Finance Bill

James Murray Excerpts

Report stage
Monday 3rd March 2025 Commons Chamber

[Graham Stuart]

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

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

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

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

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

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

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

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

[Sir Ashley Fox]

I invited the Minister to explain how the Budget would improve the lot of farmers. In particular, I gave the example of the £5 million family farm that would incur an inheritance charge of £400,000. How will that family pay that out of an annual income of about £50,000? That is eight years’ income, with nothing to live on.

[James Murray]

The debate on this Finance Bill has to focus on matters that are within the Bill and in the new clauses and amendments. As the hon. Gentleman will know, and as Madam Deputy Speaker reminded him, he strayed rather outside the ambit of the Finance Bill by referring to important changes to agricultural property relief that are not dealt with by the Bill or by any of the new clauses or amendments. I gently point out that any of his constituents, whatever industry they work in, will see that the income tax on their earnings does not go up as a result of this Government keeping their commitment in that regard.

[Dr Luke Evans]

The Minister is right to point to the amendments in front of us. New clause 3 looks at household income specifically. If he is so confident in the measures he and the Chancellor are putting forward, why will he not accept new clause 3, which has the ability to show just how fantastic the Budget and the Finance Bill are from the evidence base that we have?

[James Murray]

I was hoping that the hon. Gentleman would again leap to the defence of Liz Truss, as he did just last week. Sadly, that was not to be the case in his intervention. I will come on to the new clauses in a moment; I am only halfway through thanking people on his side of the House for intervening, so I would be grateful if he would let me make a little progress.

The hon. Member for Wimbledon (Mr Kohler) spoke about his concerns that things will be unworkable when the wine easement ends, but it ended over a month ago. Our early indications are that firms, warehouse keepers and HMRC have adapted well to the new system, although I and my officials will carefully monitor the situation.

[Mr Kohler]

Has the Minister actually spoken to people in the wine industry? They are absolutely at their wits’ end about this.

[James Murray]

I have been in routine contact with people from the wine industry throughout my time as Exchequer Secretary, and my officials are also in touch with the industry. As I said, the end of the wine easement happened at the beginning of February, and our early indications are that firms, warehouse keepers and HMRC have adapted well.

The hon. Member for Strangford (Jim Shannon) made a rare early speech during the debate, which rather took me by surprise. He raised his points with typical grace and forthrightness. I will address some of his points later in my remarks, but on the point about the impact of changes in the Finance Bill on some of the firms that export their spirits, I remind him that duty does not apply to exports. That part of the legislation would not be relevant to those considerations.

--- Later in debate ---

[Graham Stuart]

Will the Minister give way before he moves on?

[James Murray]

One more time.

[Graham Stuart]

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

[James Murray]

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

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

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

[Daisy Cooper]

In new clause 8, which deals with alcohol pricing, we have made explicit that we are not just looking for an impact assessment of the tax that the Government intend to raise. It is about the estimate of administrative operational costs—that is, the red tape that is going to be put on the industry. Does the Minister agree that we need that impact assessment, and will he meet me to discuss how we can do it?

[James Murray]

The impacts of the changes to the alcohol duty and the energy profits levy have already been set out in the tax information and impact note that was published alongside the autumn Budget, so that information is already in the public domain. Information on the impact on households was also published alongside the autumn Budget in the “Impact on households” report, which demonstrated that households are on average better off in 2025-26 as a result of these decisions.

Finally, I will address the amendments tabled by the Opposition that deal with VAT on private school fees—several hon. Members have spoken about that matter. Amendments 67 to 69 would collectively remove clauses 47 to 49, which remove the VAT exemption for private schools and set out anti-forestalling provisions and the commencement date.

Ending the VAT tax break for private schools is a tough but necessary decision that will secure the additional funding needed to help deliver on our commitments, including those relating to education and young people. This policy took effect at the beginning of January, and I note that in his speech, the shadow Minister, the hon. Member for North West Norfolk (James Wild), did not say how his party would pay for its decision to reintroduce that tax break for private schools. The policy will raise £1.7 billion by the final year of this Parliament, so it is essential that the Opposition explain what they would cut from the schools budget, from education services, or from any other public services to pay for the reintroduction of that tax break. I will happily give way if the shadow Minister would like to make an intervention to place on record how he will pay for it. I do not see him leaping to his feet, so I will move on.

Finally in the debate we are having about VAT on private schools, the Government set out the expected impacts of this policy in the autumn Budget, so I do not believe that new clause 7—which would require the Government to make a regular statement on the impact of pupils with special educational needs and disabilities—is necessary. However, I take this opportunity to make clear that in developing this policy, the Government carefully considered the impact it would have, including on pupils with special educational needs and disabilities. I am sure that the hon. Member for St Albans (Daisy Cooper) and her colleagues will welcome the extra £1 billion next year for high needs funding that we have been able to announce thanks to our decisions on tax policy, including on private schools.

I hope I have set out why the Opposition amendments are unnecessary, and indeed why reintroducing the VAT tax break for private schools not only runs counter to the manifesto on which the Government were elected, but represents an unfunded tax cut from the Opposition—have they learned nothing? I therefore urge the House to reject those amendments, and I commend our amendments to the House. Again, I extend my thanks to all Members who have contributed to this debate.

[James Wild]

I beg to ask leave to withdraw the clause.

Clause, by leave, withdrawn.

New Clause 2

Energy (oil and gas) profits levy: impact assessment of increase in rate

“(1) The Chancellor of the Exchequer must, within six months of this Act coming into force, commission and publish an assessment of the expected impact of Sections 15 to 17 of this Act on—

(a) domestic energy production and investment;

(b) the UK’s energy security;

(c) energy prices, and;

(d) the UK economy.

(2) The assessment must examine the impact of provisions in this Act in comparison with what could have been expected had the energy (oil and gas) profits levy remained unchanged.”—(James Wild.)

This new clause would require the Chancellor to commission and publish an assessment of the expected impact of changes to the energy (oil and gas) profits levy on domestic energy production, the UK’s energy security, energy prices and the UK economy.

Brought up, and read the First time.

Question put, That the clause be read a Second time.

--- Later in debate ---

[James Murray]

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

At the autumn Budget, my right hon. Friend the Chancellor laid the essential foundations for boosting investment and growth to put more money in people’s pockets, the No. 1 mission of the Government under the Prime Minister’s plan for change. The Budget was built on robust fiscal rules, rules that put a stop to day-to-day spending being funded through borrowing and to get net financial debt falling as a share of GDP.

The Finance Bill delivers on our manifesto commitments by removing the outdated concept of domicile status from the tax system, increasing the capital gains tax rate for carried interest, increasing the higher rates of stamp duty for additional dwellings, introducing the 20% standard rate of VAT on private school fees, and changing the energy profits levy by extending the period over which it applies and adjusting its rate by 3 percentage points.

As we know, my right hon. Friend the Chancellor set out at Budget how the fiscal inheritance was far worse than we had expected. The Opposition, when in government, let public spending plans become unsustainable. They did not share this with the OBR or the British people. It fell to us to fix that mess when we took office. That is why we had to make an increase to capital gains tax, changes to inheritance tax thresholds and a plan to close the tax gap by a record package of £6.5 billion of additional tax revenue by the end of the Parliament.

I thank right hon. and hon. Members from across the House for their often helpful and insightful contributions to the debates during the Bill’s passage. I would like to thank officials at the Treasury and in Parliament for their work on the policies and the legislation that have led to the Bill whose consideration we are now concluding. The Bill plays a key role in delivering economic stability, repairing the public finances and laying the essential foundations for growth. It is through that growth that we will put more money into the pockets of people across Britain, and I commend it to the House.

UK-Andorra Double Taxation Convention

James Murray Excerpts

Wednesday 26th February 2025 Written Statements

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

A double taxation convention with Andorra was signed in London on 20 February 2025. The text of the convention is available on HM Revenue and Customs’ pages of the www.gov.uk website and will be deposited in the Libraries of both Houses. The text of the convention will be scheduled to a draft Order in Council and laid before the House of Commons in due course.

[HCWS473]

High Street Bank Closures

James Murray Excerpts

Wednesday 26th February 2025 Westminster Hall

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

It is a pleasure to serve with you in the Chair, Mr Stringer. I thank my hon. Friend the Member for Blyth and Ashington (Ian Lavery) for securing this important debate. We can see from the number of Members who have intervened to raise concerns about their constituencies that this issue is widely felt across our country, and the issue resonates deeply with our constituents.

It is a priority of this Government to ensure that all citizens have appropriate access to banking across the UK. As hon. Members have alluded to, banking has changed significantly in recent years thanks to digital innovations, and many people can now bank more conveniently, at any time and in any place, without needing to go to a bank in person. In 2017, 40% of UK adults regularly used banking branches, but by 2022 that figure had fallen to 21%, and in the same year nearly nine in 10 adults used online banking or mobile apps, including, notably, 65% of those aged over 75.

However, the Government are committed to ensuring that everyone can benefit from banking services. At the autumn Budget 2024, the Chancellor announced funding of more than £500 million in 2025-26 to deliver digital infrastructure upgrades through Project Gigabit and the shared rural network. Those initiatives will drive the roll-out of broadband and 4G connectivity to support access to good internet and to plug connectivity black holes across the UK by 2030. More than 86% of UK premises can now access gigabit-capable broadband, which is a huge leap from July 2019, when coverage was just 8%.

Investing in digital infrastructure will improve access to digital banking services, but I assure hon. Members that the Government also understand the importance of face-to-face banking services in communities and high streets across the country. Many of our constituents are particularly concerned about the availability of cash and access to in-person banking services, so the Government are committed to ensuring that people and businesses across the UK have access to those banking services and that everyone can contribute to economic growth in local areas and thriving local high streets.

[Gareth Snell]

I thank the Minister for that point. His brief reference to access to cash is vital, but the word that was missing was “free”: access to free cash. One of the by-products of the closure of high street banks is that the cashpoints that remain tend to have a transaction fee, and that is particularly the case in the communities that can least afford it. That means that people in some parts of my constituency pay up to £3 simply to withdraw their money. For people who do not have a lot to start with, that is a huge barrier to getting the cash they need.

[James Murray]

My hon. Friend makes an important point about the barriers to people accessing cash—not merely the location of banking hubs or facilities, but financial barriers. There may also be transport barriers to people getting to banking hubs in the first place. I hope to address that briefly in the remainder of my remarks.

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

On that point, will the Minister give way?

[James Murray]

Very briefly.

[Graham Leadbitter]

On the point of geographic vulnerabilities, Aviemore, which many people will know as a major ski resort in Scotland, is pretty remote: it is on a major A-road, but it is in the middle of the Cairngorms. It has lost its last bank, and the nearest is Inverness, which is a 40-minute drive away—if someone has a car and it is not minus 10°, which is quite common in the middle of winter. Does the Minister agree that a degree of common sense needs to be applied by Link when looking at banking hubs—because that common sense is critical in making that assessment and it should not just be a tick-box exercise, as has been alluded to?

[James Murray]

The hon. Gentleman’s point relates to transport links and the accessibility of banking hubs. It links well to the comment from my hon. Friend the Member for Stoke-on-Trent Central (Gareth Snell), which is that a banking hub or banking service on its own might need further infrastructure around it to ensure that people can get there. I hope to address that briefly in just a moment.

The Economic Secretary to the Treasury is working closely with the industry to roll out 350 banking hubs—as my hon. Friend the Member for Blyth and Ashington mentioned—by the end of this Parliament. Banking hubs allow people and businesses to withdraw and deposit cash, deposit cheques, pay bills and make balance inquiries. Importantly, they also contain rooms where customers can see community bankers to carry out wider banking services, such as registering a bereavement or getting help with changing a PIN. The Government are committed to working with the industry to ensure that banking hubs meet customers’ needs.

Following rules laid out for the Financial Conduct Authority, the roll-out of banking hubs is determined in accordance with legislation. When a bank announces the closure of a branch or a material change of cash access, an assessment will be carried out by Link, which we have heard hon. Members refer to today and is the operator of the UK’s largest ATM network. That is an impartial assessment of a community’s access-to-cash needs. Where Link recommends a banking hub, Cash Access UK, a not-for-profit company funded by major UK banks, will provide it. The assessments take into account criteria such as population size, the number of small businesses, and levels of vulnerability. They also consider the distance to the nearest bank branch and the cost and travel time to get there on public transport. Importantly, where the announcement of a bank closure triggers an assessment, the branch cannot close until recommended services have been installed. Any member of the public—including Members of this House—can request an access-to-cash review directly, through the Link website.

My hon. Friend the Member for Blyth and Ashington and others have put on record their concerns about the criteria that Link uses to make the assessments. Those concerns are on record through this debate. Any decisions on changes to Link’s assessment criteria are a matter for Link, the financial services sector and the FCA, which oversees the access-to-cash regime. The FCA is required by law to keep its rules under review. It monitors the impact of those rules on an ongoing basis to ensure that they deliver the right outcomes for businesses and consumers.

[Darren Paffey (Southampton Itchen) (Lab)]

I thank my hon. Friend the Minister for giving way and my hon. Friend the Member for Blyth and Ashington (Ian Lavery) for securing the debate. On the point about the criteria, it is difficult to match some of what we know about our own constituencies with some of the criteria that Link deals with, which seem restrictive. Does the Minister agree that the Government have set a target of opening banking hubs, but the Link criteria are not meeting community needs and need to change? Does he agree that that is a priority?

[James Murray]

I thank my hon. Friend for his intervention. As I set out, the Government have committed to 350 banking hubs in the course of the Parliament, but any changes to Link’s assessment criteria are a matter for Link, the financial services sector and the FCA, under the rules set out in legislation.

I will also point to the fact that customers have other options to access everyday banking and cash services. In particular, the Post Office deserves a mention for its extensive presence on the country’s high streets, which ensures that 99% of the UK population live within 3 miles of a post office. Through the Post Office banking framework, 99% of personal banking and 95% of business banking customers can access vital cash withdrawal and deposit facilities at 11,500 post office branches across the country.

We talked a lot about some of the issues with accessing banking services and banking hubs when they are open. It is important to note that in the autumn Budget, we announced £1 billion of investment in support of bus services, which will be crucial in connecting rural areas and small towns and helping people to get to their nearest banking services. In recognition of the fact that each community has individual needs, we have introduced the Bus Services Bill, which will put power over local bus services back in the hands of local leaders. We continue to take action to make sure that high streets and communities across the country can realise their full economic potential.

I again thank my hon. Friend the Member for Blyth and Ashington for securing this important debate. I welcome the support from him and other hon. Members for the Government’s important work to ensure access to banking for all, and to support our commitment to unlocking the full potential of high streets across the country.

Question put and agreed to.

Family Businesses

James Murray Excerpts

Wednesday 26th February 2025 Commons Chamber

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

I thank the shadow Chancellor for opening the debate.

In their motion, the Opposition have set out a list of objections to the decisions that the Government have taken—or, in the case of the measurements around pints, decisions that shadow Ministers seem to have entirely imagined. They may be able to list their objections, but they are unable to accept responsibility for the damage that they did to our economy. Crucially, they are unable to offer any credible alternative. The motion makes it clearer than ever that the Conservatives have no vision, no ideas and no plan to deliver the change that our country needs.

In contrast, Labour is the party with a plan for change—a plan to restore economic stability, boost investment and drive growth across the UK to put more money in people’s pockets. We know that it is up to the Government to provide stability, security, fiscal responsibility, and to remove unnecessary regulation when it stands in the way of growth. It is businesses large and small—including family businesses and their workforces—that will create jobs and wealth and be the engines of growth in the economy. We know that pubs, shops, traders and services across the country not only play an important role in all our lives, but drive economic growth. Those businesses and their workforces are the backbone of our economy, and they need a Government who will take the right decisions in the national interest, even when they are difficult, to support our security and prosperity.

I briefly remind Conservative Members of the context in which the decisions have been made. That context is, of course, the inheritance that this country faced after 14 years of the Conservative party being in power.

[Dr Evans]

The context is that back in 2010 the then Government had to borrow £158 billion. Fast forward another decade, and we had something called the pandemic, when we had to borrow £400 billion on top of that. Collectively, that is a great big difficulty. Five years ago, when the pandemic happened, I sat in this Chamber listening to all the interventions asking for more spending. Does the Minister not agree that that is the problem the Conservative Government dealt with?

[James Murray]

The hon. Gentleman said that we had something called the pandemic; we also had a Prime Minister called Liz Truss and that had a pretty big impact on our economy. I know the shadow Chancellor is distancing himself from it. If his colleagues would like to leap to Liz Truss’s defence, I would welcome an intervention. No, they are not seeking to intervene. Funny that, Madam Deputy Speaker. Perhaps, in closing, one of the other shadow Ministers can defend Liz Truss’s record.

[Dr Evans]

Will the Minister give way on that point?

--- Later in debate ---

[James Murray]

Yes—on Liz Truss’s record.

[Dr Evans]

The way I see it, the problem that Liz Truss had with her Budget was that she did not set out her workings. The problem with Rachel Reeves’s Budget is that she did, and the country and the world does not believe it. That is far more detrimental to the situation we find ourselves in because she cannot get out of that problem. That is the difference between Liz Truss and Rachel Reeves.

[James Murray]

Wow. I should let the hon. Gentleman intervene more often if he is going to say that the only problem with Liz Truss is that she did not set out her workings. I think the problem was rather more fundamental than that, as people across this country will attest.

Frankly, it is no wonder that Conservative Members want to bury their heads in the sand and try and pretend the last 14 years did not happen. It was 14 years of mismanagement and decline, along with jolts of disaster, digging ever deeper holes in our public services and our economic resilience. It was their decisions that led to their resounding electoral loss last year and it was their record in office that made necessary the difficult decisions that we had to face on entering government.

[Paul Holmes (Hamble Valley) (Con)]

I thank the Minister for handling this debate in his usual courteous way. May I take him back to something that he said in his remarks about hospitality businesses and pubs delivering economic growth? There is a small pub chain in my constituency that must find a third of its total turnover because of the actions of this Government, with the result that it may have to close a venue that supports a small village in my constituency. Is that the economic growth that he thinks he is delivering?

[James Murray]

I assume the hon. Gentleman refers to the changes around employer national insurance, to which I will come in my remarks.

Let me be absolutely clear about the context: no responsible Government could have let things carry on the way they were. That was simply not a tenable situation and I think Conservative Members know that. That is why at the autumn Budget, we took the difficult but necessary decisions on welfare, spending and tax, and those decisions were vital steps towards restoring economic stability and fixing and supporting the public finances. As I said earlier, while Conservative Members have taken every opportunity to say they oppose those choices, they have yet to offer any solutions of their own. Difficult decisions were necessary, so let me set out why we made some of the choices that we did.

[Nick Timothy (West Suffolk) (Con)]

The Labour party manifesto said that by the year 2028-29, it would increase spending by £9.5 billion a year. Why, then, did the Budget increase it by £76 billion—eight times more than the Labour manifesto said?

[James Murray]

As I am sure the hon. Member will know, upon entering Government and speaking to Treasury officials about the state of the public finances, we uncovered a £22 billion black hole, which was known to then Ministers but which the OBR was not informed about.

[Nick Timothy]

Will the Minister give way?

[James Murray]

I will give way one more time.

[Nick Timothy]

The Minister might have noticed that there is a bigger gap between £9.5 billion and £76 billion than £22 billion. His answer is clearly ridiculous. We are talking about such tax rises not because of the £22 billion fictional black hole, but because of the decision to increase spending by eight times more than the Labour party promised at the election. Will he accept that or not?

[James Murray]

The hon. Member’s comments are clearly ridiculous if he thinks the £22 billion black hole was fictional. It has real-terms consequences in terms of the pressure—

[Nick Timothy]

Will the Minister give way?

[James Murray]

I will make some progress as I have been very generous in giving way to the hon. Gentleman. He will know that his colleagues who were in government were aware of the in-year spending pressures and they chose not to share that with the Office for Budget Responsibility and thereby not to share it with the British people. That is the truth of what we inherited, and that is why we had to take difficult decisions.

I turn to some of the difficult decisions that we had to take in the Budget last year, because the Opposition motion refers to our decisions on business property relief. I assure hon. Members that the decisions we took on that and on agricultural property relief were not taken lightly. The Government recognise the role that those reliefs play, particularly in supporting small farms and family businesses, and that is why we chose to maintain rather than abolish them, which has meant maintaining significant levels of relief from inheritance tax beyond what is available to others. Indeed, the reliefs will remain more generous than the last time they were changed. The changes we are making mean that agricultural and business property reliefs will be better targeted and fairer.

According to the most recent data from His Majesty’s Revenue and Customs, 40% of agricultural property relief benefits the top 7% of estates making claims. It is a similar picture for business property relief, with more than 50% of business property relief claimed by just 4% of estates making claims. Those data bear out the fact that the benefit of the existing 100% relief on business and agricultural assets has become heavily skewed towards the wealthiest estates.

It is neither fair nor sustainable to maintain such a large tax break for such a small number of the wealthiest claimants, particularly in the light of the wider pressures on the public finances. That is why we are changing how we target agricultural property relief and business property relief from April next year. Individuals will still benefit from the 100% relief for the first £1 million of combined business and agricultural assets. On top of that amount, there will be 50% relief, which means that inheritance tax will be paid at a reduced effective rate of up to 20%, rather than the standard 40%. That sits on top of the other spousal exemption and nil rate bands, which apply more widely within the inheritance tax system.

[Gregory Stafford (Farnham and Bordon) (Con)]

Kilnside farm in my constituency, run by Bob Milton, is only 36 acres in total. It is a tiny farm, yet it will be subject to the new taxes. How can the Minister say that only 4% will be affected? Even the smallest farmers in my constituency will be hit.

[James Murray]

To correct the hon. Gentleman, I did not say that only 4% will be affected. We have set out that up to 520 estates claiming agricultural property relief, including those that also claim business property relief, are expected to be affected in 2026-27. That means that about three quarters of estates will be unaffected and will not pay any more inheritance tax. All the data on that has been set out in a letter from the Chancellor to the Treasury Committee, and if the hon. Gentleman looks at that document, he will see some of the stats that I refer to.

[Rebecca Smith (South West Devon) (Con)]

Of the 500 or so that the Minister has just explained will have to pay inheritance tax, does he have any idea what number are small businesses, compared with the large estates that he seeks to challenge in the legislation?

[James Murray]

The data that I refer to is based on claims data. This is an important point that comes up frequently when we have debates on agricultural property relief and business property relief. If one were to consider assets owned by farmers or other business owners, the actual value of the asset does not give a guide to what claim might be made against inheritance tax because that will depend on the ownership structure, on debt that might be owned or on what inheritances have happened earlier in people’s lives and so on. The only data that can give an indication of what impact the changes will have from April 2026 is the claims data.

The data that I referred to earlier and which I referred to in response to the hon. Member for West Suffolk (Nick Timothy) is the real claims data that HMRC has. That is the data on which we made decisions around this policy and which informs some of the Chancellor’s statistics in her response to the Treasury Committee, which the hon. Lady may like to consult.

[Carla Lockhart (Upper Bann) (DUP)]

In Northern Ireland, the Agriculture Department has indicated that almost half of all farms, and 75% of all dairy farms, will be impacted by the inheritance tax. When will the Minister start to speak with, and listen to, industry leaders? Quite frankly, the meeting last week was an outrage. He needs to sit and listen to industry leaders, who know the industry and are speaking on behalf of real farmers on the ground who will be impacted by this inheritance tax.

[James Murray]

The hon. Lady referred to meetings that I held last week, both with representatives of UK-wide organisations and those that represent other nations within the UK. There is a difference between listening to people and having to agree, because sometimes we listen and we disagree. That is the situation we found ourselves in after that meeting—we listened to concerns but we have a different approach. I have been setting out in this debate exactly why we have taken this decision.

[Caroline Voaden (South Devon) (LD)]

I recently surveyed all the farms in my constituency, and 85% of the people who responded said that they would be affected by this inheritance tax, mainly because of the cost of land in South Devon—practically all farms will be subject to it. When will the Government listen to the evidence that we are collecting from our farmers, which shows that their assessment that only 25% of farms will be affected is not correct?

[James Murray]

It is important to emphasise that the correct data to work out the impact of these changes is the claims data. That is what is available to HMRC, and it is the basis on which we have established how many farm estates are likely to be affected by the changes.

[Wendy Morton]

The point that we are trying to make is that the Minister is looking only at one dataset, not the big picture. We have spoken a lot about farmers, but the business property relief is about the whole of the business community. Will he not go away and have another look at this, taking account of all the evidence that, hopefully, he has been listening to since the announcement of this reckless policy?

[Madam Deputy Speaker (Ms Nusrat Ghani)]

Order. Before the Minister continues, let me remind Members who have not understood the etiquette that they cannot just wander into a debate when someone is on their feet and try to intervene. They need to take part in the whole debate.

[James Murray]

I return to the point that I have made several times today: the way to understand how the policy on agricultural property relief and business property relief will work is to look at actual claims data—the claims as they relate to individual estates. The overall value of farms or businesses does not tell us exactly what the estate value will be through an individual claim. That is the correct way to approach it.

[Several hon. Members rose—]

[James Murray]

I will make some progress, because I have given way many times on this particular point. I have plenty more to get through and I am sure that other Members would like to contribute.

Depending on people’s individual circumstances, a couple will be able to pass on up to £3 million to their children or grandchildren free of any inheritance tax at all. If owners pass on their assets more than seven years before death, no inheritance tax will be due either. Where any payment is due, it can be paid over 10 years interest-free in most circumstances. That benefit is not seen anywhere else in the inheritance tax system.

I recognise, as evidenced today, that the inheritance tax reforms generate strong views, but reform is necessary given the fiscal challenge that confronts us. This is a fair approach that helps put the public finances back on a sustainable footing.

[Several hon. Members rose—]

[James Murray]

I am going to make some progress.

Let me move on to the changes to employer national insurance contributions, which is another of the difficult decisions that we had to take at the Budget. I recognise that the changes will have impacts, but asking employers to contribute more is the fairest way to restore fiscal stability and to provide essential services, such as our NHS, with the resources they desperately need. The rate of employer national insurance will increase from 13.8% to 15%, while the per-employee threshold at which employers start to pay national insurance, known as the secondary threshold, will be reduced to £5,000.

At the same time, we firmly recognise the importance of small businesses, and we will protect the smallest businesses and charities by more than doubling the employment allowance to £10,500. That means that next year, 865,000 employers will pay no national insurance contributions at all. More than half of employers will see no change or will gain overall from this package, and employers will be able to employ up to four full-time workers on the national living wage and pay no employer national insurance contributions.

Employers will also be able to benefit from other employer national insurance contributions reliefs, including hiring under 21s and under-25 apprentices, where eligible. These changes broadly return national insurance contribution revenues as a proportion of GDP to the level that they were before the previous Government’s cuts to employee and self-employed national insurance, but in a way that does not result in higher taxes in people’s payslips.

The Opposition’s motion also refers to business rates. We want local shops and high streets to thrive again, which means we must act to support the businesses behind them, which have had to contend with changing consumer habits and significant economic headwinds in recent years. While online shopping is convenient and offers great variety, the high street brings people together. Hospitality businesses have played a key role in bringing people into town centres.

However, at present the business rates burden falls more heavily on property-intensive sectors, which is why business rates need rebalancing. From 2026-27, we therefore intend to introduce permanently lower tax rates for high street retail, hospitality and leisure properties with rateable values below £500,000. This will benefit more than 280,000 properties. At the same time, to make this tax cut sustainable, we will apply a higher rate to properties with a rateable value of £500,000 and above. That group represents less than 1% of all properties, but covers the majority of large distribution warehouses, including those used by online giants, helping to level the playing field for high street businesses.

[Damian Hinds (East Hampshire) (Con)]

The hon. Gentleman and other Ministers have constantly come back to the point about the higher rateable value commercial premises, saying that they include distribution centres for online giants. What proportion are they of the total?

[James Murray]

Data is being set out by the Valuation Office Agency, which should give the right hon. Gentleman the details that he requests, but I am happy to write to him with the details that are available. In order to sustainably fund a permanent cut for retail, hospitality and leisure properties below £500,000, we have to ensure that it is paid for. We are seeking to increase the rate on properties with a rateable value of £500,000 or more to ensure that it is sustainably funded. That will come in from April 2026.

[Andrew Lewin]

My hon. Friend is talking about the importance of sustainable funding, and I completely agree. It is fascinating that the last Government had a business rate relief system, which was a good one, but had nothing in the Budget for it at all, so they planned to cancel it entirely. That is why we are now in this situation.

[James Murray]

My hon. Friend is absolutely right to point out that, under the previous Government, there was a series of cliff edges and one-year extensions that provided no stability whatsoever to businesses trying to plan investment, hiring or expansion decisions. That is why we have decided to extend the relief that the previous Government were due to end in April 2025 for one further year, before introducing permanently lower rates from April 2026.

[Dr Johnson]

The Minister is talking about planning—I should declare an interest as a farmer’s wife—and says that 500 farmers will be affected. Of course, none of us can know who is going to die next year. While 500 farmers will be affected, there may be many, many more who might die and might be affected. There is a discrepancy between how many he thinks will definitely be affected—how many he predicts will die—and the actual number of people who may be affected and cannot plan their businesses accordingly, because they simply do not know. He argues that they can put their assets down a generation, but no one knows if there will be a car accident and the younger generation will be killed. He is simply taxing tragedy.

[James Murray]

I think I was following the hon. Lady point that in many cases no one knows when inheritance tax will be due, because people cannot predict the sad events that may happen in their lives. But it is clear that, in trying to work out the impact of changes to tax policy, the best source of data is the actual claims data for those reliefs in the past. That is exactly what we have used. We have looked at the HMRC data on actual claims under agriculture property and business property relief. That is what determines the data that I mentioned of up to 520 estates being affected in 2026-27.

[Dr Johnson]

My point was that the Minister may be correct that 520 estates will be affected, but others who may be affected will need to plan their businesses and lives accordingly. That is why so many more people are affected by his announcement than simply those who will die next year or the year after.

[James Murray]

I return to my point that three quarters of estates claiming agricultural property relief, or agricultural property relief and business property relief, will not pay any more inheritance tax in 2026-27 as a result of these changes. In terms of the extra inheritance tax liability, which is what the data about claims points towards, the data is clear that the majority of estates will not be affected. As I mentioned to several of the hon. Member’s colleagues on Conservative Benches, the data is set out in quite some detail in the letter that the Chancellor wrote to the Treasury Committee. If she has a look at the data in that letter, that might answer some of her questions.

I will briefly finish my comments in relation to business rates. I was thanking my hon. Friend the Member for Welwyn Hatfield (Andrew Lewin) for intervening to point out what we inherited from the previous Government: a situation where relief for retail, hospitality and leisure was chopping and changing year to year. Indeed, from April this year there was to be a cliff edge, so it would have gone away entirely—according to the plans we inherited from the previous Government, there was to be no relief at all after April. We therefore decided to extend the relief at a fiscally responsible level for a further year, ahead of our permanent reforms coming in.

While we are on the subject of hospitality, let me address the absurd notion in the Opposition’s motion—I do not believe the shadow Chancellor mentioned this in his comments—that the pint is under threat. The pint is part of our nation, and we do not need a new law to protect the pint any more than we need a new law to say that the sun must rise in the morning—I wonder whether the Opposition Members who drafted that part of the motion may have been close to a number of points when they did so. In any case, I am proud to reject the insinuation in their motion and to put on record—if it needs to be said—that pints are at the heart of our nation and, under Labour, they will stay that way.

[Bradley Thomas (Bromsgrove) (Con)]

The Government continually talk about how the Chancellor has shaved one penny off a pint, but many publicans in my constituency tell me that they are having to find an extra £2,000 a month for additional costs as a result of the Government’s Budget. Does the Minister accept that a penny off a pint is futile if there are no pubs left to drink in?

[James Murray]

What I accept, as I said earlier, is that our difficult decision on employer national insurance contributions will have impacts on different businesses across the country. But the hon. Member should welcome—businesses across the country will welcome this—the extra support that we have provided through draught relief to support those pubs to succeed. That is an essential part not just of our economic activity across the country, but of our social lives and enjoying pints. I know that enjoying pints matters very much to Opposition Front Benchers.

I will try to make some progress, because there is quite a lot to cover in the Opposition’s motion. On employment, the motion seeks to undermine the Employment Rights Bill, so let me directly address those points. The Bill is the first phase in delivering our plan to make work pay, supporting employers, workers and unions to get Britain moving forward to bring greater predictability to the lives of working people. While I recognise that the flexibility offered by zero-hours contracts, zero-hours arrangements and low-hours contracts can benefit both workers and employers, without proper safeguards that flexibility can be one-sided, and it is far too often the workers who end up bearing all the financial risk.

That is why we have committed to ending this one-sided flexibility, to ensure that all jobs provide a baseline of security so that workers can better plan their lives and their finances. That includes ending exploitative zero-hours contracts. We will deliver the commitment through two measures: first, a right to guaranteed hours where the number of hours offered reflects the hours worked by the worker during a reference period; and secondly, new rights to offer reasonable notice of shifts, with proportionate payment for shifts that are cancelled, moved or curtailed at short notice.

I will try to draw this to a close. [Interruption.] Opposition Members might not want to hear it but, out of respect to you, Madam Deputy Speaker, I will bring my remarks to a close. The motion exposes a Conservative party that is happy to object to the difficult decisions that we have taken but totally unable to offer an alternative plan of its own. The debate has also allowed me to set out, on behalf of the Government, how we are moving fast to take the sometimes difficult but necessary decisions to deliver our plan for change.

We are taking the right decisions to fix our public finances, to restore stability and fiscal responsibility, and to ensure that both businesses and their employees can work productively and securely to drive economic growth. The changes that we have begun making are essential for economic growth, so we reject the Opposition’s motion. We are determined to move further and faster to make people across the UK more secure and better off.

[Madam Deputy Speaker (Ms Nusrat Ghani)]

I call the Liberal Democrat spokesperson.

Bank Closures: Rural Areas

James Murray Excerpts

Monday 24th February 2025 Commons Chamber

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

I commend the hon. Member for North Dorset (Simon Hoare) for securing this debate. He has ensured that the views and concerns of his constituents have been heard by Ministers this evening, and he has set out the particular dynamics of the role of banking hubs in rural communities. The fact that he received so many interventions from other hon. Members underscores how important this issue is to constituents across the country, and I thank him for securing this important debate.

It might be helpful if I outline some of the context around this issue. In recent years, people across the UK have reaped the benefit of the transformations of the UK’s banking sector, particularly the enhanced accessibility and convenience afforded by remote banking. For example, in 2017 40% of UK adults regularly used a bank branch, but by 2022 only 21 % of UK adults did so, and almost nine in 10 banked online or used a mobile app. Notably, that includes 65% of the over-75s. However, the Government recognise that those changes have presented considerable challenges for others.

Bank branch closures can have a particular impact on rural communities given the distances to alternatives—indeed, we heard examples of that from the hon. Member for North Dorset, and other hon. Members who intervened to highlight specific cases and to draw the House’s attention to the challenges facing their constituents. I assure hon. Members, and the people they represent, that this Government understand the importance of face-to-face banking, and banking access, to local communities and high streets. Our objective is to ensure that people and businesses have access to banking services, supporting local communities and local economic growth. Work on that is well under way, and we are working closely with banks to open 350 banking hubs by the end of this Parliament. My right hon. Friend the Chancellor marked the opening of the 100th banking hub in December, and more than 200 hubs have been announced in total.

[Jim Shannon]

The hon. Member for North Dorset referred to 14 banks closing, and I referred to 11 closing. When it comes to the criteria for agreeing where those bank hubs will be, will the Minister reassure me that those constituents who have lost the most banks will be those who get more banking hubs when the opportunity comes through?

[James Murray]

The hon. Gentleman highlights how this issue affects communities right across the UK, and in a moment I will turn to the criteria by which the locations of banking hubs are decided—hon. Members have raised that important issue, and put on record their concerns and feelings about it.

Banking hubs offer counter services provided by post office staff, which allows personal and business customers of more than 30 banks and building societies to withdraw and deposit cash, deposit cheques, pay bills and check their balance. They also, crucially, contain rooms where customers can see community bankers from their bank to carry out wider banking services, such as registering a bereavement or help with changing a PIN. As the hon. Member for North Dorset pointed out, banking hubs offer more than just access to cash—that is an important point regarding why such hubs can bring so much to an area that has otherwise lost its local banks.

Community banking hubs can clearly contribute a great deal to local areas where existing banks have closed, and decisions over the opening of a hub are guided by the Financial Conduct Authority’s regulations. In response to the question from the hon. Member for Strangford (Jim Shannon), it may be helpful for me to briefly outline how the FCA’s process works. When a bank announces a closure, Link, the operator of the UK’s largest ATM network, conducts an impartial assessment of a community’s access to cash needs. Link considers criteria such as population size, the number of small businesses and levels of vulnerability, as well as the distance to the nearest branch, and the cost and time taken to get there via public transport.

Should Link recommend a banking hub, Cash Access UK, a not-for-profit entity funded by major UK banks, will implement it. Crucially, a bank branch cannot close until any recommended services are in place. Additionally, individuals, including Members of Parliament, can directly request an access to cash review via the Link website. In collaboration with industry, the Government remain committed to advancing the roll-out of these hubs.

It is worth pointing out that customers have alternative options for accessing everyday banking services. Notably, 99% of personal and 95% of business banking customers can conduct their banking, including taking out and depositing cash, at over 11,500 Post Office branches nationwide. The Post Office, as several hon. Members have mentioned, has a duty to serve rural communities, with the Department for Business and Trade requiring that 95% of the total rural population across the UK be within three miles of a Post Office. Therefore, where communities might be too small for a banking hub, as may be the case for some of the rural communities we are focusing on this evening, individuals and businesses can still access essential services at their local Post Office.

[Helen Morgan]

Have the people who have developed these regulations considered that three miles is a very long way for those who do not drive or have access to a car, or where there is no bus service? That is certainly the case for large numbers of people in North Shropshire and, I am sure, the other rural communities mentioned during the debate. People have set up their lives to be able to access the services that are available, but if those services are taken away and put somewhere else, they are unlikely to be able to get to that location, which is really problematic. Will the Minister consider reassessing the criteria, so that banking hubs are placed where banks were previously located so that people can still access them?

[James Murray]

The hon. Member is correct that people need to be able to get to banking hubs, and I will address that point later in my speech.

More broadly, this Government are committed to improving the quality of life for people living and working in rural areas, so that rural communities and businesses can realise their full potential. A prosperous rural economy will be underpinned by improvements in rural connectivity, as the hon. Member for North Shropshire (Helen Morgan) pointed out, and access to a diverse range of services. In the autumn Budget of 2024, the Government therefore announced funding of over £500 million next year to deliver digital infrastructure upgrades through Project Gigabit and the shared rural network. That investment will drive roll-out of broadband and 4G connectivity to support access to good internet in rural areas across the UK.

We have also confirmed investment of over £1 billion to support and improve bus services and keep fares affordable. In recognition of the fact that each community has individual needs, we have introduced the Bus Services (No. 2) Bill to put power over local bus services back in the hands of local leaders. Every region in England, including the rural communities at the heart of this debate, will benefit. Taken together, these investments will help improve access to banking services, whether digital or in-person. More broadly, they will help to deliver economic growth more evenly across the country, helping rural areas to thrive.

In closing, on behalf of the Economic Secretary to the Treasury, my hon. Friend the Member for Wycombe (Emma Reynolds), I again thank the hon. Member for North Dorset for his continued work in highlighting this important topic. I assure him and other hon. Members that this Government are steadfast in their commitment to supporting rural communities in their access to banking services, and I thank him again for raising his constituents’ concerns in the House tonight.

Question put and agreed to.

Crown Estate Bill [Lords]

James Murray Excerpts

Report stage
Monday 24th February 2025 Commons Chamber

[Madam Deputy Speaker (Judith Cummins)]

I call the Minister.

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

I thank all hon. Members who have contributed to the debate, and provided further detail about their amendments or concerns.

I start by making it clear that the Government have carefully considered all amendments throughout the passage of the Bill. Where we have agreed with the intent behind an amendment, we have worked hard to find an appropriate way forward. That was evidenced in the changes made by this House to ensure appropriate protections for our seabed. As a result of changes made to the Bill, the Crown Estate will now be required to seek the approval of the Treasury for any permanent disposal of the seabed. I thank the Opposition for a constructive debate on that matter. Alongside that, further changes made in the other place have helped to strengthen the Bill, including changes to require the appointment of commissioners with special responsibility for giving advice about England, Wales and Northern Ireland; a reporting requirement in respect of activities with Great British Energy; and a requirement relating to sustainable development. In that spirit, I have considered the amendments that are before us.

I thank the hon. Member for Ynys Môn (Llinos Medi) for tabling new clause 1, under which, within two years of the day on which the Act commences, the Treasury must have completed the transfer of responsibility for management of the Crown Estate in Wales to the Welsh Government. It would allow the Treasury, by regulations, to make provision about the transfer relating to reserved matters as necessary, and would require it to ensure that no person in Crown employment has their employment adversely affected by the transfer of responsibility.

I also thank the hon. Member for South Cambridgeshire (Pippa Heylings) for tabling new clause 4, to which her colleague, the hon. Member for Brecon, Radnor and Cwm Tawe (David Chadwick), also spoke. It would require the Treasury to set out a scheme for transferring all Welsh functions of the Crown Estate commissioners to Welsh Ministers or a person nominated by Welsh Ministers. The Welsh functions would consist of the property, rights or interests in land in Wales, and rights in relation to the Welsh zone. As I set out in Committee, the Government believe that there is greater benefit for the people of Wales and the wider United Kingdom in retaining the Crown Estate’s current form.

New clause 4 would most likely require the creation of a new entity to take on the management of the Crown Estate in Wales—an entity that, by definition, would not benefit from the Crown Estate’s current substantial capability, capital and systems abilities. It would further fragment the UK energy market by adding an additional entity and, as a consequence, it would risk damaging international investor confidence in UK renewables. It would also risk disrupting the National Energy System Operator’s grid connectivity reform, which is taking a whole-system approach to the planning of generation and network infrastructure. Those reforms aim to create a more efficient system and reduce the time it takes for generation projects to connect to the grid.

[Ben Lake]

I am grateful to the Minister for outlining his concerns about devolving the Crown Estate to the Welsh Government—he listed a number of them. Am I right in saying that he believes that the devolution of powers from the Crown Estate to Scotland has fragmented the market, and is in some way to the disbenefit of people in Scotland?

[James Murray]

The matter that we are considering today, through the two new clauses that I have mentioned, is the proposal by Opposition parties for devolution to Wales. We are not analysing what may have happened in Scotland, historically; we are looking at the proposals put to us in those new clauses, which I am addressing.

To be clear, the cumulative impact of the changes that the hon. Member for Ynys Môn is suggesting in her new clause would likely be to significantly delay the pathway to net zero.

[Liz Saville Roberts]

The Minister said that the Bill would be beneficial to the people of Wales as it stands. Could he quantify that benefit, please?

[James Murray]

If the right hon. Member waits just a moment, I will come to some of the direct benefits for the people of Wales of retaining the Crown Estate in its current form.

It is important to emphasise that the Crown Estate’s marine investments are made on a portfolio-wide basis across England and Wales. Devolving to Wales would disrupt existing investments, as they would need to be restructured to accommodate a Welsh-specific entity. To devolve the Crown Estate at this time would risk jeopardising the pipeline of offshore wind development in the Celtic sea, which is planned for into the 2030s. The Crown Estate’s offshore wind leasing round 5 is spread across the English and Welsh administrative boundaries in the Celtic sea. It was launched in February last year and is expected to contribute 4.5 GW of total energy capacity—enough to power 4 million homes.

In addition to energy, the extensive jobs and supply chain requirements of round 5 will also likely deliver significant benefits for Wales and the wider United Kingdom. Lumen, an advisory firm to the Crown Estate, has estimated that manufacturing, transporting and assembling the wind farms could potentially create around 5,300 jobs and a £1.4 billion boost for the UK economy. Devolution would also delay UK-wide grid connectivity reform. The Crown Estate is using its data and expertise as manager of the seabed to feed into the National Energy System Operator’s new strategic spatial energy plan. On Wales, the Crown Estate is working in partnership with the energy system operator to ensure that its pipeline of Welsh projects—the biggest of which is the round 5 offshore wind opportunity in the Celtic sea—can benefit from this co-ordinated approach to grid connectivity up front.

[David Chadwick]

If devolution presents such enormous barriers, why are the Government choosing to put the headquarters of Great British Energy in Scotland?

[James Murray]

GB Energy is for the benefit of the whole of the UK. It is absolutely right to locate its headquarters in Aberdeen, given the strong connection between Aberdeen and use of the assets of the North sea to generate power for the entire United Kingdom. In fact, the hon. Gentleman’s example underlines my point, which is that when different parts of the United Kingdom work together, we can achieve more than we can separately. I thank him for endorsing my point.

It would not make commercial sense to introduce a new entity, with control of assets only within Wales, into a complex operating environment in which partnerships have already been formed. Furthermore, the Crown Estate’s assets and interests in Wales are fundamentally smaller than its assets in England, and would likely not be commercially viable if their costs were unsupported by the wider Crown Estate portfolio. The Crown Estate can take a longer-term approach to its investments and spread the cost of investments across its entire portfolio. A self-contained, single entity in Wales would not have the same ability; neither would it benefit from the expertise that the Crown Estate has developed over decades of delivering offshore wind at scale. A devolved entity would be starting from scratch.

[Liz Saville Roberts]

The Minister has just told the House that Wales is too small and poor to benefit from the devolution of the Crown Estate. That is an extraordinary argument, and I am sure that the Welsh Government will share my amazement. Has he discussed that with his partners in Welsh Labour?

[James Murray]

I think the right hon. Member has misunderstood the point I was making. If we were to have a devolved entity, it would be starting from scratch midway through a multimillion-pound commercial tendering process, just at a time when the Crown Estate is undertaking critical investment in the UK’s path towards net zero—something I am sure she is keen to support.

The commercial viability of all three 1.5 GW floating offshore wind project development areas in the Celtic sea, which straddle the English and Welsh administrative boundaries, benefited from the Crown Estate’s significant investment of time, expertise and capital, which enabled their entry into the market. UK floating offshore wind, an emerging offshore technology that the Crown Estate is supporting, would be particularly vulnerable to market disruption.

It is important to underline that income generated by the whole Crown Estate benefits the people of Wales. As I have noted, the Crown Estate pays its entire net profits into the UK Consolidated Fund each year. That means that much of the revenue already supports public services in Wales, either by supporting UK Government spending in reserved areas or through the funding provided under the Barnett formula and the Welsh Government’s block grant funding.

[Llinos Medi]

As I mentioned in Committee, the Barnett formula is not a fair formula for Wales. In the Scottish model, £10 million was taken out of the block grant, but those communities received £103 million back. I think that is a fair exchange. Does the Minister not agree?

[James Murray]

The hon. Member has highlighted that the changes made in Scotland led to a reduction in the block grant to Scotland.

The focus of the new clauses is the proposal to devolve Crown Estate capabilities to Wales. As I am setting out, that would not make commercial sense when it comes to advancing greater energy capacity, or when it comes to increasing the Crown Estate’s net profit, which is of course reinvested in public services right across Wales and other parts of the UK.

I draw Members’ attention to the fact that in the other place, the Government supported the inclusion of clause 6, which requires the appointment of commissioners responsible for giving advice about England, Wales and Northern Ireland. That will ensure that the Crown Estate’s board of commissioners continues to work in the best interests of Wales.

[Jim Shannon]

I seek assurance that the ambitious net zero targets will not detrimentally affect the fishing sector. I remember some years ago there was talk of a wind farm just off the coast of Kilkeel, and the fishermen were concerned that it would be in one of their prime fishing sectors, where scallops were plentiful. If that continued, the fishing sector could lose out because the Government decided to push for net zero. I sought reassurance that Northern Ireland MPs would be able to contact the Northern Ireland commissioner directly, but I ask specifically for a wider assurance about the fishing sector in Northern Ireland—for Portavogie, Ardglass and Kilkeel.

[James Murray]

I thank the hon. Gentleman for his intervention about the impact on the fishing sector, and I can reassure him that the Crown Estate is committed to the sustainable management of the seabed. As with any developer, the Crown Estate’s proposals go through the standard planning approval process, which includes the relevant environmental assessments. Under the Crown Estate’s strategy, it has an objective to take a leading role in stewarding the natural environment and biodiversity. Key to delivering on that aim is managing the seabed in a way that reduces pressure on, and accelerates recovery of, our marine environment. Of course, the Bill will not impact directly on how much commercial fishing takes place in areas managed by the Crown Estate.

I pointed out that the inclusion of clause 6 in the Bill in the other place provided for the appointment of commissioners responsible for giving advice about England, Wales and Northern Ireland. The requirement to give advice to the board about Wales will be alongside the commissioners’ existing duties. That change will strengthen the Crown Estate’s ability to deliver benefits for the whole UK.

Hon. Members may not agree with the points I have made, but I hope that I have set out clearly why the Government believe that the existing structure remains the best approach, and I hope that hon. Members will feel that they do not need to press their new clauses to a vote.

New clause 2, which was tabled by the hon. Member for South Cambridgeshire, would require the Crown Estate to ensure that any decisions about marine spatial priorities are co-ordinated with the priorities of the Marine Management Organisation, and to consult any communities or industries impacted by the plans, including fishing communities. I confirm that the Crown Estate and the Marine Management Organisation already have well established ways of working together to ensure effective collaboration for marine spatial planning and prioritisation.

--- Later in debate ---

[Pippa Heylings]

We will not be pressing this new clause to a vote, but the new investment and borrowing powers change the context for the 2020 memorandum of understanding. I ask for reassurance that we might seek a new memorandum of understanding between the Marine Management Organisation and the Crown Estate.

[James Murray]

I thank the hon. Member for her intervention. As I said, the Crown Estate and the Marine Management Organisation agreed the statement of intent in 2020, and it is reviewed periodically to focus on priorities and opportunities for alignment. That may provide an opportunity for review in due course to ensure that it meets current aims.

In addition to the Crown Estate’s relationship with the Marine Management Organisation, there are various regulatory requirements on developers who lease areas of the seabed from the Crown Estate to engage with the Marine Management Organisation themselves. Those include requirements through marine licensing. Developers must obtain marine licences from the Marine Management Organisation for activities that could impact on the marine environment. That process involves consultation with statutory bodies and adherence to marine plan policies.

As part of a marine licence application, developers must conduct environmental impact assessments for projects that could significantly alter the environment. That includes consultation with the Marine Management Organisation and other relevant authorities. Developers are furthermore encouraged to engage with local communities, statutory bodies and other stakeholders throughout the planning and development process to address concerns and ensure compliance with marine plans. I welcome the indication from the hon. Member for South Cambridgeshire that she feels able to withdraw the new clause, and I hope I have gone some way to addressing the points that she made.

New clause 3, which was also tabled by the hon. Member, would require the commissioners to assess plans for benefits to local communities and coastal communities in respect of offshore activities before making any investment decisions. It would also require the commissioners to transfer at least 5% of the Crown Estate’s net profit to local communities impacted by its activities. As I set out in Committee, local communities benefit economically from onshore and offshore developments—for example, through job creation and increased business for local suppliers. Local communities will also benefit in the long term as the country transitions away from volatile fossil fuel markets towards clean, domestically produced power, enhancing Britain’s energy independence and security.

As I highlighted in Committee, the Crown Estate has specifically designed the leasing process for its offshore wind leasing round 5 in the Celtic sea to require developers to make commitments to deliver social and environmental value. Tender bidders must think about how their developments can encourage healthier, more resilient and more prosperous communities, creating lasting benefits that extend beyond the lifetime of wind farm leases. Those commitments will be monitored, reported on and enforced throughout the lifetime of the relevant round 5 developments.

As I have laid out before, the Crown Estate is committed to proactively working with local communities and partners to enable employment and skills opportunities. As I mentioned in Committee, it has invested £50 million through the supply chain accelerator to stimulate green jobs and develop a green skills pipeline. It is supporting development in the skills we need for the future, through measures that range from a GCSE in engineering skills for offshore wind, seed-funded by the Crown Estate and developed with Cornwall college, to a post-16 destination renewables course with Pembrokeshire college. It is also partnering with the employment charity Workwhile to create green construction apprenticeships.

The Crown Estate already works closely with communities, charities, businesses and the Government to ensure that its skills initiatives are sensitive to market demands and emerging technologies. While I respect the concerns reflected in new clause 3, the Government consider it important that the Crown Estate retains flexibility in how its skills initiatives are funded and delivered. That enables it to contribute to skills training in the best possible way, while—importantly—not conflicting with its statutory duty to maintain and enhance the value of the estate. On that basis, I hope that the hon. Member for South Cambridgeshire feels able to withdraw the new clause.

New clause 5 seeks to limit the ability of the Crown Estate to dispose of assets without Treasury approval, by requiring it to seek consent for disposals of assets totalling 10% or more of its total assets in a single year. It would also require the Chancellor to lay a report before Parliament within 28 days of being notified of disposals above that threshold. As the Government have set out both in Committee and in the other place, in our view imposing a limit on disposals would undermine the flexibility needed to enable the Crown Estate to operate commercially and meet its core duties under the Act. It is important to emphasise that the Bill is not intended materially to alter the independence of the Crown Estate. Requiring the Treasury to approve the Crown Estate’s ordinary business transactions, which may well be caught by the new clause, would encroach on the independence of the Crown Estate. That is inconsistent with the Government’s vision for the Crown Estate.

The hon. Member for North West Norfolk (James Wild) has concerns that the Crown Estate could choose to sell off critical or significant assets—indeed, he raised that point in Committee. I reassure the House that strong safeguards are already in place to ensure that the Crown Estate maintains and enhances the estate. The first is a legislative safeguard, namely the statutory duty on the Crown Estate to maintain and enhance the value of the estate, and the returns obtained from it, while having due regard to the requirements of good management. Those are set out in the Crown Estate Act 1961 and will remain unchanged by the Bill. The second is a requirement set out in the framework document that governs the relationship between the Treasury and the Crown Estate. That document is clear that the Crown Estate should inform the Treasury of any matters concerning spending, income or finance that are novel, contentious or repercussive. The Government’s view is that that captures any proposed sales of nationally significant assets—a point the shadow Minister raised. I recognise that he may not agree, but I hope he understands the Government’s position on the matter and, as a result, feels able to withdraw his new clause.

The shadow Minister also tabled new clause 6, which would require the Chancellor to lay before Parliament any partnership agreement between the Crown Estate and Great British Energy. As I made clear in Committee, partnership agreements are highly commercially sensitive. It is therefore right that any agreement is not made public or laid before Parliament, as to do so would likely prejudice the commercial interests of the Crown Estate or Great British Energy. I hope the hon. Member feels that he does not need to push the new clause to a vote.

I will consider amendments 1 and 4 together to try to make progress as speedily as I can, Madam Deputy Speaker. They would impose a legislative limit on the amount of borrowing that could be undertaken by the Crown Estate, and both would require the Government to introduce affirmative regulations, setting out a borrowing limit of no more than a 25% net debt-to-asset value ratio. I thank hon. Members for their contributions on this matter. The Government recognise that borrowing controls are an important consideration for the Bill. As such, the Government made available the Crown Estate’s business case, as well as the underpinning memorandum of understanding, which sets out the guardrails that will protect against uncontrolled or excessive borrowing. The key principle is whether a specific limit should be set in legislation. As I have set out previously, it remains the Government’s view that limits on borrowing are best set outside of legislation in a memorandum of understanding.

I have listened to the point made by the hon. Member for North West Norfolk that a limit outside legislation can be easily changed, but I reassure the House that the Bill has been carefully drafted to include strong controls, specifically the requirement for Treasury consent. Alongside that, the existing requirement for the Crown Estate to maintain and enhance the value of the estate, while having due regard for the requirements of good management, is maintained. Taken together, those elements provide clear guardrails around the ability of the Crown Estate to borrow.

Amendment 2, tabled by the hon. Member for South Cambridgeshire, would require any framework document published by the Chancellor of the Exchequer, the Crown Estate or the commissioners to define “sustainable development”. That definition would be required to include a reference to a “climate and nature duty”, which would mean

“a duty to achieve any targets set out under Part 1 of the Climate Change Act 2008 or under sections 1 to 3 of the Environment Act 2021.”

As I set out in Committee, the Government understand the intention behind amendment 2, but a key purpose of the 1961 Act was to repeal various detailed statutory provisions that had built up over the previous 150 years, which were hampering the effective management of the estate. By focusing the commissioners’ duties on enhancing the estate’s value and the returns generated, the commissioners have a clear objective on which they can be held to account. It is an important principle that giving an organisation too many objectives will make it far less effective than giving it clear and focused priorities, and, as I set out in Committee, the Crown Estate is a commercial business, independent from Government, that operates for profit. That mandate is unchanged by the Bill—[Interruption.]

I am getting vibes from the Whip, Madam Deputy Speaker, so I might not respond as fully as I had hoped to some of the remaining amendments. However, I will address amendment 5, which I know matters to several Labour Members who have spoken to it. Amendment 5, tabled by my hon. Friend the Member for Mid and South Pembrokeshire (Henry Tufnell), would require the commissioners, when keeping the impact of their activities under review with respect to clause 3, to have regard to the UK’s net zero targets, regional economic growth and resilience of energy security. I thank my hon. Friend for the discussions that he and I had on this topic both before Committee and last week. A version of the amendment was debated in Committee. I particularly thank my hon. Friends the Members for Truro and Falmouth (Jayne Kirkham), for St Austell and Newquay (Noah Law) and for Camborne and Redruth (Perran Moon) for engaging with me on this matter, and setting out so clearly what is important to them in the constituencies they represent.

Although I understand the sentiment behind my hon. Friend’s amendment, it is perhaps helpful to set out the context behind clause 3. The clause was supported by the Government in the other place, as it sought to clarify and enhance the accountability of the Crown Estate to deliver on environmental, social and economic outcomes. Clause 3 will require the commissioners to keep under review the impact of their activities on the achievement of sustainable development in the United Kingdom. I emphasise that the public framework document, which governs the relationship between the Crown Estate and the Treasury, will be updated in light of that clause, and will include a definition of “sustainable development”, as I have set out several times. The Crown Estate will continue to include information on its activities in its annual report, which is laid before Parliament. The Government’s intention throughout the passage of the Bill has been to ensure that it can stand the test of time without need for regular updates. That, in part, is why the term “sustainable development” was adopted.

I hope I have addressed some of the concerns raised by hon. Members, although I regret I was not able to address all the amendments with quite the level of detail I had hoped. As I made clear earlier, the Government have carefully considered all amendments throughout the passage of the Bill, and I hope that hon. Members will understand the approach we are taking. I thank my hon. Friends the Members for Reading Central (Matt Rodda), for Wolverhampton North East (Mrs Brackenridge), for Harlow (Chris Vince), and for Rushcliffe (James Naish) for powerfully setting out the benefits that the Crown Estate and measures in the Bill will provide to people in their constituencies and across the country. I hope all hon. Members will understand the approach we are taking, and support our targeted and measured changes to ensure that the Crown Estate is able to operate independently, commercially and in the national interest.

[Llinos Medi]

Diolch, Madam Dirprwy Lefarydd. The Government have tried to explain how devolution and the creation of a Welsh Crown Estate would undermine investor confidence, but that has not been the case for the devolved Scottish Crown Estate, which has raised £700 million from offshore wind investments since 2022. A devolved Crown Estate could lead to greater alignment and integration with the economy in Wales, as has been the case in Scotland. With a well-managed transition, there is no evidence that disruption would occur. Devolution would also offer opportunities to strengthen the role of the local supply chains to be used and to actually see the 5,300 jobs that the Government claim will be created for the people of Wales.

I remind hon. Members that it is projected that child poverty numbers will reach 34.4% in Wales in five years’ time, at the end of this decade, but the Joseph Rowntree Foundation says that the forecast in Scotland is 19.8%. I refer hon. Members to the words of a former Secretary of State for Wales, Lord Peter Hain. He recently said that opposing devolution of the Crown Estate

“reflects old, centralised, conservative, anti-devolution Whitehall thinking.”—[Official Report, House of Lords, 14 October 2024; Vol. 840, c. 18.]

Labour promised us that a Labour Government in Wales and a Labour Government in Westminster would benefit the people of Wales. This Labour Government do not show any ambition for the people of Wales, and I ask every Member who wants to see the best for Wales to join me in the Aye Lobby.

Question put, That the clause be read a Second time.

--- Later in debate ---

[James Murray]

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

The Crown Estate is an independent commercial business with a varied portfolio of assets across London, and with marine, rural and urban holdings. It operates for profit and competes in the marketplace for investment opportunities. However, it is governed by legislation that has not changed since 1961. That is why the Bill is focused on modernising the Crown Estate by removing limitations that, if unchanged, would hamper its ability to compete and invest as a commercial business.

The central aim of the Bill has been to ensure that the Crown Estate has a sustainable future for decades to come. Through these targeted and measured changes to its founding legislation, particularly in respect of its investment and borrowing powers, the Government are building on the Crown Estate’s strong track record of success in creating long-term prosperity for the nation. The changes will ensure that the Crown Estate has flexibility to support sustainable projects and preserve our heritage for generations to come. Crucially, the measures will unlock more long-term investment, helping to drive growth across the UK.

The Bill has been strengthened and improved in its passage through both Houses. It has been amended to require the Crown Estate’s board to include commissioners with special responsibility for giving advice about England, Wales and Northern Ireland. That will ensure that the Crown Estate continues to work in the best interests of the UK. There have also been changes to strengthen its transparency and accountability, for example through the requirement for the Crown Estate to report on its activities under the partnership with Great British Energy, and the requirement to keep its activities under review with regards to the achievement of sustainable development.

I thank all hon. Members and all noble Lords in the other place for their thorough consideration and scrutiny of the Bill, and for the many and varied amendments that have been tabled and debated. I also thank everyone who has played a role in getting the Bill to this stage, including my colleagues in the Treasury, Members from across the House who took the time to provide scrutiny, all the parliamentary staff who worked on the Bill, and the officials in my Department who have put in a significant amount of time and effort. I am grateful for the broad support for the Bill from across all Benches. It will ensure that the Crown Estate can operate successfully for many more decades to come. I commend the Bill to the House.

[Madam Deputy Speaker (Ms Nusrat Ghani)]

I call the shadow Minister.

Inheritance Tax Relief: Farms

James Murray Excerpts

Monday 10th February 2025 Westminster Hall

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

It is a pleasure to speak in this debate with you in the Chair, Dr Murrison. I begin by extending my thanks, as other Members have, to my hon. Friend the Member for South Norfolk (Ben Goldsborough) for opening today’s debate. I recognise his commitment to making sure that his constituents’ opinions are heard here today. I also thank all other hon. Members who have contributed to today’s debate for setting out their views.

I appreciate that some Members disagree with either the principle or the detail of the changes that the Government have announced to agricultural and business property reliefs. It is important to be able to debate this issue here today, given the public interest in this topic. I am aware of the strength of feeling, both within the room today and outside, including from the almost 150,000 people who have signed this petition. I understand, as the petition sets out, that there are concerns about the impacts of the reforms to the reliefs, particularly on working farms.

I will seek to address the points that hon. Members have raised in a moment, but, first, I would like to emphasise the fact that the decision to reform agricultural and business property reliefs was not taken lightly. It was one of many tough decisions that we had to take at the autumn Budget in 2024, given the incredibly challenging fiscal position we inherited from the previous Administration.

[Rachel Taylor]

Does my hon. Friend agree that, until we improve the living standards of ordinary working people, we will never drive up the profitability or sustainability of family farms? It is the Conservative party, with its Budget choices, that devastated our rural communities, and only a Labour Government will focus on improving living standards for every single person living in my constituency of North Warwickshire and Bedworth.

[James Murray]

I thank my hon. Friend for her intervention. She is absolutely right about the importance of repairing the public finances and supporting public services, for her constituents in North Warwickshire and Bedworth and indeed for all of our constituents across the country.

I noted that, in her contribution earlier, my hon. Friend made a point about what this Government are doing to support the profitability of the farming sector. She may have seen that, at the Oxford farming conference in January, the Secretary of State for Environment, Food and Rural Affairs set out the Government’s long-term vision. That includes reforms to use the Government’s own purchasing power to make sure that we are buying more British food, planning reforms to speed up the delivery of infrastructure, and work to ensure supply chain fairness, which will help people involved in the farming industry and more widely, across her constituency and those of other Members here today.

As I said, the decision that we took to reform agricultural property relief and business property relief was one of the difficult but necessary decisions that we needed to take on tax, welfare and spending to restore economic stability, to fix the public finances and to support public services, including an NHS in crisis. We have taken those decisions in a way that makes the tax system fairer and more sustainable.

The reforms to agricultural property relief and business property relief mean that, despite the tough fiscal context, the Government will still maintain significant levels of relief from inheritance tax beyond what is available to others. The Government recognise the role that these reliefs play, particularly in supporting small farms and businesses, and, under our reforms, they will continue to play that role.

The case for reform is underlined by the fact that the full, unlimited exemption, as introduced in 1992, has become unsustainable. Under the current system, the benefit of the 100% relief on business and agricultural assets is heavily skewed towards the wealthiest estates. According to the latest data from HMRC, and as hon. Members have mentioned, 40% of agricultural property relief benefits the top 7% of estates making claims—that is 117 estates claiming £219 million-worth of relief.

[Dave Doogan]

On the point the Minister just made about the notional value of estates, I think I can help him, because that is where he is going wrong, and where he has taken his Government up an agricultural cul-de-sac. When it comes to agriculture, what is important is not the notional value of the estate, but how someone came by that estate—whether they used billions of pounds of money on which they should have been paying tax in order not to pay tax, or whether they inherited the family farm from the generation that went before. That is the differentiation that the Treasury should be making. The value is irrelevant; the Minister should focus on the nature of the inheritance or acquisition.

[James Murray]

What has driven the Government in making the decision to reform agricultural and business property relief is the overwhelming priority of fixing the public finances in a fair and sustainable way. That is why the statistics to which I just referred, about how agricultural and business property relief have come to be used in recent years, are important for understanding the context in which we decided that the time for reform was now.

[Charlie Dewhirst]

rose—

[Ben Lake (Ceredigion Preseli) (PC)]

rose—

[James Murray]

I will respond fully to the point made by the hon. Member for Angus and Perthshire Glens (Dave Doogan) first. As I was saying before he intervened, the data from HMRC, to which other Members have referred, shows that 40% of agricultural property relief benefits the top 7% of estates. It is a similar picture for business property relief, more than 50% of which is claimed by just 4% of estates—that equates to 158 estates claiming £558 million in tax relief. Given the wider pressures on the public finances, we do not believe that that is fair or sustainable, and we felt it was appropriate to reform how the reliefs operate.

[Graham Stuart]

To follow up on the earlier question that I channelled in the Minister’s direction, will he say something about the average profitability of family farms? That puts this in context.

[James Murray]

Earlier in the debate, we heard that the average return on capital is 0.5%, but I am sure that the right hon. Gentleman will be aware that 10% of farms in England have made a return on capital of 10%, so it is perhaps a more complicated picture than the one presented earlier. Similarly, farm business income, which is net profit, shows a wide variation. In designing the reforms, we obviously considered the fact that those who have assets on which they currently claim agricultural or business property relief still need to have generous relief. That is inherent in the design of the reforms that we are proposing: there is full 100% relief for the first £1 million of assets—above other nil-rate bands, spousal transfers and so on—and then effectively an unlimited 50% relief thereafter.

[Graham Stuart]

I thank the Minister for his answer and for telling us about the variation, which I am sure is there, but will he provide the average or median, to give us a sense of the situation for the vast bulk, rather than the top 10%? What does the average or median look like? What is the reality for most farms up and down this country?

[James Murray]

I thank the right hon. Gentleman for his further intervention. In understanding how the reliefs are reformed, the important point is to focus our conclusions on the data on claims. In understanding how many estates are likely to be affected by the changes, the data that matters is the data on claims. That is why the information that I was setting out around where the bulk of the relief currently goes is based on claims data. In a moment I will come to some other statistics that were referred to in the debate.

[Ben Lake]

rose—

[Mr Carmichael]

rose—

[James Murray]

I will make a little progress, and then take interventions in a second.

The data that I just referred to on where the relief currently goes—I was going to address in a moment the data on how many estates making claims we think will be affected in 2026-27—is based on actual claims, so we believe it is the right data on which to base the reforms.

[Damian Hinds]

Will the Minister give way?

[James Murray]

I will take interventions in a moment, but let me make a little progress. Based on the statistics I have just set out, which show where the bulk of the benefit from agricultural property relief and business property relief has been going, we felt it was appropriate to reform how those reliefs operate. That is why the Government decided to change how we target agricultural property relief and business property relief from April 2026. As I have said, we are doing so in a way that maintains significant tax relief for all estates, including for small farms and businesses, while making sure that we repair the public finances.

Under the reforms that we have announced, all individuals will, of course, be able to access the general nil-rate bands and spousal exemptions that apply within the inheritance tax system. On top of those allowances, any business and agricultural property within people’s estates will benefit from 100% relief on a further £1 million of combined assets, except in cases of shares designated as “not listed” on the markets of recognised stock exchanges. Beyond the £1 million of full relief, a further 50% relief will apply with no limit. That means that any inheritance tax paid will be at a reduced effective rate of up to 20%, rather than the standard 40%.

[Mr Carmichael]

Does the Minister not understand that by penalising family farming at the same time as offering the 20% threshold, he leaves a situation in which purchasing land is still an attractive option for those who wish to shelter their wealth? He penalises those he wants to protect while protecting those he seeks to penalise.

[James Murray]

I thank the right hon. Gentleman for his intervention, but let us consider those who will still have generous protection from inheritance tax under the reformed system that we have announced. I point the right hon. Gentleman towards the fact that the reliefs in the reformed system, when taken together with the spousal exemptions and the nil-rate bands, will mean that, depending on people’s individual circumstances, up to £3 million can be passed on by a couple to their children or grandchildren, free of any inheritance tax.

[Ben Lake]

There has been much debate about the discrepancies between the estimate of the Treasury, which states that some 500 farms will be affected every year, and the estimates from the NFU, the Farmers’ Union of Wales, the CAAV, the AHDB—I could name a few more. Is the Minister not concerned, and should it not give the Government pause for thought, that the Central Association for Agricultural Valuers has estimated that in Wales alone the proposals will make an extra 200 family farms subject to an inheritance tax liability? If we are to believe the Government’s estimates, that would constitute 40% of the UK total.

[James Murray]

I am about to come to some of the statistics to which the hon. Gentleman and others referred. I do not have much time, so I will make a little progress before answering some of those questions.

On the point of how the nil-rate band and spousal exemption allowances work together, anything beyond the nil-rate band, the spousal transfers and the 100% full relief will receive unlimited 50% relief, and heirs can spread any payments due over 10 years, interest free. That is a benefit not seen anywhere else in the inheritance tax system.

[Mike Wood]

Will the Minister give way?

[Caroline Voaden]

Will the Minister give way?

[James Murray]

I will make some progress and turn to the impact that the reforms will have on taxpayers, because there has been a lot of discussion of the impacts, and of the numbers that various Members have highlighted during the debate. As the Government have set out in recent months, in ’26-27 up to 520 estates claiming agricultural property relief, including those that also claim business property relief, are expected to pay more as a result of this change. That means that around three quarters of estates claiming agricultural property relief, including those that also claim business property relief, will not pay more tax as a result of the changes.

[Harriet Cross]

Will the Minister give way?

[James Murray]

I will make some progress.

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

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

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

[John Lamont]

Will the Minister give way?

[James Murray]

I have only a few minutes left, so I will not.

I have also participated in several meetings with farming bodies since the autumn Budget 2024, and I am meeting farming bodies again shortly to discuss their concerns further. At the same time, it is important to recognise that other organisations have called for the reliefs to be abolished or restricted. Commentators have highlighted that the reliefs currently contribute to an inheritance tax system that means that the very largest estates pay lower effective tax rates than smaller estates. As the Institute for Fiscal Studies has set out since the Budget, the changes we announced will still leave farmland much more lightly taxed than other assets.

I want to address as many of the points that Members made during the debate as possible, but it is worth saying first that it is important to see the changes in the context of wider support for farmers and the rural community. The Budget committed £5 billion to farming over the next two years, including the biggest budget for sustainable food production in our history. It committed £60 million to help farmers affected by the unprecedented wet weather last year, and we are protecting farms and rural businesses by committing £2.4 billion over the next two years to rebuild crumbling flood defences.

We will also continue to provide existing support for the farming industry in the wider tax system. That includes, for example, the exemption from business rates for agricultural land and buildings, and the ongoing entitlement for vehicles and machinery used in agriculture to use red diesel, as the hon. Member for Dumfries and Galloway (John Cooper) mentioned.

On the point made by the right hon. Member for Orkney and Shetland (Mr Carmichael) about the inheritance tax treatment of Scottish agricultural leases, the Government are aware of the issue and officials have already discussed it with their counterparts in the Scottish Government. There is an existing provision in the Inheritance Tax Act 1984 that deals explicitly with the Scottish agricultural leases. Section 177 of the Inheritance Tax Act means that Scottish agricultural leases passed down on death are not included in the value of the estate.

[Wendy Chamberlain]

On that point, will the Minister give way?

[James Murray]

I have only a few moments, so I will not.

My hon. Friend the Member for North Northumberland (David Smith) asked about introducing a working farmer test. I draw his attention to the fact that a test where relief was provided only if, among other things, the individual received 75% of their income from agriculture did exist in the UK for a short period, between 1975 and 1981. It was removed, however, because of concerns about its impact on the availability of land for tenant farming.

Finally, I will address an issue raised by a number of Members, including the hon. Members for North Cornwall (Ben Maguire) and for Chester South and Eddisbury (Aphra Brandreth), about mental health among the farming community. The Government are committed to supporting farmers and agricultural workers in accessing the support they need to protect their mental health. DEFRA already works with a range of farming charities including the Royal Agricultural Benevolent Institution and Yellow Wellies, which was mentioned by the Liberal Democrat spokesperson. Those organisations have highlighted the mental health challenges for farming communities more generally.

To conclude, as we have heard, the reforms to inheritance tax generate strong views, and I understand that. I recognise that a small number of estates will have to pay more tax, but the reform of the reliefs is necessary given the fiscal challenge that confronts us and the fact that the bulk of the cost of the reliefs had become skewed towards the wealthiest estates. We must put our public finances back on a stable footing and repair our broken public services. We are doing so in a way that involves tough decisions but is as fair as possible and preserves significant relief from inheritance tax for small farms and businesses.

[Julia Buckley]

On a point of order, Dr Murrison. The manner in which the shadow Minister described the view that a farmer was better off if he committed suicide before April 2026 was highly irresponsible. This is a public debate on a very emotive subject. It is televised and it is being shared across social media in real time. This is not the moment to encourage anyone to consider suicide. Farmers’ anxiety and concerns about mental health are running high, and this is the moment to engage constructively with the Treasury, and with farmers and the NFU, who have been in dialogue, to seek the transition to tapered support that I referred to in my intervention, to avoid the very scenario that the shadow Minister repeated.

Every Member here cares for our farmers; it is the reason that has brought us all from different parties together to discuss this matter in a respectful manner. In the interests—[Interruption.] Dr Murrison, may I finish? In the interests of mature and responsible debate, will the shadow Minister kindly correct the record to show that he does not condone suicide but encourages constructive dialogue?

Crown Estate Bill [ Lords ] (Second sitting)

James Murray Excerpts

Committee stage
Thursday 6th February 2025 Public Bill Committees

[The Chair]

I remind the Committee that with this we are discussing new clause 4—Partnership agreement: the Crown Estate and Great British Energy—

“The Chancellor of the Exchequer must lay before Parliament any partnership agreement between the Crown Estate and Great British Energy.”—(James Wild.)

This new clause requires the Chancellor of the Exchequer to lay before Parliament any partnership agreement between the Crown Estate and Great British Energy.

[James Murray]

It is a pleasure to see you in the Chair, Mr Mundell. In his remarks, the shadow Minister essentially set out a similar question, rephrased in a number of different ways, about the publication of the partnership agreement between the Crown Estate and Great British Energy, and I would like to remind him of some of the points we discussed before lunch.

The Crown Estate is keen to ensure that details of the partnership are publicly available on an ongoing basis, and the Government agree that it is sensible to require the Crown Estate to include the relevant detail in its existing annual reports. I would also emphasise—I do not know whether the hon. Gentleman feels that this is less important than we do—that partnership agreements are highly commercially sensitive. It is therefore right that any agreement is not made public or laid before Parliament, as to do so would likely prejudice the commercial interests of the Crown Estate or GB Energy and risk the aims of the partnership, which are to speed up the process of delivering clean energy and investing in clean energy infrastructure.

[Mr Andrew Snowden (Fylde) (Con)]

The shadow Minister talked about the agreement being presented to the Public Accounts Committee in confidence. I am not sure how it would create commercial issues for GB Energy or the Crown Estate if the agreement was viewed in private by the Chair of the Public Accounts Committee and its members.

[James Murray]

We have considered the importance of making sure that the details of the partnership are publicly available. Because of the highly commercially sensitive nature of partnership agreements, the Government have set out that the way forward is to ensure that the commissioners include in their annual reports a summary of their activities, and of any effects or benefits resulting from their activities, under the partnership between the Crown Estate and GB Energy. We believe that that measure fulfils the aim of making sure that the information about the partnership is publicly available.

The work of GB Energy and the Crown Estate is very important for achieving some of the Government’s goals. They will work together to speed up the process of developing clean energy projects by co-ordinating planning, grid connections and leasing to de-risk projects for private developers to build. That will unlock private investment, speed up the deployment of clean energy infrastructure, boost energy independence, save costs for families, create jobs and tackle the climate crisis.

I hope that the Opposition would support some of those goals, although it was drawn to my attention that the shadow Minister campaigned against national grid infrastructure last year in his constituency. He teamed up with Liz Truss to do it; it was the shadow Minister and Liz Truss. Am I going to get sued now for having referenced that? I do not know whether the shadow Minister would like to express his regret at having campaigned against national grid infrastructure, which is obviously so important for the energy transition. Perhaps that is why this debate has touched a particular nerve on the Opposition Front Bench, but that is for him to say, not for me to speculate about.

What I do not have to speculate about, and what I can say with great certainty, is that the Great British Energy and Crown Estate partnership is very important for this Government, and the measures in clause 4 ensure that the relevant information is publicly available. I therefore commend the clause to the Committee.

Question put and agreed to.

Clause 4 accordingly ordered to stand part of the Bill.

Clause 5

Salmon farms on the Crown Estate

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

[James Murray]

Clause 5 would require the Crown Estate commissioners to assess the environmental impact and animal welfare standards of salmon farms on the Crown Estate on an ongoing basis. Where that assessment determines that a salmon farm is causing environmental damage or has significant animal welfare issues, the Crown Estate would be required to revoke the relevant licence. The commissioners would be required to make the same assessment of any applications for new licences for salmon farms, and where they determine that an application may cause environmental damage or raises significant animal welfare concerns, the Crown Estate must refuse the application.

During the Bill’s passage in the other place, peers felt it necessary to amend the Bill to add clause 5. The Government understand the objectives behind the clause, but we are unable to support it, as it would duplicate existing protections. Fisheries policy is also largely devolved, and therefore responsibility for this issue in Scotland, Wales and Northern Ireland rests with the relevant devolved Government. At present, virtually all salmon aquaculture in the UK takes place in Scotland, and the management of the Crown Estate in Scotland is also a devolved matter.

For those reasons, the clause would have almost no impact in practice on farmed salmon in the UK. As it stands, it risks impeding an already thoroughly regulated industry, while having little to no positive impact, due to the territorial realities of the Bill. Therefore, I do not recommend clause 5 to the Committee.

[James Wild (North West Norfolk) (Con)]

It is a pleasure to serve under your chairmanship again so soon, Mr Mundell. As the Minister noted, the clause was added in the other place, particularly following the efforts of my noble Friend Lord Forsyth of Drumlean. It was backed by peers from across the parties, and Labour peers may have supported it as well. The Minister says that it duplicates provisions that exist. Given that the Government said in the House of Lords that they support its objective, it is clearly disappointing to see them removing these provisions, with the message that that sends about the importance of protecting the future of wild Atlantic salmon.

Question put and negatived.

Clause 6

Commissioners with special responsibility

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

[James Murray]

Clause 6 amends the Crown Estate Act 1961 to require the appointment of commissioners with special responsibility for giving advice about England, Wales and Northern Ireland. That responsibility would be in addition to the other responsibilities of a commissioner. For appointments relating to Wales and Northern Ireland, no recommendation may be made to His Majesty, unless Welsh Ministers and the Executive Office in Northern Ireland have been consulted.

The legislative changes brought about by clause 6 ensure that those on the board of commissioners of the Crown Estate continue working in the best interests of Wales and Northern Ireland, alongside performing their existing duties as commissioners. The clause, which was added as an amendment, following Government support in the other place, will bring knowledge of the devolved nations even more directly to the board table and will supplement the expertise of the Crown Estate’s director for the devolved nations, who is based in its recently opened office in Cardiff. The clause will ensure that the board of commissioners of the Crown Estate continues working in the best interests of Wales and Northern Ireland. I therefore commend it to the Committee.

[James Wild]

This is a pretty straightforward clause. It is one of those that were added to the Bill in the other place to improve it, and I hope the Minister might learn the lesson of those clauses as we come to consider the new clauses shortly.

Question put and agreed to.

Clause 6 accordingly ordered to stand part of the Bill.

Clause 7

Extent, commencement and short title

[James Murray]

I beg to move amendment 3, in clause 7, page 4, line 4, leave out subsection (4).

This amendment removes the privilege amendment inserted by the House of Lords.

[The Chair]

With this it will be convenient to discuss clause stand part.

[James Murray]

These are very straightforward matters to debate. Government amendment 3 removes the privilege amendment inserted by the other place. Clause 7 sets out the Bill’s extent, commencement period and short title in the usual manner for such legislation. I commend Government amendment 3 and clause 7 to the Committee.

[James Wild]

Thank you for calling me to speak again, Mr Mundell—it is good to get the exercise. There is not much to add on this very straightforward clause and amendment, other than that the commencement date, which brings the legislation into force automatically within two years, could usefully be applied to other legislation from the last Parliament. Quite a lot of private Members’ Bills and other pieces of legislation were passed that have not been commenced. I could expand on that issue at length, Mr Mundell, but you would rightly say that it was not in scope. However, car parking regulations, for example, have not been brought into the code of practice or into effect. Having a clear date in legislation to say, “This will happen, as long as the Bill passes,” is a good thing to do.

Amendment 3 agreed to.

Clause 7, as amended, ordered to stand part of the Bill.

New Clause 2

Territorial seabed

“After section 3A of the Crown Estate Act 1961 (inserted by section 1 of this Act) insert—

‘3AA Restriction on permanently disposing of interest in seabed etc

(1) The Commissioners may not without the consent of the Treasury permanently dispose of—

(a) any part of the territorial seabed, or

(b) any interest, right or privilege over or in relation to the territorial seabed,

which forms part of the Crown Estate.

(2) Accordingly, without that consent, any purported disposal of a kind mentioned in subsection (1) is void.

(3) In subsection (1), “territorial seabed” means the seabed and subsoil within the seaward limits of the United Kingdom territorial waters.’”—(James Murray.)

This new clause requires the Crown Estate Commissioners to obtain consent from the Treasury before they permanently dispose of any of the Crown Estate’s interest in, or rights or privileges in relation to, the territorial seabed.

Brought up, and read the First time.

[James Murray]

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

[The Chair]

With this it will be convenient to discuss new clause 3—Limit on the disposal of assets—

“After section 3 of the Crown Estate Act 1961, insert—

‘3A Limit on the disposal of assets

(1) The Commissioners must inform the Treasury if the disposal of assets of the Crown Estate will be of a value totalling 10% or more of the Crown Estate’s total assets in a single year.

(2) The Treasury must approve of any disposal of assets above the threshold in subsection (1) and the Chancellor of the Exchequer must lay a report before Parliament within 28 days of being notified by the Commissioners.’”

This new clause requires the Crown Estate Commissioners to notify and seek HM Treasury approval for the disposal of assets totalling 10% or more of the Crown Estate’s total assets.

[James Murray]

New clause 2 relates to the seabed, which is obviously an important asset held by the Crown Estate. Specifically, the clause will prevent the Crown Estate from selling the seabed without obtaining consent from the Treasury. During the Bill’s time in the other place, there was significant interest in the ability of the Crown Estate to dispose of unique national assets such as the seabed.

It will be no surprise to the Committee that the law on the ownership of the seabed is incredibly complex. As such, the Financial Secretary to the Treasury committed to explore the matter further and, if required, to bring forward a legislative provision to restrict the Crown Estate’s ability to sell the seabed.

I am pleased to say that the clause delivers on the commitment made by the Financial Secretary by putting special protections in place for the seabed. It does that by requiring the Crown Estate commissioners to obtain consent from the Treasury before they permanently dispose of any part of, or the Crown Estate’s interests in or rights and privileges in relation to, the territorial seabed.

[Melanie Onn (Great Grimsby and Cleethorpes) (Lab)]

Could the Minister give examples of when the Crown Estate might consider selling the territorial seabed?

[James Murray]

I will come in just a moment to some of the scenarios that the new clause might cover.

As I said, the new clause ensures that the Crown Estate commissioners must obtain consent from the Treasury before they permanently dispose of any part of, or the Crown Estate’s interests in or rights and privileges in relation to, the territorial seabed. To be clear, that does not mean that the Crown Estate could never be permitted to dispose of a seabed. To answer my hon. Friend’s question, national or local interests may be best served by such a sale, including, for example, to another part of the public sector to enable local infrastructure development. Any such sale could, under these measures, take place only with the agreement of Ministers, and it is right that they are decision makers on such sales.

I should also make it clear that the clause would not fetter the Crown Estate’s existing right to agree licences or leases in relation to the seabed, which by definition do not represent a permanent disposal of the asset. The ability to agree long-term licences and leases for the seabed will continue to be an important feature of the Crown Estate, to attract significant investment needed for offshore clean energy developments.

New clause 3, tabled by the hon. Member for North West Norfolk, seeks to limit the ability of the Crown Estate to dispose of assets without Treasury approval. Specifically, it would require the Crown Estate to seek consent for the disposal of assets totalling 10% or more of its total assets in a single year, and that the Treasury lay a report before Parliament within 28 days of being notified of disposals above that threshold.

The Government’s view is that imposing a limit on disposals would undermine the flexibility needed to enable the Crown Estate to operate commercially and meet its core duties under the Bill. There may be instances where it makes commercial sense to dispose of high-value assets, particularly when the Crown Estate takes a long-term view of the business and its strategy.

I recognise that the new clause would not prohibit disposals above the specified limit, but would require the Crown Estate to obtain Treasury approval. However, as I have set out for the Committee, the Crown Estate is an independent commercial business, and it is not the Government’s intention to materially alter its independence in such a way that the Treasury is required to approve its business decisions.

However, I do understand that there may be concerns about the Crown Estate’s ability fundamentally to change the nature of the estate. I reassure the hon. Member that the core duty of the Crown Estate—to maintain an estate in land and to enhance and maintain the value of that estate—is unchanged by the Bill. I hope that that provides the appropriate reassurance and that he feels able not to press new clause 3.

The Government are thankful for the constructive engagement of the Opposition on the matter of disposals. That has led to special protections being put in place for the seabed. I therefore commend new clause 2 to the Committee.

[James Wild]

I will respond to Government new clause 2 and to new clause 3, which was tabled in my name. As we heard from the Minister, Government new clause 2 will require the Crown Estate commissioners to obtain consent from the Treasury before they permanently dispose of any of the Crown Estate’s interest in, or rights or privileges in relation to, the territorial seabed. The Government moved this measure because of the extensive debate in the other place about the sale of certain assets, and particularly the seabed. We welcome the constructive approach taken by Ministers; Lord Livermore gave a commitment in the other place, and it has been honoured today, so we will support the new clause.

Although we welcome the new clause, we still have concerns about the disposal of other assets. My new clause 3 would require the Crown Estate commissioners to seek approval from His Majesty’s Treasury for the disposal of assets totalling 10% or more of the Crown Estate’s total assets. It would also require the Chancellor to lay a report before Parliament within 28 days of being notified of such a disposal by the commissioners.

As previously noted in Committee, the Crown Estate owns some of the nation’s most vital assets. It is somewhat surprising to find that there are few safeguards to prevent the Crown Estate commissioners from deciding to sell critical assets. That is why the debate in the other place, which exposed the issue of the seabed and brought about new clause 2, was so important. However, the Crown Estate has lots of other assets, which Members may wish to refer to and which they may think also deserve special attention.

In the original business case for modernisation of the Crown Estate, which is publicly available, it was noted that the Crown Estate was planning £1.4 billion of disposals, which—coincidentally enough—equates to nearly 10% of its portfolio. In the other place, my noble Friends suggested a disposal limit of anything greater than £10 million. The noble Lord Livermore responded:

“It is the Government’s view that imposing a statutory limit on disposals in this way would undermine the flexibility required by the Crown Estate to ensure that it can operate commercially and fulfil its core duties under the future Act.”—[Official Report, House of Lords, 5 November 2024; Vol. 840, c. 1411.]

The Minister made a similar argument in his speech, but I am not sure that it is right. Given that the assets are held for the benefit of the nation, there should be some form of greater transparency if they are to be disposed of. Reporting to Parliament and seeking approval from the Treasury for disposals over a set percentage would provide such transparency.

The disposal of assets by the Crown Estate should be properly scrutinised, given its important role and statutory purpose. When I asked the Crown Estate about its planned disposals—the £1.4 billion referred to in document on the modernisation of the Crown Estate, which any Member may access—it said that it was unable to disclose its plans. Members might guess that the old “confidential, commercially sensitive” reason was given. That raises concerns about transparency. Will the Minister confirm whether he knows which assets were included in that figure and whether the Crown Estate plans further disposals? I asked the same question on Second Reading, and the Minister replied to most of my points, but that is one he did not reply to. Perhaps he will do so on this occasion.

Having reflected on the debates in the other place, we have changed our approach from a £10 million cap to a 10% cap, after which new clause 3 would require approval and a report to Parliament. That is a modest measure, which would not inhibit the commercial freedom of the Crown Estate to take such decisions if it wants to. It owns assets such as Great Windsor Park and others, and who knows which it may decide to sell at some point in the future? Such assets are held in right of the Crown, so this is not about the sovereign’s private income, but about the income generated for the taxpayer. Transparency is something that the Government should endorse.

[James Murray]

I thank the shadow Minister for his comments, but imposing a limit on disposals would undermine the flexibility needed to enable the Crown Estate to operate commercially and meet its core duties under the Crown Estate Act 1961. As I mentioned earlier, there may be instances where it makes commercial sense to dispose of high-value assets, particularly when the Crown Estate, by its nature, takes a longer-term view of the business and its strategy.

[James Wild]

The Minister talked about flexibility, but the Crown Estate would not suddenly decide tomorrow to sell some asset; it will have a business case and a process. That business case will go to the Chancellor, who will get advice rapidly—within a matter of hours or a day—either approve it or not, and report to the House. I do not see what the flexibility issue is.

[James Murray]

I point the shadow Minister to the way the system currently operates. The Crown Estate operates independently from Government, but there is a long-standing, constructive and transparent relationship between it and the Treasury. That ensures that the Government will be consulted on any potential sale of a nationally significant asset. That is underpinned by the Crown Estate’s framework document, which makes it clear that the Crown Estate should inform the Treasury

“of any matters concerning spending, income or finance that are novel, contentious or repercussive.”

That is an important point to highlight in terms of the way the system currently operates.

However, I return to my earlier point, which is that the Crown Estate is an independent commercial business, and it is not the Government’s intention to materially alter its independence in such a way that the Treasury is required to approve its business decisions. I reassure the shadow Minister and others on the Committee that the Crown Estate’s core duty, which is to maintain an estate in land and to enhance and maintain the value of the estate, is unchanged by the Bill.

Finally, to respond to the question about the £1.4 billion of disposals outlined in the business case, those published as part of the Lords stages relate to non-strategic assets.

Question put and agreed to.

New clause 2 accordingly read a Second time, and added to the Bill.

New Clause 3

Limit on the disposal of assets

“After section 3 of the Crown Estate Act 1961, insert—

‘3A Limit on the disposal of assets

(1) The Commissioners must inform the Treasury if the disposal of assets of the Crown Estate will be of a value totalling 10% or more of the Crown Estate’s total assets in a single year.

(2) The Treasury must approve of any disposal of assets above the threshold in subsection (1) and the Chancellor of the Exchequer must lay a report before Parliament within 28 days of being notified by the Commissioners.’” —(James Wild.)

This new clause requires the Crown Estate Commissioners to notify and seek HM Treasury approval for the disposal of assets totalling 10% or more of the Crown Estate’s total assets.

Brought up, and read the First time.

Question put, That the clause be read a Second time.

--- Later in debate ---

[James Wild]

I will not detain the Committee for long. The hon. Member for Ynys Môn referred to the previous Conservative Government’s position, which has not changed today. The proposal would introduce an element of risk in spinning out assets and revenue streams. We heard about the particulars of the Celtic sea, so this is not the right proposal for this time.

[James Murray]

I thank the hon. Member for Ynys Môn for tabling new clause 5, which would require that within two years of the day on which the Act commences, the Treasury must have completed a transfer of the responsibility of the management of the Crown Estate in Wales to the Welsh Government. It would allow the Treasury, by regulations, to make provision about the transfer relating to reserved matters as necessary, and would require it to make provision to ensure that the employment of any person in Crown employment is not adversely affected by the transfer of responsibility.

I also thank the hon. Member for South Cambridgeshire for tabling new clause 12, which would require the Treasury to set out a scheme to transfer all existing Welsh functions of the Crown Estate commissioners to Welsh Ministers or a person nominated by Welsh Ministers. The Welsh functions would consist of the property, rights or interests in land in Wales and rights in relation to the Welsh zone.

The Government believe there is greater benefit for the people of Wales and the wider United Kingdom in retaining the Crown Estate’s current form. Both new clauses would most likely require the creation of a new entity to take on the management of the Crown Estate in Wales which, by definition, would not benefit from the Crown Estate’s current substantial capability, capital and systems abilities. It would further fragment the UK energy market by adding an additional entity and, as a consequence, risk damaging international investor confidence in UK renewables and disrupting the National Energy System Operator’s grid connectivity reform, which is taking a whole-systems approach to the planning of generation and network infrastructure. Its reform aims to create a more efficient system and reduce the waiting times for generation projects to connect to the grid.

[Llinos Medi]

For clarification, does that plan not include Scotland, which has already been devolved?

--- Later in debate ---

[James Murray]

I thank the hon. Lady for that question, but we must consider the proposal before us in terms of the situation we face now, rather than consider decisions that have been made in relation to another nation in the past. We are considering not only the challenges but the opportunities for generating renewable energy in connection with assets closer to Wales or closer to England. The Government believe that having a united approach, through retaining the Crown Estate’s current form, is the best way to improve lives for people in Wales and across the rest of the UK.

As I was saying before the hon. Lady intervened, our reforms aim to create a more efficient system and reduce the waiting times for generation projects to connect to the grid. I am sure she would not want to see those waiting times increase. The cumulative impact of the changes that she and the hon. Member for South Cambridgeshire are suggesting in their new clauses would likely significantly delay the pathway to net zero.

Furthermore, the Crown Estate’s marine investments are currently made on a portfolio-wide basis across England and Wales. To devolve to Wales would disrupt the existing investments, since they would need to be restructured to accommodate a Welsh-specific entity. To devolve the Crown Estate at this time would risk jeopardising the existing pipeline of offshore wind development in the Celtic sea planned into the 2030s. The Crown Estate’s offshore wind leasing round 5 is spread across the English and Welsh administrative boundaries in the Celtic sea. It was launched in February last year and is expected to contribute 4.5 GW of total energy capacity, or enough to power 4 million homes.

In addition to energy, the extensive jobs and supply chain requirements of round 5 will also likely deliver significant benefits for Wales and the wider UK. Lumen, an advisory firm to the Crown Estate, has estimated that manufacturing, transporting and assembling the wind farms could potentially create around 5,300 jobs and create a £1.4 billion boost for the UK economy.

Devolution would also delay UK-wide grid connectivity reform. The Crown Estate is using its data and expertise as managers of the seabed to feed into the National Energy System Operator’s new strategic spatial energy plan. For Wales, the Crown Estate is working in partnership with the energy system operator to ensure that its current pipeline of Welsh projects, the biggest of which is the round 5 offshore wind opportunity in the Celtic sea, can benefit from this co-ordinated approach to grid connectivity up front. It would not make commercial sense to introduce a new entity, with control of assets only within Wales, into that complex operating environment, where partnerships have already been formed. Furthermore, the Crown Estate’s assets and interests in Wales, as compared with its assets in England, are of a fundamentally smaller magnitude, which would likely not be commercially viable if the costs were unsupported by the wider Crown Estate portfolio.

The Crown Estate, in its present form, has the ability to take a longer-term approach to its investments and spread the costs of those investments across its entire portfolio. A self-contained, single entity in Wales would not have the same ability, nor would it benefit from the expertise that the Crown Estate has developed over decades in delivering offshore wind at scale. A devolved entity would be starting from scratch, midway through a multimillion-pound commercial tendering process, at a time when the Crown Estate is undertaking critical investment in the UK’s path towards net zero.

For example, the commercial viability of all three 1.5 GW floating offshore wind project development areas in the Celtic sea, which straddle the English and Welsh administrative boundaries, benefited from the Crown Estate’s significant investment of time, expertise and capital to enable entry to market. UK floating offshore wind, which is an emerging offshore technology that the Crown Estate is supporting, would be particularly vulnerable to market disruption.

It is also important to underline that income generated by the whole Crown Estate benefits the people of Wales. As I have noted, the Crown Estate pays its entire net profits into the UK Consolidated Fund each year. That means that much of the revenues already support public services in Wales, either through supporting UK Government spending in reserved areas or through the funding provided under the operation of the Barnett formula and the Welsh Government’s block grant funding.

[Perran Moon (Camborne and Redruth) (Lab)]

On that point, does the Minister agree that a lot of the concern and anxiety expressed so far stems from the idea of huge opportunities for revenue generation by the Crown Estate passing through deprived rural coastal communities and going to the Treasury? Will he comment on how a place like Cornwall, which is not subject to the Barnett formula, will benefit from all the resources from something like the Celtic sea?

[James Murray]

My hon. Friend is absolutely right that a collective approach to projects such as those in the Celtic sea, which cross English and Welsh administrative boundaries, can increase a return for the UK Consolidated Fund, which benefits people in Cornwall, Wales and other parts of the UK. It ensures that we get the best return on our investment through Crown Estate activities. Our concern about the proposition in the new clauses is that it would undermine such revenue generation for all our public services, as well as disrupting the emerging market in offshore floating wind at a critical time, when what investors need is stability, certainty and confidence to invest in a growing sector, not organisational change that might undermine the investment they seek to make.

To pick up further the point made by my hon. Friend the Member for Camborne and Redruth, were Wales to benefit only from the income generated in Wales, it would likely receive zero or negligible benefits for several decades to come, because Welsh assets are relatively new and it will take them time to mature—in the order of 10 to 15 years. The Crown Estate has shown itself to be a trusted and successful organisation, with a proven track record in effective management and profit generation, which are valuable outcomes that we need to be careful not to undermine.

As I set out earlier, the Government supported the inclusion of clause 6, which will require the appointment of a commissioner responsible for giving advice about Wales. I will not repeat what I have already set out, but it is important to underline that that will help to ensure that the board of commissioners for the Crown Estate continue to work in the best interests of Wales, alongside their existing duties as commissioners. That will certainly strengthen the Crown Estate’s ability and mission to deliver benefits for the whole UK.

I am aware that hon. Members may not agree with the points I have made, but I hope that I have set out clearly why the Government believe the existing structure remains the best approach. I hope hon. Members feel able not to press their new clauses.

[Llinos Medi]

I thank the Minister for those comments; I will come back on a few of them.

This debate is about fairness. We are asking for fairness and equity for Wales, and parity with Scotland. It is important to give a bit of history. Our natural resources in Wales have been extracted from our communities yet, as I mentioned earlier, by the end of this decade 34% of children in Wales will live in poverty. If the money we are discussing was spent back in Welsh communities, it would have a dramatic effect.

--- Later in debate ---

[The Chair]

Indeed.

[James Murray]

I thank the hon. Member for Ynys Môn for tabling new clause 6, which would require that the commissioners must transfer all net revenue profit generated from the Crown Estate’s activities in Wales to the Welsh Government on an annual basis. As The Crown Estate’s operations are not divided into business units for each nation, calculating the exact net profit figure attributable to Wales is not straightforward, because most of the associated costs cannot easily be disentangled from the Crown Estate’s overall costs and would, in places, require subjective judgment.

Furthermore, as I set out earlier, given that the Crown Estate takes a long-term approach to investments, it is anticipated that its investments in Wales could take up to 10 to 15 years to see an appropriate return. Therefore, if net profits were transferred to the Welsh Government now, they are likely to be zero or negligible. I hope that explanation was helpful and that the hon. Member feels able to withdraw the new clause.

[Llinos Medi]

I am unsure how the Minister can say that we would not receive any profits when the Government cannot work out what profits Wales generates. It feels a bit difficult to understand that argument.

I am fighting the corner for fairness for Wales. We have lost all our natural resources and that has been feeding the UK machine. Unfortunately, we are seeing poverty on the rise and deindustrialisation in communities. The new clause would see the profits that are generated given back to those communities, to be spent in those communities and on their future.

Question put, That the clause be read a Second time.

--- Later in debate ---

[Llinos Medi]

I note that since 2021 the net revenue profit and asset value data for Wales has not been published by the Crown Estate. The Crown Estate says that the reason for this is that:

“While in the past, we have produced illustrative figures for Wales, we have since shifted our focus to a more holistic approach to assessing value and increasing our investment, and we realise that such figures are not a fair reflection of value. The previous Wales numbers we published have not included a cost allocation.”

In an answer from September 2024 to my written question asking about the merits of producing regular disaggregated assets and revenue data for Wales, the Government said:

“To achieve efficiency in its operations, the Crown Estate runs many of its functions at a whole enterprise level. As a result, separate financial statements for Wales would not reflect the fact that expenditure is incurred for the benefit of the whole portfolio, and it is not possible to disaggregate net revenue profit attributable to Wales.”

I also note that the Government accepted an amendment to the Bill in the House of Lords to include national commissioners for England, Wales and Northern Ireland on the board of the Crown Estate. The amendment also grants Welsh Ministers and the Executive Office in Northern Ireland the right to be consulted about the Welsh and Northern Irish appointments. Therefore, can the Government outline how these national commissioners will be able to advise on the affairs of each respective nation if there is no process by which the Crown Estate can measure and delineate the profits and costs incurred separately in England, Wales and Northern Ireland?

New clause 7 would address this gap by requiring annual reporting of both asset value and revenue across all nations under the Crown Estate, and by doing so, it would require the Crown Estate to develop a way to measure asset value and revenue in a consistent manner. I hope the Government will accept this amendment to strengthen the ability of national commissioners to fulfil their intended role to advise and act in the interests of the nations they represent on the Crown Estate board.

I turn to new clause 8. Under the current arrangements, many public bodies, such as local authorities, pay lease fees to the Crown Estate simply to lease the land in their own area. However, details of these are not routinely published. In response to my written question in October 2024, the Government noted that,

“Publishing details of those fees would risk prejudicing the commercial interests of both The Crown Estate and the local authorities involved.”

However, local authorities are able and willing to provide this information through freedom of information requests. These FOIs have revealed that in 2023 local authorities in Wales paid fees amounting to well over £300,000 a year. At a time when council budgets are under enormous pressure, how can these fees be justified? This is public money that vital council services such as housing, education and social care are being deprived of.

We should be having a debate on the merits of these fees. This has to start with total transparency and a full account of what is being charged and where. That is why I have tabled new clause 8, which requires the Crown Estate to publish in its annual accounts a list of all lease agreements it has with public bodies in Wales, England and Northern Ireland, including each lease’s name and valuation. I ask the Government to support my new clause for the sake of transparency and to agree that, where public money is being spent, the public should be able to see where this money is going.

New clause 9 is similar to new clause 8. It would require that the Crown Estate commissioners report separately for England, Wales and Northern Ireland, and that the devolved legislatures have these reports laid before them. The Crown Estate already produces highlights reports for Wales and Northern Ireland. This amendment would place this type of reporting on a statutory footing by ensuring that these reports are made available to both the Senedd and the Northern Ireland Assembly, and would allow for greater transparency and engagement between the Crown Estate and the devolved legislatures. Diolch.

[James Murray]

New clause 7, tabled by the hon. Member for Ynys Môn, would require the Crown Estate to disaggregate reporting in its accounts to show capital and revenue figures for the activities of the Crown Estate in England, Wales and Northern Ireland. At present, the Crown Estate’s operations are not divided into business units by nation. It would therefore not be straightforward to disaggregate reporting in that way. It would be a complex task, requiring a series of highly subjective judgments to be taken. Although it is possible to identify gross revenues from each nation, reporting them without any representation of the costs associated would be entirely misleading. However, the Crown Estate does publish broader information relating to its activities in England, Wales and Northern Ireland as part of its annual report and accounts. The Government’s view is that it remains appropriate for the Crown Estate to continue its reporting on a whole-business basis. I hope that that explanation is helpful and encourages the hon. Member to withdraw her new clause.

--- Later in debate ---

[The Chair]

My decision is that new clause 12 is sufficiently similar to new clause 5 as not to justify a separate vote, so we will move on to the remaining procedures.

Question proposed, That the Chair do report the Bill, as amended, to the House.

[James Murray]

May I take this moment to thank all hon. Members on both sides of the Committee for their attendance and their contributions? I also thank you, Mr Mundell, for chairing the Committee. I thank the Treasury officials, the House of Commons officials and everyone else for making the Committee run so smoothly.

[James Wild]

I am grateful, Mr Mundell, for your chairing this afternoon, and I am grateful to Ms Furniss for chairing the first session this morning. I am grateful for the support, help and advice of the Clerks and for the contributions and responses provided by the Crown Estate during the passage of the Bill. I look forward to reconvening with Members for its remaining stages, which I understand will be on 24 February—they will be a pleasure. I am grateful to the Minister for getting on the record my strong opposition to the 100 miles of pylons coming from Grimsby to Walpole in my constituency and the need to look at underground options.

Crown Estate Bill [ Lords ] (First sitting)

James Murray Excerpts

Committee stage
Thursday 6th February 2025 Public Bill Committees

[Pippa Heylings (South Cambridgeshire) (LD)]

Amendment 7 is similar to amendment 4, and is supportive of its essence. It is about introducing a sensible borrowing limit for the Crown Estate commissioners by capping their net debt-to-asset value ratio at 25%, with any change to that limit requiring parliamentary approval.

As we have just heard, clause 1 as it stands grants the Crown Estate significant new powers to borrow and access financial assistance from the Treasury. Although investment in the Crown Estate’s portfolio—particularly in areas such as offshore wind—is welcome, it is vital that we ensure fiscal responsibility and protect the long-term value of these assets for the nation.

Amendment 7 is about introducing proper safeguards. The Crown Estate manages over £16 billion in assets, and its revenues contribute directly to the Treasury and public finances. Without a clear borrowing limit, we could risk unchecked debt accumulation, which could ultimately undermine the Estate’s financial sustainability and reduce the returns it provides to the Exchequer. A 25% debt-to-asset ratio is a reasonable cap and allows for investment and growth, but prevents excessive leveraging that could put the Estate’s finances at risk. Crucially, the amendment also ensures parliamentary oversight. Any changes to the limit must be debated and approved by both Houses, rather than left solely to the discretion of the Treasury.

This is not about preventing the Crown Estate from borrowing; it is about ensuring that borrowing is responsible, transparent and aligned with the long-term interests of the nation. Given the Crown Estate’s unique status and the importance of its revenues to the public purse, it is only right that Parliament retains a say over any significant increase in borrowing capacity. The amendment would only confirm assurances that were provided in the other House by Lord Livermore. In his work with Baroness Kramer, we were assured that there would be a cap on borrowing to 20% of the loan-to-value ratio in the updated framework agreement. Amendments 4 and 7 reflect those promises, and I urge the Government to support amendment 7 to safeguard the financial integrity of the Crown Estate and ensure that borrowing powers are used wisely and with proper oversight.

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

It is a pleasure to serve on the Committee with you as Chair, Ms Furniss. I will turn to the amendments in a moment, but I will first briefly address why clause 1 should stand part, and what it would achieve in amending the Crown Estate Act 1961.

The clause amends the 1961 Act to clarify the powers of the commissioners and remove certain statutory restrictions in respect of borrowing. Those changes are central to the aims of the Bill, which are to modernise the Crown Estate and to remove limitations on investments, to ensure that it can meet its core statutory duties. Those duties—which it is right for the Crown Estate to pursue in the national interest—are to maintain and enhance the value of the estate and the returns obtained from it.

The Crown Estate is a commercial business, independent from Government, that operates for profit and competes for investment. However, limitations placed on it by the Crown Estate Act 1961 currently risk its ability to compete and invest most effectively, meaning that it is less able to deliver returns for the public purse than it might otherwise be. The clause therefore makes two main changes.

First, the clause clarifies the investment powers of the Crown Estate commissioners by expressly conferring powers that are currently implicit in the 1961 Act. That ensures that the commissioners have the power to do anything that is designed

“to facilitate, or is conducive or incidental to,”

discharging their statutory duties, including their core duties to maintain and enhance the value of the estate. The clause also removes restrictions on the commissioners’ powers to invest.

Through those broader investment powers, the Crown Estate will have greater flexibility to invest in new growth opportunities—for example, in digital technologies, to support the acceleration of offshore energy through digital mapping of the seabed. These broader powers will also unlock the Crown Estate’s ability to under de-risking activities, such as surveys and grid co-ordination, which will increase the frequency of offshore wind leasing and support the clean energy mission.

Secondly, clause 1 inserts a proposed new section into the 1961 Act that would grant the Crown Estate the power to borrow out of the national loans fund via the Treasury, or otherwise subject to Treasury consent. It also authorises the Treasury to provide financial assistance to the commissioners. That change will unlock the Crown Estate’s ability to compete more effectively, by enabling it to borrow as its competitors currently can.

The clause has been carefully drafted to include the requirement for Treasury consent prior to the Crown Estate accessing debt. That strong safeguard will ensure that borrowing is carefully considered and controlled. Furthermore, as borrowing will be from Government at commercial rates, the interest paid by the Crown Estate will outweigh the cost to Government of the borrowing.

Any borrowing undertaken by the Crown Estate will be for investment in activities that will drive increases in its revenues, thereby also increasing the profits it generates and provides to the Government, which will help to provide funding for our public services. That will be a net benefit to the public finances, and builds on the Crown Estate’s long track record of delivering significant returns to the public purse year after year. As the shadow Minister mentioned, that has totalled more than £4 billion in the last decade.

I will now turn to amendments 4 and 7, which were tabled by the hon. Members for North West Norfolk and for South Cambridgeshire respectively. The amendments would place a legislative limit on borrowing, through regulations, but it is the Government’s view that limits on borrowing are best set outside of legislation. For that reason, a limit will be set in the memorandum of understanding between the Treasury and the Crown Estate, with the cap set at no more than a 25% net debt-to-asset value ratio. That document has been made available in draft to aid the House in its scrutiny.

The primary safeguard built into the Bill is the requirement for Treasury consent. We are also retaining the requirement for the Crown Estate to maintain and enhance the value of the estate, while having

“due regard to the requirements of good management”,

as set out in the 1961 Act. Taken together, those elements provide clear guardrails and strengthen the important fiduciary duty of the commissioners not to take decisions that could endanger the estate or compromise its core duties.

To underscore the point—given that the two Opposition Members raised questions about this—the Bill is clear that any borrowing undertaken by the Crown Estate can only be from the Treasury or otherwise with Treasury consent. The Treasury will, of course, ensure that any borrowing is consistent with our wider fiscal rules. Therefore, in addition to the requirement to secure Treasury consent, the draft memorandum of understanding between the Treasury and the Crown Estate sets out additional guardrails. For instance, it says that the borrowing should “target a sustainable range”, and is “not to exceed 25%” of the

“Loan to value ratio (defined as the ratio of net debt to asset value”

As with any public sector borrowing, the Treasury will ensure that this is consistent with managing public money principles, to ensure value for money from the taxpayer. On that basis, I hope hon. Members will not press their amendments.

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[James Wild]

The clause amends schedule 1 to the Crown Estate Act 1961. Specifically, it will increase the number of commissioners from eight to 12 and require them to be paid out of the returns generated by the Crown Estate, rather than out of money provided by Parliament, as is the case currently.

Clause 2 is intended to bring the Crown Estate’s operating practice in line with best practice for corporate governance. Subsection (2) seeks to provide the flexibility to allow the board to include a combination of executive and non-executive directors, to reflect its increasingly diverse activities. Subsection (2) also removes the requirement for the second Crown Estate commissioner—a post currently held by the chief executive—to be the deputy chairman. This measure seeks to satisfy best practice standards, whereby the roles of chairman and chief exec should not be exercised by the same person.

We are supportive of the changes, and I put on record again my thanks to Baroness Vere of Norbiton for pushing the Government to give assurances that the chair of the Crown Estate commissioners could be added to the Cabinet Office’s pre-appointment scrutiny list. I understand that we are waiting for the Treasury Committee to set a date for the pre-appointment hearing for Ric Lewis. Subsection (3) requires the salaries and expenses of the commissioners to be paid out of the returns of the estate to reflect the Crown Estate’s commercial freedom and function, and to place the commissioners in a position that is more consistent with general commercial practice.

I turn now to amendment 5, which is tabled in my name. As I have set out, as well as modifying the governance, clause 2 alters the way in which the commissioners are paid. Parliament will no longer need to approve the salaries and expenses of the commissioners and their staff. However, I believe that some form of parliamentary oversight is needed. At present, the estimate details supply finance and is voted on by Parliament at the beginning of the financial year. Amendment 5 would simply require the commissioners to

“notify the Chancellor of the Exchequer of any proposed changes to the remuneration framework governing remuneration of the Chief Executive set out in the Framework Document.”

The Chancellor of the Exchequer would then be required to lay before Parliament any such notification.

Currently, the remuneration policy and framework for the Crown Estate’s staff is the responsibility of the board’s remuneration committee, and the framework document states:

“The Committee will share any planned changes to the remuneration framework with HM Treasury to seek their agreement.”

Given that Parliament will no longer be needed to approve the salaries, does the Minister agree that it would be sensible to ensure that Parliament is at least notified of any changes to the remuneration policy that affect the chief executive?

At present, the framework document sets out that the

“maximum remuneration of the Chief Executive should be in line with or below that of the lower quartile of an appropriate benchmark group agreed with HM Treasury.”

It also states that

“the clear majority of the Chief Executive’s total reward package should be conditional upon performance, with a significant element of that conditional upon long term performance”,

given the Crown Estate’s primary duty. The Opposition support rewarding success and the delivery of targets, but any such changes to the policy should be considered by Parliament.

On Second Reading, the Minister said:

“As the Crown Estate is statutorily an independent, commercial organisation, which returns hundreds of millions of pounds in profit to the Exchequer every year, continuing the success is crucial and it requires the organisation to have the freedom to compete for the top talent in the commercial world.”—[Official Report, 7 January 2025; Vol. 759, c. 805.]

We absolutely agree on that, but I struggle to see how ensuring that Parliament is simply notified of changes to the chief executive’s pay policy will restrict the Crown Estate’s ability to compete for top talent. It is about transparency, and it would simply provide much-needed scrutiny to a process for which there is currently parliamentary oversight, given the statutory purpose of the Crown Estate. I would welcome support for our amendment, and I look forward to the Minister’s response.

[James Murray]

I will turn to amendment 5 in a moment, but I will begin by briefly setting out what clause 2 seeks to achieve. The clause makes changes to the Crown Estate’s governance to bring the Crown Estate’s constitution in line with best practice for modern corporate governance. The clause makes three changes, which I will deal with in turn.

First, the clause increases the maximum number of commissioners on the Crown Estate’s board from eight to 12. That will provide the Crown Estate with the flexibility it needs to satisfy best practice standards for modern corporate governance. For example, the change will allow the Crown Estate’s board to include a wider combination of executive and non-executive members, both to reflect its increasingly diverse and wide-ranging activities and to enable it to adopt appropriate committee structures.

However, I assure the Committee that although we are increasing the number of commissioners, we are not changing the way in which they are appointed to the role, except for the new commissioner roles introduced by clause 6. The exact number and the respective roles of the commissioners within that new maximum will remain subject to the public appointments process. As such, additional commissioners will be appointed by the King on the recommendation of the Prime Minister, as is usual practice. That also includes the new commissioners with special responsibility that we will consider in our debate on clause 6, for which there will also be a process of consultation with the relevant devolved Government. The chair will face additional pre-appointment scrutiny, as the Financial Secretary confirmed in the other place.

Secondly, the clause removes the requirement for the second Crown Estate commissioner, a post currently held by the chief executive, to be deputy chair. This change will align the Crown Estate with best practice standards that set out that the roles of chair and chief executive should not be exercised by a single individual.

Thirdly, the clause will require the salaries and expenses of the commissioners to be paid out of the return obtained from the Crown Estate, rather than out of money provided by Parliament, which is the current position. Changing the source of funding for commissioner salaries is intended to demonstrate more clearly the relationship between the relevant expenditure and Crown Estate income, while also reflecting the Crown Estate’s commercial functions. However, the pay of the chair and other non-executive commissioners will continue to be set by Treasury Ministers. In line with the UK corporate governance code, that will not include any performance-related element.

[Lincoln Jopp (Spelthorne) (Con)]

Clearly, the highest standards of independence and probity will be required of the chair in order to execute their duties, particularly given that we have not brought back to Parliament the ability to raise debt on the assets of the Crown Estate. I feel duty bound therefore to ask the Minister whether he is aware of media reports that the Chancellor’s preferred candidate for chair is a recent Labour party donor who gave £15,000 to the Labour party in 2023 and £30,000 to the Foreign Secretary. It is not unreasonable of the shadow Minister’s amendment to seek that level of transparency by asking for any future changes to salaries for chairs to come back to Parliament.

[James Murray]

The hon. Member asks about the amendment tabled by the hon. Member for North West Norfolk, to which I was just about to turn. If he will allow, I will address the amendment and that will answer at least some of the questions he raises in his intervention.

Amendment 5 would require the commissioners to notify the Chancellor of the Exchequer of any proposed changes to the remuneration framework for the chief executive set out in the framework document and for such notification to be laid before Parliament by the Chancellor. I will set out the current arrangements on remuneration for the chief executive of the Crown Estate.

How the chief executive is paid is a matter for the Crown Estate’s board in the first instance. However, the pay is set with reference to the agreement between the Treasury and at a level that is at the lower end of the Crown Estate’s comparable peers, reflecting the national significance of the organisation. The framework document between the Crown Estate and the Treasury is clear that the Crown Estate

“will share any planned changes to the remuneration framework with HM Treasury to seek their agreement.”

I think that very much delivers on the spirit of the amendment.

The Crown Estate’s annual report and accounts already include as a matter of course a comprehensive report on remuneration and details of the chief executive’s pay. Taken together, those arrangements already deliver on the essence of the amendment and I hope that, with that explanation, the hon. Member for North West Norfolk will feel able to withdraw the amendment.

The primary intention of the Bill is to modernise the Crown Estate and ensure that it is best able to operate in a modern, commercial environment. These changes are central to that aim.

[James Wild]

I am grateful for the contributions on this point and for the Minister’s response. I have read the framework agreement closely. At the moment, the Crown Estate will notify the Treasury of changes and ultimately the Treasury will come to Parliament through the estimates process to approve the pay, based on that policy.

What is going to change is that the Crown Estate will be paying from within the income it generates. While the Treasury may still know that there has been a change, no one else will necessarily know. Although I take the point that the annual report will detail any changes, there will be a lag—the policy could have been in place for some time before that happens.

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[James Wild]

Okay. Amendment 1 would require the Crown Estate commissioners to have regard to net zero targets, regional economic growth and ensuring resilience in various areas. Instinctively, I am a bit sceptical about putting more obligations on the Crown Estate, given that its primary purpose is to generate a return for the nation. As I mentioned in passing, clause 3 already applies a sustainable development duty. The hon. Member for Great Grimsby and Cleethorpes spoke pretty persuasively, so I look forward to the assurances that the Minister might give before we see whether the Committee divides on the amendment.

[James Murray]

With your permission, Ms Furniss, I will briefly add to the comments that I made in the previous debate, because the shadow Minister asked about the appointment of the chair. On 23 December, the Government announced Ric Lewis as our preferred candidate for chair of the Crown Estate. The Government also confirmed that the appointment would be subject to a parliamentary pre-appointment hearing. Under paragraph 9.2 of the governance code on public appointments, political donations should be publicly disclosed if the successful candidate has made a significant donation or loan to a party in the last five years. That will happen if the appointment is confirmed, following the Treasury Committee’s report, and a subsequent announcement is made. Thank you for your patience, Ms Furniss.

Amendment 1, which was tabled by my hon. Friend the Member for Mid and South Pembrokeshire (Henry Tufnell), and to which other hon. Members have spoken, would require the Crown Estate commissioners, in reviewing the impact of their activities on the achievement of sustainable development, to have specific regard to the UK’s net zero targets, to regional economic growth and to ensuring resilience in respect of managing uncertainty, risk and national security interests. I was glad to meet my hon. Friend on Tuesday to discuss the amendment. The Government understand the motive behind it, but it is important first to set out the context for clause 3. I will be brief, as I realise that we will debate clause 3 stand part later.

The Government and the Crown Estate welcomed the addition of clause 3 on Report in the other place, as a clarified and enhanced accountability on the Crown Estate to deliver environmental, social and economic outcomes. The Crown Estate is already a trailblazer in its efforts on tackling climate change and supporting the environment, which I will address in more detail later. Clause 3 will require the commissioners to keep under review the impact of their activities on the achievement of sustainable development in the UK. It is important to note that the public framework document that governs the relationship between the Crown Estate and the Treasury will be updated in the light of clause 3 to include a definition of sustainable development and to confirm that the Crown Estate will continue to include specific information on its activities in its annual report.

The Crown Estate Act 1961 established the Crown Estate as a commercial business, independent from Government, that operates for profit and competes in the marketplace. It is analogous to a private sector commercial operator. The commissioners operate under a clear commercial objective, as set out in the Act, to “maintain and enhance” the value of the estate. At the same time, the Crown Estate can and does focus on activities that closely align with wider national interests, including on the environment, net zero, our nation’s energy needs and sustainable economic growth. As a public body, the Crown Estate seeks to work with the grain of prevailing Government policy.

In addition to its core commercial objective, the Crown Estate operates under a duty in the 1961 Act to have

“due regard to the requirements of good management.”

This obliges the Crown Estate to maintain and enhance the value of the estate responsibly. Good management practices include maintaining a strong governance structure, adhering to best practices in risk management, and fostering a culture of accountability and transparency.

It is important for the Bill to stand the test of time as new, relevant areas of concern on the environment, society and the economy emerge over the coming decades. These currently include net zero and regional economic growth, which are given regard by the Crown Estate and should be covered in its annual report. The general term “sustainable development” was chosen because it is broad and captures the widest range of relevant concerns across the environment, society and the economy, now and as priorities in those areas evolve over time.

[Noah Law (St Austell and Newquay) (Lab)]

I recognise that it might not be the place of statute to outline some of the specifics brought up by the amendment, but does the Minister agree that the spirit of the amendment is well in keeping with the mission of this Government and, moreover, that of regional economic development in particular, which spreads to all corners of Britain? That is important, and it is incumbent on the Treasury more widely to ensure that that takes place, particularly through the channel of supply chain development.

[James Murray]

My hon. Friend is absolutely right. A priority of the Government is to ensure not only that there is economic growth at a national UK level, but that all regions and nations of the UK benefit from such economic growth and the increase in productivity. We want to ensure that people right across the country are better off and have more money in their pocket through greater investment and growth in their local areas. He makes an important point.

To return to the definition of “sustainable development”, I will briefly address the point made about that by the hon. Member for South Cambridgeshire. I assure her that that definition will be published on Royal Assent of the Bill, at that point. It was, however, a deliberate decision not to specify specific targets or objectives such as net zero on the face of the Bill, given that the Crown Estate is already required to “maintain and enhance” the value of the estate responsibly. Referencing specific targets would risk complicating the Crown Estate’s existing clear commercial objective.

As I have already noted, the Crown Estate is required to pay its entire net profits to the UK Consolidated Fund every year, worth more than £4 billion over the past decade. That supports the UK Government’s spending on policy priorities, including net zero and, indeed, regional economic growth.

On national security interests specifically, it is important to be clear that the Government are responsible for ensuring that national security interests are managed effectively at a UK-wide level. It would not be appropriate to require the Crown Estate to have a specific regard in that matter. As I have noted, while the Crown Estate has goals under which its strategy can align with wider national policy objectives, the 1961 Act provides the Crown Estate with independence and autonomy. The Government believe that it should continue to operate in that way, as a commercial business independent of Government. This requirement would encroach on that independence by drawing the Crown Estate into interests managed directly by the Government.

The Government believe that the Crown Estate’s existing duties give it a clear focus, leading to a consistently significant return to the Exchequer to support the funding of public services and priorities. The duty to have due regard to the requirements of good management, alongside the new requirement to keep under review the impact of its activities on the achievement of sustainable development, are already sufficient to cover the concerns of my hon. Friend the Member for Great Grimsby and Cleethorpes. I hope that the amendment will be withdrawn.

I turn to amendments 6 and 8, tabled respectively by the hon. Members for Ynys Môn and for South Cambridgeshire. Amendment 6 would require the commissioners, in complying with proposed new subsection (3A) of the 1961 Act on sustainable development, to

“set and publish sustainable development objectives in relation to their activities…take all reasonable steps to meet these objectives, and…have regard to the relevant environmental legislation for the UK, England, Wales and Northern Ireland in relation to making these objectives.”

It would further specify that the relevant environmental legislation includes the Climate Change Act 2008, the Environment Act 2021, the Well-being of Future Generations (Wales) Act 2015 and the Environment (Wales) Act 2016.

Amendment 8 would require any “framework document” published by the Chancellor of the Exchequer, the Crown Estate or the commissioners to define “sustainable development”, and that that definition include a reference to a “climate and nature duty”. It further specifies that such a climate change duty would mean a duty to achieve any of the targets set out under part 1 of the Climate Change Act 2008, or under sections 1 to 3 of the Environment Act 2021.

The Government understand the intention behind amendments 6 and 8, but a key purpose of the 1961 Act was to repeal various detailed statutory provisions that had built up over the 150 years previously, which were hampering the effective management of the estate. By focusing the commissioners’ duties on enhancing the estate’s value and the returns generated, the commissioners have a clear objective for which they can be held to account. It is an important principle that giving an organisation too many objectives will make it far less effective than giving it clear and focused priorities. As I have already noted, the Crown Estate is a commercial business, independent from Government, that operates for profit.

[Pippa Heylings]

To seek clarification, is the Minister saying that, unlike what seemed to be the agreement reached in the other House, we will not seek, through this legislation or any burden put on the Crown Estate, to ensure that it has a climate and nature duty, such as other bodies have? That will not form part of the definition of sustainable development he said will be published on Royal Assent.

[James Murray]

As I mentioned, the definition of “sustainable development” will be published on Royal Assent. Perhaps we can return to any questions that the hon. Member may have on that definition at that point.

The fundamental point that I am seeking to make is about ensuring that the Crown Estate can operate effectively. By having clear and focused priorities, it will operate more effectively than having too many objectives, which end up meaning overall that it will perform less well in the public interest. As I have noted, the Crown Estate is a commercial business. It is independent of Government and operates for profit. Although it has goals that, under its own strategy, can align with national policy objectives, fundamentally, the 1961 Act grants the Crown Estate independence and autonomy.

The Government have accepted the amendment to require the commissioners to keep under review the impact of their activities on the achievement of sustainable development. However, expanding the Crown Estate’s core purposes in legislation, in particular with additional duties or objectives that may unnecessarily complicate or conflict with the achievement of the core commercial objective, would risk undermining that core objective being achieved.

Any actions that undermine the core commercial objective risk undermining the very funding that is used to support environmental and other policy objectives. The Government believe that the Crown Estate should continue to operate in this way—as a commercial business, independent of Government—because it has shown itself to be a trusted and successful organisation, with a proven track record and effective management.

As I noted, the Crown Estate is already a trailblazer in its efforts to tackle climate change and support the environment, and it is required to pay its profits into the UK Consolidated Fund each year. Furthermore, I confirm that the requirement under amendment 8 for any framework document between the Treasury and the Crown Estate to define sustainable development has already been agreed by the Government.

As confirmed on 5 November on Report in the other place, the public framework document that exists between the Treasury and the Crown Estate will be updated in the light of that amendment to clarify that “sustainable development” means regard for the impact of the Crown Estate’s activities on the environment, society and the economy. It will also make it clear that that regard includes, where relevant, consideration of relevant legislation, such as part 1 of the Climate Change Act 2008, which deals with the targets set for 2050, and section 56 of the Climate Change Act and sections 1 to 3 of the Environment Act 2021, which also deal with specific environmental targets. The framework document will also make it explicit that the Crown Estate will include in its annual report a report of its activities in relation to sustainable development. For those reasons, I trust that hon. Members will be able to withdraw their amendments.

[Melanie Onn]

I do not intend to press the amendment to a vote. I accept the point about the Crown Estate being a commercial business, but I am less persuaded that it is unable to cope with an additional objective. When I think about other organisations in the public sector and the number of objectives that we set for them, I am fairly sure that a commercial business has the wherewithal to be able to manage that. However, I accept the potential for an impact on the returns of that commercial business. The Minister has given indications regarding the annual report, and I hope that he will have heard today the determination of Members from coastal communities and the importance of this to them. He will be aware of the strength of feeling about the necessity of ensuring that we have real delivery and community benefits from the extended powers and facilities that we are providing to the Crown Estate.

We will not press the amendment to a vote, but, when it comes to accountability, we know where the Minister’s door is and I am sure we will happily knock on it should the need arise.

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[James Wild]

I rise briefly to speak to amendment 9, not least because I represent North West Norfolk, which is next door to North Norfolk where I grew up. It is sometimes quite difficult to get the local names correct, but Happisburgh is actually pronounced “Haysborough”, rather than “Happisberg”. I wanted to get that on the record, because people there feel quite strongly about it—it is a mistake that is inadvertently made quite a lot.

It is important to protect national assets such as those at Bacton from coastal erosion. I would expect the Crown Estate already to be taking account of such requirements, and the Government to be doing likewise through their wider planning and strategic approach to coastal erosion, so I look forward to the Minister’s response on how coastal erosion will be prevented.

[James Murray]

I rise to speak to amendment 9 and new clause 10.

Amendment 9, tabled by the hon. Member for South Cambridgeshire, would mean that in satisfying proposed new subsection (3A) of the 1961 Act, which states,

“The Commissioners must keep under review the impact of their activities on the achievement of sustainable development in the United Kingdom”,

the commissioners must assess the adequacy of protections against coastal erosion in areas affected by their offshore activities. I very much understand the concerns reflected in the amendment, but protections against coastal erosion are not the responsibility of the Crown Estate, and therefore the amendment is not relevant to the Bill.

The UK has dedicated statutory bodies under each devolved Administration with responsibility for ensuring adequate protection against coastal erosion. The Crown Estate always collaborates and complies with the relevant statutory authority for any assessment of the impact of offshore activity on coastal erosion, and the potential for coastal erosion should be considered as part of marine licensing, which is considered by the relevant regulator, depending on the jurisdiction. However, the statutory responsibility falls on the relevant body in each devolved area.

The Crown Estate becomes involved in coastal defence only when the statutory bodies responsible for coastal erosion wish to construct defences. In such cases, the Crown Estate typically grants leases to those bodies for defence works.

Although the Crown Estate is not responsiblefor coastal erosion, the Government are committed to supporting coastal communities and are investing ausb record £2.65 billion over two years in building, maintaining and repairing our flood and coastal defences. Shoreline management plans are developed and owned by local councils and coastal protection authorities to provide long-term strategic plans that identify approaches to managing coastal erosion and flood risk at every stretch of the coastline. Shoreline management plans have recently been refreshed with updated action plans, following several years of collaborative work between the Environment Agency and coastal groups.

The Environment Agency has published the updated national coastal risk map for England, which is based on monitoring coastal data, the latest climate change evidence and technical input from coastal local authorities. There are also strong safeguards to manage the flood and coastal risk through the planning system. I hope that on that basis the hon. Member for South Cambridgeshire feels able to withdraw her amendment.

I turn to new clause 10, which would require that in relation to any decisions made about marine spatial priorities, the Crown Estate must ensure the decisions are co-ordinated with the priorities of the Marine Management Organisation and must consult any communities or industries impacted by the plans, including fishing communities.

I can confirm to the Committee that the Crown Estate and the Marine Management Organisation already have well-established ways of working together to ensure effective collaboration for marine spatial planning and prioritisation. The Crown Estate’s collaboration with the Marine Management Organisation and other relevant statutory bodies is governed by the Marine and Coastal Access Act 2009, which establishes the framework for marine planning and licensing in the UK, and requires the Crown Estate to have regard to marine policy documents such as marine plans in its decision making. It is also governed by the habitat regulations, which require the Crown Estate to conduct plan-level habitat regulation assessments for leasing or licensing activities.

Furthermore, the Crown Estate and the Marine Management Organisation jointly agreed a statement of intent in 2020, which is reviewed periodically to provide a focus on priorities and opportunities for alignment, as well as longer-term ambitions. The statement of intent complements a memorandum of understanding agreed in February 2011, which sets out a framework to encourage co-operation and co-ordination between parties in relation to the sustainable development of the seabed and rights managed by the Crown Estate, based on active management, shared information and effective marine planning and management by both parties.

In addition to the Crown Estate’s relationship with the Marine Management Organisation, there are also various regulatory requirements on developers leasing areas of the seabed from the Crown Estate to engage with the Marine Management Organisation through a number of routes. Those include through marine licensing; developers must obtain marine licences from the Marine Management Organisation for activities that could impact on the marine environment. The process involves consultation with statutory bodies and adherence to marine plan policies. As part of a marine licence application, developers must also conduct environmental impact assessments for projects that could significantly affect the environment, which includes consultation with the Marine Management Organisation and other relevant authorities to ensure compliance with environmental regulations. Developers are also encouraged to engage with local communities, statutory bodies and other stakeholders throughout the planning and development process to address concerns and ensure compliance with marine plans.

This new clause therefore duplicates existing regulatory requirements and practice. I hope the hon. Member for South Cambridgeshire feels able to withdraw her amendment.

[Mr Snowden]

I feel sympathy with the contributions from both the Minister and the hon. Member for South Cambridgeshire. There are some issues at the heart of what the amendment and new clause are trying to achieve, but whether they are within the scope of the responsibility of the Crown Estate is an equally valid point. New clause 9 talks about coastal erosion and, while that is an issue, there is also the issue of coastal damage caused by projects where the seabed in particular is licensed. Again, Morgan and Morecambe off the Fylde coast will lead to years of work trying to rebuild sand dunes that will be cabled and tunnelled through for a new cabling corridor. The dunes will be completely damaged due to activity coming in to connect to the national grid.

Furthermore, the new clause talks about consultation. This is where I really do have some sympathy with the Minister, because that is not the responsibility necessarily and primarily of the Crown Estate. The root cause of the issue is that there are already regulations in place for consultation to happen where licences are being issued. The consultation happens; people consult and then they just ignore local communities and industries. Nothing changes, and perfectly valid objections and alternative routes for cabling corridors coming in from the sea are just ignored—but that is a broader issue rather than specific to this point.

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[James Murray]

Clause 3 amends the Crown Estate Act 1961 to require the commissioners to keep under review the impact of their activities on the achievement of sustainable development in the UK. I have referred to various aspects of clause 3 as part of our earlier debate, so I will try to be brief. As hon. Members know, this clause was added as an amendment in the other place, based on productive debates that reflected the important role that the Crown Estate has in stewarding our natural environment. As I noted earlier, the Government believe that the Crown Estate’s existing duties give it a clear focus, leading to a consistently significant return to the Exchequer to support the funding of our public services.

At the same time, the Crown Estate can, and does, focus on activities which also closely align with wider national interests, including on the environment, net zero, our nation’s energy needs and sustainable economic growth. As a public body, the Crown Estate seeks to work with the grain of prevailing Government policy. That said, it is right that the public and private sectors make every contribution they can to achieving our climate change targets, and the Crown Estate should continue to be a national trailblazer in that regard. The Crown Estate has committed to becoming a net zero carbon business by 2030, aligning with the 1.5° target, and will prioritise activities that help to enable a reduction in national carbon emissions, such as building net zero homes, transitioning its holdings to sustainable agricultural practices and working in partnership with the Government to meet the national renewable energy targets.

Regarding the biodiversity targets in the Environment Act, the Crown Estate is committed to delivering a measurable increase in biodiversity by 2030. It will publish its delivery plan to meet that goal later this year, which will include commitments to restore habitats in line with targets in the Environment Act. The Crown Estate also published its approach on nature recovery last autumn, where it committed to delivering increased biodiversity, to protecting and restoring freshwater, marine and coastal systems and to increasing social-wellbeing benefits from nature. However, the reforms introduced by this Bill are not intended to alter the fundamental statutory basis of the Crown Estate as a commercial business independent from Government.

The commissioners operate under a clear commercial objective, as set out in the 1961 Act: to maintain and enhance the value of the estate. As I have already noted, the Crown Estate operates under a duty in the 1961 Act to have due regard to the requirements of good management. Alongside its core commercial objective, the duty obliges the Crown Estate to maintain and enhance the value of the estate responsibly. It is the Government’s view that these existing statutory requirements and this clause are the best approach.

New clause 11, tabled by the hon. Member for South Cambridgeshire, would require the commissioners to assess plans for benefits to local communities and, in the case of offshore activities, coastal communities before making any investment decisions. It would also require the commissioners to transfer at least 5% of the Crown Estate’s net profit to the local communities impacted by its activities.

At present, local communities benefit from onshore and offshore developments through the economic advantages that such developments bring, including job creation and increased business for local suppliers, and individual developers also contribute to local initiatives. The Crown Estate has also specifically designed the leasing process for its offshore wind leasing round 5 opportunity in the Celtic sea such that developers must make commitments to deliver social and environmental value as part of the development of their new wind farms. Those commitments will be monitored, reported on and enforced throughout the lifetime of the relevant round 5 developments.

The Crown Estate is committed to proactively working with the local communities and partners to enable employment and skills opportunities. For example, it has allocated £50 million through the supply chain accelerator to stimulate green jobs and is developing a green skills pipeline, from a GCSE in engineering skills for offshore wind, seed-funded by the Crown Estate and developed with Cornwall college, to a post-16 “Destination Renewables” course with Pembrokeshire college. The Crown Estate is also partnering with the employment charity Workwhile to create green construction apprenticeships.

The Crown Estate already works closely with communities, charities, businesses and the Government to ensure that its skills initiatives are sensitive to market demands and emerging technologies and to keep them relevant and effective. The Government consider it important that the Crown Estate retains that flexibility in how its skills initiatives are funded and delivered, to ensure that it can contribute to skill training in the best possible way and, importantly, without conflicting with its statutory duty to maintain and enhance the value of the estate.

On that basis, I hope that the hon. Member for South Cambridgeshire feels able to withdraw her new clause. It is the view of the Government that the existing statutory requirements and this clause are the best approach going forward. I commend clause 3 to the Committee.

[Pippa Heylings]

The Minister might have pre-empted my speaking to the new clause. The new clause would ensure that local and coastal communities see real benefits from Crown Estate activities by requiring a proper assessment of community benefits before investment decisions are made and by mandating that at least 5% of net profits be transferred to impacted communities.

For too long, communities, particularly coastal communities, have borne the impact of large-scale offshore developments without seeing a fair share of the financial benefits; we heard that earlier today. The Crown Estate generates billions in revenue from offshore wind farms, marine industries and land developments, yet too often local people see little direct return. The new clause seeks to redress that imbalance and would ensure that those communities benefit from our journey towards net zero, taking people with us.

First, the new clause would ensure transparency and accountability by requiring that the Crown Estate formally assess community benefits before making investment decisions. That would mean that local communities would no longer be an afterthought. They must be considered from the outset in decisions affecting their livelihoods, identity, infrastructure and environment.

Secondly, the new clause would establish a concrete financial commitment by mandating that at least 5% of the profits generated by the Crown Estate’s activities must be reinvested in local communities impacted. That is a fair and proportionate measure, recognising that those communities are often on the frontline of change, whether it be from offshore energy projects, tourism pressures or rural land use shifts. The kickbacks could be revolutionary for towns and villages across the UK and would be a real testament to how clean energy can level up communities.

The new clause is about not just fairness, but economic regeneration. It would provide a direct funding stream to support local jobs, infrastructure, training and environmental projects, and ensure that prosperity generated from our shared natural resources is not centralised in Whitehall or in corporate boardrooms, but flows directly back to the people and places most affected.

If the Government are serious about levelling up and supporting coastal and rural communities and economies, they should have no issue backing the new clause. It is practical, and it would enable us to manage the different developments. It does not seek to block development; it would ensure that development happens fairly and sustainably, with proper co-ordination.

[James Wild]

I will briefly speak to new clause 11. On Second Reading, we heard a lot of debate and discussion about the role of community benefits. As I mentioned, I represent a coastal area where there are existing community benefit schemes through the operators of the offshore wind projects that operate on the East Anglian coast.

The Energy Secretary, who seems to be on a one- man mission to put solar farms on farmland and to put pylons across the countryside with no regard to the impact on communities or nature, has said that the Government will bring forward their own approach to community benefits. I am a strong supporter of community benefits, and I look forward to the Energy Secretary coming forward with that plan. It seems to be the best approach and context in which to address the important points raised by the hon. Member for South Cambridgeshire.

[James Murray]

I thank the hon. Members for their comments. To reiterate, the Crown Estate already works with communities, charities, businesses and the Government to ensure that its skills initiatives are sensitive to market demand and to emerging technologies. It is important that the Crown Estate retains this flexibility in how its skills initiatives are funded and delivered, so that it can contribute to skills training in the best possible way and, importantly, as I have referred to several times, without conflicting with its statutory duty to maintain and enhance the value of the estate. As we know, the Crown Estate already pays its net revenue surplus into the Consolidated Fund. That is a total of more than £4 billion in the last decade, and local communities already benefit from investment by the Crown Estate. I point hon. Members to the partnership between Great British Energy and the Crown Estate; they will work together to co-ordinate agencies and stakeholders to create jobs and ensure that communities reap the benefits of clean, secure, home-grown energy.

I repeat my encouragement of the hon. Member for South Cambridgeshire not to move her new clause, as I believe the Bill and the existing measures and statutory requirements achieve the outcomes that are best for this country.

Question put and agreed to.  

Clause 3 accordingly ordered to stand part of the Bill.  

Clause 4

Annual reports

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

[The Chair]

With this it will be convenient to discuss new clause 4—Partnership agreement: the Crown Estate and Great British Energy—

“The Chancellor of the Exchequer must lay before Parliament any partnership agreement between the Crown Estate and Great British Energy.”

This new clause requires the Chancellor of the Exchequer to lay before Parliament any partnership agreement between the Crown Estate and Great British Energy.

[James Murray]

Clause 4 requires the commissioners to include in their annual report a summary of their activities and of any effects or benefits resulting from their activities under any partnership between them and Great British Energy, which I referred to in our debate on the previous clause. This requirement will only apply in relation to a year in which such a partnership was in operation. Following productive debate in the other place on the new partnership between the Crown Estate and Great British Energy announced last year, this clause was added by the Government. The Crown Estate is keen to ensure that details of this partnership are publicly available on an ongoing basis, and the Government agree it is sensible to require the Crown Estate to include the relevant detail in its existing annual report. That is the intention behind clause 4.

New clause 4, tabled by the hon. Member for North West Norfolk, would require the Chancellor to lay before Parliament any partnership agreement between the Crown Estate and GB Energy. As I am sure the hon. Member will appreciate, partnership agreements are highly commercially sensitive. It is therefore right that any agreement is not made public or laid before Parliament, as to do so would likely prejudice the commercial interests of the Crown Estate or GB Energy and risk the aims of the partnership, which are to speed up the process of delivering clean energy and to invest in clean energy infrastructure. The Department for Energy, Security and Net Zero will set out further detail on GB Energy in due course. I hope the hon. Member feels able not to move his new clause as a result.

Clause 4 is a sensible change to the Bill that reflects the desire to ensure that relevant information related to the nationally significant partnership between GB Energy and the Crown Estate is made publicly available. I commend the clause to the Committee.

[James Wild]

As the Minister said, clause 4 was added on Report in the House of Lords to require the Crown Estate’s annual report to include activities under the partnership between the Crown Estate and GB Energy. I will also speak to new clause 4, which is in my name.

Clause 4 does introduce an important layer of transparency, as the Minister said, ensuring there is a specific report on the activities of the commissioners under that partnership during the year, and on any effects or benefits experienced during the year that are a result of those activities. This is a welcome step, and we support the clause. However, the reporting requirement would only apply in years when a partnership between the commissioners and GB Energy was in operation. This means we will not know what has been agreed until the partnership is operational. Parliament—I think not unreasonably—needs to see an agreement when it is finalised. That is why I have tabled new clause 4.

New clause 4 would simply require the Chancellor of the Exchequer to lay before Parliament any partnership agreement between the Crown Estate and GB Energy. This new clause is of fundamental importance. Without being able to see the details of the partnership agreement, we do not know what has been agreed and the impact on the duties of the Crown Estate. On the day that the Bill was introduced, the Government, with a lot of fanfare, announced the partnership between the Crown Estate and GB Energy. Indeed, Ministers claimed that the new GB Energy partnership would “turbocharge energy independence” and

“unleash billions of investment in clean power.”

However, currently there is a distinct lack of transparency over how this partnership will work and what difference it will make. I am concerned that this partnership may have been created for political, rather than economic, purposes.

National Insurance Contributions

James Murray Excerpts

Tuesday 4th February 2025 Commons Chamber

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

I beg to move,

That the draft Social Security (Contributions) (Rates, Limits and Thresholds Amendments, National Insurance Funds Payments and Extension of Veteran’s Relief) Regulations 2025, which were laid before this House on 15 January, be approved.

[Madam Deputy Speaker (Ms Nusrat Ghani)]

With this it will be convenient to discuss the following motion:

That the draft Child Benefit and Guardian’s Allowance Up-rating Order 2025, which was laid before this House on 15 January, be approved.

[James Murray]

Regulations are made each year to set various national insurance thresholds, and to uprate child benefit and the guardian’s allowance. In opening the debate, I will give the House details of what the regulations set out to do. First, the Social Security (Contributions) (Rates, Limits and Thresholds Amendments, National Insurance Funds Payments and Extension of Veteran’s Relief) Regulations 2025 set the rates of certain national insurance contribution classes and the level of certain thresholds for the 2025-26 tax year. The lower earnings limit, the small profits threshold and the rates of class 2 and class 3 contributions will all be uprated by the September consumer prices index figure of 1.7%, while the other limits and thresholds covered by the regulations will remain fixed at their existing levels.

The regulations also make provision for a Treasury grant—a transfer of wider Government funds—to be paid into the national insurance fund, if required, for the 2025-26 tax year. The regulations also, importantly, extend the veterans’ employer national insurance contributions relief until April 2026. The scope of the regulations under discussion is limited to the 2025-26 tax year.

As hon. Members will know, national insurance contributions are social security contributions; people make contributions when they are in work to receive contributory benefits when they are not working—for example, after they have retired, or if they become unemployed. National insurance contribution receipts fund those contributory benefits, as well as helping to fund the NHS.

The primary threshold and the lower profits limit are the points at which employees and the self-employed start to pay employee class 1 and self-employed class 4 national insurance contributions respectively. The primary threshold and lower profits limit were frozen by the previous Government at £12,570 until April 2028. However, the level of those thresholds does not affect people’s ability to build up entitlement to contributory benefits such as the state pension. For employees, entitlement is determined by their earnings being above the lower earnings limit, which the regulations will uprate from £123 a week in 2024-25 to £125 a week in 2025-26. That is the equivalent of an uprating from £6,396 to £6,500 a year.

Entitlement for self-employed people is determined by their earnings being above the small profits threshold, which the regulations will uprate from £6,725 in 2024-25 to £6,845 for 2025-26. Uprating the lower earnings limit and the small profits threshold is the usual process, and it maintains the real level of income at which people gain entitlement to contributory benefits. Wage growth is currently higher than inflation, which means that following the uprating by CPI, there will be a reduction in the number of hours that someone who has received a typical wage increase needs to work to gain entitlement compared with last year.

The upper earnings limit, which is the point at which the main rate of employee national insurance contributions drops to 2%, and the upper profits limit, which is the point at which the main rate of self-employed national insurance contributions drops to 2%, are aligned with the higher rate threshold for income tax at £50,270 a year. The previous Government also froze those thresholds until April 2028.

I now turn to the thresholds for employer national insurance contribution reliefs. As hon. Members are aware, the Government have had to make difficult decisions to fix the public finances. One of the toughest decisions that we faced was the decision to increase the rate of employer national insurance contributions and reduce the secondary threshold. Although those changes are the subject of a separate Bill, not these regulations, they are the context for why our decision to maintain other targeted national insurance contributions reliefs is so important. Those employer reliefs include those for under-21-year-olds, under-25 apprentices, veterans, and new employees in freeports and investment zones. The regulations that we are debating set these thresholds in line with other personal tax thresholds.

The regulations also provide for the national insurance contributions relief for employers of veterans to be extended for a year until April 2026. This measure means that next year, businesses will continue to pay no employer national insurance contributions on salaries up to the veterans upper secondary threshold of £50,270 for the first year of a qualifying veteran’s employment in a civilian role.

[Mr Jonathan Brash (Hartlepool) (Lab)]

I welcome the extension of national insurance contributions relief for veterans, but does the Minister agree that we need to do more to ensure that employers across the country know that the relief exists, to incentivise employing veterans?

[James Murray]

My hon. Friend is absolutely right that we want employers to be aware of this important relief, and to encourage them to make use of it to employ veterans. This relief helps to support those who have already given so much to our country, and it also means that the skills and the huge potential of those people who have already given such service to our country can be used to make a further contribution to our country and our economy. We want all employers to know that this relief exists. We can all play a role as local MPs in making sure that all employers in our constituencies are aware of this important relief. I thank my hon. Friend for letting me make that point.

The continuation of the veterans relief is evidence of the Government’s commitment to supporting our veterans. As I explained in response to my hon. Friend’s intervention, it is intended to incentivise employers to take advantage of the wide range of skills and experience that ex-military personnel offer. As I said, it is important that we support those who have given so much to our country by helping to make sure that our country benefits further from the skills and potential of our service leavers.

Let me move on to the national insurance fund, into which the majority of national insurance contributions are paid, and which is used to pay the state pension and other contributory benefits. The Treasury has the ability to transfer funds from wider Government revenues into the national insurance fund. The regulations make provision for a transfer of this kind, known as a Treasury grant, of up to 5% of forecasted annual benefit expenditure to be paid into the national insurance fund, if needed, in 2025-26. A similar provision will be made in respect of the Northern Ireland national insurance fund.

The Government Actuary’s Department report laid alongside these regulations forecasts that a Treasury grant will not be required in 2025-26, but as a precautionary measure, the Government consider it prudent to make provision at this stage for a Treasury grant. That is consistent with what has been done in previous years.

I turn to the draft Child Benefit and Guardian’s Allowance Up-rating Order 2025. As hon. Members will know, the Government are committed to delivering a welfare system that is fair for taxpayers while providing support to those who need it. The order will ensure that the benefits for which Treasury Ministers are responsible, and which His Majesty’s Revenue and Customs delivers, are uprated by inflation in April 2025. Child benefit and the guardian’s allowance will increase in line with the consumer prices index, which had inflation at 1.7% in the year to September 2024. Uprating by the preceding September’s CPI is the Government’s typical approach. Tax credit awards will end on 5 April 2025, so no changes to rates will be required from 2025-26 onwards.

I hope all Members will support the regulations. Rejecting them would mean that HMRC-administered benefits would not rise at all next year, and so would lose value in real terms. The regulations fix most of the rates and thresholds for the national insurance contributions that they cover at the 2024-25 levels for the 2025-26 tax year, except for the lower earnings limit, the small profits threshold, and the rates of class 2 and class 3 contributions, which will all be updated by the September 2024 CPI rate of 1.7%. The regulations also make provision for a Treasury grant. They extend the veterans employer national insurance contributions relief, and increase the rates of child benefit and the guardian’s allowance in line with prices.

[Dr Luke Evans (Hinckley and Bosworth) (Con)]

The Minister talked about the Treasury grant being up to 5%. As a matter of curiosity, what figure had Treasury planned to put in?

[James Murray]

The regulations contain a provision for us, in case it is needed. The expectation is that it will not be. As I mentioned, a Government Actuary’s Department report laid alongside the regulations has forecast that the Treasury grant will not be required in 2025-26. The provision in the regulations is a precautionary measure, and is in line with what has happened in previous years. The Government consider it prudent to continue the practice of previous years, and to make provision for the grant in these regulations. I hope that answers the hon. Gentleman’s question.

The regulations enable an increase in child benefit and the guardian’s allowance in line with prices. Without these regulations, HMRC would be unable to collect national insurance contributions receipts, and child benefit and guardian’s allowance would be frozen at the 2024-25 levels. I hope that colleagues will join me in supporting the regulations.

[Madam Deputy Speaker (Caroline Nokes)]

Before I call the shadow Minister, I inform the Liberal Democrat spokesman that I will call him immediately afterwards.

--- Later in debate ---

[James Murray]

With the leave of the House, Madam Deputy Speaker, I will respond to the comments of hon. Members.

The shadow Minister, the hon. Member for Grantham and Bourne (Gareth Davies), set out the official Opposition’s response to the regulations and the order that are before us, but his speech related largely to the changes being made by a different piece of legislation—a Bill—so I will be careful not to try your patience, Madam Deputy Speaker, by veering into that legislation, and will remain strictly within the confines of the regulations and the order.

Let me say briefly, however, that as the hon. Gentleman knows, we had to take difficult decisions in the Budget last October, and one of the toughest was the decision to increase the rate of employer national insurance contributions and lower the secondary threshold. The reason we had to take those difficult decisions was the fiscal situation that we had inherited from the Government of which he was a member. I note that in his recollection of history, he referred to a double crisis; I think that it was, at the very least, a triple crisis, given Liz Truss’s premiership in the country and leadership of his party, so he may have omitted certain facts from the historical record, although I am sure that the wider British public will make no such mistake.

The hon. Gentleman spoke about some of the impacts of the national insurance changes. Again, he was speaking about a Bill rather than the statutory instruments that we are discussing, and for that separate Bill a tax information and impact note has been published, as is standard practice. I welcomed his support for our extension of veterans relief for a year, until April 2026, to help more ex-service personnel into employment. As the scope of the regulations is limited to the 2025-26 tax year, they could extend it only by one year, but we think it important for that to be done.

The hon. Gentleman also spoke about work being the best way out of poverty, and I entirely agree with him in that regard. When we are creating jobs and ensuring that businesses can invest and provide work opportunities for people throughout the country, it is important for those jobs to be decent jobs with decent pay, and our changes to the national living wage are of course important in that respect. Overall, in relation to all the measures in the Budget, the Office for Budget Responsibility has concluded that the employment level will rise from 33.1 million to 34.3 million between 2024 and 2029.

The spokesperson for the Liberal Democrats, the hon. Member for Torbay (Steve Darling), also spoke about a Bill rather than the regulations that we are debating. I want to reassure him by pointing to the comments that the Chancellor has made since taking office last July. Since her first few days in No. 11 Downing Street, she has been determined to boost growth by getting rid of the ban on onshore wind turbines, reforming the way in which pensions can invest, and ensuring that the planning and regulatory barriers get out of the way of the growth that we are determined to achieve for this country.

The Chancellor’s growth speech last week was just the latest example of her leadership in taking those decisions, which are the right ones for our country, to boost investment and growth. We know that having a stable set of public finances is a prerequisite for that investment and growth. The difficult decisions that both Opposition spokespeople referred to are slightly off the topic of the regulations in front of us, but they none the less drew attention to the fact that those difficult decisions were precisely to restore the public finances, while supporting public services, therefore allowing investment to increase and seeking the growth that we are determined to deliver for this country.

Question put and agreed to.

Resolved,

That the draft Social Security (Contributions) (Rates, Limits and Thresholds Amendments, National Insurance Funds Payments and Extension of Veteran’s Relief) Regulations 2025, which were laid before this House on 15 January, be approved.

Resolved,

That the draft Child Benefit and Guardian’s Allowance Up-rating Order 2025, which was laid before this House on 15 January, be approved.—(James Murray.)

Business of the House (5 February)

Ordered,

That at the sitting on Wednesday 5 February, notwithstanding the provisions of Standing Order No. 16 (Proceedings under an Act or on European Union documents), the Speaker shall put the Questions necessary to dispose of proceedings on—

(1) the Motion in the name of Secretary Yvette Cooper relating to Police Grant Report not later than three hours after the start of proceedings on that Motion, and

(2) the Motions in the name of Secretary Angela Rayner relating to Local Government Finance not later than three hours after the start of proceedings on the first such Motion or six hours after the commencement of proceedings on the Motion relating to Police Grant Report, whichever is the later; proceedings on those Motions may continue, though opposed, after the moment of interruption; and Standing Order No. 41A (Deferred divisions) shall not apply.—(Lucy Powell.)