Inheritance Tax, National Insurance and VAT

Baroness Kramer Excerpts

Monday 27th January 2025 Lords Chamber

[Baroness Kramer (LD)]

My Lords, the Tory Government, especially in their last years, implemented a scorched-earth strategy on public finances, and I have great sympathy for the Government in facing such an inheritance. That is why, in our election manifesto, we on these Benches listed tax increases which would have avoided the three tax changes under discussion today, none of which we support. We regard family farms as vital and often economically precarious. We are trying hard in the NICs legislation to get exemptions for the health and care sectors and for other crucial groups. We will not support a new tax on education.

However, the question for debate today is the impact on the nations and regions. I thank the Library for its work, which underscores the problem. I have spoken before about Scotland. Scottish public sector organisations will be reimbursed for employers’ NICs not on a per-job basis but based on the Barnett formula, which comes up with a much lower number. That is not within the purview of the Library discussion. Looking at the Library numbers, the north-east looks most affected by the farm inheritance tax changes, and the east of England, London and the south-east are most affected by the NICs changes and the VAT on schools. However, we cannot assess the real impact just by looking at these cost numbers, which do not reflect the underlying economic vibrancy of an area, its resilience or its dependence on particular industries, and therefore the narrower impact.

Cost and impact are different. I can intuit that thriving places such as London and university towns will cope, but existing disadvantaged areas will be far less able to do so. The Tories resisted give us the much greater detail and complex analysis that would have enabled us to understand the impact of changes in taxation and national insurance, but I turn to this Government and ask: so that we can understand these complexities, can we please have that much better analysis? In turn, it might reshape policy.