Budget Statement — House of Lords, 2015-03-25
Topic: Macroeconomics
Christopher Foster (Bishops, Unknown): My Lords, it is right to acknowledge what is good and encouraging in the economic situation—particularly compared to the background of five years ago—and in much of what the Chancellor announced last week, and I am glad to do so. I warmly welcome the continuing fall in the number of people unemployed and, among the proposals, funding for wi-fi in public libraries, investment in transport infrastructure in the north of England, a boost to charities through the raising of the small donations gift aid limit and the extra allocation for mental health services for children and for new mothers, especially when half of my Bishop’s Lent appeal in Portsmouth diocese is to support local mental health charities. I am pleased, too, to hear of the planned rise in the minimum wage, though longing for the living wage to become the norm. There is much to welcome but, as I have indicated, with some caveats I turn to two areas of significance to many people, individuals and families, among whom I and my clergy colleagues serve. The right honourable Chancellor’s encouragement of saving is, of course, to be applauded, and yet the provision of tax-free savings income of up to £1,000 a year, like the increase in the ISA limit and the relaxation of terms, does little or nothing to help small-amount, short-term savings for people on lower incomes trying to meet small unexpected costs such as the proverbial washing machine breakdown. Theirs is not saving for income but a buffer for emergencies. The average amount borrowed through high-cost credit is between £100 and £300, yet 40% of people have insufficient savings to cover a shortfall of £300. For these households we need to look for more creative solutions to promote short-term savings, as outlined, for instance, in the Financial Inclusion Commission’s recent report—payroll saving and matched savings schemes or, perhaps, a savings element to universal credit as proposed by the Centre for Social Justice. Research commissioned by StepChange Debt Charity found that just £1,000 in savings would have prevented half a million households from falling into problem debt. If policymakers agree that better-off groups require incentives to save, then lower-income groups should surely be getting similar support Similarly, the rise in the income threshold before income tax is paid benefits many but helps least those on lowest earned or benefit income. Of the £2.5 billion to be spent on raising the personal tax allowance, only £1 in every £7 will go to those with below average earnings. The rhetoric of "removing people from income tax liability" and "raising the earnings limit before tax" is common to both Front Benches and, indeed, most political parties. However, as I have said before, it is disingenuous because it ignores the interplay of income tax and national insurance. The so-called national insurance contributions are effectively the same as income tax to most of us. The headline rise in tax thresholds exceeds—not at all to my surprise—the increase in the starting point for national insurance. You may pay no income tax next year with income below £10,600, but you will pay national insurance at 12% on over £2,500 of income below that. The steps of income tax and national insurance combined are rarely headlined, but you will find that they are 12% from £8,060, 32% from £10,600 and 42% from £42,380. The coalition Government’s early changes significantly helped those on very low earnings in the lowest decile of income, as we have heard. This Budget’s changes are no help at all to those lowest 20% of earners already happily lifted out of income tax. The bulk of them will pay a 12% national insurance contribution, or tax Your Lordships’ House will understand, finally, that I am grateful for the extra £40 million allocated for the church roof repair fund, increasing the initial £15 million which I welcomed in December following the Autumn Statement. The heavy oversubscription demonstrates the widespread demand—1,900 applications so far with about half likely to be met after this significantly increased provision. I am not making a sectional point here about the religious use of Christian church buildings but reflecting, rather, the importance of churches and religious buildings at the heart of community both symbolically and practically The limited time does not allow me to make similar points of welcome, with some reservation, for changes such as, for instance, the savings support for first-time house buyers. Still less can I expand on the apparent acceptance of the rapid increase in the number of people in employment needing recourse to housing benefit—a more than 50% rise during this Parliament. I would have wanted to hear and ask more about the absence of detail on the productivity challenge we face and on what seem to be planned but unspecific welfare savings In these comments of welcome with caveats, I do not seek to make party-political points. However, as I emphasised in my remarks about income tax and national insurance, our people should be given not the rhetoric or a partial or palatable version of how it is, but all they need—not least to make informed decisions in six weeks’ time.