Income Tax Threshold

Baroness Kramer Excerpts

Tuesday 4th July 2023 Lords Chamber

[Baroness Penn (Con)]

On the first point, I absolutely agree with the noble Lord. As I said in answer to my noble friend, bringing inflation under control is the most effective tax cut we can give to families across the country. On the second point, I will have to check the record; it was at least a decade before I was born.

[Baroness Kramer (LD)]

My Lords, I do not suggest cuts in the tax take in our current financial condition, but I question the distribution of the tax burden. Can the Government explain why they have chosen to use the threshold rather than the tax rate? By using the tax rate, they could certainly target the higher level of tax against those with the broadest shoulders most able to carry it. By using and freezing the threshold, they have dragged into the higher tax rate many people on very middling incomes, who are now experiencing the highest increase in taxes, according to the IFS, since 1979. Those are the people who, as the noble Lord, Lord Balfe, said, drive our economy, but they are also the group suffering severely from the cost of living increases.

[Baroness Penn (Con)]

I reassure the noble Baroness that the income tax system is still highly progressive: the top 5% are projected to pay nearly half of all income tax in 2023-24 and the top 1% are projected to pay more than 28% of all income tax. The noble Baroness is right that those on middle incomes are feeling the squeeze; that is why we are absolutely focused on supporting the Bank of England in its mandate to get inflation down.