Contribution
If I may, I will try to make some progress so that other hon. Members are able to contribute.
This Government are delivering growth and are focused on driving investment in our economy. As I said earlier, whole-economy investment has risen by 4.2% in real terms since the start of the year, outperforming the OBR’s March forecast of a decline of 0.1%. As the shadow Chancellor will know, Britain has outperformed its growth forecast this year, with growth in 2025 upgraded to 1.5% from 1% in March.
Beyond growth, this Bill delivers a set of responsible choices that safeguard our economy and prepare us for the future. We have been clear that in order to achieve that we have had to take the decision to ask everyone to contribute more at the end of the decade to protect our public services. After a freeze that was initiated by the previous Government, this Bill maintains income tax thresholds for employees and the self-employed at current levels for a further three years, from April 2028 to April 2031. That is a fair choice. In 2029-30, three-quarters of the revenue from maintaining income tax and employee, self-employed and national insurance contribution thresholds is expected to come from the top half of households.
The Bill also takes action to ensure that income from assets is taxed more fairly, raising £2.2 billion in 2029-30 by increasing taxes on property dividend and savings interest income. The Government are narrowing the gap between taxes paid on work and taxes paid on income from assets. At the moment, for example, a tenant will pay national insurance on their income, and a landlord will not. With the extra 2p, we will be closing the gap between tax rates on landlords and on tenants. In 2029-30 around two-thirds of revenue from increases to dividend property and savings interest tax rates is expected to come from the top 20% of households. Importantly, there are choices we have not taken—choices that previous Governments have taken to borrow more in a fiscally irresponsible way, or to return to austerity, which would undermine our economy and society. We have also chosen not to increase the rate of corporation tax, and we have stuck to our corporation tax road map.
It is important that those with the broadest shoulders contribute more to protect our vital public services, and the Bill delivers previously announced reforms to tax wealth fairly, including a revised tax regime for carried interest. That sits wholly within the income tax framework to ensure that reward is taxed in line with its economic characteristics, removing the opportunity for individuals to use pensions as a vehicle for inheritance tax by bringing unspent pots into the scope of inheritance tax, and by reforming agricultural property relief and business property relief, while ensuring that any of the £1 million allowance for the 100% rate that is unused will be transferable between spouses and civil partners. Those decisions build on our action in the previous Finance Bill, including abolishing the non-dom tax status, ending tax breaks for private school fees, and raising the rates of capital gains tax. That currently raises £14 billion a year, with revenue expected to more than double to around £30 billion by 2030-31.
Fair choices also mean delivering justice for those affected by the infected blood scandal. The Government will extend the existing inheritance tax relief for infected blood compensation payments, so that if an infected or affected person has already died when compensation is paid, inheritance tax relief will instead apply on the death of the first living recipient of the compensation payment.
Fair choices in a Finance Bill also mean tackling serious reforms that have been ducked for too long. That means reforming tax reliefs that, while intentioned, have exploded in cost in recent years. This Government are reforming capital gains tax relief, which has allowed wealthy business owners to sell their shares without paying any capital gains tax. We are reducing the relief available for business owners who are selling their businesses to employee ownership trusts from 100% to 50%—a relief that the previous Government expected to cost less than £100 million a year in 2018-19, although published figures now show that the cost of the capital gains tax relief reached £600 million in 2021. Without any action, forecasts suggest that that could rise to more than 20 times the original costing, to £2 billion by 2028-29.