Income Tax: Personal Allowance

Daisy Cooper Excerpts

Monday 12th May 2025 Westminster Hall

[Daisy Cooper (St Albans) (LD)]

It is a pleasure to serve under your chairmanship, Mr Stuart.

I start by thanking Mr Frost for launching this petition and the 250,000 people who have signed it. The number of people who have signed it speaks to the strength of public feeling about this issue, which is a serious policy challenge for all political parties. Indeed, I think the petition does more than showing the strength of feeling that exists. I regard it as a cry for help, because right around the country there are struggling families gripped by a cost of living crisis, there are high streets and small businesses gripped by the cost of doing business crisis, and people are crying out for the change they were promised.

Most ordinary folk work hard, play by the rules, pay their taxes and expect certain public services to be there for them when they need them. Even when they become pensioners, they may well still be working. I hear time and again that pensioners want certainty. They have worked for their entire lives, they know how much money they have coming in and they need to know how much money is going out. They need to budget. When a shock comes along—whether something like the mini-Budget, a cut to the winter fuel payment or sky-high energy prices—they do not know what to do. They have far less capacity than other people to increase their income. Increasingly, pensioners have caring responsibilities, not just for their spouses but for their children, grandchildren or, even in some cases, their great-grandchildren. I take the petition as a cry for help.

As the Liberal Democrat spokesperson, I am incredibly proud that our policy when we were in government was to raise the personal allowance. That went through, and by April 2015, more than 3 million people had been taken out of paying income tax all together. It remains our priority to raise the tax-free personal allowance, as the best and fairest way of cutting tax when the public finances allow. And there is the rub, because the public finances are under enormous pressure and strain and, at the same time, there are very few signs of economic growth. We know that the public finances are in a terrible state in large part because of the mess left behind by the Conservative Government; in part, too, because of the growth-crushing Labour Budget, but also because of President Trump’s trade war. We have a toxic combination that means that people are seeing their seeing their taxes go up but not seeing services improve. It is leading to that cry for help.

As has been mentioned, the House of Commons Library briefing estimates that this measure alone would cost around £50 billion, and additional measures to equalise it with national insurance could cost £60 billion to £65 billion. If I remember correctly, I think the pandemic cost £40 billion, so this would be 1.5 pandemics, which is a staggering amount of money. None the less, we should not dismiss the call.

There are other things that we could do. We Liberal Democrats have said that the key to sorting out the public finances is to get more economic growth. We think that a key way of doing that is to improve our trading relationship with the European Union. Liberal Democrat research has shown that since the Brexit deal came into effect, small businesses have had to fill in 2 billion pieces of paper—enough paper to go round the world 15 times. The cost of that red tape is falling on to the shoulders of small businesses and, through them, their customers as well. Sorting out that trading relationship and ripping away that red tape will improve our economic growth.

We have also said that there are fairer ways of raising taxes. We have suggested that the Government look at increasing the digital services tax on the 20 largest online social media platforms and search engines. We have suggested that the Government look at increasing the remote gaming duty on those big gaming companies that made an enormous amount of money—billions of pounds in profits—during the pandemic, who we believe could pay a little bit more to help public services back on their feet.

We know that the Labour Government have gone some way to reforming capital gains tax. We have suggested alternative ways of reforming it to raise even more money than the Labour Government have raised, but also that we should raise that money from the 0.1% richest—the super-wealthy. There are fairer ways in which this Government could raise taxes from those with the broadest shoulders—those big corporations—to bring in billions of pounds in order to support people at the other end of the ladder.

There are other things that the Government could do. We have suggested that a home insulation scheme not only would be good for the planet by reducing carbon emissions, but would reduce people’s energy bills, meaning that the money that they do have would go further. Equally, by improving investment in our farming and reducing the cost of healthy, locally grown food, people would not have to spend so much of their money on food bills.

I thank Mr Frost again, and everybody who signed the petition. We as policymakers should take this challenge very seriously. We see it as a cry for help from those who are struggling the most at this incredibly difficult time. I urge the Minister again, as I have done many times in previous months, to look at some of the suggestions from the Liberal Democrats and to engage in those conversations about how we raise tax in a fairer way and support those who are struggling at this very difficult time.