Oral Answers to Questions

Harriet Cross Excerpts

Tuesday 20th May 2025 Commons Chamber

[Rachel Reeves]

From the next financial year, this Government will introduce permanently lower rates for high street, retail, hospitality and leisure properties with rateable values below £500,000, and we are doing that exactly to support the sort of businesses that my hon. Friend champions.

[Harriet Cross (Gordon and Buchan) (Con)]

I draw attention to my entry in the Register of Members’ Financial Interests. Earlier this month, Harbour Energy announced that it would be cutting 25% of its onshore workforce, blaming the Government’s punitive fiscal position and challenging regulatory environment. When the news was announced, the Chancellor said that this was just a commercial decision by one company, so how does she explain the other energy sector jobs that have been lost in north-east Scotland in just the last few weeks? Belmar Engineering is entering liquidation, with 48 job losses. Well-Safe Solutions faces 45 job losses. Beam, a subsea technology company, has made all 200 staff redundant. With Harbour Energy’s cut of 25% of its workforce—250 jobs—we are talking about 600 jobs in total. How can the Chancellor explain that, and how will she support the industry in the spending review?

[Rachel Reeves]

My hon. Friend the Exchequer Secretary to the Treasury is working closely with businesses right across the energy sector. The previous Government increased the rate of tax on energy companies to 75%, and we increased it by three percentage points to 78%, reflecting the fact that energy companies have enjoyed huge profits since Russia’s illegal invasion of Ukraine. When people’s bills have gone up, it is right that we ask the energy companies making those profits to contribute a little more.

Finance Bill

Harriet Cross Excerpts

Report stage & 3rd reading
Monday 3rd March 2025 Commons Chamber

[Nesil Caliskan]

I absolutely support the principle of being able to use a mechanism to intervene in a market that is not working, and I think the Government’s approach is right. There is an immediate issue with high pricing, certainly, but the truth is that the Government have to be able to take decisions for the long run. I am conscious that Madam Deputy Speaker might intervene and tell me to focus on the new clauses, but as I said earlier, a long-term approach to ensure that we have a just transition that sees energy stabilised for people across the country on a long-term basis is really important.

The Government’s approach to energy levies is the right one, our focus on maintaining particular clauses on VAT on private schools is important, and, as I have said, the proposals on non-dom status are crucial.

[Harriet Cross (Gordon and Buchan) (Con)]

The energy profits levy is expected to cause huge amounts of instability for North sea firms, driving away investment, driving down employment and driving businesses away from the North sea to invest abroad. Does that sound like stability, and if so, will it bring employment, economic growth and lower prices to the country, because it does not sound like the stability or investment environment that we are looking for?

Family Businesses

Harriet Cross Excerpts

Wednesday 26th February 2025 Commons Chamber

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

The director of Family Business UK, Steve Rigby, has said that the single most important issue for the family businesses he represents is the retention of business property relief. That has come through loud and clear to me in recent weeks when I have been speaking to local businesses, both individually and collectively through organisations such as the Cairngorms Business Partnership and the local chamber of commerce. Other family businesses, which have never come together before and do not usually lobby their MPs, have come together too. They normally just get on with being hard-working and productive family businesses, but they have come together to lobby because they are so concerned about the impact of BPR.

To give a flavour of the family businesses in my constituency, we have some of the most iconic family businesses in the UK. Many will know Baxters from its food products, and Walker’s Shortbread food products can be found in pretty much every airport in the world. Glenfiddich, owned by William Grant & Sons, is another family business, and Johnstons of Elgin produces some of the finest cashmere products in the world. In Scotland as a whole, it alone employs 1,000 people.

Those businesses are not small fry. They put huge amounts of money and investment into those businesses every single year. I met a group of business owners last week who collectively represent 2,500 years of business ownership. They have a phenomenal story to tell. What is incredible about them is the stewardship of those businesses. They invest their time and energy. Family members get trained up and work in all aspects of the business, ready to take on the mantle of running it when it comes to them later in life. If the business was a limited liability partnership and you got rid of the business management of the business, it would not have any kind of inheritance tax to pay. Yet the only choice for family businesses operating on that scale, given the likely tax bill they will be hit with, is to either put away millions of pounds to cover the tax bill, which means they are not investing, or sell off large parts of the business. For manufacturing businesses, there is a very big chance that they will end up abroad rather than in the UK. They could be bought by a multinational or a conglomerate and the jobs would just be shipped abroad. That is not the way to grow the economy.

I was okay with the first couple of bits of the official Opposition’s motion, but they would have been better to have a laser-like focus on inheritance tax and national insurance contributions. Their inclusion of trying to stop a workers’ rights Bill is frankly ridiculous, and as for adding in the beer measures, it seems as though somebody must have been on a heady brew to come up with that notion. Those things make the motion unsupportable, but I hope the Minister is listening to what I have said about those aspects of the motion that I do support and have concerns about.

[Harriet Cross (Gordon and Buchan) (Con)]

In Scotland, businesses are also battling with the business rates relief not being passed on in full by the SNP Scottish Government. Will the Member be putting pressure on his party in Scotland to pass on those reliefs in full, to help family businesses and businesses across our high streets in Scotland?

[Graham Leadbitter]

I hear what the hon. Member is saying. There are a number of reliefs in Scotland, and Scotland went further and quicker than the Conservatives did in government when it came to the small business bonus scheme that was in place, so I am not going to take any lessons about what we do with business rates. It is a different system; there are other things going on that make the mix different. Also, that is not the issue that businesses are raising with me.

The first and foremost issue, as has been indicated by Family Business UK, is inheritance tax. That is what is causing the most consternation. The businesses that I met last week were saying that their financial advisers—or their finance directors, if they are big enough to have them—are already advising them to set aside substantial amounts of money to cover off risk. These are businesses that have never had to value themselves in their lives. They are family businesses that work on a model of working with what they have and getting on with it. They have never had to place an inheritance value on their business. That is yet another headache for them—another bureaucratic maze for them to work their way through—that does not apply to LLPs, which is a very unfair situation. I do not understand why a Labour Government in particular are tackling family-owned businesses in this way and allowing shareholder-owned businesses or LLPs off the hook. That does not make sense to me.

The hon. Member for St Albans (Daisy Cooper) spoke very well and, had her amendment been selected, I would certainly have gone for it. I am sorry that I cannot, but—

Bank Closures: Rural Areas

Harriet Cross Excerpts

Monday 24th February 2025 Commons Chamber

[Simon Hoare]

I agree entirely with my hon. Friend who represents Surrey and part of Hampshire.

I would be happy for the Minister to write to me on this point if it is easier, but it strikes me that there is scope for a little bit of wiggle room with regard to the Financial Services and Markets Act 2023. The Act did not give the Financial Conduct Authority powers to reflect on and assess wider banking services. The Minister’s party, when in opposition, was very keen that it should do so. When my party was in government, for some unknown reason we resisted amendments to that effect, and Labour, then in opposition, did not push them to a Division. I just think that there is too gaping a lacuna in all of this, in that it is only access to cash that is assessed, and not access to banking services.

[Harriet Cross (Gordon and Buchan) (Con)]

Will my hon. Friend give way?

[Simon Hoare]

Let me give way to the hon. Member for North Shropshire (Helen Morgan), then I will give way to my hon. Friend.

[Simon Hoare]

The hon. Lady is absolutely right. Again, I hope that any of the banks or regulators who may listen in or read the report will understand that this is not an issue that divides by party; it affects constituents across the country irrespective of which party represents them in this place. The key point is to have a proper assessment of rurality and the differential of living in a rural area compared with an urban area.

I commend the Government for their support for hubs, but they need to be more physical and robust in driving them forward. It is almost as if the banks are marking their own homework as to whether the argument in favour of a hub stacks up. As Sarah Coles of Hargreaves Lansdown commented a year or so ago:

“The closure of bank branches is a vicious circle. The more that close, the more people move online”.

Of course, by definition, the more people move online, the more that almost hollows out the argument to justify creating a hub.

I understand that initially the banks were slightly reticent, just as the mobile phone operators were about shared masts—that somehow clients would be pinched and all the rest of it—but the hubs are a shared facility jointly financed by the banks. Those banks need to remember that they are still in business principally due to the good will of the British taxpayer and the Exchequer during the financial crash of 2008, who keep our banking sector afloat. They owe a little bit of payback, as a number of my constituents have been keen to point out.

The hubs seem to work and fill that gap; but as I say, marking one’s own homework and setting the rubric to decide whether a hub will work is not right. The Treasury could take a more engaged and proactive leadership role on the matter.

[Harriet Cross]

I thank my hon. Friend for securing this important and timely debate. I certainly spent a lot of my recess looking at banking hubs, especially in a town called Ellon in my constituency, which has recently lost its last bank. Ellon is a large town of over 7,000 people, and if the surrounding villages are included, it is getting up towards 11,000 people. However, it does not qualify for a banking hub. Link has not given its permission to have a banking hub, saying that there are not enough businesses in the town. It does not take into account, for example, the farming businesses, and the rural nature of the area, as we have touched on, is not taken into account in the criteria set out by Link.

I am glad that my hon. Friend mentioned the importance of “rural-proofing” the conditions that Link looks at to deliver a banking hub. I hope that this debate and the Minister’s response will put some pressure on Link to look more holistically at the rural environment when it comes to considering hubs, because places like Ellon need a banking hub.

[Simon Hoare]

I am grateful to my hon. Friend, because again she enhances and underlines the argument that I have been deploying, and for which colleagues across the House have been kind enough to add their support.

I suppose my annoyance is that the people who write the policies, whether they are the regulators or those in the bank boardrooms, do not know what living in a rural area is like. If they are in the Square Mile, they are not part of a rural community. They may have a getaway weekend retreat that they dash off to in their personalised number-plated Land Rover or Range Rover, in which they take their food down from Waitrose, before coming back to London on the Sunday, but that is not living in a rural area. That is not running a business in a rural area.

Inheritance Tax Relief: Farms

Harriet Cross Excerpts

Monday 10th February 2025 Westminster Hall

[Harriet Cross (Gordon and Buchan) (Con)]

In the 103 days since the Budget and the Chancellor turned farmers’ lives upside down in this country, we have heard stories from farmers across the UK, and will hear more today. Labour Members marched out stories of their own farmers; a few months ago, they did not hear anything from their farmers, but suddenly they have a voice. It is good to hear that they have been listening and now are actually representing those farmers’ voices.

Farmers have been telling us for months about the impact the IHT change will have. I have spoken about the 90-year-old farmer in my constituency whose son is now resigned to the fact that he will have to sell the farm and give up on the livelihood and life he thought he was going to have. I have spoken about the farmer whose wife died earlier last year, who also realised by the end of the year that they were going to lose their farm. However, the Government did not want to listen. They would not to listen to the stories coming from our farmers.

We have heard about the fact that farmers only make 1% profit. As my right hon. Friend the Member for Beverley and Holderness (Graham Stuart) said, what other businessperson would take a 1% profit and want to continue that life? We have also heard about how investment in farms has fallen off a cliff since this policy was introduced. If we do not invest in or encourage investment in farms, how will we increase profitability? Profit and productivity are linked; if we have poor productivity and profitability, we will never get to a stage where any sort of IHT bill—let alone the one proposed by the Government—can be managed by farmers.

It is not just farmers making the Government aware of where they stand; we have heard the NFU and NFUS say that three quarters of commercial farms will be impacted. Experts in valuing the Central Association of Agricultural Valuers says that 75,000 farms will be impacted. The CLA says that an eighth of farms over 350 acres will have to sell land in order to cover the bill. Savills, the property experts, says that 88% of UK farmland will be impacted, yet, as the Treasury says it is only 20% to 25%, that is the figure we stick with. We stick with the Government figure because it fits the narrative; we do not listen to the industry or the experts, which is how we have got into the situation we are now in.

[Mike Wood (Kingswinford and South Staffordshire) (Con)]

When Jane’s husband died just under three years ago, their farm passed to their son—the fifth generation of the family to farm that land. Their accountant says that if that had happened after the Government’s changes, the farm would be looking at an inheritance tax bill of between £80,000 and £100,000. Does my hon. Friend know of any farmer who has that kind of money available without selling off a huge chunk of their farm?

[Harriet Cross]

No, I do not know of any family farmer who has the sort of money to cover that bill. That is the issue. We are penalising the very people who have fed us, who have supported our rural communities and who have been custodians of the land for generations, to fit whatever the Government’s narrative is with this policy.

The unintended consequences also have impacts. There is an impact on hauliers, vets, rural communities, farm shops and workers—they will all be impacted by the policy. It is not just family farmers; they are the start, but the result of the policy spreads through rural communities the length and breadth of the country.

[Caroline Voaden (South Devon) (LD)]

In my constituency we did a survey of all the farmers to see whether the Government’s figures stood up. The Government claim that 73% of family farms will be unaffected by the change in tax relief, but 85% of the farmers who responded to our survey believed they would be affected, with an average inheritance tax bill of £637,000 because of the extortionate cost of land in South Devon. That is nearly £64,000 a year in tax every year for 10 years. Does the hon. Lady agree that this is unworkable, and will see the decimation of our family farms?

[Harriet Cross]

Absolutely. I agree 100% with what the hon. Member says, and it will be repeated across the country in rural Labour constituencies and in our constituencies. It does not matter where they are in the country, our farmers will face hundreds of thousands of pounds in IHT bills because of this Government’s decisions—for no other reason.

Some balance sheets might say one thing and the Treasury’s might say another, but the reality in rural constituencies up and down the country is that the policy will devastate our family farmers and rural communities. The Government must change course before it is too late.

--- Later in debate ---

[Harriet Cross]

Will the Minister give way?

[James Murray]

I will make some progress.

The Liberal Democrat spokesperson, the hon. Member for Glastonbury and Somerton (Sarah Dyke), asked how the figures were arrived at. The figure to which I referred—520 estates likely to be affected in ’26-27—comes from taking the historical data and projecting it forward using economic determinants. She may have seen the letter sent by the Chancellor to the Treasury Committee in November, which set out how that calculation was done. I suggest that all Members read that letter to understand the basis for that 520 number.

The statistics also show how many estates claiming business property relief are likely to be affected. Around three quarters of estates claiming business property relief alone, excluding those only holding alternative investment market shares, will not pay any more inheritance tax in 2026-27. The Office for Budget Responsibility has been clear that it does not expect this measure to have any significant macroeconomic impacts.

I recognise the disagreement over this policy, but Ministers and officials have been listening carefully to the views of the farming sector and rural communities. Ahead of the Budget, there was media speculation that the Government were going to abolish the reliefs altogether. In reaction to that speculation, the Treasury received and considered several representations from the farming sector with views on retaining the reliefs. I responded to a debate on the matter in this very room on 17 October.

Finance Bill (Fourth sitting)

Harriet Cross Excerpts

Committee stage
Thursday 30th January 2025 Public Bill Committees

[Emma Reynolds]

The clause will enable the commissioners for HMRC to prepare for the introduction of the UK carbon border adjustment mechanism and allow information to be disclosed for the purposes of developing the CBAM.

The Government are committed to reaching net zero by 2050. As we make progress to decarbonise, we must ensure that the effect of our efforts is not undermined by carbon leakage. I am sure that hon. Members know this, but for the benefit of the Committee, let me define carbon leakage: it is the movement of production and its associated emissions from one country to another to avoid higher decarbonisation efforts and costs. The best solution to carbon leakage risk would be international co-ordination on decarbonisation and carbon pricing. However, many countries do not yet have domestic carbon pricing mechanisms. Consequently, introducing the UK CBAM will reduce the risk of carbon leakage by placing a carbon price on carbon-intensive goods imported into the UK from 2027.

The new tax will enable a charge to be placed on the carbon emissions found in highly traded carbon-intensive goods imported into the UK from the aluminium, cement, fertiliser, hydrogen, iron and steel sectors. A comparable carbon price will be placed on those goods, based on what they would have incurred if they had been produced in the UK under our domestic emissions trading scheme.

[Harriet Cross (Gordon and Buchan) (Con)]

I understand the principle of CBAM. However, in practice, if we import fertiliser to increase our food production here, for example, we will reduce our imports of food from elsewhere. It might not balance out exactly, but we would not be changing how much carbon we sent abroad, because we would just be taking it from another mechanism that is not included in the CBAM.

[Emma Reynolds]

I thank the hon. Lady for her intervention, but I am not entirely sure that I follow the logic. The purpose of CBAM, as I have said, is to ensure that if a product is produced using carbon in another country, we do not have leakage across the border. The overall impact will vary depending on the sector’s exposure to CBAM imports relative to the overall input costs and the extent to which it can substitute them. CBAM imports make up only a small proportion—about 1%—of average UK industry input costs. CBAM liabilities are expected to be small initially, and reliance on inputs of goods within scope across the economy is limited overall. I am not sure that I follow the logic that imposing CBAM on imported fertilisers will somehow have the effect that the hon. Lady suggests.

The UK emissions trading scheme is the UK’s primary carbon pricing mechanism. The scheme was established to increase the climate ambition of the UK’s carbon pricing policy while protecting the competitiveness of UK businesses. The UK CBAM will be implemented only in sectors where it will effectively mitigate carbon leakage risk and where delivery is deemed feasible. Other sectors that give rise to carbon leakage will be considered for future inclusion.

Finance Bill (Third sitting)

Harriet Cross Excerpts

Committee stage
Thursday 30th January 2025 Public Bill Committees

[Harriet Cross (Gordon and Buchan) (Con)]

It is of course welcome that more land is to be brought under the scope of agricultural property relief, but given the introduction of the £1 million cap on agricultural property, is it not somewhat redundant? I know the Government use different numbers, but the industry believes that the majority of farms will be over that threshold anyway, so bringing more land within the scope of APR does not actually make much difference to the bill they will have to pay at the end.

[James Murray]

As the hon. Lady knows, because we have debated this many times, the data that we have published, based on His Majesty’s Revenue and Customs data, shows that the large majority of small farms will not be affected. I am sure she knows well the statistics on the 530 farms affected by the reforms to APR and business property relief in ’26-27, because she will have seen them in the Chancellor’s letter to the Treasury Committee and we have discussed them many times in this place.

Clause 61 relates specifically to land managed under certain environmental agreements, and was a measure proposed by the last Government. If the hon. Lady allows me to continue explaining why the clause is important, she might feel able to support it, given the benefits it will bring. The clause was welcomed by the sector, and the Government agree with the approach. I can confirm that there have been no changes to the design outlined by the previous Government in March 2024, which is why I hope to get the Opposition’s support for the clause.

As a result of the changes made by clause 61, from 6 April 2025 APR will be available for land managed under an environmental agreement with or on behalf of the UK Government, devolved Governments, public bodies, local authorities or approved responsible bodies. This includes but is not limited to the environmental land management schemes in England and equivalent schemes elsewhere in the UK, as well as any agreement that was live on or after 6 March 2024.

The Government are fully committed to increasing the uptake of environmental land management schemes in England, and we are providing the largest ever budget of £1.8 billion for this in 2025-26. The changes made by clause 61 will ensure that the tax system is not a barrier to uptake, thereby supporting farmers and land managers to deliver, alongside food production, significant and important outcomes for the climate and environment. I commend the clause to the Committee.

--- Later in debate ---

[James Murray]

As I was saying, the clause also increases the relative value of small producer relief for both draught and non-draught products, and clause 64 ends the alcohol duty stamps scheme. To reassure Members, in consideration of what position to take at the autumn Budget, I had meetings and officials had further meetings with representatives from the wine, beer, spirits and cider industries, as well as with public health people, to understand the full range of opinions and how we could carefully calibrate our policy response.

[Harriet Cross]

The Scotch Whisky Association is not on the list of people the Minister met. Can he confirm whether he did meet the association?

[James Murray]

The association is included under “spirits”.

As we know, alcohol duty is frozen until 1 February. The OBR’s baseline, reflected in its forecast, is that alcohol duty will be uprated by RPI inflation each year. The Government have decided to maintain the value of alcohol duty for non-draught products by uprating it from 1 February. At the same time we are recognising the social and economic importance of pubs, as well as the fact that they promote more responsible drinking, by cutting duty for draught products, which account for the majority of alcohol sold in pubs.

A progressive strength-based duty system was introduced on 1 August 2023 by the previous Government following the alcohol duty review. The reforms introduced two new reliefs: a draught relief to reduce the duty burden on draught products sold in on-trade venues, and small producer relief that replaced the previous small brewers relief. The clause increases the generosity of both reliefs.

The alcohol duty stamps scheme is an anti-fraud measure applied to larger containers of high-strength alcoholic products, typically spirits. It requires the mandatory stamping of certain retail containers with a duty stamp. In 2022, HMRC was commissioned to review the effectiveness of the scheme. It found that it is outdated, susceptible to being undermined and now plays a diminished compliance role, and concluded that the cost and administrative burdens imposed on the spirits industry could no longer be justified. The previous Government announced the end of the scheme at spring Budget 2024. That is a decision that this Government will implement from 1 May 2025. That date was chosen after consultation with businesses, which requested sufficient time to prepare.

Clause 63 makes four changes. First, it increases the rates of alcohol duty for non-draught products to reflect RPI inflation. Secondly, it reduces the rates of alcohol duty on draught products by 1.7%. Thirdly, it amends the tables in schedule 9 to the Finance (No. 2) Act 2023 that are used by small producers to calculate their duty discount under small producer relief. This increases the value of small producer relief for both draught and non-draught products in relation to the main rates for these products.

In cash terms, the current cash discount given to small producers for draught products is maintained, while the discount provided to small producers for non-draught products is increased. Small producer relief provides the same relative discount, irrespective of whether a product also qualifies for draught relief. As a consequence of the RPI increase in non-draught rates, it increases the simplified rates in schedule 2 to the Travellers’ Allowances Order 1994, which is used for calculating duty on alcoholic products brought into Great Britain.

Some hon. Members raised questions about the impact of these measures on pubs and the hospitality industry. To support the hospitality industry, particularly recognising the role that pubs play in local communities, the Government have announced a reduction in the alcohol duty rates paid on draught products. This reduces businesses’ total duty bill by up to £100 million a year and increases the duty differential between draught and non-draught products from 9.2% to 13.9% for qualifying beer and cider.

As we have mentioned a couple of times in this debate, the reduction to draught relief rates will also result in the average alcoholic strength pint at 4.58% ABV paying 1% less in duty. Draught relief provides a reduced rate of duty on draught products below 8.5% ABV packaged in containers of at least 20 litres designed to connect to a qualifying system for dispensing drinks.

Clause 64 ends the alcohol duty stamps scheme from 1 May this year, removing the provisions in the Finance (No. 2) Act 2023 and the secondary legislation in the Duty Stamps Regulations 2006. It also makes consequential changes and removes references to the scheme where they appear elsewhere in legislation.

Amendment 66 would freeze alcohol duty for alcoholic products above 22% ABV. That is contrary to the Chancellor’s decision at the autumn Budget to increase those duty rates to reflect inflation, and would cost the Exchequer £150 million a year.

Specifically in relation to the Scotch whisky industry, I would like to set out that the overall alcohol package balances commercial pressures on the alcohol industry with the need to raise revenue for our vital public services and reduce alcohol-related harms. Consumers and brewers in Scotland will benefit in line with the rest of the UK, with consumption and production patterns roughly equal nationwide. Of course, 90% of Scotch whisky is exported, which means it pays no duty. The Scotch Whisky Association’s own figures show the health of the industry. The Budget offers support to the Scotch whisky industry by removing the alcohol duty stamps scheme, which we have just considered, and through investment in the spirit drinks verification scheme by reducing fees for geographical verification.

New clauses 2 and 4, which were also tabled by Opposition Members, would require the Chancellor to make additional statements about the impact of the alcohol duty measures. The Government do not believe further statements to be necessary. As usual, a tax information and impact note was published at the autumn Budget, outlining the anticipated impacts of the measures on alcohol producers and the hospitality sector. Alcohol duty, like other taxes, will be reviewed in future Budgets.

New clause 2 also requires a review of the impact on trade, but UK alcohol duty is, of course, not charged on exports. Some hon. Members raised the impact of the changes to business rates on the hospitality sector in Scotland, but business rates are, of course, devolved. The Scottish Government are accountable to the Scottish Parliament on devolved areas.

Hon. Members also raised questions around the wine easement and why it had not been extended or made permanent. I remind them that the wine easement was intended as a transitional arrangement to give the wine industry time to adapt to the strength-based duty calculation for wine. The revised alcohol duty system simplified and reduced differences between categories of alcohol. Making the wine easement permanent would introduce a new differential into the system and add to the complexity of that system. It would further lead to a duty regime in which stronger ABV wines pay less in proportion to their alcohol content than lower ABV wines. Making the wine easement permanent would, therefore, undermine the simplification and public health objectives of the revised alcohol duty system.

In conclusion, the changes to the alcohol duty balance public health objectives, fiscal pressures, cost of living pressures and the economic and social importance of pubs, while also supporting small producers by increasing the generosity of small producer relief. Furthermore, the end of the alcohol duty stamps scheme will simplify procedures for approximately 3,500 registered alcohol importers and producers, reducing overall costs on the spirits industry by an estimated £7 million a year. I therefore commend the clause to the Committee, and urge it to reject amendment 66 and new clauses 2 and 4.

Finance Bill (Second sitting)

Harriet Cross Excerpts

Committee stage
Tuesday 28th January 2025 Public Bill Committees

[Gareth Davies]

I am afraid I have not taken the time to read the academic reports, but I greatly value and emphasise the work of the OBR, which the Conservatives established in government. The new Government have taken it forward and are already seeking to bolster its impact on the Treasury’s work. If the hon. Lady will forgive me, it is the OBR’s work that I look at, and that work says that this budgetary measure is highly uncertain. As I was pointing out, that leaves questions for markets and for the Labour parliamentary party when it comes to which taxation will have to go up and what spending will be cut if that figure is not met. I will leave that to the Minister to address.

[Harriet Cross (Gordon and Buchan) (Con)]

Regardless of the uncertainty, we know from the projections that, although the tax intake should peak at about £6 billion, it tails off by the end of the period to £95 million—a huge difference. By the time this spending and the costs have been worked into the system, no matter what happens in terms of uncertainty, at the end of that tax period there will be a huge amount of money that was in the system, but which now has to be filled. This policy, if implemented, will mean that there is a hole in the system at the end of the ’29 period that will need to be filled in some way.

[Gareth Davies]

That is a very good point—if only I had included it in my speech. That is a classic example of an intervention that adds to the content of the debate on behalf of all those who will be impacted by this measure. It is important to look at the projections over the five-year period on a year-by-year basis. It will be no surprise to the Minister that I look at them very carefully. I look at the timing of when the measures generate revenue, and when they do not. I could provide lots of examples of places where questions need to be asked of this Budget—indeed, we have been asking them today.

In claiming the 100% relief on foreign income and gains, an individual forfeits their eligibility for a whole host of allowances available to normal UK taxpayers, including the personal allowance'; yet even those who were previously taxed on a remittance basis for non-UK income and gains would still pay tax on their UK earnings, just like everybody else. That was surely an uncontroversial element of the old regime, which did not require any attention, so why have the Government taken it upon themselves to make the tax treatment of UK income less favourable as a condition of claiming the new 100% relief—which we of course welcome?

The biggest concern that has been raised with me regarding these new reliefs by the likes of the now-famous Chartered Institute of Taxation, which many of us have referred to, is the requirement to itemise and actively claim each income and gain. As far as I can recall, the technical note that we produced alongside our proposals in March 2024 did not insist on that level of specificity and detail, which is quite onerous on those applying. As a basic matter of fairness, it seems wrong that the window for making a claim is so much less than the 12 years available to HMRC to issue a compliance check, and even more so when the ability to make a consequential claim to correct an error is restricted.

The Budget claims to introduce a regime that is simpler and internationally competitive, as the Minister outlined in his speech, but those two requirements are neither of those things. I would be very grateful if the Minister can explain what exactly the benefit of doing things in that way are.

The main departure from our proposals comes with clause 38 and schedule 8, which introduce financial limitations for overseas workday relief. Is that to compensate for the additional year in which the relief will now be claimable? How significant does the Treasury expect the impact of the alteration to be? I would be grateful if the Minister can indulge me by outlining an explanation on those points.

--- Later in debate ---

[James Murray]

These clauses and schedules also relate to the non-dom reform, which we just discussing in relation to the previous group of clauses. Clauses 40 to 42 and schedules 9 to 11 make changes to ensure that the remittance basis of taxation will no longer apply from 6 April this year. For previous users of the remittance basis, a temporary repatriation facility will be introduced, which we just discussed under the previous group of clauses. Individuals will be able to rebase their foreign assets to their value on 5 April 2017.

As we know well, the Government are removing the outdated concept of domicile status from the tax system and replacing it with a new, internationally competitive residence-based regime from April this year. Currently, where a non-UK-domiciled individual moves to the UK, they are able to access the remittance basis of taxation, under which foreign income and gains are not taxable unless they are brought to the UK. These arrangements can create a disincentive to invest in the UK.

The changes made by clause 40 and schedule 9 will remove the remittance basis of taxation from being claimed after 6 April 2025, and this clause clarifies how this legislation operates. Although no new claims can be made, foreign income and gains that have arisen through a remittance basis prior to 6 April 2025 will continue to be taxed at the prevailing tax rates if remitted to the UK on or after this date.

Clause 41 and schedule 10 will introduce the new temporary repatriation facility for individuals who had previously claimed a remittance basis, through which they will be able to designate and remit foreign income and gains that arose prior to 6 April 2025 at a reduced rate of tax. That will include unattributed foreign income and gains held within trust structures. That facility, as we discussed in relation to the previous group of clauses, will be available for a limited time period of three years from April 2025, with a rate of 12% for the first two years, rising to 15% in the final year.

Clause 42 and schedule 11 introduce a transitional arrangement for capital gains tax purposes. That will allow those who have previously claimed a remittance basis to rebase foreign assets they held on 5 April 2017 to the value at that date, when they dispose of them on or after 6 April 2025.

Government amendments 55 and 56 amend the wording of sections 56, 61G and 61R of the Income Tax (Earnings and Pensions) Act 2003 to ensure that those sections, which cover chargeability to tax in respect of deemed employment payment, no longer make reference to domicile, which has become redundant in light of the current reforms.

Government amendment 57 amends section 22 of the Finance (No. 2) Act 1931, section 154 of the Finance Act 1996 and section 174 of the Finance Act 1993 to ensure that an individual’s domicile is no longer a relevant consideration for Treasury securities issued with free of tax for residents abroad conditions. Government amendment 58 removes references to domicile in section 614 of the Income and Corporation Taxes Act 1988, relating to relief on income for investments of certain pension schemes, which have become redundant in light of the current reforms.

Finally, Government amendment 59 corrects an incorrect reference in schedule 10. Amendments have also been made to the associated explanatory notes to accurately reflect the legislation. The Government are committed to making the tax system fairer so that everyone who is long-term resident in the UK pays their taxes here.

[Harriet Cross]

I thank the Minister for listing the amendments before the Committee. At Davos last week, the Chancellor announced other amendments that will be made to non-dom status. It is disappointing that they have not been put before the Committee, where they can be scrutinised line by line. Why is that not the case, and when will either a Committee or the House get to see those amendments?

[James Murray]

I am glad that the hon. Lady was paying good attention to what the Chancellor was saying at Davos. The Government will introduce, as the Chancellor set out, a number of amendments to the Finance Bill on Report, to make the temporary repatriation facility simpler to use and more attractive to those who want to benefit from it, while retaining the structure announced at the Budget.

More broadly, the new regime is more attractive than the current approach, because individuals will be able to bring income and gains into the UK without attracting an additional tax charge. That will encourage people to bring funds into the UK and spend and invest them here. That is good for the UK in terms of investment and spending coming into the UK, and in terms of the tax revenue, which we spoke about in relation to the previous set of clauses. I therefore commend clauses 40 to 42, schedules 9 to 11 and Government amendments 55 to 59 to the Committee.

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[James Murray]

The clause makes changes to the inheritance tax thresholds so that they continue at the current levels in 2028-29 and 2029-30. Subject to reliefs and exemptions, inheritance tax is payable if the net value of an estate exceeds the respective thresholds for two bands: the nil-rate band, for which the threshold has been £325,000 since 2009-10, and the residence nil-rate band, for which the threshold has been £175,000 since 2021. Those thresholds rise with the consumer price index each year, but have in recent years been frozen until April 2028, by the previous Government.

The changes made by clause 57 will fix the threshold at current levels for a further two years, until April 2030. This will raise £355 million in 2029-30.

[Harriet Cross]

We heard earlier that the thresholds for income tax will be unfrozen as of 2028; why will the thresholds for inheritance tax not be? What impact will that have on, for example, agriculture and business property reliefs? Have the Government done an assessment of the number of additional estates that will be brought into inheritance tax beyond 2028, and how many of those will be family farms?

[James Murray]

Broadly speaking, the reason why we have had to take a number of decisions, including some of the more difficult decisions in the Budget, is the fiscal inheritance from the previous Government. I do not need to spend time in Committee rehearsing the arguments on that, because they are well known and widely accepted. We inherited a mess from the previous Government and had to take difficult decisions at the autumn Budget to fix that problem, put the public finances back on an even footing and get public services back on their feet. Extending the freeze for inheritance tax thresholds is one of many difficult decisions we had to take.

On the number of estates that will pay inheritance tax as a result of the freeze, fixing the nil-rate bands is forecast to increase the number of tax-paying estates by 1,400 in 2028-29 and by 2,900 in 2029-30. That means the proportion of all UK deaths subject to inheritance tax will rise by 0.2 and 0.4 percentage points in ’28-29 and ’29-30 respectively, when compared with the thresholds rising with CPI. If we look at all inheritance tax measures, the latest forecast indicates that 37,700 estates will have an inheritance tax liability in ’24-25, which equates to 5.8% of all estates. That will increase to 66,600 estates in ’29-30, which equates to 9.5% of estates. I hope that helps to put the measures in context.

We have debated the specific changes to agricultural and business property reliefs several times, and I have shared with the hon. Member for Gordon and Buchan the data on that, which shows the limited impact of the freeze in terms of the number of estates affected. Most estates will not be subject to any inheritance tax because of the way we have designed the reforms to agricultural property relief and business property relief. We have had several other debates on that issue in this place.

Finance Bill (First sitting)

Harriet Cross Excerpts

Committee stage
Tuesday 28th January 2025 Public Bill Committees

[James Murray]

Clauses 5 and 6 make changes to ensure long-term certainty on company car tax by setting the rates for 2028-29 and 2029-30. The increases in the appropriate percentages will help to ensure that the tax system contributes to supporting the sustainability of the public finances. The effect of the clauses is to gradually narrow the differential between zero emission and electric vehicles and their petrol and diesel counterparts, while ensuring that significant incentives to support the take-up of EVs remain in place. The provisions also increase rates for hybrid vehicles.

Company car tax applies when a company car is made available to an employee or their family member for private use. Company car tax rates were confirmed by the previous Government up until 2027-28. In the 2024 autumn Budget, the Government set out the rates for 2028-29 and 2029-30, to provide certainty.

The Government recognise that the company car tax regime continues to play an important role in the EV transition by supporting the take-up of EVs and their entry into the second-hand car market. Although it is important to maintain strong incentives to encourage the take-up of EVs, the Government need to balance that against the responsible management of the public finances by gradually withdrawing them over time, as EVs become more normalised. That is why we have committed to raising the company car tax rates—or appropriate percentages—for EVs, hybrids, and petrol and diesel vehicles in 2028-29 and 2029-30, gradually narrowing the differential between EVs and other vehicle types, and bringing the treatment of hybrids closer to that of petrol and diesel cars.

The changes made by clauses 5 and 6 will set the company car tax appropriate percentages for the tax years 2028-29 and 2029-30. Appropriate percentages for EVs will rise by two percentage points per year, rising to 9% by 2029-30. Meanwhile, the appropriate percentages for cars with emissions of 51 grams of carbon dioxide per kilometre or over will rise by one percentage point per annum. By 2029-30, the appropriate percentages for petrol and diesel cars will rise to between 20% and 39%, depending on the car’s specific emissions. Together, the measures will gradually narrow the gap between EVs and their petrol and diesel counterparts, while maintaining a generous incentive for EVs.

On the changes to the hybrid appropriate percentages, I draw the Committee’s attention to recent research from the European Commission that has shown that the real-world emissions of hybrid vehicles are in fact three and a half times higher than previously thought. Consequently, the Government have announced that they will align the treatment of hybrids more closely with that of petrol and diesel cars.

[Harriet Cross (Gordon and Buchan) (Con)]

On aligning hybrid cars more closely with petrol and diesel cars, what assessment has been made of the impact on the hybrid car market and the take-up of hybrid cars, if we are ultimately looking to move away from petrol and diesel in the long term?

[James Murray]

Over the coming years we need to make the transition to electric vehicles. Hybrid cars obviously play an important part in the car market and car manufacturing in the UK. The clauses are about a plan over the next five years or so regarding what will happen to the appropriate percentages. This is not an overnight change. Actually, one of the important principles of our setting out the appropriate percentages now for some years in advance is to give car manufacturers and everyone interested in the car industry certainty about what will happen. That is why, as I have been setting out, the appropriate percentages for EVs will rise, thereby narrowing the gap between them and petrol and diesel vehicles, but there will still be a generous incentive to help to shift people towards purchasing EVs.

Hybrid vehicles obviously fit within the general scheme of appropriate percentages. However, as I was setting out, European Commission research shows that emissions from hybrid vehicles are in fact three and a half times higher than previously thought, so in setting the rates for 2028-29 and 2029-30, we have decided to reflect that fact in the appropriate percentages that we are legislating for. That means all cars with emissions between 1 gram and 50 grams of carbon dioxide per kilometre—those that largely fall in the hybrid category—will see their appropriate percentages rise to 18% in 2028-29 and to 19% in 2029-30. As I outlined to the hon. Member for Gordon and Buchan, by setting out the rates until 2029-30 we will give the industry and consumers certainty about the future rates.

The company car tax system offers generous incentives to encourage EV take-up and makes an important contribution to the EV transition. The Government, however, must balance incentives against responsible management of the public finances. We are announcing the rates for 2028-29 and 2029-30 to start to narrow the differentials between EVs, hybrids, and petrol and diesel vehicles. I therefore commend clauses 5 and 6 to the Committee.

--- Later in debate ---

[James Murray]

I listened to the shadow Minister’s comments, and he must have a different definition of “overnight” from me. Legislating now for changes that will come in in 2028 does not feel like overnight. Some Budget changes come in on the day of the Budget—had he called one of those overnight, I might have had some sympathy with the description, but not for legislating now for changes that will come in in 2028, toward the end of this decade. Part of the point of legislating now for changes that will happen some years down the line is precisely to give that signal to consumers and manufacturers, to ensure that the consumers are aware of what is to happen and manufacturers know what is planned.

[Harriet Cross]

People might be buying cars now—that is, overnight—that they still have in ’28-29, when the changes come in. They will be making decisions now that will be caught up in future changes.

[James Murray]

The hon. Lady makes a similar point to that made by the hon. Member for Grantham and Bourne, which is that the changes will come in further down the line, but they are critical of the fact that we are pre-announcing the changes now so that we give greater certainty and stability. I cannot understand that criticism, because I thought that giving as much forecasting, certainty and stability as possible would be welcomed by the industry and consumers. People expect taxes to change over time, and the greater the forecasting and advance notice they have, the better for consumers and for manufacturers. Without making this too political, I know that the Opposition were not a great fan of certainty and stability when they were in office, but we are rather different. That is why we are setting out the changes now.

The shadow Minister referred to the DFT consultation, and of course, he is right that I would not pre-empt its outcome. In combination, our giving information about what the appropriate percentages will be towards the end of the decade, thereby providing certainty and stability, will help us to work closely with other Departments to ensure that consumers are well informed about what is likely to happen towards the end of the decade and manufacturers have the certainty and stability that were so desperately lacking under the previous Administration.

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

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[James Murray]

I was expecting a series of amendments from the Opposition; I was not expecting the shadow Minister to quote back at me an amendment I tabled several years ago. It is a new, although interesting, approach to opposition to rely on what I tabled in opposition and quote that back at me. I am sure it was an excellent amendment, although I cannot remember its exact detail.

On the hon. Gentleman’s questions about corporation tax rates, I am sure he will remember from his time in the Treasury that it is standard practice to legislate the charge to corporation tax on an annual basis, even when the rates remain unchanged. That is a long-standing convention that applies to income tax as well. However, because we were so determined to give businesses stability and certainty, we published the corporate tax road map alongside the Budget. In that road map, we made clear our commitment to maintaining the main rate—or, indeed, to capping it—at 25% for the duration of the Parliament.

The small profits rate and marginal relief will also be maintained at their current rates and thresholds. Full expensing and the annual investment allowance are also guaranteed for this Parliament. When it comes to corporation tax, full expensing and the annual investment allowance, the various Finance Bills in this Parliament will be quite a different experience compared with those in the previous Parliament.

[Harriet Cross]

Although we of course welcome a road map as a way to give businesses confidence on corporation tax, we should not get mixed up in the smoke and mirrors of what business taxes are. Because of the Budget, businesses now face many taxes and the uncertainty that they bring. Will we also see road maps for things such as the national insurance rises, the increase in business rates, minimum wage increases and measures in the Employment Rights Bill, all of which have an impact on business?

[James Murray]

The hon. Lady mentions business rates. I do not know whether she has read the discussion paper “Transforming Business Rates”.

[Harriet Cross]

indicated assent.

[James Murray]

I am glad the hon. Lady has read it, because it sets out our approach to business rates in the coming year, from April 2026, and what we want to do over this Parliament. Businesses want stability and certainty from Government; they recognise that, over a five-year period, things will happen that cannot be predicted on day one, but they want that certainty and predictability. That is why, in the corporate tax road map, we give certainty on capping the main rate and on the small profits rate, marginal relief, full expensing and the annual investment allowance—everything on which we can give full certainty. However, where there are areas that we seek to explore or consult on, we are also clear about that. We developed that approach in partnership with business to make sure that we give as much certainty up front as we can, while also signposting those areas that we want to discuss.

--- Later in debate ---

[James Murray]

The clause and the schedule abolish the furnished holiday lettings tax regime from April 2025, removing the tax advantages that landlords who offer short-term holiday lets have over those who provide standard residential properties. Furnished holiday let owners benefit from a more generous tax regime than landlords of other property types, such as standard residential properties. The advantages of that tax regime include capital gains tax reliefs: FHLs can qualify for gains to be charged at 10%, unlike buy-to-let properties and second homes. FHLs also benefit from unrestricted income tax relief on their mortgage interest, rather than the 20% restriction on relief for standard lettings, and from capital allowance on furniture and furnishings. FHL profits are also counted as earned income for pension purposes.

The previous Government announced at the spring Budget 2024 that they would abolish the FHL tax regime to level the playing field with landlords of standard residential properties. We are now legislating for that measure and abolishing the FHL tax regime from April 2025, which will raise around £190 million a year by 2029-30 and thereby support the vital public services we all rely on. The changes made by clause 25 and schedule 5 mean that FHL landlords will be treated the same as other residential landlords for the purposes of income tax, corporation tax and capital gains tax.

[Harriet Cross]

Does the Minister recognise the difference between properties with a use clause compelling them to be used for holiday let accommodation and houses that do not, and that can therefore be used as residential properties? Those two things do not necessarily line up in terms of what the owner can use the property for.

[James Murray]

If I understand the hon. Member’s question correctly, it might relate to clauses in the lease of the property, but I am not quite sure what her point was. I will come back to this if I have misunderstood her question, but clause 5 relates specifically to the tax treatment of these properties. It is about how FHLs, which can still operate in the same way as they have previously in terms of lettings, will be treated by the tax system to bring them in line with standard residential property tax treatment. This is about equalising the tax treatment of FHL landlords and standard landlords, rather than seeking broader changes, which may be what she was alluding to, but I am happy to return to it later in the debate if I have misunderstood her question.

This measure does not penalise the provision of FHLs; it simply brings their tax treatment more in line with long-term lets. It does that to remove the tax advantages that FHL landlords have received over other property businesses in four key areas. First, finance cost relief will apply in the same way as for long-term lettings, with income tax relief on their mortgage interest restricted to the basic rate. Secondly, it will remove the capital allowances rule for new expenditure and allow replacement of domestic items relief. Thirdly, it will withdraw access to reliefs from taxes on chargeable gains for trading business assets. Fourthly, FHL income will no longer count as earned income for pension purposes. After repeal, former FHL properties will form part of a person’s UK or overseas property business and be subject to the same rules as non-furnished holiday let property businesses.

However, the Bill does not equalise tax treatment entirely. Holiday lets, whether they qualify as FHLs or not, are subject to VAT, whereas longer-term, private rented sector accommodation is not. Withdrawal of finance cost relief will mainly affect higher rate and additional rate taxpayers, with basic rate payers largely unaffected. The Government have also introduced transitional arrangements. FHL properties will become part of a person’s overall property business and past FHL losses can be relieved against profits of that business in future years. Existing capital allowance claims can be continued, but new capital expenditure will be dealt with under the rules for standard residential let properties. The legislation also confirms that where a business has ceased prior to April 2025, business asset disposal relief may continue to apply to a disposal that occurs within the normal three-year period following cessation, which is in line with current rules.

Agricultural and Business Property Reliefs: OBR Costing

Harriet Cross Excerpts

Thursday 23rd January 2025 Commons Chamber

[James Murray]

The Government are committed to delivering the reforms announced in the Budget. We have carefully considered their impact, and designed the policy to provide generous exemptions from inheritance tax for small family farms and businesses, while ensuring that we balance the public finances as fairly as possible.

[Harriet Cross (Gordon and Buchan) (Con)]

In the light of the uncertainty in the OBR’s report; the fact that the policy will hit elderly farmers the hardest and put food security at risk; and the fact that rural communities will suffer the most, given the impact on tenants and young farmers, and the wider agricultural sector, does the Minister really still believe in this policy?

[James Murray]

The OBR’s allusion yesterday to a degree of uncertainty is exactly the same as what it said at the time of the Budget. The costing is exactly the same as what it published at the time of the Budget. Yesterday, the OBR published more information about how the costing was arrived at, but the costing itself, the degree of uncertainty and the calculations remain exactly the same as at the time of the Budget.