Finance (No. 2) Bill 2026-01-13

The Economic Secretary to the Treasury opened the debate, explaining that the Bill aims to stabilise and strengthen public finances, address cost of living issues, and renew public services. She highlighted that the Government rejects austerity and irresponsible spending commitments, focusing instead on fiscal responsibility and a tax system fair for all. Regarding clauses 63-68, she stated these changes are necessary to ensure pensions' primary purpose is saving for retirement rather than transferring wealth free of inheritance tax.

On behalf of His Majesty’s Opposition, I wish to speak to new clauses 22 to 24. These Labour Government have taken taxes to record levels, with £26 billion in additional taxes in this Budget and £66 billion since the election. This increases inheritance tax on estates and pensions from April 2027 onwards. Removing the exemption for pensions could undermine efforts to encourage people to save at a time when people are not saving enough. The measures will affect around 38,500 estates, raising £1.5 billion by 2029. I propose new clause 22 requiring the Chancellor to assess impacts on pension and household savings decisions, and personal representatives must identify every pension asset, calculate inheritance tax due within six months, and ensure payment within this period or face personal liability if they fail. The Association of Taxation Technicians and the Chartered Institute of Taxation suggest extending withholding periods and allowing instalment payments for illiquid assets. New clause 23 would require a proper consultation on the impacts and whether these changes deliver better outcomes for savers and pensioners. New clause 24 would compel HMRC to publish comprehensive guidance and set up a dedicated helpline due to the complexity of the new rules.

This is a retrospective tax without transitional protection, undermining confidence in pensions planning. The Chartered Institute and ATT have raised concerns about personal liability for IHT on pension funds, making executors cautious before distributing estates. If representatives discover new pension funds after initial settlements, this would require recalculating IHT for every part of the estate, increasing the risk of miscalculation. Our new clauses 18 to 20 urge significant reforms to protect individuals from liability for unknown private pensions and reduce waiting periods for accessing inheritances during a stressful period.

The Government do not want to introduce unnecessary reviews, amendments, and consultations on the pension tax policy changes. They believe their existing review processes are sufficient.

New clause 24 would require HMRC to publish comprehensive guidance on the implementation of policies affecting inheritance tax on pensions and establish a dedicated helpline for inquiries. The amendment aims to ensure that individuals are fully informed about how these changes will affect them.

Dickson welcomed the tax change but sought clarification on how revenue raised would contribute to lifting children out of poverty. He noted that the Treasury Committee had recommended this change before the Budget.

Snell questioned whether there was evidence supporting the disincentivising effect of tax changes on harmful gambling. He also raised concerns about driving money towards the black market, as suggested by OBR forecasts.

Minister Rigby responded to Snell's point by highlighting NHS figures indicating higher risk levels among online gamblers compared to in-person bettors. She also addressed concerns about driving money towards the black market, emphasising measures being taken to prevent this.

Williamson raised questions similar to those posed by Snell regarding the risk of increasing the illegal betting market. He sought assurances that steps would be taken to mitigate this risk.

Minister Rigby provided reassurance about the small size of the current black market and outlined additional funding for better enforcement against illegal activities, noting £26 million allocated over three years.

Butler congratulated the Minister on tackling online harms and excluding bingo halls from tax changes. She suggested considering making high streets safer regarding gambling and erasing an aim from the Gambling Act 2005.

Jogee inquired about engagement with companies to ensure workers' interests are not adversely affected by the proposed tax changes. He highlighted bet365 as a significant employer in his constituency.

Minister Rigby acknowledged concerns about job impacts and noted that employment trends had already been declining before these policies were introduced. She also offered to engage further on the matter if requested.

Proposes that tax hikes could result in job losses and greater use of unregulated operators in the black market. Independent modelling from EY suggests potential loss of 15,000 jobs due to doubling remote gaming duty and a further 1,700 from general betting duty increase.

Questions the opposition's stance on harmonising gambling taxes, suggesting it was initially proposed by his Government but rejected due to the impact on horseracing and other sectors. Criticises the current proposal for potential job losses and economic consequences.

Supports clauses 83-85, stating that online gambling has evolved beyond traditional models, requiring higher tax on remote betting to catch up with the reality of the current market. Emphasises reducing incentives for harmful forms of online gambling.

Supports doubling remote gaming duty as a fair way to raise revenue and address problem gambling. According to the Gambling Commission, online gambling companies saw revenues of £7.8 billion in 2024-25 while Public Health England estimates that gambling costs the UK economy about £1.4 billion annually. Clause 83 targets harmful forms of gambling such as online slots and casinos.

Welcomes steps on remote gaming duty to target addictive and dangerous forms of gambling like online slots and casinos, which are designed to be psychologically manipulative. The measure raises remote gaming duty to 40% and general betting duty to 25% for remote bets.

Mr. Snell defended the employment benefits provided by the gambling sector in his constituency, highlighting that bet365 alone employs thousands of people and contributes significantly to local economic regeneration. He warned about potential job losses due to tax changes and emphasised the need for caution when making moral arguments against gambling taxes.

Mr. Ballinger acknowledged that his comments were not intended to denigrate those employed in the gambling industry but argued that taxing online companies more could incentivize jobs moving into the land-based sector, which would be beneficial for employment.

Mr. Snell reiterated his point about the economic importance of bet365 in his constituency and questioned whether specifically taxing gambling is the only way to fund child poverty relief measures.

He expressed concern over the £6 billion that might move into the unregulated sector, questioning if the £26 million allocated for the Gambling Commission is sufficient to combat this issue.

Expressed concerns about the taxation of the regulated sector and its potential to push more people into unregulated sectors. Highlighted discrepancies in duty rates for land-based gaming versus remote betting, despite recognising that remote betting is less harmful. Questioned whether this was intentional or oversight. Cited evidence from the Netherlands showing a significant increase in unregulated gambling after rate increases, which could reduce revenue and job opportunities.

Supports the proposed increases in remote gaming duty to 40% from April 2026 and remote betting duty to 25% from April 2027, arguing that this addresses harmful gambling practices. Emphasised support for bingo halls as community spaces not subject to new taxes, highlighting its role in supporting lower-risk activities. Stated that the changes will raise £1 billion annually to lift half a million children out of poverty.

Defended the proposed gambling duty increases as fair reforms reflecting modern gambling trends and harms, aiming to balance revenue generation with consumer protection. Announced an additional £26 million over three years for the Gambling Commission to enforce against illegal sites and protect consumers.

Asked for a commitment that Northern Ireland will receive its fair share of funding from the gambling duty increase, particularly for organisations supporting those with gambling addictions. Highlighted high rates of problem gambling in Northern Ireland.

Asked about engagement with industry regarding remote gaming duty. She inquired whether the consultation discussed a different tax base for calculation, questioning why a specific measure was used.

Questioned if the Minister had considered the cumulative effect of various taxes on hospitality businesses. He expressed concern about the overall impact on the sector.

Stated that any pub he speaks to does not feel supported by this Government, questioning the claim that they are pro-pubs given the current tax environment. He pointed out that the profit margin from a pint is minimal.

Invited MPs to visit a local pub in her constituency to have a positive conversation about how the Government are listening and moving forward. She welcomed the idea of visiting establishments directly.

Noted that more constituents are drinking non-alcoholic beer, suggesting it as a growing market opportunity to promote through the Bill. He highlighted the potential for socialising without alcohol consumption.

Acknowledged that draught relief benefits licensed premises more than off-trade sales, questioning why the Chancellor did not reduce the draught rate to further support pubs.

Opposes the tax rises on alcohol duty. Argues that these increases will harm households and businesses struggling due to high prices and sluggish growth. Proposes new clause 26 for a statement on the impact of rising alcohol duty on hospitality, pubs, producers, jobs, and public finances.

Acknowledges the shadow minister's point but questions his omission of alcohol harm. Suggests that moving people to drinking in the hospitality sector could reduce alcohol harm.

Expresses concern about the future of rural pubs and suggests creative solutions such as special credence for draught beer sales. Condemns the Chancellor's actions against the hospitality sector, citing potential closures.

Agrees that many local pubs will go out of business due to policy changes, echoing concerns about job losses and economic impact on rural areas.

Supports the need for accountability in understanding the impact of measures that are yet to be brought forward by the Government, emphasising the importance of reviewing both current and proposed policies affecting pubs.

Acknowledges but does not elaborate on the shadow minister's points about business rates and their impact on pubs and hospitality businesses.

Supports the idea of abolishing business rates for certain sectors, suggesting it as a more comprehensive solution than proposed tax tweaks by the Government.

He noted a similar issue in his local high street involving betting shops next to off-licences selling cheap, high-strength drinks. He cited Scotland's minimum unit pricing policy as an effective measure.

Turner welcomed the Minister’s statement and highlighted that RPI remains a relevant indicator for working people despite criticisms. He suggested future uprating measures could consider alternative household costs indices (HCIs).

Cooper criticised the clause as another tax burden on struggling hospitality businesses and customers, exacerbated by rising rents, energy bills, and unfair jobs taxes. She emphasised hospitality’s role in communities and called for a report on cumulative impacts of alcohol duty measures alongside other fiscal changes.

Dillon agreed that pubs are vital to community life but criticised the Government's failure to deliver lower business rates as promised, exemplifying it through his father’s pub sale and rising rents.

Pinkerton pointed out specific examples of pubs in his constituency experiencing significant increases in business rates despite the Chancellor's earlier promises to support them with lower tax rates.

Milne shared a publican’s perspective highlighting the unprecedented challenges faced by the hospitality sector, leading to potential closure of businesses and loss of jobs.

Questions whether the Liberal Democrats have adequately addressed the issue of the living wage and its impact. Asks about specific proposals to resolve the current issues faced by the hospitality sector, particularly regarding costings for proposed measures.

Emphasises the importance of rural pubs, noting that many people in rural areas rely on cars to access local pubs due to distance. Asks Daisy Cooper to elaborate on the challenges faced by rural pubs.

Calls for differential rates of duty between supermarkets and pubs, known as draught relief, arguing that drinking in a pub is not the same as at home. Supports a higher multiplier on alcohol duty to encourage responsible drinking and support local economies. Points out significant increases in rateable values impacting his constituency's pubs.

People up and down the country may be justified in asking what the Government have against pubs. Many things are causing so many pubs to struggle and to question whether they can survive beyond the very short term—the enormous increases in business rates, the increases in employer national insurance that particularly hit those who employ part-time workers, and the ever-growing burden of regulation, not least in the Employment Rights Act 2025, that affects many pubs and hospitality venues—but I think that this clause in the Bill really sums it up. The Government did have a choice. The Chancellor could have built on a success of the previous Conservative Government—in fairness to her, she actually did so last year—by reducing that draught duty rate so that duty on beer and cider sold on draught in pubs was paid at a lower rate, perhaps at the same time as extending the differential with supermarkets and off-sales that might be sold at or below cost price. But she chose not to do that; she chose to increase duty on top of all the extra burdens that are threatening the survival of our community pubs, bars and other hospitality venues.

That is a challenge that those venues have to face, and I hope the Government will look seriously at finding a realistic workable solution. The value of pubs in our communities is not just about the pints that they sell, but about the people they look after, such as the old gent nursing a pint for a couple of hours and being looked after by the bar staff. We lose that at our peril. One of the things that the Treasury has done for many years, including under the Conservative Government, is to keep an unfair differential between the rate of duty applied to cider and that applied to beer. That came in during the coalition Government and I can only presume that it had something to do with the number of Lib Dem seats in the south-west.

Proposed a non-tax measure to support small brewers across the country, which would involve replicating a mechanism already in place in Scotland that guarantees access for small brewers to local pubs. The proposal aims to help small independent breweries sell more beer where a lower rate of duty is applied.

Expressed concern over the hike in alcohol duty, which he claimed would be detrimental to the Scottish whisky industry and the hospitality sector. He cited figures showing that the whisky industry contributes £7.1 billion to the UK economy and supports 41,000 jobs in Scotland. Lamont highlighted that a previous tax rise led to a fall in spirits revenue by £150 million according to the Scotch Whisky Association. He also mentioned the impact on pub closures due to higher taxes.

Asked John Lamont about unemployment levels being lower in Scotland compared to England, prompting a response from Lamont that while unemployment may be lower, the Scottish economy is highly taxed with underfunded public services like NHS and roads. Lamont called for replacing the nationalist Government with a pro-UK Scottish Conservative Government.

Discussed the impact of alcohol duty on his constituency, highlighting that it is causing significant hardship for hospitality businesses. He cited figures showing that alcohol duty brings in around £12.5 billion whereas the hospitality sector contributes over £60 billion to the economy and supports 2.5 million jobs. Kohler also mentioned a proposal for an emergency cut in VAT for hospitality to 15% until April 2027.

Asked Mr Kohler if he agreed with the new clause 9 proposed by Liberal Democrats, which calls for a review of the impact on the hospitality sector within six months. Adam Dance highlighted the lack of sufficient assessments and consultations regarding the proposals in the Finance Bill.

Called for an assessment of the cumulative impact of proposals on the hospitality industry. Highlighted challenges including post-pandemic recovery, energy cost increases, and national insurance hikes.

Cited local venue closures in Kingsbridge due to financial pressures from business rates and national insurance contributions. Supported a reduction in VAT for hospitality businesses.

Emphasised the need for Government support to prevent further closure of venues in her constituency, supporting a Lib Dem proposal to reduce VAT to 15% until April 2027.

Called for the Government to carry out a review of the impact of increased alcohol duty on pubs and hospitality, citing various financial burdens including soaring energy costs, minimum wage increases, and rising employer’s national insurance.

Critiqued the continued rise in spirit duty for Scotland's whisky sector, suggesting it could reduce revenue rather than increase it. Cited previous hikes that reduced revenue by 7%, costing £150 million.

The hon. Gentleman noted the differential tax treatment between cider and other beverages in his constituency, suggesting that restoring the duty differential would support agriculture.

The hon. Member questioned the effectiveness of the Scottish Government’s Budget in addressing hospitality challenges, citing comments from UKHospitality Scotland's executive director.

The hon. Member supported new clauses 9 and 26 to review cumulative impacts and alcohol consumption practices respectively. He criticised the Government for compounding issues faced by hospitality businesses with multiple policy changes.

The hon. Member suggested that the Chancellor might have misunderstood the impact of her policies on hospitality businesses, questioning whether the Business Secretary was correct in identifying this as a failing of understanding.

The Member shares concern that publicans are forced to reduce hours or lay off staff due to increased costs, leading to fewer jobs and economic impact.

The Government is taking a responsible decision by uprating alcohol duty in line with RPI. Freezing the duty would cost the Exchequer £400 million annually, which would need to be recovered elsewhere. The impact on hospitality businesses' costs is expected to remain comparable.

The new clause aims to require a report assessing the cumulative impact of alcohol duty measures and wider fiscal changes such as NIC rates, business rates, and other operating cost factors on employment levels, number of businesses ceasing or starting trade, and financial sustainability.

The new clause requires the Chancellor to make a statement detailing the effects of alcohol duty increases on the hospitality sector, pubs, producers, employment rates, and public finances within six months after the Act's passage.