Finance (No. 2) Bill (Third sitting)

Joshua Reynolds Excerpts

Thursday 29th January 2026 Public Bill Committees

[James Wild]

I may not have read that manifesto as closely as the hon. Gentleman. [Laughter.] For the record, I did not say that. I think the record will also prove that that measure was not put into effect. We continued the winter fuel payment. The issue is that the Chancellor came along. She was given advice by Treasury officials—no offence to the Treasury officials in the room—suggesting this was a simple way to save some money and fill a fictional black hole. Foolishly and regrettably, she went along with that advice; happily, she is now correcting her mistake in part.

I am looking to press amendment 41 to a vote, because it is important that we give pensioners certainty that the threshold will be protected.

[Mr Joshua Reynolds (Maidenhead) (LD)]

I rise to speak to clause 55 and new clause 27, but I can tell the hon. Member for North West Norfolk that if he does press amendment 41, he will have the support of the Liberal Democrats.

Countless pensioners were forced to choose between heating and eating last year while the Government buried their head in the sand for months on end, ignoring those who really were suffering. The Government’s changes to winter fuel payments only added to those people’s worries. The delay to the warm homes grant scheme has meant that no household has benefited from support that could have made their homes more sustainable and cheaper to heat over the last winter.

The Liberal Democrats opposed the announcement to cancel winter fuel payments, which caused many millions of the most vulnerable residents in our society to lose out on vital support. We welcome the fact that those over state pension age in England and Wales with an income of £35,000 or less will now receive their winter fuel payment. However, as new clause 27 lays out, we have some serious concerns. Quite simply, it aims to review the practical impact of the winter fuel payment changes, especially on those individuals who exceeded the income threshold by only a small amount.

The cliff edge of £35,000 means that someone on that income will keep the entire payment, but someone at £35,001 will have the entire amount clawed back. We would like to examine the behavioural effects and whether the charge and cliff edge will discourage additional work, savings or income reporting. Would it be fairer to have the amount tapered so that we can get to a fairer place?

We also want to consider the implications of making the charge a notifiable tax liability, including penalties for a failure to notify, and how that would interact with PAYE and self-assessment rules. Right now, most people, especially pensioners, do not have to actively tell HMRC about certain things, because tax is sorted through PAYE or the benefits system. If winter fuel payments become notifiable, individuals would be legally responsible for reporting to HMRC. Evaluating the effectiveness of these measures will help to ensure that we have a smooth and fair process for taxpayers overall.

[Dan Tomlinson]

I thank the hon. Members for North West Norfolk and for Maidenhead for their remarks and my hon. Friend the Member for Burnley for his enjoyable intervention.

In response to the point made by the hon. Member for North West Norfolk, we believe that total income is a reasonable way of assessing income. There are other ways of making that assessment, but we think that in this instance total income is appropriate.

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[Mr Reynolds]

I beg to move amendment 47, in clause 74, page 91, line 20, leave out from “(1)” to the end of line 25 and insert-

“may not be made unless a draft of the instrument has been laid before, and approved by resolution of, the House of Commons.”

This amendment would require that all regulations made under this section are subject to the affirmative procedure.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 48, in clause 74, page 91, line 25, at end insert—

“(6) Before laying regulations under subsection (1), the Treasury must make a statement setting out the extent to which the regulations made under this section meet the following objectives—

(a) that no infected or affected person, or their family, will be subject to inheritance tax in respect of infected blood compensation payments under the regulations,

(b) that the regulations provide fair and consistent treatment for all victims regardless of when their compensation was paid or when deaths occurred,

(c) that the relief provides compensation for physical harm and psychological trauma experienced by affected family members, and

(d) that administrative processes established for the purposes of implementation of this section will not create additional distress or burden for bereaved families.”

This amendment would require that, prior to making regulations under the section, the Chancellor should make a statement on the extent to which the regulations meet certain objectives in respect of the treatment of victims and their families.

Amendment 46, in clause 74, page 91, line 25, at end insert—

“(7) The Treasury must make regulations under subsection (1) within 60 days of the passing of this Act.

(8) Before making regulations under subsection (1), the Treasury must consult—

(a) organisations representing infected and affected individuals,

(b) the Infected Blood Compensation Authority, and

(c) bereaved families of victims who have died awaiting compensation.

(9) The regulations made under subsection (1) must make provision for identifying and assisting the estates of deceased victims in claiming inheritance tax relief, including—

(a) outreach to known affected families,

(b) assistance with evidence gathering where medical records have been destroyed,

(c) clear and accessible guidance in plain language, and

(d) a dedicated helpline staffed by trained caseworkers familiar with the infected blood scandal.

(10) The Treasury must, within 6 months of regulations under this section coming into force, and every 6 months thereafter, lay before Parliament a report on—

(a) the number of victims who have died since the previous report while awaiting compensation,

(b) the number of estates that have received inheritance tax relief,

(c) the average time taken to process claims for relief,

(d) any identified barriers preventing families from accessing their entitlement, and

(e) steps taken to expedite outstanding infected blood compensation claims.”

This amendment requires the Chancellor of Exchequer to make regulations under this section within 60 days of Royal Assent. It requires mandatory consultation with those directly affected, and a support service to help bereaved families navigate the system. It also places a six-monthly reporting requirement on the Government.

Clause stand part.

[Mr Reynolds]

The infected blood scandal represents one of the greatest treatment disasters in NHS history: more than 3,000 people died, and thousands more live with HIV, hepatitis C or lifelong trauma. Yet even now victims’ families face the indignity of inheritance tax on compensation payments meant to acknowledge that profound suffering. The clause gives the Treasury the power to provide inheritance tax relief where victims or affected persons have died before compensation payment was received. That policy is intended to develop fair and consistent treatment for grieving loved ones, but it is entirely discretionary, with no timeline, no consultation requirements and minimal parliamentary oversight.

Amendments 47, 48 and 46, in my name and that of my hon. Friend the Member for Newton Abbot, look to fix that. First, amendment 47 would ensure that all the regulations face proper parliamentary scrutiny through the affirmative procedure, ensuring that they get the correct amount of parliamentary oversight and the scrutiny that is required.

Amendment 46 would require the Chancellor to make regulations within 60 days mandating consultations with victims’ organisations and the Infected Blood Compensation Authority—people who actually understand what the families are going through. Crucially, it would establish practical support, dedicated helplines and assistance in evidence-gathering through outreach to bereaved families. That matters not just because of the number of people who have died while waiting for compensation, but because their families have already endured decades of suffering, medical records lost and destroyed, and broken promises. They should not also have to face the labyrinth of the tax system without the support they need.

Amendment 48 would require the Treasury to demonstrate how it meets key objectives: that for any victim faced with inheritance tax on their payments, the treatment is fair, regardless of the timings; and that administrative processes do not create additional distress. These amendments are not intended to distract from the clause, which we support; however, without the safeguards that they propose—without timelines and the correct accountability—we will see delay and delay. The families have waited decades for support, and the amendments aim to help to get them that support and the fair treatment that they deserve.

The Government’s policy paper was unequivocal that compensation must be a matter of entitlement rather than charity, and our amendments 47, 48 and 46 would ensure that those promises were kept and not kicked into the long grass. I hope that the Committee will support them when we press amendments 47 and 46 to a vote later.

[Dan Tomlinson]

The clause, as has been discussed, introduces a power to extend the existing inheritance tax relief for infected blood compensation payments. I worked closely on this measure with the Chancellor ahead of the Budget. It is an important measure for the victims of this scandal and their families. I am glad to hear that the Liberal Democrat spokesperson, the hon. Member for Maidenhead, supports the clause—I am sure that all Members will do so—and I of course welcome the challenge and the scrutiny.

Amendment 47 would require all regulations made under the new powers to be subject to an affirmative procedure, but the clause already provides that, if the future regulations do not amend primary legislation, they can be made under the negative procedure. That is consistent with the existing regulation-making powers for compensation payments under schedule 15 to the Finance Act 2020. The clause already provides for using the affirmative procedure, should the future regulations amend primary legislation.

The Government’s objective here is to ensure that we can introduce regulations, which will come later this year, as soon as possible to help further to clarify the inheritance tax position for all those impacted. I am sure we all agree that we want to ensure as much clarity as possible, as soon as possible, for those who are affected and might be impacted by this change, which has been welcomed.

Amendment 48 would require the Treasury to make a statement setting out the extent to which the regulations meet certain objectives. I have already issued a written ministerial statement, on 18 December, setting out in detail how the changes to the existing relief from inheritance tax for compensation payments made from the infected blood compensation scheme and the infected blood interim compensation payment scheme will be made.

Amendment 46 would introduce proposed new subsections (7) to (10), which set out various new introductory, consultation and reporting requirements. I understand the desire for prompt clarity on the inheritance tax treatment of compensation payments, and the Government are committed to delivering the regulations as quickly as possible. I also recognise the importance of consulting with relevant stakeholders; officials have worked very closely with the Infected Blood Compensation Authority, and the Government will continue to engage with stakeholders ahead of laying regulations.

The clause introduces a power to make a sensible and compassionate change, ensuring that those infected and affected by the infected blood scandal can choose how to pass on the value of any compensation received without incurring inheritance tax. Although I welcome the engagement from the Liberal Democrats on this matter, I hope the Committee agrees to clause 74 standing part of the Bill and rejects amendments 46 to 48.

[James Wild]

I am grateful to the hon. Member for Maidenhead for bringing forward these amendments to what is a very important clause, one that honours a commitment; I remember sitting in the main Chamber when a number of colleagues from across the House were pressing Ministers to introduce such a change, and it is very welcome that the Government have brought it forward in the Bill. I believe a similar treatment applies to the Horizon IT scandal. It is a common-sense clause. Fundamentally, the victims of this appalling scandal deserve compensation and their families deserve to then benefit in due course.

I put on record my tribute to the work of Sir Brian Langstaff, as well as to the work of my right hon. Friend the Member for Salisbury (John Glen) when he was in the Cabinet Office, working particularly with victims’ groups. The clause will help to provide the remedy that victims and their families have been seeking.

I have said that a similar treatment applies in the Horizon case, but I should mention to the Minister that the Hughes report on the valproate and pelvic mesh scandal is still outstanding. It was published two years ago and recommended that interim compensation payments should be made. I have raised the matter with the Health Secretary on a number of occasions; I ask the Minister to take that issue back and to consider, as the compensation scheme is designed, whether that sort of provision can be built in from the start.

We support the thrust of the amendments tabled by the Liberal Democrats, which seek to ensure that Government regulations around the issue reach the right objectives, as well as supporting victims and their families. Amendment 46 would establish a mechanism to support families to navigate the system. I think that is very important and, if the hon. Member for Maidenhead chooses to press the amendment, I assure him that Conservative Members will support it.

[Mr Reynolds]

The Minister used the words “as soon as possible”. The amendments that we have tabled would hold him and the Government to account on that. They show the seriousness of this issue, and would allow parliamentary oversight, accountability measures and a clear deadline.

I am glad that the hon. Member for North West Norfolk mentioned the Hughes report. My hon. Friend the Member for Chelmsford (Marie Goldman) mentioned the Hughes report in an oral question to the House yesterday, and the response was not particularly forthcoming. I urge the Minister to consider how this clause could apply to the Hughes report and others in the future.

Without these amendments, the clause gives a number of empty promises and more regulation in due course. That mean more waiting and more families navigating complex tax systems alone, while grieving loved ones are left in limbo. Infected blood victims were actively misled by the responsible authorities, then they were ignored, then they were told help was coming. In many tragic cases, that help is too late. The amendments would ensure that grieving relatives do not face additional challenges in receiving compensation. I hope the Minister changes his mind and supports amendments 47 and 46.

[Dan Tomlinson]

I thank the Liberal Democrat spokesperson and the shadow Minister for their contributions.

I want to reassure the Liberal Democrat spokesperson in particular that these are not empty promises. The Government take this matter incredibly seriously. When it was raised, we worked hard to engage constructively and productively, and we brought forward this legislation in the Budget. I was glad that we were able to do so for those impacted by the scandal. I put on the record that these are deep and full promises, and the Government will make the progress that needs to be made for the victims.

Question put, That the amendment be made.

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[James Wild]

At present, when a disabled person uses their mobility benefits, such as the mobility component of the personal independence payment or disability living allowance, to lease a vehicle under the Motability scheme, that lease is zero-rated for VAT. Let us remember why Motability was created: it was established to help those with serious, long-term physical disabilities to access independence and mobility, not to provide subsidised cars for people with minor or temporary conditions. However, the numbers show that the scheme has expanded far beyond its original purpose. Last year, 815,000 people were using Motability vehicles, an increase of 170,000 in a single year.

For many participants, their benefit covers the full cost of a three-year lease, so they pay nothing beyond their benefit entitlement. However, when someone chooses a more expensive model, such as a larger or higher-spec vehicle, they must make an up-front top-up payment. Until now, the entire lease, including that top-up, has been VAT-free, but clause 77 changes that. Under the new rules, only the proportion of the lease funded by the qualifying Motability payment will remain zero-rated, and any additional amount paid voluntarily will be subject to the standard rate of 20%. That is a fair and balanced reform that we wholeheartedly support.

Clause 78 narrows the insurance premium tax relief for vehicle insurance linked to disability schemes. IPT is a 12% tax on most general insurance premiums. Many cars that are leased to disabled people currently benefit from that relief, even when the vehicles are standard, unadapted models. We welcome that the clause limits the relief to applying only to contracts for vehicles that are specifically adapted for wheelchair or stretcher users; for example, vehicles with ramps, lifts or structural changes supporting wheelchair access. If a vehicle has no such adaptation, premiums will rightly be subject to the 12% charge.

Conservative Members have long argued for tighter focus and accountability in the Motability scheme, and I welcome the Government’s decision to act— we have been pushing them to do so. Sadly, we read in The Times this morning that the Prime Minister has apparently ruled out any wider reforms to welfare in the King’s Speech. Some of the growth we have seen in the Motability scheme, which the clauses will hopefully address, reflects genuine need, but much of it does not. That expansion raises questions about the eligibility standards and on whether taxpayers’ money is being used as intended. Motability should not be a back-door subsidy for people who do not meet the scheme’s original intent, which was to help those with serious disabilities.

As the Minister said, over the scorecard this measure makes a significant saving that is a meaningful contribution to public finances, which we welcome and support. Taxpayer resources should be targeted more effectively to ensure fairness. However, the measures in the Budget overall raise people’s taxes to pay for more welfare spending. We consider that to be the wrong choice. We welcome the fact that the clause mitigates some of that additional welfare spending, but overall, this is a welfare spending Budget.

[Mr Reynolds]

I will speak briefly to clause 78, and then I will ask the Minister some questions, specifically on the definition of “substantially and permanently adapted”, which is slightly lacking in the Bill. Disability is not just about wheelchairs and stretchers; many individuals use and require adapted vehicles that may not be seen as substantially or permanently adapted.

The Liberal Democrats do not aim to change or amend the clauses, but some clarification would be helpful. Could the Minister clarify the definition of substantially adapted vehicles, and confirm what consultation has happened with disability groups about those definitions? Could he also confirm what impact assessment has been done on the additional costs for individuals who will no longer receive insurance premium tax relief?

[Dan Tomlinson]

I will somewhat disappoint the Liberal Democrat spokesperson, the hon. Member for Maidenhead: the words that Ministers say in Committee are sometimes powerful and I do not think it would be appropriate for me to be more expansive on the definition. I ask him and others to rely on the words in the existing legislation, which I think are relatively clear and strong.

Question put and agreed to.

Clause 77 accordingly ordered to stand part of the Bill.

Clause 78 ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(Mark Ferguson.)