Energy Profits Levy: North-east Scotland
Harriet Cross Excerpts(2 days, 11 hours ago)
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Harriet Cross (Gordon and Buchan) (Con)
I secured this debate because what is happening in north-east Scotland simply cannot go on. Hundreds, if not thousands, of jobs are being lost on a regular basis across our region from the world-class energy sector that we are so proud of, not least because of the energy profits levy. These are geologists, engineers, technicians and project managers—highly skilled workers who are nothing but of value to the UK—but they are also people with mortgages, people with families and people who have given decades to an industry that this Government are now destroying through deliberately punitive policies.
Offshore Energies UK warns that, largely because of the EPL and other Government policies on the North sea, almost 1,000 direct and indirect jobs will be lost every month. That is 1,000 livelihoods, 1,000 mortgages and 1,000 families facing uncertainty every single month. OEUK also projects that 42,000 jobs are at risk between now and 2030. Energy workers in north-east Scotland feel like they are on borrowed time. No one really celebrates when they manage to survive a round of job cuts, because they know it is likely just to be short-term relief, with more cuts coming soon.
The energy profits levy was introduced in 2022, at a time when oil and gas prices were spiking after Russia invaded Ukraine. At that time, Brent crude peaked at over $130 a barrel and averaged $99 a barrel in 2022. Similarly, in 2022, gas peaked at 640p a therm and averaged 165p a therm that year. Let us compare that with this year. In August 2025, Brent averaged $71 a barrel and gas 81p a therm. That is a 28% and a 51% drop on the 2022 averages, and oil this week is at a six-month low. The energy profits levy has ceased to be a windfall tax. The windfall has gone, and the prices have returned to normal levels. The Competition and Markets Authority found that in 2025, oil markets are now relatively stable, and exceptional circumstances seem to have receded.
Harriet Cross
I completely agree with the hon. Gentleman. I will come on to talk about the drain of investment and other things from north-east Scotland because of the levy. It feels as if it is a particularly punitive tax on north-east Scotland, given that our region is the energy hub of the UK.
Even though the windfall no longer exists, at the Budget last year the Chancellor still decided that she would increase the EPL from 35% to 38%, giving a headline tax of 78%.
Harriet Cross
The Chancellor also extended the levy until March 2030. Just to ensure that the industry was hit from all angles, she abolished the investment allowance, removing the very mechanism that keeps companies investing.
Torcuil Crichton (Na h-Eileanan an Iar) (Lab)
I pay tribute to the hon. Lady for securing the debate. I share her passion for her constituents and their work in the North sea, because my constituents, over three generations, have done the same work, and I want to see people working in the North sea for another three generations. Does she accept that some 77,000 jobs in the North sea went on the watch of the last Government, and that the move from fossil fuels to renewables is inevitable and must be managed by things like passporting people into jobs?
We must be honest about the fact that offshore jobs are dangerous. I pay tribute to the people who have gone out there for the past 50 years to earn our energy security. The danger that they put themselves in is simply not the same in the renewables sector. Does she accept that we must balance the move from gas and oil in the North sea to renewables in the wild Atlantic, probably, with a managed transition that looks after our communities? However, that does not make it an either/or question of having either carbon from oil and gas in the North sea or onshore and offshore renewables. We can and will do both, and this Government should be committed to both for another 40 years.
Harriet Cross
I completely agree with the hon. Gentleman. At no point have I ever said that we should be persisting with oil and gas at the expense of renewables. We 100% need both, but both means both sides: we do not need to tax the oil and gas industry out of existence in the North sea in order to scale up renewables, because that will do the exact opposite, as he knows. I appreciate his point that jobs have been lost in the past—I know that because I live in the north-east of Scotland—but what happened to oil and gas prices during that time? Were they at a peak or in a trough? They were in a trough but they are now not, yet we are still seeing jobs cut and production decreasing faster than it needs to because of decisions made by this Government.
Andrew Bowie (West Aberdeenshire and Kincardine) (Con)
I commend my hon. Friend on her speech and on securing the debate. As she knows, this issue is also felt incredibly keenly in the neighbouring constituency of West Aberdeenshire and Kincardine, which I represent. While the debate about whether it is renewables or oil and gas is a false one, the fact is that skilled workers, whose jobs are being lost in the North sea right now, are the exact workers who we will need in the future to deliver cleaner energy and a more sustainable future. Those jobs do not exist in the UK right now, and they are being lost to the United Arab Emirates, Riyadh, Australia, Mexico and Canada. We need to do what we can to maintain those jobs in north-east Scotland by supporting our oil and gas industry and removing the punitive energy profits levy, which is driving people away from the country and driving companies to make redundancies.
Madam Deputy Speaker (Ms Nusrat Ghani)
Order. I remind Mr Bowie that Front Benchers do not intervene from the Front Bench in Adjournment debates.
Harriet Cross
I agree that we want to keep the workers that we have, and the skills and expertise that they have developed, in north-east Scotland because they are of huge value to north-east Scotland. They will not stay in north-east Scotland out of virtue but only if the jobs are there for them and it makes economic sense for the companies to keep them there. That is not what is happening at the moment, and we are losing a crucial asset to our energy transition at an extraordinary rate.
Graham Leadbitter (Moray West, Nairn and Strathspey) (SNP)
The loss of skills impacts investor confidence in the North sea. That investor confidence is directly linked to investor confidence in renewables, given the lack of availability of skills that will result. Does the hon. Lady agree that the Government need to give an end date for this so-called temporary measure as soon as possible, and that that needs to be implemented as soon as practicably possible?
Harriet Cross
Exactly—I thank the hon. Member for that intervention. On that point, I will skip forward a little bit to my first question to the Minister, which is when the Treasury will publish its consultation outcome on the future fiscal regime for the North sea, and whether the Government will wait until 2030 to implement that new regime, or whether they will implement it straightaway. Investment decisions worth billions are being put on hold waiting for that answer. They need to know a month, or ideally a week—not just a vague “in due course”.
Capital investment forecasts for the North sea have fallen by 84%, from over £14 billion to £2.3 billion for the period 2025 to 2029, and Offshore Energies UK calculates that £26 billion of economic value will be lost under Labour’s EPL extension. Some 90% of OEUK’s member companies are now seeking opportunities overseas, and Aberdeen and Grampian chamber of commerce agrees, warning that the EPL is
“eroding investor confidence and driving capital to rival overseas regions.”
Shell’s finance chief has called for certainty and a “stable environment”, noting that the UK’s 78% tax rate is “larger than most” other countries and makes it difficult to have confidence in long-term investments.
Although Norway, which the Government love to use as a comparison, has a similar tax rate, the Government know that this is a false comparison, because Norway also offers full capital cost deductions. It refunds almost 72% of losses to companies and gives a 24% uplift on investment over four years. The result is that Norway attracts 3.8 times more investment than the UK into the same mature North sea basin. Norway’s North sea will see around £35 billion in exploration and production investment through to 2030; ours will see just £10 billion.
John Cooper (Dumfries and Galloway) (Con)
I am from the south-west of Scotland, which is as far from the north-east as one can get in Scotland. None the less, this is a huge issue for the whole country. My hon. Friend is making a point about the North sea basin being mature. We always hear that—it is mature, it is declining—but the Norwegian investment is exploiting areas of gas and oil that previously would not have been accessible. New techniques such as horizontal drilling are delivering huge benefits for the Norwegian economy; we are denying ourselves those benefits. Is that not the case?
Harriet Cross
It is absolutely the case—my hon. Friend is completely correct. We are forgoing so many opportunities in the North sea to secure energy for our country and safeguard the skills and jobs that we will need for the transition. There are endless opportunities that, for some reason, we are willing to leave under the North sea.
That brings me to my second question for the Minister. Does the Treasury recognise the damage that the EPL is doing to the North sea? We know that the decline in the North sea did not start with the EPL—it is a mature basin—but the EPL is accelerating that decline. Its ripple effects go far beyond the energy producers themselves. The supply chain is haemorrhaging jobs. Hunting in Aberdeenshire laid off 143 employees; Wood Group cut 200 jobs last year; Belmar Engineering entered liquidation this year, with 48 redundancies; Beam in Westhill collapsed, with 100 jobs lost; Well-Safe Solutions cut about 45 jobs; and Harbour Energy has cut 250 jobs, which is 25% of its onshore workforce. I keep coming back to the words that the Chancellor said when Harbour Energy announced its job cuts earlier this year and cited the EPL as a principal factor. She said that this was just
“a commercial decision by one company”,
but the list I have given—which is not exhaustive—is evidence that that is not the case. It shows that the Chancellor either does not understand, or does not want to understand, the impact the EPL is having.
As I am sure other Members do, I regularly visit companies in the north-east of Scotland whose order books for offshore work have completely dried up, forcing them to adapt their business models to other sectors just to keep afloat. Many of those companies do not know whether they will be here in 12 months’ time. They are not hiring, they are struggling to justify investments, and in many cases, they can do nothing more than hope for a change in Government policy. These companies are owned, grown and run by some of the most innovative and entrepreneurial people I have ever met. They are not afraid of branching out or trying new things—they have done so for their whole business careers—but they are being backed into a corner and are running out of options.
The irony is that this policy is failing on its own terms, in shrinking the very economic activity that it seeks to tax. The Office for Budget Responsibility originally forecast that the energy profits levy would raise more than £65 billion between 2023 and 2028, but the revised forecast is £21.1 billion. We are on track to miss the target by £44 billion, and revenue from the EPL fell from £4.2 billion to £2.7 billion between 2022-23 and 2024-25. His Majesty’s Revenue and Customs figures show that revenues from oil and gas production were down 27% last year.
When did the Treasury last carry out an impact assessment of the EPL’s impacts on production, jobs, economic activity and tax receipts? Have those assessments been revisited following those recent HMRC figures showing the downgraded forecast? Forecasts show that the policy could ultimately cost the Treasury £12 billion in lost revenue by 2050. We have reached the point where the level of taxation means less money. The Government are taxing the North sea so heavily that tax revenues are being lost. We cannot tax jobs that no longer exist, we cannot tax production that no longer exists and we cannot tax businesses that no longer operate in the UK.
There is something else that the Government are ignoring. From the early 2030s, the Treasury will face a £2 billion to £3 billion cost each year in decommissioning rebates, a decade earlier than expected. The premature shutdown of fields, driven by the EPL making them too unviable to continue, makes that liability ever more imminent.
The policy is also undermining our energy security at a time of global instability, suppressing domestic oil and gas production and increasing our dependence on foreign imports. We are now 42% dependent on energy imports. By 2030, it is projected that our reliance on imported gas will increase to 80%, and our liquefied natural gas imports have increased by 40% in the past year alone. Those changes are partly down to geology, but the decline is accentuated by the punitive tax regime for companies operating out of the North sea.
Estimates suggest that there could be 7.5 billion barrels of oil equivalent remaining in the North sea that could be recovered with the right investment. We could cover half our energy needs to 2050 with North sea reserves. If we drive investment away, we will leave that resource untapped, only for imports from elsewhere to cover them. That is a huge loss of economic opportunity for the north-east of Scotland and the UK as a whole.
That brings me to my final question, and I will soon conclude. Will the Treasury please commit to de-linking oil and gas pricing in the energy security investment mechanism so that both commodities are assessed on their individual market conditions? Time is running out, and that is not an exaggeration. Every month of inaction means another thousand jobs gone. Every delayed investment decision means less energy security for Britain. Every skilled worker who leaves to go overseas is one we will struggle to get back when we need them for the energy transition.
I and, more importantly, the oil and gas sector have four questions for the Minister. First, when will the consultation outcome be published? Secondly, does the Treasury recognise the damage it is inflicting? Thirdly, when was the last impact assessment carried out by the Government? Fourthly, will the Government de-link oil and gas in the energy security investment mechanism? The north-east of Scotland has powered Britain for 50 years. We have contributed hundreds of billions in tax revenues. We developed expertise that is renowned around the world. We have so much more to offer to meet the UK’s current and future energy needs, but only if we are given the chance. Scrapping the EPL is a vital part of that chance.
The Exchequer Secretary to the Treasury (Dan Tomlinson)
Let me first congratulate the hon. Member for Gordon and Buchan (Harriet Cross) on securing this debate. I thank Members from all parts of the House for their contributions so far; I am sure there will be more interventions in the coming 15 minutes. I say to the hon. Member that it is clear how strongly and firmly she seeks to represent her constituents and those of her neighbour, the hon. Member for West Aberdeenshire and Kincardine (Andrew Bowie), as a resident in north-east Scotland. That comes across clearly in the House.
The UK oil and gas industry plays a significant role in our country, just as it has for more than half a century. Alongside its contribution to our energy supply, it has provided more than £400 billion in production taxes since the late 1960s and created thousands of jobs in the hon. Lady’s constituency and in many constituencies in that part of Scotland and across the country.
As we head towards a net zero future, the industry and the region will continue to play a vital role in the energy transition, with which I know the sector is keenly engaged. Between 2018 and 2024, the sector has acted to reduce its emissions by 34%, and we are seeing oil and gas companies make record investments in carbon capture, usage and storage on land and in offshore wind at sea. I agree with the hon. Member for Gordon and Buchan that it is not an either/or; we must have a managed transition in which we do all that we can to protect jobs and industry, and to grow new jobs and industry too. We are all pulling in the same direction; Government and industry are committed to a fair, orderly and prosperous transition for the region, and I am grateful for the opportunity to speak about that today.
The aim of our tax regime for the exploration and production of oil and gas in the North sea is to support investment in this vital resource, while ensuring that the country obtains a fair return in exchange for the use of an important national asset. I am sure the hon. Member for Gordon and Buchan will be very familiar with the tax regime, and I am sure that everyone else in the Chamber is, but let me set it out for the benefit of those who may not be. The regime today includes a ring fence corporation tax that is charged at 30%, the supplementary charge at 10% and, yes, the temporary energy profits levy at 38%. As the hon. Member mentioned, that was introduced amid near-record-high prices following the recovery from covid and Russia’s invasion of Ukraine.
While we pursue our net zero targets, we must ensure that we meet the country’s energy needs. That involves energy from overseas alongside our own new nuclear, wind and solar, and, of course, domestic oil and gas. With domestic gas production, net of imports, accounting for the equivalent of about a third of UK gas demand, our oil and gas industry supports more than 100,000 jobs, and will continue to play a significant role in our energy mix for decades to come. In supporting those jobs and the important contribution of the sector, our approach to taxation is, in my view, both responsible and proportionate. We believe in the ongoing contribution of the oil and gas industry and its skilled workforce, and the sector continues to benefit from £84.25 in tax relief for every £100 of private investment, with more relief available for decarbonisation-based investments.
The oil and gas sector is expected to contribute about £16 billion in tax receipts between this financial year and 2029-30, which is roughly equivalent to the entire year’s NHS Scotland budget. The energy profits levy alone has already raised more than £11 billion since its introduction. Yes, that is less than was forecast at the time, but in a way that should be welcome news for the hon. Member, because it means lower energy bills for people up and down the country who are affected by the cost of living—families in her constituency, and in mine.
Harriet Cross
What lower revenues from the EPL mean is that oil and gas companies are not investing in the North sea, that production is falling in the North sea, and that, for example, revenues from income tax—which the Scottish Government might quite like—are falling as well. There is nothing welcome about the Government not meeting their forecast. It is complete madness even to believe that.
Dan Tomlinson
If the hon. Member would have preferred energy prices to stay at their pandemic levels, and money to continue to flow in from the EPL rather than more people throughout the country receiving lower energy bills, that is, of course, a view that she is welcome to hold.
As I was saying, the levy has raised more than £11 billion since its introduction, and is forecast to raise a further £11 billion by 2030. That revenue provides vital funding for our public services, creating sustainable jobs, strengthening our energy security and independence, and supporting the energy transition.
The Government are committed to giving the oil and gas industry long-term certainty and confidence in the fiscal regime. The energy security investment mechanism is the price floor within the EPL, and that gives the sector certainty that if oil and gas prices fall for a sustained period, the EPL will cease. That remains Government policy. The hon. Member asked whether the Government intended to de-link, but the Government policy is to stick with ESIM as it stands.
I know that Members have expressed concern about the approach to tax and how it affects investment in the oil and gas sector, but we have seen capital expenditure in the sector rise from around £4 billion in 2022 to around £6 billion last year. That is why we introduced pragmatic reforms to the levy at the autumn Budget 2024 and refrained from going further than abolishing the levy’s investment allowance, helping to support the sector’s competitiveness. I want to restate to the House today that the EPL will end no later than 31 March 2030.
Working with the sector and stakeholders, the Government published the oil and gas price mechanism consultation on 5 March to give long-term certainty on the future fiscal regime, developing an approach for how we respond to unusually high prices once the EPL ends. As the hon. Member knows, the consultation closed earlier this year. The Government are now hard at work analysing submissions and suggestions, and we will publish our response—I will not say “in due course”; I will say “shortly”. I know that the sector wants certainty from the Government as to what will follow on from the EPL. I hear that, and I am meeting members of the sector this week to hear it directly from businesses. I want this to happen as soon as it can, but I hope the hon. Member will understand that it is not quite in my gift unilaterally to announce the dates and the precise timetable on the Floor of the House.
I understand that there is a need for certainty, and the Government understand just how important that is for businesses and workers in the sector. I reassure the House that it is definitely not our intention to wait until the EPL is about to cease before bringing in new legislation to provide that certainty. I want us to bring forward the necessary legislation for the new mechanism as quickly as we reasonably can, to ensure a smooth and orderly transition for the sector. That is hugely important, and for as long as I am in this post I will do all I can to make sure that we can do that; I hear the points made by Members on both sides of the House.
The Government are already delivering a fair and orderly transition in the North sea. Across the country, we are driving growth and securing skilled jobs for future generations, and that is just as true in the North sea, where we have seen unprecedented levels of investment in offshore wind and where this Government have signed contracts for two first-of-a-kind carbon capture and storage clusters. This endeavour also includes Great British Energy, which, from its headquarters in Aberdeen, will create thousands of jobs across the country, invest up to £1 billion in clean energy supply chains and, as a publicly owned energy company, ensure that the clean energy revolution is built in Britain. Alongside that, the Office for Clean Energy Jobs will work to ensure that we have the skilled clean energy workforce to deliver those goals, so that this investment unlocks thousands of new jobs, kick-starts growth in communities and industrial towns, and secures a cleaner and more independent energy future for the UK.
Property Taxes
Harriet Cross Excerpts(1 month, 1 week ago)
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Sir Mel Stride
My hon. Friend is absolutely right. We are seeing high inflation, anaemic growth, high gilt yields and a pound that has been plummeting in recent times. All those are signals flashing red on the dashboard.
Instead of getting a grip on spending and getting taxes down, the Government have been out there pitch-rolling yet more taxes. Over the summer, we have seen briefings to the press suggesting tax rises on property. The Labour party has an opportunity this afternoon to rule out those possibilities, and the Minister should do just that when he responds.
First, there has been a suggestion that there will be changes to the private residence relief under the capital gains tax regime. That would strike at the heart of our country as a property-owning democracy. People would be penalised simply for selling up and moving home. It would have clear implications by bunging up the property market, and clear economic implications by causing friction in the process of people moving from one part of the country to another, often in search of work. It would discourage downsizing, even though that would be beneficial in providing more homes for people to live in. Before the election, the Prime Minister said that there never was a policy of that type so it did not need to be ruled out, but let us rule it out just in case anyone pretends that there was such a policy. When he responds, will the Minister confirm that he stands by the words of the Prime Minister?
Secondly, there has been a suggestion of an annual tax on homes. What a tax on aspiration! What a tax on people who have saved hard and managed to get on the property ladder, but who will then be stuck with annual taxes. What about those who are asset-rich but income-poor and cannot afford to pay—are they expected to sell up? Will the Minister rule out that possibility and put people’s minds at rest?
If that was not enough, we hear that the Government may be considering changes to the gifting regime in inheritance tax. They are not content just to pulverise farmers and family businesses, and to see those businesses and farms broken up when they are passed on from one generation to another, because of the imposition of tax. In fact, it was a Labour Government in the 1970s who brought in the reliefs that this Government have chosen to abolish. The inheritance tax yield will double over this Parliament. The Opposition say, “Enough is enough.” We should not punish parents who wish to pass something on to their children. Socialists do not understand that we do not all stand as atomised individuals; we work together as families and communities. We care about each other, we care about the people we love, and it is right that we have the opportunity to pass something on to them.
Harriet Cross (Gordon and Buchan) (Con)
I thank the shadow Chancellor for introducing this debate on such an important issue. Properties and assets are vital to the country and to people. On the lifetime limit for inheritance tax, over the past year everyone will have heard the Government telling farmers and family businesses to get their affairs in order and to plan. Not having a limit on the lifetime cap was what allowed them to plan. If that is cut or the cap is not in the right place, it will negate every argument that the Government have made in the past year to justify their family farm and family business tax. Will the Minister please acknowledge that and rule out any change to the cap, which would penalise family farms and businesses?
Sir Mel Stride
My hon. Friend has put it brilliantly and succinctly, and she is absolutely right. In their horror—in their recoil from the inheritance tax changes—that is exactly what farmers and family business owners have been doing: thinking about alternatives. The seven-year rule has been one of those alternatives, and it would be a really heartless and extraordinarily cruel moment if the Government were to shut that down as well.
James Murray
The hon. Gentleman is right to remind everyone of the record under the short-lived Prime Minister, Liz Truss. I notice that Conservative Members do not refer to that themselves when evaluating the economic situation, but the British people will not forget it. On his wider point about housing across the country, we want to ensure that we are building affordable homes in every part of the country. One of this Government’s priorities has been to reform the planning system, to enable the building of 1.5 million homes and ensure that every community has those homes, so people have homes that they can afford to live in, in the area where they grew up, where they want to live or go to work. That is a central mission of this Government.
James Murray
I will give way one more time, but then I will make some progress.
Harriet Cross
The fact that the Government hope to build all those new homes shows that they recognise the importance and value of a home to a family. The Minister says that he will not talk about specific tax measures, but does he recognise the principle that we should not tax people’s homes if we are a country that values home ownership?
James Murray
I gently remind the hon. Member that council tax—a tax on property—exists in this country, so the principle of applying some taxes to property is well established in the UK, and has been for some time. She is trying to tempt me to engage in more speculation, but as I said to the shadow Chancellor, I am not going to engage in speculation about what may or may not be in the Budget.
Taxes
Harriet Cross Excerpts(3 months ago)
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John Grady (Glasgow East) (Lab)
I rise to speak against the Opposition motion. My right hon. Friend the Chancellor of the Exchequer has raised taxes. She has done so to stabilise the public finances, because the public finances that the Labour Government inherited were in a shocking state; she has done so to invest in public services, in particular the NHS and schools, because public services were left in a shocking state by the previous Government; she has done so to invest in national security; and she has done so to invest in Scotland. My right hon. Friend has raised taxes because public finances need to be managed carefully. We cannot keep pretending that we have money when we do not.
Harriet Cross (Gordon and Buchan) (Con)
On pretending, it seems to me that Labour likes to pretend that the covid pandemic never happened and that the £400 billion that the previous Government spent to protect the country and protect jobs, which Labour supported and asked us to go further on, never happened. Will the hon. Gentleman reflect on that and at least acknowledge what happened in the recent past?
John Grady
I am very happy to reflect that the covid pandemic happened, but I also reflect that Liz Truss and Kwasi Kwarteng’s mismanagement happened. The Conservatives lost the last election because they made a mess of the economy. They have lost their reputation for economic competence, which is why they have lost so many MPs and suffered an extinction event. I read in today’s Times that it was thought that the common crane had been extinct for more than 500 years in Scotland, but it is now reported that there are six or seven nesting pairs in Scotland—more than we have Conservative MPs, and there may be a reason for that.
The Opposition motion implies a reversal of more than £20 billion in taxes. The Opposition need to explain how they would fund that. What cuts would they make, and what effect would that have on the businesses they claim to support? They need to explain whether they would reverse the investment in the NHS, which is essential to businesses. Many businesses have said to me that they want to see investment in the NHS in order to get the waiting lists down and reform the service. That is exactly what my right hon. Friend the Secretary of State for Health is doing. The disruption caused to businesses by NHS waiting lists is significant, but they are now coming down—if only the same could be said for Scotland.
The Opposition must explain whether they would reverse the investment in education, because businesses say to me every week that they want to see investment in skills. They need skilled workers to grow their businesses. It is essential for economic growth.
John Slinger (Rugby) (Lab)
This is all rather desperate from the Conservative party. I had thought that pantomime season was in the winter, but clearly it is not. I will defend the decisions taken by this Government to help working people, grow the economy and fix the mess we inherited from the previous Government, and we are doing so with fairer tax at the core.
I use the term “Government” regarding the last Administration loosely, because they did not believe in government. They ran the tank dry. They were running the factory without maintaining the equipment; they just made last-minute repairs, knowing that things would break down again, and they did. An astonishing 234 schools were found to contain RAAC—reinforced autoclaved aerated concrete—and were almost disintegrating before our eyes; our Army reached its smallest size since the Napoleonic wars; prisons reached capacity; and the Government did very little or nothing. The police saw 20,000 officers cut, and that was reversed only at the last point.
That is what the last Government were: crumbling and shambolic. They presided over a country whose public services were on their knees and whose people had not seen their prospects get better for many years. So woeful was their record that they vacated even the territory that they used to occupy—they became the weak-on-defence Tories, the soft-on-crime Tories and the high-tax Tories.
That brings me to my second point. The Conservatives increased the tax burden to its highest level since the second world war. It was stable at 33% from 2010 to 2019. The 2019 Parliament saw the biggest rise in the tax take in recent history, reaching 36% by 2024. They then engaged in a reckless, unfunded cut to NI, at a time when the economy was still stagnant. They did that deliberately—in my view, it was a poisoned chalice bequeathed to this Government. The Conservatives knew that Labour’s commitment not to raise tax on ordinary working people would mean that we could not and would not reverse that reckless tax cut. They knew full well that they were leaving behind a black hole—Conservative Members may not like to hear it, but they knew that. They knew that the public services were on their knees, but they did not care; they only cared about their electoral fortunes, which did not work out so well.
This Labour Government are not afraid of difficult challenges, nor of addressing those challenges. We actually believe in the concept of government and the responsibility of government—the responsibility to take the difficult decisions necessary to fill the unforeseen £22 billion black hole that we inherited. We therefore believe that we must raise revenue through taxation, as the Chancellor outlined in her Budget last autumn. Despite the accusations of the Conservative party, this has not been to the detriment of working people, nor is it the case that we are not asking the wealthiest in society to pay more. The opposite is true: we have raised taxes on wealth. Private jet passengers now face a 50% tax increase, VAT has been added to private school fees, and we are raising £2 billion more from inheritance tax by closing reliefs used by the wealthiest.
Harriet Cross
In his speech, the Chief Secretary to the Treasury said that working people are people who go out to work. Do farmers go out to work?
John Slinger
Of course they go out to work. I believe that my right hon. Friend the Chief Secretary to the Treasury answered that point earlier in the debate, but I thank the hon. Lady for her intervention.
To add to my list, non-dom status is being largely scrapped, capital gains taxes have increased, and stamp duty on second homes now starts at 5%. These measures help raise the revenue that is required for massive public investment, benefiting working people, not making them worse off. The clue is in the name of our party—Labour. We are the party of work. We are also the party of getting our country, our economy and our public services working.
As such, I ask Opposition Members to look forward to the summer recess with optimism in their hearts. Do not let the doom-mongers and gloom-mongers fill their hearts, for change has already begun. That change is made possible by my right hon. Friend the Chancellor’s Budget and by the spending review. We are fixing the NHS —we promised 2 million additional NHS appointments in our first year, and have delivered 4 million. Waiting lists are down by 260,000, and 1,900 more GPs have been recruited. We are putting more money into people’s pockets; we have boosted the minimum wage for 3 million workers, and wages grew more in our first 10 months than over a whole 10 years under the previous Administration, testifying to the Conservatives’ incompetence and weakness when they were in government. We are fixing the foundations of our economy, with four interest rate cuts, three trade deals and business confidence at a nine-year high. In the first quarter of this year, UK growth was the highest in the G7. We are tackling childhood poverty, opening the first 750 free breakfast clubs, and expanding free school meals. In one day, this Government took action to take 100,000 children out of poverty.
I now turn to the motion in front of us, which implies a reversal of revenue-raising policies worth over £20 billion a year. If Opposition Members oppose the measures we have taken, which of the investments I have just mentioned would they reverse? Is it the free breakfast clubs? Is it the investment in the NHS, with shorter waiting lists, or is it the extra police? Perhaps more pertinently, given the title of today’s debate, how would they pay for it? The Chancellor is not ducking difficult decisions, and I am confident that if people observe her actions, they will see that she and this Labour Government were correct. I call it a “zoom out and dial down” approach. If people zoom out and look down, they will see that the challenges we face as a country—on tax, and on reform of many kinds—require us to take action. If they dial down the endless noise of discontent, whipped up by social media and sometimes in the media and by our political opponents, they will observe a country whose people have—
Regional Growth
Harriet Cross Excerpts(4 months, 1 week ago)
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Darren Jones
I congratulate my hon. Friend on her decades of campaigning for that project. I also welcome her suggestion that this is a Labour Government delivering the change that they promised to the country, but may I add to that and say that it is also the difference that brilliant Labour MPs can make in their constituencies campaigning for change for their constituents? I offer many congratulations to my hon. Friend, and I hope that she will be able to cut the ribbon when the lines are up and running.
Harriet Cross (Gordon and Buchan) (Con)
The Minister talks about regional growth, but in north-east Scotland we see only cost and decline under this Labour Government. Let us take the oil and gas sector. Labour policies will cost almost 35,000 jobs by the end of this decade, and £150 billion in economic income by 2050. The UK-EU deal will cost fishermen in Scotland £6 billion. Two thirds of Scottish farmers will be impacted by the family farm tax, with 48% of farms halting their investments, which again hits the rural businesses that would be supplying them? Can the Minister name a single policy that this Labour Government have introduced that benefits regional growth in north-east Scotland?
Darren Jones
I can reconfirm to the House that this Labour Government have delivered the largest real terms increase in funding for Scotland since devolution began. Furthermore, may I politely point her to the fact that the announcement today is about England, not Scotland. Further announcements on our commitment to delivering a new direction in Scotland will be coming next week in the spending review.
Oral Answers to Questions
Harriet Cross Excerpts(4 months, 3 weeks ago)
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Rachel Reeves
From the next financial year, this Government will introduce permanently lower rates for high street, retail, hospitality and leisure properties with rateable values below £500,000, and we are doing that exactly to support the sort of businesses that my hon. Friend champions.
Harriet Cross (Gordon and Buchan) (Con)
I draw attention to my entry in the Register of Members’ Financial Interests. Earlier this month, Harbour Energy announced that it would be cutting 25% of its onshore workforce, blaming the Government’s punitive fiscal position and challenging regulatory environment. When the news was announced, the Chancellor said that this was just a commercial decision by one company, so how does she explain the other energy sector jobs that have been lost in north-east Scotland in just the last few weeks? Belmar Engineering is entering liquidation, with 48 job losses. Well-Safe Solutions faces 45 job losses. Beam, a subsea technology company, has made all 200 staff redundant. With Harbour Energy’s cut of 25% of its workforce—250 jobs—we are talking about 600 jobs in total. How can the Chancellor explain that, and how will she support the industry in the spending review?
Rachel Reeves
My hon. Friend the Exchequer Secretary to the Treasury is working closely with businesses right across the energy sector. The previous Government increased the rate of tax on energy companies to 75%, and we increased it by three percentage points to 78%, reflecting the fact that energy companies have enjoyed huge profits since Russia’s illegal invasion of Ukraine. When people’s bills have gone up, it is right that we ask the energy companies making those profits to contribute a little more.
Finance Bill
Harriet Cross ExcerptsMonday 3rd March 2025
(7 months, 1 week ago)
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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(7 months, 2 weeks ago)
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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(7 months, 3 weeks ago)
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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.
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(8 months ago)
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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.
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 ExcerptsThursday 30th January 2025
(8 months, 2 weeks ago)
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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.
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.