King’s Speech Debate – Opposition attack ‘low growth, high tax’ government

The pageantry of the State Opening of the UK Parliament on 7 November was followed by six days of debate on topics across the political agenda in the House of Commons, which concluded eight days later with MPs agreeing to present ‘an humble Address… to His Majesty’ on a motion unamended by opposition parties. In essence this represents backing for the government’s programme for this session of Parliament, as set out in the King’s Speech.

In the King’s Speech, twenty Bills and a draft Bill were detailed; six of these were introduced in the last parliament and have been carried over.

The amendments tabled by both Labour and SNP to the King’s Speech motion focused on the situation in Israel and Gaza rather than the government programme. The Liberal Democrat amendment took the more traditional form of regretting the absence of various measures (to tackle the cost of living crisis, to fix the UK’s ‘broken relationship with Europe’, etc).

Leaders’ responses to the King’s Speech

The Prime Minister framed the King’s Speech as one addressing the country’s ‘long-term challenges’, but the Leader of the Opposition argued it was merely ‘more of the same’.

The Prime Minister, Rishi Sunak, said that the “King’s Speech is about what this government are about—taking long-term decisions to build a brighter future for our country.” He told MPs that the government has a responsibility to create conditions for the private sector to thrive. Therefore the government has provided businesses with “a £27 billion tax cut on investment, launched 12 freeports around the UK to create jobs and investment, and introduced legislation in this King’s Speech so that we can confirm our membership of the comprehensive and progressive agreement for trans-Pacific partnership”.

Labour Leader Sir Keir Starmer complained that the government’s plan “is a plan for more of the same: more sticking plasters; more division; more party first, country second gimmicks; and no repudiation of the utterly discredited idea that economic growth is something that the few hand down to the many.” He claimed that the Conservatives “are not even pretending to govern any more” and noted that UK growth is set to be the lowest in the G7 next year. Starmer said that taxes are higher than at any time since the war and that the Prime Minister had increased taxes himself 25 times.

Liberal Democrat Leader Sir Ed Davey criticised the government’s plan, saying they were not strong and united enough to take real action on the challenges facing people. He said that the British public were facing tough times but instead of soothing the situation the Conservative government has “put up taxes, energy bills and mortgage payments”.

SNP Leader at Westminster Stephen Flynn emphasised the importance of economic growth. To get it “we need the tax base to expand”, he argued, suggesting that one of the easiest way to do this is to ‘increase working age migration to these isles’. Flynn reported that most Scottish people pay less tax than those in England and said the Scottish Parliament is protecting people during this cost of living crisis.

Business taxes

A handful of MPs raised business tax issues, though the only area prominent was taxation of the oil and gas sector, where opposition MPs want more to be raised while Conservatives think taxes are high enough already.

The Chancellor, Jeremy Hunt (Con), touched briefly on business taxes on the penultimate day of King’s Speech debate, accusing the shadow chancellor, Rachel Reeves, of ‘irresponsibility’ for briefing the newspapers that she wanted to make full expensing permanent, which he described as ‘a £10 billion commitment’. However he went on to say – without giving details – that at the Autumn Statement he would “focus on increasing business investment, because despite the fact that our growth has been faster than that of many of our European neighbours, our productivity is still lower”. This backs up newspaper reports that he is considering at least extending full expensing himself.

Talking about what she said was one of her ‘favourite subjects’, former Home Secretary Priti Patel (Con) raised concerns about the OECD plans for minimum levels of corporation tax and the way the government are rolling them out. She argued that this makes the UK less competitive and has an impact on businesses and foreign direct investment. She said the Chancellor had given her assurances over the assessment and analysis that will be carried out of the impact of this measure and that she will press ministers on this.

Dr Liam Fox (Con), the former Secretary of State for International Trade, suggested that the government’s priority for cutting taxes should be small businesses as they create prosperity and employment. He also called for more government action on late payment, particularly by local authorities, and said he would “like to see the retail, hospitality and leisure business rates discount extended to give many of the companies struggling in that sector the help they require.”

In his maiden speech, Steve Tuckwell (Con), who recently became the MP for Uxbridge and South Ruislip, indicated his support for businesses and high streets, emphasising that the government has already provided “a tax cut for 38,000 British pubs earlier this year through the Brexit pubs guarantee, and to ensure that our fantastic local pubs—like my local, the Middlesex Arms in South Ruislip—remain at the centre of the communities they have helped for many years.”

The announcement of an Offshore Petroleum Licensing Bill prompted MPs to discuss a range of issues around the oil and gas sector, including the tax regime. Barry Gardiner (Lab) protested that these licences “are part of a scramble to be the last country to sell the last barrel of oil”.  He continued: “What my constituents living in cold, inefficient homes do not understand is why, under the tax rules devised by the Prime Minister when he was Chancellor, they are the ones who will end up paying to develop these licences”. Gardiner claimed that the taxpayers give 92p in tax rebate for every £1 oil and gas companies spend developing these new fields in the North Sea basin.

Additionally, Gardiner complained that the windfall tax in the UK is less than the global average, adding: “When the windfall tax expires next year, the UK tax take from oil and gas producers will fall back to the lowest tax rate in the world—not 10 per cent less than the global average, and not 20 per cent less, but 38 per cent less than the global average. If we levied tax at the global average, we would get an extra £14 billion into the public purse that could address fuel poverty and retrofit those houses.”

To fund carbon capture and storage offshore, Neale Hanvey (Alba Party) suggested that a ‘wellhead tax’ be introduced on all new oil and gas. “One significant point is how do we make that transition away from hydrocarbons and deplete the carbon that is already being generated and stored in offshore carbon banks”, he said. Responding to Hanvey’s comment Dave Doogan (SNP) said: “we would not need to be overly sceptical to take a jaundiced view of the tax regime that operates in the oil and gas sector in the UK”.

Conservatives pointed out how much tax the sector is paying already. Energy Secretary Claire Coutinho (Con) told the House that the industry supports 200,000 jobs and is “expected to provide £50 billion of tax revenue in the next five years”. Duncan Baker (Con) said Opposition MPs “seem sometimes not to recognise the stark reality that we need taxation going into the Exchequer to pay our way and fund the public services that help this country. Money does not grow on trees”. Baker said that the UK is in a transition period and should not risk “the economy and the hundreds of thousands of jobs that are still dependent on that transition happening at a just rate”.

Richard Drax (Con) sad that, to secure investment and energy security, the oil and gas industry “urgently needs low taxes”.

Sir John Redwood (Con) was enthusiastic about new rounds of licensing. The “great bonus for all of us, including the Treasury, is that the sooner we get that oil and gas landed, the sooner we will secure a big increase in tax revenues from which we could benefit”. He added that we need “a year of temporary tax cuts on energy” because the high cost of energy “makes us much less competitive, and it is a burden on household budgets”.

Personal taxes

IR35, the child benefit charge and tax relief for private health insurance were raised during King’s Speech debate. Labour highlighted their plans to scrap non-dom tax status.

The Chancellor, Jeremy Hunt, highlighted that the government has increased the thresholds at which people start to pay tax or national insurance from £5,700 to £12,570. “Take-home pay after tax for people on the adult main minimum wage has therefore gone up by more than 25 per cent after inflation. That is a bigger percentage increase than for people on much higher incomes”.

Intervening on Hunt, Debbie Abrahams (Lab) noted that, according to the House of Commons Library, in 2022 the tax burden on the lowest income decile was 25.5 per cent. She said “on the top income decile, it was 12.5 per cent. Is that fair”.

Hunt responded that the Conservatives believe in a progressive tax system and due to the measures he had mentioned “people on the lowest legal wage are getting 25 per cent more after tax. That is a significantly bigger increase than for people on higher deciles”.

Shadow Health Secretary Wes Streeting said that Labour would provide £1.1 billion to NHS staff to deliver more appointments by abolishing non-dom tax status, “because patients need treatment more than the wealthiest need a tax break”. Other Labour MPs such Lilian Greenwood, Rachel Hopkins and Liz Kendall echoed this message. Shadow Chancellor Rachel Reeves said Labour would replace it with “a modern scheme for people who are genuinely living in the UK for short periods”.

However, Work and Pensions Secretary Mel Stride attacked the policy, warning: “Those poor old non-doms are going to be paying for the entire British economy over and over again. They pay UK taxes on their UK income, and it is just not realistic to expect to be gaining more tax in the longer term as a result of taxing them”.

John Redwood expressed concern that the UK has 800,000 fewer self-employed people today than in February 2020. “Some of that is due to covid and lockdowns or to natural retirements, but some of it is due to the sharp change in the tax system called IR35… It is now very difficult for people to grow businesses, particularly if they want contracts from other businesses.” He called on the government to “change the tax system back to the pre-2017 one which allowed a phenomenal growth in the number of self-employed people, and helped the workings of not only products and services markets but the job market itself.”

Jim Shannon (DUP) accused the government of burying their heads in the sand over the high income child benefit charge threshold. Working families “are afraid of accepting small pay rises for fear of dealing with His Majesty’s Revenue and Customs, and… while prices have escalated, their wage is stagnant”, he claimed.

Dr. Caroline Johnson (Con) emphasised the government’s efforts to enhance pensions by altering the tax regime, making it more favourable for senior doctors to continue working without feeling compelled to retire due to high tax levels.

Sir Edward Leigh (Con) shared his disappointment that the government has not provided tax relief for private health insurance, though he acknowledged that it would not be a ‘wildly popular’ idea. Leigh, who chaired the Commons Public Accounts Committee from 2001-10, said: “We have to look at some sort of social insurance system by which people who pay taxes all their life are entitled to treatment within a certain period and, if they do not receive that treatment, the state will assist them to go private”.

Tax levels and economic growth

MPs from all parties bemoaned high taxes and agreed that boosting growth was the key to getting them down. However they differed on whether the King’s Speech contains measures which will achieve this.

Amongst Conservative MPs, Rob Butler, Harriett Baldwin and Sir Simon Clarke praised the King’s Speech for its focus on increasing economic growth. Clarke, a former Levelling Up Secretary, said that: “The Autumn Statement represents an enormously important moment and all of us—on the government side of the House at least—want to see pro-growth measures, the lowering of the tax burden when possible and a robust commitment not to take us back to the disastrous economic prescriptions of the Labour party”.

Labour MPs such Lilian Greenwood, Mohammad Yasin, Paula Barker, Steve McCabe and Samantha Dixon argued that taxes are too high. Greenwood stated that “working people are paying the highest levels of taxation since the end of World War Two. We are all paying more and getting less. In many other walks of life that would be deemed a breach of contract.”

Sarah Olney, the Liberal Democrats’ Treasury Spokesperson, asserted that the government has ‘wrecked the economy’ and has given “tax breaks to big banks and the oil and gas giants while the rest of us have suffered higher taxes”.

Andrew Bridgen (Reclaim) also complained about high taxes. “Taxes are used to modify behaviour, which is why we penally tax tobacco and alcohol, but we are penally taxing work when we want economic growth. I believe the Chancellor said, “You cannot borrow your way to economic growth,” but I did that many times when I was in business; I borrowed money, invested it in the business, grew the business, and paid the money back. It would appear that the Chancellor thinks we can tax our way to prosperity, but I do not think we will be able to do that either.”

Another MP to voice her concern about high taxes was Rachel Reeves (Lab), the Shadow Chancellor of the Exchequer who said: “There was no legislation in this King’s Speech for fairer tax measures. The Chancellor and the Prime Minister have been so quick to raise taxes—they have done so 25 times between them—that we now have the highest tax burden in 70 years. It is the biggest tax hike ever in a single Parliament, with working people and businesses hit hard, yet the Government allow unjustifiable tax loopholes to remain”.

Reeves also expressed her disappointment that the King’s Speech failed to include “legislative proposals to prevent a repeat of the economic fallout from the September 2022 Growth Plan, by amending the Budget Responsibility and National Audit Act 2011 to give the Office for Budget Responsibility the power to produce and publish forecasts for any government fiscal event which includes tax and spending decisions with long-term effects over a threshold to be specified in a new Charter for Budget Responsibility.” Reeves urged Conservative MPs to back Labour’s commitment to strengthen the Office for Budget Responsibility in their amendment.

The Chancellor, Jeremy Hunt, accused Reeves of ‘coping and pasting’ Conservative language about tax and said that during Gordon Brown leadership, which Reeves campaigned for, income tax, national insurance, stamp duty, fuel duty, pensions and multiple other taxes all went up. Hunt told MPs that the UK’s economy is nearly 2 per cent bigger than it was pre-pandemic and has had faster growth than France, Germany or Italy. He said he considered Labour’s amendment on the OBR ‘dangerous’ and believed it would hamper the government when acting in an emergency. He noted that the OBR is already legally required to publish two forecasts a year.

Priti Patel said that the tax system needs to be ‘simplified and fairer’. “One of the core missions of the Conservative party is to support economic freedom and liberty by cutting taxes, ensuring people can keep more of what they earn and encouraging the development of a property-owning democracy,” she proclaimed.

Margaret Greenwood (Lab) drew attention to OECD figures showing the UK has high levels of income inequality. She urged the government to address poverty and inequality through progressive taxation.

VAT and duties

MPs discussed various VAT issues ranging from the registration threshold to overseas visitors to charging it on private school fees.

Sir John Redwood said that small businesses need a tax break, “and the first thing we should do—now that we no longer have to accept the EU rules on VAT registration —is to have a big increase in the threshold level at which businesses register for VAT, because this is now a major constraint.” “[W]e all know small businesses that turn down work or close down for a month extra during the year because they do not want to go over the £85,000 turnover,” he suggested.

To fund investment in state education, the Deputy Leader of the Labour Party, Angela Rayner, reminded the House that Labour would end the “the tax breaks for private schools”. The Shadow Education Secretary, Bridget Phillipson, noted that money raised from this policy will be used to “invest in 6,500 more teachers”. Liz Twist (Lab) and Rachel Hopkins (Lab) both welcomed that some of the proceeds of the policy would be used specifically to provide mental health hubs in secondary schools.

A few Conservative MPs including Sir Geoffrey Clifton-Brown, Dame Caroline Dinenage and Henry Smith raised the issue of VAT-free shopping for overseas visitors. They argued that restoring the scheme would create new jobs, with Clifton-Brown suggesting that it would also “add up to £4.1 billion to UK GDP annually, and result in a net positive for His Majesty’s Treasury of £300 million each year”.

Turning to duties, Wendy Chamberlain, Liberal Democrat Work and Pensions Spokesperson, asked the government to freeze duty on spirits in the upcoming statement. She said the government’s refusal this spring “to include distilleries as high intensity energy users for support with their bills, while simultaneously hiking tax by 10.1 per cent, was a betrayal of the Scotch whisky industry”. Chamberlain claimed that as a result a whisky drinker would pay an extra £200 of tax per year compared with others such as cider drinkers.

On tobacco duties, Mary Glindon (Lab) suggested that a tax should be imposed on products such as vapes to make them less attractive to smokers. Sir Edward Leigh objected. “They [Conservatives] have to be about low taxation and deregulation”, he argued.

Priti Patel welcomed the 5p reduction in fuel duty that the Chancellor maintained in the spring and emphasised that such measures would make a big difference to businesses and households.

Helen Morgan (Lib Dem) said the government should extend rural fuel duty relief to those forced to drive long distances for work, for education or to access essential healthcare.

Local taxes

Conservative and Labour MPs continue to be concerned about the burden imposed by business rates. SNP MPs commended the Scottish government for its decision to freeze council tax.

Labour MPs Simon Lightwood and Jonathan Reynolds blamed the government for using what they called a “Hunger Games” approach (funding pots) to regenerate towns and stressed that the business rate system should be replaced and the playing field between online corporations and small traders levelled. Steve McCabe (also Lab) stressed that it was time that online businesses paid their fair share of taxes: “It is time to breathe new life into our high streets by abandoning outdated business rates”.

Priti Patel also raised business rates, saying they “impede growth on our high streets”. She called on the government to “maintain the freeze in the multiplier” and consider reforms to lower the cost burden of the rates. “Some 80 per cent of my constituents are employed by SMEs, which is 20 per cent higher than the national average… We like running our own businesses and being self-employed, but that means that the share of the burden on those smaller businesses is much higher. As Conservatives in government, we must always look to tackle that”, said Patel.

Making a similar request, Peter Aldous (Con), said that: “We made a start in the Non-Domestic Rating Act 2023, which received Royal Assent last month, but it was only a timid move towards getting the business rates multiplier back down to between 30p and 35p in the pound”. He argued that businesses need some certainty rather than to anticipate annually “for the cliff edge of whether the Chancellor will extend business rates relief”. Additionally, he asked the government to consider the zero-rating of VAT for redevelopment in and around town centres.

Selaine Saxby (Con) had two pleas for the Treasury: “to keep the business rate discounts” and “to reverse the Osborne tax reforms and level the tax playing field between long term and short-term rentals” to help resolve some of the issues in housing.

In relation to council tax, SNP MPs Drew Hendry and Pete Wishart praised the Scottish government for making a difference to the living standard of Scottish people. Wishart said: “The one thing we have in our gift that we can deliver to the Scottish people is freezing council tax and that is exactly what we are doing”.

Damian Green (Con) expressed concerns about the absence of any changes to the social care system in the King’s Speech. He continued that: “Underlying it all, we need a much more stable funding system, where we do not rely on council tax—that is a big problem”.

Green taxes

A Liberal Democrat MP proposed permitting landlords to offset insulation and energy-saving costs against income tax, while a prominent Conservative MP stressed the importance of consistency on encouraging green investments through tax credits.

Wera Hobhouse put forward a Liberal Democrat proposal that “all landlords should be allowed to offset their spending on insulation and energy-saving improvements against their income tax”. The party’s Energy and Climate Change Spokesperson said that only ‘well-targeted incentives’ for landlords would make the difference for those tenants who face difficulties paying their bills. She urged the government to propose an alternative if they disagree with their proposals.

Anthony Mangnall (Con) welcomed the Treasury’s position on incentivising businesses to do more to invest in green technologies via tax credits and by encouraging research and development, innovation funds and the UK Infrastructure Bank.

Chris Skidmore, the former minister who led the government’s Net Zero Review, explained that the net zero path could potentially bring up to £1 trillion of inward investment and up to 480,000 new additional jobs by 2035. However, this path requires “commitment from the Government to provide certainty, clarity, continuity and consistency”. Skidmore provided an example and said “If we look at what the States has done, the 45Q and 45X tax credits are guaranteed until 1 January 2033.”

Stephen Hammond (Con) emphasised the importance of encouraging the electric vehicle industry and suggested that the government could do this by “stabilisation and equalisation of VAT, so that people charging their vehicles in a public or a private place pay the same rate”.

Richard Drax (Con) took a somewhat more sceptical approach, asking: “Why was there not a Bill to redraft the Climate Change Act 2008, which will simply impoverish us, and scrap all the green taxes? I am all for reducing carbon emissions, but not until the renewables are reliable and affordable.”

Day one debate in full is here.
Day two debate in full is here.
Day three debate in full is here.
Day four debate in full is here.
Day five debate in full is here.
Day six debate in full is here.