Torcuil Crichton)—he will have to teach me how to pronounce his constituency, as that was the first time I have said it. His is one of the constituencies that does benefit from the relief. I am glad to hear Labour Members talking clearly about the benefits that the relief provides for constituents in some of the most rural parts of the whole country.
Again, I commend the hon. Member for St Ives for his engagement with businesses. We heard about the garage on the Isles of Scilly and how it gets petrol to and from. I think I have covered most of the points raised. If Members have a burning desire to ask me to clarify something, I will, but I am sure we all want to make some progress.
Let me make a couple of further points before I conclude. The fuel duty system supports rural areas in other ways as well. Households and non-commercial premises are entitled to use red diesel for heating and electricity generation, which includes off-grid homes in remote and rural locations that have limited alternatives. Red diesel is subject to fuel duty, which is 10.18p per litre compared with the 52.95p for diesel used on roads. Farmers also retain the entitlement to use red diesel in machinery and vehicles used for agricultural purposes after that was withdrawn from most sectors under the previous Government in 2022.
Several Members discussed the need to ensure that public transport maintains a level of affordability. At the end of the last year, the Government confirmed a long-term investment of over £3 billion over the next three years to support local leaders and bus operators across the country to improve bus services for millions of passengers. That includes multi-year allocations for local authorities under the local authority bus grant. From 2026-27, we have revised the formula to include a rurality element for the first time to ensure that the additional challenges of running bus services in rural areas are taken into account.
I was surprised that there was no mention of potholes in a debate about transport, but I know that they are of particular concern to those in rural areas that are more prone to frost, meaning that ice gets inside the tarmac and the road breaks up. By 2029-30, the Government will have committed more than £2 billion annually for local authorities to repair, renew and fix potholes on their roads. That doubling of funding since we took office will mean that we can exceed our manifesto commitment to fix an additional 1 million potholes a year by the end of this Parliament.
The Opposition spokesperson mentioned the electric vehicle decision that the Government announced at the Budget. We remain fully committed to the electric vehicle transition, which will drive growth and help the country to meet its climate change objectives. Our public charging network is growing rapidly. We had more than 87,000 public charge points as of December last year, and, in the year ending 1 October 2025, the number of charging devices in rural areas had increased by 26%. In addition, the Government announced at Budget 2025 the immediate roll-out of a package of support worth £3.6 billion to help motorists to switch to cleaner and greener cars, to support the automotive sector through the transition to EVs, and to bolster British industry.
The Government are dedicated to supporting and promoting rural areas, particularly by providing support for transport costs, such as through the rural fuel duty relief scheme. I very much look forward to further discussions—perhaps even further correspondence—over the course of the Parliament about how we can continue to do that. I thank the hon. Member for North Devon for securing the debate and all Members in the Chamber for their contributions.
The Corporation Tax Act 2010 (Part 8C) (Amendment) Regulations 2025
Dan Tomlinson Excerpts(1 week, 2 days ago)
General CommitteesRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Exchequer Secretary to the Treasury (Dan Tomlinson)
I beg to move,
That the Committee has considered the Corporation Tax Act 2010 (Part 8C) (Amendment) Regulations 2025 (S.I. 2025, No. 1253).
It is a pleasure to serve with you as Chair, Ms Lewell. The regulations before the Committee today amend part 8C of the Corporation Tax Act 2010. These changes are clarificatory and ensure that the legislation works as originally intended.
In the context of part 8C, restitution interest is compensation for not having had access to money awarded by the courts on repayments of tax in long-running litigation, between His Majesty’s Revenue and Customs and companies, about whether UK tax law was compatible with EU law when the UK was a member state. Many such cases remain in litigation, so more restitution interest may be awarded in the future. Part 8C was enacted to apply a higher 45% tax rate in the unusual event that the court were to award such restitution interest to companies on a compound basis—that is, including interest on the interest. It was not intended to apply to a more normal award of simple interest—that is, interest only on the principal sum. The first of the amendments to part 8C clarifies that intent by expressly removing the ambiguous meaning that it could apply in cases of simple interest, which I think we would all agree is very important.
The second amendment removes an unintended lacuna in the timing of assessment, which might otherwise mean that events overrun the ability of HMRC to raise a charge in certain cases where the courts’ decisions crystallising a charge under part 8C are outside the normal time limit. Again, we would not want that to happen.
The clarification that part 8C does not apply to simple interest is generally favourable to the companies involved, and the change to assessment time limits corrects a defect in the legislation and protects the Government’s interests in long-running disputes. In summary, the regulations ensure that the legislation applies as originally intended, and I commend them to the Committee.
Dan Tomlinson
I thank the right hon. Member for North West Hampshire for his contribution, and for sharing his knowledge and expertise on this matter and many other matters relating to tax and economic policy.
There are two separate changes. The first, as he points out, is more a clarification to ensure that this provision applies only on compound interest and not on simple interest.
Kit Malthouse
I realise that this is being painted as a concession, but as I hope that the Minister knows, in the most serious restitution cases, where unlawful behaviour by the Revenue has occurred, it is very rare that courts award simple interest. Actually, most of the awards are interest according to part 8C. Presumably, that was what was behind the original introduction of part 8C and the Revenue was saying, “Oh my God, we’ve got this massive financial exposure; what are we going to do? I tell you what: we’ll introduce a penal tax rate on this interest that doesn’t apply to anybody else.” I would caution the Minister against throwing these regulations in as some kind of concession, because in truth, in the biggest, most important, expensive and difficult cases, simple interest is very rarely awarded.
Dan Tomlinson
My understanding is that the majority of companies that are affected are likely to be awarded simple rather than compound interest, but I am sure there will be some cases—I am not privy to the individual details; as the tax Minister, that would not be appropriate—where compound interest potentially could be applied.
On the second point, the right hon. Member is raising a broader issue about why a tax rate is applied at all here, and about the incentive structures. One thing that this Government are seeking to do in the way that we oversee HMRC is to bring more focus on its delivering for taxpayers and providing value for money for us all. I now sit as the chair of the HMRC board, with an intense focus on scrutinising the work of the Department. As the Minister responsible, when cases are brought to my attention, I always ensure that HMRC is treating taxpayers fairly and proportionately.
My understanding is that when the specific change around the application of 45% interest was made back in 2015, there was a concern that without the changes made in part 8C, those payments would be taxed at the lower corporation tax rate that applied at the time the payments were due to be made, and because the payments may have accrued over many years, when the rate of corporation tax was much higher, companies receiving that interest would receive a significant financial benefit relative to the counterfactual, at the expense of the public purse. That is why the decision was made in 2015 to apply the rate of interest in such a way.
The right hon. Member raised a point about retrospection. The regulations will not apply to those businesses that have already settled and reached an agreement with HMRC, but he is right to point out the shift here—we are moving the time window to the end of the period, when a final decision has been made, rather than the start.
Kit Malthouse
Anybody who is currently in litigation with the Revenue that has passed the four-year mark from the period in which the liability may or may not have arisen would now have the expectation that if they win and an award is made, it would not be assessed under part 8C. Will the Minister confirm that now it will be assessed, so people in that situation will need to recalibrate almost completely their assumptions of risk around the litigation?
Dan Tomlinson
A very small number of companies are affected, but yes, my understanding is that this change will mean that the decision point where the interest is applied will shift from the beginning to the end. As the right hon. Gentleman says, that will change the financial considerations for the small number of businesses that are in litigation at the moment.
Question put and agreed to.
Inheritance Tax: Agricultural Property Relief and Business Property Relief
Dan Tomlinson Excerpts(1 week, 3 days ago)
Written StatementsRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Exchequer Secretary to the Treasury (Dan Tomlinson)
The Government have announced changes to the forthcoming inheritance tax reforms to agricultural property relief and business property relief. The Government announced on 23 December 2025 that the allowance for 100% rate of relief will be increased from £1 million to £2.5 million when it is introduced on 6 April 2026. This means a couple will now be able to pass on up to £5 million of agricultural or business assets tax-free between them, on top of the existing allowances such as the nil-rate band.
Taken together with the reform announced at Budget 2025, which made any unused allowance transferable between spouses or civil partners, it is now the case that widows and widowers will benefit from up to £2.5 million of their spouse’s allowance, even if their spouse passed away many years ago.
This increase in the allowance comes after listening carefully to feedback from the farming community and family businesses. The change means the Government are going further to protect more farms and businesses, while maintaining the core principle that more valuable agricultural and business assets should not receive unlimited relief.
This further reduces the number of estates forecast to pay more inheritance tax and further reduces the liability for many of the remaining estates.
Compared with Budget 2025, the expected number of estates claiming agricultural property relief, including those also claiming business property relief, affected by the reforms in 2026-27 halves from 375 to 185. Around 85% of estates claiming agricultural property relief in 2026-27, including those that also claim for business property relief, are forecast to pay no more inheritance tax on their estates under these changes.
Excluding estates only holding shares designated as “not listed” on the markets of recognised stock exchanges, the reforms are also now expected to result in up to 220 estates across the UK only claiming business property relief paying more inheritance tax in 2026-27. This is a reduction from up to 325 such estates forecast to pay more at Budget 2025. This means that just over 80% of such estates making claims are forecast to not pay any more inheritance tax.
The increase to the allowance will be reflected in a Government amendment to the Finance (No. 2) Bill, and this was tabled on 2 January. This will be debated in Committee of the whole House next week, on 12 January.
There is, as the Government have set out, a need to reform agricultural property relief and business property relief. As such, after the increase in the allowance, and subject to certification by the Office for Budget Responsibility, the Government expect the reforms to raise around £300 million in 2029-30.
[HCWS1218]
Agricultural Property Relief and Business Property Relief
Dan Tomlinson Excerpts(1 week, 3 days ago)
Commons ChamberRead Full debate Read Hansard Text Watch Debate Read Debate Ministerial Extracts
Urgent Questions are proposed each morning by backbench MPs, and up to two may be selected each day by the Speaker. Chosen Urgent Questions are announced 30 minutes before Parliament sits each day.
Each Urgent Question requires a Government Minister to give a response on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
Victoria Atkins (Louth and Horncastle) (Con)
(Urgent Question): To ask the Chancellor of the Exchequer if she will make a statement on the changes to agricultural property relief and business property relief.
The Exchequer Secretary to the Treasury (Dan Tomlinson)
I thank the shadow Secretary of State for Environment, Food and Rural Affairs for asking this question. I wish a happy new year to her and to all Members of the House.
The reforms announced in December go further to protect more farms and businesses while maintaining the core principle that more valuable agricultural and business assets should not receive unlimited relief.
The allowance for the 100% rate of relief for agricultural property relief and business property relief will be increased from £1 million to £2.5 million when it is introduced in April. That means that a couple will now be able to pass on up to £5 million of agricultural or business assets tax-free between them, on top of the existing allowances such as the nil rate band. Taken together with the reform announced at the recent Budget, widows and widowers will benefit from up to £2.5 million of their spouse’s allowance, even if their spouse passed away many years ago.
Our changes further reduce the number of estates forecast to pay more inheritance tax, and they further reduce the liability for many of the remaining estates. Compared with Budget 2025, the number of estates claiming APR—including those also claiming BPR—affected by the reforms in the coming tax year is expected to halve, from what would have been 375 estates to just 185 estates. That means that around 85% of estates claiming agricultural property relief in 2026-27 are forecast to pay no more inheritance tax on their estates under the changes.
The Government have announced these changes after listening carefully to feedback from the farming community and family businesses, and I am pleased that the National Farmers’ Union and others have welcomed the changes. Even after the reforms, the Government expect to raise around £300 million in 2029-30 from our changes to these tax reliefs. We are making fair and responsible choices to support the farming community, with a record £11.8 billion investment in sustainable farming and food production over this Parliament, and to modernise our tax system for the future.
Victoria Atkins
Thank you, Mr Speaker, for granting this first urgent question of 2026—and what a way to open the new year, with yet another Government U-turn. But where is the Chancellor of the Exchequer? This is her tax and her U-turn, and she should explain why she did not announce this at the Budget. Over the past 14 months, farmers, rural communities and the Conservatives have campaigned relentlessly in and out of Westminster against these vindictive taxes. This U-turn acknowledges what farmers have been telling the Government from day one: Ministers have got their maths badly wrong, and many more farms and family businesses will be broken up as a result of Labour’s higher taxes. Does the Minister accept that?
Why have the Government U-turned? Does it have anything to do with the recent Labour Back-Bench rebellion? Can the Minister tell the House how many family farms and non-farming family businesses will still have to pay this death tax? Are tenant farmers included, given that the now Chief Secretary to the Treasury admitted at the time that 14,000 tenant farmers were missed out of the Government’s original calculations? Can the Minister also confirm whether he signed the tax information and impact note for this U-turn before the Budget?
This partial U-turn does not save every family farm and family business. Indeed, for many the U-turn simply comes too late; we have seen record farm closures under this Government, and it has taken a great personal toll on many families. Given the pain, anguish, distress and, in some cases, sorrow that this cruel tax has caused families up and down the country, will the Minister now have the good grace to apologise on behalf of the Government to farmers and family business owners?
Dan Tomlinson
The Government announced the change in December because we had continued to listen to the representatives of family businesses and the farming community. I note that the National Farmers’ Union and others have welcomed the change, which will increase the threshold from £1 million to £2.5 million.
I think it is the right change to make, and it ensures that we get the balance right. We are still raising £300 million from the very largest estates. If the Conservatives would prefer not to raise that money and give a £1 million tax cut to an estate worth £10 million, that is their choice. It is not our choice. We think we have got to the right place on this policy and are striking the right balance—both raising revenue from those with the very largest estates, and making sure that we have a higher threshold. Because of the changes we announced at the Budget, someone in a couple will now be able to pass on up to £5 million.
I can confirm to the House that I did not sign the tax information note for the change that was announced on 23 December before the Budget. On the numbers, as I said, the number of estates affected who claim agricultural property relief—including those also claiming BPR—is expected to halve, from 375 to 185.
Jim Dickson (Dartford) (Lab)
Happy new year to you, Mr Speaker. I thank the Minister for his answer. I was pleased to meet NFU representatives for Dartford and for Kent in late 2024 and January 2025. Following those meetings, I passed on the view to Treasury Ministers that it was right for the Government to close the inheritance tax loophole and stop the price of farmland from being inflated by people purchasing that land to avoid inheritance tax, but that the threshold should be set at a significantly higher level to reduce the risk of smaller family businesses being affected by the changes. Does the Minister agree that the reliefs are now fairer to family farms but will still achieve their purpose of reducing tax sheltering and raising vital revenue for public services?
Dan Tomlinson
Yes, I do believe that we have got the balance right. It is worth noting that the top 4% of claims accounted for over half the Exchequer cost of business property relief and the top 7% of claims accounted for 40% of the Exchequer cost of agricultural property relief. That is hundreds of millions of pounds in tax that was forgone but will now be raised under these changes from the very largest estates. I thank my hon. Friend for his engagement on this issue over recent weeks and months.
Daisy Cooper (St Albans) (LD)
Happy new year to you, Mr Speaker, and to House staff and all Members in the Chamber. This policy was a disaster from the get-go. It came with no warning, no consultation and no clue. The Liberal Democrats were the first party to point out the damage it would do to family farms. We have repeatedly and clearly highlighted that it would fail to tackle the loopholes exploited by private equity companies but hammer the family farm, damaging our food security in the process. The changes are welcome, but they do not touch the sides, and they are a clear admission by the Government that they have got it badly wrong.
There is now only one sensible course of action left: to scrap the policy in its entirety. Will the Government now do that? If not, the Liberal Democrats will table amendments to the Finance Bill to bring this measure down. Will the Government allow a free vote so that those on their own Benches who want to vote against the measure are free to do so?
Dan Tomlinson
I am always interested in reading Liberal Democrat amendments, even though none of them will ever get passed in this House—not least on this measure, where we have got to the right position. The changes that will be in the Finance Bill will raise about £300 million. It is a legitimate position for the Liberal Democrats to say they do not wish to raise that revenue and that instead they would borrow more money or cut public spending on services like our NHS. That is not our position. We think that this is a fair and proportionate reform.
Jayne Kirkham (Truro and Falmouth) (Lab/Co-op)
I welcome this sensible compromise and point out that the £800 million put into the environmental land management scheme in 2023-24 will become £2 billion by 2028-29, along with the sustainable farming incentive being reintroduced in April, the land use framework and the farming road map. Does the Minister agree that the Labour Government are now well on track to raise food security and help our family farmers?
Dan Tomlinson
I thank my hon. Friend for her question and for her work on the Environment, Food and Rural Affairs Committee on this and many other important issues that affect rural communities up and down the country, as well as in her constituency—a fantastic part of the world that I am sure I will be able to visit soon. She is right that the Government are taking steps—for example, through our £11.8 billion fund to support sustainable farming and food production—and I look forward to working with Ministers in other Departments and across Government to ensure that we continue to support our rural and farming communities.
Mr Speaker
I call the Chair of the Environment, Food and Rural Affairs Committee.
Mr Alistair Carmichael (Orkney and Shetland) (LD)
I welcome this announcement and I pay the warmest possible tribute to the farming unions and others whose tireless campaigning since the Budget of 2024 has made this happen. These changes make the policy better, but that is not the same as saying that they make it good. It is surely bizarre that in 2025, two farms could both be valued at £5 million but one of them would pass free of inheritance tax while the other had an inheritance tax bill of £500,000. Surely the Government now have to publish the impact assessment that they have presumably done so that we can all see the reasons for this change and have some confidence that they have got the figures right this time.
Dan Tomlinson
The figures that the Government have published on this change and at previous Budgets are drawn from actual claims and from engagement with His Majesty’s Revenue and Customs on both APR and BPR. That analysis shows that before this change, up to 275 estates a year would have been affected, and that that number is now forecast to halve to around 185. That means that around 85% of all estates claiming APR, some with BPR, will now not pay any additional tax. I stand by those figures. We published them when we made the decision and they are included in the letter that I and the Secretary of State have sent to all Members.
On the right hon. Member’s point about £2.5 million or £5 million, I think he was referring to the fact that a couple can pass on up to £5 million and for a single person it is £2.5 million. That is a long-standing position. It means that the inheritance tax nil rate band and the residence nil rate band are transferable only between spouses and civil partners. Making any unused allowance transferable in the same way is consistent with that long-standing approach.
Lizzi Collinge (Morecambe and Lunesdale) (Lab)
My constituents very much welcome the changes to agricultural property relief and business property relief, which, as the Minister knows, I have raised repeatedly. The changes to the reliefs mean that family farms will be protected while large landowners who bought agricultural land simply to avoid paying tax will no longer have that loophole. Does the Minister agree that these changes show that the Labour Government are listening to rural areas and to rural Labour MPs, and that, unlike the Opposition, they are serious about proper policy development and not just headline chasing?
Dan Tomlinson
My hon. Friend is right to say that we on this side of the House are the true and better representatives of the rural community. There are over 150 MPs on this side of the House who represent rural or semi-rural constituencies—I believe that there are as many Labour MPs representing rural constituencies as there are MPs on the blue Opposition Benches.
Sir Geoffrey Clifton-Brown (North Cotswolds) (Con)
Thank you, Mr Speaker, and a happy new year to you and your staff. Farmers in my constituency will welcome this change to the thresholds for APR and BPR. However, it took 14 months to achieve it and rural communities really do feel discriminated against by some of the measures that this Government are taking against them. I ask the Minister to convey to his colleague, the Minister for Food Security and Rural Affairs, who is sitting on the Treasury Bench, that the Government should not enact any changes to shooting or trail hunting, because to do so would really damage and annoy rural communities?
Dan Tomlinson
We will be going ahead with the changes that were set out in our manifesto and that have been announced recently. I think that that is the right thing for us to do.
Jenny Riddell-Carpenter (Suffolk Coastal) (Lab)
Happy new year to you and the team, Mr Speaker.
I start by thanking the Minister and his Department for working actively with rural colleagues and myself for the last 14 months. In the many conversations that we have had, both face to face and in wider correspondence, we have set out the huge number of issues that are well known to this House, but at the heart of this, and the reason that so many of us are concerned, is the lack of profitability in farming. Baroness Batters’ report will go a huge way towards addressing some of the systemic issues in farming, but does the Minister agree that we also need to tackle supermarkets and unfair practices and to address lots of the long-standing issues, and that the Treasury as a whole needs to continue to engage with rural MPs to make sure that we introduce further reforms to support farming profitability?
Dan Tomlinson
I thank my hon. Friend, too, for her work on the Select Committee, and for representing rural communities, including hers. My understanding is that Ministers in the Department for Environment, Food and Rural Affairs and the Government are looking at what more we can do to ensure that farmers receive a fair price for their products. Of course, we support having a competitive supermarket and retail system in this country, so that we can have low prices for consumers, but we have to ensure that those prices are fair for farmers, and for the communities up and down the country that we rely on to produce good British produce.
Sir Julian Smith (Skipton and Ripon) (Con)
This policy has caused huge stress for rural communities across North Yorkshire. What discussions is the Minister having inside government about other policies, such as the policy on rates for public houses in rural areas, to ensure that this error is not made again?
Dan Tomlinson
Of course, as the tax Minister—that is why I am at the Dispatch Box today, to address a point made earlier—I look continually at what improvements we can make to our tax system to ensure that we continue to support both rural and urban constituencies and communities up and down the country. If there are changes that the right hon. Member would like to see, he is of course welcome to write to me, on that or any other matter.
Tonia Antoniazzi (Gower) (Lab)
I have worked extensively with the National Farmers Union and its Welsh branch, and with the Ulster Farmers’ Union in Northern Ireland. These changes are very much welcome, but I say to the Minister—and to the Minister for Food Security and Rural Affairs, who is sitting next to him—that it is important that we have these conversations with Labour MPs and Members from across the House at every opportunity, because this has damaged our farming communities. I also have no truck with what the Opposition say, because I have been in opposition and I know what it is like. Conservative Members let our farmers down. We are getting to the heart of this, fixing the situation, and supporting our rural communities properly, and I welcome the changes, especially for my constituents in Gower.
Dan Tomlinson
I thank my hon. Friend for her contribution, for the experience and expertise that she brings to the House as Chair of the Select Committee, and for the important work that she has done on this and other issues. The changes that we have made to this policy mean that it is now fair and balanced, and protects more farms. As I have said, the number of estates expected to pay more tax will halve. We Labour Members and the Government can hopefully continue to focus on what we can do to support our farming and rural communities—for example, on the £11.8 billion of investment that we are putting in over the course of this Parliament.
Tim Farron (Westmorland and Lonsdale) (LD)
Our farming and rural communities in Cumbria and right across Britain should be utterly proud of themselves, because this U-turn is their victory, and I pay tribute to them. However, the appalling emotional and economic damage done to farmers over the last 14 months has been cruel and will have a lasting impact. Will the Minister apologise to the farming community for the last 14 months, and recognise that many hill farms in Cumbria will still be hit by this tax, because they are worth more than £2.5 million, although their average income is less than the minimum wage? Does this tax not remain an attack on British farming and on food security?
Dan Tomlinson
If the Government had not made these changes in December, Opposition Members would have been standing here asking us to make those changes. We are coming forward with a revised position—we are increasing the threshold from £1 million to £2.5 million—and Members are criticising us for that change. We think it is the right thing to do, and we are doing it in good time—before the Finance (No.2) Bill, in which these changes will be made, is voted into law later this year.
Yes, some estates—the very largest—will continue to pay more after these changes, but it is worth bearing in mind that, relative to the position of a few months ago, estates worth £2.5 million will now pay significantly less; there is a £300,000 reduction in their tax liability. For an estate worth £5 million, it is a £600,000 reduction. These are significant reductions in the amount of tax that the very largest estates will have to pay, but we do think that it is right and fair to continue with a reform that strikes the right balance between the need to raise more revenue and the need to protect smaller family farms.
Sadik Al-Hassan (North Somerset) (Lab)
I wish you, my constituents in North Somerset, House staff and hon. Members a happy new year, Mr Speaker. I welcome the Government’s decision to amend the thresholds for APR and BPR, as do rural communities in my constituency, and extend my thanks to the organisations that campaigned for this outcome, such as the NFU. However, this is only one part of a larger problem. For 50 years, our country has witnessed the gradual erosion of our rural community sustainability, national food security and farm profitability. I look forward to 2026 being the year that the farming sector gets the wider change that it needs in order for the new year to be happy and profitable.
Dan Tomlinson
I wish my hon. Friend’s constituents a happy new year. The Batters review, which was published just a few weeks ago, set out ideas that the Government can take forward to ensure that farming can be profitable and sustainable. I know that Ministers in the Department for Environment, Food and Rural Affairs and across Government will continue to work on those important objectives.
Sir John Whittingdale (Maldon) (Con)
Although I welcome this announcement, which directly contradicts what the Secretary of State told me and my right hon. Friend the Member for Louth and Horncastle (Victoria Atkins) on the day that the House rose for Christmas, is the Minister aware that a significant number of my constituents who farm in the Dengie peninsula and elsewhere will still face a significant inheritance tax bill that may prevent them from passing on their farm, as they inherited it, to their children? If the Minister is anxious about the scheme being used for tax avoidance, will he reconsider the NFU’s suggestion that there be a clawback mechanism, which would allow the Government to take back the exemption if a farm was sold within a certain period after inheritance?
Dan Tomlinson
No, we will not be considering the clawback proposals put forward. Instead, the Government have come forward with the change that was announced in December, which increases the threshold from £1 million to £2.5 million. It is worth remembering that the tax rate paid above the higher threshold is half the rate that anyone else who has sufficient assets would pay if they were liable for inheritance tax, and that any tax liability can be paid interest-free over 10 years. On balance, while these changes will affect some of the very largest estates—the Government have published the numbers, which are based on the actual claims data from His Majesty’s Revenue and Customs; it estimates that fewer than 200 estates will pay additional tax—almost all the estates paying additional tax will pay significantly less than they would otherwise have done, because we have listened to family businesses and farming communities.
Mr Clive Betts (Sheffield South East) (Lab)
Although this issue is clearly of importance to the farming industry, it is also of importance to small firms in the steel and engineering sector in my constituency. The owner of Special Quality Alloys, Benn Beardshaw, wrote to tell me that the firm had been in the family for many years, and had been passed on from one generation to another. He was really concerned that the measure as initially proposed could lead to a break-up of that important firm, which has won the Queen’s award for enterprise, or to it being sold off. Will the Minister confirm that this measure will equally help those sorts of small businesses, which are vital to the overall wellbeing of the steel and engineering sector in Sheffield?
Dan Tomlinson
I thank my hon. Friend for his question, which has given me a chance to return to a question that the shadow Secretary of State, the hon. Member for Epping Forest (Dr Hudson), asked, but that I did not quite get to—he will have to forgive me. I will put on record for the House that the number of estates claiming only business property relief is set to fall from 325 to 220 a year as a result of our increasing the threshold from £1 million to £2.5 million.
I have met representatives of Family Business UK. I know that, as well as having private conversations about APR, Labour Members have been discussing the BPR proposals with the Government. The uplift in the threshold will mean that family businesses that people wish to pass on will now be subject to a lower tax rate, or will not have to pay the tax at all in many cases.
Wendy Chamberlain (North East Fife) (LD)
I find it interesting that the Minister says that this is the right policy. That is what the Government said on 23 December, but not what they said at oral questions on 18 December—the day before we rose for recess. I have spoken to farmers who will now not be affected by the tax, but who have spent cashflow and hard-earned savings on financial advice to ameliorate their position. Things are not getting easier for farmers; just this morning, one of my local farmers got in touch to say that he was informed on new year’s day that his milk supply faces a 3p per litre cut. What is the Government’s assessment, alongside what is in the Batters report, of the ongoing financial impact on farmers, be it of poor Government policy or of poor supply chain practices?
Dan Tomlinson
Earlier in the year, Members asked us about making these changes, and we have come forward with a revised proposal that includes a higher threshold. That is the right thing to do; it shows that we have listened to representations from the farming and business communities, as my hon. Friend the Member for Sheffield South East (Mr Betts) mentioned. The Batters report, which was published on 18 December, made a number of recommendations. We will take forward many of those proposals to ensure that we support increased profitability for farmers and continue to work on important sustainability initiatives.
John Whitby (Derbyshire Dales) (Lab)
I was grateful for the opportunity to meet the Chancellor recently to highlight the impact that the changes to APR and BPR would have had on farmers in Derbyshire Dales. I therefore sincerely thank the Minister and the Chancellor for listening to me and other members of the Labour rural research group, and raising the tax-free allowance. Since the change was announced, more than 100 farmers have written to me to say how pleased they are about it. One farmer said:
“This has been hanging over me all year, making me ill, and I can’t believe the relief I’m feeling right now.”
Will the Minister or the Chancellor take the opportunity to visit a farm in Derbyshire Dales to see for themselves the positive difference that this change has made?
Dan Tomlinson
I thank my hon. Friend for his invitation. I will pass it on to the Chancellor of the Exchequer, and will carefully consider it myself.
Sir Bernard Jenkin (Harwich and North Essex) (Con)
The Minister referred to the importance of manifesto commitments. Where in the Labour manifesto did it say that there would be any tax restrictions on inheritance for farmers? In fact, when they were in opposition, did Ministers not go around promising not to impose such a tax? They then did precisely the opposite. When he talks about manifesto commitments, will he have a slightly less selective memory and avoid misconstruing the position of the NFU, which is still in favour of the abolition of the tax altogether? Tom Bradshaw is my constituent. I hope that the Minister will send him his best wishes and congratulate him on exposing the Government’s hypocrisy.
Dan Tomlinson
I had the pleasure of meeting Mr Bradshaw last year. The NFU published statements—both at the time of the announcement and around the turn of the year—welcoming the changes that the Government have proposed. The hon. Gentleman asks about manifesto commitments. We were very clear in our manifesto that we would return economic stability to this country, putting behind us the chaos of Liz Truss and the chaos that the Conservatives left us with. Part of that is about ensuring that we do not continue to borrow at excessive levels, as they did, but bring borrowing down—[Interruption.] Borrowing is coming down in every single year of the next five years. We are ensuring that we can raise, in a fair and sustainable way, the revenue to fund our public services.
Laura Kyrke-Smith (Aylesbury) (Lab)
I hugely welcome these changes, which have been met with real relief by the farmers in my constituency, and I am grateful to the farmers who fed in their perspectives to me over the last year and allowed me to pass them on to the Treasury. Can the Minister reassure me and my local farmers that he will continue to listen and engage with our farming communities in this way, recognising the inherent value of farming, but also the great contribution it makes to the economy and our food security?
Dan Tomlinson
I thank my hon. Friend for the conversations that I know she has had with Ministers on this and other issues in recent weeks and months. Yes, we will continue to do all we can to support farmers and the farming industry in this country. That is part of why we are working hard on trade deals, to make sure we can improve access to markets for farmers here in the UK so they can export more of their produce overseas.
Dave Doogan (Angus and Perthshire Glens) (SNP)
I pay tribute to the Minister: he is back out again doing a sterling job of being a totally discredited Chancellor’s human shield. He will remember the Finance Bill that we debated just before Christmas, which took three hours in this place, and two hours of that was taken up with agricultural property relief, as I pointed out to him at the time. He wants us to believe that he has moved this policy into an acceptable position, but it is no such thing: this is a policy that Labour expressly said they would not enact, and then they did it, and now they have made it slightly less bad. I and the NFU Scotland are firmly opposed to this in its entirety, so will he take a win for a hard-up Government and pause this policy pending a proper analysis?
Dan Tomlinson
Yes, we did discuss this at Treasury questions and on Second Reading of the Finance Bill, and we will have time to discuss it in the Committee of the whole House next week too—and I can see from the number of Members wishing to speak now that there are many more questions coming so we may have many more hours today, Mr Speaker, to discuss it as well. In the end, the position that the Government have now reached is that we are going to amend the Finance Bill to make this change and increase the threshold from £1 million to £2.5 million. That will, we expect—and it will be confirmed by the Office for Budget Responsibility in the usual way at fiscal events—raise £300 million, money that we can put into our public services, rather than continue the chaos of previous years with additional borrowing. It is right to look in the round at fair and necessary tax changes that we can make on those with the broadest shoulders, so that we can fund our public services adequately.
Ms Julie Minns (Carlisle) (Lab)
Happy new year, Mr Speaker. I pay tribute to Carlisle NFU and my constituents who have raised this issue with me over the last 14 months, and I thank the Minister and his colleagues for engaging constructively and listening to those representations. North Cumbrian farmers face land price increases as a result of forestry firms snapping up large parcels of land and large landowners seeking to abuse the IHT system by hiding their wealth, and this is an important step in balancing the need to tackle that abuse and rising land prices and the need to raise the revenue required for our village schools, local health services and to tackle crime. Does the Minister agree that this now achieves that balance?
Dan Tomlinson
I thank my hon. Friend for her question and for her strong representation of rural constituents and rural communities. She makes a very important point. It is worth noting that this is a tax relief, and the tax relief as it stood before the changes that the Government have come forward with since the 2024 Budget meant that the top 7% of claims for agricultural property relief accounted for 40% of the Exchequer cost of the relief. That meant £219 million in foregone tax revenue—revenue that, by and large, this Government will now be raising from the very largest estates to help fund our public services in a sustainable way. The Opposition were never able to do that because of their chaotic management of the economy and the public finances.
Aphra Brandreth (Chester South and Eddisbury) (Con)
The Government have heard from these Benches time and again about the impact the family farm tax has had on food security and the risk to countryside stewardship and our environment and the economic viability of farms, but also, crucially, about the impact on farmers’ mental health. My question to the Minister is simple: on behalf of farmers across Chester South and Eddisbury, why did this decision take so long?
Dan Tomlinson
The Government wanted to ensure that the changes that we are legislating for in the Finance Bill in the coming weeks came forward before that Bill was passed. We have continued to listen to farming communities and family businesses. The changes with which we have come forward, including increasing the threshold from £1 million to £2.5 million, coupled with the changes announced in last year’s Budget, will mean that a couple can pass on up to £5 million of agricultural or business assets tax free, which we think is a fair and proportionate way to raise revenue from some of the largest estates in the country.
Ben Goldsborough (South Norfolk) (Lab)
South Norfolk is home to 400 farms, and I put on record my thanks to Will, Nick, David and Deborah, who are some of the farmers have supported me hand in glove over the past 14 months in making representations to the Minister. I welcome these changes, but the biggest threat to family farming in South Norfolk right now is biosecurity risk. I urge the Treasury to pay special attention to avian influenza and African swine fever, so that we can protect those family farms going forward.
Dan Tomlinson
I thank my hon. Friend for the strong representation that he has provided for his constituents since he was elected in 2024, and for raising an important issue. I am sure that DEFRA Ministers are alive to that issue and will continue to have conversations with hon. Members.
David Davis (Goole and Pocklington) (Con)
I refuse to call this property relief on what is an absolutely new tax, but will the Minister tell us if the agricultural property tax threshold will rise in line with agricultural land prices?
Dan Tomlinson
The Government have set the thresholds for tax policies over the period of the OBR’s forecast, and it would not be right for me to comment on the changes that may or may not happen after that. May I say to the right hon. Gentleman that throughout the time that Margaret Thatcher was in power, we did not have a system like the current system, so he is not quite right to say that this relief has always been there? It was not there when the political hero of many Conservative Members was in power.
Andrew Pakes (Peterborough) (Lab)
Happy new year to you, Mr Speaker, and to all your team. I welcome the Minister’s comments. I thank DEFRA and Treasury Ministers for engaging with farmers and National Farmers Union members in my constituency, and for listening to their views. Farming has had a terrible decade—much longer than 14 months—with rural services cut, farming budgets unspent, failed Brexit plans and trade deals that sold out British farmers. Does the Minister agree with me that with the changes that we have made to APR, the findings of the Batters review and the funding that this Government are putting in place, we can now turn a corner on that terrible decade for British farming?
Dan Tomlinson
Yes, I agree with my hon. Friend’s powerful contribution. He made important points about how the trade deals negotiated by the previous Government undermined British farming and that there was no consistency of investment and support for farmers up and down the country. What do rural communities think about that? At the last general election, they turfed out hundreds of Conservative rural MPs and elected over 150 Labour MPs to represent rural and semi-rural constituencies. Labour Members are now the mainstream voice of rural communities up and down the country.
Helen Morgan (North Shropshire) (LD)
The psychological impact of the past 14 months has been profound in rural places like North Shropshire. At every primary school visit that I have made in the past 14 months, I have been asked by children as young as seven or eight to confirm that I oppose the family farm tax, because it is having a devastating impact on their families at home. The uncertainty has also had a devastating impact on related businesses, such as agricultural machinery suppliers. It will continue to have an impact by making business owners deliberately keep their businesses small so that they do not have to pay inheritance tax, because they cannot sell off part of their farms as they will no longer be viable. Why are the Government continuing with this daft policy of restricting growth in rural areas?
Dan Tomlinson
The Government want to support growth and investment in rural communities. That is why we are putting in £11.8 billion of support over the course of this Parliament and ensuring that we improve our economy and our economic fortunes across the board as a country after the chaos of the last 14 years. We have had six interest rate cuts in a row, borrowing costs are coming down, and inflation is falling faster than people forecast—it is now forecast to continue to fall. All those long-term changes to improve our economic outlook will support businesses in rural communities and communities across the country.
Joe Morris (Hexham) (Lab)
May I put on record my thanks to farmers such as Nick, Matt, Debbie, James and Graham in the Northumberland branch of the NFU in my constituency? I was in contact with them regularly, and they welcomed the Minister to my constituency to hear at first hand about the potential impact of the policy had it not been changed. I urge him to impress on colleagues the importance of buying British wherever possible. The best way to improve farming profitability is to ensure that much of the public sector food procurement is done with British farms and to ensure that farmland is not lost. To replace potential food-producing land, more food-producing land does not need to be cut out of forests elsewhere in the world.
Dan Tomlinson
I thank my hon. Friend for inviting me to his constituency last year; I believe it was shortly after I was made a Minister on 1 September. It was a very productive and useful visit, and I thank the farmers and members of the community I met when I went to a lovely café and had some lovely tea and cake with my hon. Friend and those farmers. It was a really helpful conversation for me, and I am thankful to him for his representations on behalf of his constituents over many months. I want to work with him on procurement and ensuring that we can continue to support farmers and farming communities; I know that Ministers across Government, particularly in DEFRA, will continue to do that in the months and years ahead so that we can turn the page on the chaos we had under the previous Government.
Sir Gavin Williamson (Stone, Great Wyrley and Penkridge) (Con)
I cannot adequately put into words the fear, concern and stress that farmers in my constituency and right across the country have felt as a result of the policy announced at the Government’s first Budget. That same fear is now being felt in rural pubs up and down the country due to the changes to business rates. Will the Minister apologise to those farmers for the fear, stress and cost that he has put them all through? Will he indicate to many publicans across Staffordshire that the Government are going to U-turn on business rates so that they do not close rural pubs?
Dan Tomlinson
The Government have been listening to rural communities, farming representatives and the representatives of family businesses. That is why, after listening, we have come forward with these changes, which we think strike the right balance between the necessary impulse to ensure a fair and sustainable tax system and continuing to protect smaller businesses and farms. I am sure that we will have many more chances in this place to continue to discuss business rates.
Terry Jermy (South West Norfolk) (Lab)
This is very welcome news, and many farmers in my constituency will be delighted. May I acknowledge the Minister’s engagement on this subject and the many conversations he has had with myself and other Labour party representatives from rural communities? I pay tribute to my hon. Friend the Member for Suffolk Coastal (Jenny Riddell-Carpenter) for her role as the chair of the Labour Rural Research Group and her advocacy for hundreds of farmers across the country. It is fair to say that the changes to APR are part of a long list of concerns for farmers in this country—concerns that were increased over 14 years of Conservative Government, when we saw a huge decline in farming. May I invite the Minister to join me in a new year’s resolution to work with Treasury colleagues to do more and to do all that we can possibly do to support farming in this country?
Dan Tomlinson
I thank my hon. Friend for his reminder that the previous Government and previous Conservative Prime Ministers were roundly rejected by the country at the last general election. People in rural communities and communities up and down the country voted for change for the better with this Labour Government and for a Government who will continue to represent and support farming communities up and down the country. Let me praise my hon. Friend on his recent appointment to the Environment, Food and Rural Affairs Committee, to which I know he will provide an invaluable contribution in his continued representation of rural communities.
Sammy Wilson (East Antrim) (DUP)
I wish you and the staff of the House a happy new year, Mr Speaker.
Regardless of the reason for the change in policy—whether it is simply fear of the electoral consequences of breaking election and manifesto promises to farmers, or a belated recognition of the importance of the farming industry to feeding the nation in an increasingly unstable world—I welcome these changes. However, I would point out to the Minister that despite his assurances, 25% of farmers in Northern Ireland will still fall over the threshold he has announced, which will have an impact on family farms because of the cost of land and so on. Having seen the disaster of the policy, does he accept that the only answer is to abolish it altogether?
Noah Law (St Austell and Newquay) (Lab)
I thank the Minister for his considered engagement with rural Labour MPs such as myself on this issue from the get-go. I also thank farmers—at least in my part of Cornwall—for their dignified engagement at what I know has been a difficult time. Does the Minister agree that where we have landed now strikes a much better balance, one that in relative terms favours small family farms compared with industrial concerns, institutional investors and those looking to use agricultural property as a means of avoiding tax?
Dan Tomlinson
I thank my hon. Friend for his continued engagement on this and a whole range of issues that affect rural communities in Cornwall—he is a strong advocate for his constituents. As he says, we have now come forward with a change in the APR and BPR thresholds to make sure we can protect those smaller family farms.
Madam Deputy Speaker (Ms Nusrat Ghani)
I urge colleagues to keep their questions short, and for the answers to be on point.
Alicia Kearns (Rutland and Stamford) (Con)
This U-turn comes too late for too many. It is extraordinary to hear Labour MPs saying that their farmers are delighted; mine are sick with relief after 14 months. At the Liaison Committee, the Prime Minister accepted that he knew that some farmers had planned to take their lives or had already done so, yet it still took him well over a week to decide that rural lives matter. What was it that suddenly changed after 14 months for him to decide that our farmers should be stood by, and should not be questioning whether or not they were going to be here for next Christmas?
Dan Tomlinson
Over the course of recent months—since I have been in the Government, from September onwards—Ministers from the Department for Environment, Food and Rural Affairs and from the Treasury have continued to engage with farming communities and with business communities. As has been raised by some Members today, it is worth remembering that this change affects business property relief, not just agricultural property relief. As a result of that listening and engagement, we have come forward with this change in time for it to be included in the Finance (No. 2) Bill.
Steve Witherden (Montgomeryshire and Glyndŵr) (Lab)
This month marks 12 months since I first called on the Government to raise the APR threshold. I strongly welcome their decision to do so, and thank NFU Cymru and the Farmers’ Union of Wales for their tireless campaigning. Can the Minister assure me that the Government will continue to listen to rural communities like mine?
Dan Tomlinson
Yes, I can reassure my hon. Friend that we will continue to listen to, and engage with, the over 150 Labour MPs who represent rural and semi-rural constituencies.
Sarah Dyke (Glastonbury and Somerton) (LD)
It really should not have taken over a year for the pleas of thousands of farmers to be heard, and for the Government to finally concede their mistake and change the disastrous family farm tax. However, it is clear that they still simply do not understand the industry. Many farms in Glastonbury and Somerton are run by multi-generational family partnerships, rather than married couples. Those businesses will not benefit from the combined spousal allowance of up to £5 million, so will the Chancellor finally give up and completely leave farmers alone to get on with what they do best: producing food for the nation?
Dan Tomlinson
We think that continuing to raise around £300 million from this policy is the right thing to do, so that—alongside the other changes that the Government are making—we can raise revenue in a fair and sustainable way to fund our public services.
James Naish (Rushcliffe) (Lab)
I refer the House to my entry in the Register of Members’ Financial Interests. I thank the Minister for his engagement on this issue over recent months—it has made a real difference. Given his engagement on this matter and rural issues, does he agree that this country needs a rural strategy, which this Government should be delivering?
Dan Tomlinson
This Government have our farming road map. We have also published the Batters review, and we will be taking forward many of the proposals and the recommendations in it, so that we can continue to support profitability and sustainability for farmers and our farming communities.
John Cooper (Dumfries and Galloway) (Con)
A guid new year to you, Madam Deputy Speaker, and the staff of the House.
The past 14 months have been hell for the farmers of Dumfries and Galloway, and the Minister has made it clear that he will not apologise for that. Will he stop fantasising, like the wealthfinder general, about the money he can take out of agriculture and instead concentrate on helping British farmers to put British food on British tables?
Dan Tomlinson
We need to continue to do all we can to support British farming so that we can have more British produce on our shelves and so that countries overseas can have more British produce, too. That is why we have been working hard on our trade deals to secure more access for British farmers to markets overseas.
Perran Moon (Camborne and Redruth) (Lab)
I thoroughly welcome the increase in the threshold, and I remind the Minister that in terms of farming profitability, my Conservative predecessor—a former DEFRA Secretary —described their Australia deal as
“not actually a very good deal for the UK”.—[Official Report, 14 November 2022; Vol. 722, c. 424.]
The Conservatives sold out and undercut our farmers with trade deals to New Zealand, whereby we could not export to New Zealand, but it could export to us. These deals were cheered on by Reform. Will the Minister confirm that this Labour Government will never sign such incompetent and damaging deals, and that we will not take lectures on farming profitability from the Conservatives or Reform?
Dan Tomlinson
My hon. Friend gives me the chance to quote Michael Gove, who admitted that the previous Government had let down British farmers. He said:
“I can confirm I think we negotiated poorly with Australia, and New Zealand, but particularly with Australia in defence of our farmers”.
He admits that the last Government made mistakes, failing farmers on trade; I wonder whether the Opposition will do so too.
Richard Tice (Boston and Skegness) (Reform)
This partial U-turn on the dreadful family farm tax is partially welcomed by farmers in Boston and Skegness, but where is the Chancellor to come and admit the error of her ways? Jobs have been lost, investment has been slashed and, tragically, lives have been lost by this grief tax. Will the Minister, at the third time of asking, apologise to the farming community?
Dan Tomlinson
As the Minister with responsibility for tax, I am here answering questions about tax, and I am happy to continue to do so. The change that the Government came forward with last month—we will be legislating for it in the Finance Bill—will increase the threshold from £1 million to £2.5 million. We are doing that because we have listened to farmers and their representatives and to family businesses, too. We think that is the right thing to do, and we think it strikes the right balance.
Dame Nia Griffith (Llanelli) (Lab)
I thank my hon. Friends in DEFRA and the Treasury for listening to farming colleagues, including NFU Cymru and the Farmers Union of Wales, in making this welcome change to the proposals for agricultural property relief. It will mean that many more Welsh farms will not pay any additional inheritance tax. The Minister will know that the previous Conservative Government signed very detrimental trade agreements with Australia and New Zealand, which within 10 years will lead to limitless meat imports. Will he look carefully at what can be done now to help those Welsh family farms to maintain their farming tradition? At the moment, they will be open to severe competition, and we need to look at everything that can be done to help them.
Dan Tomlinson
The previous Government negotiated poorly when it came to trade deals. When the Conservatives negotiate, Britain loses. Labour has negotiated four new significant trade deals that will help to ensure that British businesses—farming businesses and businesses of all sorts—can access more markets, more easily. That is the right thing to do for long-term growth and productivity.
John Glen (Salisbury) (Con)
I welcome the partial U-turn. When I met a number of farmers on Boxing day, all 400 of them were very concerned that the next phase of this Government’s relationship with rural Britain would be a consultation on banning trail hunting. On the basis of this experience, I think that the Minister could go back to the Treasury and ask his officials to put together a team to work very closely with their counterparts in DEFRA to absolutely ensure that the farmers’ obligation, and indeed their true intent—to produce food and be good stewards of the environment— can be combined, and to ensure that never again in the course of this Parliament will such measures be undertaken as they were last year.
Dan Tomlinson
The right hon. Gentleman has mentioned the issue of trail hunting. That was in our manifesto, and it is part of our animal welfare strategy to continue with some important changes there. I think it right for governing parties to make progress on the commitments that they made when they stood before the country.
Dave Robertson (Lichfield) (Lab)
I welcome the Government’s changes in their plans in relation to inheritance tax on farmers and family businesses. The current system does not work. We need a tax regime that protects genuine family farms but does not let the super-rich dodge tax by buying up land, and many farmers in my constituency have the same concerns about that, but they have also made it very clear to me that the £1 million threshold was too low and would have a significant and detrimental impact on farming in my constituency. Along with many other Labour Members in rural seats, I have made that case to Ministers directly, and I am very pleased that the Govt are raising the threshold to £2.5 million, because that will make a huge difference for farmers in my constituency. I am very interested to hear, though, what steps the Government will be taking—and what steps the Minister can take, with colleagues—to ensure that profitability is at the forefront of our work with farmers, particularly on things like—
Dan Tomlinson
The Batters review focused closely on this, and we will be looking at its proposals and recommendations, and ensuring that we can do all that we can as a Government, within the constraints that we have, to continue to focus on improving farming profitability.
Several hon. Members rose—
Anna Sabine (Frome and East Somerset) (LD)
In my constituency, we have not just a lot of farmers but a huge number of other businesses and livelihoods that rely on those farmers, and the whole of that rural economy has been negatively impacted over the last 14 months. Will the Minister undertake not just to apologise to communities like mine, but to ensure that the Government will genuinely start listening to rural communities? At the moment, they do not feel listened to, understood by or even cared for by this Government.
Dan Tomlinson
We will continue to listen to rural communities, and to farming communities, to make sure that we can support them as they seek to grow and invest in their businesses in order to improve and support the communities that they are part of. It is because we have been listening to the representatives of farming communities and family businesses that we have come forward with the changes that we think strike the right balance.
Steve Race (Exeter) (Lab)
I welcome this sensible compromise, and thank the members of the NFU in Devon for their work and for talking to me, both here and in Exeter. The Government’s support for nature-friendly farming through environmental land management schemes is to increase from £800 million a year to £2 billion a year over the coming years. Can the Minister confirm that they are taking the necessary steps to ensure that we can, in a sustainable and environmentally-friendly way, produce the food that we need in this country?
Dan Tomlinson
I thank my hon. Friend for the engagement that we have had on this and other issues that affect his constituency, which I know contains some rural elements. He has raised an important point. We need to continue to work in partnership with farmers, and with their representatives and trade bodies, to make sure that we can support sustainable food production in the UK, and we are investing £11.8 billion of support over this Parliament.
Stuart Anderson (South Shropshire) (Con)
I thank all the South Shropshire farmers and businesses for their tireless campaign. They were continually told by the Government that they were wrong, but they have now been proved right. They are still telling me that this tax is wrong. The family farm tax is not right. Will the Minister apologise for the heartache, pain and suffering that he has caused South Shropshire farmers and businesses, and scrap the tax completely?
Dan Tomlinson
We will not be scrapping this tax completely. We have tabled an amendment that the House will have the chance to debate next week in Committee of the whole House on the Finance Bill. We think that the proposals that we plan to implement will raise £300 million in a fair way and protect smaller family farms.
Douglas McAllister (West Dunbartonshire) (Lab)
Last month, I visited Portnellan farm in my West Dunbartonshire constituency. I received a very warm and courteous welcome from husband and wife farmers David and Freda and their son Chris. The Scott-Parks run their family farm and were keen for me to hear and see at first hand the challenges that they face in ensuring that the next generation can continue to farm at Portnellan. I listened to their request that we review the original proposals. Does the Minister agree that 85% of all farming estates will now be protected from inheritance tax but, importantly, that we will maintain the original principle that tax avoiders should not use land to avoid tax at the expense of hard-working family farmers such as the Scott-Parks?
Dan Tomlinson
My hon. Friend makes an important point. If someone has agricultural or business assets worth £2.5 million, for example, they will now pay £300,000 less in inheritance tax than they would otherwise have paid; if they are worth £5 million, they will pay £600,000 less than they would have paid before the changes that we announced last month. The challenge of the proposals from the Opposition parties is that they would provide a £1 million tax cut to an estate worth £10 million. Their priority is clearly giving the very largest estates in this country tax cuts worth millions or even tens of millions, rather than using revenue in a fair way to fund our public services.
Dr Ellie Chowns (North Herefordshire) (Green)
Farmers in North Herefordshire welcome this change, as do I, but there are still huge problems with the policy: it does not even fix the tax loophole for people who buy up land to avoid tax, and it has created huge economic damage and heartache in farming communities. First, why did it take more than a year to listen to farmers’ voices? Secondly, will the Treasury please engage brain before announcing policy in future, and listen to and work with farming communities?
Dan Tomlinson
We will, of course, continue to engage with, listen to and work with farming communities on the policies that we are putting forward. It is interesting to see and hear that there is at least one wealth tax that the Green party does not support.
Sean Woodcock (Banbury) (Lab)
I thank farmers in my constituency of Banbury and Chipping Norton for engaging constructively with me on the issue—well, the vast majority of them, anyway. I know that they will welcome these changes, as they will welcome the record £1.8 billion investment in sustainable farming and food production provided by this Government. However, they are concerned about trade deals, having been left high and dry by the previous Government, so will the Minister confirm that this Government will protect farmers, not sell them down the river as happened previously?
Dan Tomlinson
Having grown up in rural west Oxfordshire, I know the importance of farming and rural communities in the fantastic county of Oxfordshire, which thankfully now does not have a single Conservative MP—long may that continue. It is a very good thing that we have strong Labour representatives in north Oxfordshire who are continuing to fight the good fight for their communities.
John Lamont (Berwickshire, Roxburgh and Selkirk) (Con)
This partial U-turn on the family farm tax is undoubtedly welcome, but does the Minister understand the hell that he has put farmers through during the past 14 months, not just in my constituency but across the United Kingdom? He should do the right thing and scrap this dreadful, dreadful tax.
Dan Tomlinson
We will not be going ahead with the hon. Member’s proposal of scrapping this change entirely.
Chris Vince (Harlow) (Lab/Co-op)
I put on the record my thanks to the farmers in my constituency of Harlow who have engaged really productively on the issue. In particular, I pay tribute to Richard and Jack Scantlebury of Great Canfield. Can the Minister talk further about how the record investment of £11.8 billion in sustainable farming can help to benefit farmers such as Jack and Richard in my constituency?
Dan Tomlinson
My hon. Friend is right that we are putting that amount in over the course of this Parliament to support innovation, agritech and all the things that farming businesses can and should do to invest and grow and to support their communities. That is the right thing to do, and it is turning the page on the chaos and the underfunding of previous years.
Richard Foord (Honiton and Sidmouth) (LD)
The Minister said that this reversal of plans to introduce inheritance tax on many farming families has happened
“after listening carefully to feedback from the farming community”.
This news just before Christmas was indeed a massive relief, but given that the farming community did not say anything in December that it had not been saying for the previous 13 months, will the Government listen properly in future?
Dan Tomlinson
Yes, the Government will make sure that we do continue to listen.
Chris Hinchliff (North East Hertfordshire) (Lab)
I thank the Minister for listening and acting on the concerns that I and many other Labour MPs raised alongside our farming constituents. Now that a happier compromise has been found on inheritance tax, the issue remains one of securing a profitable future for nature-friendly farming in our country. Can the Minister provide an update on what actions the Treasury is taking to support the swift roll-out of our manifesto commitment for 50% of the food bought by the public sector to be locally produced?
Dan Tomlinson
I cannot update my hon. Friend at this moment, but I would be happy to write to him on that point.
Dr Luke Evans (Hinckley and Bosworth) (Con)
The Government say they have been listening carefully, but they had 14 months and four votes to listen to the Opposition and the farming community. One question is: what changed the Government’s mind? The second question is: who made the decision—the Environment, Food and Rural Affairs Secretary, the Prime Minister or the Chancellor—and how long did they take to persuade the others to make that right decision?
Dan Tomlinson
Government decisions are made collectively. Yes, the Government have listened to farming communities and farming businesses, and to representatives of family businesses that would also have been affected by the £1 million BPR threshold, which was the same as the APR threshold.
Jonathan Davies (Mid Derbyshire) (Lab)
It was very welcome news that the Government had revisited the issues of business property relief, which will help family businesses in my constituency, and agricultural property relief, which means that up to £5 million can be passed on by a qualifying couple. It was also right that the Government considered this area as a whole, because too many people, including famous folk off the telly, had bought such properties with a view to insulating themselves against tax. Can the Minister assure me that we will take steps to support our farming community by not selling them down the river with dodgy trade deals, as we saw with Australia and New Zealand under the previous Government, and that we will work closely with our European export partners? Will he also ensure that the SFI and other subsidies get to where they need and are spent in a timely way, because they went unspent under the previous Government?
Dan Tomlinson
My hon. Friend is right to mention the disastrous trade deals that happened under the previous Government, and I thank him for giving me the chance to mention the trade deals that we have implemented, which seek to support businesses across the country to access more markets. I hope that, with our continued engagement with the European Union, we can continue to do that closer to home, too.
Ben Lake (Ceredigion Preseli) (PC)
Does the Treasury subscribe to the general commitment that the Government have made to ensure that all policymaking considers the impact of decisions on rural areas? If it does subscribe to that rural-proofing commitment, will the Minister elaborate on how he will ensure that it is abided by in future so that rural communities, such as those in Ceredigion Preseli, are not subjected to yet another ordeal such as we have just endured?
Dan Tomlinson
I can reassure the hon. Member that I and Ministers will continue to think through the impacts on rural communities—and all communities—when we come forward with changes to tax or other policies. It is because we have done that that we came forward with the change we announced just before Christmas, and we will be making that change in the Finance Bill in the coming weeks.
Katie Lam (Weald of Kent) (Con)
Family farms and family businesses across the Weald of Kent have been through appalling emotional turmoil in trying to work out how to avoid leaving their children unaffordable, crippling tax bills when they die. They are operating on razor-thin margins and small profits, and many of them have been forced to shell out thousands of pounds on professional services advice on this issue, which is now worthless. What does the Minister have to say to them?
Dan Tomlinson
To those families—people with farms and businesses that would have been affected by the lower threshold, but will now be affected less or not at all by the higher threshold—I would say that we have listened. Over recent months, we have heard the concerns that were raised, and that is why we have raised the threshold from £1 million to £2.5 million. That means a couple can pass on up to £5 million of agricultural and business assets tax-free on inheritance. I briefly remind the House that, above that threshold, the tax rate is half the rate that everyone else pays—20% rather than 40%—and that those who pay it will, if they so need, have 10 years to pay it interest-free.
Cameron Thomas (Tewkesbury) (LD)
Farmers are among the most robust members of society, yet since autumn 2024 several have spoken candidly with me about the mental health impact of the family farm tax, in an industry that suffers a rate of suicide four times the national average. The changes to the Government’s family farm tax are welcome, but will the Government take this opportunity to apologise to Gloucestershire farmers for 14 months of torment?
Dan Tomlinson
We have listened. We have made sure, after the engagement we have had with farmers across the country, their representatives and the representatives of family businesses, that we have come forward with a policy proposal that we, on the Government Benches, now think is balanced. It raises £300 million from the very largest estates and does so in a fair way that means we can continue to fund our public services sustainably.
Dr Ben Spencer (Runnymede and Weybridge) (Con)
Fourteen months is a long time for farmers to have the sword of Damocles over their heads. Many still do, because this is only a partial U-turn in the policy. The Minister has said many, many times today that he is and has been listening to farmers, but will it take another 14 months before he hears them and scraps this policy altogether?
Dan Tomlinson
We heard what farmers were saying and that is why we have come forward with the changes we announced last month.
Robin Swann (South Antrim) (UUP)
The Ulster Farmers’ Union and the Young Farmers’ Clubs of Ulster made many representations here with regard to the damage that this policy would do to Northern Ireland farms, but there is one specific point I want to ask the Minister about. He has mentioned a number of times the allowance being passed between couples and civil partnerships. Example 2, in his own Government paper, states:
“Two people (such as siblings) who jointly own a farm will be able to pass on a farm up to £5.65 million”
under the allowance. If there is a father and daughter, uncle, aunt, niece and nephew in that partnership, can they pass on that allowance, too—seeing as he is the tax Minister?
Dan Tomlinson
They can each pass it on up to £2.5 million to whomever they choose to pass it on to. In the inheritance tax system more broadly, it is the case that the various bands and allowances are only fully transferable between spouses, and this is consistent with that policy. But it would be the case that if a farm was owned, say, by a brother and a sister, the brother could pass up to £2.5 million to whomever he wished and the sister could pass up to £2.5 million to whomever she wished. That is what example 2, which the hon. Gentleman is referring to, gets at.
Dame Harriett Baldwin (West Worcestershire) (Con)
Worcestershire’s farmers have had to endure 14 months of sleepless nights over this policy before this partial U-turn. The Minister has hinted, at the Dispatch Box today, that he appreciates he will also have to U-turn on business property rates, because of the transitional relief coming off too quickly. Can he commit to the House that he will do that U-turn in less than 14 months?
Dan Tomlinson
We are having a discussion today about agricultural property relief and business property relief. I am sure we will have many occasions in the coming weeks and months to continue to discuss the changes that the Government have made on business rates to support businesses through the transition, because of course there has been a significant increase in their rateable values, coming out of the pandemic. I would just say to Opposition Members that the changes to the rateable values and the valuation methodology were signed off by Conservative Ministers. We have made sure that we are providing support, for example business rates will be capped at 15% for many pubs this year.
Lisa Smart (Hazel Grove) (LD)
It is wholly unacceptable that farming families in places such as Mellor and High Lane have had over a year of uncertainty and anguish since the Government first announced these tax hikes. The Government got it wrong and the changes we are talking about today are welcome, but will the Minister commit to consulting farming communities before making any future changes to taxes affecting farming communities? That was the step in the process that was missed and it could have saved them 14 months of anguish, had they got it right last time.
Dan Tomlinson
Because I sign them off, I can tell the hon. Lady that there are many consultations on tax changes that we publish alongside fiscal events. If she wished to engage with the consultation on electric vehicle taxation, she could do so; if she wished to engage with the consultation on the high-value council tax surcharge that will be published shortly, she could do so too. The Government have published many consultations on tax changes, and on those where formal consultations are not published—it is not universal—we continue to engage in detail with those who are affected, as we have done with this change.
Wendy Morton (Aldridge-Brownhills) (Con)
Despite many opportunities to do so, the Minister simply refuses to apologise. Despite warnings from so many organisations that this tax would do real harm, farmers, including those in my constituency, have been forced to live with fear and uncertainty for more than 14 months. Can the Minister explain what support his Department will give to the families who have shelled out money for advice and whose businesses have suffered irrevocable damage as a result of this Government?
Dan Tomlinson
I have been asked that question already by an Opposition Member, but I am happy to give the right hon. Lady a similar answer. I can say to those families that we listened carefully to the representations that were made about the level of the threshold as it was originally set at the Budget in 2024, and we have now come forward with a change to increase the threshold from £1 million to £2.5 million, which, coupled with the changes announced at the Budget in 2025, will now be transferable between spouses, allowing those families to pass on up to £5 million tax free.
Caroline Voaden (South Devon) (LD)
Happy new year, Madam Deputy Speaker. For 14 months, I have stood here alongside my colleagues and asked various Ministers to reconsider this policy. For 14 months, farming organisations up and down the country have campaigned relentlessly against the policy. Why did it take the Government so long to listen to them? Would it not be nice if someone was able to stand at the Dispatch Box and simply say, “We’re sorry—we got this wrong. We commit now to consult with farming and rural communities on any further changes to tax reliefs affecting them”?
Dan Tomlinson
We have come forward with a change to this policy after listening to farmers and farming communities and to the representations that have been made. We think that this is the right change. We will have the chance to debate it again when we consider the Finance (No. 2) Bill in Committee of the whole House next week, when the amendment that has been tabled will be voted on. In the end, Opposition Members who wish for the Government not to go ahead with this change at all should come forward with ideas for how they would raise £300 million from those who have the very largest estates in this country. We think it is right to raise revenue from those with the very broadest shoulders, and that is what this change will allow us to do.
Bradley Thomas (Bromsgrove) (Con)
After months of sleepless nights, fear and uncertainty, this partial U-turn is a victory for farmers—I pay tribute to farmers across the country, but particularly those in my constituency of Bromsgrove and the villages. Despite the U-turn, this policy should still be scrapped. What can the Minister say to farmers regarding incentives? Where is the incentive for a farm to invest in very expensive capital equipment if it may tip them over the threshold of liability for the family farm tax?
Dan Tomlinson
Just to be clear, this policy applies only to the farming or business estates worth more than £2.5 million, or £5 million if owned by a couple. There are still significant incentives to grow and invest in people’s businesses. This tax rate is half the rate for everyone else paying inheritance tax, if they have sufficient assets to get over the threshold. I think that is worth noting. Only around the very largest 10% of estates in the country pay any inheritance tax at all.
Brian Mathew (Melksham and Devizes) (LD)
On behalf of the family farmers of Melksham and Devizes, can I point out that farm prices differ across the UK and that raising the level of APR to a flat £6 million, say, whether a farm belongs to a couple or to an individual farmer, would be a great help in assuring the farmers about the future, freeing them from worry and ensuring their future growing our food?
Dan Tomlinson
We think it is right to have the same level across the country. It is the same in other parts of our tax system, and it would not be right to have different tax thresholds for different small parts of the country.
Jim Allister (North Antrim) (TUV)
I certainly welcome the increase in the threshold as far as it goes, and I commend the campaigning farmers who secured it. In explaining it today, the Minister said that the Government have “got the balance right”, but of course those are the very words that he used at the Dispatch Box and in Westminster Hall when defending the £1 million threshold, and each time he caused torment and anxiety to farming families. Is he sorry for the anxiety caused needlessly to those farmers?
Dan Tomlinson
The number of estates that will be affected by this change will fall by half as a result of the changes that the Government announced late last year after listening to representations from various business and farming communities. That means that rather than 375 estates being affected per year, it will now be closer to 185 estates affected per year. Around 85% of estates will not pay any additional inheritance tax, and the vast majority of those that do will pay significantly less than they would have done before the change we announced late last year.
Manuela Perteghella (Stratford-on-Avon) (LD)
I welcome the revised threshold change; it is a first step in the right direction. I thank the local farming community in South Warwickshire and the National Farmer’s Union in Warwickshire for their tireless campaigning. However, farmers across my constituency tell me that the changes to agricultural property relief have created many months of uncertainty, freezing investment and growth and affecting succession planning. Why did the Chancellor and her team announce changes to the agricultural property relief last year without meaningful consultation with family farmers first?
Dan Tomlinson
I thank the hon. Member for welcoming the changes that the Government have brought forward. We did continue to engage with representatives from the farming community. I believe that the Prime Minister mentioned being in conversation with Mr Bradshaw from the NFU, and Ministers across Government have of course listened to and engaged with the farming community. I myself went up to Hexham. I see that my hon. Friend the Member for Hexham (Joe Morris) has left—for other important business, I am sure—but I met farmers in his constituency. All those different forms of engagement have proved very valuable indeed.
Adrian Ramsay (Waveney Valley) (Green)
Farmers in Waveney Valley are relieved at this change, but they are also frustrated that the Government have not been listening about the underlying causes of why it is so difficult for farmers to make even a living wage to put food on our table. It has been obvious from the outset that the Government needed to review the threshold, so it is baffling that it took 14 months for them to do so. Does the Minister recognise the emotional and financial cost of this 14-month delay?
Dan Tomlinson
I recognise that many estates that would have been affected by the lower threshold, rather than having to pay additional inheritance tax, will now not be paying any inheritance tax at all. We have moved hundreds of estates out of having to pay additional inheritance tax. We have also reduced the tax liabilities for those larger estates too, because we have listened.
Ian Roome (North Devon) (LD)
Many of my rural constituents are relieved that the Government have partly seen sense on this issue. Given the track record of U-turns from this Government, when I meet with a group of local farmers next week, what reassurance can I give them that the Government will not change course on this policy again in the near future?
Dan Tomlinson
The Finance (No. 2) Bill will be making its way through the House in the coming weeks, and once the Bill is law that change will come forward. If the hon. Gentleman meets his farmers on 7 April this year, the change will already be in place.
Edward Morello (West Dorset) (LD)
Happy new year, Madam Deputy Speaker. I pay tribute to the farmers of West Dorset who have never stopped campaigning against the family farm tax, and especially those hardy ones who have repeatedly driven their tractors up to London to let their views be known. This is just the latest in numerous assaults by the Government against our farming communities. So will the Minister take this opportunity to put on the record that the Government will not agree to President Trump’s demands that we accept more food imports at lower food standards as part of a US trade deal?
Dan Tomlinson
We will always fight for the interests of British businesses and British farmers in the deals we strike with countries across the world.
Mr Lee Dillon (Newbury) (LD)
Happy new year, Madam Deputy Speaker. In the last 14 months, constituents in Newbury, which I am proud to represent, have really felt the burden of the unfair family farm tax. I have hosted farmers here in Parliament and invited all parliamentarians to come and meet them, and I am proud that Members—predominantly from the Opposition Benches—have made that effort, and the Government have started to listen. But I have family farms in my constituency that will still have to pay £600,000, and they will have to sell off their farms to pay those tax bills. When the Government table their amendment, will they publish an assessment of those remaining farms and whether it is likely that they will need to be sold off to fit Labour’s tax bills?
Dan Tomlinson
The amendment, which has already been laid before the House, sets out the changes that the Government are making. In the letter that all hon. Members will have received, we set out our estimate that the number of estates we think will be affected will halve, and that about 85% of farming estates claiming APR—sometimes with BPR—will not pay any additional inheritance tax at all as a result of these changes.
Claire Young (Thornbury and Yate) (LD)
Looking at farm sizes and land values locally, I fear that family farms will still be paying the family farm tax. What evidence is there that £2.5 million realistically reflects the value of a typical family farm in a constituency with higher land values, such as Thornbury and Yate?
Dan Tomlinson
May I thank all hon. Members on both sides of the House for their engagement on this important issue today? We have set the threshold at £2.5 million for a single person and £5 million for a couple as a result of the changes announced at the Budget 2025. We think that threshold is right and fair. It means that the number of farming estates that will be affected will fall by half, and the vast majority will pay no additional inheritance tax at all.
Dame Harriett Baldwin
On a point of order, Madam Deputy Speaker. Earlier the Minister said that agricultural property relief was not available under Margaret Thatcher. In fact, it was Margaret Thatcher’s Government who brought it in under the Inheritance Tax Act 1984, and it was subsequently increased to 100% under John Major. How might I go about getting the Minister to correct the record?
Inheritance tax relief for infected blood compensation payments
Dan Tomlinson Excerpts(4 weeks ago)
Written StatementsRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Exchequer Secretary to the Treasury (Dan Tomlinson)
At Budget 2025, the Government announced that they would extend the existing relief from inheritance tax to compensation payments made from the infected blood compensation scheme and the infected blood interim compensation payment scheme. A tax information and impact note has been published and can be found here:
https://www.gov.uk/government/publications/inheritance-tax-and-infected-blood-compensation-payments
Prior to these changes, infected blood compensation payments were already relieved from IHT on the death of the infected or affected person eligible for compensation. However, if the infected or affected person had died before the compensation payment was received, the IHT relief did not extend to the estate of whoever received the payment following their own death (the “first living recipient”).
The Finance Bill 2025-26 contains a power to make changes to the IHT treatment of infected blood compensation schemes in secondary legislation. The Government will lay regulations before Parliament, subject to parliamentary approval of the Bill, and this statement sets out what this means in practical terms, and what action impacted individuals should take ahead of regulations being made.
Changes for first living recipients
First living recipients will be able to pass on the value of infected blood compensation payments upon their death without attracting an IHT charge. This change will apply retrospectively.
Alternatively, first living recipients can pass on some, or all, of their compensation payment during their lifetime as a “qualifying gift”. When first living recipients make a qualifying gift, the compensation will be treated as never having formed part of their estate. As a result, qualifying gifts will not attract an IHT charge, and the IHT relief on death for the compensation transferred will also pass to the recipient of the qualifying gift.
If the compensation payment was made before 4 December 2025, the first living recipient will have two years from 4 December 2025 to make any qualifying gifts. If the compensation payment is made after 4 December 2025, the first living recipient will have two years from the date of payment to make any qualifying gifts.
Any such qualifying gifts must be recorded in writing and signed by the first living recipient, even if the gift has already been made.
Changes for infected and affected people
Any compensation in an infected or affected person’s estate on death will continue to be relieved from IHT. Lifetime transfers of compensation payments made by infected or affected people will not attract an IHT charge. This change will apply retrospectively to qualifying gifts of infected blood compensation payments that have already been made by an infected or affected person. Any such gifts must be recorded in writing and signed by the infected or affected person, even if the gift has already been made.
Collection and refunds of IHT on infected blood compensation payments
As of 26 November 2025, His Majesty’s Revenue and Customs will no longer collect IHT on infected blood compensation payments in the circumstances set out above.
HMRC will also refund any overpaid amounts of IHT made before these changes were announced. Personal representatives who have paid IHT on infected blood compensation payments can claim a refund by submitting a corrective account using form C4, which is available at:
https://www.gov.uk/government/publications/inheritance-tax-corrective-account-c4
Customers who require assistance with this process can contact HMRC’s IHT helpline for support. Contact details are available at:
https://www.gov.uk/find-hmrc-contacts/inheritance-tax-general-enquiries
[HCWS1209]
Finance (No. 2) Bill
Dan Tomlinson ExcerptsTuesday 16th December 2025
(4 weeks, 2 days ago)
Commons ChamberRead Full debate Finance (No. 2) Bill 2024-26 View all Finance (No. 2) Bill 2024-26 Debates Read Hansard Text Watch Debate Read Debate Ministerial Extracts
The Exchequer Secretary to the Treasury (Dan Tomlinson)
I beg to move, That the Bill be now read a Second time.
On 26 November, my right hon. Friend the Chancellor delivered her second Budget at this Dispatch Box. This was a Budget to build strong foundations and a secure future for our country, with no cuts to capital spending—which I am sure would have been implemented by the Conservatives, if they were in this financial situation—and no return to austerity, including for public services. This is a Budget about Labour choices.
Graham Stuart (Beverley and Holderness) (Con)
The Minister says that there will be no cut to capital budgets, but of course he is talking only about the public sector. Has he seen the CBI Economics research that suggests that there will be severe capital budget reductions in the private sector—the very sector that creates the wealth on which everything else depends?
Dan Tomlinson
I am sure that the right hon. Gentleman will have read the Office for Budget Responsibility’s report—we had a bit of extra time to read it this year. He will know that according to that report, investment—both overall, whole-economy investment and private sector investment—has outpaced the OBR’s forecast from March this year. I look forward to returning to those points later.
The Budget delivers choices that were fair and necessary—choices that deliver on the public’s priorities, and that bring about the change that this Government promised. This Government have chosen to cut the cost of living, delivering £150 off energy bills and freezing train fares and prescription charges. This Government have chosen to cut NHS waiting lists, delivering 5.2 million more appointments and announcing in the Budget 250 new neighbourhood health centres. This Government have chosen to lift 550,000 children out of relative poverty in this Parliament, by removing the two-child limit, and by expanding free breakfast clubs and free school meal eligibility.
Carla Lockhart (Upper Bann) (DUP)
The Government have chosen to absolutely decimate family farms across the whole United Kingdom. The Prime Minister was questioned yesterday by members of the Liaison Committee, and he was told that farmers have said that they might be better off dying before this tax change comes in. I feel that we need to let the reality of that sink in. His response was that Governments have to bring about sensible reform, but sensible reform is not someone lying in an early grave to avoid the break-up of their family farm. He also claimed that this policy was not targeted, and was merely a change to the tax regime, but when this Finance Bill decimates family farms, it certainly—
Dan Tomlinson
Thank you, Madam Deputy Speaker. I look forward to contributions from Members on both sides of the House on the various measures in the Finance Bill. On the point that the hon. Member raises, this Government considered really carefully the reforms that were announced at the Budget last year, and have put forward changes to agricultural property relief and business property relief. There is an additional £1 million allowance—an allowance that was made transferable between spouses in this Budget—and also a 50% discount on the inheritance tax rate, so tax on that higher allowance will be at 20%, rather than 40%.
As well as making changes to lift children out of poverty, this Government have chosen to increase the national living wage from 1 April 2026 by 4.1% to £12.71 an hour, and to increase the national minimum wage for 18 to 20-year-olds to £10.85.
Dave Doogan
The Minister will know that for the vast majority of employees in Scotland, the increase in the national living wage is redundant, because it is less than the Scottish living wage. He talks about the things that the Government increased in the Budget; was it their intention to increase unemployment by 25% as a result of their jobs tax?
Dan Tomlinson
This Budget will lift thousands of children in Scotland out of poverty, because of decisions that we have made. This Government have made £10 billion more spending available to the Scottish Government, yet we still see public services failing up and down Scotland; the NHS is not working as well as it should north of the border.
Matt Rodda (Reading Central) (Lab)
The Minister is making an excellent series of points, and I commend him on behalf of 4,000 vulnerable children in Reading for the fantastic support he is offering them and their families. It is much deserved and appreciated by our community. I point out other significant benefits, such as the freezing of rail fares, continued bus fare subsidies, and economic measures that will drive growth across this country.
Dan Tomlinson
I thank my hon. Friend for his intervention—the first from a Labour Member. I look forward to many more from Labour hon. Friends, as well as Opposition Members. This Government have also chosen to cut Government borrowing every year, so that interest rates, already cut five times since the election, keep falling.
Sir Oliver Dowden
I thank my neighbour. The Minister did not answer this point made by the hon. Member for Angus and Perthshire Glens (Dave Doogan) about the effect of the jobs tax on unemployment. In my constituency, I have met countless businesses that have laid off staff, or have shifted staff to being self-employed. Does he accept, particularly given the unemployment figures today, that there is a direct link between the jobs tax and higher unemployment?
Dan Tomlinson
The OBR was aware of the tax changes announced in the previous Budget when it made its forecast just a few weeks ago. It expects that employment will rise in every year of this forecast; that every year, the figure will be higher than it was in March; and that there will be over 35 million people in work by the end of the decade.
As I was saying, this year, borrowing as a share of GDP will be at its lowest level in six years, and the Chancellor made the decision to more than double our headroom against the fiscal rules in this Budget to provide continued economic stability. This Finance Bill, alongside other Budget decisions, delivers choices that give people new opportunities and renew our public services. These choices will help lift thousands of children out of poverty, get more people into work and maintain the highest level of public sector investment in 40 years. I was struck by the response from the North East chamber of commerce, which welcomed the ending of the two-child limit, saying,
“The Chancellor is right to scrap the two-child benefit cap. Our members have long argued that this is one of the most powerful levers available to tackle the unacceptable rates of child poverty across our region and to support more parents into sustained and meaningful employment.”
Statements like that are further confirmation that lifting 500,000 children out of poverty is not just the right thing to do, in order to give our children the best start in life, but is an investment in the future and our economy. All of us will be better for it.
This Government have promised to deliver economic growth as our No. 1 priority.
Robbie Moore (Keighley and Ilkley) (Con)
I am not quite sure whether the Minister believes what he is reading, because UKHospitality has already done the sums on the impact that this Budget is having on many hard-working hospitality businesses across Keighley and Ilkley. Indeed, it has calculated that over the next three years, hospitality businesses in my constituency will have to pay on average an additional £13,690 per annum. Can the Minister say what the Budget will mean for the growth of hard-working hospitality businesses in my constituency?
Dan Tomlinson
The hon. Member said that he is not sure whether I believe what I am reading. I did write this myself, and I do very much believe it. We will have plenty of time to debate the business rates measures when we consider the relevant pieces of legislation and in Committee, I am sure. They are not specifically in the Finance (No. 2) Bill, but I am mentioning things that are not in the Bill, so of course, he is welcome to raise things that are in the Budget, too. At Treasury questions last week we discussed at length, with the shadow Front-Bench team and others, the relief and support that is now in the system to help businesses with the increases in valuations they have seen since the pandemic—there is over £4 billion of support over the next few years, with £2 billion coming this year alone. However, I thank the hon. Member for his intervention. Madam Deputy Speaker, I thought I might speak for 15 minutes, but we are 11 minutes in and I am only on page 2, so I will try to make some progress.
We are sticking to our commitments in the corporate tax road map, maintaining the headline rate of corporation tax—the lowest in the G7—and making reforms to capital allowances to support fiscal sustainability while retaining incentives to invest. We are going further to support companies to scale up and attract investment and talent by significantly expanding the enterprise management incentives company eligibility limits, to maintain the world-leading nature of this scheme. We are doubling the maximum amount that a company can raise through the enterprise investment scheme and venture capital trusts scheme, to make the schemes more generous and supportive for entrepreneurs, helping to support more investment in companies and improve access to finance for those we want to see make the transition from start-up to scale-up.
We are delivering a new service to support major investment projects with advance tax certainty, as committed to in the corporate tax road map. We are also introducing a 40% first-year allowance, allowing businesses to immediately write off a significant amount of their investment to reduce their corporation tax or income tax bill in the year that they make that investment. Overall, these growth measures and the many others we are delivering across the Government will result in the doubling of limits for our enterprise tax incentives and will support many scale-ups and businesses to attract capital as they grow.
This Finance Bill builds on many other measures announced at the Budget and delivered over this Parliament. We are expanding and continuing the work of the National Wealth Fund. We have committed £14 billion for Sizewell C, to help power more than 6 million homes. We are making rapid progress on enabling the delivery of a third runway at Heathrow, and we have provided £120 billion in additional capital investment for roads, rail and energy, including £15.6 billion for major city regions.
Oliver Ryan (Burnley) (Lab/Co-op)
I welcome the £50 million or £60 million that the Government have provided to Lancashire county council to provide good roads for my constituents. On the Minister’s point about business investment, I welcome the three-year holiday from the stamp duty reserve for new listings, which we are not talking about enough. That will be a huge benefit to newly listed companies in the UK and manages our competitiveness very well.
Dan Tomlinson
I, too, welcome that change in the Budget, and I commend my colleague the Economic Secretary to the Treasury for the work she has been doing on that—I am sure we will hear more about it in her closing remarks.
Mr Alistair Carmichael (Orkney and Shetland) (LD)
Will the Exchequer Secretary give way?
Dan Tomlinson
I will give way, and then I will try to make some progress, so that other Members can get in.
Mr Carmichael
I am grateful to the Exchequer Secretary for giving way. On the point of growth, he should be aware that, since the Budget last year, 49% of farm businesses have paused or cancelled planned investment, 10% have already downsized operations, and 21% intend to do so before next April. What are the Government going to do to restore confidence in farming to invest? Without that, there is no growth in the rural community.
Dan Tomlinson
I thank the right hon. Member for his point. We do want to see farming businesses in rural communities and businesses up and down the country investing and growing for the future. On the changes to agricultural property relief and business property relief, it is worth noting that the statistics suggest that up to 375 estates a year will be affected—a small proportion of the overall number—and that number has come down from 520, as was forecast at the previous Budget.
Several hon. Members rose—
Dan Tomlinson
If I may, I will try to make some progress so that other hon. Members are able to contribute.
This Government are delivering growth and are focused on driving investment in our economy. As I said earlier, whole-economy investment has risen by 4.2% in real terms since the start of the year, outperforming the OBR’s March forecast of a decline of 0.1%. As the shadow Chancellor will know, Britain has outperformed its growth forecast this year, with growth in 2025 upgraded to 1.5% from 1% in March.
Beyond growth, this Bill delivers a set of responsible choices that safeguard our economy and prepare us for the future. We have been clear that in order to achieve that we have had to take the decision to ask everyone to contribute more at the end of the decade to protect our public services. After a freeze that was initiated by the previous Government, this Bill maintains income tax thresholds for employees and the self-employed at current levels for a further three years, from April 2028 to April 2031. That is a fair choice. In 2029-30, three-quarters of the revenue from maintaining income tax and employee, self-employed and national insurance contribution thresholds is expected to come from the top half of households.
The Bill also takes action to ensure that income from assets is taxed more fairly, raising £2.2 billion in 2029-30 by increasing taxes on property dividend and savings interest income. The Government are narrowing the gap between taxes paid on work and taxes paid on income from assets. At the moment, for example, a tenant will pay national insurance on their income, and a landlord will not. With the extra 2p, we will be closing the gap between tax rates on landlords and on tenants. In 2029-30 around two-thirds of revenue from increases to dividend property and savings interest tax rates is expected to come from the top 20% of households. Importantly, there are choices we have not taken—choices that previous Governments have taken to borrow more in a fiscally irresponsible way, or to return to austerity, which would undermine our economy and society. We have also chosen not to increase the rate of corporation tax, and we have stuck to our corporation tax road map.
It is important that those with the broadest shoulders contribute more to protect our vital public services, and the Bill delivers previously announced reforms to tax wealth fairly, including a revised tax regime for carried interest. That sits wholly within the income tax framework to ensure that reward is taxed in line with its economic characteristics, removing the opportunity for individuals to use pensions as a vehicle for inheritance tax by bringing unspent pots into the scope of inheritance tax, and by reforming agricultural property relief and business property relief, while ensuring that any of the £1 million allowance for the 100% rate that is unused will be transferable between spouses and civil partners. Those decisions build on our action in the previous Finance Bill, including abolishing the non-dom tax status, ending tax breaks for private school fees, and raising the rates of capital gains tax. That currently raises £14 billion a year, with revenue expected to more than double to around £30 billion by 2030-31.
Fair choices also mean delivering justice for those affected by the infected blood scandal. The Government will extend the existing inheritance tax relief for infected blood compensation payments, so that if an infected or affected person has already died when compensation is paid, inheritance tax relief will instead apply on the death of the first living recipient of the compensation payment.
Fair choices in a Finance Bill also mean tackling serious reforms that have been ducked for too long. That means reforming tax reliefs that, while intentioned, have exploded in cost in recent years. This Government are reforming capital gains tax relief, which has allowed wealthy business owners to sell their shares without paying any capital gains tax. We are reducing the relief available for business owners who are selling their businesses to employee ownership trusts from 100% to 50%—a relief that the previous Government expected to cost less than £100 million a year in 2018-19, although published figures now show that the cost of the capital gains tax relief reached £600 million in 2021. Without any action, forecasts suggest that that could rise to more than 20 times the original costing, to £2 billion by 2028-29.
Several hon. Members rose—
Dan Tomlinson
I give way to the hon. Member for Keighley and Ilkley (Robbie Moore), who was the first to catch my eye on that occasion.
Robbie Moore
Business property relief impacts many family businesses across the country. What does the Minister say to Fibreline in my constituency, which has worked out that its BPR liability is about £850,000? The company employs 250 people in Keighley whose jobs are potentially at risk as a result of the business not being able to mitigate an inheritance tax liability that this Government are imposing on it.
Dan Tomlinson
Our proposals on APR and BPR mean that those with business or agricultural assets will have both the additional £1 million allowance and a tax rate that is half the rate that others within the system pay. My understanding is that the system will be more generous than the one in place before 1992, throughout the whole time that Margaret Thatcher was Prime Minister.
We are reforming the Motability scheme to end the VAT relief on top-up payments, which was a one-off payment required to lease more expensive vehicles on the scheme. We are also ending the application of insurance premium tax on leases to ensure that the scheme delivers value for money for the taxpayer, while choosing to continue to support disabled people.
We are introducing reforms to ensure that private hire vehicle operators will no longer be able to illegitimately exploit an administrative scheme intended for tour operators to pay a much lower rate of VAT than others.
Graham Stuart
The Minister is always both gracious and generous. Further to the point made by my hon. Friend the Member for Keighley and Ilkley (Robbie Moore) about the impact of BPR, imagine a company that is worth £11 million. It will have a £2 million BPR tax payment to make. The person who inherits the shares will not have that £2 million, so they will have to extract that money from the business. Am I right in thinking that that would require £3.3 million to be deducted and taken out of the company in order to pay that £2 million in tax? Is that in the right order?
Dan Tomlinson
I am happy to discuss those numbers with the right hon. Member in more detail, either afterwards or I can come in and discuss those points with him, although I did not quite follow all of the maths—[Interruption.] I thank Members on the Conservative Front Bench for their intervention about that.
Increasing taxes on online gaming and betting is another change that we are making in the Budget, with the rate for remote gaming increasing from 21% to 40% from April 2026, and the rate of remote betting increasing from 15% to 25% from April 2027, while choosing to protect in-person betting and horseracing, which plays such an important role in our sporting culture and many local economies.
Gareth Snell (Stoke-on-Trent Central) (Lab/Co-op)
The Minister will be aware that those rate changes will have a consequential impact on jobs, particularly in places such as Stoke-on-Trent, where thousands of people are employed by gambling companies. The rights and wrongs of gambling aside, there will be an impact on jobs. Is he willing to look at that issue with the industry going forward, so that we can mitigate the damage done to the sector and keep people in Stoke-on-Trent gainfully employed?
Dan Tomlinson
My hon. Friend is a strong advocate for his constituents and the businesses based in his part of the world. Those businesses contribute significant revenue to the Exchequer, and this Government are asking them to contribute a bit more in order for us to be able to continue to fund our public services in a sustainable way. I will continue to have conversations with him and others about the impact of the changes that the Government are announcing to this sector and others in the Budget and this Bill.
Alongside the choices I have mentioned, we are also taking action on the loan charge review. That will include accepting all but one of the recommendations of the independent review, and in some places going further than the review suggested. We are creating a new settlement opportunity to support those with outstanding liabilities to resolve their affairs with HMRC. This marks the start of a final opportunity to draw a line under this long-running issue. I sincerely and dearly hope for everyone involved that we will be able to move forward and that this issue can start to be part of people’s pasts, rather than a seemingly never-ending part of their future.
In tandem, we are delivering a package of measures to close in on promoters of marketed tax avoidance and help taxpayers to steer clear of the schemes that they promote. Those measures include a new prohibition on promoting avoidance arrangements that have no realistic prospect of success and new promoter action notices to require businesses to stop providing goods or services to promoters of tax avoidance where they are used in the promotion of avoidance.
Matt Rodda
The Minister is making an excellent point. May I commend him on his work on the loan charge? Many IT consultants in my constituency and across the Thames valley are grateful to the Treasury for looking into this matter. Many of them felt they were sold schemes that they did not always fully understand, and they are also grateful for the action to tackle inappropriate schemes being marketed at professional people. I thank him for his work on this matter.
Dan Tomlinson
That is very kind of my hon. Friend. I know that he and others on all sides of the House have made representations over many years on behalf of their constituents affected by the loan charge. I have met some of those affected and members of the all-party parliamentary group. In the months that I have been in this role, having been appointed only on 1 September, I have worked hard to ensure that we come forward with proposals that I hope will help to draw a line under this issue. I hope that those affected can see we have a reasonable and fair set of proposals that will help those who were subject to the loan charge to be able to come forward and to settle; I really encourage those individuals to come forward.
Alongside those changes, we are making steps to continue to close the tax gap by closing loopholes and removing barriers to ensure that people pay the tax that they owe, including raising an additional £2.4 billion in ’29-30 by introducing further reforms to pursue those who bend or break the rules to collect more unpaid taxes. We are also going to modernise the tax system to make it easier for taxpayers to get their tax right the first time. With the choices delivered in this Finance Bill, that will bring the total additional revenue raised by closing the tax gap in this Parliament to £10 billion by 2029-30.
My right hon. Friend the Chancellor has spoken about this Budget being
“a package, not a pick-and-mix”,
and that is so important for our public finances and our public services. Through this Bill, we are choosing to deliver long-overdue reforms to update our tax system so that it can work for a modern, dynamic and thriving economy, and funding vital policies such as the removal of the two-child limit, which will lift half a million children out of poverty.
This Bill is about delivering on choices: choices to protect working people; choices to cut energy bills, and to freeze train fares and prescription charges; choices to boost wages and reduce poverty; and choices to cut inflation to bring down mortgage costs. It delivers the Government’s commitment to this country to build a stronger and fairer economy in which living standards rise, to see child poverty fall, and to ensure that public services are improved up and down the country. With every measure in this Finance Bill being geared towards that goal, I commend this Bill to the House.
Conduct of the Chancellor of the Exchequer
Dan Tomlinson Excerpts(1 month ago)
Commons ChamberRead Full debate Read Hansard Text Watch Debate Read Debate Ministerial Extracts
The Exchequer Secretary to the Treasury (Dan Tomlinson)
I thank the Chief Secretary to the Treasury, my right hon. Friend the Member for Ealing North (James Murray), for his earlier remarks, which framed today’s debate rather well. As he set out, we have here an Opposition day debate, a chance for Members to really interrogate Government policy, to challenge our decisions, to say what they would do differently and to paint a picture of the kind of country that they would build if they were in charge. Oh, what a sight it would be! In short, an Opposition day debate is a chance to be a serious Opposition, but as my right hon. Friend set out in his opening remarks, they have not chosen to do that, instead preferring to rehash their already discredited complaints about process, which we have already addressed extensively, rather than talk about the Budget.
Dan Tomlinson
I am going to make some progress, if that is okay, because my hon. Friend will know that many other Members have not yet spoken and I might give way to them later.
It is worth recounting just how many times Conservative Members have chosen in the last few days to major on process rather than policy. They are very interested in what was said by whom and on what day, so let us recount it. On Wednesday 26 November, the Leader of the Opposition, in response to the Budget, raised process multiple times, introducing to Hansard the somewhat intriguing phrase “fiscal fandango”. No, me neither! Admittedly, this was immediately after the OBR had dumped the Budget just before the Chancellor stood up, so that is fair.
But then the Tory process paso doble—two can play at this game—really began. Thank you, everyone! On 27 November, the shadow Chancellor raised process in a Budget debate. On 2 December, the shadow Chief Secretary to the Treasury raised it in a Budget debate. On 3 December, the Leader of the Opposition raised it at Prime Minister’s questions. This was the same day that the Opposition called an urgent question on the resignation of the chair of the OBR, which had coincidentally happened during a statement two days earlier by the Chief Secretary to the Treasury on the OBR and its forecast. Yesterday, the Opposition Front Bench raised this at Treasury orals, and today we are having an Opposition day debate on the same topic after the Chancellor took questions on it this morning in the Treasury Committee.
All this political dancing has denied the Opposition the chance to scrutinise the Budget. I am not sure how much of it they have read. Let me remind them that the Budget will cut the cost of living, raise pay for those earning the least and invest in our NHS. It meets our fiscal rules and delivers £21.7 billion of headroom. It is a Budget that delivers on the promise of this Government and delivers for the British people. By contrast, the Opposition are stuck in the past, playing the songs of old again and hoping for a new audience.
Shaun Davies
There are 4,600 reasons in my constituency why this Budget is the right thing to do: 4,600 children who will be lifted out of poverty by the Budget. On the basis of the Opposition’s remarks, it is my understanding that the Conservative party would plunge those 4,600 children back into poverty as part of a £46 billion welfare cut if it were to win the next general election—as well as potentially scrapping the triple lock. Does my hon. Friend agree that that is morally bankrupt?
Dan Tomlinson
I agree with my hon. Friend, who is a strong advocate of ensuring that we do all we can to support people, lift people out of poverty, and grow our economy and our towns and cities across the country.
By contrast, the Opposition are stuck in the past, playing the songs of old again and hoping for a new audience. After a year and a half on the Opposition Benches, the Conservative party knows that all it has to offer the country is the same as it offered before: a reheated and not renewed set of Conservative policies, tax cuts for the wealthy, wages held down for the poorest, cuts to public services and a rise in child poverty.
The problem is not just that the Conservative party is playing the old tunes but that half the old band has jumped ship to join the more extreme party, which has not even bothered to show up to this debate. I do not know how the band will manage to perform without the likes of the hon. Members for Ashfield (Lee Anderson) and for East Wiltshire (Danny Kruger), Jonathan Gullis, Dame Andrea Jenkyns, Nadine Dorries, Ann Widdecombe, Sir Jake Berry, Mark Reckless, Maria Caulfield and Marco Longhi—those are just the Tory-to-Reform switchers I have heard of. There are many more who I think are probably as well known as I am, so I do have a soft spot for them. For completeness, let me remind the House of their service and their defection, too: Lia Nici, Chris Green, Anne Marie Morris, Graham Simpson, Adam Holloway, Alan Amos—
Graham Stuart
On a point of order, Madam Deputy Speaker. Last time I checked, this debate was supposed to be about the conduct of the Chancellor of the Exchequer. I know the Minister is relatively new to the Dispatch Box; perhaps he may need a little guidance.
Madam Deputy Speaker (Judith Cummins)
I thank the right hon. Gentleman for his point of order. I am sure the Minister has heard it and will return to his speech.
Dan Tomlinson
Indeed; I heard the point of order loud and clear. It is worth remembering that this is an Opposition day debate—I think it is within the remit to talk about the Opposition and the fact that they have lost all their players to the other team.
I also think it is time to move on from talking about process, because on this side of the House, we have a country to run, an economy to build and public services to mend. Instead of this subject, we could have talked about whether it is right to raise wages for those on the lowest incomes, but the Opposition did not want to bring that up. Maybe that is because wages have risen faster in the first 10 months of this Government than they did in the first decade of the Conservative Government, or maybe it is because it turns out that their latest policy is a real-terms cut to the living wage. We could have talked about the cost of living, but again, the Conservatives did not choose that as a topic because its mini-Budget crashed the economy and added thousands of pounds to mortgages, and since this Government have come to power, the Bank of England has cut interest rates.
Rachel Hopkins (Luton South and South Bedfordshire) (Lab)
The Minister makes a point about the previous disastrous mini-Budget of September 2023. The shadow Chancellor, the right hon. Member for Central Devon (Sir Mel Stride), said at that time,
“I welcome much in this statement. There is a great deal that will help millions of families and businesses up and down the country.”—[Official Report, 23 September 2022; Vol. 719, c. 942.]
Does the Minister agree that the reason the right hon. Member focused on process is that his judgment on policy is so poor?
Dan Tomlinson
I agree entirely with my hon. Friend. Too many Conservative Members defended the mini-Budget, which crashed the economy and added thousands of pounds to mortgages. In contrast, since this Government have come to power, the Bank of England has cut interest rates five times, taking £1,200 off a typical two-year fixed rate mortgage. At this Budget, we cut £150 from the average energy bill, froze rail fares and prescription charges, and extended bus fare caps and fuel duty cuts, but the Conservatives do not want to talk about that either. They could have chosen in their Opposition day debate to talk about fiscal stability and increased headroom, but again, they chose not to do that because of the £21.7 billion of headroom that the Chancellor secured at the Budget, which will help protect our country from global shocks and unforeseen challenges.
Of course, the Conservatives do not want to talk about child poverty either because they know that this Budget has lifted 550,000 children out of poverty, whereas the last Government were content to leave them, preferring instead to rebrand the hungry children who they let down while in power as benefit scroungers. They should be treated as our future, not as our opponent.
I have a couple more minutes, so let me address some of the points made during the debate. I thank the Liberal Democrat spokesperson, the hon. Member for St Albans (Daisy Cooper), for engaging on policy. We have had conversations on business rates already this week, and I am sure that we will have more. We have begun the work to rebalance the system with a £900 million switch from the highest value properties to those on the high streets.
I thank my hon. Friend the Member for Harlow (Chris Vince) for his Thatcher quote. It was a good quote that bears repeating. She said,
“I always cheer up immensely…if they attack one personally, it means they have not a single political argument left.”
I thank the hon. Member for West Worcestershire (Dame Harriett Baldwin) for going through every single tax change and saying that she opposes them all. That is the sort of opposition we have got used to. Rather than constructive opposition, which comes forward with proposals that would raise revenue in a fair way, such as the changes on electric vehicle excise duty, which will stop us losing £12 billion of fuel duty revenue in the coming years, we just hear, “No, no, no,” over and over again. I thank my hon. Friend the Member for Loughborough (Dr Sandher). His experience in economics is richly valued in this place, and I enjoyed his speech, as I always do.
Finally, it has been a short debate, has it not, Madam Deputy Speaker? I am glad that the right hon. Member for Beverley and Holderness (Graham Stuart) took the time during the debate to read the Labour manifesto—that was much appreciated—and that he was able to clarify for the House that my right hon. Friend the Chief Secretary was right to say that we have stuck to our manifesto commitment.
James Wild
To bring the Minister back to the debate, it is about honesty and the real-world consequences of the briefing that happened around the Budget. Does the Treasury accept that hundreds of thousands of people drew down their pensions, which is an irrevocable decision—yes or no?
Dan Tomlinson
What the Treasury does accept is that at this Budget, the Government had to make the decisions to ensure that we could increase our fiscal stability and get borrowing falling in every single year. The previous Government were not able to control our public finances, and yet in every year of this forecast, borrowing will be falling, and we have more than doubled our headroom to £21.7 billion.
Dr Arthur
I always try to be helpful, and I thank the Minister for giving way.
There was a lot of speculation about the Budget, but a lot of that came from the Opposition Benches. Every single clickbait headline was repeated in the Chamber to fuel speculation. It was incredibly damaging—does the Minister not agree?
Dan Tomlinson
I agree that the Opposition are incredibly damaging for the economy.
The clean-up operation of the disaster zone that was the last 14 years is well and truly under way. Our economic plan is working, with growth up, employment up, interest rates down and borrowing falling, with a Labour Budget focused on the British people delivered by a Labour Chancellor making the fair and right choices. We reject this absurd monologue of emotion from the Conservatives, and we will stick to our plan for a better Britain.
Question put.
Oral Answers to Questions
Dan Tomlinson Excerpts(1 month ago)
Commons ChamberRead Full debate Read Hansard Text Watch Debate Read Debate Ministerial Extracts
Sir Ashley Fox (Bridgwater) (Con)
The Exchequer Secretary to the Treasury (Dan Tomlinson)
The Chancellor was clear at the Budget that we are taking the fair and necessary decisions on tax to do all we can to ensure that the contribution of working people is kept as low as possible. We have reduced the gap between taxes on income from assets and on income from work, stopped the unfairness that meant people could pay less council tax for a £10 million property than for a typical terraced house in much of England, and done much more.
John Lamont
There seems to be only one word that the Chancellor understands: tax. Her decision to continue the freeze on income tax thresholds is a hammer blow to working people. In fact, even one of the Chancellor’s favourite unions, Unison, has said:
“Freezing personal income tax thresholds disproportionately impacts lower and middle-income workers.”
Does the Chancellor agree with the Labour party’s union paymaster?
Dan Tomlinson
I am a bit confused by that question. The hon. Member said there was one word that was important. Let me give him one figure: £150. That is the amount we are taking off energy bills next year to help people to deal with the cost of living in the here and now. We are supporting people because of the mistakes that previous Governments made by not investing in our energy infrastructure and not investing in our future. We are picking up the pieces after the Conservatives did not take the necessary decisions.
Sir Ashley Fox
Extending the freeze on income tax thresholds will cost working families £900 a year. It will also drag many pensioners into paying income tax for the first time. Why is the Minister hitting these low-income families to pay more for welfare?
Dan Tomlinson
I suggest the hon. Member asks his Front Benchers why 75% of the impact of people paying more tax at the lower end is the result of decisions made by the previous Government, who spent seven years freezing income tax thresholds. It is a bit rich for the Conservatives to talk about this Government doing it for three years when they did it for seven years.
Martin Rhodes (Glasgow North) (Lab)
What assessment has the Minister made of the impact on working people of the historic increase in the living wage?
Dan Tomlinson
We have chosen to uplift the national living wage and the national minimum wage so that those on low incomes are properly rewarded for their hard work. It will benefit 2.7 million people, including many people in my hon. Friend’s constituency and across the whole country. I thank him and Members—particularly those on this side of the House—for their support in making sure that we can make work pay up and down the country.
Mr Jonathan Brash (Hartlepool) (Lab)
Pensioners in my constituency of Hartlepool who rely solely on the state pension have shared with me their concern that freezing the tax threshold will draw them into paying tax. Can the Minister confirm what the Chancellor has already said publicly, which is that pensioners who rely solely on the state pension will not be taxed during this Parliament?
Richard Fuller (North Bedfordshire) (Con)
The Minister said this was “fair”—no, no, no. Perhaps breaking the election promise on tax thresholds is the reason why, by two to one, the public view the Budget as unfair, just 3% think it will make them better off, and two out of three think things will get worse. Does the Minister want to tell the public they are wrong, or will he explain to the House why this Budget has been received so badly by the British people?
Dan Tomlinson
The Conservative spokesperson talks about fairness. Let me just identify one element of unfairness he left in the tax system that this Government is correcting, and it is a popular measure when we look at the views of the public up and down the country. We on this side of the House do not think it is fair that someone in a £10 million property can pay less council tax than someone in a typical terraced house in his constituency, my constituency and constituencies across the whole of England. We are making that change to make things fairer in this country.
Jack Rankin (Windsor) (Con)
Wera Hobhouse (Bath) (LD)
The Exchequer Secretary to the Treasury (Dan Tomlinson)
Small and medium-sized businesses are vital to our economy and our communities, and the Government’s small business strategy, published in July this year, sets out our approach to supporting them. As temporary pandemic business rates relief ends and the new revaluation comes into effect, we are supporting the high street with £4 billion-worth of support through transitional relief and our supporting small business schemes, as well as through our long-term reforms to permanently lower the multipliers for eligible retail, hospitality and leisure properties, and support them with a significant package that will cap most of the increases this year for those who have seen large increases since the pandemic.
Sir Julian Smith
Last week, Skipton was voted the happiest town in Britain to live in. One of the reasons for that—[Hon. Members: “Is you!”]—is its hospitality sector. Through covid, energy cost rises, national insurance rises and other challenges, that hospitality sector is facing massive challenges. I urge the Government to look again at reliefs and multipliers. Over the weekend, so many pubs and hotels raised with me the fact that they are not going to invest. We need the growth and we need the jobs. Will the Government look at how they can make things easier for the pub and hospitality industry?
Dan Tomlinson
If I had a such a charming Member of Parliament, I would also be as happy as his constituents in Skipton. I thank him for his question. We considered the support really carefully in advance of the Budget decisions announced last month. There is a challenge in that the revaluation, which was instigated by the previous Government and is carried out independently by the Valuation Office Agency, means that some businesses have seen their values increase significantly since the pandemic. That is why the Government are putting in £4 billion of support over the coming years, with around half of that coming next year to support businesses. Many will see their increases capped at either £800 or 15%. We think that that support will provide significant help to those businesses, alongside the underlying reform we are making to rebalance the system in favour of the high street.
Wera Hobhouse
May I give the Minister another example in which the numbers simply do not stack up? Mr B’s independent bookshop in Bath will see its business rates bill rise by more than 70% after factoring in changes to rateable value. The changes were packaged as a move away from short-term fixes, yet vital discounts have been scrapped and replaced with less-generous support and an unclear transitional relief system. How can he justify such a stark increase in business rates? It is a challenge for Bath’s cherished bookshops—we have three—which we want to support.
Dan Tomlinson
It is important that we all communicate to the small businesses in our constituencies, as I was doing this weekend, that there is a difference when it comes to the increase in the rateable value. It may be that the business to which the hon. Lady refers—I like good small independent bookshops myself—has seen a large increase in its value since the pandemic, but precisely because that has happened in some cases, we are implementing a significant support package this year. That will mean that no business that has a rateable value of less than £100,000 will see an increase in its bills of more than either 15% or £800. There is a bit of a technical detail there, which I would be happy to go into with her, but the important thing is that there are significant protections on bills in place this year, even if rateable values have increased significantly since the pandemic.
Clive Lewis (Norwich South) (Lab)
In Norwich there is a saying: there is a church for every Sunday and a pub for every day of the week. After 14 years of austerity, the numbers are a lot lower. After this Budget, many pub landlords—small and medium-sized businesses—tell me that we are not going far enough, and that many of them will go under. They need more support, and they need it soon. If the changes go through, I fear that Norwich will not have that saying at all; we will have hardly any pubs. Can we not put more of the burden on the pub companies and big corporations, which should be paying their fair share, rather than on the small and medium-sized businesses and small pub landlords, who cannot pay what is coming at them?
Dan Tomlinson
One of the things we announced at the Budget is a rebalancing in the system away from properties that have large rateable values and towards the small businesses on our high streets. That shift from the large to the smaller properties is worth almost £1 billion and supports them in the business rates system, as part of our work to reform business rates and support our high streets.
Ruth Cadbury (Brentford and Isleworth) (Lab)
I welcome the Government’s support for our high streets and the consultation on the business rates system, which the Treasury launched on 25 November. But it is not just high streets that are suffering. Under the current system, major transport infrastructure owners face crippling bills: Eurotunnel’s business rates valuation has tripled from 2017, so it has cancelled investment in its international freight hubs, and Heathrow Airport’s business rates bill will increase by millions of pounds. Will the Treasury’s consultation on 25 November give transparency and predictability—
Mr Speaker
Order. The hospitality sector might use the rail industry, with freight, so I am sure we can get something on that.
Dan Tomlinson
I am sure that many of us do jump on the train to support our hospitality businesses. The consultation that my hon. Friend mentions, which we published on the day of the Budget, is an important piece of work. Chapter 4 of our call for evidence on how we can reform business rates to support investment will be important. We recognise that airports and other large infrastructure are valued in a different way from other business properties, and we want to look at the changes that we can make to support those businesses, which have seen very significant increases in their rateable values. Under the scheme that we have announced, they will of course be capped as well.
James Wild (North West Norfolk) (Con)
The Chancellor promised a new golden era of hospitality, but the reality of her business rates raid, as the British Beer and Pub Association has said, is
“sleepless nights, pay cuts and staff layoffs”
for publicans, who will be paying an extra £13,000 on average. Why did the Chancellor tell businesses last week that their taxes were going down when they are going up, and will she think again and change the multipliers?
Dan Tomlinson
The multipliers are a product of the change in the valuation, and they did come down. We brought them down even further for retail, hospitality and leisure businesses. Without intervention this year, the bills paid by pubs would have increased by 45% as a result of the increase in value since the pandemic; because of this Government’s significant intervention this year, bills are going up by 4%. That is the impact of the changes this Government have made.
Dan Tomlinson
We have set out our plans to reduce the multipliers for retail, hospitality and leisure properties, which is a rebalancing in the system. It means that those businesses—particularly the smallest RHL properties—face the lowest tax rate in the system since 1991. At the same time, there is—[Interruption.] The hon. Lady shakes her head, but the tax rate is the lowest it has been since 1991. At the same time, there has been an unwinding of the reduction in values going into the pandemic, and because we are seeing a recovery and businesses are bouncing back, and their properties are worth more, there has been an increase in the values. We are spending £2 billion this year to cap those increases at either 5% or 15% for many of those businesses up and down the country.
Kevin Bonavia (Stevenage) (Lab)
Matt Vickers (Stockton West) (Con)
The Exchequer Secretary to the Treasury (Dan Tomlinson)
Let us be clear: nobody’s business rate bills are trebling. If businesses come to talk to us about increases in their rateable values because of the unwinding of the effect of the pandemic, it is important that all of us, on both sides of the House, are clear that the Government have put in support to ensure that pubs and those that have seen their values go up will not see increases next year. If the pubs rateable value is more than £100,000, they will be capped at a 30% increase. If it is less, they will be capped at 15% or £800. That is £4 billion of support that this Government are providing.
Tom Hayes (Bournemouth East) (Lab)
An independent and effective OBR is critical for our country, but it needs to do better. Why can the OBR not count? Why can it not forecast accurately, given that the economy grew 50% faster than it had predicted in March? Why can it not even publish the Budget document without making a dog’s breakfast of it? Is it not time for the OBR to properly price pro-growth measures and get behind our growth mindset?
Alison Bennett (Mid Sussex) (LD)
Dan Tomlinson
At the Budget, we came forward with a revision to the policy to support people whose spouses have already passed away, and we made the allowance transferable between the spouses. That change will reduce the number of farms affected by the agricultural property relief changes from about 500—as was estimated at the previous Budget—to 375, when coupled with changes to the underlying economic forecast. The policy raises money from those with the largest estates in a fair way, and I encourage Members in all parts of the House to consider whether or not—
Alison Hume (Scarborough and Whitby) (Lab)
Alexander Dennis is a British electric bus manufacturer employing more than 700 people in Scarborough. Major bus contracts are due to go live in early 2026. Will the Minister confirm that this Government are backing British-built buses over Chinese imports, and can he confirm that the changes to public procurement processes will be implemented in time for taxpayers’ money to be spent on buying British buses?
Dan Tomlinson
I thank my hon. Friend for her question and her continued campaigning on this issue, which I know is important to her constituents. On those who seek to bend the rules, companies like Airbnb now send data to His Majesty’s Revenue and Customs on all their hosts, and where hosts fail to provide the detail that HMRC requires, Airbnb stops payments until they do. However, we need to go further, and I will meet my hon. Friend to discuss this.
Simon Hoare (North Dorset) (Con)
In the hope that the Government had listened to the National Farmers’ Union and others, a North Dorset farming family sat to watch the Chancellor’s Budget statement, in expectation. They were disappointed with the announcement on the family farm tax. The farmer withdrew from his medical treatment, and three days later he died. That is how determined he was to keep the farm in his family. He knew the struggle that they would have had in meeting the tax bill after 1 April. I share that not to be inflammatory, but to ensure that Members on the Treasury Bench know that their decision on the family farm tax has direct consequences for people up and down the country.
Dan Tomlinson
Members on the Treasury Bench are fully aware of the fact that changes to inheritance tax have an effect on those who are older. In the changes to both agricultural and business property relief that we have put forward, we have ensured that there is a higher allowance, with an extra £1 million, and a tax rate that is half as low as everyone else pays. We think that these reforms, which raise money in a fair and sustainable way, will contribute to raising the revenue that we need, in a way that protects family farms. Of course, we understand that there will be impacts on people. That is why we have designed the policy in the way that we have, and why we came forward with the changes that we announced at the Budget just a few weeks ago.
Rachael Maskell (York Central) (Lab/Co-op)
Independent businesses in York are really struggling with the revaluation of business rates. In 2024 they were £6,200; in 2025 they are £15,000; and in 2026 they will be £19,100, after discounts. Will the Minister meet representatives from York High Street Forum to understand the challenge of those rates for my city?
Dan Tomlinson
I am happy to speak to my hon. Friend about the issues that she raises in her constituency.
Rupert Lowe (Great Yarmouth) (Ind)
The Chancellor has embarked on a Fabian programme of brutal tax-and-spend economics that might please the dwindling number of Labour voters, but is hollowing out the nation’s productive base. Those who take risks, invest long term and create high-quality jobs are increasingly voting with their feet. Record numbers of top earners—the rain-makers who actually bankroll public services—are leaving the UK for good, taking their wealth and, more importantly, their brain power with them. Does the Chancellor even begin to understand the lasting and irreversible damage that she is causing to the British economy?