Finance (No. 2) Bill

Lord Eatwell Excerpts

Committee negatived & 3rd reading
Tuesday 4th July 2023 Lords Chamber

[Lord Eatwell (Lab)]

My Lords, I am grateful for the privilege of saying a few remarks in the gap. I will refer to the change in the lifetime allowance. As noble Lords will recall, this change was initially mooted because pensions anomalies were occurring in respect of better-paid consultants in the National Health Service. Then the Government decided to abolish the lifetime allowance altogether, thus creating a tax giveaway, estimated at the time at £1 billion. As the noble Baroness said in her speech, it was given to the

“most experienced and productive workers”.

Since this is just the top 1% of earners in this country, does she not think the other 99% might be rather offended by her words? Would it not be politic to withdraw that phrase when she sums up?

When the LTA was abolished, it was realised that there would be a significant impact on inheritance tax. At the time of the Budget, I asked the Minister what the impact would be and she was unable to give me a figure. Can she tell me now what the impact on inheritance tax revenues was, and therefore what the total tax giveaway from the abolition of the LTA has been? Will she also confirm that this tax giveaway is being funded by the Government’s increased borrowing? In doing so, will she give her assessment of the impact of this increased borrowing and government indebtedness on the rate of inflation?

--- Later in debate ---

[Baroness Penn (Con)]

I am saying that that is most certainly a risk. There is a high amount of uncertainty about the impact of any changes in that area, and it would not necessarily lead to an increase in revenue, as is being relied upon by the Labour Party.

[Lord Eatwell (Lab)]

My Lords, surely there is not that degree of uncertainty, since the Government did raise a base levy on non-doms. Surely, then, we have evidence from the mobility of non-doms reacting to that base levy. What is the evidence? I suggest it is evidence of no mobility at all.

[Baroness Penn (Con)]

My Lords, I was speaking about the difference between changes to any scheme and abolition of the status altogether, but I would say that there is a high degree of uncertainty about the impact of changes made in this area.

Finally, I turn to the pension tax changes made through this Bill and the Budget, which many noble Lords have spoken about. To respond to the noble Lord, Lord Eatwell, I was not implying that only the most highly skilled and productive workers benefit from these changes, but many of them will. They have been designed in response to feedback from the NHS in particular that there was an impact on retention of the most skilled staff.

Regarding the suggestion that a doctors-only change could have been implemented instead, unlike more targeted policies, the Government have considered a range of options to address this issue over a number of years. One of the elements which means that a more targeted approach would not be appropriate in these circumstances is the time it would take to implement. These changes could be implemented quickly, from April 2023, minimising the risk of early retirements in the NHS before any changes take effect.

In the Statement taken before this debate, we heard about the pressures on our NHS workforce and the pressing need to address those immediately. If we were to take a targeted approach to one profession—NHS doctors—we may well come back to the same issue, as the same issues are faced by employees in other sectors, such as air traffic controllers, the police, the Armed Forces and senior teachers. To introduce targeted measures for each profession would not be an effective way to deal with challenges across those different workforces.

The Government are aware of the concern raised by the noble Lord, Lord Eatwell—

[Baroness Penn (Con)]

I think one of the reasons why I frustrate the noble Lord in this area is that the Government do not normally comment on individual taxpayers. On his more general point, the Government have taken action to tackle tax avoidance and evasion over many years and to reduce its incidence in our economy.

Finally, I turn to the impact of the change to the annual allowance and its potential inheritance tax impacts. Noble Lords are right that the annual allowance has meant that there has been a limit on how much individuals can put into their pensions and therefore pass on. The Government are aware of concerns that some may be using their pension pots to reduce future inheritance tax liabilities, rather than for their purpose: to fund their retirement. As with all taxes, the Government keep the rules under review.

[Lord Eatwell (Lab)]

My Lords, before the noble Baroness moves away from the lifetime allowance, I asked her if it was true that this £1 billion was funded by increased borrowing. In her summing up just now, she said very clearly that unfunded tax cuts increase inflation; those were her exact words. Is this not an unfunded tax cut?

[Baroness Penn (Con)]

The OBR has been clear about its forecast for the public finances, which has shown that they are more resilient than previously expected. Debt is lower in every year of the forecast compared with the November forecast. Borrowing falls year on year and the current Budget is in a surplus from 2026-27. All these decisions are taken in the round and assessed against the Government’s fiscal rules and the independent OBR’s forecasts for government borrowing and debt.

We have had a wide-ranging debate today, but if we return to the measures in the Bill, they form an essential part of our plan for the economy. They support enterprise, business investment and employment, including in the NHS. The Bill seizes the freedoms now available to the UK outside of the EU, addresses international tax avoidance and the problem it causes for the sustainability of our public finances, and will help simplify our tax system. For these reasons, I beg to move.