Spring Budget 2024 Debate

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Department: HM Treasury
Lord Sikka Portrait Lord Sikka (Lab)
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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.