Finance Bill

Second Reading (and remaining stages)

17:48:00

Moved by

That the Bill be now read a second time.

My Lords, it is a pleasure to open this Second Reading debate on the Finance Bill. I take this opportunity to warmly welcome my noble friend Lady Caine of Kentish Town to your Lordships’ House, and I very much look forward to her maiden speech. The Bill before your Lordships’ House legislates for tax changes announced in the Budget last October, many of which come into effect this financial year. That was a once-in-a-generation Budget, on a scale commensurate with the challenging inheritance that this Government faced, an inheritance consisting of three distinct crises: a crisis in the public finances, a crisis in our public services and a crisis in the cost of living. In the public finances, as noble Lords may have heard me say before, this Government inherited a £22 billion black hole—a series of commitments made by the previous Government that they did not fund and did not disclose. The OBR has established that the previous Government concealed £9.5 billion and “did not provide the OBR with all information available”. As we now know, during the five months they had left in office, the previous Government continued to amass unfunded commitments that they did not disclose. By the Spring Budget, Treasury records show that these had reached £16.3 billion; by July, they had reached £22 billion. The Treasury has published a line-by-line breakdown of these unfunded commitments: 260 separate pressures that the previous Government did not fund and did not disclose. The previous Government also failed to budget for costs they knew would materialise, including £11.8 billion to compensate victims of the infected blood scandal and £1.8 billion to compensate victims of the Post Office Horizon scandal. Of course, this Government inherited not just broken public finances but broken public services, with NHS waiting lists at record levels, children in portakabins as school roofs crumbled and rivers filled with polluted waste. Added to this was a cost of living crisis that had hit working people hard, with inflation peaking at over 11%. This was the reality we inherited. Faced with this reality, any responsible Government would need to act. That is why this Government took action in the Budget to wipe the slate clean, repair the public services, protect working people and invest in Britain. That included a historic investment of an additional £25.7 billion for the NHS, which is helping to bring down waiting lists more quickly and put an end to over a decade of under- investment and neglect. We took this action in the fairest way possible, by keeping the promise we made to working people in our manifesto not to increase their income tax, national insurance or VAT. The Government did, however, need to take some very difficult decisions elsewhere in relation to tax—difficult decisions, but the right decisions. We have always been clear that there are costs to responsibility and that the increase in employers’ national insurance contributions will have consequences for businesses and beyond, but the costs of irresponsibility would have been far greater. As a result of the decisions we have taken, we have created a foundation of stability on which we are now taking forward our agenda of growth and reform. The Bill before your Lordships’ House is wide ranging, and I will speak to the measures within it in three distinct categories: first, the measures the Government have taken to deliver on the specific commitments made in our manifesto; secondly, measures to put the tax system on a fairer and more sustainable footing; and thirdly, measures to improve health outcomes and support the clean energy transition in line with our growth strategy. On the first of these, our manifesto included a commitment, which is being delivered through this Bill, to remove the outdated concept of domicile status from the tax system and ensure that everyone who is a long-term resident in the UK pays their taxes here. In its place, the Bill introduces a new residence-based regime from April this year. This new regime will be internationally competitive and focused on attracting the best talent and investment into the UK. The new rules mean that anyone who has been tax resident in the UK for more than four years will pay UK tax on their foreign income and gains, as is the case for other UK residents. That is a much simpler and clearer test than exists under the current regime. The independent Office for Budget Responsibility has confirmed that these reforms will raise a total of £33.8 billion over the five-year forecast period. This includes £21.1 billion from the previous Government’s reform and £12.7 billion from the further reforms announced at the Budget. This will help to fund vital public services and provide stability in the public finances. Reflecting our continued engagement with stakeholders to ensure the reforms operate as intended, the Chancellor recently announced that we are making elements of these reforms simpler to use and more attractive, while retaining the structures announced at the Budget. Our manifesto also pledged to “end the VAT exemption … for private schools to invest in our state schools”. This Bill delivers on that commitment too. Some 94% of children in this country attend state schools. However, too many children do not get the opportunities they deserve because too often these schools are held back by a lack of investment. That is why we introduced VAT on private school fees from 1 January this year to secure the additional funding needed to improve educational outcomes across the UK. Together with our changes to business rates, this measure will raise around £1.8 billion a year by 2029-30 and just under £500 million in this year alone. The Government published a tax impact and information note setting out the impacts of this policy at the time of the Budget. The Government’s costings, set out in a detailed costings note, have been certified by the OBR. The evidence to date supports these assessments, and we remain very confident in them. Private schools have continued to open in England. Pupil movements remain in line with expectations. Many private schools are partially or fully absorbing costs, instead of passing on higher fees. More pupils are receiving their first choice of school than they did last year. A final key manifesto commitment relates to the energy profits levy on oil and gas companies. The Bill before your Lordships’ House fulfils our promise to increase the rate of the levy by three percentage points to 38%. It also extends the levy by one year and removes an investment allowance for the oil and gas industry that was not available to any other sector. While oil and gas will continue to play an important role in the energy mix during the transition, we must drive public and private investment towards cleaner energy. The money raised from these changes will help finance our clean energy transition, enhance energy security and create new jobs. To support these objectives, the Bill maintains 100% first-year allowances in the energy profits levy regime, along with a targeted decarbonisation allowance to help the sector reduce its emissions. The Bill also contains a range of measures to make the tax system fairer and more sustainable and to restore stability to the public finances. The Bill takes a balanced approach towards capital gains tax, which is paid by fewer than 1% of adults each year. The higher main rate will increase from 20% to 24%, ensuring that the system remains internationally competitive, with the UK retaining the lowest rate of any European G7 economy. The new headline top rate will also remain lower than it was from 2010 to 2016. We are maintaining business asset disposal relief, with its £1 million lifetime limit, and increasing the rates of capital gains tax applied to this relief and investors’ relief in a phased way to give businesses time to adjust. On inheritance tax, the Bill will ensure that wealthy estates contribute their fair share by extending the freeze in inheritance tax thresholds by a further two years to 5 April 2030. To support home ownership, the Bill also increases the higher rates of stamp duty land tax, so that those looking to move home or purchase their first property have a greater advantage over second home buyers, landlords and companies purchasing residential property. Putting the tax system on a fairer and more sustainable footing also requires addressing the tax gap—the difference between the amount of tax that is owed and the amount that is collected. The measures set out by the Chancellor in the Budget last October represent the most ambitious package ever to close the tax gap and ensure that everyone who should be paying their taxes is doing so. Overall, our package is expected to raise £6.5 billion per year by 2029-30. We will achieve that by investing £1.9 billion in HMRC staff and modernised IT systems, including recruiting an additional 5,000 compliance staff, and we will remove loopholes used to reduce tax liabilities. For example, the Bill introduces capital gains on liquidation of a limited liability partnership, changing the way capital gains are taxed and closing a route used for avoidance. The third and final set of measures in the Bill seek to reduce health-related harms, support the clean energy transition and fund our vital public services. As our growth strategy makes clear, improving health outcomes is essential for delivering resilient, long-term growth. The Bill renews the tobacco duty escalator at RPI plus 2% and increases duty by a further 10% on hand-rolling tobacco this year. The soft drinks industry levy is being reviewed and uprated to maintain incentives for manufacturers to reduce their sugar contents. Alcohol duty is uprated in line with RPI, except for draught products in pubs, recognising the unique role that pubs have in communities. To support our net-zero commitments, we are introducing new powers to allow for the introduction of the carbon border adjustment mechanism, which will place a carbon price on emissions-intensive goods imported into the UK. We are supporting the take-up of electric vehicles by increasing incentives for zero-emission vehicles in the vehicle excise duty first-year rates. This Bill delivers on the Government’s manifesto commitments, puts the tax system on a fairer and more sustainable footing, supports the transition to clean energy and improves health outcomes. It is also a Bill to fix the foundations of our economy by repairing the £22 billion black hole in the public finances that we inherited. The measures contained within the Bill reflect responsible choices. The Government have always been clear that there are costs to this responsibility, but the costs of irresponsibility would have been far greater. As a result of these choices, we have now created a foundation of stability in the public finances on which we will drive forward our agenda of growth and reform. We have set out a clear strategy for achieving our growth mission, but we are not satisfied. That is why we are going further and faster to put Britain on a better path and to deliver for the British people. I beg to move.

18:00:00

My Lords, I start with a note of regret that participants in this vital debate are given an advisory time of only five minutes. As the Official Opposition’s spokesman, I can speak for a little longer, but the time set aside seems inadequate to deal with all stages of such an important Bill—especially on top of consigning the national insurance contributions Bill to the Moses Room. We have distinguished economic and financial experts in this House, and we should make it easier to hear from them in prime time. I look forward to the maiden speech of the noble Baroness, Lady Caine of Kentish Town, and to welcoming her to their number. It seems a long time since the Chancellor delivered her Budget and James Murray, the Exchequer Secretary, introduced the Bill in the other place. At that time, the Chancellor was destroying morale and animal spirits by talking the economy down, and then bashing business with the highest tax burden in the history of our country. Now, growth is flatlining—as we predicted—and the legacy of fragility lives on, with 10-year bond rates currently at 4.6%. I have some sympathy for the Minister, as it was necessary to deal with the challenges facing the country—not least improving productivity, which is the long-term way to sustainable growth. That also means tackling the public sector, which the Health Secretary, Wes Streeting, has shown the determination to do, not least with the abolition of NHS England and the multiple tiers of staffing that he hopes to tackle. The worst and biggest mistake in the Budget was the hike in national insurance—the jobs tax—especially the lowering of the threshold, not least because it will not deliver the hoped-for savings. The OBR has said that by 2029-30, the annual yield from these NIC increases will be slashed by nearly £10 billion through the job cuts and lower nominal wages these measures will inflict. Moreover, a further £5 billion a year will be needed to compensate public service employers. We will come back to these issues at ping-pong next week. The second mistake, which will hit entrepreneurs, family businesses and the farming community, is the class-driven raid on IHT—the family farms tax. We look forward to hearing the results of the consultation and hope that the noble Lord, Lord Wood of Anfield, the new chair of the Economic Affairs Committee, will follow convention and arrange a sub-committee to look at the changes before the details are finalised. The third mistake is the ideologically driven tax grab on private schools—the education tax. The Bill introduces the first-ever tax on education, and I will major on this because it is provided for in the Bill before us. The Minister has also done so, albeit from a different perspective. Since 1 January 2025, all education, boarding and vocational training provided by private schools in the UK has been subject to VAT at the standard rate of 20%. Alongside this, the Government are removing charitable business rates relief for independent schools in England, meaning they will, for the first time, face the additional burden of local business taxes from April 2025. To be clear, this is a new, punitive tax on education. Its imposition part-way through the academic year will cause—and has already caused—significant disruption to the education of thousands of children. It harms parents on modest incomes who have worked hard to send their children to the school they believe is best suited to them, and will make independent schools unaffordable for military families, who make the greatest sacrifice by serving in our Armed Forces. Most of all, the Government’s education taxes will have a disastrous impact on pupils with special educational needs and disabilities, especially on those in independent and state schools who lack education, health and care plans. Over 100,000 children with special needs—many of whom are in independent schools—will be hit. The Government have acknowledged that the policy will have a “disruptive impact” on pupils with SEND, potentially forcing them out of their schools as fees become unaffordable, which will overwhelm the state-funded system and burden local authorities with a surge in EHCP applications. Ultimately, this tax on education could, according to the Adam Smith Institute, cost the taxpayer £1.6 billion a year if it forces a quarter of pupils into the state sector. This policy is a direct attack on aspiration. It punishes those who have worked hard to succeed and we will only begin to see the real damage at the start of the next academic year. Parents will deprive themselves of much to avoid taking a child out of school during the year, but, in the autumn, hard-pressed parents will in many cases have no choice but to remove their children from private education. The Government have also broken their manifesto promises with the Budget and the Finance Bill. Their pledge was: “We will ensure taxes on working people are kept as low as possible”. Yet, they have increased the tax burden to a historic high of 38.2% by 2029-30. Rather than creating an environment that promotes investment and growth, the Bill makes our tax system less competitive. It abolishes the remittance basis of taxation for non-domiciled individuals and raises the main rates of capital gains tax—from 10% to 20%, and from 18% to 24%, respectively. It reduces investor relief and increases stamp duty. These measures do not lay the foundations for the growth we need; they erode the incentives for businesses to invest and create jobs in the UK. We are seeing the consequences. More than 10,000 millionaires left Britain last year, up from 4,200 in 2023. With his growth hat on, can the Minister confirm how the Government will ensure that the UK remains an attractive place to work and invest in? What has happened to the enterprise economy? The Government made another promise. They said: “The dream of homeownership is now out of reach for too many young people”, and vowed to “support first-time buyers who struggle to save for a large deposit”. However, once again, the promises have been broken. Millions of young people have now learned that those were empty words. The Government have confirmed that stamp duty relief for first-time buyers will be slashed this month. This means that first-time buyers purchasing homes worth over £300,000 will pay thousands more in tax under this Budget. Rents will also be pushed higher as a result of this stamp duty hike, as stated by Paul Johnson of the Institute for Fiscal Studies. This will further squeeze young people, who are already struggling to make ends meet. It is plainly clear: the Government are not prioritising the future of young people as they should. The Bill also perpetuates the Government’s flawed energy policy, which fails to prioritise our energy security. It increases the energy profits levy to 38%, bringing the headline rate on oil and gas activities to 78%, and extends that rate for another year, removing investment allowances. The real-world consequences of this ideological policy are dire. Offshore Energies UK has warned that the change will stifle investment and put 35,000 jobs at risk. If investment falls—the OBR concludes that capital expenditure will be down 26% over the forecast period—the country will become more dependent on imported energy. This will not only compromise the UK’s energy security but expose consumers to price fluctuations, leaving them vulnerable to global supply disruptions. The Government are relying on the levy to help fund GB Energy and support the transition to clean power. However, if investment in UK oil and gas declines, the revenue generated by the levy will diminish, eroding the very schemes that they claim will create a “green energy superpower”. We should be maximising our homegrown energy, not undermining domestic production. There are three other points that I hope the Minister may be able to clear up. First, what are the Government’s plans for the digital services tax, particularly in the light of adverse comments from Washington about the future of the tax in any trade deal? I was in favour of the introduction of the tax as a means of reducing the discrimination against physical retail that has been so damaging to our high streets. Any reassurance would be most welcome. Secondly, the Government acknowledged that the transitional provisions for remittance by non-doms were faulty and helpfully tabled an amendment in the other place, now paragraph 6 of Schedule 9. However, I have been advised by the Chartered Institute of Taxation that this is also defective, so that, for example, individuals who brought money into the UK to buy a house several years ago would now face a big retrospective tax charge. To stop yet further departures from the UK to avoid such perverse effects, could the Minister make a statement that the Government recognise the issue and commit to a further amendment in the next Finance Bill? Thirdly, and this is important, will the Minister repeat the Chancellor’s commitment that the Government will not extend the freeze of income tax and national insurance contribution thresholds beyond April 2028? I conclude by reminding the House that the Government inherited the fastest-growing economy in the G7, with inflation under control, unemployment halved and the deficit reduced, yet the measures in the Bill do nothing to boost growth or to secure our stable future. The combination of the jobs tax, the family farms tax and the education tax has devastated business confidence, put the future of British farming in jeopardy and is disrupting the education of hundreds of thousands of children. This was a Budget that failed to rebuild the foundations of our nation, as promised. It does not deliver the economic growth that we need. It does quite the opposite. The Government pledged that their prime mission would be to boost economic growth. Instead, they have consistently talked down the British economy and growth has evaporated. Ministers must act in the Spring Statement next week to correct the mistakes they made and put the British economy back on track.

18:12:00

My Lords, it is a life-memorable moment to be making my maiden speech in the customary way. I owe my sincere thanks to my noble friends Lady Morris and Lord Stevenson, who supported and introduced me to this place, and to my noble friend Lady Smith, the Leader of the House, who has shown me much kindness and, with the Chief Whip, my noble friend Lord Kennedy, such warm and welcoming leadership. Warmth and kindness are a signature of the culture here, for which my thanks go also to all my new noble friends on these Benches, as well as noble Lords from the other parties and indeed on the Cross Benches, and to Black Rod, the excellent doorkeepers and all the parliamentary and party staff, who have all been so friendly and supportive as I wander around seeking directions and help. I thank them all so much. To my background: my father was working-class and my mother middle-class. After the Second World War, they were both recruited into the Foreign Office. Their paths crossed in Bucharest at the start of the Cold War, where they fell in love. I was born in Tokyo. My first schools were in the Jordanian side of Jerusalem just before the Six Day War, then in South Africa at the height of apartheid, followed by other postings around the world. In our family home, the news was always on, newspapers were eagerly read and round the dining table from a very early age we discussed current and foreign affairs, but it was the Foreign Office way that at 10 I was sent to my other home, an English boarding school, and it provided a stark contrast. I was 13 in 1973, and it was a defining year. It was the time of the three-day week and power cuts. The headmistress, who belonged to another era, had been invited to lunch at our boarding house to raise morale, and I was one of those chosen to sit at her table to learn the art of conversation. Hers covered the evils of the miners’ union and the importance of people knowing their place. Mine was that the miners seemed poorly paid and worked in hard conditions. It was a cue for a frozen silence. I was then told that young women should never pass opinion on politics at the dining table and that if I continued to do so, I would never find a good husband and enjoy a comfortable life. That day I chose which table I wanted to guide my life, and it was the one that taught me to think not just for self but for all, to understand that democracy and equality are hard fought for, precious and should never be taken for granted, and to recognise that politics profoundly matters and that not all politicians are the same. My sister and I were the first young women in our family to go to university. I chose to study politics at Nottingham—well, half the time. The other half I devoted to creative activities and student politics. I joined the Labour Party in 1982 and have worked all my life in the creative industries supporting skills and education. One role for many years was as a member of the Creative Industries Council chairing the skills and education priority of its industrial strategy. That brings me to the Finance Bill before us, which enhances audio-visual expenditure credits for UK visual effects works. The UK is home to world-renowned companies, and this will further support them in an increasingly competitive global market. It builds on the benefits of the current tax reliefs, which together have turbocharged these sectors of the creative industries. That trail was first laid by my noble friend Lord Smith of Finsbury when he was Secretary of State for DCMS. A tax relief for film was the key outcome of his 1997 film policy group, which I served on, working with industry and DCMS to establish a voluntary skills levy. Producers recognised that the growth that the tax relief would incentivise required them to take on greater responsibilities for developing the UK’s largely freelance workforce. It is to their credit and that of previous Governments that there are now voluntary skills levies in place across all the enhanced credit areas with high levels of freelancing. Greater impact could have been achieved through alignment between the statutory apprenticeship levy, those investments and other public investments, but that has yet to be fully realised. The DfE and the Treasury have historically tended to one-size-fits-all policies, modelled on larger companies in traditional sectors, rather than enabling necessary flexibilities better to support the service sectors and small companies that make up the majority of our economy. The Government’s industrial strategy has prioritised the creative industries as one of eight growth-driving sectors. Education and skills is a key area for government and the industries to work on together. It is encouraging to see that with the establishment of Skills England and announcements around apprenticeships and the levy in the Finance Bill, flexibilities will be enabled to help drive success sectorally and regionally. The development of the sector plan for the creative industries provides opportunities for new actions and investments to help close current shortages and gaps that are hampering their further growth and productivity. They are a powerhouse of our economy, with the potential to contribute even more. Finally, I am proud that mine is one of 382 female life peerages that have been created since 1958, the year before I was born, when women were allowed into this House on equal terms with men for the first time. It is the greatest honour of my life to serve in this place. I give my lovingest thanks to my very good husband of many years. Yes, indeed, dear listeners, I did manage to find one. I have much to learn here and will strive to honour my party and the memory of my parents by seeking to contribute to the same high levels that I see and hear others achieve. It is a pleasure and privilege to be alongside them all.

18:19:00

My Lords, it is an honour and a pleasure to follow the excellent maiden speech of my noble friend Lady Caine. It must have been a special delight for her to highlight the importance of the creative industries on the day that the Government announced the creation of a national centre for music and dance as part of their plan for change. The changes will ensure that young people across the country will have greater access to high-quality arts education, and wider creative and sporting activities, as well as access to skills in technology and artificial intelligence. My noble friend has been one of the foremost advocates of the importance of creative education, not just for its own sake but for its impact on success in science, technology, engineering and mathematics. It is due in no small degree to her persistence that, today, Britain is enjoying such success in global markets from film and television to computer games and artificial intelligence. My noble friend brings a valuable new ingredient to the proceedings of this House and we look forward to hearing more from her. The Finance Bill is an important Bill by means of which the Chancellor tackles two essential tasks. The first is clearing up the financial mess left by the irresponsible fiscal policies of the Conservative Government, and the second is laying the foundations for economic growth. The most powerful impact of the Bill on growth is not to be found in individual tax measures, as the noble Baroness, Lady Neville-Rolfe, erroneously argued. Instead, the most important impact on growth derives from the overall fiscal balance. That is because the level of business investment for domestic markets is predominantly affected by the level of total effective demand. It does not matter nearly so much if interest rates or taxation are high or low; if the product cannot be sold due to a lack of prospective demand, there will be no investment, no matter how low taxes might be. Moreover, it is the Government’s commitment to maintain effective demand that fuels the upbeat sentiment that stimulates those all-important animal spirits—the positive sentiments that drive commitment to the future. Hence, although it is important that current spending is kept within the Chancellor’s fiscal rules, any cuts in current spending should at least be balanced by increases in investment spending on infrastructure, support for housebuilding, industrial investment policies and defence. There has been a persistent view in policy circles that investment is somehow an inefficient means of stimulating demand, since investment takes time whereas stimulating consumption has immediate impact. This typically short-termist view could not be further from the truth. The Government’s commitment to public investment is at one and the same time a commitment to long-term demand and commercial profitability, and businesses know that—hence the Chancellor should be congratulated on the fact that, in the face of the dreadful economic inheritance from the Conservative Government, in the Budget she provides a stimulus to effective demand that the OBR estimated at £26 billion. That is the fuel to power the engine of growth. There is one important area of investment in which tax rates really do matter: namely, where the international allocation of investment is concerned. A fine example of that is the television and film industry. As my noble friend Lady Caine noted in her excellent maiden speech, the Finance Bill enhances the audiovisual expenditure credit for the UK. This seemingly small measure builds on the work begun by Chris Smith—now my noble friend Lord Smith—and Gordon Brown, using fiscal incentives to stimulate investment in film and TV production. Today, as a result of those measures, the UK film and TV production industry is thriving as never before. It is worth around £7 billion a year and it produces a range of highly skilled, well-paid jobs. The success of that industry is an example of what can be achieved by a carefully targeted industrial policy linked with the necessary investments in education and training. But this successful example of the use of fiscal incentives in the context of a global industry must be used with care and with an awareness of the dangers of increasing the complexity of the tax system. Complexity generates tax avoidance and undermines any sense of fairness in taxation. It diminishes the economic efficiency of the tax system. In the immortal words of 1066 and All That, tax complexity is “A Bad Thing”. Yet attempts to reduce complexity have repeatedly failed. Consider the history of the Office of Tax Simplification—remember that?—established by George Osborne in 2010 and eliminated in the disastrous mini-Budget of 2022. It is gone without trace. So what are we to do, given the undoubted damage that tax complexity is doing to the growth objective? I propose that we establish a royal commission on taxation, charged with examining the efficiency of our tax system, applying Adam Smith’s principles of taxation and proposing reform. Establishing the commission now will produce the non-partisan proposals that will provide the framework for the radical tax reform that Britain desperately needs and avoid the dangerous trap of piecemeal changes. The major loser would be the thriving tax-avoidance industry. This Finance Bill is but one step on the long road to rebuilding the British economy while facing severe international headwinds. It clears the fiscal decks for the fundamental reforms to come. It should be welcomed.

18:26:00

My Lords, I congratulate the noble Baroness, Lady Caine of Kentish Town, on her eloquent maiden speech. Both she and the noble Lord, Lord Eatwell, referred to the audiovisual industry, or the film and TV industry, and the noble Baroness was right to explain what a successful part of the United Kingdom this is. The noble Lord, Lord Smith, has been praised, understandably, but I extend some praise to George Osborne. He appeared in the credits of a “Star Wars” film, recognising that he took the opportunity to create tax credits that attracted the franchise back into Pinewood. Indeed, further changes have meant that Warner Bros set up a studio. I am sure that, when we are looking at a good film, we can recognise the contributions of all the parties that have been in Government in making sure that we have this thriving industry. On thriving industry, it is important to think about how Finance Bills generally are there to attract investment and raise money, as well as to drive change in innovation and behaviour. I welcome that the 100% expensing has been maintained in this Finance Bill, which is a sensible approach. Clause 56 builds on the Financial Services and Markets Act 2023. On a recent trip to the London Stock Exchange, organised by the Industry and Parliament Trust, I learned about PISCES. Stamp duty exemption is going to be important to attract investment in young companies, so that we make sure that we grow more businesses in this country, rather than just seeing them acquired abroad. I welcome Clause 61, about agricultural property relief. Although I am not going to go into the farmers’ tax, because that is for another Bill, I welcome the environmental management agreements exemption that replaces the exemption for habitats in the Finance Act 1997. As Secretary of State for the Environment, I lobbied to try to make sure that landowners did not stop investing in nature because of this, and I am pleased that the Government have brought through the detailed regulations to make that happen. However, in a number of other clauses, I am trying to understand the psyche of the Government and what they are trying to do to change behaviour. Clause 78 relates to the plastic packaging tax, which is just going up by inflation. The resources and waste strategy, which I principally authored, was intended to make sure that packaging materials had at least 30% recycled plastic and to drive activity towards that. It would be worth while now to do a review of whether that has had the desired impact. In some of my discussions with food companies during the time of Covid regarding the challenge of the cost of living and what measures could be done there, several of the companies said, “Well, it would make more financial sense for our financial director to just pay the tax rather than make the changes”. To their credit, they kept to it, trying to reduce the use of virgin plastic, but I am concerned, with some of the winds that are happening in the world’s economy, about whether we might see any companies going back. So it would be worth while doing a review in that regard. On Clause 76, landfill tax reform is a great example, which is cited around the world in environmental conferences, of a change in behaviour that has basically driven a lot of landfill more to recycling. There may be more to do on incineration, but it has been hugely successful. I noted the significant increase—I think it is about 24%—but I believe that is connected to the fact that we have had high inflation for a couple of years. However, I was concerned about comments made by the Economic Secretary in the other place relating to Clause 79, and this is to do with the soft drinks levy. There is going to be a 27% uplift. Now, this tax initiative did make lots of firms reformulate, which is good for public health and for the prevention of issues later. However, the rationale given by the Minister was simply that, “Oh well, previous Governments hadn’t raised this since 2018”. Part of the issue is that in effect the tax had more or less done its job. I worry about this backdating approach simply because we have not caught up. I am not suggesting that the Government are going to do this, but, if we took the same approach to fuel duty, we would be looking at a 64% increase. So I hope the Minister will rule out any backdating measure. I am conscious that we have an advisory time limit but I have one final point that has been strongly missing, and it comes back to farmers. Despite the fiscal plan on Labour’s website saying there will be investment in reducing tax avoidance, the Prime Minister and the Secretary of State, Steve Reed, have encouraged people to properly manage their tax affairs and advocated tax planning to minimise their tax liability. There is one gap, and that is connected to the tax treatment of double cab pick-ups. The original legal case relates to Coca-Cola. I am conscious that a lot of firms—I am particularly thinking of forestry and many rural farmers—are being hit by this. It really is not fair on them, relating to something that they have invested in to do their business. I ask the Government to think again in their next Finance Bill.

18:32:00

My Lords, I also welcome the noble Baroness, Lady Caine of Kentish Town, to the House. I believe that her worldwide experience, her business expertise in the creative industry and her steely determination from such a young age will be a real asset to the House and I welcome her here today. I come at this issue from a slightly different perspective. While there are many points in the Bill that I disagree with, I accept that it will pass. I want to concentrate on what I see as the chance for a few unintended consequences. As noble Lords are aware, I am a business guy and invest in lots of businesses. I have come across a lot of high net worth non-doms during that time and, for better or worse, a lot of tax advisers. From that, I have learned three main things. First, high net worth non-doms are very mobile; secondly, tax advisers are very risk averse; and, thirdly, tax advisers generally have significant sway over their clients. This leads them to give UK non-doms two bits of advice that I know go against what the Government intend to do. The Minister himself has said they are hoping to attract the best talents from around the world, but I fear this will not be the case. First, in terms of the changes to the transfer of assets from abroad, the Bill intends that non-doms will be taxed only on future overseas earnings. However, my understanding is that tax advisers are telling non-doms that they think this might be applied retrospectively. I know this is not the intention, but HMRC needs to urgently provide clarity on this, because non-doms are being advised that they should leave, and I know that is not what anyone wants. Secondly, the temporary reparation facility is a measure designed to give people a reduced rate of 12% to 15% on any assets they transfer into the UK for a period of three years. Again, this clearly seeks to encourage non-doms to bring those assets into the UK, to the wealth and benefit of the country. Unfortunately, again, tax advisers are highlighting the risk that, in future, HMRC or the courts might reclassify this as a tax avoidance scheme. Again, I know that is not the intent here, but unfortunately that is what tax advisers are currently advising and there is a real danger from that that high net worth non-doms will be put off and, again, will decide to leave as a result. I know that neither of those things is the intention of the Government, so I urge them to urgently put out guidance to spell out that this is not a risk, otherwise—although, as I say, I know this is not the intent—it is likely to happen. I offer these points, hopefully in the spirit of helpfulness, and I hope the Minister will provide the necessary assurances as quickly as possible to make sure that this does not happen.

18:36:00

My Lords, I too congratulate my new noble friend Lady Caine on her excellent speech, which suggests that her husband was lucky to catch her, not the other way round. The Conservatives have been parroting the preposterous claim that last July they bequeathed our Labour Government a fast-growing, resilient economy, despite their 14 disastrous years in government, seeing abysmally low, slow economic growth; falling productivity; falling real living standards for the first time since the 1950s; UK investment as a share of GDP the lowest in the G7 between 2010 and 2022; key public services savaged by austerity; and a cavalier indifference to rising inequality and to communities collapsed by deindustrialisation. The shockingly poor performance of the UK economy in the 14 years after the 2008 financial crisis, almost all under the Tories, stands in marked contrast to the success of the 14 years before the global financial crisis, almost all under Labour. Tory austerity was worse than in any of the advanced economies, and over 80% of cuts were to public service budgets, equivalent to £180 billion in today’s terms, which is more than we spend on health and social care in England. It is why NHS waiting lists are so long, why GP appointments are so difficult to get, why our prisons are full to overcrowding and so on. The Tories’ addiction to public spending cuts was driven by a misplaced faith in neoliberalism, an obsession with cutting the size of the state, reducing the role of government in running the economy or in promoting the common good, relying instead on free market forces and rewarding winners, slashing top rates of income tax on the fortunate few while more than doubling the standard rate of VAT paid by the many. However, the election of Donald Trump has transformed everything. As well as facing the biggest military threat to peace in Europe since the Cold War—and without, it seems, US backing—we are now in the opening stages of a trade war that could cause a global slide into slump. In the face of huge global security threats and geopolitical turmoil, Germany has dramatically changed its fiscal rules and committed to radically higher defence spending, paid for by increased borrowing along with a €500 billion 10-year fund to boost infrastructure investment. EU leaders have recently pledged €800 billion extra to radically increase military spending by allowing member states to take out loans and increase national debt without incurring the usual penalties under the bloc’s strict fiscal rules. Our UK Government are rightly also increasing defence spending, albeit financed by a humongous cut in overseas aid. But nobody seriously thinks we can leave it at that, nor that we can cut front-line services such as health, education or policing. We must therefore make sure that extra defence spending delivers faster domestic growth too, so that a bigger GDP funds our other pressing priorities. The financial markets will have to grasp why today’s new security threats warrant increased defence spending financed by extra borrowing, as all our European partners are doing. Our Labour Government’s duty, together with our partners, is to do whatever it takes to make Britain and Europe safe again. If that means modifying our fiscal rules for these exceptional and exceptionally dangerous times, that is what we have to do. If we had not done something like this in the Second World War, Hitler would have won. Britain rearmed in 1938 by raising defence spending to £400 million, of which £272 million was financed from taxation and £128 million by extra borrowing under the Defence Loans Act 1937. Extra borrowing for defence purposes only could be made possible by issuing special purpose financial vehicles such as defence bonds up to set limits, as some of our European allies already have in mind. The key will be a steady expansion of defence procurement, not a sudden splurge which could benefit US defence contractors but leave British suppliers out in the cold. I very much hope that the Chancellor will break free from Treasury orthodoxy and do this.

18:41:00

My Lords, I am really pleased to have a chance to make a short contribution to this debate on the Finance Bill and to congratulate the noble Baroness, Lady Caine of Kentish Town, on her most eloquent and enjoyable maiden speech. I have been the chairman of the Finance Bill Sub-Committee of the Economic Affairs Committee of your Lordships’ House but we have not been invited to sit this year, which is a polite way of saying that we feel we have been discarded unceremoniously. I am really sorry that we have not been invited to prepare a report on the Finance Bill in the normal way. If we had, one of the areas I would have liked us to look at in depth is the OECD pillar 2 in the Finance Bill. As the Minister will recall, I have raised pillar 1 and pillar 2 a number of times in this House and in fact first raised them in 2013. We are all pleased to see progress in this Finance Bill in Clause 19 and Schedule 4, building on the work of previous Conservative Administrations. It is disappointing to see that in respect of pillar 1, the digital services tax raised only £678 million in 2023-24. Does the Minister agree that this is too low? As the noble Baroness, Lady Neville-Rolfe, has mentioned, if the Government are keen to raise revenue, enhancing DST would be supported by many in both Houses, so it would be interesting to know what he might be thinking about that. However, I accept that we are of course now worried by President Trump’s views on pillars 1 and 2. As the Treasury plans to raise some £2.8 billion from pillar 2, it would be interesting to know what plans the Government have to protect this figure given that Trump has said a list of protective measures will be drawn up by the United States. I remind the House of my membership of the Chartered Institute of Taxation—one of the dreaded tax advisers that the noble Lord, Lord Markham, spoke about—and I am sure Ministers are aware of its observations on the transitional safe harbour routes. It called the top-up taxes of pillar 2 “complicated and burdensome”, so will there be further clarity on these rules? It would be good to hear that. As the noble Lord, Lord Markham, mentioned, the changes to tax of people formerly called non-doms have, unfortunately, proven to be a bit of a disaster. The temporary repatriation facility will have no material effect and in 2024, on a net basis, more than 10,000 millionaires left the UK, more than double the 2023 figure. That equates to over 500,000 average taxpayers, as each of them would have paid at least £400,000 in income tax alone last year. A survey by Oxford Economics estimates that two-thirds of those remaining are thinking of leaving simply due to the tax changes and even the OBR estimates that 15% to 25% of the remaining non-doms may well leave. I cannot believe that the Chancellor’s estimates of raising £13 billion over five years from such people is right; in fact, it has been calculated that it will cost £1 billion, not make £13 billion. Has the Minister had a chance to revise the £13 billion in view of the hard fact that people are leaving the UK in much greater numbers than anticipated? The Minister may now be aware of serious concerns about deficiencies in the legislation regarding so-called double remittances. This needs to be urgently addressed in future Finance Bills. It seems appropriate to mention national insurance, particularly given PMQs earlier today, where I think the Prime Minister was embarrassed to have to admit that the amendment that we tabled in respect of hospices had not been accepted in this House and has gone to the other place. I am grateful to the Minister for once again mentioning the £22 billion. He mentioned “line by line”. He mentioned the OBR’s £9 billion, although he did not mention the £13 billion that no one can find. I cannot find one economic commentator who agrees with the Government, and he makes no mention of the underprovisions that always exist every year, which have been ignored by this Government. Much of the “black hole” has been created by the Government folding to their bosses in the unions and paying public sector wages with no productivity gains, which is a disaster if you want growth as the NHS is included in the growth statistics. Once again, we have to question those claims. Indeed, on statements of economic competence, the last Labour Administration left government with the financial crisis and, of course, left a note apologising that there was no money left in the kitty. Let us not forget that. So, as a result, private businesses are going to suffer now as resources are sucked out of them unnecessarily. The first few months of the new Government have been a disaster fiscally, with the unfortunate announcement on the winter fuel payment, the virtual riots on the streets by our farmers—normally the backbone of our society—and charities, social care homes and even hospices openly hostile to the Government. Let us try to create a better environment for fiscal changes. It is clear that the Treasury has persuaded Ministers to apply taxes which previous Chancellors have wisely resisted. I hope they learn from this and chose to consult more widely before the imposition of new taxes.

18:46:00

My Lord, I too welcome the noble Baroness, Lady Caine of Kentish Town, who clearly brings a wealth of experience to the House. It is always somewhat strange debating a Finance Bill at this end. We cannot amend it; we do not have much time to make our contributions, and it is five months after the measures were first announced in the Budget and a week ahead of the spring forecast, which will provide us with our next update on the state of the public finances. In October, the Chancellor assured people that the spring forecast would not be a fiscal event, and I think everyone would appreciate it if the Minister could repeat that commitment today. Perhaps in that context it is little wonder that these debates can range more widely than the contents of the Bill, but I shall try to reward the Minister’s hard work in preparing for the debate by focusing on four measures that are related to the Bill—one for each of my remaining minutes. The first is the changes to stamp duty, which were touched on by several noble Lords, where the additional relief for first-time buyers has been removed and an additional surcharge for second homes increased. Stamp duty is a terrible tax economically speaking but I understand the temptation to increase it. It was our Government who first introduced an additional rate for second home owners. However, the IFS has said that the measures in the Budget will result in even more unaffordable rents, which is the opposite of what our housing market needs. Does the Government’s assessment of the impact of the stamp duty changes agree with that of the IFS that it will lead to higher rents? The second measure I want to touch on are the changes to the energy profits levy. What assessment have the Government made of the impact of these changes on investment and jobs in the industry and have they made any assessment of the impact on consumers from lower production? More broadly, what is the cost in forgone revenue of the decision to grant no further North Sea licences? Have the Government made an assessment of the emissions impact of importing more gas to meet our domestic needs as we transition towards low-carbon power? The third measure is the welcome extension of agricultural property relief to land management schemes, thereby supporting the success of those schemes, as noted by my noble friend Lady Coffey. Of course, that is against the background of the wider concerns about the impact of restricting APR and BPR, announced in the Budget but legislated for elsewhere. To really understand the impact of these measures, it is important that we understand how much revenue the change to each relief is expected to generate. I asked the Minister this in January, but I think he misheard the question, so I will ask again in the hope of getting a response. Can the Government provide separate estimates for the revenue generated by the changes to APR and the changes to BPR? Fourthly and finally, the Finance Bill sets unchanged income tax rates and thresholds in England and Northern Ireland for the 2025-26 financial year. At the time of the Budget, the Chancellor said this: “Having considered the issue closely, I have come to the conclusion that extending the threshold freeze would hurt working people ... I am keeping every single promise on tax that I made in our manifesto, so there will be no extension of the freeze … beyond the decisions made by the previous Government”.—[Official Report, Commons, 30/10/24; col. 821.] Will the Minister repeat the Chancellor’s pledge today? At PMQs, the Prime Minister failed to do so, so perhaps the Minister can do the Prime Minister’s job for him in this debate.

18:51:00

My Lords, I welcome the opportunity to contribute to this debate on the Finance Bill, particularly as it is the first such Bill from our new Government. I disagree with the noble Baroness, Lady Penn, about the usefulness of the debate; I have found it an ideal opportunity to raise issues. We have the ear of the Minister, who is sitting here and listening to every word we say. In practice, we could raise any issue we like; the breadth of the Finance Bill is such that we are not restricted to narrow topics. The ability to take part in this debate, albeit with a short period, I think is valuable. The good news is that there is very little in the Bill about pensions, although this is the calm before the storm. We have the pensions Bill coming up and, presumably, in next year’s Finance Bill, there will be inheritance tax on unused pensions—perhaps the Minister could confirm that. Three clauses in the Bill deal with pensions. The only material change is in Clause 34, which tells us that administrators now have to be resident in the UK. I am a bit surprised that that was not already the case, but can the Minister give us clue as to the ideas that lay behind that decision, because there is very little in the Explanatory Notes? The main issue I want to raise, in the little time left to me, is the impact on recipients of the state pension of the decision to continue the freeze on income tax personal allowances until 2029, as the previous speaker mentioned. Successive Governments have decided to freeze the personal allowance. It is clearly a good way of surreptitiously increasing the tax burden without touching the standard rate. My main point is that we are storing up a problem for the future with frozen personal allowances, albeit up to 2028-29—I really should not believe rumours, but there are some rumours that maybe that would not be stuck to following the Statement that we expect next week, because it is a way of meeting the fiscal requirements. I ask the Minister: are the Government sticking to the decision to increase personal allowances at the end of the current freeze period? The problem that I wish to highlight and bring to the attention of the Minister is the impact of frozen personal allowances, albeit up to 2029, coupled with a state pension most of which, for people on low incomes, is covered by the triple lock, so you have the frozen personal allowance and the state pension increasing faster than inflation. Using figures from the OBR, I calculate that the impact will be that by 2027-28 the new state pension will be greater than the personal allowance. I think pensioners should pay tax like everyone else, but the problem is that the state pension is not included within the PAYE system. As soon as the income of people on low incomes who depend mainly on the state pension passes the personal allowance, there will be a big political consequence. There will be no way to collect that tax from many low-income pensioners without sending them a brown envelope saying, “You’ve got to pay some money because you haven’t paid enough”. The political downside of that I urge my noble friend to appreciate. For example, let us take someone on £15,000 a year: that is hardly a high income, but it is roughly £2,000 more than the personal allowance. They will be liable for 20% tax on £2,000, which is £400. As they are not part of the PAYE system, they will get that demand for £400 in a brown envelope at the beginning of the next fiscal year. That sounds like a political calamity to me, and I hope my noble friend will be seized of the importance of doing something to avoid this problem.

18:56:00

My Lords, not wholly surprisingly, I will speak to the impact that this Bill, and the Budget which preceded it, will have on investment in sport and physical activity. I regard this as part of the creative industries of which the noble Baroness, Lady Caine, spoke so eloquently in her maiden speech, not least because the creativity part of sport is the original creation of the sport itself. From my experience as a former Minister for Sport and chair of the British Olympic Association for the London 2012 Games, I warmly welcome confirmation from the Government that an extra £9 million a year will support athletes ahead of the LA Olympic and Paralympic Games. It is an increase of 10% on the current settlement, which now means a total investment of £344 million over the cycle. This is welcome news, but not surprisingly, I do not believe it goes far enough, because some proposals in the Bill could wipe out the benefits I have just mentioned. The first is the decision set out in Clause 47 to apply VAT to the independent schools sector. The cost savings urged by government on independent schools to pay for the heavy tax increases, set out by my noble friend Lady Neville-Rolfe, are predicted to have a serious impact on the dual use of their excellent sports facilities by local communities. There is also the loss of sports scholarships and bursaries, which will impact opportunities for talented young people from a wide range of backgrounds. To demonstrate the scale of this support, I drew the attention of the House yesterday to the 14 athletes on Team GB who came from Millfield School and participated in the Paris Olympics. Thirteen of those 14 came through its means-tested financial support mechanism. Those athletes brought home seven Olympic medals and one Paralympic medal—four gold, three silver and one bronze—yet now, sadly, support of this scale across the independent sector is under threat. At the Paris Olympics in 2024, 33% of Team GB’s medallists attended independent schools, yet just 7% of our pupils go to these schools. This demonstrates again how, through sports bursaries and scholarships, the independent sector has become a cornerstone of the sporting success of which we are so proud and yet is now at risk. Sadly, the loss of sporting opportunity in the independent sector is not made up by investment in the maintained sector nor in the wider public sector, although Clause 79, referring to the soft drinks industry levy, may help, despite my noble friend Lady Coffey’s strictures. In that context, I ask the Minister to confirm that the increased revenues from the SDIL will, as now, be ring-fenced to fund the PE and sports premium for primary schools. That would be very important, and I would welcome it if the Minister could confirm that when he comes to wind up. The harsh reality is that we are losing public sector sports and recreation facilities at an alarming rate. This is not a party-political point: 710 local football pitches have been sold since 2010 and ukactive estimates that 400 gyms, pools and leisure centres have already been lost, with a further 2,400 at risk without support. In 2021, Swim England estimated that 1,868 of the 4,336 public pools in England could be forced to close by 2030. State schools continue to sell off their playing fields. As a result, Britain’s prohibitively high levels of childhood obesity are rising and low physical activity levels cost our economy £7.4 billion a year. Surely we can all agree that it is vital we protect the places where local communities can be active. The top of the sports pyramid continues to do well and is supported by the Budget. Our best continue to perform brilliantly across the world, but the heart and base of the pyramid are fracturing. We have old and out-of-date sports facilities; we have poor participation rates; we face growing levels of obesity. We are becoming a second-tier nation with poor and ageing sports facilities, while failing to support our sport and recreation policies. I believe that the Government recognise the challenge and, for my part, there should be all-party support for Ministers if it is openly addressed. In the meantime, despite the Bill’s and the Budget’s focus on revitalising the NHS and other public services, there remains a notable absence of the role that sport, recreation and physical activity can play in tackling the nation’s key policy priorities—and that needs to be addressed.

19:01:00

My Lords, I welcome the noble Baroness, Lady Caine of Kentish Town, to the Benches and look forward to her many contributions in this House. I am grateful to the Minister for setting out the Government’s aims in the Bill and would like to comment on the overall direction of travel, which we see before us, in terms of the Government’s aim of achieving economic growth. This aim of growth is indeed laudable but the measures anticipated in this Finance Bill, along with measures proposed elsewhere, are not the way to promote it. Rather, the evidence is that raising tax, higher borrowing and increased public spending as a proportion of GDP hinder rather than help growth. Here, we have all three. Higher tax of almost £40 billion each year in this Parliament will take money out of the productive entrepreneurial economy. The increase in capital gains tax, both its higher and lower rates, in the energy profits levy for oil and gas firms—up to 38%—in stamp duty on second homes, and in changes to non-doms come on top of the payroll taxes in the employers’ NICs Bill: £25 billion per annum is levied on businesses by lowering the threshold at which employers start paying NICs and increasing the level to 15%. The consequences have already been felt. Unemployment went up in the last quarter of 2024 by 213,000 people to reach 4.4%, up from 3.9% the previous year. Entrepreneurs and businesspeople are fleeing the UK with their assets; my noble friends Lady Neville-Rolfe and Lord Leigh of Hurley have both referred to this. I echo his question about the taxes forgone and the costs. Have any revisions been made to what this is supposed to yield? The impact of higher tax on business and individuals has its mirror in the charitable and educational sector, to which noble Lords on this side of the House have already referred. Under the Bill, VAT will be levied on independent schools, including those which educate children with special needs. Early reports have confirmed that they are cutting staff numbers. They are also reducing the number of bursaries and the range of subjects taught. Pay and pensions are being cut, as well as jobs, and I am afraid that school closures have already been announced—we have had nine announced so far this year. Overall economic growth is now down on expectations. For 2025, we are looking at 0.9% and next year at 1.4%, instead of the rather dismal 1.5%. The state and the public sector are growing, in terms of cost and numbers. The increase in the size of the state has to be paid for by taxing the productive and innovative private sector, and higher borrowing is costing £32 billion a year. At the time of the Budget, the public sector had increased by 28,000 people between July and October. This is the only growth we see from the measures being taken by the Government. There is another, more sinister side to what this Bill and its policies imply: that the Government have declared war on the private sector; that they want to impose penalties on those who succeed, while referring euphemistically to broad shoulders. The truth is that by penalising the private sector in this way, the Government are penalising the whole economy. Despite its apparent move to the right—I welcome the cuts to quangos such as NHS England—Labour still appears to see the world in terms of class division: employers versus employees and haves versus have-nots, but this is myopic. The victims of this Bill are the whole of society: the jobless with no job on offer and none in the offing, the employee with pay frozen and the child whose school closes. To judge by this Bill, we are looking at a revolutionary Government. They threaten to devour not just Britain’s wealth but the freedoms of its people and the settled ways in which they have ordered their society, the fruit of their efforts over centuries, paid for by their work, shaped under the laws they have ordained, and for which people from all political sides have come together to enable a state which knew its place.

19:07:00

My Lords, I welcome my noble friend Lady Caine of Kentish Town to the House and look forward to hearing more from her. The key point is that Governments cannot rejuvenate the economy or reduce the welfare bill without increasing the purchasing power of the bottom 50% of the population. Some 16 million people live below the poverty line and their lack of purchasing power has turned many town centres into economic deserts. The Chancellor must improve their purchasing power, but this Bill does not do that. The Bill continues the Tory freeze of income tax personal allowances. Consequently, more people are trapped into real tax rises. In 2024-25—that is, this year—37.4 million individuals are paying income tax, compared with 30.6 million in 2010. This year, 8.5 million pensioners are paying income tax, compared with 5.69 million in 2010. The erosion of poor households’ disposable income is compounded by continuing the Tory two-child benefit cap and deepened by the removal of winter fuel payments from pensioners below the poverty line. This Bill misses the chance to reduce taxes on the poorest. This year—that is, 2025—the richest fifth will pay 30% of gross household income in direct taxes, compared with 16% paid by the poorest fifth. The richest fifth will pay only 11% of their disposable income in indirect taxes compared with the poorest fifth, who will pay 27%. Altogether, the poorest will pay a higher proportion of their income in taxes, and that is damaging society. Whatever happened to this thing called progressive taxation? The Chancellor could have abolished VAT on domestic fuel and cut the standard rate of VAT to help the poorest, but she did not do that. To appease private equity, the Government did not impose the promised 45% tax rate on private equity managers and made late amendments to the Bill. Who hears the cries of the less well off? They too are crying for concessions. The Bill does little to address tax inequities, and I have time to give just a couple of examples. The Government are continuing with the anti-worker policies: capital gains and dividends are taxed at a lower rate than wages, and recipients of capital gains and dividends do not pay any national insurance, even though they use the social infrastructure. By aligning taxation of dividends and capital gains with wages, the Government could raise billions—some estimates suggest at least £15 billion a year. Can the Minister explain why labour is taxed at a higher rate than the return on investment of wealth? Accountants, lawyers and private equity managers operate through limited liability partnerships. This enables them to dodge national insurance contributions. Partners of LLPs derive most of their income from one source but are treated as self-employed for national insurance purposes. They pay only class 4 national insurance rates but avoid employers’ national insurance contributions. This perk alone saves the partners around £138,000 for every £1 million of profit shared. Partners of just four big law firms benefit from this gift by around £4 billion a year. Add to this the profits shared by partners of other law, accountancy, architecture, surveying and other firms and one can see that the Government could collect billions simply by attacking this anomaly. Can the Minister explain why such anomalies have not been eradicated? Is it really fair that our lower-paid workers pay national insurance but some of the richest do not? To remind the Minister, it is easier to eradicate tax anomalies than punish the disabled with benefit cuts. The Government must improve the economic well-being of the bottom 50% of the population or there is a risk that they will be only a one-term Government.

19:12:00

My Lords, I want to reflect for a moment on the impossibility of achieving the economic growth our country needs when the family-owned businesses, which are some of our most innovative, entrepreneurial and successful enterprises, will be hobbled. The changes to business property relief announced in the Budget place a material uncertainty over the future of family-owned enterprises; as a result, the growth ambitions of the Government and our nation will be damaged. I should declare an interest. I have managed to make a career in a number of family businesses, and, in some way, it is my role to speak for them in this place. I know there is no such thing as unearned income when someone puts the whole of their family’s wealth on the line to provide good jobs and secure careers for those who work alongside them. Family businesses have an eye to the long-term thinking that builds generational wealth in our islands. They spend money locally, and they enjoy the services of local employees for decades. Those sorts of businesses comprise nearly 90% of all firms in our nation. They employ 14 million people—51% of all private sector employment—and represent the spirit of enterprise and aspiration that we see in the trading estates that surround every market town. These are the people who pay their taxes on honest profits. McKinsey tells us that family businesses “focus on purpose beyond profits”, with “a long-term view and emphasis on reinvesting in the business”, combined with “a conservative and cautious stance on finances”. That resonates with me. My grandfather, an Olympic sprinter, told me that nothing less than running 110 yards to everybody else’s 100 would do in our family business. I have combined his hunger for business with my strong work ethic to stand beside loyal friends who have worked alongside our shareholder families for over 40 years. Nothing has pleased me recently more than the son of one of our long-term employees, Curtis, joining us in business. Tim Rix, of the Rix Group in Hull and Montrose, tells us in the Times how the chilling effect of the changes in business property relief has already caused him to stop doing deals, trim back on investment and shelve staff growth. I know Tim’s business well; his family has built it up over six generations. It is a shining example of what patient capital can achieve. But he warns that enterprises crafted over generations can be easily dispersed and lost. Labour’s Budget plans carelessly and recklessly place businesses like his in danger. For a Government apparently fixated on growth since the Chancellor’s damascene conversion at a car factory in Oxford in January, it is odd that they imperil growth in this way. The effect of the BPR plans is to starve businesses of working capital—the lifeblood of next year’s profits and corporation tax receipts—while at the same time put an arbitrary £80,000-a year aspiration cap on profit, because that is the level at which the EBITDA multiplier gets you to a £1 million valuation. It will see diverting cash to less productive uses—unless you are in the life insurance business—and damage incentives to grow and innovate. It amounts to an asset-stripping of that part of the economy with the greatest growth potential. Most businesses are not rich in cash terms. In my own, we reinvest all our money into growing that business. These plans will result in a pivot away from profit. They will drive new core activities to offset future tax liabilities and the preparation of different succession plans. In many cases, these will involve selling assets, diverting investment, cutting hiring or, terribly, doing something completely different entirely. It all exposes how Labour fundamentally misunderstands how business works, whether through the effect on VAT in schools hollowing out rural market towns, stifling innovation by restricting APR relief to schemes run by the Government and not by others, and killing off the country pub. At its heart, we see that Labour does not understand the relationship between profit and loss and the balance sheet, and between revenue and capital, and that today’s working capital drives tomorrow’s profits. To Labour it is just money and, “We’ll have that”. History will show that the plans laid out in the Budget will slowly start to strangle private businesses and instead show a preference for large, debt-fuelled corporations that reshore profit and taxes elsewhere. It is generational investment, long-term thinking and, yes, business property relief, that have helped private business make Britain the world’s sixth-largest economy in GDP terms. BPR is not a loophole, it is a feature. Britain is already poorer as a result of this Budget, but damaging the bedrock of family businesses will impoverish us even further by killing the geese that lay the golden eggs.

19:17:00

My Lords, from these Benches I welcome the noble Baroness, Lady Caine of Kentish Town. We thoroughly enjoyed her very warm speech. She brings an expertise not only in a key industry but in skills development, and boy, do we need that. The Finance Bill, in so many ways, feels like old news, but it is relevant and many of its features will go into effect in the next few weeks. We on these Benches approached our response to this Bill with an understanding of the difficult fiscal position Labour inherited from the Tories. Consequently, we have not objected to replacement of the non-dom regime—though we think it could have used much better and proper consultation—and we have accepted the increase in capital gains tax and the rise in the energy profits levy. We would have also closed existing loopholes in the capital gains tax regime and backdated the increase in the energy levy, as outlined in our general election manifesto. However, we absolutely cannot support a tax on education through the introduction of VAT on independent school fees. Our concerns lie particularly with the thousands and thousands of families with SEN children who do not have an education, health and care plan and who have turned to independent schools because they cannot find available state provision. In some cases, this is because the EHCP assessment process is so long, onerous and costly, but it is also because the hurdle for an EHCP is so high that many children fail to get the early help they need to prevent them falling behind unless they switch to the private sector, and now the VAT costs will further penalise those families. We are also worried about the impact of the increase in alcohol duty, particularly on the whisky and wine industries and the knock-on to the hospitality sector, which already faces so many stresses and new costs—not least the increase in employers’ NICs. I do not understand the Government’s resistance to at least doing an impact evaluation on this sector and all the many ways in which it has been hit post Budget. The hospitality sector and the high street could be so much helped by a proper reform of business rates; we are dismayed by the delay in that process and call for something much more drastic that would make a fundamental difference—a commercial landowner levy. I pivot to an issue raised primarily by the noble Lord, Lord Leigh of Hurley, on which I would go farther than he did. Clause 19 and Schedule 4 bring into UK law the undertaxed profits rule, pillar 2 of the OECD’s project to counter the use of artificial arrangements by large multinationals to shift profits away from the country where they should rightly be taxed to a jurisdiction where tax is low or non-existent. This is known as base erosion and profit shifting, or BEPS, and the biggest culprits, as we all know, are the mega US tech companies. This is a crucial piece of international law which, when implemented, would mean that the UK can charge a top-up tax where BEPS is demonstrated. This would replace the UK’s current 2% digital tax, which, as the noble Lord said, raises the pathetic amount of something like £600 million a year, according to the Treasury. It shocked me—I am not sure whether the noble Lord, Lord Leigh, noticed this, because it slipped by most of us—that on 17 January the PRA and the Treasury announced that they would delay beginning the implementation of this undertaxed profits rule until 2027; it had already been postponed once to 2026. This is even though the anticipated tax revenue is more than £2 billion a year; the noble Lord cited the updated figure of £2.8 billion a year. The reason the Government gave was that: “This allows … time for greater clarity to emerge about plans for its implementation in the United States”. Even more significantly, the PRA has paused until further notice its firm data collection exercise, which is a vital step in bringing us to a point where we could support the implementation of this rule. In effect, the PRA and the Treasury might just as well have written that they will close their eyes to tax avoidance by the US mega tech companies because they are afraid to annoy President Trump and Elon Musk. Will the Minister explain to me why—at a time when we are looking at cuts in benefits to disabled people, there is pressure on the public sector in every direction and we have to increase defence—we will make a £2.8 billion annual gift to tax avoiders when these other measures are necessary? The UK’s economic numbers are not in a happy place, as many have noticed. GDP declined in January and the drop in construction is particularly worrying. The Government seem to be tackling the problem with answers that in some ways are too simplistic, and I do not hear them being challenged much on it. Diverting pension money into illiquid, high-risk investments may sound like an excellent strategy, but it is utterly unconvincing until we get safeguarding for small pots. Not a word has been said on that issue. Updated public/private partnerships can work to bring in private money, particularly for infra- structure investment, but only under limited and highly controlled circumstances. I had to sit and watch from the board of TfL the last Labour Government enter into a completely insane public/private partnership for the London Underground. It was the flagship PPI arrangement, but predictably collapsed at a cost to the taxpayer and the London fare payer of many billions of pounds. At TfL I was told the loss was £11 billion; the latest reports now estimate it at closer to £20 billion. There are limited circumstances in which this engagement can be used; it has to be done with a very open-eyed and carefully crafted set of rules. I beg the Government not to be naive in the way they were a decade ago. I accept that the international backdrop of live wars and trade wars would be a challenge to any Government, but in these circumstances we need to know who our real friends are and stand with them. On this theme, I urge the Government not to be naive in dealing with the United States. The UK steel industry is the first UK casualty to the Americans, but it will not be the last. Any trade deal on offer by Trump will be one-sided. If it is not, the Americans will simply renege when it suits them, as they have with Canada and Mexico. That should be a salutary lesson. Getting closer to Europe and into the customs union should be plan A, not plan B or C. That strategy alone would seriously strengthen our hand with the Trump Administration.

19:26:00

I thank the Minister for listening so carefully to this debate and welcome the noble Baroness, Lady Caine. I was so pleased that she talked about politics at the table; it is a privilege for us that she has joined this House, and we look forward to hearing from her in future. As the noble Baroness, Lady Penn, pointed out, we are looking at a Bill from a little while back. It went in the oven more than four months ago and comes to us like a slow-roast goose. Just before it went in, the OBR was allowed to have a look and, if noble Lords remember, was rather unkind. Very soon afterwards, public market investors took a look, sold off UK gilts—the 10-year gilt has not come back to the previous level—and said they did not want to see another goose any time soon. We already know what the public markets thought about this Finance Bill at the time. It is a reminder to us, with the perspective of time, of how important fiscal policy is and how impactful a Budget can be for jobs, investment and prices. This Budget will be remembered primarily for allowing, and partly driving, a degree of unemployment through policy. It will be remembered for its impact on jobs, for slowing private sector investment and for allowing a degree of tax migration, as raised by the noble Lord, Lord Leigh. On jobs, the Government like to talk about growth—we all want to—but unemployment among young people is moving up sharply. There are 640,000 unemployed people under 24; that is the age group in which many are in education, but that number is approaching the cohort size of the age group. Their cohort sizes are smaller than ours were when we were young. There are at least 750,000 unemployed people under 28 and the unemployment rate for under-28s is in the mid-teens at the moment. It is going up sharply and has been doing so months ahead of this national insurance change. The noble Lord, Lord Eatwell, always helpfully updates us in these Treasury debates with a little macroeconomic insight and reminds us that there might be public or fiscal demand and a stimulus in the economy. That might be true, but it is not particularly helpful for an unemployed 24 year-old and is not coming through any time soon. It is the Keynesian thing about imagining aggregate demand, the long-term future and what might happen on a macro level. It will not help unemployed young people today. It will not help an unemployed economics graduate, who might be rather disappointed with their status. Thinking about employment, the only source of new growth is going to be from the private sector. The problem here is that the private sector is going to need the economy to be taxed a little less than it is currently. We have the tax to GDP ratio going through 38% to now 39%. This level of taxation on the economy may be the level where the tax yield can go no higher. We may already be at the limit of yield—not of tax rates or levels, but of the actual yield, the amount of money that the Government can take out of the economy, at this current time. The reason why that is so sensitive is that the tax system is very concentrated. We have 2 million to 3 million people in the country paying the large majority of all taxation—not just of income tax but of all tax—and the concentration is close to being around 2 million people. So migrations out of the country of higher rate taxpayers in the tens of thousands could be very dilutive to our tax base, which is why the comments of my noble friend Lord Leigh about non-doms really matter. We asked the Minister a few weeks back if the Treasury had numbers on departures of wealthy people, and the reply was that it did not, because HMRC does not collect the data. That is a real shame, because we have had a problem with population forecasting in the UK. One of the reasons why the Government have had to recognise a higher population—another million people who need public services—is that there was an underestimate of the number of people in the UK. Now, we might be misestimating the population because of population movement out. It is very important that the Government have a good grip on this, and I wonder whether the Minister could comment on that. On non-doms, the focus of the Government’s discussion has been on foreigners and their position in the UK, and my noble friend Lord Leigh asked some good questions about that, in particular whether the yield from non-doms of £13 billion over the next five years will be achieved. It seems most unlikely, but it would be helpful to have an update on that. Much more sensitive, and not commonly talked about, is the movement of doms, of UK taxpayers moving out of the UK. They are not non-doms, they are Brits, and they may also be moving in the tens of thousands. They are not in this same topic, so we need to get a grip of what is happening here. For example, in the Budget, they moved the inheritance tax rules to a residency basis. The issue with being UK domiciled—which we all are in this Chamber—is that inheritance tax goes with domicile, so that, even if you leave the UK, you would still be subject to inheritance tax. Everything has been moved onto a residency basis, meaning that everybody in this Chamber, and everybody in the UK, who might choose to no longer be resident, would no longer be subject to inheritance tax. It creates a tremendous incentive for certain types of wealthy people to leave the UK. Would the Minister comment on this adjustment, and to what extent the Treasury has looked at what might happen to inheritance tax? As an aside, it is relevant to an issue that came up in the elections Bill a couple of years ago. We extended the franchise out for years and years, but part of the reason for that was that people were still subject to UK taxes. Now, we have brought the tax horizon right in. It is only at about six years, at the non-res limits, when people can leave the country. Looking at investment and the private sector, my noble friend Lady Neville-Rolfe talked about the importance of investment in the energy sector. The Budget took another look at North Sea oil in the energy profits levy, and the Government’s position seems to be somewhat fluctuating. It would be helpful to get a comment from the Minister on where he thinks this is going. It is a fraught area of public policy and everybody can see that energy policy and dependence, or non-dependence, on oil is a difficult area. Whether or not the levy is useful in increasing taxation from North Sea oil, the shutdown process is now far advanced. That is important, because this Budget may have been the last time when the Government could moderate the shutdown of North Sea oil, in case policy was to change. A future Government, even this Government, might pause before shutting down North Sea oil, which still produces a million barrels a day of crude. The shutdown is extremely bad news for the public exchequer, so when we accelerate the shutdown, we bring the decommissioning costs much closer. These are in the tens of billions, so it is not just that North Sea oil still employs tens of thousands of people in the country today, it is that decommissioning costs are very real. Perhaps the Minister could comment on expectations of the timetable for the shutdown, and whether decommissioning is coming sooner, or can be mitigated in any way? This is the issue of the full removal of all the oil rigs and the restoration of the seabed. More broadly, the Finance Bill may have been a missed opportunity to improve the investment incentives into the UK economy. As mentioned by my noble friend Lady Coffey, there is also the importance of whether we could moderate stamp duty and taxes for the trading of small company shares, improve the allocation of DC pension funds into the UK—that is the issue of whether they are obliged to hold only public stocks—and accelerate the Solvency II changeover for insurance companies invested in the UK. I am sure that all of these will be dealt with by the Government in due course, but, to the extent that the Minister can make any comments on allocating or incentivising domestic investment, that would be helpful. It is important at the moment, because investment in the UK is going through a moribund period and some level of government support and encouragement is important. The noble Lord, Lord Hain, made an interesting comment about war bonds. There is another entity that needs investment, which is His Majesty’s Government. We might think, in a benign financing period, that His Majesty’s Government would always be able to raise debt. Other countries incentivise their citizens to hold government stock: Italy and Japan do. We might think creatively—it would be interesting if the Minister could comment on this—about whether we could incentivise British citizens to hold gilts. At the moment, our citizens are holding more than £1 trillion in cash. It is mostly in bank deposits, but also in other forms of savings. It is a meaningful amount of money that could be moved, somewhat, into government stock, and stabilise our own funding needs, which may be very challenged in the future because there is so much issuance coming from the United States and elsewhere. So we should at least think about how we might attract our own savers towards our own Government’s needs. Would the Minister comment on that? Finally, I will say that the Budget is created within the constraints that the Government set themselves and are well publicised. But, in reality, the Budget comes within a financing envelope that is very constrained for the Government. Their room for manoeuvre is constrained. At the perspective of four months since the Finance Bill came out, now that we have had a little time to see this Budget, we can see that the Government went towards the edge of that envelope, and the economic consequences of going to the edge are, in a sense, all around us.

19:38:00

My Lords, it is a pleasure to close this Second Reading debate on the Finance Bill. I am grateful to all noble Lords for their contributions and questions. I join others in warmly congratulating my noble friend Lady Caine of Kentish Town on her fascinating maiden speech. My noble friend brings a wealth of experience to your Lordships’ House, particularly in the creative industries that she spoke about with great expertise today. I am very pleased that she chose the table that she did and I very much look forward to working with her, and to her further contributions in debates such as this. Upon taking office, this Government inherited three distinct crises: a crisis in the public finances; a crisis in our public services; and a crisis in the cost of living. As my noble friend Lord Eatwell said, that included a £22 billion black hole in the public finances, public services at breaking point, with NHS waiting lists at record levels, and working people suffering the worst cost of living crisis in a generation, inflation having reached over 11%. Faced with this reality, any responsible Government would have needed to act. That is why we took action in the Budget to wipe the slate clean, to repair the public services, to protect working people and to invest in Britain. We did so in the fairest way possible by, contrary to what the noble Baroness, Lady Neville-Rolfe, said, keeping our promises to working people not to increase their income tax, national insurance or VAT. However, we needed to take some very difficult decisions elsewhere on tax, including some of those contained in the Bill. They were difficult decisions but they were the right ones, because not acting was simply not an option. As a result of those decisions, as my noble friend Lord Eatwell also said, we have created a foundation of stability on which we are now taking forward our agenda of growth and reform. It is notable that during the many debates on this subject since the Autumn Budget, including today, we have not heard any alternative put forward by the party opposite: no alternative for dealing with the challenges we face or for restoring economic stability, and therefore no plan for driving economic growth. They have shown no humility for the economic damage they inflicted on this country over 14 years, they have come up with no alternative plan and they have provided no apology. It falls to this Government to clean up the mess that we inherited. The noble Baronesses, Lady Neville-Rolfe and Lady Lawlor, and the noble Lord, Lord Altringham, spoke about economic growth. As my noble friend Lord Hain said, there was, of course, no bigger failure by the previous Government than their failure on growth. The combined effect of their austerity, their disastrous Brexit deal and their Liz Truss mini-Budget was devastating. Had the economy grown by the average of other OECD countries over the past 14 years, it would be more than £150 billion larger today. The OECD’s interim economic outlook, published on Monday, shows that in a changing world, as the noble Baroness, Lady Kramer, observed, increased global headwinds are affecting all G7 economies. Although the UK is forecast to be Europe’s fastest-growing G7 economy over the coming years, second only to the US, the structural problems in our economy run deep. That is why the Government are going further and faster to protect our country, reform our public services and boost growth. Our strategy consists of three key elements: stability, investment and reform. It recognises that, first and foremost, it is businesses, investors and entrepreneurs that drive growth, as many have said today, alongside a Government who systematically remove the barriers that they face. It includes launching the biggest sustained increase in defence spending since the Cold War; fundamentally reshaping the British state to deliver for working people and their families; and taking on the blockers to get Britain building again. The noble Baronesses, Lady Neville-Rolfe and Lady Kramer, spoke about the changes to employer national insurance contributions, which are being legislated for separately in the national insurance contributions Bill. We have always been clear that there are costs to responsibility, and the increase in employers’ national insurance contributions will have consequences for businesses and beyond. But the consequences of irresponsibility, for the economy and for working people, would have been far greater. We saw that with the Liz Truss mini-Budget, which crashed the economy and saw typical mortgage payments increase by some £300 a month. The noble Baroness, Lady Penn, asked about the Spring Statement. I am happy to confirm that there will continue to be only one fiscal event a year: the Budget every autumn. She will have to wait, I am afraid, as will my noble friend Lord Davies of Brixton, until next Wednesday to hear what the Chancellor has to say. The Bill before your Lordships’ House spans three distinct categories: first, the measures the Government have taken to deliver on the specific commitments made in our manifesto; secondly, measures to put the tax system on a fairer and more sustainable footing; and thirdly, measures to improve health outcomes and support the clean energy transition, in line with our growth strategy. The Government made a series of commitments in our manifesto that are being delivered through the Bill. They include our commitment to remove the outdated concept of domicile status from the tax system and ensure that everyone who is a long-term resident in the UK pays their taxes here. This was focused on by the noble Lords, Lord Markham, Lord Leigh of Hurley and Lord Altringham. In its place, the Bill introduces a new residence-based regime from April. This new regime will be internationally competitive and focused on attracting the best talent and investment to the UK. During the passage of the Bill, as mentioned by the noble Baroness, Lady Neville-Rolfe, the Government tabled a number of minor technical changes and administrative easements to ensure that the new regime works as intended. As part of this, we have made changes to ensure that no tax will be due in any past or future tax year for taxpayers in circumstances where they were previously UK-resident and taxed on the remittance basis; they remitted foreign income or gains during a period of long-term non-residence before 6 April 2025; and they have enjoyed or continue to enjoy the benefits of the remitted foreign income and gains after resuming their UK residence. These changes provide certainty for taxpayers and ensure that no tax will be due in these circumstances. The existing remittance rules will continue to apply in circumstances not covered by this amendment so that, where a non-taxable remittance has been made prior to 6 April 2025, a second remittance of the same income or gains remains taxable. The noble Lords, Lord Markham and Lord Leigh of Hurley, asked about the impact of these changes. We are confident that our new regime will remain internationally competitive and focused on attracting the best talent and investment to the UK. Evidence from the previous Government’s reforms to the non-dom regime in 2017 show that the vast majority of former non-doms who became liable for tax on their worldwide income and gains remained UK-resident and continued to contribute to the UK economy. The new regime will also be more competitive for new arrivals over their first four years of UK residence than the current rules. The noble Lord, Lord Leigh of Hurley, and the noble Baroness, Lady Lawlor, asked about the amount raised, which we remain confident of. The OBR has certified that the non-dom reforms the Government are legislating will raise £33.8 billion over the forecast period. The noble Lord, Lord Markham, raised concerns about changes being made to the transfer of assets abroad rules in relation to the reforms to non-domicile status. The transfer of assets abroad legislation is a wide-ranging anti-avoidance provision aimed at preventing individuals who are UK resident avoiding a tax liability by transferring assets to a person abroad. I reassure the noble Lord that the changes to these rules will not displace the effect of the old remittance basis rules for the years in which they had effect, such that a tax charge will continue to arise only at the point of remittance. The noble Lord, Lord Markham, also raised a concern that the introduction of the temporary repatriation facility—the TRF—could lead to retrospective taxation if the Government choose to change the rates of tax charged in the future. The rates of the TRF charge are set out in the Bill and will be set at 12% for the tax years 2025-26 and 2026-27, and at 15% for 2027-28. Our manifesto also pledged to “end the VAT exemption … for private schools to invest in our state schools”. The Bill delivers on that commitment, as focused on by the noble Baroness, Lady Kramer. Some 94% of children in this country attend state schools; however, too many children do not get the opportunities they deserve because these schools are too often held back by a lack of investment. That is why we introduced VAT on private school fees from 1 January this year, to secure the additional funding needed to improve educational outcomes across the UK. Despite what the noble Baroness, Lady Neville-Rolfe, seemed to suggest, the evidence to date supports the assessments we have made and we remain confident in them. Another key manifesto commitment relates to the energy profits levy on oil and gas companies, mentioned by the noble Baroness, Lady Neville-Rolfe. The Bill fulfils our promise to increase the rate of the levy by three percentage points to 38%. It also extends the levy by one year and removes the 29% investment allowance. Although oil and gas will continue to have a role in the energy mix during the transition, we must drive public and private investment towards cleaner energy. The Government recognise that oil and gas will continue to have an important role. The sector continues to benefit from £84 of tax relief for every £100 of private investment. It will also continue to benefit from a decarbonisation allowance at a similar value of relief as it received prior to the increase in the rate of the energy profits levy. The noble Baroness, Lady Penn, and the noble Lord, Lord Altrincham, asked about the impact on jobs and investment as a result of this change. The Government are committed to managing the energy transition in a way that supports jobs in existing and future industries. That is why, beyond the abolition of the investment allowance in the energy profits levy regime, we have not made any additional reductions to the level of tax relief that the sector can claim. We are also taking steps to give the sector and its investors long-term certainty by publishing a consultation looking at how the fiscal regime will respond to oil and gas price spikes after the energy profits levy ends. An impact assessment was also published at the time of the Budget. The Bill also contains a range of measures to make the tax system fairer and more sustainable and to restore stability to the public finances. The noble Baronesses, Lady Neville-Rolfe and Lady Coffey, and the noble Lord, Lord Fuller, spoke about the reforms to agricultural property relief and business property relief, which will be legislated for separately. Under the current system, 100% relief on business and agricultural assets is heavily skewed towards the wealthiest estates. According to the latest data from HMRC, 40% of agricultural property relief is claimed by just 7% of estates making claims. That amounts to just 117 estates claiming £219 million of relief. It is neither fair nor sustainable to maintain such a large tax break for such a small number of claimants, given the wider pressure on the public finances. The new system, which will apply from April next year, maintains significant tax reliefs for estates while supporting the public finances in a fair way. The reliefs sit on top of existing spousal exemptions and nil-rate bands. Therefore, a couple with agricultural or business assets will typically be able to pass on up to £3 million-worth of assets without paying any inheritance tax. I am pleased to say that I did hear the noble Baroness, Lady Penn, clearly on this occasion with her question. The reforms to APR and BPR from April 2026 are expected to raise £520 million in 2029-30. This is a combined policy across the reliefs, rather than separate policies for each relief, so a breakdown of the revenue between them is not available. The noble Baroness, Lady Coffey, asked about double-cab pick-ups. The change announced at the Autumn Budget 2024 will be implemented in April 2025, and HMRC has put in place extensive transitional arrangements for businesses which purchase, lease or order a double-cab pick-up prior to this. As a result, the charge will not impact the capital allowance’s treatment of anyone who already owns a double-cab pick-up or who purchases one before April 2025. For employers and employees with a benefit-in-kind currently or who purchase, lease or order a DCPU before 6 April 2025, the existing treatment will continue to apply until the earlier of the disposal lease expiry or 5 April 2029. There are alternative vehicles with the same off-road and haulage capabilities that are still treated as goods vehicles, such as single-cab pick-ups. The noble Baroness, Lady Neville-Rolfe, asked about the digital services tax. The UK’s objective has always been to ensure that all businesses pay their fair amount of UK tax on the value they derive from the UK market. The UK remains committed to removing a digital services tax once the pillar 1 global solution on international tax is in place. The Government are looking forward to working with the new US Administration to understand their concerns regarding the DST and to consider how these can be addressed in a way that preserves the DST’s policy objectives. The noble Lord, Lord Leigh of Hurley, and the noble Baroness, Lady Kramer, asked about the position of the US Government on pillar 2. The UK and the US continue to enjoy a strong relationship, as the Prime Minister’s recent visit to Washington demonstrated. We recognise that the US Administration have concerns about pillar 2, and the Government are looking forward to engaging with the US to work through these concerns, alongside other members of the inclusive framework. My noble friend Lord Davies of Brixton asked about the rationale for requiring administrators of UK-registered pension schemes to be UK residents. Under existing rules for such schemes, the scheme administrator can be resident in the EEA, which can make enforcement of tax debts from the scheme difficult and costly for HMRC. This requirement will support HMRC’s enforcement activities, as there will be a UK resident for it to engage with. The third and final set of measures in the Bill seek to reduce health-related harm, support the clean energy transition and fund our vital public services. As our growth strategy makes clear, improving health outcomes is essential for delivering resilient long-term growth. Transitioning to net zero is central to this mission, and that is why the Government are capitalising on new opportunities and investment in clean energy industries right across the UK. The noble Baroness, Lady Kramer, spoke about the impact of alcohol duty changes on pubs. Alcohol duty rates on non-draft products increased in line with RPI from February this year. However, nearly two-thirds of alcoholic drinks sold in pubs are served on draft. Therefore, instead of uprating these products in line with inflation, the Government are cutting draft duty by 1.7%, which means a penny off a pint in the pub. Overall, this change will reduce the total duty bill for eligible businesses by up to £100 million a year. The noble Baroness, Lady Coffey, spoke about the soft-drinks levy. Based on evidence of the soft-drinks levy’s impact to date, the Government anticipate further product reformulation as a result of this measure, and this is reflected in the OBR-certified costing. This announcement will protect the real-terms value of the SDIL and maintain the incentives for manufacturers to reduce sugar content. This is not a retrospective tax: the new rates will apply only from 1 April. Historic tax rates and treatment will not change. The noble Lord, Lord Moynihan, spoke powerfully about the importance of school sports and about childhood obesity. As I understand it, revenues from the soft-drinks levy are not formally allocated to any individual spending programmes. However, since the introduction of the SDIL, the Government have helped schools support healthier and more active lifestyles through expanded investment in the PE and sport premium, and this will continue. This Bill delivers on the Government’s manifesto, puts the tax system on a fairer and more sustainable footing, supports the transition to clean energy and improves health outcomes. It is a Bill to fix the foundations of our economy by repairing the £22 billion black hole in the public finances that we inherited. That has involved making difficult but responsible choices to wipe the slate clean, repair public services, protect working people and invest in Britain. These decisions have been taken in the fairest way possible, by keeping our promises to working people not to increase their national insurance, VAT or income tax. As a result of these decisions, we have created a foundation of stability on which we are now taking forward our agenda of growth and reform. Low growth is not our destiny, but growth will not come without a fight. That is exactly why the Government are going further and faster to unlock the full potential of the economy. Bill read a second time. Committee negatived. Standing Order 44 having been dispensed with, the Bill was read a third time and passed.