Finance Bill

Graham Stuart Excerpts

2nd reading
Wednesday 27th November 2024 Commons Chamber

[The Exchequer Secretary to the Treasury (James Murray)]

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

Four weeks ago today, my right hon. Friend the Chancellor delivered the first Budget of this new Government. It was a historic, once-in-a-generation Budget—a Budget to deliver economic stability, to fix the public finances and to secure a step change in investment. It was a Budget to lay the essential foundations for growth, which is this Government’s No. 1 mission.

And let’s face it, after 14 years under the Conservatives, the foundations needed some fixing. That is why our Budget is built on tough new fiscal rules that will put a stop to borrowing for day-to-day spending and get debt falling as a share of GDP. Our Budget delivers fiscal responsibility while getting the NHS and other public services back on their feet and protecting working people. That is the difference a Labour Budget makes. That is not to say that the decisions have been easy. The very opposite is true. We have taken difficult decisions on spending, welfare and tax, and this Finance Bill begins to implement some of those decisions.

Before I turn to the measures in this Bill, I will speak about what the Bill does not include. When I was a shadow Minister, shadowing the tax brief, I covered a total of six Finance Bills and probably as many Ministers. Through those Finance Bills, we saw the Conservatives repeatedly extend the freeze in the personal allowance and the higher rate threshold for income tax. The Finance Act 2021 froze income tax thresholds from 2022 until 2026, and then the Finance Act 2023 extended those freezes by another two years until 2028. The Conservatives were responsible for six consecutive years of rising taxes on working people’s payslips.

Our Government will not follow that path. In this Finance Bill, there are no tax rises on working people’s payslips, nor on many pensioners’ incomes, like those the Conservatives put into law. We have made no changes to the basic, higher and additional rates of income tax. We have made no change to the rate of VAT. And in next week’s National Insurance Contributions (Secondary Class 1 Contributions) Bill, we will make no increase to working people’s contributions. We said that we would fix the public finances while protecting working people, and that is exactly what we are doing.

We also said that we would provide stability for businesses making investment decisions, and that we would cap the rate of corporation tax. This Bill delivers on those commitments, too.

In the last Parliament, we repeatedly saw Finance Bills being used to put temporary measures in place, leading to an unstable and ever-changing investment allowances regime. At the start of the last Parliament, the annual investment allowance had been temporarily raised to £1 million. That level was extended twice on a temporary basis before finally being made permanent. Meanwhile, full expensing for expenditure on plant and machinery was also introduced on a temporary basis. And, over the last Parliament, the super-deduction came and went entirely.

We are doing things differently. Our corporate tax road map, which was published at the Budget, and the Finance Bill before us today both make it clear that we are prioritising the stability that we know businesses need to invest.

[Graham Stuart (Beverley and Holderness) (Con)]

Does the Minister agree with Gary Smith? This was supposed to be a Budget for growth and jobs. The increased energy profits levy is driving investment out of the North sea and will not make the slightest difference to how much oil and gas we consume, yet it is estimated that it will lose £13 billion of much-needed revenue for the taxpayer. This means we will lose environmentally, fiscally and in terms of jobs. Surely even the Minister can recognise how wrong that is.

[James Murray]

I will come to the energy profits levy in a moment, but we have engaged with the oil and gas industry to ensure that we raise the money we need for the clean energy transition while supporting investment and jobs in that industry. We recognise that oil and gas will play a part in the energy mix for years to come, but we also recognise that the industry must contribute to this essential transition.

This Bill maintains the 25% cap on corporation tax that we set out in our manifesto. It also makes no changes to the permanent full expensing regime or the annual investment allowance.

Before turning to other measures in the Bill, I note that the Leader of the Opposition has already committed to reversing several of them. If Conservative Members disagree with the difficult but necessary choices that this Government have had to make to repair the public finances and protect working people, they have every right to oppose our plans, but they must explain what choices they would make instead. So far, their new leadership has fallen at the very first hurdle of being a credible Opposition by trying to have it both ways. [Interruption.] They make plenty of noise, but I do not hear any alternatives.

The Leader of the Opposition has said that she opposes the measures in this Bill, but she also claims to support the investment that those measures fund. She says that reintroducing the VAT tax break for private school fees would be the very first thing she does if she became Prime Minister, yet she also appears to support the extra £2.3 billion that our Budget puts into state education. In fact, we have calculated that she has made unfunded pledges worth £12 million for every hour since she was appointed. By my reckoning, that is £1 million-worth of pledges since I began speaking five minutes ago.

By behaving this way, the Conservatives simply remind people how very far away they are from being a credible Opposition, and they are getting further away by the day.

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[James Murray]

I am afraid I will not give the hon. Gentleman inside information on any ongoing discussions between the Treasury and devolved Governments. The policy for reimbursing increases in employer national insurance contributions is well established. The last Government followed a similar process in relation to the health and social care levy, whereby Departments, employees and other direct public sector employees are typically refunded the entire increase and third parties, contractors and so on are not. As for the devolved Governments’ settlements, they have their own process to go through with the Treasury. I am sure the hon. Gentleman will understand why I cannot give a running commentary on that, but I am sure that his colleagues will pick that up.

[Graham Stuart]

Will the Minister give way?

[James Murray]

I will make some progress. I have been generous in giving way to the right hon. Gentleman in particular. [Interruption.] All right, go on, then.

[Graham Stuart]

I am grateful to the Minister, who has shown his customary good humour and good will to the Chamber. He is unable to discuss the precise numbers for the devolved Governments, but can he confirm what the overall cost is to the Exchequer of compensating the public sector for the impact of NICs? I believe it is around £5.9 billion, but I want to check with the Minister that that is correct.

[James Murray]

I regret giving way to the right hon. Gentleman. I invite him to return to the Chamber next Tuesday for the Second Reading of the National Insurance Contributions (Secondary Class 1 Contributions) Bill, when I will also be speaking. We can have a full debate on national insurance then, which I am sure he and his colleagues are looking forward to. I hope they will support it in the Lobby because, no doubt, they support the extra investment in the NHS which that decision funds. I thank him in advance for signalling his good grace and support for our measures.

After we were elected, we said that we would take the difficult decisions necessary to fix the public finances. We said that we would close the tax gap, implement our manifesto pledges and protect working people. We said that we would deliver economic stability, fiscal responsibility and the certainty that businesses need to invest and grow. This Bill plays a central role in achieving those goals and I commend it to the House.

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[Mel Stride]

On the Government’s watch. A number of measures in the Bill will further weigh on growth. Capital gains tax will go up, destroying wealth creation. The energy profits levy will destroy jobs, making us less secure when it comes to energy. Stamp duty will go up, and that is one of the worst taxes. The hon. Member for Swansea West (Torsten Bell) will accept that, as he shares that view—I think he makes the point in his recent book. The level of activity in the housing market will be dampened, people will be discouraged from downsizing, which will put pressure on the housing supply, and labour mobility—an important component of growth—will be impacted.

[Graham Stuart]

My right hon. Friend is painting an accurate but bleak picture, as reflected by the IFS, the OBR and all the independent analysts of what the impact of the Budget will be. However, I put it to him that he is understating the weakness that the Budget will create for this country. Look back at the last 14 years. We were recovering from the financial crash. We had the pandemic, Brexit and the energy crisis. We are unlikely to make it to the end of this decade without some form of further shock. Is it not central to the weakness of the Budget that it makes this country so much more vulnerable to what we do not yet know is coming?

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[Phil Brickell (Bolton West) (Lab)]

It is a pleasure to speak in this debate on the first Labour Finance Bill in 14 years, and an even greater pleasure to respond to the very first Budget delivered by a female Chancellor. It is also an honour to speak on Lancashire Day, and I would like to put on record my congratulations to all my constituents in Bolton West and further afield who are celebrating this important day.

As others have done, I congratulate the Chancellor and thank her for blazing a trail for girls in my constituency to follow. In response to the remarks from the shadow Chancellor, the right hon. Member for Central Devon (Mel Stride), I would say that having spent 14 years working in FTSE 100 companies, I believe that the measures in the Bill will be a turning point for our country. They are the first step in fixing the foundations of a broken economy after 14 long years of economic vandalism by the Conservative party.

Let me be clear: the Labour Government inherited a difficult financial situation, with debt above 90% of GDP, millions of pounds of public money wasted during the pandemic, including via contracts awarded through the VIP fast line, inflation at 11%, and a cost of living crisis that bore down not just on the most vulnerable in my constituency, but on working families, young people and many businesses. That is the economic inheritance bequeathed by Conservative Members, and we should take no lessons from them on how to manage the public finances. To that end, I very much welcome the measures in the Bill.

[Graham Stuart]

To take the hon. Gentleman back just a few months, he may remember that inflation was at 2% and down at target, and the level of employment was up by 4 million people on where it was in 2010. It would be fair for the hon. Gentleman, who is new to the House, to want to give a balanced picture, and he may want to reflect on those 4 million additional jobs, the fact that inflation was down, and the fact that the UK was the fastest growing economy in the first quarter in the entire G7.

[Phil Brickell]

I thank the right hon. Member for his contribution, but I will return to the point I mentioned earlier about inflation at 11%. Frankly, the work was not done by the previous Government to mitigate that.

I very much welcome measures in the Bill that will increase stamp duty on those who own a second home. The blight of second home ownership in certain parts of our country has destroyed the housing market for local people, massively inflating prices and denying those otherwise invested in the local area the ability to put down roots. I am pleased to see the Chancellor delivering on our election promise to scrap the non-dom loophole, which has been abused for far too long by those who wish to enjoy all the privileges of life in this country without paying into the system. I applaud the Chancellor’s commitment to delivering fairness into the tax system through the Budget and the Bill.

In the light of the debate we have been having in the country at large over the past few weeks, I wish briefly to focus my comments on three key topics, which I hope the Government will soon revisit at some juncture during this Parliament. The first topic, tax justice, has been overlooked for far too long. According to His Majesty’s Revenue and Customs, the tax gap—the difference between what it should collect annually and what it actually collects—is almost £40 billion. Let me repeat that figure—forty thousand million pounds. Closing that gap by just 20% could pay for 60,000 nurses, 40,000 teachers, and 40,000 police officers. Imagine the transformative impact that could have on our public services, on education, on health, and on tackling crime. Simply put, working people in Bolton West are expected to pay the taxes they owe, so why should big multinationals and the super-rich be able to avoid contributing their fair share?

The renewed focus on tax avoidance and evasion in the Budget is much needed, but we sometimes have to spend money to make money. We all know that tough decisions about public finances have to be made, but that does not have to come at the expense of boosting enforcement through our public bodies, including HMRC, which should be self-funding, with a greater proportion of cash raised from fines, asset seizure and the like returned to the relevant agencies. Our enforcement agencies work incredibly hard to claw back billions of pounds that are lost every year to economic crime in the UK, but they do not have the resources to protect us from all manner of crimes from fraud to money laundering and tax evasion. It should be criminals who are made to pay, not the hard-working taxpayer, and for me, that would be a sensible way to both combat economic crime and bolster our public finances.

We already know that every pound invested in the Serious Fraud Office returns three pounds to the Treasury—a 317% return on its budget—while every pound spent on the National Crime Agency’s international corruption unit results in £21 of illicit wealth frozen. As it happens, research published this month by Spotlight on Corruption—I hope the Minister will take note of this—found that just 17.6% of the £4 billion generated for the Government by law enforcement agencies and anti-money laundering supervisors between 2017 and 2024 was reinvested in those agencies or in crime reduction and community projects. If just 50% of those enforcement receipts had been reinvested, economic crime regulation and enforcement would have received an extra £233 million a year—nearly double the annual investment underpinning the 2023 to 2026 economic crime plan—at no cost to the taxpayer but with potentially substantial rewards.

The second area of focus that I would like the Government to attend to during this Parliament is council tax. For almost three decades, successive Governments have sat on their hands when it comes to reforming the levy, which is regressive and disproportionately targets the wealth of lower-income families and the young, as well as affecting local authorities. Bolton council finds that it does not provide an adequate funding base to provide critical services for my constituents. Last year, a modest property in Hartlepool worth £150,000 would have been taxed at over 1% of its value, while the owner of an £8 million mansion in Westminster would have seen a bill equivalent to just 0.02%.

The Fairer Share campaign has called for a proportional property tax, which would see homeowners pay a flat rate based on current and annually updated valuations, not the absurdly outdated 1991 numbers. It calculates that that would put an average of £600 into the pockets of households in Bolton West and leave 96% of people in my constituency better off. Indeed, in total, Fairer Share reckons that that reform could save households outside central London and the south-east £6.5 billion a year, helping to level up communities and genuinely boost local economies.

Finally, I would very much like to see the spending commitment to 2.5% of GDP on defence reached as soon as fiscally possible. I welcome the Government’s commitment to that effect. The increase of £2.9 billion for defence already announced by the Government is indeed welcome. We must continue to invest in defence to ensure that the UK will have the capacity to keep us safe in what is becoming an increasingly dangerous world.

This Finance Bill demonstrates that after 14 years of dither and delay, the Labour Government are taking the difficult decisions head on. With the measures announced last month by the Chancellor, I am confident that my constituents across Bolton West will be able to realise their full potential and that together we can build the healthier, more prosperous society that I want to see, with tax justice at its heart and those with the broadest shoulders paying their fair share to fix the crises in our schools, our hospitals and our prisons.

[Alison Griffiths (Bognor Regis and Littlehampton) (Con)]

I commend the hon. Member for South Derbyshire (Samantha Niblett) for her maiden speech. She and I share many interests, not least in technology, promoting women in technology and accessibility. I wish her well.

Turning to the matter in hand, the measures in the Bill are in addition to others announced as part of a Budget that has caused serious concern for businesses in Bognor Regis and Littlehampton. Re-energising our high streets has been one of my key priorities, but the Budget pushes us further from that goal.

The Government plan to increase employers’ national insurance contributions from 13.8% to 15% and to lower the threshold from £9,100 to £5,000. That will force businesses to pay more sooner. Meanwhile, business rates relief for retail and hospitality will drop from 75% to 40%. Research shows that that will cause a 140% increase in rates, with the average UK restaurant seeing costs rise from £5,051 to £12,122l, a £7,000 hike that could force closures. Those changes come on top of existing pressures caused by covid, the war in Ukraine and energy price inflation. A local business has shared the impact of that on its profit and loss: its freight costs are up 126% since 2019, raw materials are rising by 6%, warehouse rents were up 24% last year, with another 6% rise in 2024, and utility costs were up 58% in 2023. Businesses already stretched thin cannot absorb the additional costs that the Budget imposes. Piling on national insurance contributions and higher business rates alongside steep minimum wage hikes, without supporting productivity and growth, is a recipe for disaster.

[Graham Stuart]

In painting this stark picture, my hon. Friend has not mentioned the Employment Rights Bill, which is expected to impose particular burdens on hospitality businesses, including those on her high streets—a total of £5 billion in addition to the measures in this Budget.

[Alison Griffiths]

My right hon. Friend makes a valid and important point. I have restricted my comments to the Finance Bill and the Budget, but the Employment Rights Bill places significant additional pressures on businesses, and I thank him for that point.

For towns such as Bognor Regis and Littlehampton where businesses already operate on razor-thin margins, these measures could be existential. Highly regarded local employers, including family-run small and medium-sized enterprises such as Temple Spa and Meridian Medical, are gravely concerned. Entrepreneurs like those take immense personal and financial risks to create jobs and support our economy, yet this Government treat them as an endless revenue source instead of engines for growth. The Chancellor’s projections may work on paper, but they are disconnected from reality. Our high streets, SMEs and family businesses need support, not policies that make survival—let alone growth—harder. I urge the Government to rethink their approach or take steps to mitigate the impact on our communities.

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[Graham Stuart (Beverley and Holderness) (Con)]

It is a pleasure to take part in this debate. Let us travel back in time to those halcyon days for the Labour party: so confidently predicting victory in the election, so far ahead in the opinion polls and so clear on the prospectus they laid before the British people. It had a fully funded, fully costed programme. When the now Chancellor was challenged about whether she had a full insight into the public finances, she assured the interviewer, if I recall correctly, that absolutely she did. Therefore, people could rely on the cast-iron promise, which all Labour Members stood on, that Labour would not raise national insurance, would not raise income tax, would protect farmers and would not cut pensioners’ benefits. That was the promise.

But it is better than that. It is not just that Labour was not going to bring in all those taxes, but that it was going to make growth their No. 1 mission for a mission-led Government. Those who feared a return to a sort of socialist job-destroying and enterprise-wrecking past could be reassured that this was a moderate party that had put the right hon. Member for Islington North (Jeremy Corbyn) well behind it, no matter how many Labour Members had said he was a great friend and would make a great Prime Minister. They had changed their mind. There was a moderate promise.

It was not only members of the public who were led to believe in the Labour mission and what it could bring for the country. Imagine Labour Members, the people who were selected as candidates for the Labour party, who came in not to Jeremy Corbyn’s Labour party but to this Labour party of enterprise, protecting workers and encouraging a low-tax system, but doing so in a way that none the less would prioritise the healthcare system, special educational needs children and the like. That was the promise and it did not just beguile many people in the country—although not that many, as only 34% of people actually did vote Labour, but none the less enough. Imagine what it was like—I say this to Opposition Members—to come to this place and be a part of that fantastic crew of hundreds and hundreds of Labour MPs to deliver that manifesto. And where are we now at the historic Second Reading of the Finance Bill of the central policy measures of this new Government. Where are they?

[Nesil Caliskan (Barking) (Lab)]

Will the right hon. Gentleman give way?

[Graham Stuart]

They have been humiliated in the Budget debate, as one after another repeated their rote words. It was the most intellectually empty Budget debate I have ever taken part in. I listened to Labour Member after Labour Member trot out their “14 years of chaos” and their “£22 billion black hole”.

[Nesil Caliskan]

Will the right hon. Gentleman give way?

[Jim Dickson]

Will the right hon. Gentleman give way?

[Graham Stuart]

It would be entirely wrong of me, given how few Labour Members there are in the Chamber prepared to defend the Budget, if I did not now give way to one of them.

[Nesil Caliskan]

I thank the right hon. Gentleman for finally giving way. I wonder if he might use the opportunity to reflect on the economic record of the previous Government, which saw the highest interest rates and inflation through the roof that affected people’s pockets and their ability to get on in life. Will he also reflect on the fact that his party lost the election and perhaps show some humility?

[Graham Stuart]

I am grateful to the hon. Lady. I am happy to do so, although it is worth pointing out that we are supposed to reflect today on the actual proposals put forward by the Government of which she is now a member.

But the hon. Lady is right to highlight the Conservative’s economic record. I have a criticism of those of us on the Conservative Benches: I do not think we do enough to talk about it. From 2010 to 2024, which economy in Europe grew the most? Was it Germany or the UK? Oh, it was the UK! Was it France or the UK? Oh, it was the UK! Which country in Europe created 4 million more jobs? For which Government did the horrible scar of youth unemployment, which was a permanent feature even in the good years prior to the crash—for those interested in the history of employment—stay horribly high, with its long-term scarring impact on young people? It was the Labour Government.

All that was turned around. People were paying tax at £6,500 when Labour left power. That was lifted to £12,500. They may be decrying and disowning their part in the coalition Government, but the Liberal Democrats should have some pride in what we were able to do together. We inherited an economic basket case. We brought discipline back. But while we were fixing the foundations, we did not lose sight of the fact that we knew where the wealth comes from. It comes from the private sector, not the public sector—from those small shops, those restaurants, all those other businesses on which the country relies for its wealth. This Budget has gone down and damaged each and every one of them, one by one. It has looked around for targets—the “broad shoulders” for the socialist envy to vent itself on—and who better than landowners?

So the Budget focuses on people. I am not an expert on every area of the economic life of this country, but let us suppose that I looked across the entire economy and tried to find people in private enterprise using their own assets. Where would people have millions of pounds in assets and be prepared to receive a 1% return on them? Who would keep that up, year after year, simply in order to feed the nation as part of a pact—a compact—between them and the Government, indeed the whole country? Who would be prepared to do that, and to feed us, while asking so little in return? Attacking farmers, of all groups in society, is one of the most retrograde and regrettable of attacks.

[Joe Robertson (Isle of Wight East) (Con)]

As my right hon. Friend knows, I worked for a charity for six years—or a decade, as the Chancellor of the Exchequer likes to call it. Would he care to reflect on the damage done to charities by this Government’s Budget? They are already in a squeeze, and the Government have squeezed them further through their decisions on employment rights and also through taxation in the Budget.

[Graham Stuart]

We are seeing a kind of socialist envy and attack on misguided targets. For instance, children with special educational needs in private schools will be pulled out of those schools mid-year because their families can no longer afford to send them there. That was not the intent; not only did Labour Members want to stand on an honest prospectus, but that is not, I am sure, what they wanted. Nevertheless, that is what is happening. [Interruption.] It is exactly what is happening.

My hon. Friend is right, however, to point out that this is not just about a class-based assault on people who do not deserve to be assaulted. It is also about sheer ineptitude. Let us consider the £22 billion for the NHS. Why so little for social care? Surely Labour Members, however green and new to the House, must be aware that the NHS depends on the social care system, but because of the increases in national insurance contributions and the minimum wage, its costs are rising by about £2.5 billion and it is getting £600 million. Hospices will be affected, and so will small charities.

[Madam Deputy Speaker (Caroline Nokes)]

Order. I remind the right hon. Gentleman, and indeed all other Members, that this is, specifically, a Finance Bill Second Reading debate. We are not having a general debate on the Budget.

[Graham Stuart]

I am extremely grateful to you for your guidance, Madam Deputy Speaker. I will try not to refer too much to the impact of national insurance contributions, because we will have that opportunity next Tuesday. None the less, my hon. Friend was right to talk about the impact of this Budget overall, and the effect on hospices and charities in particular.

Yesterday I met the chief executive of HICA, a large not-for-profit provider of social care homes and in-home care. HICA is a brilliant organisation, which has made real progress over the last few years. It finally managed to make a surplus last year, so it can pay its staff more than the minimum wage and invest in its stock. Now it is facing a £3.5 million impact on its £40 million turnover as a result of this Budget and this Finance Bill.

As well as farmers, oil and gas have been touched on today. When I was the Minister for Energy Security and Net Zero, it always struck me as absurd to look at the production of oil and gas rather than the consumption. It is the consumption that is the problem. We must change our factories, our vehicles, our buildings, so that they no longer need oil and gas if we are to move away from them. Attacking production when it is driven by demand is attacking the wrong end. In this measure, the Labour Government are raising the energy profits levy, on top of refusing to issue new licences. The net effect of that, notwithstanding the Liberal Democrats’ saying that they support the policy—I do not know why or how they can do so—

[Daisy Cooper]

Will the right hon. Gentleman give way?

[Graham Stuart]

I will in a moment.

This does not make the slightest difference to how much we consume, but it means that we import more from abroad, and, in the case of liquefied natural gas, those imports have embedded emissions four times higher than the emissions of what we produce domestically. We are going to bring this in from places that are less careful than we are in its production. We are going to lose tens of thousands of jobs and £13 billion of tax revenue, and we are going to lose the engineering expertise and companies that we need for the transition. There is literally no way to make that make sense, and I hope the hon. Lady will now do a U-turn and see the logic of my argument.

[Daisy Cooper]

I will resist that invitation. Does the right hon. Gentleman understand the nature of a windfall tax? It raises money on the windfall that a sector was not expecting. We know that the big oil and gas giants base their investment plans on the profits that they were expecting, but clearly they raised a lot more money because of Russia’s illegal invasion of Ukraine. Windfall taxes have been placed on the big oil and gas giants for the profits over and above what they were expecting to receive.

[Graham Stuart]

The hon. Lady did not actually refer to the measure in front of us. I know it is the Liberal Democrats’ policy to have a windfall tax on anyone who does not sound popular—big banks, big tech, and oil and gas. That is their answer. If anyone says, “How would you do it?”, they trot that out and lose not a single vote, because the very definition of not taking a tough choice is suggesting that there is easy money.

The measure in front of us, which the hon. Lady specifically said she supported, is not a windfall tax. It is a further tax, in tandem with the removal of any new licences, which effectively destroys investment in the North sea. I point to Apache—which says it is looking to withdraw by 2029, risking 500 jobs—Harbour Energy, JAPEX and Chevron, to name just a few. They are pulling out, and there is no environmental benefit. We are losing all that tax, all those jobs and all that expertise, which is exactly what we need for carbon capture, and for hydrogen, for the green economy. It is utterly insane.

I note that there are very few Labour Members present. I watched them as they came in for the Budget, full of cherry-cheeked enthusiasm and reading out their Whip-prepared rote remarks about the disaster left behind, which, as we know, was the fastest-growing economy in the G7, with inflation at target, debt coming down and the economy coming up. They are not all mad, socialist loons, and day by day we can see them losing spirit in the Tea Room and in the corridors as they realise that the deceit that their Front Benchers practised not only on the people, but on them, is coming home to roost.

The Government will pour all of the £22 billion into the NHS in the next year—it is in the figures—and we are supposed to believe that public services will rise by 1.3% or 1.4% in the rest of the period up to the next general election. Is that credible? It is not. I think Labour Members know that, which is what they have signalled by their absence, because they realise, as we do, that this Finance Bill and the Budget are ruinous for this country. My right hon. Friend the Member for Central Devon (Mel Stride) was absolutely right to say that they make this country more vulnerable to the shocks that may and most likely will come, and it will be the Labour party that owns the mistakes that are being sown today.

[Alex Ballinger (Halesowen) (Lab)]

It is a pleasure to follow my hon. Friend the Member for South Derbyshire (Samantha Niblett), who gave a wonderful maiden speech. I am sure that her daughter Lillian will look on her as a lovely role model as she moves forward.

Earlier this month, we witnessed an historic moment as the first ever female Chancellor delivered the Government’s Budget—a comprehensive plan that is designed to support working people, rebuild our economy and bring fiscal responsibility back to the heart of Government. The Budget delivered a plan for recovery, a plan to undo the damage left by the previous Government and, most importantly, a plan that will benefit the people of Halesowen and the wider community.

However, let us be clear: this Government inherited a dire financial situation. [Interruption.] It is true. The Chancellor exposed a £22 billion black hole that was left by the previous Government, and a series of undeliverable promises that the Conservatives knew they would never have to keep. The last Government knew that they had no money to deliver their agenda, yet they concealed the truth from the British people, leaving the incoming Government to pick up the pieces. The Budget was about sorting this out, and we are committed to doing just that.

Our economy faces multiple challenges, including high debt, underfunded public services and rising youth unemployment, but the true cost of the past 14 years is felt most acutely by the people who have been left behind. In Halesowen I hear from residents every day: people who have been waiting weeks for a doctor’s appointment; people who are forced to travel miles to receive healthcare; and people who are completely unable to access their NHS dentist. Fourteen years of cuts have left our NHS in crisis, and no matter someone’s political affiliation, no one can deny the challenges our health service faces.

But it is not just in healthcare. Our schools, roads, railways—all of this infrastructure—has suffered from years of under-investment. Our public services are falling apart.

[Graham Stuart]

It is tempting for Members to read out the rote stuff that is given to them—as some of the hon. Gentleman’s colleagues have been prepared to do, but are mostly not prepared to do today—but I just gently point out that there was never a reduction in NHS spending; in real terms it went up in every single year. If there is a belief that the NHS can be magically turned around by having above-inflation increases in spending alone, I can assure the hon. Gentleman that that is not true, because we did it every year and we still had demand going beyond the resource.

[Alex Ballinger]

The right hon. Gentleman will have noticed that we reached record NHS waiting lists under the last Government, more than 7 million people waiting and many of my constituents waiting over two years. If he thinks the investment in the NHS by the last Government was enough, he is completely wrong.

Our roads are literally crumbling, working families are struggling and the hope of upward mobility is slipping further out of reach. We cannot let this continue. The Government are faced with what the Institute for Fiscal Studies has described as a genuinely difficult inheritance. The truth is that the last 14 years can be described as, at best, a period of managed decline; or at worst, wilful neglect. The last Government will be characterised as an Administration that allowed services to erode and future generations to be abandoned.

We must take a different approach and offer real change. We are not pretending that the work ahead will be easy, but we are determined to rebuild and restore. A key part of this recovery is investing in our most vital public services, especially the NHS, which cannot survive on good will alone. The Budget commits to injecting much-needed funds into our healthcare system, securing a lifeline for the NHS that will allow it to begin this recovery.

The Budget is also about presenting an offer to working people who have been neglected for so many years, including a rise in the minimum wage to boost the living standards of 3 million low-paid workers; NHS funding to support 2 million more operations, scans and appointments every year; fuel duty frozen for another year, providing relief to drivers and families; a £500 million investment to fund the construction of 5,000 more social homes; a significant increase in the carer’s allowance earnings limit, because those who care for our loved ones deserve our support; and a crackdown on tax avoidance, fraud and waste, ensuring that the super-wealthy pay their fair share of tax.

The decisions in the Budget, though some are difficult in the short term, are the right ones for the long-term good of our country. This is a Finance Bill that prioritises public services and working people without raising taxes on the majority. It is about restoring fairness, rebuilding trust and setting the country on a new path towards growth. It is also important to remember that fiscal responsibility is central to this Government’s approach. The IFS has praised the soundness of our fiscal rules, ensuring that our efforts to drive growth are sustainable and the public finances remain on a stable footing. Changing the fiscal rule to allow more investment is both sensible and necessary, and this investment will boost long-term growth.

The Bill is not just about recovery; it is about securing a prosperous future. Businesses in Halesowen have been struggling, especially on our high streets, where many have been forced to close their doors in recent years. I have heard the concerns of small business owners and the concerns shared by the Black Country chamber of commerce, and I am pleased that the Chancellor’s plans include support for high street businesses, including business rates reform, which will give local shops the chance to compete against tax-avoiding multinationals.

--- Later in debate ---

[Adrian Ramsay]

If the hon. Gentleman is aware of my campaigning background, he will know that I have been one of the strongest advocates for accelerating to move to renewable energy for decades, with all the benefits that brings for reducing bills. If he heard the Westminster Hall debate yesterday, he will know that we need to combine speed on renewables with bringing communities with us and assessing all the options available, and we had cross-party support in arguing for that.

[Graham Stuart]

Will the hon. Gentleman give way?

[Adrian Ramsay]

Perhaps the right hon. Gentleman would let me make a little more progress first, please.

A wealth tax would go a long way towards funding the public services that our economy relies on and to delivering nature and climate-friendly policies that will benefit us all. For example, by maintaining the winter fuel allowance for pensioners, while investing in the roll-out of the street-by-street insulation programme, we could bring down household bills and carbon emissions and at the same time support the most vulnerable households with energy bills over the winter months, preventing hundreds of avoidable deaths. There are also nature-based solutions that would help to protect against the flooding chaos and misery caused, for example, by Storm Bert recently. Preparedness or adaptation is often neglected when it comes to climate action, yet this week has demonstrated what a difference it can make.

A wealth tax could see charities and not-for-profit health and social care providers, for example, exempted from the planned increases in national insurance contributions for employers, in recognition of the significant work they do in our communities and the significant further strain that this planned change will put them under. As Community Action Suffolk has warned, this financial challenge may be a step too far for some organisations that

“deliver vital services keeping Suffolk residents safe and well”,

and reduce pressure on other public sector systems, including the NHS.

The Government have taken, or have sought to take, some steps towards taxing wealth in addressing the real problem of very wealthy people investing in farmland to avoid paying inheritance tax. However, the way in which they have gone about doing so is resulting in huge problems. It is clumsy because it is impacting on small farms that may, on paper, have assets worth several million, but if the farmer is not actually earning any income, or very little, they never actually see the benefit of that.

The Exchequer Secretary is back in the Chamber, and I would ask him whether, in considering the agricultural property relief—I know it is planned for a further year’s Budget, so there is time for the Government to look at this—he will look at the work of tax analyst Dan Neidle. Dan Neidle has highlighted that the Government’s own intentions of rightly clamping down on tax avoidance will not be met under the current plans, which will impact far more small, ordinary farms than the Government have admitted. His proposals include an alternative suggestion for meeting the Government’s stated aim of clamping down on tax avoidance, not affecting ordinary farmers.

--- Later in debate ---

[Tulip Siddiq]

It was a difficult decision, and I understand the point the hon. Lady is making, but the reforms to agricultural property relief mean that farmers can access 100% relief for the first £1 million and 50% relief thereafter, meaning an effective 20% tax rate. It was a difficult decision, but we had to do it to fund public services.

My hon. Friend the Member for Bolton West (Phil Brickell) talked about tax avoidance and fraud. To stop people taking unfair advantage of our system, the Government announced in the Budget the most ambitious ever package to close the tax gap, raising £6.5 billion in additional tax revenue per year by 2029-30.

[Graham Stuart]

Will the Minister give way?

[Tulip Siddiq]

The right hon. Gentleman has spoken enough times in the debate, so I will not be taking yet another intervention from him.

The hon. Member for Bognor Regis and Littlehampton (Alison Griffiths) raised questions about SMEs and high streets. The Government have been absolutely clear that we need to take difficult decisions to deliver long-term stability and growth, and that stabilising public finances is the only way to create long-term stability in which businesses can thrive. But we recognise the need to protect small employers, which is why we have more than doubled employment allowance—she may like to know that—meaning that half of businesses with mixed liabilities will either gain or see no change at all next year.

The right hon. Member for East Hampshire (Damian Hinds) raised questions about VAT on private schools hitting SEND pupils. To protect pupils with special educational needs and disabilities who can only have their needs met in a private school, the local authorities and devolved Governments that fund those places will be compensated for the VAT they are charged on those pupils’ fees. I hope that reassures him.

The right hon. Gentleman also raised a point about faith schools. Of course the Government value parental choice and recognise that some people want their children to be educated in a school with a particular faith ethos. My hon. Friend the Exchequer Secretary met the Partnerships for Jewish Schools and the Association of Muslim Schools during the consultation period on this policy. To ensure fairness and consistency between all schools that charge fees, faith schools will remain in the scope of the policy. It is worth noting for the right hon. Member that some faith schools are likely to be less impacted by the policy if some of their income is derived from voluntary donations from the community, because donations that are freely given and for which there is no obligation are outside the scope of VAT. As such, not all the income that small faith schools receive will necessarily be subject to VAT. I hope that reassures him a bit.

Finance Bill

Graham Stuart Excerpts

Committee of the whole House
Wednesday 11th December 2024 Commons Chamber

[The Exchequer Secretary to the Treasury (James Murray)]

This Government believe that all children should have the opportunity to succeed. That opportunity should not be limited by who they are, where they are from or how much their parents earn. We are determined that a young person’s background should not limit what they can achieve. That is why, despite the dire fiscal situation that we inherited and the numerous tough choices that it has entailed, the Chancellor prioritised investment in education at the Budget in October.

At that Budget, the Chancellor announced real-terms growth of 3.4% in education funding, including a £2.3 billion increase to the core schools budget in England for the next financial year. This funding supports the recruitment of 6,500 additional teachers, in line with the Government’s commitment, and includes £1 billion for the special educational needs and disabilities system, to help the 1 million pupils in the state system with special educational needs.

This Government will make sure that all children get the high-quality education that they deserve, as well as high-quality school buildings; funding has been announced for the school rebuilding programme, and for school maintenance, so that we can begin to tackle the maintenance backlog. These changes are crucial first steps to improving education for all children and meeting the aspirations of parents across the country.

Investment in education has to be paid for, so I turn to the focus of this debate: our decision to end the VAT exemption for private school fees. In July, the Chancellor announced that the Government will end tax breaks on VAT and business rates for private schools. These policies are expected to raise £1.5 billion in their first full year, rising to over £1.8 billion a year by 2029-30.

[Graham Stuart (Beverley and Holderness) (Con)]

Has the impact on the market of children being withdrawn from schools been greater than expected? In my time as a Minister, I always found that the Treasury rather underestimated the dynamic impact of policy change. I would be interested to hear his reflections.

[James Murray]

I thank the right hon. Gentleman for his question on the impact of the policies on children’s education. I will come to the details shortly, but to give him an overview of the forecast impacts, we estimate that ultimately there will be around 37,000 fewer pupils in the private sector. That is a combination of pupils who will never enter the private sector in the first place and those who will leave. They represent around 6% of private school pupils. We expect most of the moves to take place at natural transition points, such as when a child moves from primary to secondary school or at the beginning of exam courses.

--- Later in debate ---

[James Wild]

My hon. Friend makes an important point. He will have been here throughout many of the debates on the Finance Bill, the national insurance and jobs tax Bill, where very few Labour Members have made contributions to defend their first Budget for 14 years. I think we all know why.

Clause 47 removes the exemption for private school fees and spells out what Labour’s education tax will mean from 1 January. As my right hon. Friend the Member for Hertsmere (Sir Oliver Dowden) said, doing that mid-year is a cruel measure.

[Graham Stuart]

Further to that point, I think one of the reasons there may be so few colleagues on the Labour Benches is because they stood on a manifesto that was all about economic growth, protecting farmers and holding down tax. That is what they stood on, but it turns out that they have a leftist Front Bench which has introduced this pernicious tax midway through the year, and we have an Education Secretary so filled with malice and spite that she cannot even bring herself to congratulate the state school that has been No. 1 in the country three years in a row.

[James Wild]

My right hon. Friend makes a typically salient point. I agree, in particular about the lack of congratulations. The Education Secretary was not prepared to congratulate the head of Michaela school, which is the best performing school in the country.

Putting VAT on independent schools will particularly hurt those parents on modest incomes who are saving to send their children to a school that they think will best serve their needs. None of those parents is getting a tax break. They are also contributing to funding places in the state system, whether or not their child takes one up. The clause excludes the teaching of English as a foreign language, education at nursery and higher education courses from the new tax, but the Government have already crossed the line. They are taxing education and learning for the first time. Will the Minister rule out widening the scope of the education tax to include university fees, for example?

The Opposition are deeply concerned about the impact the tax will have on pupils with special educational needs, small rural schools, faith schools and schools taking part in the music and dance scheme. We have consistently warned of the damage it will do to young people’s education, and we voted against the measures in the Budget resolutions. New clause 8, in the name of my right hon. Friend the Member for Central Devon (Mel Stride), the shadow Chancellor, would require the Chancellor, within six months of the Act being passed, to make a statement to Parliament on the impact of the changes on those groups in particular, as well as the music and dance scheme. That is needed because there is such a wide gap between what the Minister is telling us and what the limited impact assessment is saying, and what all hon. Members who are actually talking to schools and parents know will be the case.

--- Later in debate ---

[James Wild]

I entirely agree with that point. Families come together to help out, perhaps to fund a place for grandchildren to give them the best chance in life. We are not going to criticise people who make that choice, but unfortunately the Government are singling them out with their vindictive measure.

This change also represents a significant complication of the tax system. Even HMRC seems confused. The guidance on VAT registration for private schools has undergone seven technical updates since its publication, and there is confusion—as has been mentioned—about the meaning of “closely related supply”.

[Graham Stuart]

On the subject of confusion, my hon. Friend will have observed that the hon. Member for Calder Valley (Josh Fenton-Glynn) appears not to have noticed that VAT was removed from tampons on 1 January 2021 by the Conservative Government. Is my hon. Friend, like me, hopeful that the hon. Member—however ignorant he may be of changes in our tax law—may join us in the Lobby tonight to oppose this pernicious policy? That would be consistent with the views that he tried to espouse a little earlier.

[James Wild]

We can but hope that the hon. Member will join us in the Lobby tonight, and also that he will one day develop the attuned knowledge that my right hon. Friend has of the tax system and the changes that were introduced in the last Parliament.

Let me add that the Association of School and College Leaders has said that there is

“increased anxiety among school leaders”

who are having to deal with the change in the middle of the academic year.

This is the first time an education tax has been introduced, which is why we need to oppose it and review its impact. The Government’s very limited impact assessment estimates that 37,000 more pupils will come into the state sector, at a cost of £270 million a year. It also concedes that there will be a loss of places equivalent to the closure of 100 more independent schools over the next three years than would otherwise be predicted. That assessment is thin, and the Government’s consultation was flawed.

--- Later in debate ---

[Graham Stuart]

Like so many Liberal Democrats, the hon. Lady seems to have forgotten that her party was the first major party to call for a referendum. Brexit was supported by the British people, not the Conservative party. The leadership of the Conservative party at the time was in favour of remain. The people decided. It is about time the Liberal Democrats learned to respect the people’s choice.

[Munira Wilson]

I remind the right hon. Gentleman that it was his Government who negotiated the Brexit deal. I want to put that on the record.

Colleagues from across the House have spoken frequently in recent months about the crisis facing SEND provision in this country, and we have heard so many stories of struggling families fighting within a failing system to get their children the education they deserve. After years of Conservative neglect, the system is on its knees. Just this week, we have heard from the Institute for Fiscal Studies about the scale of the problem. Once again, its report laid out clearly the huge costs that have left local councils on the brink, while failing to deliver better outcomes for children. Two out of every three special schools are oversubscribed. Just half of education, health and care plans are granted within the statutory 20-week limit, and 98% of those rejected are granted on appeal when parents go to tribunal.

It is clear that the system is failing families and our vulnerable young people, so is it any wonder that parents who feel that their children’s needs cannot be met in the state system are turning to the independent sector if they can just about manage it? Small schools of less than 100 pupils make up some 40% of the independent sector. In so many cases, those are the schools that struggle and strive each day to provide desperately needed support for SEND pupils—support that, sadly, is all too often unavailable in their local state school. Those are the schools that will be punished under this measure, and the families who will need to bear the load. The Government have said that pupils who have been placed by a local authority in an independent school to fulfil the terms of their EHCP will be exempt from the VAT hike. Taken in isolation, that is a welcome mitigation to this damaging policy, but there are a whopping 100,000 SEND pupils in the independent sector who do not have an EHCP, and their families will be saddled with this VAT hike.

One such family came to see me in my surgery a few weeks ago. The parents were in tears in front of me. Their son has autism and various other needs. When he was in an excellent local state primary school, he was at risk of exclusion because of the behaviours that were manifesting as a result of his additional needs, which could not be supported in that state primary school. Those parents made the difficult decision to remove him and put him in a local private school, where he is thriving. He is coping well and his conditions are being well managed. His parents are not just paying the basic school fees; they are paying an extra £18,000 a year on top of the school fees for the additional support their child needs. All of that will be subject to VAT, which is why they were in my office in tears. They do not know how they are going to meet those costs to keep their child, who was at threat of being excluded from a state school, thriving. That is the individual human reality of this policy, which the Minister just waves away with numbers, as if these statistics do not have human stories and faces behind them.

--- Later in debate ---

[Dr Sandher]

The difference in our approaches is that I do not believe in running down the state sector so people have to use the private sector to get a decent education. Half of schools do not have the specialist maths teachers they need and a third of students fail their maths GCSE. We do have a difference in our governing philosophies.

[Graham Stuart]

I join everyone else in congratulating the hon. Member. He has talked about trying to create a fairer society. Does he want to see one in which the 100,000 children with special educational needs who attend independent schools cease to do so? As he will remember, another great economist, like himself, Milton Friedman said, “If you want less of something, tax it.”

[Dr Sandher]

I thank the right hon. Member for his kind words. As he will know, the Government are fixing things for those who need special education—there is a huge amount we have to fix in this country—and he should remember the VAT exemption for those with EHCPs.

For those who cannot currently afford a decent life, the situation has become increasingly bleak. Non-graduates and young people are locked out of the opportunities their parents had. Before the 1980s, non-graduates could leave school and find good jobs with decent wages in their local factory. Then came deindustrialisation that destroyed mid-pay manufacturing jobs and led to a divided nation, where non-graduate men have seen their employment rates fall by 20 percentage points since then. Today, twice as many young men as young women are unemployed and we see the political shocks reverberate around us. Manufacturing jobs have been destroyed and replaced by low pay and insecure service jobs that do not pay enough to live on.

A couple with two children, both on average wages, do not currently earn enough for a decent living. On top of that, young people cannot afford the homes they need. Around 40% of my generation are living with their mum and dad.

--- Later in debate ---

[Dr Sandher]

I will make some progress. We are creating good jobs through our measures in the green transition and the caring economy and yes, building homes for the young to live in. Our warm homes plan will upgrade 300,000 homes and create tens of thousands of good construction jobs. Our expansion in early years childcare will see more women in work and tens of thousands more jobs. Our affordable homes programme means more homes for young people, and for those who are struck down by hopelessness—

[Graham Stuart]

On a point of order, Madam Deputy Speaker.

[The Chairman]

I assume that this is an appropriate point of order.

[Graham Stuart]

Is this what we are supposed to be discussing this afternoon? I obviously fail to follow its relevance to VAT on private schools, which is what I thought we were discussing, but I may be mistaken.

[The Chairman]

We are discussing private schools and VAT. I do not think that is an appropriate point of order, but, Dr Sandher, there is no doubt that you will bring your contribution very close to VAT and schools. I look forward to hearing that.

--- Later in debate ---

[Sarah Olney (Richmond Park) (LD)]

The Liberal Democrats do not support imposing VAT on private school fees. We do not support treating independent schools differently from other independent education providers for VAT purposes, and that is why I wish to speak in favour of new clause 9, tabled by my constituency neighbour and hon. Friend the Member for Twickenham (Munira Wilson). I thank her for tabling the amendment, which would require the Government to produce an impact assessment of the effect of the VAT provisions in the Bill on pupils with special educational needs but who do not have an education, health and care plan. Of the 615,000 children in private schools in this country, almost 100,000 are being educated privately because they have special educational needs but do not have an EHCP.

The Lib Dems are glad that the legislation exempts from VAT on school fees those privately educated pupils who have an EHCP that requires the local authority to fund a private school place. That is a welcome step, but it does not protect those who do not have an EHCP from a steep rise in fees. The parents of many of those children will find that they cannot afford the increase, throwing the future of their children’s education into doubt.

Moreover, there will be an increase in demand for local authorities to issue EHCPs stating that the local authority must fund a private school place. Local authority resources for special educational needs and disabilities are already stretched to breaking point, and additional demand will be impossible to manage.

[Graham Stuart]

The hon. Lady is right. The Government share the analysis that our special educational needs provision in our state schools is under massive pressure already and there is a shortage of capacity, notwithstanding the vast increases in expenditure since 2019. However, the Government’s policy, recognising that, is to tax and therefore deter and reduce expenditure on children with special educational needs out of people’s private pockets. It does not make any sense, does it?

[Sarah Olney]

I trust that that means the Liberal Democrats can look to the right hon. Gentleman to support our new clause today, because the inevitable result of the legislation, if unamended, will be thousands of children with SEND forced into the state sector all at once, which will be enormously disruptive, and not just for them but for pupils already in the state sector. It will be potentially traumatic for those children, as well as being immensely difficult for the state schools to manage. New clause 9 would protect both the children and the schools affected by the impact of these measures—the children who have special educational needs but do not yet have an EHCP, as well as the children of families who have applied for one.

However, it is not just children with SEND who will be affected. The parents of many thousands of other children across the country will find that they can no longer afford to keep them in their current school, and those children will experience enormous disruption to their education as they are forced to change schools. Many will face the upheaval of being separated from their friends and a familiar environment. The Government should reflect carefully on whether the benefits of this policy that they are intent on pursuing are worth the damage caused to these children’s education and wellbeing.

The influx will not be evenly distributed. In my constituency of Richmond Park, more than 45% of children attend a fee-paying private school. In common with other parts of London, demand for state primary places is down, so younger children will be easily accommodated, but secondary schools are experiencing great pressure for places and a rise in requests for in-year admissions will be difficult to meet. There may only be a small proportion of children whose parents are no longer able to meet the fees, but a drop in headcount at private schools could see them closing because they become unviable. That means that the effect of children needing to transfer out of independent schools and into the state sector could be much greater than is currently forecast.

I want to reflect on what the shadow spokesperson, the hon. Member for North West Norfolk (James Wild), and others have said about the music and dance scheme. The Royal Ballet school at White Lodge in the middle of Richmond park in my constituency is a world-leading ballet school, and it has expressed great reservations to me about the effect of this policy, and I would very much like the Government to reflect on that.

If the survey done by The Times of private school parents earlier this year is accurate, and 25% of parents have to withdraw their children from private education due to the Government’s proposals, that could have a huge impact on children in communities such as mine across the country. The Government propose that their new tax treatment should be applied only to the provision of private schooling, but taxing some forms of education and not others will almost inevitably create loopholes.

Creative accountants will find ways of delivering education services that fall outside the VAT legislation while other education providers that the Government did not intend to tax will unwittingly find themselves caught up in it. The risks of these distortions increase if legislation is hastily framed with insufficient time for scrutiny. Between parents who cannot afford to pay their children’s fees and schools that cannot keep their doors open, the state will need to find space and resources for an influx of new students.

The Liberal Democrats are opposed to the Government’s plans to impose VAT on private school fees because we believe it is wrong to tax education. Imposing this increase in fees will have a disproportionate impact on children with SEND, which will create not just hardship for those children and their parents but enormous difficulties for the local authorities and state schools that will be required to provide alternative schooling. That is why I join the calls of my colleagues to urge the Government to back new clause 9.

--- Later in debate ---

[James Murray]

The way that we treat private school fees and the other charges that private schools may levy has to be consistent with the VAT principles more broadly, which is why I have tried to explain how the supply of education and the supply of other elements would interact with the VAT system more widely. I will hold back from giving specific advice about that individual school, but I would encourage it to contact HMRC to get advice about its specific registration. If the school staff read what I have just said in Hansard, I hope they will see some information that will help them to understand how to approach this issue.

[Graham Stuart]

As ever, the Minister is being very gracious in giving way. If someone were to establish a new educational establishment providing entirely modular educational elements that people could choose between, would that be subject to VAT, individually or collectively, or not?

[James Murray]

The right hon. Gentleman is tempting me into hypotheticals and into trying to give advice to a school that does not yet exist—I will hold back from that, because I think the principles of our Bill are very clear on what VAT at the standard rate is applied to and what can be made exempt, in line with the existing rules on VAT.

We heard several times from the right hon. Member for East Hampshire (Damian Hinds). I assure him that the Government costing has, of course, been fully scrutinised and certified by the Office for Budget Responsibility. He also spoke about capital funding. Obviously, pupil numbers fluctuate for a number of reasons. The Government have already announced more than £700 million to support local authorities over this academic year and the next to provide places in new schools and expand existing schools. I did note, however, that in response to an intervention by my hon. Friend the Member for Hartlepool (Mr Brash), the right hon. Gentleman seemed implicitly to admit to his Government’s failure to improve high-needs education in the state sector, which is precisely why our measures today are so important.

Finance Bill

Graham Stuart Excerpts

Report stage
Monday 3rd March 2025 Commons Chamber

[James Wild]

Well, the last Government had to deal with a global pandemic and an energy price shock. I am happy to enlighten the hon. Gentleman, who has obviously not read the Red Book: taxes are going up—they are going up to record high levels—under the Budget and the Finance Bill that he is supporting. If he is worried about the tax burden, he should not be voting for this Finance Bill today.

Households are facing financial challenges, and the measures in the Bill will only make things worse. The Office for Budget Responsibility predicts that real household disposable income will fall by 1.25% by the start of 2029, largely due to the measures in the Budget. New clause 3 would require the Chancellor to publish an assessment of the impact of the changes on household finances. The choices that this Chancellor and this Government have made mean that borrowing is increasing, so interest rates will be higher for longer and people’s mortgages will be higher, and hard-working families will be paying billions of pounds to pay off the debt interest. The Government inherited inflation at target, but since then inflation has gone up, meaning less money in people’s pockets.

While it is the Chancellor’s wider mishandling of the economy that is attracting the headlines, the measures in this Bill will have a direct role in squeezing households. Whether it is higher stamp duty, increased alcohol duty, air passenger duty, capital gains increases, vehicle excise duty, changes to the tax treatment of hybrid vehicles or many other measures, the costs of the Bill will be felt directly by households across the UK. When households are stretched, it is essential that we have transparency about what the Government’s actions are doing to incomes.

[Graham Stuart (Beverley and Holderness) (Con)]

Of course, the big tax-raising measure in the Budget, as my hon. Friend says, was the national insurance contributions rise, with its £25 billion impact on the economy, yet once we have taken off compensation for public services and the negative impact on activity, it nets only about £10 billion. It is a peculiarly ridiculous policy that nets only £10 billion or £11 billion, yet, according to the Office for Budget Responsibility’s numbers, will take £19 billion out of people’s pay packets. Does my hon. Friend agree that there has surely never been a more ridiculous measure that costs so much and delivers so little?

[James Wild]

My right hon. Friend makes the point that this measure may have been introduced by a Chancellor who did not actually understand the impact it was going to have. The Government should have stuck to the promise they made at the election not to increase national insurance at all.

New clause 2 concerns the Government’s plan to undermine our energy security by increasing the energy profits levy to 38%, bringing the headline rate on oil and gas activities to 78%, extending the tax by a year and removing investment allowances. The consequences are fairly predictable. Offshore Energies UK has said that the hike will choke off billions of pounds of investment in the North sea, putting 35,000 jobs at risk.

--- Later in debate ---

[James Wild]

Absolutely. I wonder if, when the Prime Minister was in Washington last week, he had the opportunity to talk to President Trump about home-grown energy and the importance of supporting the domestic sector. That is what we on the Conservative Benches certainly support. This is a sector with 200,000 high-skilled jobs, so it is important that we have an up-to-date assessment of the impact of what the Government are doing on our domestic energy production, energy security, energy prices and the UK economy. Unfortunately, we already see some of that impact: the US firm Apache has said that it will end its operations in the North sea by the end of 2029, blaming the extension of the profits levy for making it uneconomic to stay beyond then.

[Graham Stuart]

This measure is vying with the national insurance contribution change to be the most absurd measure. I think that it wins by a head. The Prime Minister says that we must have energy security, and the Climate Change Committee that says we will still need oil and gas for 25% of our energy needs if we meet net zero in 2050, but the Government will have no more licences. We will lose tens of thousands of jobs, tens of billions of pounds in tax, and the engineering capability that we need for the transition. It is absurd on every single possible front.

[James Wild]

My hon. Friend is 100% correct. I think we all know that the architect of much of this is the Secretary of State for Energy Security and Net Zero, who takes a rather fundamentalist approach. He wants to cover farmland with solar farms, and wants to undermine our oil and gas sector. We on the Opposition Benches disagree. It was the previous Government who introduced the levy, but that was to tackle extraordinary profits at an extraordinary time. The revenue helped to keep energy bills lower for all our constituents, but now the Government are ratcheting up the levy and seem to want to tax North sea exploration out of existence. This is just a further example of the Government’s ill-conceived energy policy. GB Energy is a net zero vanity project that will not generate any energy or be an energy supplier. It certainly will not deliver £300 off bills.

Amendments 67 to 69, tabled in my name, would remove clause 47 and abolish Labour’s education tax. Since 1 January, independent school fees for education and vocational training have been subject to VAT at 20%. It is the first time education has been subject to VAT. Why is that? Because education is a public good, so we do not tax it. Putting VAT on independent schools particularly hurts those on the most modest incomes who have chosen to save and make sacrifices to send their children to a school that they think will serve them best.

--- Later in debate ---

[James Wild]

I agree with the hon. Gentleman. Everyone will have an opportunity, if the amendment is moved and selected for a Division, to vote to strip the measure out of the Bill. None of those parents on modest incomes are getting a tax break. They are also contributing to funding places in the state sector, whether or not their children take them up. Ultimately, this is a tax on aspiration, and we oppose it. In Committee, we raised concerns about the impact on certain groups, including children with special educational needs, small schools, faith schools and military families.

[Graham Stuart]

My hon. Friend is being very generous in giving way. He touches on the issue of children with special educational needs. This is not just about scrimping parents making a choice; this is about people with no choice, whose children have been bullied or who have special needs that have not been met in the state sector, and who have made a sacrifice to put their children in the private sector. People with children in particular need will pay the price of this ill-thought-through measure.

[James Wild]

My right hon. Friend is consistently absolutely right. There are more than 100,000 pupils in independent schools with special educational needs and disabilities who do not have an education, health and care plan. They will have to pay VAT on their school places—that is not covered by the Government.

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[Daisy Cooper]

We disagree on this point. Fundamentally, Liberal Democrats have said that we should rise the tide for all children, not lower the tide for some. We had a very ambitious education agenda in last year’s general election manifesto. Some areas we had in common with the Labour party, and some not. Our very ambitious agenda for education included a ringfenced high needs budget. I have campaigned relentlessly on improving SEND provision for the past five or six years in this Chamber, in Westminster Hall debates and in various meetings. We do not think that this particular measure is needed to improve SEND funding. Other measures could be used. We have a difference of opinion about how to raise that money.

[Graham Stuart]

The hon. Lady’s response to that intervention is perfectly good in its own way, but her new clause simply asks to measure the impact and look at whether the damage is too great to justify it in that broader sense. I hope that the Government consider looking at it, take it seriously and follow the hon. Lady’s arguments.

[Daisy Cooper]

I am grateful to the right hon. Member for highlighting that the new clause is about an impact assessment. Labour colleagues will be aware that the VAT provision will come into effect very quickly, but it will not provide the instant support that many children need. If children’s education is disrupted, they immediately suffer disadvantages in their life. If the Government had really wanted to pursue this measure, I would have hoped at the very least that it would have happened in a few years’ time to allow for adjustment. But we are where we are. We do not support the measure, but at the very least we request an impact assessment, as the right hon. Member suggested.

New clause 8 on alcohol duties would require the Government to produce an impact assessment of the Bill’s measures on distilleries, wine producers and the hospitality industry. Since 2022, I have tabled numerous questions in the House and written letters to the Treasury with evidence of falling tax receipts and sales as a result of the measures that the Labour Government are now introducing. They will introduce huge amounts of red tape, which will be very complicated, very costly and, ultimately, will push up prices for consumers and the industry.

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[Jim Dickson (Dartford) (Lab)]

It is a pleasure to contribute once again to a debate on this important piece of legislation. A number of amendments have been tabled by hon. Members from across the House and, while I do not have time to cover them all, I will address the key ones.

As I said in Committee of the whole House, this is a crucial Bill that underpins the new Government’s aim of fixing a tax system that has become less fair and less sustainable over the last 14 years of Conservative government. I am conscious of the need to confine my remarks to the amendments rather than speaking to the Bill itself, but I remind everyone that the Bill was necessary because of the dire economic inheritance that the Government found on entering office last year.

[Graham Stuart]

The hon. Gentleman said that the tax system had become less fair over those 14 years. Does he oppose the increase in the tax burden paid by the higher paid? That is what happened over those 14 years. Does he not see it as fair that those on lower and average earnings saw their share of the tax take go down? Is he opposed to that? In what way precisely, from his deep understanding of the tax system, has he concluded that it has become less fair over the last 14 years?

[Jim Dickson]

When the last Government left office, taxes were at their highest level for 70 years. Thresholds have been frozen, bringing more workers into higher tax rates than was fair on them. The Labour Government are dedicated to trying to ensure that taxes are paid by those with the broadest shoulders and those best able to pay them.

[Graham Stuart]

rose—

[Jim Dickson]

If I might make a little progress before the right hon. Gentleman intervenes once more, that would be lovely.

Opposition Front-Benchers have tabled new clauses 1 to 8, which would require the Government to undertake a number of reviews of the impact of measures in the Bill, ranging from a requirement for the Chancellor to commission and publish an assessment of the expected impact of changes to energy, oil and gas profits levy on domestic energy production, the UK’s energy security, energy prices and the UK economy to a requirement on the Chancellor to publish an assessment of the impact of the changes in the Bill on the finances of households at a range of income levels. I gently remind Opposition Members that much of the information requested is already available. Details on tax liabilities are published by HMRC, the Department for Work and Pensions and the Office for Budget Responsibility, and the impacts of the changes set out in the autumn Budget are published in documents including the tax information and impact notes and the “Impact on households” report.

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[Nesil Caliskan]

I want to thank the Members who have spoken so far. I have great enthusiasm for the Finance Bill, and I thank the hon. Member for North West Norfolk (James Wild) for his contributions, alongside the Minister at the time, over the several days I sat through the Bill’s Committee stage. I speak in favour of the Finance Bill as a member of the Committee. I recognise that it is part of the Government’s mission to turn the page on what was a period of decline for the country.

There are several aspects of the Bill that I would like to focus on. To begin with, I see the Government’s proposals on non-dom status as a crucial part of our agenda to ensure that we are delivering a fair approach to taxation in this country. Closing the non-dom loophole, alongside extending the levy on oil and gas companies and ending the VAT exemption for private schools through this Bill, will raise the necessary income to deliver what the Government are trying to do: achieve a balanced budget that will stabilise and then grow the economy.

[Graham Stuart]

If it turns out that the energy profits levy, lugged up to even higher levels, leads to a lower tax take than there would have been if it were at a lower level, would the hon. Lady think that that was a mistake and urge her colleagues to change course?

[Nesil Caliskan]

Ministers have provided an assurance of their assessment, and they do not believe that will be the case. The Government are taking a rounded approach to energy that, alongside our commitments to GB Energy and to a transfer to more renewable energy, will allow there to be a more mission-led approach. I take the right hon. Member’s point, but the Government have provided assurances that there will be constant monitoring and that if changes are required they will deliver them.

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New clause 7 demands transparency on the impact that the policy will have on pupils across the UK. This change will have a disproportionate impact on children with SEND, which will create not just hardship for those children and their parents, but enormous difficulties for the local authorities and state schools that will be required to provide alternative schooling. I urge the Government to back the new clause and reconsider this policy.

[Graham Stuart]

It is a pleasure to take part in tonight’s debate on the Finance Bill, and on the amendments and new clauses that have been tabled. The debate follows several remarkable days and this afternoon’s session when pretty much the whole House came together to congratulate the Prime Minister on his composure and leadership on Ukraine. The need to rebuild our military capability and our hard power as this decade goes on, if we are to ensure the security of Ukraine, Europe, including the UK, and the wider world, was made clear. The Finance Bill has been introduced in that context, because the only way to deliver that security is by having a strong economy and the economic growth that colleagues from across the House have discussed, yet this Budget is the most growth-destructive Budget imaginable.

As we look at the amendments and new clauses, it is worth going back over the context of the Bill, following the pandemic and the energy crisis, which continues in some ways. Thanks to the hard decisions made by the Conservatives, which did not always lead to our popularity and in fact contributed to our electoral disaster last July, inflation was back on target at 2% when the election came. We were the fastest growing economy in the G7 and some 4 million additional jobs had been created. That was the legacy. The incoming Labour Government, with their unprecedented majority and the good will to get on and do something, needed to hold their nerve and recognise that the key components for economic growth had been put in place, which was vital to meet the demands of the NHS, an ageing population and an ever more dangerous world. Instead, what we got from this Labour Government was the most disastrous economic suicide note in history, which has been devastating for the popularity of their party. Never has such a huge majority been squandered so quickly.

New clause 1 addresses the tax that will be taken from a state pension. The Labour Government propose that someone whose only income is the state pension could pay tax on that income. Forget the winter fuel payment being taken away as well—is that really what Labour Members came here hoping to do? I do not think they did, so new clause 1, which would ensure that we look at that, understand it and look for opportunities to change it, is sensible.

New clause 3 looks at the overall tax impact on households and sets our an approach that has to be right. My hon. Friend the Member for North West Norfolk (James Wild) gave a powerful speech at the beginning of the debate and I fully support the points he made.

We have heard powerful speeches from across the House on special educational needs. Again, I say to Labour Members, did they really get elected to come here and target children with special educational needs? Some 100,000 children who are in the private sector do not have an education, health and care plan, even though they are eligible for one. They will be forced out of their schools with no notice and no time to change and plan. It is a cruel policy that the Labour party should be ashamed of. I fully support amendments 67 to 69, which focus on VAT on private school, as well as new clause 7 proposed by the Liberal Democrats, which was spoken to powerfully by the hon. Member for St Albans (Daisy Cooper).

On non-doms, it is ironic that, as colleagues have said, the Government have not listened to pensioners, small businesses, farmers and all those with domestic interests. One might have thought that the Government would want to listen to them, reflect and make some changes to lower the negative impacts, but none of them has been listened to in the least. But non-doms in Davos? The Chancellor has gone off there and there is some change on non-doms, but let us not let the Government off entirely on that, because driving out the very rich, who bring us a massively disproportionate amount of revenue, is not sensible.

Socialists often put equality above all other values. As Churchill said:

“The inherent vice of capitalism is the unequal sharing of blessings. The inherent virtue of Socialism is the equal sharing of miseries.”—[Official Report, 22 October 1945; Vol. 414, c. 1703.]

One of the greatest ways of creating more equality in this country is to drive all the rich people out; drive all the people out who invest, give us jobs and take little from public services, but contribute enormously to them. That always goes down well with the union backers of the Labour party.

[Naushabah Khan (Gillingham and Rainham) (Lab)]

On that point, will the hon. Gentleman give way?

[Graham Stuart]

I promised I would not go on for too long, so I am going to sit down—[Interruption.]

[Hon. Members]

More!

[Graham Stuart]

I said I would speak for six minutes and I have now spoken for six minutes, but interestingly I have not talked about the main topic I was going to touch on: oil and gas. I made my point in an earlier intervention, but I appeal to the Government because putting up taxes on oil and gas in the North sea will mean that there will be tens of thousands of job losses, and a loss of engineering and other capacity in this country, which is vital to the transition to net zero. In response to my interaction with the hon. Member for Barking (Nesil Caliskan) earlier, no one expects the tax take from this sector to go up in the coming years as a result of the measure; the tax take will go down. The rate can be put up to such a level that it means there will be a lower tax take; the hon. Member for Angus and Perthshire Glens (Dave Doogan) spoke powerfully about that as well.

The hon. Member for Barking appeared to accept that point, and she seemed to have a belief in the Minister on the Front Bench that they would listen if it turned out that that was a short-sighted move. If it means that we import more oil and gas from abroad—by the way, that almost always has a higher embedded carbon content than domestically produced oil and gas—that does not benefit the environment, it certainly does not benefit all the jobs that we would have in this country, and it loses us tax revenue. It is truly a crazy policy.

I appeal to Labour Members, especially the new Members, on this point. We heard from the distinguished economist the hon. Member for Loughborough (Dr Sandher) earlier, who was retreading his speech for about the fourth time, little realising it was supposed to be focused on these particular amendments—[Interruption.] Anyway, he did it with great good humour. But I would ask him to take his finely honed mind and address these issues. If the oil and gas policy is as crazy as every expert witness says it is, then he and others should suggest that the Government change course. The hon. Member for Barking said that the Government should consider changing course if the policy did not deliver what it was supposed to deliver, so I ask Government Members to support the amendments that we have put down tonight and oppose this ridiculous Bill. I look forward to hearing from the Minister.

[The Exchequer Secretary to the Treasury (James Murray)]

At the heart of the Prime Minister’s plan for change is our mission to grow the economy to put more money in people’s pockets. We are determined to make people better off. We know that investment and growth depend on the essential foundations of economic stability, fiscal responsibility and public services being on a firm footing, but this Government inherited a challenging and unsustainable set of future spending plans based on unfunded commitments that had not been shared with the OBR or the British people.

No responsible Government could have let things carry on as they were. That is why at the autumn Budget, my right hon. Friend the Chancellor set out the Government’s plans to fix the foundations of the economy and deliver change—a plan to protect working people, fix public services, including the NHS, and rebuild Britain. That has meant taking difficult decisions on tax, spending and welfare to repair the public finances and support investment in public services, and the Government have done that while protecting people’s payslips. We have also ensured that the UK is one of the best places in the world to grow a business, with corporation tax capped at 25% and reforms that will support small businesses and the British high street. This Finance Bill represents the next step in delivering on the autumn Budget by legislating for several key manifesto commitments, supporting businesses to invest and implementing reforms to the tax system.

I thank all hon. Members for their contributions during the debate; before I turn to the individual amendments, I will briefly address some of the points that they made. I thank my hon. Friend the Member for Loughborough (Dr Sandher) for setting out the importance of growth and making people better off, and for his thorough analysis of all the amendments and new clauses to the Bill, which I seem to recall. Perhaps that was in fact my hon. Friend the Member for Dartford (Jim Dickson), who did go through all the new clauses—I thank him for his contribution. I also thank my hon. Friend the Member for Barking (Nesil Caliskan) for being on the Finance Bill Committee, although I note her description that she “sat through” it, rather than thoroughly enjoying the episode.

I also thank Opposition Members for their contributions to the debate. The hon. Member for Bridgwater (Sir Ashley Fox) recognised that even in his view, he could agree with a few points in our Bill, which I welcome.

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I will move on, Madam Deputy Speaker. I will perhaps not go into some of the amendments in as much depth as I had hoped, as I am getting very well attuned to the subtle signals from my hon. Friends.

[Graham Stuart]

Will the Minister give way before he moves on?

[James Murray]

One more time.

[Graham Stuart]

The Minister is gracious, if not always in the Whips’ best books. Does he expect pensioners who are solely reliant on the state pension to get drawn into tax and the need to produce a tax return? Has he made an assessment of that, and what kinds of numbers would there be?

[James Murray]

As the right hon. Gentleman will be aware, in the coming financial year 2025-26 the personal allowance will be above the level of the new state pension, so what he said should not apply when it is people’s sole income. However, there are already cases of individual pensioners who do owe tax; indeed, around two thirds of pensioners pay tax, because they also have private pensions. They pay via pay-as-you-earn or self-assessment.

I will not go into detail about the Government amendments to visual effects relief, because I assume they have the consent of the whole House. However, I will briefly speak to some of the amendments tabled by Opposition Members, as I feel I should address them. I will take together new clauses 1, 2, 3, 5, 6 and 8, which would require the Government to review the number of individuals receiving the full state pension and their income tax liabilities over the next four years, and to publish various impact assessments regarding the impact of changes to the energy profits levy, as well as the impact of the Bill on households, small and medium-sized enterprises, distilleries, wine producers and the hospitality industry.

The Government remain opposed to all of these new clauses, for the same reasons that I gave in Committee. First, the relevant information on those receiving the state pension and their tax liabilities is already published by HMRC, the Department for Work and Pensions and the OBR, and is publicly available.