Budget Responsibility Bill

James Murray Excerpts

2nd reading
Tuesday 30th July 2024 Commons Chamber

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

I welcome your election to the Chair, Madam Deputy Speaker. It is a privilege to close this debate on the Budget Responsibility Bill on behalf of the Government. I thank all hon. Members for their contributions; in a moment I will address many of the points that they have raised.

Let me start by reminding the House why the Bill is so important and what it is designed to achieve. At the general election earlier this month, the British people voted for change. They voted to turn the page on 14 years of economic failure. People across Britain voted to remove the Conservatives from power. They voted to remove the party that crashed the economy, and whose Ministers we now know were reckless with the public finances right till the very end. People voted to give Labour the chance to serve. With that honour afforded to us, we have got to work straightaway in fixing the mess the previous Government left and getting our economy growing.

That economic growth is at the heart of our national mission as a Government. That growth underpins our plans in government to make people in every part of the UK better off and to get public services back on their feet in a sustainable way. We know that a crucial foundation for sustained growth is economic stability and fiscal responsibility. We have brought that stability and fiscal responsibility back into the heart of government. Our fiscal rules are non-negotiable. As the Chancellor set out yesterday, meeting them is a principle on which this new, Labour Government were elected, and that will guide her at October’s Budget.

But we want to go further in restoring the trust that was so badly damaged by the Conservatives during their time in office, by embedding fiscal responsibility not just into our country’s government but also into its laws. That is why one of the first Bills to be presented to the House of Commons by our new Government was the Budget Responsibility Bill whose Second Reading we are debating today. The Bill will hardwire fiscal responsibility into significant financial decisions of any future Government, and it will prevent any party ever again being able to play fast and loose with the public finances.

We saw under the previous Government what happens when politicians fail to show respect for taxpayers’ money. People across Britain are still feeling the impact of Liz Truss and Kwasi Kwarteng’s recklessness nearly two years on from the economic disaster they created. The Conservatives’ recklessness in 2022 showed just how much damage unfunded spending commitments can cause. Ministers at the time unleashed economic turbulence that pushed up people’s mortgages and rents and made people across Britain worse off, though it hit the least well-off the hardest. We must never let that happen again.

Budget responsibility must never be optional. That is why Labour will hardwire this responsibility into Government through our fiscal lock, which will mean that all significant fiscal announcements in future will be guaranteed independent scrutiny from the Office for Budget Responsibility. This Bill empowers the OBR to independently produce an assessment of a Government’s fiscal plans if it judges that the fiscal lock has been triggered. That will make sure that there is always proper scrutiny of a Government’s fiscal plans, and guard against large-scale unfunded commitments and disasters such as the Conservatives’ so-called mini-Budget ever happening again. This Bill is a crucial step in fixing the foundations of what we have inherited.

I will take a pause from focusing on the substance of the Bill to thank so many hon. Members for their truly excellent maiden speeches. We had a real tour around Britain, and I feel I have got to know places in all corners of our country through their passionate speeches about the places and people they are all so proud to represent.

We began with my hon. Friend the Member for Glasgow North (Martin Rhodes), who spoke about Kelvingrove park, which I went to when I visited Glasgow. He spoke about the serious work of Government, and the importance of delivery and rebuilding trust in politics.

My hon. Friend the Member for East Renfrewshire (Blair McDougall) said that the hard decisions we make today are what create a better tomorrow. There is no better summary of the position we find ourselves in today. He spoke passionately about the history of his constituency and the importance of a better future for the next generation.

The hon. Member for Carshalton and Wallington (Bobby Dean) spoke movingly about his upbringing and how it has influenced his politics. He also spoke about his anger at the previous Government’s recklessness. I have to say that while I enjoy going to the pub when there are big games on, I do not know that much about football, so I actually understood the fiscal bit of his speech more than the football analogy.

[The Minister of State, Home Department (Dame Angela Eagle)]

Shame!

[James Murray]

I am just being honest—honesty in politics!

My hon. Friend the Member for Southend West and Leigh (David Burton-Sampson) made a very important point that we should all heed about civility in politics. He spoke about the diverse community spirit in his area, but I am not going to even begin to compete with him on how impressive the coastline is in my landlocked suburban constituency.

The hon. Member for Chichester (Jess Brown-Fuller) spoke about how special and sunny her constituency is. She began a new competition; now it is not only who has the most beautiful constituency, but the sunniest. I was very touched by her recognition of the importance of family for both inspiration and practical support in politics.

My hon. Friend the Member for Peterborough (Andrew Pakes) spoke about his Co-operative and trade union values, which I think many of us Labour Members share. I did not know until he spoke about the connection between Peterborough and mustard, so that is something I have learned today. I thought that his focus on the promise of new towns really sums up our sense of optimism for the future. There is the idea of being proud of one’s heritage, and honest about the challenges that we face, but he is also ready to achieve more in the future with a Government who support him. I wish him great stability in his seat.

The hon. Member for Maidenhead (Mr Reynolds) gave a particularly rich history of his constituency, which went from bridges to “Carry On” movies, and he also mentioned the Spice Girls. I think a Spice Girls CD was the first I ever bought, but he may not know what a CD is. That sums up the different perspectives we come from.

My hon. Friend the Member for West Ham and Beckton (James Asser) spoke about the Royal Docks, where I spent much time in a previous role working at City Hall; I saw the great potential that that area of the capital city has. He eloquently set out the combination of heritage and diversity, past and present, that makes his constituency such a lively and wonderful place to represent. I make him an offer: when he is jumping on the Elizabeth line to visit the hon. Member for Maidenhead, he can stop off at West Ealing to say hello to me.

The hon. Member for Ynys Môn (Llinos Medi) spoke honestly about the importance of keeping people in this place on their toes. That is right; the electorate do keep us on our toes, and one of the great benefits of our system is the way in which we are brought down to earth every time we go back to our constituencies on Thursdays or Fridays. However great and important the debates in this place are, when we knock on that door or sit down in our surgery, we are brought right back down to earth. It is a great feature of our political system, and she was right to draw attention to it.

My hon. Friend the Member for Kettering (Rosie Wrighting) spoke about how proud she was of the history of the place that she now represents and where she grew up. I was very moved to hear her speak about her mum’s role as a local youth worker, and how that inspired her to do what she is doing in life. I wish her well as one of the youngest MPs in this place.

My hon. Friend the Member for Wirral West (Matthew Patrick) spoke about the natural beauty of his constituency—he was not the first Member to do so today—and the passion of the people there. His comments about politics being as much about listening as speaking were particularly thoughtful. We should all bear that in mind in this place. He made an important point about learning from those with whom we disagree, or maybe only appear to disagree, and about breaking down barriers through listening and having conversations.

My hon. Friend the Member for York Outer (Mr Charters) spoke about businesses and voluntary projects in his constituency. He underscored how important it is that taxpayers’ money is treated with respect. I know that the residents of York Outer will be very well served by the excellent new MP we heard from today.

My hon. Friend the Member for Earley and Woodley (Yuan Yang), whom I enjoyed campaigning with during the general election, managed to inject some humour into economics, which is quite an achievement for a maiden speech. I am not even going to begin to try to replicate that in my comments just now, but she spoke passionately about the importance to those in her constituency of having access to nature and affordable housing. I know from what she said, particularly about her personal experience, that she will be a true champion for breaking down barriers to opportunity.

Finally, we heard from my hon. Friend the Member for Falkirk (Euan Stainbank), and it was worth the wait to hear his wonderful speech. He gave a fantastic whistle-stop tour of his constituency, and made many excellent recommendations of where to eat and drink next time we are in the area. What really came across is how connected he is to the community he represents, through his neighbours, his friends and his family. He used a phrase that sums up well what I and other Government Members want to do: unite and serve.

Those were all the maiden speeches we had today. It was a truly excellent tour of not just the country, but the talent we have in this place following the general election. I wish all hon. Members very well for however many years they spend in this place.

We heard from other Members about the substance of the Bill, including the shadow Ministers. They both seemed a bit confused about whether they support the OBR and the Bill. I am glad that they confirmed that they support the Bill and will not vote against it, but at one point the hon. Member for Grantham and Bourne (Gareth Davies) seemed to defend Liz Truss over her handling of the economy. He must be pretty much the last person in the country willing to do so; it was certainly brave of him. We Government Members are clear on why the OBR is so important and what its role should be. The Bill sets out to strengthen that.

The hon. Gentleman asked what the purpose of the fiscal lock might be. The fiscal lock will prevent the sidelining of the OBR by giving it the power to start an assessment if the Government announce fiscally significant policies without one. I remind him that the current shadow Chancellor said, at the time of the disastrous mini-Budget, that some of the difficulties were caused by the lack of a forecast, so this is something that the Opposition agree with.

The shadow Minister also asked about the definition of an emergency. We are very clear that in emergencies—for instance, during the pandemic—it may be necessary for the Government to take rapid action. In those cases, it would not be appropriate to hold back the response to the emergency until a forecast could be produced. Finally, he asked whether the OBR reports triggered by the fiscal lock will be published. I can answer him simply: they will. That is set out in section 8 of the original Budget Responsibility and National Audit Act 2011.

I welcome the support from the Lib Dem spokesperson, the hon. Member for Richmond Park (Sarah Olney), for the Bill. She asked about the definition of “significant”, a point also raised by my hon. Friend the Member for Walthamstow (Ms Creasy). The threshold set out in the draft charter for budget responsibility, which we have on the gov.uk website, is 1% of GDP in any single financial year. The purpose of the legislation is to prevent large irresponsible fiscal announcements that could undermine economic stability, and that requires a threshold targeted at fiscally significant announcements. That is why we have chosen that figure in the draft legislation and the draft text published on gov.uk.

Let me mention two other Members who spoke in the debate. I welcome the support of the hon. Member for Angus and Perthshire Glens (Dave Doogan) for the Bill. I think that his only criticism was one word in the terminology, and we can probably live with that. He said that he was nauseous from hearing us talk about being a Government of service, but he may have to get used to feeling nauseous, because we will proudly be a Government of service every day that we have the honour to serve.

Finally, I am glad that this is not an exceptional debate in which the hon. Member for Strangford (Jim Shannon) does not make an intervention. I welcome his support for the Bill, and for the Government’s wider actions in resolving the junior doctors’ industrial dispute. I reassure him that, like my right hon. Friend the Chief Secretary to the Treasury, I recognise the importance of working with political representatives from all nations in the UK.

As my right hon. Friend said at the beginning of this debate, a crucial first step to achieving sustained economic growth is delivering economic stability. This Bill will help provide that stability and ensure that fiscal responsibility is not only embedded in our approach to government, but locked into how government works from this point on. It will make sure that there is always proper scrutiny of the Government’s fiscal plans, reinforcing credibility and trust, and making sure that no Government can ever again play fast and loose with the public finances. The Bill is a key step in fixing the foundations of our country as we set out to get the economy growing and to make families across Britain more secure and better off.

We now know that the Conservatives called the election to run away from the problems that they had covered up, rather than taking the tough decisions to fix them. While they may have run away from the problems that they created, they cannot run away from their record in office. People in Britain will not forget the last Government’s recklessness in 2022, which showed just how much damage unfunded spending commitments can cause. Budget responsibility will never be optional under Labour, as it was under the Conservatives. We have brought fiscal responsibility back into the heart of government, and we will hardwire it into law through our fiscal lock. That is what this Bill will achieve. This Bill will draw a line under the economic recklessness of recent years and make it clear that it must never be allowed to happen again. Budget responsibility underpins our national mission to make people across Britain more secure and better off. For that reason and others, I commend this Bill to the House.

Question put and agreed to.

Bill accordingly read a Second time.

Budget Responsibility Bill: Programme

Motion made, and Question put forthwith (Standing Order No. 83A(7)),

That the following provisions shall apply to the Budget Responsibility Bill:

Committal

(1) The Bill shall be committed to a Committee of the whole House.

Proceedings in Committee, on Consideration and on Third Reading

(2) Proceedings in Committee shall (so far as not previously concluded) be brought to a conclusion four hours after their commencement.

(3) Any proceedings on Consideration and proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion five hours after the commencement of proceedings in Committee of the whole House.

(4) Standing Order No. 83B (Programming committees) shall not apply to proceedings in Committee of the whole House, to any proceedings on Consideration or to proceedings on Third Reading.—(Jeff Smith.)

Question agreed to.

Budget Responsibility Bill: Money

King’s recommendation signified.

Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),

That, for the purposes of any Act resulting from the Budget Responsibility Bill, it is expedient to authorise the payment out of money provided by Parliament of any expenditure incurred by the Treasury in consequence of the Act.—(Jeff Smith.)

Question agreed to.

Business of the House (Today)

Ordered,

That at today’s sitting, notwithstanding the provisions of Standing Order No. 122B, the Speaker shall put the Questions necessary to dispose of proceedings on the Motion in the name of the Prime Minister, Rishi Sunak and Ed Davey relating to Select Committees not later than one hour after the commencement of proceedings on the Motion for this Order; such Questions shall include the Questions on any Amendments selected by the Speaker which may then be moved; proceedings on that Motion may continue, though opposed, after the moment of interruption; and Standing Order No. 41A (Deferred divisions) shall not apply.—(Lucy Powell.)

Tax Measures: Next Steps

James Murray Excerpts

Monday 29th July 2024 Written Statements

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

The Government are committed to addressing unfairness in the tax system and raising revenue for public services by closing loopholes and tackling tax avoidance.

The Government are setting out next steps on their priority tax commitments to allow for technical consultation and provide taxpayers with certainty ahead of their final confirmation at Budget.

The Government are also publishing draft legislation on certain measures ahead of potential inclusion in the next Finance Bill to seek stakeholder views at this stage.

Tax announcements and associated documents

VAT and business rates on private schools: The Government are publishing a technical note setting out their plan to introduce 20% VAT on education and boarding services provided for a charge by private schools across the UK, from 1 January 2025. 20% VAT will also apply to prepayments of fees for terms starting on or after 1 January 2025, made on or after 29 July 2024. These changes will not impact pupils with the most acute special educational needs, where their needs can only be met in private schools.

In addition, the technical note confirms that the Government will remove private schools’ eligibility for charitable rates relief under business rates in England. However, the Government will consider how to address the potential impact of these changes in cases where private school provision has been specified for pupils through an education, health and care plan. The Government will engage with schools before setting out a final proposal in due course. This is intended to take effect from April 2025, subject to parliamentary passage.

The Government are also publishing draft VAT legislation. The legislation will be accompanied by an explanatory note (EN). A technical consultation on the legislation and technical note will run from 29 July 2024 until 15 September 2024.

Abolishing the tax regime for non-UK domiciled individuals: The Government are publishing a policy note setting out their plan to remove the concept of domicile status from the tax system, and to implement a new residence-based regime. This reform will end the use of offshore trusts to keep assets outside the scope of inheritance tax and scrap the 50% foreign income discount in the first year of the new regime. Full details of this reform will be provided at the Budget.

Taking action against the carried interest loophole: The Government are publishing a call for evidence confirming their intention to take action against the carried interest loophole, and to form the basis for detailed engagement with expert stakeholders.

Energy Profits Levy reform: The Government are publishing a policy document that confirms their intention to increase the rate of the energy profits levy (EPL) to 38% from 1 November 2024, and extend that levy from March 2029 to March 2030. The energy security investment mechanism will remain, helping to provide operators and their investors with confidence the levy will no longer apply if prices fall to, or below, historically normal levels for a sustained period.

The Government will also remove unjustifiably generous investment allowances from the EPL, including by abolishing the levy’s core investment allowance. Further details on the Government’s approach to all allowances in the EPL will be set out at the Budget.

The Government recognise the importance of providing the oil and gas industry with long-term certainty on taxation after a period of change. The Government will therefore set out a way of working with the industry and others to develop an approach for responding to price shocks after the EPL ceases.

Tackling the tax gap: The Government will take a comprehensive approach to tackling the tax gap and making sure more of the tax revenues that are owed are correctly paid.

The Government will invest in HMRC’s compliance work, hiring around 5,000 additional staff to recover more tax revenues. HMRC has already started the process of recruiting additional staff into compliance roles. The Government will also invest in HMRC’s technology infrastructure, helping to make HMRC more efficient and improve taxpayers’ experience of interacting with HMRC.

The Government will reform the tax system by making policy changes to simplify tax, close loopholes and reduce non-compliance, designing out non-compliance before it happens. At the Budget, the Government will provide an update on the implementation and development of measures that form their plan to close the tax gap.

Abolishing the Furnished Holiday Lettings tax regime: The Government are publishing draft legislation to abolish the furnished holiday lettings tax regime from April 2025. This will remove the tax advantages that landlords offering short-term holiday lets have over those providing standard residential properties. The legislation also contains information about the transitional arrangements that will apply.

OECD Pillar 2: The Government are publishing draft legislation to translate an internationally agreed anti-avoidance rule into UK legislation. The draft legislation stops attempts by multinational enterprises to avoid pillar 2 top-up tax by exploiting a temporary simplification in the rules. The legislation will apply from 14 March 2024 and will prevent multinational enterprises that enter into certain avoidance transactions from accessing the simplification.

In addition, to provide certainty for affected businesses, the Government are confirming that the UK will introduce the undertaxed profits rule (UTPR) of pillar 2 for accounting periods beginning on or after 31 December 2024, and will continue efforts to ensure the UK rules are effective and up to date.

The draft legislation on abolishing the furnished holiday lettings tax regime and OECD pillar 2 legislation is accompanied by a tax information and impact note (TIIN) and an explanatory note.

All publications can be found on the gov.uk website.

https://www.gov.uk/government/collections/finance-bill-2024-25-draft-legislation-and-technical-tax-documents

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