Finance Bill

Harriet Cross Excerpts

Report stage
Monday 3rd March 2025 Commons Chamber

[Nesil Caliskan]

I absolutely support the principle of being able to use a mechanism to intervene in a market that is not working, and I think the Government’s approach is right. There is an immediate issue with high pricing, certainly, but the truth is that the Government have to be able to take decisions for the long run. I am conscious that Madam Deputy Speaker might intervene and tell me to focus on the new clauses, but as I said earlier, a long-term approach to ensure that we have a just transition that sees energy stabilised for people across the country on a long-term basis is really important.

The Government’s approach to energy levies is the right one, our focus on maintaining particular clauses on VAT on private schools is important, and, as I have said, the proposals on non-dom status are crucial.

[Harriet Cross (Gordon and Buchan) (Con)]

The energy profits levy is expected to cause huge amounts of instability for North sea firms, driving away investment, driving down employment and driving businesses away from the North sea to invest abroad. Does that sound like stability, and if so, will it bring employment, economic growth and lower prices to the country, because it does not sound like the stability or investment environment that we are looking for?

Family Businesses

Harriet Cross Excerpts

Wednesday 26th February 2025 Commons Chamber

[Graham Leadbitter (Moray West, Nairn and Strathspey) (SNP)]

The director of Family Business UK, Steve Rigby, has said that the single most important issue for the family businesses he represents is the retention of business property relief. That has come through loud and clear to me in recent weeks when I have been speaking to local businesses, both individually and collectively through organisations such as the Cairngorms Business Partnership and the local chamber of commerce. Other family businesses, which have never come together before and do not usually lobby their MPs, have come together too. They normally just get on with being hard-working and productive family businesses, but they have come together to lobby because they are so concerned about the impact of BPR.

To give a flavour of the family businesses in my constituency, we have some of the most iconic family businesses in the UK. Many will know Baxters from its food products, and Walker’s Shortbread food products can be found in pretty much every airport in the world. Glenfiddich, owned by William Grant & Sons, is another family business, and Johnstons of Elgin produces some of the finest cashmere products in the world. In Scotland as a whole, it alone employs 1,000 people.

Those businesses are not small fry. They put huge amounts of money and investment into those businesses every single year. I met a group of business owners last week who collectively represent 2,500 years of business ownership. They have a phenomenal story to tell. What is incredible about them is the stewardship of those businesses. They invest their time and energy. Family members get trained up and work in all aspects of the business, ready to take on the mantle of running it when it comes to them later in life. If the business was a limited liability partnership and you got rid of the business management of the business, it would not have any kind of inheritance tax to pay. Yet the only choice for family businesses operating on that scale, given the likely tax bill they will be hit with, is to either put away millions of pounds to cover the tax bill, which means they are not investing, or sell off large parts of the business. For manufacturing businesses, there is a very big chance that they will end up abroad rather than in the UK. They could be bought by a multinational or a conglomerate and the jobs would just be shipped abroad. That is not the way to grow the economy.

I was okay with the first couple of bits of the official Opposition’s motion, but they would have been better to have a laser-like focus on inheritance tax and national insurance contributions. Their inclusion of trying to stop a workers’ rights Bill is frankly ridiculous, and as for adding in the beer measures, it seems as though somebody must have been on a heady brew to come up with that notion. Those things make the motion unsupportable, but I hope the Minister is listening to what I have said about those aspects of the motion that I do support and have concerns about.

[Harriet Cross (Gordon and Buchan) (Con)]

In Scotland, businesses are also battling with the business rates relief not being passed on in full by the SNP Scottish Government. Will the Member be putting pressure on his party in Scotland to pass on those reliefs in full, to help family businesses and businesses across our high streets in Scotland?

[Graham Leadbitter]

I hear what the hon. Member is saying. There are a number of reliefs in Scotland, and Scotland went further and quicker than the Conservatives did in government when it came to the small business bonus scheme that was in place, so I am not going to take any lessons about what we do with business rates. It is a different system; there are other things going on that make the mix different. Also, that is not the issue that businesses are raising with me.

The first and foremost issue, as has been indicated by Family Business UK, is inheritance tax. That is what is causing the most consternation. The businesses that I met last week were saying that their financial advisers—or their finance directors, if they are big enough to have them—are already advising them to set aside substantial amounts of money to cover off risk. These are businesses that have never had to value themselves in their lives. They are family businesses that work on a model of working with what they have and getting on with it. They have never had to place an inheritance value on their business. That is yet another headache for them—another bureaucratic maze for them to work their way through—that does not apply to LLPs, which is a very unfair situation. I do not understand why a Labour Government in particular are tackling family-owned businesses in this way and allowing shareholder-owned businesses or LLPs off the hook. That does not make sense to me.

The hon. Member for St Albans (Daisy Cooper) spoke very well and, had her amendment been selected, I would certainly have gone for it. I am sorry that I cannot, but—

Bank Closures: Rural Areas

Harriet Cross Excerpts

Monday 24th February 2025 Commons Chamber

[Simon Hoare]

I agree entirely with my hon. Friend who represents Surrey and part of Hampshire.

I would be happy for the Minister to write to me on this point if it is easier, but it strikes me that there is scope for a little bit of wiggle room with regard to the Financial Services and Markets Act 2023. The Act did not give the Financial Conduct Authority powers to reflect on and assess wider banking services. The Minister’s party, when in opposition, was very keen that it should do so. When my party was in government, for some unknown reason we resisted amendments to that effect, and Labour, then in opposition, did not push them to a Division. I just think that there is too gaping a lacuna in all of this, in that it is only access to cash that is assessed, and not access to banking services.

[Harriet Cross (Gordon and Buchan) (Con)]

Will my hon. Friend give way?

[Simon Hoare]

Let me give way to the hon. Member for North Shropshire (Helen Morgan), then I will give way to my hon. Friend.

[Simon Hoare]

The hon. Lady is absolutely right. Again, I hope that any of the banks or regulators who may listen in or read the report will understand that this is not an issue that divides by party; it affects constituents across the country irrespective of which party represents them in this place. The key point is to have a proper assessment of rurality and the differential of living in a rural area compared with an urban area.

I commend the Government for their support for hubs, but they need to be more physical and robust in driving them forward. It is almost as if the banks are marking their own homework as to whether the argument in favour of a hub stacks up. As Sarah Coles of Hargreaves Lansdown commented a year or so ago:

“The closure of bank branches is a vicious circle. The more that close, the more people move online”.

Of course, by definition, the more people move online, the more that almost hollows out the argument to justify creating a hub.

I understand that initially the banks were slightly reticent, just as the mobile phone operators were about shared masts—that somehow clients would be pinched and all the rest of it—but the hubs are a shared facility jointly financed by the banks. Those banks need to remember that they are still in business principally due to the good will of the British taxpayer and the Exchequer during the financial crash of 2008, who keep our banking sector afloat. They owe a little bit of payback, as a number of my constituents have been keen to point out.

The hubs seem to work and fill that gap; but as I say, marking one’s own homework and setting the rubric to decide whether a hub will work is not right. The Treasury could take a more engaged and proactive leadership role on the matter.

[Harriet Cross]

I thank my hon. Friend for securing this important and timely debate. I certainly spent a lot of my recess looking at banking hubs, especially in a town called Ellon in my constituency, which has recently lost its last bank. Ellon is a large town of over 7,000 people, and if the surrounding villages are included, it is getting up towards 11,000 people. However, it does not qualify for a banking hub. Link has not given its permission to have a banking hub, saying that there are not enough businesses in the town. It does not take into account, for example, the farming businesses, and the rural nature of the area, as we have touched on, is not taken into account in the criteria set out by Link.

I am glad that my hon. Friend mentioned the importance of “rural-proofing” the conditions that Link looks at to deliver a banking hub. I hope that this debate and the Minister’s response will put some pressure on Link to look more holistically at the rural environment when it comes to considering hubs, because places like Ellon need a banking hub.

[Simon Hoare]

I am grateful to my hon. Friend, because again she enhances and underlines the argument that I have been deploying, and for which colleagues across the House have been kind enough to add their support.

I suppose my annoyance is that the people who write the policies, whether they are the regulators or those in the bank boardrooms, do not know what living in a rural area is like. If they are in the Square Mile, they are not part of a rural community. They may have a getaway weekend retreat that they dash off to in their personalised number-plated Land Rover or Range Rover, in which they take their food down from Waitrose, before coming back to London on the Sunday, but that is not living in a rural area. That is not running a business in a rural area.

Inheritance Tax Relief: Farms

Harriet Cross Excerpts

Monday 10th February 2025 Westminster Hall

[Harriet Cross (Gordon and Buchan) (Con)]

In the 103 days since the Budget and the Chancellor turned farmers’ lives upside down in this country, we have heard stories from farmers across the UK, and will hear more today. Labour Members marched out stories of their own farmers; a few months ago, they did not hear anything from their farmers, but suddenly they have a voice. It is good to hear that they have been listening and now are actually representing those farmers’ voices.

Farmers have been telling us for months about the impact the IHT change will have. I have spoken about the 90-year-old farmer in my constituency whose son is now resigned to the fact that he will have to sell the farm and give up on the livelihood and life he thought he was going to have. I have spoken about the farmer whose wife died earlier last year, who also realised by the end of the year that they were going to lose their farm. However, the Government did not want to listen. They would not to listen to the stories coming from our farmers.

We have heard about the fact that farmers only make 1% profit. As my right hon. Friend the Member for Beverley and Holderness (Graham Stuart) said, what other businessperson would take a 1% profit and want to continue that life? We have also heard about how investment in farms has fallen off a cliff since this policy was introduced. If we do not invest in or encourage investment in farms, how will we increase profitability? Profit and productivity are linked; if we have poor productivity and profitability, we will never get to a stage where any sort of IHT bill—let alone the one proposed by the Government—can be managed by farmers.

It is not just farmers making the Government aware of where they stand; we have heard the NFU and NFUS say that three quarters of commercial farms will be impacted. Experts in valuing the Central Association of Agricultural Valuers says that 75,000 farms will be impacted. The CLA says that an eighth of farms over 350 acres will have to sell land in order to cover the bill. Savills, the property experts, says that 88% of UK farmland will be impacted, yet, as the Treasury says it is only 20% to 25%, that is the figure we stick with. We stick with the Government figure because it fits the narrative; we do not listen to the industry or the experts, which is how we have got into the situation we are now in.

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

When Jane’s husband died just under three years ago, their farm passed to their son—the fifth generation of the family to farm that land. Their accountant says that if that had happened after the Government’s changes, the farm would be looking at an inheritance tax bill of between £80,000 and £100,000. Does my hon. Friend know of any farmer who has that kind of money available without selling off a huge chunk of their farm?

[Harriet Cross]

No, I do not know of any family farmer who has the sort of money to cover that bill. That is the issue. We are penalising the very people who have fed us, who have supported our rural communities and who have been custodians of the land for generations, to fit whatever the Government’s narrative is with this policy.

The unintended consequences also have impacts. There is an impact on hauliers, vets, rural communities, farm shops and workers—they will all be impacted by the policy. It is not just family farmers; they are the start, but the result of the policy spreads through rural communities the length and breadth of the country.

[Caroline Voaden (South Devon) (LD)]

In my constituency we did a survey of all the farmers to see whether the Government’s figures stood up. The Government claim that 73% of family farms will be unaffected by the change in tax relief, but 85% of the farmers who responded to our survey believed they would be affected, with an average inheritance tax bill of £637,000 because of the extortionate cost of land in South Devon. That is nearly £64,000 a year in tax every year for 10 years. Does the hon. Lady agree that this is unworkable, and will see the decimation of our family farms?

[Harriet Cross]

Absolutely. I agree 100% with what the hon. Member says, and it will be repeated across the country in rural Labour constituencies and in our constituencies. It does not matter where they are in the country, our farmers will face hundreds of thousands of pounds in IHT bills because of this Government’s decisions—for no other reason.

Some balance sheets might say one thing and the Treasury’s might say another, but the reality in rural constituencies up and down the country is that the policy will devastate our family farmers and rural communities. The Government must change course before it is too late.

--- Later in debate ---

[Harriet Cross]

Will the Minister give way?

[James Murray]

I will make some progress.

The Liberal Democrat spokesperson, the hon. Member for Glastonbury and Somerton (Sarah Dyke), asked how the figures were arrived at. The figure to which I referred—520 estates likely to be affected in ’26-27—comes from taking the historical data and projecting it forward using economic determinants. She may have seen the letter sent by the Chancellor to the Treasury Committee in November, which set out how that calculation was done. I suggest that all Members read that letter to understand the basis for that 520 number.

The statistics also show how many estates claiming business property relief are likely to be affected. Around three quarters of estates claiming business property relief alone, excluding those only holding alternative investment market shares, will not pay any more inheritance tax in 2026-27. The Office for Budget Responsibility has been clear that it does not expect this measure to have any significant macroeconomic impacts.

I recognise the disagreement over this policy, but Ministers and officials have been listening carefully to the views of the farming sector and rural communities. Ahead of the Budget, there was media speculation that the Government were going to abolish the reliefs altogether. In reaction to that speculation, the Treasury received and considered several representations from the farming sector with views on retaining the reliefs. I responded to a debate on the matter in this very room on 17 October.

Finance Bill (Third sitting)

Harriet Cross Excerpts

Committee stage
Thursday 30th January 2025 Public Bill Committees

[Harriet Cross (Gordon and Buchan) (Con)]

It is of course welcome that more land is to be brought under the scope of agricultural property relief, but given the introduction of the £1 million cap on agricultural property, is it not somewhat redundant? I know the Government use different numbers, but the industry believes that the majority of farms will be over that threshold anyway, so bringing more land within the scope of APR does not actually make much difference to the bill they will have to pay at the end.

[James Murray]

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

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

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

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

--- Later in debate ---

[James Murray]

As I was saying, the clause also increases the relative value of small producer relief for both draught and non-draught products, and clause 64 ends the alcohol duty stamps scheme. To reassure Members, in consideration of what position to take at the autumn Budget, I had meetings and officials had further meetings with representatives from the wine, beer, spirits and cider industries, as well as with public health people, to understand the full range of opinions and how we could carefully calibrate our policy response.

[Harriet Cross]

The Scotch Whisky Association is not on the list of people the Minister met. Can he confirm whether he did meet the association?

[James Murray]

The association is included under “spirits”.

As we know, alcohol duty is frozen until 1 February. The OBR’s baseline, reflected in its forecast, is that alcohol duty will be uprated by RPI inflation each year. The Government have decided to maintain the value of alcohol duty for non-draught products by uprating it from 1 February. At the same time we are recognising the social and economic importance of pubs, as well as the fact that they promote more responsible drinking, by cutting duty for draught products, which account for the majority of alcohol sold in pubs.

A progressive strength-based duty system was introduced on 1 August 2023 by the previous Government following the alcohol duty review. The reforms introduced two new reliefs: a draught relief to reduce the duty burden on draught products sold in on-trade venues, and small producer relief that replaced the previous small brewers relief. The clause increases the generosity of both reliefs.

The alcohol duty stamps scheme is an anti-fraud measure applied to larger containers of high-strength alcoholic products, typically spirits. It requires the mandatory stamping of certain retail containers with a duty stamp. In 2022, HMRC was commissioned to review the effectiveness of the scheme. It found that it is outdated, susceptible to being undermined and now plays a diminished compliance role, and concluded that the cost and administrative burdens imposed on the spirits industry could no longer be justified. The previous Government announced the end of the scheme at spring Budget 2024. That is a decision that this Government will implement from 1 May 2025. That date was chosen after consultation with businesses, which requested sufficient time to prepare.

Clause 63 makes four changes. First, it increases the rates of alcohol duty for non-draught products to reflect RPI inflation. Secondly, it reduces the rates of alcohol duty on draught products by 1.7%. Thirdly, it amends the tables in schedule 9 to the Finance (No. 2) Act 2023 that are used by small producers to calculate their duty discount under small producer relief. This increases the value of small producer relief for both draught and non-draught products in relation to the main rates for these products.

In cash terms, the current cash discount given to small producers for draught products is maintained, while the discount provided to small producers for non-draught products is increased. Small producer relief provides the same relative discount, irrespective of whether a product also qualifies for draught relief. As a consequence of the RPI increase in non-draught rates, it increases the simplified rates in schedule 2 to the Travellers’ Allowances Order 1994, which is used for calculating duty on alcoholic products brought into Great Britain.

Some hon. Members raised questions about the impact of these measures on pubs and the hospitality industry. To support the hospitality industry, particularly recognising the role that pubs play in local communities, the Government have announced a reduction in the alcohol duty rates paid on draught products. This reduces businesses’ total duty bill by up to £100 million a year and increases the duty differential between draught and non-draught products from 9.2% to 13.9% for qualifying beer and cider.

As we have mentioned a couple of times in this debate, the reduction to draught relief rates will also result in the average alcoholic strength pint at 4.58% ABV paying 1% less in duty. Draught relief provides a reduced rate of duty on draught products below 8.5% ABV packaged in containers of at least 20 litres designed to connect to a qualifying system for dispensing drinks.

Clause 64 ends the alcohol duty stamps scheme from 1 May this year, removing the provisions in the Finance (No. 2) Act 2023 and the secondary legislation in the Duty Stamps Regulations 2006. It also makes consequential changes and removes references to the scheme where they appear elsewhere in legislation.

Amendment 66 would freeze alcohol duty for alcoholic products above 22% ABV. That is contrary to the Chancellor’s decision at the autumn Budget to increase those duty rates to reflect inflation, and would cost the Exchequer £150 million a year.

Specifically in relation to the Scotch whisky industry, I would like to set out that the overall alcohol package balances commercial pressures on the alcohol industry with the need to raise revenue for our vital public services and reduce alcohol-related harms. Consumers and brewers in Scotland will benefit in line with the rest of the UK, with consumption and production patterns roughly equal nationwide. Of course, 90% of Scotch whisky is exported, which means it pays no duty. The Scotch Whisky Association’s own figures show the health of the industry. The Budget offers support to the Scotch whisky industry by removing the alcohol duty stamps scheme, which we have just considered, and through investment in the spirit drinks verification scheme by reducing fees for geographical verification.

New clauses 2 and 4, which were also tabled by Opposition Members, would require the Chancellor to make additional statements about the impact of the alcohol duty measures. The Government do not believe further statements to be necessary. As usual, a tax information and impact note was published at the autumn Budget, outlining the anticipated impacts of the measures on alcohol producers and the hospitality sector. Alcohol duty, like other taxes, will be reviewed in future Budgets.

New clause 2 also requires a review of the impact on trade, but UK alcohol duty is, of course, not charged on exports. Some hon. Members raised the impact of the changes to business rates on the hospitality sector in Scotland, but business rates are, of course, devolved. The Scottish Government are accountable to the Scottish Parliament on devolved areas.

Hon. Members also raised questions around the wine easement and why it had not been extended or made permanent. I remind them that the wine easement was intended as a transitional arrangement to give the wine industry time to adapt to the strength-based duty calculation for wine. The revised alcohol duty system simplified and reduced differences between categories of alcohol. Making the wine easement permanent would introduce a new differential into the system and add to the complexity of that system. It would further lead to a duty regime in which stronger ABV wines pay less in proportion to their alcohol content than lower ABV wines. Making the wine easement permanent would, therefore, undermine the simplification and public health objectives of the revised alcohol duty system.

In conclusion, the changes to the alcohol duty balance public health objectives, fiscal pressures, cost of living pressures and the economic and social importance of pubs, while also supporting small producers by increasing the generosity of small producer relief. Furthermore, the end of the alcohol duty stamps scheme will simplify procedures for approximately 3,500 registered alcohol importers and producers, reducing overall costs on the spirits industry by an estimated £7 million a year. I therefore commend the clause to the Committee, and urge it to reject amendment 66 and new clauses 2 and 4.

Finance Bill (First sitting)

Harriet Cross Excerpts

Committee stage
Tuesday 28th January 2025 Public Bill Committees

[James Murray]

Clauses 5 and 6 make changes to ensure long-term certainty on company car tax by setting the rates for 2028-29 and 2029-30. The increases in the appropriate percentages will help to ensure that the tax system contributes to supporting the sustainability of the public finances. The effect of the clauses is to gradually narrow the differential between zero emission and electric vehicles and their petrol and diesel counterparts, while ensuring that significant incentives to support the take-up of EVs remain in place. The provisions also increase rates for hybrid vehicles.

Company car tax applies when a company car is made available to an employee or their family member for private use. Company car tax rates were confirmed by the previous Government up until 2027-28. In the 2024 autumn Budget, the Government set out the rates for 2028-29 and 2029-30, to provide certainty.

The Government recognise that the company car tax regime continues to play an important role in the EV transition by supporting the take-up of EVs and their entry into the second-hand car market. Although it is important to maintain strong incentives to encourage the take-up of EVs, the Government need to balance that against the responsible management of the public finances by gradually withdrawing them over time, as EVs become more normalised. That is why we have committed to raising the company car tax rates—or appropriate percentages—for EVs, hybrids, and petrol and diesel vehicles in 2028-29 and 2029-30, gradually narrowing the differential between EVs and other vehicle types, and bringing the treatment of hybrids closer to that of petrol and diesel cars.

The changes made by clauses 5 and 6 will set the company car tax appropriate percentages for the tax years 2028-29 and 2029-30. Appropriate percentages for EVs will rise by two percentage points per year, rising to 9% by 2029-30. Meanwhile, the appropriate percentages for cars with emissions of 51 grams of carbon dioxide per kilometre or over will rise by one percentage point per annum. By 2029-30, the appropriate percentages for petrol and diesel cars will rise to between 20% and 39%, depending on the car’s specific emissions. Together, the measures will gradually narrow the gap between EVs and their petrol and diesel counterparts, while maintaining a generous incentive for EVs.

On the changes to the hybrid appropriate percentages, I draw the Committee’s attention to recent research from the European Commission that has shown that the real-world emissions of hybrid vehicles are in fact three and a half times higher than previously thought. Consequently, the Government have announced that they will align the treatment of hybrids more closely with that of petrol and diesel cars.

[Harriet Cross (Gordon and Buchan) (Con)]

On aligning hybrid cars more closely with petrol and diesel cars, what assessment has been made of the impact on the hybrid car market and the take-up of hybrid cars, if we are ultimately looking to move away from petrol and diesel in the long term?

[James Murray]

Over the coming years we need to make the transition to electric vehicles. Hybrid cars obviously play an important part in the car market and car manufacturing in the UK. The clauses are about a plan over the next five years or so regarding what will happen to the appropriate percentages. This is not an overnight change. Actually, one of the important principles of our setting out the appropriate percentages now for some years in advance is to give car manufacturers and everyone interested in the car industry certainty about what will happen. That is why, as I have been setting out, the appropriate percentages for EVs will rise, thereby narrowing the gap between them and petrol and diesel vehicles, but there will still be a generous incentive to help to shift people towards purchasing EVs.

Hybrid vehicles obviously fit within the general scheme of appropriate percentages. However, as I was setting out, European Commission research shows that emissions from hybrid vehicles are in fact three and a half times higher than previously thought, so in setting the rates for 2028-29 and 2029-30, we have decided to reflect that fact in the appropriate percentages that we are legislating for. That means all cars with emissions between 1 gram and 50 grams of carbon dioxide per kilometre—those that largely fall in the hybrid category—will see their appropriate percentages rise to 18% in 2028-29 and to 19% in 2029-30. As I outlined to the hon. Member for Gordon and Buchan, by setting out the rates until 2029-30 we will give the industry and consumers certainty about the future rates.

The company car tax system offers generous incentives to encourage EV take-up and makes an important contribution to the EV transition. The Government, however, must balance incentives against responsible management of the public finances. We are announcing the rates for 2028-29 and 2029-30 to start to narrow the differentials between EVs, hybrids, and petrol and diesel vehicles. I therefore commend clauses 5 and 6 to the Committee.

--- Later in debate ---

[James Murray]

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

[Harriet Cross]

People might be buying cars now—that is, overnight—that they still have in ’28-29, when the changes come in. They will be making decisions now that will be caught up in future changes.

[James Murray]

The hon. Lady makes a similar point to that made by the hon. Member for Grantham and Bourne, which is that the changes will come in further down the line, but they are critical of the fact that we are pre-announcing the changes now so that we give greater certainty and stability. I cannot understand that criticism, because I thought that giving as much forecasting, certainty and stability as possible would be welcomed by the industry and consumers. People expect taxes to change over time, and the greater the forecasting and advance notice they have, the better for consumers and for manufacturers. Without making this too political, I know that the Opposition were not a great fan of certainty and stability when they were in office, but we are rather different. That is why we are setting out the changes now.

The shadow Minister referred to the DFT consultation, and of course, he is right that I would not pre-empt its outcome. In combination, our giving information about what the appropriate percentages will be towards the end of the decade, thereby providing certainty and stability, will help us to work closely with other Departments to ensure that consumers are well informed about what is likely to happen towards the end of the decade and manufacturers have the certainty and stability that were so desperately lacking under the previous Administration.

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

--- Later in debate ---

[James Murray]

I was expecting a series of amendments from the Opposition; I was not expecting the shadow Minister to quote back at me an amendment I tabled several years ago. It is a new, although interesting, approach to opposition to rely on what I tabled in opposition and quote that back at me. I am sure it was an excellent amendment, although I cannot remember its exact detail.

On the hon. Gentleman’s questions about corporation tax rates, I am sure he will remember from his time in the Treasury that it is standard practice to legislate the charge to corporation tax on an annual basis, even when the rates remain unchanged. That is a long-standing convention that applies to income tax as well. However, because we were so determined to give businesses stability and certainty, we published the corporate tax road map alongside the Budget. In that road map, we made clear our commitment to maintaining the main rate—or, indeed, to capping it—at 25% for the duration of the Parliament.

The small profits rate and marginal relief will also be maintained at their current rates and thresholds. Full expensing and the annual investment allowance are also guaranteed for this Parliament. When it comes to corporation tax, full expensing and the annual investment allowance, the various Finance Bills in this Parliament will be quite a different experience compared with those in the previous Parliament.

[Harriet Cross]

Although we of course welcome a road map as a way to give businesses confidence on corporation tax, we should not get mixed up in the smoke and mirrors of what business taxes are. Because of the Budget, businesses now face many taxes and the uncertainty that they bring. Will we also see road maps for things such as the national insurance rises, the increase in business rates, minimum wage increases and measures in the Employment Rights Bill, all of which have an impact on business?

[James Murray]

The hon. Lady mentions business rates. I do not know whether she has read the discussion paper “Transforming Business Rates”.

[Harriet Cross]

indicated assent.

[James Murray]

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

--- Later in debate ---

[James Murray]

The clause and the schedule abolish the furnished holiday lettings tax regime from April 2025, removing the tax advantages that landlords who offer short-term holiday lets have over those who provide standard residential properties. Furnished holiday let owners benefit from a more generous tax regime than landlords of other property types, such as standard residential properties. The advantages of that tax regime include capital gains tax reliefs: FHLs can qualify for gains to be charged at 10%, unlike buy-to-let properties and second homes. FHLs also benefit from unrestricted income tax relief on their mortgage interest, rather than the 20% restriction on relief for standard lettings, and from capital allowance on furniture and furnishings. FHL profits are also counted as earned income for pension purposes.

The previous Government announced at the spring Budget 2024 that they would abolish the FHL tax regime to level the playing field with landlords of standard residential properties. We are now legislating for that measure and abolishing the FHL tax regime from April 2025, which will raise around £190 million a year by 2029-30 and thereby support the vital public services we all rely on. The changes made by clause 25 and schedule 5 mean that FHL landlords will be treated the same as other residential landlords for the purposes of income tax, corporation tax and capital gains tax.

[Harriet Cross]

Does the Minister recognise the difference between properties with a use clause compelling them to be used for holiday let accommodation and houses that do not, and that can therefore be used as residential properties? Those two things do not necessarily line up in terms of what the owner can use the property for.

[James Murray]

If I understand the hon. Member’s question correctly, it might relate to clauses in the lease of the property, but I am not quite sure what her point was. I will come back to this if I have misunderstood her question, but clause 5 relates specifically to the tax treatment of these properties. It is about how FHLs, which can still operate in the same way as they have previously in terms of lettings, will be treated by the tax system to bring them in line with standard residential property tax treatment. This is about equalising the tax treatment of FHL landlords and standard landlords, rather than seeking broader changes, which may be what she was alluding to, but I am happy to return to it later in the debate if I have misunderstood her question.

This measure does not penalise the provision of FHLs; it simply brings their tax treatment more in line with long-term lets. It does that to remove the tax advantages that FHL landlords have received over other property businesses in four key areas. First, finance cost relief will apply in the same way as for long-term lettings, with income tax relief on their mortgage interest restricted to the basic rate. Secondly, it will remove the capital allowances rule for new expenditure and allow replacement of domestic items relief. Thirdly, it will withdraw access to reliefs from taxes on chargeable gains for trading business assets. Fourthly, FHL income will no longer count as earned income for pension purposes. After repeal, former FHL properties will form part of a person’s UK or overseas property business and be subject to the same rules as non-furnished holiday let property businesses.

However, the Bill does not equalise tax treatment entirely. Holiday lets, whether they qualify as FHLs or not, are subject to VAT, whereas longer-term, private rented sector accommodation is not. Withdrawal of finance cost relief will mainly affect higher rate and additional rate taxpayers, with basic rate payers largely unaffected. The Government have also introduced transitional arrangements. FHL properties will become part of a person’s overall property business and past FHL losses can be relieved against profits of that business in future years. Existing capital allowance claims can be continued, but new capital expenditure will be dealt with under the rules for standard residential let properties. The legislation also confirms that where a business has ceased prior to April 2025, business asset disposal relief may continue to apply to a disposal that occurs within the normal three-year period following cessation, which is in line with current rules.

Agricultural and Business Property Reliefs: OBR Costing

Harriet Cross Excerpts

Thursday 23rd January 2025 Commons Chamber

[James Murray]

The Government are committed to delivering the reforms announced in the Budget. We have carefully considered their impact, and designed the policy to provide generous exemptions from inheritance tax for small family farms and businesses, while ensuring that we balance the public finances as fairly as possible.

[Harriet Cross (Gordon and Buchan) (Con)]

In the light of the uncertainty in the OBR’s report; the fact that the policy will hit elderly farmers the hardest and put food security at risk; and the fact that rural communities will suffer the most, given the impact on tenants and young farmers, and the wider agricultural sector, does the Minister really still believe in this policy?

[James Murray]

The OBR’s allusion yesterday to a degree of uncertainty is exactly the same as what it said at the time of the Budget. The costing is exactly the same as what it published at the time of the Budget. Yesterday, the OBR published more information about how the costing was arrived at, but the costing itself, the degree of uncertainty and the calculations remain exactly the same as at the time of the Budget.

UK-China Economic and Financial Dialogue

Harriet Cross Excerpts

Tuesday 14th January 2025 Commons Chamber

[Rachel Reeves]

This Government’s clean energy mission will mean that we are less reliant on foreign dictators for our basic energy needs. That is why we are investing in carbon capture and storage and floating offshore wind, and it is why we are getting rid of the previous Government’s absurd ban on onshore wind.

[Harriet Cross (Gordon and Buchan) (Con)]

The Chancellor referred in her statement to safeguarding national security, which I welcome, but this must include energy security. Yet her changes to the energy profits levy, removing investment allowances and not permitting new licences at a time when we are still reliant on oil and gas, not only undermines our energy security but dwarfs the £600 million that she has brought back from China with the £12 billion of tax revenues that will be lost from the sector. Why, rather than supporting our energy security, is the Chancellor turning her back on the sector, turning her back on these tax revenues and risking selling our energy security to China?

[Rachel Reeves]

If the hon. Lady has a brief look at the documents from the Office for Budget Responsibility, she will see that the changes to the energy profits levy—taking the tax rate up from 75% to 78%, the same rate as in Norway—raises money; it does not lose money.

Agricultural and Business Property Relief

Harriet Cross Excerpts

Tuesday 14th January 2025 Westminster Hall

[Graham Stuart]

The hon. Gentleman is right. The expert valuers who do this for a living have come out with different numbers, but they are all violently different from the Government’s assumptions. Even on the basis of the Government’s own figures, if I take Beverley and Holderness—as a rural constituency—it would be a farm a year. And of course, everyone is affected. They are all having to spend and bring advisers into the room. They are sitting there, as a small business that might be making less than £25,000 a year, and having to pay £1,000 an hour to get the expertise in the room to advise them on something that, sure, depending on the longevity of family members, may not have an impact for 15, 20 or—hopefully—30 years, but none the less they are spending that money now because of the uncertainty of this policy, which is very ill advised.

[Harriet Cross (Gordon and Buchan) (Con)]

I thank my right hon. Friend for bringing forward this debate, which is so important. Just this morning, I was at the meeting on food security, speaking to poultry farmers there, and they said that they are already taking decisions not to invest in new buildings, directly because they are now thinking of how they need to save for an APR bill. Of course, that has a knock-on effect on other businesses that will be the suppliers, and therefore we come into the BPR argument as well. Does he share my concerns that, if farmers cannot invest in their holdings, they will not be as profitable in future? It is a huge cycle—a self-fulfilling prophecy that will mean that more farms will be impacted down the line.

[Graham Stuart]

My hon. Friend is right. I say to the Minister that rather than looking at the issue through a fairness lens or an “attack wealth” lens, it must be in terms of incentives. Incentives are what drives behaviour, and behaviour is what drives wealth creation and security. If we come at it with some sort of A-level politics student’s approach, rather than one grounded in human behaviour and incentive, and get it wrong, we will see reduced investment from farm to farm and business to business.

If someone is not buying that new piece of planting machinery, they will not be investing in the training of their staff or they will not take on that extra employee who would have been brought on, because to justify expenditure they needed to invest in them, pay them more, and bring on more staff. All of that goes into reverse. I hope that as they come face to face with the realities of being responsible for the economy, Ministers will take that onboard and start to have a different philosophical approach in the way they do policy.

--- Later in debate ---

[James Murray]

I have only a few moments, so I will make progress.

The Leader of the Opposition has made it clear that she would prioritise that tax break within the public finances, but we do not believe it is fair or sustainable to maintain such a large tax break for such a small number of the wealthiest claimants, given the wider pressures on the public finances. It is for those reasons that the Government are changing how we target agricultural property relief and business property relief from April 2026. We are doing so in a way that maintains a significant tax relief for estates, including for small farms and businesses, while repairing the public finances fairly.

Let me be clear that individuals will still benefit from 100% relief for the first £1 million of combined business and agricultural assets. On top of that, as we know, there will be a 50% relief, which means that inheritance tax will be paid at a reduced effective rate of up to 20%, rather than the standard 40%. Importantly, those reliefs sit on top of the existing spousal exemptions and nil-rate bands. Depending on individual circumstances, a couple can pass on up to £3 million to their children or grandchildren free of inheritance tax.

[Harriet Cross]

At the Oxford farming conference, the Secretary of State suggested that farms should diversify to be more profitable, but diversification has become a lot less incentivised because that all gets wrapped up into the BPR, as well as the APR. Does that not completely negate the Secretary of State’s argument for diversification if it will all be taken away in tax?

[James Murray]

My right hon. Friend the Secretary of State made an important point about diversification, but whatever category the assets fall into, a couple can pass on up to £3 million to their children or grandchildren free of inheritance tax; that applies across agricultural and business property relief. The point I was making is that the agricultural and business property relief sit on top of the existing transfers and nil-rate bands, so when considering individual circumstances, we must look at the details of the situation that an individual or couple face.

I have a minute left, so I will be brief. Some hon. Members questioned the statistics about how many estates will be affected. We are very clear—we have published the data, and the Chancellor has written to the Treasury Committee about it—that up to 520 estates claiming agricultural property relief, including those claiming business property relief too, will be affected by these reforms to some degree. That means that about three quarters of estates claiming agricultural property relief, including those also claiming business property relief, will not pay any more tax as a result of these changes in the year they are introduced. All estates making claims through these reliefs will continue to receive generous support at a total cost of £1.1 billion to the Exchequer. The Office for Budget Responsibility has been clear that it does not expect this measure to have any significant macroeconomic impacts.

I thank all hon. Members who have contributed today, and I am grateful to the right hon. Member for Beverley and Holderness for securing this debate.

Motion lapsed (Standing Order No. 10(6)).

Public Finances: Borrowing Costs

Harriet Cross Excerpts

Thursday 9th January 2025 Commons Chamber

[Darren Jones]

That is exactly why our fiscal rules are non-negotiable. While the Conservatives borrowed to pay the bills every month because they did not have enough money to pay for all their promises, this Government are investing in the future of our country, whether through reforming public services or investing in infrastructure and opportunities for growth. That is exactly the right approach to the economy; it is what our fiscal rules demand, and what we will be held to.

[Harriet Cross (Gordon and Buchan) (Con)]

Next has said that it will increase prices by 1%, directly because of the increases to national insurance contributions, and has warned of slowing growth. With business confidence plummeting, gilts at a 26-year high and growth stagnating, do the Government still maintain that they have an iron grip on public finances, or will they admit that their Budget has done exactly what the Conservatives warned: increase costs, increase prices and reduce growth?

[Darren Jones]

The question was whether the Government have an iron grip on public finances; the answer is yes.