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

The clause makes changes to the inheritance tax thresholds so that they continue at the current levels in 2028-29 and 2029-30. Subject to reliefs and exemptions, inheritance tax is payable if the net value of an estate exceeds the respective thresholds for two bands: the nil-rate band, for which the threshold has been £325,000 since 2009-10, and the residence nil-rate band, for which the threshold has been £175,000 since 2021. Those thresholds rise with the consumer price index each year, but have in recent years been frozen until April 2028, by the previous Government.

The changes made by clause 57 will fix the threshold at current levels for a further two years, until April 2030. This will raise £355 million in 2029-30.

We heard earlier that the thresholds for income tax will be unfrozen as of 2028; why will the thresholds for inheritance tax not be? What impact will that have on, for example, agriculture and business property reliefs? Have the Government done an assessment of the number of additional estates that will be brought into inheritance tax beyond 2028, and how many of those will be family farms?

Broadly speaking, the reason why we have had to take a number of decisions, including some of the more difficult decisions in the Budget, is the fiscal inheritance from the previous Government. I do not need to spend time in Committee rehearsing the arguments on that, because they are well known and widely accepted. We inherited a mess from the previous Government and had to take difficult decisions at the autumn Budget to fix that problem, put the public finances back on an even footing and get public services back on their feet. Extending the freeze for inheritance tax thresholds is one of many difficult decisions we had to take.

On the number of estates that will pay inheritance tax as a result of the freeze, fixing the nil-rate bands is forecast to increase the number of tax-paying estates by 1,400 in 2028-29 and by 2,900 in 2029-30. That means the proportion of all UK deaths subject to inheritance tax will rise by 0.2 and 0.4 percentage points in ’28-29 and ’29-30 respectively, when compared with the thresholds rising with CPI. If we look at all inheritance tax measures, the latest forecast indicates that 37,700 estates will have an inheritance tax liability in ’24-25, which equates to 5.8% of all estates. That will increase to 66,600 estates in ’29-30, which equates to 9.5% of estates. I hope that helps to put the measures in context.

We have debated the specific changes to agricultural and business property reliefs several times, and I have shared with the hon. Member for Gordon and Buchan the data on that, which shows the limited impact of the freeze in terms of the number of estates affected. Most estates will not be subject to any inheritance tax because of the way we have designed the reforms to agricultural property relief and business property relief. We have had several other debates on that issue in this place.

The hon. Member for Gordon and Buchan asked about one specific part of the system, but the two rates affected by clause 57 relate to the inheritance tax thresholds that apply to all estates. As I said in my response to her intervention, the reason why the Government are taking these decisions and taking forward measures like this is to repair the public finances, given our inheritance from the previous Administration. Fixing the inheritance tax thresholds for a further two years contributes to putting the public finances back on an even footing. I will defend at every possible opportunity our decision to restore economic stability to the public finances in the UK, because without economic stability, it is not possible to boost investment and growth in the way we are determined to do.

Clause 57 fixes the inheritance tax thresholds at their current levels for a further two tax years, as the Minister set out. The nil-rate band, which remains fixed at £325,000, has been unchanged since 2009. The residence nil-rate band, which comes into play when a person leaves a property to their direct descendants when they die, was introduced at £100,000 in 2017-2018 by a Conservative Government, before being increased by £25,000 in succeeding years. In reaching the current level of £175,000, we delivered on our manifesto pledge to create an inheritance tax threshold for married couples and civil partners of up to £1 million. Since then, the legislative default is for the thresholds to be increased in line with the consumer prices index, although Parliament agreed to override that provision in the aftermath of the pandemic and to maintain the current thresholds to 2027-2028.

Although we do not oppose the measures, HMRC has reported that the Labour Government’s decision to extend the freeze on the current thresholds for a further two years will, as the Minister just set out, increase the number of tax-paying estates by 1,400 in 2028-2029 and by 2,900 in 2029-2030. It was perfectly reasonable for my hon. Friend the Member for Gordon and Buchan to ask why this Labour Government have chosen to unfreeze income tax in 2028 but not inheritance tax. I am afraid the answer we got was not good enough in the context of a Budget and a series of measures that have spent £8 billion on GB Energy, an energy company that will not produce any energy or reduce any energy bills; £7 billion on a national wealth fund, which basically means repainting the UK Infrastructure Bank building; and £9 billion on union pay deals that came with no reform and no productivity gains, but massive pay rises that, by the way, the OBR has assessed as inflationary.

Sure enough, inflation has gone up and interest rates are going to stay higher for longer. It is mortgage payers who will pay the price. That is the state of the public finances that Labour inherited. While we are on the subject, Labour inherited the fastest growth in the G7, half the deficit—[Interruption.] It is true. Labour Members do not like facts, and we know they are not good with numbers, but being the fastest growing economy in the G7 is a pretty good inheritance. On top of that, the deficit was 50%—[Interruption.] Even the Liberal Democrats are reacting.

This is a very important point. People out there want to know why these difficult decisions are being made. It is important to set out the facts on how the economy was doing when the Government came into office. There was 2% inflation; it is now higher. The deficit was half of what it was. These are important factors. It was very reasonable of my hon. Friend the Member for Gordon and Buchan to point out the dichotomy and the choices that this Government have made.

The election last year was momentous: it was a landslide election for the new Government. I note the hon. Gentleman’s glowing impression of the inheritance from the previous Government; where did it go wrong?

Where it has gone wrong is that the Labour party said pre-election that it would not increase national insurance, but has now gone back on that. Labour said it would not hit farmers and would support them, but we now have the family farm tax. We are slightly veering off topic, as Mr Mundell will point out, but I say gently to the hon. Gentleman that although I hope he retains his seat at the next election—[Laughter.] The Chancellor, who is completely out of her depth, has made his life a little more difficult. He is laughing now but I am not sure he will be in four years.

In the context of more drastic changes to inheritance tax elsewhere in the Budget, and the changes to agricultural relief in particular, my hon. Friend the Member for Gordon and Buchan asked about the Government’s assessment of how many of the estates being brought into the regime as a result of the threshold freeze are family farms. I did not quite hear an answer. On behalf of all the farmers we all represent, I say it would be good to hear the Treasury’s estimate as to how many family farms will be impacted.

Ministers frequently cite the inheritance tax thresholds in mitigation of their decision to introduce the family farm tax, but that mitigation is being steadily eroded by inflation. By the time the family farm tax comes into effect next year, Labour’s excuses will be worth even less than they are today, not least because the OBR forecasts that inflation will be higher for longer under Labour. It has already gone up in this short period. It is a shameful exercise in how not to govern, and we will be holding the Government to account going forward.

That was a fairly wide-ranging response from the shadow Minister to what is quite a straightforward clause. I could not help but notice that he began by saying that he supported what we are doing in the clause, that he understood that we needed to take tough decisions and that he will not oppose the decision to extend the freeze to inheritance tax thresholds—which the Conservatives began—for a further two years. He then proceeded to explain why he did not support it. I know the Opposition have not made their policy on many things, but it seems that even individual Members have not made up their minds.

I was pointing out the discrepancy in how, as we covered earlier, the Government are unfreezing income tax—apparently, although they are not legislating for it—but keeping the freeze on inheritance tax, which I pointed out that we did, not least for public finance reasons. Not only that, but the freeze has also been used as a mitigation against the disgraceful family farm tax that has impacted many of our farmers. Every year that inflation goes up—and it is going up under Labour—that mitigation goes away. That was the point I was trying to make, and it would be great if the Minister could address it.

The shadow Minister alleges that there is some discrepancy on this side of the Committee; I feel like there is some discrepancy within his own views. I return to the central point that he seemed to begin by saying that he welcomed our measures—that he supports them and understands why tough decisions have to be taken—but then seemed to explain why he did not support them.

The shadow Minister asked why we decided to extend the threshold freeze for inheritance tax while not, for instance, increasing income tax rates; that is a political choice. It is a difficult choice, but it is a political choice. As a Government we have made the choice to make sure that we do not raise income tax. We went into the election saying that we would not raise taxes on working people, and we have kept that pledge through our policies on income tax, employee national insurance and the rate of VAT. We made those commitments and we are honouring them.

Will the Minister consider the fact that the increase in national insurance has harmed many companies that have really struggled? An increase in the top rate of income tax or capital gains tax would at least have hit organisations that are making proper profits and proper money.

The debate is only in the context of the clause. If the Minister feels he can find a context, he can respond.

I will attempt to link that question to inheritance tax thresholds. I am thinking rapidly on my feet and struggling somewhat. With your permission, Mr Mundell, I will respond briefly to the hon. Gentleman’s point about the difficult decision—one of the toughest we took in the Budget—to increase employer national insurance contributions. We did not want to have to take that decision, but we had to take a series of difficult decisions because of the state of the public finances. We recognise that it was difficult for businesses as well. What is critical for businesses, and for the economy more widely, is having the public finances in balance, meeting our fiscal rules and ensuring that we have stability in the economy. As I said earlier, without that, the investment in growth that we are determined to pursue will not have the right foundations.

I will return to inheritance tax thresholds. I set out the number of estates that will be affected as a result of the thresholds. I do not know whether the shadow Minister is aware of the data that has been put out on the changes to agricultural property relief and business property relief. The number of estates affected that claim agricultural property relief, and agricultural property relief with business property relief, is estimated to be up to 530 in ’26-27. I have referred to that information in the Chamber several times, and it was in the letter that the Chancellor sent to the Treasury Select Committee.

To conclude, although the shadow Minister’s position is confusing, I welcome the Opposition’s support for the measures.

Ordered, That the debate be now adjourned.—(Christian Wakeford.)

Adjourned till Thursday 30 January at half-past Eleven o’clock.

FB 01 Institute of Chartered Accountants in England and Wales (ICAEW)’s Tax Faculty – Clause 25 and Sch 5 Furnished holiday lettings

FB 02 Institute of Chartered Accountants in England and Wales (ICAEW)’s Tax Faculty – Clause 31 and Sch 6 Employee Ownership Trusts

FB 03 Institute of Chartered Accountants in England and Wales (ICAEW)’s Tax Faculty – Clauses 21 and 37 to 46 and Schedules 8 to 13 – Replacement of special rules relating to domicile

FB 04 Association of British Insurers (ABI)

FB 05 Association of Taxation Technicians – Clauses 5 and 6

FB 06 Association of Taxation Technicians – Clause 24

FB 07 Association of Taxation Technicians – Clauses 37 to 39

FB 08 Chartered Institute of Taxation – Clauses 19 to 22

FB 09 Chartered Institute of Taxation – Clauses 25, 35, and 54 and 55

FB 10 Chartered Institute of Taxation – Clause 31

FB 11 Chartered Institute of Taxation – Clauses 57 to 62

FB 12 Chartered Institute of Taxation – Part 2 Replacement of special rules relating to domicile