Finance Bill

James Murray Excerpts

2nd reading
Wednesday 27th November 2024 Commons Chamber

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

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

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

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

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

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

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

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

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

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

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

[James Murray]

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

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

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

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

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

[Dr Andrew Murrison (South West Wiltshire) (Con)]

The then Leader of the Opposition, and now Prime Minister, rightly said that his Administration would go for growth. He made it his No. 1 priority, and he inherited the fastest-growing economy in the G7. [Interruption.] The Minister shakes his head, but this is a fact. Can he say what has happened to growth since 4 July?

[James Murray]

Every business knows that we can make investment decisions only on the basis of secure public finances and economic stability, which is why this Government’s first priority has been to wipe the slate clean of the mess we inherited from the Conservative party, to deliver economic stability and to provide the environment for businesses to make the investments on which we will grow the economy. That remains our No. 1 mission.

[Paul Holmes (Hamble Valley) (Con)]

Will the Minister give way?

[James Murray]

I will make some progress.

As the Chancellor set out in the Budget, we believe that before making any changes to the tax rates that people pay, it is vital that we do everything we can to close the tax gap. That is why, in the Budget, the Chancellor announced a step change in our ambition to do so, with a package raising £6.5 billion of additional tax revenue by 2029-30. This package will ensure that more of the tax that is owed is paid, and that taxpayers are supported to pay the right tax first time. Our plan involves boosting the capacity of His Majesty’s Revenue and Customs to ensure compliance and reduce debt, alongside changes to legislation, some of which this Finance Bill delivers, to remove loopholes used to reduce tax liabilities.

That is why this Bill includes measures such as introducing capital gains on the liquidation of a limited liability partnership, closing a route increasingly used to avoid paying tax. The Bill reforms rules for overseas pension transfers, closing a gap that allows individuals to transfer significant pension savings overseas tax-free. And the Bill implements the cryptoasset reporting framework, tackling complex compliance cases where a significant proportion of offshore risk sits.

In our manifesto, we said that we would take on the tax gap, and that is what we are doing in government.

[Jerome Mayhew (Broadland and Fakenham) (Con)]

The Minister recognises the importance of reducing the tax gap, so will he commend the previous Conservative Government for halving the tax gap they inherited from Labour in 2010?

[James Murray]

As we all know, efforts to close the tax gap thoroughly stalled under the previous Government, and we have brought renewed focus to this effort. It is one of our top priorities. Before increasing any tax rates, we must ensure that people pay the tax that is owed. Frankly, if the previous Government had been doing such a great job, how is it that our Government have been able to find an extra £6.5 billion to close the tax gap in our first Budget alone? That was in our manifesto, and that is what we are delivering.

In our manifesto, we made other specific commitments on tax, and I will set out now how the Bill seeks to implement them. First, let me turn to non-doms in the tax system. As right hon. and hon. Members will know, this Government believe that everyone who is a long-term resident in the UK should pay their taxes here. That is why this Government are removing the outdated concept of domicile status from the tax system, and why we are implementing a new residence-based regime from 6 April 2025. We have long argued for such a change to be made. Although the previous Government ended up being forced towards our position, they never implemented any changes. Under this Government, we will finally make the reforms necessary to make the system fit for the 21st century.

Our new regime will be internationally competitive and focused on attracting the best talent and investment to the UK. Our reforms will scrap the planned 50% reduction in foreign income subject to tax in the first year of the new regime; introduce a new residence-based regime for inheritance tax; retain and reform overseas workday relief, encouraging employees to spend more of their earnings in the UK; and extend the previously announced temporary repatriation facility to three years, from April 2025.

The new rules mean that, from April 2025, anyone who has been tax resident in the UK for more than four years will pay UK tax on their foreign income and gains, as is the case for other UK residents. That is a much simpler and clearer test than exists under the current regime. The Office for Budget Responsibility confirmed that these reforms will raise £12.7 billion in revenue over the five year forecast period. That funding is crucial for meeting our commitments to fixing the public finances.

Secondly, in government we have decided to go further than our manifesto commitment to increase the non-resident stamp duty surcharge, and we will instead increase the higher rate of stamp duty on additional dwellings, from three percentage points to five percentage points above the standard residential rate. That increase to the higher rate of stamp duty will raise more money than set out in the manifesto—a total of £310 million by 2029-30—and will go further to rebalance the housing market.

The OBR’s certified costing assumes that an increase in the higher rate of stamp duty by two percentage points is expected to result in 130,000 additional transactions over the next five years by first-time buyers and other people buying a primary residence. We estimate that approximately half those who paid a non-resident stamp duty surcharge also pay the higher rates of stamp duty, so the change will improve the comparative advantage of UK resident home movers, while ensuring that no additional barriers are faced by those coming to the UK and buying their main home.

Thirdly, the Bill delivers our manifesto commitment to introduce the 20% standard rate of VAT on private school fees. That will apply to any charges charged on or after 29 July for terms starting after 1 January 2025, and it sits alongside our changes to private schools business rates relief in the Non-Domestic Rating (Multipliers and Private Schools) Bill. Ending tax breaks for private schools is a tough but necessary decision that will secure additional funding to help the Government deliver their commitments to improve education in state schools across the country, and achieve the aspiration that every parent has for a high-quality education for their children.

[Mr Mark Sewards (Leeds South West and Morley) (Lab)]

Is it not the case that state school parents work just as hard as private school parents, although they will never be in a financial position to be able to send their kids to private schools, and therefore it falls on this Government to fund state schools properly?

[James Murray]

My hon. Friend is right that every parent aspires to a high-quality education for their children, and that is exactly what this Government will achieve through the already announced £2.3 billion increase to the core schools budget for the financial year 2025-26, increasing per pupil funding in real terms. That includes £1 billion of additional funding for the special educational needs and disabilities system.

[Paul Holmes]

The Minister is dedicated to extolling the virtues of his manifesto. When he sat down to write the Budget with his right hon. Friend the Chancellor, did he recall whether the manifesto put to the country at the general election stated that growth forecasts under this Government would be lower than they were under the previous Government? Was the taxing of small family farms for a total revenue of £590 million in his manifesto? He is very keen on the manifesto, but did it outline that growth would be lower under this Government?

[James Murray]

I am keen on our manifesto, which delivered this Labour majority and this Labour Government. If the hon. Gentleman looks at the manifesto that we went into the election with, he will see the three words that open our pledges: “deliver economic stability”. After the mess that the previous Government made of the public finances, and the damage they did to our public services and our economy, that is crucial. Delivering economic stability, fixing the public finances and putting our public services back on a firm footing are essential to getting the investment and growth that our country badly needs.

Let me be clear about the VAT policy on private school fees: charging the standard rate of 20% does not mean that schools must increase their fees by 20%, because schools can reclaim VAT paid on inputs and reduce the cost to minimise the extent to which they need to increase fees. Many schools have already publicly committed to cap increases at 5%, or to absorb the full VAT costs themselves.

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

Parents from two private schools in my area have written to me that they will have to move their children into the state system, but the problem is that there are not places in the state system to accomplish that. Will there be a dedicated fund to help those schools when pupils move? Will funds be put aside for the welfare of the kids who are being taken out of school mid-term? Figures that have been released suggest that there could be about 3,000 such pupils. Such a move will have a significant impact on their mental health and their family’s welfare, and I know this Government are committed to ensuring that children have good welfare. Will the Minister consider a ringfenced fund to help support the mental health of those kids?

[James Murray]

As the hon. Gentleman knows, mental health, more broadly, is a priority for this Government. On the policy around VAT on private school fees, the impact on pupils in private schools having to change to a state school is expected to be very limited. The Government estimate that 35,000 pupils—less than 0.5% of all state school pupils—will leave, or never enter, the private sector as a result of this policy. Those movements will take place over a number of years, and only 3,000 pupils are estimated to move within the current academic year. To put that number in context for the hon. Gentleman, every year many pupils move between schools, including between private schools and the state sector. A Department for Education report published in 2022 looking at moves between state schools and out of state schools, found that almost 60,000 moves take place every year. As he will know, pupil numbers in schools fluctuate regularly for a number of reasons, and the school funding system in England is already set up to manage that.

[Chris Vince (Harlow) (Lab/Co-op)]

Does my hon. Friend not think it ironic that Conservative Members are talking about the mental health of students? They did not consider that when they made changes to the state system. As a former teacher, I know the massive impact on young people’s mental health of the Conservative party’s decision to move from lettered grades to numbered grades at short notice, to completely change the syllabus and not to provide the resources or textbooks that teachers needed to teach those courses.

[James Murray]

My hon. Friend is right to point out that the lack of funding that the previous Government put into the state sector has implications. It takes a toll on children if schools are not properly funded. If the capital budgets for schools are not properly funded, as well as their revenue budgets, that has an impact on children’s lives. That is why the funding that we are putting into schools is something for which I will make no apology. The fact that we are having to take difficult decisions to fund it is the nature of government. I note that Conservative Members are happy to support our investment in state schools, but they refuse to support the difficult decisions necessary to generate that funding. Frankly, that underscores how far away they are from even being a credible Opposition.

[Dr Murrison]

On that point, will the Minister give way?

[James Murray]

I have already given way to the right hon. Gentleman, so I will make some progress.

Within the policy, provision for pupils with special educational needs is an important matter that a several right hon. and hon. Members have raised with me. The Government recognise the importance of that too, and I am glad to confirm that where pupils have special educational needs that can only be met in private schools, as determined by an education, health and care plan in England or its equivalent in Scotland, Wales and Northern Ireland, local authorities and devolved Governments that fund those places will be compensated for the VAT they are charged on those pupils’ fees.

Fourthly, this Government are delivering on the manifesto commitments to increase the energy profits levy by three percentage points, from 35% to 38%, and to extend the period over which the levy applies by one year. The Government are also ending unjustifiably generous allowances by removing the levy’s core investment allowance, which was unique to oil and gas taxation and not available to any other sector of the economy. We are, however, providing stability within other features of the system, by maintaining the level of tax relief available for decarbonisation investment, by setting the rate of the allowance at 66% and by maintaining the availability of 100% first-year allowances.

[Dave Doogan (Angus and Perthshire Glens) (SNP)]

The Minister is defending the changes that he is making to the fiscal regime as it relates to the North sea and the production of oil and gas. Can he identify another oil and gas-producing nation that taxes its industry higher than the United Kingdom does?

[James Murray]

We know that other countries tax in different ways. Norway has a high headline rate, although it has a different set of structures of allowances and so on. It is important for us that we calibrate the headline rate and the allowances in the right way. That is why we have taken the measured decision to increase the rate as I described, to remove the investment allowance but at the same time to retain the 100% first-year allowances and the level of relief available for decarbonisation investment.

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

Does the Minister think that that is the right balance, given that Offshore Energies UK suggests that the changes will cost £12 billion in tax revenues?

[James Murray]

I am absolutely confident, through all my engagement with OEUK and many firms that work in the oil and gas sector, that our approach strikes the right balance, as needed in our economy. It recognises that oil and gas producers will have a role in the energy mix for years to come, while also being clear that it is crucial we raise money for the energy transition. The energy profits levy seeks to achieve that by providing the money for that transition while also supporting jobs and investment in the sector, as exists at the moment.

Fifthly, the Bill delivers on our manifesto commitment around carried interest by increasing to 32% the capital gains tax rates that apply as an interim measure from 6 April next year, ahead of reforming carried interest more fully in a future Finance Bill. The reforms, which will have effect from April 2026, will ensure that the reward is taxed in line with economic characteristics. They put the tax treatment of carried interest on a fairer and more stable footing for the long term, while preserving the UK’s competitive position as a global asset management hub.

As the Chancellor set out both in July and again at the Budget, the fiscal situation we inherited was far worse than we had expected. We know that the previous Government left us with a £22 billion black hole and so we have had to take tough decisions to fix the public finances and get public services back on their feet. Some of those decisions are outside the scope of this Finance Bill and will be debated during the passage of other Bills. However, this Bill includes a number of those decisions, which we have sought to take in as fair a way as possible.

The Bill makes changes to the main rates of capital gains tax by increasing them to 18% and 24% from 30 October 2024. That decision will raise revenue while ensuring that the UK tax system remains internationally competitive. We are supporting businesses through that transition by maintaining business asset disposal relief, with its million-pound lifetime limit, and by phasing in the increase to that relief’s CGT rate, in line with the changes to investors’ relief, to 14% in April 2025 and then to 18% in April 2026.

The Bill maintains inheritance tax thresholds at their current levels for a further two years to 5 April 2030. It also legislates for air passenger duty rates for 2025-26 and for those announced in the Budget for 2026-27. From 2026-27, all rates of air passenger duty will be adjusted to partially account for previous high inflation, and that change will help maintain the value of air passenger duty rates in real terms.

[Dr Evans]

When it comes to flying, Ryanair has come out and said it will cut 5 million tickets because of the change. How does that help growth?

[James Murray]

Let me put these decisions into context for the hon. Gentleman. The increase equates to £1 more for people taking domestic flights in economy class and £2 more for those flying to short-haul destinations in economy class. None of the decisions are easy, but we have to take them to fix the public finances and to get our economy back on a stable footing.

[Paul Holmes]

Will the Minister give way?

[James Murray]

I will make some progress. That is the impact the changes have on domestic flights and short-haul destinations in economy class. However, in addition to the broad changes in air passenger duty rates, the higher rates for larger private jets will also increase by a further 50% to ensure they contribute fairly to the public finances.

The Bill also renews the tobacco duty escalator and enables His Majesty’s Revenue and Customs to prepare for the introduction of a new duty on vaping products. The Bill increases the soft drink industry levy over the next five years to reflect the 27% increase in consumer prices index inflation between 2018 and 2024, as well as increasing the rate in line with CPI each year from 1 April 2025. Finally, while the Bill increases alcohol duty for non-draught products, in line with retail prices index inflation, duty on qualifying draught products will be cut by 1.7% in cash terms to support pubs, and we will increase the duty discount on products that qualify for small producer relief from 1 February 2025.

The Chancellor has been clear that the Budget was a once-in-a-generation event, at which the Government took difficult but necessary decisions. By taking those tough decisions, the Budget delivers economic stability, sound public finances and stronger public services. On those foundations, we will work day in, day out across the rest of this Parliament to boost investment and growth.

Many of the measures to boost investment are being delivered outside of the Finance Bill, from the planning reform that we got under way within days of taking office to the creation of mega-funds for pension investments, which the Chancellor announced at Mansion House. The Bill introduces additional reliefs for our creative industries, for visual effects within film and high-end TV, which will play a key role in strengthening the UK as a global hub for film and TV. Likewise, the Bill introduces measures to support the transition to electric vehicles, through higher vehicle excise duty first-year rates for hybrid and internal combustion engine vehicles, which boosts the incentive for EVs, and by an extension of first-year allowances for electric cars and charge points until 2025-26.

Above and beyond any individual measures, the impact of the Bill and the Budget that it follows is to lay the foundation for greater investment and growth, through fiscal responsibility, stronger public services and economic stability. We have laid the foundations for creating wealth, jobs and opportunity in every part of this country, enabling people to meet their aspirations for themselves and their families, and making people across Britain better off.

[Ben Lake (Ceredigion Preseli) (PC)]

One of the measures that has a bearing on the provision of public services is the increase to the employer national insurance contributions. I understand the Treasury is in discussion with the devolved Governments and local Government across England to ascertain precisely how much extra funding support is required to offset the increased cost upon their services. Will the Minister give us an update on those discussions and when he believes local authorities and, indeed, the devolved Governments will know how much money in additional support they will receive?

[James Murray]

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

[Graham Stuart]

Will the Minister give way?

[James Murray]

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

[Graham Stuart]

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

[James Murray]

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

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

[Madam Deputy Speaker (Ms Nusrat Ghani)]

I call the shadow Chancellor.

Non-Domestic Rating (Multipliers and Private Schools) Bill

James Murray Excerpts

2nd reading
Monday 25th November 2024 Commons Chamber

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

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

Last month, the Chancellor set out the Government’s first Budget. That Budget was a once-in-a-generation event to wipe the slate clean after 14 years of the Conservatives. At that Budget, we laid the foundations for our No. 1 mission of economic growth. The scale of the mess that we inherited at the general election meant that we had to take tough decisions on welfare, spending and tax. Those decisions have been difficult, but they were necessary. They have enabled us to deliver economic stability and fix the public finances. Doing that is crucial to getting public services back on their feet, and to giving businesses the confidence they need to invest and thrive.

Stability, certainty and predictability are highly prized by businesses when making decisions about where and how much to invest. In opposition, I spoke to businesses time and again about the importance of stability, so in government we have made sure to deliver for them by publishing our corporate tax road map alongside the Budget. In my meetings with businesses about what they need to succeed, the system of business rates also came up time and again. I heard businesses criticise a system that is inflexible, that disincentivises investment and that places an unfair burden on those businesses on high streets across England.

That is why, in the Budget, the Chancellor confirmed our first steps towards creating a fairer business rates system that protects the high street, supports investment and is fit for the 21st century. We are determined to support high streets, as they are places that bring people together and serve as focal points for economic activity. Their success is what people across the country want to see, and it is a priority for the Government to deliver it. That is why, in our first Bill on business rates in this Parliament, the Government have prioritised making progress to rebalance the rates burden faced by high street businesses.

The Bill before us seeks to put into law the commitments made at the Budget by enabling the introduction from 2026-27 of permanently lower tax rates for the retail, hospitality and leisure properties with rateable values below £500,000 that make up the backbone of high streets across England. We are determined to give those businesses a tax cut, and we know that that must be fully funded in a challenging fiscal context. For that reason, the Bill also enables us to generate sustainable funding for those tax cuts through an increase of multipliers on the most valuable 1% of business properties in the country.

This targeted approach captures the majority of large distribution warehouses, including those used by online giants, as well as other out-of-town businesses that draw footfall away from high streets. It will enable us to lock in new, permanently lower tax rates for core high street businesses, providing not only a tax cut but stability and certainty after the one-year retail, hospitality and leisure relief, which has been precariously extended year by year since the pandemic. Our approach provides a permanent tax cut to help high street businesses succeed, alongside the certainty that they need to invest and the means to pay for it within our tough fiscal rules.

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

The Minister talks about certainty, but one of the biggest problems for small businesses is that so many things are happening at once, including the national insurance contributions increase, the Employment Rights Bill that is coming in, and now the levy that has been cut down from 70% to 40%. The cumulative effect of all those makes a massive difference for my businesses. A hairdresser that I met only this weekend talked about how much of a problem that will be. How does the measure help to engender stability for those small businesses, which have to wait until 2026?

[James Murray]

Let me remind the hon. Gentleman that, around the difficult decision that we had to take on employer national insurance contributions, we provided explicit protection for small businesses by more than doubling the employment allowance from £5,000 to £10,500, which will benefit hundreds of thousands of small businesses across the country. I suggest that he talks to businesses in his constituency about that.

We are not shying away from the fact that difficult decisions were taken in the Budget, but he might also consult the plans that were left in operation by the previous Government in July. If we had pursued those plans, and if we had not taken any action on business rates, the retail, hospitality and leisure relief would have ended entirely next April. The cliff edge looming next April would have seen it go down to zero. We have extended it, despite the tough fiscal circumstances, for another year at 40%. That is a reasonable way forward while we put in place these permanent reforms.

As I mentioned, the measures in the Bill to level the playing field for high streets are the beginning of our efforts to transform the system of business rates. Our ambition to go further is set out in the paper published alongside the Budget, “Transforming business rates”. That paper sets out the Government’s priority areas for further reform to support investment and make the system fairer. It invites businesses and industry representatives to work with us on designing the best possible system for the future.

I am grateful to all those businesses and representative bodies that I have spoken with in the last few weeks for their engagement already. We will consider what more the Government should do to incentivise investment and growth, including by looking at the efficacy of improvement relief and empty property relief, the impact of losing small business rate relief on expanding businesses, and the cliff edges within the current system.

[Andrew George (St Ives) (LD)]

If the Minister is looking for other methods by which public finances could be effectively deployed, will he look carefully at the last decade, during which small business rate relief has been used by second home owners to flip their properties to business rating and pay nothing at all? In Cornwall alone, that has resulted in over £500 million of taxpayers’ money being paid out to wealthy second home owners through covid aid and the small business rate relief. Will he look at how wealthy people have been incentivised to use that method to their advantage? Will he ensure that we have a much fairer system that puts first homes before second homes?

[James Murray]

The hon. Gentleman raises a crucial point about ensuring that the tax system is fair and that it supports the behaviour that we seek to incentivise.

That leads me neatly to my next point. As part of the discussion paper on transforming business rates, we have committed to consulting on adopting a general anti-avoidance rule for business rates in England. Although that might not necessarily address the exact problem the hon. Gentleman highlights, it speaks to the general issue of avoidance in relation to business rates.

We will also look at how the burden adjusts with the economic cycle, and we will assess the merit of a further increase in the frequency of re-evaluations. I look forward to working closely with businesses and representative organisations to deliver a business rates system that is fit for the 21st century, and that work begins today with the powers in this Bill to deliver our permanent tax cut for high streets.

As I said earlier, the tough decisions that the Chancellor set out in the Budget to deliver economic stability and fix the public finances enable us to give businesses the confidence they need to invest, and to get public services back on their feet. One public service that is crucial to breaking down barriers to opportunity is the education system, which is why the Government have prioritised ensuring that every child has access to the high-quality education that they deserve.

[Jim Shannon (Strangford) (DUP)]

Like others, I have repeatedly raised the need for exemptions for religious schools. For the Free Presbyterian Church in Northern Ireland, for example, the expression of its faith and treasured beliefs does not sit comfortably with mainstream schooling, and it is the same for many other faiths. If the Government are determined to press ahead, does the Minister agree that exemptions must be made, at the very least, for such schools? On behalf of those Churches, those faiths and those people, I have to say that the Government must think again.

[James Murray]

I thank the hon. Gentleman for a rare intervention, but this Bill is about business rates in England. Some of his wider points may relate to the removal of the VAT exemption for private school fees in other countries and nations of the UK. Those provisions will be debated as part of the Finance Bill on Wednesday and, if he repeats his comments, I might be able to address them more specifically.

Today, we are addressing the business rates system that applies in England. This is important because every parent aspires to get the best education for their child, and we as a Government are determined to ensure that those aspirations are met. At the Budget, the Government announced a real-terms increase in per pupil funding, with a £2.3 billion increase to the core schools budget for the financial year 2025-26, including a £1 billion uplift in high-needs funding.

This funding increase needs to be paid for so, to help make that happen, the Government are ending the tax breaks for private schools, as set out in our manifesto. This includes ending charitable rate relief eligibility for those private schools in England that are charities. This Bill will do that, and its measures operate alongside the ending of the VAT exemption for private school fees, which is being delivered through the Finance Bill that I will be moving on Wednesday. Together, these measures will raise £1.8 billion a year by 2029-30.

[Dame Caroline Dinenage (Gosport) (Con)]

The Bill makes provision for maintaining the charitable status of institutions that are wholly or mainly concerned with providing full-time education for pupils with an education, health and care plan. Will the Minister set out the definition of “wholly or mainly”? What support will be put in place for councils to afford the burden of extra pupils moving into mainstream education? Schools will be facing the double whammy of losing charitable status and VAT being imposed on school fees. Hampshire county council is already under financial strain, and it will face a crisis point by 2026-27 under these proposals.

[James Murray]

As I will explain, the test of “wholly or mainly concerned” is 50% of pupils, or more, having an EHCP specifying that their educational needs can be met only in a private school. I will provide some more detail in a moment.

Of course, the Government have prioritised funding for the state education system in this Budget. The £2.3 billion increase, including a £1 billion uplift in high-needs funding, is possible only because of the difficult decisions that we have taken on taxation, including in the Bill.

[Chris Vince (Harlow) (Lab/Co-op)]

Does the Minister agree that the Budget’s prioritisation of state schools should be welcomed? I have talked to teachers in Harlow and, under this Labour Government, they feel hope for the first time in 14 years. Is it not shocking that the Conservative party is still bemoaning the removal of tax exemptions from private schools, rather than focusing on the mainstream education attended by 96% of children?

[James Murray]

My hon. Friend is right that we, as a Government, are focused on improving state education for children across the country, because we know that every parent aspires for their child to get the best possible education. That is what our plans seek to achieve, and I would welcome it if the Opposition supported our efforts for the good of children across the country.

Members will have the chance to scrutinise the detail of this Bill in Committee, but I will now spend a few moments outlining how the Bill’s provisions are intended to operate.

[Munira Wilson (Twickenham) (LD)]

Does the Minister recognise that many independent schools, such as Lady Eleanor Holles school and Hampton school in my constituency, are involved in a huge amount of partnership work with schools in disadvantaged areas, like Feltham’s Reach academy, to help disadvantaged children to have opportunities that they would not otherwise get? Does he recognise that both the measures in this Bill and the introduction of VAT on private school fees will lessen that partnership work, which will have a detrimental impact on many state schools?

--- Later in debate ---

[James Murray]

I thank the hon. Lady for her intervention, but what will have a positive impact on state schools across the country is the extra funding that we announced in the Budget. If Opposition Members want to support extra funding for schools, they have to support some of the tough decisions to raise that revenue in the first place. They cannot have it both ways. I know the new Leader of the Opposition is very keen to oppose tax rises while claiming that she supports the investment, but she cannot have it both ways. If Opposition Members want to support extra funding for schools, the NHS and other public services, they have to have some responsibility and accept the decisions that we are taking, or propose some of their own.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

Will the Minister confirm the continuation of small business rates relief for the rest of this Parliament?

[James Murray]

I will come to business rates. The hon. Gentleman will have a chance to respond in full in just a moment. [Interruption.] I see that he is impatient to tell us how much he supports the Bill—or am I misreading the signs from across the Dispatch Box?

As I have said, this Bill will enable the introduction of new multipliers in the business rate system from 2026-27. The provisions in this Bill will enable the introduction of two lower tax rates, which may be applied only to qualifying retail, hospitality and leisure properties. The definition of “qualifying properties” will ultimately be set out in secondary legislation but, for the avoidance of doubt, it is our intention that the scope of these new tax rates will broadly follow that used for current retail, hospitality and leisure relief. These new rates will provide permanent tax cuts, offering certainty to businesses by ending the continued uncertainty of retail, hospitality and leisure relief, which has been rolled over annually since covid-19.

Our intention is for a lower rate that offers a tax cut for retail, hospitality and leisure properties that currently pay the standard multiplier, with a rateable value between £51,000 and £499,999. Another rate will offer a larger cut to the retail, hospitality and leisure properties currently paying the small business multiplier, which are those with a rateable value below £51,000.

We are clear, however, that any tax cut must be sustainably funded. For that reason, the Bill will also enable the introduction of higher multipliers, which can be applied only to the most valuable properties—those with a rateable value of £500,000 and above, which represents less than 1% of all properties in England. The rates for any new multipliers will be set in the 2025 autumn Budget in the light of the outcomes of the 2026 revaluation. The Government recognise, however, that it would be inappropriate to take unfettered powers that allowed the Government to change tax liabilities by unlimited amounts. For that reason, the Bill includes sensible guardrails to limit the use of those powers.

The guardrails determine that the two lower tax rates, when introduced, may not be set lower than 20p below the small business non-domestic rating multiplier, and that the higher tax rates, when introduced, may not be set higher than 10p above the non-domestic rating multiplier. Let me make it clear that those values are maximum parameters and do not represent the changes that we intend to implement. They are guardrails that offer sensible limits with proportionate flexibility. They ensure that the Government can respond to future revaluations as well as the changing economic and fiscal context. As I said, the exact rates for 2026-27 will be set out in next year’s Budget.

Alongside the provisions on multipliers, the Bill contains provisions relating to private schools that will raise around £140 million a year. There are more than 2,400 private schools in England, of which approximately half are charities and are able to benefit from business rates charitable relief. The Bill will remove the eligibility of private schools that are charities for that relief. The Bill provides a specific definition of a private school as

“a school…at which full-time education is provided for pupils of compulsory school age…where fees or other consideration are payable for that…education”

or

“an institution…which is wholly or mainly concerned with providing education suitable to the requirements of persons over compulsory school age but under 19…where the provision of full-time education…is wholly or mainly provision in respect of which fees or other consideration are payable”.

A number of right hon. and hon. Members have questioned how the Government’s plans will affect pupils with special educational needs and disabilities. My officials and I carefully considered the design of the policy, and the provisions in the Bill mean that private schools that are charities that wholly or mainly provide education for pupils with an education, health and care plan will remain eligible for charitable rate relief. To be clear, in answer to the earlier question from the hon. Member for Gosport (Dame Caroline Dinenage), “wholly or mainly” in business rates generally means 50% or more. The Government believe that will ensure that the majority of special educational needs schools will not be affected by the measure.

The measure will operate in addition to the existing business rates exemption for properties used by private schools wholly for the training or welfare of disabled people. That exemption, which we are retaining, means that those types of properties pay no business rates at all. Taken together, the existing and new provisions are intended to ensure that most private special educational needs schools will not be affected by the removal of charitable rate relief.

[Victoria Collins (Harpenden and Berkhamsted) (LD)]

Given the terrible SEND crisis across the country, does the Minister really think that it is good enough that only “most” of those schools will be exempt?

[James Murray]

I hope that the hon. Member will welcome the fact that we have committed an extra £1 billion in 2025-26 to high needs funding in the education system. The Government are committed to reforming England’s SEND provision to improve outcomes and return the system to financial sustainability. I would welcome her support for our measures in that regard.

[Dr Luke Evans]

I appreciate the Minister making this carve-out on SEND, but I would be grateful if he could give us some statistics. He said that “most” will be carved out. Have the Government done any work to determine how many schools will still fall under the provisions? If not, placing such an impact assessment in the Library would be useful for Members across the House.

--- Later in debate ---

[James Murray]

Let me point the hon. Gentleman to a document that has already been published: “Removal of eligibility of private schools for business rates charitable relief”, which sets out the impact and all the figures that he requests. There are 2,444 private schools in England, 1,139 of them are charities, and we expect that under our plans 1,040 will lose the relief. The schools that are wholly or mainly concerned with provision for children with an EHCP that specifies that their educational needs can be met only in a private school will retain access to charitable rate relief. I hope that that document will give him some of the statistics that he requests.

Let me add a few more details, in case they help hon. Members in understanding the policy. I can confirm that stand-alone nurseries with their own rates bills are not within the scope of the Bill. If they are charities, they will retain their eligibility for the existing relief. In addition, the Bill references independent training providers, which provide valuable vocational training courses on behalf of the Government, ensuring that there are suitable further education opportunities for all. Because of the funding mechanism used by the Government to fund independent training providers to provide full-time education and training for 16 to 19-year-olds, the Bill provides a specific carve-out to ensure that those institutions will not be affected by the measures in the Bill. As previously announced, it is the Government’s intention that this measure will come into effect from 1 April 2025. As business rates are a devolved tax, the measures in the Bill will apply only in England.

The measures in the Bill will play their part in bringing about the change that the Government were elected to deliver. The powers to introduce new multipliers serve as first steps on the road to transforming the business rates system. We are determined to transform the business rates system to support our high streets in a sustainable way, to offer stability and promote investment, and to drive the economic growth that is our mission as a Government. Our vision of a modern business rates system is one that helps to create wealth and decent jobs in every part of the country, and that ensures that high streets serve as the heart of local communities.

We are also determined to break down barriers to opportunity and help all parents to achieve their aspirations for their children. That is why the Bill will make changes to the relief from business rates that private schools that are charities currently enjoy, raising crucial funding to help to ensure that every child has access to the high-quality education that they deserve. The Bill delivers change. Change is what the British people voted for, and I commend the Bill to the House.

[Madam Deputy Speaker (Ms Nusrat Ghani)]

I call the Opposition spokesperson.

--- Later in debate ---

[Kevin Hollinrake]

I am grateful to the hon. Gentleman for his intervention. I remind him that it was not the Conservative party that voted to leave the European Union, but the people of this country. We respect democratic mandates.

I hope every Member on the Government Benches who walks through the Lobby to support the Bill tonight realises the price their constituents will pay for that decision. If the Government will not publish the likely consequences of the Bill, let me set out what I believe the consequences will be.

The Government claim to be cutting business rates relief for retail, hospitality and leisure businesses in England, but that is not the case. The business rates relief for retail, hospitality and leisure businesses that we introduced cuts 75% off bills, but that support is being reduced by the Labour Government. They are almost halving that relief to 40%, meaning that shops, restaurants, cafés, pubs, cinemas, music venues, gyms and hotels will all see their business rates rise.

[James Murray]

Was that 75% business rates relief for retail, hospitality and leisure businesses due to expire in April 2025?

[Kevin Hollinrake]

As the Minister knows, it had been renewed every year since 2021. The Conservative party supports businesses. When that 75% was passed on in England, the same moneys were provided to Scotland and Wales. What did Wales do? Only 40% relief was passed on, not 75%. That is the Welsh Government’s attitude to business. The Conservative party supports businesses, but the Labour party does not because it does not understand them.

Businesses face a stealth tax from Labour, with a £925 million rise in rates next year. That will add more than £5,000 to the business rates bill for the average pub, on top of £5,000 per year in extra costs for national insurance rises. It will also add more than £9,000 to the rates bill for the average restaurant, on top of the £12,000 national insurance increase, which means an additional £21,000 in total per annum for a typical business.

There will also be an increase of up to £2.7 billion in 2026 through higher business rates via the new multipliers, despite Labour’s manifesto promise not to increase the amount raised by the levy. These tax rises, as the CBI has said again today, will be passed on to workers through lower wages and to consumers through higher prices, making a mockery of Labour’s claim that it would not raise taxes for working people. The British Retail Consortium has warned the Government:

“The sheer scale of new costs and the speed with which they occur create a cumulative burden that will make job losses inevitable, and higher prices a certainty.”

The Bill will replace retail, hospitality and leisure relief with a lower multiplier for businesses with a rateable value below £500,000. That will be funded by the new higher rate multiplier for premises with a rateable value of more than £500,000, as the Minister set out. Setting the threshold at that higher level is a blunt instrument. I can assure the Government that it will have consequences for businesses that are not big online retailers. It will hit large supermarkets, supermarket delivery, large department stores, football and cricket clubs, conference centres and airports. Some of those on whom the new charges will be levied pay tens or hundreds of millions of pounds in rates. At the maximum level, it will mean a 20% increase to their rates bill.

It is no wonder that the outgoing chief executive of John Lewis has criticised Labour’s lack of business rates reform and warned that, alongside the national insurance increase, this is a “two-handed grab” from businesses. The Cold Chain Federation has warned that the business rates changes and the NICs increases could lead to the cost of food and medicine going up. That might be a double whammy for consumers, as the National Farmers Union has warned that the cost of food will go up because of the family farm tax. The Labour Government do not seem to have thought that through. The Labour party used to say that the business rates system created uncertainty, but now KPMG has described the Government’s plan to change the business rates system, as set out in the Bill, as “creating uncertainty for businesses”.

The Bill is silent on the matter of small business rates relief, which is a lifeline for many businesses on our high streets. When the Minister for Local Government and English Devolution winds up the debate, will he confirm that the Government intend to retain small business rates relief for the rest of this Parliament? Business is listening, and it needs to know.

Let me address the sting in the tail of the Bill: Labour’s education tax. The shadow Education Secretary, my right hon. Friend the Member for Sevenoaks (Laura Trott), feels passionately, as do all Conservative Members, that the Government are making the wrong decision. This Bill is part of the Government’s education tax, because removing the charitable rate relief from private schools that are charities goes hand in glove with the utterly wrong-headed, anti-aspirational and counterproductive policy of charging VAT on private school fees.

UK and Romania Double Taxation Convention

James Murray Excerpts

Monday 18th November 2024 Written Statements

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

A double taxation convention with Romania was signed in London on 13 November 2024. 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.

[HCWS229]

Single Trade Window

James Murray Excerpts

Tuesday 5th November 2024 Written Statements

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

The Government are considering their future plans for the border and how best to meet the needs of their users. In the context of financial challenges, the Government are pausing delivery of the UK single trade window in 2025-26.

As part of their efforts to support businesses trading across the UK border, the Government will consider the role of the single trade window and will provide an update as part of the next phase of the spending review, reporting in late spring 2025.

[HCWS188]

Oral Answers to Questions

James Murray Excerpts

Tuesday 29th October 2024 Commons Chamber

[Mr Will Forster (Woking) (LD)]

7. What fiscal steps she is taking with Cabinet colleagues to help support households with energy bills.

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

Household energy bills have fallen by 30% since their peak, and are now around £800 lower for a typical household. This Government are committed to improving the quality and sustainability of our housing stock through our warm home plan, further details of which will be set out through the spending review. That will be vital in making sure that the UK is more energy-resilient, in lowering household bills and in meeting our 2050 net zero commitment.

[Mr Forster]

Given that many constituents of mine in Woking and across the country live in fuel poverty and are fearful of losing their winter fuel allowance, does the Minister or the Chancellor agree that targeted support for low-income families and households should be included in tomorrow’s Budget or in the warm home plan, so that no one has to decide between eating and heating this winter?

[James Murray]

The hon. Gentleman can see our commitment to supporting vulnerable households with the cost of energy and food in our extension of the household support fund, at a cost of half a billion pounds, from the end of September to the end of March. That will allow local authorities to help low-income families with the cost of essentials, such as food and energy.

[Dr Jeevun Sandher (Loughborough) (Lab)]

This nation experienced the highest rise in energy bills of all G7 countries after Putin invaded Ukraine, because the Conservatives left us dependent on natural gas and with the worst-insulated homes in western Europe. Can the Minister assure me that we will invest in the clean energy and home insulation that we need to lower energy bills for good?

[James Murray]

My hon. Friend is absolutely right to say that while it is essential that we tackle high energy bills now, it is also essential that we invest for the future to bring energy bills down for good. Critical to that is investing in our housing stock, as I have mentioned, but also, through GB Energy, in sustainable energy sources to make sure we improve our energy security and bring bills down for families across the country.

[John Grady (Glasgow East) (Lab)]

8. What steps she is taking to help ensure sustainable public finances.

--- Later in debate ---

[Mr James Frith (Bury North) (Lab)]

16. What steps she is taking to minimise taxes on working people.

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

As hon. Members know, any changes to tax policy will be set out in tomorrow’s Budget. Members will also know that our approach to fixing the foundations of the economy will be one that protects working people. This Labour Government will honour our commitment to protect working people by not increasing national insurance, basic, higher or additional rates of income tax, or VAT.

[Blake Stephenson]

The Government have got into an absolute pickle over the definition of working people. People deserve certainty. In Mid Bedfordshire, we are proud of the hard work of the owners of nearly 5,000 small businesses. They are working people creating jobs and growing our economy, and all while providing for their families. They are lying awake at night worrying about yet higher taxes. Will the Chancellor give them a peaceful night’s sleep ahead of tomorrow’s Budget and confirm that she will honour her manifesto commitment not to raise taxes on them?

[James Murray]

I do not think I am pre-empting anything tomorrow by confirming that the Chancellor will absolutely stick to our commitment not to raise taxes on working people through national insurance, the basic, higher or additional rates of income tax, or VAT. And I might add that what people and businesses in the hon. Gentleman’s constituency might want is stability in the economy, a Government who support investment in the economy, and a Government who will get the economy growing and make people across Britain better off.

[Mr Frith]

In Bury North, child poverty rates are at 43%, densely populated in three of our nine wards: Bury East, Redvales and Moorside. Does the Minister agree with me that minimising tax rises for working people is just the starting point, and that tackling the crippling level of impoverishment for those in work requires a laser focus and intervention from this mission-driven Government?

[James Murray]

My hon. Friend is absolutely right that, while keeping taxes on working people as low as possible is crucial, the way to make people better off in the long run is through boosting public and private investment, and delivering sustained economic growth. That is the focus of this Labour Government, and that will guide the choices we make.

[Mr Speaker]

I call the shadow Minister.

[Laura Trott (Sevenoaks) (Con)]

During the election campaign, I held a press conference at which I outlined the glaring funding gaps in Labour’s plans and the taxes they might raise to pay for them. One of those taxes was employer national insurance contributions. The right hon. Member for Bristol North West (Darren Jones)—now Chief Secretary to the Treasury—responded at the time by arguing that this was a list of things that “Labour isn’t doing.” Is it correct that raising employer national insurance contributions is something Labour isn’t doing?

[James Murray]

The right hon. Member will have to wait for the Budget tomorrow. She was a Minister not that long ago, so she might still remember that the Budget is the time when such announcements are made. Let me restate our commitment, so it is crystal clear, that we will protect working people by not increasing national insurance, income tax or VAT. Might I add, very briefly, that I note the Conservatives suddenly have a new-found interest in the livelihoods of working people? It is a shame, frankly, that they never prioritised that during their 14 years in office, during which, time and again, they made working people pay for their mistakes.

[Anna Dixon (Shipley) (Lab)]

17. What steps she is taking to help ensure value for money in public spending.

--- Later in debate ---

[Adam Jogee (Newcastle-under-Lyme) (Lab)]

T2. My constituency’s beer and pub sector makes a significant contribution to the economy, both locally and nationally. Our 76 pubs and two breweries generate £23 million in tax receipts each year. Will the Chancellor work with the sector to unlock its growth potential, in Newcastle-under-Lyme and across our country?

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

I know that Newcastle-under-Lyme and, indeed, the whole county of Staffordshire have a proud brewing tradition, and my hon. Friend will be an excellent champion of breweries in his constituency. Supporting pubs and breweries is very important for me as a Minister. Indeed, on my first day in the Treasury’s Darlington economic campus, I visited Durham brewery—it was a work visit—where I heard from the Society of Independent Brewers and associates about the huge contribution that breweries make to British society. Further details will be set out by the Chancellor tomorrow.

[Mr Tom Morrison (Cheadle) (LD)]

T4.   The Chancellor recently announced an extra £550 million for the school rebuilding programme. Can she now confirm that all the schools on that programme, including Bramhall high school, are fully funded and will get their repairs soon?

--- Later in debate ---

[James Murray]

I thank my hon. Friend for his question. He is absolutely right to say that pubs make an enormous contribution to our society and economy. The current alcohol duty system supports pubs through draught relief, which ensures that eligible products served on draught are charged less duty. The Government are committed to delivering a fairer business rates system for high streets, including hospitality. Any decisions on future tax policy will be announced by the Chancellor at a fiscal event, the next of which is tomorrow.

[Mr Richard Holden (Basildon and Billericay) (Con)]

Eighty-two per cent of those who have seen Labour take away their winter fuel payment are either below the poverty line or within £55 a week of it. How can the Government justify this, when they are not even allowing a freedom of information request from the Financial Times to be responded to? They are hiding the figures from the people.

--- Later in debate ---

[Mr Speaker]

Order—[Interruption.] No, these are topical questions and I decide.

[James Murray]

My hon. Friend will have to wait for the Budget tomorrow, but he will know that we have committed to closing some loopholes, including VAT on private schools, the non-dom loophole and cracking down on tax avoidance.

[Caroline Voaden (South Devon) (LD)]

In South Devon, the average house price is now 14 times the average salary, at £425,000. What measures is the Chancellor taking to ensure that rural and coastal areas, such as the South Hams, which face huge digital and transport connectivity problems, will be included in measures to boost economic growth?

UK and Ecuador: Double Taxation Convention

James Murray Excerpts

Wednesday 23rd October 2024 Written Statements

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

A double taxation convention with Ecuador was signed in Quito on 6 August 2024. The text of the convention is available on the HM Revenue and Customs pages of the 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.

[HCWS160]

Business Property Relief and Agricultural Property Relief

James Murray Excerpts

Thursday 17th October 2024 Westminster Hall

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

It is a pleasure to serve under you in the Chair, Dr Huq. Let me join others in congratulating the hon. Member for Gordon and Buchan (Harriet Cross) on securing the debate. I thank all hon. Members for their contributions —including the advice from the shadow Minister, the hon. Member for Droitwich and Evesham (Nigel Huddleston), on what to expect in my new role from the hon. Member for Strangford (Jim Shannon).

As many Members have rightly highlighted, there has been a great deal of speculation in recent weeks about potential changes to taxation in the Budget, including to the reliefs that we are debating today. Hon Members will understand—indeed, many of them acknowledged in their speeches that they understand—that I cannot add to that speculation. The Budget is on 30 October, and my right hon. Friend the Chancellor of the Exchequer will set out any changes to the tax system then, in the normal way. However, ahead of that, I welcome this opportunity to hear Members’ views on this matter.

Let me start by briefly setting out the context for this Budget. Following the spending audit in July, the Chancellor has been clear that difficult decisions lie ahead on spending, welfare and taxation to address the £22 billion black hole that we inherited from the previous Government. Decisions on how to address that will be taken at the Budget in the round. It is crucial that we get the public finances back on a firm footing so that we can restore economic stability. On those foundations, we will boost investment, increase growth across the UK and improve public services. That is the prize ahead and how we will make people across Britain better off.

Let me turn to how inheritance tax operates in the UK tax system. Inheritance tax, as other Members have said, is a wealth transfer tax and applies to the estate of the deceased. Transfers made in the seven years before death are also taken into account. The estates of all individuals benefit from a £325,000 nil-rate band. The residence nil-rate band is a further £175,000 and is available to those passing on a qualifying residence on death to their direct descendants, such as children or grandchildren. That means that, altogether, qualifying estates can pass on up to £500,000. Furthermore, the qualifying estate of a surviving spouse or civil partner can pass on up to £1 million without an inheritance tax liability, because any unused nil-rate band or residence nil-rate band is transferable to the surviving spouse or civil partner.

Above those thresholds, the headline rate of inheritance tax is 40%, but it is important to remember that that rate is charged only on the part of the estate that is above the threshold, and after the application of reliefs. That is obviously the subject of today’s debate, so let me turn first to business property relief. That relief is a long-standing part of the inheritance tax system. It is designed to ensure that businesses need not be broken up or sold on the death of an owner in order to pay an inheritance tax liability. That reflects concerns that there may not always be enough liquid assets in the business to pay the tax. Subject to certain qualifying conditions, the relief generally applies to unquoted shares and interests in a business. It also applies to shares designated as “not listed” on a “recognised stock exchange”, such as shares that are quoted on AIM, as mentioned by the shadow Minister. The rate of business property relief is usually 100%, but can be 50% in some circumstances. Until March 1992, the maximum rate of the relief was 50% and there was a lower rate of 30% alongside that. Hon. Members may be interested to know that the cost of the relief has risen from £685 million in 2019-20 to a forecast £1.3 billion in 2023-24.

Agricultural property relief is also a long-standing part of the system. It has a similar purpose to business property relief, although the main benefit is to ensure that relief is available when land is let to tenant farmers, as we heard from various hon. Members today. This is largely because owner-occupiers of agricultural land also qualify for business property relief. Again, the rate of agricultural property relief is usually 100%, but can be 50% in some circumstances, and as with business property relief, lower rates existed before 1992. The cost of this relief has risen from £320 million in 2019-20 to a forecast £365 million in 2023-24.

There are many different views on these reliefs. Stakeholders, including Family Business UK and the Country Land and Business Association, have argued strongly against any prospect of the reliefs being abolished. Other organisations are in favour of changes to the reliefs, with the Institute for Fiscal Studies suggesting that a cap on such reliefs could allow those passing on small farms or businesses to be taken out of inheritance tax, while preventing agricultural and business investments from being used to avoid it. The right hon. Member for Orkney and Shetland (Mr Carmichael), whom I thank for his contribution, said that there may be a case for certain reforms to agricultural property relief. Of course, the previous Government had views on these reliefs. I understand from reports in the Telegraph that the previous Government considered abolishing these reliefs as part of reforms to the system.

I welcome the opportunity today to hear from Members on their views, particularly on agricultural property relief, but also on issues relating to farmers and their constituents more widely. The hon. Member for Chester South and Eddisbury (Aphra Brandreth) rightly highlighted the importance of food security for this Government and its importance in our policy making. The hon. Member for Strangford (Jim Shannon)—in nudging me gently, to quote the shadow Minister—spoke eloquently about the importance of farming in his constituency and in the economy of Northern Ireland. The hon. Member for Central Suffolk and North Ipswich (Patrick Spencer) spoke of some of the wider challenges facing the farming community in recent years, not least energy bills. My hon. Friend the Member for Hexham (Joe Morris) is proving to be a very effective constituency MP already, raising a number of important issues on behalf of those he represents, as well as drawing attention to the wider significance of having economic stability and security for farmers and everyone in his constituency.

[Mr Carmichael]

The Minister reminds us—it is our fault for doing this—that we have focused very much on the family farm as the unit of concern, because that is what concerns most of our constituents. However, a lot of agricultural land is, in fact, owned by bodies such as the Royal Society for the Protection of Birds, of which I am a member. The RSPB is never going to have a succession event, to join the hon. Member for Gordon and Buchan (Harriet Cross) in using that expression. The consequence of abolition could be that two farms right next door to each other—one owned by a charity or an institution of that sort, and the other owned by a family—would be left having to farm in very different economic circumstances. Is that really fair?

[James Murray]

I thank the right hon. Gentleman for his point, although he presupposes he knows what will happen to agricultural property relief, which, as I set out earlier, I cannot comment on further. He will have to wait a couple of weeks, perhaps, to have further conversations about what the Government will do in this space. I thank him and all hon. Members for their comments today, because it has been an interesting debate. As we have heard, the issue generates some strong views among many of our constituents and the Members present, who represent them.

I understand that there are many different views on what the Government should do, and the debate has allowed me to hear them. As always, the Government welcome all opinions and keep all taxes under review. However, I return to my earlier point: the Chancellor will, of course, announce changes to the tax system at the Budget. There is not long to wait.

Independent Schools: VAT and Business Rates Exemptions

James Murray Excerpts

Tuesday 8th October 2024 Westminster Hall

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

It is a pleasure to speak in this debate with you in the Chair, Dame Caroline. I start by congratulating the hon. Member for Bromsgrove (Bradley Thomas) on securing this debate, and thanking all hon. Members for their contributions. I have listened carefully and, although I do not have much time, I will attempt to address as many of the points raised as possible.

Every member of the Government cares deeply about education, and we are committed to breaking down barriers to opportunity. We are determined to fulfil the aspirations of every parent in our country to get the best education for their children. We are committed to doing so by improving state schools, and by making sure that every child has access to high-quality education.

We will start to make that happen by expanding early years childcare for all, by opening 3,000 new nurseries across England. We will recruit 6,500 new teachers, alongside improving teacher and headteacher training. We will roll out breakfast clubs to all primary schools, so that no child starts class too hungry to learn.

Those improvements to the state education system will begin our work to make sure that every parent’s aspiration for their child can be fulfilled. We want to get on with those important changes right away, and to do so, they must be paid for.

[Damian Hinds (East Hampshire) (Con)]

Will the Minister give way?

[James Murray]

I will make some progress first. That is why, to help fund those improvements to our state schools, we have made the tough but necessary decision to end tax breaks for private schools. At the July statement, the Government announced that as of 1 January 2025, all education services and vocational training provided by a private school in the UK for a charge will be subject to VAT at the standard rate of 20%. Any fees paid from the date of the 29 July statement, relating to the term starting in January 2025 onwards, will be subject to VAT. As hon. Members know, the Government also announced that private schools in England with charitable status would lose their eligibility for business rates charitable rate relief from April 2025, subject to parliamentary passage of the legislation.

Those changes were set out in a technical note published online, alongside draft VAT legislation, which formed a technical consultation. As part of that consultation, the Government, at both official and ministerial level, engaged with a broad range of stakeholders, including the devolved Governments, to make sure that we understand the impact of the policy in each nation of the UK.

We have listened carefully to the points people have raised with us. We recognise that, while this policy will raise revenue to help support improvements in the state education sector, it may lead to increased costs for some parents and carers whose children are in the private education system. Let me be clear that while private schools will now be required to charge VAT on the education services and vocational training they provide, we expect most private schools will be able to absorb a significant proportion of this new VAT charge to keep fee increases affordable for most parents. They will be able to make efficiencies and recover the VAT they incur on the things they buy.

[Mr Adnan Hussain]

Will the Minister give way?

[James Murray]

I am going to make some progress. Those recovered costs can be used to offset the increases to feepayers. We are already seeing that some schools have committed to absorbing the VAT liability entirely, while others are choosing to cap fee increases at 5% or 10% to keep fees as low as possible for parents. Members have asked today why we will introduce this policy in January 2025. The reason for doing so is simple: we want to raise the funding we need as soon as possible to deliver our education priorities to state schools across the country.

[Dr Ben Spencer]

Will the Minister give way on that point?

[James Murray]

I do not have much time and I need to address the other points that hon. Members have made in this debate. Importantly, a January 2025 start date means that schools and parents will have had five months to prepare for the VAT change. HMRC is ready to ensure that schools are supported in delivering this change. To respond to the shadow Minister’s comment, HMRC will put in place a number of measures to ensure that all private schools can be registered ahead of 1 January 2025, including publishing bespoke guidance on gov.uk ahead of 30 October, updating registration systems and putting additional resource in place to help process applications.

Ahead of the policy being implemented, the Government have carefully the considered the impact the changes will have on pupils and their families across both the state and private sectors, as well their impact on state and private schools. The Government’s costings of this policy are currently being scrutinised by the independent Office for Budget Responsibility. The Chancellor will confirm our approach to the measures at Budget, where we will set out our assessment of the expected impacts of the change in the normal way.

We recognise, as some hon. Members have raised, the changes may lead to some pupils moving into the state education sector. However, we believe that the number of pupils who may switch schools as a result of the changes will represent a very small proportion of overall pupil numbers in the state sector and such switches will take place over several years. We are confident that the state sector will be able to accommodate any additional pupils.

[Damian Hinds]

Will the Minister give way?

[James Murray]

I have only a few moments left to address a number of points, so I will make some progress. Several hon. Members in their contributions today also raised their concern about the impact of the policy on pupils in private schools with special educational needs. We have carefully considered that element of the policy. Our proposed approach makes sure that pupils will not be impacted where they have acute additional needs and an education, health and care plan—in England, or its equivalent in other nations—specifies that those can be met only in a private school. In such cases, where a pupil’s needs can be met only in a private school, local authorities will fund their places and will be able to reclaim VAT. Similarly, on business rates, the Government are developing an approach to address the potential impact of the changes in cases where private school provision has been specified for pupils through an EHCP. More widely, as a Government, we are committed to transforming the system for supporting children and young people with SEND in all schools. We need to deliver better outcomes in a financially sustainable way.

I close by again thanking all hon. Members for taking part in this debate. In our consultation about the technical detail of this policy, we have been engaging widely and in depth, and of course the views of MPs are an important part of that. As I said earlier, it has been a tough but necessary decision to end tax breaks for private schools. We believe it is the right decision and one we need to implement as soon as possible to help raise the funding we need to deliver our priorities for state education in our country. We are determined to improve the education that is available to all, because that is how we will ensure that the aspiration of every parent to get the best possible education for their children can be fulfilled.

[Dame Caroline Dinenage (in the Chair)]

Bradley Thomas has one minute to wind up.

VAT: Independent Schools

James Murray Excerpts

Tuesday 8th October 2024 Commons Chamber

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

This Government were elected to break down barriers to opportunity. We are determined to fulfil the aspiration of every parent in our country to get the best education for their children. We are committed to doing so by improving state schools and making sure that every child has access to a high-quality education. We will start to make this happen by expanding early years childcare for all by opening 3,000 new nurseries across England. We will recruit 6,500 new teachers, alongside improving teacher and headteacher training, and we will roll out further mental health support to schools and colleges in England. Those improvements to the state education system will begin our work to make sure every parent’s aspiration for their children can be fulfilled.

We want to get on with these important changes right away, and to do so, they must be paid for. That is why to help fund improvements to our state schools, we have made the tough but necessary decision to end tax breaks for private schools. In the July statement, the Government announced that as of 1 January 2025, all education services and vocational training provided for a charge by a private school in the UK will be subject to VAT at the standard rate of 20%.

[Graham Stuart]

I know the Minister to be an honourable man, so will he take this opportunity to apologise to the House in the absence of the Secretary of State for Education for the malicious and spiteful tweet that she put out this weekend? That tweet was ill-advised, even if one believes that this policy is the right thing to do.

[James Murray]

Neither I nor any of my colleagues will make any apology for wanting to improve state education across this country to make sure that the aspiration of every parent in our country to get the best possible education for their children can be fulfilled. That is why we have announced that any fees paid from the date of the July statement, 29 July, relating to the term starting in January 2025 onward will be subject to VAT.

[Shaun Davies (Telford) (Lab)]

This package of support will put thousands of teachers back into school classrooms in Telford and across the country. Has my hon. Friend received any representation to say that if this change did not take place, those plans by this Government—who were elected by the people of this country—would go ahead by any other means?

--- Later in debate ---

[James Murray]

My hon. Friend makes an important point about the reason why we have taken the tough decision to end tax breaks for private schools. It is to fund our education priorities, because we know that the way to improve opportunities for people right across this country is to make sure that our state schools can provide the best-quality education for all children.

[Priti Patel (Witham) (Con)]

The Minister was in a similar debate this morning, in which he heard a range of views. He is a Treasury Minister, not an Education Minister or the Education Secretary; will he commit to publishing an impact assessment on the overall cost of this policy? There were parents in the Gallery listening to the debate this morning, and it is clear that there will be a legal challenge to this policy. Will the Treasury also publish the potential cost of that legal challenge and the bill that his Department will be footing in order to meet it?

[James Murray]

I thank the right hon. Member for her contribution. First, in terms of an impact assessment, while developing these policies, the Government have carefully considered the impact they will have on pupils and their families across the state and private sectors, as well as the impact they will have on state and private schools. In addition to having reviewed analysis published by third parties such as the Institute for Fiscal Studies, the Government have conducted their own analysis of the likely impacts of these policies, which draws on a range of sources.

[Graham Stuart]

On a point of order, Mr Speaker.

[James Murray]

I am not going to give way, because I am responding to the right hon. Member for Witham (Priti Patel).

[Mr Speaker]

Order. It is a point of order, so you do give way, unfortunately.

[Mr Speaker]

Order. As you know, that is not a point of order—do not waste my time. Carry on, Minister.

[James Murray]

As I was saying to the right hon. Member for Witham, the Government will publish a tax information and impact note on the VAT policy change at the Budget, once the independent Office for Budget Responsibility has scrutinised and certified the costing of the final policy.

[Mims Davies]

Will the Minister give way?

[James Murray]

I am still replying to the hon. Member’s right hon. Friend. [Interruption.] Maybe Conservative Members could sort this out on their side of the House before they come into the Chamber, but I will continue replying to the right hon. Member for Witham.

Turning to the legal cases, the Government have considered the policy’s interaction with human rights law and are confident that it is compatible with the UK’s obligations under the Human Rights Act. I hope that addresses the right hon. Member’s concerns.

[Mims Davies]

Will the Minister give way?

[James Murray]

I will.

[Mims Davies]

I thank the Minister for kindly giving way. This policy will have an economic impact in each and every constituency: on librarians, on maintenance people and on those who work in labs, in catering and as minibus drivers—everything that is predicated on schools such as the ones we are discussing. Will the impact assessment and the Treasury look at the wider implications for employment?

[James Murray]

As the hon. Member knows, there are established processes for developing tax information and impact notes. This one will be developed in line with the OBR costing in the normal way and published alongside the Budget, so she will see all the information.

[Several hon. Members rose—]

[James Murray]

I have given way quite a lot, so I am going to make a bit of progress.

Alongside the announcements about VAT, the Government announced in July that private schools in England with charitable status would lose their eligibility for business rates charitable relief from April 2025, subject to parliamentary passage of the legislation. Those changes were set out in a technical note that was published online alongside draft VAT legislation, which together formed a technical consultation. As part of that consultation, the Government—both at official and ministerial level—have engaged with a broad range of stakeholders, including the devolved Governments.

We have listened carefully to the points that people have raised with us. We recognise that while this policy will raise revenue to help support improvements in the state education sector, it may lead to increased costs for some parents and carers whose children are in the private education system. However, let me be clear: while private schools will now be required to charge VAT on the education services and vocational training they provide, we expect that most private schools will be able to absorb a significant portion of this new VAT charge and keep fee increases affordable for most parents. They will be able to make efficiencies and recover the VAT they incur on the things they buy. Those recovered costs can be used to offset increases for fee payers. We are already seeing that some schools have committed to absorbing the VAT liability entirely, while others are choosing to cap fee increases at 5% or 10% to keep fees as low as possible for parents.

[Dr Ben Spencer (Runnymede and Weybridge) (Con)]

I had a pop at getting the Minister to give way during the debate this morning, and I appreciate his doing so now. I love the irony of what he is saying, which is, “We need to do this to raise all this money, yet it isn’t actually going to raise all that much money because it can be reclaimed.” On the impact assessment, it is really interesting that one line in the consultation document that went out this summer says:

“The government understands that moving schools can be challenging.”

How many of his own constituents have contacted him to say they will have to move schools as a result of this policy, and how do we measure the damage that moving schools is going to cause for so many children in our constituencies?

--- Later in debate ---

[James Murray]

I have been clear: the Government recognise that some pupils may subsequently move into the state education sector as a result of these policies. However, as is set out in a technical note—and I take it from the hon. Gentleman’s comment that he has read it—the

“number of pupils who may switch schools as a result of these changes represent a very small proportion of overall pupil numbers in the state sector. The government is therefore confident that the state sector will be able to accommodate any additional pupils”

whom this policy will cause to move.

[Several hon. Members rose—]

[James Murray]

I will make a bit of progress, because I have been quite generous in giving way so far.

I want to address some of the questions that the shadow Secretary of State asked in his speech, particularly about why we are introducing this policy from 1 January 2025. The reason we are doing so is simple: we want to raise the funding we need as soon as possible to deliver our education priorities for state schools across the country. Importantly, a January 2025 start date means that schools and parents will have had five months to prepare for the VAT change, and His Majesty’s Revenue and Customs stands ready to make sure schools are supported in delivering it.

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

Will the Minister give way?

[James Murray]

I am going to make some progress.

HMRC will put in place a number of measures to ensure that all private schools can be registered ahead of 1 January, including publishing bespoke guidance on gov.uk ahead of 30 October, updating registration systems and putting additional resource in place to help process applications.

[Several hon. Members rose—]

[James Murray]

I am going to make some progress, because I have given way quite a lot so far.

Ahead of this policy being implemented, the Government have carefully considered the impact that these changes will have on pupils and their families across both the state and private sectors, as well as the impact they will have on state and private schools. The Government’s costing of these policies is currently being scrutinised by the independent Office for Budget Responsibility. The Chancellor will confirm our approach to these measures at the Budget, when we will set out our assessment of the expected impacts of this change in the normal way.

We recognise that, as hon. Members have said, these changes may lead to some pupils moving into the state education sector. While the impact of this policy is being fully considered, we know that projections by the Institute for Fiscal Studies indicate that the number of pupils who may switch schools as a result of these changes is likely to represent a very small proportion of overall pupil numbers in the state sector—less than 0.5%—with any displacement expected to take place over several years.

[Dr Evans]

I am very grateful to the Minister for giving way. This is about children—and even the Prime Minister made a choice to better the education of his children—so putting this in place in January, halfway through a year, is going to have a significant emotional impact on families and children. That is why it should be delayed. If it is good enough for the Prime Minister to make such choices for himself, why cannot this Government make choices for the rest of the nation, and support the most impacted families and children?

[James Murray]

I have made clear the reason why we are proceeding with this policy to a January 2025 date, which is that we want to raise the money as soon as possible to invest in our improvements to state education. There will have been five months for parents and schools to prepare for the change.

[Simon Hoare (North Dorset) (Con)]

Will the Minister give way on that point?

[James Murray]

I am still responding to the hon. Member for Hinckley and Bosworth (Dr Evans), so please let me come back to that point. HMRC is putting in place bespoke guidance, and it is standing by to make sure that schools are properly registered for the change. All the evidence we have seen from the IFS and so on suggests that the impact on the state sector will be very small, which means that it will not have a material effect on children’s education.

[Several hon. Members rose—]

[James Murray]

I am going to make some progress.

To pick up the point made by the hon. Member for Hinckley and Bosworth, I am not denying that some pupils may have to move into the state sector, but we expect much of this to take place at natural transition points, such as when a child moves from primary to secondary school, or at the beginning of their GCSE or A-level years. As I have said, the IFS expects any displacement to take place over several years. We are confident that the state sector will be able to accommodate any additional pupils, and that these policies will not have a significant impact on the state education system as a whole.

[Several hon. Members rose—]

[James Murray]

I am going to make some progress. I am sorry, but I have taken a lot of interventions.

I would like to address the issue of special educational needs. It is a point that many hon. Members have raised, and I know that some parents are concerned about the impact of this policy on pupils in private schools with special educational needs. Let me start by saying that we have considered this element of the policy very carefully. Our proposed policy makes sure that pupils will not be impacted where they have acute additional needs and an education, health and care plan in England, or its equivalent in other nations, specifies that these can be met only in a private school.

[Marie Goldman (Chelmsford) (LD)]

I thank the Minister for giving way on that specific point, because he is relying on those schools still being open because other parents have not left. How will he address the situation in which parents of children needing that extra support rely on such schools for their special educational needs, yet those schools have closed because they cannot afford to stay open any longer?

[James Murray]

We will take a community-wide approach that sees improved SEND provision in mainstream state schools, as well as ensuring that state special schools cater for those with the most complex needs.

[Jen Craft (Thurrock) (Lab)]

As a parent of a disabled child, the issue of SEND education in this country is very important to me, as it is to a number of my friends and acquaintances. Let us be clear that the SEND system in this country is broken, and it was the actions of the previous Government that left us with parents being desperate and having to search for alternatives to mainstream education for their children. The vast majority of my constituents who find themselves without suitable education placements for their children, for reasons of disability or educational needs, are unable to afford to send their children to a private school. Does the Minister agree with me that perpetuating a system of inequality is not the solution for our broken SEND system?

[James Murray]

I thank my hon. Friend for her comments. She is absolutely right to say that we need to improve SEND provision for all children in this country in a financially sustainable way, and she speaks with great experience.

[Several hon. Members rose—]

[James Murray]

Let me make a bit of progress.

We want to improve state schools across this country so that when people have children with special educational needs, they never need to send them to a private school because the provision in state schools is better. That is the crucial point behind our approach, which my hon. Friend the Member for Thurrock (Jen Craft) was right to highlight.

[Several hon. Members rose—]

[James Murray]

I am going to make a bit of progress, because I have been quite generous in giving way so far.

I was talking about when EHCPs in England, or their equivalents in other nations, specify that a child’s education can be met only in a private school. In cases where pupils’ needs can be met only in a specified private school, local authorities will fund their places and be able to reclaim the VAT. Similarly on business rates, the Government are developing an approach to address the potential impact of these changes when private school provision has been specified through an EHCP. More widely, as we have just been addressing, we as a Government are committed to transforming the system for supporting children and young people with SEND in all schools. We need to deliver better outcomes in a financially sustainable way.

[Mr Joshua Reynolds (Maidenhead) (LD)]

Will the Minister give way?

[James Murray]

I am going to make a bit of progress.

To address some other points raised in this debate, we know that a small number of diplomatic officials and service personnel are posted abroad for extended periods. In such circumstances, the Foreign, Commonwealth and Development Office and the Ministry of Defence provide the continuity of education allowance to ensure that this does not interfere with their children’s education. I can give the reassurance today that the Government will monitor closely the impact of these policy changes on affected diplomatic and military families, with any changes to the scheme being considered as—[Interruption.]

[Mr Speaker]

Order. I am sure the Lib Dems do not need coaching.

[James Murray]

I am not quite sure what happened there, but I will carry on. I was making an important point, which is that the Government will monitor closely the impact of our policy changes on affected diplomatic and military families, with any changes to the scheme being considered as part of the ongoing spending review.

[Alicia Kearns]

Will the hon. Gentleman give way on that point?

[James Murray]

I will make a bit of progress. In our consultation on the technical detail of this policy, we have been engaging widely and in depth, and the views of MPs are an important part of that. As I said earlier, it has been a tough but necessary decision to end tax breaks for private schools. We believe it is the right decision, and one we need to implement as soon as possible to help raise the funding that we need to deliver our priorities for state education in this country. We are determined to make sure that education, which is available for all, is of the highest possible quality, because that is how we ensure that we meet the aspiration of every parent to get the best possible education for their children.

[Mr Speaker]

I call the Liberal Democrat spokesperson.

Winter Fuel Payment

James Murray Excerpts

Tuesday 10th September 2024 Commons Chamber

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

This is a serious topic and we know from the debate earlier this afternoon that it is one on which Members across this House and people across this country have strong feelings. We understand that. This is a difficult decision to have to take. By means-testing winter fuel payments, we know that we will be ending future payments to most pensioners while maintaining our steadfast commitment to protecting those in greatest need. But although they do not like to be reminded of it, Conservative Members know exactly why we need to take this step. Because it was Conservative Members—and, indeed, former Members of this House who have now been voted out by the British public—who did such damage to our country’s economy and the public finances. The legacy of the last—

[Dame Harriett Baldwin (West Worcestershire) (Con)]

On a point of order, Madam Deputy Speaker. This is the second Government Minister we have heard from the Dispatch Box today, yet only moments ago we saw the Chancellor sitting on the Front Bench. It was the Chancellor who chose to spend billions on setting up Great British Energy. It was the Chancellor who chose to spend billions giving pay rises to their union paymasters. It was the Chancellor—

[Madam Deputy Speaker (Caroline Nokes)]

Order. I thank the hon. Lady, but she will be aware that that is not a point of order; it is more of a speech that she is seeking to make. Perhaps she will find an opportunity to contribute in the debate.

[James Murray]

Thank you, Madam Deputy Speaker. The hon. Member who just intervened, and indeed everyone on that side of the House, might like to reflect on what the legacy of the last Government truly was. It was one of irresponsible overspending, of uncosted commitment after uncosted commitment, and of Ministers running away from taking difficult decisions. As a direct consequence, when we came to power we were faced with a £22 billion black hole in the public finances for this year alone.

[Paul Holmes (Hamble Valley) (Con)]

I am genuinely grateful to the Minister for giving way. He is a Minister at the Treasury, so I am hoping he will be able to outline some of the facts and answer my question. He will outline today that the saving made by cutting the winter fuel payment is £1.1 billion. If everybody accepted the means-testing that he is proposing, it would cost £3.3 billion, so can he outline to the House, despite the bluster that he has just made about saving money for the great British people, how it will save money when it will cost more under his proposals?

[James Murray]

I thank the hon. Gentleman for his intervention. The announced savings include an assumption of an increased take-up of pension credit, which is in line with the highest levels ever achieved. Frankly, if more people are taking up pension credit when they are eligible for it, we should welcome it because it means that support is being targeted at those in greatest need.

[Several hon. Members rose—]

--- Later in debate ---

[James Murray]

I am going to make some progress.

The Opposition did not like to be reminded of their legacy when they were in government, but let us have a look, shall we? What do they have to show for their years of reckless overspending? A failed asylum system, prisons at breaking point, more than 1 million people waiting for council homes, 4 million children growing up in poverty, and more than 7.5 million people on NHS waiting lists. This Government and every Member of this House who stood on my party’s manifesto were elected to turn things around.

[Kit Malthouse (North West Hampshire) (Con)]

Yesterday, in the other place, the Transport Minister cast doubt on the continuation of travel concessions for pensioners, which has caused significant alarm in my constituency and others. Notwithstanding the discussion we are having today, could the Minister reassure us that travel concessions for pensioners will continue under a Labour Government?

[James Murray]

I thank the right hon. Gentleman for his intervention. The Chancellor will take all decisions in the Budget on 30 October—[Interruption.] Let me make one important point to him as we approach the Budget on 30 October: we know there are going to be difficult decisions that we have to take in the Budget and, frankly, that is a direct consequence of the decisions taken by him and his colleagues when they were in government.

[Dr Caroline Johnson (Sleaford and North Hykeham) (Con)]

As he is a Treasury Minister, I wonder whether he could help me with this question. How many of the pensioners who will lose the winter fuel allowance today receive less than the average train driver the Government have just given a pay rise to?

[James Murray]

I understand the political point that the hon. Lady is trying to make. But let me be clear. If she is talking about pensioners, the foundation of state support for pensioners is the state pension, which is why the Government have committed to maintaining the triple lock for the duration of this Parliament.

[Several hon. Members rose—]

[James Murray]

I am going to make some progress.

The triple lock means that pensioners are receiving £900 more this year. Figures released this morning indicate that they may get well over £400 more next year. Over the course of this Parliament, they will get £1,700 more under the state pension. That is the foundation of state support for pensioners.

[Several hon. Members rose—]

[James Murray]

I am going to make some progress.

We have seen clearly how Conservative Members do not like to be reminded of their legacy in government, of the mess in which they left the economy, our public services and the rest of our country after their 14 years in office. This Government and every Labour Member were elected to turn things around.

[Several hon. Members rose—]

--- Later in debate ---

[James Murray]

I am going to make some progress.

We are under no illusions. We know it will be a slow and difficult process when the damage goes so deep, but we are determined to fix the foundations of our country so that, on the bedrock of financial stability and fiscal responsibility, we can get our economy growing after 14 years under the Conservatives.

[Dave Doogan (Angus and Perthshire Glens) (SNP)]

I thank the Minister for giving way on the point about fiscal responsibility. I am not sure of the morality of trying to balance this country’s fiscal books on the backs of pensioners. He referenced the manifesto on which the Labour party stood at the election. “No austerity under Labour” was said in Scotland, so what should the 37 Scottish Labour MPs do in this vote? Should they bow down to the Chancellor, or should they stand up for their Scottish constituents?

[James Murray]

Every Labour Member was elected on a promise to restore economic stability and fiscal responsibility to our country, and it is on that basis that we will get the economy growing to make people across the country better off and to put our public services on a sustainable footing. I remind the hon. Gentleman that winter heating assistance is a devolved matter in Scotland. The Scottish Government intend to legislate to introduce a means-tested payment this winter which is equivalent to the winter fuel payment in England and Wales.

[Several hon. Members rose—]

[James Murray]

I have taken several interventions, so I will make some progress.

The point of this debate is to focus on why we have to take difficult economic decisions, even if they risk us being unpopular. We know that the universal application of winter fuel payments was already recognised as unfair. In the face of our dire economic inheritance, it is simply unsustainable.

We should be clear that, when the winter fuel payment was introduced in 1997, a higher percentage of pensioners than people of working age were in poverty. That is no longer the case. Put simply, there are now pensioners receiving winter fuel payments who do not need them and that is a reality we cannot afford.

Let me put it in financial terms. Over a quarter of pensioners have wealth of more than £1 million, half have wealth of over £500,000 and a fifth of pensioner households have gross incomes equivalent to £41,600 a year. That is why it is right to means-test winter fuel payment.

[Dame Caroline Dinenage (Gosport) (Con)]

Pensioners in my constituency will be saddened by the way the Minister is caricaturing pensioners as wealthy and not in need of this winter fuel support. Age UK has said that, in the Gosport constituency alone, 15,000 pensioners stand to lose their winter fuel payment. These are not wealthy people; they are people who, in many cases, are just outside the pension credit limit and are hanging on by their fingertips. Does he agree that caricaturing them as wealthy and not in need is unbelievably insulting?

[James Murray]

I think the hon. Lady unintentionally misunderstood my point. I will put the question back to her. Does she feel that pensioners who have wealth of over £1 million or who earn more than £41,600 a year should get the winter fuel payment in the context of the financial circumstances? The argument we are making is that, given the dire economic situation we face and given our dire inheritance, we should means-test the winter fuel payment.

[Several hon. Members rose—]

[James Murray]

I will make some progress, because it is important to explain why we are choosing to means-test the winter fuel payment. Means testing will allow us to make sure that those in the greatest need still receive the help they need. We will make sure that all pensioners continue to benefit from the triple lock, and we will start to deal with the shocking state of the public finances that we have inherited.

[Several hon. Members rose—]

[James Murray]

I am going to make some progress, as I have taken many interventions already.

Under our approach, those eligible for pension credit will continue to receive winter fuel payments. We want to target winter fuel payments to those on the lowest incomes, which is why we are linking the payment to eligibility for pension credit and other qualifying income-related benefits and tax credits. That is the right approach to help those on the lowest incomes. We are determined to make it as effective as possible by making sure that people who are eligible for pension credit make a claim.

[Jamie Stone]

The point I made to the shadow Secretary of State, the right hon. Member for Central Devon (Mel Stride), is a fair one. Distance and remoteness militate against take-up. People living in very remote hamlets in the highlands do not necessarily perceive the Department that they should. Can I have an undertaking from the Minister that the Government will look at this issue?

[James Murray]

I thank the hon. Gentleman for his comment, and I know that my colleagues are aware of this issue. In fact, it is one reason why the automatic payment of pension credit and other benefits is so important. For instance, the merging of housing benefit and pension credit would help to overcome some of the problems. It would help some of the people in the situation he describes. That merger of housing benefit and pension credit was first mooted in 2012, and was delayed several times by the previous Government—I think they intended to leave it until 2028. My right hon. Friend the Secretary of State for Work and Pensions is looking at that as a matter of great priority, to ensure that people get the help that they deserve.

[Several hon. Members rose—]

[James Murray]

I am going to make some progress.

The important point to focus on in this debate is making sure that everyone eligible for pension credit takes up that offer, not only so they receive the benefit of pension credit, but so that we can better target the winter fuel payments, given the financial inheritance that we have. We estimate that 880,000 pensioners are missing out on pension credit to which they are entitled, and frankly the Conservatives failed to act on that for years. That is why it is so important that we are now conducting a campaign to make sure that as many people as possible make a claim.

Our approach is already showing signs of success. The Government have received around 38,500 pension credit claims in the five weeks since the announcement on 29 July. That is more than double the number in the previous five weeks, and we will continue to do all we can to encourage pensioners who are eligible to apply for pension credit. We have used a wide range of media to reach pensioners and key stakeholders, and have been working with voluntary organisations such as Age UK and Citizens Advice, local authorities and the devolved Governments to raise awareness through their networks and channels. The Secretary of State for Work and Pensions is taking the further unprecedented step of writing to 120,000 pensioner households who are in receipt of housing benefit but who are not yet claiming the pension credit that they are likely to be entitled to.

Our national pension credit campaign will run right through until the application deadline on 21 December.

[Andrew Bowie (West Aberdeenshire and Kincardine) (Con)]

On 11 February 2021, the temperature in Braemar in my constituency sank to minus 23°. Some 17,000 pensioners there will lose their winter fuel allowance through a decision taken by this Labour Government. Can the Minister explain to those pensioners in one of the coldest constituencies in the country why they have to surrender that important support at the same time as the Government have found £11 billion to give pay rises to their union paymasters?

[James Murray]

I would be interested to understand why the hon. Gentleman is backing a candidate to lead his party who supports the means-testing of the winter fuel payment. He might want to have a conversation with that candidate before he starts criticising our approach of targeting support at those in greatest need. The critical point is that the combination of the state pension rising under the triple lock with those in greatest need getting winter fuel payments alongside pension credit, not to mention the extension of the household support fund, means that the right measures are in place to give all pensioners the support they need.

Opposition Members want to know why the legislation is being progressed urgently. I will be really clear: it is urgent because we need to deal urgently with the £22 billion black hole—the huge in-year spending pressure—that we inherited from the Government that they ran. It is crucial that we act quickly to restore responsibility to our public finances and stability to our economy. On top of that, it was important that we made sure that regulations were in place at the start of the qualifying week for winter fuel payments, while wasting no time in doing all we can to raise pension credit take-up.

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

We have heard that the Transport Minister yesterday could give no assurance to pensioners about their transport concessions. Last week, I asked the Deputy Prime Minister about the single person council tax discount. There is a very real prospect that pensioners could lose even more than £300—another £300 or £400. Will the Exchequer Secretary take this opportunity to reassure pensioners that there is no way that the Government will remove the single person discount from the council tax? It would be politically good for him and the Labour party, and it would be enormously important for people who need to hear some reassurance at this time.

--- Later in debate ---

[James Murray]

The right hon. Gentleman will not be surprised to hear me say that the Chancellor will take all decisions in the Budget. However, he might like to reflect on the record of his party in office on encouraging take-up of pension credit. We have been painfully aware since taking office how little the Conservatives did to increase take-up of pension credit during their 14 years in office. That is why it is so urgent for us to make progress in getting those eligible to sign up for pension credit. By doing so, they will get pension credit, which they may have been missing out on for years under the Conservatives, and they will continue to receive the winter fuel payment.

Pensioners may well be angry at the Conservatives for how little they did to get people to sign up for pension credit while they were in office. Pensioners may well be angry at the Conservatives for leaving the country with a legacy of a £22 billion black hole in the public finances.

We on the Government Benches are committed to protecting the triple lock. That will mean that pensioners on the full new state pension, who have received an extra £900 this year, will, pending the uprating review by the Secretary of State for Work and Pensions this autumn, receive a boost that could be worth well more than £400, so by the end of this Parliament they could be receiving around £1,700 more than they do today.

Conservative Members are keen to play politics with the tough decisions that this Government are taking. They are desperate to take attention away from the fact that, as people across this country know, it is the Conservatives who are to blame for the economic mess we have gained. They created a mess and now they want to criticise us for cleaning it up. If they had governed more responsibly, they might not have been sitting on the Opposition Benches, in opposition to a Government who are fixing the foundations they left to rot.

[Andrew Pakes (Peterborough) (Lab)]

Does the Minister agree that the only shameful thing in this debate is the legacy that the Government were left? It forced the new Government—[Interruption.] The reality that 800,000 pensioners are not receiving pension credit is a shameful legacy. If Conservative Members wanted to show humility and learn from their party’s record in government, they would acknowledge that they are the ones who crashed the economy, left the NHS in a way that pensioners cannot get to see a doctor, and broke NHS dentistry. Does the Minister agree that it is our job to fix the economy so that we can keep on helping pensioners?

[James Murray]

My hon. Friend is absolutely right. Frankly, it is time for Conservative Members to recognise and accept what they have done to this country, and to show some contrition and accept responsibility. However, no matter what the Conservatives choose to do, we are getting on with the tough decisions that are necessary in government. By changing the winter fuel payment and making it means-tested, we are beginning to take the necessary steps to address the black hole they created, while protecting the most vulnerable in society.

The Prime Minister has said that we must be prepared to be unpopular if we are to govern responsibly, which means facing up to tough challenges and tackling them head-on. The motion laid by the Opposition sets out several “regrets”, but they have never once shown regret for all the reckless decisions they took and the damage they did to our public services, public finances and economy. Our task now in government is to fix the mess they made and to give our country the chance of the better future we deserve.

[Madam Deputy Speaker (Caroline Nokes)]

I call the spokesperson for the Liberal Democrat party.