House of Lords
Devolution: England
Baroness Janke
To ask Her Majesty’s Government what progress has been made on devolution of services and powers in England; and what work has been done to provide a basis for a future Government to advance that agenda.
Baroness Williams of Trafford (Con)
My Lords, the Government are committed to devolving greater spending powers. We have created local enterprise partnerships giving power to local councils and businesses, agreed city deals with 27 cities and invested £7 billion in local areas through growth deals. Devolution deals have been agreed with Manchester and Sheffield and, looking ahead, the Government are open to discussing proposals with any area which would welcome increased powers and greater freedoms to maximise their economic growth.
Baroness Janke (LD)
I thank the Minister for her Answer and very much welcome these developments. However, given that the current arrangements that the Government have made fall short of fiscal devolution, is she aware that an additional £8 million could be added to national income if financial and other powers were devolved? Does she consider that a key priority of the new Government should be to move forward on fiscal devolution?
Baroness Williams of Trafford
My Lords, it will be for a future Government to decide whether they want to move forward with fiscal devolution. However, as regards business rates retention, £11 billion has been retained in local areas.
Lord Morgan (Lab)
My Lords, has not one of the problems with our arrangements been that our constitutional changes have been very piecemeal and haphazard? Should not the excellent suggestions of the noble Baroness be considered side by side with proposals for further devolution, fiscal and otherwise, for Scotland and Wales, preferably in a constitutional convention, as has been so wisely proposed by the leader of the Labour Party?
Baroness Williams of Trafford
My Lords, we have had a Silk commission, a McKay commission and a Calman commission. We are not currently contemplating a further convention. There is no particular demand for it—
Baroness Williams of Trafford
From the public, my Lords. We are moving to a more decentralised system within England through city deals and devolution deals. The devolution deals are confined not just to cities.
Baroness O'Neill of Bengarve (CB)
My Lords, is the noble Baroness aware that by doing separate bits of devolution for the separate devolved nations we do not make progress towards retaining the United Kingdom, we risk its dissolution?
Baroness Williams of Trafford
My Lords, this Question is around devolution in England rather than devolution to England and is confined purely to the local government aspect.
Lord Forsyth of Drumlean (Con)
Does my noble friend agree that, before embarking on further devolution in England/to England, it would be a good idea to have a system of fair funding throughout the United Kingdom, and to deal with Barnett and have funding based on need?
Baroness Williams of Trafford
My Lords, that is what this Government are working towards in terms of fair funding across the country and ensuring growth in those regions that have not previously had as much growth as we would wish.
Lord McKenzie of Luton (Lab)
My Lords, the Minister talks about empowering northern cities in particular and devolving responsibilities, but is it not the case that the Government have consistently hit areas such as Liverpool and Manchester, some of the most deprived parts of the country, with the largest cuts in funding? What is empowering about taking with one hand and giving back far less with the other?
Baroness Williams of Trafford
My Lords, after talking to local government leaders in both Liverpool and Manchester I know they are very pleased with what this Government have given them. If we just look back over the last 30 years we see that it was a Conservative Minister in the form of the then Michael Heseltine who did so much work in Liverpool. It was a Conservative Minister in the form of the then Michael Heseltine who led the regeneration of Hulme, who brought the Metrolink to Manchester and, indeed, who started the regeneration of Manchester after the bomb. I do not accept the noble Lord’s point.
Lord Tebbit (Con)
My Lords, I am extremely grateful to my noble friend for having drawn a distinction between decentralisation and devolution. Devolution we do not need—for who needs another layer of government, another load of paid politicians and another load of hangers-on, all swinging on the taxpayers’ wallets?
Baroness Williams of Trafford
My noble friend, as always, hits the nail on the head. I could not have put it more articulately.
Lord Elis-Thomas (PC)
My Lords, during my time spent in both Houses of Parliament campaigning for devolution in Wales, I always thought that devolution for England—especially the north of England, which I dearly love, being my nearest region—was part of the project. Therefore, has not the time come for all us devolutionists within this kingdom to recognise that without the liberation of England, there is no future for the United Kingdom?
Baroness Williams of Trafford
My Lords, as my noble friend Lord Tebbit said, this is about decentralisation rather than devolution to England. I would just reiterate my previous point.
Lord Richard (Lab)
My Lords, I thought I detected something in what the Minister said a little earlier. Can she assure the House that she meant it when she said that the Government were working towards the abolition of the Barnett formula and its replacement by one based on need? That is what she said. Did she mean it?
Baroness Williams of Trafford
My Lords, in terms of devolution in England—decentralisation in England—as local authorities and groups of local authorities take on their share of public funding, Barnett will actually change in terms of its distribution.
Lord Shutt of Greetland (LD)
My Lords, the noble Baroness has referred to various partnerships and deals. Is there not a gap, in terms of direct democracy, in dealing with that which is supposedly devolved in these areas?
Baroness Williams of Trafford
My Lords, in terms of the first devolution deal, which is in Greater Manchester, the arrangements and relationships between the local authorities have been well established for over three decades. In terms of local engagement, the election of a mayor as the person accountable to government will add clarity to it.
Baroness Farrington of Ribbleton (Lab)
My Lords, the noble Baroness has not explained fully her remark about the Barnett formula. The Barnett formula allocates public funds between the countries of the United Kingdom. The noble Baroness seemed to imply that allocation between different areas of this country would be revisited. Also, would she take it from me that those who welcome the decentralisation moves do not number among those who are happy with the Government’s formula for allocating resources? Speaking from the north-west, we need an answer.
Baroness Williams of Trafford
My Lords, this is a Question about England and the point I was making was that Barnett will become less relevant in the future.
Defence Review
(9 years, 6 months ago)
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Lord Empey
To ask Her Majesty’s Government whether, in the light of the current security situation in Europe, they will bring forward the commencement date for the next defence review.
Lord Wallace of Saltaire (LD)
My Lords, the exact timing of the post-election strategic defence and security review is for the incoming Government to decide, but preparatory work is under way across Whitehall. Noble Lords will be aware of the latest edition of Global Strategic Trends, published by the Ministry of Defence. This and other papers feed into the confidential national security risk assessment, which will in turn inform the next national security strategy and the subsequent strategic defence and security review.
Lord Empey (UUP)
My Lords, the Minister will be aware of the widespread concern, both inside and outside Parliament, that, with the lack of defence capability, we face widespread political and security turbulence, not only in eastern Europe, but in other areas, such as the Middle East. I appeal for this process to be truncated. This is a matter of urgency because of the clear gaps in our capability. We cannot hide them or sweep them under the carpet: they are there. This review is the mechanism that can start the process of filling the gaps. I appeal to the Minister to ensure that his right honourable friends in the other place understand that that is the feeling I believe to be widespread throughout the United Kingdom and that this needs to be brought forward as a matter of urgency.
Lord Wallace of Saltaire
My Lords, I disagree with the noble Lord in a number of ways. It is important not to rush too far and too fast into this. The question of what forces we want for what ends remains relatively open. The noble Lord’s Question referred to the situation in Europe as the reason why we had to rush. The last time we were in a direct conflict with Russia we bombarded Helsinki and laid siege to Sevastopol. I do not think that is what we want to do this time.
Lord West of Spithead (Lab)
My Lords, the Minister will be aware that RUSI has calculated that next year, 2015-16, we will spend 1.88% of our GDP on defence. I also have from the House of Commons Library its post-Budget calculations, which show that we will be spending 1.5% of our GDP on defence by 2019. Does the Minister not think it a disgrace that, having lectured the whole of Europe about coming up to 2%, we are planning and working on a basis of not hitting 2% in future?
Lord Wallace of Saltaire
My Lords, we will hit 2% this year. My understanding is that, on current trends, we will hit 2% next year. What happens after that is a question for the SDSR and for the next comprehensive spending review, which the new Government will take through. I am sure that the question of the need for more frigates will be high on the agenda for any SDSR.
The Lord Privy Seal (Baroness Stowell of Beeston) (Con)
My Lords, as the noble Lords are not giving way to each other and the House was calling for my noble friend Lord Spicer, we will start with him.
Lord Spicer
My Lords, why are we so hooked on 2%? Surely we may want to spend more.
Lord Wallace of Saltaire
My Lords, I am sure that some will want to spend more but, as all noble Lords are aware, the number of calls on public expenditure is large and the amount of revenue available is relatively limited.
Lord Rosser (Lab)
The previous Government produced a Green Paper in early 2010 to promote discussion on future defence strategy and inform the work on a strategic defence review after the 2010 general election. Why have this Government not sought, in the same or a similar transparent way, to engage the public in general, and relevant stakeholders in particular, on the options and considerations to be taken into account in the strategic defence and security review, which is now scheduled to be finalised in just nine months’ time?
Lord Wallace of Saltaire
My Lords, as the noble Lord knows, there has been a great deal of discussion on preparations for the next SDSR. He will have seen the new House of Commons Defence Committee report. The Government have responded to various reports from the Joint Committee on the National Security Strategy, and there have been a number of conversations between officials, Ministers and various think tanks around London. I have certainly taken part in those and I think that the noble Lord has as well.
Lord Palmer of Childs Hill
My Lords, the report suggests that the departing part-time chairman of BAE Systems was paid £211,000, plus £5,000 for a chauffeur, for three and a half months after he ceased his board duties. Can the Minister confirm that the defence review will ensure that these obscene costs are not recharged to the taxpayer?
Lord Wallace of Saltaire
My Lords, I was not aware of the issue that the noble Lord has just raised. The next security and defence review will certainly look at how to squeeze the most out of the defence procurement process.
Lord Lexden (Con)
Returning to current spending, will the £25 million allocated in the Budget to military veterans be extended to former service men and women in Northern Ireland?
Lord Wallace of Saltaire
My Lords, I am assured that it will be extended to Northern Ireland and that the MoD is quite clear that this is a UK scheme and not just a Great Britain scheme.
Community Life
Lord Phillips of Sudbury
To ask Her Majesty’s Government whether they will establish a Royal Commission to investigate threats to community life in the United Kingdom and their effects; and to recommend counter-measures.
Baroness Williams of Trafford (Con)
My Lords, community life is alive and well. Strong communities are shaping their own destinies across England and we are supporting people in their efforts. The Government have given power to communities and they are seizing the opportunities offered. Fourteen hundred communities are shaping development in their area through neighbourhood planning, over 130,000 young people have delivered community projects through the National Citizen Service, and 800 multifaith Near Neighbours volunteering projects are happening across the country.
Lord Phillips of Sudbury (LD)
My Lords, I thank the Minister for her reply, but if I may say so the Answer was extremely complacent. Most of the indicia of a vibrant society and community life are giving rather the opposite impression. I think of things such as loneliness, a lack of civic engagement and an increasing individualisation of life. Therefore, are we not overdue in looking at admittedly elusive and complex issues in a national and interdisciplinary way before the trends that seem obvious to many of us engulf us?
Baroness Williams of Trafford
My Lords, my noble friend has a point about social capital, which has been in decline since the war, but this Government have been successful in many of their efforts to encourage people to engage in community life and indeed to combat the loneliness that afflicts so many people, particularly our elderly.
On planning and engaging with local government, communities are now far more involved in the destiny of neighbourhood planning. One hundred and thirty thousand young people are delivering community projects through the National Citizen Service, and this has resulted in 3 million volunteering hours. The Centre for Social Action has invested £40 million and has leveraged £27 million into 215 social action projects.
Lord McKenzie of Luton (Lab)
My Lords, I should like to ask about neighbourhood planning, but before I do that perhaps I may take the opportunity, on behalf of the Labour group, to pay tribute to the noble Lord, Lord Phillips of Sudbury, for his substantial input into our deliberations over a number of years. We wish him a long and happy retirement, doubtless in the company of some of his friends from the other end.
The noble Baroness referred to the new neighbourhood planning regime brought in by the Localism Act 2011. As regards the coverage of those neighbourhood plans, it is understood that three-quarters of them are concentrated in the south of England and only a third in urban areas. Little has been done to widen the remit of the plans and to encourage uptake in disadvantaged communities. What more do the Government propose to do to help disadvantaged communities to have their opportunities in this regard?
Baroness Williams of Trafford
My Lords, 1,400 communities have been involved in neighbourhood planning, but I am afraid that I will have to get back to the noble Lord on where those communities lie. There is no doubt that for community cohesion, when neighbourhoods are involved in their own destiny, for example in planning, it leads to happier communities.
The Lord Bishop of Peterborough
My Lords, community life struggles and suffers very much in rural areas as well as in urban areas. While welcoming the promise of a 95% rollout of superfast broadband, does the Minister appreciate that the other 5% represents more than 3 million people who are almost all in rural areas and will not have access to superfast broadband or, all too often, to post offices, gas supplies, public transport, local schools and so on? Is this not the time to have a royal commission?
Baroness Williams of Trafford
My Lords, the right reverend Prelate is correct when he says that some of the infrastructure in rural communities, such as shops, schools, and post offices in particular, is their lifeblood. I commend the rural communities in, for example, Cumbria that have done their own social action project to make sure that broadband gets to their communities. The right reverend Prelate is right that the remaining 5% of the population do not have superfast broadband, but the Government are working on that.
Baroness Afshar (CB)
My Lords, is it not right that we should move on from cohesion to the celebration of differences? The only way for many communities to feel included and not otherwise is if their different approaches are recognised, respected and accepted, rather than always trying to make a single society.
Baroness Williams of Trafford
The noble Baroness makes a very good point. As communities we should celebrate what unites us and not what divides us. We should celebrate our differences as well as our similarities. I thank her for bringing that point forward. The Government have launched a number of projects that help to celebrate the fact that we are one community and are not separated by faith and other things. I saw an example of the Near Neighbours project in Rochdale, which is a very good example of the Church of England working with the neighbouring mosque. People, particularly the elderly, in those communities feel altogether safer and that they are in a better neighbourhood.
Baroness Pitkeathley (Lab)
My Lords, I wonder whether other noble Lords find it as surprising as I do that the noble Baroness in her answers has not mentioned the big society, which was launched with such fanfare at the beginning of this Government and which promised to make the sort of contribution to community life that is contained in this Question.
Baroness Williams of Trafford
My Lords, the big society is alive and well and living in a community near you. It is now so integrated that perhaps I forgot to mention it. Since 2010, volunteering has increased hugely from 66% in our communities to 74%. Particular mention should be made of the legacy of the Olympics, which generated 100,000 volunteers. Their talents and help are being harnessed in the Join In project.
I, too, pay tribute to my noble friend Lord Phillips of Sudbury. I had not realised that it would be the last time he would be on his feet here.
Lord Cormack
My Lords, no Conservative has yet taken part in these exchanges. I echo the thanks to the noble Lord, Lord Phillips of Sudbury. Would it not help community cohesion if we enabled all our young people to go through a proper citizenship ceremony—I have advocated this many times before—where they acknowledge their rights and responsibilities as part of a united community, however disparate their faiths and other beliefs may be?
Baroness Williams of Trafford
My Lords, I pay tribute to our young people. I sometimes think that they get a very bad press. I certainly speak for my children’s friends’ generation when I say that they have a far better sense of community spirit and social action than, say, I ever had.
Israel: Elections
(9 years, 6 months ago)
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Baroness Prosser
To ask Her Majesty’s Government what changes they plan to make to their policy in respect of the Middle East following the recent election result in Israel.
The Minister of State, Foreign and Commonwealth Office (Baroness Anelay of St Johns) (Con)
My Lords, the UK’s policy in the Middle East remains clear following the recent election in Israel. We look forward to good relations with the new Israeli Government, when formed, and to working closely together to address the vitally important task of building peace and stability between Israel and the Palestinians and the wider Middle East. Making progress towards the two-state solution remains a foreign policy priority for the United Kingdom.
Baroness Prosser (Lab)
I thank the Minister for that reply, but could she tell the House whether or not the Government will be developing a strategy to build a broad alliance of allies committed to persuading the Israeli Government that it is in their interests and the interests of the Israeli people to take more seriously the need for a two-state solution? Can she further tell us whether the Government propose to ensure that Mr Netanyahu takes that commitment more seriously?
Baroness Anelay of St Johns
My Lords, I welcome the narrative that the noble Baroness has set out. We are in close consultation with international partners, including the US, EU and Arab states, on how we should encourage both parties to make progress towards peace. The UK has already led EU efforts to set out a package of unprecedented support that Europe would offer both parties in the event of a final status agreement. That offer is still on the table. Through the Arab peace initiative, Arab states have offered Israel the normalisation of relations in the event of a comprehensive peace agreement. That signals the benefits that peace would bring to the entire region. It is important that both Netanyahu and the Palestinians understand the serious proposals on offer and take them up.
Baroness Falkner of Margravine (LD)
My Lords, does my noble friend accept that now may be the time to bring the United Nations back in? What discussions have the Government had with other EU Governments about a framework resolution on a peace settlement through the UN Security Council now that the United States is recalibrating its position?
Baroness Anelay of St Johns
My Lords, I am sure these matters will continue to be discussed within the United Nations. In particular, of course, we are still awaiting the opportunity to see what the commission of inquiry into Israel produces in its report. We are disappointed that Israel did not allow the commission access to specific places. As to EU co-operation, currently discussions are going ahead in the EU about what further sanctions might be required if progress on the peace initiative is not made.
Lord Leigh of Hurley (Con)
My Lords, on the subject of UN involvement in the Middle East, does my noble friend share the concerns expressed by the UN political affairs chief, Jeffrey Feltman? He has cited evidence of Hamas testing missiles and attempting to smuggle in materials that could be used for missile production. Does she share my concerns that Hamas might be preparing for another conflict against civilians?
Baroness Anelay of St Johns
My Lords, we have assessed that Hamas is seeking to rebuild infrastructure, including the tunnel network in Gaza, and we are indeed deeply concerned about the reports to which my noble friend has referred of militant groups rearming. Hamas faces a fundamental decision about whether it is prepared to accept the quartet principles and join in with the efforts for peace or whether it will continue to use violence and terror, with all the terrible consequences for the people of Gaza. Hamas needs to make that choice.
Lord Clarke of Hampstead (Lab)
My Lords, the election results in Israel show a clear concern for internal security and for the surrounding borders. Does the Minister agree that any future discussions about policy should take into account the developing nuclear programme in Iran, which poses a constant threat to the peace of the whole region? I hope that we will continue the work to stop Iran producing a nuclear bomb.
Baroness Anelay of St Johns
My Lords, discussions are currently under way with Iran about producing a political framework to resolve the issue of the potential development of its nuclear capability. As I say, those negotiations are currently under way and I would not wish to compromise them, but clearly a huge amount of effort has been put into them. We are of course aware of the implications for the whole region of getting that settlement right. We need a good deal and the right deal, and all our efforts are bent towards that. It is important not only for Israel and Palestine; it is important for the whole region and for us.
Lord Ashdown of Norton-sub-Hamdon (LD)
My Lords, there are of course many impediments to peace in the Middle East, but is not the greatest of these Israel’s flagrantly illegal occupation of Palestinian territory?
Baroness Anelay of St Johns
My Lords, I assume that my noble friend is referring to the way in which Israel has extended settlements against the original agreements rather than simply where Israel has its own territory as such under international law. Our position on settlements is clear. They are illegal under international law, they present an obstacle to peace and they take us further away from a two-state solution. We strongly urge the Government of Israel to reverse their policy on illegal settlements.
Lord Bach (Lab)
My Lords, the House will be pleased to hear that Her Majesty’s Government’s support for a two-state solution remains strong, and I should say that Her Majesty’s Opposition continue to support a two-state solution as the best way to end this tragic impasse. My question is this: will Her Majesty’s Government make it clear in the strongest possible terms to the new Israeli Government, when formed, that any move away from this principle will leave Israel more isolated from the international community and will make it more difficult for its friends around the world?
Baroness Anelay of St Johns
My Lords, I welcome the support of the Opposition which the noble Lord, Lord Bach, has just evinced, and I agree with every single word of his analysis.
Business of the House
(9 years, 6 months ago)
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Baroness Stowell of Beeston
That, in the event of the Finance (No. 2) Bill being brought from the Commons, Standing Order 46 (No two stages of a Bill to be taken on one day) be dispensed with on Thursday 26 March to allow the Bill to be taken through its remaining stages that day.
Care Act 2014 and Children and Families Act 2014 (Consequential Amendments) Order 2015
(9 years, 6 months ago)
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Earl Howe
That the draft order and regulations laid before the House on 5, 11 and 25 February be approved.
Relevant documents: 24th and 25th Reports from the Joint Committee on Statutory Instruments (Special attention drawn to an instrument). Considered in Grand Committee on 19 March.
Greater Manchester Combined Authority (Amendment) Order 2015
Baroness Williams of Trafford
That the draft orders laid before the House on 11 December 2014, 25 and 27 February and 4 March be approved.
Relevant documents: 25th and 26th Reports from the Joint Committee on Statutory Instruments (Special attention drawn to an instrument), 29th and 30th Reports from the Secondary Legislation Scrutiny Committee, 15th Report from the Delegated Powers and Regulatory Reform Committee. Considered in Grand Committee on 23 March.
Insolvency (Protection of Essential Supplies) Order 2015
Baroness Neville-Rolfe
That the draft order and regulations laid before the House on 9 and 23 February be approved.
Relevant documents: 23rd and 24th Reports from the Joint Committee on Statutory Instruments. Considered in Grand Committee on 23 March.
Local Government (Religious etc. Observances) Bill
Lord Avebury (LD)
My Lords, I take this opportunity to raise a couple of points which I took up with my noble friend Lord Cormack in Committee and to which I have not received the promised answers. Without going into all the questions that I put to him, the first was whether or not he had taken legal advice on the compatibility of the proposals in the Bill with the public sector equality duty. The answer to that is either yes or no. I also asked him, if he had taken legal advice on it, whether he would place a copy in the Library of the House.
The second question I put to him, which is equally important, was whether or not Section 111(1) of the Local Government Act already gave local authorities most of the powers that were purported to be given in new Section 138B, which is to be added to the statute book by the Bill. We always say that legislation should not duplicate Acts that are already on the statute book, and I asked my noble friend to say whether he checked this point. I would be most grateful if he could give me replies to both those questions.
Baroness Turner of Camden (Lab)
My Lords, I was not able to be present at the previous discussions on this Bill but I support what the noble Lord has just said. A number of us who are secularists feel that our views have been somewhat bypassed. It is one thing to have prayers, but it is quite another thing to have prayers as part of an actual meeting. If I had been present when the earlier part of the Bill was discussed, I certainly would have made that point quite strongly. A number of us do not have any particular religious views and are secularist in outlook and so on. A situation in which prayers are regarded as part of a meeting is quite different from having something additional to it, in line with what people may wish to have. I very much regret that I missed the opportunity to make this kind of statement earlier in the discussion of the Bill.
Lord Cormack (Con)
My Lords, if I may gently say so, the noble Baroness had two opportunities: first, on Second Reading, and secondly in a fairly extensive Committee stage, where critical amendments were moved by the noble Earl, Lord Clancarty, and by my noble friend Lord Avebury. Both graciously withdrew their amendments, but there was significant debate and the points the noble Baroness has made were discussed.
I will come to my noble friend in a moment, but in response to the noble Baroness, all I would say is that this is the most gentle and permissive of Bills. Her noble friend Lady Massey of Darwen allowed me to quote her in Committee when she said that, as a convinced humanist, she felt that there was no danger or threat in the Bill to anyone. It gives to local authorities and to other elected authorities the opportunity—if they wish—to decide, by a majority, to begin their meetings with prayers or silent contemplation. There is absolutely no compulsion on them to do it, nor is there any obligation that the prayers should be of a particular or specific faith or as to whether the reflections should be religious or secular. I honestly think that these points are met in this very permissive Bill.
In answer to my noble friend Lord Avebury, I would just say, first, that I am sorry if this did not reach him before. The Government took advice. The Bill was backed not only by the Government but by the Official Opposition, in the person of the noble Lord, Lord Kennedy, who spoke from the Dispatch Box twice in Committee and once on Second Reading. Advice was taken, consistent with the Bill, which judged that the Bill was in no way in conflict with the declaration of human rights.
In answer to my noble friend’s second question, which I did seek to answer earlier—clearly, without persuading him—following the High Court ruling in 2012 there was a degree of ambiguity. The right honourable Eric Pickles, the Secretary of State, invoked the appropriate provisions of the Localism Act to give freedom, which they had thought that they had, to larger parish councils and other elected local authorities. But other authorities were not covered—the majority of parish councils, single-purpose authorities, et cetera—so it was thought appropriate to introduce a Bill that would put beyond any doubt the freedom, if they so choose, to begin their meetings and to participate in such annual services as the act of remembrance.
I would be in conflict with the rules of your Lordships’ House if I sought to make a longer speech. I would just like to thank Mr Jake Berry, who took this Bill through another place with great skill; my noble friend Lord Ahmad of Wimbledon, who spoke very persuasively and movingly from the Front Bench; and the noble Lord, Lord Kennedy, and others who have taken part in these debates.
Health and Social Care (Safety and Quality) Bill
Health Service Commissioner for England (Complaint Handling) Bill
Modern Slavery Bill
(9 years, 6 months ago)
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17:18 - Division on Motion A1 - Ayes: 196 / Noes: 285 - Motion A1 disagreed.
Lord Bates
That this House do not insist on its Amendment 72 and do agree with the Commons in their Amendments 72A, 72B and 72C in lieu.
“Protection from slavery for overseas domestic workers
All overseas domestic workers in the United Kingdom, including those working for staff of diplomatic missions, shall be entitled to—
(a) change their employer (but not work sector) while in the United Kingdom;
(b) renew their domestic worker or diplomatic domestic worker visa, each such renewal being for a period not exceeding twelve months, as long as they remain in employment and are able to support themselves without recourse to public funds;
(c) a three month temporary visa permitting them to live in the United Kingdom for the purposes of seeking alternative employment as an overseas domestic worker where there is evidence that the worker has been a victim of modern slavery.”
Commons disagreement and amendments in lieu
The Commons disagree to Lords Amendment 72 and propose Amendments 72A, 72B and 72C in lieu.
“Overseas domestic workers
(1) Immigration rules must make provision for leave to remain in the United Kingdom to be granted to an overseas domestic worker—
(a) who has been determined to be a victim of slavery or human trafficking, and
(b) in relation to whom such other requirements are met as may be provided for by the rules.
(2) Immigration rules must make provision as to the conditions on which such leave is to be granted, and must in particular provide—
(a) that the leave is to be for the purpose of working as a domestic worker in a private household;
(b) for a person who has such leave to be able to change employer (subject to paragraph (a)).
(3) Immigration rules may specify a maximum period for which a person may have leave to remain in the United Kingdom by virtue of subsection (1). If they do so, the specified maximum period must not be less than 6 months.
(4) For the purposes of this section an overseas domestic worker has been determined to be a victim of slavery or human trafficking if a public authority has determined that he or she is such a victim—
(a) under regulations made under section (Regulations about identifying and supporting victims)(2)(b), or
(b) where no such regulations apply, under arrangements identified in the immigration rules.
(5) The Secretary of State must issue guidance to persons having functions under the Immigration Acts about the exercise of those functions in relation to an overseas domestic worker who may be a victim of slavery or human trafficking.
(6) The guidance must provide for a period during which no enforcement action should be taken against such an overseas domestic worker in respect of his or her—
(a) remaining in the United Kingdom beyond the time limited by his or her leave to enter or remain, or
(b) breaching a condition of that leave relating to his or her employment, if he or she did so because of the matters relied on as slavery or human trafficking.
(7) In this section—
“immigration rules” has the same meaning as in the Immigration Act 1971;
“enforcement action” has the meaning given by section 24A of that Act;
“overseas domestic worker” means a person who, under the immigration rules, has (or last had) leave to enter or remain in the United Kingdom as—
(a) a domestic worker in a private household, or
(b) a private servant in a diplomatic household.”
The Parliamentary Under-Secretary of State, Home Office (Lord Bates) (Con)
My Lords, holding overseas domestic workers in modern slavery is totally unacceptable. This Bill will help stop such abuse. The Bill will mean that those who traffic overseas domestic workers or hold them in servitude can receive a life sentence. The Bill will mean that the slavery, servitude and forced or compulsory labour offence will reflect the circumstances of vulnerable victims, and it provides new protections for all victims of modern slavery, such as the statutory defence.
We began this Bill and we probably all feel a bit disappointed that at this stage—almost the 11th hour—we are discussing a key amendment to the Bill. Of course, we share broad agreement on the way in which this has been approached. The Bill was published in draft form. It was then put before a Joint Committee, on which many Members of your Lordships’ House served. The Joint Committee then put forward a series of recommendations and these were broadly accepted by the Government as the Bill moved through the Commons stages, which were—being generous to the other place—more thorough and more detailed than perhaps has been the case with some other legislation. It then arrived in your Lordships’ House.
In its journey through your Lordships’ House, the Bill attracted a further 100 amendments. There have been 262 further amendments to the Bill that we brought forward, including whole new clauses on areas such as the supply chain. We brought all those amendments forward because we recognised here that this is a great shame of modern-day British society and that, in the words of the seminal report by the Centre for Social Justice in March 2013, “it happens here”. In the estimate of the chief scientific adviser at the Home Office, some 12,000 people are held in modern slavery in Britain and we want to do something about it. We want to help the victims and we want to prosecute the perpetrators. One thing that I have appreciated is the way that we have worked on this with a cross-party focus. We have had many all-interested Peers meetings and bilateral meetings, and many exchanges of correspondence. We have worked with NGOs as well.
I say all that as a precursor to coming to the main substance of the amendments, because I think it is important that we put this amendment in that sort of context. I pay tribute to the noble Lord, Lord Hylton, for the work and passion that he has given to the issue, particularly to that of overseas domestic workers. It is recognised that he has a deep passion and concern for these people, which we share and which he champions and we respect. I want to say to him that I hope he can reflect on the process that we embarked on when the Bill first came here and see that we have been increasingly trying to respond to the concerns that he and other Members of your Lordships’ House have raised.
There was concern about the conditions that many people were facing when they came to this country and that they were not even being paid, let alone receiving the minimum wage. Therefore, we introduced the provision that the national minimum wage must be made clear to the individual. Now, the immigration officer who is making a judgment on an overseas domestic worker’s visa application must be satisfied that the employer, in addition to signing a contract to that effect, intends to pay the national minimum wage of £6.50 per hour. We now have a model contract. I know that we exchanged views on that and it has been amended in the light of the views expressed by the noble Lord, Lord Hylton, and others. That model contract is presented to employers to say that those who seek overseas domestic workers must make available to them those minimum employment criteria before they come to the UK and a visa is granted.
Next—I know that my noble friend Lady Hanham felt particularly strongly about this point—it is very important that we make it abundantly clear to employers that once the Bill receives Royal Assent, which we all want it to, the consequences of abusing an employee brought into this country under a visa will be a potential life sentence. This country is very strong in its commitment to that.
We want to make sure that we hear the views of the individual applying for the overseas domestic visa. As a result of the process of this Bill, we are piloting direct video interviews to check that people are aware of their rights. We are piloting at ports of entry a new card that has been introduced giving people details of what their rights are and, most crucially, telephone helpline numbers that they can call should they feel that they are in need. We are improving the national referral mechanism, following the view expressed by Jeremy Oppenheim that received broad support around the House, to say that this is not going to be adjudicated on by United Kingdom Visas and Immigration but by a multidisciplinary panel involving different groups and agencies focused on the welfare of the individual for whom the decision is being made using the national referral mechanism. We propose to improve the care and support for victims within that national referral mechanism on overseas domestic workers to make sure that they get the legal protection, access to health services and shelter that they need, and psychological support where that is needed.
Finally, in the course of the passage of the Bill through your Lordships’ House, when we were discussing the noble Lord’s amendment, we said that we would invite James Ewins, a widely respected barrister, who had worked for the International Justice Mission in the Bangalore office, was a deputy director of the Centre for Social Justice which produced a report, and was a legal adviser to the Joint Committee, to undertake a review of how the overseas domestic worker visa is operating and make recommendations as to how it should be improved, with the clear indication that the Government intend to act on them.
With all those points in place, the House none the less felt insistent—by a slender majority of seven, as I recall, but it is absolutely right that a majority is a majority—we failed to win that argument and the Bill went to the other place. Sometimes when that happens, the Government take the line of saying, “Well, your Lordships have spoken but the other place has also spoken”, and simply send the same message back up for us to consider. Not so here, because we were deeply conscious of the importance of the issue and the sincerity with which the noble Lord and others had spoken to the amendment.
We were aware that there were two issues of principal concern. The first was that often when an overseas domestic worker comes over here on a visa—we know this from the evidence that Kalayaan and other organisations working in the field have given us—their passport is withheld and they are told that if they dare to leave or to try to leave, they will be immediately removed from the country. That fear is imposed on them. In our amendment, we specifically state that under no circumstances will enforcement action be taken against anyone who is fleeing persecution on an overseas domestic worker visa.
The second concern was that people may be denied the opportunity to have a livelihood. We return to that debate time and again and the issue of the ability to switch employers. We have said that where someone who has come enters the national referral mechanism and achieves conclusive grounds under the new multidisciplinary panels, we will introduce a new six-month victim’s visa to enable them to work in the same sector as before.
In the rather long list that I have presented to the noble Lord, I want to communicate that he has moved the Government several steps—if I may say so, many steps—down the road to what he seeks to achieve. I suggest that those final steps may well be adjudged best to wait for the report of James Ewins in July, which the next Parliament will then be able to implement. It does not require primary legislation; the Immigration Rules can be changed at any time. Those changes can be made on the basis of those recommendations.
Some particular points need to be addressed by those who want to press the Motion at this stage. First, we desperately want to ensure that victims of abuse receive the help and support that they need. Therefore, to have a Motion that does not provide for the fact that they must go through the new and enhanced national referral mechanism—the vehicle by which all these additional helps of legal aid support, medical and psychological support and accommodation and hardship payments can be delivered to them—and skips that mechanism would mean that victims lose out in many ways.
Lord Hylton
As an amendment to Motion A, at end insert “but do propose Amendments 72D, 72E and 72F as amendments to Amendment 72A”.
(a) change their employer (but not work sector) while in the United Kingdom provided they notify the Secretary of State;(b) renew their domestic worker or diplomatic domestic worker visa, each such renewal being for a period not exceeding twelve months, as long as they remain in employment and are able to support themselves without recourse to public funds;(c) obtain a temporary visa permitting them to live in the United Kingdom for the purposes of seeking alternative employment as an overseas domestic worker where there is evidence that the worker has been a victim of modern slavery.”
Lord Hylton (CB)
My Lords, I offer a big bouquet to the Minister. I pay tribute to his sincere desire to improve the situation for the victims, of whom we have seen far too many over recent years. He has truly shown a listening ear: he has met me and others on many occasions; he has given us the national referral mechanism for domestic workers as well as for trafficked people; he has given us the Ewins review; and now he comes with a government amendment approved by the other place. I am also grateful to the Independent Anti-slavery Commissioner, who has given me time on these issues.
Some might think that I should be content with the Government’s moves, but I shall try to show why I am not. I seek to protect the incoming domestic workers from the first day of their arrival here. What I am proposing is a real improvement on the Government’s amendment, because that amendment takes effect only once the worker has found the national referral mechanism, from which there is no right of appeal. To do so, the worker must first endure a period of abuse and exploitation, then escape, and then find the national referral mechanism.
The government amendment restricts the person to working in a private household, whereas mine will allow him or her to work as a domestic in a hotel or embassy. The Government may say—indeed, the Minister made this point—that the workers will initially be protected by written contracts and information cards to be given to both employer and employee. I argue that all these pieces of paper may be withheld by the employer, just as passports have frequently been withheld up to now. The worst employers are likely just to disregard both contract and card. If my amendment is accepted, employees will know that they have an immediate remedy, just like any other worker. Employers will also know this and will, I believe, modify the worst of their past behaviour.
The Government further argue that the average visitor who brings a tied worker with them stays for only about 15 days. If that is right, then many, or possibly most, incoming workers will simply not be affected by my amendment. They will not seek to change jobs for such a very short period. They will suffer, if they have to, and they will go back with their employer. On the other hand, many employers stay for much longer than 15 days. When they apply for extensions of stay, as they often do, they easily obtain them. Their workers will therefore benefit from this new freedom, which is similar to that enjoyed between 1998 and 2012. I suggest to your Lordships that it is of great importance not to allow the kafala system, which ties the employee to a single named employer, to exist here because it has led to abuse and exploitation in the Gulf and nearby countries where trades unions are seldom allowed. I understand that our Government have sought to get it amended and improved in that part of the world. It should not be allowed to creep in here by the back door, even if the majority of visiting employers behave decently.
At first glance, it may appear that the amendment I am proposing is similar to the one approved by this House on Report on 25 February. In fact, it has been considerably changed to meet points raised by the Government. The first three lines of my amendment have been clarified and now look forward without retrospection. I put in that variation in order to try to meet the Government. Paragraph (a) of the proposed new clause states that workers must notify the Secretary of State if they change employer. This meets the point that they must not just disappear into the general labour pool. They must not expose themselves to being trafficked from one employer to another. They must also not claim state benefits. However, that does not mean that they must find their way to the front door of the Home Office and knock there. Any police station, citizens advice bureau, law centre, specialist NGO, councillor or Member of Parliament will do for the purpose of notification.
Paragraph (b) provides that the visa renewal shall be for not more than 12 months. This gives enough time to secure a reasonable job and bring a case for unpaid wages or damages against the first employer. It also prevents the growth of a pool of people who may eventually qualify for residence here. Paragraph (c) contains the word “evidence”. This means that workers changing employer and seeking to remain temporarily in this country must submit themselves to the national referral mechanism. That will produce a finding on the case and, more importantly—the point already mentioned by the Minister—it should give access to essential support and advice for those who need it. Amendments 72E and 72F are consequential.
My amendment is a compromise, which takes account of all that has been said in both Houses and of discussions with the Minister. It has been carefully crafted, with the best professional advice. I ask the Government to accept it, even at this late hour, and I commend it to your Lordships. If Britain is a “moral community”, as Edmund Burke might have defined it, we cannot condone domestic slavery in our midst. To do so immediately reduces our influence in the world and undermines our soft power. I beg to move.
Baroness Royall of Blaisdon (Lab)
My Lords, I support the amendments in the name of the noble Lord, Lord Hylton. I will say two things before I address the issues. First, my eyes are on the totality of the Bill. It is a fantastic Bill, and I warmly thank and congratulate the Minister on all the steps that have been taken throughout the process of the deliberations on it. The fact that I support these amendments does not detract from that in any way; I merely wish to make a terrific Bill even better.
Secondly, it is being said in the corridors that we are putting the Bill in danger with this amendment—much was made of that in the Commons. I have heard it said that civil servants have been saying that to some of your Lordships. I would not support an amendment if I thought that it was putting the Bill in danger. It is not doing so. There is ample time for us to discuss the amendment and for it to go back to the Commons, were it to be passed. What we are doing now feels like an anomaly only because of the Fixed-term Parliaments Act, which means that we have had a sort of protracted wash-up, and we are no longer used to the ping-pongs we used to have.
The substance of the amendment seeks to defend the important win that Members from around this House secured earlier this month. As we know, many overseas domestic workers are subject to appalling working conditions, long hours and little pay, and are sometimes at risk of mental, physical and sexual abuse. They must be entitled to the most basic rights to enable them to leave their abusive employer when they feel the need to, and they should know, as a matter of precaution, that a system is in place to protect them. That is the most crucial piece of the jigsaw, which is currently missing from the Government’s amendment. Without that, there is no bargaining power between an employee and an employer.
The workers must be able to challenge maltreatment and abuse, and be able to leave and change their employer without having to take a leap of faith. To make co-operation with the authorities a condition on securing leave to remain would only drive more domestic workers underground and lock them into a cycle of abuse. What incentive would they have in coming forward? Would the authorities believe them? What if the NRM decision was not positive? The NRM does not provide them with any access to legal aid or right of appeal. Even if they got a conclusive grounds decision, who would employ them for the mere six months they would be able to remain in this country?
In the three years during which migrant domestic workers have been tied to their employers, fewer have gone to the authorities. Understandably, they are reluctant to do so because they are afraid of people in authority. Of the 214 people who Kalayaan internally identified as trafficked since April 2012, only 63 have consented to a referral to the NRM. Therefore, can we rely on the NRM to deliver accurate decisions on the fate of these workers, when only a few months ago the independent review into the effectiveness of the NRM highlighted significant areas for improvement? I have no doubt that as a consequence of the review and the Bill there will be real changes in the NRM, and I welcome that. However, change takes time, during which overseas domestic workers will continue to suffer abuse. Moreover, as Kalayaan pointed out in its briefing, if forcing domestic workers into the NRM is a way of prosecuting employers, why have none been prosecuted during the three years of the tied visa? If we put ourselves in the shoes of such a worker, would we risk our livelihood on an uncertain decision or prefer to stay abused and exploited for the sake of our family, who are dependent on us in our home country? Could the Minister compare the system for spouse visas and overseas domestic workers visas? The Government provide a route for settlement to those who suffer domestic violence while in the UK on a spouse visa in the hope that this will be an incentive to people to leave the abusive relationship, not to stay in it because of fears about their immigration status. So why do the Government seek to create a system in which ODWs are treated differently?
Statistics from Kalayaan, which has done such a fine job in campaigning on this issue, show that in 1998, when the right to change employer was introduced, the numbers of those abused went down. Similarly, in 2012, when the restrictions on freedoms were put in and the right to change employer was removed, the numbers went up. This is not a coincidence. All the evidence that we have from NGOs and from the media coverage has shown that there is a link between tied visas and abuse of overseas domestic workers. Surely we can best facilitate the end of suffering on abuse for overseas domestic workers by listening to them, the charities that work with them and the independent expert groups that have looked at the issue. All of them are unanimous that to help to prevent the abuse happening in the first place, the overseas domestic worker visa must be untied.
I very much hope that this excellent listening and responsive Minister will, having answered the points made today, accept the amendments. In doing so, he will have made a very good Bill even better. More importantly, he will have helped and protected these most vulnerable of workers.
Lord Lea of Crondall (Lab)
I add in support of what my noble friend has said that it would be useful if the Minister could elucidate what sort of contract of employment we are normally talking about, because that would subsume many of the worries about the lack of rights that we are discussing.
Baroness Butler-Sloss (CB)
My Lords, I have been involved in this Bill before it even existed, because I was a member of a working party set up at the request of the Home Secretary which Frank Field chaired. Sir John Randall and I were the other two members. We started in October 2013, and it was as a result of our report in December 2013 that the first draft Bill came into existence.
There have been so many changes to the Bill that the current version is almost unrecognisable from the first draft given by the Government. As the noble Lord, Lord Hylton, said, the Government are greatly to be congratulated on listening—and not only that but on tabling a remarkable number of amendments, having listened to what we have all been saying. There are child advocates, which the noble Lord, Lord McColl, must feel is one the great triumphs of his recent time in the Lords. Then there is defence for victims and protection in court; the existence of a commissioner, even if he may not have all the powers that everybody wants him to have; and, perhaps most astonishingly of all, the supply chain. That was totally opposed at the beginning, but it now forms an integral part of the Bill. So this House and the other place should really be very proud of what we have done to make a good Bill.
Of course, the Bill is not perfect. The Minister accepts that—it is a starting point, and it could be better. But all parties support the Bill, as well as the Cross-Benchers. There are gaps, and those gaps can and should be filled under the next Government, whichever sort of Government they are, because no Government will not support the concept of the Bill when it becomes law—as I hope that it will—and I hope that they will be sympathetic to several amendments. I warn the Government that strategy and policy issues also need to be improved—but again that is for the next Government. But what is perhaps of supreme importance to your Lordships’ House as well as to the other place is to have the framework of the Bill as part of the law of England and Wales. That is absolutely crucial.
I, of course, recognise the plight of overseas domestic workers. This is something that we need to tackle and improve over a period. However, there were criticisms of the previous Government’s visa requirements. The commissioner-designate says that there were opportunities for traffickers to traffic people from one employer to another under the visa requirements that came in before this Government changed them. The Minister reminded us that James Ewins—a sensible, intelligent lawyer—is looking at how the present system of visas works and how the previous one worked, and will report on that. It seems to me very sad that we should be going in a sense to war at the last moment, the day before Parliament prorogues, on an issue which is now the subject of a review which I have no doubt will come up with excellent recommendations. As the Minister has already said, primary legislation is not required to make the changes that James Ewins may well recommend, and which the next Government may well accept; they could be done by regulation.
In addition, the Government have made strong concessions. There will be the opportunity for those deemed to be victims of slavery to stay in this country and to get another job. The noble Baroness, Lady Royall, said that that applied only for six months, but that is not what Amendment 72A says. It says,
“not … less than 6 months”.
I read that rather differently from just six months. That seems to me an important distinction that I make in disagreeing with the noble Baroness.
Why at this moment, with Prorogation of Parliament tomorrow, are we still fighting over this clause? With one day to go we are in danger of the best being the enemy of the good. That has been said before but I make no apology for saying it again. We may be fighting a Custer’s last stand if this House and the other place find themselves scrabbling around tonight and tomorrow morning, trying to get a second go on the second ping-pong. If the noble Lord, Lord Hylton, persists tomorrow, what will happen? If he is not going to persist tomorrow, will he tell us when he replies why he is persisting today? The Government have already gone a long way on this issue. When we are so close to the end of this Parliament, do we really expect them to give in to what is in a sense almost blackmail?
Baroness Butler-Sloss
That may be a very strong word but you need to look at what is happening to a good Bill, which is in some danger. It is not absolutely in danger because the other place can deal with it tonight, presumably, and we can deal with it tomorrow morning. However, I am looking at what will happen tomorrow if this House votes to support the amendment of the noble Lord, Lord Hylton.
Personally, I cannot bear to see this Bill at risk. I have lived with it for so long. The House is aware of my credentials with regard to modern slavery and human trafficking. I ask the House to support the Government and oppose the amendment of the noble Lord, Lord Hylton.
Baroness Hamwee (LD)
My Lords, on Report, I spoke forcefully in favour of the amendment of the noble Lord, Lord Hylton, because I thought it was essential to express the strength of my feeling, and for the House to be able to express the strength of its feeling. However, after that debate, I commented to a number of people that I did not think the amendment could stand because I believe that it contains inherent problems. I have in no way changed my view about the issue—having said that, it is inappropriate to refer to people as an “issue”; I mean the situation in which some people find themselves, for which few adjectives are adequate. I hope that those who thanked me at that point will not feel that I am breaking the faith. I am certainly not condoning the situation.
Lord Alton of Liverpool (CB)
My Lords, like the noble Baroness, Lady Hamwee, I would like to make a number of points about Motion A1, which my noble friend has laid before your Lordships’ House. In doing so, let me say first to my noble and learned friend Lady Butler-Sloss that she has been involved in the drafting of this legislation, as she said, even before it was presented as a Bill. However, on Report I passed an article to my noble friend Lord Hylton that he had written in 1996, and which I had kept, about the importance of safeguarding domestic migrant workers. No one has done more in your Lordships’ House than my noble friend Lord Hylton to champion their cause. That is why the noble Lord, Lord Bates, was right to pay tribute to him.
Although this risks becoming like a mutual admiration society, I join with the noble Baroness, Lady Royall, in congratulating the Minister on the exemplary way that he has handled the Bill. It has, throughout, been a bipartisan Bill—the Opposition have played a huge part in it, as have people from all Benches in your Lordships’ House—and a bicameral Bill, with a lot of interaction between both Houses. The right honourable Member for Birkenhead, Frank Field—we all wish him well as he recovers from his recent heart attack—chaired that important committee on the draft Bill. He is right to emphasise the totality of this Bill.
There is no one in your Lordships’ House, including my noble friend, who will put this Bill at risk in any way whatever, but making a good Bill even better is surely what Parliament is all about. We have made this provision better. I will come back to that in a moment, but it is worth pointing out that supply chain transparency, which my noble and learned friend referred to, was not even in the Bill after the pre-legislative scrutiny stage in another place; it was incorporated on the Floor of the House. Similarly, there was no provision in the Bill on domestic migrant labour when it began to go through its stages. We have been improving it as we have proceeded. The Minister will correct me, but I think in Committee and on Report—I was able to take part in all stages of the Bill—around 100 amendments, many of them emanating from the Government after the discussions we had in the meetings that the noble Lord organised for us, were incorporated into the Bill. That is why it is already so much better than when it began.
I take issue a little with my noble and learned friend. It is the job of parliamentarians to be here until Parliament is dissolved. We have not got to the last gasp; this is not Custer’s last stand, as she put it. I certainly do not regard people laying amendments before your Lordships’ House and giving them proper consideration, as we are doing, as blackmail. I think it unreasonable to suggest that. I ask the Government this in that context: why is it that an amendment that was incorporated on domestic migrant labour about a week ago in another place has taken so long to come back to your Lordships’ House? Why is it here on the penultimate day? Why could it not have been here on Monday, for instance, allowing for more consideration if time is really the issue?
As the noble Baroness, Lady Royall, rightly said, there is plenty of time for this to go to another place tonight. I have served in one or other of these Houses for the last 36 years. As the noble Baroness said, I remember the so-called wash-ups where we were here all night long dealing with things going between the two Houses until we got it right. Often, we got it much better as a consequence. I think back to the LASPO legislation. I moved an amendment concerning the legal aid provisions for people who had contracted mesothelioma. Your Lordships, across the House, were good enough to support it and it ping-ponged back and forth between both Houses. On the third time of asking, the Government relented and modified the legislation. That is our duty as parliamentarians: to seek as much as we can get and to recognise the moment when no more can be gained. I am sure that my noble friend, who has been in your Lordships’ House for a lot longer than I have been, will be able to remind your Lordships of plenty of such precedents. If we are here tomorrow again debating an amendment and the Commons decide that they do not wish to modify Motion A but wish to persist with it, then we will no doubt hear from the noble Lord what he wishes to do.
I turn briefly to the substance of the amendment. Until we incorporated this new clause, the Bill contained nothing whatever to address the tying of migrant domestic workers to their employers. On two occasions in the last three weeks I have met domestic migrant workers on Cromwell Green, and I know that other Members of your Lordships’ House have done so too. They were brought here by the Kalayaan charity, which the noble Baroness referred to. They told me that when news of the vote in your Lordships’ House on my noble friend’s amendment was announced, a young woman called Marissa Begonia, herself a domestic worker and co-ordinator of the self-help group Justice 4 Domestic Workers, described how she received texts from workers asking her, “Am I free now?”. Unfortunately, of course, the answer is “Not yet”. However, I recognise that the Minister has gone some way today, particularly in what he said about the review, but that review can now take place anyway, regardless of what we decide regarding this amendment. These things are not mutually exclusive.
In a nutshell, the government amendment does not provide additional protections against exploitation. Once someone is trafficked, it forces them to go to the police without any guarantee of protection before they do so. One employment agency told me that it would not place someone on a six-month visa with no hope of renewal. As the noble Baroness, Lady Royall, said, there is a real risk that it could drive people underground—again, with no access to things such as legal aid.
My noble friend’s amendment merely asks for the most basic of protections, and they are threefold: first, to change employer but remain restricted to domestic work in one household; secondly, if in full-time work as a migrant domestic worker in a private household, the option to apply to renew the visa; and, thirdly, in instances of slavery, a three-month visa to allow the workers to look for decent work. Without these kinds of provisions, we leave in place a system found repeatedly during almost three years to facilitate exploitation, including trafficking of migrant domestic workers.
Many workers coming to Kalayaan describe how they have “sacrificed” themselves for the well-being of their wider family. They do not self-protect in the way that someone with more choices would expect. Many explain that they are prepared to put up with practically any amount of mistreatment if they can provide for their children and ensure that the same will not happen to them.
In 2009, the Home Affairs Select Committee, in its inquiry into trafficking, said that the visa issue was,
“the single most important issue in preventing the forced labour and trafficking of such workers”.
No one is so naive—I agree with the noble Lord, Lord Bates—to suggest or imagine that the exploitation of domestic workers would be abolished by such minimal protections, but they would certainly be an improvement on the current situation. The Minister referred to the anti-slavery commissioner designate, Kevin Hyland, and said that he did not feel that this went far enough. Well, he is right about that, so let us at least go as far as these amendments and as far as we can by regulation in due course, but let us do as much as we can for the moment.
When the Minister comes to reply, can he say whether the measures might include provisions—maybe as a result of the review—for annual inspections, for checks with the Inland Revenue to ensure that employers have registered and are making reasonable levels of contributions, and for annual meetings between the worker and a trusted authority? All those will be crucial. I believe that my noble friend is right to have laid this amendment before your Lordships’ House and I do not think that it is a question of this being Custer’s last stand. I hope that, from my noble friend’s point of view and because of all the things that he has done in raising this issue in the past, we will continue to give him our support if he chooses to press the matter to a Division.
Lord Deben (Con)
My Lords, all my instincts lead me—I think Members of this House will recognise this—to being enormously sympathetic towards the amendment before us. However, I remind the noble Lord, Lord Alton, that it is not just a question of some people saying that they do not want an amendment because it will hold things up and might mean that we lose the Bill. The argument is that there are serious faults in this amendment which need to be considered.
The Lord Bishop of Derby
My Lords, I, too, pay tribute to the noble Lord, Lord Hylton, for his inspirational leadership on this issue. He has frequently expressed that this is a moral and a practical issue, which is why we take it so seriously. I am also grateful for the way that the Government have responded positively to the discussion around the noble Lord’s first amendment, for which I voted. However, I am afraid that I cannot support this amendment, for reasons much along the lines of the noble Lord, Lord Deben.
The issue is very complex. In the debate in the House of Commons, there were all sorts of complex strands, which are in the background of some of the statements being made in your Lordships’ House today. There is a discussion about the nature and the length of visas. There is also discussion about the scope and limitations of the national referral mechanism. We have heard today about the spouse’s visa and where that model fits in. There is discussion about the principles of domestic labour and employment law and about what particular provision should be made for overseas domestic workers. This is a complex issue.
I applaud the Government for appointing James Ewins to lead the review because all these issues need to be looked at in the round so that overseas domestic workers can be best supported and cared for. We need to let the review do its work and not foreguess it in the way that the amendment tries to do. I am batting for the review and trusting that it can be implemented by regulation. Therefore, I am with any future Government who are serious about this issue—as they should be on moral and practical grounds—and pursue it appropriately.
I am uneasy about the details of the amendment on two counts. There is a real danger, as the Minister alluded to, of separating the victim from the crime. It is important for future victims that any system of care and support for those caught up in this terrible crime, and oppressed and abused by it, can kick back into where the crime is coming from and how it is manipulated and engineered. There is a danger that this could encourage people to try to escape from it but not be invited to play a responsible part, if they can, in challenging the crime and seeking to stop it.
Again, I applaud the desire to offer other alternatives in terms of work—the James Ewins review could look at that—but we are talking about people who have come into this country on a particular and intimate relationship and who often have a particular dependency, as those of us who have had the harrowing experience of meeting overseas domestic workers who have been abused in this way will know. They are not migrant labourers who can easily get up and go and get another job. The situation is more complex than that and needs a more subtle and careful approach.
I cannot support the noble Lord on the amendment for those reasons. I hope that we will give James Ewins the opportunity to look at all the complex issues and to come up with a more joined-up approach that we can continue to gather round and support in the future.
Baroness Williams of Crosby (LD)
My Lords, we have had some remarkable contributions to this debate. I certainly do not wish to delay the outcome but I would like to ask two or three questions before we make a decision on the Motion of the noble Lord, Lord Hylton. Before I do so, I pay tribute to the 30 years of his life that the noble Lord has given to the effort to get social justice for this particularly badly treated group in society. I have absolutely no qualification in saying that. Of course, like everyone else, I thank the Minister for his endless persistence in trying to get answers that will satisfy the House.
My questions are very simple. The first is about access. Noble Lords have referred to the extreme risks that domestic workers in difficult situations may face in attempting to access the system we have now begun to establish, including the NRM. We need to make sure that they do have access. I ask the Minister whether access to, for example, the churches or non-governmental organisations can then be passed on by them on behalf of the person who is objecting and concerned. Is that a possibility? I ask this because the trust that overseas domestic workers—for example, Filipinos—have in a church or an NGO might be much greater, sadly, than the trust they might place in the authorities. I am sorry to have to say that, but it has been my experience in talking in particular to Filipino migrants, who are among the most helpful and forthcoming that we have in this country. They have deep concerns—from their own experience back home as much as anything—about whether the authorities will be fair in the way that they treat their complaint.
My second question concerns the issue raised by the noble Lord, Lord Hylton, as well as by the noble Lord, Lord Deben, and others, including my noble friend Lady Hamwee. There is a complete lack of any form of legal aid for this pathetically waged group in society. I am not sure whether they would get any money at all to pursue these issues, which is why it is of such great concern to me that access to employment tribunals and the civil courts is not made available in some form that would enable these people to bring their cases forward. There may be no answer to that, but we cannot pretend to ourselves that passing laws that cannot be implemented because the people they affect do not have the money to do so is a satisfactory outcome.
I have two more questions. The third is about the inquiry. The Minister said that the inquiry would be in July, but my impression is that that is not when it will be concluded, but when it will be started. As we know, an inquiry can be a very long process indeed, particularly when it comes—as this one will—between the end of a Parliament and a general election that will be followed by the creation of an effective Government. Is the Minister telling us that the inquiry will start in July but not giving any indication of when it is likely to be terminated?
Secondly, will the inquiry look not only at the law but at the implementation of the law? It was mentioned in the Commons that there had been 63 cases where exploitation or other forms of slavery were clearly identified. There has been just one prosecution. That reminds me a little of the issues around the banks. It is no good having a law that is not implemented. Perhaps the Minister will be kind enough to say whether the inquiry will be able to look into the issue of implementation as well as at the law itself. This seems to me to be absolutely crucial.
My final point concerns the issue of serious crime associated with, for example, cases of exploitation. I will give an example from my own experience, because I used to lecture on this subject when I was at the Kennedy School in Harvard. One of the most dreadful pieces of evidence I came across was that one of the single largest exports to the Philippines from the Trucial States of Saudi Arabia was that of coffins for those who had been domestic workers. I do not point the finger now; maybe things have changed. However, they were very serious in the past.
My last question is this. If someone who makes a complaint refers to a capital or substantial crime such as rape or assault, could we take that into account in the way that we deal with the issues that are now before us? Will the Minister say how that is dealt with at present, because my impression is that sometimes it is not dealt with at all?
Lord Warner (Lab)
My Lords, a number of noble Lords who served on the Joint Select Committee with me have spoken against the Motion of the noble Lord, Lord Hylton. I will say a couple of words in support of the Motion and of the remarks made by the noble Lord, Lord Alton. First, it is worth remembering that we have known for some time about the problems arising from the changes made in 2012 to the Immigration Rules. The Government have come very late to the party on having a review into this issue. I suggest to noble Lords that they may have—finally—come late to the party only because this House, through its amendments, has put a good deal of pressure upon them to do so.
Secondly, I will draw attention to the key difference between the Motion moved by the noble Lord, Lord Hylton, and that of the Government. Essentially, the Motion moved by the noble Lord, Lord Hylton, whatever its shortcomings, gives a degree of protection as soon as the person comes into the country. The government Motion does not do that. It would seem to be a failure on our part as a scrutinising House if we give up this opportunity to put something into the Bill which will make it better and provide more protection while the review goes on. If the noble Lord, Lord Hylton, chooses to divide the House, I can see no reason why we should not vote in favour of his Motion. It does not in any way stop the Government getting this legislation through.
Lord Bates
My Lords, in the character of this legislation, this has been an exemplary debate. The issues have been raised calmly and with great passion and determination by people who have given their lives to tackling this issue of abuse. I am aware that some very serious questions have been asked. I will do my best to respond to them and will also seek to make some other points which I hope will be helpful in reassuring noble Lords about the Government’s intentions.
The noble Baroness, Lady Royall, talked about the position on legal aid for those people accessing the national referral mechanism, a point picked up by the noble Baroness, Lady Williams, as well. Any potential victims, including those on overseas domestic worker visas, will have access to legal aid for immigration, employment and damages claims, once they receive a positive reasonable grounds decision—reasonable grounds being, as we discussed before, a very low, almost formal, test for entering into the national referral mechanism. The Government have said that they have accepted the NRM review recommendations. Here, Jeremy Oppenheim suggested a new process to review decisions where a negative conclusive grounds decision has been made. The noble Baroness made a fair point about where the appeal system is under the existing NRM system. Jeremy Oppenheim recognised that we needed to do something, and we are running a pilot on this. The Government have accepted all the recommendations that have been put forward.
The noble Baroness also asked why this is different from the domestic violence visa. The domestic violence visa is designed solely for those who have come to the UK to join someone who is settled here. They may have come to make their home here. Domestic workers are issued with visas to come for short visits with their existing employers. Most visits are short: about 15 days.
My noble friend Lady Hamwee asked what the government amendment says about Immigration Rules and what the additional requirements will be. The requirements for the visa will be limited to the following: that the person has a conclusive grounds decision from the NRM; that they are a victim of trafficking or modern-day slavery; and that they are not excluded for reasons of public policy, for example serious criminality. My noble friend also asked whether we will allow people with the new visa to work for agencies that clean private homes. This is an interesting point, which we will consider and discuss with interested parties such as Kalayaan. Our concern will be to avoid inadvertently creating a further risk of abuse.
There is a wider point on the review that is being undertaken by James Ewins. This is different, because we have an amendment, but we also have an ongoing review by someone who is widely respected on all sides of the House for his ability to look at this issue. He has been asked to start his work and will report by July. That was one of the decisions that we took in response to the noble Lord, Lord Hylton, the first time he raised this. We therefore expect a report by July, and changes can be made from then. There is a tradition that Immigration Rules are handled in blocs twice a year for the convenience of the House, but it will be for the next Government to say whether this will come in October or whether action could be taken as early as July.
The noble Baroness, Lady Royall, asked whether far more workers have been abused since the changes to the overseas domestic worker visa. This is really a point about the evidence base for this. We have had some evidence presented to us, and other evidence that points in another direction. The quality of the evidence is one of the things that we have asked James Ewins to look at in order to assess its veracity.
The noble Baroness, Lady Williams, asked about the woefully low level of prosecutions. Of course, this is exactly what the Independent Anti-slavery Commissioner-designate has been brought in to do—to ensure that we care for victims but also that this is taken seriously. We specifically ask in the remit whether the policies and processes for pursuing those accused of perpetrating modern-day slavery against those who are on overseas domestic worker visas are effective. That is a specific part of his remit.
Can churches bring forward victims? We are already working with faith groups, including the Catholic Church—I pay tribute to the noble and learned Baroness, Lady Butler-Sloss, who chaired an excellent meeting with British Black Churches looking at this issue, increasing their awareness of it and getting their co-operation in fighting it—in our plans to communicate the new protections. The national referral mechanism review recommendation will support and improve relationships between statutory agencies and organisations including churches. Any organisation that comes into contact with a potential victim may work with the slavery safeguarding lead to refer them into the national referral mechanism.
When will the measures come into effect? I have dealt with that by saying that it is normally twice a year but it can in fact be any time.
Baroness Hamwee
My question was about bringing this particular clause—or section, as it will be—into effect.
Lord Bates
I do not want to get this wrong. I probably need to look to my left for some inspiration, which I have relied on heavily during the passage of the Bill, because this is at such a critical stage. It is pointless to say, as I normally do, that I will write to the noble Baroness. It is a very reasonable question and we should have an answer to it.
On employment tribunals, overseas domestic workers have the same rights of access to employment tribunal services as other workers where the tribunal has jurisdiction. They are able to file a claim and nominate a representative to appear on their behalf. Additionally, it may be possible to provide evidence via a videolink.
Of course, the answer to the noble Baroness’s question is really so obvious I wonder why she needed to ask it. [Laughter] It will come in in October. That is the current plan and the current schedule. But as I have also said, it is for the next Government to introduce this when they wish. There is nothing to stop them bringing it forward once they have James Ewins’ review.
The noble Lord, Lord Hylton, talked about the notification requirement. This is about notifying the authorities when they are going to change employer. This was something that Kalayaan highlighted in its report, Ending the Abuse, which was produced some time ago, in May 2011. I pay tribute to Kalayaan’s consistent work on this topic. The report says, on the right to change employers:
“Home Office data for the period from January 2003 to August 2010 shows that … 41 per cent … of migrant domestic workers cited abuse/exploitation as the reason for changing employer. Given that many MDWs prefer not to reveal their personal experiences to the Home Office, the figures are likely to be much higher in reality”.
That is still an issue with regard to the wording of Amendment 72D.
There have been a number of remarks and I probably cannot do justice to them all. I take seriously the intent behind the intervention by the noble Lord, Lord Alton, to say that there is usually a Parliament to press. I am trying to remember all that he said, but he said at the end that it is important to recognise the moment. In a sense, I am saying that, although perhaps not for the straightforward reasons that we have brought forward here, the Government have made significant steps. The noble Lord, Lord Hylton, acknowledged that. We have moved significantly down the route of making sure that, before people come here, they are aware of their rights and the protections that exist; that employers are aware of the consequences of abuse; that people who come here have knowledge of the minimum wage and other elements that they are entitled to; and that, when people arrive at port, there are interviews with Border Force officials. The Government have moved. They have not simply said no to the amendment but have launched a review; in essence, we are unsure whether we have gone far enough and whether this is the right route.
We have highlighted the particular problems with the amendment. As a number of people have pointed out—the noble and learned Baroness, Lady Butler-Sloss, the noble Lord, Lord Deben, and the right reverend Prelate the Bishop of Derby—there are problems and weaknesses with this amendment. Being the generous man that he is, I know that the noble Lord, Lord Hylton, will probably recognise some of those deficiencies.
The question is whether the House wants to insist upon this amendment and send a Bill that incorporates it back to the other place. The noble Baroness, Lady Royall of Blaisdon, said that there is ample time, and I suppose that there is always time—
Lord Bates
“Ample” is an interesting word when we are on the eve of the Dissolution of Parliament. However, there is of course time to do this—that is not the argument. The argument that we and others have put forward is whether this is the amendment that we want. As worded, it will simply mean that lots of people who are already here in the country and are victims of abuse will not be eligible to be covered by its provisions, whereas our amendment is retrospective and covers people who are already here.
The amendment is also defective in that there is a suite of measures, which people in this House have fought long and hard to include in and make available to this victim-focused legislation, available through the national referral mechanism. It is critical that victims get that level of medical and financial support, which is available through the NRM; that is what it is there for and why it has been reviewed and reformed as part of the work that we have done here. Most crucially, the amendment is defective because a serious and considered piece of work is currently going through its process under the widely respected James Ewins. Our argument is that that should be allowed to take its course.
I hope that people attach some weight to what I am about to say. Those who are responsible for this—Shaun Sawyer is leading the charge for us at the national policing level and making sure that those who are guilty are prosecuted—warn that the amendment as worded has the real, inherent danger of, in the words of the right reverend Prelate, not separating the victim from the crime. That is a potential danger. We want to make sure that the victim is protected but we also want to make sure that the perpetrator of the crime does not then continue to abuse other employees who are there.
I sense that the House is filling up and has probably reached a point where it wants to reach a judgment on this. I sense that and accept it, but I would not want the noble Lord, Lord Hylton, or other noble Lords who might be considering their action, to think, first, that the Government have not wrestled with the issue and tried to find a way forward which works for victims. I would not want noble Lords to feel that this is a one-off chance: that if they miss this moment, they will never get the opportunity to act again. We can act again at any time—Immigration Rules can be changed at any time if they are laid before Parliament—and the report will come forward.
There is another reason—I shall finish on this. This is in no way to suggest that we ought to fit in with this timescale, but today is the UN-sponsored International Day of Remembrance of the Victims of Slavery and the Transatlantic Slave Trade. In my view, it is a highly appropriate day to ensure that this momentous piece of legislation, which has been shaped, reformed and improved so much by all parts of your Lordships’ House, goes for Royal Assent and lands on the statute book, to give protection to the victims who need it and to ensure that the perpetrators can practise their crime no more in this country.
Lord Hylton
My Lords, I thank the Minister for his careful and comprehensive reply to this debate. I must also express my deep gratitude to those who have spoken to the amendment from all sides of the House, whether they attended to support it or to call it into question.
A great deal of reliance has been put on the forthcoming or already started review. I am sure that it will come up with good recommendations, but we have seen too many reviews lie far too long in the long grass to put a great deal of reliance on that. The view has also been expressed that we need more time for more information. We have had two Joint Committees, which have heard a great deal of evidence. We have had more evidence from a whole range of voluntary organisations. I suggest that the time is now to take a decision. Therefore, I wish to persist, just for today, and I beg leave to seek the opinion of the House.
Arrangement of Business
Lord Taylor of Holbeach (Con)
My Lords, now the progress of business is certain, it may be for the convenience of the House if I indicate that I expect royal commissioners to attend this House at the end of business on Thursday to signify Royal Assent to several Bills and to prorogue Parliament. The exact time of the ceremony will be settled tomorrow once the flow of business in both Houses is clear. I will make an announcement to that effect.
Budget Statement
(9 years, 6 months ago)
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Lord Deighton
That this House takes note of the economy of the United Kingdom in the light of the Budget Statement.
The Commercial Secretary to the Treasury (Lord Deighton) (Con)
My Lords, the case that the UK has recovered strongly from its catastrophic financial state in 2010 is hard to dispute—although I am sure some noble Lords will do so. We are now the fastest growing major advanced economy, growing at our fastest since 2007. Employment is at a record high: nearly 2 million jobs have been created during this Parliament, and the claimant count rate has not been lower since 1975. Inflation is at an all-time low. On Friday, the FTSE broke through 7,000 for the first time—both a sign of confidence and a further boost to it. The eye-wateringly high budget deficit of 2010, which represented over 10% of GDP, is forecast to halve to 5% by the end of this financial year. Debt as a proportion of GDP is forecast to fall in 2015-16, in line with the original target set in 2010 by my right honourable friend the Chancellor.
The evidence that this is a journey from “austerity to prosperity” is provided by the latest projections from the OBR for real household disposable income per head, which show that on average households will be around £900 better off in 2015 than they were in 2010. However, risks remain. The deficit is still too high, and productivity too low—challenges the next Government will have to address. Our fiscal plan is to eradicate that deficit by 2018-19, which will require around £30 billion of further consolidation over the next two years—2016-17 and 2017-18. That was initially laid out in December’s Autumn Statement and was reiterated in last week’s Budget. If the Conservative Party is elected, it would achieve that through reductions in the following three areas.
Some £13 billion—from a total department bill of £365 billion—represents a continuation of the same rate of saving we have achieved in this Parliament, during which, according to independent polls, satisfaction with public services has risen; that is not surprising when, for example, crime is down. We will carry on reforming public services by focusing on achieving outcomes more efficiently. A further £12 billion of savings will be found from our very large welfare budget of over £200 billion this year, which must be managed to control cost, and structured so that it pays to work. Finally, £5 billion will come from a variety of measures to reduce tax evasion and avoidance. Again, we have a proven track record of success here. Every year we have introduced initiatives to tackle evasion and avoidance—most recently last Thursday, by my right honourable friend the Chief Secretary to the Treasury. We should be particularly proud that the Prime Minister has put tackling tax erosion at the top of the G8 agenda, as that can be effectively addressed only through international co-operation.
By following our fiscal plan, in the final year of this decade—2019-20—public spending will once again be able to grow in line with the economy while continuing to pay down the national debt. At that point, government spending will represent 36% of GDP—higher than in 1999-2000, when the spending crescendo started, fed by the illusion that the cycle of boom and bust had somehow been abolished, an approach which left this country so exposed when the financial crisis struck. Our aim is not smaller government per se, just better and smarter government. The discipline of extracting better value for taxpayers’ money is healthy—and government needs to remind itself that it is spending taxpayers’ money, not its own.
We need to build in resilience to our public finances to absorb the shocks that experience tells us will inevitably hit our economy. That involves not only reducing debt in the good times—the right thing to do for future generations—but also reforming and derisking the banking sector, which was our priority early in this Parliament. We are now able to recoup some of the £192 billion spent bailing out the banks, with our ongoing disposals of Lloyds Bank shares and the securitisation of mortgages from Northern Rock and Bradford & Bingley. It is, therefore, appropriate that my right honourable friend the Chancellor chose to use these proceeds to pay down our national debt and not to indulge in pre-election giveaways.
Our unrelenting focus on fixing the economy is right. Without a strong economy, we will not be able to invest in what we care about most—the NHS, the education of our children and the defence of the realm. Without a credible plan for the economy, promises in other areas are meaningless. One of this Government’s most valuable legacies will be our commitment to the transparency and independent scrutiny of public finances. We set up the independent OBR, imposed a Charter for Budget Responsibility and publish, at every fiscal event, a distributional analysis of the effects of policy changes. It is now much harder for a Chancellor to fix a problem by plugging an unrealistic assumption into a forecast or to avoid a genuine debate about the choices he or she has made.
Of course, the least painful way in which to reduce the deficit is to increase tax receipts by growing the economy. At the beginning of this Parliament our recovery was held back by a combination of the profound impact of the financial crisis, the continuing problems in the eurozone, and a bout of commodity inflation. As a result, growth picked up only in 2013, at a rate of 1.7%, improving to 2.6% in 2014. At 2.5% for 2015 and 2.3% for 2016, the OBR’s growth forecast is at the modest end of the range; if we achieved the Bank of England forecast through to the end of 2017, this would represent an additional £25 billion of GDP in real terms, a potential upside for the future. However, there are also significant downside risks to this forecast growth, beyond our control, as the UK is not immune from Greece exiting the euro in a disorderly fashion, the situation in Ukraine and Russia, potential weaknesses in emerging markets, or the market impact of how the US Fed may choose to exit its current low interest-rate policy.
Economists attribute continuing low productivity growth, both in the UK and elsewhere, to the lingering after-effects of the financial crisis. Reigniting productivity growth is essential for our prosperity, and indeed the OBR forecasts a small increase of 0.9% this year, followed by an increase of 2.5% from 2017. This is credible, if you look at the performance of some of our key manufacturing sectors, such as cars, and service sectors, such as retailing, as well as the opportunities for growth spurred by innovation in technologies such as driverless cars, medical diagnostics and 3D printing. An improved outcome depends in part on the continuing recovery of the banks, so we have a fully functioning financial system, lubricating the reallocation of the economy’s assets to their most efficient uses.
This Government have consistently pursued policies to enhance our growth and productivity through an attractive tax environment and investment in infrastructure, education, skills and training. We have introduced a national infrastructure plan, setting out how we will meet our infrastructure needs for the future. At Autumn Statement, the Government laid out the most ambitious plans in a generation for our transport infrastructure, with huge investment in roads and rail. In this Budget, we set out our strategy for our communications infrastructure, building on our current plan to deliver superfast broadband to 95% of the UK by 2017, by investing in clearing more spectrum to improve mobile services, and setting a new ambition for ultrafast broadband to become available for nearly all. We also built on our education reforms at Budget by introducing postgraduate loans for master’s and PhD students, targeted at supplying the high-end skills that employers have specified. I was delighted to see Sir James Dyson’s support for design engineering at Imperial announced earlier this week.
The tax environment is obviously crucial and we have reduced taxes to stimulate business and investment, illustrated in this Budget by our support to the oil and gas industry. We now expect the companies involved to realign their cost bases to a lower oil price to free up capital for additional investment to boost production in the UK continental shelf. The announcement last week that the Government will carry out a wide-ranging review of business rates will ensure that they are modernised to suit the 21st century.
My right honourable friend the Chancellor has personally spearheaded the northern powerhouse, a second great engine alongside London, for the UK economy. This is based on consolidating northern cities into a super-conurbation, bringing them together through investment in transport and exploiting their strengths in, for example, science and advanced manufacturing. The transport strategy being devised by Transport for the North is aimed at improving connectivity across the region, so that it is not only Manchester and Leeds which benefit but Liverpool, Sheffield, Hull, Newcastle and other cities. However, we are, of course, backing all the regions. We would be delighted to see a south-west powerhouse too.
We want more cities and local authorities following in the footsteps of Manchester and West Yorkshire, with local leaders seizing the opportunity to make key decisions and unleashing higher growth in their areas. The simple theory is that if the long-term growth rate of the slower-growing regions was raised to the forecast rate for the UK as a whole, this could add an extra £90 billion to the UK economy by 2030.
Our strategy is working. Current growth is indeed propelled by business investment, not the household debt that has fuelled past cycles. It is well spread across services, manufacturing and construction and it is geographically balanced. The favourable verdict business gave the Budget speaks for itself. However, this confidence, which is built over the long term, is easily lost by ill thought through interventions prompted by perceived political advantage which only damage the health of the British economy. I am afraid that the Opposition’s foray into the energy markets, criticised by the CBI earlier this week, is a perfect example of what not to do. We now have a situation where investors in energy are reluctant to commit to the UK until after the election—they now regard other countries as less risky, undermining the many years spent building our reputation—and where energy companies are incentivised not to pass on current cost savings to consumers now because they may have price cuts imposed on them later. That is not the way to help businesses succeed or the way to increase living standards.
I will try to shed some light on the living standards debate that the Budget has stimulated. Let us start with the most important fact: the reason living standards fell was the financial crisis and it is people at the bottom of the income scale, particularly those who lost their jobs, who were hit the hardest. The reason living standards have taken some time to recover was the depth of that crisis. In the long run, only productivity improvements will drive the rise in living standards we all seek. That is why growth policies are key.
During the difficult post-crisis period, the Government intervened in the economy in many critical ways to support living standards. Keeping the banks afloat was step one, accompanied by monetary easing to maintain interest rates at record low levels, protecting people with mortgages. The most powerful support to living standards has been the extraordinary performance of the jobs market. Some predicted that adherence to deficit reduction could only result in a jobs Armageddon. That could not have been more wrong. While 400,000 public sector jobs have disappeared, more than five times as many private sector jobs have been created, mostly full-time and skilled. The number of those on jobseeker’s allowance has fallen by 700,000. The youth claimant count is at its lowest since the 1970s. These are not dry statistics. These are real people whose lives have been transformed, and this is a nationwide phenomenon, with all regions benefiting. Alongside job creation, we have put more cash in people’s pockets.
Lord Lea of Crondall (Lab)
I am grateful to the Minister for giving way but he has just made two comments that are very hard to reconcile. First, he said that living standards depend on productivity growth. He then referred to jobs growth. However, there has been no productivity growth; in fact, the growth in productivity since 2010 has been zero. How does the Minister think that living standards will rise fundamentally if we do not make productivity growth our top priority, as gross national product growth is not the same thing?
Lord Deighton
I entirely agree with the noble Lord. My reference to employment simply acknowledged that having a job enables people to protect their living standards. I acknowledge that productivity has not improved in recent years. That is the focus for the future. I have said that productivity is still too low; I agree with the noble Lord on that. It is the key to raising living standards.
As I said, we have put more cash in people’s pockets. We have consistently raised the personal tax allowance from £6,457. That is set to rise to £11,000 in 2017. That enhances take-home pay—a change that has dramatically improved the incentive to work—and has benefited 27 million people and taken 4 million out of tax altogether. We have frozen fuel duty and council tax as well as reducing energy bills. We protected pensioners with the triple lock, so that pensioner poverty is the lowest ever, as well as introducing radical changes to both pensions and savings, which suffer in periods of low interest rates, to give savers much more flexibility and remove most of them from tax altogether.
At the beginning of this Parliament, inflation was eroding living standards, driven above 5% in 2011 by global commodity prices. This position has reversed with inflation now at zero. Motor fuel prices have fallen by 16% and food prices by more than 3%. This is different from the kind of stagnation we have seen on the continent. As a result, we are today seeing rising wages outpace the level of falling inflation. The OECD and the IFS both endorse the use of real household disposable income per head as the best measure of living standards because it includes the effect of tax and benefit changes and employment. On this basis, the latest OBR forecasts show living standards rising at their fastest rate in 14 years. They are projected to improve by over 3% in 2015, leaving them higher in 2015 than they were in 2010 and set to rise every year this decade.
I am proud of this Government’s record in rescuing our economy from the perilous condition we inherited, and I am excited by the prospects of what can be accomplished if we are given the opportunity to see our plan through.
Finally, noble Lords will be aware that this week the Government plan to submit their convergence programme to the European Commission, setting out our fiscal plans. It makes sense to combine a review of this programme with our Budget debate, given their identical subject matter.
Lord McFall of Alcluith (Lab)
My Lords, it is a pleasure to engage in this debate. I want to focus on three areas: first, the fantasy figures given by the Government in the Budget; secondly, the productivity puzzle; and, thirdly, the issues raised in Who is my Neighbour?, the Church of England document, which was welcome.
The Budget last week was nothing other than a party political broadcast with fantasy figures. The OBR was very clear: it is a rollercoaster by which public spending will fall to the floor for the first two years of the next Parliament, with cuts the gravity of which has not been seen to date. But miraculously, it will all recover the year before the next election, with £12 billion extra spending for largesse. It seems that the Chancellor’s reputation grows with every failure. Would he balance the books by 2015? Easy. He failed. In the Autumn Statement last year he predicted a £23 billion surplus. He failed; it is now £7 billion. He promised £12 billion in future welfare cuts. When asked to explain from where they would come, he could not explain. Notwithstanding all the rhetoric on social security, it has done nothing because the social security budget was £220 billion in 2010, and is still £220 billion. The policy in those areas has failed.
As the IFS has said, we are left guessing about radical cuts. The NAO’s Amyas Morse has said that the Government are performing radical surgery without knowing where the heart is. This has ensured that the election debate to come will be about spending cuts. The OBR has said that that sharper squeeze in 2016-18 is indeed savage. The IFS questions whether cuts on that scale can ever be delivered. This is against a background of the slowest recovery on record. Paul Johnson of the IFS was clear. He said that household incomes crawling back to pre-recession levels seven years after the crisis is no cause for celebration.
We have a Chancellor under whom consumption, rather than production, has defined the economic approach. The biggest failure has been mentioned: the lack of productivity growth between 2010 and 2015. It has been stable for the past 40 years, although not at great levels; but it was nonexistent from 2010 to 2015, thereby undermining wages and incomes. The failure to understand productivity undermines confidence in the accuracy of any figures produced by this Government. The economy normally grows at lower rates after financial crises, but stagnation in productivity is extremely rare, and that is what we have witnessed. The question for the next Government is: is this temporary or permanent? The answer will determine our future economic prospects.
There is a dissonance between what the Government state is a “long-term economic plan” and what is happening in the country. Help to Buy ISAs and pennies off a pint are insignificant compared to what is happening in the country, particularly when put against the big picture. That big picture, on which the Government have failed, is a lack of a national infrastructure board, a lack of decentralisation to ensure that local economies prosper, and a lack of a productivity plan. We need a 20-year productivity plan, with annual reports to Parliament, so that we get this right. The Government have gone on about supply-side policies, but such policies on transport, housing and skills have been wanting. I am a member of the Economic Affairs Committee, which today published a report on HS2. The £50 billion of public investment, with £31.5 billion in direct subsidy, should be set against the background of no national transport infrastructure plan. How can one plan for a country without that? When Sir David Higgins came before the committee he was very clear. He supported an east-west line for the north. I asked him why. He said, “I talked to people in Manchester, who told me that it was a good idea, and I accepted that”. That is not the way to go about developing our transport and economic policies.
In 2013 we completed the lowest number of houses since 2010, and that includes a reduction of 5% in 2012. There was a time, in the 1950s, when a Tory Government under Harold Macmillan had an ambition to build 300,000 houses, and they did. Sadly, there is no ambition here on one of the most pressing problems facing people in this country, particularly young people.
This Budget is a manifesto for a meaner Britain. We need to re-inject a politics that is about beliefs and society. That is why I welcome the Church of England report, Who is my Neighbour?. It is very clear that today in Britain it is impossible to support a family on the minimum wage. The report notes burgeoning in-work poverty, whereby 75% of the welfare cuts are to the working-age population. The stark truth is that parents with low-wage jobs and young people have suffered most in this crisis. If we are to recommend a manifesto that is more tolerant, efficient and productive for the country, we could start with the six key values which the Church of England bishops have written in their letter regarding the general election.
The debates about the Budget have centred on the dry currency of figures, rather than on people’s lives. But we have a choice. A no less august body than the Financial Times was very clear in its leader when it said:
“Nothing is inevitable about Britain’s fiscal path”.
We can:
“Pursue an absolute surplus with further tax cuts”,
and thereby have,
“deep cuts in welfare and unprotected departments”,
Or we can:
“Raise £10bn in tax and allow borrowing for investment, and public spending austerity may come to an end next year”.
Those are the words of the Financial Times, not mine.
These are all feasible choices. No one can say at the next election, “There is no alternative”. People’s future livelihoods are indeed at stake at a time when there is disengagement and disillusionment among the electorate. The centre is being questioned as to whether it can hold in Westminster. There is a duty to consider the human and the societal elements, and the sentiments embodied in Who is my Neighbour? are a good start.
“The care of human life and happiness, and not their destruction, is the only legitimate object of good government”.
Those words are not from the Church of England document or Labour, but Thomas Jefferson. That cry is still relevant hundreds of years later. The Government have failed in all three areas and it will be up to the next Government to tackle these important subjects after the election comes in fewer than 50 days.
Lord Shipley (LD)
My Lords, I should like to address three matters: first, the achievements of this Government in dealing with the state of the economy which they inherited in 2010; secondly, rebalancing the economy in terms of growth outside London and the south-east, particularly in the north-east of England; and, thirdly, the current level of debt and the cost of servicing it, the need to get the deficit down and the timescale for doing that.
The noble Lord, Lord Deighton, defended a number of the Government’s achievements, but they are important. We have the highest growth in the G7 in the last year and a record number of people in work. Almost 2 million extra jobs have been created since 2010; 80% of those are full-time, and 80% are in skilled occupations. Employment is growing fast in the north and the Midlands. Apprenticeships have nearly doubled to 2 million since 2010. We have the lowest inflation on record, which helps household finances. The number of university students from disadvantaged backgrounds is higher than ever. Unemployment is down from 8.5% at its peak to 5.7%. Of the 28 countries of the EU, only Germany and Austria have lower unemployment. Low interest rates are helping households too, which is important given that we still have high levels of personal debt. We should applaud this success, particularly that of my own party, which has led the policy of the increase in the personal allowance in income tax to £11,000. It was only £6,500 under Labour in 2010.
The job is not done. There are a number of things that we still must do and there are two very big strategic issues that I agree are very important. Both have already been mentioned in the debate. The first is low pay. It simply must get higher. I do not understand why we have the minimum wage when a living wage is higher. I understand the constraints, but surely we have to have as a policy objective that low pay should be higher. We also need to increase our productivity, although there are some signs of this beginning to happen.
I think we have learnt that most growth under the previous Government was fuelled by consumption. We should recognise that the much higher level of growth now results from investment in infrastructure, plant and equipment, rather than real estate. When I look at the rebalance of the economy, the north is now growing faster than the south, taking a number of measures. This Government have done more to devolve power and responsibilities than any predecessor. There is now a new confidence and a greater understanding that devolution can drive growth. We have heard of the northern powerhouse and the plan for northern transport. City deals and the local growth initiatives, in which I have had an advisory role, have all made a welcome contribution.
The north-east of England has an impressive story to tell. Looking at the north-east LEP area—the figures I will quote are the LEP’s—it is clear that the north-east is closing the gap with the rest of the United Kingdom. We have record output and strong growth across many sectors. We have the highest employment rate on record, with 33,000 more people employed in the north-east LEP area since the Adonis review two years ago. Government and European funding have helped a lot, of course, which are worth well over £1 billion into the north-east LEP area. That funding is being committed locally by local people. The north-east has the lowest level of unemployment since 2008 at 7.8%. Exports in the north-east rose by 7.2% in the last year, despite a national fall of 3.9%. The north-east is the only English region still to have a positive balance of trade, amounting to £4.45 billion.
On productivity, GVA growth per head is growing at a faster rate than in most LEP areas, being the fourth highest in 2013. I contend that this would not be happening had the Government not got control of the public finances in 2010 and had my party failed to form a coalition Government to work in the national interest. The north-east is doing a remarkable job in getting out of the recession and everyone there should be congratulated for it, as should central government. There is a long way to go, but the north-east is headed in the right direction.
The trend in government finances seems to be headed in the right direction, too, for it is essential to maintain fiscal discipline. We are borrowing £90 billion this year to add to our debt, which will have almost doubled under this Government. There are understandable reasons for that, but interest payments have risen to the equivalent of £1,841 per household simply to service the debt. I doubt most households in the UK realise the amount the Government are spending in interest charges on their behalf when they could be spending it on the NHS or, say, on adult social care.
There is a difference between the two parties in the coalition in that the Chancellor’s overall aim, which is agreed, is to achieve £30 billion of further annual savings by 2017-18. I understand the need for that, but we need to be a bit clearer about where we come from. When I talk about annual savings, I am talking about cutting the annual deficit by 2017-18. I doubt the deliverability or desirability of cutting a further £13 billion from undefined Whitehall departments, £12 billion from welfare payments, but only £5 billion from reducing tax evasion, tax avoidance and aggressive tax planning. I prefer the Chief Secretary’s approach, which wants £6 billion more from tax dodging, and £6 billion from additional tax rises from the better off, those with high-value property assets, and the banking sector. That approach means that cuts in welfare and adult social care could be far, far lower. The deficit reductions should be achieved on a 50:50 basis: 50% budget reductions and 50% from extra taxation. That would enable further modest investment in the NHS to take place and it would also protect education spending.
I should declare my vice-presidency of the Local Government Association. I think it very difficult to protect the NHS, pensions and schools and at the same time effect the reductions in spending that the Chancellor seems to want. The impact on local government services, in particular on adult social care, could be very serious. I hope that the next Government will think very carefully about that.
I have one last point, which is an issue that impacts on the north-east and Cumbria, relating to the announcement on Northern Rock. The Chancellor announced that the Government are to sell off the mortgage assets of Northern Rock. It has been reported that the Government might make a profit on its staged sale. If they do, will they consider the strong moral case for donating 5% of the profit that it makes to the Northern Rock Foundation or to a successor body? My point is this: the foundation had been receiving 5% of pre-tax profits since Northern Rock became a bank. If the Government make a profit on the sale, it seems fair that a donation representing 5% of that profit should be passed to the foundation. I hope that the next Government will be willing to address that issue, because it is of great importance to those who have been receiving the additional charitable support from the Northern Rock Foundation in the north-east and Cumbria.
Lord Skidelsky (CB)
My Lords, at the time of his first Budget in June 2010, the Chancellor said:
“The most urgent task facing this country is to implement an accelerated plan to reduce the deficit”.
He committed himself to achieving a “cyclically-adjusted current budget balance”—the relevant part of that deficit standing at 4.8%—by the end of this Parliament. Instead, today, we still have a deficit of 2.8%. Of course, as a good politician, the Chancellor left himself wiggle room by talking about a “rolling five-year period” for achieving his goal. We are still rolling, but always “on target”. In last week’s Budget Statement he said that he will hit his original target three years late. He is like the runner, who, when the race is finished, gets to decide when it started.
In 2010, the Chancellor said that,
“reducing the deficit is a necessary precondition for sustained economic growth”.
Had he said, “sustained economic growth is a necessary condition for reducing the deficit”, he would have been nearer the mark. The main reason for his failure to balance the books is that the economy did not grow according to plan. His 2010 deficit reduction programme presupposed an average GDP growth of 2.7% between 2011 and 2013. Actual growth in the period was 1.3%.
Understandably, the Chancellor does not say much about the growth failure and never talks about the possible connection between his own plans and the failure of growth to materialise. Instead, the Chancellor and his supporters say that this poor growth record was bad luck: his entirely correct policy was undermined by “headwinds”. The noble Lord, Lord Deighton, mentioned a couple of them today—the eurozone crisis and our higher oil prices. However, the Chancellor’s own watchdog, the OBR, disagrees with the headwinds theory. It concludes that austerity reduced UK GDP growth by 1% in both 2010-11 and 2011-12—2% altogether. Using this analysis, Professor Simon Wren-Lewis of Oxford University has shown that austerity has produced a cumulative loss of GDP since 2010 of 5%. That means five years of British output and income permanently lost—we cannot get it back. And that, as Professor Wren-Lewis, points out, is a conservative estimate. No “accelerated plan to reduce the deficit” was required in 2010; just a rate of public spending growth somewhat less than the pre-crash GDP growth rate would have done the job.
The Chancellor’s new rolling five-year deficit elimination programme forecasts GDP growth of just under 2.5% for the next five years. Why on earth do we think that these forecasts will be any better than those of the previous five years, given the continued drag of the proposed cuts on the growth rate and the highly unstable GDP growth pattern since 2013? I accept that there has been a lot of progress in the north-east but the main driver of growth in the last couple of years has been rising asset prices. Where is the Chancellor going to find the £35 billion of cuts that he needs to meet his 2018-19 target? The noble Lord, Lord Deighton, referred rather airily to spending cuts and efficiency savings. I look forward to hearing details of these rather nebulous plans. In fact, what we suffer from is a candour deficit, not a budget deficit.
In conclusion, I enter a protest against the Chancellor’s slippery use of the word “deficit”—a slippery use that has spread throughout the public conversation on the matter and confounds public understanding of what he is doing. In 2010, George Osborne committed himself to eliminate the “cyclically adjusted current deficit”—the word “current” being crucial. However, this was going to be politically difficult, as it meant cutting public services. So his project soon morphed into one of cutting the “structural” deficit—that is, cyclically adjusted current spending plus net investment. This was politically easier, as cutting investment just means scrapping or slowing down investment projects, not cutting actual services. Nearly all the cuts in the Chancellor’s first two years were cuts in public investment, not in current consumption.
Now we come to last week’s Budget. In his speech, the Chancellor claimed that he has cut the deficit from 10% to 5% of GDP and will eliminate it entirely by 2018-19. But here he just means public sector net borrowing: no more cyclically adjusted caveats, no more borrowing, full stop. Since raising taxes is not on his agenda, this means only one thing—getting public spending permanently lower. He evidently now feels confident enough to proclaim openly what was probably in his mind from the start: to reduce the size of the state to dimensions which would have brought a smile to the face of the Iron Lady.
Lord Higgins (Con)
My Lords, since the last general election, the Chancellor has succeeded in transforming the disastrous situation that he inherited into one in which recovery is well under way. He has done so to the extent that the Economist headlines its article on the Budget “Bust to boom”. I think that is something of an exaggeration. Indeed, we must always be aware of creating yet another unsustainable boom. What we need is a sustainable rate of growth, and I shall come to the problems of achieving that in the middle part of what I have to say.
The Chancellor also gave a warning at the beginning of his Budget by saying that,
“the OBR has once again revised down the growth of the world economy … the growth of world trade and … the prospects for the eurozone. It warns us that the current stand-off with Greece could be very damaging to the British economy”.—[Official Report, Commons, 18/3/15; col. 766.]
I believe that that is profoundly true. Perhaps the biggest danger that we now face is another total disruption of the international economic situation. I therefore believe that, as we clearly have an interest in it, we should take a leading role as far as the Greek crisis is concerned. The reality is that it is inconceivable that Greece will become competitive at the present exchange rates. It will do so only if it leaves the euro. Therefore, it is desperately necessary for us to help the rest of the eurozone and overcome some of its inhibitions on this issue by having a plan to ensure that Greece can leave in an orderly way.
In that context, it is important to realise that one reason the Greeks are so keen not to leave the euro is that they do not want to go back to an undemocratic regime, which they had under the colonels. Having said that, they need to be able to sustain their growth. That means that not only do we have to arrange an orderly withdrawal but Greece will need a great deal of financial assistance then, ahead of a crisis arising. Otherwise, the danger is that it will get a competitive exchange rate, having left the euro, and then find itself being financed by Russia, which would be very dangerous. Therefore, the incoming Government should give great priority to persuading the members of the eurozone that the approach they are adopting at the moment is not the right one. We must have proper contingency plans to deal with that problem if our own economy is not to be damaged in the way that the OBR suggests it might be.
I turn, secondly, to the deficit. I understand the various thoughts that the noble Lord, Lord Skidelsky, has just voiced—it is always a pleasure to follow him in these debates—but, despite what he said, it is crucial that we continue to get the deficit down. It is of course true that the Government failed to achieve the objective announced at the last general election. I said at the time that all my experience at the Treasury with previous cuts made me extremely sceptical that they would ever be able to do so, but it is still vital that we should get it down: first, because we cannot leave our children with the kind of debt that we would otherwise have and, secondly—the point made from the Liberal Democrat Benches a moment or two ago—we have to avoid the amount of interest that the Government pay on the debt becoming a bigger and bigger burden compared with other items of public expenditure. Therefore, we must remain on course. I believe that the Government are right to have changed the date but we should still try to achieve a surplus within the period that the Chancellor has now specified. That is crucial if we are to continue the process.
I should say in passing that it is quite extraordinary for Mr Miliband or Mr Balls to shout loudly that the Government have failed in their deficit objective when they have opposed every proposal that might have enabled the Government to achieve it more rapidly. That is a very cynical, but not surprising, approach for them to have adopted.
Turning to the boom, we should be grateful to the OBR for an extremely interesting forecast and analysis of where we are in the so-called gap between productive output and the level of demand. In that situation, I am rather surprised because it seems to suggest that if we continue to mop up such excess capacity as now exists, we can grow at 2.5%, which is a noticeably lower level than almost 40 years ago when we normally assumed that the growth in productive potential would be 3%.
None the less, to my surprise, the OBR is indicating that we are getting closer to that productive ceiling than was previously thought. Clearly, we probably lost more capacity in the recent crisis than we originally thought. Therefore, while we can grow at 2.5% for the immediate period, we will then be in a situation where we can grow only at the rate of productive potential, which must require more investment. I certainly agree with the noble Lord, Lord Skidelsky, on the importance of investment. We need to make sure that that happens.
In passing, there is a continual danger that we may confuse investment from overseas with simply buying up property in England from overseas. If there is to be investment from overseas, it is essential that it should be investment in real productive resources.
Having said all that, with a supportive monetary policy, which has been very much a feature of the past five years, we can make progress. I am more sceptical about whether the governor’s forward guidance on interest rates is a good idea. At all events, the two must go together. The monetary policy has to be combined with the policy of deficit reduction. If that is so, we can have sustainable growth under a Conservative Government in the next five years.
Lord Layard (Lab)
My Lords, if you want to have the right policy, you have to start with the right diagnosis. Unfortunately, the Chancellor has got the wrong diagnosis. He and his colleagues have argued all along that Labour caused the deficit by irresponsible public expenditure, which led to his policy. In fact, the deficit was caused by the banks, and the resulting worldwide recession and the fall in tax receipts. It was not caused by irresponsible expenditure.
I will begin with a few revealing facts from the Treasury’s wonderful Pocket Databank. The Labour deficits in the 11 years before the world recession averaged only 1.2% of GDP. Over that same period, the national debt was substantially reduced relative to GDP. Let us have a comparison with the five years of the preceding Conservative Administration under John Major. In that period the deficit averaged 5.1%, which is four times the Labour figure of 1.2%, and the debt rose relative to GDP. I believe that those are significant figures. Therefore, who is irresponsible? It is outrageous to attribute our problems to the alleged fiscal irresponsibility of the Labour Party before the world recession threw our country and every country into deficit. It is time to see the last of the mantra—the mess that Labour made. It should be revealed as the myth that it is and relegated to the dictionary of phrase and fable.
Unfortunately, in consequence of this wrong diagnosis, something serious is happening in the real economy that is affecting the citizens of this country: the dismantling of many of our public services. As has been said, that is now the central issue for this election. The issue is whether we want to see our public services reduced relative to GDP to the level, or lower, of the 1960s. We say no, for many reasons. Simple economics says that this is nonsense. Every textbook says that, as people get richer, demand for some things grows faster than income, while demand for some other things grows more slowly. Demand grows faster for health and education—things that are characteristically well supplied by the public sector. Demand for things such as food, which are typically paid for privately, grows more slowly.
As we become more affluent, surely we will want to spend disproportionately more on old people, child protection, family support and the local environment. We value these things increasingly as we move further from the breadline. This is basic economics 101. It is interesting that in polls, such as the YouGov poll I looked at this morning, when people are asked whether they are willing to pay more for better schools and hospitals, most of them on balance are in favour of doing so. Therefore, economic theory is in line with what people say about their preferences.
Instead of that, we always hear the argument that people would be better off keeping the money for themselves. What do we think about that argument? Last year, Mrs Merkel had a seminar in her office on the subject of what matters to us. Various people presented evidence on what makes people most satisfied with their lives. In every survey in every country, the evidence is clear that the variation in disposable household income across the population explains less than 1% of the variation in life satisfaction. People vary enormously in their life satisfaction but the variation in their household income explains only a very small part of it. Much bigger factors include variation in mental health or physical health, variation in the quality of family life and so on. If that is taken through to an analysis of the benefits of different things, it can be shown, for example, that money spent on evidence-based mental health care benefits the well-being of people 10 times more than the same sum would if it were left in the household budget. The general point is that, as we get richer, our greatest problems become problems not of material survival and comfort but of health and human relationships.
To say that you are protecting the NHS is simply not enough. We have to think in a different context where we would expect the NHS to grow faster than our national income and not simply protect it. We really want to tackle all the things that people worry about and talk about, including alcoholism, domestic violence, dementia and suicide, which are all big, national problems that require public services. One could argue that people should pay for their own healthcare but that is not the route to an efficient health service. The US spends three times as much on health as Britain but has a lower life expectancy and administration gobbles up 25% of the costs. The philosophy of private good and public bad is too simplistic to handle these issues.
If politicians want to improve the life satisfaction of their people they should stop cutting public services. Why would they want to improve the life satisfaction of their people? Very simply, it is because that is what makes people vote. We now have good evidence that the biggest determinant of how people vote is how satisfied they are with their lives. That is even more important than the state of the economy. That is of course a justification, if you like, for democracy.
We do not need to destroy our public services. Our debt is now 80% of GDP but it is stable, and 80% is well below the average that we have had over the past 200 years. This debt is owed not to foreigners but almost entirely to the Bank of England, which is owned by us—or will be owned by our children who will own the bonds which we leave to them when we die. It is not an imposition on our children—that is a fallacy.
In the short run, cutting our public services will cut our GDP as much as it cuts our debt. The cuts that the Chancellor is proposing are a disaster. The plan has been ridiculed by all responsible commentators, and almost everyone finds it hard to believe that the Chancellor would ever carry it out if he regained power. Let us earnestly hope that he does not.
The Lord Bishop of Portsmouth
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.
Baroness Smith of Basildon (Lab)
My Lords, much of the commentary we have heard since the Budget—but not, I am pleased to say, in your Lordships’ House—has been a caricature of an economic debate between two harshly polarised views: one political party wants a strong economy and the other does not. Clearly, that is a fiction and a nonsense. There is a dividing line, but it is not on whether it is a right and worthy objective to seek a strong economy; it is on the how and the why—how we can achieve a strong economy, and why we want it. For me, any debate about the economy also has to be a debate about the quality of life. My noble friend Lord Layard made the point that it is about the purpose behind wanting a strong economy.
I know that it suits the government parties to seek to justify their damaging and harmful austerity programme by blaming the last Labour Government, but let us be clear. We did not have a recession because we built too many schools and hospitals. We did not have a recession because too many people used their bus passes. We did not have a recession because there were too many doctors, nurses and teachers. We did not have a recession because too many people had hip replacements. The recession did not start here in the UK; it was world-wide and global. The inconvenient truth for the Government is that the economy was growing in 2010 because of the measures taken by the Labour Government in 2008 and 2009 to ensure that we did not fall into recession.
I refer to the point made by my noble friend Lord McFall that government has to be about more than just the economy. To use his expression, it is about more than just the dry currency of figures; we want a strong economy for a purpose. At one point it seemed that the Prime Minister agreed with this when he launched what was quickly nicknamed the “happiness index”. It was a bit like the “big society” in that we do not hear much about the index any more, but in 2010 it was the new big thing for the Government. The Prime Minister made a speech about the happiness index and said that,
“we’ll start measuring our progress as a country, not just by how our economy is growing, but by how our lives are improving; not just by our standard of living, but by our quality of life”.
He went on to say that he would,
“make sure those government decisions on policy and spending are made in a balanced way, taking account of what really matters”.
We need to judge whether decisions have been made in terms of quality of life and whether they have been made in the light of what really matters.
It seems to me that one of the things that really improves the quality of life for people the most is a sense of well-being that arises from feeling safe and secure, whether in their jobs, in their homes or in society. Yet we have seen an unprecedented level of cuts in policing and community safety, while police morale is the lowest that I have ever known it to be. Police sickness rates, often related to stress, are the highest they have ever been. Across the country we have lost 17,000 police officers—8,500 of those on the front line—4,000 police and community support officers and 15,000 police staff. The Association of Chief Police Officers says that there will be 30,000 more losses in the next Parliament.
Last year, almost 100,000 crimes were reported, but the number being solved has fallen to less than 28%, which means that not even one in three criminals are being charged. Reported rapes are up by around 30%, but there has been a drop in the number of cases being referred to the CPS and a 14% fall in prosecutions. Some 9,000 fewer crimes have been solved. Prosecutions are down, and yet violent crime is up by 16%. That is not a record for the Government to be proud of and it is due to the unprecedented level of cuts in policing.
In my own county of Essex the Government have cut police numbers by almost 600, with another £46 million-worth of cuts being planned. The police mounted section has been axed, the dog section has been cut by 20% and in a coastal county the marine section has lost both officers and equipment. Through tabling Parliamentary Questions I have uncovered the fact that, as the number of people being killed or seriously injured on Essex roads has risen to 750, with the most significant increase among those aged under 18, the number of traffic police has been dramatically cut from 257 officers in 2010 to only 76 last year. There are no longer any 24-hour police stations in Essex and more station closures are planned. My nearest police station is in Laindon. The bright road signs are still directing the public to what is a fairly new police station—but do not ever knock on the door, because it is not open to the public at any time, day or night.
The Government’s answer to all this is that crime is falling, but is it not also the case that crime is changing? How many of us have received emails that are in fact online scams? We have seen increasing rates of cybercrime and fraud as well as internet sexual abuse. The Office for National Statistics has said that, if all of these crimes were fully reflected in the annual crime survey, they could increase the crime figures by around 50%. So that 2010 speech about improving the quality of life rings pretty hollow to me.
Today outside Parliament, I met a number of local residents from Essex and Kent who were protesting about cuts being made by their local councils which have led to their street lights being turned off at around midnight each and every night. Residential areas are then plunged into darkness. Let us recall the Prime Minister’s comments about the quality of life for those who will not go out at night in case they cannot get home before the lights are turned off. There are shift workers, council workers and hospital cleaners who now have to walk to and from work in the pitch dark. They told me that they do not know where the kerb ends and the road starts, or if anyone is lurking in the darkness. There are people alone at home or with their families. They hear a noise outside and look out of the window to see what is happening and whether someone needs help, but they can see absolutely nothing. I have to say that I am utterly appalled by what I regard as a tacky election gimmick cooked up by local Tory MPs who are worried about the huge number of complaints from the public. “We should not be turning the lights off at midnight because it is dangerous; let us leave them on until 1 am.” We can be plunged into darkness at 1 am, not midnight.
I was disappointed by the Minister’s opening speech because I thought that it was rather complacent. He talked about the number of extra people in work. Yes, more people are in work, but why are tax receipts from employment down by so much? It is because many people cannot get the jobs they want, so they take lower-paid jobs that offer fewer hours. The average household is losing £1,600 a year. The Government’s austerity programme has not brought the economic success that was promised. It has led to unprecedented cuts across public services, services which matter to the public, and public confidence has been lost. When we look back at what was said in 2010 about the happiness index and the quality of life, the Government really do have to think again. It is time to make way for a new Government to make the changes that are needed.
Baroness Valentine (CB)
I appreciate that the recent Budget should be treated more as political positioning ahead of the election than as a serious attempt to tackle macro long-term issues, but I want to touch on two things in that latter camp: the north/south divide and the provision of housing. I declare that I am on the boards of London First, HS2 and Peabody.
I turn first to the north/south divide. I am delighted that early on in his speech, the Chancellor recognised that we do not pull the rest of the country up by pulling London down. In the years since the credit crisis, while London has continued to play to its strengths as a global hub—currently we have more large foreign subsidiaries than any other city in the world—the rest of the country has struggled to keep up. As the Chancellor has reined in spending and cut public sector jobs, those economies which are more dependent on the public sector have suffered. But any future Chancellor is going to be faced with the reality that we are still spending some £90 billion a year more than we receive in tax receipts. Without the more than £30 billion net tax receipts provided by London last year, that figure would be a third higher. So the Chancellor needs to work out how to continue to invest the billions of pounds in the infrastructure that is required to get a return from London while at the same time stimulating growth in the north. Perhaps he can take some comfort from a report published yesterday by London First showing that every £1 invested in London’s infrastructure generates around £2.50-worth of economic benefit.
Whether you look at Britain from London or from the north, the key issue is the same: productivity. London is by far the most productive part of the country, but its productivity will be increasingly hampered unless the pressure on housing, commercial property prices and transport is eased. In the north, where Birmingham, Manchester and Leeds are all below the national average, poor connectivity is an important contributing factor. Infrastructure is key to turning both around, and our current low interest rates mean that we have a once-in-a-generation opportunity to invest.
I see HS2 as the backbone of the UK, connecting up social and economic opportunity from north to south. But in order for it to achieve its full potential, it needs to be part of a co-ordinated national transport strategy, and local communities, councils and businesses need to seize the opportunity. The Department for Communities and Local Government should stand ready to support local growth strategies, with serious investment in cities such as Birmingham. In this context, I am very heartened by proposed devolution to Manchester. I am likewise sure that significant investment in London will require some kind of further local tax.
In the Budget, we heard once again about plans for building many houses. The Chancellor claimed that 20 new housing zones outside London could support up to 45,000 new homes, while inside the capital, funding was promised to help unlock 7,500 homes at Brent Cross and 4,000 in Croydon. However, on its own, increasing targets is no guarantee of more houses. In London, targets have increased from 32,000, to 42,000 and on to 49,000—yet actual completions remain stubbornly at around 25,000. Housing in London has got so bad that, in a recent survey, three-quarters of business leaders identified the housing crisis as one of the biggest threats to our economic competitiveness.
There is no quick way to sort this out, but one important dimension is making those targets bite. Local authorities, which are at the sharp end of nimbyism, need both stick and carrot. The stick should be the threat of planning applications being taken over where targets are repeatedly missed. The carrot should be a far higher financial incentive. The current housebuilding bonus has had no discernible effect on housebuilding and is simply not enough. Alongside being more generous on the homes bonus, I would urge our future Chancellor to look at freeing up local authorities’ ability to borrow prudentially for housebuilding. I would, though, like to congratulate the current Chancellor on his proposal for the creation of a land commission in London, which will facilitate getting unused public sector land and buildings out into the marketplace for housing.
I cannot resist finishing on one other small point. The Chancellor has set aside money to help UK exporters to China. It would be very good if a future Chancellor could sort out our airport strategy so that we can actually get to this eastern economic nirvana.
Lord Rooker (Lab)
My Lords, before I start, I will say that I agree with everything the noble Baroness, Lady Valentine, said in her speech about housing, particularly about the threat of planning. I have said before that we should get planning out of DCLG and into BIS, as part of changing the culture of planning.
We should have a little history lesson before we close down for the election. I realise that the noble Lord, Lord Skidelsky, and my noble friends Lord Layard and Lady Smith have mentioned the past, but I want to do that in a little more detail. Do any of your Lordships remember 40 straight quarters of economic growth under Tony Blair—there, I have mentioned his name? There were 40 straight quarters of growth under Tony Blair. The UK entered economic recession in the second quarter of 2008 and—wait for it—left it in the fourth quarter of 2009. We then had three quarters of economic growth under Alistair Darling. Then we had the coalition.
A bit more history—if you google, “How did the economic crisis start?” or “What caused the economic crisis?”, you do not get the answer, “Labour”. It was born in the United States of America, and the answers you do get from various websites, whether the Economist or Accuracy in Media, are the reminder that we all need. The crisis had multiple causes, but the most obvious is the financiers themselves, and central bankers and regulators also bear the blame. We are reminded when we look at these sites of the terms “subprime mortgages” and “collateralised debt obligations”—CDOs. We are also reminded that it started in the USA, where a house price slump began in 2006. By 2008 in the United States, 6% of all mortgages were in default, which was three times the rate of the historical record. Risky loans were made under pressure—and, by heaven, they were risky, with no deposits and no verification of incomes.
Remember Fannie Mae and Freddie Mac, which were backed by the US Government? They were ordered to buy up these risky loans. The writing was on the wall. In the United States, attempt after attempt that was made to reform Fannie Mae and Freddie Mac was blocked by the Democrats. The Clinton Justice Department threatened banks with fines if they did not make the dodgy loans. This is all on the record. Clinton reduced Fannie Mae’s and Freddie Mac’s reserve requirements, leaving them, backed by the taxpayer, even more vulnerable when those dodgy loans started defaulting. This is all on the record.
The trust was lost the year before the Lehman Brothers bankruptcy. The first casualty of the American-led collapse in the UK was Northern Rock, which was saved by the Government—I fully accept that people might have lost jobs but nobody lost any savings, as it was part of the bailing out of the banks. Looking at these sites, we are reminded that, in the US and UK, regulators were asleep at the wheel. There was severe criticism of them for letting Lehman Brothers go when they did, as it simply multiplied the panic. In the US and the UK, the banks thought they had found a way to banish risk and, under pressure from shareholders, operated with minimum equity, leaving them vulnerable.
I do not see why my senior colleagues have allowed history to be rewritten. That is the reality, and that is my criticism of the shadow Cabinet, because it has been rewritten. The record of the last Labour Government on economic growth—getting us out of the recession before the coalition—is there for everyone to see, as is the new Labour record in respect of: the minimum wage; literacy and numeracy hours; NHS Direct; more than 2,000 Sure Starts; full-time workers getting 24 paid days holiday for the first time; 1 million pensioners out of poverty; 600,000 children out of poverty; 1 million social houses brought up to standard; free TV licences for the over-75s; free off-peak travel nationally for the first time for pensioners; free eye tests for the over-60s; free nursery for three and four year-olds; the doubling of pupil funding in England; the cutting of long-term youth unemployment by 75%; the cleanest rivers, beaches and drinking water since before the Industrial Revolution; and the New Deal getting 1.8 million back to work.
I could go on and on and on about the record of that Government, but the point is the Labour leadership should be going on and on about it. I fully accept that new Labour has moved on, but there is no reason not to tell the good story of what was achieved and to stop the rewriting of history. Of course there were mistakes—I was in government most of the time and know some of the internal mistakes that were made. The big, key one of course was the appalling lack of honesty and planning over the Iraq invasion. But come on, election victories came on the back of that record and can do so again—but only if we are prepared to remind people of the facts. That is the reality, but there is a self-denying ordinance: do not talk about new Labour, because of the Iraq war. Therefore, you do not talk about the leadership and the positive things that came from that Government. Then you allow history to be rewritten so that we get the blame for the recession. That is the reality, but we have time to turn it around, if they get their backsides off their seats. That is my view.
Now we have rising levels of inequality, for which I will give just one example. I am not pleased about the inequality but I am pleased that I chose this example before I heard that the Prime Minister had been booed by pensioners on the issue earlier this week. In the field of social care, there has been very unequal treatment. A report from the Joseph Rowntree Foundation last week, The Cost of the Cuts: The Impact on Local Government and Poorer Communities, showed that social care spending in the most deprived communities has fallen, in real terms, by 14%, but in the least deprived communities it has risen by 8%. The reality is that in the most deprived it has fallen by £65 a head—14%—and in the least deprived it has risen by 8%, which is £28 a head. The independent analysis by CIPFA shows that in the least deprived 40% of local authorities, funding for social care has risen, and in the most deprived 60% of local authorities funding for social care has fallen. People are seeing this as a blatant unfairness—no wonder the Prime Minister was surprised when he got booed by pensioners. He was boasting about the NHS and they said, “But you have cut social care”, because the two are interlinked and that is where the cut is now being felt, particularly with the substantial impact on poorer households. That is not the kind of society we should be creating.
I regret that I missed the beginning of the speech of the noble Lord, Lord Skidelsky, but his final point was—which is true and has been said before but has been denied by Ministers—that the attempt is to depress and close down the size of the state. That is what it is about—making a smaller state. The consequences of that are horrendous with the inequalities we already have. I think we should reverse that and we can do it on 7 May.
Lord Brooke of Sutton Mandeville (Con)
My Lords, it is a real privilege to follow the noble Lord, Lord Rooker. I am junior to him in entry to the Houses of Parliament, but it is always a pleasure to participate in a debate with him. The noble Lord, Lord Davies, must be very grateful to him. I shall stay mainly in Britain, although I have visited all the states in the United States except North Dakota and Nebraska, and I have been told that if I have done South Dakota in depth I do not need to hurry back.
The late Ian Wallace, the singer, had a party trick, much in demand at Christmas Day Matins, of singing the carol “The First Noel” to the tune of “On Ilkla Moor Baht ’at”. To borrow the cliché about singing off the same hymn sheet, which always reassures one that the Church of England is still alive, both sides in the Budget debate are doing this but one of them has the hymn sheet upside-down, and the Treasury never does that. As Paul Johnson of the Institute of Fiscal Studies characterised it, there is much truth in the numbers both sides are using but Mr Miliband is quoting gross earnings, whereas the Chancellor is quoting net income, which enables them to have a dialogue about the outcome. In Mr Miliband’s case, a top rate of tax down from 50% to 45% and tuition fees of £6,000 sound good but are in fact doing more for the rich than the poor.
Kipling did not write until 1906 his romantic poem, “A Smuggler’s Song”:
“Five and twenty ponies,
Trotting through the dark—
Brandy for the Parson,
’Baccy for the Clerk;
Laces for a lady, letters for a spy,
And watch the wall, my darling, while the Gentlemen go by!”,
but Pitt the Younger had lanced the Revenue’s excise boil in the 1780s by slashing the customs duties and in the process, in 1787, sustaining his newly launched Consolidated Fund with the duties that consequentially emerged in profusion from the shadows.
In column 782 of Hansard for 18 March, Mr Miliband poses the rhetorical question, “What about hedge funds?”, and since then his special adviser on private health funds has helpfully revealed that he must have been talking to himself. Mr Miliband implies constancy in policy but practises vacillation, although I agree that he does not go as far as UKIP, which has used a single saving in expenditure to fund a double-figure flood of new expenditure projects. The White Knight in Alice, who once invented a pudding during the meat course, would be a good candidate to be UKIP’s policy director. Finally, Mr Miliband said that the Chancellor of the Exchequer had not acted on tax havens, but the diverted profits tax was promised in the Budget Statement for legislation this week, to be brought into effect next month.
On another front, 2015 has seen a marked increase in the number of sightseers in the Royal Gallery, looking at Maclise’s painting of Wellington and Blücher on the evening of Waterloo. I am not yet clear whether, when the Chancellor gave public largesse towards repairing the buildings at Hougoumont on the field of Waterloo, where the Brigade of Guards saw out Waterloo’s “livelong day”, he was aware that his own namesake, George Osborne, had been the lead figure in the first half of Thackeray’s “Vanity Fair” until his fictional death on the field of Waterloo in June 1815.
As it has just been announced that the living quarters at Hougoumont, which are suitable for four people, are to be managed as a holiday let by the Landmark Trust, this brings us neatly to one of the pressing questions of the hour; namely, the supply of new housing, where there is still a chronic shortage. The demand side does not currently need encouragement, which might even be counterproductive. Of course, the creation of the first 20 housing zones is encouraging on the supply side but they are not the total answer and we still sigh for the 300,000 houses, mentioned by the noble Lord, Lord McFall, which Harold Macmillan and Percy Mills orchestrated annually in the 1951 Administration. But there were bomb sites to build on then and by now we are the second most highly populated member state of the European Union after Malta.
The dilemma of new space for building adds ironic exacerbation to the issue of the contribution of immigrants within the construction industry. Immigration strains education and health provision in the community but, ironically, it adds to housing demand as well—although working in the industry, they have to have homes themselves. There are no easy answers and UKIP’s responses are unreal as well as unreliable. Happily, and not least because of the presence of the particular Treasury Minister on the Front Bench this evening, infrastructure has been a persuasive magnet in forward planning for the next five years, not only in the comprehensive strategy for the north but in south Wales and the south-west.
I will conclude with a final issue that has not been given front-page billing by either side in the overall argument—the crux of productivity growth, which is always the joker in the pack but is also a hidden complication when even greater employment than the current figures, which Martin Wolf rightly described in the Financial Times as “stunning”, is still looked for. I served my last Parliament in the Commons during Gordon Brown’s first Parliament as Chancellor. I knew that productivity growth, like higher education, was one of his favourite feeding pastures and in consequence I used to put the subject down as a monthly item for Treasury Questions, which incidentally provoked him from time to time into contradicting whoever was his Chief Secretary at the time. But I hope that in the next Parliament it will soon receive more attention. I imagine that what the Budget Statement calls,
“the biggest increase ever in the apprentice rate”,—[Official Report, Commons, 18/3/15; col. 768.]
will make a step in the right direction and a modest contribution to productivity growth, but I have not yet embraced the specifications of what is called the “new national energy catapult” announced in Birmingham, which sounds as though it would have pleased Boulton & Watt.
To end on a similarly appreciative personal note, the House of Lords Library has done its habitual miracle by distilling in a comprehensible form the raw Treasury data into a Library briefing pack for this debate. We are all in its debt.
Lord Whitty (Lab)
My Lords, I very much agree with the remarks of the noble Lord, Lord Brooke, on housing. I do not claim I will be able to match the erudition of the rest of his speech, however.
I was provoked into speaking in this debate by sitting through the whole of the Chancellor’s performance the other day. It was an amazing performance, full of new-found self-confidence, chutzpah, ringing phrases and even a few quite good jokes. But the one thing that was clear about it was that we are in an election period. I, therefore, have to abandon my normal consensual approach in this House and make it clear that I also am in an election period and that that election needs to be fought largely on the economic battlefield.
The speech, although showing a commendable Stalinist commitment to a long-term economic plan, was very tinkering. The Budget did not amount to very much; as one commentator put it, it was a good day for drinkers and a good day for the manufacturers of smoke and mirrors. Apart from that, the speech was, as my noble friends Lord Rooker and Lord Layard have already spelled out, a complete distortion of recent economic history. Indeed, arguably the most successful aspect of the Chancellor’s economic strategy has been to convince the media and large sections of the population—as my noble friend Lord Rooker says, even some members of the Labour Party—that the economic crash of 2008 was entirely due to the last Labour Government’s public spending profile. Never mind that the crisis started in America; never mind that it hit every western country; never mind that prior to the crisis Britain was relatively low in ratios of both debt and deficit to GDP; never mind that it was primarily a crisis of a corrupt banking system that, at the time, the then shadow Chancellor was arguing was far too overregulated; never mind that it was therefore a crisis of private debt, not public debt, and it was the state that had to bail out the financial sector. The Chancellor’s thesis appears to be to blame the cure and not the acute disease of the banking crisis.
If that position were just propaganda, we could probably live with it. The problem is that the Chancellor clearly has believed over the last few years quite a lot of his own propaganda—always a pretty dangerous thing for politicians. For the first three years of this Government, Budgets appeared to reflect that propaganda, and, with it, the nascent economic growth that we were beginning to see in 2010 was stalled and reversed at huge cost to many parts of the economy. Infrastructure spending was the first to go; public services, particularly local authority public services, were cut; housing spending was cut. The continuing lack of recovery, which the Chancellor was blaming on problems in the eurozone and commodity prices, was actually due to the deliberate decisions and austerity programme of the Government.
It is true that, after the rather disastrous Budget of 2013, the Chancellor appeared to panic and change direction a little. Thankfully, we have had some recovery. But most of that recovery is despite rather than because of the Chancellor’s ministration. After all, capitalist economies inevitably are cyclical and eventually there is always a recovery. But the recovery that the Government and the Chancellor are crowing about has, in reality, been the longest coming recovery from a depression in a century, and the nature of the rising tide that is now thankfully here is not one that has raised all the boats at the same time—it is a very unbalanced and divisive recovery. Nor is it really attaining major improvements in economic efficiency. As others have said, our basic productivity rates are behind most of our competitor nations and are very sluggish. Low productivity both causes and reflects the situation in the labour market of low pay. Yes, jobs have been created, but most of the new jobs are at relatively low levels of real pay and most workers have still hardly had a rise in their real wages under this Government. Many of the jobs are highly insecure as a result of a deregulated labour market with a weakened ability to enforce the rights for workers that still exist as they are watered down and access to justice is denied or priced out.
The recovery is deeply divisive: divisive between rich and poor; between old and young; between different parts of the country; between the south-east and the rest of the economy. Only in this last Budget has the Chancellor begun to recognise that the south-west and the north need substantial infrastructure investment. The recovery is socially divisive between those who have paid off their mortgage or are close to doing so and those who are forced to rent in the private sector, trying desperately to get on the housing ladder, or live in social housing. Indeed, this Government appear to wish to see the abolishment of social housing altogether. I have often warned this House that the housing crisis is perhaps the greatest economic disaster, as well as social disaster, that we are faced with, compounding dysfunction in all forms of housing tenure, with families with a head of household who is under 40 facing a continuing prospect of inadequate and overexpensive housing. This is particularly the case in London, but it affects many other cities and many villages and towns in our rural areas. Unfortunately, the Chancellor’s response has been simply to underwrite more pressure on the demand side and do nothing to increase the supply side of new housing. The inevitable result of this is an escalation in the housing benefit bill. More generally, the escalation in welfare payments is a reflection of the low incomes of in-work families and not a result of skiving or people trying to avoid their economic obligations to the rest of society.
The Chancellor’s record is one of nearly four years of unnecessary cuts followed by one year of unequal and divisive recovery—and what does he promise us for the next few years? Pretty much the same: three years of deeper cuts, with a bit of relaxation post-2018.
Others, more informed than I, have talked about the problem of defining economic success in terms of the deficit and debt. The current level of debt, around 80% of GDP, is about the average for the last 200 years, as my noble friend has said. The deficit needs to come down, but not at the expense of economic performance. The repayment of debt depends on the cost of that debt and on the timetable for the repayment of it. If they are manageable, then the debt is manageable. That is indeed the UK’s case. We are not Greece and we never have been, despite the Chancellor’s propaganda. Closing the deficit depends on increasing the income to the Exchequer, as well as controlling expenditure, and that in turn requires a growing economy, not a further round of harsher public sector cuts and the prospect of another five years of a rollercoaster economy. There must be another way. This side of the House will support another way.
Lord Taverne (LD)
My Lords, it is a long time since I spoke in an economic debate. My reason for speaking today is my deep disappointment with the Budget. I respect George Osborne, who does not normally seek cheap popularity. He has depth and stamina and is not a PR man, unlike some other senior figures in the Government. But his Budget boasted about our economic success. If one looks at the record, one will see that boasting reveals a certain degree of complacency. At one time, I was a non-executive director of some major companies. I found the companies that kept declaring how excellent they were to be generally mediocre. The really good British companies were self-critical and concentrated on improving their weaknesses, not on boasting about their strengths.
In fact, our economic record since the crash of 2007 has not been brilliant. There has been progress, but our recent recovery is based on some very shaky foundations. Perhaps the most serious deficit we face is a huge trade deficit, which means that we depend precariously on the inflow of hot money. According to the IMF, the current account deficit is some $120 billion, the largest of any OECD country and three times that of France, with which Osborne compared us so unfavourably. The inflow of hot money, that is excluding capital for portfolio investment in companies and property, is some $210 billion. Our dependence on this fickle form of capital is greater than that of any other major country and it could flow out very rapidly. For example, after the election we are committed to a referendum, and polls show that there is a real chance of Brexit. That could be an economic disaster.
Why can we not pay our way? Because we are not competitive. Indeed, we are pretty well bottom of the league of major countries in the growth of productivity—on which, in the end, as many speakers have mentioned, prosperity depends. Our GDP per head is still 0.5% below what it was in 2007. Productivity has recovered much faster in the United States, Germany, Japan and—please note, Mr Osborne—in France.
Furthermore, the monstrous inequalities in today’s Britain have increased. More people are in jobs, that is true, and unemployment has fallen—good—but at the cost of a major decline in wages, the biggest in more than 100 years. There is now some recovery, but it is very slow. At the same time, top executive pay has been rising by more than 10% a year while wages have suffered.
For that, there is no justification, moral or economic. Inequality does not improve growth or productivity, and of course it undermines a good society. Two of the most important books that I have read in the past decade are The Spirit Level, by Wilkinson and Pickett, and Capital in the Twenty-first Century, by Piketty. The first shows that the most unequal countries are also the most socially dysfunctional. Piketty traces the rise and fall and rise of inequality in the United States, Britain, France and Germany and explains that it is due to the fact that generally, return on capital grows faster than the growth of GDP. Hence, the owners of capital, the rich, grow richer. He also shows that the post-war years, when, through progressive policies, inequalities were reduced in all those countries, were also the years of fastest economic growth. So much for the need to pay chief executive officers and bankers millions a year so that we can be better off or to pay bankers huge bonuses to stop those who helped to bring about the crash being recruited abroad for their unique skills.
Conservatives favour shrinking the state and tax cuts. Tax cuts mean crippling public services. Apart from anything else, it is foolish for Mr Cameron to pledge no VAT rise. He could reasonably say that he sees no present need for an increase in VAT and has no present plans for it, but why tie his hands with solemn pledges when he does not know what crises may be ahead?
Anyway, it may be unfashionable, but in my belief, in present circumstances tax cuts should be the lowest priority of policy. I am with that great American lawyer Oliver Wendell Holmes. He not only dominated the Supreme Court for 20 years after his appointment at the age of 72—which is a good example for those of us of riper years—but declared that paying taxes is the price for a civilised society. Amen to that.
Viscount Hanworth (Lab)
My Lords, you can fool all of the people some of the time, and you can fool some of the people all of the time, but you cannot fool all of the people all of the time. If we take as our evidence his Budget speech of last Wednesday, this is a nostrum of democratic politics of which George Osborne seems to be in denial. Indeed, he seems to have forgotten it completely.
The Conservative Government have had almost five full years in which to observe the developments within the modern British economy and to take the necessary steps to correct its most dysfunctional aspects. Instead of addressing the most prominent problems, the Conservatives have been fanatically pursuing an atavistic political and economic agenda which they have inherited from a previous Conservative Administration: that of Margaret Thatcher, which lasted from 1979 to 1990. The Conservatives under Margaret Thatcher sold council houses without any replacements. They privatised many previously publicly owned industries. They sought to defeat the power of working people that was vested in the trade unions and they oversaw a prolonged period of industrial decline.
That Government also unleashed the financial sector by deregulating its activities with consequences that eventually came to a head in 2007 in a major financial crisis. During Thatcher’s period as Prime Minister, the Conservatives sought to effect a major redistribution of income and wealth in favour of the already prosperous classes. Perhaps the most extreme example of Conservative measures of redistribution occurred in 1988, when the top rate of tax was reduced from 60% to 40%.
The present Government have had the same intentions as their forebear, but they have had less room for manoeuvre and have been weakly restrained by the coalition partners, the Liberal Democrats. Most of the leading publicly owned industries and utilities had already been privatised, so this Government have had to apply their privatisation policies elsewhere. They have applied them to agencies that have been responsible for some basic social provisions.
On the national level, privatisation has extended to the Prison Service, the police force, labour exchanges and education. A major privatisation of our National Health Service is now well under way. At local level, the budgets of councils have been slashed and they have been compelled to hand many of their functions to private enterprises. We have seen the emergence and rapid growth of a new class of unregulated private monopolies, which have assumed the role of the public service providers. Some of them have been notoriously inefficient and exploitative. They include such giant enterprises as Atos, Capita, Serco, G4S and the notorious A4e, which, notwithstanding disturbing allegations of malpractice, continues to gather contracts from the Government.
The ideological justification for employing such agencies to provide public services has been the supposed superior efficiency of private enterprise when compared with that of the public bodies that they have replaced. Even a cursory examination of their activities will show that their operational efficiency has often been dire. However, the concept of efficiency that has been espoused by the Government encompasses the cost savings available from reducing the number of employees and their rates of pay. Contracts of employment that would not have been tolerated when the unions were a force to be reckoned with are now commonplace. Rates of pay in many occupations have been falling drastically at a time when remuneration of high earners has been rapidly increasing.
The Government appear to be satisfied with such an outcome on the grounds that a cheap labour force coupled with high rates of profit and of salaried remuneration are factors that will render the UK attractive to inward investment from abroad. Inward financial investment mediated by the City of London has become a vital factor in averting what would otherwise have become a major balance-of-payments crisis.
The process of the deindustrialisation of Britain, which accelerated dramatically in the era of Margaret Thatcher, has proceeded apace. In 1979, manufacturing in the United Kingdom contributed 25% of GDP, and it contributed largely to our export earnings. In 2010, manufacturing accounted for only 12% of the country’s national output. Its decline has been greater than in any comparable western economy.
The inward financial investment, which has averted a balance of payments crisis, has added nothing to our manufacturing capacity. It has found its way into purely financial assets and into residential and commercial property. Much of it has been devoted to the acquisition of company ownership via hostile takeover bids. Water companies, power companies, airports and banks have been among the many enterprises that have fallen into the hands of foreign investors.
The high-tech industries that continue to emerge in Britain have been particularly prone to hostile takeovers. Their vulnerability can be attributed to a number of associated factors and circumstances that serve the interests of our financial community and their political allies within the Conservative Party. Foremost among those are the rules of corporate governance that facilitate mergers and acquisitions to an extent unparalleled anywhere else among western economies. Britain’s financiers profit hugely from mediating the sale of British companies to foreign buyers. In seeking the finance for expansion, our small and medium-sized enterprises in the UK cannot rely on the commercial banks, which are the main source of industrial finance in other countries. Instead, they must rely upon either retained profits or stock market flotations. Because shares in such companies inevitably entail voting rights, a stock market flotation renders a company prone to the sorts of takeovers that have been bedevilling our manufacturing enterprises.
The inwards foreign investment that has delivered our nation’s assets into the hands of foreign owners has also sustained the high value of the pound. For many years, our overvalued currency has made it difficult for our manufacturers to export their products, which has exacerbated our current account deficit. The Government have done nothing to amend this circumstance, which is now severe. They have done little to restrain the depredations of our overgrown financial sector. They have failed to compel our banks to provide funds to British manufacturing enterprises.
It is extraordinary that in such circumstances George Osborne has been able to declare in his Budget speech that,
“Britain is back paying its way in the world today”.—[Official Report, Commons, 18/3/15; col. 770.]
He has talked of reductions of deficits as if they were reductions of indebtedness, which is increasing in all our national accounts. The Government’s finances have a heavy reliance on the inflated taxes from the financial sector, and their revenues collapsed when the financial sector collapsed. The Chancellor has done much to encourage the revival of the financial sector. He has done nothing to aid the recovery of other sectors of our economy or our society. The Government have been serving the interests of a very narrow sector of our society, and the British electorate will not be fooled for much longer.
Lord Freeman (Con)
My Lords, I want to concentrate on the impact of the Budget and the Autumn Statement on pensions and savings. I very much welcome the initiatives that have been taken, not only by the Chancellor but by the excellent Pensions Minister in the other place, Mr Steve Webb. The noble Lord, Lord Deighton, is going to sit through some three and a half to four hours of debate, so I am not expecting a response, but I would be grateful if he would draw my brief remarks to the attention of the Minister, for whom I have a high regard.
The first point that I want to cover is the taxation of savings interest. This may not sound a very dramatic change, but for a large portion of the population it will have a significant effect because what is proposed, which I welcome, is a tax-free allowance on interest from 2016. Although it is limited to the first £1,000 of savings, it will benefit 95% of savers—that is, 17 million people in this country taken out of tax. The tax-free interest will affect the basic rate of taxation. We have very low interest rates. Those who have looked at their bank statements recently will realise that one is earning something like 1% on bank savings so this elimination of tax, although it may not amount to very much, will be welcomed by many. In due course, I hope that there will be a further extension of this concession in taking savers out of tax.
My second point concerns the cashing-in of savings, typically from defined contribution schemes where people have been saving, perhaps with the assistance of their employers or themselves, into pension schemes. These are typically defined contribution schemes, as opposed to the defined benefit schemes run by the large companies in this country. The Chancellor announced a relaxation in the Autumn Statement, and now again the Budget Statement, which will be subject to legislation, on the rules governing the drawing-down of moneys in savings in these pension pots, although the drawings-down will of course be subject to tax. There is also the trading of annuities, which I very much welcome, although clearly there are issues here which require careful advice to those who are either considering selling their pension or wishing to trade the stream of annuity payments. It is very important that there should be proper care and advice given to those who take advantage of this welcome relaxation.
I start from the principle of trusting the people—those who will receive this benefit—but there has been a lot of cautionary press. Indeed the Opposition, in a recent debate, cautioned about exploitation by those who might offer erroneous advice to pensioners who wish to cash in their pension pots. We need Pension Wise, the new organisation which in literally a few days’ time is to take responsibility for advising pensioners on the use of their funds, to be properly staffed. I suggest that your Lordships’ House have the chance to debate after 12 months the record of the advice given, and any instances of exploitation or bad advice given to people who might not be financially expert in looking after their savings. I hope very much that there will be a report back to Parliament within the first year, or at least after the end of the first year.
Perhaps I may deal briefly with the lifetime allowance for maximum savings with tax relief. It is to be reduced from a pension pot which can be built up, with certain tax reliefs, to £1.25 million—it sounds an awful lot—to a pot of £1 million in 2016-17 and indexed thereafter. However, there is a warning here. If a husband has a spouse and the inflation arising is eating into any payments that come from drawing down those savings, then one journalist estimated quite recently in the press that drawing down £1 million, subject to tax but with a spouse and with necessary inflation-proofing built in, would amount to something like only £30,000 per annum in a pension from the age of 65.
Finally, I want to deal with defined benefit schemes, which are run by the large companies and corporations in this country. A particular problem at the moment is that the very low rates of interest used to discount the liabilities, both gilt rates and corporate bond rates, are such that there are rising deficits in these big pension funds. This is not only in former nationalised industries and large corporations; they cover perhaps well over 50% of those employed in industry and commerce. The impact of these bigger deficits means that companies have to transfer cash into the pension funds to make sure that they have sufficient funds to pay out the pensions. This is causing great concern and I hope that, in due course, the Chancellor can make a Statement on this.
That is all I wish to say, except to repeat the one key point which I hope that the Minister will convey to Steve Webb, the Pensions Minister. I hope that your Lordships will have an opportunity, at least after the first 12 months, to look at the record of these greater freedoms on the population and whether they have been abused by improper advice.
Lord Graham of Edmonton (Lab)
My Lords, I am pleased to have the opportunity of speaking in this debate. Having asked the Minister to note that I intend to speak on my pet subject of mobile homes and the attention paid to it by the Government, I confess to him that I will not be able to stay here until the end of the debate because I am not well. But I am obligated to make one or two points.
I thought that there would be a fair bit in the Budget Statement on housing. Although the Government have lots of plans for housing, there is very little direct reference to it in the Statement. When I asked for the Treasury background papers, I found that a great deal has been put in train on housing by the Government, and that relaxed me a little bit.
In an earlier debate on mobile homes, I relied on information received that Mr Henry Morrison Junior had practised what was called “sales blocking” on his park at Welford-on-Avon, Warwickshire. This practice has disappeared, largely as a result of the 2013 Act. Mr Morrison wrote to me saying that he had never taken part in such actions. I immediately wrote to him, apologised and promised to express my withdrawal of any allegation of such a policy. He has my full approval to use this apology, and I reiterate my regrets and apologise unreservedly. I want to put that on the record.
Very often, parliamentarians are written to by interest groups with their point of view. There are one or two who do so in respect of park homes: Sonia McColl, who is very active in the JUSTICE campaign; Mr Tony Turner, who represents a group in Cornwall; and others. I rely completely on them. In the main, what they send to me has already been sent to the Minister. Therefore, all I want the Minister to do is give me an assurance that he will draw the attention of his parliamentary colleagues to what I have got to say.
The matter deserves attention. There was a phrase that was used by the Government some time ago: “We’re all in this together”. Well, some of us are more in it than others. I think that people who live in mobile homes are getting the short end of the stick. Most of them are aged; most of them are infirm; most of them rely on the good will of the site owner—and many of the site owners can be castigated. The mobile homes population is well looked after not only by the organisations that I have mentioned but by other people, too.
What strikes me is the gap between what the establishment says and what those representing residents experience. Let me illustrate that in the following way. From a small sample, the JUSTICE Campaign, so ably led by Sonia McColl, tells me that police were “wonderful” in Cornwall but that in Arun District Council they were not. The police were helpful in Bracknell, but action was not taken on complaints to the police in east Hertfordshire. No police action was taken in north Somerset, but it was taken in Maidstone. Police were helpful in Test Valley, but in Sevenoaks they said that it was a civil matter and not a criminal one.
That reminds me of a case that was investigated. Inspector Colquhoun of the West Mercia Police was instrumental in making inquiries. One night, a group of men deliberately set fire to two mobile homes on a site. They were caught and they were sentenced, eight of them, to 64 years in prison—so you can see the seriousness of the matter.
Sonia McColl provided a document known as the “name and shame” list—the Minister already has this information. Twenty site owners are on the list. One owner had 13 parks with 120 homes; another had three sites with 118 homes; another had four sites with 234 homes; another had eight sites with 417 homes; yet another had two sites with 67 homes; another had 17 sites with 1,000 homes; and yet another had 43 sites.
I have with me a newspaper cutting which draws attention to the fact that, in the matter of council house sales, a man and his wife in the Ashford area own 1,000 homes. They have bought them and are renting them out. They are thinking in terms of selling their portfolio, which is estimated to be worth millions of pounds. There is something wrong in the field of housing when that sort of situation can take place.
In the time that I have left, I will simply refer to what other councils are doing. In Cornwall, they issue a document to every resident of a park home. The Minister will know that there is a gap between the activities of the ministry concerned and the effective dissemination of the information to the residents. It is not easy, but it needs to be improved.
Last week, Sarah Wollaston, who is chair of the Health Committee in the other place, asked the Secretary of State for Communities and Local Government how many local authorities had,
“revoked the licences of park home site owners who have breached their site licences more than three times in the last two years”.
The Minister had to say that the Government had no information about this activity. My point is that direct action needs to be taken against site owners who have been taken to court and dealt with, yet who refuse to comply. The written statement which governs these things lays down obligations and responsibilities for the site owner and the applicant. I see that the Whip on duty is smiling at me and he does not do that very often. I know what the smile means, so I will sit down.
Lord Bilimoria (CB)
My Lords, the Government are very proud of the good things in the economy at the moment. As the Minister said in opening the debate, we have low inflation, low interest rates, high employment and growth figures et cetera, but, as he said, it is austerity to prosperity, and he admitted frankly that productivity is too low and the deficit too high.
Earlier this month, my noble friend Lord Low held a debate which I chaired. The motion was:
“This house believes that the Government’s deficit reduction plan involves cutting the deficit too far and too fast”.
The noble Lord, Lord Skidelsky, was present as well. We had Jonathan Portes, the well known economist, Simon Wren-Lewis, professor of economics at Oxford University, Roger Bootle and Doug McWilliams—all very well known economists. When the motion was put to the vote at the insistence of the noble Lord, Lord Skidelsky, it was carried quite comfortably. The point was made, as the noble Lord, Lord Skidelsky, has mentioned in the debate, that the calculations are that if austerity had not been as severe as it was, the growth rate could have been 5% to 10% higher over the five-year period. One needs just to do the sums to see the difference that that would have made. On the other hand, austerity has created confidence in the global financial markets and we have the security of a lender of last resort in the form of the Bank of England.
The Chancellor has, on the one hand, shown his commitment to long-term prosperity for the economy by sticking to the austerity agenda, but, on the other, he has not had the guts to invest in what will make this country truly competitive and increase the productivity that so many noble Lords have spoken about. For example, where in the Budget is an increase in investment in higher education? We invest less by far as a proportion of GDP than the United States, the EU average and the OECD average. This Labour proposal to reduce tuition fees to £6,000 is a red herring. What we need is more investment in higher education. What about investment in innovation? Where in the Budget is the major investment in R&D and innovation? Once again, we as a country invest way below the United States, the EU and the OECD average as a proportion of GDP. The patent box is tinkering at the edges. How can we get businesses and universities to invest more in innovation? Will the Minister tell us about that?
What about tax rates being competitive? A brilliant thing the Government have done is to bring corporation tax down to 20%. It is one of the best things they have done, attracting inward investment and making our companies more competitive. On the other hand, the Government do not have the guts to bring the income tax rate down to 40%. In his enthusiastic speech, the noble Lord, Lord Rooker, spoke about the catalogue of achievements of the Blair Government. It was the Blair Government who carried on with 40% rate of tax, until it was increased to 50%. It was the Blair Government who reduced capital gains tax to 18%, which was hugely competitive, while entrepreneurs’ relief was 10%, encouraging wealth creation, prosperity and tax competitiveness. On the other hand, the Labour Government’s mistake was to increase public spending to nearly 50% of GDP. This Government want to reduce it to 36% of GDP. I still believe that will require unrealistic and drastic cuts in the welfare state and the NHS, which make up a huge proportion of our public spending. Will the Minister explain how the Government are going to achieve that drastic cut? As the Chancellor said, the EU has 7% of the world’s population, 25% of its economy and 50% of its welfare spending. In the Chancellor’s words, we cannot go on like this. Will the Minister explain what he is going to do?
When it comes to defence, the Government refuse to commit to the 2% of GDP NATO commitment. Will the Minister commit to it? The SDSR was negligent. We do not have our Nimrods, which we now need with Russian submarine incursions. We have no aircraft carrier capability for Harriers, which we have needed several times over the past five years, let alone now with the threat in the Falklands. For one of the strongest defence countries in the world to have no carrier capability for a decade is negligent. The Army cannot even fill Wembley, which is negligent. The security of our country is our number one priority. We have physically destroyed the Nimrods and depend for carriers on the French—on the 200th anniversary of the Battle of Waterloo. Will the Minister tell us whether the back-up from the French has been effective?
When he speaks, will the noble Lord, Lord Davies, speak about Labour’s policies? We hear about the dangerous policies: the mansion tax; raising income tax to 50p; increasing corporation tax by perhaps up to 6%; employees sitting on boards of companies’ remuneration committees; employees being given first refusal when a company is sold; and employees being given a share of companies’ profits. To an entrepreneur and a businessman, these sound like real communist measures, and we know how successful communism has been. The business community has genuine concern about the leader of the Opposition and his care for, knowledge of and familiarity with business. He has missed out business in many major speeches. Will the noble Lord on the Front Bench confirm that these Labour measures will be implemented?
What about the SNP? The leader of the Opposition says he will not go into coalition with the SNP, but what if the SNP props up a Labour Government? It wants to get rid of Trident, our nuclear deterrent. Would the noble Lord, Lord Davies, agree with that? Increase public expenditure and you have the nightmare scenario of Labour being propped up by the SNP. It reminds me that in the middle of the financial crisis, my fellow Fellow of Sidney Sussex College, Cambridge, Desmond Tutu, looked up and said, “Oh God, we know you’re up there, but can you make it a little more obvious?”.
It is a question of balance. Britain is number two in the world in inward investment. We have to protect that, and Governments have not been able to. If you look at the graphs in the Budget reports, Governments have not been able to balance their books. Public spending at 40% is the best a Government can achieve. That is what we should target, and getting a 40% tax take. With regard to debt interest, servicing it alone takes 2.5% of GDP. Will the Minister tell us what the plan is when debt interest goes up? How will the Government deal with that amount of more than £50 billion?
The Office of Tax Simplification is an oxymoron. Simplification of tax collection is in this Budget, but the tax code is still 11,000 pages long. There are huge issues here. As chancellor of the University of Birmingham, I chaired for the first time the university court and the university annual meeting. I was able proudly to say that it is a billion-dollar institution. It has revenue of more than £500 million, a healthy surplus, a healthy cash position and, most importantly, a £300 million infrastructure investment programme over the next five years, with a state-of-the-art swimming pool, libraries, a dental centre, new student accommodation and all the things that make it attractive to inward investment in terms of students and academics from around the world. If only our country could balance its books in that way and have an investment programme in the future, we would be able to get high productivity, get the deficit down and get our debt down.
Lord Hunt of Chesterton (Lab)
My Lords, it is a pleasure to follow the noble Lord, Lord Bilimoria. I slightly wonder what country he was talking about, given all the things he referred to, such as worker participation in companies, which the British helped to introduce in Germany after World War II.
This debate should be an opportunity to talk about the economic policy and future prosperity of the UK. I declare my interests in one or two companies. As other noble Lords have said, the speech’s historical analysis seems slightly deficient. There was clearly an enormous crisis, which was not made in the UK. After the crisis, countries responded to it in different ways. Some, such as the United States, immediately stimulated their economy, while others, including the UK, were flat. If you compare the process of coming out of a slump or a crisis to walking up a mountain, there are two ways of doing it. One is to find a nice gentle slope to the top of the mountain, which America did, and the other is to go absolutely flat and then find the steepest place to climb. Obviously, while you are climbing up the steep slope you are climbing more metres per second than those on the gentle slope and then, as the Government keep saying, for one year you do better than other countries. It is a strange kind of geometrical definition.
The important point is that, for most countries, the fundamental aspect of the economy—nobody has really talked about this—is the ownership of the country’s main businesses and the economic relationships with other countries. Neither was really mentioned in the Minister’s speech or, indeed, in the Chancellor’s speech. Financiers in the public and private sectors in the UK do not seem to regard the ownership issue as important. Indeed, the City and the Treasury relish every opportunity to sell off what remains of the UK’s large industrial businesses. We read articles saying that this is a bad month because we not selling off any industry. We have seen this with more and more of our major industries in the UK. In aerospace, Airbus is taking more control. In trains, we have now sold off the Channel Tunnel, where we had a successful public sector. I was talking to a significant manager in the nuclear industry, who said that all nuclear work here is now owned by foreign countries. We have a nuclear programme, which is very welcome, but it is all owned by other countries. We had major world industries in motor cars, electrical engineering and chemical engineering. The noble Lord, Lord Taverne, raised this question: if we lose ownership of all these companies and lose the entire strategic planning of this country, how can we possibly become a world-class country working around the world?
UK engineers and scientists—I declare that I am an engineer and an honorary fellow of the Institution of Civil Engineers, which is where I have had these conversations—recognise that if the countries which own these industries are abroad, that is where the important, interesting design is taking place, such as Hitachi’s nice train which will arrive here. Who did the design? It was done in Japan. Are we going to build them? Yes, but all the design was done in Japan. Of course, there is one way—I have debated this with the Minister before—which is for us sometimes to have a golden share, and then of course we have control, as with Rolls Royce. Why is there only one company with a golden share? We want lots of golden shares, and then we would operate around the world.
This year, of course, we had the near catastrophe of losing AstraZeneca, a major pharmaceutical company. I am glad to say that now, with the help of other European countries, that remains in the UK and will provide a tremendous opportunity for research and development here, and indeed for operating round the world.
Where, then, is the mentality? One Minister, in a very excitable debate—I will not say who it was, as he might be embarrassed—got more and more excited and said, “The thing about this country is that we want to be the corner shop of the world!”. I think he made a Freudian error there. But that is exactly the point: the Government do think this is the corner shop of the world, not the workshop of the world, and that is the problem. It is about internal vision. The Treasury simply does not mind at all, as far as I can see. However, the Government do not seem to realise that if you do not own any industry, you do not control what you make and what you do. That is a logical point that other countries, such as France, Germany and America, understand.
Equally depressing in the Chancellor’s speech—and, I am afraid, in the speech of the noble Lord, Lord Deighton—was the absence of vision about the importance of the UK continuing to be at the heart of development of the European economy. The inwardness and short-sightedness of the Budget speech was breathtaking in that respect. However, two evenings ago I was fortunate enough to hear the vision of the new Commissioner for Science in the European Commission, Mr Moedas, an engineer from Portugal. He called for the continuing role of the UK, with its extraordinary science and technology, in Europe, but he was too polite to mention that the UK is not in the lead in R&D investment as a proportion of GDP. Therefore, it is very important that we remain in Europe; perhaps the Minister might refer to that in his wind-up.
My final point is on the Government’s support for small and regional industry. I welcome the emphasis on working in the regions and the greater development of the regions. It was of course not mentioned in the Government’s speech that after they came to power in 2010 they got rid of the regional development agencies. After some havering, they have now introduced the local enterprise boards. From a major speech last week by the leader of the Labour Party, we know that there will be no going back when the next Labour Government come to power. They will continue with the local enterprise partnerships, unlike their predecessor, who gave the bad example of immediately throwing that up.
However, I give credit to the present Government, who kept on with the Technology Strategy Board; they have now changed its name to Innovate UK, but that is fine. I am afraid, however, that there is no indication that the UK understands that it will not have its own world-class industrial companies unless there is significant investment in the UK ownership of those companies. Maybe the only way to do that is with the famous golden share, in which case we need more of those. Finally, it is important, as the noble Lord, Lord Taverne, said, that this should be the way we have a strong export sector, because at the moment the balance of trade and productivity problems are rather severe.
Lord Flight (Con)
My Lords, voters in this country understand that the Government have done a pretty good job in bringing the economy back after the worst depression since the Second World War. I will only make the point that, first, it was that much worse here than in most of the European countries because of the importance of the financial sector; and secondly, one of the main reasons for the decline in 2010-11, as Professor Collins pointed out, was the mistaken reduction in the money supply in 2009, which was exactly the wrong monetary policy for that time. For the past five years, the fiscal monetary mix has been about right and the austerity Keynesian mix has been about right. As I have said before, there has been a greater explosion of entrepreneurial activity, particularly in new, high-tech industries, than I have ever known or seen in my lifetime, not just in London but all over the country.
To some extent the savings rate overlaps with some of the excellent points made by the noble Lord in his speech. The savings rate in this country has been significantly too low for at least 20 years, if not since the Second World War, which has led to two different sorts of problem. The first is completely inadequate provisioning for retirement and care home expenses going forward, which, sadly, contrasts with Britain having been the leader on pensions and retirement saving in the 1980s. An average pot of some £230,000 is needed to provide the standard two-thirds of income in retirement. The average size of the pot is now only about one-tenth of that. The tipping point will come in 20 years’ time when retirement incomes will start to fall materially. Therefore, without more saving, there will be a big problem down the line.
The second is the economic and strategic impact, to which the noble Lord, Lord Hunt, drew attention. Whereas we were a major creditor nation, owning a lot more around the world than the world owned of us, 25 years of current account deficits totalling some £700 billion on a cumulative basis have been financed by selling off assets, such as businesses. We cannot do Hinkley Point without the Chinese and the French. The strategic loss showed up first in the utility sector, but it is dangerously spread across too much of our economy, as the noble Lord, Lord Hunt, pointed out. Even here in London, one of the reasons why young people cannot buy houses in central London is that 49% of them are owned by people from abroad and an astonishing 49% of City property is now internationally owned. We got away with doing that for a long time. We discovered in the 1980s, following the ending of exchange controls and a floating exchange rate, that current account deficits, which had been such a big issue previously, got funded automatically by capital inflows. I am certainly not against the abolition of exchange controls, and I believe in open markets, but if you have an inadequate savings rate, what has happened here is what will happen. The Government still spend £90 billion per annum more than tax revenues and the household debt to income ratio is up to 172%, which is higher than it was in 2007-08. The savings rate now is about 3%. We need a savings rate of at least 10% on average to be in a more balanced situation. Never forget that savings equals investment, so one of the reasons why investment has been inadequate and productivity growth has been disappointing has been lack of savings. In summary, Governments can borrow other countries’ savings for quite a long time and, as it were, get away with it, but it eventually comes home to roost, and we are now at that stage.
There is some good news. Between 1997 and 2010, four-fifths of growth came from consumption and only one-fifth from investment. Since 2010, investment has increased four times faster than consumption. Last month we had the best current account deficit for 15 years. Auto-enrolment is still in its early days but there is scope for contributions from employer, employee and government to increase and lead to a reasonable accumulation of pensions. The need is perhaps less than forecast because it is very clear that many people do not want to retire as they enjoy the companionship of work. Indeed, if we go back to the late 1990s, some 80% of the total increase in economic activity came from people working longer. I am sure that it will become perfectly natural for people not to want to retire until they are 70 or even 75, with people living much longer.
I hope that this will be a watershed Budget for trying to revive the savings culture. The Budget measures for ISAs have been helpful and important and saving by ISAs is now something like seven times individual money purchase pension scheme saving. It has become extremely important for the self-employed, a growing part of the population, and its great advantage is that it is simple and straightforward. Free interest income up to £1,000 will, I hope, encourage people to save more. I am less keen on limiting pension pots to £1 million. It would have been better to have reduced the tax credit to 20% for everyone and to have got rid of both the maximum that you can have in a pension pot and the maximum that you can put in every year.
The savings rate is far too low, and coming out of a recession that is, perhaps, unavoidable. But over the next decade, if whoever is in power does not take measures to increase the savings rate, there will be growing strategic problems in running the economy and there will need to be stick as well as carrot to achieve what is needed.
Lord Thomas of Gresford (LD)
My Lords, I want to say something about the impact of the Budget on Wales. This Government will be remembered for three things: first, that a coalition of political parties can provide a strong and sustainable Government in the United Kingdom; secondly, that this coalition Government pulled the country back from the brink of economic disaster; and, thirdly, that they set in train new and exciting developments in renewable energy. It was a prospective parliamentary candidate for UKIP who asked the question of the year at a meeting in Cleethorpes last month, when she asked:
“What happens when renewable energy runs out?”.
We in Wales are delighted that the £1 billion project announced in the Budget to build a tidal lagoon in Swansea Bay will be supported. It has a design life of 120 years, it will deliver renewable power to more than 155,000 homes and it will save 236,000 tonnes in carbon dioxide emissions each year. Swansea Bay has one of the highest tidal ranges in the world at an average of about 10 metres and will power turbines four times a day as the tide rises and falls indefinitely.
Ed Davey, the Liberal Democrat Energy and Climate Change Minister, has led the charge, and it is thanks to his efforts to make sure that the environment stays top of the agenda that the Chancellor in this Budget committed the Government to negotiations with Tidal Lagoon Power over the contract for difference—CFD—that will guarantee a fixed price for the lagoon’s electricity over a period to be agreed. The project will create 6,000 jobs and the company has said that the jobs will be created in Wales, with the supply of machinery and so on coming from the United Kingdom. It will generate millions of pounds to the local economy through tourism. The plans demonstrate that there will be a 10 kilometre track around the barrage for running, walking and cycling, and the lagoon itself will be an ideal venue for sailing, rowing and other water sports.
Furthermore, Swansea Bay will be the pioneer for similar developments in Wales, where there are plans already in place for tidal lagoons in Cardiff, Newport and in Colwyn Bay in the north. Montgomeryshire is situated between two national parks and has been subjected to many applications for wind turbines and wind farms, and there is a proposal to devastate it with 33 miles of electricity pylons to connect the output to the national grid in England. I think that the tidal lagoon project is a much more satisfactory and environmentally friendly way in which to deal with renewable energy.
Ed Miliband came to Wales last week and said that the Budget has “dreadful implications” for Wales. Of course, he has no knowledge of the lives of the 3,000 Welsh farmers for whom the ability to average such profits as they may make over a five-year period will do much to deal with the uncontrollable factors of weather, disease and fluctuating prices. Mr Miliband does not appreciate the implications for rural motorists who depend upon their cars of the freeze on fuel duty that the Budget announced will continue. He has no knowledge of the relief to commuters and businesses in south Wales as a result of the proposed reduction of tolls on the Severn Bridge, which will I hope be abolished in 2018, or of the 45,000 people in Wales who could with the help-to-buy ISA purchase their first home over the next five years.
In Cardiff, where the Labour-controlled council is incapable of organising anything at all in Brains Brewery—or indeed any other brewery—the Chancellor, as a result of meetings between Jenny Willott, the Lib Dem Cardiff MP, and Vince Cable, has agreed to promote a city deal which would support large-scale infrastructure projects.
Straight from the front page of our last Lib Dem manifesto, the coalition Government have delivered income tax cuts to millions of low-income and middle-income workers. In Wales, that means that 1.25 million workers have received a £900 tax cut and 167,000 Welsh workers will no longer pay any income tax at all.
I am proud of these achievements, and of all those Liberal Democrats who have served in government. This morning there was a demonstration in Old Palace Yard, as there normally is midweek when Parliament is sitting. It was not a big one, but it had all the usual whistles and horns. Despite my admiration for the demonstrators’ optimism that they could achieve anything with parliamentarians heading for the hustings, I decided to put the headphones on and listen to Mendelssohn’s symphonic poem, “A Calm Sea and a Prosperous Voyage”. It all started off smoothly enough, but soon the tempo quickened, the dissonances arose, and the timpanist had a fine time bashing his drums, while the brass built up to a fortissimo passage. But eventually, following a great fanfare on the trumpets, the music resolved into harmony and peace. At the end of this coalition Government, that is how I feel. I just hope that next time I will not be listening to a Scottish “Fingal’s Cave”.
Lord Lea of Crondall
My Lords, in following the noble Lord, Lord Thomas of Gresford, and his mention of the hustings, this of course is not a Budget in any normal sense of the word. Who is going to have a copy of the Finance Bill? Where is it? Well, quite, thank you—it is sitting on a table. What is actually happening is, as my noble friend Lord Whitty said, that the Chancellor has made an election speech. When my noble friend said that, I thought that it was a statement of the obvious—until I realised that that was not the election he was talking about. My noble friend was talking about the election for the next leader of the Conservative Party. That is the election that matters—and we should get focused on our realities here.
The only real thing that it seems to me is happening in the economy at the moment is the extraordinary and sudden decision that all these pension pots—annuities—can be spent just as you like. Okay, set the people free, but I have to ask a rather relevant question in terms of our savings ratio, wealth and poverty and so on. Savings are very much a factor in the distribution of income and wealth. Indeed, you could treat the state pension as part of the distribution of income and wealth. Donkeys years ago, I was a member of the Royal Commission on the Distribution of Income and Wealth, and I know that these things are not unimportant. If everybody can blow their pot when they feel like it, is that really what the Government want? What is the latest on this focused advice that we keep reading about that is going to ensure that people do not just blow their pot, if I can put it that way?
I was very struck by a point made by the noble Lord, Lord Taverne, which had not been made hitherto—namely, that of the scenarios which may emerge after the election, by far the most damaging is that of a weak Conservative Government playing to their Back-Benchers who want a quick referendum on Europe, with that referendum being badly handled due to the time factor. Given that time factor, the referendum will not follow a real renegotiation, and we know that the different countries in Europe have different timetables as regards elections.
If all that went wrong, Scotland could say goodbye to England in order to stay in Europe and we would lose many billions of pounds’ worth of Chinese investment et cetera. This Conservative Government, and their successor, if that fate befell the country, would go down as about the most disastrous Administration since one that we had in Anglo-Saxon times. However, I do not need to take that historical analogy any further. That scenario would mean that we would be out of everything. We are only half in things at the moment. We have to engage with the rest of the world via Europe very much more intensively than we are doing, using European benchmarks for much of what we do.
My main point concerns the connection between the low productivity problem and the trade balance problem. I think that I have told the following anecdote once before in the Chamber. Someone I know quite well who runs an engineering company in Britain wants to take over a Swedish company. So off he goes to Gothenburg, where a buffet smorgasbord lunch is served and he is invited to say a few words. The person sitting next to him then says a few words along the lines of, “I am the chairman of the works council. Mr Struthers, if you take over our company, I would like to know how you will ensure that this will help us increase our world market share”. On the plane home, Mr Struthers thought about this and said to his colleagues when he got home, “You know, these works council chaps in Stockholm asked me an extraordinary question—namely, whether we had worked out, if we took over their company, how this could be conducive to the company increasing its world market share. Nobody in Britain has ever asked me that question”.
I thought that summed up a very necessary connection between the lack of involvement of workers and the huge tale of low performance. I do not mean low performance only in terms of productivity but also in terms of wages, because whatever theory of value in production you adhere to, it is certainly the case that in our national income accounts, low productivity and low pay equal low gross product. I do not buy that myself. I can cite the opposite argument and see whether anyone in this Chamber believes it. Over the last five years, FTSE 100 chief executive officers have seen their real earnings rocket by 26% —an astronomical rise compared with the years of pay cuts that everyone else has had to endure. Of course, such people in our type of capitalism—there are other types of capitalism in northern Europe—seem to think that accountability is only to shareholders, which has led in some strange cases to boards operating as cabals. That is something that a Labour Government will change, not in a revolutionary but an evolutionary way—and that change will start in June of this year.
Finally, I stress the importance of worker training in improving performance. Only 10% of our employers employ apprentices, compared with three to four times as many in some other countries. In fact, about one-third of employers do not carry out any training at all. That could not possibly happen if we had works councils involving both employers and workers. It constitutes a great gap in our arrangements in this country. As a former trade union official, I suggest that many council members should be elected on the basis of their trade union affiliation. I very much believe that this issue will be central to the policy of the incoming Labour Prime Minister. I trust that he will pursue this initiative and set up a unit in the Cabinet Office reporting to No. 10. Employment, productivity, labour market issues and world market share would be the central focus of such a unit. That focus is totally lacking in the present Whitehall structure.
Lord Holmes of Richmond (Con)
My Lords, we have heard a great deal of numbers, figures and statistics this evening. Coming in at this stage of the debate, I am happy to say that 95.6% of the numbers I was going to use have already been deployed.
It is also a pleasure to speak alongside the noble Lord, Lord Bilimoria. The difficulty is that, at this stage of the evening, it makes one very desperate for a Cobra beer, which would be very pleasant. I had the pleasure of growing up in Kidderminster and the noble Lord, Lord Rooker, was a regular in my living room on “Midlands Today”. I agree entirely with the noble Lord’s point about the beginning of the crash being the American Dream Downpayment Assistance Act. Nobody can dispute that. That is where it began. It was a well intended, naive piece of legislation which was always going to end in tears.
Where I depart from the noble Lord, Lord Rooker, is on the impact of the crash on our economy. Rightly, the Iraq war was mentioned. Billions of pounds that could have been spent on public services were deployed on a misadventure which ruined a country and was a massive drain on our economy. Similarly, public spending on the NHS unquestionably increased by 20%, but for only a 2% increase in productivity. Productivity matters—we heard that earlier in the debate. However, if one is going to increase spending by 20% on the NHS but have only a 2% increase in output, that does not make any sense. Although well intended, it cannot be seen as a good use of public money.
To re-rehearse some of the figures: growth is 2.6%—the highest of any advanced leading economy. Inflation is 0.2%. I agree that it is somewhat Saudi assisted but such a low rate of inflation is still a massive opportunity. Unemployment is 5.3%, a fantastic figure—low unemployment with the highest-ever level of employment. Regarding some of the measures in the Budget, as we have heard, the overall increase in personal allowances by £4,500 is a benefit to many people of £900 in their pockets. Four million people have been taken out of paying basic rate tax completely. The measures on beer duty can be laughed at, but this is the third year running in which it has been reduced. That has a positive impact. The increase in fuel duty planned for this autumn has been cancelled. On savings, and the allowance of £1,000 for those on the basic rate and £500 for those on the higher rate, I should like to ask the Minister: how can these measures and many more not have a positive impact for millions of people from every region and every background across the entire United Kingdom?
I move to the two “I”s—infrastructure and innovation. It is always best to have two “I”s rather than one. Infrastructure spending in the planned powerhouse of the north-west, with HS3, has to be applauded. This is the way in which to drive our cities, not just London but powerhouses up and down the nation. Similarly, the roads programme will have a massively positive impact. Spades at the ready will come up trumps.
There is one piece of infrastructure on which we and every Government could do more. It is the whole question of broadband. If we are going to be a competitive nation, we do not have to just acknowledge the digital opportunity but embrace and lead it. We can be at the cutting edge of this. I ask the Minister to consider the report of the Select Committee on Digital Skills, of which I was lucky enough to be a member. We published our report on 17 February; it addressed a number of these issues—not least the pressing need for high-speed, universal broadband access. We could have this today, but years ago we abandoned technology neutrality and said, “Fibre is the only way”. Fibre is a fantastic way of delivering high-speed broadband, not least in urban areas, but it is not the solution for all areas. In rural areas, there are already satellite solutions that could solve the problem right now, right here today. We need strongly to consider this, not least for farmers but for all rural businesses to let them play their part, not just in the national economy; with modern digital communications, one can have a global business wherever one happens to be if one has that broadband on which to base one’s business.
We need to consider broadband as a utility; it is as significant as water, heat and power. Does my noble friend believe that Her Majesty’s Government are doing enough to embrace, understand and commit to the opportunities that digital offers? We entitled our report, Make or Break: The UK’s Digital Future. It is that significant. There will be no “an economy or a digital economy” question; there will be just a digital economy. It is the everythingness of digital that we all need to understand and embrace if we are to go on the front foot and not just compete but be at the forefront globally in a digital future. There is a potential £43 billion at stake here; 35% of jobs are potentially in danger from automation but, by the same token, almost 1 million will be required in the digital sector before the end of this decade.
In conclusion, I ask my noble friend to consider this: we have had five Budgets from Chancellor Osborne. We have low inflation, the highest levels of employment ever, low unemployment and low interest rates. As a graduate in economics at Trinity College Cambridge, can my noble friend speculate on what the situation would be if we had had five Budgets from Mr Balls?
Lord McKenzie of Luton (Lab)
My Lords, it is a pleasure to follow the noble Lord, Lord Holmes. It was the FT which described this Budget as making the best of a bad job. We should endorse at least half that assessment. That the Chancellor’s rhetoric was running ahead of reality was most starkly demonstrated by the expressed aim that Britain should become the most prosperous country in the world. Would that it could, but we are reminded in our briefing of the gap in real GDP per head between the UK and not only the US but Germany and France, as other noble Lords have mentioned. In the case of the US, it is a gap that has widened.
I was proposing to speak just on the issue of housing but was encouraged by the contribution of the noble Lord, Lord Freeman, to divert briefly to the issue of pensions because he, quite properly, raised the issue of where we are on the guidance service. We are a few days away from these new flexibilities coming into being. My noble friend Lord Lea pressed this point as well. Can the Minister assure us that everything is in place, as originally anticipated and promised, to make sure that support is there for people having to make these decisions for the first time? It started off, in the Chancellor’s terms, as “advice”, then it became “face-to-face guidance”. Now I think it is guidance either face-to-face, digitally or by telephone. It is crucial that everything is in place; certain concerns have been expressed about whether that is the case. It is important that we hear tonight that things are properly in place.
The Red Book records that more than 537,000 new homes have been built during this Parliament—not all started in this Parliament, of course—as though this should be a source of some satisfaction. But this amounts to less than 110,000 each year on average, way less than half of what is required if demand is to be satisfied. We have another housing initiative in the Help to Buy ISA but, as my noble friend Lord McFall said, it is relatively small beer: it is modest and does not look at the supply side. The noble Baroness, Lady Valentine, referred to housing zones and a number of other initiatives that have been announced. We have had a number of them during this Parliament, but it is the net effect that is concerning.
Instead of getting on and building, the Government have spent almost five years making empty announcements on garden cities. The Ebbsfleet scheme was announced in 2012 and announced again in last year’s Budget, with £200 million of funds but only £100 million allocated in the Autumn Statement. The Northstowe development is already in the planning system. Nick Clegg promised £225,000 in funding for large-scale housing schemes in late 2012. That appears again in the Red Book this time.
It is estimated that England’s population will grow by more than 7 million over the next 20 years and that we need to build 243,000 homes each year to keep pace, let alone to deal with the backlog of more than 1 million homes. That is why we have a housing crisis: the shortfall is making it more difficult for people to buy, more expensive for people to rent, and has driven increased homelessness. Home ownership is at its lowest level for more than 25 years. The building of social homes has fallen to its lowest level in more than 20 years. Affordable housebuilding has fallen to its lowest level for at least five years. As the Lyons review reminded us, the typical first-time buyer now needs a deposit of 65% of their income; the average home now costs eight times the average wage; and one in four adults between the ages of 20 and 34 are still living with their parents. The private rented sector now houses 18% of all households, including 1 million children, with the average household in the private rented sector spending 40% of their income on rent, compared with 20% for those with mortgages.
At the start of this Parliament the Chancellor removed more than £4 billion of funding from affordable housing—a 60% cut. National government spending has steadily switched from investing in new homes to subsidising housing costs via housing benefit. The coalition now spends 20 times as much on housing benefit as on affordable housing building grants. The cost of housing benefit has risen by 9%, despite curbs on entitlements. The Government’s flagship new homes bonus is failing to get new homes built and is diverting money away from local areas with the greatest need. We would replace this with fairer funding arrangements, since the Government’s approach has unsurprisingly been regressive, with low-income households being disadvantaged by benefit cuts and the better-off being able to access the Help to Buy scheme.
What would we do? We need to get at least 200,000 homes built a year by 2020, providing up to 230,000 jobs in construction, with all the training and apprenticeship opportunities that that would bring. To do this, we would give local authorities the powers and resources to build the homes that their communities need. We will ensure that all councils produce a plan for homebuilding in their area and allocate sufficient land for development to meet the needs of local people. We will give local councils the power to designate new housing growth areas, in which they will be able to assemble land, commission development and deliver the homes that their communities need. We will unlock the supply of new homes by giving local authorities “use it or lose it” powers over developers who hoard land that has planning permission so that they can sell it on for a bigger profit, instead of building on it now.
Generation rent has been ignored for too long by this Government. We need to ensure that private renters get a better deal. We need to give security and peace of mind by legislating to make three-year tenancies the norm, giving renters a stable home and landlords more stability too. We need to end excessive rent increases by putting a ceiling on rent increases during the new three-year tenancies. We need to ban rip-off letting agent fees for tenants by legislating to stop agents charging fees to tenants. We need to drive up standards by introducing a national register of landlords and giving new powers to local authorities to drive up standards in their areas.
We need to allow greater flexibility to individual local authorities for their housing revenue accounts where councils present a business case and an investment plan to build more social homes. The Treasury would be able to ensure that the additional flexibility does not see an increase in total borrowing over and above that currently planned for. We need to strengthen the definition of “affordable housing” in the planning system, and we need to reverse the Government’s changes to affordable homes obligations. The Government have exempted developments of less than 10 homes from affordable housing Section 106 levies and have introduced vacant building tax credits, which will have a disastrous impact on the delivery of affordable housing.
The Government’s record on housing over this five-year term is not good. The Budget has shown no recognition of the scale of the challenge and no credible policies to tackle the crisis. This must be left to others.
Lord Best (CB)
My Lords, I think that I am going to make myself popular, being speaker number 25 and being able to say that the words of wisdom that I have carefully crafted have already been spoken by one or other of your Lordships this evening, particularly perhaps by the last speaker, the noble Lord, Lord McKenzie of Luton. He is an expert on housing matters, and it is housing that I was intending to address. Perhaps I may give some extracts from my speech that will give its flavour.
The headline in last week’s Inside Housing, the award-winning magazine for those in the world of housing, read:
“Sector dismay after Budget ignores supply”.
The Budget came less than two days after a huge rally at Westminster Central Hall, which called for “homes for Britain” and the ending of the housing crisis within a generation. The anxiety now is that the Budget’s principal measure for housing, the Help to Buy ISA scheme, will promote demand, with a grant of £3,000 for first-time buyers who save £12,000, but there are no measures in the Budget to increase the supply of new homes.
The Budget’s small print has some positive messages for housing: an increase in the number of growth areas, where development of brownfield land gets a boost, although there are no new funds for these areas; a London land commission to map sites and more powers to the London mayor; a feasibility study on progressing large-scale projects promoted by local authority partnerships; consultation on more effective use of compulsory purchase powers, which are such an essential tool in securing sites; and a feasibility study on boosting self-build and custom housebuilding. That is all good stuff but declarations, maps, consultations and feasibility studies do not in themselves build houses.
Two realistic options exist to crank up housebuilding to a level approaching that of times past: reviving council housebuilding and expanding housing association output. Many local authorities are raring to go, with the capacity to borrow and the willingness to work collaboratively with partners. Their borrowing, even though it can be safely and prudentially repaid from rents and sales, currently counts against the deficit in the UK. It would not do so if accounting practices used in other EU countries, and by the OECD and the IMF, were adopted here. Government must be braver in going for a change in the definition of public spending that would allow councils that are willing and able to do so to use their huge assets to get back into some serious building programmes.
Then there are the housing associations. The Chancellor found the £2 billion in the Budget for Help to Buy ISAs. That same level of investment, as spelt out by David Orr, the chief executive of the National Housing Federation, would enable housing associations to build 69,000 new affordable homes. Doubling that investment—enough to create around 140,000 extra affordable homes—would be a real response to the crisis in housing supply hitting our children and grandchildren. Can we hope for this in the next spending review?
Baroness Thornton (Lab)
My Lords, to justify his spending priorities, the Chancellor quipped:
“The sun is starting to shine and we are fixing the roof”.—[Official Report, Commons, 18/3/15; col. 769.]
This blinkered perspective deliberately ignores the growing crisis of underinvestment in the social infrastructure on which the economy rests. The 60-minute Statement made no mention of vital areas such as childcare, social care, education, the disabled and health. Even if one accepts that a bit of roof repair is going on, can it make sense to fixate on the roof while causing the social foundation to crumble?
What has life been like for the last five years under this coalition Government if you are a woman with children on a low or modest income or you are disabled? As my noble friend Lord McFall said, quite rightly, the success of any economic strategy is measured in its effect on people and their lives. So how have disabled people fared?
After many years of progress under both Tory and Labour Governments, with the DDA, Making Rights a Reality for Disabled People and the signing of the United Nations convention under a Labour Government, now, under this Tory-led coalition it feels as though we have gone back to the dark ages. Disabled people have been—I do not think it is an exaggeration to say this—vilified, while the support that they rely on has been slashed without a care for the long-term or human consequences. According to campaigners, disabled people have been hit nine times harder than non-disabled people by austerity cuts. Such support as has remained in place is increasingly confined to the most severely disabled. Surely, such an approach is simply counterproductive.
Those seeking work have faced reduced employment support. Thousands of disabled people have been affected by welfare changes. Councils have experienced significant budget reductions and have had to reduce access to social care for disabled people and their families as a result. Two-thirds of those hit by the hated bedroom tax are disabled. That is 440,000 people. There is no automatic exemption for disabled people, except for those with an overnight carer. We are proud that when Rachel Reeves gets to the DWP she will scrap the bedroom tax, before she goes on maternity leave. Noble Lords know that Labour is a modern party.
This Government’s policies have led to greater isolation, reduced social participation, worse health outcomes and less chance of disabled people being able to participate economically. Yet even as disabled people are taking the hit, every day there is a drip-drip story in the media, which repeatedly portrays them as scroungers, skivers and frauds. On these Benches, we have said clearly that it is wrong, cruel and shameful. It underlies unacceptable levels of hate crime against disabled people and we need to call time on it. The result of this general election will do just that.
Turning to how women have fared over the last three years of George Osborne and his Lib Dem cohorts, everyone is aware that David Cameron and this Government have a problem with women. Even so, it is amazing that they have hit women and their families hardest with their austerity programme. Research from the House of Commons has found that £22 billion out of the £26 billion—85%—raised over this Parliament from tax and benefit changes has come from women’s pockets. According to the IFS, families with children have been hit hardest by all of David Cameron’s choices, which is a clear betrayal of his promise to lead the most family-friendly Government ever.
Forty-four years after the Equal Pay Act was passed, women still earn just 81p for every £1 earned by a man. The Chancellor said that the gender pay gap is falling, but this is mostly due to a greater fall in men’s wages than women’s. Self-employed wage statistics are not included in this figure, so there is still cause for great concern. Progress on closing the gender pay gap slowed under this Government. While I welcome the recent turnabout on equal pay transparency, we have to ask why we have waited so long. Let us look at actions and not words: even David Cameron thinks that it is acceptable to pay one of his own Cabinet Ministers less than her male predecessor—namely, our Leader in your Lordships’ House being paid over £22,000 a year less than her predecessor.
I agree with my noble friend Lady Smith that the story of this recovery has been one of low-waged, insecure, temporary work, which has hit women particularly hard. More than one-quarter of all working women are now on low pay and make up the majority of workers on zero hours contracts. Yet the Government have refused to back our plans to ban exploitative zero hours contracts, to provide incentives to employers to pay living wages and to raise the minimum wage to £8 an hour. A Labour Government will do those things. More women are moving into part-time work than ever before and more young women are being left behind under this Government. Half a million young women aged between 18 and 24 are not in education, work or training, which is higher than when Labour left office.
While this Government boast about the apprenticeships they have created, they are prepared to tolerate a stark gender divide within apprenticeships, with women overwhelmingly in the lowest paid occupations. For example, 58,000 women took up apprenticeships in health and social care, and 25,000 went into children’s care, but only 400 took a position in engineering. A truly woman-friendly Government would recognise this gender segregation as a problem and would tackle it.
Key to a woman being able to work, if she is a mother, is childcare. Childcare costs have soared under this Government, with the price of a nursery place up 30% since 2010. There are 720 fewer Sure Start centres than in 2010 and the number of registered childcare places has fallen by more than 40,000. What will Labour do when it is in government? We will support families to better balance work and childcare. We will extend free childcare for the three and four year-old children of working parents to 25 hours to support more parents back to work. That will be on top of tax-free childcare. We will fund that by increasing the bank levy. We will guarantee access to wraparound childcare, such as breakfast clubs and after-school clubs. We will support both parents to share in those important first weeks with their newborn baby by doubling paternity leave to four weeks paid at the minimum wage. We will pay for this in the savings we will make from more women returning to work because of the 10-hour extra free childcare to which they will be entitled.
The Chancellor claimed in his Budget speech that the Government had been a success for women, with the smallest pay gap and the largest number of women at work in our history. These are incidental successes. There are more women at work than in our history because there are more women, not because the Government have created more jobs. The Government have shown little sign of giving any specific attention to women in the economy even though they have been under particular strain over the past five years.
For one of the most potent examples of how this Government’s lack of awareness of the impact of their policy on women you only have to look at what has happened to women’s refuges. Services and networks protecting women against domestic violence are under terrible strain and the most vulnerable women are being set back probably about 40 years. I have already mentioned the impact of cuts on women seeking refuge from domestic violence in places such as Chester and Gloucester. It is a disgrace and it is serious.
The current austerity agenda and programme of deep spending cuts has left women facing a triple jeopardy—cuts to jobs, benefits and essential services—locking them into poverty. Women have fared extremely badly under the Government’s austerity programme. This is absolutely not a price worth paying.
Lord Northbrook (Con)
My Lords, as speaker number 28 on the list, I shall try to avoid repeating figures mentioned by others.
I was surprised by how many speakers on the Benches opposite absolved the previous Labour Government of any responsibility for the huge budget deficit the coalition inherited. While I recognise that what happened in the USA was a major contributor to the financial crisis, the Labour Chancellor forsook the prudence of new Labour’s earlier years. As the noble Lord, Lord Rooker, stated, new Labour moved on—and Tony Blair is a classical example of that. UK debt was already high because of other reasons, including the Iraq war, and had we not as a coalition put the squeeze on public spending the markets could have panicked, interest rates could have gone through the roof and we could have been in a situation similar to Greece.
The first good economic news in the Budget was the OBR’s upgrading of growth forecasts for this year and the following two years. The Chancellor stated that business investment has grown four times higher than household consumption since 2010 and manufacturing output has increased more than four and a half times faster than it did in the entire decade before the crisis. Over the last year, the north grew faster than the south.
The job figures last week continued the tremendously good trend. When the Government set out on their strategy, the Opposition predicted more than 1 million jobs would be lost. Instead, more than 1.9 million new jobs have been created. Critics have said in the past that these are not real jobs, that they are all part-time and all in London. However, the Chancellor stated that 80% are full-time jobs, 80% are in skilled occupations and employment is growing fastest in the north-west. Of course, as many speakers have said, productivity is still a problem, although in the car industry and the retail sectors it has improved markedly. Overall, the job news is good. Low unemployment means lower rates of increase in welfare benefits. Table 4.27 of the OBR report shows downward revisions of, on average, £3.2 billion a year between 2015-16 and 2019-20.
On the budget deficit, it is a tremendous achievement to get annual borrowing down from £150 billion to £90 billion—£1 billion lower than forecast in the Autumn Statement—and the latest figures last Friday showed a £3 billion improvement over the previous year. This of course means that government gilt and interest charges compared to last December’s forecast for the next five years are now expected to be £35 billion lower due to the decline in inflation.
I turn now to government spending. Lower borrowing will continue only with a credible plan to control public spending and welfare. The Chancellor pointed out that the administrative costs of central government have fallen by 40%. This is highly commendable. However, welfare spending is still forecast to increase by nearly 10% over the next five years.
Other areas of annually managed expenditure which show eye-catching increases are central government debt interest, still increasing at more than 25%—a legacy of the previous Government’s mismanagement of the public finances—while local finance current expenditure is predicted to be up by more than 25%. As far as I am aware, no one else seems to have mentioned net public sector pensions, which are even worse at 10%. But they come up with an 18% increase because for some reason the employer’s contribution is netted off, although it seems to me that it is paid by you and me as taxpayers.
With regard to the overall spending picture, the Government should be congratulated on keeping departmental spending under control, but other expenditure does not appear to be in control. That is why total expenditure is planned to increase by 8% over the next five years.
I now move on to living standards, although most of this has been said by others. GDP per capita is up by 5%, and according to the living standards measure used by the ONS and the OECD, households are on average £900 better off than they were in 2010. Increasing the personal tax-free allowance has been a huge benefit to working people, and that is forecast to keep improving over the period. I also welcome the commitment to raise the higher rate threshold to £50,000, but I still believe that the top rate of tax should be brought down from 45% to 40%, which after all is only what it was under the last Labour Government. Lower taxes, within reason, bring in higher revenues.
I also welcome the Chancellor’s move to help savers with the four major steps which have been announced, but I support the view of the noble Lord, Lord McKenzie of Luton, that very careful surveillance is required and safeguards must be in place for those who choose to take out their lump sums and annuities. Secondly, allowing flexibility on ISA withdrawals within the tax year without losing the tax-free entitlement is a good idea. Thirdly, the Help to Buy ISA is ingenious and will help first-time buyers with their deposits, especially where houses are cheaper.
On corporation tax, which has been one of the highlights of the tax policies of the coalition over the past five years, the latest cut to 20% is especially welcome for smaller businesses, as are the national insurance exemptions for the under-21s and apprentices, along with the abolition of class 2 contributions for the self-employed. The business rates review is welcome, as is the replacement for the annual investment allowance. Can the Minister give us any more detail on what is expected on either the business rates review or the annual investment allowance?
In other business areas, the oil industry has been thrown a lifeline, and I welcome its £1.3 billion cut in taxes over the next five years. According to the Financial Times, the move has been welcomed by UK operators.
The diverted profits tax on multinationals is welcome, but several commentators are saying that it is being pushed through too quickly. The danger is that, however well intentioned it may be, the OECD review is coming out only later in the year. Might it not be better to wait for the results of that review rather than rushing this through and HMRC being subject to a flood of lawsuits? Companies might be able to challenge the legislation under European law or the UK’s treaty provisions, according to the law firm Pinsent Masons. Some £5 billion of tax is anticipated as long as the welter of new rules does not create more loopholes than it closes. The Government should be wished well in this area, but not too great haste is recommended.
Overall, I think that the Chancellor has done a good job, which I hope is appreciated by the electorate. Finally, I think that it would be very dangerous to hand the car keys back to the guys who crashed the car.
Lord Stevenson of Balmacara (Lab)
My Lords, with some notable exceptions, including the last speaker, this has been quite a good debate. There is no question but that the prizes for economic literacy lie on this side of the House, although notable exceptions might be made for the noble Lord, Lord Skidelsky, who, as usual, put his finger exactly on the button and made a number of points which I am sure had the Minister squirming in his seat. At least they bloomin’ well ought to have done—I did not see much squirming, but I hope he will read the remarks in Hansard.
The advantages of being the last Back-Bench speaker are often not recorded. Several noble Lords at the end of this debate have said that they did not like the fact that they were among the last, but I quite like it. For one thing, what you say is usually ringing in the ears of those who have to wind up, so you will get some response to what you have said. Secondly, if like me you are the sort of person who deals with the fag-end, if you like, of the political spectrum, you can often get in without having all your remarks previously made. I will speak about the arts and the importance they have in the economy—your Lordships may not like that, but I am going to do it anyway, because it needs to be said. The remarks by my noble friend Lady Thornton on disability and women were also refreshing and very apposite to the debate.
Like many other Members of your Lordships’ House, I was present at the moving memorial ceremony for the late Dickie Attenborough—Lord Attenborough—who died last year. As part of the ceremony, his brother David read an extract from his maiden speech, given in November 1994, which I would like to quote. He said:
“From the very earliest of times the arts have been an instinctive essential of our humanity … The arts not only enrich our lives but grant us the opportunity to challenge accepted practices and assumptions … The arts are not a luxury. They are as crucial to our well-being, to our very existence, as eating and breathing … The arts are not a perquisite of the privileged few; nor are they the playground of the intelligentsia. The arts are for everyone—and failure to include everyone diminishes us all”.—[Official Report, 22/11/94; cols. 178-81.]
As my right honourable friend the leader of the Opposition observed in his excellent speech after the Budget last week, a glaring omission from the Budget Statement was public spending. Why, he asked, was there,
“no mention of investment in our national health service and our vital public services”?—[Official Report, Commons, 18/3/15; col. 780.]
I am sure that he meant public services including arts, culture and sport, which I will mention later.
The figures are there to be seen in the Red Book. Page 69 shows what is planned in the next Parliament, particularly for 2015 to 2018. There are as many cuts in departmental spending in this period as there have been over the last five years, and what is striking is that the pace intensifies in the early part of the next Parliament.
In its Budget commentary, the Office for Budget Responsibility says that achieving the Government’s plans,
“depends heavily on cuts in public spending—particularly on public services and administration”,
in,
“the first two years of the Government’s medium-term spending policy assumption”.
That represents a,
“3.6 per cent of GDP (or £65 billion in today’s terms) cut in day-to-day spending on public services and administration”.
The OBR’s briefing note says:
“The real cut in public services spending … is … much more severe than anything we have seen to date”.
It comments:
“It is important to emphasise that this profile arises from what the Government itself describes as a ‘fiscal assumption’ and not from firm and detailed departmental plans”.
You might ask why there are no plans—it is very surprising to find at the end of the Parliament that there are no plans set out for the next few years. According to the OBR, these assumptions,
“will form the baseline for whichever party or parties are in government after the election and have to carry out the next spending review. This profile for implied public services spending may have ticked a number of boxes for this Budget, but it will not have made that task any easier”.
According to the Red Book, the Budget implies real cuts in departmental allocations, which I make to be 5.5%, 5.25% and then 2.3% over the first three years. I would be grateful if the noble Lord could confirm that those are the figures and I have read them correctly. I make that total £65 billion in round terms. However, given that certain departments are protected, there is going to be a differential impact on departments such as the DCMS, which is what I want to speak about. Again, the figures are not there in the Red Book, but I reckon that will be 30% over three years, which is almost exactly the same as the cut made in that department over the last five years. Given that the DCMS has a current baseline figure of about £1.2 billion, that suggests that a body such as Arts Council England, for instance, will face a cut of some £85 million in that three-year period, which is roughly 10% of its grant. That of course is on top of cuts already imposed in this Parliament of about 30%.
Like my late noble friend Lord Attenborough, I believe that the arts are important for the economy as well as the country more generally. At a time when people ask where the jobs of the future are going to come from and how we are going to pay our way in the world, we should be in no doubt that the arts and creative industries are the important sector that we must be supporting, because it will provide the jobs, the growth and the support for the economy.
Of course, this country excels in the arts and culture in all their forms. We produce some of the greatest creativity on the planet. Whether it is music, fashion, film, theatre, broadcasting, design, art, libraries or museums, our cultural creativity is admired, envied and consumed right around the world. The creative economy already accounts for more than 2.5 million jobs and contributes more than £70 billion a year to the UK’s economy and £15.5 billion of exports. The creative industries are growing faster than any other sector.
However, the artistic and creative success which is so evident today did not come out of the blue. It is built on years of public support and investment—investment which nurtured the creative talent of people from all walks of life, in all parts of the country, because arts and culture thrive on the widest pool of talent. For our economic success in this sector to continue to grow in the future, it needs a widening, not a narrowing, talent pool. These cuts will destroy this growth.
Let us take, for example, the decline in arts provision in our schools. The fact is that since this Government came to power there has been a marked reduction in the participation of our children in the arts. The Government’s own report Taking Part spells it out. For primary schoolchildren, participation in arts activities is down by a third: music down from 55% to 36%; theatre and drama down from 49% to 33%; dance down from 45% to 29%; and visits to heritage sites have almost completely declined.
Your Lordships’ House will recall the debates on the much vaunted EBacc, which the arts community fought so valiantly against because it sent a damaging signal to schools that they could, with impunity, downgrade the arts they already provided. So now the number of children sitting arts GCSEs is declining. Since the election, music is down 9%, drama down 13% and film—my topic—is excluded from the curriculum altogether. Incidentally, the Government have also cut teacher training places in arts education by 35%, so the numbers of specialist arts teachers have fallen. This makes no sense in terms of the arts and our creative industries but it makes no sense at all in wider cultural terms either.
Britain is for some reason blessed with brilliant creative talent, dynamic artistic cities, vibrant festivals and one of the world’s most iconic cultural institutions—the BBC—but what we do not have from the current Government is substantial, strategic, visionary leadership in this sector, an arts policy fit for the 21st century which ensures art and culture for all, or the investment, particularly for young people. As Lord Attenborough said in 1994:
“The arts are for everyone—and failure to include everyone diminishes us all”.—[Official Report, 22/11/94; col. 181.]
Lord Davies of Oldham (Lab)
My Lords, I begin by craving the indulgence of the House. My noble friend Lord Stevenson caught my ear; I was present at the memorial service, and the defence of the arts by Lord Attenborough was a brilliant speech, reprinted in the programme. On either side of it were sayings from Mahatma Gandhi and a Shakespeare sonnet. As far as I was concerned, the service was a work of art in itself on paper before we actually heard the words being read. It was a great occasion.
I would also like to comment on my noble friend Lord Graham. He and I won adjoining seats in Enfield in 1974 and served together there for a number of years. I was delighted that he spoke this evening. I know that it was a limited area on which he spoke and probably pretty marginal to the Budget, but I think it gave cheer to us all that he puts a very high priority on service in this House in difficult times.
This has been an excellent Budget debate—but so was the debate in the House of Commons, which of course went over several days, in which many of the contributions were extremely thoughtful and well worked-through. That suggests that the debate we will have in the country in the general election may reach rather greater heights than some people suggest our political culture is now capable of. It did not start off too well because, as my noble friend Lord Lea indicated, there was pretty well nothing in the Chancellor’s speech about the macroeconomy. It is not long before the election so he indulged in a political speech, but he said little about the macroeconomy.
We had nothing on the question of our balance of payments problem. We had nothing on productivity. In fact, those issues seem to be suffused in the general aura of success, which the noble Lord, Lord Deighton, succeeded in imitating, to a degree, in his opening contribution this evening. What success? The success of the economic plan—but that economic plan became long term when it failed because the Chancellor could not deliver an end to the budget deficit in 2015. So, we have an extended plan, and that plan has some very dire implications indeed.
It is quite clear—it is all in the Red Book—that, as my noble friend Lord Stevenson and many other speakers in the debate said, we have not seen anything yet. The cuts of the past five years are going to be exceeded in three years, which will have a dramatic effect upon our economy and our society. And for why? As the noble Lord, Lord Skidelsky, identified, the Government’s original position way back in 2010 was a false analysis of the crisis leading to some pretty awful solutions to it. My noble friend Lord Layard identified very clearly the basis of the false analysis: that it was all down to excessive spending by the past Labour Government. No, it was not. This country was the second lowest in debt of the advanced countries when we left office and it was not the case that our expenditure had run out of control. What happened was that the global financial crisis, which started in the United States, as described most excellently by my noble friend Lord Rooker, reduced the receipts of government to a calamitous extent.
Of course it needed a significant response, but the idea that it called for a Government imbued with a philosophy of reducing the size of the state and doing everything that they can to get public expenditure down, irrespective of the impact upon our economy and society, it did not need and has not needed but has unfortunately received thus far under this Administration. The task of noble Lords on my side of the House is to make sure that this Government get no opportunity to extend their ill thought-through plans based upon a completely false premise.
We have to recognise that the expenditure cuts that are coming are coming against a base where cuts have been so sharp already that we are getting right to the bone. How can the police meet their obligations with the kinds of cuts that are likely to face them? What about defence? After all, that has, on the whole, been an issue that has concerned the Conservative Party in particular over the years. What does it think about this debate about the 2% figure if defence is to bear its share of the cuts? As defence is an unprotected sector, it is going to, if this Government were returned to power.
What about other areas of expenditure? Local government spends a very great deal of its expenditure on social support and welfare for children and the aged. It is going to get a massive cut in those resources if this Government continue in office.
The challenge is clear. We need to establish that this Government have presided over failure and the slowest recovery for over a century, with a desperate price being exacted from ordinary people.
What about the bedroom tax? The Government recoil at Labour’s proposal on the mansion tax directed towards the wealthy in our society and those who take advantage of the London housing position, to which the noble Baroness, Lady Valentine, referred. Housing in London is critical. We cannot keep the economy of London running if there is a flight of large numbers of people from the city because housing is too expensive because of foreign investment. That is so obvious, but what did the Government say about housing in the Chancellor’s Budget speech? Nothing of any significance.
We have a major task to tackle after what has been a desperate decline in growth, lost revenues, as the noble Lord, Lord Skidelsky, identified so very clearly, and then a little bit of a spurt before the general election, which is about to be put at enormous risk if the Government carry on with their existing policies. It is quite clear that we have a low-wage, low-productivity economy in which people get poor returns for their work and, as the right reverend Prelate the Bishop of Portsmouth, identified, many of them are still subject to a marginal rate of taxation—if you take taxation plus national insurance—which renders it difficult for them to sustain their living standards.
We know that the success of an economy cannot be based on low wages and low productivity, not least because the only way in which it has been continued thus far is because migration figures are so high and large numbers of our labour force are earning low wages and doing jobs in circumstances where wider society is more reluctant to respond.
We have 1.8 million zero-hours contracts in this country at present. The tax and national insurance combination has extended to considerable levels. We have a £300 billion deficit on our balance of payments. I will just mention the success story of 2011-12: we lost our triple A credit status. This Chancellor dares to come before the country to say, “Give me a renewal of the mandate because I am doing so well”. In fact, what is reflected is a colossal failure.
That means that we need to take different measures. Labour is quite clear what we are going to do. We intend to raise living standards by increasing the minimum wage, because we do not think that a low-wage economy makes any sense. We intend to safeguard the National Health Service, because we are terrified that such is the level of cuts promised in this Budget, they are bound to impact on the health service. They do in any case, because cuts in social welfare thrust people into the health service through the accident and emergency service. The leakage is already there, but it is due to get a great deal worse if this Government are able to follow through on their plans.
We intend to cut business rates for 1.5 million small business properties by not reducing corporation tax—with a slight increase to corporation tax. We also intend to deal with housing in the only way that one can, which is to build houses. It is not a problem of illegitimate demand—it is a problem of supply. I should have thought that the party of Macmillan in the 1950s would recognise that Governments can put their back into creating supply of houses if they are prepared to do it and it is defined as a priority. By heavens, it ought to be a priority in our country at present.
We are also going to balance the budget and the books in a fair way. That means we shall take a slightly different view on the bedroom tax, which we intend to scrap, and on tax cuts for the very wealthy in our society—the millionaires.
Lord Bilimoria
I thank the noble Lord for giving way. Did he just say that there would be a slight increase in corporation tax?
Lord Davies of Oldham
My Lords, the Government are promising a reduction. We are not going to carry out that reduction. That is putting it as fairly as I possibly can in comparison between the parties. We will keep it where it is. The Government intend, for reasons best known to themselves, to cut it.
That means that a change of government is absolutely essential. The greatest need is the one that was expressed by my noble friends Lord McFall and Lord Layard, by the right reverend Prelate the Bishop of Portsmouth and by my noble friend Lady Thornton, who talked about the position of women in society. It is that we need an improved public morality. We need to recognise that there is more to life than just the economy of getting and spending. Life for people, when it is enriched, is about relationships, fairness and degrees of co-operation to help those who have greater needs—to have some degree of common endeavour. Those are the values of my party, and we intend to carry them out in government.
Lord Deighton
I thank noble Lords for an excellent and wide-ranging debate. When I first did a Budget debate, the discussion was all about whether growth would ever return. Today, we are discussing whether having the fastest-growing economy in the world, creating 2 million jobs and having zero inflation is a good thing or not. I will drill a little more into the detail on that.
I had thought that we were talking about this Budget but we have also had an interesting discussion because the party opposite has wanted to wallow in whether it was responsible for the financial crisis, which is an open goal that I can scarcely resist. I think everybody agrees that the recession was caused by the financial crisis, starting off in the American mortgage system. However, as my noble friend Lord Northbrook said, the rate at which public spending had expanded by the time we got to the financial crisis left this economy more exposed than it should have been. This was a problem for all recent Governments, who left us too exposed to the financial sector.
The other point, which is not often raised, is that we clearly had very poor financial regulation in the financial crisis. That exacerbated the problems with the banks. I am afraid that the previous Government were the architects of a highly flawed regulatory system, which failed to detect many of the problems. While I am not saying that they are completely guilty, I am saying that there are some very serious cases to answer.
Lord Stevenson of Balmacara
I appeal to the noble Lord to move on in this debate because we are going to get nowhere with it. The regulation he is talking about was of course fully endorsed by his party. It was absolutely thrust on us but with pressure on all sides to do it. He cannot evade or duck the responsibility in this. This was something that happened outside the UK. It was brought into the UK and we did our best about it. We have already heard my noble friend Lord Layard and others explain how we managed to get the economy back on track. I think that it would be worth moving on.
Lord Deighton
I am very happy to move on. I did not really bring it up. I was just expanding my perspective on a topic that many noble Lords opposite had rehearsed.
With that incentive, I shall move on to living standards. I think everybody accepts that the financial crisis has created an extraordinarily difficult period. As I said in my opening remarks, it affects people at the bottom end of the income spectrum, people with other difficulties to cope with, more than anybody else. The noble Baronesses, Lady Thornton and Lady Smith, were eloquent on some of those issues.
Lord Lea of Crondall
Would the Minister like us to infer that it did not require any touch on the tiller from the Government for that inequality to increase, and that it was to do only with something inherent in the nature of the economy that we have had this growing inequality? Surely what the Government have done has given a massive boost to inequality.
Lord Deighton
I will try to deal with facts rather than with emotion. I referred earlier to what I think is one of the better legacies of the Government: the transparency with which we measure things. We do it at every fiscal event. The distribution impact of the fiscal changes under this Government has been more favourable to the bottom end of the income spectrum than in any year of the previous Labour Government. That is what the statistics tell you.
Lord Lea of Crondall
Would the Minister like to tell us what has happened to the top-to-bottom ratio?
Lord Deighton
Inequality has not increased at all between the previous Government and this Government. That is not to diminish the problems that people at the bottom end of the scale face. This Government have tried to deal with the root causes of poverty: worklessness, low earnings and poor education. That is where the Government’s premier programmes have been addressed. The number of workless households has fallen by about 600,000 under this Government. Many noble Lords, including my noble friend Lord Shipley, have commented on the situation with respect to employment and the number of jobs that have been created. The noble Baroness, Lady Smith, asked how tax receipts could come down when employment went up. The reason was that we moved up personal allowances and took people out of tax. It is as simple as that.
This Government intervened in many critical ways to protect living standards for people. I shall not go through the list again because we do not have time. The noble Baroness, Lady Thornton, and the noble Lord, Lord Davies, cited zero-hours contracts. They represent just over 2% of the total workforce. Of the jobs created, the majority are at the high or middle end and the vast majority of them are full time. The party opposite should accept that creating 2 million new jobs is okay. It does not have to keep describing what the problems with it are. It is actually a good thing; it is part of the recovery. It is much better to have those people in work. As I have said, the jobs are principally at the middle and high end and they are permanent jobs.
Our focus has been on trying to protect the young and old. We have protected pensioners through the triple lock. The measure again tells us that pensioner poverty is at an all-time low. I listened carefully to the comments made by the noble Baroness, Lady Thornton, about disability. Probably my most rewarding experience in the past 10 years was working on the Paralympics and seeing the difference that they made to people’s perception of the ability in disability. That is a legacy that, on a cross-party basis, we should absolutely build on.
I shall talk about spending cuts as there is significant concern about the potential impact of continuing, in the words of the noble Lord, Lord Layard, the dismantling of public services. That is absolutely not the intention of spending taxpayers’ money more carefully, of looking at ways of reforming public services, of being focused on the outputs and of being more efficient about the inputs that go into them. There is still significant opportunity for reform in delivering public services more efficiently, and that is where the focus of the spending cuts should and will be.
The noble Viscount, Lord Hanworth, asked where privatisation fitted into it. I make no apology for this party being careful with taxpayers’ money. If you really want to look at the record of this Government, we adhered precisely to the spending plan we set out five years ago. We have delivered that in a disciplined way with the public’s view of public services being that they have in fact improved. That is the evidence.
A number of noble Lords, including the noble Lords, Lord Bilimoria and Lord Davies, referred to the defence budget. Let me restate that at £34 billion, we have the second-largest defence budget in NATO. It is the largest in the EU. We are currently spending 2% and we will decide what to do at the next spending round. Again, my preferred approach to spending is that we have to have a plan and understand what we are trying to accomplish, and the budget numbers flow from that. It is about what you are trying to accomplish. I am delighted that the right reverend Prelate the Bishop of Portsmouth was able to acknowledge the tripling of the church roof fund.
Let us switch to the deficit. It is at the heart of the differences in fiscal policy between the parties. We have discussed the case put by the noble Lord, Lord Skidelsky, over the past few years. I was taught Keynesian economics at the feet of the noble Lord, Lord Eatwell, so I certainly understand the theory, but in 2010 this country had a massive, unsustainable deficit and the practical situation was that action needed to be taken to reduce that deficit in order for the public and the markets to have confidence. Frankly, we were faced with no other option but to deal with that as the primary objective and responsibility of government at that time. Had we not dealt with it as effectively as we did, it would have been an irresponsible act and would have left us substantially exposed to future debt costs. It is a bit like a vastly overweight person saying, “I’m going to start a diet in two years’ time, but in the mean time, keep serving me the chips and chocolate”. That is how it would have been.
Lord McFall of Alcluith
The Minister talks about the debt, but let us think of the debt that they inherited in 2010, which was £870 billion. That figure has now almost doubled to more than £1,500 billion. Why has that debt doubled in a period when there has been a mania from the Tory Front Bench about having to pay off the debt?
Lord Deighton
Technically what happened was that we stuck to the spending plans, growth did not recover as we expected, principally because the rest of the world was in recession, so the tax receipts did not come in, and the deficit continued to go up. That is the reality of the situation. If you listen to the two sides on the deficit argument, one is asking why we have not cut fast enough and the other is saying that we have to cut a little slower. I think that, given the circumstances, my right honourable friend the Chancellor has navigated the balance very effectively. My noble friend Lord Flight made that point.
Lord McFall of Alcluith
The Minister has failed to answer. In the light of his failure to answer, will the Government adopt a more modest approach to this situation and recognise their failure on debt over the past five years and the kid on that they are trying to exercise on the British public?
Lord Deighton
The Government’s strategy is crystal clear. The benefit of getting the deficit under control is absolutely worth it in terms of fixing the roof while the sun is shining. That is the philosophy. To do it over a two-year period and to get control of our public finances so that we can then grow and focus on, for example, the productivity argument I shall speak about in a minute is the critical part of the argument.
Lord Skidelsky
Does the noble Lord not accept the OBR’s conclusion that the austerity policy slowed down the rate of growth of the economy in 2011-12 and 2012-13? If that is the case, is it not a bit neglectful of him not to take into account the effects of the spending cuts on the economy?
Lord Deighton
That is consistent with my earlier response, that we did not have that choice because the markets would not have allowed us to continue with the scale of deficit we had.
Many noble Lords made very useful and interesting contributions on the housing market: the noble Lords, Lord McKenzie, Lord Best, Lord McFall, Lord Whitty, the noble Baroness, Lady Valentine, and the noble Lord, Lord Graham, who, with mobile homes, may well have the solution to some of our supply problems. The current status is that over 500,000 homes have been built during this Parliament. Of course, that is also tied to the financial crisis, but planning approval and housing starts are now at their highest for seven years, so they are benefiting from part of the recovery.
I agree with the general sentiment of most noble Lords who contributed on this topic that supply is the principal problem, and that dealing with our planning system, incentivising local authorities to build more, using both sticks and carrots in the process, is absolutely key to the way ahead. The noble Lord, Lord Best, suggested that there was nothing in the 2015 Budget for housing supply, but then referred to all the things in the small print that are going on. The demand-side interventions by my right honourable friend the Chancellor have been very effective; Help to Buy has been a successful policy—more than 80,000 people now own homes who would not have been able to do so before. The OBR and the Bank of England are comfortable that the impact of improving demand in that way has not been highly inflationary to the house price market.
There were lots of comments on pensions and savings, from my noble friends Lord Freeman and Lord Flight—who talked about the savings rate in a very interesting and thoughtful contribution about what we need to do about the long-term savings rate and how important it is—and from my noble friend Lord Northbrook and the noble Lord, Lord McKenzie.
One of the key questions all noble Lords asked was about where we are on Pension Wise, which is the service provided by government to provide guidance to people who are now faced with these new flexibilities. There are three potential channels: the digital channel—noble Lords can go home tonight and look at that, as it is up and running—which gives a description of what the flexibilities are; the telephone channel which is managed by the respected organisation TPAS—you can call up a call centre now and book an appointment with TPAS to have a 45-minute telephone session; and you can also call up Citizens Advice, which is the respected brand that delivers the face-to-face service. Therefore, each of those organisations—TPAS and Citizens Advice—has hired and put its people through a training programme so that they are ready to meet the demand. Of course, that is a very challenging thing to work out, because it is very hard to work out how many people will want what kind of advice, and when. However, we have done everything we can to ensure that that service will be available with the right capacity and the right quality—and to take on board my noble friend Lord Freeman’s point, with support from the FCA there will be plenty of opportunities to have a look at how it is working, and there will be a lot of work around making sure that potential scammers cannot be successful.
It is useful to be critical about growth and productivity performance, because it is important to focus on what we can do to make it better. We should remember that we are growing faster than anybody else at the moment, so it is not all bad news.
My noble friend Lord Taverne and the noble Lord, Lord Hunt of Chesterton, talked about the role of foreign capital coming in—hot money, as my noble friend referred to it. Generally speaking, this economy has enormously benefited from being an open economy, with the advantages that come with that. The noble Lord, Lord Hunt, referred to Hitachi, which has come here to assemble the trains, and has also decided to set up in the UK as the base for its European rail business. So, generally speaking, operating as an open economy has been a hugely successful thing for this economy.
Lord Taverne
Would my noble friend deal with the question of the danger of the inflow of hot money, which makes us very vulnerable indeed if there is a crisis of any kind? Is not the deficit on the balance of trade a very serious failure of the present Government?
Lord Deighton
There is a deficit on the balance of trade, although the most recent figures two weeks ago were the strongest that they have been for a very long time. I accept that our relative export and import performances are not as strong as they should be, but I would not put it down to a failure of this Government. It is a chronic long-term challenge, which British industry has to face up to.
Hot money is a complicated subject. In terms of investing and having ownership shares in our big businesses, I frankly do not find that particularly disturbing, because we are in a global market and those ownership positions are traded very actively. As I said, Britain has benefited on a net basis and manages that exposure very effectively.
The noble Lord, Lord Northbrook, asked what the future was for a business rates review and the annual investment allowance. The Chancellor said that that allowance would be looked at in the Autumn Statement next year.
There was a strong consensus for more decentralisation around the House—the noble Baroness, Lady Valentine, for London and my noble friend Lord Shipley, looking at the north-east.
My noble friend Lord Thomas referred to the tidal lagoon in Swansea, and I am delighted that that has moved into the next stage of negotiation. I was also delighted that he pointed out the work that has been done for farmers to help with their volatility by spreading out their taxes over a five-year period.
I am very much in sympathy with the perspective of the noble Lord, Lord Stevenson, on the arts, which is an important part of life and a great national strength. Through the tax system we are doing quite a lot to support the film industry.
In conclusion, I thank noble Lords not just for this debate but over the years that I have been at the Dispatch Box, when we have had very interesting exchanges. I have learnt a lot and improved my perspective from it. I thank my noble friend Lord Newby, who has been my colleague at the Treasury and has been magnificent at the Dispatch Box.
Despite the argument that we have been having, the British economy is in a very different situation five years on from the one that we inherited. We have stabilised the public finances. There is a very valid debate about the pace at which deficit reduction continues from here, but the circumstances of the economy will have a great deal to do with that, as they did over the past five years. For me, the focus is really on two things, both of which I would describe as productivity challenges. One is in the public sector, delivering great outcomes but in a much smarter way with more limited inputs. The same applies to the private sector, where the Government’s job is to create an environment in which we can unleash the inherent dynamism of that sector and, frankly, let them get on with it.
Convergence Programme
(9 years, 6 months ago)
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Lord Deighton
That this House approves, for the purposes of section 5 of the European Communities (Amendment) Act 1993, the Government’s assessment as set out in the Budget Report and Autumn Statement, combined with the Office for Budget Responsibility’s Economic and Fiscal Outlook and Fiscal Sustainability Report, which forms the basis of the United Kingdom’s Convergence Programme.
Finance (No. 2) Bill
Public Contracts Regulations 2015
(9 years, 6 months ago)
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Lord Hunt of Kings Heath
That this House regrets that the Public Contracts Regulations 2015 laid before the House on 5 February are being implemented with unseemly haste, will cause confusion as to which procurement regime is to be used for integrated health and care contracts, and do not implement the assurances given by Ministers to Parliament during the passage of the Health and Social Care Act 2012 that NHS commissioners would be free to commission services in the way they consider in the best interests of NHS patients. (SI 2015/102)
Lord Hunt of Kings Heath (Lab)
My Lords, I say at once that I welcome certain aspects of the regulations we will debate tonight, specifically the help for social enterprises. However, I am concerned about their potential impact on the NHS, the enforced tendering of services that will entail and the potential confusion between two different sets of procurement regimes for the health and social care sector.
These regulations implement the main public sector procurement directive agreed by the EU in 2014 but also introduce a number of UK-specific changes intended to open up public procurement, including for small businesses. The directive replaces the old system of type A and type B services, and the new light-touch regime will apply to health and social services—formerly Part B services.
Contracts in the category will fall under the new rules if they are valued at above €750,000. Above the threshold, commissioners will have to publicise in advance their intention to award contracts and announce the contract award decision after it has been made. This regime will sit alongside the healthcare-specific requirements in the NHS (Procurement, Patient Choice and Competition) Regulations 2013 and Section 75 of the 2012 Act, which we debated in your Lordships’ House on 24 April 2013. I am sure that the noble Earl will recall that lively debate.
The introduction of this new regime has been delayed for NHS-funded healthcare services until April 2016 to allow commissioners time to adapt. The Government have argued that this is necessary because of the need to ensure that commissioners and other key stakeholders are fully prepared. The Government have stressed that other contracting authorities, such as local authorities, are not subject to these additional domestic regulations and therefore need to follow the new rules for the light-touch regime as soon as they come into force. However, the Government have also been forced to acknowledge that there are concerns about the scope for potential confusion as a result of the existence of two regimes side by side for another 12 months.
The Opposition have sought two different legal opinions, both of which advised that these new regulations could force the tendering of NHS health and social care services to go beyond the requirements of the Section 75 regulations under the 2012 Act. Practically all health services will be above the €750,000 threshold. This would escalate the level of service tendering and privatisation of health and social care services as well as wasting vast amounts of money on pointless tendering procedures when the money would be far better spent delivering services for NHS patients.
At best, the new procurement regulations are confused and unclear. NHS services have an additional year because the new regulations do not come into force for health services until April 2016, whereas they came into force on 26 February 2015 for all other areas. Council social care services have to comply with these new regulations immediately so, in effect, two procurement systems will be operating for health and care until 2016. There will undoubtedly be confusion over the definition of some services, to do with whether they are strictly social care or include elements of healthcare as well, and therefore whether they are subject to these regulations and there is a requirement for them to be advertised and tendered. The advice we have—I think experience in the last three years shows that this will be the case—is that CCGs will understandably err on the side of caution to avoid legal challenge and therefore advertise or tender services in case the new regulations are found to apply to them.
What happens if an NHS body wishes to commission a contract that includes elements of clinical healthcare and social care? This will not be completely unknown, given the effort that we all support towards trying to integrate health and social care. The question arises: which regime will the NHS body have to follow? Will it not be driven to split out these elements in two separate contracts to comply with two separate legal requirements? What about the potential for legal challenge? Would it not drive a wedge between joined-up commissioning of health and social care?
The regulations also fail to take advantage of many of the flexibilities in the 2014 directive that could have exempted the NHS from having to run pointless tenders. They also fail to incorporate the flexibilities in the directive that would have allowed NHS bodies to decide not to tender when there are wider strategic interests that mean a comprehensive local health service must continue to be provided by a key NHS provider.
These missed opportunities reflect the Government’s political imperative to turn the NHS into a market and pave the way for private sector operators to deliver more NHS services. The imposition of market mechanisms when they are not needed, and the failure to allow CCGs flexibility to decide when tendering is the right approach for patients, will create wholly unnecessary additional cost and uncertainty at a time when NHS bodies should be focused on meeting the needs of an ageing population and improving services.
We are already seeing the impact because many CCGs undoubtedly believe that there is no alternative to full-scale tender. A vast amount of resources is being consumed, with no benefit to patients. The evidence is clear. Commissioner spending on private providers has increased from £4.1 billion in 2009-10 to £6.3 billion in 2013-14. The proportion by value of community health services provided by private sector providers has increased from 12% in 2010-11 to 18% in 2012-13. Private provider spending on mental health services increased by 12% between 2010-11 and 2012-13. Overall, the Department of Health’s annual accounts suggest that some £10 billion of the total NHS budget of £113 billion is spent on care from non-NHS providers.
Some large contracts have attracted particular attention and concern. For example, in Staffordshire, CCGs are seeking bids for a 10-year contract worth £1.2 billion for cancer and end-of-life care, which is potentially likely to significantly involve private sector providers. Then there is the Bedfordshire case. The Bedfordshire CCG awarded a five-year contract to Circle as prime provider, assuming a total risk for musculoskeletal services worth £120 million. A local NHS provider has subsequently refused to sign the contract under which it would provide some of those services because it would see a referral drop of 30%, thereby putting at risk its trauma services, which are cross-subsidised by musculoskeletal services. There are other examples of bizarre decisions being made by clinical commissioning groups because they feel that they must put services out to tender, and by doing so they seem to have no analysis of what that would mean for the viability of the whole health service system.
A recent study by the British Medical Journal found that one-third of contracts to provide clinical services awarded in the year from 2013 were secured by private providers. A study by the NHS Support Federation found that, of 80 contracts awarded, 54 went to non-NHS providers. We have also seen what I can describe only as a ludicrous intervention by the competition authorities in sensible service changes in Dorset and then Bristol.
I am sure that the noble Earl will want me to refer to the recent King’s Fund study, which concluded that any benefits from competition,
“can be outweighed by costs and difficulties of competitive process”.
As the study says, it is also clear that CCGs remain very uncertain about procurement and tendering rules. They are spending a lot of money on legal advice. A lot of that legal advice is very risk-averse, which is why so many services are being put out to tender.
The Lord Bishop of Peterborough
My Lords, I am grateful to the noble Lord, Lord Hunt, for bringing this Motion. I will speak only very briefly because he has given most of the detail and said most of what I want to say, particularly about the confusion in the tendering and commissioning process. Integrating health and social care is obviously right—I very strongly support it—but why the rush? Why not do it slowly and carefully? If I understand aright, Scotland has entered a lengthy, considered stakeholder consultation and will finalise its regulations on health and social care at the same time, by April 2016, along with the majority of EU member states. So why do we have to go so quickly? I do not understand the rush in one-half of the equation, which unbalances the whole thing.
Experience tells us—we have had examples from the noble Lord, Lord Hunt—that changes on this scale are highly complex, deeply disruptive to those involved and often much harder to implement than initially imagined. Is not proper consultation, careful decision-making and measured implementation the right way forward in such matters? I, too, urge the Government to take this more slowly and get it right, because it really is important and we want to support it.
The Parliamentary Under-Secretary of State, Department of Health (Earl Howe) (Con)
My Lords, I am grateful to the noble Lord, Lord Hunt, for initiating this debate on what is a very important subject. Let me begin by emphasising one key point. The main purpose of the Public Contracts Regulations 2015 is to implement the new EU procurement directive. There is no choice over whether the UK transposes that directive: it is mandatory to do so. It contains the new rules regime by which all European public authorities have to abide. The Government implemented this directive early to realise as soon as possible the economic benefits from the modernised rules regime. Both the noble Lord and the right reverend Prelate have expressed criticism to us for doing so, but the reason is that this should lead to more than £4 billion-worth of benefits to the economy each and every year. That could not be overlooked.
Since 2010, the Government have embarked on a radical programme of commercial reform as a lever to stimulating economic growth and reducing the deficit. In 2013-14 alone, this approach saved taxpayers £5.4 billion. As part of our ongoing commercial reform programme, the UK negotiated hard in the European negotiations on the new EU procurement directives in 2012-13, and we were successful in securing a number of key improvements to the European public procurement rules regime. The new rules support UK government priorities of economic growth and deficit reduction by making the public procurement process faster, less costly and more effective for business and procurers alike. The European Commission estimates that SMEs across the EU could save up to 60% of bidding process costs.
Aside from transposing the new public procurement directive, the regulations include a number of domestic reforms, instigated by my noble friend Lord Young of Graffham, to make it simpler for small businesses when bidding for public sector contracts. The Minister for the Cabinet Office, my right honourable colleague Francis Maude, and my noble friend Lord Young of Graffham have driven these reforms from concept through to implementation in these regulations. The changes include ensuring that all advertisements for public sector contracting opportunities appear in one place on a national website, the abolition of time-consuming and costly pre-qualification questionnaires for low-value contracts, and improving payment terms down the supply chain.
The statutory instrument was laid in Parliament on 5 February 2015. The regulations came into force, for most purposes, on 26 February 2015. I stress the words “for most purposes” because, although most public procurement activities will be subject to these rules from that date, there are special provisions in some areas. One such special area is the healthcare sector. The Government have delayed the coming-into-force date for procurements by NHS clinical commissioning bodies to the latest possible date allowed by the EU—18 April 2016—to give clinical commissioners more time to prepare for the rule change in recognition of the interplay between the new EU procurement rules and the UK’s existing healthcare procurement legislation.
I make it clear that the Public Contracts Regulations themselves were not foisted upon Parliament at the last minute or hidden until the regulations were laid but have been, in line with good practice, subject to formal public consultation over a period of time, over and above what had already taken place for the EU procurement directive.
The Government received more than 200 stakeholder responses to the public consultation on the draft regulations. Most respondents were supportive of the overall approach to early transposition, and the delayed transposition for NHS clinical commissioning services was welcomed by stakeholders in that sector. The government response to the consultation was published and publicly available from 30 January 2015.
I should now like to reflect on the concerns about potential confusion as to which procurement rules regime applies for integrated health and care contracts. To consider this, it is helpful to reflect not only on the regulations and the directive that they implement but on the pre-existing set of UK healthcare procurement rules. Those rules have existed in the UK since 2013, following the Health and Social Care Act 2012; the noble Lord, Lord Hunt, alluded to them in tabling this Motion. The new EU procurement directive includes a mandatory new provision for member states to put in place a new light-touch regime of procurement rules for health, social, education and certain other service contracts. In transposing that requirement, the UK has taken careful account of stakeholders’ concerns and has designed its national provisions to be as genuinely light touch as possible, within the parameters set by the EU. In the UK health sector, a set of healthcare-specific procurement rules has been in place for some time, covering arrangements for the purchasing of clinical services. The NHS Procurement, Patient Choice and Competition Regulations 2013 were put in place to drive improved quality and best value, which effectively put in place a light-touch regime for clinical services.
During the Government’s recent public consultation on the Public Contracts Regulations 2015, it became apparent that stakeholders in the field of clinical services procurement were concerned about the interplay between the new light-touch procurement rules regime and the existing healthcare procurement rules. The Government acted upon this feedback and agreed to allow more time for clinical service commissioners to adapt. Consequently, the Government decided to take the sensible and pragmatic decision to delay the application of the new regulations on clinical services procurement by clinical commissioning groups and NHS England until the transposition deadline of April 2016. Such procurements will continue to be governed by the pre-existing procurement regulations—that is, the Public Contracts Regulations 2006—until that time.
The delayed implementation in respect of clinical procurement is clearly defined, and rests on the identity of the commissioning body. Commissioners of healthcare services are exempt until 18 April 2016. Local authorities are not. Integrated commissioning plans, joint commissioning or arrangements for a CCG or local authority to commission on behalf of the other will all remain available. The decision about which rules regime applies will depend on which commissioner leads the procurement and the service in question. The Government’s response to the public consultation on the draft regulations acknowledged the potential for short-term complexity.
The Government have since published guidance on the new light-touch regime, in addition to providing a wide variety of training and guidance materials on the new procurement rules overall. In the health sector, work is also under way to bring greater clarity in the system about how health commissioners, both from NHS bodies and local authorities, can work together under the respective legal regimes. NHS England and Monitor have, and continue to, run a successful series of joint workshops for commissioners and continue to provide advice and support to clinical commissioners in individual cases, where appropriate.
Turning to the concerns about the freedom of NHS commissioners to commission services in the best interests of patients, I would like to reassure noble Lords that these regulations respect those freedoms. As I have already set out, these regulations do not apply to the procurement of clinical services procured by NHS England or clinical commissioning groups yet. But even when they do apply in April 2016, they will not force commissioners to tender NHS services automatically.
Advertisements for competitively procured contracts will have to be placed in the official journal of the EU where the contract is worth more than €750,000, unless an exemption applies. Commissioners can consider whether there is, in the circumstances, an obligation to go to the market or not under the terms of the directive and implementing regulations. The requirement to advertise if no exemption exists is a mandatory feature of the new EU procurement directive. The Government have no option but to implement it in national legislation but, as I have already said, we are delaying implementation of that requirement to the latest date possible.
The Public Contracts Regulations 2015 and the Procurement, Patient Choice and Competition Regulations 2013 are consistent in requiring contracts to be procured fairly and transparently. They also both contain appropriate exemptions that apply to contracts that need not be advertised—for example, where there is only one possible provider.
It is perhaps helpful at this stage to delve deeper into the issue of when to tender, in particular to address some of the incorrect commentary that is often perpetuated suggesting that all services have to be put out to tender. The Public Contracts Regulations, when implemented for health, contain a number of flexibilities that can, where justified, be utilised by commissioners to dispense with the need for an open competition. Importantly, the Public Contracts Regulations require a fair and transparent process once the commissioner has decided to go out to competition. The major change introduced by the directive relates to the need ordinarily to advertise in the Official Journal of the European Union—or OJEU, as it is generally known—rather than to the decision on which procurement process to follow.
Lord Hunt of Kings Heath
My Lords, I thank the noble Earl for his response. He said that the imperative of the Government to introduce the regulations early is because of the economic benefits. Let me say at once that I have always accepted that there are some benefits in these regulations. I particularly welcome the social enterprises provisions, but my concern remains, rather like that of the right reverend Prelate, that the introduction of the regulations applying to care services now as far as local government is concerned, along with the existence of NHS regulations, will cause a great deal of confusion.
I also think that the noble Earl is underestimating the confusion out there in the health service about which services should be tendered and which should not. I do not believe that clinical commissioning groups accept the kind of view that he is putting forward. They are getting legal advice that actually makes them very risk averse. The noble Earl said that the requirement to advertise does not mean that people have to tender, but once you advertise you are inevitably on a route towards tendering.
Finally, on Staffordshire, my issue is that essentially the CCGs are outsourcing commissioning decisions which they as the statutory bodies ought to be taking for 10 years, and they are failing to engage with the public. They will not appear at public meetings to defend the position. The noble Earl will know from MPs in Staffordshire that there is a lot of concern about this, and if a Labour Government are elected we will certainly want to call in on what is happening.
Before I beg leave to withdraw the Motion, perhaps I may say to the noble Earl that he has been the Minister for Health in this Chamber for five years, and on behalf of my noble friend Lady Thornton and myself I would like to thank him for the courteous way in which he has responded to our many debates. I particularly thank him for the way he has agreed to meet a number of small charities over those five years on issues that I have raised. That is very much appreciated. I should also say that we have enjoyed working with the noble Baroness, Lady Jolly, as well.