Autumn Statement 2022

Lord Sikka Excerpts

Tuesday 29th November 2022 Lords Chamber

[Lord Sikka (Lab)]

My Lords, it is a pleasure to follow the noble Baroness, Lady Jones of Moulsecoomb.

This Budget offers nothing to women. Over half the workforce in the public sector is female and all the Government are offering them is cuts in real wages, condemning millions of teachers, nurses and others to rely on charity.

Depressions are avoided by improving people’s purchasing power but this Government are bent on depleting it; for example, by freezing personal allowances and income tax thresholds. Some 3.2 million additional people will now become liable to pay income tax, and another 2.6 million will pay tax at the higher rates. 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%. Can the Minister explain why the poorest continue to pay the highest proportion of their income in taxes?

After the September Budget, the Government found £19.2 billion to bail out pension funds. They have for years funnelled billions in quantitative easing to City speculators. In the most recent Budget, the Chancellor handed £18 billion of tax cuts to banks but could not hear the cry of 800,000 hungry children. Ministers have taken to the airwaves to claim that they are actually inconveniencing their rich friends, even though the Chancellor failed to introduce a wealth tax or financial transactions tax, end the non-dom tax dodges, or reform trusts to prevent the rich from avoiding inheritance tax.

However, the Government have lowered the 45% income tax band threshold from £150,000 to £125,140. The result is that, from April, a FTSE 100 chief executive earning a £4 million annual salary will pay £1,243 a year extra in income tax. That is equivalent to £24 a week, which is less than they pay for a glass of wine when they go out on a Saturday night. The Government call this progressive taxation. By taxing capital gains at the same rate as earned income and charging national insurance on the same basis, the Government could have raised £25 billion to redistribute, alleviate poverty and invest in the economy. Instead, they have tinkered with the tax-free allowances for capital gains tax and will now raise only around £1.6 billion over five years.

The Government continue to penalise workers by taxing earned income at rates between 20% and 45%, but capital gains are taxed at rates between 10% and 28%. Recipients of capital gains use the National Health Service and social care but pay nothing in national insurance. That is wrong. There is similar tinkering with domestic dividends, which will raise £940 million by 2027-28. The Government could have raised around £8 billion a year by aligning the tax rate on dividends with earned income. And the Government have done absolutely nothing to check tax avoidance on dividends paid to foreign investors; they continue to be paid tax- free. No other Government do that.

Conservative Chancellors make ritualistic references to tax avoidance, and this Budget is no exception—although the Chancellor failed to mention that, since 2010, HMRC has failed to collect over £400 billion in taxes. Alternative models of the tax gap put that amount at around £1,500 billion.

Additional investment in HMRC is most welcome. Every £1 spent on investigations into the tax affairs of large businesses yields an extra £56 in tax to HMRC, while investigations into wealthy individuals yield £28 for every £1 spent. But what budget have the Government actually allocated to HMRC? Let us look at the small print in the Treasury papers. For 2022-23 the budget for HMRC is £5.9 billion, for 2023-24 it goes down to £5.6 billion and for 2024-25 it is down to £4.6 billion. That does not suggest that the Government are serious about tackling our tax-avoiding friends—and double-digit inflation means that HMRC’s budget is in fact totally depleted.

On 13 July, during the passage of the Energy (Oil and Gas) Profits Levy Bill, I drew attention to several fatal flaws in the design of the levy, otherwise known as the windfall tax. It applied only to profits from the North Sea and excluded profits generated through refining, trading and forecourts. It did not apply to untaxed global profits of companies resident in the UK. Several Ministers continued to claim that we cannot tax the global profits of companies, so I shall remind the Minister what the law is: companies resident in the UK are liable to pay UK corporation tax on their global profits. Of course, they get credit for taxes paid in other countries that are subject to double-tax treaties and agreements. That means that if a company has funnelled profits from the UK to a tax haven with zero corporation tax or at least a lower rate, those profits can be taxed here—but the Government choose not to do so.

The result of the failed windfall tax levy is that Shell has not paid any windfall tax while BP might, and neither company has paid any UK corporation tax for the last three years. So my question to the Minister is: how do the Government hope to collect more without redesigning the windfall tax scheme? It needs a complete redesign. I hope the Minister will be able to answer that.

Finally, empirical evidence shows that austerity kills. Some 335,000 people died between 2012 and 2019 from government-imposed austerity. Could the Minister tell us how many more will die from the cuts included in this Budget?