MPs divided over Spring Budget announcements

This is likely to be the final Budget before this year’s general election, giving the debate something of a campaigning flavour. There were accusations about the government accepting certain Labour Party policies - in particular, changes to non-dom status and extending the windfall tax on oil and gas companies – which they had previously dismissed.

Key tax points in the Budget, and CIOT’s immediate reaction, are summarised here.

The 25 Budget resolutions (all passed) can be found here. These pave the way for the new Finance Bill, which was published on 14 March. There were divisions on two of the resolutions – income tax charge (resolution 1) and the capital gains tax rate for residential property gains (resolution 6) – both forced by the SNP. Both passed easily.

We summarise the four days of debate below, grouping contributions by topic rather than chronologically.

Party messages overview

In his Budget statement, Chancellor Jeremy Hunt argued that the government’s plans would help “families not just with cost of living support but with permanent cuts in taxation”.

He called it “a Budget for long-term growth. It delivers more investment, more jobs, better public services and lower taxes. However, dynamism in an economy does not come from Ministers in Whitehall but from the grit and determination of people who take risks, work hard and innovate—not government policies but people power. It is to unleash people power that today we put this country back on a path to lower taxes: a plan to grow the economy versus no plan; a plan for better public services versus no plan; a plan to make work pay versus no plan. Growth up, jobs up and taxes down.”

But Labour leader Sir Keir Starmer criticised the measures, accusing the government of continuing to “give with one hand and take even more with the other”.

Rachel Reeves, the Shadow Chancellor, said that the government’s ambition to abolish National Insurance contributions entirely, at a cost of £46 billion, amounted to an “unfunded commitment” that would leave a ‘gaping hole’ in the public finances larger than those announced in the September 2022 ‘mini Budget’. She said that the ‘stark reality’ of the Budget was: “taxes rising, living standards falling, growth stalling, and yet again the Tories making promises that they cannot deliver. They have failed on the economy, they are out of ideas and they are out of time.”

For the Liberal Democrats Sarah Olney welcomed some measures in the Budget, but said it did not go far enough. “The Chancellor could have stood up last week, proposed a fair deal for the British people and taken steps to get our economy growing again… He could have cancelled this unfair stealth tax and raised the tax-free personal allowance; he could have reversed tax cuts for the big banks and put in place a proper windfall tax on fossil fuel giants to help fund our public services; and he could have presented a serious strategy to stimulate economic growth by reforming business rates and developing an industrial strategy, as was done by the Liberal Democrats in government.”

Drew Hendry, for the SNP, said the Budget ‘does nothing for the people of Scotland’. “Where are the real measures that would have a real impact on the cost of living, which is what people need the most direct help with,” he asked. He said the general election would offer a clear choice between the Conservative approach and “the SNP’s calls to invest in public services, the economy and our communities, in our town and city centres, in our manufacturing future and our rural areas, in our tourism industry, in our food and drink sector, and in the priorities and values they hold dear.”

National Insurance and income tax

While Conservative MPs welcomed the cut to National Insurance (NI), some argued that income tax cuts should have been prioritised. Meanwhile, opposition MPs argued that gains from the reduction would be wiped out by the freeze on thresholds and other tax increases.

Harriett Baldwin (Con), Chair of the Treasury Select Committee, said the NI cut was a “smart way to help growth” across the UK. Baldwin acknowledged some ‘major’ tax simplifications, including the elimination of Class 2 National Insurance, but warned that the UK continued to have “a very complicated tax system…and well over 1,000 different tax reliefs”.

Conservative MPs including Sir David Evennett, Priti Patel, Andrew Rosindell, John Stevenson and Dame Jackie Doyle-Price welcomed the NI cut, with Evennett describing it as “an unfair double tax on work” and Stevenson arguing in favour of NI’s abolition.

Damian Green (Con) suggested that the cut should be the start of a journey towards wider simplification of the tax system, with “the ultimate aim of taxing all income at the same rate, regardless of its source”. He acknowledged the “absurdly complicated” nature of the tax system and emphasised that a streamlined regime would have the “dual benefit of reducing red tape and incentives to avoid tax”. He said: “Nigel Lawson used to have the admirable aim of abolishing a tax in every Budget”.

Some Conservative MPs said that they would have preferred to have seen cuts to income tax. Sir David Davis said this would benefit the over 65s (who don’t pay NI) and help keep “highly skilled and capable people” in the workforce. Suella Braverman (Con) said a 2p cut in the basic rate of income tax would have helped poorer households and “lifted about 20% of all taxpayers out of tax altogether”.

Labour and SNP MPs spoke out against the measure. Gareth Thomas (Lab) argued the cut in NI would not “compensate for the interest rate rises” people are facing. Rushanara Ali (Lab) referred to research by the Women’s Budget Group suggesting that men would gain more than women from the combined NI cuts in the autumn statement and spring Budget.

Drew Hendry (SNP) argued that gains from NI cuts would be “cancelled out” by threshold freezes, in particular for those on low incomes. He praised the Scottish government’s “progressive approach” towards income tax and said that “the majority of people [in Scotland] pay less tax”.

Shadow Chancellor Rachel Reeves countered the Chancellor’s claim that a person on average earnings would be £900 better off as a result of the government’s cuts to NI. She accused the government of creating the highest tax burden in 70 years.

Paul Blomfield (Lab) quoted the Resolution Foundation who argued that workers earning below £27,000 would be up to £500 a year worse off as a result of decisions to freeze tax thresholds. He said: “Tax cuts hit those struggling most with the cost of living crisis”.

Toby Perkins (Lab) suggested that for every 10p extra that working people pay in tax, they will “get only 5p back as a result of the combined national insurance cut”. “Work does not pay” under this government, he stated.

Concerns were also raised about the government’s longer-term ambition to abolish NI and the potential impact this could have on public finances. Sir Stephen Timms (Lab) highlighted that even if income tax were increased by 8p in the pound to pay for the abolition of NI, “the question of eligibility for the state pension and other contributory benefits would be very difficult to address”.

Shadow Chief Secretary to the Treasury, Darren Jones, raised a question about how the government plans to fund the £46m gap, adding: “Surely not through higher taxes or higher borrowing, given that both are at record highs already”.

Geoffrey Clifton-Brown (Con) defended the government saying that “when economic conditions allow, such a move is an ambition”. Financial Secretary to the Treasury Nigel Huddleston added: “when it can be achieved without compromising high-quality public services, we will continue to cut NICs, making work pay”.

Steve McCabe (Lab) criticised the continued freeze on allowances and the fiscal drag this creates. Nigel Huddleston acknowledged that taxes were “at a higher level than we want, but now we are in a position to reduce them”.

Philip Dunne (Con) suggested that the tax-free personal allowance was sufficient to ensure that “a pensioner receiving only a full basic or new state pension will not pay any tax on that income”.

Sir Edward Davey (Lib Dem) suggested the Chancellor could have increased the personal allowance to give people “a fair deal”, but that by choosing not to do so, families would face paying an extra £366 in taxes in the coming tax year.

Non-Doms

Labour MPs blamed the government for not closing the non-doms ‘loophole’ sooner, saying that if the change had been made two years earlier it would have raised an additional £6 billion in tax revenue.

The Financial Secretary, Nigel Huddleston, said the non-dom regime would be replaced with a residency-based system “including measures that will encourage and incentivise further investment into the UK”. He added that the transition measures proposed by the government would encourage £15 billion of additional investment into the country. He said: “We want to welcome people, but we recognise that those with the broadest shoulders must carry the greatest burden”.

Labour leader Sir Keir Starmer said the government had finally accepted Labour’s argument on the need to reform the non-dom tax regime.

Dame Angela Eagle (Lab) asked whether those who lose their non dom status would now have to pay inheritance tax, accusing the government of engaging in “an unedifying, increasingly frantic search for tax rises and future spending cuts to top up the kitty for personal tax giveaways”.

Many Conservative MPs welcomed the abolition of the non-dom tax regime. Nigel Mills observed that he had called for this ‘in about the past three Budgets’. He said he had been expecting ‘a little fudge’ – perhaps a reduction in the number of years that a person could claim it from 15 to 10, or an increase in the amount they have to pay to access the regime – but “announcing a complete reform of how we tax temporary residents and non-residents is absolutely the right thing to do”. “Having one modern regime, where everybody who is a long-standing resident pays the same taxes, is absolutely right,” he declared.

Jeremy Corbyn (Ind) welcomed the abolition of non-dom status but suggested that the money raised would be better used to end restrictions on benefits (specifically the ‘two child policy’) rather than on tax cuts.

Labour MPs including Rachel Reeves and Stephen Kinnock, blamed the government for not closing the non-dom tax loophole sooner, arguing that, as a result, the government has “missed out on £6 billion in tax revenue” which could have been used for public services.

Wes Streeting (Lab) disputed claims from Conservative MP Jonathan Gullis that wealthy individuals would leave the country as a result of changes to non-dom status, asking why he thought “the only reason people would want to live in this country is to avoid paying taxes”.

High Income Child Benefit Charge and family taxation

While most MPs welcomed the changes to the High Income Child Benefit Charge (HICBC), some called for clearer guidelines and additional reviews of household income levels relative to inflation and the HICBC to prevent unintentional fines.

Nigel Huddleston (Financial Secretary) told MPs that the proposal would ensure that no one earning under £60,000 would pay the charge: “This will put pounds in parents’ pockets, saving nearly half a million families with children an average of £1,300 a year”. He added: “Our tax system is based on the principle of individual taxation, and there are many aspects of confidentiality and so on that are important in that as well”.

Sir Christopher Chope (Con) asked if HMRC would use household-level information from 2026 to enable the government to “introduce transferable tax allowances and end the discrimination in the tax system against married couples”.

Sir David Evennett (Con) said it was “right that we look to end the unfairness faced by single-earner families by moving towards a household system by April 2026.”

Jim Shannon (DUP) said the government should be mindful of the impact of inflation. He said: “The increase to the lower threshold is positive, but if working-class families do not notice the difference in line with inflation, they are ultimately still going to struggle”.

Dame Meg Hillier (Lab) criticised the government for breaking the independent taxation rule, which she said was a “problem”.

Sir Peter Bottomley (Con) criticised the original decision to introduce the charge arguing: “There is no philosophical or economic justification for it”. He said: “It was an error, and I hope that I voted against it when it came in”.

Sarah Olney (Lib Dem) asked the government to “go further” and review the operation of HICBC so that families do not continue to “incur excessive fines through no fault of their own”.

Economic Secretary to the Treasury, Bim Afolami, acknowledged that “hard-working parents have been unfairly penalised by our tax system” but said that the policy had not been created “out of some ideological fancy”. He added that the government’s reforms would encourage growth in the labour market and generate an increase in work hours equivalent to around 10,000 people entering the workforce full-time.

Business taxes and VAT

Some MPs expressed disappointment that VAT-free shopping was not reinstated and criticised the extension of the windfall tax on oil and gas companies. Others raised concerns about the increase in the VAT threshold, arguing it failed to account for inflation.

Conservative MPs such as Andrew Jones, David Simmonds and Sally-Ann Hart endorsed the Autumn Statement’s decision to make full expensing permanent with Jones particularly welcoming the commitment to extending it to leased assets.

Other MPs were disappointed that the government did not reinstate VAT-free shopping for international visitors. Nickie Aiken (Con) said she was “at a loss to understand why the Treasury does not accept the arguments to reintroduce tax-free shopping”. Geoffrey Clifton-Brown (Con) asked the government to conduct a “proper independent study into the full impact of tax-free shopping on British businesses”, and the former business secretary Sir Jacob Rees-Mogg (Con) suggested it could have been the ‘easiest’ tax for the government to abolish.

Conservative MPs including Steve Double, Jane Hunt and Danny Kruger welcomed the increase in the VAT threshold to £90,000, but Sammy Wilson (DUP), Matt Western (Lab) and Peter Grant (SNP) raised concerns. Wilson said the measure does not “take into consideration inflation over the period in which the limit has been in place” and Grant suggested that this is not “enough even to make up for the deterioration in small business income after seven years of that ongoing stealth tax.”

Derek Thomas (Con) said: “I would like it [VAT threshold] to be increased to £120,000 as soon as possible”.

Richard Drax (Con) said it was ‘nonsensical’ to extend the windfall tax on oil and gas companies, asking: “[w]hich company is going to bid for a licence when it is simply punished for providing the country’s energy”?  Tulip Siddiq (Lab) said that despite the proposal: “the Chancellor is leaving loopholes that mean the energy giants will still pay billions less in tax”.

Kirsty Blackman (SNP) suggested that narrowing tax reliefs for the creative sector would “not fix the systemic issues” that exist within the creative industries and raised concerns about VAT on tickets referring to it as “a significant problem”. Blackman’s SNP colleague, Alison Thewliss, also drew attention to this matter and urged the minister to consider ‘going further’ on VAT to encourage people to return to cultural events and revitalise cities and town centres.

Richard Thomson (SNP) expressed disappointment about the lack of significant change in R&D, arguing the UK “lags behind” European competitors when it comes to overall levels of investment in research and development.

Capital and property taxes

MPs backed changes to the taxation of furnished holiday lets but stressed the importance of getting details right. Concerns also arose over the impact of capital gains tax changes.

Kirsty Blackman (SNP) warned people were less likely to benefit from the decision to reduce capital gains tax on property from 28% to 24% “if they are female or black, or if they live outside London. Blackman argued that if the Chancellor ‘cared very much about the tax system and trying to make a difference…[h]e would freeze council tax’.

Alan Brown (SNP) argued that capital gains and income tax rates should be aligned, citing evidence that taxing capital gains at the equivalent income tax rate could generate an additional £10-15 billion for the Treasury.

Ranil Jayawardena (Con) said he was ‘delighted’ that the Treasury had “accepted the existence of the Laffer curve on capital gains tax” and hoped it would go further and “apply it to other taxes in the years ahead”. He expressed disappointment that inheritance tax cuts were not included in the Budget arguing that abolishing it “would grow the economy” and increase “overall tax revenue”.

Luke Pollard (Lab), Dr Thérèse Coffey and Dr Neil Hudson (both Con) welcomed the abolition of the preferential regime for furnished holiday lettings. But Pollard argued the changes would “not deal with the scourge of second homes”, which are “hollowing out our communities”.

James Wild (Con) stressed getting the “details right” on this policy, arguing that support should be given to both local people who wish to buy and rent homes, and to hospitality and tourism businesses.  Steve Double (Con) suggested that the focus should be on ‘outcomes’, warning that “we need to ensure that we are focused on delivering the outcome and not just taxing people who are not able to put their property on the rental market.”

Full debates: 6 March debate. 7 March debate. 11 March debate. 12 March debate