Income Tax Threshold

Lord Sikka Excerpts

Tuesday 4th July 2023 Lords Chamber

[Baroness Penn (Con)]

My Lords, of course, the Government want to bring taxes down. It is worth reminding noble Lords that since 2010 we have nearly doubled the personal allowance and, this year, around 30% of those with income are projected to pay no income tax at all. In our current circumstances, we need to be fiscally responsible, and the best tax cut we can give people is to cut inflation.

[Lord Sikka (Lab)]

My Lords, the income tax threshold and personal allowances are frozen at the April 2021 level until 2027-28. At that time, the real value of the personal allowance—to which the Minister just referred—will be less than it was in 2013. As a result of government policies, an additional 4.2 million people are expected to pay the basic rate of income tax this year; that is, 20% plus national insurance of 12%. Can the Minister explain the rationale for extra taxes on the poorest, already hit hard with negative wage rises and rising bills? How does the Government’s hiking of the taxes of the poorest reconcile with their levelling-up, or is it squashing-down, agenda?

[Baroness Penn (Con)]

My Lords, I could not disagree more with the noble Lord. On the personal allowance, the increases we have seen under this Government since 2010, even with the freeze in thresholds, will be more than if it had been raised in line with inflation. We have put in place unprecedented support for people after the two major shocks of Covid and Russia’s invasion of Ukraine. We need to consolidate our public finances in the face of that and it is right that everyone contributes. We have looked to change corporation tax rates while protecting the smallest businesses, and we have frozen tax thresholds. We brought down the additional rate threshold at the Autumn Statement 2022, which is a sign of those with the broadest shoulders bearing the biggest burden.