Budget Statement

Lord Sikka Excerpts

Wednesday 3rd November 2021 Grand Committee

[Lord Sikka (Lab)]

My Lords, it is a real pleasure to follow the noble Lord, Lord Balfe. The Chancellor’s Budget will not lead to an economic renaissance, reduce inequalities or improve household budgets.

The word “women” gets just one mention in the Chancellor’s Statement and there are no policies associated with women’s welfare, whether that is reducing the gender pay gap or the pension pay gap, or reducing women’s tax disadvantages. The disabled and pensioners get absolutely no mention in the Chancellor’s speech. The £10 Christmas bonus for pensioners was introduced in 1972 and is still the same. If linked to inflation, it would need to be around £140. The £100 winter fuel payment has not changed since 2011 and, if linked to energy prices, would need to be £153. The Government seem to really have it in for pensioners—they want to hurt them any way they can.

Household budgets are being squeezed by rising energy and food prices, but the Chancellor has not offered any relief by, for example, eliminating VAT on domestic fuel or perhaps offering or considering rent controls. The £4 billion tax cut for banks—from what I could add up—is part of a £54 billion tax giveaway, mainly in the form of tax relief to corporations that are already making billions of pounds in profits. The banks are a good example of that.

The Budget reduces the spending power of households and increases queues at food banks, and that will inevitably undermine the economic recovery. The suspension of the triple lock on the state pension will remove £30.5 billion from pensioners over the next five years, and some 4.4 million families will be worse off by around £4 billion a year because of the cut in universal credit.

Some £8 billion, perhaps more, is removed from household budgets by freezing personal allowances. Consequentially, 1.3 million people, generally the poorest, will be forced to pay income tax. The Johnson tax, which is the name I have given to the 1.25% levy—it does quite nicely on the internet—will remove £85 billion from people’s pockets in the next five years. Income tax begins at £12,570, but the Johnson tax is levied on an incomes from £9,500. People who do not earn enough to pay income tax have to pay national insurance and the Johnson tax. The IFS has pointed out that the Government’s relentless squeeze since 2010 will make the average worker almost £13,000 a year worse off by the middle of the 2020s compared with pre-2008 financial crash growth in wage rates.

The Government like tax perks for the rich. Capital gains are taxed at a lower rate than earned income. Dividends are taxed at a lower rate than earned income. I hope the Minister will tell us why is it that no national insurance is levied on recipients of unearned income. If it were levied, it could go a long way towards addressing many of our social problems. I have asked that question of a number of Ministers, but nobody has answered. I hope that we get an answer today, and I am looking forward to it.

Even before the pandemic, the poorest 10% of households paid 47.6% of their income in direct and indirect taxes, compared with 33.5% by the richest 10%. The Budget has increased that burden, so I have another question for the Minister. Can he explain why the poorest continue to be targeted by the Government? What is to be achieved by increasing their tax burden even more?

The Chancellor said a lot about growth and productivity as the UK lags in international league tables. We have had more than a decade of low inflation, low interest rates, low wages and low corporate taxes, but that has not delivered the much-needed investment. UK investment in productive assets is around 16% of GDP, which is almost the lowest in Europe. When the opportunity arises, I hope that, on another day, I will be able to advance my thesis about why the UK remains in the doldrums.

Historically, the UK economy has been built by the public and private sectors. UK businesses have not shown a great deal of appetite for risky investment, which is why the state had to shoulder the burden and build airlines, telecommunications, biotechnology, nuclear and computer industries. It also had to rescue and reinvigorate railways, water, gas, electricity and many other industries. However, when you withdraw the state from that arena you do not really progress that much. What is the Government’s response? It is to reduce R&D spending by £2 billion to £20 billion. We are told that by 2024 they will spend about 1% of GDP on R&D. That is almost the lowest government spend in Europe, and it is again highly problematic. It will not deliver high productivity and growth.

The Government’s mishandling of Brexit is holding back the economy. The OBR said that

“supply bottlenecks have been exacerbated by changes in the migration and trading regimes following Brexit. Energy prices have soared, labour shortages have emerged in some occupations, and there have been blockages in some supply chains. These can be expected to hold back output growth”.

Yet the Chancellor offered no remedies for these structural problems.

The much-hyped policy of free ports did not get much endorsement from the OBR either. It said:

“There is also broader uncertainty around how much of the economic activity that takes place within a freeport will have been displaced from other UK regions and how much is genuinely additional.”


The major winners from the Budget are tax-dodging, champagne-sipping bankers on short-haul flights. For most people it is a continuation of austerity. That will inevitably increase social instability.