National Insurance Contributions (Secondary Class 1 Contributions) Bill

Debate between James Murray and Luke Evans

2nd reading
Tuesday 3rd December 2024 Commons Chamber

[James Murray]

I recognise that the decision we are taking will have impacts, and in some cases it will mean that employers have to take difficult decisions. We are, however, reforming business rates to help retail, hospitality and leisure on the high street, so I would suggest that the hon. Member speaks to the Scottish Government about their doing something to support businesses in the same way; I cannot speak on their behalf.

Taken together, the measures, should the Bill pass, will mean that 865,000 employers pay no national insurance at all next year, with over 1 million—more than a half of all employers—paying the same or less than they did previously. I have been clear, however, that I recognise that there will be impacts on some employers as a result of the changes. While many small businesses and charities will be protected through the employment allowance increase, others will have to contribute more.

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

The Minister talks about protecting businesses or charities, but hospices, for example, employ many more than four people. I cannot think of one hospice that does not employ more than four people. How will they be protected?

[James Murray]

I thank the hon. Gentleman for his question. That will depend on the exact set-up of the hospice, but typically hospices are independent charities, so they will be able to use the employment allowance against their national insurance contributions liability. They will also be able to access the other tax reliefs in the system that benefit charities, such as business tax relief and gift aid relief, which we have maintained in the Budget. We have taken the decision to maintain—

Finance Bill

Debate between James Murray and Luke Evans

2nd reading
Wednesday 27th November 2024 Commons Chamber

[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.

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[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.

Non-Domestic Rating (Multipliers and Private Schools) Bill

Debate between James Murray and Luke Evans

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.

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[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.

VAT: Independent Schools

Debate between James Murray and Luke Evans

Tuesday 8th October 2024 Commons Chamber

[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.

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[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.

Finance (No. 2) Bill

Debate between James Murray and Luke Evans

2nd reading
Wednesday 17th April 2024 Commons Chamber

[James Murray]

I thank the hon. Gentleman for his mini-speech. I feel I may have touched a nerve. He talks about people being scared; yes, I think people are scared when they hear the Government making a £46 billion unfunded spending commitment and not saying how they will pay for it. When the previous Prime Minister made an unfunded tax cut commitment of a similar order of magnitude, we know what havoc that caused in the economy, and people are still paying the price in higher mortgage payments and rent payments. I will just say to the hon. Gentleman that I gave him a chance to rule out cuts to the NHS or the state pension, or tax rises elsewhere, to pay for this black hole. I am not quite sure if he did that—maybe he has not got the line from his boss in No. 10 Downing Street—but the truth is that until the Government rule those things out, people will rightly worry about the impact his unfunded commitment will have on the economy.

The pledge the hon. Gentleman was speaking about sounds like exactly the sort of pledge that the right hon. Member for South West Norfolk (Elizabeth Truss) would approve of, because it comes to almost exactly the same amount as her Government’s unfunded tax cuts. Of course, the previous Prime Minster has been touring the TV studios and talking to newspaper journalists in recent days, saying, among other things, that people who claim that she crashed the economy are

“either very stupid or very malevolent”.

I wonder if the Minister would like to intervene to say whether he shares that view. No? He is not leaping to his feet now. I would have thought he would; I would have thought that Treasury Ministers would want to put as much distance as possible between themselves and the previous Prime Minister. Instead, with their £46 billion unfunded commitment, they seem determined to be a tribute act. Frankly, whatever the previous Prime Minister says, people across Britain know what impact her time in office is having on all of us, as we face higher mortgages and higher rents as a direct consequence of her economic recklessness.

That is the context in which we are debating this Finance Bill. The context is one of a Government who are out of time, out of ideas and out of touch with reality, and of a country that is feeling the impact of 14 years of Conservative economic failure. Even a simple clause such as clause 2, which sets the main rates of income tax, highlights the impact on ordinary people of decisions taken by this Government. Although the basic and higher rates of income tax are unchanged by this Bill at 20% and 40%, the tax burden on working people is rising as a result of the income tax personal allowance and the higher rate threshold being frozen from 2021-22 to 2027-28. Those tax thresholds would ordinarily have risen this April, but instead they are in the middle of a six-year freeze. According to the Office for Budget Responsibility, which I assume the Minister has respect for, these freezes will create 3.7 million extra taxpayers by 2028-29 and mean that 2.7 million more people will be paying the higher rate.

The truth is that, even taking into account any reductions to national insurance rates, the freezes in thresholds and the rises in council tax mean that by the end of the forecast period, the average family will still be £870 worse off. As the Resolution Foundation noted at the time of Budget, despite the reductions in national insurance, there will still be a net rise of £20 billion a year by 2028-29 in personal taxes. It pointed out that those over the state pension age, who do not benefit from national insurance cuts, will be particularly badly hit, and will face an average tax rise of £960 a year. The reality has been summed up by Paul Johnson, the director of the Institute for Fiscal Studies, who said following the Budget:

“This remains a parliament of record tax rises.”

That is the record of the Conservatives in government.

[Dr Luke Evans]

There is a certain Leader of the Opposition who, when standing for their post, said that as part of their No. 1 pledge, which was for economic justice, they would increase income tax for the top 5% of earners and reverse corporation tax cuts. If the hon. Gentleman’s party was voted into government, would it stand by that pledge? That too would increase the tax burden significantly.

[James Murray]

I am sorry, but I did not quite follow the hon. Gentleman’s question. I can, however, respond to the general point that I think he was making. We have been very clear that this is a Parliament of record tax rises. The tax burden is set to be the highest in 70 years, and we think that the tax burden on working people should be lower. However, we would only ever support tax rises if they were responsible, and done on a basis of economic security and stability.

[Dr Evans]

Will the hon. Gentleman give way?

[James Murray]

I will make some progress, because I have made that point quite clearly.

The tax burden has been pushed to a record high, and we have also seen a record number of changes and U-turns on tax rates and reliefs under this Government. That applies not just to personal taxation, but to tax rates and reliefs relating to businesses. Let us consider the Chancellor’s approach to the rate of corporation tax, which the Bill sets at 25% in clause 12. In July 2022, during his leadership bid, the current Chancellor pledged to cut the headline rate of corporation tax from 19% to 15%, yet when he became Chancellor just three months later, one of his first acts was to U-turn on what he inherited and to commit to raising that tax from 19% to 25%. He has been typical of the Conservatives in lacking any certainty, predictability or consistency, and we know how damaging that is to businesses that are trying to make investment decisions.

As the shadow Chancellor set out, if we win the next general election, we will bring back certainty by capping the headline rate of corporation tax at its current rate of 25% for the whole of the next Parliament. We would take action if tax changes in other advanced economies threatened to undermine UK competitiveness. We believe that the current rate of 25%—the lowest in the G7—strikes the right balance between what our public finances need and keeping our corporation tax competitive in the global economy. We also recognise the importance of stability and predictability in the reliefs available to businesses. We have seen a great deal of chopping and changing in capital allowances in recent years—indeed, this is a rare example of a Finance Bill from this Government that does not change the annual investment allowance or expensing regime.

We have made it clear that if we win the next general election, we will publish a road map for business taxation in our first six months in office, to give businesses the stability, predictability, and long-term plan that is so important to those making investment decisions. We have been pushing for a proper windfall tax on the profits of oil and gas companies operating in the North sea. The Government, despite initial opposition, U-turned on that and adopted some of our proposals with the introduction of the energy profits levy. Ahead of the general election, we have set out our plans to make the windfall tax stronger, and to raise more revenue to support our country’s energy transition, but it is also right that we give as much certainty as possible to those companies affected.