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A high-ranking Treasury minister has discussed significant tax changes being implemented. Chief Secretary to the Treasury, James Murray, was put under the spotlight by a House of Lords committee regarding the Government’s policies.
The Economic Affairs Committee sought to probe the minister about Labour’s fiscal policies, and its endeavours to maintain economic stability. They began by questioning Mr Murray if he believed the manner in which the Autumn Budget 2025 was unveiled was “unfortunate” and “counterproductive”. The committee mentioned there had been pre-release leaks, with some potential policies eventually overturned.
In the lead-up to the Budget, there were rumours that Rachel Reeves might raise income tax, with the Chancellor suggesting in the weeks prior that tax hikes could be on the horizon. As the Budget day drew near, Labour felt compelled to categorically dismiss this prospect.
Budget day itself also included turmoil in the House of Commons. Just minutes before the Chancellor was due to deliver her speech, an Office for Budget Responsibility (OBR) report was inadvertently released, outlining the major policies she was meant to announce at the despatch box.
Mr Murray responded: “The Chancellor made her feelings clear about all of the speculation, and obviously the leak that happened, the fact the leak inquiry is under way and indeed the OBR publishing its report before the Budget was announced itself, all of that process, views have been set out in quite some detail following the Budget process.”
The Budget included several significant tax measures, including maintaining frozen income tax thresholds until 2031, cutting the cash ISA allowance and introducing a fresh cap on the pension salary sacrifice scheme. The committee questioned Mr Murray regarding the Government’s reversals on numerous policies.
Lord Andrew Turnbull questioned whether the Government was setting out “difficult decisions” but failing to follow through on them. Labour has been forced to backtrack on various policies, including restricting Winter Fuel Payment eligibility, amending the Personal Independence Payments (PIP) qualification criteria and its Digital ID plans
‘Toughest decision’
However, Mr Murray was eager to highlight several major tax policies where the Government has held firm. He said: “Since coming into Government, we knew that we had inherited a difficult fiscal situation.
“Look at the example of raising employer National Insurance contributions. It is not something that any of us wanted to do. It was the toughest decision I think we took at that first Budget, but we were determined to make sure that we would restore stability to the public finances and get the NHS and other public services back on their feet. That decision on employer National Insurance is already in place.”
As set out in the Autumn Budget 2024, the rate for employer National Insurance rose from 13.8 per cent to 15 per cent, effective from April 2025.
He also highlighted an instance where the Government had altered a proposed tax change, yet it still signifies a major shift, looking at the changes to inheritance tax which are coming in soon. Mr Murray told the committee: “One example where we have changed the policy is around the threshold for agricultural property relief and business property relief.
“That is one where we have maintained the principle of what we have done. That principle behind the policy remains the Government’s position, but we adjusted the threshold. That is one example there, but there are numerous other tax choices I could go through, many of which have been tough choices, such as the employer National Insurance that I mentioned, but we think that they are the right and necessary choices.”
Under proposals outlined in the April 2024 Budget, the inheritance tax relief of 100 per cent on agricultural and business assets was to be capped at the first £1million of assets being transferred, with the remaining total assets to be taxed at 20 per cent. But following widespread condemnation of the proposals, the Government raised the threshold to £2.5million.
Inheritance tax is typically charged at 40 per cent. Each individual receives a nil rate allowance so they can pass on up to £325,000 in total assets tax-free, plus an additional £175,000 when transferring a main residence to a direct descendant.
You can transfer any unused allowances to your spouse or civil partner upon your death, meaning they could pass on up to £1million in assets tax-free when they ultimately die.
