Finance (No. 2) Bill (Fifth sitting)

Debate between James Wild and Joshua Reynolds

Committee stage
Tuesday 3rd February 2026 Public Bill Committees

[Mr Reynolds]

The £50,000 threshold imposed as part of schedule 16 is incredibly low. It catches small construction firms importing tonnes of cement or steel, materials that could be consumed in one single medium-sized building project. The businesses importing such volumes will lack the resource of dedicated compliance teams and environmental consultants for quarterly emission verification. Meanwhile, large industrial importers, responsible for the vast majority of imported carbon emissions, face identical per unit compliance obligations, giving them a competitive advantage through their economies of scale.

CBAM introduces entirely new foreign concepts to normal commercial activities, such as calculating the emissions across international supply chains, determining whether carbon prices were paid in origin countries and applying complex fee allocation formulas. A family-run metalworking shop that has successfully filed VAT for 20 years must suddenly become an expert in lifetime emission methodologies and international carbon-pricing verifications. I do not believe that the Government have published any analysis comparing the £50,000 threshold to alternatives such £100,000 or £250,000 thresholds. I am interested to hear from the Minister what verification and changes have been made, and what assessment has been made of the compliance costs for various businesses.

Schedule 16 also introduces a £500 fixed penalty plus a £40 daily charge for failure to notify a change of circumstances, and a £500 penalty for record-keeping failures. While paragraph 40 of schedule 16 includes a reasonable excuse defence, HMRC interprets that quite narrowly as applying to circumstances such as illness, postal strikes or computer failures. The idea that the system or methodology was confusing or, “My supplier could not provide the data,” typically do not fall within the reasonable excuse defence.

The problem here is timings: the comprehensive penalties for CBAM take effect on 1 January 2027, so businesses navigating entirely unprecedented requirements are going to have a challenge. I note that the EU’s CBAM began with a transitional reporting period before enforcement ramped up, whereas the UK’s has no such mechanism.

These are not familiar tax concepts for lots of businesses. They involve new software, new tracking and international verification. These things have not been done in British business before, and I believe that small importers will face penalties while genuinely trying to comply with the regulations. The Liberal Democrats are not against the concept of a CBAM, but we take issue with the way that it has been put together.

Has the Minister considered a 12-month transitional period during which full penalties for deliberate avoidance are maintained but an allowance is given for honest compliance?

[James Wild]

I share the hon. Member’s concerns about the £50,000 threshold. Has he considered what might be a more appropriate level, in order to reduce the impact on smaller producers?

[Mr Reynolds]

The EU, for its CBAM, has not set a specific number in that way; it has set a number of tonnes of product. I would be interested to hear from the Government what work has been done to analyse the different impacts of £50,000, £100,000 and £250,000. The Treasury must have done some work on this, but I could not see any. We need the answer to that in order to find out where we stand.

Let me finish by saying that a transitional period may be quite beneficial. It would make sure that we are not setting our small and medium-sized enterprises up to fail and penalising them when they try to do the right thing but unfortunately, because of the complications in the system, they are unable to.

Finance (No. 2) Bill (Fourth sitting)

Debate between James Wild and Joshua Reynolds

Committee stage
Thursday 29th January 2026 Public Bill Committees

[James Wild]

My hon. Friend, like me, has a very rural constituency that spends tens of millions of pounds on this. I think Norfolk spends around £30 million or £40 million a year on taxis to transport pupils with special education needs to school. That is a huge proportion of the money that is spent on special educational needs, and potentially adds to the burden and costs of councils who are struggling, particularly in rural areas. They have been—I will be polite—disadvantaged by the latest local government settlement and the way that the Government have skewed the formula against rural areas, having already removed the rural services grant, which we had come to rely on.

What is the Government’s estimate of the average fare increase for passengers as a result of this measure? How can the Treasury justify raising the transport costs at a time when families are already struggling and the Government claim that the cost of living is their priority?

The charge in this clause will not only hit passengers. Operators will face new administrative burdens as they try to account for VAT under far more complex rules. That creates uncertainty—this Committee has discussed the need for certainty on many occasions—and increases the costs for local businesses that operate on relatively small margins. As one operator of a private hire vehicle firm said, rather starkly,

“a 20% VAT hike would hit the elderly, disabled and rural passengers hardest. Businesses cannot plan, invest or grow while uncertainty remains.”

The places most exposed are those with limited public transport networks and a consequently high reliance on the use of taxis and private hire vehicles. That is why we have tabled amendment 42, which proposes to exempt rural communities. It is a simple and fair way to protect those most affected. It would amend clause 79 so that the charge does not apply to journey by private hire vehicle or taxi in rural areas.

If the Minister refuses that limited relief, will he at least commit to supporting new clause 14? It would require a proper impact assessment of the effect of the measure on the taxi and private hire industry, driver earnings, vulnerable passengers, rural communities and passenger fares.

There is a practical problem with clause 79, as with so many clauses that we have debated. Some major operators, including Uber, have reclassified themselves or are exploring ways to reclassify themselves as technology platforms rather than transport providers. That seems to be happening in cities outside London already. If they succeed, the VAT liability would shift from the company to the individual drivers, many of whom are not VAT-registered owing to their earnings level. What is the Minister’s response to that shift, which is already taking effect in parts of the country?

Concerns have also been raised by the Institute of Chartered Accountants in England and Wales that the list of qualifying services in proposed new subsection (3A) in section 53 of the Value Added Tax Act 1994 is too narrow. The institute contends that the list excludes other key designated travel services, most notably trips, excursions and the services of tour guides. That creates a genuine issue for tour operators who supply day-trip packages, whether to the coast of North West Norfolk or to other parts of the country. A lot of small, often family firms provide these services.

For example, if the package consists of a private car transfer, picking up someone from King’s Lynn station and taking them up to sunny Hunstanton, and that is combined with a professional tour guide or excursion ticket, under the clause the private hire element will fall out of TOMS while the guide or excursion will remain in it. What will that do? It will add considerable complexity, forcing the unbundling of a single commercial package. It will require changes to systems and changes to invoicing.

If the intent, as the Minister will no doubt tell us, is simply to go after taxis and private hire vehicles, this is a glaring example of where the drafting is wrong and goes too far. The ICAEW contends that the existing ancillary tests are robust enough to avoid any obvious attempt to dodge paying the tax that is due.

This is a tax rise that will increase fares, hurt rural and vulnerable passengers and create fresh uncertainty in a vital sector. In my constituency, the funding that has been provided for buses is reducing in comparison with the funding provided by the last Government. I expect that that position is being replicated across the country. People in my constituency do not have the luxury of the regular services that I am sure the Minister has in his Chipping Barnet constituency, with maybe three an hour. In parts of my constituency, three a day would be frequent.

I hope that the Minister recognises the points that are being made on behalf of rural areas; I am sure that other hon. Members who represent rural areas will not sit silently when the issue is being discussed, but will speak up for their constituents.

As I say, this is a tax that will increase fares, hurt rural areas and vulnerable passengers and create uncertainty. It will also add to the cost of living. The Office for Budget Responsibility has forecast that real living standards will increase by 0.25% in each year of this Parliament, which is a staggeringly low figure when the average has been 1% in each of the past 10 years. That is not a great record—no wonder the Government are cancelling elections left, right and centre.

If the Government are intent on pressing ahead, the very least the Minister can do is agree to review the measure, looking at fare levels, passenger numbers and any reduction in service availability. Otherwise, I look forward to pressing to a vote my amendment, which would protect rural areas.

[Mr Joshua Reynolds (Maidenhead) (LD)]

In November, the Chancellor told the House that what we are now seeing in clause 79 would protect about £700 million of tax revenue, ensuring that VAT is paid on fares. Yet, according to The Guardian on 2 January, Uber

“has swerved paying millions of pounds”

by simply rewriting its contracts with drivers so that it acts

“as an agent, rather than as the supplier”

outside London. That means that the vast majority of Uber fares outside the capital will avoid the 20% VAT tax on Uber and, as the majority of drivers’ earnings are below the VAT threshold, that money will not come into the Treasury. Meanwhile, passengers in London, where Transport for London has prevented the agency model, will see higher fares.

Can the Minister explain how much of the projected £700 million in revenue is actually going to be protected, given Uber’s change? Why are we now in a position where we have an absurd two-tier system in which identical journeys are taxed differently depending on whether they take place inside or outside London? I note that no Government amendment to the clause has been tabled. Has the Treasury accepted that because of Uber’s decision, this policy has failed before it has even begun?

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[James Wild]

Having debated so many clauses that tighten the rules and put up taxes on individuals and businesses, we finally reach something unusual for the Chancellor: a tax break. I will speak to the amendment—in my name and that of my hon. Friend the Member for Wyre Forest and the shadow Chancellor, my right hon. Friend the Member for Central Devon (Sir Mel Stride)—and to the clause. The clause addresses a long-standing phenomenon in the VAT rules governing the donations of goods to charity.

In the present situation, when a VAT-registered business donates stock, those goods can sometimes be treated as if they were sold, triggering a VAT bill on a notional supply that never took place. Sensibly, the clause corrects that anomaly. It provides that qualifying charitable donations of goods will no longer count as taxable supplies for VAT purposes. In practical terms, that means that no output VAT charge will be liable simply because a business chooses to donate stock to a charity, provided that it meets the conditions and value limits set out in the legislation.

I acknowledge that the change has been warmly welcomed across the charity sector, unlike some of the other provisions about which concerns have been raised. It represents a small but meaningful step towards encouraging more corporate donations. The Opposition, however, have tabled amendment 43, which would ensure that the £200 cap set out in the legislation would increase by the level of the consumer prices index in the previous tax year—as with amendment 41, that would mean that the measure would retain its value over time.

The Opposition support the principle behind the measure. It is right to remove a barrier that discourages generosity and adds unnecessary complexity to charitable giving, but the Association of Taxation Technicians has already cited concerns. In its view, the changes do not fully match the existing relief for goods donated for resale. Businesses will still face different VAT treatments, depending on how a charity uses the donated items.

Clause 80 adds yet another outcome, meaning that the system remains complex for what is, in simple terms, the same act of giving goods to charities—the charities across our constituencies. Practical guidance from His Majesty’s Revenue and Customs will therefore be vital, because businesses need to understand exactly when the new relief applies, how the value limits work and what evidence they must keep to stick on the right side of the rules. Without that clarity, many could decide that donating just is not worth the administrative hassle. Will the Minister commit to providing such guidance and working with the sector to produce it?

According to the Budget documents, the measure will cost around £10 million to the Exchequer, which is a small price to pay for allowing more goods to reach charities and the communities they serve. However, amendment 43 would ensure that the measure retains its value over time. The current £200 limit risks eroding year by year as inflation drives up the cost of goods. Our amendment would simply link that cap to CPI, so that it keeps pace with prices, rather than becoming less generous each year. I think the Minister would have to agree that this is a modest and practical suggestion that would ensure the relief continues to operate as intended, so I hope he might agree to accept the amendment.

To conclude, I will ask the Minister three things. What estimate has the Treasury made of the additional volume and value of goods expected to be donated following the change? Secondly, will HMRC commit to publishing clear and accessible guidance for small and medium-sized businesses so that they can use the relief with confidence? Finally, if the Government will not support our amendment, will they at least agree to review the £200 limit within a year or so, listening to evidence from charities and donors about how the policy is working in practice?

In the end, the change is about making generosity easier, not harder. If we can make the tax system work just a little better for those who give and those who do so much vital work on the ground in our constituencies and communities, that is something that all members of the Committee would want to support. I look forward to the Minister’s response to what is a very modest and helpful amendment.

[Mr Reynolds]

The Liberal Democrats fully support clause 80 and would support amendment 43 if it were pushed to a vote. When I worked in retail, including in grocery retail for a significant number of years, I saw time and again that goods were going in the bin that should have been going to a good home, such as a charity, but that was not happening because it was cheaper to dispose of those goods than to donate them to a worthwhile cause. That is an unacceptable position, and one that we should not be in, so I am really glad that the Government have brought forward clause 80 to help change that.

Clause 80 explicitly names the household goods to which the £200 limit applies—household appliances, furniture, flooring, computers, tablets and phones. As someone who is renovating a house at the moment, I am not sure whether many household appliances can be bought for £200 or less, and I do not know whether the Treasury has set that limit deliberately. When buying a tablet or phone, there are very few options under that £200 limit, and I wonder whether the limit has been drawn too narrowly to ensure that the majority of products donated will not fall under it. I would welcome the rationale from the Minister as to why £200 was chosen as the appropriate number, and what consideration the Treasury has given to widening that limit.

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[James Wild]

I thank the Minister for that very succinct description of the clause. He will be pleased to hear that I have only a few points to make—[Interruption.] The hon. Member for Burnley says, “That’s good.”

The clause allows newly created combined county authorities to reclaim VAT incurred on non-business activities, such as statutory public functions. At present, established local authorities can recover VAT on such activities under section 33 of the Value Added Tax Act, but the definition does not explicitly include combined county authorities. We understand that that change took effect last year.

The explanatory notes make it clear that the clause is intended to ensure fiscal neutrality for the new governance arrangements. Combined county authorities should be no worse off than traditional counties because of their form, but of course the beneficiaries are the combined authorities that are being formed under the Government’s local government reorganisation plans.

My own county of Norfolk is set to be joined with Suffolk in one of these combined county authorities, with a mayor sitting across the two counties. People in Norfolk and Suffolk were looking forward to that mayor being elected in May, until the Government cancelled our election as a late Christmas present in December. As a result, we will not have a combined county authority mayor in place and we will lose out on the £40 million that the mayor was meant to have through the investment fund.

The county council elections for the authority that will make way for the combined county authority, which will then benefit from this VAT exemption, were also cancelled. So there is more delay and uncertainty, and a loss of funding, as people look at the creation of these combined county authorities, which are the subject of the clause, and the refund that they will be able to get. The clause is sensible, but the Government’s wider plans that sit behind it are somewhat chaotic, and cancelling elections is undemocratic.

[Mr Reynolds]

Balancing VAT refund rights to ensure fairness for CCAs is, of course, welcome, and we support it. We support the idea that VAT refund rights should be balanced across groups and institutions that are similar and have a similar purpose. That is why I hope you will allow me to share some surprise, Mrs Harris, that the Government have not gone further in balancing refund rights. For example, a school with a sixth form attached can claim its VAT back, but a sixth form college cannot. My hon. Friend the Member for Mid Sussex (Alison Bennett) has been campaigning on that for a significant time. In answer to a written question, the Minister confirmed that the Government are not planning to extend the VAT refund right to sixth form colleges, but they have done so for combined county authorities. Will the Minister explain the rationale for that? We all support the idea of balancing VAT refund rights, so we should surely be extending that to other situations.

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[James Wild]

My hon. Friend makes an important point about the effect of these clauses on putting up costs and potentially adding to inflation, which as we know has almost doubled from the rate that the Government inherited. Of course, that is partly due to the decisions that the Chancellor has taken and the huge amount she is borrowing and spending, which was not mentioned in her party’s manifesto.

To my hon. Friend’s point, the Minister must tell us what assessment has been made of the knock-on impact on consumer prices, particularly for essentials such as food that depend on road freight to get to our supermarkets and local stores. This is a time when we should be backing British logistics, not burdening it. I therefore hope that, on reflection, the Minister will accept new clause 18 as a sensible one that will help him provide that information to our constituents, to the public, and—importantly—to the logistics sector, transport operators and supermarkets.

[Mr Reynolds]

The haulage sector has seen significant challenges in recent years: increases in fuel prices, increases in wages and significant changes in the Employment Rights Act 2025, business rates and vehicle excise duty, as we see here. I would not be the investment and trade spokesman for the Liberal Democrats if I did not mention another challenge for the road haulage sector in recent years, which is the significant amount of red tape involved in Brexit, and the cost of that.

The Government’s EU reset has not touched the sides, as haulage associations have been telling us recently. The Business and Trade Committee recently heard about some goods moving from the UK to France that required 29 different stamps on their paperwork. If one stamp goes in the wrong place, the vehicle gets stuck in France or sent back. That is an additional cost for the road haulage sector, on top of all these extra costs and the vehicle excise duty increases.

For example, we were told on the Business and Trade Committee about a vehicle that was sat in France for almost one month because of paperwork that was not quite correct and small technical challenges. That vehicle being sat in France for one month meant consistent driver changes and meant the freezer compartment having to be kept on to ensure that the goods did not spoil. There was a £6,000 cost to the business because of two stamps being in the incorrect place. If we add that to the £2,000 cost per truck of the changes to vehicle excise duty, we see very clearly that the significant changes that the Government are making in quick succession are not helping the sector, which needs all the support it can get.

[Dan Tomlinson]

I thank the hon. Member for North West Norfolk for his romantic invitation to King’s Lynn; I may be otherwise engaged on that date, but I thank him for it all the same. I am interested to see whether any Members wish to intervene to say whether they will be taking up the invitation, but it is good to hear that he is an active constituency MP.

We do, of course, look at measures in the round, as the hon. Member for North West Norfolk implored me to. We did so ahead of the Budget, and I will continue to work with my right hon. Friend the Chancellor on tax policy in the run-up to the Budget at the end of the year. We are providing stability this year for the private sector and for individuals by moving away from the relatively chaotic approach under the previous Government of having multiple tax events with big swings and roundabouts twice a year, so future tax changes will not come until the end of the year, but that will give me more time to consider things in the round.

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[James Wild]

I rise to speak to clause 94 and new clause 19, which stands in my name. Clause 94 makes changes to the expensive car supplement in vehicle excise duty, as the Minister referred to, specifically for zero emission vehicles. This is an extra £425 charge that applies to most cars with a list price above £40,000. Under the clause, the Government propose to increase the threshold to £50,000, but only for zero emission vehicles. That means that buyers of higher-value electric vehicles will avoid paying the charge, while the £40,000 limit still applies to petrol, diesel and hybrid cars. This change is due to take effect from April 2026.

Let us recall that, back in the Public Bill Committee on last year’s Finance Bill, one of the Opposition’s “review” new clauses called for an independent assessment of the £40,000 threshold and its impact on consumers, particularly for electric vehicle sales, because we said that it was not at the right level. The Minister’s predecessor rejected that idea, and now here we are: the Ministers have quietly decided to raise the very threshold that we urged them to raise a year ago. They are playing catch-up, but they get there in the end. Is the Minister willing to admit that they have been a bit slow to follow the points that we made? Maybe we will be here in Committee next year, talking about other clauses on which the Minister has rejected things and reversed his position.

That brings me to the hybrid point. The Government now seem to have decided that hybrids no longer warrant support, despite the fact that they are critical in bridging the transition to fully electric vehicles. I would be grateful if the Minister expanded at length on the reasoning behind that decision, and on how many jobs in the UK are dependent on the manufacture of hybrid models when a lot of our electric vehicles come from China, where the Prime Minister is now.

We are broadly supportive of the measure, having recommended it a year ago, but let us be realistic: it will not do anything for most of the households in our constituencies, who simply cannot afford a new electric vehicle, especially one that costs £50,000. That is completely out of reach for people in my constituency. I do not know whether that is also the case in constituencies nearer to London, but it is certainly the case in mine.

How does this increase fit with the wider EV policy and charging infrastructure and its roll-out? To support ordinary people up and down the country, we should be joining countries such as Canada—along with the EU, or so it looks—in scrapping the mandate forcing manufacturers to produce EV vehicles and ending the 2030 ban on the sale of new petrol and diesel cars.

New clause 19 would require a proper review of the policy, its effects on the automative sector and the impact on the sale of hybrid cars and on vehicle excise duties. It would ensure a consideration of whether the threshold remains appropriate as market prices shift.

I hope that the Government will accept this accountability and transparency in policymaking, which will benefit everyone. Will the Minister at least commit to reviewing the threshold in future, particularly if it turns out that it needs to be adjusted? Will he also look at the hybrid point?

[Mr Reynolds]

We welcome the uprating of the expensive car supplement for EVs to the value of £50,000, supporting EVs and EV take-up. However, we are surprised that during the Committee’s first sitting on Tuesday, when I asked about extending zero VAT for charging infrastructure beyond 2027, the Economic Secretary declined to do so. I am aware that the Minister who is present today was not there, but that is slightly confusing. Here, we see the Government supporting electric vehicles and increasing the threshold from £40,000 to £50,000, but not applying the same policy by supporting electric vehicles post 2027 in other clauses of the Bill.

The Economic Secretary, who was in the Minister’s place on Tuesday, is now in China; I do not know whether I should commiserate with the Minister for not being invited on that trip. We are concerned about floods of electric vehicles that are coming in from China, undercutting European and British competitors. We are worried that they will be impacted by that £50,000 change, but several British vehicles will not be. I am sure that we do not want a world in which the Government are unintentionally encouraging British residents to buy electric vehicles made in China rather than electric vehicles from Britain. I hope that the Minister will clarify that point for us.

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[James Wild]

Clause 98 increases the standard and lower rates of landfill tax from 1 April, uprating them in line with the retail prices index. In practical terms, that means the standard rate will increase to £130.75 per tonne, with the lower rate applying to less polluting materials increasing by the same cash amount.

Landfill tax, as the Minister said, is intended to discourage disposal in landfill and promote recycling and recovery, and of course we support that aim. However, it is also right that we scrutinise the real-world effect of these changes on business costs, recycling rates and wider environmental outcomes. That is why we have tabled new clause 22.

According to the Budget 2025 costings document, the measure is expected to raise £35 million in 2026-27, increasing to £130 million by the end of the decade. Members will remember the intense speculation ahead of the Budget that the Government might move to a single landfill tax, and the Minister referred to a consultation. The speculation did not come from nowhere; it came from a Government consultation that proposed to do precisely that.

As such, the Minister could have been a bit more up front that this is something the Government were consulting on, presumably because they thought it might be a good idea. Indeed, I recall raising this directly with the Chancellor at Treasury questions earlier last year, where she accused me of scaremongering when I spoke about her own consultation, so I am glad that she has dropped her proposal to move to a single rate. Had she gone ahead with it, material such as topsoil could have faced a thirty-onefold increase.

The Minister kindly referred to my hon. Friend the Member for Grantham and Bourne and his video; he led a determined campaign alongside the industry to stop the reckless proposals put forward by the Chancellor. They could have added £28,000 to the cost of a new home and increased road construction costs by up to 25%.

When we asked what discussions the Treasury had had with the Ministry of Housing, Communities and Local Government before coming forward with its proposal for a thirtyfold increase in the tax rate, it was clear that there had not been any. There was then a sudden panic that the 1.5 million new homes target would be sunk by the Treasury’s actions. I welcome the rethinking of this policy—I will be generous to the Minister on that—to spare the sector yet another unnecessary blow that could have worsened house building numbers and jeopardised the key infrastructure upgrades that we all want to see across the country.

So far, so good, but—and there is always a “but”—the Government’s retreat on that issue does not mean all is well with these proposals. The long-standing exemption for dredging material and its removal has caused deep concern, if the Committee will accept the pun, in the ports and water sector.

The British Ports Association, I believe, has written to the Minister as well as the Chancellor, warning that if these changes proceed unchecked, we may see

“the collapse of major industrial and development projects, particularly in ports, rivers and canals”.

I declare an interest, as King’s Lynn in my constituency has a fine historical port. Indeed, the wealth of King’s Lynn was built on our trading links with the Hanseatic League in medieval times. The knock-on effects of removing the exemption could be significant; delayed waterway clean-up projects, increased flooding in vulnerable areas, and reduced investment in our ports, which keep our country trading.

New clause 22 seeks a proper assessment of how these tax changes will affect construction and infrastructure projects, investment in ports, recycling levels and illegal dumping rates, and progress towards the Government’s environmental objectives. The Minister needs to set out how the Government are responding to address the serious concerns raised by the British Ports Association, which, if correct, could have a very damaging effect on major infrastructure. We welcome that the proposals put forward in the consultation have been ditched, but there are concerns that the Minister now needs to address.

[Mr Reynolds]

I am very glad that the Government have ditched the plan to converge the rates of landfill tax and to massively hike the charge for inert waste, adding tens of thousands of pounds to the cost of a new build home at a time when the Government want to build 1.5 million new homes. That was not joined-up government, and I am concerned at the lack of joined-up thinking when the Treasury put forward this proposal.

There are a number of gravel quarries in my Maidenhead constituency, and converging the rates would have meant that a significant number of those quarries would have gone unfilled, resulting in more quarry lakes in our town. We know that quarry lakes are dangerous: they are quite shallow until they suddenly become incredibly deep. That is dangerous when young people are out on the water or swimming, and in areas not too far from my own we have seen some unfortunate deaths as a result.

I am glad that the Government have decided to back down on this and are not going to burden the quarry sector or developments with that proposal. However, can the Minister confirm what the cost would have been to UK infrastructure projects such as High Speed 2, and what the additional cost to the taxpayer would have been?

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[James Wild]

Clause 99 will increase the aggregates levy—the tax on commercially exploited rock, sand and gravel—from April. The levy, charged per tonne of primary aggregate, is intended to encourage efficient use of materials. As colleagues will know, aggregates are fundamental to almost every form of infrastructure: they are the foundations of our roads, our concrete structures and our coastal defences. They are the essential components in so many products, from ready-mixed concrete to asphalt, lime, mortar and countless others. As the Mineral Products Association puts it so aptly,

“Aggregates provide the backbone of our world”,

and in the UK we use around 250 million tonnes every year.

New clause 23 would require the Government to assess the impact of clause 99 on the construction industry and key national infrastructure products. Although roughly a quarter of aggregate comes from recycled sources, the overwhelming majority still comes from primary extraction. Around 90% is used by the construction industry itself. While we obviously support the principle of encouraging sustainability that is behind the levy, the construction of a single home requires, on average, around 200 tonnes of aggregate and associated materials, from the foundations to the roof tiles. At a time when the Government are looking to accelerate house building, has the Minister looked at the impact of this measure on housing delivery and cost? We will not oppose clause 99, but new clause 23 would require the Government to assess its impact on construction and infrastructure projects.

The Minister set out that clause 100 and schedule 23 will simplify things for the introduction of the new Scottish aggregates tax, reducing the number of businesses that would otherwise need to account for the levy. That is a perfectly good and common-sense measure, so I have no further comment on it.

[Mr Reynolds]

Clause 99 introduces a very small increase in the rate of aggregates levy, but a small increase when dealing with massive numbers is still quite a large increase. High Speed 2, for example, is predicted to use 20 million tonnes of aggregate during phase 1. That means that the measure will add about £3.2 million to the bill for HS2, which we know is already significantly over budget. Has the Minister worked out the cost associated with money being passed from the Government to HS2 and then from HS2 back to the Government through things like the proposed aggregates levy increase?

Finance (No. 2) Bill (Third sitting)

Debate between James Wild and Joshua Reynolds

Committee stage
Thursday 29th January 2026 Public Bill Committees

[James Wild]

I may not have read that manifesto as closely as the hon. Gentleman. [Laughter.] For the record, I did not say that. I think the record will also prove that that measure was not put into effect. We continued the winter fuel payment. The issue is that the Chancellor came along. She was given advice by Treasury officials—no offence to the Treasury officials in the room—suggesting this was a simple way to save some money and fill a fictional black hole. Foolishly and regrettably, she went along with that advice; happily, she is now correcting her mistake in part.

I am looking to press amendment 41 to a vote, because it is important that we give pensioners certainty that the threshold will be protected.

[Mr Joshua Reynolds (Maidenhead) (LD)]

I rise to speak to clause 55 and new clause 27, but I can tell the hon. Member for North West Norfolk that if he does press amendment 41, he will have the support of the Liberal Democrats.

Countless pensioners were forced to choose between heating and eating last year while the Government buried their head in the sand for months on end, ignoring those who really were suffering. The Government’s changes to winter fuel payments only added to those people’s worries. The delay to the warm homes grant scheme has meant that no household has benefited from support that could have made their homes more sustainable and cheaper to heat over the last winter.

The Liberal Democrats opposed the announcement to cancel winter fuel payments, which caused many millions of the most vulnerable residents in our society to lose out on vital support. We welcome the fact that those over state pension age in England and Wales with an income of £35,000 or less will now receive their winter fuel payment. However, as new clause 27 lays out, we have some serious concerns. Quite simply, it aims to review the practical impact of the winter fuel payment changes, especially on those individuals who exceeded the income threshold by only a small amount.

The cliff edge of £35,000 means that someone on that income will keep the entire payment, but someone at £35,001 will have the entire amount clawed back. We would like to examine the behavioural effects and whether the charge and cliff edge will discourage additional work, savings or income reporting. Would it be fairer to have the amount tapered so that we can get to a fairer place?

We also want to consider the implications of making the charge a notifiable tax liability, including penalties for a failure to notify, and how that would interact with PAYE and self-assessment rules. Right now, most people, especially pensioners, do not have to actively tell HMRC about certain things, because tax is sorted through PAYE or the benefits system. If winter fuel payments become notifiable, individuals would be legally responsible for reporting to HMRC. Evaluating the effectiveness of these measures will help to ensure that we have a smooth and fair process for taxpayers overall.

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[James Wild]

I am grateful to the hon. Member for Maidenhead for bringing forward these amendments to what is a very important clause, one that honours a commitment; I remember sitting in the main Chamber when a number of colleagues from across the House were pressing Ministers to introduce such a change, and it is very welcome that the Government have brought it forward in the Bill. I believe a similar treatment applies to the Horizon IT scandal. It is a common-sense clause. Fundamentally, the victims of this appalling scandal deserve compensation and their families deserve to then benefit in due course.

I put on record my tribute to the work of Sir Brian Langstaff, as well as to the work of my right hon. Friend the Member for Salisbury (John Glen) when he was in the Cabinet Office, working particularly with victims’ groups. The clause will help to provide the remedy that victims and their families have been seeking.

I have said that a similar treatment applies in the Horizon case, but I should mention to the Minister that the Hughes report on the valproate and pelvic mesh scandal is still outstanding. It was published two years ago and recommended that interim compensation payments should be made. I have raised the matter with the Health Secretary on a number of occasions; I ask the Minister to take that issue back and to consider, as the compensation scheme is designed, whether that sort of provision can be built in from the start.

We support the thrust of the amendments tabled by the Liberal Democrats, which seek to ensure that Government regulations around the issue reach the right objectives, as well as supporting victims and their families. Amendment 46 would establish a mechanism to support families to navigate the system. I think that is very important and, if the hon. Member for Maidenhead chooses to press the amendment, I assure him that Conservative Members will support it.

[Mr Reynolds]

The Minister used the words “as soon as possible”. The amendments that we have tabled would hold him and the Government to account on that. They show the seriousness of this issue, and would allow parliamentary oversight, accountability measures and a clear deadline.

I am glad that the hon. Member for North West Norfolk mentioned the Hughes report. My hon. Friend the Member for Chelmsford (Marie Goldman) mentioned the Hughes report in an oral question to the House yesterday, and the response was not particularly forthcoming. I urge the Minister to consider how this clause could apply to the Hughes report and others in the future.

Without these amendments, the clause gives a number of empty promises and more regulation in due course. That mean more waiting and more families navigating complex tax systems alone, while grieving loved ones are left in limbo. Infected blood victims were actively misled by the responsible authorities, then they were ignored, then they were told help was coming. In many tragic cases, that help is too late. The amendments would ensure that grieving relatives do not face additional challenges in receiving compensation. I hope the Minister changes his mind and supports amendments 47 and 46.

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[James Wild]

At present, when a disabled person uses their mobility benefits, such as the mobility component of the personal independence payment or disability living allowance, to lease a vehicle under the Motability scheme, that lease is zero-rated for VAT. Let us remember why Motability was created: it was established to help those with serious, long-term physical disabilities to access independence and mobility, not to provide subsidised cars for people with minor or temporary conditions. However, the numbers show that the scheme has expanded far beyond its original purpose. Last year, 815,000 people were using Motability vehicles, an increase of 170,000 in a single year.

For many participants, their benefit covers the full cost of a three-year lease, so they pay nothing beyond their benefit entitlement. However, when someone chooses a more expensive model, such as a larger or higher-spec vehicle, they must make an up-front top-up payment. Until now, the entire lease, including that top-up, has been VAT-free, but clause 77 changes that. Under the new rules, only the proportion of the lease funded by the qualifying Motability payment will remain zero-rated, and any additional amount paid voluntarily will be subject to the standard rate of 20%. That is a fair and balanced reform that we wholeheartedly support.

Clause 78 narrows the insurance premium tax relief for vehicle insurance linked to disability schemes. IPT is a 12% tax on most general insurance premiums. Many cars that are leased to disabled people currently benefit from that relief, even when the vehicles are standard, unadapted models. We welcome that the clause limits the relief to applying only to contracts for vehicles that are specifically adapted for wheelchair or stretcher users; for example, vehicles with ramps, lifts or structural changes supporting wheelchair access. If a vehicle has no such adaptation, premiums will rightly be subject to the 12% charge.

Conservative Members have long argued for tighter focus and accountability in the Motability scheme, and I welcome the Government’s decision to act— we have been pushing them to do so. Sadly, we read in The Times this morning that the Prime Minister has apparently ruled out any wider reforms to welfare in the King’s Speech. Some of the growth we have seen in the Motability scheme, which the clauses will hopefully address, reflects genuine need, but much of it does not. That expansion raises questions about the eligibility standards and on whether taxpayers’ money is being used as intended. Motability should not be a back-door subsidy for people who do not meet the scheme’s original intent, which was to help those with serious disabilities.

As the Minister said, over the scorecard this measure makes a significant saving that is a meaningful contribution to public finances, which we welcome and support. Taxpayer resources should be targeted more effectively to ensure fairness. However, the measures in the Budget overall raise people’s taxes to pay for more welfare spending. We consider that to be the wrong choice. We welcome the fact that the clause mitigates some of that additional welfare spending, but overall, this is a welfare spending Budget.

[Mr Reynolds]

I will speak briefly to clause 78, and then I will ask the Minister some questions, specifically on the definition of “substantially and permanently adapted”, which is slightly lacking in the Bill. Disability is not just about wheelchairs and stretchers; many individuals use and require adapted vehicles that may not be seen as substantially or permanently adapted.

The Liberal Democrats do not aim to change or amend the clauses, but some clarification would be helpful. Could the Minister clarify the definition of substantially adapted vehicles, and confirm what consultation has happened with disability groups about those definitions? Could he also confirm what impact assessment has been done on the additional costs for individuals who will no longer receive insurance premium tax relief?

Finance (No. 2) Bill (Second sitting)

Debate between James Wild and Joshua Reynolds

Committee stage
Tuesday 27th January 2026 Public Bill Committees

[James Wild]

I rise to speak clause 53 and new clause 7, which was tabled in my name. My comments will reflect submissions from people involved in the charitable sector and my discussions with them. The clause extends the allowable purpose to all categories of recognisable charitable investment—at present, it applies to only one, but it will cover all 12. The Institute of Chartered Accountants in England and Wales has raised a suggestion that the test be reframed from

“for the sole purpose of”

to “wholly or mainly” to the benefit of the charity. The concern is that there could be increased obligations for compliance on trustees who have to demonstrate that their every investment in, for example, their portfolio was made for the benefit of the charity rather than an ancillary purpose therein. Was that more flexible approach something that the Government have considered, and if so why did they chose to reject it?

[Mr Reynolds]

As the Minister has outlined, clause 53 extends the purpose test from one category to all 12 categories. What guidance will HMRC provide for charity trustees to determine where the line is to be drawn between a legitimate investment strategy and those that are seen as having an ulterior purpose, because anti-avoidance should not penalise prudent charitable investment strategies?

Can the Minister also confirm exactly which charity sector bodies were consulted on these provisions and how they responded to that consultation, because many charity trustees are volunteers and this seems to place a significantly larger burden on those charity trustee volunteers to determine where to draw the line? It would be interesting to see what the consultation came back with as to where they would see that line and how they would attribute it.

Finance (No. 2) Bill (First sitting)

Debate between James Wild and Joshua Reynolds

Committee stage
Tuesday 27th January 2026 Public Bill Committees

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

It is a pleasure to serve under your chairship, Sir Roger, and on the Committee considering this 536-page doorstop of a Bill. We are grateful for the written contributions and evidence provided to the Committee, but I think the usual channels should consider having oral evidence sessions for future Finance Bills, so that people can make important representations on significant pieces of legislation.

I will turn to clause 13 and new clause 24 tabled in my name. We need to have an enterprise economy that incentivises investment. The tax regime clearly has an important role to play in helping to achieve that, and in doing so, backing much needed growth in the economy. Clause 13 amends the Income Tax (Earnings and Pensions) Act 2003 to expand the enterprise management incentives scheme. That scheme helps attract, keep and motivate staff by allowing employees to buy shares in the company with tax advantages. That includes no income tax or national insurance contributions at the time of grant and exercise, with gains eventually being taxed under the more favourable capital gains regime, rather than as income tax.

The changes in the clause should make it easier for start-ups and growing companies to use the enterprise management incentives scheme, helping them reward staff and link employees’ success to the company’s growth. That is something that we support and the British Private Equity and Venture Capital Association has also welcomed the change. The clause increases the company options limit from £3 million to £6 million, raises the gross asset limit from £30 million to £120 million, and doubles the employee limit from 250 to 500. It also extends the exercise period to 15 years. These are all welcome changes.

However, one important element that is not due to change under these provisions is that the scheme allows qualifying companies to grant employee share options up to a maximum value of £250,000 per individual. Has the Minister considered going further and raising the cap beyond £250,000 to attract the brightest and best to grow businesses?

In its report on competitiveness, published yesterday, TheCityUK states that,

“the UK’s tax schemes such as…Enterprise Management Incentives (EMI) offer lower relief thresholds and tighter eligibility than international equivalents such as the Qualified Small Business Stock regime in the US, weakening incentives to scale and retain activity domestically.”

I have tabled new clause 24, which would require the Government to assess and report to Parliament on the impact that the changes have on the recruitment and retention of skilled employees in qualifying companies, on high-growth and innovative companies and on the Exchequer.

The Minister referred to the tax information and impact note, but clearly that is a forecast of what the Government hope will happen, not a review of what has actually happened. I think that will be a debate that we have many times as we consider the Bill: a TIIN is not a review of what has actually happened. The numbers that the Minister gave may be higher or lower, but we need to have a post-implementation review.

According to the Budget 2025 policy costings, the objective is to increase eligibility to allow scale-ups, as well as start-ups, to access the scheme. That is, of course, something we support. Will the Minister commit to keeping the scheme under review to ensure it is delivering on its aims to support high-growth firms and to consider whether further action, such as on the individual threshold, is needed?

Given the substantial investment, can the Minister clarify what behavioural assumptions underpin these projections? How many companies just above the existing threshold are expected to utilise these expanded limits? The BVCA has said that the enterprise management incentives scheme is

“long overdue for reform: high growth companies are often unable to grant EMI options due to the constraints of the £30m gross assets and 250 employee limits.”

Does the Minister have figures showing how much these limits have actually restricted growth?

[Mr Joshua Reynolds (Maidenhead) (LD)]

It is a pleasure to serve under your chairmanship, Sir Roger, on what is not only my first Finance Bill Committee, but my first Bill Committee—a nice, simple one to start me off. The Liberal Democrats welcome the changes made by clause 13. We need to support our British start-ups and British start-up culture to grow and develop.

We would of course like the Government to go further than clause 13 in what they promise. We need to ensure that we have a British start-up culture where start-ups do not, after five or 10 years, head off to the United States, taking that capital and leaving the UK with a brain drain. I have only one question to the Minister: how can we go further to ensure that once we have implemented the Bill, we will be in a position to say that fantastic UK companies will not head overseas, taking that capital and culture with them?

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[Mr Reynolds]

New clause 25, which I hope to press to a Division, would require the Government to undertake a report to consider a number of issues pertinent to the loan charge settlement scheme outlined in the Bill. The Liberal Democrats are clear that the settlement opportunity should be fair to everybody affected, including those who have already paid or settled, so as to ensure that people outside the loan charge years are not treated differently without clear reason. Unequal treatment can create the perception of unfairness, even if the policy is technically and soundly legal. It seems to us that if perceived unfairness in the system could be reduced, we should strive to do so, in order to protect the public’s trust in HMRC and the wider tax system. Is it right that someone who has already settled should be ineligible for the loan charge settlement? Surely, that tells people that in future they should just hold off and not settle or come to agreement, because that will leave them in a better position.

[James Wild]

We will look sympathetically on the hon. Gentleman’s new clauses if he chooses to press them to a vote. I have constituents who were heavily pressured by HMRC and ended up settling, which left them at a considerable financial loss, so I share his concern that those people, who were effectively bullied by HMRC, will now not get the same support as people who held out.

[Mr Reynolds]

The hon. Gentleman is completely correct. The place we are in now is that someone who settled and came to an agreement with HMRC is excluded from the opportunity laid out in the Bill. That means that when something like this happens again—and we all know that it will—those individuals will not want to come to an agreement with HMRC. They will know that if they hold off, a better solution and a better agreement will come through.

The report required by new clause 25 would outline a range of things, including whether the loan charge settlement opportunity is available to individuals who have settled, which is really important and something that we need to ensure; whether the settlement opportunity applies to individuals with disguised remuneration outside the loan charge years; and the extent of the impact of differential treatment between those two groups and those who are eligible. The extent of the impact is the most important thing, because for those individuals it will be severe. The report would also include an assessment of whether extending more favourable settlement terms to excluded groups would improve fairness and consistency with HMRC overall.

[Lucy Rigby]

The purpose of the review, as I think is well known, was to bring the matter to a close for those who had not yet settled and paid their loan charge liability to HMRC. That by its very nature meant focusing on open cases and outstanding liabilities. The Liberal Democrat spokesman, the hon. Member for Maidenhead, referred to something like this happening again. I think we would all agree that we hope it does not. However, we would probably also agree that it is crucial that any resolution to this issue is fair to the wider tax-paying population that has never avoided tax.

The Government believe that this settlement opportunity is the most pragmatic solution to draw a line under the issue for as many individuals with outstanding liabilities as possible. The settlement opportunity being provided is substantially more generous than any opportunity HMRC has previously offered and will substantially reduce the outstanding liabilities of people who have yet to settle with HMRC, particularly those with the lowest liabilities. Most individuals, as I said, could see reductions of at least 50% in their outstanding loan charge liabilities. We estimate that 30% of individuals could have their liabilities written off entirely.

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[James Wild]

The hon. Member and I agree about the importance of long-term certainty. People who are watching the proceedings may wonder why we did not just table an amendment to extend the scope to 2030, but due to the narrowness of the measures passed by the House, we are unable to do so. As I weigh up whether to push my new clause to a vote in a few weeks’ time, will the hon. Member consider supporting it?

[Mr Reynolds]

We can look into whether to support new clause 3 in a few weeks’ time. There seems to be very little in the new clause that we as Liberal Democrats would not support. Let us face it: we need to review the impact of the 2027 expiry date. We do not believe that the allowance should expire in 2027; it needs to be extended significantly further, so we would certainly consider supporting a review of whether 2027 is the right place.

That is my question for the Minister, really: why are we saying that the expiry date will be in 2027? Will we all be sitting here excitedly after the next Budget, looking at a 2028 expiry date, and so on for 2029 and 2030?

Finance (No. 2) Bill

Debate between James Wild and Joshua Reynolds

Committee of the whole House
Tuesday 13th January 2026 Commons Chamber

[James Wild]

I am sure that the hon. Member is welcome, but let us be clear that some are not.

If I go into a pub, I do not think I will find many publicans who think that this Government are pro-pub. We have a Chancellor who said that she did not understand the impact that her Budget, the revaluation and the removal of the discount on business rates would have. That is staggering. Frankly, it shows once again that she does not understand business and was not listening when the sector and many others warned that that was precisely the impact that her policy would have.

The Chancellor is reportedly about to do a U-turn on her business rates raid. She has not come to the House yet to inform us or the sector, but what is being briefed is likely to be wholly inadequate. On the radio this morning we heard Ministers saying that the impact will be limited to pubs, but the hospitality sector, leisure businesses and retail all face huge increases in business rates.

[Mr Joshua Reynolds]

Does the shadow Minister agree that if this Labour climbdown is happening, it is not enough for there to be a smaller increase than the one that was planned? There needs to be no increase in business rates.