Start-up Companies: Tax Incentives

Lord Sikka Excerpts

Monday 29th April 2024 Lords Chamber

[Baroness Vere of Norbiton (Con)]

I hear what the noble Lord is saying and I will very happily look at the evidence that he has provided to officials in the Treasury. Perhaps he would like to join the meeting with my noble friend Lord Leigh.

[Lord Sikka (Lab)]

My Lords, in January the National Audit Office reported that error and fraud in SME research and development tax credits had increased to 24.4% or £1.04 billion. It added:

“There are too many examples where these reliefs either do not achieve their economic objectives or are subject to significant error and fraud costing the Exchequer billions of pounds”.


Can the Minister explain why the Government have failed to monitor benefits of tax reliefs?

[Baroness Vere of Norbiton (Con)]

The Government have actually monitored the benefits of the tax reliefs and indeed published independent reports at the 2023 Autumn Statement into EIS and SEIS. We have also published annual reports into R&D on whether the schemes are appropriately designed. However, the noble Lord raises a really important point. He is right that there has been an enormous amount of error and fraud, so HMRC has taken action and has boosted the number of people working in fraud from 100 to 500 people who are very much focused on those things. It was also the case that much of the fraud or error was happening using nominated bank accounts. HMRC has now closed the ability for companies to use nominated bank accounts, which will have an impact.

Spring Budget 2024

Lord Sikka Excerpts

Monday 18th March 2024 Lords Chamber

[Lord Sikka (Lab)]

My Lords, I too welcome the noble Lord, Lord Kempsell, to this House and look forward to hearing from him again very soon.

For the last 14 years, seven Chancellors, carrying red boxes rather than red noses, have promised to rejuvenate the economy, eradicate poverty, cut taxes and improve public services. What they have actually delivered are lower living standards, higher taxes and worse public services, and they have transferred wealth to the rich. This year’s Budget is no different.

No one can grow an economy by depressing household incomes. The real average wage is stuck at the 2007 level. In February 2024, according to the ONS, the median annual pay was £27,972. The Joseph Rowntree Foundation estimates that a single person needs an income of £29,500 to have a minimal standard of living, and a couple with two children needs at least £50,000. A large part of our population is therefore below the level of a decent standard of living.

Rather than helping, the Government have piled on the agony. Since March 2021, 4.2 million more individuals have been dragged into paying income tax because tax thresholds have been frozen. By 2028-29, another 3.7 million workers will be forced to pay income tax at the basic rate of 20%, another 2.7 million at 40% and another 200,000 at 45%. The Government will collect £41.1 billion extra, which no doubt will be handed to more billionaires.

A rise in personal allowance at least in line with inflation would have helped lift millions out of poverty, but the Government chose not to do that. The 2 pence national insurance cut gives zero benefit to the 17.8 million adults with an income below £12,570. When I raised that point with the Minister on 21 February, she said:

“Does the noble Lord want me to give them a tax cut for taxes that they do not pay?”—[Official Report, 21/2/24; col. 665.]


I have news for the Minister: the poorest fifth pay 28.3% of their disposable income in indirect taxes such as VAT, whereas the richest fifth pay 9%. Can the Minister explain what the Budget offers to the 17.8 million poorest, and why indirect taxes such as VAT have not been slashed to help them?

The Budget extends the high-income child benefit threshold from £50,000 to £60,000, and the taper is extended to £80,000. Some 500,000 families will benefit by around £1,300 next year. In sharp contrast, the two-child benefit cap, which hits the poorest, depriving 402,000 families of around £3,200 a year, has been retained. Can the Minister explain why the two-child benefit cap has not been abolished?

Wages and salaries are taxed at the marginal rates of 20% to 45%, but capital gains are taxed at much lower rates. Instead of ending this discrimination against workers, the higher rate of capital gains tax on residential property disposals has now been capped, from 28% to 24%—a tax break for multiple property owners such as the Chancellor himself.

Recipients of capital gains do not pay any national insurance, even though they use the NHS and social care. Tens of billions of pounds can be raised by simply aligning the taxation of capital gains with the taxation of wages, but the Government do not want to upset their rich friends.

Since 2010, local council funding has been cut by 23.3% in real terms. Between 2010 and 2023, councils have sold 75,000 public assets for £15 billion to maintain some semblance of public services. Assets such as town halls, libraries, playgrounds and community and youth centres have been sold and are now lost for ever to future generations. That has enabled the Government to privatise numerous services by stealth, but young people now roam the streets and have nowhere to go. Can the Minister provide an estimate of the damage done to community building by the cuts to council funding?

The Government have raised the VAT registration threshold, but nothing has been done to simplify the anarchic VAT rules that are forcing many retailers to shut their shops. Here are some examples; I hope the Minister will take note. Toilet rolls are subject to 20% VAT, but caviar—a luxury—is zero-rated. Potato crisps have 20% VAT, but prawn crackers and tortilla chips are zero-rated. Cakes and biscuits are zero-rated, but if they are “wholly or partly covered” in chocolate they become subject to 20% VAT—I do not know what “partly” means here. There is 0% VAT on unshelled nuts but 20% VAT is levied on shelled nuts, with the exception of peanuts, even when they are out of their shells. Roasted nuts in shells are zero-rated for VAT, but if the shell is removed from the roasted nuts or they are salted, they become standard-rated for VAT. If the nuts are toasted, they are free from VAT altogether. Can the Minister explain to the House what the principles are here and why, after 14 years in office, the Government have failed to simplify the VAT rules, which would reduce administration costs for retailers by millions of pounds?

Overall, the Budget will do absolutely nothing to chart a course for a future that we would be proud to pass on to our future generations. It is simply carrying on with the same misery of the last 14 years.

Overseas Territories: Tax Haven Status

Lord Sikka Excerpts

Monday 26th February 2024 Lords Chamber

[Baroness Vere of Norbiton (Con)]

I am afraid I have to say to the noble Lord that we have not carried out that assessment.

[Lord Sikka (Lab)]

My Lords, on 8 June, the Treasury Secretary in the other place said:

“HMRC plans to calculate and publish a new stand-alone”


estimate of the

“offshore tax not being correctly reported”

by individuals

“next year, for the ‘Measuring tax gaps’ 2023 edition”.

Well, that hat has already been published, but there is still no estimate of the offshore tax gap. Can the Minister explain why the Government are so relaxed about offshore tax avoidance?

Finance Bill

Lord Sikka Excerpts

2nd reading & Committee negatived & 3rd reading
Wednesday 21st February 2024 Lords Chamber

[Lord Sikka (Lab)]

My Lords, it is always a great pleasure to follow the noble Lord, Lord Leigh of Hurley, even though I do not agree with much of what he said.

This Bill is a mishmash of policies that have already given us recession, poverty, stagnation, NHS queues, food banks, inequalities and crumbling public infrastructure. Building a just society does not seem to be on the Government’s agenda at all. The Bill continues with failed policies and somehow, different outcomes are expected, which will not happen.

Since 2010, the Government have showered tax reliefs on businesses, but we continue to suffer from chronic underinvestment. The Bill hands out tax reliefs in the form of 100% first-year capital allowances, in the hope that this can somehow increase business investment by possibly £14 billion within the forecast cycle, but that is in any case too little and is unlikely to be durable.

The major reason for low investment is that people do not have enough purchasing power to buy goods and services, and that dissuades businesses from investing. Just look at any town centre and you will see that it has become an economic desert, simply crumbling away. But the Government remain wedded to real wage and public spending cuts. The real average wage is now around the 2007 level; people have not got enough money to spend.

Following the Second World War, the state invested in new industries and took the long-term risks the private sector simply was not willing to take. It invested in new industries such as biotechnology, information technology and aerospace. However, the entrepreneurial state has now been replaced by a state that guarantees corporate profits through subsidies, cash handouts and the exploitation of people and the natural environment. The result is record corporate profits and low investment in productive assets. According to the OECD table, the UK occupies the 35th spot out of 38 countries in the league for investment in productive assets. That position will not change until the state resumes its entrepreneurial role, directly invests in new industries and infrastructure, and ensures that the masses have sufficient purchasing power.

The Government offer nearly 1,140 tax reliefs but have no idea of the total cost. Little is known about the macroeconomic benefits of handing out vast amounts of tax reliefs. The Bill hands out generous research and development tax incentives to creative industries, which will be welcomed by many. Accountants would happily reclassify some business expenditure as R&D and claim higher tax relief. The National Audit Office laments that the tax reliefs for R&D routinely exceed the UK’s actual R&D expenditure. I hope the Minister will be able to tell us why.

In handing out generous tax reliefs, the Government should also ensure that the resulting profits are taxed in the UK. Oil and gas companies get generous tax reliefs, but their profits are not necessarily taxed in the UK. I worked as an accountant in our oil companies, and I am quite familiar with how transfer pricing works. The Government ought to look at that to see where the profits end up.

James Bond movies are made and marketed through a labyrinth of opaque offshore entities. UK government money is given to make those movies. E.ON, the company behind the James Bond enterprise, received £30 million for “Spectre”, £47 million for “No Time to Die”, £24 million for “Skyfall” and £21 million for “Quantum of Solace”. However, E.ON declares tax losses in the UK and very little of its profit is taxed in the UK. Despite receiving £120 million of subsidy, E.ON has been paying less than £500,000 a year in UK corporation tax. Can the Minister explain why there is no comprehensive programme of tracking benefits of tax reliefs, or for ensuring that the resulting profits are taxed in the UK?

The Government make lots of claims about curbing tax dodges, but they are soft on the enablers. If the Minister disagrees, she is welcome to tell the House how many partners of big accounting firms have been investigated, fined or prosecuted for selling unlawful tax avoidance schemes. Hopefully she can name one or two; that would suffice.

An estimated £570 billion of UK wealth is stashed in tax havens. There is little effective check on profit shifting through intragroup transactions to low or no tax jurisdictions. Despite promises, the Government have failed to publish an estimate of what is called the offshore tax gap. Civil investigations opened by the offshore, corporate and wealthy unit, part of HMRC’s fraud investigation service, have declined from 1,417 in 2018-19 to only 627 in 2022-23. This reduces any faith in the measures contained in Part 3 of the Bill.

Tax policy for the last 14 years has become a circus under this Government. There is no sensible debate of what or who ought to be taxed, and at what rate, to shape what kind of society. Special low tax rates are enacted for the rich because they fund political parties, or simply because they demand it. Prime Minister Rishi Sunak paid tax of £508,308 on an income of just over £2.2 million, which is an effective tax rate of 23%. That is the tax rate faced by somebody on a wage of around £30,000 per year.

As I said earlier, no attention is paid to building a fair and just society. The reason why the Prime Minister’s tax bill is so low is that the capital gains accruing to him are taxed at 10% to 28%, while workers’ wages are taxed at 20% to 45%. Workers pay national insurance, but beneficiaries of capital gains pay zero national insurance. Indeed, under the Government’s rules, it is possible to pay a tax rate of only 10% on capital gains of up to £10 million. That does not seem fair to me at all.

The benefits of low capital gains tax are unevenly spread, unfair and create numerous inequalities. In 2020, just 0.5% of adults in the UK paid capital gains tax and benefited from this special regime. Capital gains tax payers are concentrated in London and the south-east of England. Notting Hill, with a population of around 6,400, has more than the combined populations of Liverpool, Manchester and Newcastle. You can see where these benefits are going.

The distortions also fuel a tax avoidance industry and rob the public purse. SME directors pay themselves with dividends rather than wages because that reduces their tax bill, as dividends are taxed at a lower rate than wages. The rich hire accountants to convert income to capital gains. Just think about the number of graduates finding jobs in the tax avoidance industry, which adds absolutely zero to the economy.

HMRC data shows that a quarter of people with an income of £2 million paid tax at an effective rate of less than 20%. One in 10 of those earning £2 million paid tax at an effective rate of only 10%, which is less than what someone pays on the minimum wage. This is an utterly unfair system and an unfair society, so can the Minister explain why someone making £2 million a year pays tax at a lower rate than somebody earning £15,000 a year? How is that consistent with claims of levelling up?

Finally, no child should go hungry, so I will suggest how the Government can fund free school meals for everybody: simply deal with one tax abuse, which arises from gift aid. If somebody gives £100 to a charity, that is obviously considered to be net, and the charity can claim £25, so it becomes £125 in the charity’s books. If the donor enters it on their tax return—many do not—they can also claim tax relief. A basic rate taxpayer will claim a tax relief of £20, but higher and additional rate taxpayers claim tax relief on that £100 at 40% and 45%. They are quids in—they are getting more because they are giving to charity. That does not seem fair. If tax relief on charitable donations was curbed at 20% for everybody, that would generate £740 million extra in tax revenues, which is quite enough to fund free school meals for everybody. Hopefully the Minister will say, “Yes, that will be in next month’s Budget”.

--- Later in debate ---

[Baroness Vere of Norbiton (Con)]

My Lords, I had better intervene quickly, before that continues. I am grateful to my noble friend, but I am sure he is well aware that that was not the usual procedure.

I am very grateful to all noble Lords who have taken part in the debate this evening. It has been a spirited debate, as ever, and I can definitely say at the outset that I am unable to agree with everything that has been said—by some noble Lords more than others, and by one or two almost entirely. But let us leave it at that.

There have been many excellent contributions and points raised. I am very grateful to the noble Lord, Lord Davies, who kicked off the debate with some wonderful tax questions about pensions. Clearly, the issue around pensions catching up with the personal allowance is not something that I can comment on now, but it is something that people are aware of and it will be addressed over a period of time. It is the case, too, that many political parties are committed to the triple lock. Pensioners whose sole income is the new state pension and who do not have deferred or received protected payments currently do not pay any income tax, as noble Lords will know. This year we provided the biggest ever cash increase to payments—a 10.1% rise.

The Government have doubled the personal allowance since 2010, ensuring that those with the lowest incomes do not pay income tax at all. Many noble Lords are concerned about the level of the personal allowance. I believe that over the longer period of time, looking back to 2010, there have been significant increases, such that 30% of people do not pay tax at all. I accept that, given external headwinds, certain decisions had to be made—and were made quite rightly—to freeze the personal allowance over a period of time. However, it is one of the goals of this Government that, as we return to the sort of growth that I think all noble Lords would like to see, it would be a possibility in future that we would be able to address how those personal allowances are going to change over time.

If a person has to pay tax that cannot be collected through PAYE, whether because they have no employment or they have an occupational private pension, and they are not already a self-assessment taxpayer, HMRC may issue them with a simple assessment to explain what tax they owe and how to pay it. That would be well in advance of any payment being needed. But, of course, that assumes that personal allowances and the state pension collide in future. I would not want to say that that is the case, but it is an issue that people are aware of.

The issue around the tax threshold freezes comes up quite a lot in your Lordships’ House. I absolutely accept that we have had to make some incredibly difficult choices but, having done so, a UK employee can earn more before paying income tax and social security contributions than an employee in any other G7 country. We do not tax our employees as highly as other people do, and that is to our credit. We have taken a fair approach to repairing the public finances, so we have asked everybody to contribute a little through keeping tax thresholds fixed. However, that ensures that those with the broadest shoulders pay the most. As I say, now that inflation is falling and the economy has turned a corner, we must continue with our plan, and we can responsibly return some money to taxpayers to slightly change the shift and the amount of tax that people will now pay, versus what they were going to pay in the past. But it is important that we do that in a way that supports the work and grows a sustainable economy for the future. Prioritising those in work is the best way in which to get the economy growing and reducing national insurance contributions is the best way in which to target those individuals.

I will check through the comments made by the noble Lord—

[Lord Sikka (Lab)]

I am grateful to the Minister. Is she saying that we cut taxes for people? Earlier she mentioned 29 million people. Can she also confirm that 17.8 million UK adults with an income of less than £12,570 a year received a zero cut in national insurance or taxes in last year’s Budget?

[Baroness Vere of Norbiton (Con)]

Yes, but let us also remember that the national living wage has gone up by 25% in real terms since 2010. There are all sorts of different things that the Government have done to protect the most vulnerable; the noble Lord is picking on just one thing. We are always looking at the most vulnerable to ensure that, for them too, work pays. That includes lifting the national living wage.

[Lord Sikka (Lab)]

I am happy to respond to the Minister—this could get interesting. The £12,570 threshold —and, as I said, 17.8 million adults have less than that —is after taking account of the increases in minimum wage. Many people have zero-hours contracts, work part-time or are maybe on a pension. That is after taking account of all the increases that the Minister said have been handed out.

[Baroness Vere of Norbiton (Con)]

Does the noble Lord want me to give them a tax cut for taxes that they do not pay? I am not following here at all, but I am not willing to get into a long debate about this right now. The noble Lord may write, and I will respond, if he would like to get into that in detail, but I am not willing to get into the debate right now.

Moving on to other issues raised by the noble Lord, Lord Davies, I will write in more detail around the specific things; I was doing very well for 80% of his speech but I lost him towards the end, around the taxation of negative pension growth, or gains. I will write on that point.

The noble Lord, Lord Desai, noted that the Bill is too late. Obviously, this is beyond a humble Minister like me. The House authorities will have guided it through. I know that it took a while to get through the Commons, and we addressed it in your Lordships’ House as quickly as we could once it had finished in the Commons. I would like to push the blame down to the other place and leave it there. However, it is always our ambition to get our Finance Bills into and through Parliament as quickly as possible, because it is a really important thing that we do.

I suspect that, particularly as we go into the Spring Budget, there will be many more debates around growth. I say again that, since 2010, we have had the fastest growth of any European G7 nation. I also suspect that there will be counterarguments to that, and that those will continue. In many of these circumstances, particularly some of the points raised by the noble Lord, Lord Desai, it is just a case of economists not agreeing. Not all economists agree—it is an art, not a science. For those of us who studied economics at university, it is clear that there are sometimes fundamental differences, as noble Lords have said today. My noble friend Lord Leigh is also a very experienced person in these matters. As he pointed out, he does not agree with much of the analysis. Sometimes, that is the case.

I am incredibly grateful to my noble friend Lord Leigh, his committee and the officials for the report of their sub-committee. I reassure him that we take those reports very seriously. Officials read them to ensure that we take into account the considerations and the recommendations made. On research and development, I think he agrees with us that we want to keep things as stable as possible. We do not intend to make any further changes. However, there are a few small areas where we will continue to engage, and any changes will be done cautiously. We hear what he and his committee say, and we will consider it carefully.

My noble friend noted the issue around HMRC data and tax administration. The Government’s economic response to the coronavirus pandemic was made possible through the powerful use of all sorts of data. However, it highlighted that there are gaps in the data that HMRC holds. New or improved data collected by HMRC, such as detailed information on employee hours and start and end dates on self-employment, will help government to address some of the gaps, building a tax system which is more resilient. I reassure him that the Government are taking a proportionate response and collecting improved data in areas where taxpayers already hold it, to minimise administrative burdens. The existing safeguards are robust, well-established and well-understood. I reassure him that we expect all taxpayers to have this information already and be able to provide it to HMRC. HMRC will take a reasonable and proportionate approach to the application of any fees or penalties in this regard. These changes will not take effect before April 2025, to give the system some time to adjust.

My noble friend Lord Leigh also mentioned HMRC customer service. Noble Lords will have heard me say this before, and indeed I have had the discussion directly with HMRC: it acknowledges that its customer service levels are simply not as good as they should be. Levels on the phone and in the post are below service standards from last year. HMRC has been working very hard to improve services for those people who need to call, but encourages people to use the digital services as much as possible, as they can be very efficient and get very good ratings from customers.

My noble friend Lord Leigh once again brought up his minority sport—a very important sport—of EIS and VCT, and why these are being extended by regulation. He hinted about it being something to do with the Windsor Framework, the EU, Northern Ireland, and the trade and co-operation agreement, and he is right. These are important schemes, and the vast majority of UK subsidies will need to comply only with the UK’s domestic subsidy regime, as noble Lords would expect. The Windsor Framework also means that the EU-UK Trade and Cooperation Agreement will now serve as the primary framework governing subsidy control between the UK and the EU. For the EIS and the VCT scheme, we are engaging with the EU on approval for extension, due to Northern Ireland’s unique access to the EU single market. We are working to meet all relevant obligations. We believe that the systems are consistent with subsidy control principles and address evidence of market failure, and therefore we think those conversations will go well.

My noble friend mentioned the complexity of Pillar 2. I agree that it is complex and difficult to administer—it is necessarily complex, because of the wide variety of different corporate structures which exist. However, we are reassured that we have simplified processes as much as we possibly can, such that compliance from business will be at the sorts of levels that we want to see.

On stooge directors, as noble Lords would expect, these measures are targeted at the promoters of tax avoidance schemes. Stooges enable these promoters to hide their activities, and, frankly, that is not what we are after at all. The Government understand the need for strengthened HMRC powers to be proportionate and balanced. Those are the two words that are absolutely key. Nobody wants to put anybody in jail because they did something under the duress of somebody else.

The noble Lord, Lord Sikka, raised a number of points and many rhetorical questions, and, I suspect, lots of really good ideas for the Labour Party manifesto. I, unfortunately, cannot agree with much of what he said, particularly his insistence that the state needs to substantially increase investment which is traditionally private sector activity. The state does invest, but it invests in those areas where we feel it is right for the public sector to be investing. We believe that the private sector is much better at picking up that sort of investment.

The noble Lord seemed to imply that the Government have done nothing against tax avoidance and that it is all terrible out there, etcetera. I am afraid that is just not right. The amount of money lost to the Exchequer from tax avoidance has fallen from £3.6 billion in 2010—to pick a year—to £1.4 billion in 2021-22. That is a significant reduction in the amount of tax avoidance. Again, I do not expect the noble Lord to agree with me. He went on to ask me for specific examples. HMRC already prosecutes promoters. Since 2016, more than 20 individuals have been convicted of offences relating to arrangements which have been promoted and marketed as tax avoidance. Our interventions are working, and there are interventions in the Bill to make our levers stronger. This Government do not tolerate tax avoidance and we will do whatever we can to stop it.

The noble Baroness, Lady Kramer, raised a number of issues. I have already mentioned thresholds; from the Government’s perspective, we understand what had to happen over that time. She raised the issue of public spending, which I note is going up in real terms by 0.75% over the forecast period. What slightly concerns me now is the question of where it would stop. If it is going up in real terms every single year, after how many years would we say that that is enough? However, I also put it to her that, as important as productivity is in the public sector, in the private sector you would not get away with the lack of focus on productivity. That is why the Chief Secretary to the Treasury is looking at a productivity review across all areas of government, to ensure that public spending is the right amount. At the end of the day, the best way to increase the amount of money that we have available for public spending is to grow the economy, and that is exactly what this Government are doing.

The noble Baroness mentioned productivity. It has been estimated that supply-side measures from the Autumn Statement 2023 could close up to half of our productivity gap with France, Germany and the US. We feel that we are making good progress, investing in the right areas to improve productivity.

The noble Baroness mentioned climate change, which is incredibly important. It is also interesting that she mentioned Labour in her appeal to keep climate change front of mind, because Labour still has its very unachievable climate plans, with now literally no funding. It used to have £28 billion of funding, which shadow Front-Bench Members managed to commit to over 300 times. Unfortunately, that £28 billion has now disappeared, but all the policy seems to remain in the same place. That goes back to the point that the noble Lord, Lord Livermore, made. Apparently, in the stability, investment and something else he said—their plan to deliver, which I am still looking for the detail on—all Labour policies will be fully costed, apart from those on climate change. Is that right? I am looking forward to it. I do not know; the £28 billion has disappeared but the policies have not.

The noble Lord asked me to commit to certain things for the Conservative Party manifesto, which I will not do, but the Government have just introduced permanent full expensing. It would be a great surprise to me if, all of a sudden, it were to disappear again, because we believe that it is a very valuable thing to do.

The noble Lord mentioned non-domiciled individuals. I, too, am very interested in that and will keep an eye out for how much money will be raised from the changes to non-domiciled individuals’ tax arrangements. I suspect that it will not be anywhere close to the amount of money that Labour platitudes and unfunded promises will need as we head into the election. But we believe that non-UK domiciled individuals play an important role in funding our public services through their tax contributions. The Government want the UK to be a destination that will attract talented people to work and do business, and that includes people from overseas. It is only right that those who choose to live here for a long time pay their fair share of taxes—namely, that they cease to become non-domiciled.

I believe that I owe various noble Lords a letter, which I will ensure gets to them as soon as possible. In the meantime, I commend the Bill to the House.

UK Economy

Lord Sikka Excerpts

Wednesday 21st February 2024 Lords Chamber

[Baroness Vere of Norbiton (Con)]

I agree with my noble friend—let us celebrate good news, and I believe there will be more good news to come. He mentioned debt. It is fair to reassure noble Lords that we are on track for debt to fall as a share of the economy. Public sector net debt as a percentage of GDP is expected to fall next year to the end of the forecast. If one were to exclude Bank of England debt, it will fall in the final year, and public sector net borrowing as a percentage of GDP is forecast to fall every single year. We also have the second-lowest debt as a share of GDP in the G7.

[Lord Sikka (Lab)]

My Lords, the Minister talked about curbing inflation. The Government have a very strange policy. I characterise it as somebody who has an ailment and goes to see their doctor, who dusts off a 100 year-old book in which, regardless of the reasons for the ailment, the answer is the same remedy. Whether inflation is caused by wage rises, inequalities or profiteering, it is the same policy: we must increase interest rates and force ordinary people to hand over their wealth to the banks. That is no policy, because it causes other ailments. Will the Minister tell us what other ailments have been caused by this remedy adopted by the Government?

[Baroness Vere of Norbiton (Con)]

As the noble Lord will know, interest rates are just one of the levers that the Bank of England has to influence inflation. The Government can also play a key role in tackling inflation —for example, by ensuring that public sector pay awards are kept within reasonable bounds.

[Lord Sikka (Lab)]

Can I have another bite here? The Minister said that public sector wages are within reasonable bounds, which suggests that the Government think wage rises are inflationary. But that does not apply to executive pay, profiteering, dividends or share buybacks—are they not inflationary as well? If they are, why are the Government not curbing them?

[Baroness Vere of Norbiton (Con)]

The noble Lord well knows that inflation is caused by a vast amount of different factors. When we announced our interventions at the Autumn Statement, the OBR said that they were not inflationary. That is another way in which the Government put downward pressure on inflation. As we have seen, the proof is in the pudding; we have gone from 11% in October 2022 to 4% in January 2024.

Buy Now, Pay Later: Regulation

Lord Sikka Excerpts

Wednesday 7th February 2024 Lords Chamber

[Baroness Vere of Norbiton (Con)]

I have to be honest with the noble Lord in saying that I have not read Labour’s plan, but he talked about clarity of information. It is worth pointing out that it is not just the FCA that looks at advertising and financial promotion. We have the Consumer Protection from Unfair Trading Regulations 2008; we have the Consumer Rights Act, and then we have the UK advertising code. In terms of information, it is clear that consumers have a number of recourses, but I return to what I said at the outset: the consultation closed in April 2023; the Government have reiterated our position that regulation must be proportionate. I am quite surprised that the Labour Party thinks that it has a solution that has been backed by all buy now, pay later firms, because it is a very complex area and we need to achieve a balance.

[Lord Sikka (Lab)]

My Lords, buy now, pay later services may offer interest-free periods, but, as has already been said, they charge high interest rates and fees for late payments, which really push up the price of the product. Without regulation, this industry is likely to go the same way as pawnbrokers, who charge interest of up to 160%. Will the Government impose a ceiling for the fees and interest rates that this industry can charge?

[Baroness Vere of Norbiton (Con)]

I am not sure whether the noble Lord has looked at what the late payment fees are for buy now, pay later firms. They are incredibly small, because the business model is very different in that it does not necessarily rely only on such charges; they are paid by the retailers as well. As I said, all sorts of existing and broad consumer protections underpin fair contracts—that would be the Consumer Rights Act. The FCA has already taken action against six buy now, pay later firms, where it felt that the contract terms were either unfair or unclear. The system is working; it is a very complicated area; the Government are looking at the responses to the consultation, and we will publish a response in due course.

HMRC: Tax Returns

Lord Sikka Excerpts

Wednesday 10th January 2024 Lords Chamber

[Baroness Vere of Norbiton (Con)]

My noble friend will be very pleased to know that I phoned HMRC on Monday and eventually managed to speak to a person. I did not tell them who I was, and I do not have very complex tax affairs. It was something very simple, but it could be done only by a real person.

[Lord Sikka (Lab)]

My Lords, it is very interesting that the Minister here is defending an IT system installed by Fujitsu, after what we heard about the scandal at the Post Office. Coming back to the broader issue, as a result of fiscal drag there are more people filing self-assessment tax returns. Can the Minister tell us how many more people have been employed to handle the telephone queries? I have tried and I was unable to get through at all.

[Baroness Vere of Norbiton (Con)]

First, let me clarify that I am not defending Fujitsu or any other software— I am not sure where the noble Lord got that from. It is the case that more people will be filling in self-assessment tax returns, but it is also the case that, given the current figures, it seems that people are perfectly capable of doing so. By 1 January, 6.49 million people had completed their self-assessment tax return; that is 200,000 more people than last year and well over half of those whom we would expect by this stage, so at this current time we are not seeing a significant drop-off of people being unable to fill in a tax return.

Financial Stability: Private Equity Firms

Lord Sikka Excerpts

Wednesday 13th December 2023 Lords Chamber

[Baroness Vere of Norbiton (Con)]

I reassure the noble Baroness that the Treasury works with the Bank of England and other regulators to monitor the system.

[Lord Sikka (Lab)]

My Lords, private equity is part of the £131 trillion shadow banking system, which is largely unregulated even though it is much bigger than the regulated retail banking sector. Recently, IOSCO has said that the high leverage of private equity poses a threat to the world economy, so it is hard to see why the Minister is dismissing that. I ask the Minister to do two things: first, apply the banking prudential regulations to private equity; and secondly, end tax relief on corporate interest payments and thereby reduce private equity’s capacity to increase leverage and cause the next financial crash, which will inevitably be caused by private equity.

[Baroness Vere of Norbiton (Con)]

My Lords, there are £250 billion of private equity assets under management in the UK, versus £10.3 trillion of total assets under management. It is a smaller part of the financial system. The noble Lord is not right to say that it is unregulated: UK private equity managers are regulated under the alternative investment fund managers regime. They must also comply with the senior managers and certification regime.

National Insurance Contributions (Reduction in Rates) Bill

Lord Sikka Excerpts

2nd reading
Tuesday 12th December 2023 Lords Chamber

[Lord Sikka (Lab)]

My Lords, in the era of never-ending real wage cuts, high inflation, high taxes, high interest rates and the cost of living crisis, any help for hard-pressed households is welcome, but that cannot hide the Government’s sleight of hand. Let us remember that last year the Government were prepared to increase the national insurance contribution rate for employees from 12% to 13.25%. They did not really feel that there was any need to help the poorest then. Now that they are doing incredibly badly in the opinion polls, some bribes are obviously coming out and this 2p cut is just one example.

Of course, people will not be fooled by the bribes; they will remember what the Government have done to them. Since March 2021, the income tax personal allowance and thresholds have been frozen and will remain frozen until 2027-28 or maybe even beyond. In 2022, the UK had a tax-to-GDP ratio of 35.3% compared to the OECD average of 34%, and it is going to get worse because of fiscal drag: millions more people are going to be paying income tax and national insurance contributions because of that.

Since March 2022, the threshold for national insurance contributions has also been frozen. Due to the impact of inflation on VAT, higher duties, income tax and national insurance, the additional tax yield is expected to be around £57 billion in 2027-28. This shows that the Government’s claim that they are handing things back to the people is really a work of fiction. The cut in the main rate of national insurance for employees from 12% to 10% and changes in rates for the self-employed will hand back, according to the OBR, £2.2 billion in 2023-24 and £9.4 billion in 2024-25, rising to £10 billion in £2028-29. That is a total of nearly £50 billion.

What are the Government going to collect through national insurance contributions for the same period? According to the OBR, despite the cut in the rate, they will collect £62 billion—£12 billion more than the cut they are handing back. That is all because of fiscal drag. Can the Minister explain why the cut in the national insurance contribution rate does not fully wipe out the increase in revenues from the contributions? Whichever way anyone looks at it, this cut is part of an impression management exercise. It is a small part of the additional taxes that the Government have already collected and will continue to collect.

In line with their usual practice, the Government are handing a lower amount of the national insurance cut to the less well-off and more to the rich. The annual median wage for an employee is £29,669, so a median-wage earner will get a cut of just £341 a year. Those earning more will collect far more. The median earners will still pay a higher proportion of their income in national insurance contributions than wealthier individuals: the Resolution Foundation concluded that the Budget favoured the richest 20% of earners. It will be interesting to see whether the Minister wants to deny that.

As people in London and the south-east of England tend to have higher wages, they will collect a bigger national insurance cut compared to the rest of the country. Due to the Government’s failure to address regional disparities, inequalities will now be widened. In the last tax year, 21 million adults had a taxable income of less than £12,570 and, as a result, were not liable to pay any national insurance contributions. Due to fiscal drag, that number is now around 19 million. The national insurance cut delivers zero benefit to 19 million adults, the majority of whom are women. This includes families who have been robbed of nearly £3,000 a year by the Government’s two-child benefit cap. As usual, the poorest are invisible to the Government. Can the Minister please explain the impact of the national insurance cut on regional and gender inequalities?

The national insurance cut provides little comfort to most families. Savings for median earners are immediately wiped out by the higher price of food, energy, transport, interest rates, mortgage payments, rents and council tax—there is no benefit. The Resolution Foundation estimates that, due to sluggish economic growth, persistent inflation and higher taxes, the average household will be £1,900 a year poorer by January 2025, compared to December 2019—that is a real legacy of the Government. There is no redistribution or levelling up; nothing in the Bill matches that.

The Government could have helped the 19 million adults receiving zero benefit from the national insurance cut by abolishing VAT on domestic fuel, or by cutting the standard rate of VAT, but they chose not to do that. The cost could have been met by clawing back the benefit of the 2% national insurance cut from the richest individuals—for example, by making the national insurance contribution rate more progressive for individuals on higher incomes. Patriotic Millionaires have urged the Government to tax them more, but the Government do not even want to do what the rich are urging them to—possibly because those rich people are not in the Conservative Party.

In case the Minister is tempted to say that the Government have helped the poor by increasing benefits, I remind her that the real value of benefits has fallen since 2010. The Government could have addressed the anomalies in the national insurance contribution laws. For example, there is no economic or moral reason for exempting capital gains, dividends and investment income from national insurance payments. The individuals enjoying exemptions use the National Health Service and social care system, but do not pay anything towards them. If a rich person with capital gains has an accident, a taxpayer-funded ambulance and the NHS would come to the rescue, so why do they not pay national insurance contributions? What is the moral and economic justification? The Government could have raised billions of pounds by eliminating that anomaly.

The Government could also have hit the tax avoidance industry. I know many accountants who are busy converting incomes to capital gains so that certain individuals not only pay tax at a lower rate but dodge national insurance contributions. The Government have done absolutely nothing to deal with that. Of course, getting rid of the tax avoidance industry helps with economic efficiency as well, but again the Government are oblivious to that. Can the Minister explain why investment income in the hands of comparatively few people continues to be exempt from national insurance payments? What is the justification for this? If she wishes, I would be delighted to participate in any debate that she might wish to call on this.

--- Later in debate ---

[Baroness Vere of Norbiton (Con)]

My Lords, I definitely was not lecturing the House—far be it from me to do so. However, it would obviously not be a debate without a Liberal Democrat mentioning Brexit.

I am going to move on from that general observation that I am pleased that there is this political groundswell now back behind the Conservatives for lower taxes, which is excellent—

[Lord Sikka (Lab)]

My Lords, I apologise for intervening, but just to back up the Liberal Democrats, it is not just Brexit. As the Minister will know, since 2010, between £450 billion and £1,500 billion of taxes have not been collected due to avoidance, evasion, fraud and error. If only a fraction of that had been collected, the Minister can imagine how the whole country would have been transformed. If the Minister is looking to expand the debate, here is a point to talk about.

[Baroness Vere of Norbiton (Con)]

The Minister is definitely not looking to expand the debate but is trying to make progress. I hear what the noble Lord says, and if he has read the Autumn Statement, which I am sure he has, he will have seen the announcements made in it about tax avoidance.

Moving on to comments made by noble Lords, I think it is probably not worth rehearsing and rehashing the elements around fiscal drag. Again, I want to put some numbers on record, because there is an opportunity to do so. Thanks to the cut in employee national insurance contributions announced at the Autumn Statement and to above-average increases to starting thresholds since 2010, an average worker in 2024-25 will pay more than £1,000 less in personal taxes than they would otherwise have done. That statement has attracted some interest, and I reassure noble Lords that the calculations underlying this statistic are based on public information, including a published estimate of average earnings. They are robust and could be replicated by an external analyst. This goes back to what I was trying to say about data. Lots of people will do calculations on different bases, but at the end of the day, from the Government’s perspective, we want taxes to come down—this is a start—but of course we will do it only in a responsible manner. However, personal taxes for somebody on an average salary of £35,400 have come down since 2010.

The noble Lord, Lord Sikka, asked about distribution analysis, and the national insurance cuts will of course benefit everybody who pays national insurance. That includes 2.4 million people in Scotland, 1.2 million in Wales, 800,000 in Northern Ireland, et cetera. The latest published HMRC data for 2021 shows that the largest proportion of income tax payers reside in the south-east, followed by London. It will be the case when one has a tax cut that those who pay the largest amount, and the numbers of people who pay tax if they are located in certain areas, are therefore going to see the largest reductions.

However, we have also looked at the impact on women—again, an issue raised by the noble Lord, Lord Sikka. NIC charges apply regardless of personal circumstances or protected characteristics. The equalities impact will reflect the composition of the NIC-paying population. Of course, that feeds into whether we would like women to be paid more. Of course we would. That is why rewarding work will see 28,000 people come into jobs—and I very much hope that they will be well- paid jobs and will be taken up by women.

The noble Lord, Lord Sikka, talked about better-off households. Distribution analysis published at the Autumn Statement shows that a typical household at any income level will see a net benefit in 2023-24 and 2024-25, following government decisions made from the Autumn Statement 2022 onwards. Low-income households will see the largest benefit as a percentage of income. Furthermore, looking across all tax, welfare and spending decisions since the 2019 spending round, the impact of government action continues to be progressive, with the poorest households receiving the largest benefit as a percentage of income in 2024-25. I know that the noble Lord feels that we do not focus on those on the lowest incomes, but he is not correct in that regard.

[Baroness Vere of Norbiton (Con)]

I absolutely accept that the noble Baroness is right to say that you can look at it in a different fashion but, in terms of whether what the Government are doing is progressive, it is fair to say that people on lower incomes are benefiting, as a proportion, to a greater degree. Of course, the Government have intervened when it comes to cost of living. That has been cash and that is not about percentage of income. It is all around our energy price guarantee, increases to the national living wage and looking at the uprating of benefits, which will rise by much more than inflation is forecast to be next year. So there are lots of different factors to take into account and sometimes one can be quite blunt when dealing with a tax cut that is, frankly, going to benefit 29 million people.

The noble Lord, Lord Sikka, asked why national insurance contributions do not apply on unearned income. National insurance contributions are part of the UK social security system, which is based on a long-standing contributory principle centred on paid employment and self-employment. ‘Twas ever thus. Of course, a future Government may make substantial changes to that which would again increase the tax burden—but this Government are content that we will maintain the contributory principle.

[Lord Sikka (Lab)]

I thank the Minister for giving way. I hear what she says, but people who have what the Minister calls unearned income—some people may call it “rentier income”, which is perhaps a clearer expression—can still use the National Health Service. If there was an accident, an ambulance would arrive, even though they had not paid any national insurance. If the need arises, they can still get social care. So why are they not required to pay? They simply are free riders. If they paid, the Government could have made an even bigger cut in national insurance.

[Baroness Vere of Norbiton (Con)]

This potentially leads on to the next question from the noble Baroness, Lady Primarolo, about the percentage of mixed receipts that goes to the NHS. It is about 20%; 80% comes from elsewhere. Those people who pay taxes on their unearned income will, of course, pay into the general fund.

[Lord Sikka (Lab)]

As the Minister knows, the taxes levied on dividends and capital gains are lower than the taxes on wages. If she wants her point to stand, can she explain why capital gains and dividends are taxed at a lower rate than wages? What is the justification for that?

[Baroness Vere of Norbiton (Con)]

I suspect that we are now moving into an area of debate where is not appropriate to go today, because there is business still to come in the House; I know that my noble friend is desperately waiting to get up.

I go back to the point made by the noble Baroness, Lady Primarolo. Obviously, the balance of the national insurance fund is monitored closely. The most recent report from the Government Actuary’s Department—GAD—forecast that the fund will be able to self-finance for at least the next five years. But, of course, the Treasury has the ability to top up the NIF from the consolidated fund when needed. Indeed, this has been done in the past—it was routinely done in the 1990s—so it is not right to say that the cut in NICs puts any pressure at all on any payment to the NHS or otherwise; that is set independently from the national insurance fund.

Autumn Statement 2023

Lord Sikka Excerpts

Wednesday 29th November 2023 Lords Chamber

[Lord Sikka (Lab)]

My Lords, the Budget is further evidence of the Government’s war on low and middle-income families. The 2p reduction in national insurance delivers zero benefit to 19 million adults whose annual income is less than £12,570. The two-child benefit cap continues and removes around £3,000 a year from some of the poorest families. Wages continue to be taxed at a much higher rate than capital gains, dividends or income from speculative ventures. The freezing of income tax and national insurance thresholds means that, by 2028-29, another 4 million people will be paying income tax; 3 million more will pay tax at the higher rate of 40%; and 400,000 more will end up paying tax at 45%.

The Minister referred to economic growth. Despite economic growth since 2010, the average real wage has returned to the 2007 level and the Resolution Foundation estimates that the average household will be £1,900 poorer by January 2025 than in December 2019. The Government have to remember that, in the absence of good purchasing power for the masses, the economy cannot be rejuvenated—they simply have not learned that lesson over the last 14 years.

The Government’s failures have caused huge growth in poverty. Malnutrition, scurvy and rickets have returned to the UK, and people are actually dying. Between 2012 and 2018, some 335,000 people died from government- imposed austerity—that is the excess deaths according to a paper published in a refereed scholarly journal. We had a debate in this House and I never got a decent reply from the Minister. The Government’s response is to cut real public spending by another £19 billion, which means that public sector wages will be cut, hitting women the hardest as they form the majority of the public sector workforce. Can the Minister explain why the Chancellor’s Statement is not accompanied by an impact assessment showing how many more people will die as a direct or indirect result of the Government’s policies?

On economic growth, the Government offer absolutely no vision. Despite a decade of low inflation, low interest rates and low corporation tax, and numerous incentives, the private sector has failed to invest adequately in productive assets. In the OECD table of 38 countries, the UK is ranked 35th. The private sector will not invest because people do not have good enough purchasing power, and the Government have starved the public sector of investment, which then fuels private sector activity. So the Government are not really offering to increase public sector investment.

Last week the Deputy Governor of the Bank of England told the Treasury Committee that Brexit “has chilled business investment”. It has grown by less than 1% a year in real terms since Brexit. The Government have offered absolutely no answer to Brexit woes, though they have now belatedly offered £4.5 billion for investment in advanced manufacturing, as the Minister said, over the next five years. That shows hardly any ambition. I give the example of investment in the semiconductor industry: the US has offered a package of $50 billion; China, $40 billion; India, $10 billion; and the UK, £1 billion, or $1.2 billion. That is no vision of any kind whatever.

I have some specific questions for the Minister about the public debt, which she referred to in her speech. Nearly £1 trillion of quantitative easing has pushed up asset prices and enriched a few. One study has shown that QE boosted the wealth of the richest 10% of households by between £128,000 and £322,000 per household. Instead of squeezing the poor and public services, the Government could have clawed back this gift to the richest. Can the Minister explain why the gains arising from QE have not been clawed back?

Public debt under the Conservatives has soared from around £1 trillion, or 65% of GDP, in May 2010 to £1.79 trillion, or 79% of GDP, just before the pandemic. The latest figure is £2.64 trillion, or 97.8% of GDP. What does this public debt actually consist of? Ministers have never explained. I can see no rationale whatever for treating quantitative easing balance as part of the public debt, especially as the Government hold equivalent gilts and bonds. In any case, QE is an intrastate transaction between the Bank of England and the Treasury, and the consolidated effect is zero. Can the Minister explain how much of the QE is included in the public debt amount, and why?

Through the QE, the Government have enriched speculators by pushing up the price of gilts and corporate bonds, but they are now selling them at a loss. Can the Minister explain why, as part of quantitative tightening, the Government are selling securities at a loss, how much has been lost, and why the public purse is being held responsible for that loss? The Government are also paying interest to commercial banks on what are called central bank reserves, which are created as a result of QE. Can the Minister explain why this interest is being paid on the money that has been created by the state and given away freely? How much has been paid so far, and when will the Government stop this practice? It is akin to a farmer growing carrots and giving them away, then when he wishes to have one or two carrots back he offers interest to those who will return a carrot. That is exactly what the Government are doing, and it is a crazy policy. I hope the Minister will be able to give a detailed reply to each of my questions.

--- Later in debate ---

[Baroness Vere of Norbiton (Con)]

A medal? I am going to come up with a medal. She is going to get it, because she came up with a plan. Of course, her plan was more taxes—but we knew that was going to happen, so that is okay. There was one other person who came up with a plan for how to pay for this increased public spending, and that was the noble Viscount, Lord Hanworth. He said to ditch the tax cuts. So there were two people. Everybody else just wanted to increase spending, and therein lies the problem.

Looking in more detail at some of the public spending that noble Lords were concerned about—and obviously I can reflect some of these concerns as well—the noble Baroness, Lady Pinnock, called for additional funding for councils so that essential services could continue. The Government stand behind councils up and down the country. The 2023-24 local government finance settlement provides councils with a 9% increase in core spending power in total, making available almost £5 billion in additional resources. It should be noted that local councils can also raise funds from local taxpayers for local services.

Personally, I live in Kingston-upon-Thames, which all noble Lords well know has a Liberal Democrat council—and my word, my council tax is eye-watering. I think it is one of the highest in the country. What makes me slightly laugh about this is that, despite having some of the highest council tax in the country, the Liberal Democrats have closed the swimming pool. The noble Baroness, Lady Pinnock, is very concerned about swimming pools. I suggest that she go to Kingston-upon-Thames and get them to open it again. There is not a lot of happiness around that.

Public spending also needs to be efficient and not greedy, as noted by my noble friend Lord Howell. It is really important that we set public spending on sustainable trajectories, delivering high-quality public services effectively and efficiently. This is why my honourable friend the Chief Secretary is leading an ambitious public sector productivity review. I hope that my noble friend Lord Sherbourne will share his thoughts with her, because we need to reimagine the way that government delivers public services. So often we fall into the trap where the amount of money put into something equates directly to its outputs. That would never happen in the private sector. It just does not happen. Outputs can be independent of the money that one puts in, and it is very important that, within the public sector, we get that and we try to do that.

I take on board the comments made by the noble Lord, Lord Lee of Trafford, about the 60,000 civil staff in defence. My former Secretary of State is now the Defence Secretary; I know him well, and I am fairly sure that he will already have looked at this in great detail, but I will nudge him in case he has not.

The noble Lord, Lord Macpherson, asked to what extent the Autumn Statement was informed by the OBR’s report on fiscal risks and sustainability. That report did inform the Autumn Statement, as I am sure the noble Lord thought I would say. The Government’s agreement to respond at a subsequent fiscal event establishes this feedback loop, which demonstrates the Government’s commitment to thoroughly assessing and actively mitigating fiscal risks.

The noble Lord, Lord Sikka, asked a question I was a little surprised by; I thought he may have known this, but perhaps it is not well known. He asked about the inclusion of QE in public debt. The UK’s fiscal rules target public sector net debt. This metric excludes the Bank of England and all its subsidiaries, including the asset purchase facility. This changed in 2021 as it was felt that excluding the Bank of England’s contributions to public sector net debt through the valuation effects associated with its quantitative easing programme and term funding schemes better reflected the impact of government decisions.

I will write to noble Lords on MoJ funding and the maintenance of schools. I want to talk about the cost of living because the amount of support that the Government have given, and will continue to give, is not fully recognised. There has been some good feedback about the local housing allowance rates going up, and not enough noble Lords welcomed where we are on the national living wage.

[Lord Sikka (Lab)]

Can the Minister tell the House how much of QE is included in the public debt now? Why is it the case that, when the left hand of government transacts with the right, the Treasury with the central bank, it somehow creates debt?

[Baroness Vere of Norbiton (Con)]

I will probably write to the noble Lord with clarity on that, because I would like to make a little progress.

A number of noble Lords tried to pull out one element of the Autumn Statement and made the point that it will benefit rich people more than poor. One cannot look at one measure in isolation. The Government have conducted extensive assessment of the policies announced both in this Autumn Statement and in previous years. It shows that, across all government decisions dating back to the 2019 spending round, the combined impact of tax, welfare and public services spending measures has benefited the lowest-income households the most.

I will touch briefly on welfare reforms. I am grateful to my noble friend Lord Jackson for his support for these reforms. We want to see people who can work be able to work; we are absolutely willing to provide support for them.

The right reverend Prelate the Bishop of Manchester mentioned mental health. I agree with him that we must confront this issue in our country. It remains a priority for the Government. Alongside other recent mental health interventions, the back to work plan includes nearly £800 million over five years to expand talking therapies for those with mild or moderate conditions, as well as individual placements and support to be delivered within community mental health schemes for those with more serious conditions.

I will write to noble Lords on a couple of other things. I come back to growth because it is undeniable that growth in many developed nations has been difficult. Since 2010, when this Government first came to power, the UK has grown faster than many of its competitors, including France, Germany, Italy, Spain and Japan. Would I like to see us grow even faster than we currently are? Absolutely—indeed, the growth trajectory is on an upward trend after the first two years. The noble Lord, Lord Livermore, did not quite get to those numbers but they are higher, peaking at 2% a year. This Autumn Statement is focused on creating sustainable growth without adding to inflation or overall borrowing. It is sensible supply-side interventions that boost business investment.

This is in stark contrast to the plans set out by the party opposite, such as they are. It is not clear to me which parts of the Autumn Statement the Labour Party actively oppose or would do substantially differently, and the noble Lord, Lord Livermore, has not enlightened me. So not only do we have a cut-and-paste shadow Chancellor; it seems we have a cut-and-paste shadow Exchequer Secretary too. It is worth reflecting on the much-vaunted flagship Labour spending policy of £28 billion. For clarity, that is £28 billion per year. In the absence of significant tax rises or substantial cuts to public spending—and only the former is in the traditional Labour playbook—this £28 billion per year will just add to our national debt, piling pressure on future generations and busting through fiscal rules. As I said, this Conservative Autumn Statement is about sensible supply-side reforms to support British businesses and boost productivity.

The noble Lord, Lord Howarth, asked whether full expensing represents value for money. The Government have prioritised the business tax cut as a targeted way to support businesses which invest. It does this by reducing the cost of capital for UK companies. This policy will drive 0.1% GDP growth in the next five years, increasing to slightly below 0.2% in the long run. Whereas the benefits of the policy will grow over time, the costs will reduce. Full expensing brings forward relief that would otherwise be claimed over decades, meaning that the costs are highest in the policy’s introduction.

The noble Lord, Lord Londesborough, talked about a productivity council. The Government take a range of advice on matters of growth and productivity from all sorts of organisations, including public sector organisations such as the National Infrastructure Commission and the Competition and Markets Authority, but also from academics, think tanks and businesses. While I respect his idea, at the moment we will probably not take it forward.

There was some interesting comment around the pension reforms. The noble Lord, Lord Davies, welcomed the proposals. He asked for the timing of implementation of changes to retired benefit schemes. This will become clearer when the consultation period has completed. I will write on the second question about pensions, because I am conscious that I will imminently run out of time.

My noble friend Lord Northbrook and the noble Lord, Lord Lee of Trafford, asked why the Government are not bringing back the VAT retail export scheme. The Government continue to accept representations from industry regarding the tourist tax and are considering all returns carefully. It is about providing very robust evidence on this. At the moment, we feel that it is a little lacking.

The noble Baroness, Lady Featherstone, talked about the creative industries. There is a large number of specific asks for a very specific sector, so I will certainly write.

It is also worth noting some of the more general discussions that noble Lords had today, and I hope will continue to have in the future. There were considerations around the size and shape of the state, the amount of contributions that should come from taxpayers, and, from the noble Lord, Lord O’Neill, public versus private sector investment. My noble friend Lord Willetts talked about the shape of the state. These are things to mull on, definitely. They will not change government policy today or in the near future but are really important issues that should be debated.

I second what my noble friend Lady Noakes said about regulation. We need to look at regulation as our economy develops. It is most helpful for the Government when noble Lords can go into specifics. I am always very happy to hear about specific regulations that we feel are not fit for purpose and which need to be improved.

Also, to my noble friend Lady Noakes, on the 100-plus measures, I say that the details can be found in the “Policy Decisions” chapter of the Autumn Statement document.