Autumn Statement 2022

Lord Davies of Brixton Excerpts

Tuesday 29th November 2022 Lords Chamber

[Lord Davies of Brixton (Lab)]

My Lords, in her absence, I congratulate the noble Baroness, Lady Lea of Lymm, on her maiden speech.

In the Chancellor’s Autumn Statement, I was struck by the emphasis placed on public services. It merited several references, and it was one of the three “priorities” that were identified, that is, stability, growth and public services. There were mentions of teachers and nurses, and the declaration that what we needed were “high-quality public services”. Even the Prime Minister got a mention shoved into the middle of the Statement, that he is also in favour of high-quality public services. My question is: how can we expect to achieve high-quality public services when we are going to cut pay to the people who provide them? Public services are, by and large, about people; people carry out the work that we require to deliver good-quality public services. What does this plan deliver? It delivers cuts to their pay. How can you align those two factors?

In addition to that, cutting the take-home income in real terms of large parts of the workforce in itself creates the austerity that the Government claim they wish to avoid. So I am puzzled—well, I am not puzzled, because it is part and parcel of the Conservative philosophy, but inflicting the pain of the cost of living crisis on public service workers who are receiving pay increases materially less than the pay increases of the equivalent employees in the private sector is totally against what the Government claim they are trying to do.

As well as pay, there are pensions, and I shall say two things. First, I challenge the use, which Ministers have frequently adopted, of the phrase “generous public service pensions”. Public service pensions are not generous; they might be good—I would describe them as “adequate”—but to me they are the pensions that everyone should be receiving. They should not be dragged down to achieve the poor-quality pensions all too prevalent in large parts of the private sector; they are the objective at which all employment should be aimed. Using the term “generous” for such pensions is clearly wrong; it ascribes a motive of generosity. Well, I can assure noble Lords that terms and conditions of employment are never a matter of generosity—they are a matter of the rate for the job, and if the rate for the job includes an adequate pension, that is nothing to do with generosity, it is paying the rate for the job.

Secondly, I come back to the annual allowance for taxation purposes. It is an issue that is not going to go away. Implicit in the Government’s plans is that it is going to be frozen at a time when inflation is out of control; there is galloping inflation of 20% or 30% over a relatively short period, which means a significant effective increase in the impact of the annual allowance on people’s pay and their employment. It is worth reminding ourselves that the last Prime Minister promised to stem the exodus of doctors from the NHS caused by the annual allowance. The Prime Minister before that promised to fix the pension tax relief rules, and the new Chancellor, no less, has called the situation a national scandal in the report that he chaired for the Commons Health Committee.

Unlike the noble Baroness, Lady Penn, I am in favour of high taxation. I make no secret of the fact that I think that the well-off and the wealthy should be paying high rates of income tax—tax on their earnings. What puzzles me, and what I do not understand, is why they think it is worth taxing income from a pension at a marginal rate of 55%. That is what the system does. We are told that 45% is at the margins of what is considered to be acceptable, yet pensions, where people have sought to provide themselves with a decent income, are being taxed at 55%. Where is the sense in that?

Clearly, pensions taxation is a mess and needs a thorough review, but we still need some short-term measures to address the problems caused by the annual allowance. It is not just a question of doctors, although they have quite rightly fought that campaign. I recall comments made three years ago by the noble and gallant Lord, Lord Craig of Radley, who spoke about the annual effect of the annual allowance on forces personnel. He referred to the

“complex and indefensible treatment of Armed Forces pensions”

and pointed out that the annual allowance

“incurs a significant … tax charge”

that

“must be paid forthwith”

unless you use the

“irrevocable scheme pays”—[Official Report, 15/10/19; col. 72.]

approach.

The noble and gallant Lord identified that at that time there were 4,000 members of the Armed Forces who in a single year had breached their annual allowance and had to produce that financial contribution, not out of their current income but out of the income that they did not prospectively expect to receive for many years in future. So I hope that the Minister will be able to assure us that action will be taken on the annual allowance to relieve the impact that it has had on NHS staff as well as on the military, in schools, and throughout the public service.