Finance Bill

Debate between Lord Davies of Brixton and Lord Harlech

2nd reading & 3rd reading & Committee negatived
Tuesday 20th December 2022 Lords Chamber

[Lord Harlech (Con)]

My Lords, it is a privilege to close this debate on the Finance Bill on behalf of the Government. I thank all noble Lords for their constructive and considered contributions and the welcome to the Dispatch Box. I will try to address many of the points raised in today’s debate, but will begin by reminding the House of what this Bill is designed to achieve.

We are taking these changes forward rapidly now because we are serious about fiscal sustainability and know how essential it is for economic stability and growth. As my right honourable friend the Chancellor set out at the Autumn Statement, we are facing hugely significant challenges, including on the cost of living, exacerbated by Putin’s invasion of Ukraine.

The UK is not alone in dealing with these issues, with one-third of the global economy forecast to be in recession this year or next. However, it is clear that we must prioritise restoring sustainability in our own public finances; only then will we be able to face down the economic storm, while protecting the most vulnerable. That stability will provide the foundation that is essential for economic growth.

The Autumn Statement set out a clear plan to deal across all these areas, with three priorities: stability, growth and public services. Even in these difficult economic times, we are still protecting public services by investing billions of pounds in the health service and education. We will continue to emphasise these facts as we move on with this work.

This small, focused Bill forms the essential next part of that plan. It implements tax measures which will provide certainty to markets and help stabilise the public finances, and does so in a fair way, with the heaviest burden falling on those with the broadest shoulders. In summary, the Bill makes changes to the energy profits levy to ensure that oil and gas companies experiencing extraordinary profits pay their fair share of tax. It also takes forward changes to R&D tax reliefs, to ensure the taxpayer gets better value for money and to continue to support valuable research and development needed for long-term growth. The Bill’s changes to personal tax ensure that while we are asking everyone to contribute a little more towards sustainable public finances, the better-off will shoulder a greater burden. The changes to the taxation of electric vehicles ensure that all motorists start to pay a fairer tax contribution, while continuing to provide generous incentives to support EV uptake.

Let me turn to points raised during the debate. The noble Lord, Lord Davies of Brixton, raised the issue of public sector pensions. It cannot be overstated how much the Government value the work of all public sector staff. Public sector pension schemes are mainly defined benefit schemes and are among the most generous schemes available. The tax relief offered on pension contributions is expensive, costing the Exchequer £67.3 billion in 2020-21, with around 58% relieved at higher and additional rates. The annual allowance affects only the highest-earning pension savers. The Government estimate—

[Lord Davies of Brixton (Lab)]

Whoever wrote the brief clearly assumed I was going to talk about public service pensions, but I conspicuously did not mention them, as they are not relevant to this Bill. I do not want to dump an official in it, but I did not raise that issue; I raised a completely separate issue.

[Lord Harlech (Con)]

I thank the noble Lord for the intervention. I will have to go back and check Hansard. I heard him raise pensions in general but also public sector pensions, but if I am wrong, I apologise, and I stand to be corrected.

All noble Lords raised the issue of the personal tax thresholds. Our mantra throughout this process has been to make sure that those with the broadest shoulders carry the most weight, which is the fairest approach to take. The changes to personal tax ensure that, although we are asking everyone to contribute a little more towards sustainable public finances, we do so in a fair way, with the better off shouldering a greater burden.

We have tried to balance the needs of the country as a whole with the need to protect the most vulnerable. However, as I mentioned, we must continue to improve the health of our public finances, which is why the personal allowance has been frozen. The changes for most will remain small, with the average taxpayer paying only an additional £38 in income tax and NICs by 2028, and the personal allowance will still be £2,150 higher in April 2028 than it would have been if it had been uprated by inflation since 2010.

The noble Baroness, Lady Bennett of Manor Castle, raised the issue of a wealth tax. The Government’s priority is restoring stability, but we will try to do this in a fair and compassionate way which protects the most vulnerable and ensures that those on higher incomes pay a fair share. The Autumn Statement reduces the additional rate threshold, which will raise revenue from the top 2% of taxpayers. The income tax and gains tax systems are also being reformed to reduce the generosity of certain allowances, which will bring the treatment of investment income and capital gains closer in line with employment income.

This year, the Government raised the threshold at which workers start paying national insurance contributions to £12,570 and have reversed the health and social care levy. This comes on top of the energy price guarantee to support households with their energy bills over the winter, and a further £37 billion of support for the cost of living.

The noble Baroness, Lady Kramer, raised council tax. The Government expect that local authorities will exercise restraint in setting council tax, balancing the extra income for local services against the tax burden on residents for the cost of living pressures. Local authorities have the flexibility to design their own working-age local council tax support schemes to protect their most vulnerable residents. The UK does not have a single wealth tax but has several taxes on assets and wealth. As set out by the Wealth Tax Commission report in December 2000, the UK’s taxes on wealth are on a par with those of other G7 countries.