Finance (No. 2) Bill

Matt Rodda Excerpts

Committee stage & Committee of the Whole House (Day 1)
Monday 19th April 2021 Commons Chamber

[Sarah Olney (Richmond Park) (LD) [V]]

I wish to speak to clause 5 relating to the changes in personal income tax allowances and to clause 28 relating to the freezing of the lifetime allowance on pension pots.

There is no doubt that the last year has made unprecedented demands on the public purse, and it is right that the Government should be prepared to take difficult decisions on taxation as we move forward, as we all very much hope, out of the pandemic and into the changed world beyond. However, the Government made clear commitments in their 2019 manifesto that they would not raise income tax on working families and they have broken that commitment in this Bill. The freezing of the personal allowance and the higher tax bands means that more working people will pay tax and at higher rates than they would otherwise have expected.

Clearly the Government are banking on a consumer-led recovery and this tax burden on working families will reduce the amount of discretionary spend available to households, limiting their ability to spend on consumer goods. As housing costs increase to their highest ever levels, household budgets will continue to be squeezed, and piling additional tax charges on top will create an enormous burden for those who are already struggling to make ends meet. It is a particular insult to those in our NHS, who have sacrificed so much to keep us all safe this year and have been told to expect only a 1% pay increase for their trouble. Our nurses will have to give back more of that 1% in tax than previously despite all that they have already given. This is particularly galling when compared with the Government’s decision to delay a corporation tax increase. The Government have chosen to tax hard-pressed frontline workers first and large, profitable corporations later. Only those companies that have remained profitable throughout the pandemic would be paying corporation tax next year, which is why an immediate increase in corporation tax could have captured the windfalls or excess profits of those who found their revenues increased as a result of the unusual trading conditions of the last year. This would have been a far more equitable route to raising income than putting the burden on hard-working families.

On clause 28, I urge the Chancellor to carefully consider the impact on NHS pensions of freezing the lifetime pension allowance. I have heard a few stories from constituents about how this measure interacts with their final salary scheme. While a figure of a little over £1 million would rightly strike most as more than sufficient as a tax-free pension pot, senior doctors in the NHS are finding it extremely difficult to assess whether or not their overtime will result in their yearly calculation of their lifetime allowance being tipped over the threshold and result in a current tax bill. The British Medical Association estimates that the number of GPs taking early retirement has tripled over the past decade and puts this down partly to the uncertainty about their tax bills.

It is worth noting that when the lifetime allowance was first introduced in 2006, it was set at £1.5 million, rising to £1.8 million in the financial year 2010-11. Since the Conservatives came to power, it has reduced every year to the current level of only just above £1 million. Like the freezing of the personal allowance, this has the impact of catching more ordinary people in the taxation net, and again we see that the Chancellor wants to raise money off the back of hard-working NHS frontline workers while protecting profitable corporations.

This issue has been a problem for doctors for the last few years, so the Government have no excuse for not knowing that the freezing of the pension lifetime allowance would make the situation worse. Have the Government carried out an impact assessment of the measure on NHS retention of senior staff? I am extremely concerned, at this time when our senior NHS staff are exhausted and facing a huge backlog of elective surgery, that skilled staff should not feel compelled to take early retirement because of an unintended and avoidable tax consequence.

The Finance Bill seeks to tax hard-working families and penalise those who have been working so hard to keep us all safe this year, and the Liberal Democrats cannot support these measures.

[Matt Rodda (Reading East) (Lab)]

I want to offer my support to the shadow Minister, my hon. Friend the Member for Ealing North (James Murray), who put his case very fairly. I want to illustrate what that means in my constituency of Reading East and perhaps develop some of the points he made.

I particularly want to raise the growth in the use of food banks, which has been very significant across the country, and our area is typical in so many ways, as indeed it is in many instances. The growth in the use of food banks illustrates why the Budget was such a complete failure, because the Government failed to offer real help to many families. In particular they offered very little to those in the greatest need, as we heard from the shadow Minister, and very little to those who are self-employed and have recently set up a small business. Indeed, the3million campaign group rightly pointed out that, although a small number will benefit from some measures offering further support for recently set-up small businesses, most will not, and that has been widely recognised in my constituency.

Before going into the detail of local food banks, I want to thank all the volunteers at our local council in Reading and many others, both businesses and individuals, who have helped support food banks by generously giving their time and putting the community and others first at what is a very difficult time for so many people. I have tried to keep in touch with the pressures by going to help myself and to receive regular briefings from food banks and other charities, and I want to describe to colleagues what this is like.