Autumn Budget 2024

Lord Sikka Excerpts

Monday 11th November 2024 Lords Chamber

[Lord Sikka (Lab)]

My Lords, poverty and inequalities hold back economic development and prevent people living fulfilling lives. Our political system is now disconnected from the masses, as evidenced by the 59.7% turnout at the last general election. Many are drifting to the far right, which scapegoats minorities and threatens social stability. Against that background, the Budget is a missed opportunity to reshape the social landscape. No one can build a sustainable economy unless the masses have good purchasing power.

The Budget could have alleviated poverty by abolishing VAT on domestic fuel and reducing the standard rate of VAT, but the Chancellor followed Conservative policies and did not do that. The Budget could have abolished the two-child benefit cap, restored winter fuel payments to pensioners trapped below the poverty line and put a triple lock on benefits. It did not do that. The Budget could have increased personal allowances by at least £1,000 and lifted millions out of poverty. It could have provided free school meals for all children to reduce hunger, but the Chancellor followed the Conservative policies.

In 2021-22, 31 million people paid income tax; that number is set to rise to 40 million by 2028-29. The result of following Tory policies is that the average family will be £770 worse off in real terms by October 2029. Progressive taxation can reduce inequalities, but the Chancellor seems reluctant to embrace it. Despite promises, the carried interest of private equity managers will be taxed at rates lower than wages. Despite some tweaks, capital gains will also continue to be taxed at rates lower than wages and its recipients will pay no national insurance. Dividends will continue to be taxed at lower rates. The result is that there will be plenty of tax avoidance opportunities for the rich—the very thing the Chancellor wants to stamp out.

There is no justification for taxing rentiers at a lower rate than workers. That is unfair and fuels inequalities. For example, capital gains per capita are four times higher in London than in less prosperous parts of the UK, so somebody living in Kensington receives a lot of benefit from that compared to somebody living in Wales. The richest fifth pay 31% of their gross household income in direct taxes and the poorest fifth pay 14%. The richest fifth pay 9% of their disposable income in indirect taxes and the poorest fifth pay 28%. Altogether, the poorest pay a higher proportion of their income in taxes and the Budget does not actually change that. The richest 1% have more wealth than 70% of the population combined. These inequalities in the distribution of wealth and income will continue.

The revival of PFI for infrastructure investment is a matter of concern. Previously, every £1 of private investment resulted in £6 of repayment. The £13 billion NHS investment resulted in a commitment to repay £80 billion. This is poor value for money, as the Government can borrow at a lower cost than the private sector.

Previous Governments found £895 billion of quantitative easing to support capital markets. Can the Minister explain why the same has not been done to support infrastructure investment? The Budget is a missed opportunity to reduce poverty and facilitate economic prosperity.

Finally, the fake anger of the Conservatives over changes to inheritance tax and VAT on private school fees is nauseating. They showed no empathy for the people when they froze personal allowances and benefits, cut real wages of workers, imposed the two-child benefit cap and increased the standard rate of VAT to make the poor even poorer.

I fully appreciate the dire financial position inherited by the Government and hope the next Budget will be more adventurous and redistributive.