Fiscal Rules

Debate between Lord Leigh of Hurley and Lord Livermore

Tuesday 29th October 2024 Lords Chamber

[Lord Livermore (Lab)]

My noble friend makes an extremely interesting point. I am grateful for his support for what I have set out and will take away his point to give it further consideration.

[Lord Leigh of Hurley (Con)]

My Lords, the Chancellor can fiddle figures all she likes to allow more borrowing, but that will simply lead to more interest payments, in excess of the £100 billion or so that we already have, which will lead to great damage in the market. The change of fiscal rules on borrowing is apparently to fix an alleged black hole, so would the Minister care to comment on the highly respected IFS director Paul Johnson’s statement that:

“The numbers may be a little bit worse than they thought at the time … but the overall picture over the next four or five years is very, very similar to what we knew before the election”?

[Lord Livermore (Lab)]

I am grateful to the noble Lord for giving me an opportunity to talk about the £22 billion black hole left to us by the previous Government. He has done that in the past and I continue to be grateful to him. The independent Office for Budget Responsibility said at the time of the July statement that it did not know about this black hole at the heart of our finances; it established an independent review into it which will report in due course. I think there will be plenty more information on the £22 billion black hole in tomorrow’s Budget for the noble Lord to peruse.

Tax Reliefs: Theatre, Orchestra and Museums and Galleries Exhibition

Debate between Lord Leigh of Hurley and Lord Livermore

Tuesday 15th October 2024 Lords Chamber

[Lord Livermore (Lab)]

I am grateful to my noble friend for her question. The creative industries are absolutely a major driver of economic growth in this country. She will be aware that I am unable to comment on speculation about specific taxes. In the coming Budget, we must rebuild our public finances to ensure economic stability, including by addressing the £22 billion black hole inherited from the previous Government, which will involve difficult decisions on spending, welfare and tax.

[Lord Leigh of Hurley (Con)]

The Minister again raises the alleged £22 billion tax hole. He was asked, this time last week, to explain what was in the £22 billion tax hole. He could identify only two items, which amounted to £9 billion—that is all he could find. It now transpires that HM Treasury’s policy paper of 2 August 2024 reveals that £9.4 billion of the so-called black hole has been created by Labour’s political decision to give public sector workers above-inflation pay grades. Does the Minister not agree with most of the House that this is a fictious black hole, created by Labour?

[Lord Livermore (Lab)]

I am extremely grateful to the noble Lord for giving me an opportunity to talk about the £22 billion black hole in the public finances, which was concealed from this Parliament and the public, and, most importantly, from the Office for Budget Responsibility, which has confirmed that it exists and set up an inquiry to establish how it happened and to ensure that it does not happen again. The noble Lord asked me to list what went into the black hole. He knows, for example, of the £6 billion overspend on the asylum system, including the failed Rwanda scheme; of the £3 billion of uncosted commitments on road and rail projects; that the reserve was overspent, three times over, just three months into the financial year; and that there was a black hole in the spending plans for the public sector pay rises because the previous Government did not hold a spending review and did not give any affordability criteria to the pay review bodies. That is why it has happened and that is what we will ensure does not happen again.

UK Economy: Capital Gains Tax

Debate between Lord Leigh of Hurley and Lord Livermore

Wednesday 9th October 2024 Lords Chamber

[Lord Leigh of Hurley (Con)]

I beg leave to ask the Question standing in my name on the Order Paper and in doing so draw your Lordships’ attention to my registered interests in this area.

[The Financial Secretary to the Treasury (Lord Livermore) (Lab)]

My Lords, there is speculation ahead of every Budget, but the Government’s priorities for the economy are clear. We are committed to restoring growth to our economy after years of stagnation by fixing the foundations and securing investment in our country’s future; we are committed to keeping the promises we set out in our manifesto; and we are committed to rebuilding the public finances, including by addressing the £22 billion black hole we inherited from the previous Government.

[Noble Lords]

Oh!

[Lord Leigh of Hurley (Con)]

Well, the Government have managed to unite Alastair Campbell, the British Chambers of Commerce and me in identifying the damage that this delay is doing to the UK economy. If evidence is needed, entrepreneurs are leaving not in their droves but in their thousands because they are so worried about the potential impact of a rise in capital gains tax. The Chancellor has specifically ruled out certain increases. Could the Government not rule out specifically, for example, the rumoured demise of business property relief on inheritance tax, because that is hanging over the market at the moment, causing great anxiety to family companies and is an enormous cloud on the ability of companies to raise money on the AIM market?

[Lord Livermore (Lab)]

As set out in our manifesto, we are committed to not increase taxes on working people. This is why we will not increase their national insurance, the basic higher or additional rates of income tax or VAT. I know the noble Lord would not expect me to comment on speculation about any other specific taxes, but we must rebuild our public finances to ensure economic stability, including by addressing the £22 billion black hole—

Finance Bill

Debate between Lord Leigh of Hurley and Lord Livermore

2nd reading & Committee negatived & 3rd reading
Wednesday 21st February 2024 Lords Chamber

[Lord Livermore (Lab)]

My Lords, the Finance Bill that we are debating today was published following the Chancellor’s Statement in November last year, in which he claimed to be delivering an “Autumn Statement for growth”. It was the 11th such growth plan that we have seen from this Government over the past 14 years, and, over that time, the UK’s growth record has been poor.

The noble Lord, Lord Leigh of Hurley, mentioned comparative growth rates. We have languished in the bottom third of OECD countries, with 27 OECD economies growing faster than us since 2010. Looking ahead, over the next two years, no fewer than 177 countries are forecast by the IMF to grow faster than the UK. Against this backdrop, in the so-called Autumn Statement for growth, the Office for Budget Responsibility actually downgraded its forecast for growth in each of the next three years—it was revised down this year, next year and the year after that. Growth this year is forecast to be just 0.7%, which is more than halved from the 1.8% predicted in the Budget, with the economy forecast to be £40 billion smaller by 2027 than the Chancellor expected back then. Now, the Office for National Statistics has confirmed that Britain has fallen into recession. We know too, as the noble Baroness, Lady Kramer, observed, that GDP per capita fell in every single quarter of the past year.

Britain is trapped in a spiral of economic decline. Having spent 14 years in the economic slow lane, the Government have now put our economy into reverse—the latest chapter in a 14-year story of failure and economic stagnation. First, we had austerity, which choked off investment, and then years of political instability, which in turn fuelled economic instability; then Brexit without a plan; then the disastrous mini-Budget, which, as the noble Lord, Lord Desai, observed, crashed the economy, sending mortgages and interest rates soaring. We have had five Prime Ministers, seven Chancellors, and 11 plans for growth, each yielding less than the last.

If the UK economy had grown at the average rate of the OECD over the past decade, it would now be £140 billion larger, equivalent to £5,000 per household every year. This would mean an additional £50 billion in tax revenues to invest in our public services. Instead, with growth so weak, taxes have risen remorselessly, with less and less to show for it. While our public services crumble, we have seen 25 tax rises in this Parliament alone. The tax burden now rises every single year for the next five years, rising to its highest ever level and making this the biggest tax-raising Parliament ever, with an average tax rise of £1,200 per household.

However, there is one small group of people who will continue to be protected from this Government’s tax rises on much of their income. Missing from this Finance Bill, once again, is any action to tackle non-dom tax status: those people who live in Britain but do not pay UK taxes on their income from overseas. Closing this loophole and replacing this archaic status with a residence scheme like other countries have could raise crucial funding to bring NHS waiting lists down. Labour believes that those who make Britain their home should pay their taxes here. That patriotic point should be uncontroversial; yet, while families across the UK face higher taxes year on year, the Government continue to enable those who keep their money overseas to avoid paying their fair share of tax. So, while we have yet another Finance Bill that leaves this loophole open, families across the UK face a tax burden that is climbing to a post-war high.

The chair of the UK Statistics Authority rebuked Government Ministers this week for making misleading claims about their record on tax. Let us be clear: while the cut in national insurance announced in the Autumn Statement was welcome, it was more than eclipsed by increases in taxes that the Government had previously announced. For example, as my noble friend Lord Davies of Brixton mentioned, the freezing of national insurance and income tax thresholds for six years is now expected to cost taxpayers £45 billion. This fiscal drag means that nearly 4 million more people will pay income tax and 3 million more people will pay the higher rate. To quote Paul Johnson from the Institute of Fiscal Studies, the cut in national insurance rates

“pales into … insignificance alongside the … increase in personal taxes created by the six year freeze in allowances and thresholds”.

The IFS has calculated that, extraordinarily, almost every single person in the UK who is liable for income tax or national insurance will now be paying higher taxes overall. As a result, the tax burden will now reach 37.7% of GDP by the end of the forecast period, an increase equivalent to an astonishing £4,300 additional tax for every household in the country.

We have an economy in recession, the tax burden rising to its highest ever level and the biggest fall in living standards since records began. We must break this spiral of economic decline. Increasing growth is clearly the biggest economic challenge that our country faces. In government, Labour’s defining economic mission will be to restore growth to Britain, with good jobs and productivity growth in every part of our country. Our plan to deliver that mission, supported by British business and developed in partnership with British business, is built on three pillars: stability, investment and reform.

Stability will be brought about by strong, robust and respected economic institutions. Rather than criticising the Bank of England, as a number of prominent Conservative politicians have, we will protect its independence, and we will strengthen the Office for Budget Responsibility. We will introduce a new fiscal lock and tough new fiscal rules. Iron discipline will ensure that every policy we announce, and every line in our manifesto, is fully costed and fully funded. With a Labour Government, never again will a Prime Minister or Chancellor be allowed to repeat the mistakes of the Liz Truss Budget. Never again can we allow a repeat of the devastation that that Budget brought to family finances or allow a plan to be pushed through that is uncosted, unscrutinised and wholly detached from economic reality.

We prize stability and predictability for business, as we know how highly businesses that are considering investing in the UK prize stability, predictability and a long-term plan. This Finance Bill contains a number of measures that we have been calling for for some time. We welcome the Government finally making full expensing permanent after so many years of chopping and changing capital allowances; we have made it clear we will maintain this policy if we are in government. We have also made it clear that we will maintain the system of R&D tax credits introduced by this Finance Bill—again, after so many years of this Government chopping and changing the design of the scheme.

Of course, there is still a general election to face, so I use this opportunity to invite the Minister to put on the record whether the Government will follow our lead. Will she confirm that, should they win the general election, they will maintain permanent full expensing? I am sure that many businesses would welcome the certainty that comes from knowing that both main parties are going into the election fully committed to keeping this policy in place.

Let me be clear about another area where we will provide certainty, should we win the next general election. As the shadow Chancellor has set out, we believe that the current corporation tax rate strikes the right balance between what our public finances need and maintaining our competitiveness in the global economy. That is why we are pledging to cap the headline rate of corporation tax at its current rate for the whole of the next Parliament. We would take action if tax changes in other advanced economies threatened to undermine UK competitiveness. That choice provides predictability and has a clear rationale; that is the pro-business and pro-growth choice. So, again, to offer businesses as much certainty as possible, I ask the Minister whether the Government will follow our lead and also pledge, today, to cap corporation tax at its current rate for the next Parliament?

Our commitment to stability will be matched by a commitment to investment, through partnership with the private sector, to power the industries of the future with a modern industrial strategy; a new national wealth fund to invest alongside business, in our automotive sector, in our ports, and in the future of our steel industry; and a new national champion in homegrown power, leading the way on floating offshore wind, tidal and nuclear power, to ignite growth, boost our economic security, drive down energy bills, and create good, well-paid jobs across Britain. This will be combined with our commitment to reform, starting with our planning system, taking on vested interests to get Britain building again. Stability, investment, reform—the foundations of a plan to break free from the vicious cycle over 14 years of stagnant growth, rising taxes, and falling living standards.

[Lord Leigh of Hurley (Con)]

Can the noble Lord clarify a point that he made in response to a point that I made about non-dom taxation? I understand that the Labour Party originally thought that taxing non-doms in the way that he described would raise £3 billion—it then reduced it to £2 billion and I think that it now thinks that it is £1 billion. It would be very helpful to have precision and clarity on the estimate that this will raise. Will he also confirm, now that Labour Party officials are talking to the Treasury, that they have asked the Treasury for its figures on the Labour Party’s proposals on non-doms, which, as I understand it, show a net loss to HMRC in respect of those proposals?

[Lord Livermore (Lab)]

I do not think that I am at liberty to divulge the exact nature of those discussions, but I can certainly say that that is not correct.

[Lord Leigh of Hurley (Con)]

Does the noble Lord have an answer to my question on the specific amount that the non-dom tax proposals will raise?

[Lord Livermore (Lab)]

I do not have the exact number to hand.