Gareth Davies debates involving HM Treasury during the 2024 Parliament

Thu 30th Jan 2025
Tue 28th Jan 2025
Finance Bill (First sitting)
Public Bill Committees

Committee stage: 1st sitting & Committee stage
Tue 17th Dec 2024
Tue 10th Dec 2024
Finance Bill
Commons Chamber

Committee of the whole House day 1

Finance Bill (Third sitting)

Gareth Davies Excerpts
James Murray Portrait James Murray
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Clauses 58 to 60 make changes to strengthen the conditions that must be met for transfers of shares into an employee benefit trust to be exempt from inheritance tax. An employee benefit trust is a trust that provides benefits and rewards to employees of a company, often in the form of shares in the company. Under certain conditions, such shares are exempt from inheritance tax. All or most employees need to be capable of benefiting from the trust for the inheritance tax exemption to apply, so it cannot be limited to shareholders of the company or family members, for example.

In 2023, the previous Government launched a consultation on employee ownership trusts and employee benefit trusts. The consultation set out concerns that such trusts were increasingly being used as a tax planning vehicle for shareholders and their families, rather than for a wider class of employees. At the autumn Budget, the current Government responded to that consultation and announced changes to strengthen the conditions that must be met for the transfer of shares into an employee benefit trust to be exempt from inheritance tax.

The changes made by clause 58 will mean that restrictions on shareholders and their family members benefiting from an employee benefit trust must apply for the entire lifetime of the trust. The clause will address cases in which the trust deed allows individuals who are closely connected with a shareholder to benefit after the participator’s death. The clause ensures that the Government’s position is explicitly clear in legislation. The change will come into effect on Royal Assent.

Previously, family members of the shareholder who were excluded from benefiting from the capital of the trust could still receive income payments from the trust. The changes made by clause 59 will ensure that no more than 25% of employees who can receive income payments from an employee benefit trust may be family members of the shareholder. This reinforces the original policy intent of employee benefit trusts to reward and motivate a wide group of employees.

Previously, an individual could set up a company, immediately make a transfer of shares to an employee benefit trust, and obtain an inheritance tax exemption. The changes made by clause 60 will mean that shares must have been held for at least two years before being transferred into the employee benefit trust. The provision will take into account shares held prior to any share reorganisation, and will strengthen protections against employee benefit trusts being used purely for inheritance tax planning purposes.

Clauses 59 and 60 are treated as having come into effect for transfers of value to new and existing trusts on or after 30 October 2024. The clauses will ensure that the tax treatment of employee benefit trusts is consistent with the original policy intent of rewarding and motivating employees, while minimising opportunities for abuse. I commend them to the Committee.

Gareth Davies Portrait Gareth Davies (Grantham and Bourne) (Con)
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It is, as always, a great pleasure to see you in the Chair, Ms Vaz.

As the Minister set out, clauses 58 to 60 make amendments to requirements for inheritance tax exemptions involving employee benefit trusts. Clause 58 provides that restrictions on shareholders and connected persons benefiting from employee benefit trusts will now apply for the lifetime of the trust. Clause 59 provides that no more than 25% of employees who receive income payments from an EBT can be connected to the shareholders in the company. Clause 60 provides that shares will now need to have been held for at least two years prior to being transferred to the EBT.

As the Minister said, the measures follow on from the consultation launched in 2023, which we referred to when we discussed clause 31 and employee ownership trusts. Although we will not oppose the clauses, I would be grateful if the Minister could comment on one specific issue that was raised during the consultation on the changes. In response to the measure introduced by clause 59, concerns were raised at consultation on behalf of smaller companies using EBTs that may now be forced to exclude certain employees from participating in share scheme arrangements in order to comply with the new requirement. What was the Minister’s assessment of that particular impact? Is he content that the benefits of the changes outweigh that particular risk cited in during the consultation?

James Murray Portrait James Murray
- Hansard - - - Excerpts

I welcome the Opposition’s support for the clauses, which build on the consultation that started when they were in office. The shadow Minister’s question related to what effect the changes might have on small businesses in particular. I will try to answer now, but he is free to contact me if he feels I have not covered his point fully.

The changes we are making to employee benefit trusts will not have an adverse effect on small businesses, because the original policy intent of exempting transfers of value to employee benefit trusts from inheritance tax was to encourage businesses to reward and motivate a wide range of employees. To qualify for the exemption, conditions need to be met that ensure that EBTs that benefit only shareholders and their families, or other people closely connected to shareholders, do not receive preferential inheritance tax treatment. Given that that is the aim in the principles behind the clauses, I am confident that they will not have the adverse effect that the shadow Minister fairly raised. I hope that provides him with some reassurance.

Question put and agreed to.

Clause 58 accordingly ordered to stand part of the Bill.

Clauses 59 and 60 ordered to stand part of the Bill.

Clause 61

Agricultural property relief: environmental management agreements

Question proposed, That the clause stand part of the Bill.

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James Murray Portrait James Murray
- Hansard - - - Excerpts

As the hon. Lady knows, because we have debated this many times, the data that we have published, based on His Majesty’s Revenue and Customs data, shows that the large majority of small farms will not be affected. I am sure she knows well the statistics on the 530 farms affected by the reforms to APR and business property relief in ’26-27, because she will have seen them in the Chancellor’s letter to the Treasury Committee and we have discussed them many times in this place.

Clause 61 relates specifically to land managed under certain environmental agreements, and was a measure proposed by the last Government. If the hon. Lady allows me to continue explaining why the clause is important, she might feel able to support it, given the benefits it will bring. The clause was welcomed by the sector, and the Government agree with the approach. I can confirm that there have been no changes to the design outlined by the previous Government in March 2024, which is why I hope to get the Opposition’s support for the clause.

As a result of the changes made by clause 61, from 6 April 2025 APR will be available for land managed under an environmental agreement with or on behalf of the UK Government, devolved Governments, public bodies, local authorities or approved responsible bodies. This includes but is not limited to the environmental land management schemes in England and equivalent schemes elsewhere in the UK, as well as any agreement that was live on or after 6 March 2024.

The Government are fully committed to increasing the uptake of environmental land management schemes in England, and we are providing the largest ever budget of £1.8 billion for this in 2025-26. The changes made by clause 61 will ensure that the tax system is not a barrier to uptake, thereby supporting farmers and land managers to deliver, alongside food production, significant and important outcomes for the climate and environment. I commend the clause to the Committee.

Gareth Davies Portrait Gareth Davies
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As the Minister said, clause 61 brings land managed under an environmental agreement—be that with the UK Government, devolved Governments, public bodies, local authorities or approved responsible bodies—within the scope of agricultural property relief.

I am afraid we have here Labour taking with one hand and providing far less with the other. For the £5 million, which we welcome, that they will give back to farmers each year with this measure, they will take away some £500 million a year through the family farm tax, if the Office for Budget Responsibility’s highly uncertain costings are to be believed. Many farmers, and bodies such as the National Farmers Union, have raised concerns about this. The Chartered Institute of Taxation has queried why the relief remains limited to schemes entered into with public authorities, rather than allowing enterprising landowners to enter into other schemes. I would be interested to hear the Minister’s thoughts on that, but we will not oppose the measure.

James Murray Portrait James Murray
- Hansard - - - Excerpts

I thank the hon. Gentleman for his support for the measure. He made wider points about reforms to agricultural property relief, which we have debated several times. The clause focuses in a targeted way on environmental land management schemes.

The hon. Gentleman asked why private environmental land management that is outside of agreements is not included. I confirm that relief will be available for land managed under an environmental agreement with or on behalf of the UK Government, devolved Governments, public bodies, local authorities or approved responsible bodies. This will ensure that the extension of the relief applies only where there are high, verifiable environmental standards.

Question put and agreed to.

Clause 61 accordingly ordered to stand part of the Bill.

Clause 62

National Savings Bank: statements from HMRC no longer to be required

Question proposed, That the clause stand part of the Bill.

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Gareth Davies Portrait Gareth Davies
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The Minister may think that this is a minor issue—and he will be pleased to know that I agree with him. [Laughter.] I am just waking everybody up. The requirement is redundant and we will not oppose the clause.

James Murray Portrait James Murray
- Hansard - - - Excerpts

I applaud the hon. Gentleman’s theatre in delivering his response, and welcome his support.

Question put and agreed to.

Clause 62 accordingly ordered to stand part of the Bill.

Clause 63

Rates of alcohol duty

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None Portrait The Chair
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Does the shadow Minister wish to speak?

Gareth Davies Portrait Gareth Davies
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My hon. Friend the Member for North West Norfolk will speak to this clause, Ms Vaz.

James Wild Portrait James Wild (North West Norfolk) (Con)
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I apologise for the confusion on our side, Ms Vaz. The Committee will be pleased to know that I have lots to say on this clause, so we can all settle in for a while.

Clause 63 increases the headline rate of alcohol duty in line with the retail price index, provides a reduction to the rates for draught alcoholic products and cuts to the rates paid by eligible small producers. The Government have also chosen not to extend the temporary easement for certain wine products. I say at the outset that His Majesty’s Opposition is a strong supporter of the broader alcohol sector, and we have some concerns about the impact that some of the provisions will have on important sectors. As well as speaking to clauses 63 and 64, I will speak to new clause 4, which stands in my name and that of my hon. Friend the Member for Grantham and Bourne.

In 2023, the previous Government introduced a progressive strength-based duty system following the alcohol duty review, which was the biggest review of alcohol duties for more than 140 years. The new and simplified alcohol duty rates system was based on the common-sense principle of taxing alcohol by strength, with the aim of modernising the existing duties, supporting businesses and meeting our public health objectives. That was the first time that public health objectives had been inserted into the alcohol duty system. The reforms also introduced two new reliefs: the draught relief to reduce the duty burden on draught products sold at on-trade venues, and small producer relief.

At the autumn statement 2023, the previous Government froze alcohol duty rates until August 2024, and that was extended until February 2025 at the following Budget. According to the OBR, alcohol duty receipts are expected to raise £12.4 billion this year, falling by 0.6% compared with last year as the rates remain frozen, but receipts are then forecast to increase by 5% a year on average, to reach £15.9 billion by the end of the Parliament.

Pubs make a huge contribution to our culture, economy and communities. When the Conservatives were in government, we recognised that and introduced a raft of supportive measures, including draught relief, small producer relief and the Brexit pubs guarantee, which I am sure all hon. Members remember and welcome. I therefore welcome the increased draught relief from February, from 9.2% to 13.9%, and the fact that the relative value of small producer relief will be maintained. Although we welcome the inclusion of both reliefs, the increase to draught relief will mean that beer duty on a 5% pint of beer is reduced from 54p to 53p—a 1p saving. I fear that drinkers will not be toasting the Exchequer Secretary over that.

Turning to whisky—although it is a little early in the day for me—as the hon. Member for Inverness, Skye and West Ross-shire set out, Scotch whisky is one of our most iconic and successful industries. Some 43 bottles of scotch whisky are exported per second and the industry supports more than 66,000 jobs across the UK, many of which are in rural areas. The decision to uprate duty rates by RPI has been met with deep concern by the industry—indeed, the Scotch Whisky Association said that it represents a broken commitment, after the Prime Minister claimed last year that his Government’s trade strategy would

“back Scotch producers to the hilt.”

That sounds rather like the promise that he gave to farmers, which Labour’s family farm tax has broken. The managing director of Diageo said:

“This betrayal will leave a bitter taste for drinkers and pubs, while jeopardising jobs and investment across Scotland.”

I would be interested to hear the Minister’s response to those comments. Have the Government calculated the risk to jobs in the sector more widely?

A similar picture is painted by the cider industry, which supports more than 11,500 jobs and attracts more than 1 million tourists each year. The National Association of Cider Makers has raised fears that raising the headline rate, alongside the national insurance increases and the family farm tax, could put elements of the UK cider industry at risk. Has the Minister calculated the cumulative impact that these tax rises will have on the sector?

At this point, we should consider the wider context in which we are discussing these increases. Time and again we hear about the Budget placing a range of cost pressures on the hospitality industry, which is a key contributor to the UK economy. According to UKHospitality:

“In the past six years, hospitality has increased its annual economic contribution by £20 billion to £93 billion.”

The tax rises in the Budget, including the £25 billion a year jobs tax, will make it much harder for the industry to succeed. Just look at the impact of recent measures. Colliers, a professional property services company, reported that cutting the hospitality business rate relief from 75% to 40% means that restaurants will face a bill of, on average, over £13,000 a year, up from £5,500.

Finance Bill (First sitting)

Gareth Davies Excerpts
James Murray Portrait The Exchequer Secretary to the Treasury (James Murray)
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It is a pleasure to serve on the Committee with you as the Chair, Mr Mundell. Clauses 1 to 3 impose a charge to and set the rates of income tax for 2025-26, and clause 4 maintains the starting rate for savings limit at its current level of £5,000 for the ’25-26 tax year.

Income tax is the largest source of Government revenue and helps to fund the UK’s schools, hospitals and defence, and other public services that we all rely on. In ’25-26, it is expected to raise around £329 billion. The starting rate for savings applies to the taxable savings income of individuals with low earned incomes of less than £17,570, allowing them to benefit from up to £5,000 of income from savings interest before they pay tax. It specifically supports those taxpayers with low levels of earned income.

As Committee members will be aware, both the income tax rates and the starting rate limits for savings must be legislated for each year. The Bill will not change the rates of income tax. We are confirming that they will remain the same, thereby meeting our manifesto commitment not to increase the basic, higher or additional rates of income tax.

Clause 1 imposes a charge to income tax for the year ’25-26. Clause 2 sets the main rates of income tax, namely the basic rate of 20%, the higher rate of 40% and the additional rate of 45%. These will apply to non-savings, non-dividend income of taxpayers in England and Northern Ireland. Income 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, Welsh rates of income tax or Scottish rates of income tax. For example, they might apply to non-UK-resident individuals. The clause also sets the savings rates of income tax—again at 20%, 40% and 45%.

Clause 4 will maintain the starting rate limit at its current level of £5,000 for the ’25-26 tax year. The limit is being held at this level to ensure fairness in the tax system while maintaining a generous tax relief. In addition to the starting rate for savings, whereby eligible individuals can earn up to £5,000 in savings income free of tax, savers are also supported by the personal savings allowance, which provides up to £1,000 of tax-free savings income for basic rate taxpayers. Savers can also continue to benefit from the annual individual savings account allowance of £20,000. Taken together, as a result of these generous measures, around 85% of savers will pay no tax on their savings income.

Finally, I should mention the Government’s efforts to encourage those on the lowest incomes to save through the help to save scheme. We recently extended the scheme until 5 April 2027, and we have extended the eligibility to all universal credit claimants who are in work from 6 April 2025. I encourage Committee members to do what they can to promote the scheme to their constituents.

New clause 3 would require a review of how many people who receive the new state pension at the full rate are liable to pay income tax this year and in the next four tax years, and specifically what the tax liability of their state pension income will be. The Government consider the new clause to be unnecessary, given the information that is already publicly available.

His Majesty’s Revenue and Customs has published statistics for this tax year and past tax years that cover the number of income taxpayers, including breakdowns by marginal rate, tax, band and age, and the Department for Work and Pensions has published figures for pensioners’ average incomes. The Office for Budget Responsibility is the Government’s independent economic forecaster and most recently published projections of the number of income taxpayers for future years in its “Economic and fiscal outlook” at autumn Budget. Those projections include a breakdown by marginal rate.

Income tax is a vital revenue stream for our public services and the clauses will ensure that that remains the case in 2025-26, while also retaining the starting rate of savings at its very generous existing value. I therefore commend clauses 1 to 4 to the Committee, and I urge the Committee to reject new clause 3.

Gareth Davies Portrait Gareth Davies (Grantham and Bourne) (Con)
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It is a great pleasure to see you in the Chair, Mr Mundell. This is one of many Finance Bill Committees that I have participated in. The subjects have changed somewhat each time, but something has remained consistent: the presence of the hon. Member for Ealing North. It is a pleasure to see him in his place, and I hope that his experience as the Treasury Minister in a Finance Bill Committee is as unpleasurable as mine when I was facing him.

As the Minister rightly set out, clause 1 imposes a charge to income tax for the year 2025-26, which is a formality. Clause 2 sets the main rates of income tax in England and Northern Ireland for 2025-26—the 20% basic rate, the 40% higher rate and the 45% additional rate—leaving them unchanged. Clause 3 sets the default rate and savings rate of income tax for the tax year 2025-26 for the whole of the United Kingdom. Clause 4 freezes the starting rate limit for savings at £5,000.

Of course, the Government’s big announcement on income tax in the Budget was that they would not extend the freeze to income tax thresholds beyond April 2028. Committee members will be aware that that announcement does not need to be legislated for, as the income tax personal allowance and the basic rate limit are subject to consumer prices index indexation by default, unless Parliament overrides that via a Finance Bill, and Parliament has not overridden indexation beyond the 2027-28 tax year.

As the current legislative framework did not allow the Government to enact their announcement on income tax thresholds at the Budget, we must take them at their word that they will keep their promise and not succumb to the temptation to override the thresholds in future. Given the possibility that rising borrowing costs have eliminated the Chancellor’s headroom under the Government’s own stability rule, I would be grateful if the Minister could reconfirm that they will allow CPI indexation to resume from 2028-29 and that they will not renege on that promise.

On a point of clarity, I would be grateful if the Minister could confirm whether the unfreezing of income tax thresholds in 2028-29 will involve an increase to the fixed portion of the income tax higher limit, which he will be aware of. The limit is set at £100,000 plus twice the personal allowance, and that £100,000 is not indexed to CPI by default. Should we expect the additional rate to rise only in so far as the personal allowance rises, or will that £100,000 be unfrozen too? I would appreciate an explanation on that.

I leave it to others to interpret what it says about this Labour Government and Budget that a non-binding commitment merely not to raise some tax thresholds in three years’ time is presented as a big win for the British taxpayer. On income tax, as with most of the Government’s more positive policy announcements, the benefits are prospective and entirely speculative.

Meanwhile the pain, as we have seen with national insurance contributions and in other areas, is very much immediate and certain. Pensioners left out in the cold by the Government this winter will recognise that all too familiar pattern. A pensioner who receives the full rate of the new state pension without additional income—whose income from April is roughly £12,000—is now in most cases no longer receiving the winter fuel payment. The Government have defended that decision by referring to the triple lock.

Will the Minister update the Committee on when the Government now project the full rate of the new state pension to exceed the income tax personal allowance, and how many pensioners they expect will be newly taken into income tax as a result of the development? If he cannot tell the Committee, perhaps he and his colleagues will vote in favour of new clause 3, which would require the Treasury to produce and publish forward projections for the number of people receiving the full rate of the new state pension who are liable to pay income tax, and specifically what the tax liability of their state pension income will be.

Pensioners cannot easily alter their financial circumstances, yet they were given less than six months’ notice of the withdrawal of the winter fuel allowance. They must not be blindsided for a second time by the taxman—especially not those who are just about getting by without additional income beyond the state pension. I urge Members and the Minister to vote for new clause 3 to prevent that from happening.

James Murray Portrait James Murray
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I thank the shadow Minister for the comments at the beginning of his speech, if not for all the questions subsequently. First, on the question about whether the £100,000 threshold will be unfrozen in due course, that threshold does not move, and it sets the personal allowance taper beyond that level.

The shadow Minister asked broader questions about the personal allowance and our decision to change the policy we inherited from the previous Government. In the many Finance Bill Committees that he and I served on before the general election, the personal allowance would routinely be frozen for more and more years into the future. That is what we have inherited: the personal allowance is frozen up until April 2028. We made clear that we would do things differently. As well as not increasing the basic higher and additional rates of income tax, as we set out, we did not freeze the personal allowance beyond April 2028, which means that it will continue to rise with inflation.

The shadow Minister asked specific questions about how the change affects pensioners, and referred to new clause 3, which I addressed earlier. I will repeat what I said: new clause 3 is not necessary because the data the shadow Minister requests is already in the public domain. We need to ensure that as the personal allowance begins to rise from April 2028, that will benefit not just people in work but pensioners, because they will see the personal allowance that applies to their pension income rising as well. That is underlined by the fact that we are maintaining the triple lock, which will see generous increases in the state pension as the bedrock of state support for pensioners.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

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

Clause 5

Appropriate percentage for cars: tax year 2028-29

Question proposed, That the clause stand part of the Bill.

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Gareth Davies Portrait Gareth Davies
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As the Minister set out, clauses 5 and 6 set the appropriate percentage used for calculating the taxable benefit for a company car for tax years 2028-29 and 2029-30. In those tax years, the appropriate percentage for EVs will increase by 2% to 7% in 2028-29 and 9% in 2029-30. For most other vehicles, the appropriate percentage will increase by a further 1% in each year, up to a maximum of 39%. Hybrid vehicles are the standout exception. The effect of these clauses for vehicles capable of operating on electric power while producing between 1 gram and 50 grams of CO2 per kilometre is to introduce a steep increase in the appropriate percentage of as much as 13% in 2028-29 to reach 18%, before rising to 19% in 2029-30.

Whereas previously the appropriate percentage for cars with emissions between 1 gram and 50 grams of CO2 per kilometre would rise as the electric range reduced, from 2028-29 that system will be replaced with a single flat rate, regardless of the electric range. That means that hybrid cars with the greatest electric range, which are presumably the least polluting, will see the steepest tax rise. Any distinction between hybrid vehicles will be eliminated for the purposes of these provisions. Indeed, as the explanatory notes make very clear, rates for hybrid vehicles will align more closely with the rates for internal combustion engine vehicles, as the Minister just pointed out.

It will not have escaped Members that these new rates take us to 2030. The Government have confirmed their intention to ban the sale of new petrol and diesel cars by that date. What has not yet been confirmed is the future of hybrid vehicles. The Department for Transport is consulting on which hybrid cars can be sold alongside zero emission models between 2030 and 2035. The Minister, naturally, will not pre-empt the outcome of that consultation, but these measures effectively do just that. While the Department for Transport parses the differences between plug-in hybrid electric vehicles and hybrid electric vehicles, the Treasury is eliminating that distinction altogether by 2028, let alone by 2030.

Not only that, but the Treasury is effectively lumping all hybrid vehicles in with those powered by internal combustion engines. Treasury Ministers will be aware that the manufacturing of hybrid vehicles and engines supports thousands of British jobs, as my hon. Friend the Member for Gordon and Buchan alluded to, and car manufacturing firms operate on a multi-year investment cycle. The contradictions between the Bill and the Department for Transport’s consultation send a less than clear signal, which puts those jobs at risk. I would therefore be grateful if the Minister clarified the Government’s intention in making these changes, especially when the House of Lords Environment and Climate Change Committee has heard that these rates have been the single most effective intervention to date in changing consumer behaviour around different types of vehicles.

I would also be grateful if the Minister outlined what steps the Treasury and HMRC are taking to make the general public aware of these changes. I grant they are quite technical, but they could impose a significant additional tax bill on certain taxpayers with plug-in hybrid vehicles. The Chartered Institute of Taxation raised that as a key area of concern, which could confront unsuspecting taxpayers—those seeking to do the right thing by purchasing a less-emitting vehicle— with a massive and steep tax rise. A higher rate taxpayer on £51,000 whose company car is a plug-in hybrid VW Golf could face an additional tax bill of as much as £1,600 in 2027-28. That strikes me as neither fair nor proportionate.

It has been reported that this Labour Government ordered no fewer than 10 petrol hybrid Jaguars upon assuming office to supplement the existing departmental, chauffeur-driven pool cars. If the Minister is confident that the consequences of the changes have been communicated and fully understood, I am sure he will be able to inform the Committee of the extra tax liability in 2028-29 of someone on a salary similar to that of a Treasury Minister—£110,000—whose full-time work car is a plug-in hybrid Jaguar F-Pace valued at roughly £60,000 with an electric range of just under 40 miles.

As the Committee can tell, we have serious reservations about the communication of the changes, the unfair overnight tax hikes they impose on taxpayers just trying to do the right thing, and the mixed messages they send to vehicle manufacturers by contradicting other areas of Government policy and consultation. The measures concern the ’28-29 and ’29-30 tax years, so the Government have time to think again and to bring back a better calibrated policy in a future Finance Bill. For the reasons that I have set out, we will vote against the clauses.

James Murray Portrait James Murray
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I listened to the shadow Minister’s comments, and he must have a different definition of “overnight” from me. Legislating now for changes that will come in in 2028 does not feel like overnight. Some Budget changes come in on the day of the Budget—had he called one of those overnight, I might have had some sympathy with the description, but not for legislating now for changes that will come in in 2028, toward the end of this decade. Part of the point of legislating now for changes that will happen some years down the line is precisely to give that signal to consumers and manufacturers, to ensure that the consumers are aware of what is to happen and manufacturers know what is planned.

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James Murray Portrait James Murray
- Hansard - - - Excerpts

Clause 13 sets the charge for corporation tax for the financial year beginning April 2026, setting the main rate at 25%; and clause 14 sets the small profit rate at 19% for the same period. As Members know, the charge for corporation tax must be set every year, so it is important to legislate on the rate for 2026 now to provide certainty to large and very large companies, which will pay tax in advance on the basis of their estimated tax liabilities. That is also why we have committed to cap corporation tax at 25% for the duration of the Parliament, as set out in the corporate tax road map published at the autumn Budget. The changes made by clause 13 will establish the right of the Government to charge corporation tax from April 2026. The clauses maintain the current rates of 25% and the small profits rate of 19%. Tax certainty is of great importance to businesses, and clauses 13 and 14 ensure that they continue to benefit from stable and predictable tax rules. I commend both clauses to the Committee.

Gareth Davies Portrait Gareth Davies
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As the Minister set out, clauses 13 and 14 set the charge and rates of corporation tax for financial year 2026. The main rate remains unchanged at 25%, with the standard small profits rate at 19%, and the standard marginal relief fraction remains three 200ths.

In Committee on the last Finance Bill, the Exchequer Secretary to the Treasury, who was then the shadow Financial Secretary to the Treasury—a great Opposition role—told the House that if Labour won the election, they would bring certainty back for businesses by capping the rate of corporation tax at 25% for the whole of the next Parliament. At that point, he spoke of capping corporation tax and publishing a business taxation road map as though they were two separate things.

This year’s Budget makes clear that there is no cap outside the road map, and once again, as with income tax, we must take Labour at their word that they will stick to a non-binding commitment, which is not legislated for in this Finance Bill. It is unclear how much certainty or stability such a loose commitment will bring, especially when the Budget blindsided businesses with a £25 billion tax hike. Not only that, but the corporate tax road map itself says that, while the Government are committed to providing stability and predictability in the business tax system, they cannot rule out changes to the corporate tax regime over the course of this Parliament.

Given the Government’s ongoing worries about headroom and the uncertainty and instability that has created, will the Minister reconfirm for the parliamentary record the Government’s commitment, first, not to raise the headline rate of corporation tax for the duration of this Parliament; secondly, not to raise the small profits rate or reduce the marginal relief currently available; and thirdly, to maintain full expensing and the annual investment allowance, as well as writing down allowances and the structures and buildings allowance without meaningfully altering their eligibility?

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James Murray Portrait James Murray
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I am glad the hon. Lady has read it, because it sets out our approach to business rates in the coming year, from April 2026, and what we want to do over this Parliament. Businesses want stability and certainty from Government; they recognise that, over a five-year period, things will happen that cannot be predicted on day one, but they want that certainty and predictability. That is why, in the corporate tax road map, we give certainty on capping the main rate and on the small profits rate, marginal relief, full expensing and the annual investment allowance—everything on which we can give full certainty. However, where there are areas that we seek to explore or consult on, we are also clear about that. We developed that approach in partnership with business to make sure that we give as much certainty up front as we can, while also signposting those areas that we want to discuss.

Gareth Davies Portrait Gareth Davies
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Let us be clear: it is good when a Government set out a tax rate over a multi-year period; we accept that that is a good thing. However, does the Minister accept—to the point raised by my hon. Friend the Member for Gordon and Buchan—that although a road map has been set out on corporation tax, the Labour party has created uncertainty by saying, before the election, that it would not increase national insurance contributions and then, immediately after the election, hitting businesses with a £25 billion tax rise, including not only a rate change but a threshold change that brings many new businesses into the tax regime? Does the Minister accept that the problem is about more than corporation tax? It is about the entire business tax ecosystem. On that basis, the charge is very clear: his Government have caused great uncertainty and great damage to British businesses.

James Murray Portrait James Murray
- Hansard - - - Excerpts

Although I am mindful that the clauses are on corporation tax, Mr Mundell, let me briefly respond to the shadow Minister’s comments. This Government were elected to bring an end to the instability that had become endemic under the previous Government. I like the hon. Gentleman a lot, but for him to imply that the previous Government had stability from day to day is for the birds. I was in the House of Commons Chamber so many times for debates on Finance Bills. I think we went through the entire introduction and repeal of the health and social care levy in the space of a few months. There was no stability under the previous Government, and that was a large part of what led people to vote for change at the last general election. They wanted us to sort out the public finances, get public services back on their feet and restore the economic stability that is the bedrock on which investment can rise and on which we can get the economy growing as we know it can, supporting British businesses, entrepreneurs and wealth creators to do what they do best.

To bring us back to the clauses, publishing the corporate tax road map shows our commitment to not just campaigning on the prospect of bringing stability but delivering it in our very first Budget. The corporate tax road map clearly sets out our approach to corporation tax, related allowances and other areas we will look at. I may have discerned support for it in the shadow Minister’s comments; it was bound up in other comments but, reading between the lines, I think he supports the publication of the corporate tax road map. He is welcome to intervene if he disagrees.

Gareth Davies Portrait Gareth Davies
- Hansard - -

I will intervene anyway. As I said, any certainty that can be provided to businesses regarding the tax system is a good thing. The point I am trying to make—I will try again—is that corporation tax is just one tax paid by businesses. They also pay national insurance contributions. They also use reliefs such as the business rates relief the Minister talked about—by the way, the Government have cut that from 70% to 40%, although I am not sure that it was clear before the election that they would do that. The uncertainty has been caused by all the things that the British public were told would not happen, but that then did happen.

We are talking about corporation tax today, and I can see that you are, quite rightly, about to bring us back in scope, Mr Mundell. I will leave it here by saying that British businesses pay more than just corporation tax, and what they need is certainty across the board. We have a corporation tax road map, but why do we not have a holistic, comprehensive business tax road map that includes national insurance, business rates and other taxes borne by businesses? That is my point.

James Murray Portrait James Murray
- Hansard - - - Excerpts

With your indulgence, Mr Mundell, I would like to briefly address—

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James Murray Portrait James Murray
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Clauses 23 and 24 make changes to extend the 100% first-year allowances for qualifying expenditure on zero emission cars and plant or machinery for electric vehicle charge points by a further year to April 2026. The first-year allowance for cars was originally introduced for expenditure incurred from 17 April 2002 for low CO2-emission cars, including electric vehicles, and eligibility was later restricted to cars with zero CO2 emissions from April 2021. The first-year allowance for electric vehicle charge points was originally introduced for expenditure incurred from 23 November 2016. These first-year allowances were introduced to support the UK’s transition to cleaner vehicles and were due to expire in April 2025.

The changes made by clauses 23 and 24 will extend the availability of the capital allowances for a further year to 31 March 2026 for corporation tax purposes and 5 April 2026 for income tax purposes. This ensures that investments in zero emission cars and charge point infrastructure continue to receive the most generous capital allowance treatment. By extending the first-year allowances for zero emission cars and charge point infrastructure, the measure will provide continued support for the transition to electric vehicles.

Gareth Davies Portrait Gareth Davies
- Hansard - -

As the Minister set out, clauses 23 and 24 extend the availability of the 100% first-year allowance for business expenditure on zero emission cars and for expenditure on plant or machinery for an electric vehicle charging point. Both allowances are extended for a single year from April 2025. In their current forms, both allowances were introduced by Conservative Governments. Although we will not oppose the clauses, there are a few questions that I would like the Minister to address.

The first relates to a point that has been highlighted by the Association of Taxation Technicians concerning clause 24. The ATT has queried why the specific allowance for charging points is being extended when this expenditure has been covered by both the annual investment allowance and full expensing since the Conservative Government made those reliefs permanent in 2023. That means that the allowance is really relevant only to unincorporated business—for example, a partnership or sole trader— that has already used its annual investment allowance in full, which is a scenario that the ATT considers to be quite rare.

According to the ATT, we should be able to tell how rare this is from the number of claims made for this specific allowance on tax returns. Will the Minister provide any information that he has to hand on that? HMRC has said it expects 6,000 unincorporated businesses to be impacted by clauses 23 and 24. Does the Minister have a figure for clause 24 alone and for specific unincorporated businesses that have exhausted their annual investment allowance? At the very least, I would be grateful if the Minister explained to the Committee the rationale behind that specific extension, given the context that the ATT has so clearly set out.

The cost to HMRC of implementing the clauses is a cool £1.2 million—a relatively high figure for the extension of a pre-existing allowance for a single year. If clause 24 is largely redundant, this hardly seems good value for money on HMRC’s part. I therefore ask the Minister to provide a clause-by-clause breakdown of the £1.2 million of taxpayers’ money that HMRC will spend to be able to execute the relief.

Turning back to clause 23, electric vehicles, unlike charging points, are not in scope of the annual investment allowance or full expensing, so I will not question the extension of that specific allowance, which we welcome. However, given the Government’s ambition to accelerate our transition to electric vehicles, I cannot help but wonder why they are putting a brake on the allowance after just a single year.

The Red Book states that the allowance will

“help drive the transition to electric vehicles”,

yet from April 2026, a business investing in these cars will receive relief only through annual writing-down allowances of either 18% or 6%, depending on the car’s emissions—those incentives are less generous and less immediate. At Budget 2020, we extended the EV allowance by four years to provide the support and certainty to businesses that the Minister says he so desperately wants. This Labour Government have declined to do the same, creating what some—not me—may call a cliff edge. As Labour increases the pace and the burden of the transition to net zero, they are also shifting the burden away from His Majesty’s Government and on to British businesses and British consumers. Once again, it is they who will pay the price for the Government’s obsession with decarbonising our grid and imposing net zero policies on the British public.

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James Murray Portrait James Murray
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We know that in any local area there needs to be a balance between visitor accommodation and long-term accommodation. I am sure that the hon. Member and others recognise the tension inherent in getting that balance right. We need to ensure not only that we are supporting our visitor economy, but that the tax system supports long-term accommodation for people who live in those areas—not least because those who work in the tourism sector need somewhere to live near their place of work. It is about the balance between supporting visitor economies and long-term residential lets. We agree with the previous Government, who introduced the reform, on this point. The tax treatment of FHL landlords is better if brought more in line with standard residential lets.

I will briefly mention the anti-forestalling rule, which is also introduced as part of the Bill. It will prevent the obtaining of a tax advantage through the use of conditional contracts to receive capital gains relief under the current FHL rules. That rule applies from 6 March 2024.

In summary, the changes made by the provisions will make the tax system fairer by eliminating tax advantages for landlords who let out their properties as short-term furnished holiday lets compared with those who let out properties for longer periods. FHL landlords will now be treated the same as other residential landlords for the purposes of income tax, corporation tax and capital gains tax. We are grateful to all the stakeholders who have already fed in following the publication of the draft legislation and supporting documents.

Gareth Davies Portrait Gareth Davies
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As the Minister set out, clause 25 and schedule 5 repeal special tax rules relating to the commercial letting of furnished holiday accommodation. The changes were first announced in our Government’s Budget in March 2024, and we will not oppose them. However, it is important to view the measures in the context of the wider changes to the circumstances of the hospitality sector as a result of Labour’s Budget—most notably the hike in national insurance contributions.

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None Portrait The Chair
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Order. Can we keep the discussion within the context of the clause and the schedule?

Gareth Davies Portrait Gareth Davies
- Hansard - -

Thank you, Mr Mundell. I am grateful for the hon. Member’s intervention; we all want to see people able to get on the housing ladder, particularly younger people. There is much work to be done on that. However, I would say two things. First, I question how much of an impact the measures will have on that, but I am happy to see evidence and data from the Treasury to prove her point. Secondly, we cannot deny that the hospitality sector is in different circumstances to when the previous Government announced the measures in March 2024. As I will discuss, the measures will have an impact on the sector. I think the hon. Member would agree that it is important to support our hospitality sector, hear their concerns and for me, as the official Opposition spokesperson, to make remarks on their behalf.

As I was saying, this is not just about national insurance contributions, but the reduction in the secondary threshold for that tax, as well as the reduction in business rates relief, which has gone down from 70% to 40%. Each of those measures creates significant new costs for the hospitality sector, which is crucial to rural and coastal economies across the country. It is those same rural and coastal economies that will be disproportionately affected by the provisions of clause 25 and schedule 5.

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Blake Stephenson Portrait Blake Stephenson
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Does my hon. Friend think that, by suggesting that farmers should diversify into holiday lets, the Environment Secretary intends that farmers should pay even more tax to the Treasury?

Gareth Davies Portrait Gareth Davies
- Hansard - -

It is clear that the Government have launched an attack on farmers across rural communities in our country. The family farm tax is a disgrace. Farmers have protested and tried to make their voices heard, but still cannot get a meeting with the Chancellor of the Exchequer. I urge the Minister, who is very open to meetings, to have a word with his Chancellor, who is consistently in hiding and running out of the country when things get difficult as a result of her decisions.

Perhaps it is true that the Environment Secretary wants farmers to pay even more tax. Why else would he say to farmers in Oxford, “Convert your barns into holiday lets,” while over the road the Treasury is taking away these reliefs and making it more tax inefficient for them to do so? This is yet another area where the Labour Government seem intent on cancelling out genuinely pro-growth deregulation, which we welcome, with anti-growth taxation.

Yuan Yang Portrait Yuan Yang
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Will the hon. Gentleman give way?

Gareth Davies Portrait Gareth Davies
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Does the Labour Member who is about to intervene on me support holiday lets?

Yuan Yang Portrait Yuan Yang
- Hansard - - - Excerpts

I am glad that we have returned to this topic, because I was about to ask the hon. Gentleman whether he might clarify the relationship between his remarks and the commercial letting of furnished holiday accommodation—[Interruption.] But of course I support the equalisation of tax measures provided for by the clause.

Gareth Davies Portrait Gareth Davies
- Hansard - -

I am sorry, but there was a very loud cough when the hon. Lady intervened. Would she repeat her intervention?

Yuan Yang Portrait Yuan Yang
- Hansard - - - Excerpts

I was simply hoping to get us back on to the topic of the commercial letting of furnished holiday accommodation.

Gareth Davies Portrait Gareth Davies
- Hansard - -

Oh, so it was more of a heckle than an intervention, but that is very welcome too; it makes it a bit more lively for the very large audience we have today.

I would be grateful if the Minister could set out the policy of this Labour Government. Do they support holiday lets? The Environment Secretary clearly supports them and wants farmers to diversify into them, while at the same time the Treasury—yes, we announced the policy in March—clearly wants to tighten up the rules on taxation. It would be great to hear the Minister clarify that, but it seems that the answer depends on which Minister one talks to on any given day. Let us see what the answer is in this Committee, from this Minister, today.

Clause 25 also touches on a long-standing issue of whether letting constitutes a trading activity or a property business. The FHL regime created a clear distinction by deeming a letting business to be considered a trade for certain purposes. Some organisations, such as the excellent Chartered Institute of Taxation, are concerned that removing the regime removes this distinction and could open up a whole can of worms, leading to costly disputes for both the taxpayer and HMRC. Can the Minister clarify what defines a letting as a trading activity in the absence of the FHL regime, or at least commit to the publication of updated, clearer guidance for the industry on that subject? The Chartered Institute of Taxation is also seeking confirmation on the following points—

Rachel Blake Portrait Rachel Blake (Cities of London and Westminster) (Lab/Co-op)
- Hansard - - - Excerpts

I am confused as to why a party that brought in the proposals is now arguing so vehemently against them—perhaps it is still attached to its chaotic approach to government. What I am not following in the hon. Gentleman’s remarks is the argument that the equalisation of the taxation could have negative consequences. Has the hon. Gentleman interrogated the evidence that has been brought forward by those people who are letting out their holiday lets, and does he really think that there would not be an economic benefit to supporting a change in use of those homes?

Gareth Davies Portrait Gareth Davies
- Hansard - -

These sittings are long, but I did say at the beginning of my speech that we announced in March 2024 that we would bring in this same measure and that we will support it today.

I am not saying that we are against it, but I am saying two things. First, as I was saying at the beginning of my speech, the context in which the measure is being introduced is very different from the context in March 2024. The context today is that hospitality businesses across the country, but particularly in rural communities, are being hit by a series of taxes that they did not ask for, did not vote for and were told would not happen. That is the context in which we find ourselves.

Secondly, His Majesty’s official Opposition have a duty to communicate the concerns of the British public and the sectors that will be directly impacted by this measure. It is vital that His Majesty’s Opposition scrutinise whatever policies are put in front of us, with a forward look at how that will economically damage or benefit communities. As you can tell, Mr Mundell, and as the hon. Member for Cities of London and Westminster can tell, I take a constructive tone. When we do support measures, we will say so, and when we do not, or we feel that additional scrutiny is needed, Members better believe that I will be there. That is what I am doing today. I hope that addresses the intervention from the hon. Member for Cities of London and Westminster.

In the interests of scrutiny on behalf of the many thousands of people that will be impacted by the measure and in a context of a wider hammering through the tax system by this Labour Government, let me continue my questions on behalf of the Chartered Institute of Taxation.

First of all, I seek confirmation from the Minister that an FHL disposal must be made before 6 April 2025 in order for a qualifying replacement asset to be eligible for roll-over relief, even though the replacement asset itself can be purchased up to three years after FHL disposal. Secondly, I seek confirmation that lettings must cease altogether before 6 April 2025—not just furnished holiday lettings, but even unfurnished long-term rentals—for an FHL disposal to qualify for business asset disposal relief. Thirdly, I seek confirmation that married couples or civil partners who jointly own an FHL must make an election if they are to continue to split the income unequally, rather than reverting to the normal 50:50 rule, and make a declaration to HMRC before 6 April 2025 if this is to have effect in the 2025-26 tax year. I ask those questions constructively, on behalf of the Chartered Institute of Taxation, and if the Exchequer Secretary is not able to answer them, of course I will take a written answer by way of letter following this sitting.

In addition to the confirmation on those three points, I would be grateful if the Minister could provide reassurance that HMRC guidance has been specifically and sufficiently clear on these points, so that those affected are aware of the implications of the changes. It is important to remember that when the Government make changes and when we made changes, we were very conscious—I am sure he is too—that the public are aware. He should take all measures possible to ensure that people are aware of these changes, but I appreciate his guidance on what measures are being taken.

Finally, on the case of joint ownership—

Oral Answers to Questions

Gareth Davies Excerpts
Tuesday 21st January 2025

(1 week, 4 days ago)

Commons Chamber
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Lindsay Hoyle Portrait Mr Speaker
- Hansard - - - Excerpts

No, we have Gareth Davies up next. We are in complete chaos—[Laughter.] We have the wrong names coming in. What has confused everybody is the fact that Question 3 was withdrawn. Everybody is a question behind. Right, I call the shadow Minister next.

Gareth Davies Portrait Gareth Davies (Grantham and Bourne) (Con)
- View Speech - Hansard - -

Never in doubt, Mr Speaker.

May I welcome the Parliamentary Secretary to the Treasury, the hon. Member for Swansea West (Torsten Bell), to his place? The removal of investment allowances from our domestic oil and gas industry is strangling domestic supplies at a time when our storage levels are depleted. Labour’s ideologically driven, unachievable obsession with decarbonising the grid by 2030 might be good news for Chinese renewables manufacturers, but it is bad news for British households. Is it not the case that the only growth that we will see from Labour’s energy policy is in the amount that people pay for their energy bills, or can the Minister stand up now and commit—just as Labour did during the general election campaign—to cutting energy bills by £300?

Draft Financial Services and Markets Act 2000 (Ring-fenced Bodies, Core Activities, Excluded Activities and Prohibitions) (Amendment) Order 2024 Draft Financial Services and Markets Act 2000 (Designated Activities) (Supervision and Enforcement) Regulations 2024 Draft Short Selling Regulations 2024

Gareth Davies Excerpts
Tuesday 7th January 2025

(3 weeks, 4 days ago)

General Committees
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Gareth Davies Portrait Gareth Davies (Grantham and Bourne) (Con)
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It is always a pleasure to see you presiding over us, Mr Vickers. The Minister has covered the instruments pretty well, so I will make a few remarks, and then I have a couple of pretty straightforward questions. Let me first speak to the statutory instrument on ringfencing. As the Minister set out, the regime came into force in January 2019, requiring the largest UK banks to separate core banking services from their investment and international banking activities. The intention with the ringfencing regime was to protect British banks from shocks, whether originating from elsewhere in the group or in global financial markets.

The regime currently applies to banks with more than £25 billion in retail and small and medium-sized enterprise deposits. The original legislation contained a statutory review clause requiring His Majesty’s Treasury to commission an independent review within two years of the regime coming into effect. The review was commissioned in 2021, chaired by the excellent Sir Keith Skeoch, and the review panel reported in March 2022. The SI that we are debating seeks to implement recommendations from the Skeoch review that were aimed at improving the operation of the regime. It amends previous FSMA-related SIs from 2014 to adjust the regulatory regime applying to ringfenced bodies.

As the Minister set out, the changes will raise the threshold for inclusion in the ringfenced regime from £25 billion to £35 billion, and add a new exemption for retail-focused products that undertake minimal investment banking activity. Regulatory reporting requirements by ringfenced banks are also being reduced, while restrictions on the geographical operations are being relaxed. The products and services that ringfenced banks can offer are also being relaxed, as in the case of trade finance agreements. Finally, when banks become the subject of the regime because of an acquisition by a ringfenced bank, a four-year transition period is being introduced.

This is a long way of saying that I very much welcome the action that is being taken by this Government as relates to this statutory instrument. However, there are two points that I would like some clarification on, given that the financial landscape is continually changing and has changed a lot in the past two years alone. Regulation must adapt to changing conditions, so let me ask two questions. First, will the £35 billion threshold be reviewed again in the future? Secondly, what will be the process for adjusting the threshold in response to future market developments and inflationary pressures?

Turning to designated activities, under the 2023 Act His Majesty’s Treasury makes regulations to designate activities related to financial markets, including financial market exchanges, instruments, products or investments. The Act also gave the FCA powers to make rules and give directions relating to those designated activities. The designated activity rules framework includes provisions that allow the Treasury to designate certain activities to be regulated by the FCA, without the requirement for those carrying on the activities to become authorised persons. The SI in front of us today rightly aims to provide the FCA with the supervisory and enforcement powers to enforce the rules it makes within that framework.

We support the measures set out in this SI. However, I again have a couple of points to raise, particularly points that were raised in the other place and points that I understand were raised by the Minister, as reported in the Financial Times on 4 December 2024, regarding the naming and shaming of firms by the FCA. I completely appreciate that the FCA has reopened its consultation, but I should be grateful if she would provide clarity on two points. First, at what point exactly in the enforcement process would the naming and shaming take place? Secondly, how will the Government hold the FCA accountable for its new approach, as the Minister herself said was needed in the interview?

Finally and briefly, we turn to the Short Selling Regulations 2024. The SI establishes a new legislative framework for the regulation of short selling by creating a designated activity of short selling, thus giving the FCA powers to make and enforce rules for this practice. Short selling does play a vital role in financial markets, such as providing liquidity. However, it is important that the FCA has the tools it requires to monitor short selling activity and intervene when necessary to mitigate risks. This SI introduces a requirement for the FCA to publish anonymised aggregate net short positions based on all individual position notifications that it receives. It also removes restrictions on uncovered short selling of sovereign debt and sovereign credit default swaps, as the Minister said, as well as sovereign debt notification requirements.

The Opposition support the measures set out in this SI. I have no further questions.

National Insurance Contributions (Secondary Class 1 Contributions) Bill

Gareth Davies Excerpts
Joe Morris Portrait Joe Morris
- Hansard - - - Excerpts

My hon. Friend eloquently makes the point that I have been trying to make when I have tripped over my words.

I am extremely proud that the Government are committed to achieving economic stability, being frank with the public about the choices that we face and not simply taking the easy options. We need to implement these tough measures in order to resolve the previous Government’s disastrous economic mismanagement and to restore our foundations. I will finish by saying that traditionally, as far as I am aware, it is poor form for the arsonist to criticise the actions of the fire brigade.

Gareth Davies Portrait Gareth Davies (Grantham and Bourne) (Con)
- View Speech - Hansard - -

I rise to speak, on behalf of the official Opposition, to amendments 13 to 18 and new clause 1, which stand in my name.

First, it is important to remember the context of the situation we find ourselves in today. Throughout the election, the Chancellor and the Prime Minister promised the British people that they would not raise taxes on working people. They committed specifically to not raising national insurance, but here we are in Committee debating a national insurance tax on working people worth some £25 billion. Each and every Government Member made specific promises to their constituents on national insurance, which they have now broken. We have it here in black and white.

Clause 1 raises the rate of secondary class national insurance from 13.8% to 15%. To compound the impact, clause 2 drastically cuts the secondary threshold from £9,100 to £5,000. This two-pronged attack on business means that while clause 1 squeezes more from businesses, clause 2 simultaneously pushes more businesses into the taxman’s grasp. Taken together, based on data from His Majesty’s Revenue and Customs, a staggering 940,000 employers are set to lose out in net terms from the Bill. The Office for Budget Responsibility has made it clear that each one will be hit by an average of £26,000 in additional tax.

On Second Reading we heard the same old script from the Government and their Back Benchers. Time and again we hear that the Bill will hurt only the largest businesses, but that is not correct. Most high street hair salons would not say that they are a big business with mounds of profit to give away to the Exchequer, no matter how much hair mousse this Prime Minister buys from them. A village family butcher surely would not regard themselves as profiteering fat cats. Community pharmacies providing vital services to residents young and old surely cannot be put in the same category as a large multinational pharmaceuticals company. Yet they are.

Gareth Snell Portrait Gareth Snell (Stoke-on-Trent Central) (Lab/Co-op)
- Hansard - - - Excerpts

The hon. Gentleman is making an eloquent argument against increasing the employer’s part of national insurance contributions. Yet he himself voted for the health and social care levy, which was an increase of greater proportion on both employees and employers. I have just checked Hansard—he made none of the arguments that he progresses today when his Government were putting that through. Why has his mind been changed now that he is in opposition?

Gareth Davies Portrait Gareth Davies
- Hansard - -

I find it difficult that the Labour party says that we are irresponsible with public finances, yet when we faced a once-in-a-century pandemic and spent £400 billion or £500 billion to support residents, business and families in Stoke and across the country, we decided that we needed to pay that money back and did not want debt to keep on rising. Yes, we made difficult decisions in the face of a global pandemic. There is no global pandemic today. This is a political choice, and that is the difference.

Scott Arthur Portrait Dr Scott Arthur (Edinburgh South West) (Lab)
- Hansard - - - Excerpts

The hon. Gentleman is very kind in giving way again so quickly. The point has been made about the billions of pounds that were spent during the pandemic. Can he outline how much of that money went to Tory party mates and donors through dodgy contracts?

Gareth Davies Portrait Gareth Davies
- Hansard - -

The hon. Gentleman was not here at that time, but those of us who were in Parliament then faced an incredibly challenging time in very difficult circumstances. Billions of pounds went to support businesses in his constituency; if he has a conversation with the average business that benefited from the furlough scheme, I am sure he will correct the record.

The problem is that socialists fundamentally do not understand or care what it means to have an idea, to take a risk or to work hard day in, day out to make a business a reality. That is the problem. They think it is all so easy—that profits just flow in. They think it will all be all right, because Government can step in and take us much tax as they want. That is not the case. If Government Members talk to the average business in their constituencies, they will find this out; if they set up a business, they will see it for themselves.

Perhaps most worrying of all, not only do the Government not understand the private sector, but they have completely overlooked the different ways in which the public sector provides for our communities, as my hon. Friend the Member for Hinckley and Bosworth (Dr Evans) set out. Whether healthcare, childcare or the charity sector, organisation after organisation has warned Ministers that this tax rise will impact the services they provide. That may not have been intended, but the Government have yet to act. That is why we have tabled amendments 13 to 15 and 16 to 18, which seek to protect certain key sectors from both parts of this tax in Great Britain and Northern Ireland respectively.

Luke Evans Portrait Dr Luke Evans
- Hansard - - - Excerpts

My hon. Friend has hit the nail on the head, and the Treasury really needs to answer this question. Did it knowingly implement these tax rises on these industries, which would be a travesty in itself, or did it do so by mistake because it does not understand these issues? If that is the case, will the Government look to rectify the matter so that hospices, GPs and childcare providers are protected?

Gareth Davies Portrait Gareth Davies
- Hansard - -

I could not have put it better myself. These amendments highlight the fact that Labour’s attempt to paint this tax rise as a necessity for public services is nothing but plain politics; Labour has always intended to do this, and now it is hiding behind public services to justify it.

Those working on the frontline of healthcare in and alongside the NHS will be deeply impacted. The Institute of General Practice Management estimates that the tax bill of each GP surgery will increase by £20,000 a year, likely resulting in a reduced number of appointments. The Nuffield Trust has said that providers in the adult social care sector will face a £940 million increase, dwarfing the social care support announced in the Budget. Community Pharmacy England says that community pharmacists will be hit by an additional £50 million each year, inevitably causing pharmacies to close and services to deteriorate. Hospice UK warns that £30 million will be added to the bill for 200 hospices across the country, which will lead to greater pressure on NHS palliative services.

Edward Leigh Portrait Sir Edward Leigh
- Hansard - - - Excerpts

My hon. Friend is a fellow Lincolnshire MP. In Lincoln we have St Barnabas hospice, a greatly loved local institution where most people would want to spend their final days. We also have the Lincolnshire air ambulance, and we have GPs all over our huge county who are struggling. Can he explain how it is in the public interest to attack these people?

Gareth Davies Portrait Gareth Davies
- Hansard - -

My right hon. Friend—a Lincolnshire colleague and Father of the House—puts it perfectly. Labour says that it supports public services and that those services are apparently being trashed, so why on earth would the Government then go and tax them? Why add to their cost base, which they have very clearly said will reduce services across every constituency? Labour Members will all walk through the Lobby tonight and add to the cost burden of those services. It does not make sense. Charities have also signalled the alarm, with more than 7,000 writing to the Chancellor to warn of the £1.4 billion hit that they will face next year.

Graham Stuart Portrait Graham Stuart
- Hansard - - - Excerpts

Does my hon. Friend agree that Labour Back Benchers need to speak to their Ministers? As my hon. Friend the Member for Hinckley and Bosworth (Dr Evans) suggested, the Government cannot have meant to do this deliberately. They could accept our amendments today or move some of the funds for the NHS—the £22 billion or £25 billion, whatever it is—across to this, because the NHS depends on social care and other services. At the moment, the Government risk turning something that could be a triumph for them into a disaster, both for the NHS and, more importantly, for patients and those most in need.

Gareth Davies Portrait Gareth Davies
- Hansard - -

Once again, my right hon. Friend makes a valid point. As I have said already, I am not sure that this was intended. I do not think the Government understand what these measures will do to our communities, to the sectors I have outlined and to the businesses that I will speak about in a minute. The Minister will have to address my right hon. Friend’s point. What will the Government do to mitigate the damage of the Bill on the communities and organisations that I have highlighted?

A sector I have not yet highlighted is childcare, without which millions of parents across the country could not go to work—including, by the way, many in this House. The Bill will contribute an average of £47,000 in additional costs per nursery next year, according to the National Day Nurseries Association. The previous Government did so much to extend childcare to more families, boosting workforce participation and economic growth, but this tax hike will pull us back from that progress. That is not what people voted for. There is no mandate for this harm. I urge the Government to think again.

Ideally, all employers would be made exempt, which is why the Conservatives voted against the Bill. At this time of year, people should be reflecting on another year gone by all too soon and looking to the new year with hope, ambition and optimism, but so many employers will now enter 2025 with fear. Many will be thinking again about that planned expansion or the investment in new equipment or premises. Worse, some will be thinking about who they need to let go—never mind awarding the pay rises in the spring they once hoped to give.

Luke Evans Portrait Dr Luke Evans
- Hansard - - - Excerpts

My hon. Friend is an astute man, and he has picked up on something that I fear. According to S&P Global’s purchasing managers’ index, this has been the third consecutive month of job losses; December has seen the highest number since 2021, in the pandemic. It has said:

“Barring the pandemic, the survey has not seen job losses on this scale since the global financial crisis in 2009.”

That is a direct impact of the choices in the Budget and this NIC increase. Does my hon. Friend agree that this is something the Government really need to think about?

Gareth Davies Portrait Gareth Davies
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I agree completely with my hon. Friend, who has once again made a very astute intervention. It marries very clearly with what we have seen in business confidence. He mentioned the record since the pandemic. Business confidence has tanked to low levels that we have not seen since the economy had to be shut down during the pandemic. A survey by the CBI, which makes for stark reading, says that 62% of businesses have said that they will have to reduce recruitment, while 48% have said that they will be reducing existing staff levels. That is all because this Bill will impact them in ways they never imagined and were never told about. Whether businesses freeze or cut jobs, or, as the Chartered Institute of Taxation has warned, shift employees to a self-employed basis, or, even worse, offshore workers to overseas destinations, the potential impact on employment should absolutely worry us all.

That is why we have tabled new clause 1, which would require the Chancellor to publish an assessment of the impact of this tax rise on the employment rate within a year of the passage of the Act. It is not controversial; it just seeks clarification and an assessment.

Kit Malthouse Portrait Kit Malthouse (North West Hampshire) (Con)
- Hansard - - - Excerpts

This impact assessment is extremely important, not least because at a macro level—given that the UK is essentially a services-based economy in which human capital is the most expensive fixed cost, effectively—there is no way to escape this tax. Unlike corporation tax, which is levied on profits, this tax is levied whether a business is making a profit or not; businesses that have been marginal but struggling may well be forced into a loss, and may therefore choose to close down. It therefore has to be essential that we look backwards, if this tax goes ahead, and ask what the impact has been from a services point of view.

Gareth Davies Portrait Gareth Davies
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That was a classic case of how to make an intervention, because it added to the debate. I had not mentioned that point, but my right hon. Friend is absolutely right. The impact on employers, who will pay the tax whether they are profitable or not, is absolutely right. That is, again, not something I think the Government have fully appreciated.

Finance Bill

Gareth Davies Excerpts
Nusrat Ghani Portrait Madam Deputy Speaker (Ms Nusrat Ghani)
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Just before I call the shadow Minister, I remind Members that, in Committee, I am Madam Chair or Madam Chairman.

Gareth Davies Portrait Gareth Davies (Grantham and Bourne) (Con)
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Thank you very much, Madam Chair. It is always a pleasure to see you in Committee and to serve under your chairmanship.

On behalf of the Opposition, I rise to speak to new clauses 4 and 5, which stand in the name of my right hon. Friend, the shadow Chancellor. Before I do so, let me set the scene for clauses 7 to 12.

When announcing these changes in her Budget, the Chancellor said:

“We need to drive growth, promote entrepreneurship and support wealth creation”.—[Official Report, 30 October 2024; Vol. 755, c. 818.]

She said something similar to the BBC in 2023:

“We want Britain to be the best place to start and grow a business”

and that was why, she said

“I don’t have any plans to increase capital gains tax.”

This Bill corrects the record. Labour wants to increase capital gains tax, so clearly it does not have any plans for Britain to be the best place in which to start and grow a business. Is it any wonder that business confidence is now at the lowest level we have seen since the pandemic?

Clause 7 increases the main rates of capital gains tax from 10% and 20% to 18% and 24% respectively, with schedule 1 making consequential changes to reflect that these rates are now equal to those on residential property. The Office for Budget Responsibility rates the costings on this policy as “highly uncertain”. It says that

“these costings are among the most uncertain in the policy package, reflecting the range of potential behavioural responses.”

This Government are far too quick to ask others to explain how they would pay for Labour’s policies, when they are clearly failing to explain convincingly how their own policies would pay for themselves.

I wish to take this opportunity to highlight an issue raised with me by the Chartered Institute of Taxation. First, let me place on record my thanks to the organisation for its invaluable support. It has been informed by His Majesty’s Revenue and Customs that it is too late to change the format of the relevant 2024-25 tax return pages to accommodate this in-year change. I would therefore be very grateful if the Minister could provide the following assurances to HMRC: first, that it will be properly equipped to implement this measure; secondly, that the changes will be published as widely as possible; and, thirdly, that an appropriate level of understanding will be shown to taxpayers contending with these complications.

Clauses 8 and 9 increase the rates for gains that qualify for business asset disposal relief and investors’ relief. From 6 April 2025, the 10% rate will increase to 14%. From 6 April 2026, it will rise again to 18%. As the Chartered Institute of Taxation has highlighted, because the increase to the main rates of capital gains tax is effective immediately, this leaves a window where people selling their business can save up to 14% in capital gains tax until April 2025. In other words, the tax changes in this Bill do not cultivate a start-up Britain; they incentivise British business owners to sell up and sell up soon. This could have been avoided—along with the administrative complications that I have already outlined—had measures in clause 7 been implemented from the start of the new financial year.

Will the Minister explain why the timings of these provisions appear to be so untidy, and, for that matter, how exactly they drive growth, promote entrepreneurship and support wealth creation? I simply say that if hon. Members are not satisfied with the Minister’s explanation, I encourage them to vote for new clause 5, which would require a proper assessment of the impact of this perverse incentive.

Clause 10 reduces the lifetime limit for investors’ relief from £10 million to £1 million, while clause 11 and schedule 2 bring in transitional rules and anti-forestalling provisions. On those anti-forestalling provisions, the Chartered Institute of Taxation notes that the anti-avoidance measures risk being “unfairly retrospective”, capturing those who entered into commercial contracts in good faith before the Budget, on the grounds that they do not satisfy the stringent requirement put down by the Treasury to be “wholly commercial”. Will the Minister tell the House why the wording is so tight? Widespread concern over being hit with “unfairly retrospective” taxation would have a chilling effect on parts of the economy. It would exacerbate uncertainty among those who already feel that they have been blindsided by this Government.

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Nusrat Ghani Portrait The Chairman of Ways and Means (Ms Nusrat Ghani)
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We come to the Front-Bench wind-ups. Does the shadow Minister wish to speak?

Gareth Davies Portrait Gareth Davies
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indicated dissent.

Nusrat Ghani Portrait The Chairman
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I call the Minister.

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Gareth Davies Portrait Gareth Davies
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I am very grateful to the Minister for explaining all the things she has just set out, but I did not quite get an answer to the specific question of why it costs HMRC £4.5 million to execute this tax rise, which will not raise any money in the next year or the year after. Could she explain why this specific measure that only affects 3,100 people costs HMRC £4.5 million, but other tax increases cost hundreds of thousands of pounds?

Tulip Siddiq Portrait Tulip Siddiq
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If the shadow Minister looks carefully at the documents we have published, he will find all his answers written out very clearly there.

New clause 5 would require the Government to publish an impact assessment of the changes to business asset disposal relief, and to compare the impact of those changes with the number of claims that would have been expected if the rate had not been changed. Every year, the Government publish capital gains tax statistics, which include the number of business asset disposal relief claims for the most recent tax year with available data. The number of claims in 2024-25 compared with upcoming tax years will therefore become public information in time. Meanwhile, the fiscal impact of the changes are is out in the tax information and impacts note for this measure, which has been published online.

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Gareth Davies Portrait Gareth Davies
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I rise to speak on behalf of the official Opposition on new clause 3, which stands in the name of the shadow Chancellor, my right hon. Friend the Member for Central Devon (Mel Stride).

Clauses 15 to 18 concern the taxation of the oil and gas industry, which meets 75% of the UK’s household and industrial energy needs, with 50% of that need being met by the North sea. The sector supports more than 200,000 high-skilled jobs in this country, and that talent, along with the rest of the supply chain, will be crucial to our domestic energy transition. These realities underscore the imperative of a smooth and efficient transition and a fiscal regime that facilitates that, not least because the timeline for investment in the oil and gas industry is so long. If the fiscal regime is not calibrated correctly, the damage may be irreversible and the costs will be significant.

To recap the measures in the Bill, clause 15 increases the rate of the energy profits levy from 35% to 38%, bringing the headline tax rate on the sector up to 78%. Clause 16 removes the 29% investment allowance and reduces the rate of the decarbonisation investment allowance to 66%, so that the cash value of that allowance remains the same. Clause 17 extends the energy profits levy to 2030, at which point the Government are committing to implementing a successor regime to respond to price shocks once the levy expires. Clause 18 and schedule 3 legislate for certain payments into decommissioning funds to be treated as decommissioning expenditure so that they can attract tax relief.

The question that many are asking is this: do these measures add up to a fiscal regime that facilitates a smooth and efficient energy transition? Not according to the Office for Budget Responsibility, which concludes that on average over the forecast period, capital expenditure will be 26% lower, oil production 6.3% lower and gas production 9.2% lower compared with our March forecasts. Those are dramatic movements. The University of Aberdeen has warned:

“A rise in the EPL and loss of investment and capital allowances may have the unintended effect of accelerating decommissioning and decelerating the energy transition as companies face an additional cost burden.”

The Government have thankfully carried out a partial U-turn, retaining the decarbonisation allowance and the 100% first-year allowance introduced by the Conservative party, but if they were persuaded of the importance of those investment allowances and that removing them would do more harm than good, why persist with removing the main 29% investment allowance? What was it about that relief compared with the others that made them want to scrap it?

The Government talk about closing loopholes—we saw how well that went with carried interest—but these measures will contribute just 1% of the new revenue raised by the Budget across this Parliament. Does the Minister really think it is worth jeopardising some 50% of our domestic gas supply for that? The measures in the Budget essentially throw a massive spanner in the works for oil and gas, and it is unclear exactly what the Government’s rationale is for doing that.

When we brought in the levy, it was to tax extraordinary profits in extraordinary times. The revenue that we raised contributed to our efforts through policies such as the energy price guarantee and the energy bills support scheme to reduce energy bills for the British people. Today, as those extraordinary circumstances subside, Labour is ratcheting up the levy. That sends a mixed message to the industry ahead of the consultation on a successor regime. The terms of that regime will supposedly be set by the need to respond to price shocks, yet the Government’s justification for these measures has nothing to do with price shocks. Instead, they are all dressed up in language about the sector making a “fair contribution”, as the Minister said, to the Energy Secretary’s environmental ideological ambitions. What is the Government’s vision for the taxation of oil and gas in this United Kingdom—temporary windfall taxes or permanent climate levies? The Bill suggests the latter. I would be grateful for the Minister specifically commenting on that when he responds.

One way in which the Minister could give an indication and provide some long-term certainty would be to confirm further the future of the energy security investment mechanism, which he mentioned. As he kindly said, we introduced the ESIM so that when prices returned to normal levels, the energy profits levy would end; no more windfall profits would mean no more windfall tax. Will he confirm that the ESIM will remain in place up to 2030? I think he said so at the Dispatch Box, but I would be grateful for his reconfirming its end date. Will he go further and confirm that it will remain in the same condition as today? Will the price floor continue to be consumer prices index-adjusted?

The Treasury and the Minister have said that the ESIM will be retained, but the industry would like further confirmation, as I have set out. Will he also write to me with the Treasury’s latest modelling of future oil and gas prices to prove that the expected revenues are not at the expense of the ESIM? That modelling will be important for us to understand and get that reassurance and certainty on the ESIM. Having been in the Treasury, I know that that modelling is continually reviewed and produced; I would be grateful if he would write to me with that.

These are not purely academic questions. Our concern is for the hundreds of thousands of people employed by the UK oil and gas industry, for the UK’s energy security and for the efficient and smooth energy transition that we all care about. The Government should be not ideological but empirical in their approach, which is why we have tabled new clause 3, which would require a review of the impact of these measures on employment, investment, production, demand and the whole Scottish economy. If the Government have already made detailed assessments on those specific areas, we would be grateful for the Minister publishing them.

On every measure, the Budget has not survived contact with reality. Growth has been downgraded, real incomes depressed and business investment reduced, with broken promises and credibility completely shattered. It is not so much that the Labour Government take a different view on economic matters; it is that they take the wrong view. Labour is the party of the tax rise that loses money. We are the party of the tax cut that raises revenue. That is why Labour Governments always leave office with more unemployment, larger debt and higher taxes. They always run out of other people’s money, and this Government are set to do so in record time.

Nusrat Ghani Portrait The Chairman of Ways and Means
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I call the Liberal Democrat spokesperson once again.

Oral Answers to Questions

Gareth Davies Excerpts
Tuesday 3rd December 2024

(1 month, 4 weeks ago)

Commons Chamber
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Lindsay Hoyle Portrait Mr Speaker
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I call the shadow Minister.

Gareth Davies Portrait Gareth Davies (Grantham and Bourne) (Con)
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Later today, the House will vote on the Government’s £25 billion national insurance tax hike. To avoid any uncertainty when we vote, will the Minister confirm exactly which public sector organisations will be compensated?

James Murray Portrait James Murray
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If the shadow Minister would like to know which public sector organisations will be compensated, he could look at what his Government did with the health and social care levy, because the definition of public sector organisations—it is a regularly cited definition—is set out through the Office for National Statistics. We will reimburse Departments and other public sector organisations.

Gareth Davies Portrait Gareth Davies
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There was so little information in that response—the civil service will be very proud of the Minister. He will not say who will be spared by the Chancellor’s tax raid, but we know that working people will be made to pay—the Office for Budget Responsibility has said so; the Institute for Fiscal Studies has said so; even the Resolution Foundation has said so; and working people know so. Why is it that Labour always leaves office with unemployment higher than when it entered office?

James Murray Portrait James Murray
- View Speech - Hansard - - - Excerpts

I do not think the shadow Minister listened to my response to the previous question, in which I set out very clearly the definition of the public sector for the purposes of national insurance contributions. Look at what the OBR has said: yes, it recognises that we are asking businesses to contribute more and that this will have an impact, but it also says that the employment level will rise from 33.1 million to 34.3 million by 2029, meaning an increase in the employment level over this Parliament.

National Insurance Contributions (Secondary Class 1 Contributions) Bill

Gareth Davies Excerpts
Gareth Davies Portrait Gareth Davies (Grantham and Bourne) (Con)
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It is a great pleasure to wind up the debate on behalf of the official Opposition. I pay tribute to and thank all colleagues from both sides of the House for their contributions. I will try to touch on some of their points as I go through.

Just nine months ago, I opened the Second Reading of a Conservative national insurance Bill that cut taxes for millions of working people across the country. Today, we have before us a Labour national insurance Bill that will take the tax burden to the highest levels in history on the backs of working people. That is the stark difference that a Labour Government make, but it is not the change that people voted for.

Nine months ago, the Economic Secretary to the Treasury told the House that the then Opposition supported our tax cut, but barely three hours later, she and her Labour colleagues remarkably failed to vote for it and back up their words with actions. Now we know why: it is Labour’s playbook to say one thing as loudly as possible and then do the exact opposite as quietly as it can.

Stuart Anderson Portrait Stuart Anderson
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On the Government’s tax policy, does my hon. Friend think it is concerning that the Chancellor today refused to rule out further tax rises in future Budgets?

Gareth Davies Portrait Gareth Davies
- Hansard - -

Absolutely. We all heard what the Chancellor said at the Confederation of British Industry conference. It is remarkable that the Prime Minister will not back up her words, and even more remarkable that the Chancellor herself would not back up her words today at Treasury questions.

The British people see the Bill for what it is: the biggest broken promise of them all, and there are plenty to choose from. It is a good job the Chancellor has experience on a complaints desk, because, quite frankly, there are quite a lot coming in at the moment—not least from the business community, as my hon. Friend the Member for South Shropshire (Stuart Anderson) highlighted so well in his speech. Before the election, the Chancellor embarked on what she referred to as the “smoked salmon offensive” with British business; now the election is over, she has dropped the smoked salmon and is focusing on just being offensive.

Today’s Bill will introduce tax rises on working people in business that were never declared before the election. It is a double whammy, as the Federation of Small Businesses has said in Lincolnshire: it introduces not just the rate rise, but a reduction in the threshold. This tax is the only major tax that is paid exclusively by working people. It is a £25 billion tax rise on jobs. The OBR makes it clear that by 2027, 76% of the total cost of this tax increase will be passed on to working people through lower wages and higher prices, as the hon. Member for Angus and Perthshire Glens (Dave Doogan) said in what I thought was a very thoughtful speech for the SNP.

As I said at Treasury questions this morning, the OBR says this is a tax on working people; the IFS says this is a tax on working people; even the Resolution Foundation says this is a tax on working people. By anyone’s measure—be in no doubt—this is a manifesto breach the public will not forget. That is clear.

What is not so clear any more is what this Labour party stands for. The Budget was an attack not just on working people, but on the very lowest paid working people, according to the IFS. This is a fundamentally regressive policy, leaving many out in the cold and giving businesses no choice but to freeze hiring and freeze wages. It will hit others, too. It will hit the doctors and the nurses working in general practice and social care, as my right hon. Friend the Member for East Hampshire (Damian Hinds) set out in his speech. It will hit charities and voluntary organisations, with Marie Curie expecting that it will cost the charity £3 million next year alone—all part of a £1.4 billion bombshell to hit all charities next year. It will hit hospices, homeless support groups and disability charities, which are all warning they face reducing headcount and limiting services. This is not what the British people voted for.

Dave Doogan Portrait Dave Doogan
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Is the hon. Gentleman concerned, as many of my colleagues are, that the Government will not give the full details on compensation for the non-core public sector activities that are the lifeblood of the NHS because, if they gave them the compensation that they need, the net benefit from the tax would be so risibly small as to demonstrate that it is utterly pointless and a concoction that could come only from a dysfunctional Treasury like this one?

Gareth Davies Portrait Gareth Davies
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There is really nothing to add to that. The hon. Gentleman made that point in his speech and at Treasury questions—it is a very important point.

In just six months, we have hit the highest tax burden in history. Debt is up, with debt interest payments above £100 billion—for the first time ever—in every year of the forecast. Today’s Bill will result in lower wages, higher prices and a tougher employment market. I urge this Government to reverse course, but I will not hold my breath. Instead, I think I can predict what the Minister is going to say. She is going to say three things when she stands up to speak. First, she is going to try to blame the Conservative party—blaming everybody else for this clear political choice. She will not explain the £8 billion on GB Energy—an energy company that will not actually reduce bills or produce any energy—or the £10 billion on public pay splurges that come with no reform on productivity, or £7 billion on rebranding the national infrastructure bank. Perhaps if the Government dropped those pet projects—which will not actually grow the economy—they would have a little more money and would not have to screw with small businesses and make people unemployed.

Secondly, the Minister will forget that she is in government and that I am in opposition. She will ask me what my party would do instead. To that, I simply say that we would fund the NHS well, but we would also reform it.

Dan Tomlinson Portrait Dan Tomlinson
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Would the shadow Minister increase borrowing or increase a different tax, or are there some public spending cuts that he would like to announce?

Gareth Davies Portrait Gareth Davies
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I hope the British people are listening to this: none of those things. I remind the hon. Gentleman, although he was not here, that NHS spending increased by 45% in cash terms in the last Parliament under a Conservative Government. The issue is not spending—the Labour party will never get this—but reforming the NHS, as my hon. Friend the Member for Bromsgrove (Bradley Thomas) said. It is about growing our economy faster than the Labour party would grow it, according to the OBR, as my hon. Friend the Member for Isle of Wight East (Joe Robertson) said. We would tackle the welfare bill—£12 billion of savings that we set out in government—and we would boost productivity, because if public sector productivity returned to pre-pandemic levels, £20 billion would be saved.

Finally, the Minister will try to suggest that she is bringing stability, even though businesses and consumer confidence have plummeted ever since she and her colleagues took office. Let us remind ourselves of what she means by stability. In just a few months, we have seen a Downing Street chief of staff sacked, a Cabinet Minister resign, a Back-Bench MP quit the party, key manifesto promises like cutting energy bills by £300 completely dropped, a delayed spending review, fiddled fiscal rules and, just this week, complete confusion about whether the Prime Minister will drop his economic growth pledge. It is all so predictable, yet so damaging to our economy. The Bill breaks Labour’s manifesto. We cannot back it. We will not vote for it. We urge the Government to think again

Draft European Bank for Reconstruction and Development (Further Payments to Capital Stock) Order 2024

Gareth Davies Excerpts
Tuesday 12th November 2024

(2 months, 2 weeks ago)

General Committees
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Gareth Davies Portrait Gareth Davies (Grantham and Bourne) (Con)
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It is a pleasure to serve under your chairmanship as always, Sir Roger.

It is worth remembering that the European Bank for Reconstruction and Development was founded in 1991 to support the transition to market-oriented economies in central and eastern Europe following the collapse of socialist and communist regimes. Since then, the bank has invested more than €200 billion in more than 7,000 projects across three continents.

As a founding member of the EBRD, the UK is a generous contributor to the bank’s work. It was one of the first donors to contribute to the bank’s Ukraine stabilisation and sustainable growth multi-donor account and, in October 2023, it signed a statement of intent with the bank to help UK companies do business in Ukraine. The draft order enables the Government to make a payment of €343.6 million to the EBRD for the purchase of additional capital stock. As the Minister rightly said, this follows a decision by the EBRD’s board of governors in December 2023 to increase the bank’s capital by €4 billion.

The Opposition fully support the Government’s decision to purchase additional stock in the EBRD. Alongside ensuring that the UK maintains its stake and voting power in the EBRD, the capital increase is vital to sustaining the ongoing work in Ukraine and ensuring the bank’s ability to meet the needs of other countries in its portfolio. However, given the size of the UK’s investment, it is right that the Opposition should seek clarity on three specific, simple points, which I hope will be straightforward for the Government.

First, can the Minister tell us whether other member countries of the EBRD are increasing, decreasing or maintaining their stock shares in the bank? Secondly, as she mentioned, the EBRD has green objectives, so is support for Ukraine subject to the EBRD’s target for at least half of its business volume to be green and does that allow for Ukraine’s most urgent funding needs to be prioritised? Finally, does she believe that this capital increase will be sufficient for the EBRD to fulfil its overall mandate, or should we expect further capital requests in the future? We support the draft order, but we would be grateful for clarification of those points.

Draft Packaged Retail and Insurance-based Investment Products (Retail Disclosure) (Amendment) Regulations 2024 Draft Consumer Composite Investments (Designated Activities) Regulations 2024 Draft Securitisation (Amendment) (No. 2) Regulations 2024 Draft Prudential Regulation of Credit Institutions (Meaning of CRR Rules and Recognised Exchange) (Amendment) Regulations 2024

Gareth Davies Excerpts
Wednesday 6th November 2024

(2 months, 3 weeks ago)

General Committees
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Gareth Davies Portrait Gareth Davies (Grantham and Bourne) (Con)
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It is always a pleasure to see you in your place and to serve under your chairmanship, Mr Efford. I also welcome the Economic Secretary to the Treasury to her place. I have spent many hours with her in these rooms, and that may or may not continue—we will find out soon.

The UK is one of the world’s leading financial centres and our financial services sector is one of the great engines of our economy. We should never forget that the sector employs some 2.3 million people, two thirds of whom are based outside of London—a slightly underappreciated fact about the sector.

Investment trusts are currently subject to disclosure requirements under the EU-inherited packaged retail and insurance-based investment products regulation—or PRIIPs, which is much easier to say—regulation, alongside other assimilated EU legislation. Ensuring that retail investors can make informed investment decisions is crucial for maintaining healthy capital markets. Industry leaders widely agree that the single aggregated figure currently produced under these EU-inherited rules fails to accurately reflect the true cost of investing in shares of an investment trust. The previous Government recognised those concerns completely and launched a consultation on a proposed alternative framework for retail disclosure in the UK. This consultation was designed to ensure that, following the repeal of the PRIIPs regulation, the new framework would be better aligned with the UK’s dynamic capital markets and foster more informed retail participation.

As the Minister quite rightly set out, the draft Consumer Composite Investments (Designated Activities) Regulations 2024 replaced assimilated law relating to PRIIPs regulation, establishing a new legislative framework for the regulation of consumer composite investments. Replacing those assimilated laws was a crucial part of the previous Government’s plans to develop a smarter regulatory framework.

The draft Securitisation (Amendment) (No. 2) Regulations 2024 extend a temporary arrangement, granting preferential prudential treatment for EU origin STS securitisations, and the draft Prudential Regulation of Credit Institutions (Meaning of CRR Rules and Recognised Exchange) (Amendment) Regulations 2024 make amendments to primary legislation in connection with the revocation by the Financial Services and Markets Act 2023 of the EU capital requirements regulation, which currently forms part of assimilated law on financial services.

All that is a long way of saying that His Majesty’s Opposition welcome these draft regulations, and hope that they will provide listed investment companies with the long-term regulatory certainty that they need. However, I will end by saying that the financial services sector thrives on stability and predictability, and I am deeply concerned that such certainty will be undermined by the recent Budget of broken promises and betrayal, though I am happy to leave those discussions for another day.