Agricultural and Business Property Reliefs: OBR Costing

Debate between Lindsay Hoyle and James Murray

Thursday 23rd January 2025 Commons Chamber

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

At the autumn Budget, we took difficult decisions on tax, welfare and spending that were necessary to restore economic stability, fix the public finances and support public services. We had to do that to address the mess we inherited from the previous Government, which the right hon. Member for Louth and Horncastle (Victoria Atkins) will remember well, having served in that ill-fated Government. We have taken these decisions in a way that makes the tax system fairer and more sustainable.

The Government are better targeting agricultural property relief and business property relief to make them fairer. These reforms mean that despite the tough fiscal context, the Government are maintaining very significant levels of relief from inheritance tax beyond what is available to others.

Under the current system, the benefit of the 100% relief on business and agricultural assets is heavily skewed towards the wealthiest estates. According to the latest data from His Majesty’s Revenue and Customs, 40% of agricultural property relief benefits the top 7% of estates making claims. That is just 117 estates claiming £219 million of relief. It is a similar picture for business property relief, with more than 50% of it being claimed by just 4% of estates making claims, which equates to 158 estates claiming £558 million in tax relief. Our reforms mean that individuals can access 100% relief for the first £1 million of combined business and agricultural assets, and 50% thereafter. Given the nil rate bands, this means that a couple can pass on up to £3 million between them to a direct descendant, inheritance tax free.

Yesterday, the Office for Budget Responsibility published further details on the data sources and modelling used to estimate costings across a number of the tax measures announced at Budget, including the reforms to agricultural property relief and business property relief. The costing is the same as published at Budget, and the approach to modelling the costing is typical and in line with other tax policies. As the Government have set out, the reforms mean that almost three quarters of estates claiming APR in 2026-27, including those that also claim BPR, will not pay more inheritance tax. This is a fair approach that protects farms while also fixing the public services we all rely on.

[Mr Speaker]

I call the shadow Secretary of State for Environment, Food and Rural Affairs.

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[James Murray]

There certainly is evidence that the current inheritance tax system has caused people to use these reliefs for tax planning and to avoid inheritance tax bills. My hon. Friend alludes to the broader question of the fairness and sustainability of this measure. As I mentioned earlier, 40% of agricultural property relief benefits the top 7% of estates, and 50% of business property relief benefits the top 4% of estates. The Leader of the Opposition has said that she thinks this is a good way to prioritise public money, but we think it is neither fair nor sustainable.

[Mr Speaker]

I call the Liberal Democrat spokesperson.

Oral Answers to Questions

Debate between Lindsay Hoyle and James Murray

Tuesday 21st January 2025 Commons Chamber

[James Murray]

We set out the details of our decision to increase the rate of national insurance contributions from employers and to reduce the threshold, and we have added the different benefit we will give, particularly to small businesses and charities, by more than doubling the employment allowance. The employer national insurance contribution changes were among the toughest we took in the Budget, but they were necessary to repair the public finances and deliver the economic stability that is so crucial for investment and growth.

[Mr Speaker]

We have had the former Chair of the Treasury Committee, so let’s now have the current Chair.

[Dame Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)]

My hon. Friend the Exchequer Secretary rightly said that small and medium-sized enterprises are a vital part of our high streets and our economy, and one of the biggest changes is, of course, the change to business rates. He was not tempted at the Select Committee last week to give more detail on the timeframe for that, but many businesses want certainty about business rates as they go forward. May I tempt him to give an indication of the Government’s thinking about how quickly this change might be introduced and whether the small business rate relief is likely to survive or to be subsumed into a new regime?

[James Murray]

I thank the Chair of the Select Committee for her questions. If she did not succeed in tempting me at the Select Committee, I doubt she will succeed today, but I can reassure her that the decisions we have set out about introducing the permanently lower business rate for RHL—retail, hospitality and leisure—properties below a £500,000 rateable value will be coming in from April 2026. Specifically in relation to small business rate relief, I can confirm that the Government are committed to retaining that. One of the options we are looking at in our “Transforming business rates” discussion paper is how to support businesses that want to expand into a second premises, thereby growing the business, because at the moment there is the cliff edge where they lose small business rate relief.

[Mr Speaker]

I call the shadow Minister.

[Richard Fuller (North Bedfordshire) (Con)]

Confidence on Britain’s high streets is sliding faster than the Chancellor will be down the ski slopes of Davos later today. With retail sales down—rather than up, as expected in the run-up to Christmas—and with the British Retail Consortium saying that two thirds of stores will raise prices to cover her national insurance increases, when will the Minister accept that the Chancellor’s economic strategy of raising taxes and increasing regulations is not working?

[James Murray]

I am glad to know that the shadow Minister’s morning was well spent cooking up that line about the Davos ski slopes. What he will know, and what sectors across the economy will know, is that having a stable economy is a prerequisite for the investment we need to get the economy growing. That is why we had to take difficult decisions at the autumn Budget, including those to increase the rate of employer national insurance contributions. Alongside that increase, however, we more than doubled the employment allowance and set out our plans to have permanently lower tax rates for high street RHL properties from April 2026.

[Mr Speaker]

I call the Liberal Democrat spokesperson.

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[Mr Speaker]

Order. Mr Lowe, topical questions are meant to be short and punchy. I am sure that you are very good at that normally.

[James Murray]

One of my key priorities as Exchequer Secretary and the Minister with responsibility for HMRC is to oversee a programme of transformation at HMRC to improve its customer service, to digitise the service, to close the tax gap and to ensure that we have the modern, reformed service that we need for the future.

Oral Answers to Questions

Debate between Lindsay Hoyle and James Murray

Tuesday 3rd December 2024 Commons Chamber

[Mr Speaker]

I think that fits with the question, somehow.

[James Murray]

My hon. Friend is absolutely right. The problem with Conservative Members is that they are all happy to say that they want more funding for the NHS; they are just not prepared to pay for it. What they need to realise is that, in government, we have to take tough decisions to ensure that we can fund public services and fix the public finances.

[James Murray]

As my hon. Friend will know, many hospices are independent charities and therefore will be able to access the employment allowance, which we have doubled to £10,500 a year, as well as the other wider tax reliefs in the tax system for charities, such as business rates relief and gift aid. Of course, hospices often have statutory obligations with the NHS as well, so I suggest that hospices discuss their contracts with their integrated care boards.

[Mr Speaker]

I call the shadow Minister.

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[James Murray]

I do not think the shadow Minister listened to my response to the previous question, in which I set out very clearly the definition of the public sector for the purposes of national insurance contributions. Look at what the OBR has said: yes, it recognises that we are asking businesses to contribute more and that this will have an impact, but it also says that the employment level will rise from 33.1 million to 34.3 million by 2029, meaning an increase in the employment level over this Parliament.

[Mr Speaker]

I call the Liberal Democrat spokesperson.

Oral Answers to Questions

Debate between Lindsay Hoyle and James Murray

Tuesday 29th October 2024 Commons Chamber

[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.

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[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.

VAT: Independent Schools

Debate between Lindsay Hoyle and James Murray

Tuesday 8th October 2024 Commons Chamber

[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.

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[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.

[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.

Oral Answers to Questions

Debate between Lindsay Hoyle and James Murray

Tuesday 3rd September 2024 Commons Chamber

[Mr Speaker]

Order. Sorry, I have to get through the Order Paper. Put in for an Adjournment debate. Minister, I think you got the gist.

[James Murray]

I thank the hon. Member for his comment, but as my right hon. Friend the Chancellor set out, the state pension is £900 more this year than it was last year, thanks to the triple lock. We have committed to maintaining the triple lock as the foundation of state support for pensioners throughout the rest of this Parliament. Energy bills are lower this year. It is crucial that he and other Members across the House support our goal to increase the take-up of pension credit. If we make sure that all pensioners who are eligible for pension credit take it up, they will thereby receive the other benefits, including the winter fuel payment, to which they are entitled.

[Mr Speaker]

I call the shadow Minister.

[Gareth Davies (Grantham and Bourne) (Con)]

During the general election, the Labour party committed to bring down energy bills by £300. Now that the election is over, energy bills are going up by some 10%. On behalf of the British electorate, especially the 10 million pensioners who are having their winter fuel payment taken away, I ask the Minister to confirm to the House that the £300 cut is still Labour policy. If it is, specifically how is the £300 calculated, and when will it be delivered?

[James Murray]

I thank the shadow Minister for his comment and welcome him to his new place. He referred to the cost of energy. As we know, the cost of energy is substantially lower than it was this time last year, but we are under no illusions about how much more we need to do to make sure that energy bills are truly affordable and that we tackle the cost of living crisis. That is why we have set to work straight away in establishing Great British Energy, alongside our national wealth fund, which will help to invest in the clean energy sources of the future and bring down energy bills for good.

[Mr Speaker]

I call the Lib Dem spokesperson.