Tax Burden and Economic Growth

Baroness Kramer Excerpts

Tuesday 15th September 2026 Lords Chamber

[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.

[Baroness Kramer (LD)]

My Lords, there is a strong argument that the businesses hit hardest by the tax rises—notably in employers’ NICs—are small businesses with more than seven employees and medium-sized businesses. Have the Government done work to look at the impact of growth on that specific sector? It is crucial in very disadvantaged communities, and the impact is masked by always quoting the high-level numbers.

[Lord Wilson of Sedgefield (Lab)]

Obviously, I do not want to pre-empt anything that might come out in the Budget, but it is fair to say that the Government have protected the smallest businesses from the NICs changes by more than doubling the employment allowance, which allows eligible employers to reduce their employer NICs bill by up to £10,500. This means that around 900,000 employers, or around 40%, will have no employer NIC liabilities. We are thinking about small companies—we know that they are the ones that grow the economy—and we are going to continue doing what is best for the British economy.