Omissions from Queen’s Speech annoy peers

The report below focuses on the tax, economic and business parts of the Queen’s Speech debate in the Lords. It should be noted that these debates took place before this week’s announcement of measures to help deal with the cost-of-living crisis, including a windfall tax.

Cost-of-living crisis and a windfall tax

Government spokesperson Baroness Penn said the Queen’s Speech shows the Government taking tough decisions to repair public finances and return them to a ‘tenable path’. The measures will shield people from rising energy prices and ‘consumer rip-offs’, while preventing workers paying the price of business failure, she argued.

Responding for the Opposition, Baroness Jones of Whitchurch, Labour, said the Queen’s Speech shows the Government has chosen to pick ‘fabricated fights to please a dwindling group of core supporters rather than address rising cost of living’. Profits from oil companies are reaching ‘record levels’ and that is why there should be a one-off windfall tax on the oil and gas giants, along with an uplift on the warm homes discount, she said.

Speaking for the Lib Dems, the party’s leader in the Lords, Lord Newby, said that “the household budget crisis, which is now affecting millions of people and is set to intensify as inflation and interest rates rise further, requires immediate action. Some specific things the Government could do, such as a windfall tax on oil and gas companies, should be a no-brainer. The arguments that such a tax would harm investment or the incomes of British pensioners are belied in the first case by the comments of the chief executive of BP, and in the second by the fact that the proportion of shares in these oil and gas companies owned by British pension funds is extremely small. The proceeds of such a tax could be spent on supporting the most hard-hit households.”

The Lib Dem Treasury spokesperson, Baroness Kramer, was disappointed with the Queen’s Speech because it does not address a ‘cost of living crisis that is being followed by a debt crisis’. The Government should immediately restore the £20 uplift to universal credit, cancel the increase in national insurance contributions and cut VAT temporarily from 20 per cent to 17.5 per cent, said Kramer. Separately, she said ‘a windfall tax [on the ‘super-profits’ of the oil and gas companies] would not undercut future investment, despite what we hear from Ministers’; after all Shell has announced £8.5 billion in share buybacks for 2022, and BP is expecting to do at least £6 billion in share buybacks and hopes that the market will accept more.

Lord Northbrook (Conservative) backed a windfall tax on oil and energy companies if proceeds go to support those most affected by rising energy bills and backed cutting VAT for a period and ‘deeply regret’ the national insurance rise and ‘nervous’ about the universal credit change.

However some on the Conservative benches were sceptical of the merits of a windfall tax. Former ICAEW President Baroness Noakes said: “The Chancellor will be well aware that windfall taxes are not problem-free solutions, as they undermine our attractiveness as a destination for inward investment.”

Former Treasury adviser Lord Wood of Anfield (Labour) said while inflation is causing huge pains to millions of households, the far bigger risk for the UK is the ‘unhappy combination’ of energy price hikes, higher food prices, fiscal tightening and monetary tightening. On a windfall tax, if it is designed properly and targets genuine, supernormal profits, the idea that it will undermine investment is incorrect because investment plans do not rely on supernormal profits, he said, adding: “If they do, they are not very good investment plans.”

Baroness Hayman, crossbencher, was disappointed the Queen’s Speech did not include greater and more comprehensive action to help people with the costs of their energy and to reduce the energy they use.

Responding, Business minister Lord Callanan said the Government is boosting the incomes of the lowest paid and helping families with their energy costs. The Government already place additional taxes on those companies which extract from the continental shelf, ‘indeed, their tax rates are double those paid by other businesses’.

Tax cuts and tax increases

Conservative peer Lord Bridges of Headley, who chairs the Economic Affairs Committee, took aim more generally at tax increases, asking, if easing the cost of living for families is the Government’s priority, why are they ‘walloping’ them with higher taxes? Why are they hitting businesses with higher corporation tax and a jobs tax? Why are they risking sparking a trade war with our largest trading partner? Why are they ‘clobbering’ the self-employed with IR35? He added: “One fact is that we now rank 31st out of 37 of the OECD countries for tax competitiveness. That is nowhere near good enough if we aspire to be global Britain.”

Another Conservative, Baroness Noakes, told peers: “[T]he tax burden is far too high. We need tax cuts rather than more taxes if we are to create an environment that encourages investment and growth.”

Lord Horam (also Conservative) said a VAT cut to 17 per cent to boost the economy is, unfortunately, too expensive but the Chancellor could go for a reduction in income tax, as a penny off its standard rate would cost only £5 billion as opposed to the £19 billion for a meaningful VAT reduction.

Lord Sikka (Labour) said ‘the tax burden is the highest for 70 years and the Government have crushed the poor’. He said the Government could raise another £25 billion a year simply by eliminating the perks enjoyed by the beneficiaries of capital gains. If those were taxed in the same way as earned income, and if they were forced to pay national insurance, it would raise £25 billion, yet tax reform gets absolutely no mention anywhere in the Queen’s Speech.

Lord Harlech, Conservative, said productivity could be increased by tweaking existing taxation without the need for new legislation. Harlech cited the Chartered Institute of Taxation as saying that the current system ‘does not encourage farmers to develop more efficient production processes’. The peer said the super-deduction on capital allowances is available only to big businesses, not family partnerships or sole traders, highlighting the discrepancy between incorporated and unincorporated businesses. We should be encouraging farmers to invest in new farming technologies such as AI and automation by opening up super-deductions to these categories and allowing unincorporated businesses to access R&D tax credits.

Lord Bilimoria, crossbencher and current CBI President, said this is the worst time in history to have the highest tax burden in 71 years, partly because businesses and consumers need help now. We need to extend and broaden the recovery loan scheme and create a growth guarantee scheme as a long-term replacement. We need far more incentives for businesses to invest and grow. In green finance, Bilimoria said we need to leverage North Sea production as the UK transitions. The super-deduction ends in 2023 and the peer said we need a 100 per cent deduction for investment in future as a replacement.

Baroness Foster of Oxton, Conservative, said we should stop being the only European country not to offer tax-free shopping.

Baroness Boycott, crossbencher, wants the Government to explore tax and subsidy regimes to balance the price of healthy food, ‘which at the moment is much more expensive’.

Business, finance and economic policy

Baroness Penn set out what the Government hopes to achieve with a range of pieces of financial and business legislation: “The Financial Services and Markets Bill will establish a ‘coherent, agile and internationally respected approach’ to financial services regulation that is ‘specifically designed for the UK’. The UK Infrastructure Bank Bill will finalise the bank’s set-up and ensure that it is a long-lasting institution, The draft Audit, Corporate Governance and Insolvency Bill will set out measures to rebuild trust, the Economic Crime and Corporate Transparency Bill will strengthen the role of Companies House, reforms to prevent the abuse of limited partnerships, new powers to seize crypto assets from criminals and reforms to give businesses greater confidence to share information on suspected money laundering. And the draft Digital Markets, Competition and Consumer legislation will boost consumers’ rights, strengthen enforcement and promote more competition.

But Baroness Jones of Whitchurch, Labour, asked: “Why is the focus of the financial services and markets Bill on deregulation when we know that this has been the cause of financial crises in the past?”

And Lib Dem Baroness Kramer said the UK Infrastructure Bank is a ‘midget’ compared to the European Investment Bank and we must be careful with the Financial Services and Markets Bill because we used to win the race to the bottom on competitiveness and it gave us the 2007-08 financial crash.

Baroness Bennett of Manor Castle, Green Party, said: “The Speech contains the Financial Services and Markets Bill, where we hear talk of increasing competitiveness and cutting red tape, but also the Economic Crime and Corporate Transparency Bill, which acknowledges the fact that we have a huge corruption problem in the UK and that the City of London is not just a creaking galleon with a few rotten apples in its barrels but a ship rotten to its timbers and decaying in its sails. Avoiding shipwreck and protecting the security of us all requires strong medicine and controls, not setting sail for the open seas on course for one of our nation’s many tottering tax havens.”

Lord Forsyth of Drumlean, Conservative, a former chair of the Economic Affairs Committee as well as a former cabinet minister, said it was ‘high time’ that we held the governor and the Bank of England more to account for the important role, indeed, ‘crucial role’, given the size of its balance sheet, that it now has because of quantitative easing.

Lord Wigley, Plaid Cymru, said the Speech should have contained a shared prosperity fund Bill, devolving the management of Wales’s portion of that fund to the Senedd to dovetail its use with the economic priorities of Wales’s Government.

Baroness Drake, Labour, said the FCA’s new consumer duty and consumer vulnerability guidance concentrates on vulnerable consumers with access to retail products but it is a ‘pity’ that it does not deal with those who do not have access to those products.

Baroness Donaghy, Labour, (photographed below thanks to Parliament UK) suggested abolishing the Treasury, as suggested by Westlake and Haskel. It is unique in western economies in combining control of government expenditure, public credit and taxation and an economic ministry meant to stimulate economic growth. “It controls the political news cycle, is addicted to policy initiatives and, as Westlake describes, ‘disempowers other government departments, putting civil servants who are often experts in their field at the mercy of brilliant but inexperienced young Treasury officials’.”

Labour spokesperson Lord McNicol said rather than presenting a coherent set of measures to tackle the cost of living crisis and rebalance the economy, the Government’s answer to poor economic performance appeared to be deregulation of financial services, which could pave the way for a repeat of past financial crises. Where is the high-skill, high-tech, high-wage Britain of the 21st century? Where is the plan to rebalance and rebuild our economy?

Employment issues

Baroness Donaghy, Labour, said the Government were failing yet again to act on the recommendations of the Taylor Good Work Review.

Baroness Pitkeathley, Labour, said: “In 2019, the Conservative Party manifesto committed to introducing a right to one week’s unpaid leave… to help with caring responsibility. We expected an employment Bill to contain this provision, but it was notable by its absence. That the promised employment Bill has been excluded from the Government’s commitments for the next year is a severe blow to unpaid carers and a huge, missed opportunity.”

Lord Aberdare, crossbencher, urged the Government to address the persistent concerns of employers and others about the apprenticeship levy, introducing greater flexibility to make it more fit for purpose so that more young people are able to become apprentices, including 16 to 19 year-old school leavers; more small and medium-sized firms are able to offer apprenticeships; and more of the skills that are most needed are eligible to receive funding from the levy.

Responding, government minister Baroness Barran said: “We know it is disappointing that the Queen’s Speech did not include an employment Bill for the third Session of this Parliament, but the Government remain committed to carers’ leave and will bring forward legislation on this when parliamentary time allows.”

Environmental measures

Shadow minister Baroness Jones of Whitchurch, Labour, asked where the plans were to invest in green, zero-carbon industries? A Labour Government would insulate 19 million homes in a decade, double UK’s onshore wind capacity and triple solar power by 2030; and targeting investment in hydrogen, she said.

Baroness Hayman, crossbencher, said we should reassess the economic case for tidal power, given the economics of energy, now.

Lord Young of Cookham, a former Transport Secretary, said we should think now about an alternative basis for replacing lost revenue from fuel duty and excise duty on cars, and he believes the case for road pricing is ‘overwhelming’. Road pricing can offer differential rates for congested routes, different rates for different times of the day and week, bringing it into line with other forms of transport, and exemptions for people with a disability, which you cannot do with fuel duty, argued Lord Young.

Universal credit and other DWP issues

DWP minister Baroness Stedman-Scott said the Government has a sustained focus on ‘making work pay’, praising Restart, a separate new national in-work progression offer and Kickstart schemes. She said a new bill will lead to an ‘effective health and disability benefits system’ to help such people into work and ‘live independently’, and the DWP is ‘pulling out all the stops to get more people, including disabled people, moving into jobs’. The Social Security (Special Rules for End of Life) Bill will ensure that thousands more people nearing the end of life can access benefits sooner, without needing a face-to-face assessment or waiting period. The OneLogin programme will make it easier for more people to use a range of government services online, and there will be improvements to IT systems to help Child Maintenance Service.

Baroness Wilcox of Newport said Labour is on the side of working people. That is why we have set out our plans to reduce the taper rate when we replace universal credit, to allow those on low incomes to keep more of what they earn, said Baroness Wilcox.

Lord Young of Norwood Green, Labour, said: “Six million extra universal credit claims were dealt with by the DWP. That is an enormous achievement, and it was done because we have a digital system and achieved because it was led by a dedicated person, Neil Couling, who has enabled this to take place.”

Baroness Brinton, Lib Dem, said for nearly one million households to face a lower entitlement because of a migration to universal credit is a ‘disgrace’. The baroness asked why unpaid carers’ leave is once again not in the Queen’s Speech, despite it being a Conservative Party manifesto commitment.

Baroness Thomas of Winchester, Lib Dem, complained that the delay in the waiting time for the whole application process for personal independence payment is now about six months. This is unacceptable, she said.

The Lord Bishop of Durham said he has tabled a Private Member’s Bill to abolish the two-child limit because of overwhelming evidence documenting families being pushed into poverty.

Levelling up and rural communities

Lord Shipley, Lib Dem, said that rising prices were making the Government’s plans to reduce regional inequalities more difficult and more important. He said: “You do not level up places without levelling up people first. You have to have the education, further education and apprenticeship systems in place to help level up people. You do not level up by increasing taxation and reducing disposable incomes, as the Government have done.”

Lord Cameron of Dillington, crossbencher, talked about the levelling up of rural England, saying it has long been a ‘bone of contention’ that urban local authorities get 48 per cent more central government support per head than their rural counterparts. Cameron went on to say farms and estates have been encouraged to diversify for years, yet the moment they start a new business it has to have its own set of accounts and tax returns, which is very expensive in terms of the business owners’ time and professional fees. It would be far better if all businesses run by a farmer on a given piece of land could come under one umbrella as one rural business unit, in the same way as a wheat enterprise, for instance, comes under the same business umbrella as a dairy enterprise on a mixed farm, he said, ‘we need a rural business unit within the tax system’.

Lord Carrington, another crossbencher, said there is the need to amend and clarify the taxation of appropriate rural businesses to reflect the changing economic environment following the introduction of Environmental land management schemes (ELMS) and the consequent increase in diversification away from farming. There is a strong argument to recognise a specific rural business unit as one unit for taxation purposes, he said.

On the ports Bill, Lord Mountevans, crossbencher, said the industry is very concerned that the greatest care should be exercised to follow the rules of the ILO and to avoid imposing UK wages on ships other than those now being considered by the Government and which also call at least once a week in the UK. If, inadvertently, the provisions are applied more widely, there is a profound risk of irretrievable damage to the UK tonnage tax scheme, he said.

By Hamant Verma, CIOT Senior External Relations Officer