Local Government Finance Act 1988 (Prescription of Non-Domestic Rating Multipliers) (England) Regulations 2026

Lord Livermore Excerpts

Wednesday 11th February 2026 Lords Chamber

Moved by

[Lord Livermore]

That the draft Regulations laid before the House on 7 January be approved.

Relevant document: 48th Report from the Secondary Legislation Scrutiny Committee (special attention drawn to the instrument). Considered in Grand Committee on 10 February.

Motion agreed.

Local Government Finance Act 1988 (Prescription of Non-Domestic Rating Multipliers) (England) Regulations 2026

Lord Livermore Excerpts

Tuesday 10th February 2026 Grand Committee

Moved by

[Lord Livermore]

That the Grand Committee do consider the Local Government Finance Act 1988 (Prescription of Non-Domestic Rating Multipliers) (England) Regulations 2026.

Relevant document: 48th Report from the Secondary Legislation Scrutiny Committee (special attention drawn to the instrument)

[The Financial Secretary to the Treasury (Lord Livermore) (Lab)]

My Lords, this debate will also consider the take-note Motion tabled by the noble Lord, Lord Clement- Jones, on the Non-Domestic Rating (Definition of Qualifying Retail, Hospitality or Leisure Hereditament) Regulations 2025.

These statutory instruments form part of a wider package of legislation that gives effect to the new business rates multipliers for qualifying retail, hospitality, leisure and high-value properties. I thank the Secondary Legislation Scrutiny Committee for the detailed and thoughtful consideration of these statutory instruments in its 40th and 48th reports. Business rates are based on a property’s rateable value and a multiplier for each tax year. In the Autumn Budget 2024, the Government announced a comprehensive set of reforms to the business rates system in England, including the introduction of three additional multipliers from April 2026.

The three new multipliers are: a small business retail, hospitality and leisure multiplier for qualifying retail, hospitality and leisure properties with rateable values below £51,000; a standard retail, hospitality and leisure multiplier for qualifying retail, hospitality and leisure properties with rateable values of £51,000 to £499,999; and a high-value multiplier for properties with rateable values of £500,000 and above. In the Budget last November, the Government announced the rates for these new multipliers. These new rates will deliver permanently low multipliers for eligible retail, hospitality and leisure properties with rateable values below £500,000.

The Local Government Finance Act 1988 (Prescription of Non-Domestic Rating Multipliers) (England) Regulations 2026 prescribe the circumstances in which the new multipliers will apply. The new multipliers will replace the pandemic-era retail, leisure and hospitality reliefs that currently apply. These reliefs were introduced on a temporary basis in 2020, recognising the exceptional circumstances of the time. Continuing these reliefs would cost around £1.7 billion per year. The new multipliers will benefit over 750,000 retail, hospitality and leisure properties. However, unlike the existing relief, they are permanent, thereby providing businesses with greater certainty and support. They are also not subject to a cash cap, meaning that all qualifying properties in a retail, hospitality and leisure chain can benefit. Taking into account the upcoming business rates revaluation, the tax rate that retail, hospitality and leisure properties on the small business multiplier will pay next year will fall by nearly 12p overall. Similarly, the rate for retail, hospitality and leisure properties on the standard multiplier will fall by 12.5p compared with what they are paying now.

To ensure that support for the high street is sustainable, the Government will fund these new multipliers through higher rates on the top 1% of properties, those with rateable values of £500,000 and above. From April, the most valuable properties, such as large distribution warehouses occupied by online giants, will pay a tax rate that is 33% higher than that paid by small high street properties.

I turn to the Motion laid by the noble Lord, Lord Clement-Jones, which relates to the Non-Domestic Rating (Definition of Qualifying Retail, Hospitality or Leisure Hereditament) Regulations 2025. These regulations set out the eligibility for the new multipliers and passed into law last year. The Government’s objective in setting these regulations was to reflect the same definition for eligibility as the existing retail, hospitality and leisure relief. We want sectors that benefited under the previous relief to continue benefiting under this new relief. For example, under the existing relief, businesses benefit if they are wholly or mainly used for retail, hospitality or leisure purposes. That includes the sale of most goods, services, food and drink or entertainment as well as accommodation to the public. These requirements are the same under the new relief.

Similarly, under the existing relief, businesses benefited only where they were used for in-person activity. The same principles apply under the statutory instrument that we passed last year. The Government have retained the same approach to ensure continuity in our support for the sector while making this support permanent and uncapped.

The new multipliers are being introduced alongside a revaluation of non-domestic properties, which the Valuation Office Agency carries out independently every three years. Currently, property values are based on values from 2021, during the pandemic. Values were generally lower at this time due to the unusual economic situation that the pandemic created. Many properties are therefore seeing their rateable values increase at this revaluation, reflecting post-pandemic recovery.

To support affected businesses, the Government announced in the Budget a significant support package worth £4.3 billion over the next three years. First, we are implementing transitional relief, which will cap increases next year by 5% for the smallest properties and up to 30% for the largest properties. Secondly, we are expanding the supporting small business scheme. Currently, the scheme caps the bill increases of those losing some or all their small business rates relief or rural rates relief. We are expanding it to those which are currently eligible for the 40% retail, hospitality and leisure relief. The supporting small business scheme will cap bill increases at the relevant transitional relief cap or £800 per year, whichever is higher.

Together, these schemes will mean that the majority of properties facing increases will see them capped at 15% or less next year, or £800 for the smallest. Even after the revaluation, around a third of properties will pay no business rates at all as they receive 100% small business rate relief. A further 85,000 properties will benefit from reduced business rates as this relief tapers. We have also extended the small business rate relief second property grace period from one year to three years, to support small businesses as they grow.

Following the Budget, concerns were raised about how the valuation methodology for pubs was applied. We have listened and responded to those concerns by launching a review into how pubs are valued for business rates. This review will also cover how hotels are valued and will include extensive engagement from valuation experts, businesses and their representatives. It will report in time for any decisions that follow to be implemented for the 2029 revaluation.

In the meantime, we are taking steps to support pubs for not only next year but the next three years. From April, pubs and live music venues will receive 15% off their new business rates bill on top of the support announced in the Budget. Bills will then be frozen in real terms for a further two years. This support is worth around £1,650 to the average pub and will mean around three-quarters of pubs seeing their bills either falling or remaining the same next year. This decision will mean that the amount of business rates paid by the pub sector as a whole will be 8% lower in 2028-29 than it is today.

The Government are also committed to going further to reform the business rates system to incentivise more investment. That is why we published a call for evidence on the next phase of business rates reform in November last year; that consultation will close later this month, and the Government will respond in due course. We recognise that transforming the business rates system is a multi-year process, and we are committed to working with stakeholders throughout this process to achieve meaningful change.

The reforms being delivered through these statutory instruments will benefit over 750,000 properties across England while ensuring that the top 1% most expensive properties, including those used by online giants, pay their fair share. They will support investment and create a fairer business rates system. I beg to move.

[Lord Clement-Jones (LD)]

My Lords, I wish to speak to the Motion standing in my name on the Order Paper.

I have not secured this debate to oppose the Government’s ambition to support the high street. Permanent lower multipliers for retail, hospitality and leisure are, in principle, a welcome step towards stability. Instead, I have tabled this Motion to highlight a critical flaw in the definition of who qualifies for this support. By drawing the lines of eligibility too narrowly, these regulations inadvertently exclude the engine room of our £8 billion music industry and the R&D hubs of our visual arts sector, threatening the very existence of the UK’s grass-roots creative infrastructure.

Our recording studios face a perfect storm and I know that the noble friends of the Minister, the noble Lord, Lord Brennan, and the noble Baroness, Lady Keeley, are both very supportive of what we are trying to highlight today and regret that they unavoidably cannot be here to say so. I know that the noble Lord, Lord Berkeley of Knighton, would also want to say something if he were able and did not have other engagements. Under the 2026 revaluation, which coincides with these new multipliers, these businesses face an average increase in rateable value of 45%, with some seeing hikes of nearly 100%. Simultaneously, because Regulation 3 excludes them from the retail, hospitality and leisure RHL category, they are denied the lower tax multiplier that their neighbours on the high street will receive.

The Music Producers Guild has provided alarming evidence that 50% of studios surveyed are considering closure within the next year. These businesses operate on ultra-thin margins, often requiring 85% occupancy just to break even. They compete in a global market. If it becomes too expensive to record here, artists will simply move to eastern Europe or the United States. We are already seeing top UK artists recording major projects abroad. The urgency cannot be overstated. I have seen correspondence from the Music Venue Trust highlighting a terrifying reality: directors of these businesses are running their figures for April and realising they will be insolvent. Under HMRC rules, to continue trading would constitute what is called fiscal recklessness, risking personal liability. This means we risk a wave of closures before the first bills even land, simply because the Government have failed to provide certainty.

Let me draw the Committee’s attention to the 40th report of the Secondary Legislation Scrutiny Committee. The committee explicitly noted the submissions from UK Music and the Music Producers Guild regarding this exclusion. The committee highlighted a glaring inconsistency in government policy. Film and TV studios currently benefit from a specific 40% business rates relief, which the Treasury confirmed will continue. The SLSC invited this House to question the Minister on this matter, so on what basis does the Treasury protect the infrastructure of our film industry while the infrastructure of our music industry, facing identical economic pressures, is left to face what the sector describes as an existential threat?

The Government’s justification for excluding these studios is that they are not reasonably accessible to visiting members of the public. I must challenge this, using the Government’s own guidance. Paragraph 22 lists funeral directors, shoe repairers and key cutters as eligible because they constitute the provision of a service. Recording studios are functionally identical: they provide a specialist service accessible to any member of the public willing to pay for it, be that a professional band, a local choir or a community group. Do the public browse a funeral parlour? No, they book a specific service. A recording studio is no different. If a key cutter qualifies, surely a recording studio does too.

We know that the Government can act when the system creates anomalies. Just weeks ago, following concerns regarding pubs, the Chancellor announced a 15% reduction in bills and a freeze for two years. The Minister in the other place, referring to music venues, said:

“It would not be right to seek to draw the line in a way that includes some and not others”.—[Official Report, Commons, 27/1/26; col. 771.]


Yet that is exactly what these regulations do: they support the venue where music is performed but tax the studio where music is created out of existence. The music ecosystem is a pipeline: if you destroy the creation phase, you eventually starve the venues. The Chancellor justified the pub relief by calling pubs “community assets”. If that is the test, studios that host community choirs, youth education projects and amateur bands must surely pass it.

Reports suggest that the Chancellor is resisting wider relief for hotels and restaurants because she cannot afford to support every business. I understand that constraint, but we are not talking about thousands of hotels; we are speaking of roughly 500 recording studios. The cost must be negligible compared with the £300 million package announced for pubs, yet the value to the £8 billion music industry is existential.

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[Baroness Neville-Rolfe (Con)]

My Lords, I rise to speak to these two closely related sets of regulations, which together established the new tiered system of business rates for the 2026 financial year. One determines which hereditaments fall into each multiplier band, and the other fixes the resulting liabilities for larger premises. I thank the Minister for his clear and careful introduction to the new rules.

Although I plan to focus elsewhere today, I am very grateful to the noble Lord, Lord Clement-Jones, and others for drawing our special attention, so eloquently, to the second instrument, to the anomalous position of the recording studios and to the hikes in rates that they face. This could lead to unwelcome closures and to the expected moves of some studios abroad. I have visited Abbey Road Studios as a private citizen. Those studios are an important part of our rich art and cultural heritage, which has been referenced so many times today—indeed, I have walked across the famous zebra crossing, made of worldwide importance by the Beatles.

I am also grateful to the Secondary Legislation Scrutiny Committee for its, I have to say, critical report. It was disappointed that the Government had not seen fit to publish any of the wide range of evidence and analysis it considered on the effects of the new multipliers, other than high-level data. It also sought a proper explanation of why the Government consider it fair that, apparently without advancing evidence, a low multiplier should apply to smaller RHL premises compared to non-RHL properties. I look forward to a full response from the Minister on that report.

Prior to the election, the now Prime Minister promised a regime of permanently lower business rates multipliers. Since then, the Chancellor has claimed that, on this basis, business rates are at their lowest level since 1991, yet many businesses now face substantial increases in their bills. That is why it is so profoundly misleading to characterise these changes as record low taxation by reference to multipliers. Multipliers are not the tax rate. Bills are, and it is bills that businesses have to pay and real people have to bear.

Turning to the substance of the regulations, in their first Budget, this Government chose to cut back retail, hospitality and leisure relief, a tax rise worth £1.1 billion a year. At the same time, they have locked in automatic, inflation-linked increases every year. Can the Minister explain, in specific terms, what the Government believe the cumulative effect of these decisions will be by the end of this Parliament? What modelling has the Treasury done on business closures, employment losses and investment being deferred? For SMEs, the challenge is acute. Shops, hotels and restaurants face even steeper rises. Does the Minister seriously believe that this trajectory is sustainable?

Under the new system set out in these regulations, combined with the revaluation, businesses across retail, leisure and hospitality will face higher bills and fewer businesses will benefit from relief than under the previous 40% scheme. As the Explanatory Memorandum makes clear, local authorities previously had greater discretion over which premises benefited. Can the Minister tell the Committee what estimate the Government have made—the Valuation Office Agency will undoubtedly have provided one—of how many businesses will lose out because that discretion has now been removed?

I turn now to the Non-Domestic Rating (Definition of Qualifying Retail, Hospitality or Leisure Hereditament) Regulations, which I have looked at in combination with the draft Local Government Finance Act 1988 (Calculation of Non-Domestic Rating High-Value Multiplier) (England) Regulations. As confirmed in the letter sent by MHCLG to the chief finance officers of English billing authorities this very day, these set the new high-value multiplier at 50.8p, compared to a standard multiplier of 48p—an extra 2.8p in the pound.

The Government’s intention is for these measures to be directed at large online warehouses with rateable values of around £500,000 or above. However, as the provision currently stands, a greater number of retail premises will in fact be captured by the higher rate, including many of the anchor stores that play a central role in sustaining footfall and economic activity in our high streets. I remember these so well from my time at Tesco, since they were at the heart of a regeneration strategy in poorer areas that provided jobs for the unemployed and fresh fruit and vegetables, which Southampton University found materially improved health locally. The study was actually paid for by Sainsbury’s, but the outcomes were very positive.

It appears to be difficult to reconcile hitting such stores hard with the commitments made prior to the election, when it was said that business rates would be replaced with a fairer system intended to address disparities between large online operators and physical retailers. Will the Minister say why the Government are choosing to target anchor retail stores? What assessment has been made of the knock-on effects on surrounding businesses in the same development or high street when these anchors are weakened or lost?

The higher rates are being introduced alongside rising employment costs, NICs, national minimum wages, especially for the young, increased alcohol duties, high energy costs and the proposed tourist levy on hotels and bed-and-breakfast accommodation. UK Hospitality has warned that should mayoral authorities choose to exercise these new powers, the additional cost to consumers could amount to £518 million. Layering new fiscal burdens, even where individually justified, can in aggregate undermine the very sector that the Government wish to support.

At what point do the Government consider the cumulative impact of these measures, taken together, and reflect on whether the overall burden risks becoming counterproductive? Of course, I understand the challenges the Government face, but it is this cumulative effect that is such an acute problem. What consideration has been given to the impact on consumer prices and demand, especially at a time when households remain under significant financial pressure?

We would take a different approach. We would provide permanent 100% business rates relief for retail, hospitality and leisure businesses with rateable values of up to £110,000, supporting around 250,000 small businesses across the country. That support would be funded through a more disciplined and focused approach to welfare spending, as set out clearly at our party conference last year.

In these circumstances, I was pleased to hear from the Minister during his Statement on 29 January that the Government were looking at the adverse effect of the changes on hotels and that the wider review of business rates was ongoing. We heard that any changes to business rates would be considered at the Budget in the usual way. Can the Minister confirm that we are talking about the 2026 Budget and comment on the budgetary position? Is there new money for pubs and music venues—and, if need be, for hotels—or does everything have to come out of the £4.3 billion announced in the previous Budget?

Can the Minister please confirm that the wider review of business rates, which currently has an ongoing call for evidence due to close in a few days’ time, as he mentioned, will address not only large infrastructure businesses and premises such as airports, but small and medium-sized businesses in the context of the current economic and tax environment? Will he take a good look at incentives and anomalies in the VOA rules and at the need to align Treasury and local government thinking, as mentioned by my noble friend Lord Fuller? Will he look in particular at the problem facing recording and artist studios, raised so eloquently by my noble friend Lord Parkinson of Whitley Bay, the noble Lord, Lord Clement-Jones, who has led with his Motion, the noble Earl, Lord Clancarty, the noble Lords, Lord Freyberg and Lord Watson of Wyre Forest—and UK Music? Discussions with DCMS could, it seems, also be helpful to the VOA.

Noble Lords will know that we believe in backing those who take risks, create employment and invest in the productive economy. In our view, these regulations move in the opposite direction. For that reason, I urge the Government to reflect carefully on their approach and on the conclusions that they reach from the review that they are undertaking.

[Lord Livermore (Lab)]

My Lords, I am grateful for all the comments and questions raised throughout the debate. Let me start with the Motion tabled by the noble Lord, Lord Clement-Jones, and the comments made on that. The Motion he has laid relates to the Non-Domestic Rating (Definition of Qualifying Retail, Hospitality or Leisure Hereditament) Regulations 2025. These regulations set out the eligibility for the new multipliers, and they passed into law last year. As I said at the outset, the Government’s objective in this statutory instrument was to reflect the same definition for eligibility as the existing retail, hospitality and leisure relief. We want sectors that benefited under the previous relief to continue benefiting under the new relief. We have therefore retained the same approach to ensure continuity and fairness in our support for the sector while making this support permanent and uncapped.

I have heard clearly in the course of this debate the strong views expressed and the passion for the sector. There were comments from the noble Lords, Lord Clement- Jones, Lord Freyberg and Lord Parkinson of Whitley Bay, the noble Earl, Lord Clancarty, and my noble friend Lord Watson of Wyre Forest, who I was sorry to see is not sitting on this side of the Committee. I hope there is nothing for the Whips to worry about in that.

Noble Lords asked in the course of the debate many questions around recording studios. As I have said already, our objective in setting these regulations was to reflect the same definition for eligibility as the existing retail, hospitality and leisure relief. I suspect noble Lords will not like my answer here, but that existing relief is centred around retail, hospitality and leisure properties which are

“reasonably accessible to visiting members of the public”.

If a recording studio forms part of a single property with a qualifying hospitality or retail business, and the hospitality or retail aspect is the main purpose of the property, it will qualify for the lower multipliers. It is only if a property is wholly or mainly used as a recording studio that it will not qualify for the lower multipliers, as these are generally not open to the public.

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[The Earl of Clancarty (CB)]

I do not know whether the noble Lord, Lord Clement-Jones, is going to leap up to ask some questions as well, but the Minister did not mention film studios. A number of us talked about the possibility that recording studios could be treated in the same way as film studios and have that exemption. Is that something the Government are prepared to look at, please?

[Lord Livermore (Lab)]

As I said, I cannot commit to introducing any specific targeted relief, but we keep all taxes under review.

[Lord Fuller (Con)]

I raised the issue that this year there was a misalignment between the Treasury and MHCLG regarding some of the changes that were made to the business rates. Will the Minister commit to at least having advanced discussions between MHCLG and the Treasury in future years? There has been a temporary sticking plaster—I might characterise it as that—and the sector is very grateful for that, but it is for one year only. Having got out of the fire this year, can we be clear that we will not accidentally stumble back in on a future occasion, otherwise we will be standing here in 12 months’ time having the same debate?

[Lord Livermore (Lab)]

I listened carefully to the noble Lord’s remarks and do not think he asked a specific question, which is why I did not give him a specific answer. Of course, the Treasury and MHCLG talk regularly on all matters and will continue to do so.

[Lord Watson of Wyre Forest (Lab)]

I sincerely apologise to the Minister for my location here today. In studio terms, I have accidentally ended up on the B-side, not the A-side.

[Lord Livermore (Lab)]

As my noble friend knows, some of the best songs are often on the B-side.

[Lord Freyberg (CB)]

Artists’ studios find dealing with the Valuation Office Agency very frustrating because when they approach it, it will not give them a model answer about how the square footage of their studios is calculated. It would be very helpful if the Valuation Office Agency could give a model or examples that other councils could follow, so that there is guidance on a national basis.

[Lord Livermore (Lab)]

I will put that to it. I have also committed to ask it to attend the meeting. If the noble Lord would like to attend that meeting as well, I am more than happy for that to happen.

Motion agreed.

National Insurance Contributions (Employer Pensions Contributions) Bill

Lord Livermore Excerpts

Wednesday 4th February 2026 Lords Chamber

Moved by

[Lord Livermore]

That the Bill be now read a second time.

[The Financial Secretary to the Treasury (Lord Livermore) (Lab)]

My Lords, it is a pleasure to open this Second Reading debate on the Bill. It legislates for reforms announced in the Budget in November. That was a Budget to build a stronger, more secure economy that had at its heart three deliberate pro-growth choices. First, by choosing to maintain economic stability, getting inflation and interest rates down, we helped to give businesses the confidence to invest and our economy the room to grow. Secondly, by choosing to reject austerity, we protected £120 billion of additional investment in growth-driving infrastructure. Thirdly, by choosing to back the fast-growing companies of the future, we supported the investment, innovation and economic dynamism that will increase growth in the next decade and beyond.

But these are choices that need to be paid for. That is why the Budget contained a series of reforms to the tax system to ensure that it keeps pace with a fast-changing economy. Those reforms include changes to pension salary sacrifice, contained in the Bill we are debating today. The Government spend over £500 billion each year on various reliefs within the tax system. That is more than double the entire annual NHS budget and nearly five times the annual budget for education. The size of this spend means the Government must always keep the effectiveness and value for money of tax reliefs under review. This Bill addresses just one of these reliefs: pension salary sacrifice, the cost of which was set to treble to £8 billion a year by the end of this decade.

That increase has been driven most by higher earners, with additional-rate taxpayers tripling their salary sacrifice contributions since 2017. This includes individuals sacrificing their bonuses without paying any income tax and national insurance contributions on them. But while those on the highest salaries are most likely to take part in salary sacrifice, others are completely excluded. For example, the majority of employers do not offer salary sacrifice, including many small businesses. Groups who are most likely to be undersaving for retirement, such as those on the national minimum wage and the UK’s 4.4 million self-employed workers, are also completely excluded from using salary sacrifice.

The status quo is neither fair nor fiscally sustainable. We cannot afford to allow the cost of pension salary sacrifice to balloon, benefiting predominantly higher earners. In this, we agree with the approach taken by the previous Government. In their 2015 Summer Budget, the then Government said:

“Salary sacrifice arrangements … are becoming increasingly popular and the cost to the taxpayer is rising”.


Two years later, the previous Government introduced reforms to salary sacrifice. The Finance Act 2017 removed the tax advantages of salary sacrifice for the majority of benefits in kind—for example, living accommodation or private medical insurance. The noble Lord, Lord Hammond of Runnymede, told the other place:

“The majority of employees pay tax on a cash salary, but some are able to sacrifice salary … and pay much lower tax … That is unfair”.—[Official Report, Commons, 23/11/16; col. 907.]


The previous Government commissioned research in 2023, which included a proposal to cap pensions salary sacrifice at £2,000. This Government are now taking forward that reform to ensure that the tax system is kept on a sustainable footing.

Although some tax experts have called for pension salary sacrifice to be abolished entirely, the Government are taking a more measured and pragmatic approach. The Bill contains two main elements. First, it introduces a cap of £2,000 under which no employer and employee national insurance contributions will be charged on any pension contributions. The cap protects ordinary workers using salary sacrifice and limits the impact on employers while ensuring that the system remains fiscally sustainable. The majority of those currently using salary sacrifice will be unaffected. Indeed, 95% of those earning £30,000 or less who currently make pension contributions through salary sacrifice will be entirely unaffected. It is forecast that 87% of salary sacrifice contributions above the cap will be made by higher rate and additional rate taxpayers. Individuals can also continue to save as much as they wish into their pensions, either through salary sacrifice or outside of it, both of which will be fully relievable of income tax.

Secondly, we are introducing this change with a long implementation period so that it will come into effect in 2029-30. This gives employers and employees over three years to prepare and to adjust. I am pleased that business and industry bodies have already welcomed this lengthy implementation period. HMRC is also engaging with industry stakeholders to ensure this change operates in the most effective way. That will continue as we approach implementation.

Saving into a pension, including via salary sacrifice, will remain hugely tax advantageous under these changes. The Government currently provide over £70 billion of income tax and national insurance contributions relief on pension contributions each year. That spend will be entirely unaffected by these changes. Employees’ pension contributions, including those made via salary sacrifice, will continue to be fully relievable from income tax at the employee’s marginal rate. For example, if a basic rate taxpayer were to put £100 into their pension, it would cost them just £80 of their take-home pay, with the Government providing the remaining £20 in tax relief. For a higher rate taxpayer, that same £100 pension contribution can cost them as little as £60 because they also receive relief at their marginal rate of tax.

For employers, all pension contributions they make for their employees outside of salary sacrifice will remain exempt from both income tax and national insurance contributions. This makes pensions one of the most tax-efficient ways to invest in their workforce. For example, if an employer contributes £1,000 to an employee’s pension, this is worth £150 in forgone employer national insurance contributions.

Since the Budget in November, it has been suggested by some that these changes will negatively impact the overall level of pension saving. We do not believe this to be the case. Salary sacrifice existed in the 2000s and early 2010s, yet there were significant falls in private sector pension saving during this period. In 2012, only one in three private sector workers saved into a pension.

The key factor that has led to an increase in saving in recent years is not the complicated national insurance reliefs available to some employees, but rather automatic enrolment, introduced in 2012, which has reversed the collapse in workplace pension saving. As a result of automatic enrolment, over 22 million workers across the UK are now saving each month.

Evidence also shows that pension contributions have risen in line with regulatory requirements, not with the growth of salary sacrifice. The majority of employers reducing their tax bill by offering pension salary sacrifice did not use the savings to increase pension contributions. Overall, the Office for Budget Responsibility has made it clear in its economic and fiscal outlook that it does not expect a material impact on savings behaviour as a result of the tax changes made in the Budget.

These are fair and balanced reforms. They protect lower and middle earners, give employers many years to prepare, preserve the incentives that underpin workplace pension saving, and ensure that the tax system is kept on a sustainable footing. The Bill builds on reforms by the previous Government to the salary sacrifice system and legislates for proposals first put forward in 2023. It also forms part of a wider package of reforms to ensure that the tax system keeps pace with our fast-changing economy. As a result of these and other reforms, the Government were able to take a series of pro-growth choices at the Budget last year to maintain economic stability, to reject austerity, to protect investment and to back the fast-growing companies of the future. These are the right and responsible choices to strengthen our economy for the long term. I beg to move.

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[Lord Livermore (Lab)]

My Lords, it is a pleasure to close this Second Reading debate. I am grateful to all noble Lords for their expertise, their contributions and questions, particularly at this late hour.

The Bill before your Lordships’ House legislates for reforms announced in the Budget last November. It was a Budget to build a stronger, more secure economy that had at its heart three deliberate pro-growth choices: to maintain economic stability, to protect £120 billion of additional investment in growth-driving infrastructure, and to back the fast-growing companies of the future, but, as I have said previously, these choices need to be paid for. That is why the Budget contained a series of reforms to the tax system to ensure it keeps pace with a fast-changing economy. Those reforms include the changes that we are debating today.

As several noble Lords mentioned this evening, the Government spend over £500 billion each year on tax relief. The size of this spend means they must always keep the effectiveness and value for money of tax reliefs under review. This Bill addresses just one of these reliefs, pension salary sacrifice. The cost of that was set to treble to £8 billion a year between 2017 and the end of this decade. That growth has been fastest among higher earners, with additional rate taxpayers tripling their salary sacrifice contributions since 2017. But while those on the higher salaries are most likely to take part in salary sacrifice, others are completely excluded. For example, the majority of employers do not offer salary sacrifice, including many small businesses. Groups who are most likely to be undersaving for retirement, such as those on the national minimum wage and the UK’s 4.4 million self-employed workers, are also completely excluded from using salary sacrifice. The status quo is therefore neither fair nor fiscally sustainable. We simply cannot afford to allow the cost of pension salary sacrifice to balloon, benefiting predominantly higher earners.

The Bill therefore contains two main elements: first, to introduce a cap of £2,000 under which no employer and employee national insurance contributions will be charged on any pension contributions. Some 95% of those currently making pension contributions to salary sacrifice earning £30,000 or less will be entirely unaffected. Secondly, we are introducing this change with a long implementation period so that it comes into effect only in 2029-30. This gives employers and employees over three years to prepare and adjust.

The noble Lord, Lord Leigh of Hurley, asked about the Government’s commitment not to increase taxes on working people. As he knows, the Budget in November kept our manifesto promise not to increase income tax, national insurance or VAT. It contained a series of reforms to the tax system to ensure it keeps pace with our fast-changing economy. The cost of pension salary sacrifice was set nearly to triple to £8 billion between 2017 and the end of the decade—as I said before, benefiting mainly higher earners.

The noble Baroness, Lady Neville-Rolfe, spoke extensively about the impact on employers. The Government are taking a pragmatic, balanced approach by introducing a cap which protects ordinary workers and limits the impact on employers while ensuring that the system remains fiscally sustainable. The majority of employers—some 61%—do not offer this kind of salary sacrifice arrangement. Of the employers which do, most sectors, including retail, hospitality and leisure, have salary sacrifice contributions well below the £2,000 cap and are largely protected. Everyone using salary sacrifice will still benefit from the tax advantages available up to the £2,000 cap, this includes employers, which can make up to £300 of employer national insurance contribution savings through salary sacrifice per employee. These changes will not be implemented for over three years. In comparison, the previous Government gave just one year’s notice from announcing their changes to salary sacrifice in 2016 to implementing them from 2017.

The noble Baroness, Lady Neville-Rolfe, also spoke about employers potentially stopping offering salary sacrifice schemes. The Government do not expect significant numbers of employers to stop offering salary sacrifice arrangements. Everyone using salary sacrifice will still benefit from the tax advantages available up to the £2,000 cap.

The noble Baroness, Lady Altmann, asked about the cost to employers. The majority of employers do not offer salary sacrifice arrangements, and most sectors, including retail, hospitality and leisure, have salary sacrifice arrangements well below the cap. Everyone using salary sacrifice can still benefit from up to £300 employer national insurance contribution relief under the cap, and the full national insurance contributions relief is available on employer pension contributions outside of salary sacrifice. The Government are working closely with employers and the payroll industry to operationalise the change in the most effective way.

The noble Baronesses, Lady Neville-Rolfe and Lady Kramer, and the noble Lord, Lord de Clifford, spoke about the impact on small businesses. Small businesses are far less likely than larger businesses to offer pension salary sacrifice. Only 10% of employees in SMEs have pension contributions through salary sacrifice exceeding the cap, compared with 18% of employees in larger firms. The noble Baroness, Lady Neville-Rolfe, also spoke about the impact on retail, hospitality and leisure businesses. As I have said already, most firms in this sector have salary sacrifice contributions well below the £2,000 cap and are therefore largely protected.

The noble Lords, Lord Londesborough and Lord de Clifford, spoke about the impact on low earners. Higher earners are most likely to be using salary sacrifice and the majority of those currently using salary sacrifice will be unaffected by the changes. The Bill impacts only employees who use salary sacrifice to make pension contributions, which is around 35% of employees. Those earning at or near the national living wage cannot use salary sacrifice at all. The noble Lord, Lord Londesborough, also asked about basic rate taxpayers. The £2,000 cap is worth up to £160 a year for basic rate taxpayers. Those earning below £30,000 making pension contributions through salary sacrifice are overwhelmingly protected, with only 5% making pension contributions above the cap.

The noble Baroness, Lady Neville-Rolfe, asked about individuals earning around the £50,000 mark. The Government are taking a pragmatic, balanced approach by introducing a cap which protects ordinary workers and limits the impact on employers, while ensuring that the system remains fiscally sustainable. Everyone can still save up to £2,000 via salary sacrifice free of national insurance contributions. Amounts sacrificed above £2,000 will continue to be fully relievable from income tax, but we must continue to ensure that the £500 billion of tax reliefs provided each year are effective and provide value for money.

The noble Lord, Lord Leigh of Hurley, asked about the profile of the costings, also mentioned by the noble Lord, Lord Ashcombe. The costings reflect independent OBR scrutiny and use the best available data on current salary sacrifice and bonus sacrifice behaviour. Employees will respond to the changes in a number of ways. One way is that many employees will switch to making ordinary pension contributions, some of which will be to relief at source schemes. Where an employee contributes to a relief at source scheme, they will initially pay higher rate and additional rate income tax on their pension contributions and then reclaim this through their self-assessment tax return in the next year. This creates a temporary timing effect. Beyond the forecast period, this effect becomes very small.

The noble Baroness, Lady Maclean of Redditch, asked about indexing the £2,000 cap. The Government have no plans to index the cap, but we will keep the £2,000 level under review to ensure that it continues to meet its objectives and remains fair across the labour market. This is consistent with the approach to other pension tax reliefs, including the annual allowance.

The noble Baroness, Lady Altmann, and the noble Lord, Lord Londesborough, asked about the costings of this policy and about the savings generated from this change. The costings for this policy have been scrutinised and certified by the Office for Budget Responsibility in its economic and fiscal outlook. They already account for changes in employer behaviour, including employers providing higher employer pension contributions to replicate the national insurance contribution benefits of salary sacrifice. We remain confident of these costings.

The noble Baronesses, Lady Neville-Rolfe and Lady Kramer, and the noble Lord, Lord Leigh of Hurley, suggested that this was designed only to meet the fiscal rules in 2029-30. The reality is that the Government are giving employers sufficient time to prepare and adjust their systems by implementing the changes from April 2029. That is over three years’ notice before the changes take effect. We are also engaging with employers, payroll administrators and other stakeholders on the administration of the cap to provide certainty ahead of implementation.

On that specific point, also raised by the noble Baronesses, Lady Neville-Rolfe and Lady Altmann, and the noble Lords, Lord Leigh of Hurley and Lord Fuller, about the administration of this policy, HMRC is engaging with a wide range of stakeholders in the payroll, employer and software developer industries to work through exactly how the cap will be implemented. This will be vital to ensuring it is implemented in the least burdensome way possible for employers. Engagement will also help inform the secondary legislation, in which the detail of the operability will be set out and further consulted on.

My noble friend Lord Davies of Brixton spoke about how salary sacrifice is just one part of the pension landscape, and I say that to the noble Baroness, Lady Neville-Rolfe, who did not mention during her contribution that saving into a pension, including via salary sacrifice, will remain hugely tax advantageous even under these changes. The Government currently provide over £70 billion of income tax and national insurance contribution relief on pension contributions each year. That spend will be entirely unaffected by these changes. Employees’ pension contributions, including those made via salary sacrifice, will continue to be fully relievable from income tax at the employee’s marginal rate. For employers, all pension contributions remain exempt from both income tax and national insurance contributions. This makes pensions one of the most tax-efficient ways to invest in their workforce.

The noble Baronesses, Lady Neville-Rolfe, Lady Altmann and Lady Kramer, spoke about the impact on pension savings. The Government do not believe that these changes will negatively impact the overall level of pension saving. Salary sacrifice existed in the 2000s and early 2010s, yet there were significant falls in private sector pension savings during this period. In 2012, only one in three private sector workers saved into a pension.

As I said in my opening, the key factor that led to an increase in saving in recent years is not the complicated national insurance reliefs available to some employees but rather automatic enrolment, which the noble Baroness, Lady Neville-Rolfe, spoke about, and which has reversed the collapse in workplace pension savings. As a result of automatic enrolment, over 22 million workers across the UK are now saving each month. The Office for Budget Responsibility has also made it clear in its economic and fiscal outlook that it does not expect a material impact on savings behaviour as a result of the tax changes made in the Budget.

The noble Baronesses, Lady Altmann and Lady Kramer, spoke about the impact on individuals who are currently undersaving. The groups that we know are undersaving for their pension, including low earners, women and the self-employed, are the least likely to use salary sacrifice. Workers on the national living wage are excluded entirely from salary sacrifice, and so are the 4.4 million self-employed people across the UK. By contrast, these changes overwhelmingly affect higher and additional rate taxpayers. In 2030, 87% of affected salary sacrifice pension contributions made from earnings will be from higher and additional rate taxpayers.

The noble Baroness, Lady Altmann, also mentioned the Pensions Commission. There is cross-party agreement on the importance of the work of the Pensions Commission as it examines questions of adequacy and fairness. The Government will not prejudge the commission’s work.

The Budget in November contained pro-growth choices to maintain economic stability, reject austerity, protect investment and back the fast-growing companies of the future, but these are choices which need to be paid for. That is why this Bill reforms pension salary sacrifice to ensure that our tax system is kept on a sustainable footing. The Bill protects lower and middle earners, gives employers many years to prepare, and preserves the incentives that underpin workplace saving. These are fair and balanced reforms. They build on the steps already taken by the previous Government to reform salary sacrifice and strengthen our economy for the long term. I beg to move.

Bill read a second time and committed to a Grand Committee.

Business Rates

Lord Livermore Excerpts

Thursday 29th January 2026 Lords Chamber

[Baroness Kramer (LD)]

My Lords, I start with perhaps a modicum of welcome because the combined impact of the Budget and the business rates revaluation prior to this announcement, frankly, left the pub industry on the verge of a crisis, with up to 50% of pubs under the threat of closure. Some relief has now been offered for many pubs, and I am glad that this lifeline has been extended to live music venues, which are the birthing ground of our very important music industry.

Do the Government recognise that the relief that they have just announced amounts roughly to only £1,650 per pub, which will still leave many in a critical financial hole? Do they recognise that pubs with a rateable value of over £100,000 are, in effect, not eligible, and that restaurants, cafés and soft-play areas—so many of those hospitality and leisure operations that lie at the heart of our high streets and communities—will get no relief from these changes whatsoever?

The chaos that has surrounded the announcement of the review—the change and uncertainty that has gone with it and the impact on the sector—surely points to the fact that we need to stop trying to fix the business rates system at the fringes. We need to take a proper step back and review the whole way in which business rates are structured, which, I would say, should head in the direction of land value. There is so much to be done around this area. It is time that the Government see that, rather than get into continuous messes by attempting to ameliorate a system that, frankly, is broken.

Do the Government also accept that the chaotic process that we have seen deeply underscores the need to include hospitality in the industrial strategy? At the very least, one would hope that the effect of that would be to force the Treasury to align tax policy with the economic goal of strengthening our high streets and our hospitality and leisure sectors, and to determine that they are a source of growth, not of constant crisis and constraint. Does the Minister accept that, until the Treasury gets aligned with that agenda, we will have constant issues like that? Frankly, that is not the best way to go.

[The Financial Secretary to the Treasury (Lord Livermore) (Lab)]

I am very grateful to the noble Baronesses, Lady Neville-Rolfe and Lady Kramer, for their comments and questions, and for their cautious welcome of what we have announced.

The noble Baroness, Lady Neville-Rolfe, ignored what we announced in the Budget: the £4.3 billion of support for those experiencing increases in business rates. As she knows, the previous valuation was based on property values during the Covid pandemic, which meant that rateable values were much lower. As a result of that valuation, some businesses, including the retail, hospitality and leisure venues that we are discussing, are now seeing an increase.

At the Budget, we announced three elements of support at a cost £4.3 billion, which neither noble Baroness mentioned in their comments. We are implementing transitional relief that will cap increases at 5% for the smallest properties and at up to 30% for the largest. For any business whose value increase has meant that they are no longer eligible for small business rates relief, we are capping their increase. We have expanded the supporting small business relief scheme, to provide specific support to those who are currently eligible for the 40% RHL relief.

The noble Baroness, Lady Kramer, said that the wider system needs reform; we absolutely agree on that and have begun that. We are reforming the business rates system by introducing permanently lower tax rates for over 750,000 retail, hospitality and leisure properties. The noble Baroness, Lady Neville-Rolfe, said that what we are doing is temporary, but those new lower rates are permanent—unlike what the previous Government did—and they will be funded by higher rates on the most valuable properties, including those of online giants.

I remind the noble Baroness, Lady Neville-Rolfe, that the previous Government’s plans were to scrap entirely the temporary Covid-era retail, hospitality and leisure relief in 2025—but she now says that more support should be offered. If they had won the last election, their plans clearly show that they would have removed it overnight in April last year. They now claim that they would extend it, so why did they not say so or include that in their forecasts or projections?

I am grateful to the noble Baroness, Lady Kramer, for what she described as her cautious welcome of what has been announced. We have of course been listening to the industry. We have announced that, from April, every pub in England will get 15% off its new business rates bill, on top of the support announced at the Budget. Their bills will then be frozen in real terms for a further two years. The noble Baroness noted that the support will be worth £1,650 for the average pub next year, but that means that three-quarters of pubs will see their bills either fall or stay flat next year. This decision will also mean that the amount of business rates paid by the pub sector as a whole will be 8% lower in 2028-29 than it is today.

The noble Baroness, Lady Kramer, said that pubs with ratable values of over £100,000 would not benefit, but we are clear that this will apply to all pubs. I am grateful for what she said about this applying to music venues too. Many live music venues are valued as pubs, and many pubs are grass-roots live music venues, so it would not be right to seek to draw the line so tightly as to include some but not others.

The noble Baroness, Lady Neville-Rolfe, also talked about the structural issues that many of these businesses are facing, and she will know that the sector has raised concerns about the way that they are valued. The Government agree that this needs to be looked at. We are therefore launching a review that will examine how pubs are valued for business rates, and we will set out more detail on that in due course.

The noble Baroness, Lady Neville-Rolfe, spent a lot of her statement telling us about what businesses need. What they need most is stability; they did not need the previous Government, with the Liz Truss mini-Budget, Brexit and austerity, and all the consequences that they had. The noble Baroness commented on what we are doing for business. She will know that, under the previous Government, business investment was the lowest in the entire G7, and that, since the election, business investment has increased faster in this country than in any other G7 country. I am more than happy to compare her record with ours.

The noble Baroness will know that we are pressing ahead with wider regulatory reforms to help businesses, as well as carrying out licensing reform, and that we are looking at loosening planning rules to benefit pubs more generally. She will also know that we are doubling the hospitality support fund with £10 million of funding over three years.

The noble Baroness, Lady Kramer, talked about the importance of the sector for growth, and the noble Baroness, Lady Neville-Rolfe, talked about the challenges faced by the wider sector. I understand the challenges that many other retail, hospitality and leisure companies are facing. We have already taken significant steps to support businesses, including, as I said, the £4.3 billion of business rates support.

As we all know, consumers have changed their habits over the past decade and are increasingly working from home and shopping online. Combined with the pandemic and the increase in energy costs since Russia’s invasion of Ukraine, these trends have continued to make it harder for high street businesses. Therefore, later this year the Government will bring forward a high street strategy, and we will work with businesses and representative bodies to look at what more the Government can do to support our high streets.

[Lord Watts (Lab)]

My Lords, is it not the case that the previous Government wrecked the economy and gave us Brexit, which reduced our ability to pay for public services? The Opposition now seem to be calling for greater public expenditure and tax cuts. It sounds as though they have found not just one money tree but an orchard. Can the Minister explain how someone can call for more expenditure and less tax?

[Lord Livermore (Lab)]

I very much agree with everything that my noble friend said. Among the long litany of the previous Government’s failures, their failure on growth was one of their most significant. We saw Brexit and the Liz Truss mini-Budget, and we know what business thought of that. We saw business investment across the whole economy fall to the lowest level in the entire G7. My noble friend is also absolutely correct to point out that, every time we debate the economy in the Chamber, the noble Baroness opposite supports every single piece of spending that we announce but opposes every single piece of revenue raising. It is quite clear that those two things do not add up.

On the Tory record more widely, we should note that 7,000 pubs have closed in the past 14 years, and that the previous Government’s plans were to scrap entirely the temporary Covid retail, hospitality and leisure relief in 2025. Their plans show that they would have ended it overnight. We have chosen a different path by extending that support with the help of £4.3 billion of additional support.

[Baroness McIntosh of Pickering (Con)]

My Lords, it would be churlish not to welcome the measures—so far as they go—that the Chancellor has introduced. However, does the Minister accept that it is small family businesses—the hair salons, cafés and restaurants, among others, to which my noble friend on the Front Bench referred—that will be directly affected by the lack of support? Does he accept that, if these small family businesses do not get support, it will damage their programme for growth and lead to a lack of growth and a loss of jobs?

[Lord Livermore (Lab)]

I respectfully say to the noble Baroness that she must take what has been announced this week in the round with what was announced in the Budget. We spent £4.3 billion supporting exactly the type of businesses the noble Baroness mentions. We have expanded the supporting small business scheme to provide specific support to those who are currently eligible for the 40% RHL relief. Around one in three businesses continues to benefit from small business rates relief and does not pay anything at all. We have extended the second property grace period to support small businesses as they grow. So, I do not accept that we are not supporting those businesses. But equally, I absolutely understand the challenges that many retail, hospitality and leisure businesses are facing, which is exactly why, later this year, the Government will bring forward a high street strategy and work with businesses and representative bodies, looking at what more the Government can do to support our high streets.

[Lord Fox (LD)]

My Lords, I am sure the Minister will agree that one of the things that will drive growth is consumer confidence. It is very hard for consumers to be confident when they see their high streets putting up shutters and “closed” signs. The Minister also talked about changed behaviour and the driving of online sales. Beneath that is a real inequity, in that the out-of-town warehouses which have been driving those digital sales have a rates square foot rate about a tenth, if not less, of that of the high street stores with which they compete. When the Minister is having this review, can he review not only the high streets but how the out-of-town warehouses are eroding those high streets?

[Lord Livermore (Lab)]

I agree with the noble Lord on the importance of consumer confidence—and six interest rate cuts since the election is very important to bolstering that consumer confidence. It is the fastest pace of interest rate cuts for 17 years, and the action we took in the Budget to further cut inflation and bear down on borrowing will support the Bank of England in the work it is doing to reduce interest rates. I also agree with what the noble Lord says about out-of-town online giants, and that is why we are reforming the business rates system. As I said, we are introducing permanently lower tax rates for over 750,000 retail, hospitality and leisure properties, and we are funding that with higher rates on the most valuable properties, including the warehouses used by online giants. But I absolutely understand what the noble Lord is saying, and I am more than happy to look at that as part of the work to develop the high street strategy.

[Lord Bridges of Headley (Con)]

My Lords, can the noble Lord shed some light on when the review of hotels is likely to report and conclude, and when hoteliers might be able to see some relief on their business rates?

[Lord Livermore (Lab)]

Hotels will continue to benefit from the support for business rates announced at the Budget. As I have already said, this latest package needs to be seen in the round with the £4.3 billion that we announced at the time of the Budget, including the transitional relief scheme, which will cap increases for those seeing the largest increases. The noble Lord is right, though, to mention hotels, and we recognise that hotels have expressed concerns about how they are valued for business rates. Hotel valuations are undertaken in a different way from some other sectors, so we will review the way hotels are valued as part of our wider valuation review. The methodology used is well established, but as with pubs, specific concerns have been raised with us, and it is right to review this to ensure it accurately reflects the rental value for these sectors. Any potential changes to business rates as a result of that review will be considered at the Budget in the usual way.

[Lord Gove (Con)]

Of all the U-turns that have been executed since the Minister joined the Treasury team, whether on the family farm tax, business rates or the winter fuel payment, which is his favourite?

--- Later in debate ---

[Lord Livermore (Lab)]

I am very happy to tell the noble Lord what my least favourite policy of the previous Government was, and that was Brexit.

[Lord Forbes of Newcastle (Lab)]

My Lords, does my noble friend the Minister agree with me about the importance of certainty and security for businesses in the payment of business rates in particular? While local authority funding is predicated on the retention of business rates at a local level, as well as council tax rates, there is regional variation in the deployment of the collection of those rates, based on differential bandings according to the nature of properties in those areas. Will he consider the challenge that many small businesses face in having to pay business rates, compared to the longevity of property owners? Will he consider looking at the payment of business rates in future by business owners rather than businesses themselves as a way of smoothing out some of these challenges?

[Lord Livermore (Lab)]

I am grateful to my noble friend for that question, which obviously comes from a position of deep expertise in this matter. I am more than happy to look at all the issues he raises and take them back to my Treasury colleagues to discuss them further.

[Baroness Foster of Oxton (Con)]

My Lords, 3.5 million jobs are dependent on a successful hospitality industry in this country—that is obviously the entire supply chain. I spent a lot of my life in the airline industry, which is at one end of that. Notwithstanding that, when we look at tourism, which encompasses hotels, taxis, restaurants and cafes, this Government have a complete lack of understanding of the impact of what they are doing. They are under pressure because they will not take steps to address the welfare bill, so they are taking moneys and taxes from areas that often cannot afford it. We know that will cause long-term damage, despite this sop of the slight reduction for pubs in the next couple of years.

As we look at the welfare bill, will the Government please reconsider what they are doing, and instead of making another U-turn—well, we would like a really big U-turn on this one: we would like it to be abolished—take a real look at what else they can do to raise revenue where we know expenditure is wholly excessive and cannot be carried on?

[Lord Livermore (Lab)]

I agree with the first thing the noble Baroness said, on the importance of the sector and jobs; I did not agree with anything else she said. She said that we have a lack of understanding: I just wonder what she would have done. We spent £4.3 billion in the Budget supporting these businesses: she did not acknowledge that. She did not acknowledge that the previous Government, whom she presumably supported, would have ended Covid relief overnight and had absolutely no plans to extend it, as we have. She said she would abolish business rates. Well, she had 14usb years to do that, and she did not. I wonder how she would now fund the abolition of business rates, and what other services she would cut to do that.

The noble Baroness mentioned airlines. The Government have redesigned the 2023 transitional relief scheme to provide generous support for large properties such as airports and those in other industrial strategy sectors. That is extremely important. She mentioned hotels, and I have answered that question already. As I say, I fundamentally disagree with her. The Government she supported would have ended this relief overnight; we have extended it.

[Lord Fox (LD)]

My Lords, following the moderately good reception to my last question, I am going to push my luck. Following on from the from the noble Lord, Lord Forbes, when this review is under way, can the Treasury review a commercial landowner levy rather than a straight business rate? That does not penalise investment, and it puts the onus on the people who actually own the land. If the Minister is not 100% au fait with the Liberal Democrat policy on this, I would be very happy to arrange a briefing for him and colleagues.

[Lord Livermore (Lab)]

I may not have read all the Liberal Democrat policy documents as thoroughly as perhaps I should have. I cannot commit the review to considering specific things right now, but I am more than happy to take those thoughts back to the Treasury.

[Lord Hunt of Wirral (Con)]

Although my experience of government is now over 30 years old, the one message I remember from being in Cabinet is that on matters of taxation and investment, the Government have to get it right first time. That is the only way to establish a pro-growth, pro-business strategy. So, what I would love to hear from the Minister, having heard the messages from all sides of the House, is that the relief announced—one of what his noble friend the Minister admitted is 14 U-turns—is probably a little late and not enough. Therefore, the future must rely on a better strategy. Is the Minister confident that the consultation the Government are having right across the business sector is sufficient to ensure that they get that pro-business, pro-growth strategy right?

[Lord Livermore (Lab)]

I say, with the greatest respect to the noble Lord, that I am being lectured by Conservatives on stability and investment when we had 14 years of instability and chronic underinvestment. We saw underinvestment in the public sector and the lowest rates of private sector investment in the entire G7 so, as I said, with the greatest respect, I may not take all those lectures. Obviously, investment is vital to our economy. Stability is vital to that, as are the reforms that we are taking, not least in terms of planning, for example, to get more investment into our economy.

The noble Lord says that the measures we have taken are a little late. Of course, we spent £4.3 billion in the Budget, and it was vital that we did that. He says that they are not enough. As I said, the previous Government, if they had won the election, would have done absolutely nothing. It is important to contrast that, but I agree with what he said about consulting and working hand in hand in partnership with business, so that we absolutely understand and get the most pro-growth, pro-business policies that we possibly can.

[Lord Watts (Lab)]

My Lords, has the Minister noticed that the Opposition say that the private sector does not like U-turns, they say they do not like U-turns, and then they call for more U-turns? What is their strategy for dealing with our current problems?

[Lord Livermore (Lab)]

I cannot answer for the strategy of the party opposite—I am sure we would all like to know—but what matters most is that we get to the right policy and I believe that we have done so in this case.

[Baroness Neville-Rolfe (Con)]

My Lords, the Official Opposition have actually come forward with plans for the high street, which we would be very glad to share with the Minister as he does his high street review. I think we should have not only Lib Dem ideas but Conservative ideas. We have a new Opposition now. We are looking forward, not backwards. We are very keen to see the country grow and the high streets flourish.

[Lord Livermore (Lab)]

I am sure the noble Baroness would like to look forwards and not backwards, but I am not sure the country shares that view. The country remembers the past 14 years and the damage that party opposite did to the economy, the public services and the fabric of our nation. As I said already, the noble Baroness cannot wriggle out of the fact that, had her party won the election, it would have ended this relief overnight entirely in 2025. It was in her plans—the plans that we inherited from her. If she now claims that she would have extended the relief, why did her party not say so and include it in their forecasts or projections? We have to take what her party says now with a huge pinch of salt. As I have said, the party opposite always supports the spending that we are doing but does not support a single one of the measures we are taking to raise the revenue for that spending. I suspect that its plans are equally uncosted.

Grass-roots Music Venues

Lord Livermore Excerpts

Monday 26th January 2026 Lords Chamber

[Lord Bassam of Brighton]

To ask His Majesty’s Government what assessment they have made of the impact of the 2025 Budget on grassroots music venues.

[The Financial Secretary to the Treasury (Lord Livermore) (Lab)]

My Lords, we are introducing permanently lower tax rates for eligible retail, hospitality and leisure properties, including grass-roots music venues, worth nearly £1 billion a year. As part of the changes to business rates, we announced a £4.3 billion support package to protect those facing higher bills after revaluation. We have also more than doubled funding to support independent artists and grass-roots music venues as part of the music growth package, building on the UK’s strength as a world-leading creative industries destination.

[Lord Bassam of Brighton (Lab)]

My Lord, that is a very welcome response from the Minister, but I wonder what assessment His Majesty’s Government have made of forecasts that increased business rate valuations could result in a closure of between 80 to 120 grass-roots music venues and place a further 120-plus at risk. How do the Government square this with their welcome commitment to high street regeneration, creative sector growth, the night-time economy and protecting cultural infrastructure? Will the Minister agree to meet representatives from the sector to discuss the issue further?

--- Later in debate ---

[Lord Livermore (Lab)]

I am grateful to my noble friend for the question. I am very happy to meet the groups that he mentioned. He is absolutely right to say that the creative sector is extremely important to the UK economy. It is a major employer and a significant part of our economy. It has been included as a priority sector in our industrial strategy, recognising its high growth potential, particularly through the development and adoption of new technologies.

On business rates, which my noble friend raised, as I have said before in your Lordships’ House, I acknowledge that the revaluation means that sectors such as pubs and music venues will struggle in relation to the business rates applicable to them. That is why we are working with the sectors involved to ensure they get the support they need. Noble Lords will have heard what the Prime Minister and Chancellor said on this in recent days. I will not add to that or comment on any speculation, but where there are further comments to be made I will of course come back to your Lordships’ House to discuss them.

[Lord Clement-Jones (LD)]

My Lords—

--- Later in debate ---

[Lord Clement-Jones (LD)]

My Lords, given that the Music Producers Guild reports that 50% of recording studios are considering closure within the year, with rateable value increases of up to 100%, will the Minister commit to urgently reviewing their exclusion from the retail, hospitality and leisure multiplier, and their misclassification as office space by the Valuation Office Agency, particularly given that film studios, which are similarly not public-facing, already benefit from 40% targeted relief?

[Lord Livermore (Lab)]

The Government have been very clear that the lower multipliers will broadly reflect the scope of the current retail, hospitality and leisure business rates relief, which is centred around retail, hospitality and leisure properties that are reasonably accessible to visiting members of the public. If a recording studio forms part of a single property with a qualifying hospitality or retail business, and the hospitality or retail aspect is the main purpose of the property, it will qualify for the lower multipliers.

[Lord Vaizey of Didcot (Con)]

My Lords, the whole House will agree that music venues are a vital part of our cultural ecosystem. Music venues are now benefiting from a voluntary grass-roots levy levied on concert tickets, which I understand the Government are keeping under review with a view to introducing a statutory levy. The Government are also talking about a tourist tax. I suspect I know what the Minister’s answer will be, but would it make sense to roll up consultation on a tourist tax and a ticket levy into one single tax?

--- Later in debate ---

[Lord Livermore (Lab)]

I do not think so. I shall repeat what my right honourable friend Ian Murray, the Culture Minister, said on the industry levy:

“My ambition is to see the voluntary levy in place for as many concerts as possible and, as a milestone in that progress, for at least 50% of tickets on sale for stadium and arena shows in 2026”


to have adopted the levy by 31 December.

“Following this, I would like to see this target brought as close to 100% as possible”.

[The Earl of Clancarty (CB)]

My Lords, further to the question asked by the noble Lord, Lord Clement-Jones, is the Minister aware that as well as the possibility of closures, there is the danger that our recording studios may up sticks and move abroad? With the continuing effect of Brexit on the music industry, unfortunately, they will not need a great deal of encouragement.

[Lord Livermore (Lab)]

As noble Lords will know, I am very happy to agree with the noble Earl on the last point he raises: the incredibly damaging effect of Brexit on that sector in particular. He will like to know that, along with the EU, we have jointly recognised the value of travel and cultural artistic exchanges, including the activities of touring artists, and we will continue our efforts to support travel and cultural exchange. We will explore how best to improve arrangements for touring across the European continent with the EU and other EU member states.

[Lord Brennan of Canton (Lab)]

My Lords, the Minister will be aware that I am leading a fan-led review of live music as commissioned by the Culture Committee in the House of Commons. One of the things that comes clearly from fans’ voices is that they are happy to pay a levy if they know it is going to grass-roots music venues in order to support them, unlike the obscure levies they sometimes have to pay, or other service charges on top of ticket prices. With that in mind, will the Government commit in the forthcoming ticketing legislation to include taking powers for a statutory levy just in case the voluntary levy does not work out?

[Lord Livermore (Lab)]

I am very grateful to my noble friend for the work he is doing in the review he mentions. I do not think it is for me to commit the Government to that specific point, but I will of course take it back and discuss it with colleagues in other departments as well.

[The Lord Bishop of Hereford]

My Lords, I thank the Minister for his answers. Across the country, churches provide the largest network of performance spaces available to professional and amateur groups for music making and other artistic endeavours, so I thank him for the recent announcement regarding the new places of worship renewal fund. But I am sure he will be aware that there are thousands of churches and other faith communities across the country waiting to know how that scheme will operate. Will the Minister let us know when the details of the scheme will be published and whether the Government will work with us to ensure the scheme is workable, consistent and fair, especially in the levying of VAT?

--- Later in debate ---

[Lord Livermore (Lab)]

I am grateful for the support that the right reverend Prelate set out in his question. I assure him that that will be responded to very shortly.

[Baroness McIntosh of Pickering (Con)]

The Minister will be aware that music venues contribute hugely to growth, particularly in market towns and cities, and that the night-time economy suffered greatly during Covid. Will he discuss with his colleagues the impact that the agent of change principle is having, especially when it is not followed to the letter, where poorly soundproofed residential developments are built in close proximity to an existing music venue? It can force a music venue to close down, despite it being very popular.

[Lord Livermore (Lab)]

I will absolutely do what the noble Baroness asks. The Government have heard exactly what she said: that the existing policy to mitigate the impact of development on existing activities, including live music, is not always applied effectively. The creative industries sector plan committed to improving the implementation of the agent of change principle. MHCLG’s current consultation on the National Planning Policy Framework proposes that the policy be more explicit about the matters to be considered, such as both the current and permitted levels of activity within existing uses, which includes licensing for music and cultural venues. This will enable decision-makers to consider the right information early on, addressing the conflict between new and existing development.

[Lord Parkinson of Whitley Bay (Con)]

My Lords, live music venues are the R&D incubators for our creative industries. Some 53% of venues made no profit last year, and the Government’s choices on national insurance contributions and business rates have given them an additional tax bill of £7 million. At a recent helpful meeting with the noble Baroness, Lady Twycross, a number of noble Lords met representatives of music venues who said that one of the difficulties is hearing different things from the Treasury and from the Valuation Office Agency. So regarding the meeting the Minister’s kindly agreed to on behalf of the noble Lord, Lord Bassam, may I encourage him to bring along somebody from the Valuation Office Agency to help clarify the situation for these vital parts of our grass-roots music sector?

[Lord Livermore (Lab)]

I am not in a position to promise who specifically will attend the meeting, but I will absolutely take that representation back to the department to see if it is possible. I agree with the noble Lord on the importance of music venues; as he says, they are the R&D incubator for the rest of the sector. As part of the industrial strategy, the Government have recognised music and performing and visual arts as a priority sub-sector, and we have recognised the potential for growth. The UK is the third biggest music market globally. As you all know, as part of the music growth package, we are backing the next generation of British talent by doubling funding to support independent artists and grass-root music venues.

[Lord Spellar (Lab)]

My Lords, can the Minister take back to Whitehall the very clear message on the importance of the music industry, including for Britain’s place in the world, that he has identified? No one starts their career playing the O2; they learn their trade—particularly how to relate to an audience—by playing the small venues, night after night. This is hugely important for our soft power but also for a significant part of our economy. Is that understood in Whitehall?

[Lord Livermore (Lab)]

I hope it is understood. I agree with much of what my noble friend says. He will know that we have provided £2.5 million of funding this year for Arts Council England’s Supporting Grassroots Music Fund, enabling grass-roots music venues, recording studios, promoters and festivals to apply for grants to develop new revenue streams, make repairs and improvements, and enhance live music experiences.

Business Rates: Retail, Hospitality and Leisure

Lord Livermore Excerpts

Tuesday 20th January 2026 Lords Chamber

[Baroness Neville-Rolfe (Con)]

My Lords, we have more bad news this morning from the ONS on job numbers in hospitality. That makes it even more important that we receive clear answers to the following questions. Why did the Government not get the new rating arrangements right first time in the Budget, when we now know that they already had the relevant information on pubs from the Valuation Office Agency? Following briefing to the FT last week, not only pubs but also restaurants and hotels do not know where they stand from 1 April. This is agony for them. When will the Government make a clear statement of their intentions?

[The Financial Secretary to the Treasury (Lord Livermore) (Lab)]

As the noble Baroness knows, and as I have said before, the previous revaluation was based on property values during the Covid pandemic, which meant that rateable values were much lower. That means that some businesses, including retail, hospitality and leisure venues, are now seeing an increase as a result of this valuation. At the Budget we therefore announced three elements of support at a total cost of £4.3 billion. We implemented transitional relief; we have capped the increase for any business whose value has increased so that they are no longer eligible for small business rates relief; and we have expanded the supporting small businesses scheme.

But, as the noble Baroness quite rightly says—and as I have acknowledged in your Lordships’ House before—the revaluation means that pubs and others will struggle in relation to the business rates applicable to them. That is why we are working with the sector to ensure that it gets the support it needs. Noble Lords will have heard what the Prime Minister and the Chancellor have both said on this in recent days. I will not add to that now or comment on speculation. When there are further comments to be made, I am sure I will be back here to discuss them with noble Lords.

[Lord Freyberg (CB)]

My Lords, given that grass-roots music venues and recording studios do not qualify for RHL relief because of the way “visiting members of the public” is defined, will Ministers commit to reviewing or amending the eligibility criterion so that businesses integral to the creative economy are not excluded?

[Lord Livermore (Lab)]

I absolutely hear what the noble Lord says, and I understand the points he is making. As I said, noble Lords will have heard what the Prime Minister and Chancellor have said in recent days. I will not add to that now, but when there are further comments to be made, I am sure I will be able to discuss them with the noble Lord.

[Baroness Buscombe (Con)]

My Lords, when we are talking about business rates, are any of the many thousands of Turkish barbers, as they are so called, vape shops and nail bars—which are all cash only and which have infected our villages, towns and cities—paying any business rates? Are any of them paying tax? We know that most of them are about money laundering, organised crime and county lines drugs. They are getting away for free. The whole thing seems to be for free, and they are laughing at us. Meanwhile, our pubs and our hospitality as a whole are on a knife-edge of existence. How is that fair?

[Lord Livermore (Lab)]

I agree with a great deal of what the noble Baroness says. HMRC has announced substantial measures to crack down on some of the businesses she mentioned, and I think she will have seen several of them closing in recent months. She is quite right that more needs to be done. She is absolutely right to talk about the importance of the hospitality industry, and we completely recognise that. It plays an incredibly important role in the UK economy, employing more than 2 million people. It is vital to the life of high streets across the UK, and we will do what we can to support it.

[Baroness Kramer (LD)]

My Lords, I will repeat the adage I used formerly: measure twice, cut once. Does the Minister understand that there is real urgency to get response and relief now within the hospitality industry and for pubs, as they face uncertainty? Many, believing that the blows had ended, went ahead and hired or invested and are now unsure whether they are economically viable. Has the Minister looked at the impact of this uncertainty, particularly on the independents, which I understand are disproportionately affected?

--- Later in debate ---

[Lord Livermore (Lab)]

I understand and agree with a lot of what the noble Baroness says. It is important that we are able to create certainty for those businesses, but we did spend £4.3 billion at the time of the Budget in support of exactly the businesses she described. We are implementing transitional relief to cap the amount that bills increase for businesses that would otherwise have seen big increases. For any business whose values increase so that they are no longer eligible for small business rates relief, we are capping that increase, and we have expanded the supporting small businesses scheme. As I say, that is at a total cost of £4.3 billion, so we absolutely recognise the issues facing those businesses. The revaluation means that pubs and others will struggle in relation to the business rates applicable to them, which is exactly why we are working with the sector to ensure that it gets the support it needs.

[Baroness Wheatcroft (CB)]

My Lords, the retail and hospitality industries are often where youngsters who find it difficult to get into the workplace get their first foothold. Understandably, there have to be increases in the overheads that these organisations are paying, but can the Minister look at ways in which these organisations might be helped to bring some of those people who really need their first job into the employment market?

[Lord Livermore (Lab)]

The noble Baroness is absolutely right about the important role that those businesses play in giving young people their first jobs, and I agree with her. We are taking significant measures to help the UK hospitality sector, which employs more than 2 million people and is vital to high streets across the UK. Based on recommendations from the licensing taskforce, we published a new National Licensing Policy Framework for the hospitality sector at the time of the Budget. We are exploring planning reforms to help pubs and hospitality to expand, and the hospitality support fund has helped pubs in rural areas to diversify, ensuring that they can continue in their role as vital community hubs.

[Lord Watts (Lab)]

My Lords, on pub companies, there is no doubt that the tenants are facing major problems in the UK, but does the Minister agree with me that, although those pubs are struggling, brewers and pub companies are making record profits? Is it not time they passed that on to the pubs themselves?

[Lord Livermore (Lab)]

My noble friend is correct to say that pubs have been struggling in this economy for a long time. In the previous 14 years under the last Government, 7,000 pubs closed in the UK, so this is a long-standing issue. On his wider question, I am more than happy to look into that.

[Lord Hayward (Con)]

My Lords, as the former chief executive of the British Beer & Pub Association, I am only too conscious of the problems that the hospitality industry has faced over a large number of years. I listened to the Minister’s answers from the Peers’ Gallery in the Commons yesterday, and the unwillingness to give any indication to the industry as to when decisions will be given to it, whichever fields may be covered, means that it is totally unable to plan. The Minister’s answer today yet again gave no indication of whether there will be a response soon, at some time in the next few weeks or before the next financial year starts.

[Lord Livermore (Lab)]

I do not think I heard a question at the end there. As I have said, we are working with the sector to ensure that it gets the support it needs.

[Lord Evans of Rainow (Con)]

My Lords, given my noble friend’s question, and given the importance of hospitality for employment—and the reference in a previous question to the number of young people who are unemployed—why is hospitality not included in the Government’s industrial strategy?

[Lord Livermore (Lab)]

That is an excellent question. Of course, we have separate strategies for the retail, hospitality and leisure sector. With the industrial strategy, we are trying to do something different from what that strategy is doing. Just because a sector is not in the industrial strategy, that does not mean we do not value that sector extremely highly and do all we can for it.

[Baroness Foster of Oxton (Con)]

My Lords, there are many charity shops in the high streets across this country. They receive 80% mandatory relief and often up to 100% discretionary. Many of these charities are actually multimillion-pound businesses. Notwithstanding the pressures on the high street and the pressures on small businesses, obviously, with these forthcoming increases, does the Minister agree that perhaps it is about time that we looked into this issue to make sure that those on the high street are paying a fair rate for their business rates?

[Lord Livermore (Lab)]

I do not disagree with what the noble Baroness says. It is very important to say that we are fundamentally reforming the business rates system by introducing permanently lower business tax rates for more than 750,000 retail, hospitality and leisure properties, funded by a higher rate on the most valuable properties. I think that is absolutely the right thing to do.

Crown Estate (Wales) Bill [HL]

Lord Livermore Excerpts

3rd reading
Tuesday 20th January 2026 Lords Chamber

[The Financial Secretary to the Treasury (Lord Livermore) (Lab)]

My Lords, while the Government’s position on this matter has been made clear during earlier stages of both this Bill and the recent Crown Estate Act, I congratulate the noble Lord, Lord Wigley, on his Bill. As this House has heard previously, the Government do not support the devolution of the Crown Estate to Wales, as we believe the way it currently operates provides the best outcomes for Wales and the wider United Kingdom. The addition of two new Crown Estate commissioners with special responsibility for Wales and Northern Ireland respectively is a positive step and will ensure that the Crown Estate board continues to work in the best interests of Wales. In answer to my noble friend Lord Berkeley, we have no such plans that he asks about.

While I commend the noble Lord, Lord Wigley, on his Bill, the Government’s position is clear that we do not support devolution of the Crown Estate to Wales. Therefore, I must express reservations on behalf of the Government on this Bill.

[Lord Wigley (PC)]

My Lords, I am grateful to the two noble Lords for contributing and making the points that they have. I believe that these principles could well apply further afield in due course, though perhaps not immediately. I noted well the points made by the Minister; I only hope that the opportunity will now be given for colleagues from Wales in the House of Commons to make their voices heard from all sides of the House, and perhaps the Government could then think further about it on that basis.

Public Sector Productivity

Lord Livermore Excerpts

Wednesday 7th January 2026 Lords Chamber

[Baroness Neville-Rolfe]

To ask His Majesty’s Government what assessment they have made of the United Kingdom’s capacity to increase productivity, particularly in the public sector.

[The Financial Secretary to the Treasury (Lord Livermore) (Lab)]

My Lords, in the decade from 2010, the UK economy saw the lowest productivity growth since the Napoleonic Wars. This led to the lowest growth in living standards ever recorded. This Government inherited a situation where public sector productivity was 5.6% below pre-pandemic levels. Reversing that performance is the number one mission of this Government. As part of our growth strategy, we have set out measures to increase productivity, including reforms to planning and skills, record levels of investment in R&D, new investment in transport connectivity, and a modern industrial strategy.

[Baroness Neville-Rolfe (Con)]

My Lords, here is another statistic: the ONS has reported that total public service productivity in the UK fell by 0.7% in Q2 of 2025 compared with the previous year and that healthcare productivity fell by 1.5% over the same period. Public service productivity continues to lag behind that of the private sector, yet this Government have overseen a surge in the number of civil servants, with many still working from home; inflationary public sector pay deals, without specific and direct productivity links of the kind that are common in business; more state-controlled activity; and more regulation and taxes on business. Does the Minister agree that this is actually eroding the prospect of UK per capita growth, which is essential for the success of the Government’s ambitions?

[Lord Livermore (Lab)]

I do not agree with that. On a point of fact, the noble Baroness mentions NHS productivity. The latest figures from the NHS show that NHS productivity has grown by 2.4% in April to July 2025 compared to the same period last year. Once again, the noble Baroness criticises the fact that we are seeking to pay the public sector workforce properly. She will be aware that a workforce that is efficient and well rewarded is essential to increasing productivity—she always talks about the need for increased productivity, but she never backs the measures that actually go to deliver it. I hope that the noble Baroness will recognise some of the measures that this Government are taking. At the spending review, the Government established a programme of public service reform to drive greater productivity. As part of that, the Office for Value for Money worked closely with departments to identify £14 billion of efficiencies. The noble Baroness did not mention that in her question. At the Budget, the Chancellor announced that we will deliver a further £2.8 billion of efficiencies and savings in 2028-2029.

[Lord Kakkar (CB)]

My Lords, much of the future improvement in productivity in the NHS is predicated on the adoption of innovative technologies. Is the Minister content that there is sufficient investment in the continuing development of the NHS workforce to facilitate the adoption of that technology and deliver that improvement in productivity?

[Lord Livermore (Lab)]

I am. We are investing £10 billion in digital technologies within the NHS. We have introduced a 2% efficiency and productivity target in the NHS for each year of this Parliament. That is supported by the Government’s 10-year health plan for England, which will improve outcomes for patients and deliver better value for money for taxpayers. The noble Lord is absolutely right that digital technologies and their adoption is vital to that. As I say, that is why we have invested £10 billion in it. We are moving more healthcare into the community and we are focusing more on the prevention of illnesses.

[Lord Woodley (Lab)]

My Lords, in a recent pilot of private sector companies which were working a four-day week, over 90% chose to keep these arrangements because of seriously increased productivity. Does the Minister agree that this should be expanded to the public sector, as called for by the trade unions?

--- Later in debate ---

[Lord Livermore (Lab)]

I do not believe that that is government policy right now.

[Lord Leigh of Hurley (Con)]

My Lords—

[Baroness Kramer (LD)]

My Lords, this Question caused me to take a look at how the Government measure productivity. It strikes me as extraordinarily quantitative, taking into consideration almost no issue of quality. I am concerned that if AI is trained on these existing models, we are going to dig ourselves into a worse hole rather than make things better. Are the Government looking at how productivity is measured to give us something far more useful and valuable?

[Lord Livermore (Lab)]

I agree with a great deal of what the noble Baroness said. I noticed the noble Lord, Lord Leigh, who is very interested in this point as well, was on his feet. We have discussed it before in previous debates. We recognise the challenges in measuring public sector productivity, given the diversity of inputs and outputs in public services. The ONS recently published a review of its metrics. It has done a wide-ranging review into how productivity is measured and set out improvements that are now under way in many areas, such as healthcare, education and social security administration. It has included new quality adjustments, which better account for outcomes. I will take back to the Treasury the point the noble Baroness makes about the future adoption of AI.

[Lord Leigh of Hurley (Con)]

It is fair to say the ONS has a particular problem measuring NHS and public sector productivity because of the difficulty in measuring the outputs and inputs. None the less, the ONS reckons that public sector productivity has dropped 4.2% since 2019 and that, if it was at the same level as private sector productivity, the UK economy would have grown by 3%. Part of the problem is the measurement and part of the problem is the employment policies in the public sector. Will the Minister recognise the OBR’s warning that the Employment Rights Act will

“likely have material, and probably net negative, economic impacts on employment, prices, and productivity”?

[Lord Livermore (Lab)]

No. As the noble Lord says, public sector productivity has dropped significantly since 2019. This Government inherited a situation in which public sector productivity was 5.6% below pre-pandemic levels. That is clearly unacceptable and there are far greater issues going on than those that the noble Lord raises. I hope, as I have said before, that he will acknowledge some of the things this Government are doing to drive greater productivity in the public sector. We are working with the Office for Value for Money to identify £14 billion of efficiencies. We have gone further than that and identified a further £2.8 billion of efficiencies. We are investing in digital and AI transformation, workforce reform, rationalising the Government estate and improving procurement processes.

[Lord Londesborough (CB)]

My Lords, there is growing support for a social media ban for all those under the age of 16. In the interests of public sector productivity, would the Minister consider a similar ban during working hours for all government officials and civil servants under the age of 60?

[Lord Livermore (Lab)]

I do not think I would. I suspect social media, when used correctly, can help enhance productivity.

[Lord Howell of Guildford (Con)]

My Lords, does the Minister recall that, under both parties at the end of the last century, we attempted to beat this problem of productivity in the public sector by developing the private finance initiative idea? For a time, it was quite successful, although it did not end happily. Is he aware—perhaps he is not—that seven or eight of the most advanced countries in the world use developed and expanded versions of PFI that are much more sophisticated than ours? As they learned from us in the first place, perhaps we can learn a bit from them.

[Lord Livermore (Lab)]

The noble Lord is absolutely right. Partnerships with the private sector have an important part to play in the public sector. Obviously, the public sector can learn a great deal from the private sector, and, I hope, vice versa. That is why we announced in the spending review that we will be carrying out more public/private partnerships. Clearly, there is a lot to learn from the previous experience of PFI; we must make sure that we learn those lessons, and we should also learn the lessons from other countries and their experiences in that regard.

[The Earl of Devon (CB)]

My Lords, productivity in rural Britain is just 82% of its urban counterpart— a number that is estimated to fall to 79% by 2040. Making up this difference would add over £40 billion to the UK’s GDP. What efforts are His Majesty’s Government taking to improve this disparity?

[Lord Livermore (Lab)]

We talked before about AI and digital adoption. Digital adoption is incredibly important when it comes to rural communities—ensuring that they have access to extremely fast broadband, for example, will be important. Working from home has been mentioned. There are interesting studies that show that, particularly in rural areas where it is more difficult to travel to work, working from home can significantly improve productivity.

[Baroness O'Grady of Upper Holloway (Lab)]

My Lords, my noble friend the Minister is absolutely right that the big impact on investment, and therefore productivity, in the UK came as a result of austerity policies, a poor Brexit deal and a failure of industrial policy. However, I want to ask about quality of management in the UK. We know that that is key to workforce engagement, health and well-being, and job design and satisfaction, which, in turn, impacts on productivity. Will my noble friend consider convening a discussion with business schools about whether our education system for managers is fit for purpose and whether we can make improvements to improve workforce engagement?

--- Later in debate ---

[Lord Livermore (Lab)]

My noble friend asks a really interesting question and I am very happy to consider the point that she raises. The quality of management makes a massive difference in both the private and the public sector. We talked before about working from home. It is well documented that the better the quality of management, the more productivity comes from working from home. I am happy to consider my noble friend’s point.

Agricultural Property Relief and Business Property Relief

Lord Livermore Excerpts

Tuesday 6th January 2026 Lords Chamber

[Baroness Neville-Rolfe (Con)]

My Lords, the Government quietly announced over Christmas that the agricultural and business property reliefs threshold would increase from £1 million to £2.5 million. That change is welcome but it is plainly a U-turn, following well over a year of pressure from farmers, other family businesses and the Conservative Benches. First, does the Minister accept that this cruel delay caused unnecessary anxiety and real distress for the farming community and those operating family businesses across the country? Secondly, given that the harm was clear and the opposition sustained, why did the Government wait so long to act, which maximised the damage as families took important and irreversible decisions?

[The Financial Secretary to the Treasury (Lord Livermore) (Lab)]

I am grateful to the noble Baroness. May I first take this opportunity to wish her a belated happy birthday for the weekend just past?

I am grateful to the noble Baroness for her support for the measures that we announced shortly before Christmas. It is absolutely right that, following the reforms to the reliefs that we announced in the Budget in 2024, the Government consulted about the reforms with the farming community, as she says, and with family businesses. We have now carefully considered this feedback and have acted, and that was the right thing to do. We have acted to protect more family farms and family-owned businesses, while maintaining a core principle that more valuable agricultural and business assets should make a greater contribution.

[Baroness Kramer (LD)]

My Lords, I recommend a carpenter’s rule to the Government: “Measure twice, cut once”. Can the Government tell us their assessment of the serious harm that was done to our vital family farming sector by the devastating mistake of their original tax policy? I am glad that they have recognised that and have at least made some change. However, would it not benefit the economy more to abandon this tax policy altogether—it will now raise next to nothing—close the tax loopholes exploited by private equity, which were never actually touched by the policy in the first place, and focus on rebuilding trust and revitalising our critical agricultural sector?

[Lord Livermore (Lab)]

No, I do not agree with the points the noble Baroness makes. She says this will raise next to nothing; it will still raise about £300 million for our public services. I do not know whether she thinks that is next to nothing—I do not—and I do not know where she would get that money from if she wishes to cut this. There is also an important core principle that we have maintained: that more valuable agricultural and business assets should not receive unlimited relief. There is, I believe, a need to reform agricultural property relief and business property relief; I think she is saying that she does not agree with that. However, the status quo is not sustainable, because a very small number of claimants currently benefit from a very significant amount of agricultural property relief and business property relief. The top 7%, the largest 117 claims in 2021-22, accounted for 40% of the total Exchequer cost of agricultural property relief, and the top 4% of claims, the largest 158 claims, accounted for 53% of the Exchequer cost of business property relief. We are now getting the balance right between protecting those farms and those businesses, supporting the public finances and supporting our public services.

[Lord Bridges of Headley (Con)]

Can the noble Lord clarify how much this change will cost and how it affects the forecasts in the Budget’s EFO?

[Lord Livermore (Lab)]

The OBR will cost it precisely in the next EFO. I believe it will now raise approximately £300 million, but the OBR will confirm that in the next round of forecasts.

[Lord Wigley (PC)]

My Lords, I welcome, without reservation, the change made by the Government. The Minister will be aware of the considerable concern that there was among small farmers in Wales and the impact that the uncertainty was having on their sector. In that context, can he also have a look at the threat to that sector from the uncertainty arising from the possibility of imports from Australia and the southern hemisphere, which in a few years’ time could well undermine our domestic sector?

[Lord Livermore (Lab)]

I am grateful to the noble Lord for his support for what we have announced. I absolutely hear what he says about those trade agreements made by the previous Government and I am more than happy to look further at what he asks about.

[Lord Harper (Con)]

My Lords, my noble friend on the Front Bench made it very clear that farmers had to campaign long and hard to get this necessary change, and it happened at the very last minute. A similar campaign is being waged by the hospitality industry, which faces a near doubling of its business rates over the next three years. Will the Government force it to campaign long and hard and insist on no change before they do the right thing in the end?

[Lord Livermore (Lab)]

The previous revaluation was based on property values during the Covid pandemic. Rateable values were much lower—perhaps artificially lower—at that point. I understand that pubs and other hospitality venues, such as hotels, are now seeing increases as a result of the latest revaluation. We have provided a £4.3 billion support package. Without that, pubs would have faced a 45% increase in total bills for next year. Because of the support that we have put in place, we have got that down to 4%. However, I acknowledge that the revaluation means that pubs and others will struggle with the business rates that are applicable to them. That is why we are working with the sector and will continue to do so. We are very open to discussions with it about other measures, such as more freedom for licensing and the freedom to open for longer.

[Lord Grantchester (Lab)]

Farming is a very important part of the rural economy and the basis of the food and drink sector. The Treasury is to be congratulated on recognising the reality of asset values while maintaining the principle of inclusion for inheritance tax—that entrepreneurs more generally cannot use farmland to shelter their business assets. The emphasis must now be on rebuilding relationships with the farming sector, especially following the very poor trade deals that were done by the Conservative Governments, in which agriculture has been jeopardised in favour of industry. Can my noble friend the Minister update the House on better trade alignment with our European neighbours on standards more generally and SPS regulations in particular? I declare my interest on the register as having a farm in Cheshire.

[Lord Livermore (Lab)]

I am grateful to my noble friend for the support that he sets out for the measures that we have announced. He is right about the importance of the farming sector to our economy and our society. The Government have allocated a record £11.8 billion to sustainable farming and food production over the course of this Parliament. That includes the largest financial investment in nature-friendly farming that has ever been seen. My noble friend is also right to point to the importance of the EU reset to the farming sector. I was very pleased to see the commitment to an SPS agreement as part of that EU reset. I assure him that the UK Government are ready to move very quickly to secure that agreement and that the negotiations are ongoing.

[Lord Londesborough (CB)]

My Lords, I commend the Government on adjusting the threshold to £2.5 million, which I and other Cross-Benchers advocated a year ago in this place and which strikes the right balance. However, how many agricultural, forestry and fishing businesses closed in the 12 months since the 20% IHT measure was announced? How does that compare with the year before? I believe that the ONS has released this data. What redress, if any, will be offered to those businesses that have closed?

[Lord Livermore (Lab)]

I do not have that data to hand, but I am more than happy to write to the noble Lord.

[Lord Watts (Lab)]

My Lords, if there is now a shortfall in resources for the Government, can the Minister look at trust funds? These are the major weapon used by very rich people to avoid tax on inheritance.

[Lord Livermore (Lab)]

It is right that everybody pays their fair share towards the public services and that the tax system is based on fairness. I am confident that we have announced measures in the previous two Budgets to make sure that the tax system is fairer.

[Lord Fox (LD)]

My Lords, further to the question from the Cross Benches, does the Minister accept that some family farms, frightened as they were by the original plan, have taken irrevocable actions in terms of assets and how they run their businesses? Does the Treasury accept any responsibility for scaring those people into business threatening decisions—unnecessarily, as it turns out?

[Lord Livermore (Lab)]

As I said in answer to previous questions, it was right that we consulted with the farming community and family businesses about these reforms, that we listened to the feedback that we received, and that we acted to protect more family farms and family-owned businesses while maintaining the core principle that more valuable agriculture and business assets should make a greater contribution.

[Baroness Butler-Sloss (CB)]

On that point, why did the Minister not do it before rather than after?

[Lord Livermore (Lab)]

As I said, it was right that we took time to listen to the consultation with the farming community and family businesses. It is right that we have listened to that feedback and that we have now acted.

OBR: Resignation of Chair

Lord Livermore Excerpts

Monday 8th December 2025 Lords Chamber

[Baroness Neville-Rolfe (Con)]

My Lords, more and more information is emerging about the unfortunate decisions that individuals took during those weeks of pre-Budget speculation. Inspired by leaks from No. 10 and No. 11, stocks were sold, money was taken out of pensions, jobs were destroyed in hospitality and elsewhere, and hard workers and entrepreneurs left the UK to avoid rumoured exit taxes. There is a case for either an open pre-Budget process or a traditional purdah arrangement. There is absolutely no case for setting the rules in one way and acting in another. Will the Minister take that message home to his ministerial colleagues?

[The Financial Secretary to the Treasury (Lord Livermore) (Lab)]

I am grateful to the noble Baroness for her question and the points that she made. I should say very clearly that we take the Budget process extremely seriously and put the utmost weight on Budget secrecy. She will know that a leak inquiry is now under way, with the full support of the Chancellor and the whole Treasury team. She will also know that the Permanent Secretary to the Treasury will conduct a review of the Treasury’s security processes to inform future fiscal events. We will, of course, also work closely with the OBR to ensure that robust security arrangements are in place before the spring forecast and for all future forecasts. On the other points that the noble Baroness raises, she will be aware that the FCA has now written to the Treasury Select Committee confirming that it has not commenced an enforcement investigation.

[Baroness Kramer (LD)]

My Lords, the Minister will be aware from things I have said previously that it would be worth taking a look at the Swedish approach and that of some other countries to an open Budget process that gets away from the kind of shenanigans that we saw in the past weeks. He did not answer me when I raised that before. Will he now commit to taking it back for the Treasury to look at and think about?

Focusing on the OBR, the more I look at this episode, the more I ask myself whether any digital-based data can be truly secure. It is almost like a cat-and-mouse game at the moment, with fists being put into dykes to try to stem leaks, but nothing is reliably effective, and AI will surely be a game-changer that aggravates this. Will the Government consider an open dialogue with the public, the media and, in the case of sensitive financial reports, the financial markets, to consider how we handle data in this changed world, so that we no longer have this environment of leaks and secrecy but find a better way forward?

[Lord Livermore (Lab)]

I am grateful to the noble Baroness. She raised her suggestion about the Swedish model before. I think I said then that I do not think that we had any intention of taking that forward, and I say the same thing again today.

It is important to say that we remain absolutely committed to the independence of the OBR. That is incredibly important to the fiscal framework and to our commitment to economic stability. Clearly, it is important that the information it has is treated with the utmost secrecy. That is why it is important that, as I have said, we will work closely with the OBR to ensure that it has robust security arrangements in place for how it treats information.

On the next steps that we intend to take, the OBR has rightly conducted its initial investigation as quickly as possible, and we should now take the time, as I think I have said to the noble Baroness before, to consider its findings and the report in greater detail. The report into the OBR also made the point that it

“could not, in the time available, carry out deeper forensic examination”

of other recent economic and fiscal outlook events and recommended that such an event takes place. We have committed to doing that with the National Cyber Security Centre, as I think the noble Baroness alluded to, although it is important that we note that the report found no evidence of hostile cyber activity.

[Lord Grocott (Lab)]

My Lords, this is a question asked in all innocence. It is now 15 years since the OBR was established. Some of us have lived through the period before the OBR and the period since. Does my noble friend know of any academic studies or the like that suggest that Budgets were better prepared, more efficiently kept secret where necessary and altogether held in higher esteem before the existence of the OBR compared with the period since, or is the reverse true?

[Lord Livermore (Lab)]

I am not aware of any academic studies into what my noble friend asks about. I had the privilege of working in the Treasury for 10 years before the OBR came into existence, and I have now worked on two Budgets since the OBR came into existence. It is worth repeating that the Government are committed to the independence of the Office for Budget Responsibility. There is academic evidence that suggests that stability has a significant advantage in terms of the performance of the economy, economic growth et cetera. The OBR should and does remain at the heart of economic and fiscal policy-making, and the strength of that institution is a vital pillar in the Government’s commitment to economic stability.

[Lord Londesborough (CB)]

My Lords, I have two brief points for the Minister. First, given the importance of the OBR, why is it so lightly resourced? Those of us who run businesses or organisations of 50 staff will know that IT and security systems will essentially be back office and unsophisticated, as indeed is the case with the OBR. What are the lessons going forward on resourcing the OBR?

Secondly, this leak appears to be a technical systemic error—a serious one, yes, and naive, certainly, but not deliberate. If that is a resignation matter for the chairman, what does this mean for personnel in the Treasury and No. 11 who have been involved in deliberate and extensive pre-Budget briefings and operations?

[Lord Livermore (Lab)]

On the first question, the noble Lord is quite right to identify back-office systems as one of the issues identified by the report. He talks about systemic risk. We will look at wider questions of the systemic risk that this incident has uncovered, including the report’s conclusion that the OBR’s information security arrangements should have been regularly re-examined and assured by the management of the OBR.

His second question he expresses as fact. It is, of course, just an assertion. We take the Budget process very seriously and we put the utmost weight on Budget secrecy. As I have said, a leak inquiry is now under way with the full support of the Chancellor and the whole Treasury team. The Permanent Secretary to the Treasury will also conduct a review of the Treasury security processes to inform future fiscal events.

[Lord Leigh of Hurley (Con)]

My Lords, the situation with the OBR is clear. What is not clear is what the OBR told the Chancellor in respect of income tax receipts before her briefing statement. Should it not be the case that all information supplied by the OBR to the Chancellor is revealed in retrospect after the Budget speech?

[Lord Livermore (Lab)]

I am not sure whether the noble Lord is saying that is his view or whether he thinks it should be the case. The Chancellor was aware of the letter that the OBR sent to the Treasury Select Committee. She was content for it to be published, and she agreed this with the Permanent Secretary. We put the utmost weight on Budget security. The OBR has chosen to publish some further information. That is set out fully in Richard Hughes’s letter to the Treasury Committee. We believe it is important to maintain a private space between the Treasury and the OBR for the exchange of forecast information and Budget policy development, so we welcome the OBR’s statement that this is not intended to become usual practice.

[Lord Pannick (CB)]

My Lords, over the last few weeks and today, the Minister has studiously avoided confirming that Ministers and officials briefed possible announcements in the Budget prior to the Budget occurring. Does he really deny that this occurred?

[Lord Livermore (Lab)]

As I have said before, we take the Budget process extremely seriously and we put the utmost weight on Budget secrecy. A leak inquiry is now under way with the full support of the Chancellor, and the Permanent Secretary to the Treasury will also conduct a review of the Treasury’s security processes to inform future fiscal events.

[Lord Sandhurst (Con)]

With respect to the Minister, that is not an answer to the question. Will he confirm or deny?

[Lord Livermore (Lab)]

As I have said before, we take the Budget process very seriously and we put the utmost weight on Budget secrecy.

[Baroness Wheatcroft (CB)]

How much stress does the Minister think should be put anyhow on forecasts of relatively small numbers that can turn out to be extremely wrong?

--- Later in debate ---

[Lord Livermore (Lab)]

The noble Baroness is right about the outcome of certain forecasts. As I have said before, we remain committed to the independence of the Office for Budget Responsibility and its role at the heart of economic and fiscal policy-making. As I said in an answer to one of my noble friends, there is evidence that a greater level of independence creates greater levels of economic stability, and that can only be a good thing.