Autumn Budget 2025

Lord Sikka Excerpts

Thursday 4th December 2025 Lords Chamber

[Lord Sikka (Lab)]

My Lords, I welcome the scrapping of the Conservative two-child benefit cap. Sustained economic growth is a key objective, but that cannot be achieved by eroding the spending power of the bottom 50% of the population. There is no justification for freezing the income tax threshold until 2030-31. This freeze forces 780,000 additional people—that is, the poorest—to pay income tax for the first time. Another 920,000 will be pushed into paying income tax at a higher rate. Some 24 million people already live below socially acceptable living standards, and the freeze would lengthen queues at food banks.

Just one change—taxing capital gains at the same rate as wages—could have raised around £14 billion and enabled the Chancellor to increase income tax personal allowances by more than £1,000 a year, reduce poverty and stimulate the economy. However, the Government chose to appease the rich. There is no increase in the top rate of income tax. Dividend and capital gains will still be taxed at lower rates than wages. The poorest 20% will pay a higher proportion of their income in taxes than the richest 20%. Just 1% of the population will continue to have more wealth than 70% of the population combined. That is utterly unfair.

Energy companies have made £125 billion in profit since 2020, directly fuelling poverty, but there are no curbs on profiteering and no windfall taxes. The big four banks made pre-tax profits of £45.9 billion in 2024, but there are no windfall taxes. Even worse, banks receive a hidden subsidy of over £23 billion a year in the form of interest payments on central reserves. Since 2023, the European Union has mostly stopped paying interest on central reserves to banks. The Budget makes no attempt to curb corporate welfare payments. Can the Minister explain why the Government continue to subsidise banks?

Direct investment by the state in infrastructure remains neutered. Instead, it is channelled through PFI-type arrangements. For every £1 of private investment, the Government repay £6, which is very poor value for money. Such policies guarantee corporate profits but have not stimulated growth. They burden the public purse and public bodies with extortionate costs. There are alternative ways of funding these investments. The UK invests around 19% of its GDP in productive assets, compared with 26% for France and 25% for Germany. The average for OECD countries is 23%, while China invests 40.4% and India invests 30.5%. Despite low investment, there is no reform of corporate governance and no attempt to curtail shareholders’ ability to extract vast dividends, as we have seen in the water industry, for example.

Inequalities, profiteering, regressive taxation and neutering of public investment do not provide firm foundations for the economy. We need a Budget for the masses, not just for the super-rich, bond markets and corporations.