Economy Update

Viscount Younger of Leckie Excerpts

Thursday 26th May 2022 Lords Chamber

[Lord Sikka (Lab)]

My Lords, the Chancellor has not really done anything to control inflation. None of the measures will reduce it in any way whatever. Even on the windfall tax, and on tax, it is a sleight of hand. Let me explain how this works.

First, people are taxed to the hilt. The Chancellor then comes along and increases income tax by stealth and national insurance, then gives some of this money back to the people. They then give it to the energy companies, so that they can continue to profiteer and increase their profits, the same as before.

The windfall tax is for only one year; that will not reduce energy costs or the rate of inflation. If the Government were to cap energy prices, as the French Government have, that would definitely reduce the rate of inflation—but that is not what the Government have done. At the same time, they are handing all kinds of tax reliefs to corporations, which means that the tax base of oil and gas companies will also shrink in future—they will pay less tax. It is a very odd kind of strategy.

If a windfall tax on oil and gas companies is good enough—at last the Government have done a U-turn—why is there no windfall tax on supermarkets, banks, railway companies and water companies? They have been profiteering too. That contributes to the rate of inflation, which is damaging to the people, but none of that is being considered by the Government in any way whatever.

I have just spoken to a firm of accountants after the Chancellor’s Statement, and it is rubbing its hands and saying—

[Viscount Younger of Leckie (Con)]

My Lords, I am sorry to interrupt the noble Lord, but I ask him and all noble Lords to keep their questions succinct, so that we can get the maximum number of Back-Benchers in.

[Baroness Penn (Con)]

I am not sure that I picked up the noble Lord’s questions there, but he did talk about the potential inflationary impact of this announcement and asked what the Government are doing to tackle inflation. I can say to all noble Lords that we have three tools available to us to combat and reduce inflation and we are using them all. First, we have strong, independent monetary policy, overseen by the Bank of England. Secondly, we have responsible fiscal policy from this Government. I am cognisant of the potential inflationary impacts of announcements such as these and that is why we are ensuring that the support we are putting in place is targeted, timely and time-limited. We will continue to take difficult fiscal decisions to ensure that we remain within our fiscal rules. Thirdly, we are taking an activist approach to supply-side reforms, which will increase our productive capacity, ease inflationary pressures and raise our long-term growth potential. I do not think the list of further taxes that the noble Lord said he wanted to apply would encourage more investment in our economy, which is what we need to see the growth that we all want and to support the record lows in, for example, unemployment that this Government have presided over.