Child Poverty

Lord Sikka Excerpts

Monday 29th April 2024 Lords Chamber

[Lord Sikka (Lab)]

My Lords, I thank the noble Lord, Lord Bird, for facilitating this much-needed debate. In a country boasting a record number of billionaires and where the top 1% has more wealth than 70% of the population combined, condemning 4.3 million children to poverty is really a political choice. There is no economic necessity for it whatever. Governments have bailed out banks and energy companies and handed billions in subsidies to rail, oil, gas, auto, steel and internet companies. They can eradicate child poverty too, if there is appropriate political will. Rescuing people from poverty will also stimulate the economy because poor people tend to spend more in the local economy, which has a considerable multiplier effect.

This Government have accelerated poverty by cutting real wages. The average real wage is now lower than in 2008. Austerity, unchecked profiteering, and the two-child benefit cap, accompanied by regressive tax policies, have deepened poverty. The poorest pay a higher proportion of their income in taxes than the richest. The richest fifth of households pay 31% of gross household income in direct taxes, compared with 14% by the poorest fifth. The richest fifth pay 9% of their disposable income in indirect taxes, compared with 28% by the poorest fifth. Can the Minister explain why the Government have not reduced indirect taxes, which would help the poorest households?

The Government actually have numerous policy options. They can reform corporate governance. For example, evidence shows that having worker-elected directors on the boards of large companies helps to secure equitable distribution of income and to lift families and children out of poverty. Since 2010, the Government have handed £695 billion of quantitative easing to capital market speculators. Will the Minister also support a call for QE to alleviate poverty? Why not?

The Government can also remove the two-child benefit cap and inflation-proof benefits by eliminating anomalies and the tax perks of the rich. For example, they can cap tax relief on charitable donations for donors at 20%. At the moment, the rich get tax relief at 40% and 45%. By capping this tax relief, the Government could generate £740 million a year extra, which could easily fund free school meals for children. By taxing capital gains at the same rates as wages, another £12 billion a year of extra revenue could be raised. Similarly, by taxing dividends at the same rate as wages, another £4 billion to £5 billion a year could be raised in revenue. By capping tax relief on pension contributions to 20% for all, the Government could generate an additional £14.5 billion a year of revenues. These are just some examples of how the Government could generate resources to alleviate child poverty, and, of course, I could offer up further options, if the Minister so wishes, either in this House or even privately. I hope the Minister will consider these things.

Finally, will the Minister acknowledge that child poverty is a political choice by the Government and not an economic necessity?