Business Rates: Retail, Hospitality and Leisure

Dan Tomlinson Excerpts

Monday 19th January 2026 Commons Chamber

[Sir Mel Stride (Central Devon) (Con)]

(Urgent Question): To ask the Chancellor of the Exchequer if she will make a statement on the planned changes to business rates for the retail, hospitality and leisure sectors.

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

Colleagues will have heard what the Prime Minister and the Chancellor have said on this matter in recent days. I will not add further comments on the specifics in responding to this urgent question. When there are further comments to be made, I am sure they will be made in the usual way.

At the Budget, the Government announced a comprehensive set of reforms to business rates. We have created a new, sustainable system with permanently lower multipliers for retail, hospitality and leisure businesses. Business rates are, in line with the usual timelines, revalued every three years, and new valuations that were set in train by the previous Government come into effect in April.

It was right to support businesses during covid, but the previous Government went into the election with plans to scrap the temporary support entirely in 2025. If they had won re-election, they would have removed that support overnight last April. If the Opposition had intended to extend the relief, why did they not say so and why was that not included in their forecast or projections?

We on this side of the House have chosen a different path: we extended the support at a lower rate in 2025-26 and are slowly unwinding it over the coming three years, with the help of £4.3 billion of transitional support. I think all Members can agree that it would not be sustainable for a £1.7 billion annual temporary covid tax relief to remain fully in place at the end of the decade. At the same time, our reforms—[Interruption.] I am glad someone is enjoying them. Our reforms to rebalance the underlying design of the business rates system towards high street businesses will be implemented in April.

The new, lower tax rates will be introduced for 750,000 RHL businesses, funded by a higher rate on the most valuable properties, including for the online giants. That is worth almost £1 billion and means that smaller high street businesses will have a tax rate that is 25% lower than businesses with the largest properties. That is being supported by a significant support package, as I said, worth £4.3 billion over the next three years. As a result, over half of ratepayers will see their bills flat or falling next year, and around a third of properties pay no business rates at all, as they receive 100% small business rate relief.

I look forward to supplementary questions from the shadow Chancellor, the right hon. Member for Central Devon (Sir Mel Stride), and other Members, and I look forward to seeing whether the shadow Chancellor can keep a straight face, given that he knows his Government never did enough for our high streets: 7,000 pubs closed over the 14 years the Conservatives were in power; shops were shuttered on high streets up and down the country; the council services that keep our high streets clean and vibrant were cut to the bone; investment was down; and the public suffered from the longest squeeze on living standards on record. That is the legacy for our communities—one that we are turning around.

[Sir Mel Stride]

That was a complete non-response. The Minister says he will make a statement in future in the usual way; we can only assume that that will be via the media, not this House.

Of all the excuses for a U-turn that we have heard from the Government, this one beggars belief. The Minister expects us to accept that the Government simply did not know what the impact of the changes would be when they announced them. That is astonishing. Why did they announce crippling rises in business rates without bothering to check who would be hit the hardest?

Worse still, we now know from the chief executive of the Valuation Office Agency, who appeared before the Treasury Committee last week, that Ministers were provided with the data on revaluations before the Budget. We are left with questions not only about whether the Government’s excuse is reasonable, but about whether it is indeed correct. Can the Minister clarify what specific information was given to Ministers on the level of increases that businesses would be facing, and when?

Businesses are now in a terrible limbo over what their bills will look like in the coming years. The Government have indicated that changes will be announced for pubs at least, but there has been no official statement, which is why we have had to drag the Minister to the House this afternoon, so will he answer the following additional questions?

Can the Minister at least make it clear which sectors will be in line for further support? Will it be just pubs? If so, why are the Government refusing to help businesses in the wider retail, hospitality and leisure sectors, some of which are seeing even higher rates increases? Will the new support be a temporary or permanent cut in bills, as we have called for? How much will it cost, and will it be funded by yet more Government borrowing? Will the Minister apologise now to the thousands of local businesses up and down our country that have been so sorely let down by this shambolic Labour Government?

[Dan Tomlinson]

The shadow Chancellor said that I was dragged to the House, but that is very much not the case; I am very happy to take questions from him and from Conservative and Government Members.

[Mr Speaker]

May I help the Minister a little bit? I did grant this urgent question. This discussion would not have happened if I had not done so. I am not quite sure that his statement and mine are compatible.

[Dan Tomlinson]

I fully respect your decision to grant an urgent question, Mr Speaker. It was—[Interruption.]

[Mr Speaker]

Order. I certainly do not need any help from Opposition Members.

[Dan Tomlinson]

It was the word “dragged” that I had some objection to. I did not mean to comment on your decision to grant the urgent question, Mr Speaker.

Let me answer some of the questions asked by the shadow Chancellor. The key thing is that we are implementing the revaluations that his Government set in train. Treasury Ministers holding a similar role to mine a good few years ago undertook the process for the revaluations that will be in place from April 2026. Those are set on property values from 2024.

Yes, there is an unwind from the pandemic, in terms of increases in businesses’ property values as a result of businesses recovering from the pandemic. We were aware of the impact of the valuation, and of the fact that the previous Government did not have any plans whatsoever to extend the temporary pandemic support. We extended it for one year, and over the course of the next three years we are phasing it out, with the support of Government decisions worth £4.3 billion, and our transitional relief scheme.

I will not comment on speculation, but the shadow Chancellor referred to borrowing. Over the course of this Parliament, we will see the fastest reduction in borrowing of any G7 economy. Borrowing is set to fall in every single year of the forecast because of the decisions that the Chancellor took at the Budget. We have doubled our headroom against our fiscal rules, and we are seeing a warm response from private sector investors and the markets as a result of the decisions that the Government have taken.

[Mr Speaker]

I call the Chair of the Treasury Committee.

[Dame Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)]

Many pubs in my constituency are seeing eye-watering increases in business rates. We know from the Valuation Office Agency, which gave evidence to the Treasury Committee last week, that the formula used is the same formula that has been used for 20 years. This should have been no surprise, as the shadow Chancellor said, yet we learned in that meeting that more than 2,000 pubs have had their business rates doubled. This Government came in with a mission to transform business rates, and they came in part way through a valuation cycle. Aside from the question of what will happen to the hospitality sector, where are the plans for the reform of business rates in the medium to long term?

[Dan Tomlinson]

I thank my hon. Friend for her leadership of the Treasury Committee. At the Budget, we set out the first significant fundamental reform of the business rates system that we have ever seen. For the first time, there is a very significant divergence in the tax rate paid by businesses on our high streets and by the very largest businesses, including online giants. The tax rate is around 13p lower for high street businesses than it is for the largest businesses. That is a 25% reduction, which cost around £1 billion. It is a £1 billion reduction for businesses on the high street, paid for by higher taxes on those who can most afford it.

[Mr Speaker]

I call the Liberal Democrat spokesperson.

[Daisy Cooper (St Albans) (LD)]

These business rates changes will hammer high streets, and with the jobs tax on top, many businesses have already decided to shut up shop. Getting data out of the Government has been like getting blood from a stone; every question I am about to ask, I have asked before, but let me try again. Why did the Government set the expectation that they would reduce the business rates multiplier by the full 20p discount for retail, hospitality and leisure, and then not use the maximum power that they gave themselves to do that? Do they accept that lots of small businesses have made investment and hiring decisions based on the expectations that this Government set, and will they apologise to those businesses for raising their expectations and then dashing them? Can the Government finally tell us how many business premises have been brought into paying business rates for the first time?

Last Tuesday, we learned that that the Valuation Office Agency had sent the Treasury data drops regularly over the past 12 months. What did Ministers know, and when? The VOA also confirmed that it had told the Treasury that more than 5,000 pubs would see their business rates double, so how is it possible that Ministers did not know that this would happen? Finally, whatever the Government are considering, can they confirm that it will apply to all hospitality businesses and not just pubs, and will they consider our fully costed Liberal Democrat plan for an emergency VAT cut for hospitality?

[Dan Tomlinson]

On the point about 20p versus 5p, we legislated for a reduction in the multiplier of up to 20p for retail, hospitality and leisure businesses, but that did not set an expectation that we would go that far; it set the bounds within which the Government could choose to operate. As the first step in our significant reform to the business rates system, we chose to reduce the multiplier by 5p, which reduces the total taxes paid by RHL businesses by almost £1 billion and increases the tax take from the largest businesses by an equivalent amount.

The answers to many of the questions that hon. Members ask are very easy to find in the data published by the VOA. Detailed breakdowns of the change in the value of properties between the different revaluation periods are published on the Government’s website. I will not take—I will not say “lectures”—suggestions from Liberal Democrat Members on VAT, given that when they were in power, they and the Conservatives chose to whack up VAT, a decision that pushed up inflation and added to the cost of living for people up and down the country.

[Liam Byrne (Birmingham Hodge Hill and Solihull North) (Lab)]

The £4 billion package in the Budget is very welcome, but the manifesto commitment was to replace the business rates system, not tinker with it or subsidise it. Pubs alone will see bill increases of 4% this year. Alongside that, VAT thresholds are strangling hospitality businesses on the high street, and that is on top of a tax compliance bill of £25 billion for small business, not least because His Majesty’s Revenue and Customs does not answer 4 million phone calls a year. I repeat the question posed by my hon. Friend the Member for Hackney South and Shoreditch (Dame Meg Hillier), the Chair of the Treasury Committee: when will the Government table comprehensive, radical reform that meets the test of the manifesto commitment?

[Dan Tomlinson]

At the Budget, we published further updates on our broader work to transform the business rates system. There are things that we want to look at—for example, a switch from a slab system to a slice system, which should support and encourage investment. As was confirmed by the Chancellor at the Budget, we have already extended small business rate relief, so that businesses do not face a disincentive to expand from one premises to two premises, but there are more things that we want to look at that are in that consultation. Of course, we will continue to engage with businesses on our high streets up and down the country, and with businesses large and small, to see what more we can do to continue our work of reforming and improving the business rates system.

[Sir Gavin Williamson (Stone, Great Wyrley and Penkridge) (Con)]

Some of my publicans are facing a threefold increase in rates. They have seen the speculation that the Treasury has briefed out to the newspapers, but they are still waiting. They do not have long to wait before they have to pay these increased bills, though, so can the Minister give some indication of when there will be clarity—not just for publicans, but for retailers?

[Dan Tomlinson]

It is important to be clear that no pub will see their business rates bill go up by three times this year. [Interruption.] No, it is simply not the case. It is true that some businesses have seen significant increases in their valuations, but this year the Government are capping the increase in business rates bills at either £800 or 5%, 15% or 30%, depending on the size of the property. Yes, bills may be higher, and it could be by a large percentage if the rate is moving up by £800, but for the vast majority of businesses, the increase in their bills this year will be limited, due to the Government having intervened and provided more than £2 billion of support this year.

[Cat Eccles (Stourbridge) (Lab)]

I welcome noises from the Department about additional support for pubs, but this is not just about pubs; it is about all hospitality businesses, including music venues such as Claptrap the venue and Katie Fitzgerald’s in my constituency. They have been massively impacted by a perfect storm of new valuations by the Valuation Office Agency, the end of covid-related reliefs and rising energy costs. I also want to mention service-based industries, such as hair and beauty salons and indoor play centres. These businesses have limited opportunities to claim back VAT, as labour is their highest cost. When the Government consider additional support measures for hospitality, please can they ensure that all businesses are included?

[Dan Tomlinson]

Hospitality businesses are the cornerstone of our communities, providing life and vibrancy to high streets up and down the country. The Government are committed to continuing to support their growth and their success. We value the work that employees in that sector do—I believe that around 2 million people work in hospitality across the country—and the work of business owners who seek to grow and expand their hospitality businesses. Precisely because we value their work and the work of businesses on the high street, we fundamentally redesigned the transitional relief scheme, so that it takes the 40% reduction in bills as its jumping-off point. That reduction is a result of this Government’s decision to extend the pandemic-related relief. The previous Government had not costed or funded that, and they would have ended it overnight if they had won the general election in 2024.

[Dame Harriett Baldwin (West Worcestershire) (Con)]

The problem is that the November Red Book stated:

“The high street will benefit from permanently lower business rates for retail, hospitality and leisure”.

Businesses up and down the land think that was entirely misleading. We have had briefings to the newspapers that there will be a change, but the Minister is saying that that is not happening, and that change will be made through the normal processes, which I interpret to mean in the next spring statement. Those in businesses are lying awake at night, worried about these increases, so can the Minister tell them when relief will be on its way?

[Dan Tomlinson]

The changes at the Budget led to a reduction in the tax rate paid by businesses on the high street. That was a result of the reforms that this Government have brought in. We have been clear about the need to start the work to rebalance the business rates system to support our high streets. Because the pandemic relief is being unwound over the coming years—something that the previous Government would have done overnight in 2025, had they won the general election—and because of the increase in business rate values as we come out of the pandemic, some businesses are seeing increases in their bills. We have capped those increases significantly this year and over the coming three years, providing £4 billion of support. On the hon. Member’s point about updates being made in the usual way, it is of course possible for Ministers to make statements in the House.

[Mr Toby Perkins (Chesterfield) (Lab)]

My hon. Friend is absolutely right to say that the Opposition have no credibility on this issue. We know that had they won the election, either we would have seen these increases quicker, or the black hole would have been even bigger. None the less, it is true that many pubs are really concerned, and are under the impression that further help is coming. They are trying to make accounting decisions right now. Can he say any more about whether their bills will be exactly what they are expecting right now, or whether further help will come before April?

[Dan Tomlinson]

I am grateful to my hon. Friend for making the important point that the last Government had no plans to continue to extend the pandemic support. As for his other question, I will not comment today on the speculation. He and others can see the words that the Prime Minister and the Chancellor have said about this matter at the Dispatch Box and during various media interviews, and I have no more to say about it.

[Bobby Dean (Carshalton and Wallington) (LD)]

As has been mentioned, in its manifesto Labour committed itself to reforming the business rates system, and the Red Book for the Budget referred to

“permanently lower business rates for retail, hospitality and leisure”.

That will have given business owners the impression that their bills would be lower. The Government’s get-out about the rates being low, when they knew that transitional reliefs were being phased out and rateable values were rising substantially, is not cutting it with businesses that made plans accordingly. Last week, we on the Treasury Committee heard from the Valuation Office Agency that the Government had known for more than a year about the size of the increase in rateable values, so why has this backlash taken them by surprise?

[Dan Tomlinson]

As I have said, the Government were aware that a revaluation was taking place. That revaluation, which was initiated by the last Government, took account of property values in 2024, and will be in place from April this year. We were also aware—and Members in all parts of the House would probably agree on this—that by the end of the decade it would not be appropriate to retain the full pandemic relief almost 10 years after the height of the pandemic. In the round, as a result of those decisions, we came forward with a significant package of £4.3 billion of protection for businesses across the country—large and small, high street and non-high street—to help them adjust to the potential for higher bills that some are experiencing. Let me add that, as I said in my opening remarks, the business rates bills of about 50% of businesses are either flat or falling.

[Rachael Maskell (York Central) (Lab/Co-op)]

Pubs have a powerful lobby, unlike the independents on our high streets such as cafés and retail outlets. I have been poring over the spreadsheets showing the impacts that this will have on York. Some little retail outlets are seeing their business rates rise by 93%, and they simply do not have the resilience to deal with it. What will the Minister do for independents to ensure that they survive past March this year?

[Dan Tomlinson]

York high street, in my hon. Friend’s constituency, is a beautiful and wonderful place where there are many fantastic businesses. I worked there for a time. I know that Members in all parts of the House value the businesses that keep their high streets vibrant and thriving. We are taking steps, and we took steps in the Budget, to support high street businesses through our £4.3 billion of support, and we will continue to engage with Members and with businesses on the further steps that we can take to support them.

[Paul Holmes (Hamble Valley) (Con)]

The Minister is talking in numbers, but out there on the doorsteps and in the streets and high streets, I have met a café owner and a publican whose businesses are busier than ever—they are selling more drinks and more food—but whose top line is shrinking because of the decisions being made by this Government. One landlady was in tears as she spoke to me about whether she should carry on, directly because of this Government’s policies. What advice would the Minister give her?

[Dan Tomlinson]

I hope that when the hon. Member was conversing with businesses in his constituency, he explained that this year, if a pub has a rateable value of less than £100,000, the policy as set out in the Budget will have capped those increases at 15%. I think it important for Members to do all that they can to help business owners pick through the complexities of the business rates system. It is a complicated system: there are many different reliefs, and there is a difference between the tax rates that are paid, the relief that is applied and the rateable value of the property. Of course some businesses are seeing their rateable values increase as we unwind from the pandemic, but that is precisely why the Government included that package of support in the Budget.

[Kim Johnson (Liverpool Riverside) (Lab)]

The hospitality and leisure sector in Liverpool is one of the largest employers and contributes significantly to the local economy. However, it is facing significant challenges at the moment, with the average hospitality business facing an increase of more than £48,000 in business rates over the next three years—double the national average, and a serious threat to sustainability. That is compounded by a 20% VAT rate, which is one of the highest in Europe. By comparison, Germany has reinstated a rate of 7% to support its sector. Can the Minister explain what targeted support will be provided to safeguard jobs, and to prevent closures and redundancies, in the hospitality and leisure sector in Liverpool? Will he please come to Liverpool to speak to business owners?

[Dan Tomlinson]

When I am up at the Labour party conference, I like to enjoy the pubs and hospitality available in Liverpool. It is a fantastic and vibrant city, and I know that the constituencies and areas in the middle of the city have some of the highest numbers of pubs and hospitality businesses in the country. Like me, my hon. Friend really values those businesses, the work that business owners do and, of course, the work that their employees do—they can be quite tough and demanding jobs.

We want to support hospitality, which is why the Government redesigned the transitional relief scheme at the Budget so that it applies a 40% reduction as the baseline, rather than unwinding the support in full, as the previous Government would have done overnight. We also said at the Budget that we will appoint a retail, hospitality and leisure envoy, and I look forward to that announcement in due course.

[Several hon. Members rose—]

[Monica Harding (Esher and Walton) (LD)]

Perhaps the Prime Minister, on his much-heralded cost of living tour, might like to visit the pubs and cafés in my constituency of Esher and Walton, if they let him in. They are being squeezed to breaking point by this Government, while constituents watch their wallets because of tax rises. Hospitality venues are the lifeblood of my high street and create the jobs we need for young people. Will the Government act now by fully using business rates relief and introducing an emergency VAT cut for hospitality to protect jobs, pubs, restaurants and the lifeblood of my constituency?

[Dan Tomlinson]

One of the things that the Government are doing to support businesses up and down the country is bringing back economic stability. Under this Government, interest rates have been cut six times, which will reduce borrowing costs for businesses small and large, and we are doing all we can to boost living standards, so that people have more money in their pockets to spend in hospitality businesses. We have seen faster increases in wages in the first year of this Government than we did in the first 10 years under the Conservatives.

[Chris Webb (Blackpool South) (Lab)]

I find it a bit rich that the Conservatives are raising this issue, given that around 7,000 pubs and bars closed on their watch, which is felt in Blackpool and across the country. Will the Minister continue to engage with the hospitality sector, UKHospitality and small businesses to ensure that we get this right? Many are struggling after 14 years of Conservative government, and especially after covid. We need to support our high streets, which have been forgotten about for far too long.

[Dan Tomlinson]

I thank my hon. Friend for his engagement on this important issue, and for the work that he does on the all-party parliamentary group for hospitality and tourism. Yes, the Government will continue to engage with sector bodies such as UKHospitality on this and other matters that are important for the hospitality industry.

[Mark Pritchard (The Wrekin) (Con)]

The Minister does not have to defect to Reform to get a pint, and I am very happy to show him round the pubs in Shropshire’s villages and market towns. I will show him that pubs are not just about having non-alcoholic and alcoholic drinks; they are often at the very heart of village communities. Local charities, the women’s institute, pensioner groups and others meet there because the post office or the shop has closed. May I genuinely invite the Minister to get out of London—out of the beltway and out of the bubble—and come to Shropshire? He will not be allowed inside pubs, of course, but I can bring him a pint outside when the warmer weather comes. I appeal to him to join me in Shropshire and hear at first hand what pub landlords and owners have to say.

[Mr Speaker]

We’re at last orders. Come on, Minister.

[Dan Tomlinson]

I do not know what the current Government position is on whether pubs are allowed to sell takeaway pints, but I hope that would be allowed in Shropshire if I were to visit. However, I have about 30 pubs in my north London constituency, and I have many conversations with publicans both locally and in my role as Exchequer Secretary.

[Tonia Antoniazzi (Gower) (Lab)]

I refer to my entry in the Register of Members’ Financial Interests and to my chairship of the all-party parliamentary beer group. Does the Minister accept that pubs are anchor employers on our high streets, and will he please ask the Chancellor to expedite a package of rates relief and duty reduction aimed specifically at sustaining these really important jobs in hospitality?

[Dan Tomlinson]

I strongly agree with my hon. Friend that pubs are important anchor institutions. I know that she cares deeply about the businesses in her constituency, and she is a strong representative for them. Under the previous Government, we saw more than one pub closing every single day—7,000 fewer pubs in our communities. This Government will do all we can to continue to support publicans and institutions that are the lifeblood of communities up and down the country.

[Richard Tice (Boston and Skegness) (Reform)]

There has been an absolutely shambolic, chaotic furore around these business rates since the Budget. When will the Minister do the right thing and confirm to the House exactly when we are going to get some clarity on these changes? Is he aware just how despairing businesses are in my constituency of Boston and Skegness and around the country because of the uncertainty and the increased costs? Is he also aware that pubs are reducing opening hours and employee hours? Will he do the decent thing and apologise?

[Dan Tomlinson]

I was not sure what the hon. Member was referring to when he said there was a “shambolic, chaotic furore”, but it was probably his own party, which would not be able to run anything in any brewery, let alone a whole country.

[Gareth Snell (Stoke-on-Trent Central) (Lab/Co-op)]

The Minister says that it is the job of MPs to help publicans and hospitality businesses understand the system. I gently say to him that they do understand it. Their frustration comes not from not understanding the help that is available, but from the system they are working in. Several things can be true at once. It is true that there is a permanently lower rate and that there is a £4 billion package to soften the blow for those with increased business rates, but it is also true that, when that goes away, breweries such as Titanic Brewery in Stoke-on-Trent will have an overall business rates increase of 130%, with some of its venues seeing a 400% increase. Can the Minister set out what specific support they can look forward to in the next three years, or can he give them clarity on what they need to budget for, because as a result of these changes some pubs around the country will close, and we need to avoid that?

[Dan Tomlinson]

I totally agree with my hon. Friend that we need to avoid the situation we saw for 14 years, when 7,000 pubs closed under the Conservatives, with about 4,000 closing in the first five years when the Lib Dems were in coalition with them. This Government will do all we can to support pubs, hospitality businesses and our high streets, which is why we set out a really strong set of proposals at the Budget, as he mentioned, including £4.3 billion of support.

[Sir Bernard Jenkin (Harwich and North Essex) (Con)]

When is a U-turn not a U-turn? I would suggest it is when the Government realise that they have made a terrible mistake, brief that they will change the policy and then send a Minister to this House to explain that nothing is changing at all. Does the Minister realise how much despair people are feeling? This is not a problem about a transition; this is a fundamental flaw in the whole concept of business rates that hits the smallest businesses the hardest. We need our policy, which is to leave the transitional rates relief permanently in place until there is a new system that exempts smaller businesses from this punitive tax.

[Dan Tomlinson]

The Conservatives had 14 years to implement significant reforms to the business rates system. They could have changed the system with significant underlying reforms, meaning that the tax rate paid by high street businesses was lower than the tax rate paid by the largest businesses, but they did not. I do not think we can trust a word they say when it comes to reform of the business rates system. They did not take the opportunity when they had their chance. It is easy to say things, but the Government are getting on with the job of reforming and improving our business rates system.

[Emma Lewell (South Shields) (Lab)]

I thank my hon. Friend for his engagement so far on this issue. It will come as no surprise to him that we need a cut to VAT and the maximum 20p discount for business rates applied across hospitality, not just pubs, because nobody wants to drink in a pub surrounded by boarded-up cafés, restaurants and B&Bs. Can I urge the Government to act quickly and, as a gesture of their intent, withdraw the statutory instrument that enforces the much lower 5p business rate discount this April?

[Dan Tomlinson]

I thank my hon. Friend for her sustained and important engagement and advocacy on behalf of high street businesses in her constituency, from hospitality venues such as cafés and pubs to independent shops. She has explained to me really clearly the impact of various changes that previous Governments and this Government have announced on the businesses in her constituency. I will continue to engage with her and other strong advocates of the hospitality industry on this and other important issues that affect our high streets.

[Sarah Olney (Richmond Park) (LD)]

The Government have already imposed additional employment costs on our small businesses and those on our high streets. They are still struggling with sky-high energy costs that the Government have yet to alleviate, and now we have these massive increases in business rates. Is there anything at all that the Minister can say that will give hope to the small and medium businesses on our high streets that are wondering whether they can continue, or to our entrepreneurs who are wondering if they can get started?

[Dan Tomlinson]

The Government back small businesses and our high streets. We want to do all we can to continue to support businesses up and down the country. That is why we announced significant reforms to business rates at the Budget, making sure that we could have a permanently lower multiplier for high street businesses and providing significant support worth £4.3 billion over the coming three years.

[Janet Daby (Lewisham East) (Lab)]

Libraries and community centres are central to communities like mine in Lewisham East, and they make an excellent contribution to the local area. Can the Minister say whether there are any planned changes to their business rates and tell us how else they can be supported in our local community?

[Dan Tomlinson]

My hon. Friend is right to highlight the role that libraries and community centres in her constituency and across the country play in providing places for people to socialise, to learn new skills, and to grow and develop. I think of the libraries to which lots of parents in my constituency take their children in order to get their first books. The reforms to the business rates system that we set in place at the Budget will protect any businesses or premises that are seeing large increases in their rateable values, but I am always happy to have conversations with hon. Members on what other steps, more broadly, the Government could take to support important institutions such as those my hon. Friend raises.

[Dame Karen Bradley (Staffordshire Moorlands) (Con)]

We all look forward to whatever it is that the Government have decided to change here, but can I ask the Minister to look at two points? First, can he look at when appeals can be made to valuations? At the moment, businesses have to wait until 1 April, and that simply is not giving the sector any confidence. Secondly, can he look at wedding venues? They suffered enormously during covid and are likely, as things stand, not to benefit from any relief that he will announce in the next few weeks.

[Dan Tomlinson]

The process for businesses that are not satisfied with the valuation provided by the Valuation Office Agency is to go through the “check, challenge, appeal” process. In my role as the Minister with responsibility for His Majesty’s Revenue and Customs, I will of course be doing all I can to make sure that the performance of the VOA is as good as it can be to help businesses get through that process. That is very important, not least given that we are seeing a rebound in the values of many businesses across the country following the pandemic.

[Kerry McCarthy (Bristol East) (Lab)]

I hope the Minister will join me in congratulating Bristol East’s Lost and Grounded Brewers, which has just appeared on the list of the eight best breweries in Britain in The Times. He may recall that just before the Budget, I brought another Bristol East brewery, Left Handed Giant, to meet him and other Ministers at No. 11, where it made very clear the pressures facing the hospitality sector. Can he give me assurances that, as a first step, we need to sort out the revaluation shambles? Can he also ensure that the consideration of a differential rate of VAT, as we see in so many other countries on the continent, is also on the Treasury’s radar?

[Dan Tomlinson]

I join my hon. Friend in congratulating the brewery in her constituency. I know there is a vibrant small and independent brewery sector in Bristol, with lots of fantastic places where people can choose to have a drink if they so wish. Just the same as her, I want to make sure that this Government do what they can to continue to support businesses such as the one she mentions and those operating up and down the country. This Government are seeking to ensure that people have more money in their pockets so they can go out and spend it. That is why I am really glad that under the first year of this Labour Government, we saw faster increases in wages than we did in the whole first 10 years under the Conservatives.

[Sir John Whittingdale (Maldon) (Con)]

As well as pubs, hotels and restaurants, is the Minister aware that many grassroots music venues, some of which have never been liable for rates, now face demands for thousands of pounds? The Music Venue Trust has said that these are not bills but “closure notices”. Will he ensure that grassroots music venues are included in any relief he provides, and are recognised as critical creative infrastructure?

[Dan Tomlinson]

We considered before the Budget the matter of businesses being brought into business rates for the first time. We set out at the Budget the supporting small business relief scheme, so that businesses that are paying no business rates at the moment but which are coming into business rates for the first time will have their increases capped at £800.

[Alex Sobel (Leeds Central and Headingley) (Lab/Co-op)]

I refer to my entry in the Register of Members’ Financial Interests as the co-chair of the all-party parliamentary group on music. The vast majority of live performance venues have alcohol licences. Many are pubs, but the vast majority are not. Leeds Arena in my constituency is being dragged into the highest rate of business rates, alongside some large retailers. Without live performance venues, we will not have any future Ed Sheerans, Darcey Bussells, Idris Elbas or Simon Armitages bringing in the export income that the Treasury desperately needs. Is the Minister considering live performance venues, not just pubs, when he is thinking about the changes?

[Dan Tomlinson]

My hon. Friend is right to raise the importance of live performance venues. They not only support our economy directly, through people visiting the venues and enjoying a good night out and a good performance; they also support the local economy more broadly, with people travelling to and from, and choosing to go out for a meal before the event. He and I value the contribution they make to our national life and to our economy.

[Christine Jardine (Edinburgh West) (LD)]

Business rates in Scotland are, of course, devolved, but businesses, particularly in the hospitality, leisure and retail sectors, are not immune to the impact of these measures as they spread across the United Kingdom and undermine the economy. Has there been any effort to sit down with Scottish Government Ministers to discuss a national strategy on how we can help businesses throughout the United Kingdom?

[Dan Tomlinson]

The hon. Member is right that business rates policy is devolved. I am in conversation with the Governments in Scotland and Wales about a number of changes to taxation policy that were announced in the Budget, and I will of course be happy to continue those conversations. We need to ensure that we continue to support these vital businesses up and down the country, which is why the Chancellor set out the package of support at the Budget.

[Tulip Siddiq (Hampstead and Highgate) (Lab)]

Over 20,000 people, including the likes of James McAvoy and Benedict Cumberbatch, have rallied around to try to save the local cafés on Hampstead Heath. I recently spoke to one of the owners, Alfonso, who brought home to me the importance of having local cafés that are affordable and accessible. As a fellow north London MP, is the Minister going to join the campaign to save the local cafés on Hampstead Heath? Will he reassure my constituents that protecting small businesses is at the heart of Government policy?

[Dan Tomlinson]

If I get time and the parking permits in Camden allow it, I do like to drive down and have a walk in my hon. Friend’s constituency. I have not yet been made aware of that campaign, but I look forward to talking more with her about it. On a personal level, I will do all I can to get my tea and coffee from those establishments.

[Stuart Anderson (South Shropshire) (Con)]

I am speaking to loads of business owners across South Shropshire in the retail, hospitality and leisure sectors, who are telling me the polar opposite of what the Minister is saying from the Dispatch Box, showing that the Government are completely detached from reality. There is a U-turn coming on this policy, but many business owners are lying awake at night worrying about how they are going to get through this. Can the Government make that U-turn quickly?

[Dan Tomlinson]

It is worth pausing to note that while some businesses will see increases in their bills, more than half of rate payers’ bills will either remain flat or will fall in the next year. That, in part, is because of the support the Government have provided to businesses, as set out at the Budget.

[Mary Kelly Foy (City of Durham) (Lab)]

Hospitality and leisure businesses in the City of Durham are incredibly concerned about their future. Does the Minister agree that if we are truly to level the playing field between the high street and the online giants, it is time we show our much loved pubs, cafés, restaurants and hotels the same level of support that distribution warehouses, office blocks and supermarkets are receiving?

[Dan Tomlinson]

We are seeking to give even more support to those businesses than to the very largest ones. Under previous Governments, there would have been the same tax rate for those businesses, but, because of the changes we put forward at the Budget, the business rates multiplier for the smallest businesses on high streets in Durham and across the country is 25% lower than the tax rate paid by the largest businesses. This is the first significant, fundamental reform to the underlying tax rates in the business rates system in a very long time.

[Sammy Wilson (East Antrim) (DUP)]

Whether it is retail, hospitality or pubs, businesses right across the United Kingdom, especially small businesses, are failing. That is due in no small part to action by the Government—increased taxes, increased energy prices and increased regulation. Rates play a big part in that, too. Can the Minister assure us that if there is to be further additional money for support, it will be ringfenced and not given to the devolved Administration in Northern Ireland, where the Sinn Féin Minister has taken the money but spent it on something else?

[Dan Tomlinson]

The right hon. Gentleman raised the issue of small businesses. It is worth nothing that a third of properties pay no business rates at all, as they receive 100% small business rate relief, and that a further 85,000 will benefit from reduced bills as this support tapers away.

[Steve Witherden (Montgomeryshire and Glyndŵr) (Lab)]

Hospitality is the UK’s third largest employer; when the sector is hit, jobs are affected at scale. Pubs sit at the heart of the hospitality industry. In Montgomeryshire and Glyndŵr, we have 136 great pubs, employing more than 1,100 across the constituency, including the Eagles in Acrefair, where my wife used to work behind the bar, and the brilliant pub, the Hand, in Llanarmon Dyffryn Ceiriog. What steps is the Minister taking to support jobs in the hospitality sector?

[Dan Tomlinson]

I must say, I am very jealous that my hon. Friend has over 100 pubs in his constituency; I have only 27 in mine, and I have not made it round all of them yet. He is right to highlight the importance of the employment and job opportunities that can be provided by the hospitality sector, with around 2 million people working in it. Many people’s first job is in hospitality, helping them to get their foot on the career ladder and progress in their careers. That is why the Government provided significant support for hospitality businesses at the Budget, and it is why I will continue to engage with my hon. Friend and other Members on the issue of business rates and other matters where we can support our high streets.

[Adrian Ramsay (Waveney Valley) (Green)]

Retail, hospitality and leisure businesses are at the heart of my constituency, yet family-run village pubs such as the Blue Boar in Walsham le Willows face significant increases in business rates from this April. If the Minister does recognise that the current system is failing businesses, when will he commit to meaningful reform and action, including giving local authorities greater powers to support socially and economically essential local businesses, which village pubs in rural areas undoubtedly are?

[Dan Tomlinson]

I will happily talk further with the hon. Member about any changes that we can make to give councils more powers in relation to the issue he raises. It is not a topic that has crossed my desk before, but I would be happy to receive some correspondence on it.

[Sarah Edwards (Tamworth) (Lab)]

Two weeks ago, I held a roundtable for hospitality businesses in Tamworth to discuss the broken business rates system, and I then wrote to the Department about their preferences for support. The rates are crippling, and those businesses asked me to ask the Minister when reform is coming and how they will receive support in the interim, which is essential for my constituency and our businesses.

[Dan Tomlinson]

I thank my hon. Friend for her question and for the engagement that she has carried out with businesses in her constituency, as a strong representative of the businesses and people of Tamworth. The Government set out some significant reforms in the Budget. We lowered the tax rate that is paid by businesses on our high streets by 5p compared with what it would otherwise have been. That means that the tax rate paid by businesses on our high street is a quarter lower than that paid by the very largest businesses, which can afford higher taxes. That is why we rebalanced the system, transferring £1 billion of extra tax revenue from the largest businesses to high street businesses in my hon. Friend’s constituency and across the country.

[Mike Wood (Kingswinford and South Staffordshire) (Con)]

The tables to which the Minister refers show that the median rateable value for pubs and wine bars is increasing by a third. He visited the Prince of Wales, a pub in his constituency, to help it reopen last spring. Its rateable value is going up from £49,200 to £62,500, which will push it into the higher band and higher bills. When we have the inevitable U-turn, will he ensure that it genuinely delivers lower business rates, and not just for the Prince of Wales in his constituency but for all hospitality venues across the country?

--- Later in debate ---

[Dan Tomlinson]

I thank the hon. Member for giving me a chance to talk about the Prince of Wales in my constituency, a fantastic pub that I am glad I and colleagues in Barnet council were able to save. I was there just a couple of weeks back, after a canvassing session out on the doorsteps. He is right to point out that some pubs are seeing increases in their rateable values as a result of the unwind from the pandemic. That is precisely why we have come forward with support, capping the increases in business rates bills this year and in subsequent years. In general, the point about pubs being at the heart of our communities is totally true. From the Prince of Wales in East Barnet to the Griffin in Whetstone—I could go on—there are some fantastic pubs in Chipping Barnet, as I am sure there are in his constituency too.

[Dr Simon Opher (Stroud) (Lab)]

I am a bit surprised by the mock rage coming from the Opposition, given that, over the past decade and a half, thousands of pubs have closed. I thank the Minister on behalf of Stroud publicans for agreeing to review the system so that we can get a really practical solution for pubs. Can I confirm that all business rates, including those on the high streets, will be reviewed, so that we can have a proper level playing field with the out-of-town institutions?

[Dan Tomlinson]

It is really important that we level the playing field for business rates paid by high street businesses in Stroud—for which my hon. Friend is a strong and active representative—and those paid by the largest online retailers and those with warehouses and distribution centres. That is why we implemented the reforms in the Budget to rebalance the system through a lower tax rate on high street businesses and a higher one on those that can afford it. I thank him for raising the point that Opposition Members want to keep dodging, which is that on their watch 7,000 pubs closed across the country, hollowing out our communities and making our high streets and the places where we live less vibrant and less sociable.

[David Reed (Exmouth and Exeter East) (Con)]

I have heard from many struggling businesses across my constituency about the increasing pressures that they are facing. To give just one example, under the Government’s original plan, a small independent shop in Exmouth would have seen its rateable value rise by about 50%, wiping out the benefits of the lower small business multiplier, stripping it of eligibility for relief and leaving it facing extra costs of around £600 a month. Does the Minister understand how damaging that is for business confidence and viability, and will he please set out a timeline for when those types of small businesses can expect to receive support?

[Dan Tomlinson]

One of the challenges with the questions I am being asked by Opposition Members is that they seem to be suggesting that the Government should not have gone ahead with the post-pandemic revaluations. Those revaluations were set in train by the previous Government. I do not know about the hon. Member, but I think that, if businesses in his constituency or mine have seen a decrease in their rateable values since the pandemic, for whatever reason, it is right that the system is updated to reflect their post-pandemic values. That is what we have done. He cites a particular example. Of course there will be businesses that see increases in their rateable values, and that is precisely why we have stepped in, with the Chancellor announcing £4.3 billion of transitional support at the Budget last year.

[Jonathan Davies (Mid Derbyshire) (Lab)]

I welcome the assurance that half of businesses will see their business rates flat or falling, and that is even after the end of the covid-era support and the post-pandemic review initiated by the previous Government. Research by the Music Venue Trust estimates that 600 grassroots music venues may see quite significant rises, probably because of the revaluation. Significant areas backstage are dedicated to production and performance and cannot be used for revenue raising. Will the Minister meet me and sector representatives so that we can understand the issue better together?

[Dan Tomlinson]

I thank my hon. Friend for raising this issue. Many grassroots music venues are valued as pubs. Intricacies and complexities in the business rates system mean that, when we think of pubs, it is important also to think of grassroots music venues up and down the country. We must provide support to them and to other businesses. That is why the Government stepped in with the £4.3 billion of transitional protection, over £2 billion of which will be in place this year.

[Saqib Bhatti (Meriden and Solihull East) (Con)]

Those who run pubs in my constituency are really worried about the Budget and its impact on their business rates bills. Last week the Business Secretary said that there was no way the Government could have known about the impact of their decisions, but the valuation office then confirmed that it had told Ministers about the impact of their decisions, which I think the Minister has confirmed. He also confirmed that that data was easily accessible, so why did that happen? Was it wilful ignorance, was it incompetence or did they just go ahead anyway?

[Dan Tomlinson]

I am glad that the hon. Member was able to ask the exact same question as the shadow Chancellor, the right hon. Member for Central Devon (Sir Mel Stride). I am not going to comment on the policymaking process in the run-up to the Budget.

[Jessica Toale (Bournemouth West) (Lab)]

Most fair-minded businesses recognise that covid-era subsidies could not last for ever, yet many in hospitality, including in my constituency, are worried about what bill will come through for their rates in April. Can the Minister reassure those businesses and outline what transitional support we are putting in place in the short term and how we are reforming rates in the long term?

[Dan Tomlinson]

I thank my hon. Friend for her question and for her continued representation for the small businesses in her Bournemouth constituency, where I know there is a vibrant and growing hospitality and leisure sector. We have implemented reforms to the system to rebalance business rates away from the high street and towards the online giants. I look forward to continuing to engage with her and other Members of Parliament on business rates, other issues and other steps that this Government can take to continue to support the high street and businesses in her constituency.

[Greg Smith (Mid Buckinghamshire) (Con)]

This morning I met Roly May, the landlord of the Russell Arms pub in Butlers Cross. Government Members might recognise it: it is the closest pub to Chequers, where they can drown their sorrows after an audience with the Prime Minister. The pub has seen as £17,500 business rate increase. I have heard similar horror stories from pubs such as the Cock and Rabbit in The Lee, the Dinton Hermit in Ford and many others. Will the Minister at least accept that there is no more money to squeeze out of pubs that are absolutely on the brink of financial catastrophe under this Government?

[Dan Tomlinson]

This Government understand the pressures that hospitality businesses, and pubs in particular, are facing. One of the pressures, which I have heard about very clearly, relates to the fact that the previous Government did not invest in our energy security, which would have ensured that businesses and families had lower energy bills and certainty about future bills, and as a result those businesses and families have seen their energy bills surge. In 2022, under the previous Government, we saw inflation hit 11%, and it is things like that that have made it difficult for small businesses up and down the country.

[Darren Paffey (Southampton Itchen) (Lab)]

We all know that we are where we are precisely because of the disastrous legacy that we were left by the Conservatives, who made unfunded promise after unfunded promise. I welcome the Minister’s reassurance about transitional relief and the caps on the increases, but cafés and small hospitality businesses in Southampton are concerned not just about the future, but about the now, so what message would he give them to assure them that this Government are pro-business and have their back?

[Dan Tomlinson]

When it comes to support for businesses, we are making sure that we bring back economic stability to this country, with six interest rate cuts that will reduce the cost of borrowing for businesses and households. The economic stability that we have provided has meant that wages went up faster in the first year of this Government than they did in the whole first 10 years of the previous Government. We are supporting people up and down the country with the cost of living and providing stability for businesses in the corporation tax system, keeping it at the lowest rate in the G7 as part of our commitment to our corporate tax road map.

[Shockat Adam (Leicester South) (Ind)]

One of the worst things for business owners in my constituency is the unpredictability of running a business. They need to know, and it is simply killing them. They already have to deal with poor parking, a rise in antisocial behaviour and rises in national insurance contributions, wage costs and energy costs. Now, when they thought that they were going to have a reduction in business rates, they are possibly going to have a rise instead. Can the Minister alleviate their fears and put them out of their misery? What is it going to be? Is it going to rise or is it going to stay the same?

[Dan Tomlinson]

We want to provide stability in our taxation system, and one of the things that the Government are seeking to do in the coming years is to continue to have economic stability—something that was lacking for so long under the previous Government. That is why we are focusing on getting Government borrowing down in every year of the forecast, and it will fall faster in this country than in any other G7 economy. When it comes to business rates, the reforms that we set out in the Budget will rebalance the system to provide a permanently lower tax rate—the multiplier for those small businesses on the high street.

Clause 1

Dan Tomlinson Excerpts

Monday 12th January 2026 Commons Chamber

[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.

[Kit Malthouse]

Will the Minister give way?

[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.

--- Later in debate ---

[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.

--- Later in debate ---

[Dr Luke Evans (Hinckley and Bosworth) (Con)]

indicated dissent.

[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]

On that point, will the Minister give way?

[Dan Tomlinson]

I will happily give way.

[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]

rose—

[Dan Tomlinson]

I will happily give way to my hon. Friend.

[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.

--- Later in debate ---

[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.

[Dr Evans]

Will the Minister give way?

[Dan Tomlinson]

I will; it is good to see that the interventions are back on.

[Dr Evans]

When the Chancellor looked at these measures for her first Budget, she said that they would breach her manifesto commitments. Does the Minister believe that they breach the manifesto commitments?

[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.

[Sir Edward Leigh (Gainsborough) (Con)]

rose—

[Sammy Wilson (East Antrim) (DUP)]

rose—

[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.

[Sir Edward Leigh]

Will the Minister give way?

--- Later in debate ---

[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 Joshua Reynolds]

rose—

[Dan Tomlinson]

Go on, but then I really should make progress.

[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.

--- Later in debate ---

[Dr Luke Evans]

Will the Minister give way?

[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 (Poole) (Lab)]

Will the Minister give way?

[Dan Tomlinson]

I will happily take a first intervention from the Government Benches.

[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.

--- Later in debate ---

[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.

--- Later in debate ---

[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 (Upper Bann) (DUP)]

Will the Minister give way?

[Dan Tomlinson]

Given that the hon. Member called that debate, I will.

[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.

[Simon Hoare (North Dorset) (Con)]

Will the Minister give way?

[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.

--- Later in debate ---

[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.

--- Later in debate ---

[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.

[Charlie Maynard]

rose—

[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

Wednesday 7th January 2026 Written Statements

[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

Wednesday 7th January 2026 Westminster Hall

[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.

--- Later in debate ---

[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.

[Andrew George]

Will the Minister give way one more time?

[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

Tuesday 6th January 2026 General Committees

[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.

--- Later in debate ---

[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

Monday 5th January 2026 Written Statements

[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

Monday 5th January 2026 Commons Chamber

[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.

[Mr Speaker]

I call the Liberal Democrat spokesperson.

[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.

--- Later in debate ---

[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.

[Mr Speaker]

I call the Chair of the Public Accounts Committee.

[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?

--- Later in debate ---

[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?

--- Later in debate ---

[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?

[Dan Tomlinson]

No, I do not accept that. That is not the answer.

[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?

--- Later in debate ---

[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—

[Dave Robertson]

I will leave it there.

[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

Thursday 18th December 2025 Written Statements

[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 Excerpts

2nd reading
Tuesday 16th December 2025 Commons Chamber

[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—

--- Later in debate ---

[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 (Angus and Perthshire Glens) (SNP)]

Will the Minister give way?

[Dan Tomlinson]

I happily give way—I look forward to it.

[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 (Hertsmere) (Con)]

Will the Minister give way?

[Dan Tomlinson]

I give way to my constituency neighbour.

[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]

On that point, will the Minister give way?

[Dan Tomlinson]

I will give way—persistence pays.

[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.

[Madam Deputy Speaker (Ms Nusrat Ghani)]

I call the shadow Chancellor.

Conduct of the Chancellor of the Exchequer

Dan Tomlinson Excerpts

Wednesday 10th December 2025 Commons Chamber

[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.

[Gareth Snell]

Will the Minister give way?

[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 Scott Arthur (Edinburgh South West) (Lab)]

Will the Minister give way?

[Dan Tomlinson]

Go on—that’s helpful.

[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.