Tax Burden and Economic Growth

Debate between Lord Wilson of Sedgefield and Lord Leigh of Hurley

Tuesday 15th September 2026 Lords Chamber

[Lord Leigh of Hurley]

To ask His Majesty’s Government what assessment they have made of the relationship between changes in the tax burden and the effect on economic growth.

[Lord in Waiting/Government Whip (Lord Wilson of Sedgefield) (Lab)]

Our tax system is very supportive of economic growth. Our tax-to-GDP ratio is in the middle of the pack of the G7, and we have the lowest headline rate of corporation tax in the G7. The UK economy saw the fastest growth in the first half of this year, and the IMF expects the UK to remain the fastest-growing European G7 economy in 2026-27. According to the IMF, this year, for the first time since 2004, we are forecast to be borrowing less than the rest of the G7 on average. Despite the headwinds from the war in the Middle East, there is a lot to be optimistic about.

[Lord Leigh of Hurley (Con)]

My Lords, the tax burden is forecast to reach its highest level ever. The last two, disastrous Budgets raised taxes by £40 billion and £26 billion respectively; the results can be seen in today’s very disappointing unemployment figures. The manifesto ruled out any major tax increases, but there is still great uncertainty in the UK economy, which is damaging the economy. What evidence can the Government offer that such a historically high tax burden is consistent with promoting economic growth, which is so badly needed in this country?

[Lord Wilson of Sedgefield (Lab)]

I should just say to the noble Lord that we had quite a big mess to tidy up when we came into government two years ago; I do not think that the Opposition should be allowed to get away with that.

Only on Friday, the ONS estimated that GDP growth increased in July by 0.4%, which was well above expectations. In fact, UK GDP growth is the fastest in the G7. The tax level still sits in the middle of the G7 nations. For example, the effective tax rate for a single individual with no children and on average earnings is one of the lowest in the OECD. I am not pretending that everything is rosy in the garden—there is a war in the Middle East. On the unemployment figures that came out today, I do not know whether the noble Lord is aware of this, but in only two peacetime years out of the past 150 has the average annual employment rate been higher than it was in 2025.

Let us just listen to what businesses have been saying. A representative of the KPMG said that

“businesses are starting to press ahead with investment”

and that

“we are starting to see the data moving in the right direction”.

As I say, there is a lot to be optimistic about.

Electricity Bills: VAT Removal

Debate between Lord Wilson of Sedgefield and Lord Leigh of Hurley

Thursday 23rd July 2026 Lords Chamber

[Lord Leigh of Hurley]

To ask His Majesty’s Government how they intend to fund the proposed removal of VAT from electricity bills.

[Lord in Waiting/Government Whip (Lord Wilson of Sedgefield) (Lab)]

My Lords, before I respond to the noble Lord’s Question, I just put on record my appreciation for the work that my noble friend Lord Livermore has done for both the Government and the Treasury in this House. I know that he will be missed at the Dispatch Box. I am sure that noble Lords also want to thank my noble friend Lord Stockwood, whom I have had the pleasure of supporting on the Financial Services and Markets Bill. I wish them both well for the future.

In response to the noble Lord’s Question, on Tuesday the Government announced immediate action to cut VAT on electricity bills to give millions of households breathing space on the cost of living. This measure is estimated to cost about £850 million in 2026-27, which will be funded by the cancellation of the digital ID programme, which was expected to cost £1.8 billion over three years. The effect of this change will ensure that we help those people who are most in need.

--- Later in debate ---

[Lord Leigh of Hurley (Con)]

My Lords, if I may add to those comments, I too will miss the noble Lord, Lord Livermore, on the Front Bench. We did not agree on everything, but he certainly knew his facts and had passion and commitment when he spoke. However, the Starmer Government’s pessimism fabricated a black hole; this Government’s hubristic approach is creating a black hole. We have no real details of how these giveaways will be funded. There is talk of a grant being turned into a loan. We do not know the covenant of that loan, or the interest on it and when it will be payable. Can the Minister assure us that during the summer there will not be any further unfunded giveaways but, rather, that these types of announcements will take place properly, in the Budget, as they are supposed to do, to allow for proper scrutiny by both Houses and, equally importantly, by the OBR?

[Lord Wilson of Sedgefield (Lab)]

The priority of this Government is the cost of living. We want to bring the cost of living down to give people breathing space over the coming years. The OBR stated that we were due to spend £1.8 billion over the next three years on digital ID, funded from within existing settlements through reprioritisation. We are still going to find that money from within existing budgets through reprioritisation, but we will now use it for other things. The amount of money is relatively small when you consider that the last Government, as my noble friend Lord Livermore would say, left this Government with a £22 billion black hole.