Budget Statement

Lord Shipley Excerpts

Wednesday 3rd November 2021 Grand Committee

[Lord Shipley (LD)]

My Lords, I pay tribute to the valedictory speech by my fellow Novocastrian the right reverend Prelate the Bishop of Newcastle. I express my thanks to her for her hard work both in this House and in her diocese, and for her work in addressing issues of inequality and disadvantage so effectively.

To be a success, the Budget depends on our economy expanding and interest rates remaining low. This strategy is very risky because businesses face rising costs, particularly in energy, and shortages in the supply chain and staff in some sectors, with inflation heading over 4%. The Government’s policy of spending now to reduce taxes later may prove hard to achieve. Indeed, the OBR forecast in March that if interest rates were 1% higher than forecast, additional debt interest of £20 billion a year would be needed, which would be twice that raised by the planned health and social care levy from next April.

The Chancellor’s opening words in his Budget Statement were:

“Employment is up, investment is growing, public services are improving, the public finances are stabilising and wages are rising”.—[Official Report, Commons, 27/10/21; col. 273-4.]


He failed to add that prices are rising, taxation is rising, and that low-income families are particularly exposed to that higher inflation and those rising taxes.

Some experts have said that there will be a cost-of-living crisis for the lower-paid and that the average worker will be much worse off over the next five years, with taxes now rising to the highest level for 60 years. As the Office for Budget Responsibility has said, mortgages will no longer be cheap.

I have not understood how the Government can claim they are pursuing a levelling-up agenda while they pursue a policy of regressive taxation to fund local services. Levelling up cannot be delivered without progressive taxation. You do not level up people, or the areas in which they live, by putting up their tax bill well above either the rate of inflation or the growth in their incomes.

That takes me to council tax—I suppose I should remind the Committee that I am a vice-president of the Local Government Association. Since 2016, the Government have been pursuing a policy of increasing council tax to help fund adult social care at levels well above inflation. And council tax is a regressive tax. Council tax payers have been required to pay up to 15% more over the past five years. Council tax will go on being increased in this way through the life of this Parliament. It may even get to 6% a year. This approach means that councils able to generate higher receipts from their council tax base can raise more money for social care than poorer councils, when it is often the poorer councils that have the greatest demand for social care.

Council tax needs reform, as the noble Lord, Lord Turnbull, advocated earlier. Some poorer areas pay 20 times the level of council tax of the wealthiest areas, compared to the value of their properties. The system represents an excessive tax on poorer people. Council tax should reflect the ability to pay and should be based on up-to-date property values, yet valuations are 30 years old. Extra bands and a full revaluation are urgently needed.

Let me say something about business rates. The Government have been promising a review of business rates for several years, not least because of the damage being done to high streets by online retailing with its lower business rate levels. But now the Government have decided to avoid that full review. I am surprised, but then I suppose that a tax worth some £25 billion a year is too attractive to the Treasury even though the tax can be unfair, does not take account of the profits and losses of individual businesses, and can be a barrier to investment.

I welcome the cancellation of next year’s planned rise and the 50% temporary relief for retail, hospitality and leisure sectors and other targeted temporary reliefs, but, as my noble friend Lord Fox said earlier, it is a temporary fudge. I am disappointed that the Government will only explore the arguments for and against an online sales tax. We need a much deeper review of local taxation to include both council tax and business rates.

What consideration are the Government giving to the potential benefit of a proportional property tax, as recommended for consideration by the Housing, Communities and Local Government Committee earlier this year? It could replace council tax and business rates as well as stamp duty. To be revenue-neutral, it would need to be a flat rate charged annually at 0.48% of a property’s value. Many of the problems I have identified today could be eased by its introduction. Inevitably, it would take time and effort to achieve, but it could be fairer for those on lower incomes and with lower-value properties.

In conclusion, this Budget has introduced some temporary palliatives both in extra spending and in reduced taxation, but, as so many speakers have said, some serious underlying problems remain.