King’s Speech

Lord Sikka Excerpts

Monday 13th November 2023 Lords Chamber

[Lord Sikka (Lab)]

My Lords, a sustainable economy requires high investment and good disposable income for the masses. The Government have failed on both counts. The OECD’s data shows that, despite low inflation, corporation tax and interest rates since 2010, the UK is almost the lowest investor in productive assets; it is ranked 35th out of 38 OECD countries. There are two major reasons for this, and neither is addressed in the King’s Speech.

First, until the late 1970s, the state directly invested in industry and emerging technologies, such as aerospace, biotechnology and information technology, especially as the private sector showed little appetite for long-term risks. The entrepreneurial state has been replaced by one which guarantees corporate profits, as evidenced by privatisations, outsourcing and corporate subsidies, typified by the £45 billion handed to privatised rail companies in the last five years. Did they invest in Crossrail or HS2? No, none of that. Yet the Government skimp on direct public investment: investment into HS2 has been axed; roads are full of potholes; schools and public buildings are crumbling; and NHS England has 2.3 beds per 1,000 population and is on that basis ranked 23rd of 24 European countries. So there are plenty of opportunities for public investment, but there is nothing in the King’s Speech to suggest that the state will return to its entrepreneurial role.

Secondly, low disposable income of the masses is a disincentive for long-term investment by the private sector. Who will buy goods and services, even if we produce them? With a government-led drive to cut wages, the average real pay is back to the 2007 level. Some 14.4 million people live in poverty. One in 20 people—that is, 3.8 million people—is unable to afford food or other basics, and half of those have a weekly income of less than £85. This mass exclusion from consumption cannot provide the basis for building a sustainable economy.

People’s incomes are further eroded by the Government’s inflation strategy. Everyone knows that corporate profiteering is the main cause of higher rates of inflation. The Government could have checked it with price controls, the break-up of monopolies, windfall taxes and selective taxes on those who have excess cash, especially given that nearly £1 trillion of quantitative easing has been handed to financial speculators. But no, they do not do that—instead, they attack wages and further deplete household incomes through higher interest rates.

People have been forced to hand more of their wealth to banks. In the first nine months of 2023, the big four banks have reported profits of £41 billion, compared with £23 billion for the same period last year. Huge bank profits have increased business and household costs and destroyed many SMEs. The Government have enriched bank shareholders and executives. This policy has increased inequalities and squeezed economic growth, because people simply do not have the resources to buy goods and services. Even worse, Ministers are saying that they will continue with this forced transfer of wealth from the poor to the rich. The Government have declared war on the poor.

There can be no economic renaissance without redistribution of income and wealth. The richest 1% have more wealth than 70% of the population combined. Just 50 families have more wealth than 50% of the population—but any mention of wealth taxes and the Government say, “Not us, we’re not going to do this”. Instead of taxing wealth, the Government have anti-worker policies. Wages are taxed at a higher rate than capital gains, dividends and investment income. This needs to be rebalanced; we need to rebalance the tax system by increasing taxes on wealth and reducing taxes on work and the less well off.

This afternoon, I attended a meeting with the Patriotic Millionaires, which includes some of the country’s richest individuals. They have openly urged the Government to tax them more heavily, so that inequalities can be reduced, public services can be rebuilt and we can have a just society. I hope the Minister will tell us why the Government will not listen to the richest and tax them more.