Public Bill Committees

The Committee consisted of the following Members:

Chairs: † Clive Efford, Sir Roger Gale, Carolyn Harris, Christine Jardine

† Baxter, Johanna (Paisley and Renfrewshire South) (Lab)

Brackenridge, Mrs Sureena (Wolverhampton North East) (Lab)

Cooper, John (Dumfries and Galloway) (Con)

† Dollimore, Helena (Hastings and Rye) (Lab/Co op)

† Ferguson, Mark (Gateshead Central and Whickham) (Lab)

† Garnier, Mark (Wyre Forest) (Con)

† Mayer, Alex (Dunstable and Leighton Buzzard) (Lab)

† Reynolds, Mr Joshua (Maidenhead) (LD)

Rigby, Lucy (Economic Secretary to the Treasury)

† Ryan, Oliver (Burnley) (Lab/Co op)

† Stephenson, Blake (Mid Bedfordshire) (Con)

† Thompson, Adam (Erewash) (Lab)

† Tomlinson, Dan (Exchequer Secretary to the Treasury)

† Turmaine, Matt (Watford) (Lab)

† Wild, James (North West Norfolk) (Con)

† Woodcock, Sean (Banbury) (Lab)

† Wrigley, Martin (Newton Abbot) (LD)

Rob Cope and Lynn Gardner, Committee Clerks

† attended the Committee

Public Bill Committee

Thursday 29 January 2026

(Morning)

[Clive Efford in the Chair]

Finance (No. 2) Bill

(Except clauses 1 to 8, schedules 1 and 2, clauses 9, 10, 69 and 62, schedule 12, clauses 63 to 68 and 83 to 85, schedule 13, clause 86 and any new clauses or new schedules relating to the subject matter of these clauses and schedules.)

I have a few preliminary reminders for the Committee. Please switch electronic devices to silent. No food and drink are permitted during the sittings, other than the water provided. Hansard will be grateful if Members email their speaking notes or pass them to Hansard colleagues in the room.

Members are reminded to bob to catch my eye if they wish to participate in a debate. The selection list for today’s sittings is available in the room and on the parliamentary website; it shows how the clauses, schedules and selected amendments have been grouped for debate.

Clause 55 Winter fuel payment charge Question proposed, That the clause stand part of the Bill.

With this it will be convenient to discuss the following: Amendment 41, in schedule 10, page 395, line 28, at end insert— “(1A) The Treasury must, each tax year, amend the amount specified under section 681I(1)(b) by the change in the level of the consumer prices index in the previous tax year.”

This amendment would provide for the £35,000 income threshold for implementation of the winter fuel payment charge to be uprated annually in line with the consumer prices index. Schedule 10.

New clause 10—Review of uprating of Winter Fuel Payment charge cap— “(1) The Chancellor of the Exchequer must, within 12 months of this Act being passed, lay before the House of Commons a report on the impact of uprating, by reference to the consumer prices index, the level of the winter fuel payment charge specified under Schedule 10.

(2) The report under subsection (1) must in particular assess the impact of such uprating on— (a) households liable to the winter fuel payment charge, and (b) Exchequer receipts.”

This new clause would require the Chancellor of the Exchequer to report on the impact of uprating the winter fuel payment charge cap in line with the consumer prices index on liable households and on Exchequer receipts. New clause 27—Report on winter fuel payment charge and related compliance and collection measures— “(1) The Commissioners for HM Revenue and Customs must lay before the House of Commons a report on the operation and effects of the charge applied to winter fuel payments where an individual’s income exceeds the relevant threshold, including the compliance and collection arrangements introduced under section 55 and Schedule 10 in relation to that charge.

(2) The report under subsection (1) must in particular consider— (a) the effect of the charge on people whose income exceeds the threshold by a small amount, and any resulting behavioural impacts, (b) the administrative complexity and proportionality of introducing a tapered abatement for winter fuel payments, (c) the potential effect of updating section 7 of the Taxes Management Act 1970 so that a winter fuel payment charge becomes a notifiable liability for tax assessment purposes, including the operation of penalties for failure to notify, and the interaction with existing exceptions for liabilities reflected in PAYE tax coding adjustments or where a taxpayer has already been issued a notice to file a self assessment return, and (d) the operation and effectiveness of any new PAYE regulation provisions that allow winter fuel payment charges to be collected via tax code adjustments in year, and which allow HMRC to repay any overpaid income tax related to the charge via the tax code within the same year.”

This new clause would require HMRC to report to Parliament on the operation of the winter fuel payment charge, including its effect on people whose income exceeds the threshold by a small amount. The report would also cover the implications of updating section 7 of the Taxes Management Act 1970 to make winter fuel payment charge liabilities notifiable for tax assessment purposes.

Clause 55 and schedule 10 will provide a mechanism to recover the winter fuel payment from those who are not eligible, to balance support for vulnerable pensioners with responsible use of taxpayer money. Historically, the winter fuel payment has been near universal for pensioners over state pension age. In June 2025, however, the Government announced that only those with incomes up to £35,000 or receiving certain means tested benefits will benefit from a winter fuel payment in winter 2025. Parliament has already legislated to make the payments to all pensioners who have not opted out. To ensure that the support is targeted, HM Revenue and Customs will recover payments made to pensioners with a total income above £35,000 via the tax system.

I turn to the non Government amendments. Amendment 41 aims to uprate annually, in line with the consumer prices index, the threshold above which an individual is liable to repay the full value of their winter fuel payment. New clause 10 aims to require the reporting of the impact on households and on the Exchequer of uprating the income threshold for the charge annually in line with CPI. The Government believe that those changes are unnecessary at this time. The £35,000 threshold has been set at a level such that more than three quarters of pensioners will still benefit from the payment at the end of this Parliament. The cost of benefits is already published regularly by the Department for Work and Pensions through the benefit expenditure and caseload tables.

New clause 27 aims to require HMRC to report on the operation of the winter fuel payment charge, including its effect on people whose income exceeds the threshold by a small amount. The £35,000 threshold, above which an individual is liable to repay the full value, has no impact on those whose income exceeds the threshold, as prior to its introduction they did not benefit from a winter fuel payment. The Government believe that the new clause is unnecessary. This measure will be monitored through HMRC’s compliance and reporting systems, including pay as you earn and self assessment data. I commend clause 55 and schedule 10 to the Committee; I urge the Committee to reject amendment 41 and new clauses 10 and 27.

It is a pleasure to see the Exchequer Secretary in his place. Some Committee members may have felt that his ministerial colleague the Economic Secretary dealt with some clauses rather briefly in our earlier sittings, so we look forward to the loquaciousness that the Exchequer Secretary displayed on the Floor of the House the other day.

I shall speak to clause 55 and to amendment 41 and new clause 10 in my name. The clause is about clawing back the winter fuel payment from anyone whose total taxable income is above £35,000. According to the Budget costings, this measure will cost about £1.8 billion in 2025-26, settling at £1.3 billion the year after, but overall the changes that the Government have made with the removal of winter fuel payments will save £450 million.

However, the Chartered Institute of Taxation and the Low Incomes Tax Reform Group have raised concerns about the potential complexity of the clause; about how it could cause anxiety for people who have not had to navigate tax rules before; and about how the £35,000 per year cap will only diminish over time as inflation eats away at it. I have therefore tabled new clause 10, which would require the Government to review the case for uprating the £35,000 threshold by CPI each year, ensuring that it retains its value. I have also tabled amendment 41, which would go further and put that commitment squarely on the face of the Bill so that there can be no ambiguity about whether the level will increase.

The Minister skated over a bit of the background to the clause. The measure flows from one of the Chancellor’s first political choices, which was to remove the winter fuel payment from all pensioners except those in receipt of pensioner credit. That meant that pensioners living on incomes of around £13,000 a year lost their winter fuel support. Vital support was pulled from millions of pensioners across the country. In my constituency, 22,000 pensioners lost their entitlement overnight; the figure may have been similar in your constituency, Mr Efford. It was a deeply damaging move, which is why organisations such as Age UK and my party campaigned against it, and the Chancellor was forced to come back to the Dispatch Box to perform one of her U turns. In response to the pressure, the Government announced that everyone would get the payment but that it would be clawed back.

I turn to the points that the Chartered Institute of Taxation and the Low Incomes Tax Reform Group have raised about the clause and the schedule. If a pensioner’s income is £1 over the threshold, they will lose the entire winter fuel payment; there is no taper. Unlike other income related charge backs, such as the high income child benefit charge or the tapering of the personal allowance, the winter fuel payment is based on total income, not adjusted net income. It will affect pensioners who are seeking relief on their charitable contributions. Will the Minister explain why the Government have opted for a system that measures income in inconsistent ways, with different rules from similar income dependent clawback schemes?

The Bill sets out that the Government’s approach relies heavily on data sharing between the DWP, devolved social security bodies and HMRC. There are some exemptions, for example for those who have been on means tested benefits during the qualifying week or who have opted out of receiving the payment, but if that information is not shared swiftly and accurately, instances may occur of administrative issues causing distress and financial loss. Pensioners could also see an unexpected tax code on their pay slip, clawing back money that they should never have been charged. That might lead them to have to fight through an appeals process just to claim what is rightfully theirs.

The plan to collect the charge through PAYE, as is set out in the clause, brings its own issues. From 2027-28, HMRC will move to in year coding, meaning that pensioners could start paying back a benefit that they have not even received yet, based on HMRC’s best guess at their income. As we all know, the winter fuel payment is a one off payment that is usually paid in November, but PAYE collection is spread throughout the year, so pensioners could be having money clawed back that they have not yet received. If that estimate turns out to be wrong, they will have money taken off and refunded later. That is a recipe for potential confusion and hardship, and it could lead to more calls to HMRC that may go unanswered. In the year of transition, some pensioners could face being charged twice in a single tax year. That is not a minor administrative issue. It needs to be addressed.

We all know that any fixed monetary threshold in legislation loses its real value over time, but if Ministers believe that £35,000 is the right level today, surely they accept that uprating in line with inflation is only fair. If the Minister will not support that principle outright, perhaps he will commit to supporting new clause 10, which simply asks for a review of the impact of doing so. Schedule 10 allows for the alteration of the limit, but there is no obligation on Ministers, as there is for other benefits, to review the level or uprate the limit.

My hon. Friend talks about fairness in relation to amendment 41 on uprating in line with CPI. Is it also worth considering the importance of certainty, particularly for people on fixed incomes who will benefit from this measure? Uprating by CPI would give them certainty into the future that they are not going to fall into fuel poverty.

My hon. Friend makes a valuable point. We want more certainty within the system, as far as possible. On earlier clauses, we debated the uncertainty that can come from having administrative rules that HMRC can interpret. Our amendment would give people confidence that their income and the benefit they receive would continue in real terms.

Nobody disputes the need to focus support on those who need it most. Where the Chancellor got it wrong was in taking it away from people who are just over the £13,000 income threshold. If the Government insist on recovering payments, they need to get the fundamentals right, with clear definitions, robust data sharing and a simple route for challenging any mistakes that may have been made.

Let us be clear. We welcome the Chancellor’s latest U turn, reversing the very first decision she took in office. She was wrong to remove the benefit from millions of pensioners. This clause helps her to correct her poor political choice.

I have a great deal of respect for the hon. Gentleman, and I know he is trying his best, but I am surprised at the tone that he is taking and at his language around the winter fuel allowance. He can correct me if I am wrong, but the 2017 Conservative manifesto outlined stripping this benefit completely—and that was from the Government in which he served as a special adviser to the Deputy Prime Minister. Why does he not tell us what he really thinks?

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.

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.

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.

The Minister says that the measures that the Government are using are appropriate, but can he explain, in response to the question from my hon. Friend the Member for North West Norfolk, why adjusted income was not used and why it is not appropriate?

There are different ways of measuring income. In this instance, the Government’s decision is that total income is an appropriate way of measuring it. We keep all taxes and all thresholds under review. We are legislating for the threshold to remain at £35,000 but, as hon. Members with experience in government in the run up to Budgets will know, all things are always considered in the round. Other thresholds in the tax system were frozen by the previous Government and, as was debated in Committee of the whole House a few weeks back, income tax thresholds were frozen as well.

On the point that the hon. Member for Maidenhead made about tapering, the Government’s view is that that would add complexity to the system. We think that a simple threshold is a preferable approach.

The Minister mentions that our suggestion would add complexity to the system, but the system, in and of itself, is becoming overly complex. It started very simply: “Here is a winter fuel allowance for a harsh winter.” Every winter is harsh. Would it not be much simpler and more efficient to wind this into the main pension in future years? Will the Government consider that?

The Government’s view was that it was right to put a threshold in the system. Labour Members do not think that it is right for the super rich to continue to receive the winter fuel payment. On the hon. Member’s broader point, the Government’s policy is to continue with the payment as it stands, as a stand alone payment for those who have a total income below £35,000 a year.

Question put and agreed to. Clause 55 accordingly ordered to stand part of the Bill. Schedule 10 Winter fuel payment charge Amendment proposed: 41, in schedule 10, page 395, line 28, at end insert— “(1A) The Treasury must, each tax year, amend the amount specified under section 681I(1)(b) by the change in the level of the consumer prices index in the previous tax year.”—(James Wild.) This amendment would provide for the £35,000 income threshold for implementation of the winter fuel payment charge to be uprated annually in line with the consumer prices index. Question put, That the amendment be made.

4|0|4|9|The Committee divided:|Question accordingly negatived.||0|0

Schedule 10 agreed to.

Clause 56

Carried interest

Question proposed, That the clause stand part of the Bill.

With this it will be convenient to discuss the following: Schedule 11.

New clause 11—Impact assessment on carried interest reforms— “The Chancellor of the Exchequer must, within 2 years of this Act being passed, lay before the House of Commons a report on the impact of implementation of the provisions of section 56 on— (a) the UK’s competitiveness in attracting and retaining fund managers, (b) the level and composition of investment into the UK, and (c) revenues collected compared to forecast revenues.”

This new clause would require the Chancellor of the Exchequer to report on the impact of section 56 on the UK’s ability to attract and retain fund managers, on investment into the UK and on realised revenues compared with forecasts.

Clause 56 and schedule 11 reform the tax treatment of carried interest—a form of performance related reward that is received by individuals who work as fund managers.

At the autumn Budget 2024, the Chancellor announced that the Government would reform the way that carried interest is taxed, so that its tax treatment is in line with the economic characteristics of the reward. Following an initial increase in the capital gains tax rates applying to carried interest to 32% from 6 April 2025, the clause introduces a revised tax regime for carried interest that sits wholly in the income tax framework. The revised regime takes effect from 6 April 2026. The package of reforms announced at the 2024 Budget will raise almost £300 million by 2030-31.

The changes made by clause 56 and schedule 11 will establish the revised tax regime, under which an individual who receives carried interest will be treated as carrying on a trade. The carried interest will be treated as the profits of that trade and will therefore be subject to income tax and class 4 national insurance contributions. That reflects the Government’s view that carried interest is, in substance, a reward for the provision of investment management services.

New clause 11 would require the Government to publish a report within two years of the legislation passing, covering various issues in connection with the impact of the reforms introduced by clause 56 and schedule 11. The Government recognise the vital importance of the asset management sector in supporting growth. As set out already, we are delivering a revised tax regime for carried interest that ensures fund managers pay their fair share of tax, while maintaining the UK’s position as a world leading asset management hub.

We have engaged closely with the sector to understand the impact of the reforms at every step. We published a call for evidence in July ’24, a consultation at the autumn Budget ’24 and a technical consultation on draft legislation in July 2025. We therefore do not consider new clause 11 to be a necessary addition to the Bill. I commend clause 56 and schedule 11 to the Committee and ask that new clause 11 be rejected.

I will speak to clause 56, the schedule and new clause 11, which is tabled in my name. The Minister talks of reform; indeed, clause 56 fundamentally changes how carried interest is taxed. New clause 11 proposes a thorough assessment, given the significance of those reforms.

Until now, carried interest has been taxed as a capital gain up to 28%. Under clause 56, however, a full 72.5% of qualifying carried interest will be treated as trading income and taxed at income rates that could reach up to 45% plus class 4 national insurance contributions. The effective rate, therefore, would be around 34%. The Minister spoke about competitiveness, but that rate is far above other jurisdictions in Europe—for example, 26% in Italy and 25% in Spain. The precise rate will vary depending on the average holding of the underlying investment; longer holds will receive slightly fairer treatment. Does anyone think that sounds like a measure that is likely to attract talent and investment into the country? As we have discussed in previous sittings, those are things that everyone is signed up to, but many measures in the Bill do not deliver on them.

Carried interest is not some mysterious perk; it is a share of profits that fund managers receive only when their investments do well. It is long term, risk based and uncertain. According to UK Private Capital, in most cases it takes seven years or more before a fund pays a penny of carried interest, and quite frequently it never does.

This measure is a substantial tax rise designed to reclassify carried interest as remuneration, rather than a general return on capital. That may sound tidy in theory, but it misunderstands what carried interest is. As UK Private Capital puts it, carried interest is “fundamentally different” from a salary or a bonus because it is paid only when investments succeed, often many years later and quite often not at all—that is the nature of risk.

The famous tax information and impact note expects the measure to raise £145 million in 2027-28 and £80 million in the following year, but there is a risk of driving talent and investment abroad. Can the Minister share his assessment on what happens if fund managers start relocating to other tax regimes such as Dublin, Luxembourg or New York? What would that mean for wider tax receipts, for the thousands of jobs that funds support and those who rely on them, and for the UK’s standing as a global financial hub? TheCityUK and PwC published a significant report at the beginning of this week about measures that need to be taken to ensure that London remains a pre eminent finance hub. The measures in the clause run counter to that.

That is why I have tabled new clause 11, which would require a review of the clause’s impact on UK competitiveness in attracting and retaining fund managers, the level and composition of investment into the UK, and the revenues collected compared with forecast revenues. For the Minister’s benefit—because he was not in the Committee’s earlier sittings—we have tabled new clauses that would require reviews because a TIIN is a prediction of what might happen, not a review. We are assured that the Treasury keeps all measures under review, so if those reviews are happening, what is the problem with publishing them and giving that information to Parliament?

As well as on the principle, we need answers on the implementation. HMRC will now be expected to verify the average holding period of thousands of complex investment portfolios. What additional resources and guidance will be provided to HMRC to do that? How will it cope if receipts are lumpy and unpredictable? UK Private Capital has warned that the measure will be challenging to manage. I think that is an understatement; it could be a recipe for disputes and confusion.

A further danger is double taxation. The sector has warned that under the rules, some managers could be taxed twice on the same carried interest in different jurisdictions. Can the Minister assure fund managers and the sector that the Treasury has appropriate double taxation agreements and treaties in place to ensure that their concern is ill founded? If the Government get this wrong, we risk losing capital to countries that do offer such clarity.

In debates on earlier clauses, we have spoken about wanting to encourage enterprise and investment, to compete internationally, and to support growth in high value businesses, but clause 56 sends the opposite signal. It will leave us with one of the highest rates of tax on carried interest among competitive and competitor jurisdictions.

We can see why some Labour MPs may be happy about having some of the highest levels of tax on fund managers, but these measures will fundamentally dampen the animal spirits in our economy at a time when we need to be unleashing them. That is why I contend that new clause 11 is essential to ensure that Ministers measure the real world consequences of their choices before lasting damage is done to our economy.

The measure contained in clause 56 was in our manifesto, and I think it is good that the Government are making progress to implement our manifesto reforms. We have been working closely with the sector through the rounds of consultation and engagement that I mentioned in my opening remarks. The sector has acknowledged that the Government have had to balance the need to raise revenue for essential public services with the requirement to keep our economy competitive, and has welcomed the changes that have been made as a result of the engagement that has taken place since 2024.

I may add that I am glad that someone does read the TIINs—they are always a joy to sign off ahead of any fiscal event. We will continue to monitor the impact of the measure and other reforms, although the Government do not believe that it is necessary to legislate for such monitoring. It is our position that it is best not to over legislate.

In the debate on the first clause that we considered in Committee, there was a commitment to keep corporation tax at 25% across this Parliament. Can the Minister at least commit to not further increase the rate of tax on carried interest in this Parliament?

I am grateful to the shadow Minister for giving me a chance to reiterate that the Government have set out—it is relatively unusual for a Government to do so—a corporate tax road map where we have made very specific commitments, which we have kept to, around maintaining the headline rate of corporation tax at the lowest rate in the G7. As with all other policies, however, we keep all taxes under review. It would not be right, particularly many months from the next Budget, for me—I was called a “low ranking” Treasury Minister by the Daily Mail the other day—to comment or speculate on future tax measures.

Question put and agreed to. Clause 56 accordingly ordered to stand part of the Bill. Schedule 11 agreed to. Clause 57 Collective money purchase schemes and Master Trust schemes

Question proposed, That the clause stand part of the Bill.

Clause 57 has three connected objectives. First, the change will enable certain collective money purchase schemes to apply to become a registered pension scheme. Secondly, it will allow HMRC to refuse to register, or to deregister, an unauthorised CMP scheme. Finally, it will allow regulations to be made to efficiently support the development of those CMP schemes.

CMP schemes are a new type of pension scheme that provide members with a target pension income for life. The rules for operating such schemes are set out in the Pension Schemes Act 2021, and include a requirement that they must be authorised by the Pensions Regulator. Currently, a CMP scheme can be set up only by an employer to provide benefits to its employees and those of a connected employer. The rules regarding who can set up such a scheme are changing so that from 31 July 2026, it will be possible to set up a CMP scheme for unconnected, multiple employers.

Clause 57 updates HMRC’s pension rules to align them with the Pension Regulator’s authorisation regime for collective money purchase schemes. Such schemes pool members’ contributions into a single fund, with the benefits linked to the performance of that shared pot rather than a guaranteed payout, as Members will be aware. Master trusts operate on a similar principle, but manage pension savings on behalf of multiple, unconnected employers, each with its own ringfenced section.

The clause goes a little further than just a technical update; it gives HMRC new and wide ranging powers to refuse or remove the tax registration of those schemes, and to change the underlying tax rules through secondary legislation. The aim is straightforward: to ensure the alignment of the tax and regulatory frameworks so that only properly supervised schemes benefit from the generous pension tax reliefs. That is a principle that we would all support.

Well regulated CDC—collective defined contribution—schemes could play an important role in the future of workplace pensions, particularly as the next generation of whole of life, multi employer and retired CDC models develop. If done right, that could help savers manage their transition from work to retirement more smoothly, but it will work only if the rules are clear, consistent and fair with the existing annuity structures. As the Chartered Institute of Taxation has highlighted, the current framework does not allow for reductions in pension payments that vary between different groups of members. That potentially risks creating unfair outcomes for savers in otherwise identical positions. I would be grateful if the Minister could clarify how the Government intend to address that concern raised by the experts.

We also know that, under the new guided retirement model expected from 2027, trustees will be making complex decisions on behalf of their members yet, as the Chartered Institute of Taxation notes, trustees will hesitate to act without sufficient flexibility such as limited opt out periods or conversion options. Those safeguards are notably absent from the clause. Has the Minister, or potentially his colleague the Minister for Pensions, been engaging with the sector on those points?

A further practical point, which I hope the Minister will be able to tidy up, concerns the co ordination between HMRC and the Pensions Regulator. What safeguards will be in place to prevent a scheme being authorised by one regulator but not recognised by the other? What steps are in place to ensure that savers—our constituents—are not caught in the middle?

I thank the Opposition spokesman for his remarks. He is right that the change will involve some co ordination between the Pensions Regulator and HMRC. That is partly why we want to legislate here for changes that will allow HMRC to be confident that it can align the pension scheme tax registration process with the Pension Regulator’s authorisation and supervision regime. We think it is important for those things to be aligned and, as the Minister with responsibility for HMRC, I will continue to engage with officials, alongside, I am sure, the Minister for Pensions, to ensure that they continue to work closely with one another.

The Opposition spokesman asked what engagement has taken place. The Government invited a small group of representatives from the pensions industry to comment on the measures ahead of the publication of the Bill to assess their efficacy for our intended purposes. We will continue to work closely with the sector, colleagues from the Pensions Regulator and the DWP on this matter.

Question put and agreed to. Clause 57 accordingly ordered to stand part of the Bill. Clause 58 Corporate interest restriction: reporting companies Question proposed, That the clause stand part of the Bill.

With this it will be convenient to discuss clause 59 stand part.

Clause 58 makes changes to corporate interest restriction legislation to simplify administration in relation to reporting companies under the regime. Clause 59 makes a minor technical amendment to corporate interest restriction.

The UK’s corporate interest restriction rules restrict groups from using excessive financing costs to reduce their UK tax liability. They apply where net financing costs of a group exceed £2 million per annum. Above that threshold, the rules typically restrict interest deductions to a proportion of tax EBITDA—earnings before interest, taxes, depreciation and amortisation—which is a measure of UK taxable earnings.

The restriction is applied to the group’s UK companies as a whole, and the regime provides for groups to appoint a reporting company to act on their behalf to simplify the administration of the regime, and to allocate any overall disallowance among the individual UK companies. Difficulties can arise where groups do not appoint a reporting company on time. The lack of a reporting company can give rise to increased tax liabilities, which stakeholders have described as a disproportionate outcome, and to difficulties and additional work for HMRC.

The main change made by clause 58 is the removal of the time limit to appoint a reporting company, as well as the requirement for the appointment to be made by notice to HMRC. Most of the changes take effect for periods ending on or after 31 March 2026, but the ability for groups to make retrospective appointments will apply for periods that ended on or after 31 March 2024.

To conclude my brief remarks, clause 58 delivers changes that will reduce the administrative burden and risk for both groups and HMRC from administering the regime, while clause 59 ensures that the corporate interest restriction regime works as intended. I commend both clauses to the Committee.

Clause 58 makes changes to the corporate interest restriction rules, which limit how much interest large companies can deduct from taxable profits each year. It aims to fix an administrative problem that has frustrated many businesses. Under the CIRR, each group must appoint a reporting company—that is, a UK group member responsible for submitting a group’s interest restriction to HMRC—and the clause simplifies that process, which is obviously welcome.

At the same time, the clause introduces a new £1,000 penalty where a group submits a return without any company having been validly appointed to act as the reporting company. That is a small fixed penalty designed to encourage groups to get the appointment right. Can the Minister assure us that this will be applied with some common sense? Does HMRC have discretion not to apply the penalty automatically, so that it can take into account any mitigating factors?

Clause 59 makes a targeted but important change to the way in which companies calculate tax EBITDA under the corporate interest restriction rules. The clause adjusts the calculation so that certain types of capital expenditure related to cemeteries and crematoriums and environmental and infrastructure spending—such as waste disposal, flood prevention and coastal erosion management—are excluded from the limits on how much interest a group can deduct for tax purposes.

In practice, that means that when a company makes large one off investments in public interest infrastructure, such as new flood defences, those up front costs will no longer unfairly reduce the amount of interest they are permitted to deduct. The measure applies retrospectively to periods ending on or after 31 December 2021. On the face of it, this is a sensible change that ensures that the rules operate as intended, and we support the principle behind it.

The Government describe this as a largely technical fix, which is broadly correct. It does correct the distortion in the corporate interest restriction rules that discourage capital investment in environmental and infrastructure projects. The Budget documents suggest the fiscal impact is limited, allowing qualifying businesses to claim interest deductions they were previously denied. But it does raise some other questions. If the calculation of tax EBITDA has accidentally penalised spending on projects such as flood defence, waste treatment or crematoriums, are there are other sectors that the Treasury has looked at that might face similar unintended consequences?

Are there sectors where the Government think there might be similar distortions, or were others considered and dismissed? How will HMRC manage amended tax returns and claims retrospectively back to 2021? Does it have the resources and processes in place to do that officially? Finally, will the Minister commit to a wider review of the corporate interest restriction rules to ensure that the system generally supports the long term environmental and infrastructure investment that our economy and our constituencies need?

I am not aware of further sectors to which the changes outlined in clause 59 would apply, but I will work with officials to continue to receive representations and perspectives from those who may or may not want to see further changes. The hon. Member for North West Norfolk asked about a review—of course, taxes will be kept under review. On his specific question on clause 58 and whether HMRC will be able to have discretion in applying the £1,000 penalty—yes, it will. I hope and strongly expect that HMRC will always use its powers and penalties in a judicious fashion, making sure to treat companies and individuals reasonably. I am confident that it will continue to do so in this case.

Question put and agreed to. Clause 58 accordingly ordered to stand part of the Bill. Clause 59 ordered to stand part of the Bill. Clause 60 Avoidance schemes involving certain non derecognition liabilities Question proposed, That the clause stand part of the Bill.

The Government are taking action to tackle those who attempt to bend or break the rules to avoid paying the tax that they owe. The clause introduces a new provision to address avoidance arrangements in certain very specific situations involving the creation of liabilities and related expenses for accounting purposes. The rule addresses certain arrangements that are designed to secure a tax advantage.

The accounting and tax analysis in relation to when financial assets are derecognised or may continue to be recognised can be complex. In some cases, assets that are transferred to a securitisation vehicle may continue to be recognised for accounting purposes in the transferor’s accounts. This can potentially happen for commercial reasons. In certain circumstances, a liability may also be recognised for accounting purposes in connection with the underlying assets or otherwise in connection with the transfer. This liability is a non derecognition liability.

This new rule addresses scenarios where, as a result of tax driven arrangements, a company seeks a tax deduction for expenses in connection with such a non derecognition liability. HMRC considers that existing legislation already negates any UK tax advantage from these arrangements. However, introducing the new rule aims to deter such tax avoidance arrangements and secure receipts for the Exchequer that might otherwise be deferred through tax disputes. I therefore commend the clause to the Committee.

As the Minister said, the clause introduces a new anti avoidance provision aimed at arrangements involving non derecognition liabilities. These are complex structures whereby a company transfers assets to another entity, but under accounting rules continues to recognise those assets and related liabilities on its own balance sheets. Such structures are of course common in securitisations, which are an important part of the UK’s financial landscape. In these arrangements an originating company passes on the economic risks and rewards with an asset, yet maintains the asset on its books. Used properly, these arrangements serve a legitimate commercial purpose. However, as the Minister said, there are examples of people bending or breaking the rules. Can he give the Committee a flavour of how prevalent he thinks that bending or breaking of the rules is?

The provisions of this clause seek to correct any rule breaking by denying tax deductions where their main purpose is to seek to gain a tax advantage by exploiting non derecognition accounting. The Opposition strongly support efforts to tackle avoidance and close loopholes that undermine trust in the tax system, and efforts to bring the tax gap down—as the last Government successfully did, and this Government are, I am sure, continuing to seek to do—but, as always, the details matter.

According to the “Budget 2025 Policy Costings” document—I commend it to the Committee if any member of the Committee has not read it—this measure is expected to raise around £20 million in 2025-26. That amount is expected to rise to £145 million by 2028-29 as it blocks schemes that seek to erode the UK tax base. However, the measure as drafted relies on a broad “main purpose” test—that is, I believe, a deliberately broad standard. It is important that that wording does not capture genuine commercial transactions that rely on similar accounting treatment, not least because the securitisation market is very significant: according to figures from the Association for Financial Markets in Europe, the value of outstanding securitisations in the UK was €224 billion at the end of Q3 2024.

The Opposition want to ensure that we maintain the competitiveness and the scale of that sector, so I will conclude with a few questions to the Minister. First, how will HMRC distinguish between the abusive non derecognition schemes and bona fide securitisation deals that have valid commercial purposes? Secondly, what guidance will be published to provide clarity around the new main purpose test so that businesses have confidence and know which existing structures could be at risk? Finally, what assessment has the Treasury made of the impact of this measure on the UK’s ability to attract and retain securitisation business, compared with other jurisdictions?

The Opposition spokesperson is right to ask about the extent to which HMRC will be able to distinguish between valid purposes and uses and those that seek to bend or break the rules. HMRC is aware of a small number of companies and businesses that we think are engaging in such practices. It would not be appropriate for me to disclose the precise number, but there are some of which HMRC is aware. We certainly do not want traditional and reasonable uses of the non derecognition method to be affected.

The Opposition spokesperson asks about the potential impact of this measure. I am glad that he has also read the costings. According to those costings, which have been certified by the Office for Budget Responsibility, this measure is expected to raise quite a significant sum: £465 million in total over the scorecard period. That suggests that the experts and analysts in HMRC, as well as the independent officials at the OBR, believe that there is a volume of bending or breaking of the rules here that we should be able to go after more effectively under this measure.

Question put and agreed to. Clause 60 accordingly ordered to stand part of the Bill. Clause 61 Energy (oil and gas) profits levy: decommissioning relief agreements Question proposed, That the clause stand part of the Bill.

With this it will be convenient to discuss new clause 12—Report on decommissioning relief agreements— “The Chancellor of the Exchequer must, within six months of this Act being passed, lay before the House of Commons a report on the impact of implementation of the provisions of section 61 on— (a) North Sea decommissioning activity, (b) employment levels in the UK oil and gas industry, (c) capital expenditure in the UK oil and gas industry, (d) UK oil and gas production, (e) UK oil and gas demand, and (f) the Scottish economy and economic growth in Scotland.”

This new clause would require the Chancellor of the Exchequer to report on the impact of section 61 on North Sea decommissioning, employment and capital expenditure in the UK oil and gas industry, UK production and demand, and the Scottish economy.

Clause 61 introduces legislation to expressly state that no payments can arise under decommissioning relief agreements in relation to the energy profits levy, confirming the Government’s long standing view. Decommissioning relief agreements, which take the form of decommissioning relief deeds, are contracts entered into between the Treasury and oil and gas companies. They have been in place since 2013. They define and in effect guarantee a minimum level of tax relief that an oil and gas company will receive in relation to its decommissioning expenditure. Companies can claim a payment under a DRD if the amount of tax relief that they receive is less than the defined minimum level. DRDs enable decommissioning security agreements to be made on a net of tax basis, freeing up cash for investment.

The energy profits levy was introduced in 2022 by the previous Government, to tax the profits of oil and gas companies following record high oil and gas prices. The calculation of profits subject to the EPL does not allow a deduction for decommissioning expenditure. The Government have always been clear that that cannot be circumvented by making a claim under a DRD.

New clause 12 asks the Chancellor of the Exchequer to report on the impact of clause 61 on North sea decommissioning and on employment and capital expenditure in the UK oil and gas industry. The Government oppose the new clause on the basis that clause 61 does not impact on the statutory obligation for oil and gas companies to decommission wells and infrastructure at the end of a field’s life, or on employment, capital expenditure, production, demand or the Scottish economy. This measure simply confirms the Government’s long standing position that payments cannot be made under a DRD in relation to the energy profits levy.

I therefore commend clause 61 to the Committee, and urge that new clause 12 be rejected.

I will speak to clause 61 and new clause 12, tabled in my name. They concern reliefs and the energy profits levy, which the Chancellor increased to 78%—a very high level. When it was introduced, prices were much higher than they are now.

Clause 61 clarifies that payments under decommissioning relief agreements—long term agreements under which the Government guarantee a minimum level of tax relief for decommissioning costs—cannot be claimed by reference to the EPL; and it makes it clear that companies cannot seek refunds or payments when decommissioning costs arose on or after 26 November 2025. New clause 12 is about ensuring that the impact of these changes on decommissioning, employment and capital expenditure in the oil and gas sector, production and demand and the Scottish economy is considered by the Treasury and the Chancellor.

That is important because of the context. The reality in the North sea is stark. Investment has sunk to record lows and, according to research from Robert Gordon University, jobs are being lost at a rate of 1,000 a month. Offshore Energies UK has warned that the Government’s decision in the Budget to reject replacing the energy profits levy in 2026 will cost tens of thousands of jobs, cripple investment and undermine Scotland and its energy security.

The decommissioning reliefs to which this clause refers were designed to give long term certainty on tax treatment in the basin, precisely so that companies could plan for responsible decommissioning. The Government themselves have acknowledged that we will need oil and gas for decades to come, with about 75% of the UK’s energy still coming from oil and gas and 10 billion to 15 billion barrels required by 2050. Offshore Energies UK has shown that we can produce more than that at home, through tax reform in tandem with a pragmatic approach to decommissioning and licensing, instead of importing more energy and exporting the jobs. That is why new clause 12 would require a proper assessment of the impact on the areas that I have set out. The Chancellor likes to describe the energy profits levy as temporary, but there is nothing temporary about the damage that is being done to jobs, investment and energy security in the North sea.

As I said in my opening remarks, this clause just clarifies the treatment as was originally intended and has always been the case. It would not be appropriate or necessary to monitor and look at the impact of it, because as I believe was said—a second mention for the 2017 general election—“nothing has changed” in relation to the treatment of DRDs and the interaction with the EPL.

Question put and agreed to. Clause 61 accordingly ordered to stand part of the Bill. Clause 70 Relevant property: disapplication of exemptions from exit charges Question proposed, That the clause stand part of the Bill.

With this it will be convenient to discuss clauses 71 to 73 stand part.

Clauses 70 to 73 make changes to improve the residence based regime for inheritance tax. The clauses bolster the new residence based approach to inheritance tax, which came in last April. The Government are making targeted adjustments to the reforms to ensure that they work as intended, acknowledge the economic contribution of former non doms to our country and strengthen the UK’s position as an attractive destination for global talent.

The changes made by clauses 70, 72 and 73 introduce some of the technical amendments needed to make sure that the reform works as intended. Clause 70 is an anti avoidance provision, ensuring the settlor and its trust cannot manipulate excluded property rules to avoid an exit charge on ceasing to be a long term UK resident. Clause 72 confirms that years of diplomatic service do not count towards the long term UK residence test. Clause 73 makes minor corrections to the wording of sections in the Inheritance Tax Act 1984 that deal with spouse elections to be long term UK residents and non residents’ bank accounts.

Clause 71 introduces a new £5 million cap on inheritance tax charges every 10 years on trusts of former non doms. The usual tax levied on those trusts is 6% per decade. The cap applies only to trusts settled before 30 October 2024, recognising long term decisions made under the previous framework. The changes bolster the new residence based approach and make it more effective.

Following the 2024 Budget, the Government decided to implement a long term residency test for inheritance tax. That is a 10-year residency in a 20-year time period. Clause 70 imposes an inheritance tax charge where there has been a change in the settlor’s long term residence status. While this is not the 20% exit tax—one of the kites that was flown by someone near the Treasury ahead of the Budget—there is a risk about the message that it sends about encouraging people to this country.

The Chartered Institute of Taxation has pointed out that individuals faced with the prospect of UK inheritance tax on their overseas trusts may already have decided to leave the UK and/or wind up the trust, an issue that was debated on Tuesday afternoon in relation to the clauses that pertain to non doms. The measures that the Government are taking will undermine what we all want to see, which is more money being brought back into the UK and invested in our country. What conversations has the Minister had with groups such as Foreign Investors for Britain about these changes? How would he respond to their concerns?

Government Ministers are in regular conversation with external stakeholders and individuals to discuss tax matters and their impact. In part, the changes that are being introduced in clauses 70 to 73 are in response to engagement. We are introducing the changes in order to refine the system, which was changed significantly under this Government, to make it fairer and fit for the long term. I commend the clauses to the Committee.

Question put and agreed to. Clause 70 accordingly ordered to stand part of the Bill. Clauses 71 to 73 ordered to stand part of the Bill. Clause 74 Power to make provision about infected blood compensation payments

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.

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.

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.

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.

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.

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.

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.

5|0|4|9|The Committee divided:|Question accordingly negatived.||0|0

Amendment proposed: 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.”—(Mr Joshua Reynolds.)

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.

Question put, That the amendment be made.

6|0|4|9|The Committee divided:|Question accordingly negatived.||0|0

Clause 74 ordered to stand part of the Bill.

Clause 75

Scope of exemption for gifts to charities and registered clubs

Question proposed, That the clause stand part of the Bill.

With this it will be convenient to discuss the following: Clause 76 stand part.

New clause 13—Report on gifts exemption— “The Chancellor of the Exchequer must, within six months of this Act being passed, lay before the House of Commons a report on the impact of implementation of the provisions of section 75 on— (a) the volume and value of charitable donations, (b) the financial position and funding mix of charities and registered clubs, (c) donor behaviour, including any changes in the use of tax relieved giving, and (d) Exchequer revenues, including any distributional impacts across different types and sizes of charities.”

This new clause would require the Chancellor of the Exchequer to report on the impact of section 75 on charitable donations, the finances of charities and registered clubs, donor behaviour and Exchequer revenues.

Clauses 75 and 76 close an avoidance loophole to ensure that the inheritance tax exemption for gifts to charities works as intended. Changes were made in 2023 to the definition of “charity” for multiple taxes, including that the charity must be based in the UK. Some gifts to charitable trusts can still, however, get exemption from inheritance tax, even if they are not themselves charities. They may have no connection to the UK, bypassing the UK jurisdiction condition and other regulation requirements for charities. The tax paying public may therefore be subsidising relief on money that we cannot be sure is used solely for charitable purposes. The Government are therefore closing this loophole and protecting the exemption for legitimate charities.

New clause 13 would require the Government to report on the impact of clause 75 on charitable donations. The Government have already published, as the shadow Minister will have read, a tax information and impact note to set out the impact of the changes. It showed that charities and community amateur sports clubs should be unaffected, as exempt gifts can be made to them in the usual way. New clause 13 should therefore be rejected, and I commend clauses 75 and 76 to the Committee.

I rise to speak to clauses 75 and 76, as well as new clause 13 in my name. The clauses fit within the inheritance tax part of the Bill. In Committee of the whole House, we had debates on the family farm tax and the family business tax, and the damage and distress they are causing in rural communities, so I will not prolong that debate. I will focus briefly on clause 75, however, which tightens the rule on inheritance tax exemptions for gifts to charities and registered clubs, including sports and social clubs. Clause 76 provides limited protection for existing arrangements, seeking to prevent new restrictions from applying retrospectively or unfairly.

New clause 13 would require the Treasury to publish a report on the impact of clause 75, including on the volume and value of charitable donations, the financial health of affected charities and clubs, donor behaviour and impact on Exchequer revenues. We agree with the principle, which the Minister set out, of ensuring that charitable reliefs are used as intended, but it is also important that the Government understand the practical consequence of any tightening of the rules. On Tuesday afternoon, we discussed some of the concerns that charities have about earlier provisions in the Bill, and the potential complexity and bureaucracy that was being added to them. We all know that the charitable sector is under significant pressure, and we do not want to add undue burdens on to trustees of charities in particular.

The 2023 reforms that we introduced had already restricted relief, making it simpler in theory for HMRC to determine eligibility. The sector has warned that further tightening comes at a time when charities are already under financial strain. Can the Minister assure us that the measures will be implemented in a way that mitigates the impact on affected charities? Perhaps, as I asked on Tuesday in a different context, HMRC would provide us with worked examples of scenarios that would be impermissible, to help trustees to fulfil their duties.

I can give the assurance that this will not be an unreasonable burden, or even a small burden, on charities that are continuing to behave in a way that is reasonable and right. I note that thirdsector.co.uk reports that, according to experts, charities are unlikely to be affected by new inheritance tax avoidance measures. I agree with those experts.

Question put and agreed to. Clause 75 accordingly ordered to stand part of the Bill. Clause 76 ordered to stand part of the Bill. Clause 77 Zero rating of leases of vehicles to recipients of disability benefits Question proposed, That the clause stand part of the Bill.

With this it will be convenient to discuss clause 78 stand part.

Clause 77 will make changes to ensure that the Motability scheme and other qualifying schemes provide value for money for the taxpayer while continuing to support disabled people. It will remove the VAT relief for top up payments made to lease more expensive vehicles. Clause 78 ensures that insurance premium tax will apply at the standard rate of 12% to insurance contracts on the scheme.

The Motability scheme is an important vehicle leasing scheme available to people receiving the enhanced Motability component of disability benefits such as the personal independence payment. The weekly Motability award covers the lease cost and a generous service package. If a chosen vehicle is more expensive, the customer pays a one off top up payment in advance of the three year lease.

The Motability scheme supports the independence of disabled people, but it benefits from generous tax breaks that are supporting provision beyond the scheme’s core objectives, such as the lease of luxury cars. To limit tax support for the most premium vehicles on the scheme, the Government have removed VAT reliefs on the one off voluntary—I stress that they are voluntary—payments made to lease higher cost vehicles. VAT reliefs on weekly lease costs covered by eligible disability benefits, and the VAT relief on vehicle resale, will remain in place. Additionally, ending the IPT exemption for most vehicles will bring the IPT treatment for qualifying vehicles’ leasing schemes in line with other commercial leasing firms.

The tax changes will preserve the delivery of the core objective of the scheme, and Motability Operations Group has confirmed that, after the tax changes take effect, it will continue to offer a broad range of vehicles available without a top up payment, meaning that customers will be able to lease a vehicle that meets their needs for the value of their eligible benefit. The changes made by clauses 77 and 78 will generate savings of more than £1 billion across the scorecard. I commend them to the Committee.

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.

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?

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.)

Adjourned till this day at Two o’clock.

The Committee consisted of the following Members:

Chairs: Clive Efford, Sir Roger Gale, † Carolyn Harris, Christine Jardine

† Baxter, Johanna (Paisley and Renfrewshire South) (Lab)

Brackenridge, Mrs Sureena (Wolverhampton North East) (Lab)

Cooper, John (Dumfries and Galloway) (Con)

† Dollimore, Helena (Hastings and Rye) (Lab/Co op)

† Ferguson, Mark (Gateshead Central and Whickham) (Lab)

† Garnier, Mark (Wyre Forest) (Con)

† Mayer, Alex (Dunstable and Leighton Buzzard) (Lab)

† Reynolds, Mr Joshua (Maidenhead) (LD)

Rigby, Lucy (Economic Secretary to the Treasury)

† Ryan, Oliver (Burnley) (Lab/Co op)

† Stephenson, Blake (Mid Bedfordshire) (Con)

† Thompson, Adam (Erewash) (Lab)

† Tomlinson, Dan (Exchequer Secretary to the Treasury)

† Turmaine, Matt (Watford) (Lab)

† Wild, James (North West Norfolk) (Con)

† Woodcock, Sean (Banbury) (Lab)

† Wrigley, Martin (Newton Abbot) (LD)

Rob Cope and Lynn Gardner, Committee Clerks

† attended the Committee

Public Bill Committee

Thursday 29 January 2026

(Afternoon)

[Carolyn Harris in the Chair]

Finance (No. 2) Bill

(Except clauses 1 to 8, schedules 1 and 2, clauses 9, 10, 69 and 62, schedule 12, clauses 63 to 68 and 83 to 85, schedule 13, clause 86 and any new clauses or new schedules relating to the subject matter of these clauses and schedules.)

Clause 79

Private hire vehicles or taxis

I beg to move amendment 42, in clause 79, page 95, line 37, at end insert— “(3B) Section (3A) does not apply to journeys by private hire vehicle or taxi in rural areas.”

This amendment would exempt journeys by taxi and private hire vehicle in rural areas from the provisions of subsection (3A) of section 79.

With this it will be convenient to discuss the following: Clause stand part.

New clause 14—Report on VAT for private hire and taxi vehicles— “The Chancellor of the Exchequer must, within six months of this Act being passed, lay before the House of Commons a report on the impact of implementation of the provisions of section 79 on— (a) the taxi and private hire industry, (b) driver earnings, (c) vulnerable passengers, (d) rural communities, and (e) passenger fares.”

This new clause would require the Chancellor of the Exchequer to report on the impact of section 79 on the taxi and private hire industry, driver earnings, vulnerable passengers, rural communities and passenger fares.

It is a pleasure to see you back in the Chair presiding over our proceedings this afternoon, Mrs Harris. I will speak to amendment 42, which stands in my name and that of my hon. Friends, along with clause 79 and new clause 14.

Clause 79, which many are already calling the taxi tax —that is certainly what people in the industry are calling it—changes the way VAT is applied to taxi and private hire vehicle journeys. Currently, under the tour operators’ margin scheme, VAT is charged only on the operator’s margin—that is, the difference between what the operator charges the customer and what it pays the underlying provider. The clause will remove taxi and private hire vehicle transport from the scope of the tour operators’ margin scheme.

The clause is being brought forward following a defeat for His Majesty’s Revenue and Customs on precisely this point. The tribunal rejected HMRC’s claim that ride hailing services do not qualify for TOMS, although I understand that there is still an appeal, which is due to be heard in March. Perhaps the Minister can explain how much money is being spent preparing for that, if this legislation is going to make the question moot.

In practical terms, the clause means that drivers and businesses now have to charge VAT at 20% on the fare paid by the customer—taking, for example, a £20 fare to £24. The measure took effect from 2 January this year. The Labour party promised in its manifesto not to increase VAT. It is true that it has not increased the rate, but it has certainly expanded the scope of its application through this measure. According to the Government’s own Budget policy costings document, the change will raise about £190 million in 2025-26, rising to some £675 million a year by 2031. That strikes me as a significant new burden—a significant new tax—on private hire and taxis, hence the “taxi tax” sobriquet. It is passengers who will ultimately end up paying the bill.

Industry bodies have warned that fares could increase by double digit percentages in some areas. Every penny of extra VAT will be passed on to passengers who rely on these services because they have no viable public transport alternatives. That is particularly the case in rural areas and among disabled and elderly passengers, women wanting to get home safely at night and workers on early shifts. They are the people who will be affected by this taxi tax.

Like quite a few members of the Committee, I represent a rural constituency. We have a lot of villages that are not connected to our towns, and a lot of elderly people who need to get to appointments. There are also a lot of children with special education needs and disabilities who get to school via taxis. Does my hon. Friend agree that the increase in fares, which will be passed on to our vulnerable constituents, is unacceptable, and that a charge will be passed on to local authorities, which is not fair to our local taxpayers?

My hon. Friend, like me, has a very rural constituency that spends tens of millions of pounds on this. I think Norfolk spends around £30 million or £40 million a year on taxis to transport pupils with special education needs to school. That is a huge proportion of the money that is spent on special educational needs, and potentially adds to the burden and costs of councils who are struggling, particularly in rural areas. They have been—I will be polite—disadvantaged by the latest local government settlement and the way that the Government have skewed the formula against rural areas, having already removed the rural services grant, which we had come to rely on.

What is the Government’s estimate of the average fare increase for passengers as a result of this measure? How can the Treasury justify raising the transport costs at a time when families are already struggling and the Government claim that the cost of living is their priority?

The charge in this clause will not only hit passengers. Operators will face new administrative burdens as they try to account for VAT under far more complex rules. That creates uncertainty—this Committee has discussed the need for certainty on many occasions—and increases the costs for local businesses that operate on relatively small margins. As one operator of a private hire vehicle firm said, rather starkly, “a 20% VAT hike would hit the elderly, disabled and rural passengers hardest. Businesses cannot plan, invest or grow while uncertainty remains.”

The places most exposed are those with limited public transport networks and a consequently high reliance on the use of taxis and private hire vehicles. That is why we have tabled amendment 42, which proposes to exempt rural communities. It is a simple and fair way to protect those most affected. It would amend clause 79 so that the charge does not apply to journey by private hire vehicle or taxi in rural areas.

If the Minister refuses that limited relief, will he at least commit to supporting new clause 14? It would require a proper impact assessment of the effect of the measure on the taxi and private hire industry, driver earnings, vulnerable passengers, rural communities and passenger fares.

There is a practical problem with clause 79, as with so many clauses that we have debated. Some major operators, including Uber, have reclassified themselves or are exploring ways to reclassify themselves as technology platforms rather than transport providers. That seems to be happening in cities outside London already. If they succeed, the VAT liability would shift from the company to the individual drivers, many of whom are not VAT registered owing to their earnings level. What is the Minister’s response to that shift, which is already taking effect in parts of the country?

Concerns have also been raised by the Institute of Chartered Accountants in England and Wales that the list of qualifying services in proposed new subsection (3A) in section 53 of the Value Added Tax Act 1994 is too narrow. The institute contends that the list excludes other key designated travel services, most notably trips, excursions and the services of tour guides. That creates a genuine issue for tour operators who supply day trip packages, whether to the coast of North West Norfolk or to other parts of the country. A lot of small, often family firms provide these services.

For example, if the package consists of a private car transfer, picking up someone from King’s Lynn station and taking them up to sunny Hunstanton, and that is combined with a professional tour guide or excursion ticket, under the clause the private hire element will fall out of TOMS while the guide or excursion will remain in it. What will that do? It will add considerable complexity, forcing the unbundling of a single commercial package. It will require changes to systems and changes to invoicing.

If the intent, as the Minister will no doubt tell us, is simply to go after taxis and private hire vehicles, this is a glaring example of where the drafting is wrong and goes too far. The ICAEW contends that the existing ancillary tests are robust enough to avoid any obvious attempt to dodge paying the tax that is due.

This is a tax rise that will increase fares, hurt rural and vulnerable passengers and create fresh uncertainty in a vital sector. In my constituency, the funding that has been provided for buses is reducing in comparison with the funding provided by the last Government. I expect that that position is being replicated across the country. People in my constituency do not have the luxury of the regular services that I am sure the Minister has in his Chipping Barnet constituency, with maybe three an hour. In parts of my constituency, three a day would be frequent.

I hope that the Minister recognises the points that are being made on behalf of rural areas; I am sure that other hon. Members who represent rural areas will not sit silently when the issue is being discussed, but will speak up for their constituents.

As I say, this is a tax that will increase fares, hurt rural areas and vulnerable passengers and create uncertainty. It will also add to the cost of living. The Office for Budget Responsibility has forecast that real living standards will increase by 0.25% in each year of this Parliament, which is a staggeringly low figure when the average has been 1% in each of the past 10 years. That is not a great record—no wonder the Government are cancelling elections left, right and centre.

If the Government are intent on pressing ahead, the very least the Minister can do is agree to review the measure, looking at fare levels, passenger numbers and any reduction in service availability. Otherwise, I look forward to pressing to a vote my amendment, which would protect rural areas.

In November, the Chancellor told the House that what we are now seeing in clause 79 would protect about £700 million of tax revenue, ensuring that VAT is paid on fares. Yet, according to The Guardian on 2 January, Uber “has swerved paying millions of pounds”

by simply rewriting its contracts with drivers so that it acts “as an agent, rather than as the supplier”

outside London. That means that the vast majority of Uber fares outside the capital will avoid the 20% VAT tax on Uber and, as the majority of drivers’ earnings are below the VAT threshold, that money will not come into the Treasury. Meanwhile, passengers in London, where Transport for London has prevented the agency model, will see higher fares.

Can the Minister explain how much of the projected £700 million in revenue is actually going to be protected, given Uber’s change? Why are we now in a position where we have an absurd two tier system in which identical journeys are taxed differently depending on whether they take place inside or outside London? I note that no Government amendment to the clause has been tabled. Has the Treasury accepted that because of Uber’s decision, this policy has failed before it has even begun?

On reading the clause, I too was concerned about the costs for SEND. Devon, which is a very rural county, spends something like—from memory—£50 million a year on taxis to move children across the county who require special schools in different areas. A 20% tax on that would equate to £10 million. Will the Minister clarify whether taxis used for SEND transport by councils are included? If so, will the Minister please negotiate the extra money that will be required, so that we do not have our SEND budget in Devon cut by £10 million?

It is a pleasure to speak under your chairship, Mrs Harris. I am very glad to see you in the Chair. Rather than running through these changes in detail, let me respond to some of the points that have been raised, because they are important and, in some cases, valid.

As a tax Minister, I am not going to comment on the affairs of individual taxpayers, by which I mean individual businesses, but I will say that the exclusion from TOMS applied to several large private hire vehicle operators. Crucially, it ensured that they were subject to the same tax rules as everyone else. That is what this change is trying to do.

Regarding any subsequent potential changes to the operation of business models that may or may not have taken place—hon. Members have mentioned some reports, but at this stage they are only reports—HM Revenue and Customs will always make an operationally independent assessment of whether a private hire vehicle operator is operating as an agent or, as it is sometimes called, a principal, and it will charge tax accordingly. If there are any implications—we do not know yet whether there will be—any costing update will flow into the forecast as usual.

I am confident, and the Government are confident, that this exclusion is carefully targeted. On the point that the hon. Member for North West Norfolk made about travel operators more broadly, there is a provision for bundled private hire vehicle operators to remain within the scheme, so we are confident that this change is appropriately targeted.

The changes that we are making will put to an end the exploitation, by a small number of private hire vehicle operators, of an administrative scheme that is intended for tour operators only, which lowers their effective VAT rate to around 4%. The Government think it right and fair to make sure that that option is no longer on the table. The OBR certified our costings for the Budget, and this measure is expected to raise £700 million in tax revenue in each year. That is vital to the public finances.

May I return to the point about the ancillary services? Proposed new subsection (3A) in section 53 of the 1994 Act requires only “the provision of accommodation, or…the transport of passengers by bus, coach, train, ship or aircraft.”

Excursions or trips are not covered, which is why the ICAEW has suggested simply amending the wording to include the services of tour guides, trips and excursions to ensure that genuine day trip packages, wholly within TOMS, continue to be protected. Under the clause as drafted, they will not be; a proportion of them will face an extra 20% charge. That is the case, is it not?

We are confident that the exclusion drafted in the Bill is carefully targeted and will not have unintended implications by limiting the activities of legitimate tour operators. It is right to make this change, which will raise £700 million of tax revenue that the Government believe should already be being paid. It will be a vital contribution to the public finances.

Will the Minister address the SEND concerns, please?

The Government are, of course, aware of the pressures on local council finances as a result of the growing number of children with additional needs who require transportation or other support. It is important to note that the clause does not seek to apply additional VAT to those who are not already seeking to make use of the TOMS. The vast majority of taxi services across the country are not using the TOMS and will be unaffected by this change, but we think it right to ensure that this particular use of the TOMS cannot continue, in order that we can raise revenue.

Will the Minister give way?

I have given way multiple times, but I am happy to do so again, because we are in Committee and it is good to have thorough scrutiny.

I thank the Minister for his generosity. Will he confirm that if any local authority sees an increase in its spending on SEND transport because of the 20% VAT, the Treasury will work with the Ministry of Housing, Communities and Local Government to ensure that those authorities are paid back in full for that extra cost? That reassurance would help to put our minds at ease, along with council leaders and council chief executives across the country who are worried that they might have a hole in their budget come the next financial year.

Local authorities have usual and long standing mechanisms for handling their VAT liabilities, including reclaiming the VAT where permissible.

I hope that I have responded with sufficient thoroughness to the points that have been raised. I commend the clause to the Committee and urge that amendment 42 be withdrawn and new clause 14 be rejected.

I need to hammer the nail about day trippers while we have the taxman on the Government Benches. Proposed new subsection (3A) in section 53 of the 1994 Act does not provide for day trip excursions not to be in scope; it refers simply to accommodation and passenger transport not being captured. I hope that the Minister might look at that again, because certainly in tourist areas such as my own constituency, those day trips are part of the local economy and hospitality sector. He knows well from his portfolio that pressures are being placed on hospitality businesses more broadly, not just on pubs.

I am not sure whether we got the full guarantee on SEND. Perhaps the Minister will write to the Committee to set out the position on that, so we all have clarity and can go back to our local authorities to assure them that the £700 million that the Government are looking to raise in additional taxes will not be coming from our council tax payers.

I am not satisfied that the Minister has dealt with the rural issue or the impact on such areas. I appreciate that he does not come from a rural constituency, so he does not have that at his fingertips, but certainly in my area, people rely on private hire vehicles and taxis to get around. That is a big issue, so I will therefore be pressing the amendment to a vote.

Question put, That the amendment be made.

7|0|5|9|The Committee divided:|Question accordingly negatived.||0|0

Clause 79 ordered to stand part of the Bill.

Clause 80

Certain charitable donations not to be treated as supplies of goods

I beg to move amendment 43, in clause 80, page 96, line 28, at end insert— “(2A) The Treasury must, each year, amend by order the applicable limit set under section 5A(2)(a) by the change in the level of the consumer prices index in the previous tax year.”

This amendment would provide for the £200 applicable limit to be uprated annually in line with the consumer prices index.

With this it will be convenient to discuss clause stand part.

Having debated so many clauses that tighten the rules and put up taxes on individuals and businesses, we finally reach something unusual for the Chancellor: a tax break. I will speak to the amendment—in my name and that of my hon. Friend the Member for Wyre Forest and the shadow Chancellor, my right hon. Friend the Member for Central Devon (Sir Mel Stride)—and to the clause. The clause addresses a long standing phenomenon in the VAT rules governing the donations of goods to charity.

In the present situation, when a VAT registered business donates stock, those goods can sometimes be treated as if they were sold, triggering a VAT bill on a notional supply that never took place. Sensibly, the clause corrects that anomaly. It provides that qualifying charitable donations of goods will no longer count as taxable supplies for VAT purposes. In practical terms, that means that no output VAT charge will be liable simply because a business chooses to donate stock to a charity, provided that it meets the conditions and value limits set out in the legislation.

I acknowledge that the change has been warmly welcomed across the charity sector, unlike some of the other provisions about which concerns have been raised. It represents a small but meaningful step towards encouraging more corporate donations. The Opposition, however, have tabled amendment 43, which would ensure that the £200 cap set out in the legislation would increase by the level of the consumer prices index in the previous tax year—as with amendment 41, that would mean that the measure would retain its value over time.

The Opposition support the principle behind the measure. It is right to remove a barrier that discourages generosity and adds unnecessary complexity to charitable giving, but the Association of Taxation Technicians has already cited concerns. In its view, the changes do not fully match the existing relief for goods donated for resale. Businesses will still face different VAT treatments, depending on how a charity uses the donated items.

Clause 80 adds yet another outcome, meaning that the system remains complex for what is, in simple terms, the same act of giving goods to charities—the charities across our constituencies. Practical guidance from His Majesty’s Revenue and Customs will therefore be vital, because businesses need to understand exactly when the new relief applies, how the value limits work and what evidence they must keep to stick on the right side of the rules. Without that clarity, many could decide that donating just is not worth the administrative hassle. Will the Minister commit to providing such guidance and working with the sector to produce it?

According to the Budget documents, the measure will cost around £10 million to the Exchequer, which is a small price to pay for allowing more goods to reach charities and the communities they serve. However, amendment 43 would ensure that the measure retains its value over time. The current £200 limit risks eroding year by year as inflation drives up the cost of goods. Our amendment would simply link that cap to CPI, so that it keeps pace with prices, rather than becoming less generous each year. I think the Minister would have to agree that this is a modest and practical suggestion that would ensure the relief continues to operate as intended, so I hope he might agree to accept the amendment.

To conclude, I will ask the Minister three things. What estimate has the Treasury made of the additional volume and value of goods expected to be donated following the change? Secondly, will HMRC commit to publishing clear and accessible guidance for small and medium sized businesses so that they can use the relief with confidence? Finally, if the Government will not support our amendment, will they at least agree to review the £200 limit within a year or so, listening to evidence from charities and donors about how the policy is working in practice?

In the end, the change is about making generosity easier, not harder. If we can make the tax system work just a little better for those who give and those who do so much vital work on the ground in our constituencies and communities, that is something that all members of the Committee would want to support. I look forward to the Minister’s response to what is a very modest and helpful amendment.

The Liberal Democrats fully support clause 80 and would support amendment 43 if it were pushed to a vote. When I worked in retail, including in grocery retail for a significant number of years, I saw time and again that goods were going in the bin that should have been going to a good home, such as a charity, but that was not happening because it was cheaper to dispose of those goods than to donate them to a worthwhile cause. That is an unacceptable position, and one that we should not be in, so I am really glad that the Government have brought forward clause 80 to help change that.

Clause 80 explicitly names the household goods to which the £200 limit applies—household appliances, furniture, flooring, computers, tablets and phones. As someone who is renovating a house at the moment, I am not sure whether many household appliances can be bought for £200 or less, and I do not know whether the Treasury has set that limit deliberately. When buying a tablet or phone, there are very few options under that £200 limit, and I wonder whether the limit has been drawn too narrowly to ensure that the majority of products donated will not fall under it. I would welcome the rationale from the Minister as to why £200 was chosen as the appropriate number, and what consideration the Treasury has given to widening that limit.

I thank the Opposition spokespeople for their questions. [Interruption.] Spokesmen—very good. Before the Budget, I attended a roundtable with businesses, charities and those who had been campaigning and advocating for the change we brought in at the Budget. In response to many of the questions asked by the Opposition spokesmen, I can reassure them that we worked through the limits and detail of the clause really closely with the charitable sector and with the businesses that would have a different VAT treatment or that may pass on their goods in this way.

On the specific question about guidance, it has already been shared with stakeholders and we continue to engage with them. I will see if my officials can send the Opposition spokesman, the hon. Member for North West Norfolk, the guidance if he would be interested to see it. The value of goods will be commensurate with a £10 million a year Exchequer cost.

On the threshold, the Government have decided not to uprate it in line with CPI, but we will continue to keep it under review. As I said, it was set after detailed and extensive conversations and engagement with the groups that will be involved with the different treatment through either receiving or donating the goods.

It is worth noting that, due to the wonders of modern capitalism, lots of the prices of consumer goods have actually been falling in real terms over time—for example, we might think about how expensive a traditional washing machine or a television is today compared with 20 or 30 years ago. It is not clear to me that it would be appropriate to continue to uprate the threshold as default in line with CPI. For that reason, I encourage that amendment 43 be rejected, and commend clause 80 to the Committee.

The hon. Member for Maidenhead makes a reasonable point about the £200 limit. The Minister said that there had been a lot of discussion to arrive at that threshold, but I do not think he exposed the entire rationale underpinning it—he talked about washing machines and their prices, which was an interesting diversion. The point remains that if we have a £200 limit and we think that is the right limit now, why do we not just automatically uprate it? Then the Minister will not have to come back with regulations or put other clauses in future Finance Bills. It would save us all a lot of hassle and palaver, and would mean that people and charities know where they stand. Our amendment is a modest measure, which I am surprised that the Minister has not simply accepted, so I will test the will of the Committee.

Question put, That the amendment be made.

8|0|5|9|The Committee divided:|Question accordingly negatived.||0|0

Clause 80 ordered to stand part of the Bill.

Clause 81

Refunds of VAT to combined county authorities

Question proposed, That the clause stand part of the Bill.

My remarks on clause 81 will be very brief. The changes that the clause makes will add combined county authorities to the list of bodies eligible for refunds under section 33 of the Value Added Tax Act 1994. This will remove the need for individual Treasury orders each time a new combined county authority is established. I commend the clause to the Committee.

I thank the Minister for that very succinct description of the clause. He will be pleased to hear that I have only a few points to make—[Interruption.] The hon. Member for Burnley says, “That’s good.”

The clause allows newly created combined county authorities to reclaim VAT incurred on non business activities, such as statutory public functions. At present, established local authorities can recover VAT on such activities under section 33 of the Value Added Tax Act, but the definition does not explicitly include combined county authorities. We understand that that change took effect last year.

The explanatory notes make it clear that the clause is intended to ensure fiscal neutrality for the new governance arrangements. Combined county authorities should be no worse off than traditional counties because of their form, but of course the beneficiaries are the combined authorities that are being formed under the Government’s local government reorganisation plans.

My own county of Norfolk is set to be joined with Suffolk in one of these combined county authorities, with a mayor sitting across the two counties. People in Norfolk and Suffolk were looking forward to that mayor being elected in May, until the Government cancelled our election as a late Christmas present in December. As a result, we will not have a combined county authority mayor in place and we will lose out on the £40 million that the mayor was meant to have through the investment fund.

The county council elections for the authority that will make way for the combined county authority, which will then benefit from this VAT exemption, were also cancelled. So there is more delay and uncertainty, and a loss of funding, as people look at the creation of these combined county authorities, which are the subject of the clause, and the refund that they will be able to get. The clause is sensible, but the Government’s wider plans that sit behind it are somewhat chaotic, and cancelling elections is undemocratic.

Balancing VAT refund rights to ensure fairness for CCAs is, of course, welcome, and we support it. We support the idea that VAT refund rights should be balanced across groups and institutions that are similar and have a similar purpose. That is why I hope you will allow me to share some surprise, Mrs Harris, that the Government have not gone further in balancing refund rights. For example, a school with a sixth form attached can claim its VAT back, but a sixth form college cannot. My hon. Friend the Member for Mid Sussex (Alison Bennett) has been campaigning on that for a significant time. In answer to a written question, the Minister confirmed that the Government are not planning to extend the VAT refund right to sixth form colleges, but they have done so for combined county authorities. Will the Minister explain the rationale for that? We all support the idea of balancing VAT refund rights, so we should surely be extending that to other situations.

I am glad that the hon. Member for Maidenhead is aware of the answer to the written parliamentary question. I have also responded in writing to Members who have written to me about this issue, and the rationale has been set out in that correspondence.

Question put and agreed to. Clause 81 accordingly ordered to stand part of the Bill. Clause 82 UK listing relief Question proposed, That the clause stand part of the Bill.

With this it will be convenient to discuss new clause 15—Review of extension of three year period for UK listing relief— “(1) The Chancellor of the Exchequer must, within 12 months of this Act being passed, publish and lay before Parliament a report on the potential benefits of extending beyond three years the period for which UK listing relief applies under section 82.

(2) The report under subsection (1) must assess the— (a) impact that extending the period could have on the attractiveness of UK markets for new listings, (b) potential effects on capital raising and investment in the UK, and (c) implications for Exchequer revenues.”

This new clause would require the Chancellor of the Exchequer to report on the potential benefits of extending beyond three years the period for which UK listing relief applies under section 82, including effects on the attractiveness of UK markets, capital raising and Exchequer revenues.

The Government are committed to ensuring that world leading capital markets support our firms to raise the capital they need to continue to grow and invest. Clause 82 introduces UK listing relief, which means that transfers of a company’s securities will be subject to relief from stamp duty reserve tax for the first three years after the company lists in the UK.

Stamp duty reserve tax and stamp duty are charges on transfers of UK securities. They are vital sources of revenue for the Exchequer, and combined they are forecast to raise up to £5.3 billion a year by the end of the forecast period. The Government are focused on ensuring that the UK is the best place for firms to start, scale, list and stay, and we have delivered an ambitious programme of reforms to build on those strong foundations.

The changes made by the clause will remove the 0.5% stamp duty reserve tax charge on the transfer of a company’s securities for three years from the point at which the company lists its shares on a UK regulated market. That will enable newly listed companies to secure higher share prices, boost trading volumes and improve access to capital.

It is great to hear the Minister talking about making the City of London a pre eminent place in which to grow and list companies, and this is a very welcome measure. However, if he accepts that stamp duty is what has been holding back the listing of shares, why do the Government not go the whole hog and get rid of stamp duty altogether, thereby making the City of London comparable with pretty much every other major developed stock market in the world?

As the hon. Member knows, there are always trade offs to be considered in taxation policy design. As I have just outlined, there is around £5 billion of revenue here. We must ensure we get the balance right between raising revenue and continuing to support growth and the ability of companies to grow and invest in the UK.

We did make changes at the Budget, for example to venture capital trusts, enterprise investment schemes and enterprise management incentives to encourage start ups in particular to scale up in the UK, as one of our frontier sectors seeing growth. We have made changes to support that. I note the Opposition’s perspective, but on balance we think this is a good change to make on its own. We look forward to seeing the impact that it will have and we will continue to keep our tax measures under review.

New clause 15 would require the Chancellor to publish, within 12 months, a report on the potential benefits of extending the period in which the UK listing relief applies beyond three years. The Government have carefully considered the scope of this relief, including the length of the relief period. The first few years after listing are crucial for companies as they endeavour to establish long term viability on public markets, with the most vital period being the initial one or two years. However, our judgment is that the benefits of significantly extending the relief beyond this period would not represent best value for money, as the Exchequer cost would increase while the benefits for firms would diminish with each additional year. I therefore commend clause 82 to the Committee and ask that new clause 15 be rejected.

I rise to speak to clause 82 and new clause 15 tabled in my name and those of my right hon. and hon. Friends. As we have heard, clause 82 introduces a time limited relief from stamp duty reserve tax for companies listed on a UK regulated market. The Committee will know that stamp duty is charged at 0.5% on trades in chargeable securities such as shares. This form of transaction tax is among the most economically inefficient, in the same way stamp duty is on homes: it dampens the market, prevents people from moving and undermines labour market flexibility. As a result, we have committed to abolishing stamp duty on house sales—not stamp duty on shares—and that has been very warmly welcomed.

Under clause 82, trades in a newly listed company’s securities will be exempt from that 0.5% charge for the first three years after the company lists, provided specified conditions are met. The relief will apply to new listings from November last year, with the detail on the qualifying markets and securities set out in the clause, with which hon. Members will, I am sure, have familiarised themselves. We on this side of the Committee support the principle behind the clause.

Some Opposition Members have highlighted the potential benefits of scrapping this transaction tax entirely. We all want to see more companies listing and raising capital in the UK, and steps to lower frictional trading costs can contribute to that ambition. However, my new clause 15 seeks to go further by requiring the Government to publish a report on the potential benefits of extending the stamp duty relief beyond three years. Specifically, I am asking Ministers to assess how a longer relief period could affect the attractiveness of UK markets for new and returning listings, and the impact on capital raising, investment and Exchequer revenues. According to the “Budget 2025 Policy Costings” document, historical listing activity has raised between £14 billion and £17 billion of capital each year. The same document shows that the relief is expected to cost the Exchequer £25 million in the first year, rising to about £50 million a year once fully implemented.

What returns does the Treasury expect from this measure? If the goal is to make London and other UK markets more attractive to list on by cutting the transaction costs and supporting liquidity in the critical early trading years, we need to understand what the success measures are—the KPIs, or key performance indicators, that the Treasury has set.

The London Stock Exchange and market participants have welcomed the proposal as a positive signal. However, as the TheCityUK and PwC’s UK report published on Monday, “No time to lose”, sets out—the clue is in the title—there is a need to tackle deeper structural issues to make the UK more competitive as a listing destination. As commentators have pointed out, companies do not choose a listing venue for a short term tax holiday; they choose based on confidence in the market’s long term credibility, its regulatory environment and its investor base. A persistent valuation gap remains between London and New York. As City AM puts it, stamp duty relief

“is a gesture when what the market needs is genuine free market ambition”.

We say hallelujah to that!

New clause 15, therefore, would provide valuable evidence on whether the policy’s design—in particular, the three year limit—maximises its potential impact. Why three years? Why not five years? Why not indefinitely? Due to the resolution passed by the House, we are not able to table an amendment that would extend the period beyond the three years that was in that resolution, so the second best that we can do is to table the new clause and ask the Minister to explain.

How many new listings does the Treasury expect the relief to attract or retain over the forecast period? On what modelling are those estimates based? Why was the three year period chosen? Perhaps the Minister will elaborate slightly on his very brief introductory justification. How does the measure fit within the broader strategy that the Government must be pursuing—taking up those suggestions from TheCityUK in that report—in order to ensure that the UK is the most attractive place in the world to list? Will the Government commit to publishing regular data on the number of companies that are claiming the relief, and its impact on liquidity and listing behaviour? New clause 15 offers a practical way to help answer some of those questions, and to ensure that this measure delivers lasting benefits for UK markets, rather than being a short term signal when people are making long term decisions.

As with other measures that have been debated this week, for example on business rates, it seems that the Conservatives were just getting around to reform on the issue. Now they are in opposition, they seem to have developed a significant zeal for reform and tax cutting that they did not show at all when they were in government—for example, leaving business rates unreformed, as well as leaving this measure totally unreformed.

I am surprised that the Minister has brought up business rates. This is very important. We look with sympathy at having to reverse the Chancellor’s mess, although the Minister will be coming back in a few months, I am sure, with a further U turn. Just to clarify on business rates, did the Government choose to scrap the 40% relief that was in place when they came into office?

I do not know whether you want the conversation to continue on a tax that is not in scope, Mrs Harris, but I am happy to answer the question.

Can we keep to the clause, please?

Indeed, Mrs Harris. I respect your judgment and authority in such matters.

As I said, the Government carefully considered the scope of the relief, including the length of the relief period. The first few years after listing are vital in establishing longer term liquidity, the most important period coming right at the start. The benefits of extending the relief significantly beyond that period, in our judgment, would not represent value for money for the taxpayer.

The Minister talks about value for money and the cost, but the alternative is that there will be no listings, so it does not cost anything because this is revenue that the Government would not otherwise have. If they levy this stamp duty, people will not list—they will go to other markets. If they remove it, people will list. There is not actually any change in the revenue to the Government. I do not understand why they cannot extend it. It is not lost revenue because it never would have been generated in the first place.

Of course there will be companies that will list under the current tax regime, and changing the tax would lead to lower revenues for the companies that would have listed anyway. We have to look at both sides of the coin. [Interruption.]

Order. Mr Garnier, please stop chuntering from a sedentary position.

The Government are doing a lot to continue supporting the UK’s vibrant capital markets. We have some of the deepest capital markets globally. We have, for example, changed UK listing rules to bring the UK into line with international best practice. We are also changing and improving the prospectus regime, significantly cutting the amount of paperwork that a firm needs to produce while providing better and more relevant information to investors.

We are taking a range of actions to support our capital markets and to support firms to list here. We have seen some good progress in recent months, with more companies choosing to list in the UK, and I hope and expect that we will see more of that soon.

Question put and agreed to. Clause 82 accordingly ordered to stand part of the Bill. Clause 87 Rates of duty effective from 6pm on 26 November 2025 Question proposed, That the clause stand part of the Bill.

With this it will be convenient to discuss the following: Clause 88 stand part.

New clause 31—Review of effects of sections 87 and 88 on illicit tobacco market— “The Chancellor of the Exchequer must, within six months of this Act being passed, publish an assessment of the impact of the provisions made under sections 87 and 88 on the illicit tobacco market.”

This new clause would require the Chancellor of the Exchequer to publish an assessment of the impact of sections 87 and 88 on the illicit tobacco market.

Clauses 87 and 88 implement changes announced at Budget 2025 concerning tobacco duty rates.

At the Budget, my right hon. Friend the Chancellor confirmed that the Government will increase tobacco duty in line with the escalator. Clause 87 therefore specifies that the duty charged on all tobacco products will rise by 2 percentage points above retail prices index inflation. The new tobacco duty rates will be treated as having taken effect from 6 pm on the day they were announced, which was 26 November 2025. In October 2026, tobacco duty will rise again in line with the escalator with the introduction of vaping duty. That is to preserve the price differential between vaping and tobacco products to ensure the duty on vaping does not make smoking more attractive, and will maintain the incentive to choose vaping over smoking.

New clause 31 would require the Government to publish an assessment of the impact of the changes to tobacco duty rates on the illicit tobacco market within six months of the Bill being passed. The Government will not accept the new clause, as the potential impact on the illicit market is already one of several factors that we consider when we take decisions on tobacco duty rates. We have already published a tax information and impact note alongside the Budget to set out the expected impact of this measure. I commend clauses 87 and 88 to the Committee and I reject new clause 31.

I rise to speak to clauses 87 and 88, as well as new clause 31 tabled by the Conservatives. As the Minister said, clause 87 increases tobacco duty and the minimum excise tax with effect from Budget day, as is traditional. As he also outlined, tobacco duty is clearly charged on cigarettes and other tobacco products, while the minimum excise tax ensures that cheaper cigarettes do not escape the appropriate levels of taxation.

Clause 88 sets out a further increase from October this year, introducing an additional uplift in line with RPI, alongside a one off increase of £2.20 per 100 cigarettes and a similar rise for hand rolled tobacco. The one off increase coincides with the introduction of the new vaping products duty, which we may get to talk about later in Committee.

As the Committee discussed last year, in the autumn Budget 2024, the Government announced that the measure was intended to preserve the price gap between tobacco and vaping products, with the same £2.20 rate applying across both categories. These measures will result in a sharp rise in the duty per pack and per pouch. While we broadly support these measures, there are concerns about the implications for illicit trade and enforcement. As we discussed in the Committee of the whole House on the Budget and the Finance Bill in relation to the Government’s almost doubling of gambling taxes, the risk, as always, is that such steep increases widen the price gap between legal and illegal products, making it more profitable for criminal networks, and more tempting for consumers to turn to the black market.

The tobacco duty has been around for a long time, and in recent years successive increases have sought to maintain the financial incentive for people to switch to vaping or to give up entirely. The OBR forecasts that tobacco duty will raise around £8 billion in the current financial year, a modest rise of 0.8% from the previous year, before receipts fall steadily to £7 billion by 2031. The tax information and impact note suggests that the Exchequer impact from this measure will peak at about £130 million before tailing off, consistent with those forecasts.

In economic terms, it would appear that tobacco duty is pushing beyond the point of maximum returns—beyond the Laffer curve peak. As Members of this House, our focus should be on ensuring that further increases in gambling taxes, or the tobacco taxes that we are debating here, do not simply fuel illegal trade. Raising prices on tobacco inevitably risks boosting demand for illicit products, with the associated criminality that blights our communities and fuels organised crime gangs. Even the TIIN acknowledges that some consumers may switch to cross border or illicit purchases.

HMRC says that it will “monitor and respond” as part of its anti fraud strategy, but frankly, more clarity and more action are needed. Will the Minister outline specific measures that HMRC will use to counter any shift towards the black market? What assessment has been made of the risk to consumers who buy illicit products, both in terms of the health impacts and the costs to public services such as our NHS?

Mrs Harris, you are probably wondering what the scale of this problem is. According to HMRC, 10% of cigarettes and 35% of hand rolling tobacco consumed in the UK are from illegal or non UK duty paid sources. However, industry data suggests—I of course recognise that the companies have an interest, and I do not take their figures at face value—that the problem may be far worse, with up to 30% of cigarettes and over 50% of hand rolling tobacco now being sourced illicitly. If accurate, those are levels that have not been seen the mid-2000s.

I cited similar data in Committee during the passage of the Finance Act 2025, when similar provisions were brought forward. Can the Minister update me and the Committee on what discussions have taken place with HMRC about the discrepancy in the estimates? We have one estimate of 10% and another of 30%; that is a huge difference, and we have to get to the actualité.

HMRC’s own director of indirect tax—I want to see that on a business card—has said that illicit tobacco costs the taxpayer around £1.8 billion a year in lost revenue. That is a lot of tax being avoided that could be collected, were this legislation properly implemented. Is that the Government’s estimate? If not, can the Minister provide more up to date figures on the gap between legal and illegal sales? It would also be helpful to know whether the Government have assessed the cumulative impact on retailers and enforcement bodies, if the illegal market continues to expand. That is precisely the purpose of new clause 31, which would require “an assessment of the impact of the provisions made under sections 87 and 88 on the illicit tobacco market.”

HMRC launched its first strategy to tackle illicit tobacco back in 2000. I will not go through them all, but subsequent updates, working closely with Border Force, have delivered progress. They have reduced the duty gap on cigarettes by a third and on hand rolling tobacco by half, which is a welcome success. The previous Conservative Government launched a strategy in March 2024, building on that record.

I am pleased to see that the trading standards powers we introduced in July 2023 are producing results. By early January this year, over £1.4 million in civil penalties had been issued for illicit tobacco sales. When in government, we recognised the importance of enforcement. The Public Accounts Committee, on which my hon. Friend the Member for Mid Bedfordshire serves and I had the pleasure of serving for two years, estimated that every £1 spent by HMRC on compliance recovers £18— a fine rate of return.

That progress must not be allowed to stall. JTI and others have called on the Government to go further and give trading standards full access to HMRC’s penalty powers under 2023 regulations. At present, trading standards can only refer cases to HMRC, which then decides whether to impose on the spot fines of £10,000. There is a strong case for letting trading standards impose penalties directly. The evidence suggests so far that powers introduced by the previous Government are working. I am interested in the Minister’s view. I asked his predecessor last year whether it made sense to extend those powers and give trading standards greater sway to enforce the law.

As I have set out, we will not oppose these measures, but we will continue to press the Government on the growth of the illicit market, because every £1 lost there is £1 that is not funding the NHS, our schools or enforcement itself. I look forward to the Minister’s response to my questions about HMRC’s plans to deal with the market, what the difference is, how we will get robust data, what progress has been made in the years since I last raised this, and the proposal to give HMRC’s powers to trading standards to enforce the law, tackle illicit trade and break up the criminal gangs that blight our communities.

Let me respond to some of the Opposition spokesman’s points. HMRC’s estimate of illicit trade is published annually in “Measuring tax gaps”, which are official statistics produced to the highest quality standards. They adhere to the values, principles and protocols set out in the UK Statistics Authority’s code of best practice for statistics and are regulated by the Office for Statistics Regulation. HMRC is always looking for ways to strengthen them, but the Government consider them to be the most reliable estimates of illicit trade. As he set out, the figures produced by the tobacco industry or those working on its behalf cannot be regarded as a fully neutral assessment of the situation on the ground.

The Opposition spokesman asked about the latest figures. The latest figures from the 2023-24 tax year are that the tobacco duty gap was 13.8%, equivalent to £1.4 billion. He is right that every penny not collected there is a penny not going towards public services. We need to continue to focus our efforts on what we can do to reduce that figure. He mentioned the work of the previous Government, and this Government will build on that. We will continue to work with Border Force to seize cigarettes and hand rolling tobacco. The Committee may be interested to know that in the 2023-24 tax year, HMRC and Border Force together seized 92,435 kg of hand rolling tobacco. We are continuing to see what more we can do. HMRC and Border Force published a strategy in 2024 setting out the continued commitment to reduce the trade, with £100 million of funding in enforcement capability and £1.4 billion to recruit 5,000 compliance officers.

I had not heard the Opposition spokesman’s point on trading standards before; I did not have the pleasure of serving on the Public Bill Committee of last year’s Finance Bill when he raised it. The Government’s policy position is as it stands, but I am always interested to hear policy ideas. I will take his point back to the Department.

Question put and agreed to.

Clause 87 accordingly ordered to stand part of the Bill. Clause 88 ordered to stand part of the Bill. Clause 89 Vehicle excise duty for light passenger or light goods vehicles etc Question proposed, That the clause stand part of the Bill.

With this it will be convenient to discuss new clause 17—Statement on increases to vehicle excise duty for cars and light goods vehicles— “(1) The Chancellor of the Exchequer must, within six months of this Act being passed, make a statement to the House of Commons, on the increase to vehicle excise duty made under section 89.

(2) The statement under subsection (1) must include details of the impact on— (a) the automotive sector, (b) household incomes, and (c) the UK economy.”

This new clause would require the Chancellor of the Exchequer to make a statement to the House on the impact of the increase to vehicle excise duty under section 89 on the automotive sector, household incomes and the UK economy.

I will keep my remarks brief, if only to give the hon. Member for North West Norfolk more time to inform us of his opinions on this matter. Clause 89 makes changes to uprate vehicle excise duty rates for cars, vans and motorcycles in line with the retail prices index measure of inflation from 1 April 2026. New clause 17 would require the Chancellor to make a statement to the House on the impact of that 2026-27 increase to VED rates, but the increase announced in the Budget is in line with the retail prices index, meaning that rates will remain unchanged for vehicle owners in real terms by that metric. It is therefore the Government’s judgment that the new clause is unnecessary. I therefore commend clause 89 to the Committee, and recommend that new clause 17 be rejected.

I am very happy to share my views with the Committee on each and every clause as we go through; that is part of what we are here to do. I am also happy for the Minister to expand on the merits or otherwise of his legislation at will. If he prefers to keep it brief, we can read into that what we wish.

Clause 89 increases vehicle excise duty, the annual charge for keeping a car, van or motorcycle on the roads, in line with the retail prices index. Those changes take effect in relation to licences taken out on or after 1 April. Let us be clear: in practice, that means higher costs for almost every driver. New clause 17 seeks to make sure that those impacts are assessed. It specifically looks at the impact on the automotive sector, household incomes and the UK economy.

We will not vote against clause 89, but the Government should not take our position as an endorsement of their wider approach to motorists. Vehicle excise duty flows straight into the Treasury’s general fund, and the amount that a driver pays depends on the vehicle type, registration date and emissions, with rates adjusted. According to the OBR, vehicle excise duty is forecast to raise getting on for £12 billion by the end of the decade, due in no small part to the RPI increases. It is interesting that the Minister is keen to increase people’s taxes by RPI on a regular basis but will not give such a commitment on a fairly minor charitable threshold. We will leave that there, though, as we have debated that clause.

Ministers like to describe these increases as modest. On their own they may be, but we have to look at all these things in the round, and the impact of these clauses on individuals. If we look at all the costs—the hike in fuel duty and the new mileage based charge planned for electric and plug in hybrid electric vehicles, which will cost the average driver £255 a year—the cumulative impact begins to bite. That is why the new clause looks at the impact of this measure. That all comes on top of rising insurance premiums, servicing costs and of course the wider pressure on household budgets. Everyone’s bills are going up, and there seems to be no end in sight.

Let us not forget that it was this Government who decided to end the 5p fuel duty cut that the last Conservative Government introduced—a decision that will cost the average family around £100 a year from September. Then, from next April, the long standing fuel duty freeze that was in place for 16 years will also be scrapped, replaced by inflation linked rises. That freeze has saved motorists £120 billion since 2010, but once again, drivers are being asked, through this measure, to pay the price for the Government’s failure to get a grip on the economy.

Motorists and motoring organisations including the RAC have rightly warned that these charges come at a time when the cost of living remains high and public transport options are patchy—particularly outside our major cities, as we discussed in the context of private hire vehicles and taxis. For many in rural areas like my own, a car is not a luxury but a necessity to get around, get to work and see family. Many people do not have an alternative to their car. Drivers are paying more, yet the Prime Minister boasts about things like his £3 bus fare cap, which he quietly increased by 50%. That is why new clause 17 would require an assessment of the impact of the increase in vehicle excise duty.

Although we will not vote against the clause, we expect some answers from the Minister. Will he confirm whether the Treasury has modelled the combined impact of these motoring costs—VED, fuel duty, the upcoming road pricing charges—on household budgets, particularly in rural areas where public transport is limited? What assessment has been made of the impact on small businesses that depend on vans and light goods vehicles to operate in each of our constituencies every day? Those are the people we should think of when we consider clauses such as this. New clause 17 would help to deliver the clarity that Britain’s 50 million motorists deserve.

In response to the shadow Minister’s question, the Government do consider the impact of each individual tax measure on businesses and consumers in the round with the others, at Budgets and in between them too. As a result, we have concluded that this is the right and proportionate way forward, to protect revenue and make sure that we can increase revenue in line with inflation, rather than beyond it.

Question put and agreed to. Clause 89 accordingly ordered to stand part of the Bill. Clause 90 Vehicle excise duty for rigid goods vehicles without trailers and tractive units Question proposed, That the clause stand part of the Bill.

With this it will be convenient to discuss the following: Clauses 91 to 93 stand part.

Clause 95 stand part.

New clause 18—Statements on HGV Vehicle Excise Duty and HGV Road User Levy— “(1) The Chancellor of the Exchequer must, within six months of this Act being passed, make a statement to the House of Commons on the increase to HGV vehicle excise duty made under sections 90 to 93 and the increase to the HGV Road User Levy made under section 95.

(2) The statement under subsection (1) must include details of the impact on the— (a) haulage sector, (b) decarbonisation of the logistics industry, and (c) UK economy.”

This new clause would require the Chancellor of the Exchequer to make a statement to the House on the increases to HGV vehicle excise duty under sections 90 to 93 and to the HGV Road User Levy under section 95, including their impact on the haulage sector, decarbonisation of logistics and the UK economy.

Clauses 90 to 93 will make changes to the vehicle excise duty rates for rigid goods vehicles without trailers and tractive units, the cab of an articulated lorry, rigid goods vehicles with trailers, vehicles with exceptional loads, and haulage vehicles other than showman’s vehicles. Clause 95 will make changes to uprate the heavy goods vehicle—HGV—levy.

The registered keeper of a vehicle is responsible for paying VED. The rates depend on the vehicle’s revenue weight, axle configuration and Euro emissions status. The HGV levy is payable for both UK and foreign HGVs using UK roads. A reformed HGV levy was introduced in August 2023, which varies according to the vehicle’s weight and Euro emissions status.

New clause 18 would require the Chancellor to make a statement to the House—in a similar way, I believe, to new clause 17 that we just discussed—on the increases to HGV vehicle excise duty under clauses 90 to 93, and the HGV road user levy under clause 95. Similarly, given that the uprating is in line with inflation and that rates will remain unchanged in real terms for vehicle owners, it is the Government’s view that the new clause is not therefore necessary, and I urge the Committee to reject it.

The clauses deal with changes to vehicle excise duty for heavy goods vehicles, rigid good vehicles with and without trailers, vehicles with exceptional loads, and haulage vehicles other than showman’s vehicles. I welcome the exemption for showman’s vehicles as we look forward to the King’s Lynn Mart, which has been going for 800 years. On 14 February, I will be joining in the civic procession through the middle of King’s Lynn, before getting on the dodgems for the traditional dodgem ride, with other civic figures. Hon. Members should feel free to come along—it is on a Saturday. It is always cold for the Mart, but it is well worth coming along to.

Together, these provisions will uprate the VED and the road user levy by RPI. We have concerns about the timing of the increases, and the absence of meaningful backing for the most affected industries, especially the logistics sector, which keeps Britain moving. HGV vehicle excise duty is already complex, with more than 80 different rates, varying based on the characteristics of weight, emissions, class and configuration. Of course, as the Minister referred to, HGVs are also subject to the road user levy, which was introduced in 2014 as a charge for using the network. That levy was rightly suspended in August 2020 during the pandemic, and the reformed levy that the Minister referred to was reintroduced in August 2023, but it was frozen in the autumn statement that year.

The decision to uprate vehicle excise duty for HGVs and the levy comes at a tough time for the sector. Operators face a difficult time, with cost pressures from rising business rates, higher fuel duties and increased employment and transport taxes. The Road Haulage Association warns that fuel duty alone adds more than £2,000 a year to the cost of operating a single HGV; across the sector, that means £435 million in additional costs. The logistics industry pays a huge amount of fuel duty—it is a vital sector, which adds £170 billion in gross value added and employs around 8% of the workforce, so this is a sector that the Government should be supporting. The Minister said that all these measures are assessed at the time of the Budget; what assessment has he made of the impact of the increases contained in these clauses on the industry’s ability to invest, be efficient, grow and decarbonise?

New clause 18 will help the Minister in that task by requiring an assessment of the impact of these measures on the haulage sector, on decarbonisation of the logistics industry, and on the wider UK economy. The sector has warned that the Government risk stalling progress on decarbonisation, highlighting a lack of fiscal support for low carbon fuels such as hydrotreated vegetable oil as essential transitional solutions such as battery and hydrogen technology step up. There is also no sign of extending full expensing to higher bands, which is something that the industry thinks is worth looking at. What assurances can the Minister give the logistics sector—one of our most important sectors—to provide it with the confidence it needs to invest?

We will not oppose the clauses, but the Government need to continue to look at these issues in the round. The higher vehicle excise duty rates and the higher levy rates for HGVs feed directly into the cost of moving goods around the country. That means the food on our shelves—food inflation is already increasing, making the weekly shop and people’s meal deals more expensive. The logistics sector moves around the building materials we need for our crucial construction industry—I believe there is a big target of 1.5 million new homes, which depends on getting the materials to the right places. Costs added to the logistics sector are going to end up in the cost of buying a house, which is why proposals such as scrapping stamp duty on home purchases are very good ideas.

My hon. Friend is making an incredibly good point about the inflationary effect of these taxes. He has mentioned houses, and we know that the Bank of England is charged with using monetary policy to keep inflation under control. The direct effect of this measure could be an increase in interest rates, and therefore an increase in the cost of mortgages. Does he think that the Government would be happy with that?

My hon. Friend makes an important point about the effect of these clauses on putting up costs and potentially adding to inflation, which as we know has almost doubled from the rate that the Government inherited. Of course, that is partly due to the decisions that the Chancellor has taken and the huge amount she is borrowing and spending, which was not mentioned in her party’s manifesto.

To my hon. Friend’s point, the Minister must tell us what assessment has been made of the knock on impact on consumer prices, particularly for essentials such as food that depend on road freight to get to our supermarkets and local stores. This is a time when we should be backing British logistics, not burdening it. I therefore hope that, on reflection, the Minister will accept new clause 18 as a sensible one that will help him provide that information to our constituents, to the public, and—importantly—to the logistics sector, transport operators and supermarkets.

The haulage sector has seen significant challenges in recent years: increases in fuel prices, increases in wages and significant changes in the Employment Rights Act 2025, business rates and vehicle excise duty, as we see here. I would not be the investment and trade spokesman for the Liberal Democrats if I did not mention another challenge for the road haulage sector in recent years, which is the significant amount of red tape involved in Brexit, and the cost of that.

The Government’s EU reset has not touched the sides, as haulage associations have been telling us recently. The Business and Trade Committee recently heard about some goods moving from the UK to France that required 29 different stamps on their paperwork. If one stamp goes in the wrong place, the vehicle gets stuck in France or sent back. That is an additional cost for the road haulage sector, on top of all these extra costs and the vehicle excise duty increases.

For example, we were told on the Business and Trade Committee about a vehicle that was sat in France for almost one month because of paperwork that was not quite correct and small technical challenges. That vehicle being sat in France for one month meant consistent driver changes and meant the freezer compartment having to be kept on to ensure that the goods did not spoil. There was a £6,000 cost to the business because of two stamps being in the incorrect place. If we add that to the £2,000 cost per truck of the changes to vehicle excise duty, we see very clearly that the significant changes that the Government are making in quick succession are not helping the sector, which needs all the support it can get.

I thank the hon. Member for North West Norfolk for his romantic invitation to King’s Lynn; I may be otherwise engaged on that date, but I thank him for it all the same. I am interested to see whether any Members wish to intervene to say whether they will be taking up the invitation, but it is good to hear that he is an active constituency MP.

We do, of course, look at measures in the round, as the hon. Member for North West Norfolk implored me to. We did so ahead of the Budget, and I will continue to work with my right hon. Friend the Chancellor on tax policy in the run up to the Budget at the end of the year. We are providing stability this year for the private sector and for individuals by moving away from the relatively chaotic approach under the previous Government of having multiple tax events with big swings and roundabouts twice a year, so future tax changes will not come until the end of the year, but that will give me more time to consider things in the round.

Is the Minister therefore ruling out any further support for hospitality, leisure and retail businesses in the Chancellor’s spring statement?

The Government will consider all tax measures in the round in the usual way in the run up to the Budget. It would not be right for me to speculate on what will or will not be in the Budget; it is a long way away, and there is much to consider in the meantime. Conservative Members decided to bring up inflation, which hit 11% under them in 2022, pushing up prices for everyone up and down the country, leaving businesses and consumers significantly worse off in the worst Parliament on record for living standards.

The Minister is a fair man, so he will recognise the impact that the pandemic and the war in Ukraine had on inflation and energy prices. Could he confirm what the inflation rate was on the day the Government came into office and what it is today? That is an important context for his comments.

Over the months ahead, as a result of the action that this Government have taken to bring stability back to the economy, I look forward to seeing inflation return to 2% by the end of the year, as is forecast by the Bank of England.

I thank the hon. Member for Maidenhead for bringing up the botched Brexit deal that the previous Government left us. Under the leadership of the Prime Minister and Ministers in the Cabinet Office and elsewhere in Government, we continue to work to reduce barriers to trade and deepen our relationship with our nearest trading partner. As the Minister responsible for customs and excise, I am always looking at what more we can do to support those who move goods across borders and trade with our partners in the EU.

Question put and agreed to. Clause 90 accordingly ordered to stand part of the Bill. Clauses 91 to 93 ordered to stand part of the Bill. Clause 94 Vehicle excise duty: expensive car supplement Question proposed, That the clause stand part of the Bill.

With this it will be convenient to discuss new clause 19—Report on expensive car supplement— “(1) The Chancellor of the Exchequer must, within six months of this Act being passed, lay before the House of Commons a report on the impact of implementation of the provisions of section 94 on— (a) the automotive sector, (b) the sale of hybrid cars, and (c) vehicle excise duty revenues from high value vehicles.

(2) The review must consider whether the threshold set under section 94 remains appropriate.”

This new clause would require the Chancellor of the Exchequer to report on the impact of section 94 on the automotive sector, sales of hybrid cars and vehicle excise duty revenues from high value vehicles, and to consider whether the threshold remains appropriate.

Clause 94 will make changes such that the vehicle excise duty expensive car supplement threshold is increased to £50,000 for zero emission cars, from its current level of £40,000. This change will take effect from 1 April 2026 and will apply to zero emission vehicles first registered on or after 1 April 2025 for tax renewals from April 2026.

The expensive car supplement is a supplement to VED payable by vehicle keepers for five years, from years two to six following a car’s first registration. The rate is currently £425 a year; that will increase to £440 from 1 April 2026, in line with RPI, and is charged in addition to the standard rate of VED. The additional charge was, I believe, originally introduced in 2017 under a previous Government so that those who can afford the most expensive cars pay more than the standard rate paid by other drivers.

Clause 94 will increase the threshold for zero emission cars from £40,000 to £50,000. This measure is projected to benefit over half a million drivers of zero emission vehicles over the next five years. It will also incentivise electric vehicle take up. Increasing numbers of motorists will benefit in future years as the zero emission vehicle population grows.

New clause 19 “would require the Chancellor…to report on the impact of section 94 on the automotive sector”

and on other issues. As is usual practice, a tax information and impact note was published at the Budget, outlining the anticipated impacts of this measure as well as the expected revenue impacts of the change.

The Government remain fully committed to the EV transition, which will drive economic growth, help the country meet its climate change obligations and improve air quality. By increasing the ECS threshold to £50,000 for zero emission vehicles, clause 94 supports those goals.

I rise to speak to clause 94 and new clause 19, which stands in my name. Clause 94 makes changes to the expensive car supplement in vehicle excise duty, as the Minister referred to, specifically for zero emission vehicles. This is an extra £425 charge that applies to most cars with a list price above £40,000. Under the clause, the Government propose to increase the threshold to £50,000, but only for zero emission vehicles. That means that buyers of higher value electric vehicles will avoid paying the charge, while the £40,000 limit still applies to petrol, diesel and hybrid cars. This change is due to take effect from April 2026.

Let us recall that, back in the Public Bill Committee on last year’s Finance Bill, one of the Opposition’s “review” new clauses called for an independent assessment of the £40,000 threshold and its impact on consumers, particularly for electric vehicle sales, because we said that it was not at the right level. The Minister’s predecessor rejected that idea, and now here we are: the Ministers have quietly decided to raise the very threshold that we urged them to raise a year ago. They are playing catch up, but they get there in the end. Is the Minister willing to admit that they have been a bit slow to follow the points that we made? Maybe we will be here in Committee next year, talking about other clauses on which the Minister has rejected things and reversed his position.

That brings me to the hybrid point. The Government now seem to have decided that hybrids no longer warrant support, despite the fact that they are critical in bridging the transition to fully electric vehicles. I would be grateful if the Minister expanded at length on the reasoning behind that decision, and on how many jobs in the UK are dependent on the manufacture of hybrid models when a lot of our electric vehicles come from China, where the Prime Minister is now.

We are broadly supportive of the measure, having recommended it a year ago, but let us be realistic: it will not do anything for most of the households in our constituencies, who simply cannot afford a new electric vehicle, especially one that costs £50,000. That is completely out of reach for people in my constituency. I do not know whether that is also the case in constituencies nearer to London, but it is certainly the case in mine.

How does this increase fit with the wider EV policy and charging infrastructure and its roll out? To support ordinary people up and down the country, we should be joining countries such as Canada—along with the EU, or so it looks—in scrapping the mandate forcing manufacturers to produce EV vehicles and ending the 2030 ban on the sale of new petrol and diesel cars.

New clause 19 would require a proper review of the policy, its effects on the automative sector and the impact on the sale of hybrid cars and on vehicle excise duties. It would ensure a consideration of whether the threshold remains appropriate as market prices shift.

I hope that the Government will accept this accountability and transparency in policymaking, which will benefit everyone. Will the Minister at least commit to reviewing the threshold in future, particularly if it turns out that it needs to be adjusted? Will he also look at the hybrid point?

We welcome the uprating of the expensive car supplement for EVs to the value of £50,000, supporting EVs and EV take up. However, we are surprised that during the Committee’s first sitting on Tuesday, when I asked about extending zero VAT for charging infrastructure beyond 2027, the Economic Secretary declined to do so. I am aware that the Minister who is present today was not there, but that is slightly confusing. Here, we see the Government supporting electric vehicles and increasing the threshold from £40,000 to £50,000, but not applying the same policy by supporting electric vehicles post 2027 in other clauses of the Bill.

The Economic Secretary, who was in the Minister’s place on Tuesday, is now in China; I do not know whether I should commiserate with the Minister for not being invited on that trip. We are concerned about floods of electric vehicles that are coming in from China, undercutting European and British competitors. We are worried that they will be impacted by that £50,000 change, but several British vehicles will not be. I am sure that we do not want a world in which the Government are unintentionally encouraging British residents to buy electric vehicles made in China rather than electric vehicles from Britain. I hope that the Minister will clarify that point for us.

I am sorry to report to the Committee that when the Chancellor and I made the decision to increase the threshold ahead of the Budget, I was not aware of the representations that the hon. Member for North West Norfolk had made in last year’s Finance Bill Committee. If I am still in my role in the run up to the Budget later in the year, of course I will bear in mind everything he has said today. I have already taken some notes that I will take back with me.

The hon. Member is right to note the important role that hybrid vehicles play in the transition. Ultimately, however, to move towards our goal of net zero by 2050, we need to move to a fully clean vehicle fleet over the coming decades, so we want to particularly encourage fully electric vehicles.

We will keep this measure under review; it is important that we do so. This has been an ask of the car manufacturers here in the UK that we want to support. I take the points from the hon. Member for Maidenhead about making sure that consumers can buy vehicles that are produced here in Britain. I hope that a change such as this, which shows the Government’s intent to support the electric vehicle transition, will be a consideration for vehicle manufacturers as they choose where to produce new EV cars in the years to come. Along with other measures that we set out in the Budget, this shows our intention to work alongside the industry to support that transition.

The hon. Member for North West Norfolk raised a point about how high the supplement is. He said that many constituents in rural Norfolk, but also in north London, will find it very challenging to afford to buy a new car that costs between £40,000 and £50,000. That is true in lots of parts of the country, but as I am sure he is aware, it is important that we seek to encourage those who can afford such a car to do so, because they will then sell their cars on at a cheaper value that people may be able to afford. It supports the general health of the car market overall if we can increase the affordability of these—granted—relatively expensive vehicles. That is why the Government have brought forward this change: to support the transition and to reduce the cost of purchasing new vehicles within the £40,000 to £50,000 bracket.

Question put and agreed to. Clause 94 accordingly ordered to stand part of the Bill. Clause 95 ordered to stand part of the Bill.

I think now is an appropriate time for a comfort break. Please will Members get back as quickly as possible?

Sitting suspended.

On resuming—

Clause 96

Rates of air passenger duty

Question proposed, That the clause stand part of the Bill.

With this it will be convenient to discuss the following: New clause 20—Review of bands and rates of air passenger duty— “(1) The Chancellor of the Exchequer must, within 18 months of this Act being passed, publish an assessment of the impact of the changes to air passenger duty made under section 96 on— (a) the aviation industry, (b) passengers, (c) household finances, and (d) the public finances.

(2) The assessment under subsection (1)(c) must consider how households at a range of different income levels are affected by the changes under section 96.”

This new clause would require the Chancellor of the Exchequer to publish an assessment of the impact of changes to air passenger duty under section 96 on the aviation industry, passengers, household finances at different income levels, and the public finances. New clause 32—Air passenger duty change on boarding passes— “The Chancellor of the Exchequer must by regulations require travel operators who are liable to air passenger duty to ensure that in the case where a boarding pass is issued, the change in the level of air passenger duty made under section 96 and charged in respect of the passenger’s journey, is clearly stated on the boarding pass.”

I call the Minister.

Hear, hear!

I thank the Opposition for that warm welcome back after our break.

Clause 96 sets the rates of air passenger duty for the year 2027-28, as announced at the Budget. The rates will take effect on 1 April 2027. Following previous increases to APD, the Government will uprate rates in line with RPI from 1 April 2027. As was previously announced, they will be rounded to the nearest penny, which constitutes a real terms freeze. This will continue to make sure that airlines continue to make a fair contribution to the public finances, particularly given that tickets are VAT free and aviation fuel incurs no duty. The Government expect these measures to have an impact on approximately 600 airlines and aircraft operators.

New clause 20 would require the Chancellor to publish an assessment of the impact of changes to air passenger duty under clause 96 on the aviation industry, passengers, household finances at different income levels and the public finances. The air passenger duty national statistics on different APD rates administered by HMRC are published annually through the APD bulletin. The bulletin, which is updated annually, includes statistics and analysis on APD receipts up to the latest full month before its release, and airline passenger numbers one month behind that of duty receipts in the UK. New clause 20 is therefore unnecessary.

New clause 32 would require travel operators liable to air passenger duty to ensure that, where a boarding pass is issued, the change in the level of air passenger duty made under clause 96 and charged in respect of the passenger’s journey is clearly stated on the boarding pass. Air passenger duty is charged to airlines on a per passenger basis on departure from UK airports. Although airlines can pass the cost of the tax on to passengers, that is a commercial decision for them. I therefore commend clause 96 to the Committee, and encourage the Committee to reject new clauses 20 and 32.

James?

Wild!

I think we are on first name terms now, Mrs Harris.

I call James Wild.

Thank you, Mrs Harris. I am almost the only one who has said anything in this Committee, so hopefully people know my name. I rise to speak to clause 96 and to my new clauses 20 and 32.

As the Minister has set out, clause 96 sets air passenger duty rates for the 2027-28 tax year, uprating them in line with RPI. I believe that APD is one of the few taxes for which rates are set well in advance so that the sector knows of the increases. The clause will also expand the higher rate to all private jets over 5.7 tonnes. This applies to passengers departing from UK airports, with rates determined by distance and travel class.

My new clause 20 would require the Government to publish a full impact assessment of the APD changes on the aviation industry, on passengers, on households of all income levels and on the public finances. New clause 32 seeks to bring greater transparency to the travelling public; it would require that the change in the level of APD charge be clearly stated on boarding passes so that every passenger knows how much the rate has gone up as a result of tax imposed by the Government. The Minister says that it is a commercial decision whether airlines pass on the cost, but he will be familiar with how the world works. If a business is taxed more, it is likely to pass on the cost rather than absorbing it into what can be quite thin margins. It may not be able to absorb it, so if it does not pass it on, it will go bust.

This could start a wave of transparency. At the petrol pump, we could see how much of the price of a litre is going straight out in tax. In a pub, we could see on a pint glass how much of the pint goes on tax. Those ideas are not included in my new clause, but they have given me inspiration for when we return to the Floor of the House on Report. The new clause would bring greater transparency; I would hope that the Government and Ministers are willing to be more open.

According to the Office for Budget Responsibility, APD will raise £4.1 billion this year, which is forecast to rise to £6.5 billion by 2030-31, driven by rate increases and passenger growth. While the Government reap the higher revenues, they must also recognise the impact and pressure on families getting away for a holiday—I would say, “Come to Norfolk”—and on regional airports and the wider economy. There are concerns about the impact on people saving up for a family holiday; about the availability of routes that might be slightly marginal and which the increases might make uneconomic; and about affordability for families.

The British Airline Pilots Association said that the latest rise is: “Bad news for passengers, especially families going on holiday”.

The Business Travel Association put it rather more bluntly: “APD is not simply a passenger charge; it is a tax on global connectivity”.

It highlights an economy flight to India, a key trading partner of the UK. For 2027, the APD alone will be over £100 per passenger, and that is of course before any accommodation or other costs. It is a significant additional factor if a family of four is travelling, perhaps to see family or to go to some of the great sights in India. I enjoyed a visit there a few years ago, and I am happy to discuss where I went with colleagues after this sitting, as I fear it may be out of scope. What will this mean for children? What analysis has been done of how it might affect consumer behaviour? Will it put people off flying?

New clause 32 is about transparency. Everyone would be able to see on their boarding pass how much has been added as a result of this stealth tax. We are unable to put the full amount, due to resolutions passed by the House, which is why we would put the annual amount. Such taxes should be more visible to consumers.

From 2027, all aircraft over 5.7 tonnes will face a higher charge, and that change follows the 50% rise planned for April. When we talk about private jets, people may think of pop stars gadding around, but most private jets are corporate aircraft that are used as capital assets. They are not luxury toys; they are about people flying to trade and secure jobs in our economy. It is about people being internationally connected and going to places such as India—[Interruption.] The hon. Member for Burnley is pulling a face, as if that is not the reality, but it is what these jets are. We want people to get on a plane, go and do deals, come back and secure investment into our country. [Interruption.] The Minister is nodding. Perhaps that is why he is the Minister and not on the Back Benches.

The Prime Minister has just hired a private jet to go to China, because he could not take the Royal Squadron flight due to national security concerns. Perhaps the Minister can tell us how much chartering that plane has cost the taxpayer in air passenger duty.

We do not oppose clause 96, but we expect the Government to be up front about the impact of the tax rises they are ramming through in this Bill. We want transparency for families going on holiday, who will see prices going up and will have to pay more to get away. Our new clauses simply ask for some transparency and accountability, which are often missing from the Government’s approach to taxation.

One thing to note about Labour Back Benchers is that they are on the Government Benches, making changes for their constituents. They are supporting the work of this Government to improve living standards for people up and down the country, to ensure economic stability and to bring down interest rates. They are doing the right thing by their constituents.

Order. Can we stick to the clauses that we are debating?

Of course, Mrs Harris.

On the point that the hon. Member for North West Norfolk raised, it would be an unnecessary administrative burden to ask airlines to reformulate how they print and design their boarding passes as a result of an Opposition new clause, so I do not support it.

Question put and agreed to. Clause 96 accordingly ordered to stand part of the Bill. Clause 97 Rates of climate change levy Question proposed, That the clause stand part of the Bill.

With this it will be convenient to discuss new clause 21—Report on Climate Change Levy rates— “The Chancellor of the Exchequer must, within six months of this Act being passed, lay before the House of Commons a report on the impact of implementation of the provisions of section 97 on— (a) energy intensive industries, and (b) the UK’s international competitiveness.”

This new clause would require the Chancellor of the Exchequer to report on the impact of section 97 on energy intensive industries and the UK’s international competitiveness.

Clause 97 makes changes to the main rates of the climate change levy, with effect from 1 April 2027. Since 2001, CCL has provided an incentive for businesses and the public sector to be energy efficient by adding a tax on the non domestic supply of energy. Energy efficiency is one of the most cost effective ways in which businesses can cut emissions, and permanently reducing energy use also helps to improve the UK’s energy resilience.

CCL sets four separate main rates for different energy products. The liquefied petroleum gas rate has been frozen since 2019, and it will continue to be so from April 2027. The changes made by clause 97 will increase CCL rates on gas, electricity and solid fuels in line with the retail prices index. This represents a small increase to business bills, but it will ensure that the behavioural incentives of the tax are maintained while also protecting the public finances. The Government announced a wider review of CCL at the spring statement in 2025, and we remain committed to this to ensure the tax remains up to date in the ever changing energy landscape.

New clause 21 would require the Chancellor to report on the impact of clause 97 on energy intensive industries and the UK’s international competitiveness within six months of the Bill being passed. I reassure the Committee that the Government already consider the impact of CCL on energy intensive industries and competitiveness, and a number of reliefs are available to such businesses. For example, the exemption for certain processes in sectors such as steel, ceramics, cement, glass, metal forming and aluminium provides £270 million of relief per year. The Government do not believe that new clause 21 is necessary.

I therefore commend clause 97 to the Committee and ask that new clause 21 be rejected.

Environmental taxes are obviously a very important topic for our constituents and businesses, so it is important that we scrutinise them appropriately. Clause 97 raises the climate change levy—the tax on non domestic energy use for electricity, gas and solid fuels—while freezing the rate for LPG. As the Minister said, it was first introduced in 2001 to encourage energy efficiency.

This uprating will take effect from April 2027. According to the OBR, around £2 billion will come in as a result. We must look at the additional burden being placed on businesses. Again, we need to look at all of these things cumulatively, which is why I welcome the Government’s decision in the autumn to extend the climate change agreements for a further six years—by allowing qualifying businesses to benefit from reductions at a time when businesses are facing significant headwinds, this offers some much needed respite.

Of course, British manufacturers are paying higher prices than the European average—I think it is more than 50% more for electricity—while the gap with the United States is wider, for understandable reasons. However, high energy costs are one of the issues holding back growth and productivity in the country. We should be looking to reduce the burden and cost of energy, rather than increase it, and this measure will obviously put up the rate.

New clause 21 would require a report on climate change levy rates, and it would require the Chancellor of the Exchequer to review the impact on energy intensive industries and the UK’s international competitors. I am thinking about sectors such as ceramics, glass, data centres and gigafactories. These are the industries that drive innovation, exports and skilled jobs, and we should consider the impact of such measures on their ability to do business in the UK.

That is why we have set out a different approach that does not follow the fundamentalism of the Energy Secretary, who is picking arbitrary dates and loading up costs by rushing to meet them, rather than getting the benefits of technology development and innovation. Our plan would bring down the cost of energy, because taxing industrial energy is not a strategy for growth.

What assessment has the Minister made of the greater impact of these rates on British manufacturers’ productivity, competitiveness and ability to grow? If he cannot answer that question, perhaps he will support new clause 21 so that we can have a review after the event to see what the impact has been.

The hon. Member for North West Norfolk is right that high energy costs are one of the big challenges facing industry and consumers. The Government are doing all we can to accelerate the roll out of clean power. That includes nuclear power, which as a country we have not invested in for way too long, and we desperately need more of that firm baseload power. We also need more intermittent clean power through wind and solar. We cannot turn things around overnight, but in time, I hope and expect that these interventions will lead to lower bills for both businesses and consumers. However, I would be the first to say there is much more to do on this, given the high energy costs and surging inflation we inherited from the previous Government, particularly after 2022.

Question put and agreed to. Clause 97 accordingly ordered to stand part of the Bill. Clause 98 Rates of landfill tax

Question proposed, That the clause stand part of the Bill.

With this it will be convenient to discuss new clause 22—Review of landfill tax changes— “(1) The Chancellor of the Exchequer must, within 12 months of this Act being passed, lay before the House of Commons a report on the impact of implementation of the provisions of section 98.

(2) The report under subsection (1) must in particular assess any effects on— (a) construction and infrastructure projects, (b) investment in ports, (c) levels of recycling and illegal dumping, (d) progress towards the Government’s environmental objectives, and (e) Exchequer revenues.”

This new clause would require the Chancellor of the Exchequer to report on the impact of section 98, including any effects on construction and infrastructure projects, port investment, recycling and illegal dumping, progress towards environmental objectives and Exchequer revenues.

Clause 98 increases the standard rate of landfill tax in line with the retail prices index. It increases the lower rate by the same cash amount, and it will take effect from 1 April 2026. This tax was introduced 20 years ago, and it is charged on materials disposed of at a landfill site or an unauthorised waste site in England and Northern Ireland. The objective of the tax is to divert waste away from landfill and to support investment in more circular waste management options, such as recycling and recovery.

The Government consulted earlier this year on proposals to reform the tax to drive more materials out of landfill, and to design out incentives for landfill tax fraud. The hon. Member for Grantham and Bourne (Gareth Davies) is not here, but I enjoyed his video on this, in which he appeared with a hard hat. He, and others, have engaged on this issue.

I particularly welcome the engagement from industry, which has welcomed the Government’s decision. The National Federation of Builders said we had “really engaged with industry”, and that the decision put forward after the Budget, following the consultation, would “allow the industry to start preparing for the circular economy”.

Meanwhile, the chief executive of Biffa said that our decision “not to converge the two rates…is a good outcome for the industry”.

I am glad that we have a very good tax policy. We are making progress, consulting in good time, engaging with industry, and coming forward with a proposal to make sure the gap does not get any wider on landfill tax—we are increasing the lower rate by the same cash amount as the increase in the higher rate—without adding significant burdens on those who seek to construct and build this country’s future, which we must do after 14 long years of under investment and decline.

New clause 22 would require the Government to make an assessment of the impacts of clause 98. At the Budget, the Government published a tax information and impact note for this measure, and our approach has been informed by extensive engagement with business. The Government oppose new clause 22 on that basis, and I urge the Committee to reject it. I commend clause 98 to the Committee.

Clause 98 increases the standard and lower rates of landfill tax from 1 April, uprating them in line with the retail prices index. In practical terms, that means the standard rate will increase to £130.75 per tonne, with the lower rate applying to less polluting materials increasing by the same cash amount.

Landfill tax, as the Minister said, is intended to discourage disposal in landfill and promote recycling and recovery, and of course we support that aim. However, it is also right that we scrutinise the real world effect of these changes on business costs, recycling rates and wider environmental outcomes. That is why we have tabled new clause 22.

According to the Budget 2025 costings document, the measure is expected to raise £35 million in 2026-27, increasing to £130 million by the end of the decade. Members will remember the intense speculation ahead of the Budget that the Government might move to a single landfill tax, and the Minister referred to a consultation. The speculation did not come from nowhere; it came from a Government consultation that proposed to do precisely that.

As such, the Minister could have been a bit more up front that this is something the Government were consulting on, presumably because they thought it might be a good idea. Indeed, I recall raising this directly with the Chancellor at Treasury questions earlier last year, where she accused me of scaremongering when I spoke about her own consultation, so I am glad that she has dropped her proposal to move to a single rate. Had she gone ahead with it, material such as topsoil could have faced a thirty onefold increase.

The Minister kindly referred to my hon. Friend the Member for Grantham and Bourne and his video; he led a determined campaign alongside the industry to stop the reckless proposals put forward by the Chancellor. They could have added £28,000 to the cost of a new home and increased road construction costs by up to 25%.

When we asked what discussions the Treasury had had with the Ministry of Housing, Communities and Local Government before coming forward with its proposal for a thirtyfold increase in the tax rate, it was clear that there had not been any. There was then a sudden panic that the 1.5 million new homes target would be sunk by the Treasury’s actions. I welcome the rethinking of this policy—I will be generous to the Minister on that—to spare the sector yet another unnecessary blow that could have worsened house building numbers and jeopardised the key infrastructure upgrades that we all want to see across the country.

So far, so good, but—and there is always a “but”—the Government’s retreat on that issue does not mean all is well with these proposals. The long standing exemption for dredging material and its removal has caused deep concern, if the Committee will accept the pun, in the ports and water sector.

The British Ports Association, I believe, has written to the Minister as well as the Chancellor, warning that if these changes proceed unchecked, we may see “the collapse of major industrial and development projects, particularly in ports, rivers and canals”.

I declare an interest, as King’s Lynn in my constituency has a fine historical port. Indeed, the wealth of King’s Lynn was built on our trading links with the Hanseatic League in medieval times. The knock on effects of removing the exemption could be significant; delayed waterway clean up projects, increased flooding in vulnerable areas, and reduced investment in our ports, which keep our country trading.

New clause 22 seeks a proper assessment of how these tax changes will affect construction and infrastructure projects, investment in ports, recycling levels and illegal dumping rates, and progress towards the Government’s environmental objectives. The Minister needs to set out how the Government are responding to address the serious concerns raised by the British Ports Association, which, if correct, could have a very damaging effect on major infrastructure. We welcome that the proposals put forward in the consultation have been ditched, but there are concerns that the Minister now needs to address.

I am very glad that the Government have ditched the plan to converge the rates of landfill tax and to massively hike the charge for inert waste, adding tens of thousands of pounds to the cost of a new build home at a time when the Government want to build 1.5 million new homes. That was not joined up government, and I am concerned at the lack of joined up thinking when the Treasury put forward this proposal.

There are a number of gravel quarries in my Maidenhead constituency, and converging the rates would have meant that a significant number of those quarries would have gone unfilled, resulting in more quarry lakes in our town. We know that quarry lakes are dangerous: they are quite shallow until they suddenly become incredibly deep. That is dangerous when young people are out on the water or swimming, and in areas not too far from my own we have seen some unfortunate deaths as a result.

I am glad that the Government have decided to back down on this and are not going to burden the quarry sector or developments with that proposal. However, can the Minister confirm what the cost would have been to UK infrastructure projects such as High Speed 2, and what the additional cost to the taxpayer would have been?

I endorse my hon. Friend’s comments. We have a number of quarries in Newton Abbot, and the same principles apply. I am, however, doubly pleased that the extensive increase was not included in the Budget. I was taken to a local factory in Newton Abbot that makes high value, high performance propellers that it exports all over the world. The factory was to be put out of business, because it pours the metal into moulds of sand, and the cost of disposal of that sand would have been more than it could have borne. That would have shut down a £20 million a-year business. I am extremely grateful that the increase has not been implemented, but I draw the Minister’s attention to such side effects when considering future proposals.

I thank Opposition Members for their contributions and for welcoming the Government’s decision on this matter at the Budget. I find it a bit tiresome that the Conservatives, when we consult, accuse us of consulting, and when we do not, accuse us of not consulting. It is right and proper, where possible, for the Government to engage with industry on proposals and then come forward with good policy outcomes. I am glad that there has been acknowledgment across the Committee that we have listened, engaged and come forward with proposals that are proportionate.

It was not the fact that the Government consulted that we objected to; it was that they were consulting on a crazy idea that would have increased costs for industry 31-fold. Consult away, but do not consult on bad ideas.

The refining fire of a consultation process is something that I am happy to stand behind.

On the shadow Minister’s important point about the decision to remove the dredging exemption, I have received correspondence from the sector on the issue and will continue to engage with it. The change is not scored in the Budget. To be very clear, it was not made with the express intention of raising revenue; the Government’s judgment, after consultation, was that it would get the balance right between supporting the circular economy and encouraging more environmentally friendly ways of carrying out the activity. I want to continue to engage sincerely with the sector, so I will be responding to the correspondence I have received. I am sure that we will continue to engage.

The industry’s concerns are urgent, so if it persuades the Minister on certain points, will he table amendments on Report—the Bill will return to the House in the near future—to address them?

I am sorry to tell the shadow Minister that this matter is not being legislated for in this Finance Bill; it will be for next year’s Finance Bill.

Question put and agreed to. Clause 98 accordingly ordered to stand part of the Bill. Clause 99 Rate of aggregates levy Question proposed, That the clause stand part of the Bill.

With this it will be convenient to discuss the following: Clause 100 stand part.

Government amendments 27, 28 and 26.

Schedule 23.

Government motion to transfer schedule 23.

New clause 23—Report on aggregates levy rate— “The Treasury must, within six months of this Act being passed, lay before the House of Commons a report on the impact of implementation of the provisions of section 99 on— (a) the construction industry, and (b) infrastructure projects.”

This new clause would require the Treasury to report on the impact of section 99 on the construction industry and infrastructure projects.

Clause 99 makes changes to increase the rate of the aggregates levy in line with the retail prices index from 1 April 2026. Clause 100 and schedule 23 make changes to aggregates levy legislation in preparation for its replacement in Scotland with the Scottish aggregates tax.

The changes made by clause 99 increase the rate of aggregates levy from £2.08 per tonne to £2.16 per tonne from 1 April 2026. The changes made by clause 100 and schedule 23 make aggregate moved from a producer’s site in Scotland to England, Wales or Northern Ireland liable to aggregates levy. In addition, they provide an exemption where the aggregate has previously been supplied and will be subject to Scottish aggregates tax. Lastly, they provide for a tax credit from aggregates levy for aggregate moved from England, Wales or Northern Ireland to Scotland. The changes will take effect from 1 April 2026, when the Scottish aggregates tax is due to come into force.

Amendments 26 to 28 are needed to ensure that the legislation interacts correctly with Scottish Government legislation so that a credit from aggregates levy is available on aggregates moved to Scotland only in circumstances in which Scottish aggregates tax is payable on the movement.

The Government have also tabled a motion to transfer, which is a minor amendment to correct the placement of schedule 23 in the Bill. The schedule should appear after schedule 13, following the order of the clauses introducing the schedules, rather than at schedule 23. It is important to ensure that we get our schedules in the right place.

New clause 23 would require the Government to make an assessment of the impact of clause 99 on the construction industry and infrastructure projects. The increase in aggregates levy announced at the 2025 Budget is in line with RPI, meaning that rates remain unchanged in real terms, and new clause 23 is therefore unnecessary.

Clause 99 will maintain the real terms value of the price incentive to use recycled rather than virgin aggregate in construction. As I have said, clause 100 and schedule 23 are necessary to ensure the smooth devolution of aggregates levy to Scotland. I therefore commend clauses 99 and 100, schedule 23, Government amendments 26 to 28 and the motion to transfer to the Committee, and recommend that new clause 23 be rejected.

Clause 99 will increase the aggregates levy—the tax on commercially exploited rock, sand and gravel—from April. The levy, charged per tonne of primary aggregate, is intended to encourage efficient use of materials. As colleagues will know, aggregates are fundamental to almost every form of infrastructure: they are the foundations of our roads, our concrete structures and our coastal defences. They are the essential components in so many products, from ready mixed concrete to asphalt, lime, mortar and countless others. As the Mineral Products Association puts it so aptly, “Aggregates provide the backbone of our world”, and in the UK we use around 250 million tonnes every year.

New clause 23 would require the Government to assess the impact of clause 99 on the construction industry and key national infrastructure products. Although roughly a quarter of aggregate comes from recycled sources, the overwhelming majority still comes from primary extraction. Around 90% is used by the construction industry itself. While we obviously support the principle of encouraging sustainability that is behind the levy, the construction of a single home requires, on average, around 200 tonnes of aggregate and associated materials, from the foundations to the roof tiles. At a time when the Government are looking to accelerate house building, has the Minister looked at the impact of this measure on housing delivery and cost? We will not oppose clause 99, but new clause 23 would require the Government to assess its impact on construction and infrastructure projects.

The Minister set out that clause 100 and schedule 23 will simplify things for the introduction of the new Scottish aggregates tax, reducing the number of businesses that would otherwise need to account for the levy. That is a perfectly good and common sense measure, so I have no further comment on it.

Clause 99 introduces a very small increase in the rate of aggregates levy, but a small increase when dealing with massive numbers is still quite a large increase. High Speed 2, for example, is predicted to use 20 million tonnes of aggregate during phase 1. That means that the measure will add about £3.2 million to the bill for HS2, which we know is already significantly over budget. Has the Minister worked out the cost associated with money being passed from the Government to HS2 and then from HS2 back to the Government through things like the proposed aggregates levy increase?

On the question asked by the Opposition spokesman, the hon. Member for North West Norfolk, and implied in the specific question about HS2 impacts from the Liberal Democrat spokesman, the hon. Member for Maidenhead, the key thing is that the aggregates levy provides a price incentive to use more recycled aggregate, which we would all support, rather than virgin aggregate. Increasing the aggregates levy rate in line with inflation will ensure that the value of that price incentive does not fall in real terms.

It is important for administrative reasons and for our ability to collect tax without undue complexity that, even where services are provided ultimately for the benefit of the public sector, the taxes apply in a uniform way. It would become more complicated than it would be worth to apply the tax differently to parts of different industries, or to different contracts, depending on whether they were being used for HS2 or something else.

Question put and agreed to. Clause 99 accordingly ordered to stand part of the Bill. Clause 100 ordered to stand part of the Bill. Schedule 23 Aggregates levy: amendments relating to disapplication of levy to Scotland Amendments made: 27, in schedule 23, page 535, line 22, after “from” insert “premises in”.

This amendment together with Amendments 28 and 26 revises the inserted sub paragraph (za) of regulation 13(2) of SI 2002/761 to accommodate expected changes to provisions of the law relating to Scottish aggregates tax. Amendment 28, in schedule 23, page 535, line 23, after “Ireland” insert “operated or used by a person registered under section 24 of the Act for any purpose specified in subsection (6) of that section”.

See the explanatory statement for Amendment 27. Amendment 26, in schedule 23, page 535, line 24, leave out from “waters” to end of line 25.—(Dan Tomlinson.) See the explanatory statement for Amendment 27. Schedule 23, as amended, agreed to. Ordered, That Schedule 23 be transferred to the end of line 5 on page 468.—(Dan Tomlinson.) Clause 101 Rate of plastic packaging tax Question proposed, That the clause stand part of the Bill.

With this it will be convenient to discuss clauses 102 to 104 stand part.

Clauses 101 to 104 encourage greater demand for recycled plastic, help create demand for chemically recycled material, and allow for a more level playing field for plastic recyclers, rewarding the recycling of waste plastic. This is supportive of the Government’s broader environmental goals. The plastic packaging tax was introduced on 1 April 2022 as a part of the previous Government’s resources and waste strategy. It is the Government’s view that the clauses implement that tax in the right and proportionate way. I will not go through each in detail, but I will of course answer any questions that the Committee may have.

Clauses 101 to 104 amend the plastic packaging tax introduced in 2022 to encourage the use of recycled and reduced plastic. At the end of August last year, around 5,000 businesses were registered for the tax, and 38% of plastic packaging manufactured or imported into the UK was declared as taxable under it. The tax applies to packaging with less than 30% recycled content and is charged per tonne of plastic packaging components. The Opposition believe that the Government must ensure that the policy is working effectively in practice, encouraging the industry to change and delivering genuine environmental benefit, and not simply adding cost.

Clause 101 increases the packaging tax rate, this time in line with CPI, not RPI. Could the Minister explain why? In principle, that is reasonable, to maintain its value and sustain the incentive to recycle, but it is a practical reality that many businesses simply cannot get enough high quality recycled plastic at reasonable prices, so raising the rate without addressing that supply constraint risks making packaging more expensive but not greener.

Recycling firms are already facing higher energy bills and rising labour costs as a result of both global pressures and some of the measures that have been introduced. It is often still cheaper to import virgin or recycled plastic from Asia than to buy recycled content from within Europe, and loopholes in legislation may make it more profitable to export plastic waste than to process it here at home.

The Guardian, which I confess is not my usual paper of choice—[Interruption.] It is not the Minister’s either; it is good to get that on the record. It recently reported that 21 plastics recycling and processing plants across the UK have shut down in the last two years, which is a direct result of the imbalance between export incentives, cheap virgin plastic and low cost imports from Asia.

How much additional revenue does the Treasury expect this rate increase to bring in, given that I think receipts actually fell in 2024-25? What increases in recycled content are the Government assuming will result from the measure? Has the Treasury assessed whether the costs will simply be passed on to consumers through higher prices for everyday goods? We want a tax that drives genuine behaviour change, not one that just adds to the cost of living.

Clause 102 allows chemically recycled plastic to count towards the 30% recycled threshold and introduces a mass balance approach. That is a welcome recognition of innovation and new technology. However, analysis from Pinsent Masons notes that it will introduce significant certification and evidential demands on manufacturers and importers, and many small and medium sized businesses fear an extra compliance burden in the absence of clear guidance or support. Can the Minister set out to the Committee, and to those companies, what practical support the Government will provide to help businesses adapt to the new rules, and will Ministers commit to reviewing the effectiveness of the measure within a reasonable period to ensure that it is genuinely driving more recycling?

Clause 103 excludes pre consumer plastics, such as factory offcuts, from the definition of recycled content from April next year. The Government say that that is to ensure that the tax incentivises genuine recycling of post consumer waste, rather than reusing scrap material. That is reasonable as it goes, but Pinsent Masons has warned that some manufacturers will no longer be able to treat their own production offcuts as recycled content. While the overall burden of tax may not have changed, the burden of liability could shift from those gaining relief through mass balance accounting to those losing relief for pre consumer materials. The Government should be up front about who will bear the costs of the changes.

Finally, clause 104 deals with commencement. Businesses need certainty ahead of the changes, and time to adapt their supply chains and get the relevant certification and other measures lined up. Can the Minister confirm that HMRC will be publishing detailed guidance in advance? He may tell me that it is already out there and that I have not seen it yet, but if it is not, can he assure me that it will be published in good time for those companies?

I thank the Opposition spokesman for his questions. May I put on record my thanks to the officials for the support that they have provided to me today, in my first appearance in a Bill Committee as a Minister?

The hon. Member asked why the tax is increasing in line with CPI rather than RPI. All new tax measures introduced since 2018 have been uprated by CPI instead of RPI, so that is perfectly in keeping with established practice. That is good to know.

The hon. Member also about the mass balance approach. That is an accepted model already used in a range of industries, including cocoa and timber. Respondents to the consultation on a mass balance approach agreed that combining it with third party certification is the best approach to prevent fraud and abuse. HMRC will continue to work with stakeholders on the detailed policy development, including independent certification requirements, which will be designed to be fair and robust and to maintain the integrity of the tax.

Draft regulations on the details, and the guidance that has not yet been published, will be published for technical consultation later this year. HMRC is working with stakeholders—as the Minister responsible for HMRC, I will be taking an interest in that—to ensure that the requirements are clear, workable and sufficiently robust.

Question put and agreed to.

Clause 101 accordingly ordered to stand part of the Bill.

Clauses 102 to 104 ordered to stand part of the Bill.

Clause 105

Rates of levy

Question proposed, That the clause stand part of the Bill.

Clause 105 legislates for the new rates of the soft drinks industry levy to apply from 1 April 2026. It amends section 36(1) of the Finance Act 2017 to reflect the new rates of the levy to apply from 1 April 2026. Those rates are £2.08 and £2.78 per 10 litres of prepared drink, for the lower and higher bands respectively. I commend the clause to the Committee.

I am surprised that the Minister covered this important clause so briefly, as will become clear in my remarks. Clause 105 increases the soft drinks industry levy—the tax on soft drinks with added sugar, which is charged per litre, with higher rates applied to drinks containing more sugar. The Government propose to uprate the levy by combining one fifth of the CPI inflation from 2018 to 2024 and full CPI inflation between Q2 2025 and 2026. In practice, that all together means a total rise of 27%—I am surprised that the Minister did not want to get that figure on the record; it is a significant increase.

The soft drinks industry levy has worked in meeting its objectives, but we had a debate on it last year and, and as I warned then, we have serious concerns about the Government’s decision to backdate an inflation increase over a six year period. That is an unprecedented move, which raises serious questions about fairness, consistency and confidence in the UK tax system.

The soft drinks industry levy was introduced in 2017 by the Conservative Government to help tackle obesity, diabetes and tooth decay, particularly among children. By any reasonable measure, it has been a success. There has been a 46% reduction in sugar in fizzy drinks since the original tax came into force, and 89% of soft drinks sold now in the UK are not subject to the charge due to reformulation. As the British Soft Drinks Association points out, since 2015, more than 1 billion kilograms of sugar have been removed from the UK diet. Soft drinks now account for just 6% of the UK’s total sugar intake.

The industry has responded to the incentives that Parliament put in place by investing heavily, innovating and reformulating on a huge scale. That is why the backdated tax rise in clause 105 is so troubling. Imposing, in one go, six years of inflation over a period when it was not imposed represents a 27% retrospective increase, something that I think—unless I am corrected by the Minister—is without precedent in recent UK fiscal policy. It is not simply a technical adjustment; it is a departure from the principles that underpin our tax system, such as clarity and predictability.

As we have recently discussed when considering other clauses, inflation uprating is normally applied annually, not retroactively over a six year period. When alcohol duty or fuel duty is frozen, the Treasury does not go back and seek to make up for the years it was frozen by adding them to the rate—although maybe that is what the Government are going to do—but that is precisely what the Government are now doing with the soft drinks levy. As I pointed out to the Finance Bill Committee last year, if the same backdating principle were applied elsewhere, the results would be very troubling. According to research that the House of Commons Library kindly produced for me, if the Government were to take the same approach to fuel duty as they applied to the soft drinks levy—there has been a long freeze in fuel duty—fuel duty would rise by 64%, while the aggregates levy would rise by 67%. No one would defend that, so why is it acceptable in this scenario to have such an increase?

Businesses make long term decisions on investment, employment and pricing based on the stability of the tax regime. To introduce retrospective changes on this scale undermines that certainty and, I fear, risks setting a dangerous precedent. Is this now Government policy? Can the Minister rule out—as the Minister at the time failed to rule out—the Government taking a similar approach with other taxes, such as fuel duty? I wonder if he will be able to give us a bit more confidence. Will the Government commit to not applying such levels of retrospective taxation inflation increases to other sectors?

In the context of this debate about the soft drinks industry levy and the increase in it, also important is what might happen—given that the threshold and the rates have been set—if there are proposals to lower the rate to bring more soft drinks into the tax, such as milk based drinks—the milkshake tax—coffee drinks and milk substitutes that exceed the same sugar threshold. If that happened, that would potentially be another hit to the cost of living. Industry has estimated that compliance costs could run into the tens or possibly hundreds of millions of pounds, if such an approach were taken, moving the goalposts when the policy has delivered on its aims. The hospitality and drinks sector already face a lot of pressures, so they do not need to see further increases.

I therefore think that applying a retrospective 27% tax increase is a move that the Government should not take lightly. We support the principle of the industry levy and the goals that it serves, but this is concerning, and I look for some confidence from the Minister that the retrospective approach to taxation will be a one off.

Our approach to uprating taxes is plain to see for all the different approaches that we have taken. The Government set out their position on fuel duty, for example, and we have discussed many upratings today in Committee. The Government’s judgment in this specific circumstance was that uprating in line with inflation, as in previous years, was an appropriate step to take to protect the real terms value of the SDIL and to maintain incentives for manufacturers over time. The Government are happy to stand by that position, although of course it is well within the rights of the Opposition to take a different approach.

Question put and agreed to.

Clause 105 accordingly ordered to stand part of the Bill.

Clause 106 Amendment of customs tariff power Question proposed, That the clause stand part of the Bill.

The clause relates to trade defence. As set out in the trade strategy, the Government committed to strengthen the UK’s trade defence toolkit in response to an increasingly turbulent global trading environment. The clause supports those commitments and ensures that the Government can continue to respond to changes in the global trading system.

Unfair trade practices, including distortionary subsidies and dumping goods below cost in foreign markets, have a long pedigree. What has changed rapidly in recent years is their sheer volume and the range of markets and indeed British businesses that they threaten. Our trade defence system needs to be sharper and more flexible to respond to the increasingly turbulent global trading system.

The UK remains committed to upholding the rules based international system that has benefited us well, but in an unstable and volatile world, we cannot afford to be left behind and we need to be more agile in the face of a range of potential future shocks. That is why clauses 106 to 108 strengthen the UK’s trade defence toolkit, making it more closely aligned to that of international peers. The clauses will help to ensure that we can best protect UK interests, including in critical sectors such as steel, which are vital to our national security and critical infrastructure.

The changes made by the clause will put beyond doubt that we are able to apply tariffs on a global basis or against a group of countries, where consistent with international agreements to which the UK is a party. This measure strengthens the UK’s trade defence toolkit, ensuring that the Government can continue to respond to changes in the global trading system, as well as to unfair trading practices where they occur. I commend the clause to the Committee.

Before I go into the details of the clause, and before the Committee discusses the subsequent two clauses, it is worth getting on record how much the Opposition object to trade wars and increasing tariffs. Such tariffs harm the country that introduces them. Take what has been going on in America as an example. On its “liberation day”—as I think its Government called it—it introduced very heavy tariffs, including on something as simple as the iPhone, which the American people would consider to be one of the greatest inventions and greatest products they have ever had. It seemed that the person who introduced those tariffs had completely failed to observe that 95% of an iPhone is made in Vietnam and China, as a result of which the tariffs increased the price of iPhones for the American people, which was completely against the intentions of that Government.

Tariffs are really bad, and we have been trying to get them down for an awfully long time. However, I completely understand the point that the Government are trying to make with the Trade Remedies Authority and the toolkit that the Government need in order to respond to certain issues. It is vital that we have the ability to move on things such as tariffs, and I suspect that the Minister is 100% aligned with me on this, but I stress that we have lessons from history, from when such actions have gone hideously wrong.

The Smoot Hawley Tariff Act of 1930, introduced by President Hoover, was designed by Senator Smoot and Representative Hawley to try to help American businesses and American farmers by increasing tariffs. The net result was a global trade war that resulted in a 65% drop in global trade. That is what happens when people muck around with tariffs; that is where the damage can come. I completely appreciate that these measures are, I suspect, a very necessary response to what is happening on the other side of the Atlantic, where there is a very unpredictable trade policy, so it is the right thing to do. However, I urge the Minister to talk to all his colleagues about this matter, and to reassure the Committee that these measures are not about having our own version of that policy, and about increasing tariffs in order to have a trade war, but about having a set of relevant measures that mean that the Government can act in defence to what could be a hostile attack on trade.

I thank the hon. Member for his comments. It is good to converse with a new Opposition spokesman and I look forward to more conversations and discussions with him—though I do not have favourites. I want to be really clear—and I am glad to have the chance to be so—that the UK will continue to champion the free and fair trade that has benefited us so much in our history as a small, independent trading nation. We will always look to work with international partners to protect the rules based international trading system. With this measure, we are not lapsing into protectionism and we will always make sure to balance the need to use these powers when and if they may be required in individual circumstances, with a continued focus on the need to be open because that is the route to sustained and long term prosperity for a country with an economic and geopolitical position such as ours.

Question put and agreed to. Clause 106 accordingly ordered to stand part of the Bill. Clause 107 Dumping and subsidisation investigations

I beg to move amendment 44, in clause 107, page 129, line 32, at end insert— “(10) Before giving a direction under sub paragraph (1), the Secretary of State must lay before Parliament an impact statement setting out— (a) the evidence on which the Secretary of State has concluded that the conditions in sub paragraph (1) have been met, (b) an assessment of the potential impact on consumer prices and UK supply chains, (c) the reasons why a direction is considered necessary in the circumstances, and (d) whether coordination with other jurisdictions, including the European Union, has been considered.

(11) A direction under sub paragraph (1) shall cease to have effect if, within the period of 21 sitting days beginning with the day on which the statement under sub paragraph (10) is laid, either House of Parliament resolves that the direction should be annulled.”

This amendment would require the Secretary of State to provide Parliament with an impact statement before directing the TRA to initiate a dumping or subsidisation investigation, and would give Parliament the power to annul such directions within 21 sitting days.

With this it will be convenient to discuss the following: Amendment 45, in clause 107, page 129, line 43, at end insert— “(6A) In paragraph 17, at end insert— ‘(11) Before making a recommendation under paragraph 17, the TRA must prepare and publish an assessment of— (a) the likely impact of the proposed anti dumping amount or countervailing amount on consumer prices, (b) the effect on UK businesses that use the goods subject to investigation as inputs in their production processes, (c) the overall impact on the UK economy, including benefits to UK producers and costs to UK consumers and supply chains, and (d) whether a lower duty than the margin of dumping or amount of subsidy would be sufficient to remedy any injury to UK industry.

(12) The Secretary of State must have regard to the assessment made under sub paragraph (11) when making a decision on whether to accept the TRA's recommendation and at what level to set any anti dumping or countervailing duties.’”

This amendment would require the Trade Remedies Authority to assess and publish the consumer and wider economic impact of proposed anti dumping or countervailing duties. Clause stand part.

Clause 108 stand part.

Amendments 44 and 45, tabled by my hon. Friend the Member for Newton Abbot and I, strengthen the democratic accountability in our trade remedies system. Trade remedies exist to protect British businesses and workers from unfair foreign competition from goods dumped below cost or artificially subsidised. Since Brexit, the Trade Remedies Authority has operated as our independent investigation body. That independence matters, because trade remedy decisions affect jobs, consumer prices, business costs and our international relations.

Clause 107 gives the Secretary of State new powers to direct the TRA to initiate investigations. While the Government argue that this aligns us with international practice, it places significant authority in Ministers’ hands without adequate oversight. These decisions can reshape entire industries. Parliament should be able to scrutinise them, not simply rubber stamp ministerial decisions, so amendment 44 would require the Secretary of State to lay before Parliament a full statement before directing an investigation. That statement must set out the evidence, assess the impact on consumer pricing and supply chains and explain why ministerial direction is necessary. That is parliamentary oversight in action.

Amendment 45 addresses the economic balance. The Government are removing the lesser duty rule, which capped duties at the level needed to remedy injury. Our amendment would require the TRA to assess and publish its impact on consumers and businesses using imported inputs before recommending duty levels and would require Ministers to consider this assessment when making their final decisions.

These amendments recognise that protecting one industry can harm others. Steel duties may help domestic producers but increase costs for British manufacturers and construction firms. Solar panel duties could slow our transition to net zero. Trade remedies should be evidence based, proportionate and, most importantly, democratically accountable. I hope the Minister will accept these amendments and vote with us when we press amendment 44 to a vote.

Clause 107 gives the Secretary of State the power to direct the Trade Remedies Authority to initiate a dumping or subsidisation investigation. We support measures that tackle any unfair trading practices, including dumping and subsidisation. We are also supportive of measures that bring power back into the hands of Secretaries of State and Ministers. That is especially important when it comes to practices that could harm our industries and our constituents.

One example of that is the steel industry. Back in 2016, it was reported that Tata Steel had suffered more than 1,000 job losses, including 750 from Port Talbot alone. Tata stated that the reason for this was the flooding of cheap imports, particularly from China. This will continue to be a problem. According to the OECD, Chinese steel imports surged to a record level of 118 million tonnes in 2024. Interestingly, there are different points of view on this. For those in the building industry, the idea of having an awful lot of cheap steel coming into the country is not that unattractive, but it would affect our domestic industries.

How the Government curb dumping and subsidisation must be accompanied by, at least in part, a deterrent effect. That is crucial for investigations that implicate large and powerful countries. Clause 107 removes the opportunity to implement any deterrent effect because it caps duties imposed on the dumping margin or subsidy amount, not at the injury margin. I acknowledge that this is in line with World Trade Organisation rules. However, injury margins can often exceed dumping and subsidy margins due to their accurate reflection of the true economic harm inflicted on UK industries. Each time, they have been overridden due to the lesser duty rules, and the removal of this rule could have given the Government the opportunity to apply a regime that reflects injury margins better in dumping and subsidy investigations. That would not only protect UK industries but send a clear message to those who engage in these abhorrent trade practices that this will not be tolerated and will be met with serious repercussions. I would be grateful if the Minister could expand on the Government’s rationale not to cut duties at the injury margin. It is quite a technical question, and if he feels the urge to write back, that might save him the trouble of getting into a lot of technical detail.

We are supportive of the thrust of amendments 44 and 45, tabled by the hon. Member for Maidenhead. It is important for decision makers to be accountable to Parliament for their decisions, whether that is the Secretary of State or the Trade Remedies Authority. I suspect that these amendments will be voted down, so could the Minister help the Committee understand what safeguards are in place to address the concerns outlined by the hon. Member for Maidenhead?

Clause 108 gives the Secretary of State the power to direct the Trade Remedies Authority to initiate a safeguarding investigation. It is important that the UK has the necessary defensive measures where there is injury to UK industries. However, clause 108 requires clarity on the conditions that enable the Secretary of State to direct the Trade Remedies Authority to initiate an investigation.

I have two points on this. First, on the requirement of evidence of increased quantities in a good, clause 108 does not introduce any parameters or a threshold that would distinguish a legitimate increase in quantity of goods from an increase that warrants investigation. Secondly, there is no definition or guidance on what constitutes “serious injury”; the clause does not make clear what serious injury means. Without the clarification, the clause grants the Secretary of State substantial discretion in determining whether those conditions have been met. Fundamentally, though, on both these clauses, we must ensure that these important decisions are made with technical rigour and on the evidence. It is incredibly important that they are not driven solely by political whim. I ask the Minister for an assurance on that point.

I will not expound on the detail of the clauses, but I will explain why the Government cannot accept the amendments.

On amendment 44, any public disclosure of evidence before an investigation is formally launched risks undermining it. The formal initiation of an investigation is a defined procedural step, and once an investigation has been formally initiated, the TRA may recommend the imposition of provisional duties. If there was a gap between publicly disclosing evidence and initiating an investigation, it might incentivise exporters to increase shipments of the goods concerned into the UK to avoid potential future duties. It would also risk contravening our international World Trade Organisation obligations. The rules are clear that authorities must avoid publicising the application for an investigation before a decision has been made to initiate it. To our knowledge, no such parliamentary veto exists in comparable trade remedy systems internationally, but I assure the House that the process will remain transparent and led by the evidence.

On amendment 45, the Trade Remedies Authority is already required by our domestic legislation to publish the consumer and wider economic impact of proposed anti dumping or countervailing duties. As part of its dumping and subsidisation investigations, the Trade Remedies Authority must advise the Secretary of State on whether and how any recommended anti dumping or countervailing duties would meet the economic interest test as set out in legislation. The Secretary of State must then have regard to that advice when considering whether to accept or reject the recommendation. This advice is included in the TRA’s published reports across the case life cycle, including a statement of essential facts, which is included on the public file ahead of a recommendation to the Secretary of State.

Since he has given me leave to do so, I will write to the shadow spokesperson, the hon. Member for Wyre Forest, on his specific question.

It is important to remember that one can support both free trade and protection against unfair dumping—they are not mutually exclusive—and I think the amendments strike a balance between them transparently. Amendment 44 gives Parliament meaningful oversight of ministerial decisions to initiate investigations, and amendment 45 ensures that decisions account for impacts on consumers and businesses relying on imported inputs. Together, they strengthen democratic accountability while maintaining our ability to act against unfair trading practices. I ask the Minister to reconsider his thoughts on amendment 44 when we push it to a vote.

9|0|5|9|The Committee divided:|Question accordingly negatived.||0|0

Clauses 107 and 108 ordered to stand part of the Bill.

Clause 109

Customs facilities at approved wharves and other places

Question proposed, That the clause stand part of the Bill.

Clause 109 amends sections 20 and 20A of the Customs and Excise Management Act 1979 to update HMRC’s existing powers to require all ports to provide and fund customs infrastructure.

Customs infrastructure is essential to protecting the UK by ensuring that risk based checks on goods entering and leaving the country can take place. Provision of that infrastructure by ports is a long standing requirement. When we left the EU, the Government funded and operated customs infrastructure at inland border facilities for ports that do not have enough space for this infrastructure within the port itself. Only two inland border facilities remain: Sevington inland border facility in Kent and Holyhead inland border facility in Wales. As confirmed in the border target operating model in autumn 2023, Government provision of these inland border facilities was always intended to be temporary.

Clause 109 would, first, require the small number of ports assessed as having insufficient space on site for customs infrastructure to provide equivalent infrastructure at an offsite location, which must be approved by HMRC. Secondly, all ports will now be responsible for providing and funding the customs infrastructure required for border checks on goods. This levels the playing field between ports, bringing all ports into line with the long standing model. I commend the clause to the Committee.

Clause 109 shifts the responsibility for the remaining two inland border facilities from the Government to the port authorities. The switching of inland border facilities services and operations to a commercial basis was something that the last Government were exploring.

However, we query whether clause 109 goes a little too far. It would require the ports to prepare to take on the additional responsibility of providing equivalent infrastructure. We appreciate why the ports received the additional Government assistance in the first place, especially considering the far reaching effects that any disruption in Dover could have. However, while I agree that the ports must be able to stand on their own feet, clause 109 risks the ports’ introducing additional import and export charges being applied to every lorry and trailer that passes through. The magnitude of the price increases could be substantial for businesses, which may end up passing on the additional costs to consumers—not to mention that they would be in addition to the port inventory charges that the port of Dover implemented from 1 January this year.

I recommend that the Government assess the impact that the legislative changes in clause 109 would have on these ports, the businesses and hauliers that rely on them and consumers, who will have to pay a higher price. We get the principle of the clause, but we are concerned about whether there are any adverse knock on effects on trade through the ports.

We do not expect that the changes will result in significant cost changes. How ports that currently benefit from the inland border facilities choose to recover any costs is a commercial matter. It is worth noting that the ports have benefited from significant public investment that has already been made in the development and operation of inland border facilities since we left the EU.

Question put and agreed to. Clause 109 accordingly ordered to stand part of the Bill. Clause 110 Increases to rates of levy

I beg to move amendment 12, in clause 110, page 134, line 20, at end insert— “(2A) In consequence of the amendments made by the preceding subsections, in section 189 of the Economic Crime and Corporate Transparency Act 2023, in subsections (3)(b)(ii) and (11) (which operate by reference to provisions amended by this section), for ‘large or very large’ substitute ‘in any of bands B to D’.”

This amendment makes a consequential amendment as a result of the new bands.

With this it will be convenient to discuss clause 110 stand part.

Clause 110 will make changes to the rates charged to businesses under the economic crime (anti money laundering) levy from April 2026. The changes will increase the revenue raised each year by the levy by £110 million from 2027-28 onwards.

The levy was introduced to provide a long term, sustainable source of funding for initiatives aimed at tackling money laundering. In 2024-25, the levy funded 455 new roles fighting economic crime in organisations, including in the National Crime Agency and City of London police, and delivered a new digital service for suspicious activity reporting, which onboarded precisely 15,211 organisations. In a constrained funding landscape, we believe that the levy is right place to find the money for these initiatives. The Government have decided to change the rates charged to businesses under the levy to provide sufficient funding to deliver key projects in the economic crime space over the next three years.

The changes made by clause 110 will increase the charge paid by businesses with an annual revenue between £10.2 million and £36 million from £10,000 to £10,200 per annum. It will also introduce a new band for businesses with an annual revenue between £500 million and £1 billion. Lastly, it will increase the charge paid by businesses with an annual revenue exceeding £1 billion to £1 million from April 2026. As the levy is collected a year in arrears, the increased rates will first be collected in the financial year beginning April 2027. The changes have been designed with proportionality and fairness at their core, and no business will pay more than 0.1% of its UK annual revenue in levy charges.

Government amendment 12 seeks to update the language in the Economic Crime and Corporate Transparency Act 2023, which refers to the current band names “large” and “very large”. These will be changed to refer to the new band names A, B, C and D. The amendment contains no policy changes; it will just bring existing legislation in line with the new economic crime levy band names. I commend the clause and the amendment to the Committee.

The previous Conservative Government introduced the levy back in 2022 as a proactive measure to combat money laundering and strengthen our economy. As my hon. Friend the Member for Arundel and South Downs (Andrew Griffith), now the shadow Business Secretary, said when he brought it in, “the levy will provide an important private sector contribution from those industries at highest risk of being abused for money laundering.”

We support robust action against money laundering, but we have one or two concerns about the scale. The introduction of a new band C, with a £500,000 levy for businesses with a revenue of between £500 million and £1 billion, is a substantial new burden on businesses that are already heavily regulated and are already investing significant sums in anti money laundering compliance. To be clear, a business with £500 million to £1 billion revenue used to pay £36,000 and will now have to pay half a million—a 1,289% increase.

The Government’s own impact assessment suggests that between 100 and 110 businesses will be affected by the levy rise in this band C. It is a really big rise, so it would be helpful if the Minister could justify the nearly 1,300% rise for firms moving into the new band C. Perhaps he could also say whether he has had any representations from any businesses about the effect it could have on investment, staffing level, productivity and all the rest of it.

The simultaneous reduction in the threshold for the “very large” band, band D, means that more businesses fall into the higher levy. Will the Minister talk about the rationale for that? Has he considered the potential impact on the UK’s competitiveness, particularly mid sized firms that may now face substantially higher costs?

On competitiveness, the Government of course do not place any additional burdens on businesses lightly, but reducing economic crime helps the good functioning of the UK economy and our competitiveness, so we think that this is a proportionate change.

The shadow Minister is right to identify that there are significant changes in band C. Previously, businesses with revenue of £500 million paid only 0.007% of their UK revenue, while those with revenues of, for example, £36 million paid 0.1%. That was a significant imbalance. This change seeks to address that disparity by aligning contributions more closely with revenue size so that contributions are proportionate to revenue—more proportionate, but still bands over the broad swathe of business size. This is to make contributions fairer and more consistent, and it will ensure that larger businesses contribute proportionately to the overall funding requirement.

Amendment 12 agreed to. Clause 110, as amended, ordered to stand part of the Bill. Clause 111 Removal of time limit to claim relief under section 106(3) of FA 2013 Question proposed, That the clause stand part of the Bill.

Clause 111 removes a restrictive time limit within which relief from the annual tax on enveloped dwellings can be claimed. This measure updates the legislation to remove the current restrictive time limit for claiming relief from the ATED. Companies are still required to deliver their ATED returns on time—typically 30 days from the start of the chargeable period. ATED returns not delivered by the filing deadline will remain subject to penalties for late filing. The time limits for amending a return already delivered to HMRC are unchanged. This clause will come into effect from the date of Royal Assent of the Bill and will have effect as if it had always been in force. HMRC is currently applying its discretion to accept late claims pending enactment of this legislative change. The change is necessary to ensure that the law reflects our policy aims for relief from the ATED. I therefore move that clause 111 stand part of the Bill.

The ATED was originally brought in back in 2013 under the coalition Government to discourage the use of corporate structures to hold high value residential properties. Reliefs were built into the system to ensure that genuine commercial property businesses were not caught by the charge. However, those reliefs were subject to a clear 12-month time limit for making a claim. That was for two reasons: first, it helps ensure that relief claims are made while the facts are still reasonably clear. Secondly, it simply aligns with normal tax time limits.

Now the Government want to remove that time limit entirely. Without a deadline, if claims are made over the original 12-month period, HMRC could be required to revisit historical ATED returns long after they were filed. Given service levels in HMRC are already stretched, it is unclear why the Government have chosen to do that. It could increase, rather than reduce, administrative burdens on HMRC. Have the Government assessed the resource implications for HMRC of processing claims made more than a year after the relevant adjustment period?

Yes; in anticipation of the Budget and the announcements made at the Budget, work was carried out between HMRC and policy officials in the Treasury to assess the implications of tax changes on businesses and on the Government, and this is set out in the usual way.

Question put and agreed to. Clause 111 accordingly ordered to stand part of the Bill. Ordered, That further consideration be now adjourned. —(Mark Ferguson.)

Adjourned till Tuesday 3 February at twenty five minutes past Nine o’clock.

Written evidence reported to the House

FB 13 Imperial Brands—Clause 88

FB 14 Dr Pete Cheema OBE, chief executive, Scottish Grocers’ Federation

FB 15 Foreign Investors for Britain

FB 16 Chartered Institute of Taxation—Clauses 70 to 76: Inheritance Tax

FB 17 Chartered Institute of Taxation—Clause 79: Value Added Tax—Private hire vehicles or taxis

FB 18 Association of Taxation Technicians—Clause 80: Certain charitable donations not to be treated as supplies of goods

FB 19 Institute of Chartered Accountants in England and Wales—Clauses 37 and 38: Anti Avoidance: company reconstructions

FB 20 Institute of Chartered Accountants in England and Wales—Clause 79: Private hire vehicles or taxis

FB 21 Association of Taxation Technicians—Clauses 156 to 162: Representation on proposed prohibition of promotion of certain tax avoidance arrangements and related sanctions

FB 22 Association of Taxation Technicians—Clause 169: Publication under the new Promoter Action Notices

FB 23 Association of Taxation Technicians—Clauses 220 to 246 and Schedules 19 and 20: Registration of tax advisers with HM Revenue and Customs

FB 24 Association of Taxation Technicians—Clause 247 and Schedule 21: Conduct of tax advisers, amendments to schedule 38 to the Finance Act 2012

FB 25 Association of Taxation Technicians—Clauses 248 to 250: Power to publish information about tax advisers

FB 26 National Housing Federation—Economic Crime Levy (Part 3)

FB 27 JTI—Clause 88 (Rates of [tobacco] duty effective from 1 October 2026) and Part 4, Clauses 112 to 138 (Vaping products duty)

FB 28 Institute of Chartered Accountants in England and Wales—Clauses 156 to 162: Prohibition of promotion of certain tax avoidance arrangements

FB 29 Institute of Chartered Accountants in England and Wales—Clauses 220 to 246 and Schedules 19 and 20: Registration of tax advisers

FB 30 Institute of Chartered Accountants in England and Wales—Clauses 247 to 250 and Schedule 21: Conduct of tax advisers

FB 31 Chartered Institute of Taxation—Plastic Packaging Tax Clause 103: Pre consumer plastic

FB 32 Chartered Institute of Taxation—Part 6: Avoidance: Clauses 156-219

FB 33 Chartered Institute of Taxation—Part 7, Chapter 1: Clauses 220-246 and Schedules 19-20: Registration of tax advisers

FB 34 Chartered Institute of Taxation—Part 7, Chapter 2: Tax Advisers—Conduct etc., Clauses 247 to 250

FB 35 Low Incomes Tax Reform Group—Clause 252 and Schedule 22: Data gathering

FB 36 Association of Taxation Technicians—Clause 258: Representation on proposed powers relating to electronic communications and digital contact details

The Committee consisted of the following Members:

Chairs: Paula Barker, Wera Hobhouse, Sir Alec Shelbrooke, † Matt Western

† Argar, Edward (Melton and Syston) (Con)

† Caliskan, Nesil (Comptroller of His Majesty's Household)

† Conlon, Liam (Beckenham and Penge) (Lab)

† Francis, Daniel (Bexleyheath and Crayford) (Lab)

† Glover, Olly (Didcot and Wantage) (LD)

† Greenwood, Lilian (Parliamentary Under Secretary of State for Transport)

† Hatton, Lloyd (South Dorset) (Lab)

† Kirkham, Jayne (Truro and Falmouth) (Lab/Co op)

† Mather, Keir (Parliamentary Under Secretary of State for Transport)

† Mayhew, Jerome (Broadland and Fakenham) (Con)

† Morello, Edward (West Dorset) (LD)

† Ranger, Andrew (Wrexham) (Lab)

† Robertson, Joe (Isle of Wight East) (Con)

† Shanker, Baggy (Derby South) (Lab/Co op)

† Smith, Rebecca (South West Devon) (Con)

† Smith, Sarah (Hyndburn) (Lab)

† Turner, Laurence (Birmingham Northfield) (Lab)

Rob Cope, Francis Morse, Dominic Stockbridge, Claire Cozens, Committee Clerks

† attended the Committee

Public Bill Committee

Thursday 29 January 2026

(Morning)

[Matt Western in the Chair]

Railways Bill

Before we begin, I remind Members to switch electronic devices to silent. Tea and coffee are not allowed during the sittings. The selection and grouping document shows the way in which the amendments and new clauses have been arranged for debate. Any Divisions on amendments and new clauses will take place in the order that they appear on the amendment paper.

Clause 15 Rail strategy Amendment proposed (27 January): 134, in clause 15, page 8, line 18, at end insert “for the next 30 years for”.—(Olly Glover.) This amendment would ensure that the rail strategy set out in Clause 15 must cover a 30-year period. Question again proposed, That the amendment be made.

I remind the Committee that with this we are discussing the following: Amendment 137, in clause 15, page 8, line 21, at end insert— “(c) the support given to rural communities in accessing rail travel, and (d) the co operation with relevant local and regional transport authorities for greater integration between trains, buses, trams, cycling, walking and other active travel options.”

This amendment would require the rail strategy to set out the long term strategy for supporting rural communities in accessing rail travel and co operating with transport authorities to integrate travel options. Amendment 207, in clause 15, page 8, line 21, at end insert— “(c) the consideration of the national rail network as a whole, and (d) the development of national and regional integrated timetables including— (i) any infrastructure enhancements necessary to facilitate such development, (ii) strategies at a local or regional level to deliver these enhancements in line with the 5-year funding periods; and (iii) a system of prioritisation of connections between services, taking into account interchange times and overall end to end journey times resulting from those connections.”

This amendment introduces a requirement for the rail strategy to consider the rail network as a whole, and the relationship between integrated timetables and infrastructure enhancement to enable such integration. Amendment 224, in clause 15, page 8, line 21, at end insert— “(c) the development of rail freight network usage.”

This amendment would require the rail strategy to include developing rail freight. Amendment 25, in clause 15, page 8, line 21, at end insert— “(1A) The document issued under subsection (1) must be in force for a minimum of three control periods.

(1B) A control period as set out in subsection (1A) must be no shorter than five years.”

This amendment would require the rail strategy to remain in place for three control periods at a minimum. Amendment 260, in clause 15, page 8, line 23, at end insert— “(2A) The rail strategy must include a strategy for level crossings (‘the level crossings strategy’).

(2B) The level crossing strategy must set out an assessment of the impact of level crossings on the economy and community of the area in which the level crossing is situated, for the purpose of reducing disruption caused by level crossings.”

Amendment 261, in clause 15, page 8, line 23, at end insert— “(2A) The rail strategy must include an assessment the ability of passengers to change between— (a) main line rail services and branch line rail services, and (b) rail services and other modes of public transport.

(2B) An assessment under subsection (2A) must consider how to reduce delays and disruption to end to end journeys involving a change between rail services, or between rail services and other modes of public transport.”

Amendment 135, in clause 15, page 8, line 25, at end insert— “(3A) The rail strategy must include an international rail strategy to— (a) support the development of new international routes, (b) support operators in introducing and operating any such new routes, and (c) support new and existing operators in using the Channel Tunnel and London St Pancras High Speed.

(3B) In meeting the objectives under subsection (3A), the international rail strategy must— (a) consider options to increase rail depot capacity at, and to supplement, Stratford Temple Mills; (b) consider any enhancements that may be required to conventional rail network in the Southeast of England for the purpose of enabling international rail travel; (c) consider options for electrification, changes to gauge clearance, and any other alterations to rail infrastructure as may be necessary to increase the potential for increased rail freight to travel via the Channel Tunnel.”

This amendment would require the Secretary of State to include an international rail strategy as part of the Government’s long term rail strategy. The international rail strategy would specifically look to support new routes and operators, and increase Channel Tunnel and London St Pancras High Speed rail capacity. Amendment 136, in clause 15, page 8, line 25, at end insert— “(3A) The rail strategy must include a network electrification strategy to— (a) require that any new rail lines are electrified, and (b) set criteria for determining which existing rail lines should be fully electrified, based on current and potential operation of those lines, and set a timetable by which electrification should be completed.

(3B) In preparing the network electrification strategy under subsection (3A), the Secretary of State must take into account the current and potential future— (a) maximum operating speed of, (b) average number of trains in an hour using, (c) average volume of freight transported on, (d) maximum potential reliability of rolling stock using, and (e) acceleration requirements of trains using the relevant lines.”

Amendment 225, in clause 15, page 8, line 32, at end insert “, and persons wishing to operate services for the carriage of passengers or goods on Great British Railways’ infrastructure.”

This amendment requires consultation with freight operators during the preparation of the rail strategy. Amendment 213, clause 15, page 8, line 35, at end insert— “(8) The Secretary of State must lay before Parliament an annual report setting out any progress on the rail strategy.

(9) The report under subsection (8) must be sent to the Transport Committee of the House of Commons.

(10) References in this section to the Transport Committee of the House of Commons— (a) if the name of that Committee changes, are references to that Committee by its new name, and (b) if the functions of that Committee (or substantially corresponding functions) become functions of a different Committee of the House of Commons, are to be treated as references to the Committee by which the functions are exercisable.”

This amendment requires regular reporting to Parliament and the House of Commons Transport Committee on delivery of the rail strategy. New clause 27—Great British Railways: national rolling stock strategy— “(1) Within 12 months of the passing of this Act and every subsequent 12 months, Great British Railways must publish a national rolling stock strategy.

(2) Each strategy under subsection (1) must set out rolling stock requirements by operating region and route.

(3) Great British Railways must align each strategy to the infrastructure capacity plan in section 60, the rail strategy in section 15, and each funding period as set out in Schedule 2.

(4) Great British Railways must set out how the strategy is used to inform procurement, leasing and allocation decisions.”

This new clause would require GBR to publish a national rolling stock strategy each year, setting out the expected rolling stock requirements per operating region and route, aligned to current and future planned infrastructure, and aligned to the long term rail strategy and 5-year funding periods. New clause 28—Great British Railways: cyber security and technology strategy— “(1) Great British Railways must publish a cyber security and technology strategy (“the strategy”).

(2) The strategy must set out how Great British Railways will— (a) use emerging technologies, including artificial intelligence, to innovate in respect of its operations and services, (b) develop resilience for rolling stock and critical systems in line with industry and international standards, and (c) increase the use of technology to improve passenger experience and services including— (i) WiFi access, (ii) digital ticketing, (iii) real time information systems, and (iv) accessibility for passengers with sight or hearing loss.

(3) Great British Railways must publish an annual report describing progress that has been made against the strategy and any challenges that have arisen in delivering the strategy.”

This new clause would require GBR to publish a cyber security and technology strategy, as well as an annual report on progress. New clause 29—Railway services: Sunday working arrangements— “(1) Within one year of the passing of this Act, Great British Railways must publish a report on demand for railway services on Sundays.

(2) The report must set out— (a) current figures for use of railway services on Sundays, and (b) projected figures if services on Sundays were increased.

(3) The report must identify and set out actions that can be taken to increase demand for railway services on Sundays.

(4) When setting out actions under subsection (3), the report must have due regard to five year funding periods for Great British Railways.”

This new clause would require GBR to publish a report on current Sunday demand, suppressed Sunday demand, and identify actions to be taken to increase demand for railways services on Sundays in line with the 5 year funding periods. New clause 54—National signalling strategy— (1) Within 12 months of the passing of this Act and every subsequent 12 months, Great British Railways must publish a national signalling strategy.

(2) Each strategy under subsection (1) must set out expected signalling renewal requirements by operating region and route.

(3) Signalling requirements as set out in subsection (2) must be informed by the principle that new or renewed signalling will be digital and based on standards set by the European Train Control System.

(4) Great British Railways must align each strategy to— (a) the infrastructure capacity plan in section 60, (b) the rail strategy in section 15, (c) each funding period as set out in schedule 2, and (d) current and future planned infrastructure including electrification and rolling stock changes.

(5) Great British Railways must set out how each strategy is used to inform procurement, leasing and allocation decisions.”

This new clause introduces a national strategy for digital signalling rollout to create an approach to signalling renewals, enhancements, and interfaces with rolling stock, and to realise signalling safety, capacity, and performance benefits of digital signalling. Clause stand part.

As always, it is a pleasure to serve under your chairship, Mr Western. I am doing a rapid rewrite as this speech was full of witticisms and pithy things to do with speeches that none of us can remember from earlier this week— or last week; whenever it was. I would like to speak in support of amendments 134, 137, 136 and 213 and new clause 28, all tabled by my hon. Friend the Member for Didcot and Wantage.

Amendment 134 would require the rail strategy to cover a 30-year period. That matters because decisions on electrification, rolling stock, workforce planning and passenger experience simply cannot be made on short political cycles.

Amendment 137 is particularly important for rural constituencies such as West Dorset. Too many rural communities are poorly served by rail and have limited alternatives when services fail. The amendment would ensure that the rail strategy explicitly supports rural access and strengthens co operation with local and regional transport authorities so that trains, buses, and cycling and walking routes actually connect. No one should miss a bus just because a train arrives three minutes late or wait 40 minutes because timetables were not aligned in the first place—an experience familiar to anyone arriving at Crewkerne.

Amendment 136 would place electrification at the heart of the rail strategy. Electrification is not just about missions; it improves reliability, efficiency and resilience.

Amendment 213 would introduce a vital safeguard, which the Government refused to put in place earlier when they rejected our new clause 26, to prevent Great British Railways from hiding from accountability to those who gave both it and the Secretary of State their power. The amendment would require regular reporting to Parliament and the Transport Committee. The Secretary of State for Energy Security and Net Zero has agreed to provide an annual update to Parliament on how we are doing against our climate and nature targets. I would hope that what is good enough for the Department for Energy Security and Net Zero is good enough for the Department for Transport.

New clause 28 would require a cyber security and technology strategy. We need to know whether and how GBR will use emerging technologies, including artificial intelligence, to innovate, develop resilience and improve the passenger experience. I know from my work on the Joint Committee on the National Security Strategy under your leadership, Mr Western, that the threats to national infrastructure are real and increasing. We must make sure that our public and national infrastructure remains safe and protected.

At the same time, we continue to campaign for passengers to be placed at the heart of the Bill. They deserve modern, accessible services, reliable wi fi, real time information and inclusive design. For these and future technologies to benefit the passenger now and long into the future, we need real investment and real innovation so that we will always have a modern railway planned over the long term.

I will be brief, as I know that a number of hon. Members wish to speak.

I can see the intent behind amendment 134 in the name of the hon. Member for Didcot and Wantage, which would ensure that the strategy covers a 30-year period, and I think it is important that one looks to the future. Given our relative ages, I suspect that, notwithstanding any decisions by the electorate, the Minister may be the only person who is still in this place to assess whether the strategy has worked in 30 years’ time. The hon. Member for Didcot and Wantage was right to highlight that a 30-year strategy would set a baseline, but, as with any strategy, it would be right to refresh and, if necessary, amend it every few years to reflect changing externalities or new Government who wish to tweak it in a different direction. I think that is a sensible approach.

Amendment 137 has an important focus on rural transport links. I have four stations in my constituency: Syston, Bottesford, Sileby and Melton Mowbray. Apart from Melton Mowbray and Syston, those stations are in relatively small villages that are served by only irregular buses. The intent behind the amendment, as I understand it, is to not only focus on investment in those rural services, but ensure that there are linkages so that people in outlying villages or elsewhere can access them. I know that my constituents would very much welcome that.

Amendments 207 and 261 focus, in different ways, on interchanges and integrated transport, which are hugely important. The hon. Member for West Dorset rightly highlighted the experience, which I expect many of us and our constituents have had, of landing at a railway station five minutes after the train has gone because the bus service is not integrated in its timetabling.

I gently caution the Minister that a national integrated transport strategy may not be something he wishes to take on himself. If I recall, that was something mooted in “Yes Minister”, and Jim Hacker took on the job, in an episode known as “The Bed of Nails” because it was deemed virtually impossible to win when trying to integrate all aspects of transport strategy. Fond as I am of the Minister, I would counsel him not to take on that role, even if the Bill has the right intent of trying to integrate transport a little better.

Amendments 224 and 225 would rightly require freight services to be considered carefully, and would require consultation with freight operators. Throughout the Committee’s proceedings, we have spoken a number of times about the potential tension between passenger services and GBR’s own services, and the need for freight services to be protected and supported, as well as whether there is an explicit target for freight versus passenger services. Again, I think the amendments are sensible.

Finally, I think new clause 29 in the name of the hon. Member for Didcot and Wantage, which would require an assessment of the need for Sunday services, is extremely sensible, and I hope that others on the Committee will speak to it. I mentioned Sileby station in my constituency. Sileby is a large village, but on a Sunday it has only one bus to Leicester first thing in the morning and one bus back from Leicester in the afternoon. That is the extent of the public transport available to that large and growing village. Constituents have written to me to ask what can be done to better understand the demand for and possible implementation of a Sunday rail service there—even if it is only irregular, running once or twice a day, it would be something—to give them that option, so I know that they would welcome new clause 29.

It is a privilege to serve under your chairmanship, Mr Western. I will speak to a few of the amendments and new clauses, including those tabled by my hon. Friend the Member for Broadland and Fakenham, as well as some of those tabled by the Liberal Democrats, because some of their ideas are worth noting.

It is obvious why I would support amendment 224, which yet again seeks to include in the Bill more mention of rail freight. As someone who is keen on looking at how we can use rail, and even sea, for freight, I emphasise the necessity of ensuring that it is a central part of the Bill. The Government speak about wanting to tackle climate change and bring net zero into play, but that will be hampered if the rail freight network is not strongly represented in the Bill. I appreciate that the Minister will say that it does mention rail freight, but we do not feel it is explicit enough, and we want to ensure that we get it nailed into the Bill wherever we can.

Amendments 260 and 261 in the name of my hon. Friend the Member for Runnymede and Weybridge (Dr Spencer) would require the rail strategy to consider local need, in particular in respect of level crossings and integrated transport. That is something that the Select Committee on Transport, which I am a member of, is also looking at. Indeed, we had our first hearing on integrated transport yesterday, and one thing that came across strongly to me was that we should really have been looking at an integrated transport strategy before this Bill was introduced, because how rail and buses—I have had the privilege of serving on Bill Committees on both subjects—slot into such a strategy is really important. Therefore, having something on the face of the Bill that pushes towards ensuring that we have regard for integrated transport is important.

My hon. Friend is quite right that we need to look at modal interoperability. Does she agree with my hon. Friend the Member for Runnymede and Weybridge that a level crossing in a conurbation has a negative impact on road use and, in some instances, cuts one side of a town off from the other? Is he right, as I suggest he is, that that should be part of GBR’s consideration?

Yes, absolutely. Indeed, amendment 260, tabled by my hon. Friend the Member for Runnymede and Weybridge, would require the forthcoming rail strategy to have specific regard to level crossings. Fortunately, I do not have anything like what my hon. Friend the Member for Broadland and Fakenham describes, where a level crossing splits an entire town in half, but I presume that the Government will not want to invest in bridges everywhere there is a level crossing, so having at least some regard for level crossings in the rail strategy, and ensuring that one thing does not negate the other, will be essential. I entirely agree with my hon. Friends.

Amendment 137, in the name of the hon. Member for Didcot and Wantage, relates specifically to rural communities, and no doubt it overlaps with amendment 260. Like my right hon. Friend the Member for Melton and Syston, he has highlighted the importance of good rail connectivity in our rural communities. Again, that came up in the Transport Committee’s oral evidence session yesterday: how do we make sure that we are not just weighting the system in favour of urban areas, and make sure that due and serious regard is given to rural communities? My rural community has only one station, and we are keen to see more stations that will serve rural communities, both in my constituency and others. But ultimately, if we really want to see that modal shift away from cars to the railway, we have to make sure that everybody stands a fair chance of accessing it.

I will turn to new clauses 28 and 29, again in the name of hon. Member for Didcot and Wantage. The first is about technology and the need for connectivity on the railway. As somebody who does the right thing and uses my mobile phone rather than Great Western Railway’s wi fi to connect to the internet—because that is what the parliamentary security people tell me to do—I am entirely reliant on my 4G network to work on the train. I sit there for three and a half hours one way and three and a half hours back, if I am lucky—I have that to look forward to later on today—and I rely on that time to complete my work. I am sat in Bill Committees half of the week, so that time on the train, doing my constituency work and reading in preparation for this Committee, is essential. When there is no decent wi fi or 4G connection, that is a problem.

I am sure the Minister is well aware of the very exciting pilot that GWR has been doing using Formula 1 technology, which is right up my street, as those who know me well will appreciate. It is excellent. Effectively, it uses that thing no one likes because it technically belongs to that American Musk guy—is it Skylink?

Starlink.

That is it. It still works, though, and provides a very good internet signal.

I suppose that is a question for the Minister: what regard is he giving to such pilots? That might not be on the face of the Bill, but a large part of the population will want to know we have talked about how to ensure that connectivity on Great British Railways is up to date. Connectivity means getting from A to B, but also the ability to work using the internet. I completely agree with the hon. Member for Didcot and Wantage on that point.

I will just briefly speak to new clause 29, on Sunday working arrangements. I have mentioned this already, but those far flung parts of the country that rely on a possibly hourly service into London that connects all the way through the south west region need the guarantee of Sunday services. I have to leave at 6.55 am to get here. If I want to get here for an early start on a Monday, I have to leave the night before—if there was no train available, I would lose nearly a whole day just to get to London for a meeting on a Monday morning. It is a privilege to be able to do that, but I would rather not, and more frequent trains would help.

The Minister has heard me make this plea before, but what plans does he have for the GBR’s structure to ensure that seven day a-week services are the norm, rather than something that we almost have to be grateful for to be able to work? At the moment it is entirely down to the good will of train drivers, for which I am incredibly grateful, but without them we would be in a bit of a pickle. I thank those who tabled the amendments; they have given us a perfect opportunity to get those issues on the record. I look forward to the rest of the debate.

It is a pleasure to serve under your chairmanship, Mr Western. I want to speak in support of amendment 137, in the name of the hon. Member for Didcot and Wantage, and amendment 261, in the name of my hon. Friend the Member for Runnymede and Weybridge (Dr Spencer). The two amendments attempt to deliver the same thing: better integration between rail and other modes of transport. The hon. Member for Didcot and Wantage is a man of great attention to detail, but it was perhaps a little sloppy of him on this occasion not to include in his list of trains, buses, trams and cycling the word “ferries”. Of course, ferries are fundamental in my constituency; we cannot get off the Isle of Wight without using them.

The hon. Gentleman is quite right to rebuke me, albeit very politely and gently. I should have worded the amendment in a non exclusive manner, to make sure that I did not forget any other form of transport. He is right to highlight, as I know he is about to, the critical importance of the integrated transport terminal in Portsmouth harbour for access to and from his wonderful island. There are many other examples of such terminals, including the one in Ardrossan harbour for getting to and from the Isle of Arran in Scotland. I am sure that, if I had had the Government’s resources at my fingertips rather than having bashed away at this over Christmas, I would not have made that error.

I thank the hon. Member for his apology, if that is what that was; it is accepted. My argument for integration between rail and all modes of transport, although I will use ferries as a particular example, is important. The Minister is also the Maritime Minister, and is well aware of the specific issues that my constituency faces.

The two amendments seek to deliver integration through strategy. If we think back to the evidence given to this Committee last week by the future Prime Minister who is currently apprenticing as the Mayor of Greater Manchester, he said that integration is essential—and he would know, being in charge of a combined mayoral authority. We are due to get a combined authority for Hampshire and the Isle of Wight, and the amendments can be viewed as mirroring the strategic responsibilities put on combined mayors, who have responsibility for travel and the interoperability of transport connections in their areas.

What the amendments—and particularly amendment 137 —seek to do is ensure that the Minister and the Government also have the responsibility to ensure co operation. That is explicit in amendment 137, which calls for “co operation with relevant local and regional transport authorities”.

The amendments would end situations such as, for example, the one where, if I was to travel home on the 3.30 train from Waterloo down to Portsmouth Harbour station, the train would arrive five minutes after the ferry had departed. I imagine those are frustrations across pretty much every constituency in the land between trains and other forms of transport. If that situation is not addressed in the explicit way set out by the two amendments, it will continue to be a significant problem that will never get dealt with. Giving more attention and powers through the Bill will help to deliver improvements even for modes of transport, such as Isle of Wight ferries, that are not regulated by the Government and where they do not have explicit and express powers.

The Transport Act 1981, which privatised British Rail’s ferry operations, including the Sea Link service to the Isle of Wight, contained no passenger interest provisions of the type contained in this Bill. Does the hon. Member agree that such an omission was an oversight and an historical missed opportunity?

I do. It is not difficult for me to agree and accept that the way Wightlink, which was part of British Rail, was dealt with was more than a missed opportunity; it was a bad decision. Locally, I work cross party with the hon. Gentleman’s colleague, the hon. Member for Isle of Wight West (Mr Quigley) on that.

This Government have an opportunity. I thank the Minister for the work he is doing and I hope he will be prepared to intervene in a way no Government have done. There are clearly opportunities to make small improvements to the Bill, and accepting the amendments would do that not just in my constituency, but in others. I will leave the Minister with a question: if he does not support the amendments, how else might he use powers in the Bill, or would he be prepared to introduce amendments of his own, to improve connectivity for other modes of transport that do not have any formal regulation?

Good morning, Mr Western. It continues to be a pleasure to serve under your chairship.

I thank right hon. and hon. Members for their contributions and for the clarity and succinctness with which they delivered them. I am afraid I will not be able to follow in their footsteps when responding to what is a chunky group of amendments and new clauses, so they will have to bear with me for this section of our deliberations. Clause 15 has been of considerable interest to members of the Committee and to the rail industry more generally, as we heard during oral evidence. I am thrilled that so much enthusiasm is being expressed for the strategy both verbally and in amendments, each of which I will now address.

Amendments 134 and 25 relate to the timing of the strategy. Amendment 134 would require the strategy to be set for 30 years. The Government have already confirmed that the strategy will cover a 30-year period. Setting that in legislation, however, is inflexible and unnecessary. Although the Government’s ambition is for a 30-year long strategy, we need to provide for the ability to make reasonable changes to that term when needed.

Amendment 25 would remove the ability for the strategy to be amended within a 15-year period. That would fundamentally limit the railway’s ability to respond to unforeseen circumstances such as the covid-19 global pandemic. I hope the hon. Member for Broadland and Fakenham agrees that such a circumstance, or any number of other possible events, would clearly require the strategy to be revisited within a timeframe of less than 15 years.

The Minister’s comments imply that a 15-year strategy would be fixed in concrete and could not be amended. I am assuming that the 30-year strategy will be fluid and flexible to take into account the circumstances that he has just mentioned, such as—God forbid—a future pandemic. I feel the way he has described the amendment is not entirely in the spirit of what was meant, so it is worth reflecting that. Ultimately, we all want a flexible railway; we are just trying to say that the strategy could last for 15 years instead of the current 30.

I thank the hon. Lady for her intervention. My reading of the amendment is that it would remove the ability to amend the strategy within a 15-year period. Her broader point, about having flexibility to make determinations about the long term rail strategy and cater for unforeseen events, technological innovations and global events that we cannot predict, strengthens the argument that we made about amendment 134, when we considered whether to set the period in stone and make it exactly 30 years. There has clearly been deliberation between the official Opposition and the Liberal Democrats about whether it should be 15 or 30 years, but we think that not being overly prescriptive is the best way to ensure that the rail strategy gives a long term perspective and is sufficiently malleable to meet changing operational realities on the railway.

I just want to give the Minister some further clarity about what amendment 25 actually does. He is right that it says, “The document issued under subsection (1) must be in force for a minimum of three control periods”, but that should be read in the light of subsection (4), which gives the Secretary of State express power to “keep the rail strategy under review”, and paragraph (b), which says that they “may revise or replace it.”

Does he accept that it is quite clear that the amendment, read in conjunction with subsection (4), does not prevent reacting to new events?

On locking in a 15-year strategy that can be reopened only if the Secretary of State chooses to revise it, it has been said throughout our deliberations that we do not want politicians micromanaging the railway. I therefore presume that the Secretary of State would want to reopen the three control period review envelope only in extremis. Given our deliberations about whether it should be three control periods or 30 years, I think it is better overall to bake that flexibility into the Bill and allow those discussions to take place.

I have to make a lot more progress, and I do not want to detain the Committee for long. In the evidence sessions, several witnesses said that the ability to update and change the strategy in response to unexpected events is critical. No one can accurately predict things such as technological and environmental changes over the next 15 years. For that reason, the Bill has been drafted so that the strategy is not a once and done document, but can be revised when it needs to be.

The next theme in this group of amendments is to ensure that the long term rail strategy includes specific content. Amendments 137, 207, 224, 135 and 136 all do that. The strategy will not go into specific operational requirements in the way sought by the amendments, which relate to topics such as rural railways, co operation with local authorities, timetable integration, international rail and electrification. Those are all vital topics—of that there is no doubt—but they are all matters for Great British Railways to consider as it develops its strategic plan for the operation and optimisation of the rail network, informed by the long term strategy.

Although I agree that co operation with local authorities is critical to the success of this reform, I do not think that that objective needs to be captured in the long term rail strategy. Rather, it is already captured in the Bill via GBR’s duty to co operate with mayoral strategic authorities. That duty is provided for in legislation and will be enduring, so it does not also need to be in the strategy.

The suggestion that the long term rail strategy should set out obligations relating to the timetable is in opposition to the views of the majority of stakeholders who responded to the Railways Bill consultation. They want Great British Railways to have the autonomy to manage the timetable without Government micromanagement, and I wholly agree with that.

We seem to be losing track of the words that have been tabled. Either that or, like a group of management consultants, we are in danger of getting plans confused with strategies and tedious things such as that. Amendment 207 is neither intended nor drafted to encourage or enable the micromanagement of timetables. It is about the development of and the longer term vision for what those timetables are supposed to achieve, and that is very much in line with what should be a 30-year strategy. I just want to assure the Minister on that point.

I thank the hon. Gentleman for that assurance. I suppose that, in response to the amendments that he tabled, we agree that timetabling is of special significance because of the diffuse way in which it is currently organised between Network Rail and the Office of Rail and Road. We are conscious of the fact that making GBR a single driving mind for the railway means that timetabling needs to be dealt with in a way that is operationally responsive, but also not scattered throughout the Bill.

Although I agree with the hon. Gentleman about the importance of timetabling and having due regard for how it is implemented over the long run, I think the way in which the duties under clause 18 allow us to consider the best interests of passengers through that work has a necessary long term impact on the timetabling process overall. I hope that that would be adequate in meeting some of the concerns that he outlines and seeks to address through the amendment.

On amendment 136, I agree that electrification is important to improving passenger comfort and reliability and reducing the long term cost of operating the railway. However, the long term rail strategy is not intended to go into specific operational requirements of the nature included in the amendment. The strategy will set the strategic direction for Great British Railways through strategic objectives that include environmental, passenger, connectivity and financial considerations.

Amendment 224 would require the strategy to include freight. I am happy to confirm that the long term rail strategy will consider and reference the rail freight target required by clause 17, supporting the Government’s clear ambition to grow the rail freight sector and therefore making the amendment unnecessary.

I turn to amendments 260 and 261, which the shadow Minister spoke to, but which were tabled by the hon. Member for Runnymede and Weybridge. These amendment also seek to add things to the long term rail strategy: a level crossing strategy and an assessment of connectivity and multimodal journeys respectively. The level crossing amendment would require my Department to undertake a review of every level crossing in Britain, of which there are more than 6,000. Such a review would quickly become outdated, as risks and issues with regard to level crossings change regularly. It could also have implications for the legal framework with regard to the safety regime.

Network Rail already considers the level crossing impact on local communities of any changes to rail operations, and GBR will continue that work, with ORR oversight. GBR will manage level crossings in a way that maintains high levels of safety for all users, reflects local and national priorities, and is firmly grounded in evidence.

I am grateful to the Minister, who is doing his job in highlighting some of the practical challenges that the amendment might entail. The important bit is not so much the strategy; I think what my hon. Friend the Member for Runnymede and Weybridge is trying to get at is that, when Network Rail or GBR assesses the function of a level crossing, it also needs to take account of the impact on the society in which it is based: for instance, cutting a town in two or stopping vehicular access for multiple periods during a day. Does the Minister not agree that, if GBR did not consider that—it was not in the list of considerations that the Minister mentioned a moment ago—it would not be doing its full job?

I thank the shadow Minister for his intervention. I very much identify with the sentiment identified by the hon. Member for Runnymede and Weybridge. This is something that impacts Selby town, much as it affects communities across the country. It is right that GBR has regard to managing the way in which level crossings impact road users as much as it does the way that railway infrastructure and passenger services do.

My question is whether that obligation is best placed in this part of the Bill. Network Rail already has a system for considering the impact of changes on local communities, and that will be mapped over into the way that GBR functions. I believe that the transfer of that process, in a way that is reactive and operationally agile, is probably the best way to ensure that those considerations remain integral to how GBR carries out that work.

On connectivity and multimodal journeys, I am happy to confirm that strategic objectives in the long term strategy will already include supporting better connectivity between communities. This will provide direction on the long term trends affecting the railway. However, as with others in this group, amendment 261 would make the strategy a document focused on short to medium term assessments of passengers’ ability to change between rail services or different modes—things that could change frequently, and are therefore not appropriate for inclusion in a document that sets out long term strategic aims.

However, the hon. Member for Broadland and Fakenham will be pleased to hear that we will soon be publishing our integrated national transport strategy, which will set out the Government’s vision for domestic transport across England. It will focus on a transport network that works well for people across the country, including improving integration across modes, but I will of course take the sage advice of the right hon. Member for Melton and Syston about my personal role as part of that process.

Amendments 225 and 213 both seek to make the strategy subject to additional procedural requirements. Amendment 225 requires consultation with operators during preparation of the strategy. I can reassure the hon. Member for Broadland and Fakenham that the Government have already committed to consultative engagement with key stakeholders, including freight and passenger train operating companies, which will be essential for gathering evidence and informing the strategy’s development. Therefore, in our view, this amendment is unnecessary.

Amendment 213, meanwhile, requires regular reporting from the Secretary of State to Parliament on delivery of the strategy. However, as GBR will be the principal organisation responsible for delivering the vision and outcomes that will be set out in the long term rail strategy, it will be for GBR to report on its progress in delivering it. GBR already must have regard to the strategy, and will respond to it through its business plans, on which it will report regularly. Given that and other existing reporting mechanisms, the amendment would be duplicative.

The new clauses in this group all propose new strategies or reports—for example, on rolling stock, cyber security and technology, Sunday working arrangements or signalling. Those all naturally cut across the long term rail strategy and, if accepted, would, in my view, risk GBR being busier completing strategies than actually running the railway. However, I would like to take each new clause in turn to give them due regard.

On new clause 27, the Government absolutely agree with the principle of a long term rolling stock strategy. In fact, we would go a step further and say that this strategy should cover not just rolling stock, but the related infrastructure as well, in a single integrated strategy. Such a strategy was sadly lacking during the last three decades of privatisation, with decisions about rolling stock and related infrastructure taken to meet short term and route specific needs of operators seeking to maximise their profits. It is this Bill, establishing GBR, that will put that right.

However, I do not agree that the Bill needs this as a duty on GBR. Rather than creating a duty for GBR to deliver at some time in the future, we are already working with relevant parties across the industry to develop a rolling stock and infrastructure strategy to be published this summer. GBR will inherit that strategy and act on it to deliver improvements for industry, taxpayers and passengers.

Likewise, there is no need for a reporting requirement relating to cyber security and technology. Cyber security remains a priority for my Department; we are committed, through both existing cyber legislation and policy, to ensuring that GBR operates safely and securely. While new clause 28 reflects priorities that the Government share, the measures it proposes, such as on artificial intelligence, digitalisation and innovation, are already being delivered without the need to include them in this Bill.

On new clause 29, relating to Sunday working arrangements, I would first like to say that I have no doubt that creating GBR to improve both the quality and dependability of train services on Sundays will drive up demand and allow more people to benefit from the railway. We want a railway that operates reliably and sustainably, seven days a week, on a lower net subsidy than today, with built in resilience and a diverse workforce. However, this is not an overnight change, but a long term one, and not a process that, in my view, needs to be set out in legislation. Rather, we will continue to work with staff, managers and unions across the future railway to deliver this change collaboratively.

The Minister is touching on a key issue that the railway will have to address if he is serious about achieving a reliable Sunday service, and that is operating a seven day schedule with a six day roster. Does the Minister intend finally to address the six day roster issue and to move working practices on to a seven day roster?

We want GBR to be empowered to address and deal with all these questions relating to personnel and timetabling in a way that is consultative and in partnership with both unions and private sector operators. My point merely remains that it is not appropriate to freeze them in aspic as part of this Bill, in a way that might prevent GBR’s ability to work properly through those considerations with the workforce once it exists. Producing a separate report on the demand for Sunday travel would duplicate the work that GBR already has to undertake through its business plan, which will set out the outcomes and key deliverables for GBR, including train service levels, which will be agreed with the Government and published accordingly.

Finally, new clause 54 relates to a signalling strategy, and again there is no need to place such requirements in this Bill. Network Rail has released its approach to digital signalling for 2024 to 2029, setting out the routes that will be converted to digital signalling. GBR will take over that approach and would be expected to develop it in its future business plans.

To bring the focus of the discussion back to clause 15, the long term rail strategy will ensure that the railway will always have long term direction from this Government and future Governments. Such directions are vital for stability and confidence within the rail industry. The strategy will help to prevent the constant short termism that has been called out by both the industry and its supply chain.

I hope that, following my response to these amendments, the hon. Members will feel able to withdraw them, and I commend clause 15 to the Committee.

I call Olly Glover—Mr Glover?

I apologise, Mr Western; I had forgotten I was due to speak, because we started to discuss this group the other day.

I do not have too much to say. I can understand some of the Minister’s points, but I certainly disagree with others. There is, of course, a balance between being too prescriptive and something being so woolly that it ends up being—this is a very tenuous analogy, but it could end up being like a glass of Ribena for a two year old, or predominantly water. That is the debate that we have been having, but I shall not detain the Committee for too much longer. I wish to press these two amendments to a Division, as I stated on Tuesday.

Also, I have a thought for our subsequent proceedings. We talk a lot about preserving things in aspic, but for the interest and attention of the Committee we may need a different analogy. Perhaps we should preserve things in stone, as the right hon. Member for Doncaster North (Ed Miliband) did in the 2015 general election. Perhaps we should turn to that analogy a bit more.

Question put, That the amendment be made.

29|0|2|11|The Committee divided:|Question accordingly negatived.||0|0

Amendment proposed: 137, in clause 15, page 8, line 21, at end insert—

“(c) the support given to rural communities in accessing rail travel, and

(d) the co operation with relevant local and regional transport authorities for greater integration between trains, buses, trams, cycling, walking and other active travel options.”—(Olly Glover.)

This amendment would require the rail strategy to set out the long term strategy for supporting rural communities in accessing rail travel and co operating with transport authorities to integrate travel options.

Question put, That the amendment be made.

30|0|6|11|The Committee divided:|Question accordingly negatived.||0|0

Amendment proposed: 224, in clause 15, page 8, line 21, at end insert—

“(c) the development of rail freight network usage.”—(Jerome Mayhew.)

This amendment would require the rail strategy to include developing rail freight.

Question put, That the amendment be made.

31|0|6|11|The Committee divided:|Question accordingly negatived.||0|0

Amendment proposed: 24, in clause 15, page 8, line 21, at end insert—

“(1A) The document set out in subsection (1) must ensure that Great British Railways is focussed on meeting the key performance indicators set out in section [Great British Railways: Key Performance Indicators].”—(Jerome Mayhew.)

This amendment would require the rail strategy to be geared to enabling Great British Railways to meet its key performance indicators.

Question put, That the amendment be made.

32|0|4|11|The Committee divided:|Question accordingly negatived.||0|0

We turn to amendment 25.

I have listened carefully to what the Minister has said on amendment 25, particularly his comments on the Secretary of State, so I will not press it to a Division.

Amendment proposed: 135, in clause 15, page 8, line 25, at end insert— “(3A) The rail strategy must include an international rail strategy to— (a) support the development of new international routes, (b) support operators in introducing and operating any such new routes, and (c) support new and existing operators in using the Channel Tunnel and London St Pancras High Speed.

(3B) In meeting the objectives under subsection (3A), the international rail strategy must— (a) consider options to increase rail depot capacity at, and to supplement, Stratford Temple Mills; (b) consider any enhancements that may be required to conventional rail network in the Southeast of England for the purpose of enabling international rail travel; (c) consider options for electrification, changes to gauge clearance, and any other alterations to rail infrastructure as may be necessary to increase the potential for increased rail freight to travel via the Channel Tunnel.”—(Olly Glover.) This amendment would require the Secretary of State to include an international rail strategy as part of the Government’s long term rail strategy. The international rail strategy would specifically look to support new routes and operators, and increase Channel Tunnel and London St Pancras High Speed rail capacity. Question put, That the amendment be made.

33|0|6|10|The Committee divided:|Question accordingly negatived.||0|0

Amendment proposed: 225, in clause 15, page 8, line 32, at end insert—

“, and persons wishing to operate services for the carriage of passengers or goods on Great British Railways’ infrastructure.”—(Jerome Mayhew.)

This amendment requires consultation with freight operators during the preparation of the rail strategy.

Question put, That the amendment be made.

34|0|6|10|The Committee divided:|Question accordingly negatived.||0|0

Clause 15 ordered to stand part of the Bill.

Clause 16

Duty of Great British Railways and ORR to have regard to strategies etc

I beg to move amendment 26, in clause 16, page 9, line 11, leave out “have regard to” and insert “seek to achieve”.

With this it will be convenient to discuss the following: Amendment 218, in clause 16, page 9, line 20, after “and” insert “each single strategic authority, and”.

This amendment would require GBR to have regard to the transport strategies of single strategic authorities when exercising its statutory functions. Clause stand part.

New clause 33—Long Term Rolling Stock Leasing Framework— “(1) Within 12 months of the passing of this Act, the Secretary of State must publish a framework for the long term leasing of rolling stock (‘the Framework’).

(2) The Framework must apply to all rolling stock agreements for use on infrastructure managed by Great British Railways.

(3) The Framework must include measures to— (a) provide that rolling stock leases entered into, renewed or extended by Great British Railways or passenger operators for use on infrastructure managed by Great British Railways, have a minimum lease term of 15 years for new or renewed rolling stock, unless the Secretary of State determines that a shorter term is justified by exceptional operational or market circumstances; (b) require Great British Railways to assess whole life asset cost, maintenance, refurbishment and residual value when procuring or approving leases; (c) provide Great British Railways with the power to specify obligations in long term leases that support accessibility, improved energy efficiency, and interoperability across the network; (d) ensure that long term certainty supports— (i) manufacturers of, and (ii) persons who maintain rolling stock by enabling investment in skills, supply chains and technological innovation; (e) require that lease terms are consistent with Great British Railways’ long term network strategy, its five year funding settlements and its access and capacity allocation duties; (f) require Great British Railways to publish an annual statement setting out— (i) projected rolling stock needs for the 15 years following the publication of the statement; (ii) any lease terms agreed within the year prior to the annual statement; (iii) an assessment of the alignment of lease arrangements with the Framework’s objectives; (iv) a value for money assessment of any new or renewed leases.

(4) Before issuing or revising the Framework, the Secretary of State must consult— (a) Great British Railways, (b) the Passenger Council, (c) the Office of Rail and Road, and (d) any other persons the Secretary of State thinks appropriate.

(5) Within 12 months of the passing of this Act and every subsequent 12 months, Great British Railways must lay an annual report before Parliament setting out its compliance with the Framework and the reasons for any departures from the minimum lease requirement.”

This new clause would require the Secretary of State to publish a Long Term Rolling Stock Leasing Framework, and for Great British Railways to comply with this framework. New clause 36—Rolling Stock Investment Framework— “(1) Within 12 months of the passing of this Act, Great British Railways must publish a report containing a framework for rolling stock investment (‘the Framework’).

(2) The Framework must include an assessment of needs for rolling stock for the period of 15 years following its publication, including— (a) procurement of new rolling stock, (b) refurbishment of rolling stock that is already in use, (c) digital signalling and onboard technology upgrades, (d) decarbonisation, and (e) accessibility improvements.

(3) The Framework must set out the routes through which private investors may finance— (a) new trains, (b) refurbishments to existing stock, (c) upgrades to low carbon traction, (d) modernisation of interiors of trains, (e) predictive maintenance, and (f) digital systems.

(4) The Framework must promote private sector investment in energy efficient rolling stock and accessibility improvements.

(5) For the purposes of subsection (4), the meaning of ‘energy efficient rolling stock’ includes hybrid, battery, or hydrogen technology.

(6) The Framework must set out how procurement undertaken by, or on behalf of, Great British Railways will— (a) ensure competitive tendering, (b) encourage innovation in design and maintenance, (c) provide private investors with a stable commercial investment environment, and (d) ensure a consistent pattern for the placement of orders.

(7) Great British Railways must align any plans for investment in the Framework with— (a) its integrated business plan, and (b) funding determinations for the relevant Control Period.

(8) Great British Railways must update the Framework at least once each year after it is first published, including in relation to— (a) updating Great British Railways’ strategy for its fleet of rolling stock, (b) opportunities for private capital investment in rolling stock, (c) the reasons for any major changes to planned procurement, (d) expected timelines and volumes for procurement, and (e) how it will use private investment to— (i) reduce whole life cost of stock, (ii) improve quality of stock, and (iii) support jobs in the rail supply chain in the UK.”

This new clause would require GBR to publish a rolling stock investment framework. New clause 37—Great British Railways Accountability— (1) Great British Railways must publish a business plan each year.

(2) The business plan set out in subsection (1) must include— (a) a summary of activities that Great British Railways intends to undertake during the following year, (b) how these activities will support the delivery of the Rail Strategy, (c) the outcomes Great British Railways expects to achieve, and (d) how these outcomes reflect the funding settlement for the relevant Control Period.

(3) Great British Railways must publish a delivery report each year (‘the Report’).

(4) The Report must set out progress made against the outcomes in the Rail Strategy, including— (a) passenger experience, (b) freight growth, (c) accessibility, (d) passenger growth, (e) integration with housing and local transport, and (f) long term infrastructure and service improvements.

(5) The Report must assess Great British Railways’ performance against its statutory duties as set out in this Act.

(6) The Report must include Great British Railways’ performance against its key performance indicators set by the Office of Rail and Road, including— (a) areas of underperformance, (b) risks to delivery, (c) corrective actions taken, and (d) financial performance related to its business plan.

(7) The Office of Rail and Road must assess Great British Railways’ performance against its business plan, key performance indicators set out in section [Great British Railways: Key Performance Indicators] and statutory duties, and publish an annual assessment of its performance.

(8) If the Office of Rail and Road makes any finding of material underperformance in the assessment set out in subsection (7), it must give notice to— (a) the Secretary of State, and (b) Great British Railways.

(9) The Secretary of State must publish a written response within 90 days of receiving a notice under subsection (7).

(10) Within 90 days of receiving a notice under subsection (8), Great British Railways must set out— (a) how it will rectify any underperformance identified in an assessment under subsection (7), and (b) and how it will measure progress against any areas of underperformance.

(11) The Secretary of State must lay before Parliament a copy of— (a) each business plan under subsection (1), (b) each delivery report under subsection (3), and (c) each assessment made by the Office of Rail and Road under subsection (7).

(12) When the Secretary of State lays a copy of the delivery report in accordance with subsection (11)(b), a Minister of the Crown must make a statement to each House of Parliament about the contents of the report.

(13) For the purposes of this section, ‘Control Period’ has the meaning given in any final decision taken by the Office of Rail and Road which concludes each periodic review of access charges as described in Schedule 4A of the Railways Act 1993.”

This new clause sets out a reporting and accountability framework for GBR.

The usual procedure applies again. Clause 16 requires both GBR and the Office of Rail and Road to “have regard to” a number of different requirements, such as the long term rail strategy, the statutory transport or rail strategies published by the Welsh and Scottish Governments respectively, the mayoral combined authorities and the Mayor of London. There is a key political question within this clause: why has the Minister chosen to apply a duty on GBR and the ORR to only “have regard” to those strategies? In practice, that means only that GBR and the ORR will consider transport plans, not that they must, or even should, follow or prioritise them.

That seems a slightly unusual position for the Government to take, given their keen approach to oversight of GBR in other clauses, such as 7 and 9, where it looks like they wish to maintain their role as key stakeholder over that of the devolved Governments and the mayoral combined authorities. The weak obligations are shared, whereas the strong obligations are kept primarily to themselves. It is a surprising approach, particularly given that clauses 7 and 9 effectively strip GBR of operational independence. I recognise that the Scottish Government and, to a lesser extent, the Government in Wales have their own clauses to guide and direct, but the mayoral combined authorities certainly do not. I wonder whether this clause is directed at overweening powers demanded by certain mayors, but I could not possibly look into the depths of the psychology of the Labour party as it struggles with its issues at the moment.

It is very noticeable, as Mayor Andy Burnham said to us last Tuesday in oral evidence, that there is a substantial difference between the Government’s proposed treatment under the Bill of mayoral combined authorities and that of Transport for London. There does not appear to be any rationale for that deliberate divergence—or at least not one that the Government have identified.

As other mayoral combined authorities come online, the Bill provides no formal mechanism for their wishes to be respected. Members of the Committee who were in the oral evidence session will remember that Andy Burnham said he would “insist” on greater authority in that area. The Bill as currently drafted does not provide that avenue for him or for others, so those looking for advancement in the future might like to consider their voting strategy on this clause. After all, page 33 of the Labour manifesto states: “Mayors will have a role in designing the services in their areas.”

Can the Minister outline the mechanism for existing and future mayoralties to be put on a statutory footing, and for their local transport plans to be given greater consideration from GBR and the ORR?

There is one other question regarding this clause. It relates to subsection (3). What does GBR do if the strategy of a mayoral combined authority or Transport for London conflicts with that of the Secretary of State? How are potential conflicts between strategies resolved, and who will be the arbiter? Will it be the Secretary of State, or will there be an independent structure? With that in mind, the clause should be strengthened to ensure that GBR and the ORR respond more clearly and act under greater requirements.

That is where amendment 26 comes in. It would replace the very weak “must have regard to” with “must seek to achieve”. That change seems small on the face of it, but it would strengthen the requirement on GBR and the ORR to engage and work with mayoral combined authorities, the Welsh and Scottish Governments and the Mayor of London. Will the Minister support this modest proposal to strengthen that relationship?

The clause currently restricts the duty of mayoral combined authorities and the Mayor of London. It is silent on other strategic authorities, yet the same arguments apply to areas that are not yet or will never be mayoral combined authorities when identifying regional needs for current and future transport. We heard that concern eloquently expressed by my hon. Friend the Member for South West Devon. I hope that she will be able to expand some of her thinking on this in a moment. We have heard examples from the west country where local government reform is floundering, as it is around the country, including in Norfolk where I am a Member of Parliament. It is already delayed until 2028. That is perhaps just the first of further delays as well, as this Government lose steam. There is no idea where, when or even if it will go ahead.

There are also many areas that will never have a mayoral combined authority because of the structure of their local government settlement. We do have local transport authorities, though, which are the base level of local government that has responsibility for local transport co ordination. It seems like a very significant omission that the Bill currently only relates to mayoral combined authorities. That is the lowest level of regional government to which it deigns to provide any form of requirement for co operation with the ORR and GBR. Why is that? Where there is, for sound local reasons, no mayoral combined authority, why are the Government designing out the ability of local government representatives, the local democrats, to co operate and co ordinate with the ORR and—more importantly in this instance—GBR? What happens to their interest? There is simply no explanation as to why these large authorities, which will be the local transport authorities in their own right, have been excluded from consideration. That leads me neatly on to amendment 218, which adds them to the list.

New clause 33 requires the Government, or rather GBR, to set out a long term rolling stock leasing framework. The clause would require the Secretary of State to publish a long term rolling stock leasing framework, and require GBR to comply with that framework. It mandates a minimum 15-year lease, save in exceptional circumstances. That is because the longer the lease, the better the value for money for the taxpayer.

Longer leases lead to lower costs, which will lead to more UK investment, more trading and better value for taxpayers, as the industry and supply chain are able to plan ahead and produce effective business plans. There is a consequence to the leasing’s being done by the public sector, rather than the private sector: the Government will have to consider the impact of the cost of leasing on the national debt. That is, after all, the logical consequence of their political decision to nationalise the railways—the operating companies. There is a cost that comes with it, and that is moving from the private sector balance book on to that of the public sector. The Government need to own the financial consequences of their political and ideologically driven decision, and that is one of them.

Does my hon. Friend agree that one of the positives of new clause 33 and its attempt to rectify things as they stand, is that it is not throwing private investment in our rolling stock out of the window? We have heard in evidence and throughout the Bill process, whether that is in Transport Committee evidence or the Bill Committee, that millions and millions of pounds have been accepted by this Government by the private sector for rolling stock investment. If we are not careful, we will completely dissuade them from being involved. We are already seeing them moving to Europe with that investment instead.

My hon. Friend is absolutely right. New clause 33(3)(a) to (d) is aimed at reducing short term decisions and focusing more on long term efficiency and savings. I am sure there are many former business people on the Labour Benches—or maybe not, actually—[Interruption.] I am glad to hear that there are. There are many former business people on these Benches, and all those who have run businesses will know that predictability of the future is one of the key drivers of economic success and of driving down costs. New clause 33 will help to achieve that for the taxpayer.

GBR will also be mandated to produce an annual public report that enables Parliament and the public to properly hold GBR to account. We have heard time and again how light the Bill is on the ability of the public and of Parliament to hold GBR to account; we are the representatives of the people and we are being denied, by design, the opportunity to do that adequately. Yet it will be spending £20 billion plus each year, about 50% of which, at the current rate, is public money. Why are the Government running scared of public oversight of these operations?

Alstom UK and Ireland, in its written evidence to the Transport Committee, said this:

“We also welcome the commitment to a Long Term Rail Strategy and a five year funding period review but believe these must be underpinned by a legally anchored long term investment pipeline covering rolling stock, electrification, signalling and enhancements. The absence of a stable pipeline increases costs, undermines innovation, weakens the domestic supply chain’s global competitiveness and ultimately costs jobs.”

This new clause listens to Alstom and other manufacturers and seeks to apply the direction that they are looking for and to address their concerns.

New clause 36 would require a rolling stock investment framework, so it develops the arguments that I have already made. It aims to provide a long term view of opportunities for the market to support the delivery of modern rolling stock to GBR. The removal of the periodic franchise process will remove a predictable source of rolling stock improvements, so GBR needs a framework to replace that.

Just in my own region of east Anglia, Greater Anglia’s franchise renewal bid rested on a complete renewal of all rolling stock. The franchise turnover every seven or eight years—let us call it every 10 years—gave an opportunity for bids to come in that said, “We are not just carrying on with the status quo; we’re not just shaving off a bit here and adding a little bit there; this is our bold renewal programme.” That is what Greater Anglia did, and it really has transformed the passenger experience in the east of England.

It is a pleasure to serve under your chairship, Mr Western. I think this is an opportune moment to ask a question, as a Derby MP with Alstom in my constituency— the only place in the UK now where a train can be designed, engineered, manufactured and tested. Under the previous Government, Alstom had to make thousands of redundancies because there was just no certainty about work and there were delays on various projects. Can the hon. Member explain why the previous Government did not take any steps to come up with a rolling stock strategy?

I thank the hon. Member for his intervention, and for standing up for the jobs in his constituency, which is something we all need to do. I cannot speak for the actions of the Government before I was even elected as a Back Bench MP, but we are certainly looking to improve. I would be the first person to say that the status quo ante was capable of improvement. Privatisation did bring many benefits to the railways, particularly in encouraging innovation and focus on the customer, leading to the increase in passenger numbers, which I have already spoken about in previous sittings, but was it perfect? Of course not.

As has been trailed by the Government, this is a once in a-generation opportunity to redesign and improve our approach to the railways, and I think that taking a long term approach to rolling stock investment and creating this framework would be taking advantage of that opportunity to try to improve predictability for the supply sector—for Alstom, but also for Siemens and other manufacturers as well.

New clause 36 would require GBR to publish and keep under annual review a 15-year rolling stock investment framework that sets out future needs for new and existing trains. That includes—this is important—not just the replacement of trains but refurbishment, digital upgrades, decarbonisation and accessibility improvements. It would establish how private investors could finance rolling stock and related upgrades, promote energy efficient technologies such as battery, hydrogen and hybrid traction, and set expectations for competitive, innovative and, importantly, predictable procurement. The framework must align with GBR’s business plan and control period funding, which are two very sensible requirements, and it must also provide transparency on procurement volumes and timelines, explain changes to plans and show how private investment will be used to reduce whole life costs, improve train quality and support jobs in the UK rail supply chain.

The Government have thrown the sector into a period of uncertainty—that is inevitable with large scale redesigns like the ones we are going through at the moment. My concern is that the way in which they have chosen to do this, through a process of drifting nationalisation before knowing the details of its replacement, has exacerbated that uncertainty and extended it over a prolonged period. As the hon. Member for Derby South has already noted, we are already seeing that uncertainty in the supply chain and the manufacturing base.

There is uncertainty—that is the problem. This is a shell Bill; it does not have the answers, and it does not give any confidence to industry that things will be better in the future. It relies on a whole raft of provisions in the 19 documents to which we have referred to time and again, but they do not exist. We do not know whether things will get better or worse, and neither does the industry. There is no supporting documentation on how GBR will function in practice. I am not sure the Government even know that yet, and they really ought to have done better than this. New clause 36 would point them in the right direction, and I certainly look forward to pressing it to a Division, should the opportunity arise.

New clause 37 would increase accountability by setting out a reporting and accountability framework for Great British Railways. The new clause states: “Great British Railways must publish a business plan each year”, which we have already considered, and it dictates: “The business plan…must include…a summary of activities that Great British Railways intends to undertake during the following year”

and “how these activities will support the delivery of the Rail Strategy”.

At the end of the year, GBR would be required to produce a second report setting out its progress against the business plan objectives, the first of which is passenger experience—we all know the Government substantially ignore passenger experience at the moment, apart from reliability in short trains, and have just brushed the other aspects under the carpet. The other objectives include “freight growth…accessibility…passenger growth”, which is also ignored by the Government in the Bill as drafted, “integration with housing and local transport”

and “the long term infrastructure and service improvement.”

The ORR must assess GBR’s performance against the key performance indicators set out in new clause 2, which we have already debated but not yet voted on. If the ORR finds any material underperformance, it must give notice to the Secretary of State, who must publish a written response. This general approach is very business focused; it simply asks that GBR sets out what it is planning to do at the start of the year, and then having worked through the year, there is a process for GBR to mark its homework at the end of the year. Has GBR done what it said it would do? If it has not, the spotlight is on. It is also being assessed by the ORR, which retains its role as an independent expert adjudicator that is trusted by all parts of the rail sector.

Perhaps the best thing is that, in response to that, GBR must also set out what it will do to rectify any underperformance, and it must lay a report before Parliament and make a statement. The new clause would add critical levels of parliamentary and public scrutiny to GBR, allowing both to hold this new organisation to account, which we believe is paramount when such vast amounts of taxpayers’ money will be used. The current Bill is woefully short on accountability. It lacks strong incentives to encourage GBR to perform, to be held to account and to answer for its actions—or lack of action.

This all feels a little too comfortable. We have a nationalised industry reporting to officials from the Department for Transport, and it is not focusing on the experience of customers and passengers, passenger growth or all the other imperatives of rail in the future. The Minister will of course tell us that none of that is necessary. However, with the greatest respect, direct experience of running a business tells us that we need to design in strong incentives—this is crucial; it is not primarily a political point but a trying to improve this Bill point—so that GBR is inclined to focus on the right objectives, without having to respond to external direction. These new clauses would help to point GBR in the right direction. I look forward to the Minister’s support.

I should have said earlier, Mr Western, that it is a pleasure to once again serve under your chairship as we debate another exciting group of amendments. I want to make some brief remarks on the Conservative amendments in this group. I eagerly await the Minister’s polite but withering put down.

Amendment 26 is a matter of wording. Alas, unlike the shadow Minister, my only experience of the law is occasionally watching “Kavanagh QC”, a reference that no doubt reveals my age. I shall await the Minister’s comments on that amendment and shall reach a view in the no doubt incredibly nail bitingly tight Division on it. On amendment 218, I agree with the shadow Minister that we need to get mayoral consultation right, and to have plenty of it.

New clause 33 seems sensible, given the Conservatives’ and Labour’s total obsession with rolling stock leasing rather than purchase, which I find utterly bizarre. Rolling stock leasing can make sense, particularly when gilt prices or the cost of capital is high, but it is quite expensive on a whole life cost basis. Otherwise, why would rolling stock companies do it? There are some very nice people in them, but they are not charities. Rolling stock leasing happens elsewhere in Europe, but it is not as universal as it is here. However, that feels like either yesterday’s war or tomorrow’s—probably not today’s.

On new clause 36, I note that the shadow Minister has tabled amendments about the private sector to similar effect in group 36. I politely suggest to him that, in the same way that members of the governing party can sometimes be too ideologically committed to the idea that public sector is automatically better, the evidence does not necessarily support the view that private sector is automatically better in the rail context. It is context dependent. ORR benchmarking from 2012 showed that our train driver and rolling stock maintenance costs, both of which have been in the private sector for some time, were generally significantly higher at that time than those of our European counterparts. I do not believe that those trends have changed significantly.

I would be interested to hear from the shadow Minister and from the Government the evidence that private sector is automatically better than public sector, or vice versa. I think it depends on the context. Perhaps more important is getting requirements and specifications for tenders right or deciding in each individual context the best way to get value on a whole life cost basis. We definitely have a problem on the railway, and perhaps as a nation as a whole, with being obsessed with getting up front capital costs down, but there is not quite the same level of attention for a decent appraisal of whole life costs and deciding how to move forward on that basis.

On new clause 37, I understand the intention of an annual business plan, but my slight worry is that it could undermine the logic of the five year funding review period. Perhaps the shadow Minister can address that when he sums up.

I have a couple of small points to make. Cornwall has a very well developed local integrated transport plan and devolution of bus franchising as well. Will the Minister reassure Members representing non mayoral areas that GBR will have some regard to the solid local plans we already have in place?

The shadow Minister commented on running businesses. In a previous life, I was an equity partner in a law firm. Some of us have done a lot of other things. It might be worth considering how many shadow Ministers now in opposition worked in the public services they ran as well.

I want to make a few comments in support of the amendments in the name of my hon. Friend the Member for Broadland and Fakenham. He suggested that I might want to make some comments on amendment 218. I acknowledge the comments and the request for clarification and reassurance from the hon. Member for Truro and Falmouth, who, like me, often speaks about issues with railway service in the far south west. What is going on in Cornwall is good. It is a devolved county that has been given foundation status. Devon has something similar, but Plymouth is not part of that, so the way in which transport strategies are being developed at the moment is further complicated. Local government reorganisation will not solve that problem; it will take further devolution. I believe Devon has been told that it will not be in the next round of opportunities to be a mayoral authority.

Therefore, we are looking several years down the line before key parts of the country—in my case, notably significant chunks of the south west—are in a position to have their views taken into account by this Bill when it comes to developing their rail strategy and wider transport strategy. That is why I agree with my hon. Friend the Member for Broadland and Fakenham on the importance of inserting each individual strategic authority, and on the need to have regard to transport authorities in that.

There is a lot of good work going on in those local transport authorities; they are on the ground figuring out what is needed. In my constituency, work is being done to secure a new train station that will be essential to developing the defence work being undertaken in the city, which is vital to the country’s continuous at sea nuclear deterrent.

If we do not have a voice at the table within GBR, beyond just having a role within a business unit, I am not convinced, as the Bill stands, that that voice will be loud enough or that regard will be taken into account. We have heard the evidence given by mayors. Consistently, over the last 18 months in my role on the Transport Committee, the number of times mayors from the large mayoral authorities have been before us, extolling the virtues and benefits they can get for their public transport systems, must be heading towards at least half a dozen. It is brilliant to hear what they get to do, great for them—that is amazing. What they are doing is really exciting. They are able to deliver for their communities, but the rest of the country is just not like that, and it will not be like that for some considerable time.

On devolution, the Bill draws a line at the requirement for mayoral combined authorities and mayoral combined county authorities to be the final level or tier of local government that are consulted. That does not reassure me that we will not end up with a country in which great strides are made in those mayoral communities. We heard from Mayor Burnham last week. They are very excited—quite rightly so—because it is going to give them even more power. However, it will also highlight that those areas that have no power will continue to have none for some time. I appreciate the continued reassurance of the Minister, but ultimately amendments such as this highlight how we need to improve.

I thank the hon. Member, who is advocating for her constituents. Within London, Transport for London operates at least four lines—the Elizabeth, Central, Lioness and Metropolitan lines—all of which leave the London boundary. They would therefore potentially enter the boundaries of strategic authorities. If the amendment were passed, which would Great British Railways need to have regard to: the mayor’s transport strategy or the strategic authority’s transport strategy?

I believe that the Mayor of London’s transport strategy is already considered within the wording of the Bill. I did not draft the Bill; it is not my Bill. I am just highlighting those areas. Ultimately, many of those areas may well be further down the road towards becoming mayoral authorities. I am talking about the areas that are not even on that path. We know that certain counties outside London are doing so, but ultimately the point the hon. Gentleman is making is a valid one. However, I do not believe that it means we should not have the amendment that we are putting forward, because it would give strategic authorities the ability to communicate with the Mayor of London and with GBR. That is an additional layer of engagement and ensuring that those voices are heard. I do not see how that would be contrary to what is going on in London.

I will briefly speak to the new clauses and then bring my comments to a close. It is worth looking at the rolling stock leasing framework, and I was interested in the comments made by the hon. Member for Didcot and Wantage about pursuing a leasing framework. At the end of the day, let us be real: the Government and the country at this point in time are not in a position simply to buy new rolling stock just because GBR comes into ownership. Forgive me if I am wrong—I am not an expert on this—but ultimately there will be some requirement to continue leasing. As much as it would be great to have brand new trains that all look identical and all do the same thing, realistically we are just not in that position.

That leads me to one point that has come up in some of the evidence sessions I have sat in, which is accessibility. I know that a lot is being done to ensure that accessibility is central to the Bill and that people who need access to trains are considered. The hon. Member for Hyndburn raised this issue specifically for those outside the disabled community, including people of particular ages who have mobility needs. We heard from Lord Hendy that it could actually be decades before we see an improvement to accessibility because of the rolling stock. I believe that the amendments tabled by my hon. Friend the Member for Broadland and Fakenham would give due regard to putting some system in place to ensure that that those accessibility improvements are looked at strategically and on a rolling basis—so to speak. I believe that the amendments add something, given the argument for accessibility.

We have talked a lot about supply chain manufacturing, which amendment 36 is about. I appreciate the comments of the hon. Member for Derby South. Ultimately, we need to ensure that a long term strategy is in place for our manufacturing sector. I have already mentioned the defence sector; we have a huge requirement for our advanced manufacturing at the moment and we need that certainty. We have seen the role that private sector investment plays in the development of rolling stock. That is not to say that the private sector is better than the public sector—I happen to believe that they are both important in the right proportions—but we have had so much investment from the private sector while the railway has been privatised. To just walk away from that on an ideological basis does not seem right.

Will the hon. Member give way?

Bear with me one second. Ensuring that manufacturing process in the long term will be important. I will give way to the hon. Member, who is much more learned on this matter than me.

Much of the investment that has been channelled through the private sector since privatisation has in fact been underwritten by the state, and by Government guarantees. I will not put her on the spot to list specific examples but it would be helpful if Opposition Members could give examples of an at risk capital investment that would actually be endangered by this Bill. I do not believe that such examples exist.

The Committee heard from some representatives of the private sector. Lord Hendy has also highlighted that Hitachi—I believe it was—has made multi million pound investments that the Government were very happy to accept. It may well be that that is backed up by Government, but that was welcomed by the Prime Minister, so to say that we do not want private investment seems a bit churlish—ultimately, it has been accepted by the Government in its entirety.

The new clauses in this group are pushing the accountability piece: the reporting back, to make sure that the Great British public has the opportunity to see what Great British Railways is delivering and whether it is holding itself to account in the right way. I do not understand why the Government do not seem to think that the new clauses are a good idea. If Great British Railways will be so wonderful, would it not be great if the British people can see what it actually achieves and hold it to account? Marking one’s own homework is never good, and being able to hold GBR to account in all its forms will be essential.

It is a pleasure to serve under your chairship, Mr Western. My remarks will be incredibly brief, ahead of the Minister’s responses. To echo some of what my hon. Friend the Member for Truro and Falmouth said, as a representative of Hyndburn in Lancashire—which is currently not part of a mayoral combined authority—I look for reassurances that GBR will have regard to Lancashire’s transport authority and the local transport plans. This Government are clearly committed to the important agenda of devolution, but it would potentially undermine some of those efforts if in the transition phase—while we are trying to move as quickly as possible for as many areas as possible to benefit from that full devolution opportunity—a national body is undermining the local plans and those on the ground who understand the complexities of the needs of somewhere such as Lancashire. I would thank the Minister for reassurances in that regard.

I thank hon. Members from all parties for their well considered contributions to this debate. I shall endeavour to give full answers to them.

First, on the point made by the shadow Minister about how GBR will handle conflicting priorities that emerge within different strategies, as laid out by mayoral combined authorities or otherwise. As part of the business planning process, GBR will need to demonstrate how its integrated business plan aligns with the objectives contained in the long term rail strategy and the Scottish Ministers’ rail strategy, reflecting the role that they have as funders of the network. The Bill also requires GBR to have regard to the various other national and local strategies. Fundamentally, however, establishing no hierarchy between the general duties to which GBR is subject, in my view gives the necessary flexibility to allow it to manage competing priorities where those may arise. It will be the responsibility of GBR to ensure that its decision making demonstrates consideration of potentially competing requirements and strikes an appropriate balance in making trade offs.

On the statutory role of mayors as part of the process, GBR must have regard to their transport strategies. Mayors of course will have the right to request services and work in active partnerships with GBR. However, I also hear clearly the concerns of not only the hon. Member for South West Devon, but my hon. Friends the Members for Truro and Falmouth, and for Hyndburn about those who do not live in mayoral strategic authorities. I appreciate the hon. Lady’s scepticism when comparing this to our existing system. When it comes to engaging with private operators and with other arm’s length bodies, at the moment it feels as if parliamentary accountability cannot always be applied, and that where power resides is very diffuse, making it hard to tell who is responsible. We are actively trying to avoid and redesign that through the creation of GBR.

The hon. Member for South West Devon points to the fact that the business units might not have the teeth to engage properly and to reflect the needs of local areas, but I would say that we are creating a decentralised Great British Railways, where local areas are imbued with the powers to enter into dialogue with local authorities especially to avoid that being the case. That does not change the fact that the reason that within the Bill we have referenced mayoral strategic authorities is that we believe they are the right unit of economic and of demographic power to drive forward truly devolved change on the railway. That does not mean that we cannot not have regard to those who do not benefit from living within a mayoral strategic authority.

Will the Minister give way?

I will give way briefly in a moment, but first I will build on the point that was made by my hon. Friend the Member for Bexleyheath and Crayford about how services can run across the boundaries of mayoral strategic authorities. Through GBR, we will be able to enter into processes that engage not only with a mayoral strategic authority, but with such authorities acting in a sense as a representative of pressures that exist in cross border dynamics that may arise. That offers another useful lens through which to engage with local areas that do not have a mayor. I appreciate that the hon. Lady might want a little more reassurance, so I will give way.

On those local business units, how large an area are they likely to be structured on? That has not been in the debate to this point, and may reassure me. I appreciate that that may be a detail that is coming later, but some indication of how many counties might be included within each business unit would help.

The hon. Lady must have read my mind about that detail being forthcoming. If she will allow me to take away that specific point over the break that we are about to have, I might be able to come back to her when we resume the debate.

For the moment, I will quickly turn specifically to the amendments in the group. The lead amendment would require GBR and the ORR to “seek to achieve” the long term rail strategy and devolved strategies, rather than to “have regard to” them. The existing wording deliberately reflects the nature of those strategies within the system. The LTRS will take a 30-year perspective and set strategic objectives, rather than define a narrow set of deliverables.

We of course want GBR and the ORR to have regard to the strategies in all decision making, but they must also have the flexibility to balance long term objectives with the practical business planning processes that operate over fixed periods. To legislate that such a vision should be achieved would not be in line with that principle, or with the overall approach to the general duties that set the conditions for successful decision making, but do not dictate specific outcomes. As I have reminded hon. Members, GBR, not the Government, will be running the railway.

New clause 37 also relates to GBR’s delivery and looks to establish a statutory annual reporting framework. The Bill already provides robust reporting and accountability arrangements. GBR is required to produce an integrated business plan for each funding period, which must be published and kept up to date, and that will give Parliament and stakeholders a clear view of GBR’s objectives, activities and expected outcomes. A separate statutory annual delivery report would in essence duplicate that information. Furthermore, the ORR will have a role in monitoring GBR’s performance against its business plan and will provide independent advice to the Secretary of State. Such oversight ensures that GBR can be held to account without the need for an additional statutory reporting requirement.

New clauses 33 and 36 relate to GBR’s long term approach to securing rolling stock. The former calls for the Secretary of State to publish a long term rolling stock leasing framework and sets out a substantial amount of detail on what that should include. Within that detail, there are certainly points on which we can agree, including the benefits of longer leases and the proper consideration of whole life asset costs, both of which have been made more challenging to achieve under the franchising model. However, I profoundly disagree that the Secretary of State should dictate the detailed approach that GBR should take to rolling stock leasing, and with the specific terms set out in the new clause. It is rightly for experienced industry professionals within GBR, guided by the Secretary of State’s long term rail strategy, to secure the best value and achieve GBR’s other objectives through commercial arrangements with the rolling stock leasing market. It should not be for the Government to dictate the detail of those arrangements.

On new clause 36, I of course agree that GBR should have a long term rolling stock and infrastructure strategy, which is why we are already working with parties across the industry to develop one. The strategy will be published this summer, and will remain a live document. GBR will inherit and implement it as soon as it is established. The new clause is therefore unnecessary, as by the time it would take effect, GBR will already be up and running with a long term rolling stock strategy.

Amendment 218 would require GBR to have regard to the transport strategies of single strategic authorities. We are of course supportive of a more locally focused railway under GBR. The provisions in the Bill are pitched at mayoral strategic authority level, reflecting their growth across England, the vital role that mayors play in convening local partners and the scale and capability required to integrate rail into the wider public transport network. Nevertheless, all tiers of local government will benefit from empowered local GBR business units that are outward facing and actively engage local authorities on their priorities and local transport plans. That engagement will ensure there is sufficient opportunity for local authorities outside the mayoral strategic authority areas to collaborate with GBR on their priories and to consider proposals. I hope the hon. Member for Broadland and Fakenham therefore feels comfortable withdrawing the amendments.

Clause 16 places duties on GBR to have regard to the long term rail strategy, devolved transport strategies and local transport plans. Overall, it seeks to ensure that strategic decisions on matters such as future services and infrastructure plans appropriately reflect national, devolved and local priorities. I commend the clause to the Committee.

This is now a common refrain in our deliberations. The Minister says, “Don’t worry. All these things will be taken care of at some future date in documents that have not been drafted and certainly haven’t been shared with the Committee.” With the greatest respect to him, I do not take it on trust that the Government are looking carefully and in sufficient detail at these matters, so I will press the amendments to a Division.

Question put, That the amendment be made.

35|0|6|10|The Committee divided:|Question accordingly negatived.||0|0

Amendment proposed: 218, in clause 16, page 9, line 20, after “and” insert

“each single strategic authority, and”.—(Jerome Mayhew.)

This amendment would require GBR to have regard to the transport strategies of single strategic authorities when exercising its statutory functions.

Question put, That the amendment be made.

36|0|6|10|The Committee divided:|Question accordingly negatived.||0|0

Clause 16 ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(Nesil Caliskan.)

Adjourned till this day at Two o’clock.

The Committee consisted of the following Members:

Chairs: Paula Barker, † Wera Hobhouse, Sir Alec Shelbrooke, Matt Western

† Argar, Edward (Melton and Syston) (Con)

† Caliskan, Nesil (Comptroller of His Majesty's Household)

Conlon, Liam (Beckenham and Penge) (Lab)

† Francis, Daniel (Bexleyheath and Crayford) (Lab)

† Glover, Olly (Didcot and Wantage) (LD)

† Greenwood, Lilian (Parliamentary Under Secretary of State for Transport)

Hatton, Lloyd (South Dorset) (Lab)

† Kirkham, Jayne (Truro and Falmouth) (Lab/Co op)

† Mather, Keir (Parliamentary Under Secretary of State for Transport)

† Mayhew, Jerome (Broadland and Fakenham) (Con)

† Morello, Edward (West Dorset) (LD)

† Ranger, Andrew (Wrexham) (Lab)

† Robertson, Joe (Isle of Wight East) (Con)

† Shanker, Baggy (Derby South) (Lab/Co op)

Smith, Rebecca (South West Devon) (Con)

† Smith, Sarah (Hyndburn) (Lab)

† Turner, Laurence (Birmingham Northfield) (Lab)

Rob Cope, Francis Morse, Dominic Stockbridge, Claire Cozens, Committee Clerks

† attended the Committee

Public Bill Committee

Thursday 29 January 2026

(Afternoon)

[Wera Hobhouse in the Chair]

Railways Bill

Clause 17

Rail freight target

I beg to move amendment 262, in clause 17, page 9, line 24, at end insert— “(1A) Any proposals by the Secretary of State and Great British Rail about how they intend to meet the target under section must include an assessment of the impact of those proposals on level crossings.”

With this it will be convenient to discuss the following: Amendment 219, in clause 17, page 9, line 30, leave out “have regard to” and insert “take into account in all relevant decisions and demonstrate that it has taken into account”.

This amendment would require GBR to take into account the freight target when making all relevant decisions and to show how this has been taken into account. Amendment 252, in clause 17, page 9, line 30, leave out “have” and insert “as far as possible have due”.

This amendment requires GBR to pay greater attention to the freight growth target. Amendment 149, in clause 17, page 9, line 34, at end insert— “(5) The Secretary of State must publish a national freight strategy.

(6) A strategy as set out in subsection (5) must make provision for the electrification of freight routes and infrastructure improvements to support increased freight capacity and utilisation.”

This amendment would require the Secretary of State to introduce a national freight strategy which includes the electrification of freight routes. Amendment 220, in clause 17, page 9, line 34, at end insert — “(5) The Secretary of State must take into account the rail freight target in all relevant decisions and demonstrate how the target has been taken into account.”

This amendment would require the Secretary of State to take into account the freight target when making all relevant decisions and to show how this has been taken into account. Amendment 250, in clause 18, page 9, line 34, at end insert— “(5) Any target set under this section must provide that the proportion of goods carried by rail relative to any other form of transport increases at a rate higher than the rate of projected economic growth for the same period as is covered by that target.

(6) For the purposes of this section, the ‘rate of projected economic growth’ has such meaning as the Secretary of State may specify.”

This amendment would require that any freight growth target is set in such a way as to exceed the rate of overall economic growth, with a view to increasing the proportion of freight carriage on rail relative to other forms of transport. Clause stand part.

New clause 47—Rail freight target: Annual report on rail freight— “(1) Within 12 months of the passing of this Act, and every 12 months thereafter, Great British Railways must prepare and publish an annual report setting out— (a) the steps it has taken to have regard to the rail freight target set under section 17; (b) its performance in facilitating the carriage of goods by rail; (c) any measures taken to protect and improve access for freight services; (d) progress on enhancing the capacity and reliability of strategic freight corridors.

(2) The Secretary of State must lay a copy of the report before Parliament and provide the report to the Office of Rail and Road.

(3) The Office of Rail and Road must publish an assessment of the report within six months of its publication.”

This new clause creates an annual reporting and oversight mechanism, requiring GBR to set out how freight access, performance and corridor capacity are being supported, and requiring the ORR to publish an independent assessment of the report.

It is good to see you back in your place, Mrs Hobhouse. Something happened during our short recess: I was in the Tea Room, at the right end, but down at the wrong end I heard someone singing “Happy Birthday”. It occurred to me that today is the Minister’s birthday. [Hon. Members: “Hear! Hear!”] We are not going to sing, but I think we should all take the opportunity to say happy birthday to the Minister. What better activity could one choose for their birthday than for all of us to be together, like one big happy family?

I know that the icing on the cake will be clause 17, which requires the Secretary of State to set a target to increase freight on the railways. The Government tell us that this should be a measurable target that establishes the goal, as an amount or percentage, for how much growth is sought—although that is not specified in the Bill, like so much else. Great British Railways must have regard to the target when carrying out its statutory functions, and it should also have regard to any freight growth target or strategy set by Scottish Ministers.

This appears to be good news for the rail freight sector, and it will be a relief for it that it has been mentioned in the Bill—I believe that this is a relatively late inclusion. However, the duty is merely for GBR to “have regard” to the freight target, and we have explored such wording in the debates on other clauses. It requires that GBR only considers the target, not delivers it, which undermines its effectiveness as a statutory growth driver. The Rail Freight Group, in its written evidence to the Transport Committee, set out: “To succeed and grow rail freight customers and operators will need to be assured that…a. they can secure access to the network in a fair, consistent and timely way for their services, including those on new routes and to new destinations as they arise…b. that the costs of rail remain competitive when compared to road freight…c. that the network remains reliable and fit for purpose for freight trains (for example, to handle heavy or high gauge container trains)…d. that there is independent oversight and a right of appeal if freight is unfairly treated or disadvantaged…e. That they can invest in rail freight assets (wagons, terminals, locomotives etc) with the confidence that they will have a long term use of those assets.”

It went on to say: “The current provisions in the Bill provide some positive elements in support of these requirements, but also increase the risk in others. Overall, the Bill is not sufficient to assure rail freight of the key points ahead as currently presented.”

The main takeaway from the Rail Freight Group is that it does not feel that the target can be met, however well intentioned it might be, if the Bill’s current wording remains.

Rail Forum, in its written evidence to the Transport Committee, said: “From Rail Forum’s perspective there is nothing specific in the Bill that will guarantee improved travel for passengers. Improvement is predicated on the goodwill of GBR and others driving things in the ‘right direction’. In our view the key to improvement is culture change within those organisations coming together to form GBR. Creating GBR from Network Rail Infrastructure Ltd (NRIL) will not signal the need for change and creates a risk that the current Network Rail culture will be seen as the norm and hence the status quo will prevail.”

We have discussed this a bit. The Minister has taken the view that this cultural change does not exist. If he continues with that belief, he will condemn this nationalisation experiment to almost certain failure. The vast majority of the wider sector agrees that organisational culture is the single most important ingredient for the Bill to get right, yet time and again the Government have resisted amendments suggested by the Opposition and the Liberal Democrats to drive an improvement in culture and focus on the right things. Having set the target for GBR, the clause uses very weak language for what comes next: just “have regard to”. It is too weak.

Amendment 262, in the name of my hon. Friend the Member for Runnymede and Weybridge (Dr Spencer), who is not a member of the Committee but drafted this amendment along with a couple of others that we have already debated, seeks to highlight his constituents’ concerns about the negative impact that level crossings can have on communities. He is right to stand up for his constituents and that freight is one more part of the jigsaw when we look at the juxtaposition between the needs of the railway—whether it is passenger services or, as in the case of this amendment, rail freight—and the knock on consequences for the wider economy of a community whose economic and social heart is bisected by a level crossing. He is right that those three sometimes competing issues need to be balanced, which is the intention of amendment 262.

Amendment 219 in my name would leave out “have regard to” and insert “take into account in all relevant decisions and demonstrate that it has taken into account”.

That is a stronger line to take and makes it easier for freight organisations to hold decision makers to account. They need to have the power to challenge the historic approach of freight being secondary to passenger travel. Accommodation is needed for both in a sector where we all hope that both passenger and freight will grow, but we need to recognise that it is a capacity limited structure and that there will therefore have to be some compromise. Historically, freight has always played second fiddle to passenger travel. We need accommodation for both, and the new wording would strengthen the hand of freight to ensure that its proper position is maintained by GBR. I will seek to divide the Committee on that amendment if the opportunity arises.

Amendment 149, in the name of the hon. Member for Didcot and Wantage, would require a national freight strategy, including electrification of freight routes and infrastructure improvements. It is unobjectionable, and in fact quite good. I would support it should the hon. Member press it to a vote.

Amendment 220, which is in my name, would strengthen the accountability of the Secretary of State by adding a new subsection that states: “The Secretary of State must take into account the rail freight target in all relevant decisions and”— importantly— “demonstrate how the target has been taken into account.”

The key word there, of course, is “demonstrate”. It would keep the duty high in the mind of officials and make it easier for independent rail freight operators to hold the Government to their duty. Without that strengthening, the clause would achieve very little. We go through the whole process of having this rail freight target—“Isn’t that wonderful? We’ve done a great job. We as policymakers think this is excellent”—and then the delivery organisation just has to “have regard” to it and can leave it on the shelf. As currently drafted, it looks as though the clause is a last minute bung to the loud rail freight sector.

We all heard the oral evidence from Maggie Simpson of the Rail Freight Group. She is, without doubt, the doughtiest of campaigners on behalf of the members of her organisation. She is very effective, but it was clear to me that clause 17 was a late accommodation for her advocacy, but it is only half cocked. That explains why, while Maggie Simpson was trying not to sound too churlish in relation to what the Government have done so far, she nevertheless went on to say it is still deserving of criticism. This amendment seeks to improve further what the Government have started.

In relation to the rail freight target, new clause 47 requires an annual report on rail freight. It would create “an annual reporting and oversight mechanism, requiring GBR to set out how freight access, performance and corridor capacity are being supported, and requiring the ORR to publish an independent assessment”.

That would strengthen the clause, which the Rail Freight Group says does not go far enough—I have already set out its quote in relation to that.

Once more, we are back to the accountability of a new nationalised industry. You get what you measure, and without requirements for GBR to report, there is a serious risk of getting lost in the weeds. The decision to nationalise is the Government’s; it is a political decision based on their ideology, but we have to accept that it does remove market forces. Some people say there are negative elements of market forces, but there are undoubtedly positive elements as well; we just need to be open eyed about it. If we remove market forces as a driver of competition, efficiency and innovation, then they need to be replaced by duties in the legislation or accompanying documents. The duty to replace the incentives with cumbersome regulations and control is an inevitable consequence of the decision to nationalise. That is what new clause 47 is intended to achieve.

It is a pleasure to serve under your chairship once again, Mrs Hobhouse.

Liberal Democrat amendment 252 is intended to strengthen the freight target in the Bill, which—as I have previously said—is something that we welcome. Amendment 149 on freight electrification and the need for a freight strategy highlights the fact that freight is neglected on our network. The percentage of freight that moves by rail is much lower than in comparable western and central European countries, therefore there needs to be additional thought as to how that is going to be changed. The strategy should be a step towards how the Government intend to achieve their eventual freight target. We support Conservative amendments 219 and 220 as they are similar in spirit.

We are not quite so persuaded by the Conservatives’ new clause 47. One of the recurring debates we are having on this Committee is the balance between accountability in the form of annual reports and making sure that GBR is not drowned by the demand for them. That is our reservation about new clause 47.

It is a pleasure to once again serve under your chairship, Mrs Hobhouse. Before I begin my remarks, may I seek a piece of advice on amendment 250? We are considering it as part of this group, but if it has not been moved and has been proposed by a Member who is not on the Committee, am I required to speak to it?

You can speak to it, but we will not put the Question for Division.

Thank you, Mrs Hobhouse. I thank all hon. Members for their amendments, which seek to make changes to the provisions on the rail freight growth target. I also thank the shadow Minister for his very warm birthday wishes. I agree with the sentiment that he expressed: what more of a gift could I have received than working through the amendments in this group?

Amendment 262 seeks to require the Secretary of State to produce an assessment of how targets to increase freight on the rail network could impact level crossings. As I said in a debate on a previous group of amendments, effective consultation, robust evidence gathering and meaningful engagement with communities and local authorities will ensure that any future decisions on rail operations—passenger or freight—are well informed and responsive to local needs and those of the railway more broadly. GBR will continue to manage level crossings in a way that maintains high levels of safety for all users, as enforced by the ORR, that reflects local and national priorities, and that is firmly grounded in evidence at a local level.

Amendments 252 and 219 would both require the freight growth target to play a larger role in GBR’s decision making. The Bill already requires GBR to take the target into account when making relevant decisions. The amendments would not alter that, and could be seen as weakening the obligation. I agree that GBR needs to be held accountable against the growth target if it falls short of our expectations. To that end, we will expect GBR to set out a credible pathway in its business plan for meeting its freight growth targets. If GBR fails to meet those targets, we expect it to explain why, and in extremis, both the ORR and the Secretary of State can take action to ensure that its behaviour improves. Therefore, though I share the intent of the hon. Members for Didcot and Wantage and for Broadland and Fakenham, amendments 252 and 219 are not substantively different from what is already set out in the Bill, and the existing accountability procedures are sufficiently robust.

Similarly, amendment 220 seeks to have the same effect, but on the Secretary of State, by requiring that they take the growth target into account on all relevant decisions. The Bill requires the Secretary of State to set the rail freight growth target and to publish it; the target is also supported by the duty to promote rail freight in clause 18. That duty will apply to decisions by both the Secretary of State and GBR when exercising their functions relating to railways and rail services. Therefore, although I appreciate the intent of the hon. Member for Broadland and Fakenham, the amendment is unnecessary, as protections for rail freight are already enshrined in the Bill.

Amendment 149 requires the Secretary of State to publish a national freight strategy. This Government appreciate the importance of long term certainty, clarity and confidence for freight operators and investors. That is why, alongside the freight growth target, the Secretary of State will be required to issue a long term rail strategy. The strategy will set out the Secretary of State’s vision for the railways and will further reinforce the Government’s commitment to the freight growth target. The strategy makes the proposal to publish a similar document, tabled by the hon. Member for Didcot and Wantage, redundant.

New clause 47 would require GBR to publish an annual report setting out how it has had regard to the growth target. We will expect GBR to set out a clear and credible pathway for how it will meet the freight growth targets in its business planning. If GBR failed to meet these targets, we would expect it to clearly set out why. There will also be a representative on GBR’s board with responsibility for freight, embedding our ambition to grow the sector at the top of the organisation. The ORR, which will be subject to the duty to promote rail freight, will have an enhanced monitoring function that will enable it to provide independent advice to the Secretary of State on GBR’s delivery against its approved business plan. This Government have already set clear accountability mechanisms in place to safeguard our ambition to grow the freight sector.

Finally, as we have already discussed, the freight target will support the growth of freight and the associated environmental and resilience benefits. I urge the hon. Members for Didcot and Wantage and for Broadland and Fakenham not to press their amendments, and I commend the clause to the Committee.

The Minister will not be wholly surprised that I do not agree with his analysis. I intend to press amendments 219 and 220—and, in the fullness of time, new clause 47—to a Division, but I beg to ask leave to withdraw amendment 262.

Amendment, by leave, withdrawn. Amendment proposed: 219, in clause 17, page 9, line 30, leave out “have regard to” and insert “take into account in all relevant decisions and demonstrate that it has taken into account”.—(Jerome Mayhew.) This amendment would require GBR to take into account the freight target when making all relevant decisions and to show how this has been taken into account. Question put, That the amendment be made.

37|0|4|9|The Committee divided:|Question accordingly negatived.||0|0

Amendment proposed: 220, in clause 17, page 9, line 34, at end insert —

“(5) The Secretary of State must take into account the rail freight target in all relevant decisions and demonstrate how the target has been taken into account.”—(Jerome Mayhew.)

This amendment would require the Secretary of State to take into account the freight target when making all relevant decisions and to show how this has been taken into account.

Question put, That the amendment be made.

38|0|4|9|The Committee divided:|Question accordingly negatived.||0|0

Clause 17 ordered to stand part of the Bill.

Clause 18

General duties of Ministers, Great British Railways and ORR

I beg to move amendment 34, in clause 18, page 10, line 12, leave out “They” and insert “Each person or organisation designated under section 18(1)”.

This amendment clarifies that the statutory duties apply to those listed in section 18(1), namely Ministers, Great British Railways and the Office of Rail and Road.

With this it will be convenient to discuss clause stand part.

This is one of the more important clauses, so I look forward to discussing it with the Committee. It sets out the general duties of Ministers, GBR and the Office of Rail and Road. In other words, it sets out the things they must seek to achieve when carrying out their functions. GBR will have freedom to consider which duties are relevant and what weight to place on each duty, but should be able to demonstrate how it has had regard to its duties. Subsection (1) sets out to whom the general duties apply. In addition to GBR, they apply to the Office of Rail and Road, the Secretary of State, Scottish Ministers and Welsh Ministers when they carry out their railway functions.

There is an exception for the ORR’s safety related functions and train driver licensing functions. No doubt the Minister will correct me if I am wrong, but I assume that is because when it is exercising its safety functions, the intention is for safety to be the priority and to not be second guessed. The ORR should not have to weigh it against other duties. The Bill does not change the current safety regime and the official Opposition wholeheartedly agree with that position.

There is also an exception for the functions of the Office of Rail and Road under the Competition Act 1998. When the ORR acts as a concurrent competition regulator with the Competition and Markets Authority, as we previously discussed, both bodies should be applying the same duties, otherwise there really would be confusion.

I am going to go through the clause in some detail. It will take some time, but it is an important part of our consideration. The duties listed in subsection (2) require GBR and the sector bodies to consider the following.

Subsection (2)(a) provides that they must “promote the interests of users and potential users of the railway”— that is passengers and potential passengers—including the needs of disabled people.

Subsection (2)(b) provides that they must promote the use of rail freight. This duty, combined with the rail freight target in clause 17, recognises the importance of freight to the economy and the environment.

Subsection (2)(c) provides that they must promote “high standards” in railway performance. Subsection (3) then defines “performance” as meaning “(a) reliability (including punctuality), and (b) the avoidance or mitigation of passenger overcrowding.”

That definition is wholly inadequate, as we have discussed at some length on previous days.

Subsection (2)(d) provides that they must ensure that railway service providers, such as GBR, devolved operators, freight operators and open access operators can plan, invest and make decisions about their own business. We will come on to consider that point in more detail.

Subsection (2)(e) provides that they must run the railway “in the public interest”—so far, so good—which is defined in subsection (3) as including social, economic and environmental interests.

Subsection (2)(f) requires them to make efficient use of public funds—that is, to carefully manage the amount of public subsidy required to run the railway.

Taken together, the functions in clause 3, which are what GBR must do, and these duties, which are what GBR must think about, demonstrate GBR’s purpose—those are my words. We have put that together into a purpose clause, which I look forward to voting for when we consider the new clauses.

The functions under clause 18(2) contain nothing about growing passenger numbers, increasing private sector investment in the network or encouraging open access. Apart from scattered references elsewhere to discounting schemes or the passengers’ council, clause 18(2)(a) is effectively the only substantive accessibility duty in the Bill. It reads as a bit of a bolt on, rather than a clear, integrated obligation.

Subsection (2)(d) is meant to provide certainty for operators, but in practice it offers little reassurance to manufacturers or the wider supply chain. Without statutory planning cycles, which we have discussed, procurement obligations or long term fleet strategies, which, again, we have discussed, the duty is too vague to give industry the confidence needed for investment.

How can GBR be confident in achieving the purposes of clause 18(2)(d) given the ability of the Secretary of State to direct at whim, issue guidance, set the rail strategy and so on? For business, it would be impossible to know when a decision has been taken, since each one can be second guessed by the Department for Transport. Businesses cannot even take for granted the funding allocations in the control period either, because, for the first time in 30 years—I stand to be corrected; we are in CP7, so 30 to 35 years—inter year control period funding can be changed without notice on the whim of the Secretary of State.

Subsection (3) gives only a narrow definition of “railway service performance”—punctuality, reliability and overcrowding—but omits other core standards such as cancellations, journey time, customer experience, wi fi, mobile phone connectivity, accessibility, disruption handling and information provision. There are probably a few others as well. This limited list weakens the duty and leaves major aspects of service quality outside the statutory framework. There is no explanation for that. Why are some core elements of the customer experience included in the Bill, establishing the precedent that it is the appropriate place for them to be considered, and then—deliberately, one assumes—are many factors of profound importance to the travelling public and their experience of the railways omitted?

Amendment 34 aims to achieve some housekeeping on the drafting of the Bill. Clause 18(2) does not make it clear which of the three bodies has which responsibilities —it simply refers to “they”. That is a recipe for confusion and potential buck passing. We have three organisations or groups, each with combined duties under this clause. They are, of course, Great British Railways, the Ministers and the ORR. It is not clear which one, in a given situation, is responsible under the clause.

The duties set out are joint duties. Anyone who has been a student and rented a flat with multiple occupancy knows painfully the difference between liabilities that are joint and several, and ones that are simply joint. I believe that the intention of the drafters was to have clear lines of accountability; if that was not their intention, the Minister needs to make that clear. However, the problem with having joint liability is that one organisation could say that is not their problem, but one for one of the other organisations—GBR, the ORR, or the Minister. As landlords have found many times over to the cost of tenants, the beauty of joint and several liability is that each operation is responsible for all of the duties, and that clarifies where responsibility lies. I look forward to hearing the Minister’s explanation as to why that is not the case in this clause.

It is a pleasure to serve under your chairship, Mrs Hobhouse. I will briefly speak to clause 18 stand part. At the outset, I remind Members that I am the chair of the all party parliamentary group on wheelchair users, and one of my children is a wheelchair user.

I do not believe that some of these details need to be set out in the Bill. I am a London MP. The details of how Transport for London operates on accessibility issues are not set out in the Greater London Authority Act 1989, yet, in my mind, TfL leads the way, particularly with its TfL Go app, on the accessibility of the information that it provides to disabled passengers. As the Minister and other colleagues know, I constantly say that I would like to see that kind of app being rolled out for Great British Railways. It would be show people which stations were accessible, live information about which lifts were working, and where there were accessible toilets.

For my constituents in Bexley and Crayford, we have a nationalised railway, in the main, through Southeastern, although we also have Thameslink at Slade Green. We already have an exceptional service for disabled passengers. Sometimes, passengers will need to book, but I could give the Committee a list of stations that are staffed constantly and that provide a very good service for disabled passengers. Equally, we continue to see the roll out of changing places toilets. Toilets are a key issue for many disabled people, including my child, who cannot use a standard toilet. We have seen that roll out from Southeastern at Margate through what was Network Rail at London Bridge and Waterloo, and very soon we will see it at Charing Cross.

I accept that disabled passengers still have poor experiences on many parts of the network, and we need to improve that. However, as I say, we already have, through Transport for London, an app that leads the way. I had a terrible experience last year in Paris, when there was no live information and a lift was not working. I had to carry my child up a set of escalators, while my wife carried the wheelchair behind us. Information about those kinds of things does not need to be on the face of the Bill, but, as we have already seen with TfL, we can lead on that provision, and I believe that Great British Railways should lead in due course. Those things do not need to be set out in the Bill; we already have examples of them with Southeastern and others, who are providing the facilities here and now.

I will start with the point about accessibility, which the shadow Minister and my hon. Friend the Member for Bexleyheath and Crayford have both spoken about. I reiterate how essential it is that accessibility provisions are hardwired into the Bill. I thank my hon. Friend for raising the work that is already taking place in that space, whether that is delivering the next phase of the passenger assist programme, rolling out welcome points more broadly or widening eligibility for the disabled persons railcard. He is right to say that there is a lot further to go.

We are all responsible, through the creation of GBR, for ensuring that accessibility is wired into the heart of it through its duties and in the functioning of the passenger watchdog—to which we will turn to later in our deliberations. My hon. Friend also makes an important point about accessibility of railway functions through an app. GBR will have a one stop shop app where people will be able to book train tickets and passenger assist all in the same place, which will hopefully go some way to addressing the concerns that he has outlined.

The Minister refers to the booking app also offering the ability to ask for assistance. Will he undertake to provide access to that data so that independent retail operators can provide a similar service in their booking systems?

It is my understanding that the system this Bill creates for GBR to engage with third party retailers through ticketing will include the sharing of necessary data. I presume that would apply to such things. However, I will clarify that for the hon Member and get back to him on that point as I do not have the exact answer at the moment.

Amendment 34, tabled by the hon. Member for Broadland and Fakenham, seeks to clarify the application of the general duties in clause 18, and I thank him for it. It is important for the reformed sector that there is a set of duties shared by the key sector bodies, and that these duties apply to Ministers, GBR and the ORR. I am happy to reassure the hon. Members that clause 18(1) already sets out clearly that the duties will apply to Ministers, Great British Railways and the ORR when carrying out the functions specified in clause 18. There can, in my view, be no question as to who and what they apply to. In that regard the amendment is unnecessary from a drafting perspective, and does not provide greater legal certainty.

The hon. Member also asked about GBR’s purpose. Those functions and duties are quite literally GBR’s purpose. It seems to me that all this amendment does is rewrite them in a different format, but the functions themselves are clearly segregated for each organisation to which they apply. However, the duties apply to all and must be balanced by all.

On that basis, I commend clause 18 to the Committee. It sets out the general duties which will be shared by key players on the railway. The duties apply to GBR, the ORR, the Secretary of State for Transport and Scottish and Welsh Ministers. The duties will apply whenever those bodies carry out their relevant functions. The shadow Minister has already outlined what the duties are. If Members wish to have a look at them, they are on page 10 of the Bill, so I will not repeat them.

We believe that this common set of goals across the key sector bodies provides shared incentives to ensure that everyone works together to create the railway that we all want to see. The new duties also reduce the confusion, complexity and duplication that exists in railway legislation, allowing everybody to be clear on what their objectives are. While the functions in clause 3 of the Bill explain what we expect GBR to do, these duties set out what we want GBR to think about and achieve. Together, these two clauses set out the purpose of GBR, as the Government promised we would during the passage of the Passenger Railway Services (Public Ownership) Act 2024.

To conclude, clause 18 is a critical part of the Bill. It sets the foundation for how the key sector bodies will operate, guided by the public interest and empowered to deliver a railway that works for its users, taxpayers and the wider public. These duties are the core criteria that should guide every decision that GBR and others make about the railway. They are therefore imperative to the proper functioning of the future railway. I commend the clause to the Committee.

I am grateful for the Minister’s explanation. I do not intend to stand in the way of the clause standing part of the Bill. It is quite clear that it should do so in some form. However, I respectfully disagree with the Minister’s assessment of the consequence of the drafting where the duties are joint rather than joint and several and I will seek a vote on the amendment.

Question put, That the amendment be made.

39|0|3|9|The Committee divided:|Question accordingly negatived.||0|0

Amendment proposed: 35, in clause 18, page 10, line 17, at end insert—

“and to increase the number of passenger journeys in absolute terms and as a percentage of passenger journeys by mode of transport.”—(Jerome Mayhew.)

This amendment would require Great British Railways to carry out its functions so as to increase the number of passenger journeys.

Question put, That the amendment be made.

40|0|4|9|The Committee divided:|Question accordingly negatived.||0|0

I beg to move amendment 33, in clause 18, page 10, line 23, at end insert— “(g) in the manner best calculated to increase the number travelling by railway, (h) in the manner best calculated to contribute to economic growth, (i) in the manner best calculated to increase private sector investment and involvement in the railways and railway services, (j) in the manner best calculated to remove or reduce the need for public subsidy of the railways, (k) in the manner best calculated to increase levels of passenger satisfaction as monitored by The Passengers’ Council, and (l) in the manner best calculated to improve efficiency and productivity in the delivery of railway services.”

This amendment gives Great British Railways additional duties to promote passenger growth, economic growth, and increased private sector investment in the railways.

With this it will be convenient to discuss the following: Amendment 31, in clause 18, page 10, line 25, at end insert— “(2A) The Secretary of State must set out in an annual report laid before both Houses of Parliament how it has balanced the requirements of paragraphs (2)(a) to (g).”

This amendment would require Great British Railways to set out an annual report of how it has balanced the delivery of its duties. Amendment 32, in clause 18, page 10, line 37, leave out sub paragraphs (a) and (b) and insert— “(a) reliability, including punctuality, cancellations, short forming, delays and the reliability of key connections, (b) safety and security, including safety incidents, security incidents affecting passengers, staff presence, and the delivery of safety critical maintenance, (c) passenger comfort and on board experience, including cleanliness, the functioning of heating, air conditioning and lighting, overcrowding, the availability and performance of any internet connection or power sockets, and toilet facilities, (d) affordability and value for money, including levels of fares, the availability of discounted or flexible fares, transparency of fare information, and passenger perception of value for money, (e) passenger growth and network expansion, including growth in passenger numbers, the number of communities served, service frequency, and the provision of new or restored services.”

This amendment defines standards of railway performance for the purposes of Great British Railways functions.

In oral evidence before the Transport Committee, Ben Plowden, the chief executive of the Campaign for Better Transport, said: “We have a question about the difference in the duties between the way that freight is treated and passenger travel is treated: the duty on GBR and Secretary of State in relation to passengers is ‘to promote’ their ‘interests’, whereas it is ‘to promote the use of the…network’ for freight. Our view is that in order to incentivise GBR strongly—once it is set up—to grow the network and to grow passenger demand, there should be equivalent duties about passengers in clauses 18 and 17, so that GBR is required to promote the use of the network for passengers and future passengers, with a corresponding duty on the Secretary of State to set a passenger growth target. Our concern is that otherwise, the risk is that GBR might manage demand as a steady state, achieving its other objectives without necessarily seeking to grow demand by expanding the network or making better use of existing capacity.”

Hon. and right hon. Members will recall—although the only right hon. Member has done a runner—that Ben Plowden made a substantially similar point in oral evidence to this Committee. I think he prayed in aid the experience post covid, when all sorts of targets were met, but that was because there were not any trains running. He went on to say to the Transport Committee: “It seems to us that the logic would suggest that if it is important for GBR to have a statutory incentive to promote a growth in freight traffic, it also ought to have a statutory incentive to do that for passenger growth. We know that the expansion and increase in capacity and connectivity in the rail network has huge socioeconomic benefits. Look at the Northumberland line that recently reopened; look at Crossrail. There are huge benefits from expanding network capacity and increasing the number of people who are able to travel by rail.

If you look at the Bill, it is interesting that service performance is defined in terms of ‘reliability (including punctuality)’ and ‘the avoidance or mitigation of passenger overcrowding’. There could be a scenario whereby GBR decided that, in order to meet its reliability duty”— and this is the point— “it reduced services to smooth them out and improve reliability, and in order to avoid overcrowding, it then introduced fares that”

managed “demand, as has been suggested might happen on the west coast main line in the context of HS2.

There might be scenarios where, for perfectly logical reasons, internally GBR might decide that it did not want to increase passenger demand either on a particular route or overall. It seems to us that it would be sensible to have an equivalent duty or pair of duties in the Bill on passenger demand as it has for freight. GBR would need, as we were just discussing, to work out how to optimise that objective versus the other objectives it has set out in the duties and functions.”

That is a long quote, but I think that the Campaign for Better Transport makes a good point. The current drafting creates a duty to promote freight, but no such duty to promote passenger services. Amendment 33 would rectify that oversight by adding a number of excellent objectives: passenger growth, economic growth, private sector investment, reducing the need for public subsidy, increasing passenger satisfaction, and improving efficiency and productivity in the delivery of railway services. The amendment responds to the concerns of the passenger sector, which has clearly identified problems with the current drafting. Does the Minister have any intention of listening to the constructive advice from experts in the sector? I wait with bated breath, but I do wonder.

Amendment 31 would require the Secretary of State to report to Parliament annually on how he or she has balanced the requirements, to allow for better scrutiny. It is a cracked record from the Opposition that scrutiny and accountability need to be designed in. Who could disagree with that?

The other key part of clause 18 is the definition of “railway service performance” in subsection (3), which we have touched on a number of times. It is telling about current attitudes in the Department for Transport that reliability and avoiding overcrowding are all that the definition is—that is it. That is extraordinary. The definition of railway service performance is reliability and avoiding overcrowding. That is the most basic definition; there is no ambition to improve the service. I am concerned that we will see more of that approach when we have a nationalised GBR: a basic service where you get what you are given, you have no ability to demand improvement and you are meant to be grateful.

Amendment 32 challenges that approach and would inject some ambition into the Bill and—with a bit of luck—into GBR and its ability to strive for excellence once it is created. The amendment would insert into the definition:

“reliability, including punctuality, cancellations, short forming, delays and the reliability of key connections”—

—we have heard from hon. Members how important connectivity is to the customer experience—as well as

“safety and security, including safety incidents, security incidents affecting passengers, staff presence, and the delivery of safety critical maintenance…passenger comfort and on board experience, including cleanliness, the functioning of heating, air conditioning and lighting, overcrowding, the availability and performance of any internet connection or power sockets, and toilet facilities”.

Those are very important to passengers, and their experience of what it means to take a railway journey, as opposed to—if they have the ability—going by car. The definition would also include

“affordability and value for money, including levels of fares, the availability of discounted or flexible fares, transparency of fare information, and passenger perception of value for money,”

and

“passenger growth and network expansion, including growth in passenger numbers, the number of communities served, service frequency, and the provision of new or restored services.”

Finally, clause 18(2)(f)—it is tacked on to the end—is the only reference to value for money for taxpayers. It is right to focus on efficient use of funds, but does it need to be to the exclusion of much of the sector, with no comparison with costs or alternative provision? It is an important amendment, given that the Government are failing to show any customer focus. The drafting of the Bill appears to confirm the fears of the wider sector that GBR is going to be engineering led and dominated by the historical culture of Network Rail. That shines out in this very bald definition of service.

Clause 18(2)(a) reads: “in the manner best calculated to promote the interests of users and potential users of railway passenger services including, in particular, the needs of disabled persons”.

Is that not specifically saying that it is a duty to promote the needs of passengers and potential passengers? That is about passenger growth.

I am grateful to the Minister for her intervention, but it needs to be much clearer than that, because we are talking about the general duties of GBR. GBR will be able to rely on the definition and say, “We’ve satisfied our general duty under clause 18(2) because we have improved railway service performance as defined by the Minister,” which is reliability and the avoidance of passenger overcrowding. That is clearly wholly unacceptable and does not support the significant improvement that we all wish to see in the provision of passenger services.

We think that amendment 32 is important, since the Government are not showing a customer focus and are being overly led by an engineering mindset. It feels like they have chucked in a passengers’ council, which can be ignored because it has no enforcement powers, and then lip service is paid to the experiences of the passenger.

We already know that Great British Railways as an organisation is dominated by Network Rail. It is an organisation with about 41,000 members of staff, to which is added every six weeks or couple of months another operating company of 2,000 to 4,000 staff. It is quite apparent where, without intervention, the dominating culture will come from. We have to focus on improving customer experience as a whole, and it is for that reason that I will press the amendment to a vote.

It is a pleasure to serve under your chairship, Mrs Hobhouse. I will speak briefly and specifically on the attempt to introduce a passenger growth target. I think we have had the substantive discussion before, but it is worth briefly repeating the key points.

The railway, arguably, is already incentivised to prioritise passenger services. That is partly a financial matter, as the revenue coming in from passenger services is greater. However, I fear that the shadow Minister’s noble intent to move away from some current cultural practices is at odds with the clause. In the engineering culture, from a certain mindset, because freight trains are heavier and cause more damage to track, there is a convenience to allocating those rare paths to passengers services instead.

The shadow Minister quoted evidence, and I wish to read into the record some other comments that we heard, from Maggie Simpson of the Rail Freight Group, someone of whom I think the shadow Minister and I share a high opinion. Of a passenger growth target, she said: “people think about the passenger railway all the time, so I do not see that that incentive effect is as necessary”.––[Official Report, Railways Public Bill Committee, 20 January 2026; c. 46, Q78.] I think she put it very well: there is a real risk that if we put into the Bill both a freight growth target and a passenger growth target, with no prioritisation between them written in, one will have the effect of neutralising the other.

Does the hon. Gentleman not see the logic of the lobby group for rail freight saying that we should focus on rail freight while the lobby group in favour of the passenger, which I quoted earlier, says that there should be a passenger growth target? Does he not think that those representing passengers are better qualified to express an opinion on passengers than the rail freight lobbyist?

I am not sure that I follow the logic of the hon. Gentleman’s argument. Our job here is to look at the network and the service as a whole. This is an integrated, engineering, safety critical industry of many parts, all of which interact with one another. This is a key point, and we have said it before: sometimes, hard choices need to be made about prioritisation. I fear that if we have the two growth targets sitting alongside each other with no weighting between them, what we will actually get is the status quo. Freight is, of course, essential to the economy and to decarbonisation, and we cannot run the risk of it being squeezed out.

I thank the shadow Minister for tabling the amendments. Amendment 33 would add further duties to clause 18. The proposed duties are either duplicative of existing provisions in the Bill or would constrain GBR’s operational priorities, undermining the directing mind approach that the Bill implements.

Specifically, the proposed duty on passenger growth duplicates the existing duty to “promote the interests of users and potential users”

of the railway. That duty will already require GBR to consider how to bring more passengers to the railway. As a passenger service operator, GBR will naturally be incentivised to grow passenger numbers in order to raise its own revenue, as my hon. Friend the Member for Birmingham Northfield so ably outlined.

The proposed duties on economic growth would also duplicate the public interest duty, which explicitly requires GBR to consider economic benefits when making decisions on the railway. The proposed duty on passenger satisfaction would duplicate the minimum consumer standards that we expect to include in the GBR licence. On the shadow Minister’s point about enforcement powers relating to the passenger watchdog, it is worth saying that the watchdog will set those minimum consumer standards, covering things such as accessibility and passenger information, in consultation with the Secretary of State and the ORR. It can also request enforcement from those bodies, as well as improvement plans from GBR. There are mechanisms to ensure that accountability takes place.

The Minister says the watchdog can request enforcement. Does it have the power to compel enforcement?

As I said, it has the power to request enforcement, and that is important because, ultimately, GBR needs to be able to take those decisions but have robust accountability from the ORR and the Secretary of State should it not have regard to things such as its duties, one of which is to promote the interests of passengers with disabilities. But the watchdog plays an incredibly important oversight function in ensuring that GBR is not remiss in its duties.

The proposed duty on efficiency and productivity is already in the Bill: there is a cost efficiency duty in clause 18. On the proposal to increase private sector involvement, we want GBR to co operate with the private sector to create the best possible railway for everyone, but not to increase private sector involvement as a stand alone goal. There will be times when increasing private sector involvement will be needed, such as when it comes to freight growth, and the Bill already provides for that, but it should not be an end in itself. Rather, GBR should focus on delivering for passengers and taxpayers in the best possible way, using all the options available to it. The duties in the Bill are clear, and introducing additional, duplicative detail will not help GBR to deliver effectively. I therefore urge the shadow Minister to withdraw amendment 33.

Amendment 32 would replace the current definition of railway service performance in the Bill with a longer list of criteria, including reliability, safety, passenger comfort, affordability, passenger growth and the establishment of new services. Those are all important issues, but the Bill already requires GBR to focus on performance, including specifically reliability, punctuality and the avoidance of overcrowding. Those are top passenger priorities when it comes to train performance. Matters such as cleanliness, passenger comfort and value for money will already be considered as part of the passenger interest duty and through minimum consumer standards, which the passenger watchdog will set.

Clause 18 already requires consideration of the social and economic benefits that can be derived from the railway, which will include considering where new services might be needed. That is one of the core benefits of GBR: it will be able to look across the entire network holistically. There will be greater opportunity to maximise our limited capacity and potentially create new services compared with the current system.

Does my hon. Friend agree that under this provision, with the right economic drivers, there could be consideration in future for family friendly trains—a service seen in some parts of Europe, where entire carriages are set aside for toddlers and children to travel in comfort, which might no doubt also increase the comfort of passengers not travelling with children?

I thank my hon. Friend for her contribution as part of this debate, and throughout our proceedings, on the importance of accessibility for people with disabilities and for parents with children. She has already shared with me, for my benefit, examples from across Europe of where family friendly accessibility measures are baked into the way train services operate. One notably striking example was of a children’s playground in a railway carriage in Finland.

We hope that accessibility in all its forms can be embedded into GBR’s operational processes, including where it creates new opportunities for things like additional passenger services. I also point my hon. Friend to the fact that the rolling stock and infrastructure strategy is a really important piece of the puzzle in ensuring we have rolling stock that is unified in its capacity to offer better services for passengers with disabilities and for families travelling on our railways. Her point is very well made.

The Government are committed to ensuring that Britain’s railway continues to rank as one of the safest worldwide and, as promised, the Bill does not change that safety regime. In my view, there is no need for further safety duties in the Bill. In short, everything that amendment 32 seeks to do is already in the Bill’s provisions, so to include it would be duplicative and would muddy the definition of “performance”.

Amendment 31 is intended to require a report on how GBR has balanced the general duties in clause 18, but the amendment is unnecessary. The clearest account of how GBR has balanced its duties will be set out in its published business plan, which the ORR must advise on and the Secretary of State must approve—both reviewing the plan with those same duties in mind.

Will the Minister clarify his argument? I ask because a business plan by its nature looks forward, whereas a report looks backward and marks homework. How can the business plan mark homework?

Regard will have to be paid to the business plan over the period for which it is implemented. It will also be possible to tell, on the business plan’s completion, whether it has been completed in a way that is cognisant of and reflects GBR’s duties. The Secretary of State will review the business plans with the duties in mind, as set out in clause 18. That approval process is in itself an assessment of how GBR has balanced its duties, affording lessons as to how they have been applied in the past but also, as the hon. Member is right to point out, for the future.

The approval process is designed so that the bodies can provide checks and balances on each other, through co operation and constructive challenge, ensuring that the common objectives are achieved in the best way possible. The business plan and the advice relating to it will be published, so Members can follow along and scrutinise whether GBR is appropriately balancing its duties at all times. This is already a transparent reporting system. I therefore urge the hon. Member for Broadland and Fakenham to withdraw or not press these amendments.

I am aware that we need to make progress in this Committee, so I will not press every amendment to a Division. I am not persuaded by the Minister’s arguments in relation to amendments 32 and 33, but I will not press amendment 31 to a Division. I wish now to press amendment 33 to a vote.

Question put, That the amendment be made.

41|0|3|9|The Committee divided:|Question accordingly negatived.||0|0

Amendment proposed: 32, in clause 18, page 10, line 37, leave out sub paragraphs (a) and (b) and insert—

“(a) reliability, including punctuality, cancellations, short forming, delays and the reliability of key connections,

(b) safety and security, including safety incidents, security incidents affecting passengers, staff presence, and the delivery of safety critical maintenance,

(c) passenger comfort and on board experience, including cleanliness, the functioning of heating, air conditioning and lighting, overcrowding, the availability and performance of any internet connection or power sockets, and toilet facilities,

(d) affordability and value for money, including levels of fares, the availability of discounted or flexible fares, transparency of fare information, and passenger perception of value for money,

(e) passenger growth and network expansion, including growth in passenger numbers, the number of communities served, service frequency, and the provision of new or restored services.”—(Jerome Mayhew.)

This amendment defines standards of railway performance for the purposes of Great British Railways functions.

Question put, That the amendment be made.

42|0|4|9|The Committee divided:|Question accordingly negatived.||0|0

I beg to move amendment 36, in clause 18, page 10, line 41, at end insert— “(5) In this section, Great British Railways must make an assessment of the effect of procuring services from businesses in the private sector in meeting its duties under subsection (2)(f).”

This amendment would require GBR to assess whether procuring services from the private sector would help it meet its value for money duty.

With this it will be convenient to discuss the following: Amendment 42, in clause 31, page 17, line 2, after “public” insert “or private.”

This amendment would allow private sector companies to operate train services on behalf of Scottish Ministers. Amendment 43, in clause 31, page 17, line 8, after “public” insert “or private.”

This amendment would allow private sector companies to operate train services on behalf of Welsh Ministers. Amendment 98, in clause 74, page 43, line 5, at end insert— “(d) whether the procurement of services from the private sector would represent a more efficient use of public funds.”

This amendment would require the ORR to consider whether GBR procuring services from the private sector would be a more efficient use of public funds. Amendment 236, in clause 74, page 43, line 5, at end insert— “(d) whether the procurement of services from private sector suppliers would allow for more efficient use of public funds.”

This amendment would require GBR and the ORR to assess whether procuring services from the private sector would better enable it to meet its value for money duty. New clause 43—Private sector growth target— “(1) The Secretary of State must publish a target for increasing private sector involvement in railway services and infrastructure for each financial year.

(2) The target under section 1 must include, but is not limited to increasing the role of the private sector in— (a) supply chains, and (b) open access.

(3) The Secretary of State— (a) must keep the target under review, (b) may revise or replace the target, and (c) must publish any revision or replacement to the target.

(4) Great British Railways must, when exercising its statutory functions, have regard to the target set by the Secretary of State under this section and any policy of the Scottish Ministers relating to the investment of the private sector in railway services and infrastructure in Scotland.”

This new clause requires the Secretary of State to set a private sector growth target.

Let us go straight into amendment 36, which would require GBR to benchmark the cost of its activities against similar provision through the use of the private sector. That is important, because if competition is removed, there is literally no benchmark against which to judge the effectiveness and efficiency of the organisation. Without comparison, where is the value in clause 18(2)(f), which says: “taking into account the costs that will need to be met from public funds and the need to make efficient use of those funds,”?

What benchmark will the organisation have if it does not cross reference against alternative providers?

The amendment would require GBR to assess whether “procuring services from…the private sector”

would help it to meet its value for money duty. I should make it clear for Labour Members who are considering supporting this amendment that it would not require GBR to choose a private sector provider, but it would require it to benchmark against the private sector.

Procuring from the private sector could enable access to specialist expertise, innovation—dare I say that?—and competitive pricing, helping to deliver better value for money and more efficient outcomes for taxpayers. Will the Minister listen to the concerns of the industry and support this amendment, which seeks to make GBR an organisation that cares about passengers and taxpayers at the same time?

Amendments 42 and 43 would amend clause 31, on the provision of railway passenger services, which we will get to in due course. The clause currently allows the Secretary of State to award a licence only to a public sector company. It cannot be in the best interests of the taxpayer to exclude even the consideration of alternative providers based on their ability and value for money. This is one of the most blatant examples of political ideology trumping pragmatism. The amendments would grant maximum flexibility to a future Secretary of State and Scottish and Welsh Ministers to make an award to the organisation, public or private, that is best placed to undertake the operation. It seems obvious that we should allow that degree of flexibility to the organisation and the Secretary of State in future.

Amendment 98, which is tabled in my name, would require the Office of Rail and Road to consider whether it would be a “more efficient use of public funds”

for GBR to procure services from the private sector. It echoes the other amendments in this group but would amend clause 74, which, as everyone will remember, relates to the ORR’s monitoring duties towards GBR. Amendment 236 would also amend clause 74 to require the Office of Rail and Road to assess whether procuring services from the private sector would better enable GBR to meet its value for money duty.

New clause 43 relates to a private sector growth target. It would require the Secretary of State to publish a target for increasing private sector involvement in railway services and infrastructure for each financial year, including its involvement in supply chains and open access. Just because we want GBR to be a success, let us not forget that, even once established, it will be a minority interest in relation to the rail sector as a whole. There is not just open access—there are all sorts of other users of and suppliers to the railways—so we can have both duties. They are not mutually incompatible. The new clause would require that the target must be kept under review and that GBR must have regard to it when exercising its statutory functions.

The private sector is best at providing us with innovation and efficiencies and should therefore be used to ensure that GBR can be the best version of itself. In more common parlance, we need the private sector to keep GBR honest. The Bill designs the ORR and the Secretary of State out of comparing GBR against a thriving private sector. Surely it makes sense to give the Secretary of State all the tools in the box to allow her to drive efficiency in GBR and cross check value for money for the taxpayer.

Could the shadow Minister advise me whether there is anything in his amendments or new clause that would exclude foreign state owned railway enterprises from that definition of “private sector”?

The hon. Member is as capable of reading the amendments as I am of drafting them. I do not want to get hung up on that, but my working assumption and my assertion to him is that the ownership structure internationally may be a state owned organisation, but the delivery body in the United Kingdom would be a for profit, private organisation, so it would pass the test of being in the private sector. Jolly good news too—if the British taxpayer can benefit from the largesse of the foreign taxpayer providing a more competitive service for whatever the Secretary of State is seeking to contract for, that is a wonderful thing. That is a gift from abroad, and we should be encouraging it.

Before I get into to my substantive points on this amendment, I want to circle back to a query the shadow Minister raised earlier, via an intervention, about accessibility and data sharing. I have a little more specificity to share with him: independent retailers will have the same opportunity as GBR to provide passenger assist to customers, and we are absolutely committed to a fair and open market. As part of this, the ORR’s code of practice will ensure that retailers get sufficient access to systems and data.

I am very grateful.

Amendment 36 would require GBR to make an assessment of how procurement from the private sector could help it meet its value for money duty. The amendment is drafted on the basis that GBR would otherwise be uninterested in working with the private sector, but I highlight to the Committee that that is not currently the case for Network Rail and will not be for GBR either.

Currently, Network Rail spends, on average, around £8 billion per year with more than 4,000 rail suppliers. We expect that, in future, at least 60% of expenditure by GBR could feasibly be spent in the private sector. By providing a more integrated approach across track and train, and greater long term certainty, GBR will be in a position to give the private sector the confidence it needs to invest, support innovation and promote the adoption of new technology.

When discharging its duties under clause 18, GBR must consider the efficient use of taxpayers’ money, and it must be able to decide the most appropriate way to do that. That is the basis of the principle of decentralising decision making away from Government and empowering GBR to run the railway. Prescribing a specific assessment of potential private sector involvement, which might not always be relevant every time GBR discharges that duty, would itself be an inefficient use of funds.

Amendments 42 and 43 would allow private sector companies to operate passenger trains for Scottish and Welsh Ministers and the Secretary of State. The Government were elected on a clear manifesto commitment to return franchised passenger services to public ownership. Public ownership is the only way to make the railway run better, with the whole system working to one set of clear objectives.

If that is the clear objective of the Government, why are they allowing open access to continue?

The shadow Minister pre empts what I am sure will be a spirited debate about open access in later clauses. Open access provides a proportionally very small percentage of passenger services on the railway, but it makes a really important contribution, especially in terms of inter city links, which I personally benefit from with Hull Trains running from Selby to London. GBR does not want to lose the benefits that open access can provide. In fact, having a more streamlined and cohesive railway, as a result of GBR’s responsibility for capacity, could even increase the ability for open access services to run on within the network.

That does not change the fact that, in our view, overwhelmingly across the UK, public ownership is the right way to make the railway run better, as it can work to a whole system approach and a clear set of objectives to improve reliability, performance and punctuality for passengers. Privatisation created conflicting priorities and complex contracts that cost the taxpayer £150 million annually in unnecessary fees. A 2020 report found that Network Rail and train operators were employing hundreds of people just to work out who was to blame for disruption.

That system was outrageous, and it was symptomatic of a privatised system in which operators were financially incentivised to point fingers instead of fixing problems. We cannot continue with no one in charge, and the Bill makes it clear that, in future, GBR will be responsible for making the railway work, and no one else.

When the Minister talks about wasting money on people being employed to argue with each other about who is to blame, I think of what his colleagues are doing in the Department of Health and Social Care with NHS England, by removing that culture and not having two state organisations delivering health. Does he envisage a problem here with the Department for Transport and GBR both having some responsibility for delivering rail and getting into a situation where they are doubling up on capacity and arguing about who is responsible for what?

With respect to the hon. Member, I do not think that those two examples are analogous. The Secretary of State has a responsibility to set out the long term rail strategy, to guide how GBR will work over the decades to come, but in terms of access, charging, passenger experience and making sure that our railway runs for every part of the United Kingdom, GBR will be solely responsible for that work. Therefore, I do not believe that the NHS England comparison works in this instance.

Both amendments 98 and 236 would require the ORR to consider whether GBR procuring services from the private sector would be a more efficient use of public funds. In carrying out its monitoring role, the ORR is already under a duty to consider the efficient use of taxpayers’ money, alongside duties to promote the interests of passengers, the use of rail freight and the public interest. Prescribing a specific and focused test that the ORR must apply when monitoring the delivery and outcomes of GBR’s activities is ideologically driven and adds nothing to the already comprehensive monitoring role that the ORR possesses.

The ORR’s monitoring and advisory role, His Majesty’s Treasury spending controls and external scrutiny will all ensure proper value for money scrutiny. If the ORR thought there was a significantly better value for money way of achieving a certain objective than the one proposed in the business plan put forward by GBR, the ORR could highlight that to GBR and the Secretary of State. The Bill therefore already delivers this intent.

New clause 43 would require the Secretary of State to set a private sector growth target. I agree that the private sector has a vital role to play in our railways. That is true across the supply chain—in rolling stock, freight, open access services, ticket retail and innovation—and nothing in the Bill seeks to exclude or marginalise that contribution. However, we do not agree that imposing a statutory growth target for private sector involvement is the right approach.

The Bill establishes Great British Railways as the single directing mind for the railway, responsible for balancing its statutory duties in the round. Those duties include promoting the interests of passengers and potential passengers, making efficient use of public funds, promoting the use of rail freight and enabling providers to plan for the future of their businesses. Those are the right incentives to create the railway that we want—one that is reliable, connected, effective and brings together the best of the public and private sectors to deliver for the general public. Private sector growth in isolation, without regard to those aims, could drive the wrong incentives and will not create the railway that we all want to see.

The Bill is designed to secure the best of both worlds. GBR will simplify engagement and provide clearer long term direction and greater certainty, while continuing to procure billions of pounds’ worth of goods and services from private sector suppliers. We expect that a substantial proportion of GBR’s expenditure, once established, will continue to flow through the private sector. Open access operators will continue to play a role where they add value and represent best use of the network, supported by fair and transparent access and charging arrangements, with appropriate regulatory safeguards.

The supply chain will benefit from longer term strategies and more coherent planning than the fragmented system delivers today, and the duties reflect the need for private sector providers to plan with certainty. What matters is not meeting an arbitrary target, but delivering better outcomes for passengers, freight and the taxpayer. A statutory private sector growth target would add rigidity where flexibility and judgment are required. In the light of all those reasons, I urge the hon. Member for Broadland and Fakenham not to press the amendments and the new clause.

Before I call the shadow Minister, I advise him that we will only decide on amendment 36 at this point; decisions on the other amendments will come later.

Thank you, Mrs Hobhouse; I am grateful for that guidance. Amendment 36 is a bench marking amendment. It is absolutely crucial to keep GBR honest in the future when it comes to value for money, in particular for the taxpayer. I will certainly press it to a Division.

Question put, That the amendment be made.

43|0|3|9|The Committee divided:|Question accordingly negatived.||0|0

Clause 18 ordered to stand part of the Bill.

Clause 19

Safety duty of Ministers and ORR

Question proposed, That the clause stand part of the Bill.

Clause 19 ensures that the existing safety duty under section 4 of the Railways Act 1993 will be preserved in full and continue to apply to the relevant sector bodies. Safety is a critical priority for the Secretary of State and for this Government. The clause is necessary to fulfil the Government’s commitment that the Bill will not alter the existing legal framework underpinning rail safety, which has led to Britain’s railways consistently ranking as among the safest in the world. That is all I have to say on the clause.

I can beat that. The clause appears necessary, and it is not one that His Majesty’s Opposition will object to.

Question put and agreed to. Clause 19 accordingly ordered to stand part of the Bill. Clause 20 Competition duty of ORR

I beg to move amendment 237, in clause 20, page 11, line 21, leave out paragraph (c).

This amendment removes the exemption for ORR’s functions under schedule 2 from its competition duty.

With this it will be convenient to discuss the following: Amendment 37, in clause 20, page 11, line 22, leave out paragraph (d).

This amendment requires the ORR to promote competition in its appeals role. Amendment 210, in clause 20, page 11, line 22, leave out paragraphs (d) and (e).

This amendment removes the exemption of the ORR’s duty to promote competition in regard to GBR’s access process. Amendment 238, in clause 20, page 11, line 23, leave out paragraph (e).

This amendment removes the exemption for ORR’s functions under section 55 to 58 of the Railways Act 1993 from its competition duty. Amendment 239, in clause 20, page 11, line 24, leave out paragraph (f).

This amendment removes the exemption for ORR’s functions exercisable under section 67(3) of the Railways Act 1993 from its competition duty. Amendment 240, in clause 20, page 11, line 25, leave out paragraph (g).

This amendment removes the exemption for ORR’s functions under section 69A of the Railways Act 1993 from its competition duty. Amendment 267, in clause 20, page 11, line 25, at end insert— “(h) its functions as the enforcement body for rail passenger rights and obligations, consumer protection and accessibility, including passenger related licence conditions.”

This amendment means that the ORR’s duty to promote competition does not apply when it conflicts with its passenger rights enforcement duties. Amendment 38, in clause 20, page 11, line 27, after “competition” insert “and deliver value for money”.

This amendment requires the ORR to exercise its functions in the manner best calculated to promote competition and delivery of value for money. Amendment 268, in clause 20, page 11, line 28, at end insert “provided that such exercise does not adversely affect passenger rights, network integration or unreasonably increase the cost to public funds of providing railway services.”

This amendment means that ORR must exercise its duty to promote competition in a way that does not adversely affect passenger rights, network integration, or unreasonably increase costs to public funds. Clause stand part.

I hope I am not going to miss out any of those amendments, Mrs Hobhouse, but it is going to be quite a challenge. Clause 20 concerns the “competition duty” of the Office of Rail and Road; it sounds pretty good when you read that title but the clause gets progressively less and less good once you delve into it.

The clause requires the ORR to promote competition in the exercise of its functions, subject to certain exceptions. Exempt activities relate to safety, train driver licensing, the funding of GBR, GBR’s access process and decisions in relation to railway infrastructure, licence enforcement, functions under the Competition Act 1998, and monitoring GBR, where the Government believe that other considerations are equally or more important than the need to promote competition.

The Government claim that they want the Office of Rail and Road to have a powerful role to monitor GBR and to promote laudable objectives such as “competition….for the benefit of users of railway services.”

On the face of it, that is welcome. It is a sound principle, after all, that monopolies—whether they are public or private—are rarely in the interests of the consumer. It is for that exact reason that we created, over time, arms of the state such as the Competition and Markets Authority to break up anti competitive monopolies in the private sector, although GBR is another monopoly that the Government are setting up, in the other direction.

However, when we dig into the detail of what subsection (1) of the clause exempts from the competition duty, the picture becomes considerably less attractive. Excluding from the competition duty chapter 1 of part 3 of the Bill means that key parts of GBR’s operation, such as the access and use policy and capacity duty—two very important issues—are not covered by the duty of competition. That effectively makes GBR all powerful over any other operator, be it devolved, open access or freight. That is not competition; that is a designed monopoly.

The Minister has said that the Government have taken that decision because they want GBR to be a single controlling mind, but GBR will not be the only operator on the railways. The Minister, just a moment ago, said that there are circumstances in which he would wish open access to flourish and grow, yet the Bill as drafted does not give any confidence to that sector that an operator can put forward a business case and attract investment because such an operator does not know whether there will be fair competition around crucial elements of its business case—elements as basic as whether it will get access to the railways. In the Bill, such competition is specifically, expressly excluded.

The exceptions in the clause are key to understanding the true intentions of the Government. Despite the appearance that the clause allows the Office of Rail and Road to promote competition, examination of subsection 1(d) shows that the Office of Rail and Road is required to promote competition unless it gets in the way of the access and use policy, which—as the Committee will discuss later—does not promote competition at all.

Elsewhere, the Government appreciate the positive impact of competition. Look at international rail. Lord Hendy took the trouble to write to the Office of Rail and Road in July last year, and said: “The Government firmly believes that the arrival of competition will benefit users of international rail services by expanding the number of stations served (including new markets), encouraging greater differentiation in service provision and promoting competitive prices.”

I could not have written it better myself. The Government are clearly sending out extraordinarily mixed messages: competition is good, except when it is against the Government. Those statements cannot both be right, can they?

Let us see what the evidence demonstrates. The ORR quarterly figures on passenger rail usage are a valuable source to evaluate the impact that open access operators—competition—have made on the rail market. Three long distance open access operators in the UK operate on the east coast main line. In comparison, the Great Western main line and the west coast main line currently have no open access operations. The ORR figures enable us to get what is admittedly a high level understanding—there will be other factors at play, but it is instructive—of the impact that open access operators can have on the rail network by comparing east coast main line passenger demand to the Great Western main line and the west coast main line. These are Government figures for April to June 2025, and they were published on 30 October last year. They showcase that all long distance operators on the east coast main line are growing against 2019 figures.

Combining the operators on the east coast main line, the route is currently seeing journey growth of 30%, compared with the pre covid level in 2019. We must bear that in mind. One of those is nationalised—LNER—and the others are open access, but in combination there has been 30% growth. LNER passenger growth was 23% in 2024-25, compared with 2018-19—pre pandemic levels. Grand Central passenger growth was 20% in 2024-25, and Hull Trains passenger growth was 54% in 2024-25, compared with 2018-19. The fact that long distance passenger growth on ECML, including Lumo, was 30% in a year clearly demonstrates that all operators are growing on the east coast main line. That includes the impact of Lumo commencing in October 2021.

In comparison, the two dominant operators on the Great Western main line and the west coast main line have seen 9% and 10% fewer journeys than in 2019 respectively. That is really important. The Great Western main line data is impacted by the transfer of suburban services to TfL Rail in 2019, so it is not as good an indication—I am highlighting a potential difference—but there is still a noticeable difference in the direction of travel of performance. The Committee should ignore it at our peril, because we would be turning our face against the data to advance our political beliefs.

The difference between the east coast main line and the west coast main line is further amplified when comparing the latest Civil Aviation Authority data from September 2025, which records passenger movements between UK airports. Although rail journeys figures on the east coast main line have grown by more than 30%, the number of people travelling between Edinburgh and London by air has fallen by 13%, from 3.4 million to 2.9 million journeys. In contrast, the number of people travelling between Glasgow and London by air has fallen by only 9%, broadly in line with the overall west coast main line rail market, which has seen a 10% fall in journeys.

We have to ask why that is. Although those rail figures reflect markets on the route and not specific flows, it can be assumed that air has lost market share to rail on the east coast main line between Edinburgh and London, and not on the west coast main line, where there is no open access challenger between Glasgow and London. The difference between the east coast main line and the west coast main line is therefore stark, with all the east coast main line operators experiencing significant rail passenger growth volume while the west coast has still to get back even to 2019 levels—a difference that is amplified by the larger drop in air passenger demand between Edinburgh and London versus Glasgow and London.

While several factors will be contributing to the difference between passenger demand performance for both, the biggest difference is open access operations, which are providing choice, value and capacity to grow the market. The evidence, if we are interested in evidence, is overwhelming that competition drives down prices and drives up services, just as Lord Hendy said it would in relation to international travel.

I do not dispute some of the points that the shadow Minister makes on open access, but could he tell us a little more about how this relates to his perspective on the access regime? One of the reasons open access is unable to thrive on the west coast main line is insufficient capacity, and part of the access challenge is created by Network Rail and the ORR not having a cohesive system for managing access and timetabling in a way that makes sense. Would having one unified body to manage that access regime not allow open access opportunities to be realised in shorter order?

It may well do, in short answer. The Minister makes a valid point: having a single point of contact for this may well have a benefit. Of course, it could be the Office of Rail and Road as opposed to GBR, but the real problem, which we will come on to in a few hours—or days—is the drafting of clause 63, which concerns the capacity duty and the very onerous level that open access operators will have to get above in order for GBR to consider that there is sufficient excess capacity to allow for new services. As clause 63(2) states: “Great British Railways must exercise the functions so as to ensure that it retains sufficient capacity over GBR infrastructure to allow for…the operation of GBR passenger services and of railway passenger services that it expects will in future be GBR passenger services”.

That is a bar, I suggest, that no open access application could ever get over. GBR gets a get out of jail free card.

No one likes competition. When I ran businesses, I did my best to avoid competition as much as I could. The inclination of GBR will be no different. It will not want to be shown up by competition. It will not want its market to be pinched by competition. All it will have to do is look at clause 63 and say, “There you go. At some stage in the future we might think about having something there,” and Bob’s your uncle. Then what can the open access operators do? They could say, “That is a terrible decision. We’re going to appeal it. Even though the bar is so high in legislation that it is almost impossible to appeal, we’re going to the ORR because clause 67 says that any organisation that is disgruntled at such a decision has a right to appeal.”

Look at what the appeal duty provides for: organisations can go to the ORR, and there is an appeal akin to judicial review in the High Court, meaning that there can be no appeal at all on the application’s merits, which cannot be reopened. No evidence regarding whether there is a good business case can be considered—just whether there has been an error of law, or whether an organisation properly constituted could have come to that decision without irrationality. That is what the judicial review principles mean. Furthermore, organisations have to put in their application for judicial review within three months of the commission of the event against which they are complaining. It is incredibly onerous, and perhaps the single biggest problem with the drafting of the Bill is a combination of those two issues.

That was a very enjoyable aside, but I need to get on to the amendments—you are probably relieved to hear that, Mrs Hobhouse. Amendments 237, 37, 238, 239 and 240 essentially all serve to apply the ORR competition duty to GBR functions, to serve the passenger rather than the organisation of GBR. That is what we need to focus on time and again: this organisation is to serve the passenger, not itself as an organisation. The amendments would keep alive the role of open access operators as challenger brands to GBR, forcing GBR to up its game and stay honest, just as we have seen with the nationalised operator on the east coast main line.

Just because there would be competition, that does not mean that GBR would wither and decline. As we have seen on the east coast main line, competition drives increased performance and results from all organisations when properly applied. Competition is always uncomfortable. I complained about it many times in my previous business career. Many businesses, including my own, would have loved to be able to regulate it away. All the more reason for the Government to stand up to GBR in the interests of passengers.

The Minister was quite right to say that it is a positive step that GBR will have oversight of the whole network. However, we want to see the ORR’s competition powers in these areas restored as a way to ensure that GBR, while having a reasonable duty to look at and balance the needs of the network as a whole, does not unfairly discriminate against other operators because we have GBR as referee and player. That is clearly a designed, structural conflict of interest. We need to have the ORR focusing on competition and holding the ring.

Amendment 237 deals with funding, amendment 37 deals with access, amendment 238 deals with railway closures, and amendments 239 and 240 deal with advice to the Secretary of State and amendment 240 also deals with advice to the Secretary of State. I know all Members will have read those amendments, so I will not take the Committee through them one by one in the interests of time.

Amendment 38 would insert “and deliver value for money”

after “competition” in clause 20, page 11, line 27. We do not need the Office of Rail and Road just to fight the cause of competition; it is also about value for money for the taxpayer. We have already heard that about 50% of all money spent on the railways at the moment is taxpayers’ money, not farebox money. It is therefore crucial that the ORR should have a duty to ensure that GBR delivers value for money. The general duty, as set out in clause 18, is to have regard to the “efficient use” of public funds. That is clearly insufficiently strong. In the absence of other private passenger operators, whether via open access or a devolved concession, which would be equally powerful as a comparator for GBR’s performance, against what will GBR’s efficiency and performance on value for money be measured? Amendment 38 would correct the language in clause 20. I have not made it up myself; it has been considered and approved of by the sector as a whole—people standing up for passengers. On amendments 37, 41, 42 and 43, Rail Forum said: “Again, this is desirable to ensure some competition.”

I have spoken to all my amendments, but I would also like to speak about amendment 210, which is in the name of the hon. Member for Didcot and Wantage. The amendment also removes the exemption of the ORR’s duty to promote competition in regard to GBR’s access process. It is a variation on a theme. We are all pushing in the same direction because we are trying to stand up for passengers, and I hope the Government will too.

As the shadow Minister said, amendment 210 is our attempt to strengthen the ORR’s role in access decisions, so we agree with some of the Conservative amendments, but not all of them.

Let me explain the context. In an ideal world, I would not want to see competition between passenger services decided by the ORR, for two reasons. First, the current way that open access is run on our railways can be complicated, suboptimal and inefficient, although in certain places it is producing good results, such as on the east coast main line, as the shadow Minister said.

The second reason is that the ORR does not always cover itself in glory in its current form, as per its notorious decision, quickly reversed, about the 0700 express from Manchester to London. I have tabled new clause 56, which we will come to later, which suggests a different way of promoting competition on the railway: it would institute a centrally decided timetable, and some of the paths on routes that have more than one train an hour would be auctioned off. For example, three trains an hour run on the London to Manchester route, and GBR would intentionally introduce competition by auctioning off one train path an hour, which hopefully would encourage both sides to pull their socks up. We have increasingly seen that happening on the Italian high speed network and in France. Absent that, we feel—with those caveats having been issued—that it would be beneficial for the ORR to retain stronger powers in relation to access and competition. That is why we have put forward amendment 210.

The amendments in this group relate to the ORR’s competition duty and primarily look to remove the various exemptions set out in clause 20. I will begin by saying that we of course recognise the benefits that competition can bring to railway users and the economy at large. In the supply chain, competition drives innovation and efficiency. In the online retail market, competition provides choice and drives up the quality of passenger experience. However, although competition may be a powerful means of achieving a goal—such as innovation—there are many railway functions where it would not be appropriate, and could even be counterproductive, to treat competition as a goal in itself. That is true of many of the ORR’s functions in the new model.

Amendments 237 and 240 look to apply the ORR’s competition duty when it is advising the Secretary of State on GBR’s business plan, and when monitoring GBR’s activity against that business plan. It would also apply the ORR’s competition duty when it was monitoring GBR’s activities against its railway safety purposes. Our view on this matter is clear: if competition is not improving the railway for the passenger, taxpayer or economy, we will not be pursuing it. Competition for competition’s sake is ideological and does not help us to achieve the goal of making the railway work better.

When creating its business plan, GBR will need to take into account economic considerations, as set out in the public interest duty in clause 18; and when the ORR reviews the business plan to ensure that it offers value for money, it will be applying the same tests relating to the economy and cost efficiency. It would not be right for the ORR to overlay an additional competition objective on to that advice when the purpose of the advice, as clearly set out in the Bill, is to scrutinise GBR’s proposed business plan to ensure that GBR can deliver on the Secretary of State’s objectives in a value for money way. That should be a simple assessment of performance, not a way to pursue separate goals.

Amendments 37 and 210 would require the ORR actively to promote competition when hearing access appeals. The nature of the appeals role is a broader point, which we have covered to a small extent today and which I am sure we will cover in greater detail in a few days’ time, so I will endeavour to be brief now. The Bill establishes a robust and fair framework to enable GBR to take decisions on the best use of the network. The ORR’s appeals role is designed to ensure that GBR acts lawfully, fairly and consistently with its duties, but it is not there to supplant GBR as the directing mind by wholly retaking strategic decisions or applying a different decision making framework.

An active duty for the ORR to promote competition at the appeal stage would undermine that, effectively creating two decision makers, applying two different yardsticks, at different stages in the process. In fact, two different bodies taking decisions based on different criteria is exactly what we have at the moment with Network Rail and the ORR, and this is fertile ground for exactly the kind of conflict, disagreement and delay that plague the current access regime and that our approach is designed to fix. That is part of the system that has failed to deliver for passengers and taxpayers and that we absolutely must move away from if we want a better railway.

Amendment 210 would have the additional effect of applying a competition duty to the ORR’s enforcement of GBR’s licence. That is also the focus of amendment 238. The ORR’s task when enforcing the licence is to ensure compliance so as to provide legal and regulatory certainty. Applying a competition duty to this function would distort the purpose of these powers. The amendment would therefore undermine the regulatory framework and be counterproductive.

Flirting with tautology, amendment 239 would require the ORR to promote competition when exercising its competition powers under the Competition Act 1998. The Railways Act 1993 establishes the ORR as the competition regulator for the sector, alongside the Competition and Markets Authority. To ensure effective regulation, the two must act according to the same rules, without interference from sector specific priorities. That is why neither the ORR’s railway competition duty nor the other ORR specific duties apply when it is acting as a competition regulator. This is a continuation of the current approach to regulating competition in legislation and not one from which we should deviate.

Amendment 38 is not necessary, as it simply duplicates clause 18(2)(f), which already requires the ORR to take “into account the costs that will need to be met from public funds and the need to make efficient use of those funds”.

An additional requirement to consider value for money would therefore be redundant.

Amendment 268 seeks to ensure that the ORR exercises its duty to promote competition in a way that does not adversely affect issues such as passenger rights, or unreasonably increase costs to public funds. I support the spirit of this amendment and its focus on safeguarding passenger rights, the smooth operation of the railway and the public purse. It is precisely because I agree with those aims that clause 20 already ensures that the ORR will not be subject to a duty to promote competition when carrying out certain functions.

Further, the Bill already protects public funds through clause 18. It includes an obligation on the Secretary of State, the ORR and GBR to consider cost efficiency, which should ensure that the value for money that the hon. Member for Broadland and Fakenham is looking for is delivered. When the ORR considers value for money in the context of GBR’s business plan, the Bill ensures that it will not be distracted by the irrelevant consideration of promoting competition.

Regarding passenger rights, the ORR’s competition duty, where it applies, is specifically to “promote competition...for the benefit of users of railway services.”

It will therefore not be promoting competition except for the benefit of passengers. That wording, plus the fact that the ORR will continue to be the enforcer of passenger rights and consumer law, means that the ORR is already set up to recognise the importance of passenger rights. The Bill already sufficiently protects passengers’ rights, effective running of the network and taxpayer funds ahead of competition, so there is no need to duplicate efforts by making the amendment.

In summary, clause 20 rightly requires the ORR to promote competition when it exercises its functions, subject to some specific and necessary exemptions, which I have just explained in detail. I therefore urge hon. Members not to press their amendments.

You will not be wholly surprised, Mrs Hobhouse, to know that I am entirely unconvinced by the Minister’s arguments. This is one of the key differences of opinion between the Government and the sector, and I seek to give the sector a voice through my amendments and my submissions. I will look to you, Mrs Hobhouse, for guidance on the exact process; I intend to press some amendments to a Division, but not all of them, to save a bit of time for everyone.

If the hon. Gentleman wishes to press amendment 237 to a vote, once that is decided, the other ones will follow.

To give you an advance clue, I intend to press amendments 237 and 37 to a vote. Depending on the outcome of the vote on amendment 37, I may not seek to divide on the others, apart from amendment 38.

Okay. Olly Glover, do you intend to press amendment 210 to a vote?

One moment, Mrs Hobhouse.

My opinion is that they all basically deal with the same principle. I also remind the Committee that we need to move on to other issues.

I shall not then, Mrs Hobhouse. Thank you for your guidance.

Question put, That the amendment be made.

44|0|3|9|The Committee divided:|Question accordingly negatived.||0|0

Amendment proposed: 37, in clause 20, page 11, line 22, leave out paragraph (d).—(Jerome Mayhew.)

This amendment requires the ORR to promote competition in its appeals role.

Question put, That the amendment be made.

45|0|5|9|The Committee divided:|Question accordingly negatived.||0|0

Amendment proposed: 38, in clause 20, page 11, line 27, after “competition” insert “and deliver value for money”.—(Jerome Mayhew.)

This amendment requires the ORR to exercise its functions in the manner best calculated to promote competition and delivery of value for money.

Question put, That the amendment be made.

46|0|5|9|The Committee divided:|Question accordingly negatived.||0|0

I now propose a short suspension of 10 minutes.

Sitting suspended.

On resuming—

Clause 20 ordered to stand part of the Bill.

Before the next debate, I advise the Committee that we hope to get through clauses 21 to 24 and adjourn the sitting before we start consideration of part 2 of the Bill. I hope that is agreeable. We aim to end the session with clause 24, but we will see how it goes.

Clause 21 Duty of ORR to have regard to Secretary of State’s guidance Question proposed, That the clause stand part of the Bill.

With this it will be convenient to discuss clause 22 stand part.

Clause 21 preserves the Secretary of State’s current ability to issue guidance to the Office of Rail and Road under the Railways Act 1993, and clause 22 does the same for Scottish Ministers. The clauses are necessary to maintain the ability of the Secretary of State and Scottish Ministers to issue guidance to the ORR when exercising relevant statutory functions, alongside the ORR’s duty to have regard to such guidance, which must of course be published to ensure that the safety regime that underpins the railway does not change.

Both clauses confirm that neither the Secretary of State nor Scottish Ministers can issue guidance to the ORR in relation to its functions as an enforcing authority under the Health and Safety at Work etc. Act 1974. This is to ensure that the safety regime remains completely independent of Ministers. In addition, guidance cannot be issued to the ORR when it carries out functions relating to train driver licensing, or its functions under the Competition Act 1998 to main consistency in the arrangements for competition regulation between the ORR and the Competition and Markets Authority. That will also provide further protection for the private sector.

The guidance issued under the clauses is intended, as is currently the case, to support the ORR in discharging its relevant statutory functions. Guidance can provide for a better common understanding of an area or encourage a strategic focus on specific issues, whether that relates to supporting freight growth, driving efficiency or improving passenger experience. Furthermore, the ORR will be afforded the flexibility to balance any issued guidance against its wider statutory duties and requirements.

The ORR confirmed at the Transport Committee that it can balance receiving ministerial guidance with its role as an independent regulator, and that it does so effectively already. Therefore, the clauses will help to ensure that the ORR’s regulatory role remains aligned with the strategic priorities set by the Government in a manner that is practical, proportionate and does not undermine the ORR’s independence as a regulator. I commend the clauses to the Committee.

The principle the Government continue to establish is important for the relationship between the state and the ORR when it comes to safety related duties. I recognise the Government’s work to ensure that the clauses protect the ORR’s independence in many regards, rather than encroaching upon it. The protection of that independence is vital. When it comes to the relationship between Great British Railways, the ORR, the Department for Transport and Ministers, as well as the various devolved Governments and mayoralties —not forgetting the fact that passengers count—the Opposition have thought long and hard about how we can ensure that the ORR maintains its standards of excellence as a regulator.

I want to take this opportunity to review the safety record of the railways overseen by ORR as the safety regulator since its inception in 2004. The ORR publishes masses and reams of data as part of its continuing mission to provide transparency and oversight. By most key metrics, safety has improved significantly, with the UK being praised as one of the safest railways, if not the safest railway, in Europe. We really should stop and consider that achievement, whether it relates to nationalised or privatised parts of the industry. Government Members criticise privatisation, but it has not impinged on safety, and that is quite an achievement. It is vital that the ORR can continue its strong work in delivering not only a safe railway but a transparent one.

The ORR has consistently worked by acting as a critical friend to the franchise operators and Network Rail. In the new age of GBR, it is important that the Secretary of State, who will direct both the ORR and GBR, should be mindful not to create an environment in which the ORR feels it cannot be critical of GBR and its actions. Committee members will struggle to find many sectors where stakeholders praise their regulator, but it is right that Ministers should get out of the way of the work of the ORR, because its oversight work is the difference between life or death. I acknowledge that that is the Minister’s intention in clause 21.

Clause 22 sets out the duty of the ORR to have regard to Scottish Ministers’ guidance, and clause 22 mirrors that, enabling Scottish Ministers to give guidance except on the safety related issues I have mentioned. I have a query about clause 22—I am not leading up to some devastating amendment—in respect of the dispute resolution process, if one exists, between the Secretary of State and Scottish Ministers.

Under clause 21, the Secretary of State must consult Welsh Ministers—that creates a clear direction for the conversation—but there does not appear to be an equivalent provision in clause 22. I would be grateful if the Minister could clarify that seeming contradiction and expand further on what happens in a situation where the guidance issued by the Scottish Minister contradicts that issued by the Secretary of State, or perhaps the other way round. Would that be covered by the memorandum of understanding, which of course we have not yet seen? Or is a tightening of statute on the horizon that we are not yet aware of? The Minister might not be able to whip an answer out of his back pocket, but perhaps he can clarify that issue once he has consulted his officials.

Naturally, Scotland has had oversight of Network Rail for many years, so the working relationship between the ORR and GBR north of the border is not likely to change, but, similarly to my concerns about clause 21, protecting the ORR’s independence is important to the entire smooth functioning of the railways. I know the Minister would not wish to speak for Scottish Ministers, but I would very much appreciate it if he could outline the dispute resolution mechanism between the Secretary of State and devolved Ministers. The Minister will be delighted to hear that, beyond that query, we do not oppose clause 22.

I thank the shadow Minister for his comments about the safety regime on our railways, and join him in the sentiment he expressed about the ORR. The Committee can argue about the merits of privatisation versus nationalisation, but the fact remains that the people who work across our railways do so with safety first and foremost in their considerations. The shadow Minister is absolutely right to recognise that we have a formidable safety record in the United Kingdom because of the hard work of people across the railway network.

With regard to situations in which UK and Scottish Ministers could give potentially contradictory directions to GBR, the Bill explicitly provides for the MOU to make provision about the use of directions powers, and the intention is to use that to agree how those powers will be used to avoid giving GBR contradictory directions. We have discussed that with Scottish Government colleagues. If the shadow Minister requires further information on that point, I will be happy to provide it for him. In the meantime, I am glad that he sees the sense in the clauses, and I commend them to the Committee .

Question put and agreed to. Clause 21 accordingly ordered to stand part of the Bill. Clause 22 ordered to stand part of the Bill. Clause 23 Memorandum of understanding: Secretary of State and Scottish Ministers

I beg to move amendment 39, in clause 23, page 13, line 9, at end insert— “(3) The memorandum of understanding must be published at the same time as the Rail Strategy.

(4) The memorandum of understanding must be laid before both Houses of Parliament for a period of two months before it can come into force.”

This amendment would require the memorandum of understanding to be published at the same time as the Rail Strategy, and laid before Parliament for two months before it can come into force.

With this it will be convenient to discuss clause stand part.

I do not know why I bothered going to the gym this morning, Mrs Hobhouse, because I have been doing squat thrusts every time I rise to speak to a new group of amendments.

Clause 23 deals with the memorandum of understanding, about which we have heard so much but know so little, and the relationship between the Secretary of State and Scottish Ministers. It sets out the key arrangements between the UK Government and the Scottish Government, stating the intention for the memorandum of understanding to include steps to facilitate the integration of GBR infrastructure and Scottish railway services. The elephant in the room is that is none of that is set out in the Bill. The Opposition believe it is vital for Ministers to outline, at the very least, the broad framework for the basis of the memorandum if they will not commit to provide core elements in the Bill itself.

It really is very frustrating: we are paid to come to this Committee to give the Bill line by line consideration, set up the function of GBR and improve the relationship among Ministers in Whitehall, Edinburgh and Cardiff, the ORR and the other organisations affected by GBR, yet time and again we get the blank answer, “Oh well, this is going to be sorted out somewhere else.” It is very hard to say with confidence that we have scrutinised the Bill and come to an improved outcome when the Government have not done the work on the detail. This is not the first time Members have heard me say that—

It won’t be the last!

I hope it will be the last, but I fear I will not be.

I have some key questions for the Minister. I understand that the memorandum of understanding has not yet been finalised; has the work to scope it out even begun? The Minister should at least be able to answer that. At what stage in the deliberations between the two Ministries has it got to? What is the timeline for a memorandum of understanding under the clause being finalised and therefore made public? How often, if at all, must the memorandum of understanding be reviewed, updated or renegotiated? Or is it a one stop shop?

It currently seems that the memorandums will have no statutory force. Unless I have missed something in the Bill—I always enjoy being corrected when I have missed something—it is not in there at the moment. Is that by design? What legal standing will the memorandums have? They do not appear to have statutory force, and there is very little democratic accountability, as I have mentioned. As far as I can see, the memorandum is essentially a handshake agreement. Not a single member of this Committee is any the wiser about what will be part of the memorandums.

Finally, what happens if no agreement is reached on a memorandum of understanding between the Secretary of State and Scottish Ministers? The Minister can give evidence about his willingness to reach agreement, but he cannot give evidence on the part of Scottish Ministers. They can be willing to negotiate, but he cannot say with confidence that they will achieve full agreement until such time as that agreement is reached. I stand to be informed by the Minister, but my current understanding is that that agreement has not yet been reached.

The lack of oversight is clearly at the core of this issue. Parliament is expected to allow the Secretary of State and her Scottish counterpart to set the tone of the nature of rail operations without any say from this House, beyond this clause. The Government criticise the franchise system, but at least the parameters for its operation were clearly set out. Memorandums of understanding are nothing more than IOUs to the trust of parliamentarians, and we should not willingly give those out.

There is a further issue at stake here: the Scottish parliamentary elections. This is a matter of practicalities, as opposed to principles. The pre election period, or purdah, is rapidly approaching for the Scottish Parliament. My understanding is that it will be coming into force in late March, which is only weeks away. Given that the Minister will be eager to ensure that all the appropriate orders and memorandums are in place as quickly as is reasonably possible, what thought has he given to avoiding a rush job ahead of the election, or to the timetable for the memorandums of understanding being reached with any change of Government in Scotland? This is actually quite a significant question. Is the Minister going to rush it through to get it in before March? What happens if there is a change of Administration north of the border?

It is with that uncertainty in mind that we believe the clause ought to have a clear timeframe for the publication of the MOU. The memorandums of understanding should be laid before Parliament for approval. Parliament is being asked to give broad Executive powers as if an international treaty were being negotiated, but this is not an international treaty. Parliament ought to have the right to approve the memorandums to ensure, in particular, that Members whose constituencies are affected by them have a say on behalf of their constituents. That is what amendment 39 would provide, by providing two additions: that a memorandum be published at the same time as the rail strategy, which would give a concrete timeframe for the delivery of that important document, and that it be laid before Parliament for a period of two months before it can come into force. I look forward to the Government’s response.

I will endeavour not to detain the Committee for long. In the Committee’s second sitting, when Mr Reeve and Mr McDonald gave evidence—as I think my hon. Friend the Member for Broadland and Fakenham alluded to—Mr McDonald stated: “In the case of Wales, the heads of terms for the MOU were published in December…We are optimistic that we can jointly publish a full draft in early March.”––[Official Report, Railways Public Bill Committee, 20 January 2026; c. 56, Q104.] That is encouraging in the case of Wales, but Mr Reeve was unable to offer any similar assurance as to where things were with Scotland. He said: “We are working with colleagues in DFT on the heads of terms for that and on what the principles will be”.––[Official Report, Railways Public Bill Committee, 20 January 2026; c. 55, Q100.] He also said it remains a priority.

A different pace appears to be being reached in Wales compared with where we are with the MOU with the Scottish Government. My hon. Friend the Member for Broadland and Fakenham is right to highlight the fact that in both cases we will, in a few short weeks’ time, be entering the pre election period for the Scottish Parliament and the Senedd. In the case of Wales, there is a degree of reassurance. Will the Minister update the Committee on where the discussions with the Scottish Government have got to; when the DFT and Scottish Government will publish the heads of terms, as the Welsh Government published them in December; and whether he is still convinced that the March timescale will be met and that we will see both MOUs published?

Amendment 39, tabled by my hon. Friend the Member for Broadland and Fakenham, is pragmatic and proportionate. It simply seeks to put a degree of certainty around the timescales and, quite rightly, as he highlighted, to give the process a degree of transparency by gently nudging all Administrations concerned to lay the MOUs before the House so that right hon. and hon. Members can consider them. I look forward to hearing from the Minister.

Before I speak to amendment 39, I will respond to the questions about the timings of the MOUs, but may I bring the Committee’s attention to the fact that, by reaching this clause, we are now one quarter of the way through the Bill? [Hon. Members: “Hear, hear!”] The hard work progresses.

Work has begun on negotiating the MOUs with Welsh and Scottish colleagues. The MOUs are subject to negotiation with the two Governments, but as the right hon. Member for Melton and Syston pointed out, the heads of terms for the Welsh MOU have been published. It is our intention to publish the Scottish MOU as soon as possible.

The hon. Member for Broadland and Fakenham imagined a nightmare scenario in which we are not able to publish the heads of terms because we do not reach an agreement. Both the testimony we heard at the Transport Committee and what Scottish Ministers, including Fiona Hyslop, have had to say suggest that the negotiations are progressing, as are deliberations on the Bill overall.

The hon. Gentleman was right to ask what the pre election period means for the publication of the MOUs. I refer him to the noble Lord Hendy’s testimony on publication to the Transport Committee, in which he essentially conveyed the message that we are cognisant of the fact that that period is approaching and that we are working on the development of the MOUs on that basis.

I want to tempt the Minister. I hope he will look at me and not catch the eyes of his officials, because I am very well aware, from my time as a Minister, of phrases such as “in the fullness of time”, “at the appropriate juncture” and “in due course”, and exactly what they mean, not least as a keen student of “Yes Minister”. I am sure that, on occasions, I used them myself. May I tempt him a little further as to whether he is going to put an actual timescale on this?

As tempting as the right hon. Member’s requests are, if he would like me to use another phrase, I will say: as soon as possible. I say to the shadow Minister that, although he has to keep asking me about publication of the MOUs today, he may not have cause to do so in the future. That is something we are working to progress as quickly as possible.

The shadow Minister is right to point out—this is an important point—that the MOU itself is not legally binding or enforceable; it does not create new legal powers or obligations beyond those in the Bill. However, its preparation and publication are a statutory requirement; both parties are legally required to produce and publish it. That ensures the transparency and public accountability piece of the puzzle. The MOU is being designed to set out practical arrangements for co operation between the Secretary of State and Scottish Ministers to provide clarity on governance, track and train integration arrangements, and accountability, without altering statutory responsibilities.

Amendment 39 would require the memorandum of understanding with the Scottish Government to be published alongside the long term rail strategy and laid in Parliament. Unfortunately, it is our view that that would serve to undermine the effectiveness of the MOU, which is intended as a flexible mechanism for inter governmental co operation, setting out principles and objectives jointly agreed between Ministers. Requiring it to be published at the same time as the long term rail strategy would unnecessarily lock both Governments into the same rigid timeline for two unrelated documents that serve different purposes. The long term rail strategy sets out long term priorities for the network, while the MOU is designed to support intergovernmental co operation. There is no rationale for linking them.

Further, clause 23 already requires that the MOU be published, providing a meaningful process of transparency without the unnecessary delay that the two month review period would introduce. Amendment 39 would therefore be counterproductive, and I urge the shadow Minister to withdraw it.

Clause 23 provides a sensible legislative basis for the MOU to ensure that appropriate collaboration and accountability mechanisms are in place between the two Governments. That statutory commitment to the MOU enables the Secretary of State and Scottish Ministers to ensure that decisions on Scotland’s railways are taken in a way that reflects Scottish and UK transport priorities. The MOU also enables a route for joining track and train in Scotland, which will ensure that Scotland is able to benefit from these reforms to the same degree as the rest of Great Britain while preserving the devolution settlement. As the Committee will be aware, there is full support from Scotland for the Bill. I commend the clause to the Committee.

I am interested to hear the Minister’s strong hints that the memorandum of understanding may be much more advanced than we had previously been led to believe. The intention of amendment 39 was to flush out the MOU—it sounds like it may well have already achieved its purpose. Taking the Minister’s words at face value, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn. Clause 23 ordered to stand part of the Bill. Clause 24 Memorandum of understanding: Secretary of State and Welsh Ministers

I beg to move amendment 169, in clause 24, page 13, line 29, at end insert— “(da) contain provision about the use to be made of the power to give directions under section 7,”.

This amendment makes further provision concerning memoranda of understanding between the Secretary of State and the Welsh Ministers.

With this it will be convenient to discuss the following: Amendment 40, in clause 24, page 13, line 31, at end insert— “(3) The memorandum of understanding must include details of the allocation of ticket sales from cross border routes that are operated by Transport for Wales.

(4) The memorandum of understanding must be published at the same time as the Rail Strategy.

(5) The memorandum of understanding must be laid before both Houses of Parliament for a period of two months before it can come into force.”

This amendment would require the memorandum of understanding to include arrangements for the distribution of fare revenue from cross border services, require the memorandum of understanding to be published at the same time as the Rail Strategy, and laid before Parliament for two months before it can come into force. Clause stand part.

We have already discussed amendments 166 to 168, which provide clarity on the situations in which the Secretary of State must obtain the consent of the devolved Governments when issuing directions or guidance to GBR. Amendment 169 will provide the opportunity for further clarity by encouraging the Secretary of State and Welsh Ministers to address how the power of direction and consent requirement will be used within the terms of the memorandum of understanding. That mirrors the provision in clause 23 for the MOU between the Secretary of State and Scottish Ministers. The amendment is a sensible mechanism to ensure that the Secretary of State and Welsh Ministers will work together to hold GBR to account against their own priorities within a stable and co operative framework that supports the operation of the whole system. I commend it to the Committee.

Clause 24 provides the legislative basis for the MOU with the Welsh Government. Just as clause 23 does for Scotland, clause 24 requires the preparation and publication of the MOU and states some of the areas that it may cover. The areas the MOU may cover for each devolved Government are different to reflect their distinct devolution arrangements. For example, clause 24 explains that the MOU for Wales may contain joint objectives for the railway within the Wales and borders area. That creates a practical mechanism to drive co operation and to set out the detail of how the railway will be run. It will encourage both Governments to carry out their functions in a joined up way, while ensuring appropriate accountability and transparency. In turn, that will drive better outcomes for passengers on both sides of the border. I commend the clause to the Committee.

The Government amendment makes further provision concerning the memorandum of understanding between the Secretary of State and Welsh Ministers. I have no objection to it.

The Minister is absolutely right that clause 24 is similar in intention to clause 23, but there are huge questions about the role that Welsh Ministers are to have in the governance and management of GBR in their jurisdiction under the memorandum of understanding, and whether the Secretary of State will have any role in the governance and management of Transport for Wales. The Welsh settlement is very different from the Scottish one, in both geography and degree of devolution— I suppose that is how it can be most simply described.

The relationship between the Welsh and UK Governments is far more nuanced and complex than the relationship in the case of ScotRail and the management of rail in Scotland. Transport for Wales covers a significant number of cross border rail services. I stand to be corrected, but I think that as many as 80% of all its services have an element of cross border movement. This harks back to the former private sector franchise of Arriva Trains Wales, which ran many England only services and joint England Wales services. That system of rail service provision persists under Transport for Wales; it is much more blended than is the case in Scotland.

I have some examples. Shrewsbury station, which, for the geographically challenged, is in England, is managed by Transport for Wales. From there, it manages services that run exclusively in England, such as Shrewsbury to Manchester. It also runs all manner of cross border services, such as the Heart of Wales line, of which about 5% is in England, and Aberystwyth to Birmingham, which is 50:50 England and Wales—on it goes. Any memorandum of understanding will have to outline in detail, one assumes, how the allocation of moneys for tickets will be divided.

This works both ways. Former Great Western Railway and Avanti services from London to Holyhead and from London to Swansea via Cardiff have significant portions of their routes running through Wales as well as England. Taxpayers in both nations will rightly presume that the value of ticket sales will be distributed proportionately between both railways, as they will both be Government run, rather than going to the operator whose livery happens to adorn the locomotive. The issue is relatively small in the discussions about Scotland, where I think only 3% of services are cross border between England and Scotland. In Wales, the proportion is much greater, and I am concerned that there is no clear mechanism for how the allocation of ticket sales is set to be achieved or agreed.

Will GBR and Transport for Wales—or, more accurately, the Secretary of State and the Welsh Ministers—come to a profit sharing or fare box sharing agreement as part of the memorandum of understanding? This is at the core of the issue of value for money, so it should be an important consideration, and I look to the Minister to provide reassurance that it is in the mix.

I have a compounding concern, which I expressed in relation to clause 23, about the timeline of the publication of the memorandum of understanding. Again, a purdah period is approaching: the elections for the Welsh Senedd are in May. I think I am right in saying—my right hon. Friend the Member for Melton and Syston mentioned it—that it was suggested in the oral evidence that the heads of terms have already been agreed, but that is not the same as the memorandum of understanding being agreed, so we need a bit more detail from the Minister, if he is able to give it.

There is a big caveat for Wales in particular, where—though I do not want to ruin anyone’s sleep tonight—it is very likely that Labour will be removed from office come May, and that there will be a new Government in Cardiff. It would be improper for a rush job to take place in order to shoehorn through a memorandum of understanding between two like minded Administrations.

I have tabled amendment 40 to clause 24 for the same reason that I tabled amendment 39 to clause 23. Amendment 40 seeks to introduce a degree of control over the timeline for the publication of the memorandum of understanding. In the Transport Committee evidence session on 17 December, Peter McDonald, who is the director for transport, spoke on behalf of the Welsh Government. He spoke in some detail about the future relationship between GBR and the Welsh Government, and how it relies on the memorandum of understanding. Will the Minister take this opportunity to reassure the Committee about the safeguards or timeline the Government have in place? Do they believe it would be helpful to have a clearer timeline, especially considering the electoral sensitivities and, if the opinion polls are to be believed, the likely change of Administration in Cardiff Bay?

I have plenty more to say about this, but I am aware that it is getting dark outside and we have been going on for some time. Those concerns are the rationale for amendment 40, which would apply similar requirements to those that amendment 39 would have applied to clause 23. I tried to be understanding with the Minister in not pressing amendment 39 on Scotland to a vote, because of the direction he was able to hint at in his response. I look forward to being similarly reassured in respect of Wales.

On the shadow Minister’s point about profit sharing, the MOU is designed to set out the operational arrangement between GBR and Welsh services. In that respect, the MOU will not affect the existing profit sharing arrangement between the Governments for cross border services.

The shadow Minister also asked me for a little more information on how the MOU will affect cross border services between England and Wales. The clause allows the MOU to identify services in England that the Secretary of State and Welsh Ministers would like to be provided alongside Welsh designated services. It lets UK and Welsh Ministers set objectives for integration and steps to facilitate it, as well as the arrangements for sharing information. That will hopefully provide a clear framework for co ordinating cross border operations, enhancing efficiency and passenger experience, and supporting seamless connectivity across the Wales and borders area.

The shadow Minister’s amendment 40 would require the Welsh MOU to be published at the same time as the long term rail strategy, and to be laid in Parliament for two months before coming into force. I refer the Committee to my previous comments. The MOU serves a different purpose from the LTRS, and linking them would add unnecessary complexity for little apparent gain.

I understand the point the Minister is making about the lack of relationship between those two documents. In the debate on the previous group, he was able to give an indication of the likely timeframe for publishing the Scottish memorandum of understanding. Can he give a similar hint on the Welsh memorandum of understanding? [Interruption.] There seems to be a bit of nodding on the Government Benches, but it is entirely up to him, because he decides.

As Lord Hendy was fulsome in explaining, those involved in negotiations for the MOU are extremely cognisant of upcoming election dates in Holyrood, and I would say that they are similarly cognisant of upcoming election dates in the Senedd. I hope that provides the shadow Minister with the indication that he may need.

Returning to amendment 40, the MOU with Wales has the same publication requirement as the MOU with Scotland, meaning that transparency is already baked in without the need for a two month review period. As the shadow Minister set out, the amendment would specifically require the MOU to include details of the allocation of ticket revenue from cross border routes. That would add unnecessary complexity by effectively embedding granular, technical review formulas into a document designed to set out a strategic agreement between Governments. This detail is an operational and commercial matter rightly governed by established industry settlement mechanisms and bilateral contracts.

The Bill already provides a statutory framework for fare setting and transparency, enabling GBR to set fares for its services while devolved operators manage their own. Including these details in the MOU would duplicate existing processes and could conflict with the Bill’s intent. I therefore urge the shadow Minister not to move the amendment and commend the clause to the Committee.

Amendment 169 agreed to.

Having heard the semi reassurance of the Minister, I will not move amendment 40.

Clause 24, as amended, ordered to stand part of the Bill. Ordered, That further consideration be now adjourned. —(Nesil Caliskan.)

Adjourned till Tuesday 3 February at twenty five minutes past Nine o’clock.

Written evidence reported to the House

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