Jeevun Sandher
Main Page: Jeevun Sandher (Labour - Loughborough)Department Debates - View all Jeevun Sandher's debates with the HM Treasury
(1 day, 11 hours ago)
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Gareth Davies
My hon. Friend touches on an important point. What is this for? People know that they have to pay tax. We may disagree on who pays tax and how much, but ultimately, where is the money going? It is going to the surrender of the Chagos islands. It is used to pay public sector workers eyewatering sums, only for them go on strike again. The hard bit for the general public is understanding where on earth all the money that is being raised by record tax hikes is actually going. That is what the Minister needs to be held to account for today. No explanation has been made. We are not in covid times; we are not in times of great crisis. This money is being raised because Labour is in trouble and in the pocket of the unions. I am very grateful to my hon. Friend for his intervention.
New clause 10 includes further assessments specifically on domestic equity markets and institutional investors. This will have a negative drag effect on the international climate as it relates to getting more investment in UK equities from institutional investors.
Finally, clauses 6 to 8 and schedules 1 and 2 introduce new rates of income tax altogether, this time on property income. Again, those rates are to be set for the tax year 2027-28 at two percentage points higher than the main rate of income tax. Government Members may take great satisfaction in what could be described as a war on landlords, but we should pause and remind ourselves who many landlords are. They are not barons or vast landowners; they are ordinary people doing what we have encouraged them to do for decades: taking responsibility for their future. They are the couple—one parent works long hours in a steady job, and the other juggles work and family life—who save carefully and invest in a small property because they know that the state pension alone might not be enough when they retire. They are the retired couple who inherit a modest flat from their parents—a flat that is not a windfall, but a source of security in later life—and who rent it out to supplement a fixed income. These are not people gaming the system, as many Labour Members have tried to suggest in the past, but people responding to it. They are good people. Forty-four of them are Labour MPs.
This new tax does not just hit landlords, though; it hits renters, too. The British Property Federation and the Office for Budgetary Responsibility have both warned that this measure could restrict the supply of private rental properties, adding pressure to an already strained market. The Royal Institution of Chartered Surveyors and the National Residential Landlords Association both say that rents will rise faster as a direct result of the Bill. New clause 12 in my name seeks to force the Government not to rely on their stereotypes about landlords, but to assess the impact of their new renters’ tax on both the supply and cost of private rental properties.
In summary, these clauses represent a new front in Labour’s war on the middle class and aspirational households in Grantham and Bourne, Chipping Barnet and across the country. These clauses impose not one, not two but three income tax rises on the British public, totalling more than £5.5 billion. This is not a plan for change; it is a savers’ tax onslaught, carefully phrased, politely worded and deeply felt—the same old Labour.
Dr Jeevun Sandher (Loughborough) (Lab)
Before I speak, I draw attention to my entry in the Register of Members’ Financial Interests. It is a pleasure to speak in this packed Chamber, and to the millions of people no doubt watching at home.
I will speak to clause 4, but first I wish to thank the hon. Member for Mid Bedfordshire (Blake Stephenson). I seem to recall making a slight mistake last year in a debate on the Finance Act 2025 by not speaking to a specific clause. He very graciously saved me, callow youth that I was, and I thank him very much. I certainly remember that today.
Britain faces an affordability crisis, with record numbers unable to afford a decent living standard. On top of that, we face a military crisis; we have to defend our nation as we have not had to for almost a century. As a nation, we are deeply divided between those who can afford decent lives and those who cannot; because of that, we are unable to stand united as one nation to meet this moment and those challenges. That is why today I speak in favour of clause 4. Yes, it is a tax that hits the wealthiest, but it also ensures that we can help grow the economy, and it is easily implementable. I will cover why that is.
People in this country are deeply frustrated and angry about where this nation is. Record numbers of people cannot afford a decent standard of living; just one third feel comfortable with how much they can afford. That is lower than in the financial crisis, and lower than during austerity—it is the lowest rate in our lifetime. That is why we see such anger on our streets and screens. We constituency MPs feel it viscerally.
Meanwhile, we have also seen the wealth in this nation grow dramatically. We have seen wealth as a proportion of GDP double since the 1980s, the amount of dividends paid out more than doubling since 2010, and owner-managers able to reduce their tax liability by not drawing their income from earnings. That is why it is right that we rebalance the tax burden between earnings and income earned from elsewhere, and especially income earned from dividends.
Our taxation system has not kept up with how our economy has changed; wealth has become far more important in this nation, but it has not been taxed commensurately. While income tax and national insurance have increased as a share of GDP, the same has not happened for taxes on profits. While the amount of wealth as a proportion of GDP has doubled, the income tax from that wealth has increased by only 30%. The income taxes in this nation are being levied on earners, not those who get their income from wealth. That is why it is entirely right that, through this Budget and this clause, we tax dividends at a greater rate. I will set out how this measure will improve growth and ensure that we hit the richest, and will show that it is easily implementable. We know that it improves growth because, as we have seen in France, dividend taxation stops payments going out of companies, instead ensuring that money stays in and is invested. We know that it hits the wealthiest, because one fifth of those who gain dividends are in the top 1%. We know that it is an easily implementable tax, because we are seeing it implemented in this Bill.
Sir Ashley Fox
Does the hon. Gentleman believe that increasing taxation on dividends will result in more entrepreneurs taking risks, employing people and growing the economy, or fewer?
Dr Sandher
I believe it will lead to more investment in this country. I will say this as well: the reason why people across the world invest in this nation and create great companies is because they want the return after tax. If an economy is growing and has more investment, that means more sales and more money in people’s pockets. I do not accept the hon. Gentleman’s proposition that raising this taxation rate somehow means less entrepreneurship and less investment in our economy.
Sir Ashley Fox
I am grateful to the hon. Gentleman for giving way a second time. Is he seriously saying that increasing the rate of tax on dividends will result in more investment in this country?
Dr Sandher
To be clear, we have seen this happen in France, where that is exactly what happened. The incentive then was for payments to go back inside the company rather than being drawn out in dividends. In addition, owner-earners in this nation are currently able to reduce their tax liability by 13% by paying out in dividends. It is a form of income that is effectively earnings, but is not being reported as such. So yes, I would say that that is the case. Not only would I say that is the case, but I would say it is shown by international evidence. I take the theoretical point the hon. Gentleman raises, but in practice, we have seen that raising dividend taxes keeps the money in the company and leads to rising investment rates.
This is the most important Parliament in a century. Like those in this House a century before us, we face deep challenges: like those in this House almost a century ago, we are seeing the far right on our streets because people cannot afford a decent living; like those a century before us, we face a military dictator in Europe who wishes to redraw borders by force; like those a century before us, we in this continent must ensure that we defend ourselves. It was almost a century ago in this House that a Conservative Prime Minister increased taxes on the wealthiest to pay to defend our nation. It was almost a century ago that we taxed the wealthiest to ensure that every single person in this country had a good job. It was almost a century ago that we built a welfare state to ensure that every single person could have a decent living and a stake in this nation.
For our nation to meet this moment, we have to be united; to be united, every single person has to have a stake in this country; to have a stake in this country, people have to see and believe that democracy can deliver for them and that they can earn a decent living. That is why, by taxing the wealthiest on dividends—taxing those who gain their payments from wealth instead of earnings from pay-as-you-earn—clause 4 will help to ensure that we raise the revenue we need to get investment and growth going in a way that is easily implementable.
Jerome Mayhew (Broadland and Fakenham) (Con)
The hon. Gentleman said earlier that this was a tax on the rich because 20% of dividends are paid to the richest 1% of people in this country, but that means that 80% are not. Does he not accept that dividends are right at the heart of the savings culture in this country and that if we tax them, we will get less savings?
Dr Sandher
I am not sure I quite follow the hon. Gentleman’s point there, to be perfectly honest. It is true that most people’s main savings investment will be through the pension funds they own, which will be their biggest savings vehicle; that would not be subject to dividend taxation in the same way because people will buy out at the end and ensure that they have a payment for their products. I am not sure I quite follow, but, to be fair to the hon. Gentleman, it is possible that I misunderstood his point.
I can see there are lots of people trying to get in, Ms Nokes. [Laughter.] I will end my speech now to allow them to do so. It is a thrilling topic, as I am sure everyone across the Committee would agree.
This is the right thing to do to balance taxation between earnings and payments from wealth. It is a long-needed update to our taxation system. I am proud of a Government who do that, as I am sure we all are. With that, I will close.
The Second Deputy Chairman of Ways and Means (Caroline Nokes)
I call the Liberal Democrat spokesperson.
Dan Tomlinson
Maybe later.
I turn to the contribution of my hon. Friend the Member for Loughborough. His speech—I had hoped it would be even longer; I am somewhat disappointed not to have heard more from him—provided a clear exposition of the benefits of the modest changes the Government are setting out in this group of clauses, which are being considered by the Committee of the whole House.
Dr Sandher
Was my hon. Friend surprised that Opposition Members spoke about the complexity of implementing clause 4 when it is simply a measure changing the rates of dividend taxation and does not lead to any more burden when filing taxes?
Dan Tomlinson
I thank my hon. Friend for that intervention, which gives me a chance to repeat clearly that these changes are a 2 percentage point increase. The tax rates will increase from 20% to 22%, from 40% to 42% and from 45% to 47%. That does not add a significant—or any real—complication to the tax system. We are changing the rates in a way that is fair, closing the difference in taxation treatment between those who receive their income from employment and those who receive their income from assets.
My hon. Friend’s speech was really helpful in bringing comparative evidence to the debate. I hope he will send that my way for review. Opposition Members who asked about changes made in other countries may be interested in reading that evidence, too. He also provided a helpful exposition on the economic theory sitting behind some of these changes and the need to ensure that our taxation system incentivises people to make investments and good decisions for the long-term health of our economy. He touched on the crucial point—it is worth making this clearly—repeatedly pointed out by many tax experts and tax commentators that one challenge in the UK’s taxation system is that we treat income received from different sources very differently, which can lead to distortions. It is better to ensure that we do what we can to reduce the gaps between the tax treatment of different sorts of income. [Interruption.]
I am happy to refer to Opposition Members’ utterances —they have been shouting out the word “risk.” I make the point that there is still an incentive in the system as taxation levels have not closed completely. [Interruption.] Yes, it is smaller—hon. Members gesture as such, and they are correct that the gap has closed—but there are still significant incentives for people to set up their businesses and income streams in certain ways to increase their income.
Let me now turn to the contribution from the hon. Member for St Albans (Daisy Cooper), who helpfully mentioned the performance of HMRC, the Department for which I am the Minister with responsibility. She is right to say that we need to have a laser focus on customer service. The performance in terms of missed calls—that is, calls that are not picked up because someone hangs up before they are answered—is improving under this Government. I think that is progress—[Interruption.] The hon. Member for St Albans specifically raised the performance of HMRC in her remarks, and it is only right and proper for me to mention that. The hon. Member also raised the impact of these changes on rents; of course the Government will continue to monitor the impact of taxation changes on the rental market. One crucial thing we can do to support private renters is to increase the supply of housing to push down the price of rents in the long term.
To begin to conclude—[Hon. Members: “Hear, hear!”] To begin to conclude—[Interruption.] Did someone say they wanted to intervene? No? In that case, I hope I have been able to—
Dr Sandher
I have no doubt that Conservative Members would also like to intervene after I have made my intervention!
Does the Minister agree that we in this House prize the contribution of business people and that we are here to work productively to ensure that workers and businesses contribute to the prosperity of this nation? I am really proud of what business people do. I come from a family of business people who have invested, who have created a nation and who have created employment. On the other side, we must ensure that the benefits are paid both to them and to our wider economy.
Dan Tomlinson
I thank my hon. Friend for that intervention and for giving me the chance to reiterate this Government’s focus on economic growth and on providing economic stability. Last year, the OBR forecast that the economy would grow by 1% but it then revised that up to 1.5%. That is a 50% increase in our growth forecast. Of course, we need to continue to redouble our efforts as a Government, going further and faster when it comes to supporting economic growth, so that we can see rising living standards in every single part of the country. That is core to our plan. We do not want to see people continuing to suffer.
The last Parliament was the worst on record for living standards, and it is no surprise that the British people decided to boot out the Conservatives and replace them with a Government who are laser-focused on improving the cost of living and improving living standards, both through the changes we are making—including in the Finance Bill to support our public finances—and, as my hon. Friend mentions, through continuing to partner with business to unlock private sector investment and increase economic growth. The changes that we are making to planning do not just support more houses being built and more residential development, which of course we need for the reasons we have discussed; they should also make it easier for us to build large infrastructure projects to support economic growth—including new nuclear power stations, which the Conservatives continually did not invest in—and to get our long-term growth and productivity rates up.
By keeping the clauses in the Bill unchanged, we will raise additional revenue from those who are undertaxed relative to most employees. As I have said, the changes on dividend savings and property income will raise an additional £2.2 billion in the coming years, which will help us to repair and improve our public finances. The changes will also enable us to reduce the contribution that we are asking of working people through the threshold freezes. By making changes such as the introduction of the electric vehicle excise duty and the reduction in relief for those who are selling their businesses to employee ownership trusts, we are making it possible to reduce the ask of working people. That is in sharp contrast to the position set out by the shadow Chancellor, the right hon. Member for Central Devon, who said that if he was in Labour’s position, he would be increasing the rates of income tax. Rather than doing that, we will ensure that this Government stay true to their manifesto commitments on tax and the public finances, with borrowing falling in every year of the OBR’s forecast.
I therefore urge the Committee to reject new clause 2 and new clauses 10 to 12, and to support the inclusion in the Bill of clauses 1 to 6, schedule 1, clauses 7 and 8 and schedule 2.
Question put and agreed to.
Clause 1 accordingly ordered to stand part of the Bill.
Clauses 2 to 6 ordered to stand part of the Bill.
Schedule 1 agreed to.
Clauses 7 and 8 ordered to stand part of the Bill.
Schedule 2 agreed to.
New Clause 12
“(1) The Chancellor of the Exchequer must, within six months of this Act being passed, publish an assessment of the impact of the changes introduced by sections 6, 7, and 8 of this Act on the private rental sector in England, Wales, Scotland, and Northern Ireland.
(2) The assessment made under subsection (1) must consider -
(a) the effects of the provisions of sections 6, 7, and 8 on the cost of private rent in each region within England, Wales, Scotland, and Northern Ireland,
(b) the effects of the provisions of sections 6, 7, and 8 on the supply of private rental properties in each region within England, Wales, Scotland, and Northern Ireland,
(c) any other implications of the changes introduced by sections 6, 7, and 8 of this Act.”—(Gareth Davies.)
This new clause requires the Secretary of State to publish an assessment of the impact of imposing new rates of income tax on property income.
Brought up, and read the First time.
Question put, That the clause be read a Second time.