Finance Bill

Baroness Bennett of Manor Castle Excerpts

2nd reading & 3rd reading & Committee negatived
Tuesday 20th December 2022 Lords Chamber

[Baroness Bennett of Manor Castle (GP)]

My Lords, it is a pleasure to unexpectedly follow the noble Lord, Lord Davies of Brixton, although I regret that we will not hear from the right reverend Prelate the Bishop of St Albans, who I think would have addressed some of the social justice issues on which I will focus.

I hope your Lordships’ House will forgive me for being rather hoarse. I spent quite a bit of today chanting with the striking nurses at St Thomas’, offering the Green Party’s strong support for their highly just cause. It is not just about their own pay, inadequate as that is, but about protecting our NHS and patient care and ensuring there are enough nurses on the wards to provide the care that they want to offer and that their patients need. One of their chants ran—noble Lords will be pleased to know that I will not offer a musical rendition, although in the nurses’ hands it was very tuneful and catchy—“Rishi, where did the money go go go?”

I suspect those nurses had in mind the VIP lane PPE disaster, but I think it can also be understood in the broader context of today’s debate on the Finance Bill. Think back to the early days of the NHS. In a nation impoverished and almost destroyed by war, the money was found to establish the new service that quickly became a national treasure and so celebrated, as I am sure we all remember from the 2012 Olympics.

We know that the BBC has just recently been challenged over its continued inaccurate reporting of the national budget as if it were a household one—the suggestion that you need to secure £1 of tax in for £1 of spending out. Just look at what happened when we needed to rescue the banks from the greed and fraud of the bankers in 2006-07—and indeed the emergency of the Covid pandemic. Money—a huge amount of money—was found.

One simple and accurate answer to the nurses’ question “Where has the money gone?” is that it is sitting in the pockets—or rather, mostly in the offshore bank accounts —of the rich. As figures from the Equality Trust showed this week, the number of UK billionaires has increased by a fifth since the start of the pandemic. Fuelled by a boom in property and stock values, the super-rich, just by sitting on their hands, have seen their wealth swell—from 147 billionaires to 177. Their median wealth is £2 billion. This money is largely unearned and all too often sitting in tax havens instead of circulating round and round in our society, among workers and small businesses, to the benefit of all.

So while food bank usage grows, and nearly 4 million children live in poverty and 6.7 million households struggle to heat their homes, the super-rich sit back and watch the value of their assets grow. This is happening in a society that looks increasingly Victorian in structure; the number of domestic servants, estimated at 2 million now, exceeds that of the Victorian age, the social structure of which our society is increasingly coming to resemble.

My question to the Minister is: where in this Bill is the wealth tax? Why is there no wealth tax to address this clearly unsustainable and utterly inequitable situation? A wealth tax could start to restore stability and security in our society; it could help to pay some of the extra wages those nurses desperately need. What are the Government doing to recover the unearned, unjustified wealth that decades of policies—under Governments who sadly were all too comfortable with people getting filthy rich—have employed to the point where our society is now, in a profound sense, economically as well as environmentally unsustainable?

The Minister noted in his introduction that the Bill includes a modest increase in taxation of the windfall gains of oil and gas companies. That level of tax was applied too late and is still at an inadequate level but, none the less, the Government have made a concession and acknowledged that income falling into people’s laps should not be left just to sit there.

I have to agree with the Minister’s comments about the need for investment in renewable energy schemes. I hope that he will have a discussion with his BEIS colleagues about the need for investment in local community energy schemes, with broad backing across both Houses of this Parliament, so that local communities can make that investment and see the returns coming back to them.

The unsustainability of our society comes not just from individual poverty—the insecurity of income that sees nurses forced to go to foodbanks—but from the poverty of our infrastructure. The social safety nets and supports have been ripped away, and the libraries and community centres, lunch clubs and youth workers have been smashed away, by a decade of austerity. What this Statement does to the overall package behind the Finance Bill is deliver austerity version 2.0.

Austerity was economically unnecessary in 2010. In the 2015 general election leader debates, I recounted what happens when a Sure Start centre is closed, its workers cast into unemployment—or probably low-paid, insecure employment that does not use their skills—without the money to spend in local shops and businesses, or to support the education of their own children, while their former clients go without the support services they urgently need to ensure children get a good start in life. That is a downward spiral to which we have been condemned for a decade, and the whole approach of this Bill, failing to generate the funds to invest in the foundations of a prosperous, healthy economy and society, condemns us to descend further into even deeper circles of hell.

As the Minister outlined, the Chancellor focused his tax changes on earning, saying that those who earn the most will make the largest contribution, but this is a distraction from owning. The easiest prize when seeking to increase tax yields is the accumulated wealth of the super-rich. That is why the Green Party is proposing a wealth tax to directly remove the financial assets of the richest 1% and share them with society as a whole. Although lowering the threshold for the payment of the highest rate of tax is welcome, this ignores the fact that earnings from assets are taxed at a lower rate than earnings from investments. If we really want a flourishing economy of enterprise and energy, we should stop rewarding people for doing nothing. The Green Party would introduce a single tax on all income, so that people who live from investments pay the same rate as those who live from work.

The reality—and where to some degree at least I depart from the noble Lord who spoke previously—is that most British people are prepared to pay more tax to fund decent public services; indeed, let us make them brilliant. An Ipsos study in 2020 found that 44% said they would personally pay more tax to fund public services but, when they were asked how they would most like to raise money overall, the answer was through a wealth tax. It is a political choice whether or not to have that.

It is no surprise that the Tories protect their wealthy funders, but why are we not hearing calls for a wealth tax from the Front Bench in front of me, or from the parts of the Labour Party from which it might be expected? I honourably exempt some Members of the Labour Benches—they know who they are—from that comment. It is interesting that the Labour Party’s recent big statement was Gordon Brown’s constitutional review. The coverage focused on its suggestions for reforming the House of Lords, but a big focus of that report was on growth. The word “growth” appears 108 times, while the word “fairness” appears eight times, mostly in the context of regional inequality, and financial redistribution is referred to just once.

We cannot have infinite growth on a finite planet. Collectively, as a society, we consume our share of three planets every year. We have to get away from the idea that some people always get crumbs but if the pie keeps growing then the people who get crumbs will get a few more crumbs. The pie cannot keep growing, and people cannot keep living on crumbs. We have to transform our tax system and our economic system, and share those resources out fairly.

The sad reality is that the Bill and the package around it take us further down the spiral into a deeper circle of hell, and the people in those deepest circles are not Dante’s sinners but the innocent—the young, the old, the disabled and the disadvantaged. That is not happening because of some inexorable law of physics. The market is a human creation. We shape what it looks like, and we can create a different society with a very different kind of taxation system and a different way of investing in our society.

--- Later in debate ---

[Lord Harlech (Con)]

I thank the noble Lord for the intervention. I will have to go back and check Hansard. I heard him raise pensions in general but also public sector pensions, but if I am wrong, I apologise, and I stand to be corrected.

All noble Lords raised the issue of the personal tax thresholds. Our mantra throughout this process has been to make sure that those with the broadest shoulders carry the most weight, which is the fairest approach to take. The changes to personal tax ensure that, although we are asking everyone to contribute a little more towards sustainable public finances, we do so in a fair way, with the better off shouldering a greater burden.

We have tried to balance the needs of the country as a whole with the need to protect the most vulnerable. However, as I mentioned, we must continue to improve the health of our public finances, which is why the personal allowance has been frozen. The changes for most will remain small, with the average taxpayer paying only an additional £38 in income tax and NICs by 2028, and the personal allowance will still be £2,150 higher in April 2028 than it would have been if it had been uprated by inflation since 2010.

The noble Baroness, Lady Bennett of Manor Castle, raised the issue of a wealth tax. The Government’s priority is restoring stability, but we will try to do this in a fair and compassionate way which protects the most vulnerable and ensures that those on higher incomes pay a fair share. The Autumn Statement reduces the additional rate threshold, which will raise revenue from the top 2% of taxpayers. The income tax and gains tax systems are also being reformed to reduce the generosity of certain allowances, which will bring the treatment of investment income and capital gains closer in line with employment income.

This year, the Government raised the threshold at which workers start paying national insurance contributions to £12,570 and have reversed the health and social care levy. This comes on top of the energy price guarantee to support households with their energy bills over the winter, and a further £37 billion of support for the cost of living.

The noble Baroness, Lady Kramer, raised council tax. The Government expect that local authorities will exercise restraint in setting council tax, balancing the extra income for local services against the tax burden on residents for the cost of living pressures. Local authorities have the flexibility to design their own working-age local council tax support schemes to protect their most vulnerable residents. The UK does not have a single wealth tax but has several taxes on assets and wealth. As set out by the Wealth Tax Commission report in December 2000, the UK’s taxes on wealth are on a par with those of other G7 countries.

[Baroness Bennett of Manor Castle (GP)]

I should perhaps declare my position as a vice-president of the Local Government Association. The Minister said that he expects councils to exercise restraint with regard to council tax rises. However, the Government’s own forecasts, based on the provisional local government finance settlement released this week, indicate that they are expecting all councils to raise their rates by the maximum allowed. Those two realities do not seem to add up.

[Lord Harlech (Con)]

I will have to disagree with the noble Baroness. I did not say that councils were not going to increase council tax rates but that we expect them to show restraint.

The issue of public sector pay was raised by the noble Baronesses, Lady Bennett and Lady Kramer, and the noble Lord, Lord Tunnicliffe. The Government have accepted the recommendations of the independent pay review bodies for the NHS, teachers, police and the Armed Forces for 2022-23. This delivered the highest uplifts in nearly 20 years, with most awards targeted towards the lower paid. Pay awards for 2023-24 will be determined by the normal pay-setting process, and the Government will be seeking recommendations from pay review bodies where applicable. It is important that public sector employers can recruit, retain and motivate qualified people, and this is a key consideration for pay review bodies when they make their recommendations to government. Pay awards this year must also strike a careful balance between recognising the vital importance of public sector workers while delivering value for the taxpayer and being careful not to drive prices even higher in future through contributing to a wage-price spiral.

On the energy profits levy, which was raised by the noble Lord, Lord Tunnicliffe, and the noble Baronesses, Lady Bennett of Manor Castle and Lady Kramer, the Bill is part of our plan to deal with the international pressures caused by the challenges of Putin’s invasion of Ukraine, inflation and the hangover from the pandemic. The changes to the energy profits levy will make sure that the oil and gas companies that have been gifted extraordinary profits pay their fair share of tax. Combined with the electricity generator levy, these taxes will raise £55 billion over the next six years from companies that could not have expected such enormous profits. The investment allowance remains at its current value to allow companies to claim around £91 of tax relief for every £100 of investment.

I recognise that the Opposition disagree with this step, but it is our firm belief that businesses must be able to invest. The weaponisation of energy by Putin has made it abundantly clear that we must ensure our energy security over the coming years. This is how we will do it. Again, I remind noble Lords that our changes mean that the headline rate of tax for companies in this sector will increase to 75%—triple what other companies will pay when the corporation tax rate increases to 25%.