Consideration of Bill, not amended in the Committee and as amended in the Public Bill Committee
[Relevant document: Correspondence between the Joint Committee on Human Rights, the Chancellor of the Exchequer and the Exchequer Secretary to the Treasury, on the removal of the VAT exemption for independent school fees, reported to the House on 22 January and 29 January.]
New Clause 1
Review of impact of section 1 on recipients of the full rate of the new state pension
“(1) The Chancellor of the Exchequer must, within three months of this Act being passed, publish a review of the expected impact of section 1 of this Act on recipients of the full rate of the new state pension.
(2) The review must include analysis setting out, for the tax year 2025-26—
(a) the total number of people in receipt of the full rate of the new state pension paying tax under section 1 of this Act, and
(b) the tax liability of state pension income under section 1 of this Act of those in subsection (2)(a).
(3) For comparative purposes, the review must take account of equivalent projected figures for subsections (2)(a) and (2)(b) for the tax years 2026-27, 2027-28, 2028-29 and 2029-30.”—(James Wild.)
This new clause would require a review of how many people receiving the new state pension at the full rate are liable to pay income tax this year and in the next four tax years, and specifically what the tax liability of their state pension income will be.
With this it will be convenient to discuss the following:
New clause 2—Energy (oil and gas) profits levy: impact assessment of increase in rate—
“(1) The Chancellor of the Exchequer must, within six months of this Act coming into force, commission and publish an assessment of the expected impact of Sections 15 to 17 of this Act on—
(a) domestic energy production and investment;
(b) the UK’s energy security;
(c) energy prices, and;
(d) the UK economy.
(2) The assessment must examine the impact of provisions in this Act in comparison with what could have been expected had the energy (oil and gas) profits levy remained unchanged.”
This new clause would require the Chancellor to commission and publish an assessment of the expected impact of changes to the energy (oil and gas) profits levy on domestic energy production, the UK’s energy security, energy prices and the UK economy.
New clause 3—Review of impact of tax changes in this Act on households—
“(1) The Chancellor of the Exchequer must, within six months of this Act being passed, publish an assessment of the impact of the changes in this Act on household finances.
(2) The assessment in subsection (1) must consider how households at a range of different income levels are affected by these changes.”
This new clause requires the Chancellor to publish an assessment of the changes in this Act on the finances of households at a range of different income levels
New clause 4—Review of impact of Act on small and medium sized enterprises—
I will speak to new clauses 1 to 3, and amendments 67 to 69, tabled in my name. It is 124 days since the Chancellor delivered the first Labour Budget in 14 years—the so-called growth Budget—but it feels like longer. Inflation is up, taxes are up, borrowing is up, unemployment is up and energy bills are up. I could go on, but most tellingly of all, growth is down. The Bank of England has just cut its growth forecast for this year in half, to just 0.75%. Little wonder that business confidence has plummeted, with firms warning of fewer jobs, lower wages and higher prices. Instead of backing risk takers and supporting wealth creators, as the Conservatives do, this Finance Bill and the Budget attack enterprise and deliver lower growth, higher borrowing and higher taxes.
I turn to new clause 1, concerning pensioners. Millions of pensioners were left out in the cold this winter when the Government took away their winter fuel payments. Millions of people in receipt of only the state pension now face paying income tax on it.
When the Government decided to take away the winter fuel payment, they said that people could apply for pension credit to try to get some support. The problem is that there are huge delays in getting pension credit. When the message was first put out, the delay was 84 days. Five hundred new staff have been brought in, but it is still 56 days, which is above the 50-day limit. Does my hon. Friend share my concern that people have now passed through winter and still do not have the funds to which they are entitled under this Government, and which are not there?
I absolutely agree with my hon. Friend, who has done stellar work in drawing out of the Department the data on delays and waiting times. If everyone who is entitled to pension credit took it up, it would wipe out the savings that the Chancellor wanted, so the idea that she wanted all those people to take up pension credit is for the birds.
New clause 1 would require the Government to review how many people receiving the new state pension at the full rate will be liable to pay income tax in the coming years. At the general election, we were very clear that people in receipt of only the state pension should not pay income tax on it. However, recent forecasts suggest that an estimated 9 million pensioners will pay income tax on their state pension from April 2026. Pensioners cannot easily alter their financial situation, yet they were given just six months’ notice that they would lose their winter fuel allowance. They cannot be blindsided for a second time by the taxman.
In Committee, the Minister said that the relevant data was available, but I do not think that is correct, because the figures to which he referred do not break down the group we are talking about—recipients of the full rate of the new state pension. Will he commit to publishing data on how many people receiving the new state pension will pay income tax on it? This potential hit could not come at a worse time for pensioners, who have lost their winter fuel payments, because we learned last week that energy bills are going up yet again—a far cry from the £300 cut that they were all promised at the last election by the Labour party.
At the Budget, the Chancellor made much of her announcement that she would uprate the personal tax thresholds in line with inflation from 2028, but that is not legislated for in this Bill. The public are being asked to take the Government at face value, yet recent reports suggest that this promise may be dropped due to the impact of the Budget on growth and higher borrowing. Given the number of broken promises since the election, can the Minister reconfirm from the Dispatch Box the Government’s commitment to unfreezing those thresholds in 2028?
Can the hon. Member confirm which Government left taxes at a 70-year high? Can he also confirm which Government led to interest rates and inflation being at record highs, which has stung so many mortgage holders?
Well, the last Government had to deal with a global pandemic and an energy price shock. I am happy to enlighten the hon. Gentleman, who has obviously not read the Red Book: taxes are going up—they are going up to record high levels—under the Budget and the Finance Bill that he is supporting. If he is worried about the tax burden, he should not be voting for this Finance Bill today.
Households are facing financial challenges, and the measures in the Bill will only make things worse. The Office for Budget Responsibility predicts that real household disposable income will fall by 1.25% by the start of 2029, largely due to the measures in the Budget. New clause 3 would require the Chancellor to publish an assessment of the impact of the changes on household finances. The choices that this Chancellor and this Government have made mean that borrowing is increasing, so interest rates will be higher for longer and people’s mortgages will be higher, and hard-working families will be paying billions of pounds to pay off the debt interest. The Government inherited inflation at target, but since then inflation has gone up, meaning less money in people’s pockets.
While it is the Chancellor’s wider mishandling of the economy that is attracting the headlines, the measures in this Bill will have a direct role in squeezing households. Whether it is higher stamp duty, increased alcohol duty, air passenger duty, capital gains increases, vehicle excise duty, changes to the tax treatment of hybrid vehicles or many other measures, the costs of the Bill will be felt directly by households across the UK. When households are stretched, it is essential that we have transparency about what the Government’s actions are doing to incomes.
Of course, the big tax-raising measure in the Budget, as my hon. Friend says, was the national insurance contributions rise, with its £25 billion impact on the economy, yet once we have taken off compensation for public services and the negative impact on activity, it nets only about £10 billion. It is a peculiarly ridiculous policy that nets only £10 billion or £11 billion, yet, according to the Office for Budget Responsibility’s numbers, will take £19 billion out of people’s pay packets. Does my hon. Friend agree that there has surely never been a more ridiculous measure that costs so much and delivers so little?
20 of 548 shown
“(1) The Chancellor of the Exchequer must, within six months of the passing of this Act, lay before Parliament a report setting out the impact of the measures contained within this Act on small and medium sized enterprises.
(2) The report must include an assessment of the impact of the Act on the following matters—
(a) the number of people employed across the UK by small and medium enterprises;
(b) the number of small and medium sized enterprises ceasing to trade; and
(c) the number of new small and medium sized enterprises established.”
This new clause would require the Chancellor to conduct an impact assessment of the Act on small and medium enterprises.
New clause 5—Review of the Impact of Tax Changes on Household Finances—
“(1) The Chancellor of the Exchequer must, within six months of this Act being passed, publish an assessment of the impact of the tax changes introduced by this Act on household finances.
(2) The assessment must evaluate how households across different income levels are affected by these changes.”
This new clause requires the Chancellor to assess and publish a report on how the tax changes in this Act impact households at various income levels.
New clause 6—Report on fiscal effects: relief for investment expenditure—
“The Chancellor of the Exchequer must, within six months of the passing of this Act, lay before Parliament a report setting out the impact of the measures contained in clause 16 of this Act on tax revenue.”
This new clause would require the Government to produce a report setting out the fiscal impact of the Bill’s changes to the Energy Profits Levy investment expenditure relief.
New clause 7—Pupils with SEND without an Education Health and Care Plan: review of VAT provisions—
“(1) The Chancellor of the Exchequer must, within six months of the passing of this Act and every six months thereafter, lay before Parliament a review of the impact of the measures contained in sections 47 to 49 of this Act on pupils with special educational needs and disabilities.
(2) The review must consider in particular the impact of those measures on—
(a) children with special needs who do not have an education health and care plan (EHCP); and
(b) the number of children whose families have applied for an EHCP.”
This new clause would require the Government to produce an impact assessment of the effect of the VAT provisions in the Act on pupils who have special educational needs but do not have an Education Health and Care Plan.
New clause 8—Review of sections 63 and 64—
“(1) The Chancellor of the Exchequer must, within six months of the passing of this Act and every six months thereafter, review the impact of the measures contained in sections 63 and 64 of this Act.
(2) Each review must consider the impact of the measures on—
(a) Scotch whisky distilleries,
(b) small spirit distilleries,
(c) wine producers and wholesalers,
(d) the hospitality industry, and
(e) those operating in the night-time economy.
(3) Each review must include an estimate of administrative and operational costs for the preceding 12-month period for each of the sectors listed in subsection (2).
(4) Each review must consider the impact of the measures on the retail price for consumers of products subject to alcohol duty.
(5) Each review must also examine the expected effect of the measures on the domestic wine trade.
(6) A report setting out the findings of each review must be published and laid before both Houses of Parliament.”
This new clause would require the Government to produce an impact assessment of the measures on the Act on distilleries, wine producers and the hospitality industry.
Government amendments 1 to 17.
Amendment 67, page 53, line 30, leave out clause 47.
This amendment removes Clause 47, which removes the VAT exemption for private school fees.
Amendment 68, page 56, line 13, leave out clause 48.
This amendment removes Clause 48, which introduces anti-forestalling provisions.
Amendment 69, page 56, line 13, leave out clause 49.
This amendment removes Clause 49, which sets out the commencement date.
Government amendments 18 to 66.
As well as pensioners, working people cannot afford the costs of this Labour Government. The Prime Minister promised at the election that he would not hit working people with higher taxes, and he then broke that promise with the £25 billion-a-year jobs tax.