Finance Bill

Luke Evans Excerpts

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.

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[Mel Stride (Central Devon) (Con)]

I beg to move an amendment, to leave out from “That” to the end of the Question and add:

“this House declines to give the Finance Bill a Second Reading because it derives from the 2024 Autumn Budget which will lead to jobs being lost, curtailed investment and prices being raised; because the Finance Bill constitutes an assault on business by increasing taxes on investment; because it will reduce the competitiveness of the United Kingdom’s tax regime; because it levies the first ever tax on educational choice and will increase pressure on state schools; because it will drive up rents by increasing tax on homeownership; because it will substantially increase the size of the state without a sustainable plan to fund it; and because it will reduce living standards, increase borrowing and debt, drive up inflation and interest rates, with the result that the OBR growth forecast for the Autumn Budget is lower than that accompanying the Spring Budget of the last Government.”

This Finance Bill, this Budget, are a disgrace. They are a disgrace because they are built on a deceit—a deceit that was propagated by the Labour party during the last general election. It told the British people that they need not worry about taxes being raised left, right and centre, yet what have we discovered? The figures of the Office for Budget Responsibility clearly show that this country is now heading to its highest tax burden in the history of our nation.

During the general election, we were also told by the Labour party that it had no intention of increasing national insurance. In fact, it stated exactly that in the manifesto on which the now Government stood. It broke that commitment. Do not take my word for it; Paul Johnson of the Institute for Fiscal Studies says exactly that.

[Dr Evans]

Is it not the case that the manifesto said that there would be no rise in national insurance, but when Ministers went to defend this policy, they said, “not on working people”, but then could not define working people? Now the language has slipped to “payslips”. Is the shadow Minister aware of this translation? I am pretty sure that the “payslip” was not mentioned in the manifesto.

[Mel Stride]

My hon. Friend makes an important and valid point. As he says, Labour is now claiming that there will be no incidence of this tax increase on working people, although it seems to have a problem defining exactly what a working person is. None the less, try telling that to those people who will see their wages depressed as a consequence of this measure. Try telling that to the 50,000 full-time equivalents who the OBR says will lose their jobs as a consequence of this measure. Try telling that to the young people up and down our country who, because it is not just an increase in the rate but also an approximate halving of the threshold, will be disproportionately affected.

Labour also reassured farmers. The then shadow Secretary of State for the Department for Environment, Food and Rural Affairs—the now Secretary of State—reassured farmers. He went to the National Farmers Union and said that nothing would be done on inheritance tax and the annual percentage rate. And on that basis, the NFU told its members that, at least on that measure, there was nothing to fear from a future Labour Government. How wrong it was. Only last week, we saw, tens of thousands of farmers, in their dignified way, coming up to the very gates of our democracy to ask a simple question of the Labour Government: “Why did you lie to us?” That is the nub of it. The measure will see the break-up of our farms and it will do nothing for food security.

[Mel Stride]

The hon. Gentleman is absolutely right. It demonstrates that this Government do not understand farming and do not understand the countryside. There are 100 Labour Members who represent rural constituencies. I will not guess how many there will be after the next general election, but some number fewer than 100, I suspect.

Perhaps the cruellest deception of all was of our pensioners, who were reassured that there would not be any means-testing of the winter fuel payment, yet what happened? 10 million pensioners are to face a cut. Before somebody on the Government Benches stands up and tells us that some of those pensioners can afford it, I say that many of them simply cannot. Of those under the poverty line, two thirds will actually lose these benefits.

[Dr Evans]

While the Prime Minister was out of the country on the 19th, something else was snuck out: a letter from the Department for Work and Pensions, explaining that, at the point of reaching its decision on this, it knew from its own internal analysis that it would impoverish 100,000 pensioners into relative poverty and 50,000 pensioners into absolute poverty. This information was asked for time and again in readiness for a debate in this House. Is it not right that information relevant to these measures should have been available in time for a debate?

[Mel Stride]

My hon. Friend is absolutely right. It is disgraceful that Labour waited until the farmers were at the gates of Westminster to sneak out that impact assessment, which showed that, by 2027, 100,000 more pensioners would be in relative poverty, after housing costs, than is the case today. Indeed, the analysis by the Labour party back in 2017, when it was against this proposal, was that up to 4,000 pensioners would prematurely die in the cold as a consequence of this measure. Now, Madam Deputy Speaker, when you deal in deceit, you need a pretext for so doing. And a further deceit has been brought forward, and it was raised again at the Dispatch Box this afternoon, which is the £22 billion black hole. Where is it?

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[Mr Luke Charters (York Outer) (Lab)]

My hon. Friend the Member for South Derbyshire (Samantha Niblett) has left the Chamber, but I praise her for her maiden speech. I am pleased to speak on this Finance Bill. It underpins the first Labour Budget in 14 years. It also raises the revenue that this country needs in order to recover, rebuild and renew. I will not spend ages talking about the Conservatives and the mess they have made, but—cue groans from Conservative Members—we all know about the £22 billion black hole, the mini-Budget and their reprehensible record on public finances.

However, I want to take a moment to praise the shadow Chancellor, the right hon. Member for Central Devon (Mel Stride), because I genuinely enjoyed his astronomy references. It is just a shame that he is not quite on planet Earth when it comes to recognising that we need to not only invest in public services but pay for them—the vehicle for that being this very Finance Bill. Even while this Government are tackling the Tories’ toxic inheritance, we are, through this Finance Bill, protecting payslips, when it comes to income tax and employee national insurance.

Let me get on to other key measures in the Bill that I welcome. Measures on tobacco duty, non-dom tax status and the oil and gas windfall mean that public services in my constituency of York Outer will be all the better off. Let me start by talking about the NHS. This week, I met Yorkshire Cancer Research to talk about the vital work that it does. As we discussed on Second Reading of the Tobacco and Vapes Bill yesterday, the tobacco duty increase will act as a deterrent to smoking, and it will save lives. Taken together, these measures are important to changing habits, but the tobacco duty increase will also raise extra cash to fund our NHS.

Primary care services such as the York Medical Group, which I recently visited, and York hospital will undoubtedly welcome extra investment. I certainly welcome it, as a parent who recently had to wait many hours in York A&E with a screaming toddler after a trapped finger. It is vital that we get the NHS back up and running for constituents like mine. One constituent has been waiting seven years for surgery. Let that sink in: it is half the time that the Tories were in power. I am clear that this Bill raises the revenue to put the NHS on a much surer footing.

[Dr Luke Evans]

The hon. Gentleman is a conscientious Member of Parliament, and I understand what he is saying, but does he accept that, in the words of a former Labour leader, we invest in public services with the proceeds of growth? When he stands for re-election, will he tell his constituents that he advocated for a Budget to cut growth in his country?

[Mr Charters]

That is slightly laughable, if I may say so as an affable Yorkshireman. Things like the national planning policy framework will drive growth, and some of these measures were not included in the OBR blue book. This pro-growth Government are doing so much for growth, so I find the hon. Gentleman’s question slightly perplexing.

The Bill will abolish the non-dom tax loophole and replace it with a residence-based regime. I had a look, and this change will raise £12.7 billion. Just last week, the Transport Secretary kindly visited me and the Mayor of York and North Yorkshire to announce £12.7 million of funding for our buses, which will transform our region. My quick maths shows that closing the non-dom tax loophole will pay 1,000 times more than that sum, which is the difference this Bill will make.

I will soon be having my office Christmas do. I am sure there is a joke to be made about liquid assets, but I recently visited Elvington brewery, and this Bill rightly cuts alcohol duty on draught products. That is wonderful news for our Yorkshire pubs. I need to declare an interest for myself and my hard-working team, because these measures mean that we are looking forward to enjoying a cheaper pint of the wonderfully named Fairytale of Brew York, which will be launched by Brew York over the festive period. Conservative Members back investment in our public services, but they do not support the revenue raised by this Bill. Perhaps they have been having too many fairytale economic pints.

The VAT increase on private school fees will bring in £1.7 billion a year, which will go directly to schools like those in York Outer. The Budget announced a £1 billion uplift for SEN provision and a £2.3 billion increase in the schools budget, which will make a huge difference to places like Applefields school and Manor Church of England academy.

I have also visited Askham Bryan college, a fantastic agricultural college in York Outer. Its great students, who are studying T-levels, will benefit from £300 million of extra funding for colleges, directly stemming from this Finance Bill. While making some proportionate tax rises in the Budget, we have maintained our position of having the lowest capital gains tax in Europe. We have struck the right balance, because we will have extra cash for our schools, and it is a real lifeline.

For all the Conservatives’ obfuscation, we have actually kept so many of our manifesto promises, one of which was to deliver a windfall tax on oil and gas companies—a policy so good that the Conservatives stole it when they were in government. The additional revenue raised by the EPL will help us to set up GB Energy, which will deliver for the British people by delivering the green jobs of the future.

May I briefly refer to the first Bill I ever spoke on in this House, which is now the Budget Responsibility Act 2024? I said the Bill was important because it was

“the only way we can grow those public services with a stable economy.”—[Official Report, 30 July 2024; Vol. 752, c. 1253.]

That is as true now as it was back then—[Interruption.] I hear grumbles from the Opposition Benches. Conservative Members do not seem to think that economic stability matters when it comes to investing in public services; they certainly know quite a lot about economic instability. This Government have been tasked with ripping out the rot following 14 years of chaos. The Bill helps to fix the foundations by providing the revenue to restore public services in York Outer and beyond.

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[The Economic Secretary to the Treasury (Tulip Siddiq)]

Just as it was an honour to close the Budget debate on behalf of the Government, it is an honour to close the debate on Second Reading of the Finance Bill—the first Finance Bill by a Labour Government in 14 years. I thank hon. Members for their contributions, and look forward to hearing further contributions during the Committee of the whole House and the Bill’s remaining passages, alongside the Exchequer Secretary to the Treasury.

Before I address the numerous points raised in the debate, it is worth reflecting briefly on the points made by the Exchequer Secretary in his opening remarks on what the Bill will achieve. The Bill legislates for key measures in the Budget—a Budget in which we took tough decisions on tax, spending and welfare to restore Britain’s economic stability. The Bill delivers on our manifesto commitments and starts the work of moving to a fairer, more sustainable tax system while raising the revenue needed to adequately fund our public services. The Government have taken a balanced approach that will create a fairer system while still promoting growth and wealth creation.

We are adjusting the rate of capital gains tax, for example —a tax paid by fewer than 1% of adults every year—to raise some of that revenue. Although rates have increased, the Government will maintain the UK’s position as having the lowest CGT of any European G7 economy. There are no changes to CGT rates on property or the annual exempt allowance, and there is a phased increase to business asset disposal relief, to give entrepreneurs time to adjust. That is just one of the many measures in the Bill that will move us to a fairer system, where those who can pay do pay. [Interruption.] I will get on to farmers, hon. Members will be pleased to know.

I congratulate my hon. Friend the Member for South Derbyshire (Samantha Niblett) on an excellent maiden speech. She is absolutely an inspiration to her teenage daughter, but also to young women across the country, including my daughter. I thank her for that. We are very pleased to have her. We need more people with careers in tech in the House. She is very welcome.

We also heard powerful contributions from my hon. Friends the Members for Darlington (Lola McEvoy), for Crewe and Nantwich (Connor Naismith), for Macclesfield (Tim Roca), for Barking (Nesil Caliskan), for Vale of Glamorgan (Kanishka Narayan), for Makerfield (Josh Simons) and for Harlow (Chris Vince). I pay particular tribute to my hon. Friend the Member for York Outer (Mr Charters) for his play on words—as an English graduate, I always enjoy that, and I thought he was excellent.

Hon. Members have extensively discussed the agricultural property relief changes announced in the Budget, and will note that they are not included in the Bill. That is because the Government are committed to technical consultation on tax legislation. We feel it is important to get complex legislation right, and to give businesses and those affected by tax changes the certainty that they need ahead of the measures coming into force. The Government will publish draft legislation on this measure before legislating for it in a future Finance Bill.

[Dr Evans]

I am grateful to the Minister for making that point. Is there a timetable attached to that that she could set out to this House? Many businesses will have listened to that statement, and will want to know exactly when they need to make their business decisions.

[Tulip Siddiq]

We will set out plans in due course. The Bill does, however, extend the scope of agricultural property relief from 6 April 2025 to land managed under certain environmental agreements. That supports the UK Government’s wider environmental objective of supporting farmers and land managers so that they can deliver, alongside food production, significant and important outcomes for the climate and environment. The measure is intended to prevent the loss of APR being a barrier to the involvement of agricultural landowners and farmers in land use change under environmental agreements including, but not limited to, the environmental land management schemes in England and equivalent schemes elsewhere in the UK.

I want to address something the hon. Member for St Albans (Daisy Cooper) talked about: family farms. This is not in the Finance Bill, but I will still refer to it. Individuals can pass on a sum of up to £325,000 inheritance tax-free; £500,000 if that includes a residence being passed to a direct descendent; and £1 million when a tax-free allowance is passed to a surviving spouse or civil partner. There is also a full exemption from inheritance tax when passing assets to a spouse or civil partner.

Finance Bill

Luke Evans Excerpts

Committee of the whole House
Wednesday 11th December 2024 Commons Chamber

[James Murray]

My hon. Friend is right to point out that decisions on VAT reliefs are political choices. Indeed, the Opposition are showing which side of that choice they land on when it comes to education; through their new leadership, they are choosing to prioritise a tax break for private school fees over investment in state education. That is a political choice. I am very happy to stand behind where we are on that side of the debate.

I will turn to some of the clauses in detail. The changes made by clause 47 will remove the VAT exemption from which private schools currently benefit on the education, vocational training and boarding they provide. Let me be clear: this policy does not mean that schools must increase fees by 20%, and the Government expect schools to take steps to minimise the increases for parents. Schools can reclaim VAT paid on inputs and make efficiency savings to minimise the extent to which they need to increase fees. Many schools have already committed publicly to capping fee increases at 5% or absorbing the full VAT costs themselves.

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

One of the schools in my area has posed a question on VAT. It has combined fees, within which things like meals are included. It is not clear from Treasury guidance whether the school would have to separate those fees out, creating another accounting problem—in order to have separate VAT and travel, for example, as part of the fees—when currently it is all one unit. Could the Minister provide clarity on that? When I met the Schools Minister, he was unable to give me an answer, and was going to go away and speak to the Treasury about what that looks like. This will have real impacts for this school, which will have to decide how to set out its accounting, and whether it has to include the fees or separate them out into several different blocks.

[James Murray]

I thank the hon. Gentleman for his specific question. Let me just be clear that I am not giving tax advice for that particular school in my response, because I would always assume that any school would get its own tax advice. In general, the VAT treatment of a particular supply is determined by the predominant supply, so there are options available to schools. I am happy to pick the matter up with him outside the Chamber and to make sure he has the details in writing. As I said, I would not want to give specific advice to that school, but it is worth the school getting advice on the VAT treatment of the fees it charges based on the predominant supply.

I will return to the impact of the policy we are proposing and the changes in clause 47. Government analysis suggests that the impact of the VAT policy on private and state school sectors is likely to be very small—ultimately leading, as I was saying a few moments ago, to 37,000 fewer pupils in the private sector, which includes both pupils who will never enter the private sector and those who will move.

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

I rise to speak on behalf of the Opposition, and particularly to new clause 8. Let me start by briefly considering the context in which we are debating the Bill. It comes after a Budget in which the Chancellor said that we must have

“an economy that is growing, creating wealth and opportunity for all”—[Official Report, 30 October 2024; Vol. 755, c. 811.]

But that is not what this Finance Bill delivers. Instead, the Budget is forecast to deliver lower growth, higher borrowing and higher inflation.

The Minister referred to choices, and the Government have indeed made choices. They have chosen to tax enterprise, to tax the wealth creators and to tax the farmers who are, again, outside Parliament protesting against the family farm tax—I wonder whether, on one of his rare jaunts to this country, the Prime Minister has gone out to speak to them. Rather than promote opportunity, it was the Government’s choice to bring in a new tax on aspiration.

[Dr Luke Evans]

My hon. Friend talks about choices, and one of the choices that independent schools are now going to have to make is how to use their own resources, such as their sports pitches, bursaries and scholarships. The kinds of things that benefited the wider local community may now have to be turned into fundraising and revenue-making machines to be able to deal with this change, which in turn means that other schools will not be able to use their community facilities, such as their football pitches. Those may all have to be charged more for, or indeed cut completely, as the independent schools have to make those difficult choices. That is not good for community cohesion at all.

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[James Wild]

Absolutely; I completely agree with my hon. Friend. The Government hide behind the cloak of saying, “If you have an EHCP, everything is okay,” but 100,000 children in schools across our country will be impacted.

The next area we are concerned about is faith schools, which tend to be smaller and charge lower fees. The Independent Schools Council has warned that

“Low-cost faith schools will be faced with deficit and closure, communities will lose vital assets”.

There are small religious groups that do not have any state sector provision that can meet their needs as a denomination. Religious groups are mounting legal challenges as a result, battling for the right to educate their children and battling for the right to choose, which we on the Conservative Benches certainly support.

New clause 8(3) refers to the music and dance scheme, which provides grants to talented young people who could not otherwise attend world-class institutions such as the Royal Ballet school. We welcome the Government’s decision, under pressure, to delay taxing schools in this scheme until September next year, but that exemption should be made permanent.

To return to one of the points that has been made, in the Budget statement the Chancellor said:

“94% of children in the UK attend state schools. To provide the highest-quality support and teaching that they deserve, we will introduce VAT on private school fees”.—[Official Report, 30 October 2024; Vol. 755, c. 821.]

That is a deliberately divisive approach. The Opposition support 100% of pupils. We care about all children. We simply believe that parents should be able to choose.

We have consistently raised the situation of military families, to which the Minister referred, and argued that they should be exempt from this tax. The Government did not agree to that, but in response to our campaign they said:

“We will uprate the continuity of education allowance to reflect the increase in school fees from January.”—[Official Report, 18 November 2024; Vol. 757, c. 3.]

Well, the new continuity of education allowances have been announced and, as my hon. Friend the Member for Solihull West and Shirley (Dr Shastri-Hurst) pointed out, they fall short of protecting service families from the changes. That will have a direct impact on the retention and recruitment of our armed forces. There are 4,200 children who benefit. The allowance is in place to meet the needs of the armed forces when they have to move around the country or serve overseas and boarding schools or other provision is the only available option. Given the importance of this allowance for the retention of military personnel, why have the Government not met the commitment that they made to our armed forces?

[Dr Luke Evans]

Does my hon. Friend agree that the veterans’ commissioner that will be introduced by the new Government will be perfectly primed to look at this kind of problem to ensure that both Departments—the Ministry of Defence and the Department for Education—get the best? Is that not the purpose of the commissioner?

[James Wild]

I very much hope so. I know from my years as an adviser in the Ministry of Defence just how important the allowance is for retention. That is why it is so disappointing that the Government have broken their promise.

I am grateful to the many organisations that have shared concerns about the implementation of these clauses, especially as the measure is rushed and is taking place in the middle of the school year. The Chartered Institute of Taxation has called for a delay, saying that it is

“concerned that neither HMRC nor the private schools will be ready to implement the change in VAT liability effectively”.

In order to meet the mid-term deadline, HMRC has to register the schools in just five working weeks—an issue that new clause 8 could address.

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[James Murray]

I am going to make some progress.

I thank my hon. Friends the Members for Falkirk (Euan Stainbank) and for Loughborough (Dr Sandher) for their comments. I feel that I am duty bound to add my congratulations to my hon. Friend for Loughborough on his engagement.

The hon. Member for Hinckley and Bosworth (Dr Evans) is not in his place—sorry, he is at the Bar. Perhaps he could come and take a seat on the Benches. He asked an important question to try to get some clarity about the VAT treatment of combined fees that cover school meals, transport and other services. I hope that my earlier answer gave him some reassurance on that.

I reiterate that I cannot provide advice for individual schools, but it is worth emphasising that the general principle is that if a school supplies a package of education for a single fee, that will normally be a single supply for VAT. That package could include a number of other elements such as transport or meals, alongside the main element of education. If it is a single supply, it is a single VAT liability. However, where a school supplies education and also supplies other elements for a separate fee, that will normally be treated as a separate supply. For example, if a school offers school meals alongside the education for a separate charge, those will normally be two different supplies, and they may have different VAT liabilities. Although the education would be subject to the standard rate of VAT, the school meals may be exempt, if they meet the conditions.

[Dr Luke Evans]

I am grateful for the Minister’s clarification on that point; I think he is hitting towards it. The school itself has everything grouped into one fee, which includes the transport, schooling and food. Its contention, therefore, is that it will have to break that all out, which means it will have to deal with all the accounting issues on top of this. It is just another burden to think about. I wonder whether the Treasury has thought about that and whether there will be further guidance—there is literally just one line in a piece of written guidance put out by the Treasury. Is there anywhere the school can raise this issue to work through the exact advice it needs? I appreciate that the Minister cannot give that advice directly to the school from the Dispatch Box.

[James Murray]

The way that we treat private school fees and the other charges that private schools may levy has to be consistent with the VAT principles more broadly, which is why I have tried to explain how the supply of education and the supply of other elements would interact with the VAT system more widely. I will hold back from giving specific advice about that individual school, but I would encourage it to contact HMRC to get advice about its specific registration. If the school staff read what I have just said in Hansard, I hope they will see some information that will help them to understand how to approach this issue.

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[Dr Luke Evans]

The Minister mentions first-time buyers. However, the change to stamp duty is likely to affect them, because they are now being brought into paying stamp duty. How does that help first-time buyers to realise their aspiration of getting into the housing market?

[Tulip Siddiq]

I can tell the hon. Gentleman very confidently that the thing that will help first-time buyers in this country most is building more houses. His Government absolutely failed to do that, but we will be doing it.

Returning to the Bill, we estimate that approximately half of those paying the non-resident surcharge will also pay the higher rates for additional dwellings. This means that a non-resident purchasing an additional residential property worth £300,000 now pays £23,500 as a result of the change in rates, compared with £17,500 before the change, an increase of £6,000. This compares with a UK-resident purchaser buying their first home, who pays no SDLT, and a UK-resident home mover, who currently pays £2,500. This change therefore improves the comparative advantage of UK-resident home movers and first-time buyers—as the hon. Member for Hinckley and Bosworth (Dr Evans) might be pleased to know—while ensuring that no additional barriers are faced by those coming to the UK and buying their first or only home.

Those buying an additional property before they can sell their main residence will be liable for the higher rates for additional dwellings. However, this will be refunded if the previous main residence is sold within three years of the purchase of a new main residence, or longer if there are exceptional circumstances, such as delays in cladding remuneration. This ensures that only those who are genuinely liable for higher rates will be required to pay them.

Clause 50 increases the higher rates of SDLT on the purchase of additional dwellings by individuals and dwellings by companies from three percentage points above the main residential rates of SDLT to five percentage points. This applies to transactions with an effective date on or after 30 October this year and before 1 April next year.

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[Tulip Siddiq]

I thank the right hon. Gentleman for his intervention. I am a landlord, and that is absolutely declared in my entry in the Register of Members’ Financial Interests. If I was meant to declare it for the purposes of this debate, I do apologise, but it is referenced very clearly in my entry. I would say that, as a landlord, I am very happy to pay extra tax if it is necessary to fix the foundations of our economy.

I do not agree with the right hon. Gentleman’s assessment of London. I think we are more resilient than that, especially in Camden, and I think we will be fine.

Clauses 50 and 51 will provide an advantage for first-time buyers and those moving home, and it will help to support home ownership. The OBR-certified costing estimates that increasing the higher rates for additional dwellings by 2 percentage points is expected to result in 130,000 additional transactions over the next five years by first-time buyers and others buying a primary residence. I hope that addresses some of the concerns of Conservative Members.

Clause 52 introduces special transitional rules to ensure no additional tax is payable for land transactions substantially performed before 1 April 2025. In most cases, SDLT is charged at the point of completion in the property-buying process. In some cases, however, such as where the buyer has performed their purchase by paying for the property or taking possession of it, the tax is chargeable at that earlier point. The clause in question ensures that buyers who have performed their transactions will not pay more tax as a result of the changes in rates brought about by clauses 50 and 51 when they complete their purchase.

Clause 53 increases from 15% to 17% the single rate of SDLT payable by companies and other non-natural persons when purchasing dwellings worth more than £500,000. The single rate of SDLT was introduced alongside the annual tax on enveloped dwellings to deter the practice of buying and owning UK residential properties within a corporate wrapper by increasing the rate companies pay. The single rate applies where companies and other non-natural persons buy a dwelling for more than £500,000 that they do not intend to use for a relievable purpose such as renting the property or developing it. Increasing the single rate keeps it aligned with the highest rate of tax paid on purchases of the most expensive residential properties, so that the tax remains effective as a deterrent to enveloping.

In summary, increasing the higher rates of SDLT will ensure that those looking to move house or purchase their first property have a greater advantage over second home buyers, landlords, and companies purchasing dwellings. The measure will raise more money than the manifesto policy, and go further to rebalance the housing market. The changes will raise £310 million per year by 2029-30, which will be used to support the Government’s first steps and other priorities.

[Dr Luke Evans]

rose—

[Tulip Siddiq]

I have already given way once to the hon. Gentleman.

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[James Wild]

Indeed, and representing an area with some of the most attractive coastline in the country, I certainly recognise and share those concerns. There has been warning that the measures could make that issue worse. People also need to be able to rent in those areas, and if local people who need to work where the jobs are have to move from long-term lets to short-term, that does nothing to help.

[Dr Luke Evans]

The point is valid. The Government are trying to get more properties for people to buy, but at the same time they are changing back the threshold for first-time buyers. Those first-time buyers will be stifled when they want to buy a house because they will have to pay more tax. Introducing both measures simultaneously seems to cause a rub. Does my hon. Friend agree?

[James Wild]

I do. This is just another example of the impact of the Bill. The impact assessments, such as they are, are incredibly thin and do not get into the detail of the measures and the complications that arise. They are, I would say, wholly inadequate. Under clauses 50 to 53, taxes on property purchases will, as the Minister said, go up by £310 million. Clauses 50 and 51 increase the rate for additional dwellings, such as buy-to-let and residential properties, from 3% to 5%. Nationwide estimates that that could bring extra costs of £4,000 on the purchase of a typical rental home. At least clause 52 ensures that if transactions have been substantially performed before the increases come in, no additional tax will be charged. Clause 53 amends the single rate on purchases by companies of dwellings for more than £500,000. Let us not forget that the Government have also chosen not to renew the nil-rate stamp duty threshold, which is currently £250,000 but will halve to £125,000—I do not think the Economic Secretary to the Treasury mentioned that.

As I said, experts have warned that the changes could have damaging effects on the rental market, making it less attractive to provide homes for private rent; rents could increase as a result of the limited supply. Every hon. Member will know from their constituency the huge demand for rental properties. According to Zoopla, on average around 21 people are chasing every property that is put up for rent. This tax will do nothing to encourage the supply of new, decent, rented housing.

--- Later in debate ---

[James Wild]

I do not doubt the figures. I simply note that King’s Lynn and West Norfolk borough council, which is the council for my constituency, has met the housing need target it was set. Thousands of homes are being built in and around King’s Lynn, which will be a mixture of tenures—to rent and to buy. One of the big blockers is that the Government have not yet approved schemes that the previous Government were committed to—schemes for the roads and infrastructure needed to bring that housing online. I hope that the Minister will take that up with her colleagues, because if the Government are to meet their target of building 1.5 million homes, they need councils to deliver. That means funding the infrastructure. I am grateful to the hon. Member for enabling me to make that point.

We are concerned about the increased cost of private rent and a decreasing supply of rental properties due to this latest tax increase. New clause 6 would require the Chancellor to publish an assessment of the impact of the increased stamp duty rates on the private rental sector within six months of the Bill passing into law.

[Dr Evans]

It is important to have transparency. It is not controversial to say that we need more houses—Members on both sides of the House agree—but take Leicester, where new housing targets have been reduced by 31%. We will now have an exodus of people offering rental residences. Will that not compound the problem acutely? We will not have the number of homes. The target has dropped in Leicester, but we will have more people needing to rent. The homelessness rate could go up, because people are leaving the market. The Government need to think carefully about that. The new clauses would give transparency on whether there is a problem.

[James Wild]

My hon. Friend draws attention to the unintended consequences of the stamp duty measure. I wonder how much involvement the Deputy Prime Minister and her Department had in drawing it up, or whether it was drawn up in the Treasury just to get a line into the Red Book and fill out the Government’s spending plans.

New clause 7 would require the Chancellor to publish an assessment of the impact that increased rates for additional dwellings are having on the housing market as a whole, and in particular on the demand for homes in England and Northern Ireland. Pegasus Insight has reported that nearly 20% of landlords across England and Wales sold homes in the last 12 months, significantly more than the 8% who purchased properties in that period. We see increased rents as a result. The latest figures from the Office for National Statistics show average UK private rents increasing by 8.7% in the 12 months to October. When the cost of living is high and rents are increasing, why are the Government taking steps that could make matters worse for our constituents?

On the point made by the hon. Member for St Austell and Newquay (Noah Law), clauses 50 to 53 may increase the chance of properties switching from long-term to short-term lets, which is a concern in my constituency. We need a balance of properties—some that people can rent and those that people can buy—so that people can live and work in the area where they grew up.

The Government’s stated policy objective for the stamp duty measures is to disincentivise the acquisition of buy-to-let properties and free up housing stock for main and first-time buyers, but nowhere in their impact note is the private rental sector mentioned. My right hon. Friend the Member for North West Hampshire (Kit Malthouse) asked the Minister what impact she thought the changes could have, and what modelling had been done of the effect on the rental market; I am afraid that answer came there none. Hopefully she will have had some inspiration by the time she winds up the debate and can give some answers, because the impact note does not have any information on that point. I find that surprising. Once again, that is why it is essential that we review these measures to see what the real-world impact is on the rental market. Our new clauses would enable us to do just that.

Encouraging home ownership and helping first-time buyers to get on the housing ladder is the right thing to do. However, that should not come at the expense of the private rental sector. As the shadow Chancellor, my right hon. Friend the Member for Central Devon (Mel Stride), put it in the Budget debate, activity in the housing market will be dampened and people will be discouraged from downsizing, which will put pressure on housing supply and labour mobility.

I am proud that while in government, the Conservatives helped more people get on to the housing ladder through schemes such as First Homes, shared ownership, right to buy and the lifetime individual savings account, and doubled the threshold for stamp duty. However, with only one in eight renters able to afford to purchase a home in the area where they live, renting is the only viable option for many. What is the Minister’s response to those who say that increasing stamp duty will reduce the supply of rental housing, and that rents will increase as a result?

I must briefly address the structural tax issues that the clauses create. I am grateful to the Chartered Institute of Taxation for the discussions that we have had. There is now a top residential rate of 19%, compared with a top rate of 5% for purchase of a non-residential or mixed property, so taxpayers may be incentivised to argue that the property that they are buying is non-residential or mixed-use—for example, it may have a paddock that they would use—to take advantage of the lower rate. A number of those cases have come to the first-tier tribunal and higher court. I would be grateful if the Minister addressed the risk that she sees there, and told us what HMRC has advised her and whether increased compliance costs will arise as a result of the divergence.