GDP Per Capita

Lord Sikka Excerpts

Monday 20th October 2025 Lords Chamber

[Lord Livermore (Lab)]

That is a very long question but I can give the noble Lord a very short answer. Yes, of course, I agree with him. It is very important that we retain our high earners and retain as much talent in this economy as we possibly can.

[Lord Sikka (Lab)]

My Lords, the equitable distribution of income to enable people to buy goods and services is essential for sustained economic growth, but all is not well. At Melrose, the CEO to average worker pay ratio is 1,112; at Tesco 375; at Marks & Spencer 261; at Associated British Foods 218; and 195 at Sainsbury’s. In view of this scale of inequity, what is the Government’s plan to secure equitable distribution of income for workers and, in doing so, also secure economic growth?

[Lord Livermore (Lab)]

Clearly, we need to make sure that we retain top talent in this country, as the previous questioner asked me about, but we also need to make sure that we increase the living standards right across the income distribution, and particularly for working people. My noble friend will know that wages continue to grow and that in the first 10 months of this Government, real wages rose more than in the first 10 years of the previous Government.

Economic Growth

Lord Sikka Excerpts

Tuesday 16th September 2025 Lords Chamber

[Lord Livermore (Lab)]

The answer to the first of the noble Baroness’s questions is no. As for the second question, she says she is interested in growth but let us look at just one measure that we are taking. Our planning reforms have the largest impact on growth of any non-fiscal measure the OBR has ever scored. Yet her party, evening after evening in this place, is doing every single thing it possibly can to hold up and obstruct our planning Bill in your Lordships’ House. Is that the action of a party that wants to grow the economy? Our capital spending increases economic growth. In this month’s GDP figures, we can see the effect it is having on driving new infrastructure work. Yet her party opposes the changes to the fiscal rules that make that possible. She says she wants growth but at every single turn, she opposes the measures this Government are taking to get that growth.

[Lord Sikka (Lab)]

My Lords, people’s inability to buy goods and services is a major reason for low economic growth, and 14 years of Conservative rule delivered real wage cuts, the two-child benefit cap, frozen income thresholds, and unchecked profiteering. Some 16 million people live below the poverty line. What plans do the Government have to abandon Conservative policies and deliver redistribution of income and wealth, and curbs on profiteering?

[Lord Livermore (Lab)]

My noble friend is absolutely correct to say that we need a different approach to the economy from the one we had over the past 14 years, and he will have seen how we are delivering on that. He will know that living standards are forecast to grow over four times faster than in the previous Parliament, and real wages have already grown by more in the first 10 months of this Government than in the first 10 years of the previous Conservative Government. He will know that, in answer to the question opposite, GDP per capita is forecast to rise by 5.6% over this Parliament. Under the last Labour Government, productivity growth was the second fastest in the G7. Under the Tories, it fell to the second slowest in the G7.

Gilt Yields

Lord Sikka Excerpts

Tuesday 2nd September 2025 Lords Chamber

[Lord Livermore (Lab)]

As I have said before, the Government do not comment on specific financial market movements.

[Lord Sikka (Lab)]

My Lords, can the Minister confirm that the yield rise does not affect the cost of servicing the debt already in place, including £2.71 trillion of debt inherited from the previous Government?

[Lord Livermore (Lab)]

I am not sure I entirely follow my noble friend’s question. What I will say is that current global market volatility underlines the centrality of our fiscal rules. We have fiscal rules specifically to give markets confidence that we have a clear path to get borrowing down, and there should be no doubt about the Government’s commitment to economic stability and sound public finances, which is why meeting the fiscal rules is non-negotiable.

Financial Services Reform

Lord Sikka Excerpts

Wednesday 23rd July 2025 Lords Chamber

[Lord Livermore (Lab)]

I am grateful to the noble Baroness for her contribution. There was a lot there. There was a crumb of truth in the things she said, but I certainly do not accept the characterisation of any of the three points she made. She started by talking about risk-taking. Do we want informed consumers to be able to take risks in order to get better returns? Yes, we do. She talked about how just that alone would take us back to the situation at the time of the financial crisis. I have already set out that I fundamentally do not accept that point. We are not removing any of the regulatory architecture that was put in place after the global financial crisis and, as I have said, the Chancellor said very clearly:

“The protections that were put in place … were the right thing to do, with better protections for consumers and more accountability injected into the system”.


Does the noble Baroness think it is right that if a consumer has a large amount of cash sitting in their bank account, the banks that money is with cannot say to them that there might be better ways to invest their money? That is at the core of what she talked about. She started her remarks talking about better returns for consumers. That is exactly what we are talking about: getting better returns for consumers. That is why introducing a greater level of risk is important.

The noble Baroness talked about the Chancellor being at odds with the Governor of the Bank of England. Again, I do not think that is the case. I have read the comments. He is talking about the things that we are doing, so I do not think that that is true, and I do not think that they are at odds.

I think I have already addressed the question on ISA reforms. As I have said, the Government will continue to talk to industry and others about the options for ISA reforms. Again, we recognise the potential for ISA reforms to improve returns for savers and access to capital for UK businesses. At the end of the day, all these reforms are about getting better returns for savers—surely, we can all agree with that—and better returns for the UK economy and, again, I hope we can all agree with that.

[Lord Sikka (Lab)]

My Lords, history shows that infatuation with deregulation of the finance industry always ends up destabilising the economy. At the moment, shadow banks are bigger than retail banking and totally unregulated. Private equity is devouring care homes, water, veterinary services, town centres and companies all over the UK. Its gearing ratio is higher than that which brought down Lehman Brothers and Bear Stearns, but the Government have still not moved to look at that sector. Under the so-called effective or tighter regulatory regime that we have now, money laundering by HSBC was buried, and we are still waiting for a report on the 2003 HBOS fraud and no regulator even wants to look at it. It will not get any better under the Government’s proposals, because the post-2008 crash reforms are being repealed and the regulator’s consumer protection duties have been diluted. There will not be enough money to bail out banks, businesses, markets and households when the next crash inevitably comes. Effective risk management must consider the likelihood of what are often called black swan events. What assessment have the Government made of the probability of a financial crash?

[Lord Livermore (Lab)]

I am always grateful to hear from my noble friend on all these topics. I disagree with him, as always. He said that the 2008 reforms are being repealed. I cannot see anywhere in the Chancellor’s statement where that is the case. As I have said clearly and as the Chancellor has said clearly, the protections that were put in place were the right things to do with better protections for consumers and more accountability in the system. My noble friend said that there would not be enough money to bail out banks in a crisis. We have been clear that the minimum requirement for own funds and eligible liabilities regime plays a crucial role in maintaining financial stability and ensuring that taxpayers do not pick up the cost of bank failures. However, it is important that the regime is proportionate so that smaller banks can scale up, expand and support lending to UK households and businesses. As my noble friend will know, the Bank of England has announced the outcome of its MREL consultation.

Tax on Imports under £135

Lord Sikka Excerpts

Monday 14th July 2025 Lords Chamber

[Lord Livermore (Lab)]

The Government have pledged not to increase taxes on working people, which is why we are not increasing income tax, national insurance contributions or VAT.

[Lord Sikka (Lab)]

Can I help the Minister on how to collect a lot more in tax revenues by attacking the anomalies? By taxing capital gains and dividends at the same rate as wages, and by charging national insurance at the same rate, the Government could collect around £15 billion a year. Another £14.5 billion could be raised by restricting tax relief on pension contributions to basic rate only. Can the Minister explain why the Government have not tackled anomalies that favour the wealthy?

[Lord Livermore (Lab)]

I am always grateful to my noble friend for his Budget representations. He knows that I am not going to get into speculation about the next Budget and that, in terms of what we have done so far to tackle the tax gap, the Government announced the most ambitious package ever to close it, raising £6.5 billion of revenue in terms of the Budget. In the Spring Statement, the Government announced further measures which will raise over £1 billion in additional tax.

Unpaid Tax

Lord Sikka Excerpts

Monday 7th July 2025 Lords Chamber

[Lord Livermore (Lab)]

We have committed an average of £660 million each year on measures to do so. By the end of the Parliament, that will raise an additional £5.7 billion per year. That is quite a good cost-benefit ratio. Each Budget will report progress against that.

[Lord Sikka (Lab)]

My Lords, between 2010 and 2024, HMRC failed to collect around £500 billion of tax. I therefore welcome the additional investment, but I am really concerned about the trajectory. Page 95 of the spending review shows that the HMRC budget for 2025-26 is to be £6.8 billion, rising to £7.3 billion for 2026-27. After that, there is a real-terms cut: the budget will be £7.1 billion for 2027-28, and £6.9 billion for 2028-29. Does the Minister agree that a real cut to the HMRC budget is not conducive to a sustained fight against organised tax avoidance?

[Lord Livermore (Lab)]

What is conducive is the most ambitious package ever to close the tax gap, raising £6.5 billion in additional tax revenue per year by 2029-30 and an additional £1 billion as a result of the measures in the Spring Statement. The spending review fully funded HMRC to deliver on those commitments.

Winter Fuel Payment

Lord Sikka Excerpts

Tuesday 10th June 2025 Lords Chamber

[Lord Livermore (Lab)]

I am grateful to the noble Baroness for her question, and I absolutely share her commitment to tackle child poverty in this country. We have made initial steps with the free school meals policy that the Prime Minister and the Secretary of State for Education set out last week. I hope that the spending review will have more to say on that subject, and on the child poverty strategy published alongside the Budget.

[Lord Sikka (Lab)]

My Lords, I have two points. First, can the Minister say how many more pensioners will now have to submit a tax return? Secondly, this policy is full of anomalies. To give just one example, somebody who has saved diligently since ISAs began will have a portfolio of about £400,000. The income from that is not reported on any tax return at all. Therefore, somebody with £35,000-plus—at least £20,000, £30,000 or £40,000 more—can still get winter fuel payment under the Government’s announcement. How are the Government going to force people to disclose the income from ISAs and other tax-free savings?

[Lord Livermore (Lab)]

Well, the tax system stays exactly as it is now, so I do not quite understand how my noble friend’s question arises. As I said before, no one will be brought into the tax system as a result of this policy who currently is not in the tax system.

Social Care and Special Education Charities: Employer National Insurance Contributions

Lord Sikka Excerpts

Monday 9th June 2025 Lords Chamber

[Lord Livermore (Lab)]

On the first half of the noble Baroness’s question, as she knows, as part of the changes to national insurance, the Government recognised the need to protect the smallest businesses and charities, which is why we more than doubled the employment allowance to £10,500, meaning that more than half of businesses with national insurance liabilities will either gain or see no change this year. The Government provide a great deal of additional support to charities via our tax regime, which is among the most generous anywhere in the world, with tax reliefs for charities and their donors worth just over £6 billion for the tax year to April 2024.

[Lord Sikka (Lab)]

My Lords, partners of big law and accountancy firms derive most of their income from one source but, despite that, they are not deemed to be employed by the firm. Therefore, the firms do not pay employer’s national insurance on the partners’ share of profits. The big four law firms are avoiding about £4 billion a year in employer’s national insurance contributions. Can I urge the Minister to look into this and bring forward reforms, so that we can have lots more revenue for the things that we need?

[Lord Livermore (Lab)]

I am very grateful to my noble friend for his suggestions, which I will always take very seriously.

Tax: Changes

Lord Sikka Excerpts

Tuesday 29th April 2025 Lords Chamber

[Lord Livermore (Lab)]

I absolutely understand the point the noble Baroness is making, but I do not necessarily agree that it is driving out the people she describes. I completely understand her point, but I am not sure I agree with the conclusions she is reaching.

[Lord Sikka (Lab)]

My Lords, the richest fifth pay 30% of their gross household income in direct taxes; the poorest fifth pay 16%. The richest fifth pay 11% of disposable household income in indirect taxes; the poorest fifth pay 27%. Altogether, the poorest pay a higher proportion of income in taxes than the richest. The Government can promote tax justice and stimulate the economy by cutting taxes for the poorest and eliminating the tax perks of the richest. How quickly can we expect action from the Government?

[Lord Livermore (Lab)]

As my noble friend will know, the UK’s approach to wealth through taxes on capital gains and inheritance generates substantial revenue for the Government and is on a par with other G7 countries. The OECD has said that capital gains and well-designed inheritance taxes can act as a more efficient and less administratively costly way of addressing wealth inequality than wealth taxes. Of course we want to ensure that we increase the incomes of the poorest people in society, which we have done, for example, through increases in the minimum wage.

Finance Bill

Lord Sikka Excerpts

2nd reading & Committee negatived & 3rd reading
Wednesday 19th March 2025 Lords Chamber

[Lord Sikka (Lab)]

My Lords, I welcome my noble friend Lady Caine of Kentish Town to the House and look forward to hearing more from her.

The key point is that Governments cannot rejuvenate the economy or reduce the welfare bill without increasing the purchasing power of the bottom 50% of the population. Some 16 million people live below the poverty line and their lack of purchasing power has turned many town centres into economic deserts. The Chancellor must improve their purchasing power, but this Bill does not do that.

The Bill continues the Tory freeze of income tax personal allowances. Consequently, more people are trapped into real tax rises. In 2024-25—that is, this year—37.4 million individuals are paying income tax, compared with 30.6 million in 2010. This year, 8.5 million pensioners are paying income tax, compared with 5.69 million in 2010. The erosion of poor households’ disposable income is compounded by continuing the Tory two-child benefit cap and deepened by the removal of winter fuel payments from pensioners below the poverty line.

This Bill misses the chance to reduce taxes on the poorest. This year—that is, 2025—the richest fifth will pay 30% of gross household income in direct taxes, compared with 16% paid by the poorest fifth. The richest fifth will pay only 11% of their disposable income in indirect taxes compared with the poorest fifth, who will pay 27%. Altogether, the poorest will pay a higher proportion of their income in taxes, and that is damaging society. Whatever happened to this thing called progressive taxation?

The Chancellor could have abolished VAT on domestic fuel and cut the standard rate of VAT to help the poorest, but she did not do that. To appease private equity, the Government did not impose the promised 45% tax rate on private equity managers and made late amendments to the Bill. Who hears the cries of the less well off? They too are crying for concessions.

The Bill does little to address tax inequities, and I have time to give just a couple of examples. The Government are continuing with the anti-worker policies: capital gains and dividends are taxed at a lower rate than wages, and recipients of capital gains and dividends do not pay any national insurance, even though they use the social infrastructure. By aligning taxation of dividends and capital gains with wages, the Government could raise billions—some estimates suggest at least £15 billion a year. Can the Minister explain why labour is taxed at a higher rate than the return on investment of wealth?

Accountants, lawyers and private equity managers operate through limited liability partnerships. This enables them to dodge national insurance contributions. Partners of LLPs derive most of their income from one source but are treated as self-employed for national insurance purposes. They pay only class 4 national insurance rates but avoid employers’ national insurance contributions. This perk alone saves the partners around £138,000 for every £1 million of profit shared. Partners of just four big law firms benefit from this gift by around £4 billion a year. Add to this the profits shared by partners of other law, accountancy, architecture, surveying and other firms and one can see that the Government could collect billions simply by attacking this anomaly.

Can the Minister explain why such anomalies have not been eradicated? Is it really fair that our lower-paid workers pay national insurance but some of the richest do not? To remind the Minister, it is easier to eradicate tax anomalies than punish the disabled with benefit cuts. The Government must improve the economic well-being of the bottom 50% of the population or there is a risk that they will be only a one-term Government.