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.

National Minimum Wage (Amendment) Regulations 2025

Lord Sikka Excerpts

Monday 17th March 2025 Grand Committee

[The Minister of State, Department for Business and Trade and Treasury (Baroness Gustafsson) (Lab)]

My Lords, the purpose of these regulations, which were laid before the House on 4 February, is to enact the annual increases to the national living wage and national minimum wage rates. After the parliamentary passage of these regulations, minimum wage rates will go up on Tuesday 1 April 2025. The headline national living wage will increase by 6.7%, from £11.44 to £12.21 an hour, a real-terms pay rise that will benefit and protect millions of workers. This year, the national minimum wage rate for those aged 18 to 20 will increase by £1.40 from £8.60 an hour to £10.00. This is a record increase, worth 16.3% on an hourly basis, and it is also a significant step towards achieving the Government’s ambition to extend the top rate, currently mandatory for those aged 21 and over, to all adults.

We look forward to hearing additional detail on this point from the Low Pay Commission once it has completed its consultation on the trajectory and pace of this equalisation. In the meantime, we will also deliver substantial increases to the statutory minimum wage rates for younger workers and apprentices. The hourly minimum wage rate for workers aged above school-leaving age but under 18 will increase from £6.40 to £7.55, an increase mirrored for the apprentice rate, which is payable to apprentices aged under 19 or others in the first year of their apprenticeship. Finally, we will also increase the daily accommodation offset rate from £9.99 to £10.66.

At this point, I want to extend my thanks to the Low Pay Commission. The new rates are based on the recommendations made by the LPC, which has demonstrated, as ever, its diligence, thoroughness and adaptability. On behalf of the Government, I thank the noble Baroness, Lady Stroud, and her fellow commissioners, as well as all the officials involved at the commission for their continued hard work, particularly in a year where they responded to an updated remit after this Government took office. The Government are also grateful to the bodies that promote and enforce the minimum wage across the UK. In addition to ACAS, which ensures employment disputes are resolved as promptly as possible, enforcement and compliance officials at HMRC ensure that the rates we are enacting today will have a real-world effect, educating workers and employers, upholding the law and ensuring that any money due is repaid to the workers who have earned it. Indeed, since the minimum wage was introduced, HMRC and its predecessor bodies have overseen the repayment of more than £186 million to 1.5 million workers and the issuing of more than £100 million in financial penalties.

The Government are committed to building on this and bolstering the enforcement of employment rights through the creation of the fair work agency, which will include, among other areas, enforcement of the national minimum wage. The new body will provide better support for employers to comply with the law, but it will also have powers to take tough action against the minority who deliberately flout it.

In the meantime, the Government will continue to fund minimum wage enforcement through HMRC, and we will also publish a new naming list in due course of those businesses that have failed to pay their workers the minimum wage, showing that there are consequences for employers who flout the law.

This year’s uplift to the national living wage will deliver a gross pay rise of £1,400 for a full-time worker on the rate, while a full-time worker aged between 18 and 20 will see a gross rise of £2,500. It is worth emphasising that the 2025 national living wage is expected to have the highest real value in the history of the UK’s minimum wage, 78% higher than the main adult rate when the national minimum wage was first introduced in 1999. The national minimum wage rate for 18 to 20 year-olds will be equal to 82% of the national living wage in 2025, similar to the relative value when the national minimum wage was first introduced in 1999, and compared to 75% in 2024. In all, we estimate that more than 3 million workers will benefit directly from the increases, with the potential for millions more to receive an indirect pay rise as employers preserve pay differentials.

This year’s uprating is a crucial step towards delivering our manifesto commitment to a genuine living wage for all adult workers. This is a Government who are ambitious in their agenda for working people and serious about taking the necessary steps to deliver on it. We are delivering this through a direct, real-terms pay increase for millions of workers. We have also brought forward our landmark Employment Rights Bill, and we continue to work across the board alongside trade unions, employers and other stakeholders both to deliver on the plan to make work pay and to realise the biggest upgrade of workers’ rights in a generation.

Accordingly, the Government will issue in the coming weeks a new remit to the Low Pay Commission, asking it to recommend minimum wage rates to apply from April 2026. I commend this instrument to the Committee.

[Lord Sikka (Lab)]

My Lords, I welcome the increase in the national minimum wage, although most of its real value has already been eroded by hikes in the price of energy, water, housing, transport, internet, food, council tax and much more. I shall speak to two particular concerns.

First, I am concerned about the denial of the headline minimum wage rate to workers below the age of 21. The under-21s do not pay lower rates of income tax and national insurance, nor do they pay a lower price for housing, food, shoes, clothes, transport, medicines, internet, and other goods and services. However, they are condemned by law to receive a lower wage. The under-21s are paid a lower wage rate but the product of their labour does not sell at a lower price. This enables many an employer to profiteer. The denial of the full minimum wage has relegalised exploitation.

Over the years, the typical government response has been that low wages preserve employment opportunities for young workers, yet I meet young people who are working longer hours and holding down multiple jobs simply to collect a decent wage and to make ends meet. This cannot be good for their health; indeed, it will create pressures somewhere else. Young people on low wages are trapped in low-paid jobs. I have met many who would like to undertake part-time education in order to further their opportunities but cannot because they simply do not have the resources. I therefore urge the Government to abolish the lower rates of the minimum wage and to alleviate poverty.

Secondly, I am concerned about the enforcement of the statutory minimum wage. The annual reports published by HMRC show a steady parade of companies that fail to pay the required wage. Last year, 524 employers were named for failing to pay £16 million in wages to 172,000 workers. Over the years, the culprits have included companies such as Argos, easyJet, Estée Lauder, Greggs, Marks & Spencer, Moss Bros, WHSmith and many others. None of these offenders ever forgets to pay the agreed wage rate to their executives but, somehow, they always forget to pay their workers a statutory minimum wage.

Although the recovery of unpaid wages is highly commendable, the persistence of non-payment suggests that there are systemic problems and that the penalties are not high enough. The International Labour Organization’s Convention No. 81, signed by the UK, recommends at least one inspector per 10,000 workers to monitor compliance with workers’ rights. The UK has less than 0.4% of the benchmark requirement, and employers can expect an inspection once every 500 years. Can the Minister explain why the Government are not meeting the ILO requirements? There are potential fines of up to 200% of the underpayment of the minimum wage, and a maximum of £20,000 per worker, but I could not find anyone who has actually faced this maximum penalty. Can the Minister say when the maximum penalty was last levied?

The persistence of offences suggests that penalties are simply not effective. I urge the Minister to consider a minimum penalty, which should be equivalent to the remuneration of the entire board of directors, and at least 50% of it must be paid by directors personally. This would deal with the business scale problem and incentivise directors to pay the minimum wage. It would also improve their memory.

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[Baroness Gustafsson (Lab)]

I thank the noble Lord. I talked about the additional rights and enforcing the wider roles and rules of the domestic agency, but on how that will be impacted operationally, as well as the interface with HMRC, I will write to the noble Lord, Lord Fox, with some details on exactly how that will be undertaken.

[Lord Sikka (Lab)]

My Lords, perhaps I, too, could have one more bite. I referred to the penalty situation. The one we have at the moment enables directors to gain because the chances of all companies being inspected are very low. If they get away with it, they are quids in because the bottom line means that they will get a higher bonus and remuneration. If they are caught, there will be a penalty on the company, and they do not bear any personal penalties. Will the Government change that and make sure that directors personally pay at least half the penalty, as I suggested?

[Baroness Gustafsson (Lab)]

There is a lot of conversation about enforcement. We talked about the 200%. There is currently no legislation about directors’ personal accountability, but I am more than happy to follow up with the noble Lord on the specifics of what that would look like.

Pension Fund Reliefs

Lord Sikka Excerpts

Tuesday 4th February 2025 Lords Chamber

[Lord Livermore (Lab)]

I am not sure that the noble Lord should talk down the British economy in quite that way.

[Lord Sikka (Lab)]

My Lords, for 2023, the cost of tax relief on pension contributions was £46.8 billion, and another £23.8 billion of relief was given on related national insurance contributions. Some 63% of the total tax relief went to 6 million higher and additional rate taxpayers, and only 37% went to 28.1 million basic rate taxpayers. By fixing the tax relief at 20% for everybody, the Government can not only reduce inequalities but have £14.5 billion a year surplus. Will the Minister consider this reform?

[Lord Livermore (Lab)]

I am grateful to my noble friend for his question. He is correct that the Government spend around £70 billion annually on pension tax reliefs, because we want to encourage pension savings. That is why, for the vast majority of savers, pension contributions made from income during working life are tax free, and it is why, like many other countries, the UK exempts from tax the returns pension funds receive on the investments they make. Tax is not within the scope of the pensions review.

Growing the UK Economy

Lord Sikka Excerpts

Monday 3rd February 2025 Lords Chamber

[Lord Livermore (Lab)]

I am grateful to the noble Baroness for her question. I completely agree with her, which is why the Government have set a 2% productivity target for all government departments as part of the spending review. We have been very clear that, clearly, in a constrained fiscal environment, productivity and reform will be central to delivering better public services. In an environment where the noble Baroness opposite and I do not agree on very much, this is definitely an area where we agree, in terms of the importance of driving productivity not just in the private sector but in the public sector too. Please let me reassure the noble Baroness that this is absolutely top of mind as we consider the spending review decisions that we have to take.

[Lord Sikka (Lab)]

My Lords, the key lesson from the last 14 years is that sustained economic growth cannot be secured without improving the purchasing power of the bottom 50% of the population. The two-child benefit cap, the winter fuel payment cut for pensioners below the poverty line and a freeze on personal allowances are just some of the impediments. Can the Minister say when these policies will be reversed and when steps will be taken to secure equitable distribution of income and wealth because, without money, people simply cannot buy products and services?

[Lord Livermore (Lab)]

Although I disagree with my noble friend on some specifics that he raises, I think we all agree that it is right that we have a goal to raise living standards in every part of the UK by the end of this Parliament, which is why that is central to our Plan for Change targets when it comes to the economy. We have already provided stability to the economy, enabling the Bank of England to make two interest rate cuts; we have protected working people by keeping our promises on tax at the Budget; we have frozen fuel duty; and we have increased the minimum wage, and we are now seeing wages starting to rise. All those things are beneficial in terms of living standards. My noble friend will appreciate, though, that we have to grow the economy before we can start distributing the benefits of that growth.

Low and No-Tax Jurisdictions

Lord Sikka Excerpts

Thursday 30th January 2025 Lords Chamber

Moved by

[Lord Sikka]

That this House takes note of the tax implications of corporations shifting profits to low and no-tax jurisdictions.

[Lord Sikka (Lab)]

My Lords, I begin by welcoming the noble Baroness, Lady Coffey, to this House. I really look forward to hearing her maiden speech.

It is a good time to talk about profit shifting, as the US is tearing up tax treaties and the OECD’s base erosion and profit shifting—BEPS—project has stalled. HMRC states that since 2010 some £500 billion of tax has not been collected. A methodological annexe issued by HMRC, dated 20 June 2024, states:

“Some forms of base erosion and profit shifting (BEPS) are included in the tax gap where they represent tax loss that we can address under UK law. The tax gap does not include BEPS arrangements that cannot be addressed under UK law and that will be tackled multilaterally through the OECD”.


Basically, HMRC does not really know how much profit is shifted out of the UK and what the related tax losses are.

Multinational corporations are shifting annual profits of around $1.4 trillion into tax havens, causing Governments around the world to lose $348 billion a year in direct tax revenue. I am sure the Minister will be able to tell us how much the UK is losing. Over $329 billion of profit is shifted into the UK’s Crown dependencies and overseas territories by multinational corporations every year, causing a tax loss of $80 billion.

This daylight robbery is facilitated by financial engineering and opacity from a rapacious tax abuse industry located in the UK and its global dependencies. The Criminal Finances Act 2017 was introduced to tackle corporate tax evasion but, to the best of my knowledge, to date no one has been charged or prosecuted under it. So how exactly are profits shifted? I have a couple of examples.

Consider the case of BHS, which collapsed in 2016. I declare an interest as an adviser to the Work and Pensions Committee during its investigation into BHS. Lady Green, spouse of the chief executive, held 98% of its shares. In 2001, BHS sold some of its properties for £106 million to Carmen Properties Ltd, a company based in Jersey and under the sole control of Lady Green. The properties were then immediately leased back to BHS in England. Between 2002 and 2015, BHS paid £153 million in rent to the company in Jersey. These rents were tax-deductible expenses in the UK and reduced the tax liabilities of BHS. The rents booked in Jersey were not taxed because the profits were not made on the island. The profits of Carmen, the Jersey-based company, were then paid as dividends to Lady Green, who resided in Monaco, which levies no income tax at all.

Through this related-party transaction, BHS was able to manufacture a tax-deductible expense and reduce its tax liability. Lady Green received dividends on which no tax was paid in the UK or anywhere else. This type of financial engineering is not uncommon and the resulting losses do not form part of HMRC’s tax gap numbers, which are grossly understated. Governments can easily check the leakage of tax revenues by deducting tax at source from dividends, interest and other payments to entities in low and zero tax-rated jurisdictions. If the recipient can show that he or she paid the tax on the transaction elsewhere then the tax withheld can be refunded, but successive Governments have made no effort to curb this sort of tax avoidance.

My second example relates to the use of affiliates and subsidiaries in low or no-tax jurisdictions to shift profits. Starbucks, Microsoft, Google, Amazon, oil, gas and numerous other entities use complex corporate networks to shift profits. Apple’s profits are parked mostly in Jersey, where it really has no physical presence. Transnational corporations have huge opportunities for profit shifting and tax abuse. A microchip company has its product designed in country A, manufactured in B, tested in C and patented in D, and has its marketing rights located in E. Determining the cost, profits and allocation to each country is highly problematic.

Companies adjust their import and export prices and shift profits, especially as around 60% of world trade is internal to companies. The OECD’s transfer pricing rules require the use of arm’s-length prices, but in the absence of active independent markets such prices are almost impossible to ascertain. The top 500 companies in the world control around 70% of world trade; 80% of global sales of coffee are attributed to just three multinational corporations; and two companies control 40% of the global commercial seed market. Around 10 companies dominate the global pharmaceutical industry, four dominate the agricultural commodities market and around 14 dominate global auto manufacturing. This gives them huge opportunities for profit shifting and tax abuse.

I will illustrate this with an example relating to bananas. I am sure that all noble Lords have had bananas and have wondered where exactly most of the UK’s bananas come from. The UK’s bananas come from an island that does not grow any bananas and which no banana-laden ship has ever visited—that is, Jersey. Companies such as Chiquita, Dole, Fresh Del Monte, Fyffes and Geest control banana production in west Africa and Latin America, but all the paperwork is routed through Jersey.

For bananas selling for £1 in a UK supermarket, 13p goes to the growing country, of which 10.5p is for the cost of production, 1.5p is for labour and 1p is profit. After that, the games begin: 8p goes to a purchasing network located in the Caymans, within the same group of companies; 8p goes to a Luxembourg subsidiary for providing financial services, including interest payments on intragroup loans; 4p goes to Ireland for the use of a brand name; 4p goes to the Isle of Man for providing insurance; 6p goes to Jersey for management services; and 17p goes to Bermuda for providing a distribution network, even though no ship ever visits there.

By the time the bananas are unloaded in the UK, the 13p-worth of bananas magically has a cost of 60p and is sold in the supermarket for £1. The supermarket incurs costs in selling those bananas and will eventually declare a profit of 2p, which if taxed at the rate of 25% will yield half a penny for the Chancellor, out of the £1 that the customer has spent. So 47p of the profit made from UK customers is booked in low or no-tax jurisdictions and those profits are not taxed anywhere in the world. These numbers do not form part of HMRC’s tax gap calculation. Almost every multinational company is engaged in this type of profit shifting and tax abuse. I used to work for an oil company; another day I can maybe give the House examples of what the oil companies get up to.

Profit shifting requires urgent attention. The Companies Act 2006 does not require company accounts to provide any information about profits shifted. Accounts are totally opaque. Can the Minister say what plans the Government have to give visibility to profit shifting? Some visibility can be provided by public country-by-country reporting, which would enable proper transparency on both the amount of taxes avoided by multinationals and how far the UK’s measures have been effective in tackling that.

Section 122 of the Finance Act 2015 contained a requirement for multinationals operating in the UK to publish a public country-by-country report. But the legislation was never implemented and was subsequently repealed by the Finance (No. 2) Act 2023. The UK is now way behind other countries. The EU and Australia now require companies to make these disclosures through public country-by-country reporting. Can the Minister explain why the UK shuns tax transparency?

The UK Government have signed up to the OECD global tax deal, requiring a 15% minimum effective tax rate on multinational corporate profits, but President Trump has withdrawn from that agreement and threatened sanctions against Governments which levy 15% minimum tax on US companies operating in their countries. There is a way forward in the UN framework convention on international tax co-operation, but, unfortunately, last November the UK Government voted against it. It would be helpful to know what their strategy is.

Finally, it would be helpful if corporate tax returns are made publicly available, so that we can all see how they are shifting profits and what kind of taxes are being abused. That would empower the Public Accounts Committee to scrutinise those corporations and any sweetheart deals done by HMRC. I beg to move.

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[Lord Sikka (Lab)]

My Lords, I thank the noble Baroness, Lady Coffey, for her excellent speech. I look forward to interacting with her in the months and years to come. I also thank all other noble Lords for their contributions. I think this issue will become more, acute because successive Governments have shifted profits away from corporations to what I call normal people. They have been given the choice: either pay more for crumbling services or lose hard-won social rights completely. Therefore, the way we treat corporations and corporate power will become a vital issue for debate.

Transfer pricing rules are now broken, because world trade is dominated by a handful of companies, as I indicated earlier. Numerous actors are dominated by very few companies, which means arm’s-length prices are almost impossible to find. Some noble Lords may have noted that the BRICS countries, especially Brazil, and others have developed their own way of applying arm’s-length prices because companies have been abusing them. That is also worth looking at.

I am sure there will be lots of reflection on the various contributions, but my final point is that a UK resident company is liable to pay UK corporation tax on its global profits, subject to tax treaties and double taxation agreements—in other words, giving benefit after credit for the taxes paid somewhere else. If those companies’ profits are not taxed anywhere that means the UK Government can tax them, but I have not come across any example of where any Government have actually done so, so there are billions of pounds waiting to be collected. Perhaps in the next debate—I might try my luck next year—we can have this point clarified. Once again, I thank all noble Lords.

Motion agreed.

Non-domicile Status

Lord Sikka Excerpts

Tuesday 28th January 2025 Lords Chamber

[Lord Livermore (Lab)]

I am grateful to the noble Lord, and I am of course happy to look at that. Obviously, we keep this policy under review and will continue to engage with stakeholders to ensure that the system operates as it should. It is important to remember that the basis of this policy is ensuring that everyone who makes their home in the UK should pay their taxes here; that is absolutely the right thing to do. We want to ensure that our system remains internationally competitive, and the system that we are introducing as a result of these reforms is far more internationally competitive than the system that it replaces.

[Lord Sikka (Lab)]

My Lords, for far too long the wants of the few have been prioritised over the needs of the many. I cannot recall marches or petitions calling for concessions to wealthy non-doms, but despite marches and petitions, the two-child benefit cap and winter fuel payments cut for pensioners below the poverty line remain. Can the Minister offer some guidance to families and pensioners as to how they can get a concession too?

[Lord Livermore (Lab)]

The Government are committed to making sure that the wealthiest in our society pay their fair share of tax, consistent with our commitment to economic growth. That is why the Chancellor announced a series of reforms at the Budget to help to fix the public finances in as fair a way as possible. That is absolutely what we are doing, and we are ensuring the fairest treatment to those affected.

Sterling: Rise in Yields on 30-year Gilts

Lord Sikka Excerpts

Tuesday 14th January 2025 Lords Chamber

[Lord Livermore (Lab)]

They already are. We have seen many planning projects already unblocked by this Government as a result of changes to planning. As soon as this House passes the planning Bill, we will see even more growth in the UK economy.

[Lord Sikka (Lab)]

My Lords, during the 14 years of the last Government, public debt increased from £1 trillion to £2.8 trillion. Public services were decimated, NHS waiting lists tripled, average real wages fell back to the 2008 level and 16 million people now live below the poverty line. Does the Minister agree that the Conservative Party owes the country an explanation?

[Lord Livermore (Lab)]

I agree that the Conservative Party owes the country an explanation—it also owes the country an apology. There was no bigger failure of the previous Government than their failure on growth. First, they introduced austerity, which choked off investment. Then, their Brexit deal created new trade barriers equivalent to a 13% increase in tariffs for our manufacturing sector, permanently reducing GDP by 4%. Finally, their disastrous mini-Budget crashed the economy and set inflation and interest rates soaring. Of course, they left us with the £22 billion black hole in the public finances.

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.

United Kingdom Declining Birth Rate

Lord Sikka Excerpts

Wednesday 6th November 2024 Lords Chamber

[Lord Livermore (Lab)]

I am very grateful to the noble Lord for his question. The example he gives of the reform that is no longer going ahead is an interesting one. It was a £1.4 billion commitment made by the previous Government but not a single penny was put behind it in the Budget that they prepared. It is exactly an example of how we got to £22 billion of unfunded spending—it simply was not affordable. If noble Lords opposite would like to find that £1.4 billion or tell us how to raise it, we would be happy to spend it. This Government are committed to family-friendly policies; it is at the core of our opportunities mission. In the Budget, we allocated £8 billion to family services because it is one of our key priorities.

[Lord Sikka (Lab)]

My Lords, low wages, poverty, poor housing, food, the high cost of living and household debt dissuade many people from having children. the eradication of poverty must be a priority for the Government. Can the Minister ensure that, within a decade, no one on the national minimum wage will pay any income tax or national insurance, and that the cost of that policy will be borne by the ultra-rich? After all, 1% of the population has more wealth than 70% of the population combined. When will he do that?

[Lord Livermore (Lab)]

I am afraid I cannot agree with my noble friend on that, but I agree with him that alleviating poverty should be central to the Government’s objectives. Clearly, work is one of the best routes out of poverty. Equalising women’s participation rates in the economy with those of men would add 1.3 million economically active people into the workforce, which is why helping women back into work is central to the Government’s goals.