Income Equality and Sustainability

Lord Tunnicliffe Excerpts

Wednesday 6th May 2020 Lords Chamber

[Lord Tunnicliffe (Lab)]

My Lords, I too thank the most reverend Primate the Archbishop of York for introducing this debate and for his service to the country and the House of Lords. I also welcome the right reverend Prelate the Bishop of Derby—my hometown—and look forward to her future contributions after such a good maiden speech.

It has been an interesting debate, wide-ranging and touching on many points. I will try to give a personal perspective on inequality, which is about so much more than income. When I was young—I was born in 1943—we were poor. But my father had secure employment as a porter in the National Health Service. We had a council house, with security of tenure. We had controlled rents. In summary, we lived poor but in no fear. Today’s working poor are the very opposite. They have low incomes, employment insecurity, housing insecurity—frequently because they do not have security of tenure—and escalating housing costs in the private sector. They have lived over the last 10 years with declining public services on which they disproportionately depend.

The working poor live in fear, a fear that most of us in this House—there may be exceptions—cannot begin to imagine. When things go wrong, they go very wrong. If people are in the wrong part of the economy—including large parts of the care and hospitality sectors—when things go wrong, as Covid has illustrated, they go catastrophically wrong.

However, there are other features of inequality which we must not ignore. The most obvious of these is the inequality of capital and asset wealth. This is where housing, for some, instead of being a problem, is the opposite. My own house is probably now worth, in real terms, two or three times what I paid for it, without anything having been done by me to contribute to that appreciation. Housing ownership exacerbates inequality in a number of ways, including in retirement. The working poor are likely still to be in insecure rented accommodation when they retire; the affluent will by then almost always own their own house and their retirement will therefore be that much more comfortable. The inequality of capital wealth flows through to subsequent generations through inheritance. We must not forget also that there are inequalities through responsibility, where carers look after their young and old, as well as inequalities in standards of work and in relation to work satisfaction.

Poverty is wrong. Poverty in all its forms is unfair and uncaring. It creates a society that is unfair and uncaring. This is in income, housing, security and fear. In my experience, high pay is unnecessary. Most high pay depends on bonuses. Bonuses pervert behaviour and we know that we get some pretty perverted behaviour as a result of them, as the noble Lord, Lord Balfe, noted.

The economic and social effects of Covid-19 will take many years to run through. Instead of seeing these as a threat, we must see them as an opportunity—as some have said, a Beveridge moment. We must try to get a better understanding of our society and of inequality and its effects. I believe that a better understanding will lead us to a more equal society, a society more at ease with itself, with a more holistic understanding of value, not simply of wealth.

Budget: Economic and Fiscal Outlook

Lord Tunnicliffe Excerpts

Tuesday 5th May 2020 Lords Chamber

[Lord Tunnicliffe (Lab)]

My Lords, a number of noble Lords have called this debate surreal, ludicrous and “Gilbert and Sullivan”. As Treasury spokesman for the Opposition, I must apologise for causing it to happen. We have found year on year that this debate comes at a useful time, and we can use it to discuss the whole economy. Noble Lords did not have to volunteer for this debate if they did not think it was useful.

The debate has, surprisingly, involved quite a lot of concern about Brexit, which has been the preponderant theme. There has been much talk about how wonderful and invigorating it might be, but overall very few feel that Brexit will be positive in economic terms. With Covid-19, the problems of negotiating it are really quite frightening. Conversely, the need to co-operate with our neighbours in this crisis is most important.

There has been discussion on this, and the Government have restated their commitment to leave the Common Market and end the transition period at the end of December this year. I, like many others, feel that this would be disastrous. The idea that we can negotiate a sensible deal in this time is unreal. The only real probability of leaving on 31 December is that we will leave without a deal at all.

There has been considerable debate about the economy, but it is unfortunate that there has not been more concentration on what I would loosely call the economic infrastructure of the country. We have to worry about saving companies, both the SMEs and the strategic sectors such as aviation and steel that, once lost, would be very difficult to rebuild. The whole task of the future has to be much more holistic than we have seen so far. I agree with the number of noble Lords who have said that we should not aim to go back to where we were; we have to pursue policies which are different and more holistic and which involve considerable innovation. We cannot assume that we will enter another devastating period of austerity, as we have had since 2010.

Turning to the technicalities of the Motion, we have to submit a statement to the EU that was circulated to us yesterday—the 2019-20 convergence programme for the United Kingdom. However, as I understand it, all we are formally approving is the input into the document. The document comes from Budget 2020—HC 121—and the two OBR documents.

I turn first to the Budget half of this. It is no longer credible. Great chunks of the Budget will not happen, in terms of both revenue, which will be damaged severely by the virus, and the expenditure that has been necessary to make sure the economy does not collapse. The virus and the Chancellor have changed things. We support what has been done so far, but it is becoming clear that problems with the design and performance of many of the existing programmes are reducing their take-up. The efficacy of these programmes will be essential in the dealing with the impact of the crisis on jobs and incomes.

The Labour Party has three tests for the economic response to the coronavirus: keeping people in work, getting cash to struggling businesses, and preventing additional poverty through changes to social security. We believe that international co-ordination needs to be rapidly increased, with the Treasury leading on extensive co-ordination with the IMF, the G20 and EU policymakers. It was good to see that a global conference was recently held on these issues, but unfortunate that the US and China did not take part. It will be interesting to know what further plans the Government have to pursue this sort of conference.

We call on the Government to act urgently to protect jobs and incomes by preventing even more people being made redundant, by acting on those employers who continue to refuse to furlough affected workers. We need to fix blockages in the business loans scheme so that businesses can access the support that they desperately need. The bounce-back loans are clearly a first step but there is a considerable gap in those schemes, with the larger loans being much more difficult and, it is feared, not arriving in time. We need to clarify urgently the situation for those currently excluded from the Government’s self-employment and furlough schemes.

We should turn universal credit advances into grants and consider additional changes to improve universal credit. We should make all workers, including the low-paid, eligible for statutory sick pay and increase its level. We should spearhead international co-ordination to prevent worldwide spillovers in financial systems caused by the crisis. We should make public the proposed exit strategy to ensure that economic measures remain appropriate in protecting the long-term future of business and workers. It is the long term we need to worry about, as well as the short term. Finally, we need to reflect on the fact that key workers’ hourly wages are 8% lower on average than those of other employees. As we recover from this pandemic, we must ensure that key workers are never again left overlooked and underpaid.

Turning back to the Budget, while I accept that the issues have inevitably changed, I would like to be assured by the Minister that the spending parts of the Budget designed to take us out of austerity will still take place. The Government announced a £27 billion programme with unprecedented investment in urban transport, including £4.2 billion for a five-year integrated transport settlement for eight city regions, on top of £1 billion allocated to shovel-ready transport. There were also commitments to funding a shared rural network, with £5 billion for a gigabit broadband rollout in the hardest-to-reach areas, record funding of £5.2 billion for flood defences between 2021 and 2027, and a £10.9 billion increase in housing investment to support a commitment to build at least 1 million new homes by the end of the Parliament. The Government are also investing £1.5 billion in new capital spending for further education colleges and £2.5 billion for a national skills fund. All these things are in the Budget. Can the Minister assure me that they remain commitments and will be delivered as part of the end of austerity, in our looking forward to a brighter future?

Economy: Update

Lord Tunnicliffe Excerpts

Tuesday 28th April 2020 Lords Chamber

[Lord Tunnicliffe (Lab)]

My Lords, I am grateful to the Minister for repeating yesterday’s Statement and to the entire Treasury team, Ministers and officials, for their continued work in response to coronavirus.

As the Chancellor said in his Statement, these are tough times. The Minister read out the number of new universal credit claimants, as well as the staggering figure of 4 million furloughed jobs. He also warned that things are likely to get worse before they get better. Even if the figures do not grow, they are clearly worrying in the economic context. We have seen the projections of the OBR, the statistics in relation to business confidence and the analysis of a variety of economists and think tanks. However, throughout all this we must remember that behind the numbers and statistics are real lives and hard struggles to keep households running and businesses afloat.

Yesterday, the shadow Chancellor asked what steps the Government are taking to convert initial universal credit loans into grants to ease the burden on new claimants. She noted that the issue appears to be with the IT system behind universal credit, rather than a lack of political will. In response, the Chancellor listed a number of benefit reforms introduced by the DWP. However, he failed to answer the particular point on the IT problem, so I hope the Minister can comment. For the avoidance of doubt, do the Government agree that initial universal credit loans should be converted into grants if the IT problems can be overcome? If the answer is yes, what is being done to solve those IT problems?

Turning to the wider economic response, we welcome the many measures announced thus far and have, I hope, played a constructive role on occasions such as these. My honourable friend the shadow Chancellor has had multiple meetings and exchanges of correspondence with the Chancellor; I hope she receives a speedy reply to the questions attached to her latest letter.

The announcement of so-called bounce-back loans, which will be 100% guaranteed by the Government, is a welcome step. We are grateful to the banks for getting the scheme up and running so quickly and hope it will ease some of the concerns and cash-flow issues of SMEs across the country.

Problems remain for those firms seeking more than £50,000 of support. Many will rightly question why they are not able to access funds as quickly or easily. I therefore hope that the Minister can offer assurances that the Government are looking at ways to make the main coronavirus business interruption loan scheme faster and less cumbersome. The long-term cost of not improving the system could be significant. That said, we appreciate the speed at which the Treasury has worked to formulate its response to Covid-19, and that the calls from SMEs, backed by the Labour Party, for swifter access to business loans have been heeded, at least in part.

While we accept that the initial government response had to be reactive, I hope the Minister can comment on what is being done to shift thinking towards a more proactive, whole-economy view, whereby sector-specific problems are identified earlier. It is vital that further coronavirus support schemes are designed and rolled out when they are of most use, rather than when the situation on the ground has become critical. Specifically, is cross-departmental work being undertaken to produce a whole-economy view? If the answer is yes, who is responsible? If the answer is no, why not?

One example of this concerns pubs and restaurants. These businesses play a vital role in communities across the country, both in the pleasure they bring and the employment they support. However, they face perhaps the greatest uncertainty of all. They are likely to be the last to reopen and, assuming social distancing remains in place for some time, their capacity, and therefore their earning potential, will be much reduced. This raises a number of questions.

The Minister will know that Section 82 of the Coronavirus Act 2020 affords increased protections for commercial tenants, in the event of their being unable to pay rent. However, these protections will lapse at the end of June unless extended by a negative SI. Will the Government be extending this provision and, if so, until when? He will know that the equivalent protections in Section 81 for residential tenants run until the end of September, offering greater certainty. Further, can the Minister confirm whether the Government are looking at what forms of additional support may be provided for such small businesses, even once they have reopened? If firms are having to operate differently because of government guidelines, they should surely not have to accrue debt as a result.

Finally, if the earning potential of pubs and restaurants is limited for an extended period, what protections can the Government put in place to ensure that landlords do not begin to seek other tenants, such as fast-food chains or takeaway restaurants, which are likely to be perceived as safer options? There are many other examples of where long-term, proactive thinking is required, so I hope the Minister will make himself available for further exchanges in the future.

[Baroness Kramer (LD)]

My Lords, the bounce-back loans are clearly welcome, but I am going to press for more help for the self-employed who have fallen through the gaps in all the various rescue packages, especially the independent contractors who take much of their income in dividends and the newly self-employed. When we come out of lockdown, self-employment will be critical. It is a path for those who will have lost their jobs because of the pandemic and cannot return to them, and we will need innovation. As the Government know, a lot of innovation is embedded in these self-employed individuals, and I hope they will look again, because they must support this sector.

We all kept a minute’s silence today for key workers who have died, but many such key workers are very low earners with insecure work. Will the Government show their respect for these individuals by reviewing their funding of both social care and local government to ensure that those workers are properly paid, with proper employment rights, in recognition of the vital role they play and the vital contribution they make to all of us?

At the end of lockdown, public sector net debt will be at a historic high—certainly by the end of the pandemic. As the Government grapple with paying that debt down, will the noble Lord take action to tax the digital companies that have so far managed to pay very little tax in the UK though they now dominate large sectors of our economy? Indeed, they are doing well in the pandemic. I do not say that as an insult, but it increases the tax they should be contributing. Indeed, there are others who are, frankly, doing well out of the pandemic. Quite a number of traders have made windfall profits. Does the Minister agree that the Government should look for these companies to pay windfall taxes?

Budget Statement

Lord Tunnicliffe Excerpts

Wednesday 18th March 2020 Lords Chamber

[Lord Tunnicliffe (Lab)]

My Lords, I thank the noble Lord for introducing this debate, in particular for his intelligent and pragmatic approach in addressing not only the Budget but the Statement made last night. I assume that he will be responding to questions from noble Lords on last night’s Statement as well as the Budget itself. I note that he nods as I say those words.

Our post-Budget debates are often interesting affairs, not least because an extra week or two allows for greater scrutiny of the famous Red Book. I expect that this one will be even more enlightening, even if for the wrong reasons. As the Chancellor acknowledged in his Statement last week, the Spring Budget took place against an unconventional political and economic backdrop. Not only was it delivered by a Chancellor who had not expected his promotion, but it came as the global Covid-19 pandemic required a series of extraordinary actions from the Government.

We have since had a supplementary economic Statement from the Chancellor in which he announced additional measures to assist some of the businesses that will be worst affected in the weeks and months ahead. I want to be clear: to a large extent we support the action being taken. There are areas where we have concerns, but we appreciate the spirit in which Ministers have approached this challenge. Many of my noble friends have been engaged in meetings with their opposite numbers in recent days and have been able to put forward concerns and suggestions, which appear to have been taken seriously.

Before turning to our analysis of the economy, I place on record our thanks to everybody across the UK who is working to minimise the wide-ranging effects of Covid-19. Our NHS workers are once again demonstrating their heroism in the face of unprecedented demand. Public health and other authorities are reacting swiftly and decisively. Many members of the public are supporting friends and neighbours, helping them navigate these most unusual times. We thank them for all their hard work and community spirit.

I am grateful to all noble Lords who are due to participate in this debate and to those who have considered their own circumstances and decided to stay away on this occasion. We may not get to hear their words of wisdom this time, but we look forward to doing so in future.

As I have mentioned the coronavirus, I will raise our concerns about it now. As I have said, we largely support the measures that have been announced, but noble Lords will not be surprised that we have some concerns. This is a fast-moving situation and there will be more to come. Although it is perhaps a little late, we welcome the establishment of new government committees to enable swifter, joined-up responses to new developments.

Nevertheless, as we discussed in yesterday’s PNQ on entertainment venues, some recent announcements have caused confusion rather than offering clarity. The issues relating to insurance seem to have been resolved, but in such turbulent times it is vital that the Government are a calming influence, rather than causing further uncertainty. There remains the question of unequal treatment; banks are offering mortgage customers the ability to negotiate payment holidays, but there is a lack of action to ensure that renters are not adversely impacted by temporary cash-flow problems. We have been promised a statement by the Secretary of State for Housing, Communities and Local Government. When will this take place?

We have previously relayed concerns over the current level of statutory sick pay, which we believe introduces a risk that some will have to choose between health and financial hardship. This should concern us all. We have also expressed alarm that some firms have moved swiftly to lay off staff, pushing them towards benefits rather than guaranteeing stronger levels of protection. As the director of the Institute for Fiscal Studies has noted, it will remain expensive for businesses to pay their staff, particularly if demand drops. Therefore, we urgently need targeted government intervention to protect workers.

The crisis will inevitably create incidents of real hardship. We therefore welcome the funding of local hardship funds, but while the headline figure of £500 million sounds significant, it will be spread across hundreds of authorities. Will a top-up be available if required? What of the administrative side? Will costs be reimbursed by central government, or will councils have to deduct them from the funds allocated? We welcome the changes to the benefit system to improve access for those who fall on hard times. However, questions remain over universal credit, particularly regarding the five-week delay; is that being lifted?

As this is a debate on the state of the economy, I want briefly to touch on the overall economic picture. Last week’s Budget was delivered on a day when the Office for National Statistics estimated flat GDP growth for the last quarter. Manufacturing figures continue to cause alarm, and growth in services has been inconsistent. As the Resolution Foundation noted, pre-coronavirus, the Office for Budget Responsibility forecast average annual growth of just 1.4% in the coming years. This is even weaker than the sluggish rates we have seen in the post-financial crisis era. The economic hit from weaker growth, even on these incomplete forecasts, is around £300 per household this year, rising to almost £600 per year by the middle of the Parliament. To people up and down the country, this outlook, which must now be seen as a best-case scenario, does not sound like the Government fixing the roof.

Yesterday, the OBR’s Robert Chote warned that Britain faces “a wartime situation” and must do more to support households and businesses through the current health crisis, even if this leads to increased borrowing and national debt. Charlie Bean, a former deputy governor of the Bank of England said:

“If you damage the economy, you damage the public finances further down the road.”


Whether it is a financial crisis or something such as this, all the evidence shows that big action taken early is better than half-hearted action delayed. Last night’s economic Statement provided a step forward, but it is not yet clear whether Ministers have a firm grip on the scale of the challenge our economy faces. If we get one thing from the Minister’s response this evening, it is that I very much hope I am proved wrong.

Returning to the spring Budget, I was disappointed that we saw nothing substantive on social care. In his first Downing Street address, the Prime Minister told us that he had a plan that was “oven-ready”. It was said that the Government have recently decided to convene cross-party talks on the future of care. It has taken years to get to this stage, and while a level of consensus is clearly needed to address the long-term challenges we face, local authorities and care providers will continue to face an uphill struggle in the meantime. According to the Local Government Association, adult social care faces a funding gap of £810 million in 2021, rising to £3.9 billion in 2024-25. That gap accounts only for core pressures. When factoring in unmet and under-met needs, and workforce challenges, the cost will be much higher.

Speaking of local authorities, I note that other than one-off schemes relating to the virus, and the commitments to reviewing business rates, there is little to offer long -term reassurance on the provision of local services. Indeed, the LGA expressed disappointment that next year’s public health budget was not confirmed, despite the new financial year being just weeks away. This was addressed yesterday, but the cause of the delay is not clear.

While there have been real-term increases for the year ahead, these do not compensate for funds being reduced by £700 million over the past five years. After the cancellation of the last comprehensive spending review, the Chancellor has finally launched a new exercise. I hope that it addresses the fact that England’s councils face an overall funding gap of almost £6.5 billion by 2025, which is only to meet demand and inflation pressures. Improving local services will require significantly more. I hope that it will also enable the Government finally to get to grips with the many big challenges that our country faces. After calling and winning called an election, more was expected from the Prime Minister and his Chancellor. We have heard that the Government want to tackle low pay by increasing the national living wage, yet workers will have to wait five years for a modest increase, and only if the economic conditions allow for it. Even then, the basic wage will remain far below the level suggested by the Living Wage Foundation.

We are told that the Government want to tackle rough sleeping, which has increased exponentially since 2010, but did homeless services receive the £1 billion they needed to reverse previous cuts? No, they did not. Neither did Ministers commit enough money to tackling domestic violence. The £10 million provided for

“innovative new approaches to preventing domestic abuse”

would need to be multiplied more than 15 times to meet the needs of refuges.

Ministers say that the UK has the most ambitious climate-change agenda in the world. However, this Budget barely mentions the climate crisis. The IFS said that in terms of reaching net zero

“the decisions made in this Budget don't provide great confidence that the government is willing to grasp the nettle.”

This is particularly disappointing since the UK is to host the COP 26 conference.

While I reiterate our general support for the actions relating to Covid-19, I express our disappointment that this Budget represents another missed opportunity. We hope that the negative consequences of a decade of austerity will finally begin to be addressed when we see the outcome of the spending review. We desperately need progress on social care, more funds for councils and steps forward on a variety of societal issues. However, on current form, and given the challenges facing the UK and global economies, there is little cause for optimism.

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[Lord Agnew of Oulton]

That is an extremely good idea. I will certainly take it back to the Treasury, where we will investigate it.

[Lord Tunnicliffe]

If the Minister is going to write to individuals, will he copy in all noble Lords who participated in the debate?

[Lord Agnew of Oulton]

Yes, of course. I am afraid I have not had time to answer various noble Lords’ specific questions, so I will ensure that they are all copied in to my replies.

To sum up, there have been many calls today for the Government to move faster—not just by putting more money into the system but by being ever more restrictive of people’s liberty and way of life. Indeed, I was at a meeting with the Prime Minister last night. He said to the assembled group, “Even in the war, we didn’t stop people going to the pub.” We have to try to bring the country with us as we do some of the most profound things to happen in our lifetime.

I want to finish on a slightly more positive note. For those noble Lords interested in history, it is worth remembering that it was in difficult times like this that the Education Act 1944 was introduced for its Second Reading that January, nearly five months before D-day and nearly 18 months before the war was won. Parliament had the vision then to introduce legislation that would change the lives of young people in peacetime well before we had any sense that we had achieved peace. I hope we will be able to look back on this Budget in 18 months’ time and say something similar, but for the whole economy and everyone who lives in Britain.

Employment Allowance (Excluded Persons) Regulations 2020

Lord Tunnicliffe Excerpts

Tuesday 3rd March 2020 Lords Chamber

[Baroness Kramer (LD)]

My Lords, I will be extremely brief. I am supportive of this change. It seems appropriate that the employment allowance is focused on the smallest businesses. I fully accept what the Minister says: that small businesses will be far more motivated to take on additional staff than any large business by this—in effect—grant.

On reading this, it seems that one of motivations is to make sure that the employment allowance is covered by only the de minimis regulations in the EU. Am I correct that it is the Government’s long-term policy focus to direct this aid towards small businesses, and that this is not just an accommodation to what they see as an EU framework—in other words, that it portends the future? Can the Minister give us any further assurance that any money saved will be redirected into the small business community?

[Lord Tunnicliffe (Lab)]

My Lords, the Explanatory Memorandum states:

“The purpose of this reform is to target the Employment Allowance to support smaller businesses.”


It directs us to Employment Allowance: Excluded Persons Regulations 2020, a document published in January this year, which repeats that statement:

“This reform is designed to focus the Employment Allowance at the original intended beneficiaries: smaller businesses.”


This is rubbish. You have businesses that can currently claim this £3,000, you have a very large group of businesses whose NI bill is less than £100,000—for which the rules will not change one iota as a result of this SI—and you have another group in the £100,000-plus category that will get nothing. It may be the Government’s intention to focus on smaller businesses, but this SI has no such effect. In fact, the sole impact of this SI is to save the Government money. I do not mind this, and the statutory instrument is perfectly reasonable. I just do not like the fact that false claims are made in this document. Unless the noble Lord is able to give me the assurance that the noble Baroness, Lady Kramer seeks, it seems improper to claim that taking money from one group while doing nothing about another somehow focuses more money on the group that you are not going to change.

Social Security (Contributions) (Rates, Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations 2020

Lord Tunnicliffe Excerpts

Tuesday 3rd March 2020 Lords Chamber

[Baroness Kramer (LD)]

My Lords, we are indebted to the noble Baroness, Lady Lister, for illuminating the underlying policy issues that underpin these statutory instruments. There is a real fear in my party—and I know in hers—that the changes that are taking place today embed, in effect, austerity for those on benefits and those on the lowest incomes. However, because we are looking at statutory instruments, I am going to make my comments extremely narrow. I recognise that for the annual rerating of NIC contributions and various other benefits, we are simply implementing a mechanism that has been through a normal parliamentary process. Frequently, this has been part of a Budget; it would certainly have been debated in both Houses, and MPs would have had an opportunity to express an opinion in the Commons if they wished to make changes. However, I am somewhat at a loss—and perhaps the Minister will help me—as to how any of that applies to the changes in PT and LPL.

It is not that I have a particular objection to the changes, but it appears that their basis lies in the Conservative manifesto, not in actions taken in the other place either in the form of a Budget—because the Budget is not due for another week—or in a finance Bill, which is where I would expect fundamental changes such as this, which affect most working people, to be embedded. It is hard to accept that changes are being made to national insurance contributions, which have a major impact on the Budget, but not within the context of the Budget. I am rather concerned that the Government might be returning to a pattern that we have seen in the past, when major policy change was introduced by statutory instrument rather than through primary legislation or being put into the Budget framework, where full debate and challenge could take place. It happened with universal credit, as I think everybody who is present in the House today will remember, and I am now concerned to see this appearing here within two of these statutory instruments. So that is where I would like the Minister to focus: to explain why a change which, as far as I can see, perfectly belongs to next week’s Budget and a finance Bill, is appearing in a statutory instrument, where, by definition, the debate is extremely limited and challenge is, frankly, near impossible.

[Lord Tunnicliffe (Lab)]

My Lords, I will take a similar self-denying ordinance to that of the noble Baroness, Lady Kramer, and speak relatively briefly. I would like simply to put on record my support for the excellent speech by my noble friend Lady Lister. I join with the noble Baroness, Lady Kramer, in failing to understand why this is not part of the Budget. Because it is not part of the Budget, it is lacking in process. In some senses, virtually all the changes that the Minister described are designed to introduce the CPI increases of 1.7%. Insomuch as that has previously been announced in budget processes, I cannot object, except on the wider basis that my noble friend Lady Lister outlined.

There is one particular increase, however—the increase in PT, which I am told is the “primary threshold”—which is not in line with inflation. Its excuse for being introduced is that it is in the Conservative manifesto. I have a copy of that manifesto and I have to admit that I could not find it. Fortunately, a member of the Treasury was able to advise me that it was on page 15—which was conveniently not numbered, but never mind. It says:

“We not only want to freeze taxes, but to cut them too. We will raise the National Insurance threshold to £9,500 next year—representing a tax cut for 31 million workers.”


I thought that a basic rule of introducing a change of policy would be that it would be properly costed. Just to make sure that this was not trivial, I did a few sums. The effect, as the Minister said, is to increase the threshold by £868; it would have increased a little anyway because of the 1.7%, but the policy impact is something like a real £720 increase. If you multiply that by the 12% rate and the 31 million people involved, you get a figure of, say, £2.7 billion. My concern is that such a sizable sum ought to have been properly set out and illustrated.

The Explanatory Memorandum says:

“A Tax Information and Impact Note has not been prepared for this instrument as it gives effect to previously announced policy and it relates to routine changes to rates, limits and thresholds.”


Well, it does not. This one is clearly a policy change, and clearly the cost is a few billion pounds. Will the Minister tell us how much it will cost? Why was it not set out in the Explanatory Memorandum? Surely it is improper to introduce a national insurance change that is a reduction in taxation without calculating its cost and putting that in the public domain.

[Lord Agnew of Oulton]

My Lords, I will try to deal with the queries raised by the noble Baronesses and the noble Lord. I will start with the question asked by the noble Baroness, Lady Lister, on the impact of the historic benefit freeze. We have to put all these events into some context. When the freeze was originally announced in 2010, we were putting the public finances back on track. For example, before 2010, welfare spending was rising at an unsustainable rate. Between 1997-98 and 2010-11, welfare spending rose by £84 billion in real terms—a 65% increase. The Government are committed to building a welfare system that ensures that work pays, that there is a strong safety net for people who need it, and that the system is fair for claimants and taxpayers. As I mentioned in my earlier comments, this is a substantial payment back into the system to support some of our most needy and vulnerable people. However, the Government are not able to provide a blank cheque for an unlimited uprating from the years of austerity that we have had to come through.

--- Later in debate ---

[Lord Agnew of Oulton]

The answer to the first part of the noble Baroness’s question is that this is what it will cost; the figure I mentioned earlier in my comments, which I think was £800 million, is the cost. The second question was: what about the people at the top end? Again, I am proud to represent a Government who are focusing our attention on those at the very bottom end of income, so this is where we are at the moment. I cannot speak for the Budget—

[Lord Tunnicliffe]

Can I just check the Minister? The area that I was concerned about, which is the increase in the PT, affects virtually every taxpayer and is not in any way concentrated at the bottom end of employment.