Cost of Living — House of Lords, 2022-06-09
Topic: Macroeconomics
Prem Sikka (Labour, Centre-left): My Lords, I thank my noble friend Lord Eatwell for tabling this debate. The major reason for the erosion of our social capital and the undermining of social cohesion is the state-sponsored squeeze on household income. In 1976, workers’ share of GDP, in the form of wages and salaries, was 65.1%. The ONS reminds us that just before the pandemic that had declined to 48.7%—a decline unmatched in any other industrialised country. Some 16 million people could now be living in poverty and therefore excluded from social consumption, with dire consequences for building a sustainable economy Huge amounts of wealth have been transferred from labour to capital. Indeed, the state itself has been restructured; it has become a guarantor not of the provision of public services but of corporate profits, as evidenced by PFI, privatisations and outsourcing. At the same time there is virtually no concern in state policy about the declining share attributed to labour, so labour’s share of GDP is being eroded. Hopefully, the Minister will tell us how the Government are going to increase labour’s share of GDP. Just this week Sainsbury’s CEO was paid £3.8 million—treble the salary that he collected last year—while workers got only 5.3%. Again, the Government have no policy for reducing income inequalities Taxation policy has been grievously misused to impoverish the masses. The poorest 10% of households pay 47.6% of their income in direct and indirect taxes compared with 33.5% for the richest 10%. I hope the Minister will tell us when the Government are going to end such regressive policies The Government target the poor for taxes while letting off the rich and big business. HMRC recently admitted that it has no idea how much tax is evaded by wealthy residents holding £850 billion in assets and accounts overseas, including £570 billion in tax havens. The Government are also soft on the tax-avoidance industry. I have asked many times, but the Minister has been unable to name even one big accounting firm that has been investigated, fined or prosecuted for peddling unlawful tax-avoidance schemes—that is the judgment reached by the courts We are now in a situation where work is penalised by government tax policy. A worker on gross wages of £30,000 takes home £24,205 after paying income tax and national insurance. In contrast, a speculator with £30,000 of capital gains takes home £28,230 after paying only £1,770 in capital gains tax—no national insurance is payable. There is absolutely no justification for such anti-work and anti-worker policies—yet all of this is central to what the Government do. Unsurprisingly, work does not pay—41% of claimants of universal credit are in work, and 68% of families living in poverty include at least one working adult. I have received wage slips from people who are holding three jobs simultaneously and still cannot make ends meet. The Government say that the number of jobs has increased. Well, perhaps the Minister would like to meet the people who are holding down three jobs and still cannot make ends meet. No economy can thrive when the income of the masses is squeezed, and the Government need to attend to this We have had a decade of low interest rates and low inflation, but this has not stimulated investment in productive assets. The UK invests around 16.9% of its GDP in productive assets, compared with 20.1% in EU countries, and this low investment leads to low productivity. The Government give over 1,100 tax reliefs but have little or no idea of their economic benefits. They have become tools of tax avoidance, with accountants weaving their way through them Companies appease capital markets by focusing on the short term. In 1970, major companies paid out £10 of each £100 of profits in dividends; by 2015, that number reached between £60 and £70, and in some companies it is now 80%. How will these companies invest? How will the Government check this short-termism In conclusion, the Government need to change their economic policies. Policies that have plunged the country into crisis cannot deliver the solutions.