National Insurance Contributions (Secondary Class 1 Contributions) Bill

Nusrat Ghani Excerpts

Committee of the whole House & 3rd reading
Tuesday 17th December 2024 Commons Chamber

[Sammy Wilson]

This is a mentality—

[The Chairman of Ways and Means (Ms Nusrat Ghani)]

Order. I, too, enjoy listening to the right hon. Gentleman, but it would really help if he could continue to speak to the Bill at hand, and not make broader comments.

[Sammy Wilson]

The mentality is that with these national insurance increases we are imposing more taxes on small businesses and on all the sectors I have spoken about. I would ask the hon. Gentleman what spending decreases could have been looked at—have any productivity impositions been put on the public sector, for example? That should be the answer, rather than asking, “Who should we tax to pay for the black hole?” Instead, we should be asking how we can reduce and reprioritise the things that we do; looking at some of the things the Government do at present that they do not need to do, or that they could do better, or that they could save money on.

I listened with bemusement to the hon. Member for Dartford (Jim Dickson), who was relieved by a survey in The Guardian in which more than 50% of those surveyed were quite happy with this tax. If there are so many Guardian readers happy to pay more taxes, I am sure the Scottish National party would love them all to move to Scotland, because it might solve some of the problems they have. These are the kinds of strained arguments that we have had from Government Members.

They know the impacts the Bill will have. I am sure they are having the same conversations with their constituents as I have had with the people who have spoken to me in my constituency office—the small businesses, those in the hospitality industry, the GPs and those in the care sector and the charitable sector, who have come to me and told me the impact it will have on their organisation. I do not believe we can run away from this, despite what will happen when we vote later today.

I do not share the optimism of the right hon. Member for Beverley and Holderness (Graham Stuart) that somehow little cabals will form on the Government Benches—that they will all start whispering, and maybe 10 of them will go to see the Chief Whip, and then next week it will be 20, and then, by the time there are 50 of them going to see the Chief Whip, this will all change. I do not share that optimism. What I do hope, however, is that the predictions that have been made about the Bill will finally resonate with the Chancellor, and we will see a change in policy.

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[The Chairman]

I know that colleagues read about how we manage the Chamber, so they will know that I cannot put speaking limits on individuals contributing in Committee of the whole House. However, if the last two Members speak for around five minutes each, the Minister will have time to respond before we have to conclude business, so please be mindful of that.

[Robin Swann (South Antrim) (UUP)]

I will shorten my speech on your guidance, Ms Ghani. I encourage all Members of the House to follow the example of the hon. Member for Newcastle-under-Lyme (Adam Jogee) and sign up to the Antrim Guardian—a very good local publication from my constituency that carries good articles.

I rise to come back to the topic of the debate, employers’ national insurance contributions, because we have covered many subjects this afternoon. I support the amendments that look to alleviate the punishing implementation of, and increases to, employers’ NICs, especially for our family health service and social care providers. Unlike other speakers on the Opposition Benches who have looked to blame the Government for the increases, I do not think the Government are to blame. I think this is more about the Treasury than the whole Government.

I want to pick up on a point raised, I think, by the hon. Member for Isle of Wight East (Joe Robertson). I have a lot of respect and sympathy for the Secretary of State for Health and Social Care, the right hon. Member for Ilford North (Wes Streeting). When he announced his 10-year plan for the national health service, there were three main platforms: to move from analogue to digital, to move from sickness to prevention, and to move from hospital to community. The increases to NICs for community-based health providers will put many of those services at risk and under pressure. This is where there is a disconnect between what the Government are trying to do and what they are actually going to do and achieve. I think that was the point described by the right hon. Member for Beverley and Holderness (Graham Stuart). If we put the additional charges on our GPs, community pharmacies, opticians, domiciliary care providers and social care providers, that will come back, in a circular route, in how we fund our health service.

On the specifics for Northern Ireland, we are looking to transform and modernise a health service that has been largely underfunded and under pressure for quite a number of years, and trying to exist on single-year budgets since 2016. We are doing that by introducing multidisciplinary teams, where a general practice has a psychologist and a social worker all within its practice. General practices are asking for that to be extended across Northern Ireland, but the increase in ENICs will increase wage bills and pressures on the pharmacies and general practices that have already taken that step.

The right hon. Member for Beverley and Holderness also made a point about the introduction of social care within the health service. We already have that in Northern Ireland, and 75% of the provision is done by the private sector. One thing this House needs to address, especially those on the Labour Benches, is that when we talk about private provision, they are not organisations making massive amounts of money. In my constituency they are often family-run social care practices that look after two or three homes. Nearly all nursing and residential care homes are privately owned too.

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[Iqbal Mohamed (Dewsbury and Batley) (Ind)]

rose—

[Madam Deputy Speaker (Ms Nusrat Ghani)]

Order. May I ask the hon. Gentleman to keep his contribution to just a few minutes, so that the Minister has time to respond to all the Back Benchers?

[Iqbal Mohamed]

Everyone in my constituency, and indeed in the whole country, knows that the last Tory Government decimated public services after 14 years of austerity, mismanagement, negligence and a sole focus on the rich, at the expense and neglect of the poor working class and the public sector. I sympathise with the new Government, and I will try to provide constructive support.

I wholeheartedly welcome the Government’s announcements in the Budget of increased investment in education, the NHS, infrastructure projects and other public services, but, like many other people in the House and throughout the country, I do not agree with the approach taken to the funding of those investments. Members on both sides of the Committee have indicated today that failing to protect key sectors and services such as general practices, care homes, pharmacies, childcare providers and third sector providers may have been an oversight or a mistake on the Government’s part, but I am not so sure. On the basis of the Government’s other blanket policies on abolishing the winter fuel allowance, imposing VAT on all private schools including low-fee and charitable schools and removing business rates relief from all private schools and charities without any announcement of safeguarding or compensatory measures to protect these services and sectors, it appears to have been a deliberate, or negligent, decision.

It is clear that the Government inherited a dire state of affairs that requires huge investment, which must be paid for in a responsible way. I am sorry to say that the way that has been chosen by this new Labour Government is not the right one. Viable and progressive alternatives are available to the Government to raise finances for the necessary investment rather than inflicting the increase in national insurance contributions on the impacted bodies. Let me suggest a couple of easy measures that would support the Government’s investment. One possible solution is the imposition of a 2% wealth tax on assets over £10 million, which would raise the amount predicted to be raised by national insurance contributions; another is the closing of corporation tax loopholes that allow corporations to save billions and to offshore profits.

Finance Bill

Nusrat Ghani Excerpts

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

[The First Deputy Chairman of Ways and Means (Judith Cummins)]

I remind Members that in Committee they should not address the Chair as Madam Deputy Speaker. Please use our names when addressing the Chair. “Madam Chair”, “Chair” and “Madam Chairman” are also acceptable.

Clause 47

Removal of exemption for private school fees

Question proposed, That the clause stand part of the Bill.

[The Chairman]

With this it will be convenient to consider the following:

Clauses 48 and 49 stand part.

New clause 8—Statements on charging VAT on private school fees—

“(1) The Secretary of State must, within six months of this Act being passed, make a statement to Parliament about the removal of the exemption for private school fees introduced by section 47 of this Act, and other changes to private school fees introduced by sections 48 and 49 of this Act.

(2) The statement under subsection (1) must include details of the impact on—

(a) pupils with special educational needs and disabilities,

(b) small rural schools, and

(c) faith schools.

(3) The Secretary of State must, within 18 months of this Act being passed, make a statement about the impact of the removal of the exemption on schools that take part in the music and dance scheme.”

This new clause requires the Secretary of State to make a statement about the impact of charging VAT on private school fees.

New clause 9—Pupils with SEND without an Education Health and Care Plan: review of VAT provisions—

“(1) The Chancellor of the Exchequer must, within six months of the passing of this Act and every six months thereafter, lay before Parliament a review of the impact of the measures contained in sections 47 to 49 of this Act on pupils with special educational needs and disabilities.

(2) The review must consider in particular the impact of those measures on—

(a) children with special needs who do not have an education health and care plan (EHCP); and

(b) the number of children whose families have applied for an EHCP.”

This new clause would require the Government to produce an impact assessment of the effect of the VAT provisions in the Act on pupils who have special educational needs but do not have an Education Health and Care Plan.

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[Euan Stainbank]

I am surprised that our SNP colleagues are not here, but, again, I welcome their eventual and tepid support for this measure during the general election campaign—something that they have tried to distance themselves from.

I was proudly educated at two Falkirk state schools: Ladeside primary and Larbert high. Neither I nor the 94% of young people in the UK who are educated at state schools should ever feel like our parents or our teachers lacked aspiration for us. From my conversations with parents, pupils and teachers in Falkirk about their concerns about our state education system, I know that their overwhelming opinion is that we must now invest in our state education system as a priority.

If today’s decision is between billions of pounds going into state education annually and having £1.5 billion to £1.8 billion less for state education by maintaining a tax exemption for fee-paying institutions, I know what the people of Falkirk’s preference is. Falkirk does not need tax breaks for institutions that largely serve the wealthiest. Falkirk does need well-funded state schools.

[The Chairman of Ways and Means (Ms Nusrat Ghani)]

We come to the Liberal Democrat spokesperson.

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[Several hon. Members rose—]

[The Chairman]

No doubt the whole House will join me in congratulating the next speaker on his engagement. How lucky you are. [Hon. Members: “Hear, Hear!”]

[Dr Jeevun Sandher (Loughborough) (Lab)]

Thank you very much, Madam Chair. I thank the entire House for its well wishes.

I rise to speak of how our reforms will raise tax revenues from the wealthiest and use that money to build prosperity for all, because that is at the heart of our governing spirit.

Building prosperity for all means creating prosperity for those who cannot afford a decent life, no matter how hard they work, including non-graduates who cannot earn enough to live and the young who cannot earn enough to afford the homes they need. Today, we are proudly raising money from those who can best afford it to create good jobs and build homes across our nation, to create an affordable life for everyone.

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[Matt Rodda (Reading Central) (Lab)]

May I also extend my congratulations to my hon. Friend on this wonderful day for him and his family? He is making an excellent speech. On the specific point about housing, can my hon. Friend say a little more about his vision? [Interruption.] He was coming on to housing. Can he speak, in particular, about the needs of young families? In many medium-sized towns and cities across the country, such as Reading, which I represent, there is a need for more affordable housing, both to buy and to rent.

[The Chairman]

Order. Can we ensure that the interventions are clearly related to the debate in hand? I have no doubt that the answer will be.

[Dr Sandher]

By building the houses we need, we get the revenue from the tax changes we see today. Indeed, that is the entire point of our programme, in addition to the planning reforms that my hon. Friend the Member for Reading Central (Matt Rodda) referred to. From the tax revenue we raise from the measure we are debating and others, we will build a nation where every person has a stake in our society and a nation where working hard makes a difference.

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[Graham Stuart]

On a point of order, Madam Deputy Speaker.

[The Chairman]

I assume that this is an appropriate point of order.

[Graham Stuart]

Is this what we are supposed to be discussing this afternoon? I obviously fail to follow its relevance to VAT on private schools, which is what I thought we were discussing, but I may be mistaken.

[The Chairman]

We are discussing private schools and VAT. I do not think that is an appropriate point of order, but, Dr Sandher, there is no doubt that you will bring your contribution very close to VAT and schools. I look forward to hearing that.

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[Sarah Olney]

I trust that that means the Liberal Democrats can look to the right hon. Gentleman to support our new clause today, because the inevitable result of the legislation, if unamended, will be thousands of children with SEND forced into the state sector all at once, which will be enormously disruptive, and not just for them but for pupils already in the state sector. It will be potentially traumatic for those children, as well as being immensely difficult for the state schools to manage. New clause 9 would protect both the children and the schools affected by the impact of these measures—the children who have special educational needs but do not yet have an EHCP, as well as the children of families who have applied for one.

However, it is not just children with SEND who will be affected. The parents of many thousands of other children across the country will find that they can no longer afford to keep them in their current school, and those children will experience enormous disruption to their education as they are forced to change schools. Many will face the upheaval of being separated from their friends and a familiar environment. The Government should reflect carefully on whether the benefits of this policy that they are intent on pursuing are worth the damage caused to these children’s education and wellbeing.

The influx will not be evenly distributed. In my constituency of Richmond Park, more than 45% of children attend a fee-paying private school. In common with other parts of London, demand for state primary places is down, so younger children will be easily accommodated, but secondary schools are experiencing great pressure for places and a rise in requests for in-year admissions will be difficult to meet. There may only be a small proportion of children whose parents are no longer able to meet the fees, but a drop in headcount at private schools could see them closing because they become unviable. That means that the effect of children needing to transfer out of independent schools and into the state sector could be much greater than is currently forecast.

I want to reflect on what the shadow spokesperson, the hon. Member for North West Norfolk (James Wild), and others have said about the music and dance scheme. The Royal Ballet school at White Lodge in the middle of Richmond park in my constituency is a world-leading ballet school, and it has expressed great reservations to me about the effect of this policy, and I would very much like the Government to reflect on that.

If the survey done by The Times of private school parents earlier this year is accurate, and 25% of parents have to withdraw their children from private education due to the Government’s proposals, that could have a huge impact on children in communities such as mine across the country. The Government propose that their new tax treatment should be applied only to the provision of private schooling, but taxing some forms of education and not others will almost inevitably create loopholes.

Creative accountants will find ways of delivering education services that fall outside the VAT legislation while other education providers that the Government did not intend to tax will unwittingly find themselves caught up in it. The risks of these distortions increase if legislation is hastily framed with insufficient time for scrutiny. Between parents who cannot afford to pay their children’s fees and schools that cannot keep their doors open, the state will need to find space and resources for an influx of new students.

The Liberal Democrats are opposed to the Government’s plans to impose VAT on private school fees because we believe it is wrong to tax education. Imposing this increase in fees will have a disproportionate impact on children with SEND, which will create not just hardship for those children and their parents but enormous difficulties for the local authorities and state schools that will be required to provide alternative schooling. That is why I join the calls of my colleagues to urge the Government to back new clause 9.

[The Chairman]

We come to the final Back-Bench contribution, no doubt saving the best till last.

[Lewis Cocking (Broxbourne) (Con)]

I am a Hertfordshire county councillor, and it is that authority that will have to pick up the pieces if parents cannot afford the VAT on private schools or if private schools close. A bit like in the farming debate, I have a specific example from my constituency that tears down the Government’s argument on adding VAT to private school fees.

Turnford was a secondary school in my constituency in decline. Academic standards and behaviour were poor and the quality of teaching was inconsistent, leading to students becoming demotivated and achieving less than the national expectations. Staff suffered from low morale and there were significant recruitment challenges. The school buildings, on a poorly laid-out site, were dilapidated. But thanks to a unique partnership with Haileybury, an independent school in my constituency, the tide began to turn. In 2015 the school was relaunched as Haileybury Turnford academy, with Haileybury as the sole sponsor. A generous annual improvement grant was established worth £200,000 a year; that has gone on for about five years, so more than £1 million has gone directly into that state school in my constituency. That has enabled Turnford to recruit much-needed staff and retain high-quality specialist teachers.

Haileybury also gives additional financial support for Turnford’s SEN students and provides opportunities for a wide breadth of academic and extracurricular activities, such as supporting programmes for gifted and talented pupils. Because of that partnership between state and private schools, academic standards have been transformed. We have had new classrooms constructed, and in 2022 Haileybury Turnford was judged by Ofsted to be “good” for the first time in the school’s history.

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Question proposed, That the clause stand part of the Bill.

[The Chairman]

With this it will be convenient to consider:

Clauses 51 to 53 stand part.

New clause 6—Sections 50 and 51: impact on private rental sector—

“(1) The Chancellor of the Exchequer must, within six months of this Act being passed, publish an assessment of the impact of the changes introduced by sections 50 and 51 of this Act on the private rental sector in England and Northern Ireland.

(2) The assessment in subsection (1) must consider—

(a) the effects of the provisions of sections 50 and 51 of this Act on the cost of private rent in each region within England and in Northern Ireland,

(b) the effects of the provisions of sections 50 and 51 of this Act on the supply of private rental properties in each region within England and Northern Ireland,

(c) any other implications of the changes introduced by sections 50 and 51 of this Act.”

This new clause requires the Chancellor to review the impact increased rates of stamp duty for additional dwellings are having on the private rental sector in England and Northern Ireland.

New clause 7—Review of effects of sections 50 and 51 on housing market—

“(1) The Chancellor of the Exchequer must, within six months of this Act being passed, publish an assessment of the impact of the changes introduced by sections 50 and 51 of this Act, on the housing market in England and Northern Ireland.

(2) The assessment in subsection (1) must consider—

(a) the effects of the provisions of sections 50 and 51 of this Act on the demand for houses in each region within England and Northern Ireland, and

(b) the implications for the housing market of the provisions of sections 50 and 51 of this Act.”

This new clause requires the Chancellor to review the impact increased rates of stamp duty for additional dwellings are having on the housing market in England and Northern Ireland.

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

This is a Budget to fix the foundations of the economy and deliver change by protecting working people, fixing the NHS and rebuilding Britain. The Government are achieving this by taking difficult decisions on tax, spending and welfare to repair the public finances and increase investment in public services and the economy, to rebuild Britain and unlock long-term growth. This Finance Bill delivers on a number of the Government’s priorities for tax reform, prioritising stability for businesses making investment decisions and ensuring fairness and sustainability in the long term. We will discuss the full range of manifesto commitments delivered in this Bill throughout its passage, but today, I will talk about an area in which the Government have decided to go further than our manifesto commitment.

The clauses we are debating increase the higher rates of stamp duty land tax on purchases of additional dwellings by individuals and of dwellings by companies from three percentage points above the main residential rates of SDLT to five percentage points. These clauses also increase the single rate of SDLT payable by companies and other non-natural persons when purchasing dwellings worth more than £500,000 from 15% to 17%. They will support home ownership by ensuring that those looking to move house or purchase their first property have a greater advantage over second home buyers, landlords and companies purchasing dwellings. These changes will raise £310 million per year by 2029-30, which will be used to support the Government’s first steps and other priorities.

One of our manifesto commitments was to increase the non-resident SDLT surcharge by one percentage point. The Government have decided to go further than that commitment and increase the higher rates of SDLT, known as higher rates for additional dwellings. This will raise more money than the manifesto policy, helping to restore economic stability and address the £22 billion-worth of unfunded pressures, as well as supporting delivery of the Government’s first steps. Increasing the higher rates for additional dwellings will also go further to rebalance the housing market in favour of first-time buyers and those moving house.

Finance Bill

Nusrat Ghani Excerpts

Committee of the whole House
Tuesday 10th December 2024 Commons Chamber

[Ms Nusrat Ghani in the Chair]

[The Chairman of Ways and Means (Ms Nusrat Ghani)]

I remind Members that, in Committee, Members should not address the Chair as “Deputy Speaker.” When addressing the Chair, please use our name. “Madam Chair” or “Chair” will also suffice.

Clause 7

Main rates of CGT for gains other than carried interest gains

Question proposed, That the clause stand part of the Bill.

[The Chairman]

With this it will be convenient to consider the following:

Schedule 1.

Clauses 8 to 11 stand part.

Schedule 2.

Clauses 12 stand part.

New clause 1—Impact assessment: capital gains tax—

“The Chancellor of the Exchequer must, within six months of the passing of this Act, lay before Parliament a review of the impact of the measures contained in clauses 7 to 12 and schedules 1 and 2 of this Act, on—

(a) long-term investment;

(b) disposable income across different income deciles, and

(c) tax revenue.”

This new clause would require the Government to produce a report setting out the impact of changes to Capital Gains Tax made in this Act on investment and the disposable income of taxpayers across different income deciles.

New clause 4—Section 12: review—

“The Chancellor of the Exchequer must, within three months of this Act coming into force, publish a review of the expected impact of the measures in section 12 of this Act on—

(a) the timing of asset disposals or transactions;

(b) shifting between different assets;

(c) shifting between gains and income;

(d) tax planning;

(e) migration; and

(f) non-compliance by non-payment, misreporting or underreporting of chargeable assets, gains or income.”

New clause 5—Business asset disposal relief: review of increase in rate—

“(1) The Chancellor of the Exchequer must commission and publish an assessment of the expected impact of the provisions of section 8 on the number of Business Asset Disposal Relief claims involving the sale of a business.

(2) The assessment must compare estimates for the number of claims involving the sale of a business in the tax year 2024-25 with the number of such claims in the tax year 2025-26.

(3) The assessment must compare the impact under the provisions of section 8 with what impact could have been expected had the rate remained unchanged”.

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

Since 2010, the UK has experienced low productivity, rising debt levels and declining public services. Public sector net debt is at its highest since the early 1960s, at 98.5% of GDP. Per capita, GDP remains lower that before the covid-19 pandemic.

In July this year, the Government uncovered a challenging fiscal and spending inheritance, with a £22 billion in-year pressure in the public finances. The Office for Budget Responsibility’s review into March’s spending forecasts concluded that had the information that has since been shared by the Treasury been made available to it at the time of the March Budget, there would have been a materially higher departmental expenditure limits forecast for 2024 to 2025. This was the result of the previous Government not factoring in the impact of a series of new, challenging pressures on the public finances, not taking the difficult decisions needed to address these pressures, and instead making a series of commitments that they could not fund.

This Government are committed to fixing the foundations and delivering a decade of national renewal. To do so, we must turn the page and take a different approach. In the autumn Budget, the House will have heard the Chancellor set out the Government’s first steps to repair the public finances, by taking the tough decisions needed to address the £22 billion in-year pressures to avoid further damage to our public services, including securing £5.5 billion of savings.

We are also putting in place significant reforms to strengthen our fiscal and spending framework that will improve certainty, transparency and accountability, and ensure that the situation can never happen again. This Government are taking the tough decisions on tax, spending and welfare that are necessary to repair the public finances and restore economic and fiscal stability. Those choices are not easy, but they are transparent, they are responsible and, with such a difficult position, they will ensure that the Government can deliver on our commitments not to increase taxes on working people.

The changes to the main rates of capital gains tax in clauses 7 to 11 will help to address the gap in public finances while retaining the UK’s internationally competitive investment climate. The new rates are revenue-maximising in the current design of the tax system, generating an additional £8.9 billion over the forecast period. The UK’s headline CGT rates will remain lower than those of France, Germany and Italy, and the highest rate is still lower than it was between 2010 and 2016. The new rates will mostly affect people who earn income from selling financial assets. The Government are taking the difficult but responsible decision to ask that group to pay a little bit more tax in order to restore economic stability.

Clause 12 represents the first step in a package of reforms to the taxation of carried interest by increasing the applicable rates of capital gains tax to 32% for carried interest arising on or after 6 April 2025. The reforms will 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.

I will begin with clauses 7 to 9, concerning the capital gains tax package. CGT is charged on individuals’ annual capital gains, net of losses and allowable costs. Less than 1% of adults pay CGT per year. There are lower rates available for reliefs, including business asset disposal relief and investors’ relief. CGT has an annual exempt amount of £3,000 for individuals, which keeps people with lower levels of capital gains out of the system.

To repair the public finances and help raise the revenue required to increase funding for public services, the Government are increasing the main rates of CGT. The clauses will increase the lower main rate of CGT from 10% to 18% and increase the higher rate from 20% to 24%. Those changes affect disposables made on or after 30 October 2024. The clauses also increase the CGT rate at which business asset disposal relief and investors’ relief are charged in a phased way from 10% to 14%, effective from 6 April 2025, and from 14% to 18%, effective from 6 April 2026. Phasing in the rate increases for those CGT reliefs demonstrates the Government’s commitment to a predictable tax system.

The Government accept that for some entrepreneurs, a lower CGT rate will be factored into their plans for exiting the business, which can be a once-in-a-lifetime event. Although it is right to increase CGT rates to raise revenue, it is also fair to give business owners some time to adjust. The changes will raise £2.5 billion per year by the end of the forecast period, while ensuring the UK’s headline CGT rates remain below those of France, Germany and Italy.

Turning to clause 10, investors’ relief offers access to the lower rates of CGT on the disposal of qualifying unlisted shares. Its objective is to provide the financial incentive for individuals to invest in unlisted trading companies over the long term and help companies in accessing other forms of investment. The lifetime limit for investors’ relief was previously £10 million, compared with business asset disposable relief’s lifetime limit of £1 million. We feel that that disparity in lifetime limits is unfair towards entrepreneurs and could encourage harmful tax planning strategies. The changes made by clause 10 will reduce the lifetime limit for investors’ relief to match that of business asset disposal relief at £1 million of qualifying gains per person. Investors’ relief has received little take-up since its introduction in 2016, and so the Government expect that the measure will affect a very small number of individuals.

Turning to clause 11 and schedule 2, which introduce transitional arrangements and anti-forestalling rules, the transitional arrangements are consistent with similar rules put in place when CGT rates were charged in-year in 2010. The anti-forestalling rules draw on the approach taken when changes were made to business asset disposal relief in 2020. Transitional arrangements are needed for a small group of taxpayers in some specific circumstances. Those taxpayers will have capital gains that are ascribed to the 2024-25 tax year in general and not to any particular point in the year, and because clause 7 makes in-year changes, the Government have a legal responsibility to clarify the capital gains tax liabilities of those taxpayers. To avoid taxing those individuals retrospectively, the legislation puts in place transitional arrangements. The relevant capital gains are treated as arising in the earlier part of the year and are therefore subject to the previous rate schedule. From April 2025, there will be no need for those arrangements to remain.

I now turn to anti-forestalling rules. Some taxpayers will have tried to lock in the old rate by entering into various artificial arrangements and specific anti-forestalling rules are needed to prevent abuse. The anti-forestalling rules target disposals entered into before 30 October 2024 but completed after that date for the main rate change and the investors’ relief lifetime limit reduction. They also target disposals entered into on or after 30 October 2024 for the phased rate changes applying to business asset disposal relief and investors’ relief. The provisions ensure that such people can still access the previous rates and the previous investors’ relief lifetime limit, but only where the disposal has not been artificially structured for the purpose of securing a tax advantage.

I now turn to clause 12, which concerns CGT on carried interest gains. Carried interest is a form of performance-related reward that is received by a small number of individuals who work as fund managers and, unlike other such rewards, carried interest can, where certain conditions are met, be subject to capital gains tax. Hon. Members will have heard the Chancellor announce at the Budget that the Government will reform the way carried interest is taxed, ensuring that that is fairer and in line with the economic characteristics of the reward. From 6 April 2026, a revised regime will tax all carried interest within the income tax framework with a 72.5% multiplier applied to the amount of qualifying carried interest that is brought into charge. The Government are also consulting on potential new conditions of access to the regime. Legislation to implement that revised regime will be included in a future finance Bill.

In advance of the implementation of the revised regime, the Government are acting now to increase the rates of capital gains tax that apply to carried interest. Clause 12 therefore increases the rates of capital gains tax for carried interest arising on or after 6 April 2025 from 18% and 28% to 32%, and from that date, the single CGT rate will apply to all relevant carried interest, subject to the same conditions as currently.

To conclude, the increases to the main rates of CGT to 18% and 24% represent a balanced and responsible approach to revenue raising, which will help the Government to improve the UK’s public finances and services while remaining competitive for investment. The clauses phase in the rate increase for business asset disposal relief over 18 months to mitigate impacts where the previous level of relief was factored into anyone’s plans to exit their business in the short term. That underlines the Government’s commitment to supporting entrepreneurs and recognising the vital role that small businesses play in our economy. In addition, the move to a single higher rate of CGT on carried interest at 32% demonstrates the Government’s commitment to decisive action now, while we rightly take the time to undertake technical consultation on the revised regime.

[Madam Deputy Speaker (Ms Nusrat Ghani)]

Just before I call the shadow Minister, I remind Members that, in Committee, I am Madam Chair or Madam Chairman.

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

Thank you very much, Madam Chair. It is always a pleasure to see you in Committee and to serve under your chairmanship.

On behalf of the Opposition, I rise to speak to new clauses 4 and 5, which stand in the name of my right hon. Friend, the shadow Chancellor. Before I do so, let me set the scene for clauses 7 to 12.

When announcing these changes in her Budget, the Chancellor said:

“We need to drive growth, promote entrepreneurship and support wealth creation”.—[Official Report, 30 October 2024; Vol. 755, c. 818.]

She said something similar to the BBC in 2023:

“We want Britain to be the best place to start and grow a business”

and that was why, she said

“I don’t have any plans to increase capital gains tax.”

This Bill corrects the record. Labour wants to increase capital gains tax, so clearly it does not have any plans for Britain to be the best place in which to start and grow a business. Is it any wonder that business confidence is now at the lowest level we have seen since the pandemic?

Clause 7 increases the main rates of capital gains tax from 10% and 20% to 18% and 24% respectively, with schedule 1 making consequential changes to reflect that these rates are now equal to those on residential property. The Office for Budget Responsibility rates the costings on this policy as “highly uncertain”. It says that

“these costings are among the most uncertain in the policy package, reflecting the range of potential behavioural responses.”

This Government are far too quick to ask others to explain how they would pay for Labour’s policies, when they are clearly failing to explain convincingly how their own policies would pay for themselves.

I wish to take this opportunity to highlight an issue raised with me by the Chartered Institute of Taxation. First, let me place on record my thanks to the organisation for its invaluable support. It has been informed by His Majesty’s Revenue and Customs that it is too late to change the format of the relevant 2024-25 tax return pages to accommodate this in-year change. I would therefore be very grateful if the Minister could provide the following assurances to HMRC: first, that it will be properly equipped to implement this measure; secondly, that the changes will be published as widely as possible; and, thirdly, that an appropriate level of understanding will be shown to taxpayers contending with these complications.

Clauses 8 and 9 increase the rates for gains that qualify for business asset disposal relief and investors’ relief. From 6 April 2025, the 10% rate will increase to 14%. From 6 April 2026, it will rise again to 18%. As the Chartered Institute of Taxation has highlighted, because the increase to the main rates of capital gains tax is effective immediately, this leaves a window where people selling their business can save up to 14% in capital gains tax until April 2025. In other words, the tax changes in this Bill do not cultivate a start-up Britain; they incentivise British business owners to sell up and sell up soon. This could have been avoided—along with the administrative complications that I have already outlined—had measures in clause 7 been implemented from the start of the new financial year.

Will the Minister explain why the timings of these provisions appear to be so untidy, and, for that matter, how exactly they drive growth, promote entrepreneurship and support wealth creation? I simply say that if hon. Members are not satisfied with the Minister’s explanation, I encourage them to vote for new clause 5, which would require a proper assessment of the impact of this perverse incentive.

Clause 10 reduces the lifetime limit for investors’ relief from £10 million to £1 million, while clause 11 and schedule 2 bring in transitional rules and anti-forestalling provisions. On those anti-forestalling provisions, the Chartered Institute of Taxation notes that the anti-avoidance measures risk being “unfairly retrospective”, capturing those who entered into commercial contracts in good faith before the Budget, on the grounds that they do not satisfy the stringent requirement put down by the Treasury to be “wholly commercial”. Will the Minister tell the House why the wording is so tight? Widespread concern over being hit with “unfairly retrospective” taxation would have a chilling effect on parts of the economy. It would exacerbate uncertainty among those who already feel that they have been blindsided by this Government.

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[Yuan Yang (Earley and Woodley) (Lab)]

It is a pleasure to serve under your chairship, Madam Chair. I will talk mostly about new clause 5 on capital gains tax, but, given the remarks by the shadow Minister, I will make a few points on the broader matter and on incentives to start a new business.

My constituency of Earley and Woodley in the Thames Valley is one of the hottest destinations for business investment and for new start-ups in the tech and pharmaceutical sectors. I have met a number of those inspiring entrepreneurs to talk about their start of the business journey. As is widely known, when entrepreneurs start passionately with a project, they are thinking not about the disposal and taxation regime at the end of their journey, but about the infrastructure and the support that they will have around them that brings their idea to fruition. For the tech and pharmaceutical entrepreneurs in Earley and Woodley, that is about a transport infrastructure, a skills base, and schools, colleges and universities in the area that can produce the kinds of graduates who will then staff their company. It is about a regime that is welcoming to entrepreneurship and is welcoming for people to live in and to prosper in. For all those reasons, I very much support our Budget and the Budget that brings more investment to infrastructure across the UK.

First, I welcome the measures on capital gains tax introduced in new clause 5. Let me remind Conservative Members that it was Chancellor Nigel Lawson who, in a much more dramatic measure than that proposed today, equalised the rate of capital gains tax with income tax in 1988. That equalisation was proposed because of tax avoidance. To many people listening to the debate, capital gains tax will not be familiar because, like me, their main means of taxation will be income tax and they will not have come into contact with CGT.

For the purposes of understanding, let me illustrate what I mean by “tax avoidance”. The issue was raised with me by a retired consultant when I was canvassing in the summer in the north of my constituency. When I knocked on his door, he said, “What are you going to do about capital gains tax? I want you to ensure that this doesn’t happen any more.” He then proceeded to illustrate the means by which he had paid less income tax than he otherwise would have done through the capital gains tax system. It was a principled and honourable admission for him to make to his then parliamentary candidate on the doorstep.

Many of us pay income tax, and we are all familiar with the way that it is structured. Among those of us who do not receive income from payroll—that is, who do not work for a company—but have the ability to structure it as self-employed or consultancy income and funnel it into a business of our own creation, that is a channel by which many people avoid paying income tax on activities that are arguably income-like. That happens, as I said, for a minority of people in the UK. The vast majority do not have access to that route because they earn through working for other people through companies, and they are on the payroll and not able to structure their own companies. When those companies holding the—arguably—income revenues are disposed of, that is when capital gains tax comes into the picture. Of course, the rate of capital gains tax is much lower than the rate of income tax, and that is where the gap comes from that was illustrated by my retired constituent.

Madam Deputy Speaker, it is important that the tax system is efficient in raising revenues, which is what our Budget sets out. The tax system must also be principled in ensuring that the tax purposes to which we have allocated certain measures raise the right taxes and are targeted towards the kinds of activities that are meant to be taxed. All of us in the Committee would probably agree that we should pay tax through a progressive system that distinguishes between different forms of revenue-raising activities, but that allocates people fairly and proportionately to those right and relevant activities.

I am reminded of the announcements that came out during the last Government regarding the tax affairs of the former Prime Minister, the right hon. Member for Richmond and Northallerton (Rishi Sunak), who paid 23% in average tax on his £2.2 million in earnings. That was of course possible because of the relatively low rate of capital gains tax that he was paying on the vast majority of his earnings, which came through capital and not through earned income.

Again, to the vast majority of people listening to the debate, I am sure that that is a reality far outside their understanding. The vast majority of people in the UK earn income through going out to work and working hard every day. It is for those people—the working people of this country—that this Budget has been made, so that we can lift livelihoods across the country by properly funding our public services and by closing the significant in-year overspend that the previous Government made of £22 billion. Through those measures, and by ensuring the financial stability of our tax system and the economic stability of our country, we will start to raise living standards across the UK. For those reasons, I very much support the measures.

[The Chairman of Ways and Means]

As colleagues will notice, the Speaker’s Chair is vacant, so I remind Members that the Chair should be addressed as Madam Chair or Madam Chairman. I call the Liberal Democrat spokesperson.

[Daisy Cooper (St Albans) (LD)]

I commend the Government for looking at capital gains tax as a potential source of revenue to get public services back on their feet, but we Liberal Democrats believe there was a better way of doing it. Right now, capital gains tax is unfair for everyone. Most people already pay too much capital gains tax when they sell a property or a few shares because the system does not account for inflation over the time they have owned them. At the same time, a tiny number of super-wealthy individuals—the top 0.1%—are able to exploit the capital gains system as effectively one giant loophole to avoid paying income tax like everyone else.

According to the latest HMRC statistics, 12,000 multimillionaires used the loophole to pay less than half the top rate of income tax on their combined £50 billion of income. Instead of raising capital gains tax across the board, we Liberal Democrats would have liked to see the Government properly reform CGT to make it much fairer. To provide a comparison, under the Labour Government’s proposals, the main rate of capital gains tax for basic rate taxpayers is being increased from 10% to 18% and, for higher and additional rate taxpayers, from 20% to 24%. According to the Government’s own statistics, the change will raise about £2.5 billion per year by 2029 to 2030. Under the Liberal Democrat proposal, we would have separated out capital gains tax from income, raised the tax-free allowance, provided a new allowance for inflation and had three different rates of capital gains tax. That would have raised £5.2 billion, more than twice the Government’s proposals.

As colleagues will hear, key to our proposal is the reintroduction of indexation—effectively, an allowance keeping people from paying tax on gains that are purely the result of inflation. That would be fair for ordinary people selling a family home or a few shares, but it would also incentivise long-term investment by ensuring that taxpayers are not penalised due to inflation if they hold their assets for a long period of time.

To summarise, the Liberal Democrat proposals for reforming capital gains tax would be fairer and would raise twice as much. The Institute for Fiscal Studies said our proposals would move CGT in a “sensible direction”. Our new clause 1 is incredibly simple. It would require the Government to produce a report setting out the impact of the changes to capital gains tax under the Bill on investment and on the disposable income of people in different income brackets. The objective behind the new clause is to illustrate to the Government that there is a fairer way to reform capital gains tax and to encourage the Government, in the spirit of constructive opposition, to look at our proposals in future years.

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

We in the SNP and the Scottish Government believe in progressive taxation. I think that is evident from the changes we have made to income tax since those matters were devolved. We would like a more progressive influence in the changes before us, rather than simply clawing at allowances and increasing the rate. Nothing in clauses 7 to 12 is designed to make matters better in Scotland, but at least the Labour party is consistent on that.

Inheritance tax and capital gains tax are increasingly out of step with modern activity in the UK economy. As the IPPR points out, since the 1980s, household wealth in the UK has risen from three times the national income to more than seven times, yet over the same timeframe wealth taxes have not risen at all as a share of that income. Taxing unearned wealth more fairly and efficiently is a legitimate long-term ambition in a state where the economy is on life support. Taxpayers are left wondering from this Budget whether more tax rises are on the way, after a substantial lack of clarity from the Chancellor, who said a week or so ago that the Government would not come back for more tax rises, or indeed more borrowing, but has since refused to echo those rather injudicious remarks. If she does not have the confidence to stand by her own statements, it is hard to imagine the effect on business and investor confidence across the UK.

The Chancellor should have worked with economic experts, such as those at the IFS, to create a fairer and more growth-friendly capital gains tax, but instead she has been captured by the same old Treasury dogma that has served the UK so badly over recent decades. Capital gains tax raises a growing amount of revenue—about £15 billion last year—partly reflecting the increased role of wealth accumulation in the UK, but it is still less than 2% of all tax take, and although CGT is paid by about 350,000 people each year, two thirds of receipts are from just 12,000 people with an average gain of £4 million.

CGT rates vary significantly across assets, and are almost always significantly lower than income tax rates. That rate differential is unfair and creates undesirable distortions, including to what people invest in and how long they choose to work. The IFS has criticised the Chancellor for choosing simply to increase CGT rates with no effort to carry out what it describes as much-needed reform. It also describes the whole design of CGT as “flawed”, adding:

“There are steps the government could and should take to make the tax fairer and less harmful to economic growth and well-being.”

Moreover, the Centre for the Analysis of Taxation proposes further changes to CGT, including aligning capital gains tax rates with income tax rates, introducing allowances to incentivise investment, taxing the increase in an asset’s value when it is inherited, and implementing an exit tax to prevent individuals from dodging UK taxes on gains made while residing in the UK. It estimates that that package would generate £14 billion, but none of those measures is in the Bill.

The IFS says that if the Chancellor chose to raise CGT rates while leaving the flawed tax base unchanged, she would be choosing to raise some limited revenue at the expense of weakening savings and investment incentives, and of further distorting which assets people buy and how long they hold on to them. The IFS says that that would not be the decision of a Chancellor who is serious about growth. Well, what a portent that turned out to be. She did not reform CGT, and look what happened to growth: forecasts were down immediately after first contact with this inverse Midas-touch Chancellor. It is clear that, in preparing for the Budget, she could have done with a full hour or more with the IFS, but I doubt that she would have listened.

[The Chairman of Ways and Means (Ms Nusrat Ghani)]

We come to the final Back-Bench contribution, and have saved the best until last. I call Bobby Dean.

[Bobby Dean (Carshalton and Wallington) (LD)]

Before I address capital gains tax directly, I will make a few short remarks about the state of the national conversation about tax more generally, which I think is highly relevant. I note that tax is always something to be “hit by” in politics—it is violent; we are “hammered” by it—so the debate ends up focusing on who is deserving or undeserving of such punishment. As a result, few organisations are viewed as legitimate targets for taxation. Very rarely do we in politics have the bravery to talk about the virtue of paying tax—what it pays for, how it benefits us all, and why collectively contributing to schools, hospitals and physical infrastructure is sensible investment that we should be proud to make.

That is where the political conversation falls slightly out of step with the mood of the public. Believe it or not, I have had conversations about tax on the doorstep, and I mostly meet people who are proud to make that contribution. Let me be clear: this is not some special plea to talk about tax in a warmer, fuzzier way in order to improve the civility of public discourse. Nor should it be confused for advocacy of a high-tax based economy. I raise that point because our distorted public conversation means that we end up with a dysfunctional tax system that is neither efficient nor equitable. Where we are with capital gains tax is a good example of that.

Decades of wrangling over whether capital gains tax stifles entrepreneurship or is merely a ruse for the rich often results in a pretty reductive focus on rates. It seems that that happened again in the Budget, and I fear that we have missed an opportunity to make that tax better. As others have explained in putting capital gains tax into context, it is paid by around 350,000 people and raises around 2% of total tax revenue, and 12,000 people account for two thirds of that revenue. That tax does not necessarily affect a broad section of society, but it does play an important role in investment in the economy and in the overall sense of fairness in our system.

Let me start with the economy. It makes no sense to me for the Government to make changes to capital gains tax without sorting out the tax base. If we do not index capital gains for inflation, we are not really taxing the thing that we say we are taxing. We should be focused on the real gains—otherwise, we risk taxing those who simply hold on to an asset for a long time, and ultimately we end up discouraging long-term investment.

Secondly, we ought to be targeting capital gains tax at those making the larger gains—if large gains are to be had, those investments will be made anyway. Smaller gains, however—the stuff at the margins—are where investment decisions could be at risk. Raising the CGT allowance a bit would go a long way towards addressing that, as would designing better-targeted reliefs that more precisely encourage investment.

Finally, we come to capital gains tax rates, whose alignment with income tax rates is often called for. The Government have of course moved a bit on that, but a focus on rates alone means that an inherent unfairness remains. There would still be the sense that there is one rule for small businesses and another for the giants. When he appeared before the Treasury Committee, Paul Johnson of the IFS remarked on another unfairness: someone can simply leave the country for a few years and dispose of an assets overseas—somewhere like Monaco—and they are then no longer responsible for capital gains tax. That is another inherent unfairness.

Ultimately, with the proposed changes only, the system will continue to disproportionately benefit the very wealthiest. It is for that reason that I cannot support the measure. If it passes, I hope the Government will consider carefully the impact of the change in isolation, and whether further reforms are necessary in future. Our tax system needs to ensure that everybody pays their fair share, and I do not think the Government have quite got this one right yet.

[The Chairman of Ways and Means (Ms Nusrat Ghani)]

We come to the Front-Bench wind-ups. Does the shadow Minister wish to speak?

[Gareth Davies]

indicated dissent.

[The Chairman]

I call the Minister.

[Tulip Siddiq]

I thank hon. Members for their contributions to today’s debate. I will take a few moments to respond to some of the points, and will then give the Government’s views on the proposed amendments. If there are questions that I do not answer, I will write to hon. Members.

I thank my hon. Friend the Member for Dartford (Jim Dickson) for his important speech and agree with his points about much-needed reform to our tax system. I also thank my hon. Friend the Member for Earley and Woodley (Yuan Yang) for her powerful speech and wholeheartedly agree with her constituent, who seems very principled and knowledgeable.

To respond to the points made by the Conservative spokesperson, the hon. Member for Grantham and Bourne (Gareth Davies), about the revenue impacts of the carried interest measure, the OBR-certified costings demonstrate that this measure raises revenue over the scorecard period. The Budget does deliver on the Government’s manifesto commitments on tax: estimated revenues for these policies have been adjusted for final policy decisions and to account for underlying changes in the OBR’s forecast, but overall, the hon. Gentleman may be interested to know that the tax measures raise over £1 billion more than was in the manifesto.

To answer the hon. Gentleman’s question about why the changes are being made in-year, the in-year rate changes were made to protect Exchequer revenues from the impacts of forestalling. It is common practice for tax changes to take effect from the date of the Budget. As for anti-forestalling, we would not expect the anti-forestalling provisions to apply to an ordinary commercial sale of an asset where the contract was entered into prior to 30 October. Those provisions target those who enter into artificial arrangements to lock in the pre-Budget tax treatments.

The Lib Dem spokesperson, the hon. Member for St Albans (Daisy Cooper), talked about inflation indexation of CGT. Indexation previously existed when CGT rates were charged at income tax levels with a top rate of 40%. A rate schedule of 18% and 24% is significantly below those levels, so for the important reason of simplicity, indexation is not a part of the system.

New clause 1 would require the Government to present to Parliament a review of the capital gains tax package’s impacts on long-term investment, disposable income across the distribution, and tax revenue. In deciding on these changes to capital gains tax, the Government have already considered all three factors. On long-term investment, the OBR assessed the CGT package to have no measure-specific macroeconomic impact. On impacts across incomes, distributional analysis for all Budget measures combined is set out in the “Impact on households” publication. The Government do not normally publish the impacts of individual measures. Finally, the Government’s projection of the revenue raised by these CGT changes has been certified by the OBR and published in the Budget document. Every year, the Government publish the amount of CGT paid in the most recent tax year with available data, where table 3 breaks down gains by income. For those reasons, the proposed report is unnecessary, and I implore Members to reject the new clause.

New clause 4 would require the Government to publish a review within three months of the passing of this legislation covering various issues in connection with our reforms to the tax treatment of carried interest. As set out earlier, the CGT rates applicable to carried interest will increase to 32% from April 2025. This is a first step in advance of moving to a revised regime fully within the income tax framework from April 2026. The Government believe that their reforms will deliver increased fairness and place the tax rules on a more sustainable footing, while preserving our country’s position as a global fund management hub. We will also be undertaking extensive technical consultation ahead of legislating for the revised regime in a future finance Bill, which the House will of course have the opportunity to scrutinise. We therefore do not consider that new clause 4 is a necessary addition to the Bill that is before us today.

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Question proposed, That the clause stand part of the Bill.

[The Chairman]

With this it will be convenient to consider the following:

Clauses 16 to 18 stand part.

Schedule 3.

New clause 2—Report on fiscal effects: relief for investment expenditure—

“The Chancellor of the Exchequer must, within six months of the passing of this Act, lay before Parliament a report setting out the impact of the measures contained in clause 16 of this Act on tax revenue.”

This new clause would require the Government to produce a report setting out the fiscal impact of the Bill’s changes to the Energy Profits Levy investment expenditure relief.

New clause 3—Changes to energy (oil and gas) profits levy: review—

“The Chancellor of the Exchequer must, within three months of this Act coming into force, publish a review of the expected impact of the measures in sections 15 to 18 on—

(a) employment in the UK oil and gas industry;

(b) capital expenditure in the UK oil and gas industry;

(c) UK oil and gas production;

(d) UK oil and gas demand; and

(e) the Scottish economy and economic growth in Scotland.”

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[Perran Moon (Camborne and Redruth) (Lab)]

New research published in the last few days has found that fossil fuel companies reported profits of nearly $0.5 trillion during the 2022 energy crisis. By contrast, people struggled with fuel poverty and had to choose between heating and eating. One in seven households in my constituency is in fuel poverty. Does the Minister agree that the ability to extend and increase the energy profits levy is a key lever for addressing this imbalance and supporting households?

[The Chairman]

Order. That was neatly done, but interventions have to be very closely related to what we are debating here and now.

[James Murray]

I hope that my hon. Friend’s constituents will benefit from lower bills as a result of the investment that we are ensuring, by the public and private sectors, in the clean energy sources of the future.

We knew, when the Conservatives introduced the energy profits levy, that the extraordinary oil and gas profits were driven by global circumstances, including resurgent demand after covid-19, and the Russian invasion of Ukraine. Households in the UK, however, were particularly badly hit by higher oil and gas prices, as the Government at the time had failed to invest adequately in energy independence, or in measures such as home insulation. When the energy profits levy was introduced, an 80% investment allowance was also introduced, and this was later reduced to 29% when the levy rate increased from 25% to 35% in January 2023. An 80% decarbonisation investment allowance was later put in place for decarbonisation expenditure, which is money spent on the reduction of emissions from the production of oil and gas. The levy was initially set at 25%, but the previous Government increased it to 35% and extended it beyond 2025, first to 2028, and later to 2029.

As I mentioned, the Government recognise the continued role for oil and gas in the UK’s energy mix during the energy transition. We are committed to managing the transition in a way that supports jobs in existing and future industries, recognising that our offshore workers have the vital skills to unlock the clean industries of the future. I put on record my thanks to the offshore workers I met in Aberdeen in August for giving me some of their time and their views when I was there for a meeting with Offshore Energies UK and representatives of the sector. As I mentioned, it is essential that we drive both public and private investment in the transition to clean energy. Clause 15 therefore increases the energy profits levy by three percentage point—from 35% to 38%—from 1 November 2024. The clause also sets out the rules for apportioning profits for accounting periods that straddle the start date. As I have made clear, the money raised by these changes will help to support the transition to clean energy, enhancing our energy security and providing sustainable jobs for the future.

Clause 16 concerns allowances in the levy. The clause removes the 29% core investment allowance for general expenditure incurred on or after 1 November 2024, as I mentioned to the hon. Member for Bath (Wera Hobhouse). The Government have been clear about our intention to end unjustifiably generous allowances, and that is exactly what we are doing by abolishing the core investment allowance. We are bringing the level of relief for investment in the sector broadly in line with the level of capital allowances available to other companies operating across the rest of the economy through full expensing, which we have committed to maintaining. The energy profit levy’s decarbonisation allowance will be retained to support the sector in reducing emissions.

Qualifying expenditure includes money spent on electrification of production, or on reducing venting and flaring. The retention of the decarbonisation allowance reflects the Government’s commitment to facilitating cleaner home-grown energy. However, in the light of the increase to the levy, clause 16 also reduces the rate of the decarbonisation allowance to 66% in order to maintain the same cash value of the tax relief per £100 of investment.

Clause 17 extends the sunset of the levy by one year from 31 March 2029 to 31 March 2030. To provide the oil and gas industry with long-term certainty and confidence in the fiscal regime, we are retaining the levy’s price floor, the energy security investment mechanism.

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To conclude, the Government are committed to protecting billpayers by securing our future home-grown energy supply. Our plans will put us on track to deliver at least 95% clean power by 2030 and help accelerate the UK to net zero. Taken together, the changes made in clauses 15 to 18 will raise an additional £2.3 billion over the scorecard period. That funding is crucial for the investment needed in our future energy supply and to support our efforts to deliver a world-class CCUS industry in the UK. They represent a crucial investment in the future of our country. I commend the clauses to the Committee.

[The Chairman of Ways and Means (Ms Nusrat Ghani)]

I call the shadow Minister.

[Gareth Davies]

I rise to speak on behalf of the official Opposition on new clause 3, which stands in the name of the shadow Chancellor, my right hon. Friend the Member for Central Devon (Mel Stride).

Clauses 15 to 18 concern the taxation of the oil and gas industry, which meets 75% of the UK’s household and industrial energy needs, with 50% of that need being met by the North sea. The sector supports more than 200,000 high-skilled jobs in this country, and that talent, along with the rest of the supply chain, will be crucial to our domestic energy transition. These realities underscore the imperative of a smooth and efficient transition and a fiscal regime that facilitates that, not least because the timeline for investment in the oil and gas industry is so long. If the fiscal regime is not calibrated correctly, the damage may be irreversible and the costs will be significant.

To recap the measures in the Bill, clause 15 increases the rate of the energy profits levy from 35% to 38%, bringing the headline tax rate on the sector up to 78%. Clause 16 removes the 29% investment allowance and reduces the rate of the decarbonisation investment allowance to 66%, so that the cash value of that allowance remains the same. Clause 17 extends the energy profits levy to 2030, at which point the Government are committing to implementing a successor regime to respond to price shocks once the levy expires. Clause 18 and schedule 3 legislate for certain payments into decommissioning funds to be treated as decommissioning expenditure so that they can attract tax relief.

The question that many are asking is this: do these measures add up to a fiscal regime that facilitates a smooth and efficient energy transition? Not according to the Office for Budget Responsibility, which concludes that on average over the forecast period, capital expenditure will be 26% lower, oil production 6.3% lower and gas production 9.2% lower compared with our March forecasts. Those are dramatic movements. The University of Aberdeen has warned:

“A rise in the EPL and loss of investment and capital allowances may have the unintended effect of accelerating decommissioning and decelerating the energy transition as companies face an additional cost burden.”

The Government have thankfully carried out a partial U-turn, retaining the decarbonisation allowance and the 100% first-year allowance introduced by the Conservative party, but if they were persuaded of the importance of those investment allowances and that removing them would do more harm than good, why persist with removing the main 29% investment allowance? What was it about that relief compared with the others that made them want to scrap it?

The Government talk about closing loopholes—we saw how well that went with carried interest—but these measures will contribute just 1% of the new revenue raised by the Budget across this Parliament. Does the Minister really think it is worth jeopardising some 50% of our domestic gas supply for that? The measures in the Budget essentially throw a massive spanner in the works for oil and gas, and it is unclear exactly what the Government’s rationale is for doing that.

When we brought in the levy, it was to tax extraordinary profits in extraordinary times. The revenue that we raised contributed to our efforts through policies such as the energy price guarantee and the energy bills support scheme to reduce energy bills for the British people. Today, as those extraordinary circumstances subside, Labour is ratcheting up the levy. That sends a mixed message to the industry ahead of the consultation on a successor regime. The terms of that regime will supposedly be set by the need to respond to price shocks, yet the Government’s justification for these measures has nothing to do with price shocks. Instead, they are all dressed up in language about the sector making a “fair contribution”, as the Minister said, to the Energy Secretary’s environmental ideological ambitions. What is the Government’s vision for the taxation of oil and gas in this United Kingdom—temporary windfall taxes or permanent climate levies? The Bill suggests the latter. I would be grateful for the Minister specifically commenting on that when he responds.

One way in which the Minister could give an indication and provide some long-term certainty would be to confirm further the future of the energy security investment mechanism, which he mentioned. As he kindly said, we introduced the ESIM so that when prices returned to normal levels, the energy profits levy would end; no more windfall profits would mean no more windfall tax. Will he confirm that the ESIM will remain in place up to 2030? I think he said so at the Dispatch Box, but I would be grateful for his reconfirming its end date. Will he go further and confirm that it will remain in the same condition as today? Will the price floor continue to be consumer prices index-adjusted?

The Treasury and the Minister have said that the ESIM will be retained, but the industry would like further confirmation, as I have set out. Will he also write to me with the Treasury’s latest modelling of future oil and gas prices to prove that the expected revenues are not at the expense of the ESIM? That modelling will be important for us to understand and get that reassurance and certainty on the ESIM. Having been in the Treasury, I know that that modelling is continually reviewed and produced; I would be grateful if he would write to me with that.

These are not purely academic questions. Our concern is for the hundreds of thousands of people employed by the UK oil and gas industry, for the UK’s energy security and for the efficient and smooth energy transition that we all care about. The Government should be not ideological but empirical in their approach, which is why we have tabled new clause 3, which would require a review of the impact of these measures on employment, investment, production, demand and the whole Scottish economy. If the Government have already made detailed assessments on those specific areas, we would be grateful for the Minister publishing them.

On every measure, the Budget has not survived contact with reality. Growth has been downgraded, real incomes depressed and business investment reduced, with broken promises and credibility completely shattered. It is not so much that the Labour Government take a different view on economic matters; it is that they take the wrong view. Labour is the party of the tax rise that loses money. We are the party of the tax cut that raises revenue. That is why Labour Governments always leave office with more unemployment, larger debt and higher taxes. They always run out of other people’s money, and this Government are set to do so in record time.

[The Chairman of Ways and Means]

I call the Liberal Democrat spokesperson once again.

[Daisy Cooper]

At the heart of the debate is a stark injustice, understood by every man, woman and child on the streets of Great Britain. In the last few years, oil and gas giants have made eye-watering profits—in many cases, they are profits that they did not expect to make—and they have made them off the back of Putin’s brutal invasion of Ukraine and global supply chain issues that caused energy prices to soar. At the same time, people have seen their living standards drop and their energy prices soar. In too many cases, people have had to choose between heating and eating.

We Liberal Democrats were the first party to call for a tax on oil and gas windfall profits back in October 2021, but it was not until May 2022 that the previous Government eventually introduced the energy profits levy. It was half-hearted and woefully late. If it had been brought in when we had called for it, there would have been additional revenue to reduce people’s energy bills and launch an emergency home insulation scheme, reducing energy consumption, which would have been good for the climate, and reducing people’s bills, which would have been good for their pockets.

The previous Government effectively let oil and gas giants off the hook, by initially setting the energy price levy at just 25% and putting in place a massive loophole in the form of the investment allowance. That allowed the oil and gas giants to get away with vast sums at taxpayers’ expense, with the excuse of investments that they would have made anyway. In essence, the Conservatives gave them tax relief on polluting activity when they should have been doing everything to raise funds to reduce people’s bills and urgently insulate homes.

Thanks to the investment allowance—the big loophole—in 2022, Shell admitted that it had paid zero windfall tax despite making the largest global profit in its 115-year history: a profit of £31 billion. As some colleagues in the Committee have referred to, energy prices have come down since those record levels of 2022, but the oil and gas producers have still seen huge profits. In 2023, Shell saw its profit come down from £31 billion, but it still made £22.3 billion.

--- Later in debate ---

[Harriet Cross]

Exactly. There must be a balance between production and demand—I will come to demand later. There is no point reducing our domestic production while our demand stays the same, because we will only fill the gap with oil and gas from abroad, which is produced with a higher carbon intensity in poorer working environments, where overseas jobs and investment will take precedence over investment at home. It makes no sense that while we are using oil and gas—the Minister himself confirmed that we will be for a while—we do not prioritise taking it from our own North sea domestic basins.

New clause 3 also asks for a review on capital expenditure and investment in the UK. In Scotland alone, oil and gas contributed £19 billion of gross standard volume. In the UK, it contributed £27 billion. A 2022 report by Experian showed that for every £1 million of investment by the oil and gas industry, 14 jobs and £2.1 million of GVA are added. This industry is blatantly a net benefit to the UK and the Exchequer, and one in which we should encourage investment and capital expenditure, not an environment where the returns do not justify the risk of investment.

As my hon. Friend the Member for Grantham and Bourne (Gareth Davies) said, the OBR’s own figures show that capital expenditure will fall by 26%, and therefore production of oil by 6.3% and gas by 9.2%, because of these changes. We must ask, can the UK afford this? Maybe those were the parameters that the Exchequer and the Treasury are looking for, if they see them as allowable. But if that is the case, what assessment has been made of the impact on the economy and jobs across the UK?

The OEUK has put the projected drop in production down to a rapid decline due to underinvestment over the decade. Under new clause 3, we can assess the impact of the changes to the EPL and head this off to begin with because, as I said, it is important that while we have demand, we have production. It has been confirmed that we will need oil and gas in the UK for years to come, but through the changes to the EPL in the Bill, in particular clauses 15 and 16, which increase the EPL by 3% and remove the investment allowances, the Government are choosing to make our homegrown domestic energy sector so uncompetitive that current investment falls away and future investment is no longer on the cards.

We cannot afford to lose investment because, as I said, it will drive the transition. It is so important that it is protected now, to help us bring the transition forward quickly and efficiently into the future. Clauses 15 to 18 were introduced without adequate consultation on the impact assessment. New clause 3 simply asks for proper scrutiny of their impact. If the Government are confident in their approach, why resist a responsible request for transparency? My Gordon and Buchan constituents, and people in Scotland working in the oil and gas sector and across the UK, deserve to understand how these changes will impact their livelihoods.

[Madam Deputy Speaker]

Before I call Dave Doogan, I remind Members that if they wish to speak, they need to be bobbing consistently—I cannot read people’s minds to put together a speaking list.

[Dave Doogan]

The changes to the EPL, particularly those set out in clauses 15 and 17, will have a hugely damaging effect on jobs and the Scottish economy. This is also an inauspicious day for Scotland in this so-called United Kingdom as Norway’s sovereign wealth fund records a €1.7 trillion breakthrough, while Scotland’s oil wealth has been squandered by successive Westminster Governments. Norway gets financial security in perpetuity; Scotland gets Labour’s bedroom tax, cuts to winter fuel payments for our elderly and the highest energy prices in the G20—that is the Union dividend wrapped up and served on a plate right there. More than £400 billion has flowed from our waters to the Treasury over the years, with very little coming back in the other direction. Rather than reverse the train, the Labour Government have, with this increase to the EPL, chosen to accelerate it.

The cumulative effect of clauses 15 to 18 will sound the death knell for Scotland’s hydrocarbon production in advance, crucially, of the transition—economically illiterate, fiscally incompetent and with industrial suicide as the result. A windfall tax is supposed to be a tax on extraordinary profits, yet the extraordinarily high global oil and gas prices that preceded the introduction of the tax have long since abated. Through these changes, the Labour party jeopardises investment in Scotland’s offshore energies and risks the future of our skilled workforce and our ability to hit net zero while employing those workers. Analysis from Offshore Energies UK shows that the increase and extension of the EPL risks costing the economy £13 billion and putting 35,000 jobs at risk.

The analysis from OEUK also shows a collapse in viable capital investment offshore under these changes from £14.1 billion to £2.3 billion in the period ’25-29. It is increasingly apparent that the Government do not really understand how investment horizons work offshore. They are not on a month-to-month basis; they take years to work up. This loss of economic value impacts on not only the core sector, but domestic supply chain companies, many of whom exist in my constituency, which have an essential role to play in the just transition.

The Labour party promised that there would be no cliff edge, yet it has concocted one for the 35,000 workers whose jobs this EPL change puts at risk. Labour had claimed that these changes would keep the UK in line with Norway, but the regime after Labour’s changes cannot be compared to that of Norway, which allows companies a maximum £78 of relief per £100 expenditure —in the UK, this relief would be £46.25. After these past couple of weeks, I am given to wondering if those on the Treasury Front Bench can actually count.

Changes to the EPL will hinder the just transition. The Government argue that the reduction in the rate of the decarbonisation investment allowance to 66% will maintain the overall cumulative value of relief for investment expenditure following the rate increase, reflecting the fact that this relief will increase in value against a higher levy rate. However, the policy still reflects a political choice by Labour to deprioritise investment in decarbonisation. Rather than allowing more valuable decarbonisation relief as the solitary positive by-product of its tax hike, Labour has striven to ensure that there is absolutely no silver lining to this fiscal attack cloud on Scotland’s energy industry.

--- Later in debate ---

[Wera Hobhouse]

Indeed. I could not agree more and I thank the hon. Gentleman for clarifying the figures. That is why something needed to change and something needed to give. I repeat that I hope Government Members can support our new clause 2, because it matters. It will lay open what has been squandered and what difference we could make if we close the loophole.

[The Chairman of Ways and Means]

I call Yuan Yang.

[Yuan Yang]

Thank you, Ms Ghani. I apologise for my inconsistent bobbing. I am still learning when to stand up, but what has gone up and stayed up are the record profits of the oil and gas majors. I will start my speech on that topic, and will go on to speak about where those profits have come from and, finally, what the proceeds of our EPL will go to fund.

First, on those record profits, I think all Members of the Committee agree that the record profits in the oil and gas industry in 2022 were excessive. In 2023, however, the profits for Shell, the largest oil and gas major in Europe, barely decreased from the previous year. In fact, if we take its profits from the first half of this year, Shell looks likely to eclipse even those of last year. In the first half of this year, Shell has had profits of $14 billion. Half of that went to share buybacks, which do nothing to fund the decarbonisation that is so necessary to secure the future of energy production here in the UK and around the world. Those record profits, much of which have been handed back to shareholders, are going in the opposite direction of what ordinary families and working people need. Rather than reinvest in the transitions of the future, I would argue that the Conservative party is looking at the industries of the past and clinging on to a past that is quickly fading from reality.

Secondly, let us look at where those profits have come from. The House of Commons Library states that generally lower wholesale prices in the last year led suppliers to start offering fixed tariffs, as of summer 2023. However, they have been far more cautious in pricing those tariffs, with prices close to the level of the energy cap. Any return to competition in the market is expected to be slow. That reflects the state of affairs we face today. The wholesale prices of oil and gas—as an example, look at the price of Brent crude in the market today—are back below the levels they were pre the Russian invasion of Ukraine, yet the retail prices facing ordinary working families in the UK are still far above those levels. What happens in the middle? The profits are being taken by the oil and gas companies. Largely, they are not being reinvested in the productive sectors of the future, but being paid back to shareholders.

In any market where the return of competition is expected to be slow, there is a role for the Government to regulate the fair share of proceeds—who gets the surplus from that market. Here I pause and say that when we look across the Committee to who is arguing for the interests of working people and who is arguing for the interests of the oil and gas profit-making giants, the political divisions are clear. There are schools in my constituency that are fundraising to insulate themselves. The Maiden Erlegh school where I live is asking its parent association to provide better wooden frames for its windows, because they leak in winter. That is the public estate that our Government have been elected to fix and repair. We will set about doing so with the profits from the levies set out in the Bill we are discussing today.

Farming and Inheritance Tax

Nusrat Ghani Excerpts

Wednesday 4th December 2024 Commons Chamber

[Alicia Kearns (Rutland and Stamford) (Con)]

Given that he appears to be leading for the Government on this issue, rather than the Secretary of State for Environment, Food and Rural Affairs, can the Minister tell me how many farmers he has met personally over the last three months? He seems very confident about how this will affect them. The exact number, please, of the farmers you have met personally over that period.

[Madam Deputy Speaker (Ms Nusrat Ghani)]

Order. The hon. Lady should ask how many farmers the Minister has met, rather than how many I have met.

[James Murray]

I have met members of the National Farmers Union, representing the farming industry, a number of times since the Budget for detailed discussions. That has helped us to understand the impact that this policy will have and to ask for their support in communicating how it will work.

--- Later in debate ---

[Laura Kyrke-Smith (Aylesbury) (Lab)]

Farmers in my constituency tell me how much they are struggling to see a GP and to get public transport—the buses just are not there. The rural economy has been ruined by 14 years of Conservative Government. Can the Minister reassure us that the necessary actions that we are taking in the Budget will get our public services working again for our farming and rural communities?

[Madam Deputy Speaker (Ms Nusrat Ghani)]

Order. Interventions should relate to the debate in hand.

[James Murray]

I will not try your patience, Madam Deputy Speaker, but I feel that my hon. Friend’s intervention relates to the debate in hand, as we have had to take a tough decision on taxation policy in order to fund our public services. Those public services are, of course, enjoyed by people across the country, including farmers and those in rural communities.

--- Later in debate ---

[James Murray]

My hon. Friend makes a powerful point about the record of the Opposition parties. In our Budget, we made sure to protect the payslips of working people by not increasing income tax, employee national insurance or VAT.

Our approach to reform strikes the right balance between providing significant tax relief for family farms and fixing the public finances in a fair way. As such, I commend the Government’s amendment to the motion before us today.

[Madam Deputy Speaker]

I call the Liberal Democrat spokesperson.

--- Later in debate ---

[Several hon. Members rose—]

[Madam Deputy Speaker (Ms Nusrat Ghani)]

This debate is already oversubscribed. To point out a simple fact, if you were not here for the shadow Minister’s opening speech, you will not be called. That is basic etiquette.

--- Later in debate ---

[Several hon. Members rose—]

[Madam Deputy Speaker (Ms Nusrat Ghani)]

At some point, speaking limits will be introduced, so please think about editing your speeches. Before then, I call Andrew Pakes.

--- Later in debate ---

[Several hon. Members rose—]

[Madam Deputy Speaker (Ms Nusrat Ghani)]

After the next contribution I will impose a time limit of five minutes on speeches. I call the Chair of the Environment, Food and Rural Affairs Committee.

--- Later in debate ---

[Mr Carmichael]

“Working people” hardly does justice to farmers. Some of my young constituents told me they were working for returns of about £6 an hour. There is a reason I chose not to become a farmer at 16 and why I thought law was a more attractive career opportunity to pursue, but I bow to no one in my admiration for those who make that choice.

Of course, there is the question of those who have made their estate planning decisions on the basis of APR being available. Others have pointed to that, but it is absolutely critical, and it goes beyond estate planning. I wonder how many farmers over the years decided in a divorce settlement to take the farm as their part of the capital, because they have a familial and emotional connection to the land, and are now finding that what looked like an equitable settlement a few years ago risks being much more inequitable.

The particular opportunity I fear we have missed is that in relation to tenant farmers. The Tenant Farmers Association came up with an excellent proposal, which would reward landlords who grant leases in excess of 10 years with exemption from inheritance tax liability. That would be good for the very people who everybody on both sides of the House says they want to help: the small family farmers. There are multiple reasons why people might buy up agricultural land. I do not know anybody who takes an agricultural tenancy thinking that it will make them a member of the super-rich as a result.

The idea that is being mooted of a clawback—something on which we could see a bit of a sensible discussion and a consensus between the Front Benches—or the idea of a suspended inheritance tax liability which would crystallise only at the point of the land sale after the death of the owner, would both work to keep land in active food production. The irony of the way in which the Government have structured the measure is that, by allowing a 50% relief on farmland above £1 million, the purchase of agricultural land will probably remain an attractive proposition for the super-rich.

We have reached a point in the debate where we need to broaden it out beyond just inheritance tax, and look at the wider question of farming finance and ask ourselves how we can build a consensus that puts farming and food production at the heart of the countryside, where it truly belongs.

[Madam Deputy Speaker (Ms Nusrat Ghani)]

Now, with a speaking limit of five minutes, I call Matt Bishop.

--- Later in debate ---

[Markus Campbell-Savours (Penrith and Solway) (Lab)]

I must admit that, as a new Member and a novice when it comes to the fine details of parliamentary procedure, I am surprised that we are debating this issue in this way today. As the Opposition know, the agricultural property relief measures announced in the Budget were not included in the Budget vote last month. They also know that the measures will be included in a future Finance Bill alongside other measures that will be subject to the technical consultation in the new year. This decision is simply not being made today, despite the disingenuous social media posts that imply otherwise.

This detail matters to me, because I have spent the last few weeks speaking to farmers in Penrith and Solway to try to understand the full impact of the inheritance tax proposals, knowing that I have months left to engage with DEFRA and the Treasury and to seek important amendments. Let me be clear: if today was the real vote, I would vote against the Government’s plans. I am no rebel—I am a moderate—but during the election, I read what I thought were assurances from my party that we had no plans to introduce changes to APR. On that basis, I reassured farmers in my constituency that we would not, and now I simply am not prepared to break my word. I am told that there is no Labour MP in the country with as many farms as I have in Penrith and Solway, and I hope my colleagues will understand my feelings on this.

Today, however, we are debating a frankly irrelevant motion from the Conservatives. The motion fails to acknowledge how they failed to deliver for my farmers, how they failed to deliver on trade deals after Brexit, and how they set budgets for new rural payment schemes, but could not make the schemes accessible. They made manifesto commitments for the public sector to buy British that never materialised, and they failed to spend flood prevention money that is desperately needed by my farmers on the Solway plain. They failed to deliver reforms of inheritance tax rules that farmers know were being abused by non-farmers at their expense. I simply will not walk into a Lobby with people who talk a good game on farming but do not deliver. Their motion starts with the words, “That this House regrets”, yet 14 years of failure do not even get a whisper.

[Madam Deputy Speaker (Ms Nusrat Ghani)]

I listened to the Member’s speech very closely. Paragraph 20.13 of “Erskine May” states:

“Formerly, the House strictly observed a rule against anticipation”.

That was designed to restrict debate on a subject to the type of proceedings deemed to be the most effective. As the word “formerly” suggests, the rule is no longer strictly observed and has not been for many years. The principal provision in the Budget relating to agricultural property relief is not contained in the Finance Bill currently before the House, so the question of anticipation does not arise. In any case, I am firmly of the view that any absolute rule should not prevent Members, whether acting individually or as parties, from holding the Government to account. I hope that that satisfies the Member; it is not a point for him to respond to right now.

--- Later in debate ---

[Esther McVey]

It would be good if Members listened to what I said. I said it is not too late for Labour to reverse this policy; even their own tax advisers are saying, on closer inspection, it needs to be reversed. That is what I am asking those on the Government Benches to do.

We have heard today that farmers are asset-rich, but in reality they are cash poor, and that is the crux of the matter before us today. In the time I have left, I will mention a couple of farmers from my constituency. A seventh-generation farmer told me she was hoping to pass her farm on to the eighth generation, but that now does not seem possible because if they have to sell a proportion of the land, which they will, that will make the whole farm is unviable.

Another farmer of mine, Richard Shepherd, a few years ago built a state-of-the-art cow cubicle shed for their dairy herd, a piece of modern technology he believed would prepare the farm for the challenges of the 21st century, investing in methods to produce high-quality, affordable and nutritious food—the type of innovation this country will come to rely on for food security in the future. However, now, with this change from the Labour Government, he will owe between £600,000 and over £1 million in inheritance tax. He has said that, “Like any other business, we need confidence to invest in our farms. That’s what we wanted to do: we wanted to grow our farm, invest in it, and this will destroy this.”

Richard Barnett, an accountant who works with many farmers in my constituency, has warned of two immediate consequences of these proposed changes. First, there will be an increase in the number of individuals seeking to acquire farmland up to £1 million to mitigate inheritance tax, resulting in a reduction in the amount of tax that the Treasury can expect to generate from this policy, as well as an increase in land prices. Secondly, he expects a consequence of these changes to be that the financial industry will enter the land market with individuals investing up to £1 million in farmland, acquiring it and then we will see farmland being lost—

[Madam Deputy Speaker (Ms Nusrat Ghani)]

Order. I call Callum Anderson.

National Insurance Contributions (Secondary Class 1 Contributions) Bill

Nusrat Ghani Excerpts

2nd reading
Tuesday 3rd December 2024 Commons Chamber

[Several hon. Members rose—]

[Madam Deputy Speaker (Ms Nusrat Ghani)]

I have just calculated how to get everybody in before we run out of time, and I will have to drop the time limit to four minutes.

--- Later in debate ---

[Dan Tomlinson]

I will give way.

[Madam Deputy Speaker (Ms Nusrat Ghani)]

Order. The hon. Gentleman has already taken two interventions, and the clock will now continue to run for every subsequent intervention that he takes, just in case he was not aware of that and wants to take this intervention from Mr Hinds.

[Dan Tomlinson]

Maybe I will take further interventions when I speak in tomorrow’s debate, Madam Deputy Speaker, because I know that many Members still wish to speak.

In my final 13 seconds, let me conclude by saying that the risk for the Conservative party is that it forgets the importance of managing the public finances, which gives us the economic stability from which growth can come. By voting against the Government, Conservative Members will make that more difficult, and will signal that they do not wish to have economic stability and growth.

--- Later in debate ---

[Graham Leadbitter (Moray West, Nairn and Strathspey) (SNP)]

Government Members have talked about difficult choices. Not taking away the winter fuel payment from people, or voting to remove the two-child cap, might also have been difficult choices, but instead they have been easy targets. This Bill adds to those easy targets.

The Bill, presented under the guise of fiscal responsibility, is a thinly veiled austerity measure that will disproportionately burden Scotland and undermine our ability to deliver vital services to our citizens. The increase in employer national insurance contributions is touted by the Government as a necessary step to bolster public finances. However, closer examination reveals the stark reality: the increase will lead to a significant shortfall in Scotland’s public sector funding. We will be left grappling with the fact that the UK Government undervalued the cost of the measure by at least £200 million.

Scottish Government figures, corroborated by independent analysis from reputable institutions such as the Fraser of Allander Institute, paint a grim picture. The national insurance hike will cost Scotland more than £500 million, including a staggering £191 million burden on our already stretched NHS. That figure rises to an alarming £750 million when we factor in indirect employees in sectors such as childcare, GP practices and social care—sectors vital to the fabric of our society.

In Moray West, Nairn and Strathspey, a local firm with a number of care homes across the north of Scotland faces an £800,000 bill. It provides vital services to the community. To give another example, a local dentist has said that the increased cost of employment as a result of the Bill may force them to go private to recoup those costs. Finally, the Bill is a double whammy for GP practices. They face the national insurance hit, but by dint of being designated a public service, are not eligible for employment allowance.

The UK Government’s paltry offer of £300 million in Barnett consequentials is simply not enough to bridge the gap, and it fails to account for Scotland’s proportionally larger public sector, which employs 22% of the workforce, compared with 17% in the UK as a whole. Among other reasons, that is because in Scotland, we already have a publicly owned and managed rail service, and a publicly owned and managed water service. The funding disparity is a clear indication that the UK Government have given scant consideration to the unique needs and circumstances of Scotland. That includes the disregard demonstrated in the winter fuel payment debacle, which exposes a pattern of neglect, regardless of which party occupies the Government Benches. It is exactly this pattern of neglect and lack of understanding of Scotland by successive UK Governments that strengthens the case for Scottish independence, and for our ability to take decisions for ourselves, like every other normal country, on the delivery of public services and taxation that impacts us.

The impact of the Bill goes far beyond mere budgetary concerns. It will have a ripple effect across our economy, harming businesses, stifling growth and ultimately hurting the very workers it purports to protect. The Office for Budget Responsibility has cautioned that the increase will likely lead to lower wages and higher prices; effectively, the burden will be passed on to consumers, and the purchasing power of hard-working families will be eroded. We urge the UK Government to reconsider this damaging Bill, to fully fund the cost of this tax hike to public services in Scotland, and to engage in a meaningful dialogue with the Scottish Government, so that Scotland’s interests are protected.

[Madam Deputy Speaker (Ms Nusrat Ghani)]

We have two remaining Back-Bench contributions. Colleagues who have contributed to the debate should consider making their way back to the Chamber before the wind-ups.

--- Later in debate ---

[Liz Jarvis (Eastleigh) (LD)]

I am grateful for the opportunity to contribute to this important debate. I have previously raised in the Chamber the impact that increased employer national insurance contributions will have on GPs, dentists, pharmacies and care providers in my constituency of Eastleigh. I have also been contacted by many owners of small businesses who are hugely concerned about the impact that changes to employer national insurance contributions will have on their businesses. That includes the early years sector, which plays a crucial role in supporting working families and the wider economy. Providers who operate on tight margins and with a limited ability to adjust income face unique challenges. For a sector that is already under immense financial pressure, this added burden feels short-sighted and risks undermining the stability of a service that families rely on so heavily.

Crestwood pre-school in my constituency serves local families by providing care and education for children aged two to five. As a charity-run pre-school, it is already stretched to its limits, despite huge fundraising efforts. Clare, the manager of Crestwood, wrote to me explaining how the increase in employer national insurance contributions will add tens of thousands of pounds to its annual costs. Those are funds that it simply does not have.

I have also heard from Forest Footsteps Childcare in Chandler’s Ford, another early years provider in my constituency. Erin, who opened the centre in 2022, is worried about how she will manage the extra costs. She calculated that the new national insurance plans for employers’ contributions along with the rise in the national minimum wage will cost her approximately £13,000 a year more. While she is showing remarkable resilience, she told me that some providers have been less fortunate and already closed their doors.

The YMCA Eastleigh nursery and community centre has also shared its concerns. It told me that the combined impact of these changes will cost the nursery and community centre an extra £95,000 a year. This is a problem being acutely felt across the whole sector.

These stories are not unique. Across the country, nurseries, pre-schools and childminders are warning that rising employer national insurance contributions coupled with inadequate Government funding will lead to higher fees for parents, reductions in staff pay and closures in those essential early years settings, which would not only harm working families but risk deepening the staffing crisis in the sector. What reassurance can the Minister give early years and childcare providers in Eastleigh and across the country that they will not be adversely affected?

Raising employer national insurance is a tax on jobs that will hurt small businesses and essential services. The Government must reconsider their approach. The early years sector, primary care and small businesses are not staffed by those with the broadest shoulders. This weekend we have Small Business Saturday, a chance to celebrate the incredible work of small businesses, who do so much for our communities. They need our support. The Government must think again and support working families. They must rethink this unhelpful policy.

[Madam Deputy Speaker (Ms Nusrat Ghani)]

I call the shadow Minister.

Finance Bill

Nusrat Ghani Excerpts

2nd reading
Wednesday 27th November 2024 Commons Chamber

[James Murray]

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

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

[Madam Deputy Speaker (Ms Nusrat Ghani)]

I call the shadow Chancellor.

--- Later in debate ---

[Torsten Bell (Swansea West) (Lab)]

I wish to reflect on the tone of the shadow Minister’s remarks. Looking at chart 4.5 in the OBR’s document, I can see a big rise in the tax to GDP ratio, but from the right hon. Gentleman’s indignant tone, one would think that there had never been a tax rise under the previous Government. What the chart shows is a significantly larger rise in the tax to GDP ratio, because of the decisions taken by the previous Government, so is it not the case that the right hon. Gentleman’s tone does not reflect the facts of the decisions he took?

[Madam Deputy Speaker (Ms Nusrat Ghani)]

Order. Before the shadow Minister responds, may I caution him against using the word “deceit” in the Chamber? No doubt he will now want to respond to the intervention.

[Mel Stride]

Madam Deputy Speaker, I will of course be guided by you on that matter. On the hon. Gentleman’s point, there is no doubt that, as we went into the last general election, the analysis of the manifestos of the three major parties showed that Labour’s manifesto would have by far the greatest increase on the tax burden. What Labour has done is to break its manifesto and go still further to take us, as the OBR has said, to what will be the highest tax burden in the history of our country. It is as simple as that.

--- Later in debate ---

[Madam Deputy Speaker (Ms Nusrat Ghani)]

Order. The hon. Member for Swansea West (Torsten Bell) has twice used the word “you” when heckling. I will not let him off in the future.

[Mel Stride]

I take it as a familiar mark of respect from the hon. Gentleman.

The fact of the matter is that the ONS’s figures for the third quarter of this year show growth of 0.1%. That is one seventh of what has been achieved in the United States. In September, the third month of the quarter, there was negative growth. The reason for that is very clear. When this Government came to office, the first thing that they did was talk down the economy, and talk about black holes and what a terrible mess everything was in, as cover for what they intended to do all along. That had an impact on purchasing managers’ index surveys. We can see the slump in business confidence in the data, and the Government are now reaping the whirlwind. We have now had a Budget that will do even more damage to growth.

What will happen to inflation? Let us go back to our friends at the OBR. In every single year of its forecast, inflation is higher than in every single year of the forecast based on our last Budget back in the spring—a fiscal splurge up front that will translate into higher prices and higher interest rates for longer, meaning higher mortgage rates. Before Labour Members start jumping up and down at the M-word, the Government now own mortgage interest rates, and they are being affected in the wrong direction as a result of their policies. What about living standards? They are down and flatlining. The Joseph Rowntree Foundation says that by October 2029 the average family will be £770 worse off in real terms than they are today.

Non-Domestic Rating (Multipliers and Private Schools) Bill

Nusrat Ghani Excerpts

2nd reading
Monday 25th November 2024 Commons Chamber

Second Reading

[Madam Deputy Speaker (Ms Nusrat Ghani)]

The reasoned amendment in the name of Kevin Hollinrake has been selected.

--- Later in debate ---

[James Murray]

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

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

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

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

[Madam Deputy Speaker (Ms Nusrat Ghani)]

I call the Opposition spokesperson.

--- Later in debate ---

[Charlie Maynard (Witney) (LD)]

I find it more than ludicrous to hear the Tories lecturing Labour about red tape. What the Tories have served up to the country through Brexit and the damage they have done to our economy is a disaster. To hear them masquerading as—

[Madam Deputy Speaker (Ms Nusrat Ghani)]

Order. Only interventions relevant to the speech in hand should be made. There is no need for that performance.

[Kevin Hollinrake]

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

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

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

--- Later in debate ---

[Adam Thompson]

I remind the right hon. Gentleman that if Opposition Members did not want us to have to take drastic measures to re-establish our country’s economy, they should not have left a £22 billion black hole in it.

I want to flag a particular failure in the education system that was brought to crisis by the previous Government: the provision of SEND education. It has long been under-supported, and after the past decade, things are worse. Opposition Members will claim that the Bill will make SEND provision worse still. Let me tell them that for SEND children and their families in my constituency and across Derbyshire it is scarcely conceivable that things could get any worse. Some 20% of the casework that I receive in my office relates to SEND problems. The recent Ofsted report on SEND services offered by Conservative-run Derbyshire county council found that it had “widespread” weaknesses, that communication with parents was “poor” and that children’s needs were often not accurately identified or provided for. The report is utterly damning—it is the worst Ofsted report I have ever seen—and Derbyshire county council’s failures are extreme. For my constituents, the local elections cannot come soon enough.

I was very pleased when the Chancellor announced in the Budget an extra £1 billion to support SEND services. Having spoken extensively to parents of SEND children in my constituency, I can say that they are not worried about whether private school fees might increase; they are worried about whether their children will be able to go to school at all. This Bill is about providing equality of opportunity. It is about ensuring that a child’s postcode or their parents’ income does not determine their chances in life. This Bill will provide funds to fix our state schools, reverse the bite of austerity, get more teachers into school and help them to stay there, ensure that all children are properly included, and ultimately provide them with the education they all deserve.

I feel strongly that supporting this Bill is my duty to my Erewash constituents and to its schools, its teachers, its children, their parents and the future of our towns and villages. It is my duty, therefore, to vote for the Bill.

[Madam Deputy Speaker (Ms Nusrat Ghani)]

I call the Liberal Democrat spokesperson.

--- Later in debate ---

[Madam Deputy Speaker (Ms Nusrat Ghani)]

Curiously, the hon. Member did not explain the movie he referred to in opening his speech.

Financial Assistance to Ukraine Bill

Nusrat Ghani Excerpts

2nd reading
Wednesday 20th November 2024 Commons Chamber

[The Chief Secretary to the Treasury (Darren Jones)]

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

I am proud of the unity that this House has shown in its support for Ukraine. This support has been steadfast since the onset of Russia’s illegal full-scale invasion in February 2022, regardless of the party in office, and it remains so today. We in this House recognise that while Ukraine is on the frontline, it is fighting for democracy and security across Europe. I want to make it clear that this Government stand, and will continue to stand, in unwavering support of Ukraine with our G7 allies.

On 22 October, my right hon. Friends the Chancellor of the Exchequer and the Defence Secretary announced that the UK would contribute £2.26 billion to the G7 extraordinary revenue acceleration loans to Ukraine scheme, the ERA. This landmark agreement will provide Ukraine with a total of $50 billion in vital additional funding, allowing it to continue to fight back against Putin’s war machine. Crucially, these funds will be repaid not by Ukraine, but from the extraordinary profits made on sanctioned Russian sovereign assets held in the European Union.

This Bill simply provides the spending authority for the UK to contribute to the ERA scheme, enabling us to begin disbursing funds to Ukraine. It is another important demonstration of the UK’s commitment to backing Ukraine for as long as it takes. It will unlock our £2.26 billion contribution to the ERA, funding which is additional to all previous commitments.

The UK has long been at the forefront of support for Ukraine. Our total military, humanitarian and economic support pledged since February 2022 already stands at £12.8 billion. We have often been the first mover on military support in particular, which ranges from training over 47,000 Ukrainian military personnel to providing a squadron of Challenger 2 main battle tanks. Earlier this year, the Government announced that the UK would continue to provide guaranteed military support of £3 billion per year to Ukraine for as long as it takes.

But while we can be proud of what the UK has already done for Ukraine, Members of the House need no reminding that Ukraine’s military, budgetary and humanitarian needs continue to be grave. Existing support is not enough; we must go further still to ensure that Ukraine wins this war. We must do this alongside our allies. The ERA is an ambitious scheme, and represents a united G7 pledge, with contributions from the United States, the European Union, Canada and Japan. Our £2.26 billion constitutes a fair and proportionate contribution to the scheme based on the UK’s GDP share in the G7 and EU.

Each lender will now negotiate a bilateral loan with Ukraine to govern how the funds are distributed and spent within a collective framework agreed by the G7. Repayments from the profits on immobilised Russian assets will be redistributed to the G7 lenders from the EU in proportion to our contributions. The EU regulation providing for this is already in place.

The Government have assessed that Ukraine’s most pressing need is for military support. The UK’s contribution to the ERA is therefore earmarked for military procurement to bolster Ukraine’s capacity for self-defence. This support will help ensure that Ukraine can continue to withstand Russian aggression and fight back against it. The UK is committed to ensuring value for money for both the UK and Ukraine, including through exploring the use of existing UK-enabled procurement channels for Ukraine to purchase the equipment that it needs. Our funding will be delivered in three tranches over three financial years, with the first tranche intended to be delivered in early 2025.

The Bill has one simple purpose: to unlock the UK’s contribution to the ERA. It consists of one substantive clause, which seeks the authority of Parliament to spend the money on the UK’s contribution and make good on our commitment. The Bill is not intended to be used for any purpose beyond that, and it will not be used to spend above the £2.26 billion figure that has been announced. Our figure has been agreed with the G7 and caps have been built into the scheme at a G7 level through the EU repayment mechanism.

Although slim, this Bill is essential. Royal Assent is required before we can begin disbursing funds to Ukraine, and before we can receive any repayments from the profits being held in the European Union. It is therefore vital that we pass this Bill as quickly as possible, so we can begin disbursement this winter, as Ukraine’s needs are immediate. I hope that I can count on the support of the House to achieve this, and help us get this vital money into Ukraine’s hands as quickly as possible.

The $50 billion collectively delivered through the ERA lays down a marker to show that we will continue to stand with Ukraine for as long as it takes. Collectively, we will pursue every available means of making Russia pay for the damage it has done in Ukraine. I am proud to present the UK’s contribution to the scheme today, which will make an immediate tangible difference to Ukraine’s capacity to defend itself. This Bill facilitates that contribution, and I commend it to the House.

[Madam Deputy Speaker]

I call the shadow Minister.

--- Later in debate ---

[Alex Sobel (Leeds Central and Headingley) (Lab/Co-op)]

We are now 1,000 days into the Russian invasion of Ukraine and we are entering a crucial period for Ukraine and its people, with the Kursk offensive and Administration change in the United States. I would first like to praise our Government for their evolving strong support for Ukraine, reflecting the needs on the ground. The United Kingdom was the first responder and supporter of Ukraine. The Government’s participation in implementing President Zelensky’s 10-point victory plan is very welcome. Ensuring that the war does not last indefinitely and ends on fair terms is crucial. MPs of all parties work closely on campaigns around aid, sanctions, seizure of assets and so much more.

There is the potential that Ukraine could lose 50% of its military aid support from its international allies. The UK and other supportive nations struggle to make up the shortfall from our own stores. If this remains the case, Ukraine will slowly lose the ability to defend itself. Russia will increase and intensify its atrocities across the country. Where will Russia stop? The increasing rhetoric from the Kremlin needs a robust response. It has been shown again and again to take advantage of perceived weakness. Now, 1,000 days into the Russian invasion of Ukraine, we can take the first step in unlocking frozen Russian assets to support Ukraine. I welcome today’s Bill, which will ensure that the loans made will be repaid with the Russian state’s assets currently frozen in the UK.

The G7 must act collectively on this. At the start of the war, approximately $300 billion of Russian central bank reserves were frozen in the west. We need a route to mobilise these reserves. We must understand how other states have been able to disclose the amount of Russian central bank reserves they hold. We need to know how many billions of pounds of Russian reserves reside in the City of London. Canada has passed the Special Economic Measures (Russia) Regulations, which collects data on Russian assets, freezes them and publishes the value, which currently stands at 135 billion Canadian dollars frozen in Canada. Can the Government move to disclose the level of Russian assets held here in a similar way?

I also wish to call for the seizure of Russian central bank reserves to pay for the defence of Ukraine. Many Governments are seizing the profit generated from the frozen money and using that to back Ukraine. The US has passed legislation giving the President the power to do that, and I welcome this legislation, which will move us in the same direction. In the UK, we also have £2.5 billion frozen from the sale of Chelsea football club. If unlocked, it could create the second wealthiest charity in Britain, but it remains frozen in a UK bank account. Can the Minister outline what steps he is taking to immediately release this funding, which would provide much-needed humanitarian aid to Ukraine? In Ukraine, winter is not coming; winter is here.

We must decide on a route to mobilise the UK’s seizure of Russian assets. The estimated cost of reconstruction in Ukraine is at least $486 billion over the next decade, and growing every day. We must begin the process of confiscating the Russian central bank reserves in the UK with this Bill. Defending Ukraine’s democracy is defending our democracy. I look forward to the potential of this Bill to be a route to mobilising billions of pounds of Russian central bank reserves. Can the Minister clarify the position on whether the loans in the Bill today will be in the form of a recourse or non-recourse loan?

The Financial Assistance to Ukraine Bill allows the UK to fulfil our commitment made in the June 2024 G7 loan agreement to Ukraine. The UK’s expected contribution under this agreement is approximately £2.26 billion, which Ukraine can decide to utilise for its defence. We have Russian central bank deposits in the Bank of England, as well as Russian bonds that have matured and the funds deposited in UK commercial banks. Can the Minister outline when we will legislate to seize these assets for the defence and reconstruction of Ukraine, as they dwarf the sums we are debating today? I conclude by again thanking Ministers in the Treasury, the Foreign, Commonwealth and Development Office and the Ministry of Defence for their stalwart support of Ukraine. Slava Ukraini!

[Madam Deputy Speaker (Ms Nusrat Ghani)]

I call the Liberal Democrat spokesperson, James MacCleary.

[James MacCleary (Lewes) (LD)]

Yesterday, Ukraine entered its 1,000th day since the start of Russia’s illegal and unprovoked invasion, and it is about to enter its toughest winter yet. This Bill represents a significant and welcome step in providing much-needed financial support to Ukraine as it continues its courageous resistance. It will deliver tangible assistance during this critical phase of the conflict, providing a vital lifeline to our Ukrainian allies.

Before the war, my partner and I had the good fortune to travel in Ukraine, visiting both Kyiv and Odesa. We visited modern cities similar to any other in Europe, so the sight of ordinary Ukrainian families being forced, at the start of the Russian attack, to shelter in the Kyiv underground stations that we had both so recently used for sightseeing in that beautiful city was both shocking and moving for us. It also brought home why the UK’s unwavering support for Ukraine is so essential, not just for the brave people of that nation but for all of us. If liberal democratic nations do not stand together against tyranny and aggression, the tyrants will feel no constraint and the citizens of other European nations, including potentially the UK, might find that they are the ones forced into underground stations looking for shelter.

The Liberal Democrats support this Bill and its intent, but we are disappointed that it has taken so long to come to the House. My noble Friend Lord Purvis of Tweed raised this issue back in January, some 10 months ago, but now the Bill is finally here, we are pleased to see that it demonstrates a commitment to ensuring that those responsible for Ukraine’s devastation—Russia and its oligarch elites—should, at the very least, contribute financially to Ukraine’s recovery. However, we believe the Bill does not go far enough.

The UK should consider seizing all frozen Russian assets, not just their profits, and redirect them to aid Ukraine. With around £22 billion-worth of such assets currently held in the UK alone, the Government are missing a significant opportunity to amplify their support. Distinguished international lawyers have made a strong case for this step.

Although some economists have expressed concern about repercussions in the financial markets, we believe that, given the very specific circumstances of this conflict, the justification and the benefits far outweigh those concerns. Such action would provide an immediate and substantial financial boost to President Zelensky’s forces and Ukraine’s reconstruction efforts, while sending a clear message to the Kremlin that aggression against sovereign nations will have severe and lasting consequences. We therefore also back the calls for a special tribunal to prosecute those responsible for Russia’s war of aggression and to ensure accountability for the heinous crimes committed.

The Liberal Democrats have consistently called for the UK to lead by example in supporting Ukraine, extending it beyond financial assistance to include military, diplomatic and humanitarian measures. The provision of advanced weaponry, including longer-range precision arms, is critical to Ukraine’s success. We must also bolster British arms and ammunition supplies, work closely with our allies to replenish stockpiles, and maintain Ukraine’s defensive capabilities. It is essential that we co-ordinate effectively with NATO and the European Union to maximize collective impact, which is why I urge the Government to be bolder in their efforts to rebuild our relationship with the EU, including by deepening our security and military co-operation.

We urge the Government to build an international consensus for the proscription of the Wagner Group, whose activities represent a grave threat to international security. The UK must also take a strong stance against Russia’s continuing human rights violations and support anti-war activists within Russia, many of whom face persecution for their bravery. Offering asylum to such individuals and raising their cases in international forums is not only a moral imperative but a strategic means of undermining the Kremlin’s control.

It is vital to recognise that supporting Ukraine financially and militarily should not come at the expense of other nations in need. Restoring the 0.7% gross national income target for international development spending is a crucial step towards ensuring that humanitarian aid to Ukraine does not result in the neglect of our wider global responsibilities. The Government’s failure to meet this target undermines Britain’s reputation as a global leader in development and humanitarian support.

The Liberal Democrats also urge the Government to take robust action to close the loopholes in economic crime legislation that have allowed Putin’s allies to funnel dirty money through the UK for far too long. A Financial Times investigation published yesterday revealed that companies in British overseas territories exported $134 million-worth of goods to Russia in 2024, potentially breaching UK sanctions aimed at restricting access to military and high-tech supplies. I call on the Minister to give an undertaking that the Government will look to address these violations and close these loopholes.

The National Crime Agency must be properly resourced to tackle economic crime effectively, and Magnitsky sanctions should be used to target relatives and associates who attempt to evade existing measures. This is about far more than financial probity; it is about standing up for the rule of law and ensuring that our financial system cannot be used to bankroll aggression.

This Bill comes at a moment of uncertainty. The possibility of diminished US support for Ukraine, following the recent election and the imminent return of Donald Trump to the presidency, is deeply concerning. Should the United States falter in its support, Europe must step up. This should serve as a wake-up call for the UK Government to lead in Europe by seizing frozen Russian assets, reversing damaging cuts to our armed forces and strengthening co-operation with both NATO and the European Union on security and foreign policy.

With a hard winter ahead, time is of the essence. The UK must not waver in its commitment to Ukraine. This is about more than financial assistance; it is about justice, accountability and the preservation of international law. This Bill is a vital step forward, but it must not be the final word.

We must demonstrate bold leadership by acting decisively to ensure that Ukraine not only survives but prevails, and that the principles of sovereignty, freedom and democracy endure. Let this Bill be the beginning of a renewed and united effort to support Ukraine. By seizing frozen Russian assets, providing advanced military support and working closely with our allies, we can help Ukraine to secure a lasting victory and ensure a future of peace, stability and justice for Europe and beyond. Let us rise to this challenge for Ukraine, for Europe and for the values we hold dear.

[Madam Deputy Speaker (Ms Nusrat Ghani)]

I call Linsey Farnsworth to make her maiden speech.

--- Later in debate ---

[Mark Ferguson (Gateshead Central and Whickham) (Lab)]

I wish to associate myself with the comments of many other Members who congratulated my hon. Friend the Member for Amber Valley (Linsey Farnsworth) on her wonderful maiden speech. She spoke particularly movingly about the impact that being in this place has on our families. I am sure that all of us will be thinking of our friends and family as we think back on that speech.

I am proud to speak in support of the Bill. I am proud of the additional money that is being provided for the defence of Ukraine and its people. I am proud that the sum of £2.26 billion, as my hon. Friend the Member for Rushcliffe (James Naish) said, is in addition to the £3 billion that has been committed each year. I am proud, too, that this House stands for Ukraine and democracy, and in opposition to Putin and tyranny. That position is shared almost universally across this House, and certainly universally in this debate.

In my early contributions in this place, I have spent much of my time decrying the legacy of the last Conservative Government. I dare say I will do that a few more times, Madam Deputy Speaker, but I certainly will not be doing that on Ukraine. One area in which the last Government deserve real praise is their support for the Ukrainian people. In their darkest hour, this House and this country stood as one—in defence of Ukraine, in defence of democracy, in defence of freedom.

At a time when the opinion of politics and politicians is low, I think it speaks well of the House that we can come together on issues of such great magnitude. The support for the people of Ukraine under the last Government and under this Government make me proud to be British, and proud to be a Member of this House, because defending Ukraine, its independence and its way of life, is also defending our way of life. It is drawing a line in the sand and saying to those who wish to tear up our democracy and subvert our society that we will not stand idly by. I am sure that I am not the only Member to have stood at his or her local cenotaph on Remembrance Sunday or Armistice Day and thought of those who are fighting right now for their freedom and for their loved ones in Ukraine.

At the same time, we must not think that those who are taking on Russian aggression are solely those on the frontline. This war is being fought with more than just bombs, bullets and missiles. It is fought by the families who keep on living despite the presence of a dictator who wishes to snuff out the existence of their nation. It is fought by those who are willing to say, in this House and anywhere else where speech is free, that Vladimir Putin is an illegitimate tyrant. It is fought by those inside Russia who stand—or seek to stand—in democratic elections, knowing that the elections in which they stand are neither free nor fair, but doing so anyway. It is fought through the dignity and defiance of those nations who also stand on the border of the Russian aggressor state, wishing only to remain free. We must stand with them too.

Across the UK, including in Gateshead and Whickham, people have taken Ukrainian refugees into their homes. They have made them welcome. They too are part of the fight for dignity and democracy. Today we take the next critical step in that fight, at a time when, as has been said, it is more urgent than ever. We do not know when this war will end, but we do know that it must end, and how it must end: with a peace that is just for the Ukrainian. Slava Ukraini: glory to Ukraine.

[Madam Deputy Speaker (Ms Nusrat Ghani)]

We now come to the final Back-Bench contribution.

[Dave Robertson (Lichfield) (Lab)]

Thank you, Madam Deputy Speaker. I sincerely hope to be last but not least.

Let me begin by congratulating my hon. Friend the Member for Amber Valley (Linsey Farnsworth) on her first speech in the Chamber. I too, like many Members who are present today, am relatively new to the House, and I do not think I will ever forget the first time I walked into the Chamber with that real sense of awe that we have when we walk in here. We are faced with the history of this place which stretches back for centuries—the ideas that have been debated, discussed and decided in this room—but we are on the next page. This debate, and the debates that we will have over the coming months and years, are the next step on that journey, the next page of that history, and as we move forward we must continue to remember our place in the story—a story of the importance of democracy and the importance of ordinary people standing up, having their say and ensuring that ideas such as democracy, justice and self-determination are never forgotten, and are always close to the forefront of what happens in this place, in this country and around the world.

We should be proud of the history of this place in defending those ideals, as I am proud of this country’s support for Ukraine. I am also proud of the support from people throughout my constituency, in Lichfield, Burntwood and the villages, who have thrown open their homes to welcome those who have been displaced from Ukraine. It is heartening to see how many people across the country have acted so quickly in saying, “These are our friends—these are people who are in need”, and making sure that there was a place for them to come and to be safe. Let us make no bones about it: the Ukrainians are defending our values. They are Europe’s eastern flank, and Europe’s bulwark against autocracy. The fight in which they are involved, the fierce fighting that is taking place, is not for some nebulous idea; it is not for drawing lines on a map; it is for something as fundamental as the values that we hold dear.

I think it is important for us to remember where we want to be when those next pages of the history of this place are written. What do we want it to say? I know that when I play my part in that, I want it to say that I was on the right side of history—on the side of our values, justice and democracy. That is why I support the Bill, so that we can provide support to Ukraine. More than that, I want to be part of sending a message—a G7 message, a NATO message, a European message—to Washington about the importance of supporting Ukraine, and part of sending a very strong message to Moscow, and its supporters in Tehran, Pyongyang and anywhere else that supports this illegal war in Ukraine, that it has to stop. But it can only stop with a Ukrainian victory. Slava Ukraini.

[Madam Deputy Speaker (Ms Nusrat Ghani)]

We now come to the Front Benchers, starting with the shadow Minister.

Financial Statement and Budget Report

Nusrat Ghani Excerpts

Wednesday 30th October 2024 Commons Chamber

[Madam Deputy Speaker (Ms Nusrat Ghani)]

Order. Before I call the Chancellor of the Exchequer, I would like to make a short statement.

Over the past few days, Ministers have made a series of new policy announcements with significant and wide-ranging implications for the Government’s fiscal policy and for the public finances. It is evident to me that they should have been made in this House in the first instance. The principle is unambiguously set out in paragraph 9.1 of the ministerial code. The premature disclosure of the contents of the Budget has always been regarded as a supreme discourtesy to this House and to all of its democratically elected MP, not to mention to Mr Speaker and the Chairman of Ways and Means—[Interruption.] I really do not need any help.

Let me remind Members on the Treasury Bench that the Budget statement and the ensuing resolutions are

“the most important business of Ways and Means”

in the House, as set out in “Erskine May” paragraph 36.33. I am disappointed by comments made by Government spokespeople believing they can use precedent as an excuse. I am telling them today that they are entirely wrong.

Mr Speaker has always defended the undoubted right of this House, including Members of Opposition parties and Back Benchers from all parts of the House, to be the first to hear major Government policy announcements on behalf of their constituents. As Chairman of Ways and Means, I have responsibility to oversee the House’s consideration of the Budget fairly and impartially, and to ensure hon. Members on both sides of the House have adequate opportunity to hold the Chancellor to account.

Finally, we, collectively, should all remember to respect the Chair, respect our colleagues and respect this House.

Before I call the Chancellor of the Exchequer, I remind hon. Members that copies of the Budget resolutions will be available from the Vote Office in the Members’ Lobby at the end of the Chancellor’s statement, and online. I also remind hon. Members that interventions are not taken during the Chancellor’s statement, nor during the replies of the Leader of the Opposition or the Leader of the Liberal Democrat party.

I call the Chancellor of the Exchequer.

[The Chancellor of the Exchequer (Rachel Reeves)]

Madam Deputy Speaker, on 4 July, the country voted for change. This Government were given a mandate: to restore stability to our economy and to begin a decade of national renewal; to fix the foundations and deliver change through responsible leadership in the national interest. That is our task, and I know that we can achieve it.

My belief in Britain burns brighter than ever, and the prize on offer is immense. As my right hon. Friend the Prime Minister said on Monday, change must be felt: more pounds in people’s pockets; an NHS that is there when we need it; and an economy that is growing, creating wealth and opportunity for all, because that is the only way to improve living standards. The only way to drive economic growth is to invest, invest, invest. There are no shortcuts, and, to deliver that investment, we must restore economic stability and turn the page on the last 14 years.

This is not the first time that it has fallen to the Labour party to rebuild Britain. In 1945, it was the Labour party that rebuilt our country out of the rubble of the second world war. In 1964, it was the Labour party that rebuilt Britain with the white heat of technology, and, in 1997, it was the Labour party that rebuilt our schools and our hospitals. Today, it falls to this Labour party—to this Labour Government—to rebuild Britain once again. And while this is the first Budget in more than 14 years to be delivered by a Labour Chancellor, it is the first Budget in our country’s history to be delivered by a woman. I am deeply proud to be Britain’s first ever female Chancellor of the Exchequer. To girls and young women everywhere, I say: let there be no ceiling on your ambition, your hopes and your dreams. Along with the pride that I feel standing here today, there is also a responsibility to pass on a fairer society and a stronger economy to the next generation of women.

Madam Deputy Speaker, the Conservative party failed our country: its austerity broke our national health service; its Brexit deal harmed British businesses; and its mini-Budget left families paying the price with higher mortgages. The British people have inherited the Conservative party’s failure: a black hole in the public finances; public services on their knees; a decade of low growth; and the worst Parliament on record for living standards.

Let me begin with the public finances. In July, I exposed a £22 billion black hole at the heart of the previous Government’s plans—a series of promises that they made, but had no money to deliver—covered up from the British people and covered up from this House. The Treasury’s reserve, set aside for genuine emergencies, was spent three times over just three months into the financial year. Today, on top of the detailed document that I provided to the House in July, the Government are publishing a line-by-line breakdown of the £22 billion black hole that we inherited, which shows hundreds of unfunded pressures on the public finances this year, and into the future too.

The Office for Budget Responsibility has published its own review of the circumstances around the spring Budget forecast. It says that the previous Government

“did not provide the OBR with all the information to them”

and that, had the OBR known about these

“undisclosed spending pressures that have since come to light”,

then its spring Budget forecast for spending would have been “materially different”.

Let me be clear: that means that any comparison between today’s forecast and the OBR’s March forecast is false, because the previous Government hid the reality of their public spending plans. Yet at the very same Budget, they made another £10 billion-worth of cuts to national insurance. It was the height of irresponsibility, and they knew it. They had run out of road, and they called an election to avoid making difficult choices. So let me make this promise to the British people: never again will we allow a Government to play fast and loose with the public finances and never again will we allow a Government to hide the true state of our public finances from our independent forecaster. That is why I can today confirm that we will implement in full the 10 recommendations from the independent Office for Budget Responsibility’s review.

The country has inherited not just broken public finances, but broken public services. The British people can see and feel that in their everyday lives: NHS waiting lists at record levels; children in portacabins as school roofs crumble; trains that do not arrive; rivers filled with polluted waste; prisons overflowing; crimes that are not investigated; and criminals who are not punished. That is the country’s inheritance from the Conservative Government. They had no plan to improve our public services and they had no plan to put our public finances on a sustainable footing—quite the opposite.

Since 2021, there have been no detailed plans for departmental spending set out beyond this year, and the previous Government’s plans relied on a baseline for spending this year, which we now know was wrong because it did not take into account the £22 billion black hole. They also failed to budget for costs that they knew would materialise, including funding for vital compensation schemes for victims of two terrible injustices—[Interruption.]

[Madam Deputy Speaker (Ms Nusrat Ghani)]

Order. I have just spoken about respecting colleagues. The public are watching, and they want to hear what the Chancellor has to say. Simmer down.

[Rachel Reeves]

I would politely suggest that hon. Members listen to this, because it includes funding for vital compensation schemes for victims of two terrible injustices: the infected blood scandal and the Post Office Horizon scandal.

The Leader of the Opposition rightly made an unequivocal apology for the injustice of the infected blood scandal on behalf of the British state, but he did not budget for the costs of compensation. Today, for the very first time, we will provide specific funding to compensate those infected and those affected in full, with £11.8 billion in this Budget. I am also today setting aside £1.8 billion to compensate victims of the Post Office Horizon scandal—redress that is long overdue for the pain and injustice that they have suffered.

The leadership campaign for the Conservative party has now been going on for over three months, but in all that time there has been not one single apology for what they did to our country. The Conservative party has not changed—but this is a changed Labour party and we will restore stability to our country once again. The scale and seriousness of the situation that we have inherited cannot be underestimated. Together, the hole in our public finances this year, which recurs every year, the compensation schemes that the previous Government did not fund, and their failure to assess the scale of the challenges facing our public services, means that this Budget raises taxes by £40 billion. Any Chancellor standing here today would have to face this reality, and any responsible Chancellor would take action. That is why today I am restoring stability to our public finances and rebuilding our public services.

As a former economist at the Bank of England, I know what it means to respect our economic institutions. I put on record my thanks to the Governor of the Bank, Andrew Bailey, and the independent Monetary Policy Committee. Today, I can confirm that we will maintain the MPC’s target of 2% inflation, as measured by the 12-month increase in the consumer prices index. I thank James Bowler, the permanent secretary to the Treasury, and my team of officials. I also thank my predecessors as Chancellor of the Exchequer for their wise counsel as I have prepared for this Budget. In particular, I thank the former right hon. Member for Spelthorne for his invaluable advice in this weekend’s papers, where he concluded that his mini-Budget “wasn’t perfect”. For once, he and I are in absolute agreement. Finally, I thank Richard Hughes and his team at the Office for Budget Responsibility for their work in preparing today’s economic and fiscal outlook.

Let me take the House through that forecast. The cost of living crisis under the last Government stretched household finances to their limit, with inflation hitting a peak of above 11%. Today, the OBR says that CPI inflation will average 2.5% this year, 2.6% in 2025, 2.3% in 2026, 2.1% in 2027, 2.1% in 2028 and 2.0% in 2029.

Moving on to economic growth, today’s Budget marks an end to short-termism, so I am pleased that, for the first time, the OBR has published not only five-year growth forecasts but a detailed assessment of the growth impacts of our policies over the next decade. The new charter for Budget responsibility, which I am publishing today, confirms that this will become a permanent feature of our framework. The OBR forecasts that real GDP growth will be 1.1% in 2024, 2.0% in 2025, 1.8% in 2026, 1.5% in 2027, 1.5% in 2028 and 1.6% in 2029. The OBR is clear: this Budget will permanently increase the supply capacity of the economy, boosting long-term growth. [Interruption.] It may sound shocking to Conservative Members, but this Government are boosting long-term economic growth.

Every Budget that I deliver will be focused on our mission to grow the economy, and underpinning that mission are the seven key pillars of our growth strategy, developed and delivered alongside business, and all driven forward by our excellent Financial Secretary to the Treasury. The first and most important is to restore economic stability. That is my focus today. Secondly, increasing investment and building new infrastructure is vital for productivity, so we are catalysing £70 billion of investment through our national wealth fund, and we are transforming our planning rules to get Britain building again. Thirdly, to ensure that all parts of the UK can realise their potential we are working with the devolved Governments and partnering with our mayors to develop local growth plans. Fourthly, to improve employment prospects and skills we are creating Skills England, delivering our plans to make work pay and tackling economic inactivity.

Fifthly, we are launching our long-term modern industrial strategy and expanding opportunities for our small and medium-sized businesses to grow. Sixthly, to drive innovation, we are protecting record funding for research and development to harness the full potential of the UK’s science base. Finally, to maximise the growth benefits of our clean energy mission, we have confirmed key investments, such as carbon capture and storage, to create jobs in our industrial heartlands. Our approach is already having an impact: just two weeks ago, we delivered an international investment summit that saw businesses commit £63.5 billion of investment into our country, creating nearly 40,000 jobs across the United Kingdom. But we cannot undo 14 years of damage in one go. Economic growth will be our mission for the duration of this Parliament.

In our manifesto, we set out the fiscal rules that would guide this Government. I am confirming those today: our stability rule and our investment rule. The stability rule means that we will bring the current Budget into balance so that we do not borrow to fund day-to-day spending. We will meet that rule in 2029-30, until that becomes the third year of the forecast. From then on, we will balance the current Budget in the third year of every Budget, held annually each autumn. That will provide a tougher constraint on day-to-day spending, so that difficult decisions cannot be constantly delayed or deferred. The OBR says that the current Budget will be in deficit by £26.2 billion in 2025-26 and by £5.2 billion in 2026-27, before moving into surplus of £10.9 billion in 2027-28, £9.3 billion in 2028-29 and £9.9 billion in 2029-30, meeting our stability rule two years early.

Monthly public sector finance data show that Government borrowing in the first six months of this year was already running significantly higher than the OBR’s March forecast, and the OBR confirmed today that borrowing in this financial year is now £127 billion, reflecting the inheritance left by the Conservative party. The increase in the net cash requirement in 2024-25 is lower than the increase in borrowing, at £22.3 billion higher than the spring forecast. Because of the action that we are taking, borrowing falls from 4.5% of GDP this year to 2.1% of GDP by the end of the forecast. Public sector net borrowing will be £105.6 billion in 2025-26, £88.5 billion in 2026-27, £72.2 billion in 2027-28, £71.9 billion in 2028-29 and £70.6 billion in 2029-30.

Before I come to tax, it is vital that we are driving efficiency and reducing wasteful spending. In July, to begin dealing with our inheritance, I made £5.5 billion of savings this year. Today we are setting a 2% productivity, efficiency and savings target for all Departments to meet next year by using technology more effectively and joining up services across Government. As set out in our manifesto, I will shortly be appointing our covid corruption commissioner. They will lead our work to uncover those companies that used a national emergency to line their own pockets, because that money belongs in our public services, and taxpayers want it back. I can confirm today that David Goldstone has been appointed chair of the new office for value for money to help us realise the benefits from every pound of public spending.

Today, I am also taking three steps to ensure that welfare spending is more sustainable. First, we inherited the last Government’s plans to reform the work capability assessment. We will deliver those savings as part of our fundamental reforms to the health and disability benefits system that my right hon. Friend the Work and Pensions Secretary will bring forward.

Secondly, I can today announce a crackdown on fraud in our welfare system—often the work of criminal gangs. We will expand the DWP’s counter-fraud teams, using innovative new methods to prevent illegal activity, and provide new legal powers to crack down on fraudsters, including direct access to bank accounts to recover debt. That package saves £4.3 billion a year by the end of the forecast.

Thirdly, the Government will shortly be publishing the “Get Britain Working” White Paper, tackling the root causes of inactivity with an integrated approach across health, education and welfare, and we will provide £240 million for 16 trailblazer projects, targeted at those who are economically inactive and most at risk of being out of education, employment or training, to get people into work and reduce the benefits bill.

Before a Government can consider any change to a tax rate or threshold, they must ensure that people pay what they already owe. We will invest to modernise His Majesty’s Revenue and Customs systems using the very best technology, and recruit additional HMRC compliance and debt staff. We will clamp down on the umbrella companies that exploit workers, increase the interest rate on unpaid tax debt to ensure that people pay on time, and go after the promoters of tax avoidance schemes. Those measures to reduce the tax gap raise £6.5 billion by the end of the forecast, and I thank the Exchequer Secretary to the Treasury for his outstanding work on that agenda.

I know that for working people up and down our country, family finances are stretched and pay cheques do not go as far as they once did, so today I am taking steps to support people with the cost of living. It was the Labour Government who introduced the national minimum wage in 1999. That had a transformative impact on the lives of working people. As promised in our manifesto, we asked the Low Pay Commission to take account of the cost of living for the first time. I can confirm that we will accept the commission’s recommendation to increase the national living wage by 6.7% to £12.21 an hour, worth up to £1,400 a year for a full-time worker. And, for the first time, we will move towards a single adult rate, phased in over time by initially increasing the national minimum wage for 18 to 20-year-olds by 16.3%, as recommended by the Low Pay Commission, taking it to £10 an hour—a Labour policy to protect working people, being delivered by a Labour Government once again.

Secondly, I have heard representations from colleagues across this House, including my hon. Friends the Members for Shipley (Anna Dixon) and for Scarborough and Whitby (Alison Hume), and the right hon. Member for Kingston and Surbiton (Ed Davey), about the carer’s allowance and the impact of the current policy on carers who are looking to increase the hours that they work. Carer’s allowance currently provides up to £81.90 per week to help those with additional caring responsibilities. Today, I can confirm that we are increasing the weekly earnings limit to the equivalent of 16 hours at the national living wage per week—the largest increase in the carer’s allowance since it was introduced in 1976. That means that a carer can now earn over £10,000 a year while receiving carer’s allowance, allowing them to increase their hours where they want to, and keep more of their money. I am also concerned about the cliff edge in the current system and the issue of overpayments. My right hon. Friend the Work and Pensions Secretary has announced an independent review to look at the issue of overpayments, and we will work across the House to develop the right solutions.

Thirdly, we will provide £1 billion from next year to extend the household support fund and discretionary housing payments to help those facing financial hardship with the cost of essentials. Fourthly, having heard representations from the Joseph Rowntree Foundation, the Trussell Trust and others, I will reduce the level of debt repayments that can be taken from a household’s universal credit payment each month from 25% to 15% of their standard allowance. That means that 1.2 million of the poorest households will keep more of their award each month, lifting children out of poverty, and those who benefit will gain an average of £420 a year.

Our plan to make work pay will also protect working people. I know that Conservative Members are deeply interested in our plans. Having seen their colleagues repeatedly dismissed at short notice, I know that they are worried about their future under the right hon. Member for North West Essex (Mrs Badenoch). They should rest easy knowing that our plan will protect working people from unfair dismissal; it will safeguard them from bullying in the workplace; and it will improve their access to paternity and maternity leave. I hope the new shadow Cabinet will soon be grateful for those increased protections at work.

It is right that we protect those who have worked all their lives. In our manifesto, we promised to transfer the investment reserve fund in the mineworkers’ pension scheme to members. I have listened closely to my hon. Friends the Members for Easington (Grahame Morris), for Doncaster Central (Sally Jameson), for Blaenau Gwent and Rhymney (Nick Smith) and for Ayr, Carrick and Cumnock (Elaine Stewart) on this issue. Today, we are keeping our promise, so that working people who powered our country receive the fair pension that they are owed.

Our manifesto committed to the triple lock, meaning that spending on the state pension is forecast to rise by over £31 billion by 2029-30, to ensure our pensioners are protected in their retirement. That commitment means that while working-age benefits will be uprated in line with CPI at 1.7%, the basic and new state pension will be uprated by 4.1% in 2025-26. This means that over 12 million pensioners will gain up to £470 next year, up to £275 more than uprating by inflation. The pension credit standard minimum guarantee will also rise by 4.1%, from around £11,400 per year to around £11,850 a year for a single pensioner.

While I have sought to protect working people with measures to reduce the cost of living, I have had to take some very difficult decisions on tax. I want to set out my approach to fuel duty. Baked into the numbers that I inherited from the previous Government is an assumption that fuel duty will rise in line with the retail prices index next year and that the temporary 5p cut will be reversed. To retain the 5p cut and to freeze fuel duty again would cost over £3 billion next year. At a time when the fiscal position is so difficult, I have to be frank with the House that that is a substantial commitment to make. I have concluded that, in these difficult circumstances, while the cost of living remains high and with a backdrop of global uncertainty, increasing fuel duty next year would be the wrong choice for working people. It would mean fuel duty rising by 7p per litre, so I have decided today to freeze fuel duty next year, and I will maintain the existing 5p cut for another year, too. There will be no higher taxes at the petrol pumps next year.

The last Government made cuts of £20 billion to employees’ and self-employed national insurance in their final two Budgets. Those tax cuts were not honest, because we now know that they were based on a forecast that the OBR says would have been “materially different” had it known the true extent of the last Government’s cover-up. Since July, I have been urged on multiple occasions to reconsider those cuts—to increase the taxes that working people pay and see in their payslips—but I have made an important choice today: to keep every single commitment that we made on tax in our manifesto. I say to working people, I will not increase your national insurance, I will not increase your VAT, and I will not increase your income tax. Working people will not see higher taxes in their payslips as a result of the choices I am making today. That is a promise made and a promise fulfilled.

Any responsible Chancellor would need to make difficult decisions today to raise the revenues required to fund our public services and restore economic stability. So in today’s Budget, I am announcing an increase in employers’ national insurance contributions. We will increase the rate of employers’ national insurance by 1.2 percentage points to 15% from April 2025, and we will reduce the secondary threshold—the level at which employers start paying national insurance on each employee’s salary—from £9,100 a year to £5,000. This will raise £25 billion per year by the end of the forecast period. I know that this is a difficult choice; I do not take this decision lightly. We are asking businesses to contribute more, and I know that there will be impacts of this measure felt beyond businesses, too, as the OBR has set out today. [Interruption.]

[Madam Deputy Speaker (Ms Nusrat Ghani)]

Order. Our constituents are watching—they need to be able to hear the Chancellor. Simmer down.

[Rachel Reeves]

In the circumstances I have inherited, it is the right choice to make. Successful businesses depend on successful schools, healthy businesses depend on a healthy NHS, and a strong economy depends on strong public finances. If the Conservative party chooses to oppose this choice, it is choosing more austerity, more chaos and more instability. That is the choice our country faces, too.

As I make this choice, I know it is particularly important to protect our smallest companies. Having heard representations from the Federation of Small Businesses and others, I am today increasing the employment allowance from £5,000 to £10,500. This means that 865,000 employers will not pay any national insurance at all next year, and over 1 million will pay the same or less than they did previously. This will allow a small business to employ the equivalent of four full-time workers on the national living wage without paying any national insurance on their wages.

Let me now come to capital gains tax. We need to drive growth, promote entrepreneurship and support wealth creation while raising the revenue required to fund our public services and restore our public finances. Today, we will increase the lower rate of capital gains tax from 10% to 18% and the higher rate from 20% to 24%, while maintaining the rates of capital gains tax on residential property at 18% and 24%. This means that the UK will still have the lowest capital gains tax rate of any European G7 economy.

Alongside these changes to the headline rates of capital gains tax, we are maintaining the lifetime limit for business asset disposal relief at £1 million to encourage entrepreneurs to invest in their businesses. Business asset disposal relief will remain at 10% this year before rising to 14% in April 2025 and to 18% from 2026-27, maintaining a significant gap compared with the higher rate of capital gains tax. Together, the OBR says that these measures will raise £2.5 billion by the end of the forecast.

In a sign of this Government’s commitment to supporting growth and entrepreneurship, we have already extended the enterprise investment and venture capital trust schemes to 2035, and we will continue to work with leading entrepreneurs and venture capital firms to ensure that our policies support a positive environment for entrepreneurship in the UK.

Next, I turn to inheritance tax. Only 6% of estates will pay inheritance tax this year. I understand the strongly held desire to pass down savings to children and grandchildren, so I am taking a balanced approach in my package today. First, the previous Government froze inheritance tax thresholds until 2028. I will extend that freeze for a further two years, until 2030. That means that the first £325,000 of any estate can be inherited tax-free, rising to £500,000 if the estate includes a residence passed to direct descendants and £1 million when a tax-free allowance is passed to a surviving spouse or civil partner.

Secondly, we will close the loophole created by the previous Government, made even bigger when the lifetime allowance was abolished, by bringing inherited pensions into inheritance tax from April 2027. Finally, we will reform agricultural property relief and business property relief. From April 2026, the first £1 million of combined business and agricultural assets will continue to attract no inheritance tax at all, but for assets over £1 million, inheritance tax will apply with a 50% relief at an effective rate of 20%. This will ensure that we continue to protect small family farms, with three quarters of claims unaffected by these changes.

I can also announce that we will apply a 50% relief in all circumstances on inheritance tax for shares on the alternative investment market and other similar markets, setting the effective rate of tax at 20%. Taken together, these measures raise over £2 billion by the final year of the forecast.

Next, I can confirm that the Government will renew the tobacco duty escalator for the remainder of this Parliament at RPI+2%, increase duty by a further 10% on hand-rolling tobacco this year, and introduce a flat-rate duty on all vaping liquid from October 2026, alongside an additional one-off increase in tobacco duty to maintain the incentive to give up smoking. We will increase the soft drinks industry levy to account for inflation since it was introduced, as well as increasing the duty in line with CPI each year going forward. These measures will raise nearly £1 billion per year by the end of the forecast period.

We want to support the take-up of electric vehicles, so I will maintain the incentives for electric vehicles in company car tax from 2028 and increase the differential between fully electric and other vehicles in the first-year rates of vehicle excise duty from April 2025. These measures will raise around £400 million by the end of the forecast period.

Let me update the House on our plans for air passenger duty—and I can see the Leader of the Opposition’s ears have pricked up. Air passenger duty has not kept up with inflation in recent years, so we are introducing an adjustment, meaning an increase of no more than £2 for an economy class short-haul flight. But I am taking a different approach when it comes to private jets, increasing the rate of air passenger duty by a further 50%. That is equivalent to £450 per passenger for a private jet to, say, California. [Laughter.]

Let us now turn to our high street businesses. I know that, for them, a major source of concern is business rates. From 2026-27, we intend to introduce two permanently lower tax rates for retail, hospitality and leisure properties, which make up the backbone of our high streets across the country, and it is our intention that it is paid for by a higher multiplier for the most valuable properties. The previous Government created a cliff edge next year, as temporary reliefs end, so I will today provide 40% relief on business rates for the retail, hospitality and leisure industry in 2025-26 up to a cap of £110,000 per business. Alongside this, the small business tax multiplier will be frozen next year.

Next, I can confirm that alcohol duty rates on non-draught products will increase in line with RPI from February next year. However, nearly two thirds of alcoholic drinks sold in pubs are served on draught, so today, instead of uprating these products in line with inflation, I am cutting draught duty by 1.7%—[Hon. Members: “Hear, hear!”]—which means a penny off the pint in the pub.

Alongside the changes I am making today, I am publishing a corporate tax road map, providing the business certainty called for by the CBI, the British Chambers of Commerce and the Institute of Directors. This confirms our commitment to cap the rate of corporation tax at 25%—the lowest in the G7—for the duration of this Parliament, while maintaining full expensing and the £1 million annual investment allowance, and keeping the current rates of research and development relief to drive innovation.

In our manifesto, we made a number of commitments to raising funding for our public services. First, I have always said that if you make Britain your home, you should pay your taxes here, too, so today I can confirm that we will abolish the non-dom tax regime, and we will remove the outdated concept of domicile from the tax system from April 2025. We will introduce a new, residence-based scheme, with internationally competitive arrangements for those coming to the UK on a temporary basis, while closing the loopholes in the scheme designed by the Conservative party. To further encourage investment into the UK, we will extend the temporary repatriation relief to three years and expand its scope, bringing billions of pounds of new funds into Britain. The independent Office for Budget Responsibility says that this package of measures will raise £12.7 billion over the next five years.

The fund management industry provides a vital contribution to our economy, but as our manifesto set out, there needs to be a fairer approach to the way that carried interest is taxed, so we will increase the capital gains rates on carried interest to 32% from April 2025, and from April 2026 we will deliver further reform to ensure that the specific rules for carried interest are simpler, fairer and better targeted.

In our manifesto, we committed to reforming stamp duty land tax to raise revenues, while supporting those buying their first home. We are increasing the stamp duty land tax surcharge for second homes, known as the higher rate for additional dwellings, by 2 percentage points to 5%, which will come into effect from tomorrow. This will support over 130,000 additional transactions from people buying their first home or moving home over the next five years.

Next, we are committed to reforming the energy profits levy on oil and gas companies. I can confirm today that we will increase the rate of the levy to 38%. The levy will now expire in March 2030, and we will remove the 29% investment allowance. To ensure that the oil and gas industry can protect jobs and support our energy security, we will maintain the 100% first-year allowances, and the decarbonisation allowances, too.

Finally, 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 from January 2025, and we will shortly introduce legislation to remove their business rates relief from April 2025, too.

We said in our manifesto that these changes, alongside our measures to tackle tax avoidance, would bring in £8.5 billion in the final year of the forecast. I can confirm today that they will in fact raise over £9 billion to support our public services and restore our public finances. That is a promise made and a promise fulfilled.

I have one final decision to announce on tax today. The previous Government froze income tax and national insurance thresholds in 2021, and then did so again after the mini-Budget. Extending their threshold freeze for a further two years raises billions of pounds—money to deal with the black hole in our public finances and repair our public services. Having considered the issue closely, I have come to the conclusion that extending the threshold freeze would hurt working people. It would take more money out of their payslips. I am keeping every single promise on tax that I made in our manifesto, so there will be no extension of the freeze in income tax and national insurance thresholds beyond the decisions made by the previous Government. From 2028-29, personal tax thresholds will be uprated in line with inflation once again. When it comes to choices on tax, this Government choose to protect working people every single time.

Those are the choices I have made to restore economic stability and protect working people. My next choice is to begin to repair our public services. In recent months, we conducted the first phase of the spending review to set departmental budgets for 2024-25 and 2025-26. I thank my right hon. Friend the Chief Secretary to the Treasury for his tireless work with colleagues from across Government. Because I have taken difficult decisions on tax today, I am able to provide an injection of immediate funding over the next two years to stabilise and support our public services.

The next phase of the spending review will report in late spring, and I have set out the overall envelope today. Day-to-day spending from 2024-25 onwards will grow by 1.5% in real terms, and today departmental spending, including capital spending, will grow by 1.7% in real terms. At the election, we promised that there would be no return to austerity, and today we deliver on that promise, but given the scale of the challenge that we face in our public services, there will still be difficult choices in the next phase of the spending review. Just as we cannot tax and spend our way to prosperity, neither can we simply spend our way to better public services. We will deliver a new approach to public service reform, using technology to improve public services and taking a zero-based approach, so that taxpayers’ money is spent as effectively as possible, and so that we focus on delivering our key priorities.

In the first phase of the spending review, I have prioritised day-to-day funding to deliver on our manifesto commitments. I want every child to have the very best start in life, and the best possible start to their school day. I know that my right hon. Friend the Secretary of State for Education shares my ambition, so today I am tripling investment in breakfast clubs to fund them in thousands of schools. I am increasing the core schools budget by £2.3 billion next year to support our pledge to hire thousands more teachers in key subjects. So that our young people can develop the skills that they need for the future, I am providing an additional £300 million for further education. Finally, this Government are committed to reforming special educational needs provision, to improve outcomes for our most vulnerable children and ensure that the system is financially sustainable. To support that work, I am today providing a £1 billion uplift in funding—a 6% real-terms increase from this year.

There is no more important job for Government than keeping our country safe, and we are conducting a strategic defence review, to be published next year. As set out in our manifesto, we will set a path to spending 2.5% of GDP on defence at a future fiscal event. Today, I am announcing a total increase in the Ministry of Defence’s budget of £2.9 billion next year, ensuring that the UK comfortably exceeds our NATO commitments, and providing guaranteed military support to Ukraine of £3 billion per year for as long as it takes. Last week, alongside my right hon. Friend the Defence Secretary, I announced, in addition to that, further support for Ukraine, on top of our NATO commitment. That support comes through our £2.26 billion contribution to the G7’s extraordinary revenue acceleration agreement. That will be repaid using profits from immobilised Russian sovereign assets.

As we approach Remembrance Sunday, it is vital that we take time to remember those who have served our country so bravely. I am today announcing funding to commemorate the 80th anniversary of VE and VJ Day next year, to honour those who served at home and abroad. We must also remember those who experienced the atrocities of the Nazi regime at first hand. I would like to pay tribute to Lily Ebert, the Holocaust survivor and educator who passed away aged 100 earlier this month. I am today committing a further £2 million for Holocaust education next year, so that charities such as the Holocaust Educational Trust can continue their work to ensure that those vital testimonies are not lost, and are preserved for the future.

To repair our public services, we need to work alongside our mayors and local leaders. We will deliver a significant, real-terms funding increase for local government next year, including £1.3 billion of additional grant funding to deliver essential services, with at least £600 million in grant funding for social care and £230 million to tackle homelessness and rough sleeping. We are today confirming that Greater Manchester and the West Midlands will be the first mayoral authorities to receive integrated settlements from next year, giving mayors meaningful control of funding for their local areas. To support our high streets, we are taking action to deal with the sharp rise in shoplifting that we have seen in recent years. We will scrap the effective immunity for low-value shoplifting introduced by the Conservative party, and having listened closely to organisations such as the British Retail Consortium and the trade union USDAW, I am providing additional funding to crack down on the organised gangs that target retailers, and to provide more training for our police officers and retailers, in order to stop shoplifting in its tracks.

Finally, I am today providing funding to support public services and drive growth across Scotland, Wales, and Northern Ireland. Having discussed the matter with the First Minister of Wales, Eluned Morgan, my hon. Friend the Under-Secretary of State for Wales (Dame Nia Griffith), and my hon. Friend the Under-Secretary of State for Justice (Alex Davies-Jones), I am today providing £25 million to the Welsh Government next year for the maintenance of coal tips, to ensure that we keep our communities safe. To support growth, including in our rural areas, we will proceed with city and growth deals in Northern Ireland, in Causeway Coast and Glens, and the Mid South West. We will drive growth in Scotland, which is a key priority for Scottish Labour and our leader, Anas Sarwar, including through a city and growth deal in Argyll and Bute.

This Budget provides the devolved Governments with the largest real-terms funding settlement since devolution, delivering an additional £3.4 billion to the Scottish Government through the Barnett formula—funding that must now be used effectively in Scotland to deliver the public services that the people of Scotland deserve. This Budget also provides £1.7 billion to the Welsh Government, and £1.5 billion to the Northern Ireland Executive in 2025-26. I said there would be no return to austerity; that is the choice I have made today.

To rebuild our country, we need to increase investment. The UK lags behind every other G7 country when it comes to business investment as a share of our economy. That matters. It means that the UK has fallen behind in the race for new jobs, new industries, and new technology. By restoring economic stability, and by establishing the national wealth fund to catalyse private funding, we have begun to create the conditions that businesses need to invest, but there is also a significant role for public investment. For too long, we have seen Conservative Chancellors cut investment and raid capital budgets to plug gaps in day-to-day spending. The result is clear for all to see: hospitals without the equipment they need; school buildings not fit for our children; a desperate lack of affordable housing; and economic growth held back at every turn. Under the plans I inherited, public investment was set to fall from 2.5% to 1.7% of GDP, but in Washington last week, the International Monetary Fund was clear: more public investment is badly needed in the UK.

Having listened to the case made by the former Governor of the Bank of England, Mark Carney, the former Treasury Minister, Jim O’Neill and the former Cabinet Secretary, Gus O’Donnell, among others, I am confirming our investment rule. As was set out in our manifesto, we will target debt falling as a share of the economy. Debt will be defined as public sector net financial liabilities—or net financial debt, for short. That metric has been measured by the Office for National Statistics since 2016 and forecast by the Office for Budget Responsibility since that date, too.

Net financial debt recognises that Government investment delivers returns for taxpayers by counting not just the liabilities on a Government’s balance sheet, but the financial assets, too. That means we count the benefits of that investment, not just the costs, and we free up our institutions to invest, just as they do in Germany, France and Japan. Like our stability rule, our investment rule will apply in 2029-30, until that becomes the third year of the forecast. From that point onwards, net financial debt will fall in the third year of every forecast. Today, the OBR says that we are already meeting our target two years early, with net financial debt falling by 2027-28 and £15.7 billion of headroom in the final year.

So that we drive the right incentives in Government investments, we will introduce four key guardrails to ensure capital spending is good value for money and drives growth in our economy. First, our portfolio of new financial investments will be delivered by expert bodies, such as the national wealth fund, and must by default earn a rate of return at least as large as that on gilts. Secondly, we will strengthen the role of institutions to improve infrastructure delivery. Thirdly, we will improve certainty, setting capital budgets for five years and extending them at spending reviews every two years. Finally, we will ensure greater transparency for capital spending, with robust annual reporting of financial investments based on accounts audited by the National Audit Office and made available to the Office for Budget Responsibility at every forecast. Taken together with our stability rule, these fiscal rules will ensure that our public finances are on a firm footing, while enabling us to invest prudently alongside business.

The capital plans I now set out to drive growth across our country and repair the fabric of our nation are possible only because of our investment rule. Let me set out those investment plans. Today, we are confirming our plans to capitalise the national wealth fund to invest in the industries of the future, from gigafactories to ports to green hydrogen. Building on those investments, my right hon. Friend the Business Secretary is driving forward our modern industrial strategy, working with businesses and organisations such as Make UK to set out the sectors with the biggest growth potential. Today, we are confirming multi-year funding commitments for these areas of our economy, including nearly £1 billion for the aerospace sector to fund vital research and development, building on our industry in the east midlands, the south-west and Scotland; more than £2 billion for the automotive sector to support our electric vehicle industry and develop our manufacturing base, building on our strengths in the north-east and the west midlands; and up to £520 million for a new life sciences innovative manufacturing fund.

For our world-leading creative industries, we will legislate to provide additional tax relief for visual effect costs in TV and film, and we are providing £25 million for the North East combined authority, which it plans to use to remediate the Crown Works Studios site in Sunderland, creating 8,000 new jobs.

To unlock these growth industries of the future, we will protect Government investment in research and development, with more than £20 billion-worth of funding. This includes at least £6.1 billion to protect core research funding for areas such as engineering, biotechnology and medical science through Research England, other research councils and the national academies. We will extend the innovation accelerators programme in Glasgow, Manchester and the west midlands. With more than £500 million of funding next year, my right hon. Friend the Secretary of State for Science, Innovation and Technology will continue to drive progress in improving reliable, fast broadband and mobile coverage across our country, including in rural areas.

We committed in our manifesto to build 1.5 million homes over the course of this Parliament, and my right hon. Friend the Deputy Prime Minister is driving that work forward across government. Today, I am providing more than £5 billion of Government investment to deliver our plans on housing next year. We will increase the affordable homes programme to £3.1 billion, delivering thousands of new homes. We will provide £3 billion-worth of support in guarantees to boost the supply of homes and support our small house builders. We will provide investment to renovate sites across our country, including at Liverpool Central Docks, where we will deliver 2,000 new homes, and funding to help Cambridge realise its full growth potential.

Alongside this investment, we will put the right policies in place to increase the supply of affordable housing. Having heard representations from local authorities, social housing providers and Shelter, I can today confirm that the Government will reduce right-to-buy discounts and that local authorities will be able to retain the full receipts from any sales of social housing, so that we can reinvest them back into housing stock and into new supply. By doing that, we will give more people a safe, secure and affordable place to live.

We will provide stability to social housing providers with a social housing rent settlement of CPI plus 1% for the next five years, and we will deliver on our manifesto commitment to hire hundreds of new planning officers to get Britain building again. We will also make progress on our commitment to accelerate the remediation of homes, following the findings of the Grenfell inquiry, with £1 billion of investment to remove dangerous cladding next year.

The last Government made a number of promises on transport, but failed to fund them. Working with my right hon. Friend the Transport Secretary, I am changing that. We are today securing the delivery of the trans-Pennine upgrade to connect York, Leeds, Huddersfield and Manchester, delivering fully electric local and regional services between Manchester and Stalybridge by the end of this year, with a further electrification of services between Church Fenton and York by 2026, to help grow our economy across the north of England with faster and more reliable services.

We will deliver East West Rail to drive growth between Oxford, Milton Keynes and Cambridge, with the first services running between Oxford, Bletchley and Milton Keynes next year, and trains between Oxford and Bedford running from 2030. We are delivering railway schemes that improve journeys for people across our country, including upgrades at Bradford Forster Square station, improving capacity at Manchester Victoria and electrifying the Wigan to Bolton line.

My right hon. Friend the Transport Secretary has also set out a plan for how to get a grip of HS2. Today, we are securing delivery of the project between Old Oak Common and Birmingham, and we are committing the funding required to begin tunnelling work to London Euston station. That will catalyse private investment into the local area, delivering jobs and growth.

I am also funding significant improvements to our road network. For too long, potholes have been an all-too-visible reminder of our failure to invest as a nation. Today that changes, with a £500 million increase in road maintenance budgets next year—more than delivering on our manifesto commitment to fix an additional 1 million potholes each year. We will provide over £650 million of local transport funding to improve connections across our country, in towns such as Crewe and Grimsby and in our villages and rural areas from Cornwall to Cumbria. While the previous Government’s policy was for the bus fare cap to end this December, we understand how important bus services are for our communities, so we will extend the cap for a further year, setting it at £3 until December 2025. Finally, we will deliver £1.3 billion of funding to improve connectivity in our city regions, funding projects such as the Brierley Hill metro extension in the west midlands, the renewal of the Sheffield Supertram, and West Yorkshire mass transit, including in Bradford and Leeds.

To bring new jobs to Britain and drive growth across our country, we are delivering our mission to make Britain a clean energy superpower, led by my right hon. Friend the Energy Secretary. Earlier this month, we announced a significant multi-year investment between Government and business in carbon capture and storage, creating 4,000 jobs across Merseyside and Teesside. Today, I am providing funding for 11 new green hydrogen projects across England, Scotland and Wales—they will be among the first commercial-scale projects anywhere in the world—including in Bridgend, East Renfrewshire and Barrow-in-Furness. We are kick-starting the warm homes plan by confirming an initial £3.4 billion over the next three years to transform 350,000 homes, including a quarter of a million low-income and social homes, and we will establish GB Energy, providing funding next year to set it up at its new home in Aberdeen.

Overall, we will invest an additional £100 billion over the next five years in capital spending—that is possible only because of our investment rule. The OBR says today that this investment will drive growth across our country in the next five years and, in the longer term, increase GDP by up to 1.4%. It will crowd in private investment, meaning more jobs and more opportunities in every corner of the UK. That is the choice that I have made: to invest in our country and to grow our economy.

Today, I am setting out two final areas in which investment is so badly needed to repair the fabric of our nation. My hon. Friend the Member for Lewisham West and East Dulwich (Ellie Reeves) and I joined the Labour party because of the condition of our schools in the 1980s and 1990s under Conservative Governments. When we were at secondary school, my sixth form was a couple of prefab huts in the playground. My school, like so many others, was rebuilt by the last Labour Government, but after 14 years of Tory government, progress has gone backwards: school roofs are crumbling and millions of children are facing the same backdrop as I did. I will be the Chancellor who changes that.

Today, I am providing £6.7 billion of capital investment to the Department for Education next year—a 19% real-terms increase on this year. That includes £1.4 billion to rebuild over 500 schools in the greatest need, including St Helen’s primary school in Hartlepool, Mercia academy in Derby and so many more across our country. We will provide £2.1 billion more to improve school maintenance—£300 million more than this year—ensuring that all our children can learn somewhere safe. That will include dealing with reinforced autoclaved aerated concrete-affected schools in the constituencies of my hon. Friends the Members for Watford (Matt Turmaine), for Stourbridge (Cat Eccles) and for Hyndburn (Sarah Smith) and beyond, alongside investment in new teachers and funding for thousands of new breakfast clubs. This Government are giving our children and young people the opportunities that they deserve.

I come to our most cherished public service of all: our NHS. My right hon. Friend the Health Secretary is beginning to repair the damage of the last 14 years. In our first week in office, he commissioned an independent report into the state of our health service by Lord Darzi. Its conclusions were damning. While our NHS staff do a remarkable job, and we thank them for it, it is clear that in so many areas we are moving in the wrong direction. A hundred thousand infants waited over six hours in A&E last year. Three hundred and fifty thousand people are waiting a year for mental health support. Cancer deaths here are higher than in other countries. It is simply unforgiveable.

In the spring, we will publish a 10-year plan for the NHS to deliver a shift from hospital to community, from analogue to digital and from sickness to prevention. Today, we are announcing a down payment on that plan to enable the NHS to deliver 2% productivity growth next year. These reforms are vital, but we should be honest: the state of the NHS that we inherited after—I quote Lord Darzi—

“the most austere decade since the NHS was founded”

means that reform must come alongside investment. So today, because of the difficult decisions that I have taken on tax, welfare and spending, I can announce that I am providing a £22.6 billion increase in the day-to-day health budget and a £3.1 billion increase in the capital budget over this year and next. This is the largest real-terms growth in day-to-day NHS spending outside of covid since 2010.

Let me set out what this funding is delivering. Many NHS buildings have been left in a state of disrepair, so we will provide £1 billion of health capital investment next year to address the backlog of repairs and upgrades across our NHS. To increase capacity for tens of thousands more procedures next year, we will provide a further £1.5 billion for new beds in hospitals across our country, new capacity for over a million additional diagnostic tests, and new surgical hubs and diagnostic centres so that people waiting for their treatment can get it as quickly as possible.

My right hon. Friend the Health Secretary will be setting out further details of his review into the new hospital programme in the coming weeks and publishing in the new year, but I can tell the House today that work will continue at pace to deliver those seven hospitals affected by the RAAC crisis, including West Suffolk hospital in Bury St Edmunds and Leighton hospital in Crewe. And finally, because of this record injection of funding, the thousands of additional beds that we have secured and the reforms that we are delivering in our NHS, we can now begin to bring waiting lists down more quickly and move towards our target for waiting times to be no longer than 18 weeks by delivering on our manifesto commitment for 40,000 extra hospital appointments a week. That is the difference that this Labour Government are making.

The choices I have made today are the right choices for our country—to restore stability to our public finances, to protect working people, to fix our NHS and to rebuild Britain. That does not mean these choices are easy, but they are responsible. If the Conservatives disagree with the choices that I have made, they must answer: what choices would they make? Would they again choose the path of irresponsibility—the path taken by Liz Truss—and ignore the problems in our public finances all together? If that is their choice, they should say so. But let me be clear: if they disagree with my choices on tax, they would not be able to protect working people. If they disagree with our plans to fund public services, they would have to cut schools and hospitals. If they disagree with our investment rule, they would have to delay or cancel thousands of projects that drive growth across our country.

This is a moment of fundamental choice for Britain. I have made my choices—the responsible choices—to restore stability to our country and to protect working people. More teachers in our schools, more appointments in our NHS, more homes being built, fixing the foundations of our economy, investing in our future, delivering change and rebuilding Britain. We on the Government Benches commend those choices, and I commend this statement to the House.

Provisional Collection of Taxes

Motion made, and Question put forthwith (Standing Order No. 51(2)),

That, pursuant to section 5 of the Provisional Collection of Taxes Act 1968, provisional statutory effect shall be given to the following motions:—

(a) Value added tax (private school fees) (motion no. 34);

(b) Stamp duty land tax (additional dwellings: purchases before 1 April 2025) (motion no. 35);

(c) Stamp duty land tax (purchases by companies) (motion no. 37);

(d) Rates of tobacco products duty (motion no. 46).—(Rachel Reeves.)

Question agreed to.

[Madam Deputy Speaker (Ms Nusrat Ghani)]

We come now to the motion entitled “Income Tax (Charge)”. It is on this motion that the debate will take place today and on the succeeding days. The questions on this motion and the remaining motions will be put at the end of the Budget debate on Wednesday 6 November.

VAT: Independent Schools

Nusrat Ghani Excerpts

Tuesday 8th October 2024 Commons Chamber

[Several hon. Members rose—]

[Madam Deputy Speaker (Ms Nusrat Ghani)]

Many Back Benchers wish to contribute, and I want to make sure that that happens. Back-Bench speeches will be limited to four minutes, and maiden speeches to six minutes. We all love a debate, but every intervention eats into the contribution of another Back Bencher, so I ask Members please to be mindful of that.

--- Later in debate ---

[Mr Frith]

My hon. Friend is absolutely right. We are not anti. We are for the many and the few. Conservative Members want to remain in their comfort zone following their election defeat. We have all been there, but it is the wrong place to be. It is right that people pay VAT on school fees.

I was at a termly governors’ meeting—Opposition Members will like this—when news of the last Government’s bare-minimum teachers’ pay rise came through. There was some welcome surprise that the then Government had done even the bare minimum. That was quickly replaced by the hard-headed financial reality from the business manager. They confirmed to the same meeting that, even with the 3.5% that had been kept in reserve to meet the contribution they were expecting in Bury to make the pay rise, they would face a budget deficit because the teachers would no longer be on strike. That is right—the Tories designed a system where the leaderships of our state schools have to rely on the unfair treatment of our teachers in order to come in under budget. That is the reality that we face, and it is their everyday experience. There have been no maths teachers for year 11s, and the leadership have been weighing up whether to buy in multiple teaching assistants for cover rather than a science teacher for science—if they could find one. There is a huge amount to do, and this measure will only touch on a fraction of the legacy that Labour must clear up from the last Government and their 10 Education Secretaries.

[Madam Deputy Speaker (Ms Nusrat Ghani)]

I call Joe Robertson to make his maiden speech.

[Joe Robertson (Isle of Wight East) (Con)]

Thank you, Madam Deputy Speaker. I congratulate the hon. and gallant Member for North East Derbyshire (Louise Jones) on her maiden speech, and thank her for her military service before entering this place.

It is an enormous honour and privilege to represent Isle of Wight East. It is one half of the former Isle of Wight constituency and, if I may say, the better half of the island, only because its wise residents chose to elect a Conservative MP unlike our neighbours in the west. I pay tribute to my predecessor Bob Seely, who served here with dedication, passion and commitment and made a genuinely significant contribution to our shared understanding of Russia and Ukraine, and of international relations more widely. I am sure that whatever the future holds for Bob, he will continue to contribute in that sphere. I also pay tribute to his predecessor Andrew Turner, who served for 16 years and first got me involved in local activism while I was still at school.

The Isle of Wight is known for many things and is much loved, not least of all for sailing. This week is genuinely significant for sailing, as Sir Ben Ainslie and his team have qualified for the America’s cup. The America’s cup was first sailed for around the Isle of Wight in 1851. Unfortunately, the British boats did not win then, and we have never won it, so this is very significant. I send Sir Ben, Sir Jim and the whole team my sincere best wishes to bring back the cup to the Isle of Wight, where it belongs.

The island is well known for its dinosaur fossil records and rock festivals, and as a holiday destination for many happy families from across the UK and internationally. Our biggest town is Ryde, which, together with Sandown and Shanklin, has some of the best beaches in the United Kingdom. Sandown is the home of the Wildheart Animal Sanctuary, which is soon to welcome two new residents—two European brown bears are coming to the sanctuary very soon. In the south we have Ventnor, known for its microclimate and bohemian atmosphere. We have ye olde Kynges towne of Brading, which dates back to Roman times. Brading Roman Villa is a popular visitor destination today, as is Havenstreet steam railway.

However, it is not just the fantastic places on the island and the wonderful scenery that make it special—it is the people. It is warm, generous people like Sally Grylls, a tireless campaigner for better dementia care and better support for those looking after their relatives with long-term frailties, and generous people like Kirsty Chapman at Better Days Café, who help provide food and warmth to those who struggle.

However long I have on these green Benches, I hope to make my own significant contribution, particularly to the most pressing issue of our day: dealing with the pressures in health and, particularly, social care. The biggest reform the NHS needs is to deal with the pressure in social care, to relieve pressure on our hospitals. This Government have said some good things about what they would like to achieve, and I urge them to act quickly. Putting off every reform to a future commission that will report some months or years down the line is not dealing with the issue sufficiently quickly. There are things the Government can already do, and I know from my time working for a national nursing charity immediately before entering this place that we can redirect existing funding better to community services, to help people live at home longer and avoid hospital admissions.

I also hope to contribute to the debate on integrated UK transport. The Secretary of State for Transport has spoken much of buses and rail and improving passenger experience. But we are a collection of islands, and she has said nothing of ferry services. If the Government fail to intervene on ferry services, my residents on the Isle of Wight risk becoming the only community in the United Kingdom entirely reliant on foreign-owned, private, unregulated, debt-laden companies for essential travel—for health, to see their relatives and to access work and other essential services not available on the island. That cannot be allowed to happen, and I urge the Government to intervene.

Finally, on the debate today on taxing children’s education, I remind the Government that not every independent school is a wealthy, famous boarding school. There are good community independent schools such as Ryde School on the Isle of Wight, which make a genuine contribution to the community in which they exist. The Secretary of State put out an unfortunate tweet in which she said that she would prefer to see careers advice in state schools than astroturf for private schools. The private school on the Isle of Wight provides the only competitive astroturf on the entire island, and makes it available to the local hockey teams and football teams. The Government must recognise that contribution.

For however long I have in this place, I look forward sincerely to working with all Members across the Chamber, including my neighbour, the hon. Member for Isle of Wight West (Mr Quigley), to help improve the lives of our constituents, the British people.

[Madam Deputy Speaker (Ms Nusrat Ghani)]

I call John Grady to make his maiden speech.

--- Later in debate ---

[Stuart Anderson (South Shropshire) (Con)]

I rise to speak on what I clearly see as an aspiration tax. I want to make it clear that all of my five wonderful children are in, or have gone through, state schools. One is in a school that requires improvement because of the catchment area we are in. My education was exceptionally poor. I went to the worst school in the area. I did not get any GCSEs, and when I was handed my results, the teacher said, “There you go, Anderson. I told you you’d never make anything of your life.” My experience of education was not good, but I am a Conservative because I believe in opportunity. I did not have those opportunities as a child, but I believe that everybody should have them.

There are about 1,000 children in my constituency who go to Moor Park school, Bedstone college or Concord college; I have visited all three. Bringing in VAT for independent schools will create huge pressure. I believe that the measure is rushed. It has not been thought through, and it will have a massive impact on all those schools. Some parents will be able to afford it and will not feel the pinch, but many parents I have spoken to in my constituency work two jobs, have one car and do not go on holiday. They do everything they can to give their children the best opportunity in life. That should be championed. We should not remove these opportunities. We should have great state schools across our country, but if somebody wants to work hard and strive, and aspires to give their children the best opportunities they can, we should not remove that. We do that at our own cost.

Growing up, my dad was a soldier, and my mum also served in the military. Many of my friends at school moved around every two years or so. I, too, was a soldier and had children while I served in the military. I know the Minister is a supporter of the armed forces, and even the Secretary of State for Defence has said how serious this measure is for military families. In this debate, there will be a lot of to-ing and fro-ing, but I urge the Government to take seriously the impact that this policy will have on military families. To bring it in as a blanket measure will be detrimental. We will see people leave the armed forces; that will be the cost. That would not be a good way to do this. I am asking for time. Can we push this back? We have talked about what to do to fill the gap. Recruiting more people and raising the standard of state schools will not have happened by January, so we need to look for a time to bring in this measure; mid-term does not work.

The measure will have an impact on special educational needs and disabilities, and people who aspire to send their children to private school, but what is important to me and many of my constituents are military families. I urge the Government to think about that, and come to a decision very quickly about military families, because people are deciding whether to stay in the forces or sign off. Our great men and women in the armed forces need certainty that their children’s education will not be disrupted.

[Madam Deputy Speaker (Ms Nusrat Ghani)]

I call Antonia Bance to make her maiden speech.

--- Later in debate ---

[Connor Naismith (Crewe and Nantwich) (Lab)]

You might imagine, Madam Deputy Speaker, that members of the Conservative party would understand how out of touch they are on these matters, given that they were so roundly rejected by the electorate in July. However, unsurprisingly, they have demonstrated perfectly that nothing has changed, and it is business as usual as they leap to the defence of tax breaks for private education. This Government believe in equality of education for all our children, and this policy is designed for the betterment of 93% of the UK school population. Only 7% of children in the UK go to a private school—a far smaller proportion than in the most recent Conservative Cabinet, 65% of which, it is believed, were privately educated. Perhaps that tells us something about why we are debating this matter today.

Conservative Members campaigning against the Government’s policy couch it as an attack on the aspiration of hard-working parents. Perhaps they need to be reminded that the warehouse workers, cleaners, shop workers, carers, nurses and teachers in my constituency are also aspirational for their children. They work just as hard to provide the best opportunities for their children. It is offensive in the extreme for the Conservatives to suggest otherwise, and to suggest that they are less deserving of support from this Government.

I accept that a consequence of this decision may be that some people will no longer be able to send their children to private school, as schools might choose to recoup the cost of VAT through increases to fees. However, we should acknowledge the fact that private schools have implemented above-inflation increases to their fees year on year in recent times—over 20% in real terms since 2010—and this has had a minimal impact on children moving into the state sector. I say directly to parents: should our ambition not be that they could send their child to a fantastic state school that has the teachers and resources it needs to deliver the education their child deserves, and where they can excel both academically and culturally by mixing with children from a wide range of backgrounds and experiences that reflect the society in which we live?

The Conservative party was quite keen to promote and exacerbate a two-tier approach to the education of our children during its term in government—a system in which it is only state-educated children who have to accept tough choices and shoestring budgets. We have schools where the ceilings are propped up by scaffolding, schools where teachers are forced to buy basic school supplies out of their own pay packets, and schools where the workload and conditions have become so dire that teachers are leaving in droves.

I am delighted that we now have a Government who do not believe that state schools alone should be asked to make difficult choices—a Government who will end the tax break for private schools and invest the £1.3 billion that that choice will generate into our state schools, which educate 93% of our children. That is why I will be voting against the Opposition motion and in favour of state education.

[Madam Deputy Speaker (Ms Nusrat Ghani)]

I call John Milne to make his maiden speech.

[John Milne (Horsham) (LD)]

Thank you, Madam Deputy Speaker.

First, I would like to pay tribute to my predecessor, Sir Jeremy Quin, who represented Horsham for the last 10 years. He was a dedicated MP, and in my first couple of months I have heard praise from many constituents for his past help. An MP’s best work is often unsung and behind the scenes, and I intend to continue his campaigns on issues such as child trust funds.

I would have to go back very much further to find a fellow Liberal MP to celebrate—144 years, to be precise. Being a rock-solid safe seat in a first-past-the-post system is not great for democracy. So many people have come up to me since the election and said it is the first time their vote has ever counted. Horsham’s turnout was over 70%, and if we had proportional representation, we would see that level of engagement everywhere.

For most of my life, I worked as a creative director in advertising, before becoming a local councillor five years ago. I would especially like to thank my family, who are up in the Gallery today, for supporting me in this unexpected career change, because this is a huge journey for all of us, not just me.

Most of Horsham is open farmland, with patches of ancient woodland and villages that retain a strong sense of community. Horsham town itself is pretty enough to be charming, but not so temptingly chocolate-boxy that it gets overwhelmed by tourists. As the name suggests, Horsham was once a home for horse trading, and to this day it is a centre of excellence in the equestrian industry. Horsham is also where our great national poet Percy Bysshe Shelley grew up. With luck, we will see him around town again soon if fundraising for a statue in his honour is successful. We have high-achieving schools, both state and private, and we want to keep it that way. Many of them have approached me with concern over the VAT imposition.

Although Horsham has never been the site of a major battle, it is where the Dalek invasion of Earth started through the work of Ray Cusick, the BBC theatrical designer and long-term Horsham resident. But perhaps the jewel in the crown of the constituency is the Knepp estate, the UK’s leading rewilding enterprise, which now has international fame. This is no frozen museum of conservation; it is a living, breathing experiment in flora and fauna, where nature herself is the key architect.

Of course, Horsham is not immune to national challenges, from a creaking health service to cuts in public transport and crumbling roads, but today I want to focus on the positives. Horsham is a great place to do business. It is hard to believe it now, but Horsham was once a centre of England’s iron industry. Later we became a leading brewery town, and today that tradition is carried on by energetic start-ups like Hepworth, Weltons, Kissingate and Brolly Brewing, which rather enterprisingly came up with a Lib Dem-branded beer during my campaign. We are home to Creative Assembly, one of Europe’s largest video game designers; Schroders, a world-class investment company; and innovative tech businesses like Metricell, which might one day help us solve our pothole problem—that would surely be worth a Nobel prize.

Whereas many high streets have struggled, Horsham’s is bustling—a shopping destination for not just local residents, but visitors alike. I urge Members to join us at the Carfax bandstand on a Friday evening in the summer, where the district council has pumped new energy into the town with a series of free events themed on everything from ska, ABBA, Pride and Bollywood to German oompah music. After a quietish first 1,000 years, Horsham is learning how to party. Whereas other communities have been losing their local theatres, ours is getting a multimillion-pound investment to help the council reach its net zero targets. After the last revamp, under the Tories, the theatre reopened with that surefire box office attraction, “An Evening With Ann Widdecombe”. I wonder if she is still available.

As a constituency that is now half town, half rural, Horsham plays a lead role in striking a balance between competing needs. We have large areas of productive farmland, making a valuable contribution to food security, but the same land is under pressure to provide housing and renewable energy installations. All of these are positive things, but the same land cannot do them all at once.

If there is one thing I would like to focus on during my term, it is housing. I strongly support the new Government’s house building ambitions, but I am surprised and disappointed to see that they are using the same flawed system to fix local targets as before, except with a bigger stick. The standard method, as used since 2018, has been shown to be a hopelessly inaccurate way of assessing local need, nor will it ever make housing more affordable. In Horsham, the average price of a new house is higher than that of the existing stock, so the more we build, the higher our target goes—the exact reverse of what is supposed to happen. Horsham already has 13,500 unbuilt permissions. We will be forced to continue building houses that people cannot afford to satisfy a local need that does not exist, while heaping further stress on to already overloaded local services— and then we are surprised when people say they do not like it.

Just to make things more complicated, Horsham has its own unique challenge, known as water neutrality, which restricts water use for environmental reasons. We are caught between two Government directives that completely contradict each other. One rule says we have to build a fixed number of houses per year, but the other rule says we are not allowed to build any houses at all because we cannot use any more water without damaging the environment. We are being punished for failing to build the houses we are not allowed to build. This is a planning system devised by Kafka, not Beveridge.

For all the challenges, I would like people to see Horsham as a place of opportunity. For everything that is going wrong, something else is going right. It is a huge honour to represent the people of Horsham—one that I never expected to have. As someone who campaigned on a promise to serve as a constituency MP, I could not ask for a better constituency to work for.

[Madam Deputy Speaker (Ms Nusrat Ghani)]

To make sure that we get in as many valuable contributions as possible, Back-Bench speeches will now be limited to three minutes. Please be mindful.