Welfare Benefits Up-rating Bill

Baroness Hollis of Heigham Excerpts

Monday 25th February 2013 Lords Chamber

[Baroness Hollis of Heigham]

I support the non-existent amendment of my noble friend Lord Bach as it is key to the changes that we are having. We should not be discussing this Bill in isolation from the Welfare Reform Act that preceded it. They represent a package of cuts and changes that will bear very heavily on 5 million to 7 million people in this country—no light measure.

To follow my noble friend, it is worth reminding the House of what we discussed at Second Reading about the number of changes that will affect people who are receiving benefits, even though many of them are in work. Those changes will happen to them all at once. We will see a new structure of benefits, brought together in universal credit—that is a structure that I welcome—but it will be accompanied, as in this Bill, and in reducing benefit inflation to CPI, by serious cuts, which many benefit claimants will think is simply an error by the department. They will go frantic with concern in trying to rectify them. That is the second change.

The third change that we are going to see is to the new patterns of payment. For example, tenants of social housing who currently have their housing benefit paid directly to the landlord will now have it paid to themselves, looped through a bank account. Very often, given other pressures of finance, debts and so on, they may be in real difficulties in making that money over to the landlord at the end of the month. So there is a new pattern of payment, with which tenants must become familiar. They will also have monthly payment of benefit, when many of them have been used to weekly or fortnightly payments, and the payment will go to a single earner or person in the household and not split. Again, that is a major change.

All those changes—the new structure, the cuts, the new method of payment direct to tenants, and the monthly payments—will be handled by an IT system, when we know that 20% to 30% of the tenants wishing to claim benefit have no familiarity with IT at all. So what will they do? What they have always done is to seek legal advice from Citizens Advice, which in the past has been funded very substantially by the Lord Chancellor’s Department. CABs have received some 40% of their funding from the Lord Chancellor’s Department, but that has been cut, and they are now 40% short. As a result, those same people facing this sequence of changes, some of which I support, like universal credit, and some of which I deplore, will make their bids for benefit on the basis of an IT system, with which they are not familiar, instead of a paper trail. Where do they go? They cannot go to the traditional advice centres because the legal aid money that sustained them has been withdrawn in the worst, most foolish and most indecent economy of which I can conceive. I declare my interest as a chair of a housing association. I am having to appoint paid professionals to do the welfare advice, to be paid for out of increased tenants’ rents, which hitherto was provided by the skilled but unpaid volunteers of the CABs, which represented a real commitment to the big society to which we all give lip service and which, I fear, is too seldom observed in this House.

My noble friend is absolutely right that this is a foolish way to proceed and I regret very much that we were not allowed to debate this properly. I speak with some concern because, as a departmental Minister for eight years, I was responsible for tribunals before they went over, via Leggatt, to a generalised tribunal system. I sat in on those tribunals for DLA and other benefits. My noble friend is exactly right—I could see within five minutes whether the person coming before the tribunal had or had not received prior legal advice. If they had not, the appeal or discussion at tribunal took five times as long, with the chairman, as they were then called—now judge—trying to tease out the issues and establish whether it was a bona fide case, whether they could take it further and even whether the person was claiming against the right benefit. In some cases, they were complaining about an incapacity benefit when it should have been DLA, and I felt like jumping up and saying, “You’ve got the wrong benefit here—let’s start again”.

That is the situation here. We are transferring the pressure of the problem away from the point that is most approachable, accessible and value for money—local services in the community funded by legal aid—to the tribunal process itself and merely distributing the pressure over a longer time, at greater cost, with greater inaccessibility and greater difficulty for everyone to understand. That is a huge folly and, like my noble friend, I beg the Government, even at this late stage, to reconsider.

[Lord Newby]

My Lords, at the risk of repeating arguments made in earlier debates, I remind the Committee of the context of the Bill. This country is still recovering from the most damaging financial crisis for generations. When this Government came to power, the state was borrowing £1 in every £4 that it spent. Even before the recession, the UK had the highest structural deficit in the G7 and between 1997 and 2010 welfare spending increased by some 60% in real terms. Welfare spending now accounts for more than a quarter of government spending: that is, more than £200 billion. The £1.9 billion of savings enabled by this Bill in 2015-16 is a necessary part of helping to reduce public spending, tackle the deficit and secure the economic recovery.

Amendments 1 and 9, spoken to by the noble Lord, Lord McKenzie, would remove the 1% uprating figure in the Bill in Clause 1 and Clause 2. The effect of these amendments would be to give the Government discretion over benefit levels on an annual basis in much the same way as under existing legislation. As I have already explained, we believe it is vital that we set out credible plans for the longer term. The Bill is needed to enable us to set out our uprating policy over several years so that we can be sure we will deliver those £1.9 billion worth of savings.

My speaking notes at this point said that this amendment would completely undermine that core purpose of the Bill. I was relieved, but not surprised, that the noble Lord, Lord McKenzie, used that very word to define the effect of these amendments. He said that the amendments would undermine and, indeed, negate the core purpose of the Bill. They would, and so a vote for these amendments would be equivalent to a vote against the Bill at Second Reading. I note that the amendments, while removing the 1% figure, do not suggest an alternative uprating metric. If we assume that the noble Lord’s intention is that we operate in line with the CPI, this would obviously not deliver the savings we are talking about. I remind the Committee that the £1.9 billion worth of savings that this Bill will generate in 2015-16 are equivalent to the salaries of about 45,000 nurses and about 40,000 teachers, so these are not negligible amounts, as some noble Lords have suggested, and the savings would have to be found somewhere else.

As I say, the amendments undermine the purpose of the Bill and, frankly, demonstrate a fundamental difference of opinion between the two sides of the House on how we deal with the current economic situation. The Government believe that the main priority is to get spending under control, reduce the deficit and restore growth. The Bill helps us to achieve that. At the same time, we are implementing policies that make a real difference to people’s lives—people of the most modest means. Let me name just a few of them: universal credit; the pupil premium; reform of early years education; tackling problem debt; and lifting people out of paying income tax through raising the personal allowance. We believe that these policies are vital if we are to have a real and sustainable impact on poverty over the medium to longer term. We cannot simply focus on increasing incomes through welfare payments, lifting people just above the poverty line.

The noble Baroness, Lady Meacher, asked me a number of questions about the impact assessment. I remind the Committee that we published a detailed impact assessment for the Bill, which includes details of the impact by family type, and have made public details of the impacts on relative child poverty. She asked whether we could delay the changes until we had a broader impact assessment that covered the impact on mental health, crime and, I think she said, social unrest. As regards the impact on crime, it seems to me that the noble Baroness is being completely unrealistic to believe that such an impact can be measured with any degree of precision. At the start of the downturn, most commentators believed that crime rates would rise substantially. If one had taken the average view of people in the know, that is what one would have put in an impact assessment. The truth is that crime rates have not risen substantially. They have fallen. I obviously welcome that. I make that point only to make the more general point that, while one can make an impact assessment that covers some things with a reasonable degree of precision, on other things—on crime, for example—it is impossible to do what the noble Baroness wants. That is why the impact assessment is couched in the terms that it is.

The noble Baroness asked about exceptions or exemptions from direct payment. We are not setting out the exemptions in the regulations because they will be based on individual needs and assessments. Individuals will work with an adviser via Jobcentre Plus. There will be personal budgeting support, which will contain two elements: money advice, to help people who cannot manage monthly payments, and alternative payment arrangements, which include rent paid direct to landlords, more frequent payments and payments split between partners. These will be undertaken on an individual basis.

I do not really want to get involved in a long macroeconomic discussion. I would like to get involved in one, but perhaps I might simply refer the noble Baroness to the letter from the noble Lord, Lord Desai, in the Financial Times last week. It seemed to explain extremely carefully and clearly why this downturn is not like the typical Keynesian downturn that we have seen in the past. I would commend that letter to all noble Lords who are looking for a primer on why the Government are following the line that they are.

Welfare Benefits Up-rating Bill

Baroness Hollis of Heigham Excerpts

Monday 11th February 2013 Lords Chamber

[Lord Sheikh]

My Lords, I welcome the Bill as it will restore fairness and simplicity to the process of social security payments. It will also deal with the question of affordability. It is important for a Government of any persuasion to show that they empathise with taxpayers who are essentially paying for welfare handouts. The concept of fairness is one of the reasons for proposing this Bill. It is worth remembering that the coalition Government inherited the biggest budget deficit of any country in the developed world. It is estimated that capping social security benefits in this manner will save the Treasury £3.7 billion in 2015-16 and that, thereafter, there will be permanent savings each and every year in our welfare spending.

Welfare spending increased by 60% under the previous Government but this did not produce the intended result of helping individuals to return to work. If we can get more people in work, some of them will receive salary progressions and improve their standards of living. In the years 1997 to 2010, when average earnings increased by 30%, tax credit spending increased by 340%. One of the aims of this Bill is to tackle the lack of aspiration and ambition among a number of those who have been trapped in poverty. I believe that the 1% uprating stipulated in Clauses 1 and 2 will improve incentives to work.

It is true that the welfare debate has been described in overly simplistic terms in certain quarters. However, it is a fact that a culture of dependency exists in some areas. Previous Governments have tried to tackle this issue with the best of intentions but the complexity and scope of the problem has often meant that past strategies have not been successful in addressing the matter. Children and young people who live in households where adults do not engage in any form of employment are not only the most deprived in our society but are most likely to follow this path once they leave full-time compulsory education. This generational cycle of worklessness is a key factor in the rising levels of welfare dependency and poverty in our communities.

I am sure that all noble Lords will agree that work gives people pride and confidence. Unemployment sometimes creates depression and has an adverse affect on people. Work is good for people’s mental health, their physical health and their general well-being. These benefits have been demonstrated repeatedly. Dependency is not liberating; it constrains people and prevents them achieving their ambitions.

[Baroness Hollis of Heigham]

I am grateful to the noble Lord for giving way for a moment. Would he not agree that, on the contrary, what welfare benefits such as tax credits have done, and what universal credit proposes to do, is to make work pay and thus get people back into the labour market, exactly as he wishes?

[Lord Sheikh]

I still feel there is a culture of dependency. Obviously, we would like to get more people into work and incentives must be given to people to go to work. People have become trapped in our welfare system and they need to be freed. This Bill will make a great contribution to their liberation.

The Government deserve recognition for trying to ensure that we have a fair welfare system to support those in genuine need. Social security should be for people who find themselves out of work and are trying to get back into employment. This House recently debated the success of the Asian community who were expelled from Uganda and came to settle in this country in 1972. My family was among those people who were expelled by General Amin and who came here. A number of these Asians came here penniless and were initially housed in Army camps. At the outset they received state benefits but they came off those benefits, and started to work and established small businesses. They have been successful and now offer employment to others, pay taxes and create wealth for the country. It is unfortunate that some people have chosen not to make a contribution to society and have opted to receive benefits as a way of life. The welfare system was created to ensure that people were not left destitute if they lost their jobs. It was viewed as a matter of support for those who were down on their luck. It is unfortunate that the original purpose of this safety net has been distorted.

I wholeheartedly support the Government’s decision to retain the uprating of long-term disability benefits at the rate of inflation. I also support the triple-lock guarantee for basic state pensions, which means that pensioners will receive an increase of at least 2.5%. A compassionate society is one that shows respect and understanding to the most vulnerable. I am proud that the Government have taken these steps as they are both a moral and civil duty. Further to erroneous reports about these measures, I would be grateful if the Minister could inform your Lordships’ House of the steps Her Majesty’s Government are taking to ensure that people are well informed and reassured about policy regarding disability and pension provision.

It is neither prudent nor fair to distribute welfare payments or benefits without question or regard for our economic situation. The uprating measures in this Bill will show considerable savings by 2015-16 and for years after that. This is essentially about taxpayers’ money. We have a financial deficit that we need to rectify and we need to put the country on a sound financial footing. We can achieve this by reducing our spending, applying appropriate taxes and undertaking more business at home and overseas. I have spoken on the latter point in your Lordships’ House previously. We cannot afford to continue paying welfare benefits as in the past.

The Government have reduced the deficit by a quarter since they came to power in 2010. Obviously, this is to be commended. More than 1 million jobs were created in the private sector in the same period. The FTSE 100 index has risen above 6,300 points for the first time since May 2008. If we can achieve more growth we will create more jobs, and if we can encourage people to work rather than be dependent on the state, more people will be gainfully employed. I support the Government on getting the economy right and we must be firm and keep on the right track. It will indeed cause pain to some people but, of course, if a person is ill it is necessary to take strong medicine. We should not borrow our way out of the current financial crisis. Borrowing is the easy way but it is the wrong way.

There are wider social implications at the heart of this debate. We cannot ignore the resentment and anger felt by hard-working families who see others making a conscious effort not to work being rewarded handsomely by the state. Failure to address this issue may cause tensions within communities. I am sure that some of us have heard the expression, “I cannot afford to go to work”. This is an absurd situation and we are perhaps the only country where people are better off not working.

The measures in the Bill are necessary to remedy the culture of dependency that is blighting some members of our population. The Bill is a sign of the Government’s commitment to ensuring that we live in a fair society. The fact remains that since the economic downturn salaries have risen on average by 10%, whereas payments for some individuals in receipt of benefits have risen by 20%. We need to look at all areas of expenditure for our well-being, which will of course include the welfare benefits. The present state of affairs is simply not sustainable. I am supporting this Bill as it is a step forward in dealing with issues relating to affordability and fairness.

--- Later in debate ---

[Lord Newby]

My Lords, I thank all noble Lords who have taken part in today’s debate. It is an issue about which all participants feel passionately and I can well understand why. I will try to respond to as many questions as possible, but let me begin by reminding the House of the purpose of the Bill. As my noble friend Lady Stowell pointed out in her opening speech, this Government inherited an exceptional fiscal challenge. The financial crisis of 2008-09 resulted in the largest deficit since the Second World War and the UK experienced one of the deepest recessions of any major economy. Even before the recession began, the UK had the highest structural deficit of any country in the G7. This level of public spending was simply not sustainable. There are still tough choices to make. The savings from this Bill provide a significant contribution towards delivering the savings needed to ensure that spending is on a sustainable path. It is, of course, never an easy decision to take action on welfare spending and I understand only too well that the welfare system provides vital support to millions of people. I also understand that while benefit rates will rise in cash terms, they will be fall in real terms.

In these tough economic times, people have seen significant restraints in their pay across the public and private sectors. With welfare expenditure accounting for £1 in every £4 spent, it is simply unrealistic to think we can achieve the savings we need without taking further action on welfare. We have already had to take tough decisions on welfare spending in this Parliament, yet despite these, more than £200 billion was spent on welfare last year. Under the previous Government, spending for working-age people and children increased by around 60%—equivalent to an extra £1,400 cost per household in Great Britain. This is the context against which this Bill must be judged.

However, in making what we believe are necessary limits in welfare spending, I cannot stress enough that our motivation is not, to quote various noble Lords today, to “demonise”, to “stigmatise”, to brand the poor as undeserving, to impose a harsh ideology on them or to divide and rule. It is simply to help—albeit painfully—provide a sustainable platform for the public finances and the economy going forward. This is something that every citizen of the UK will benefit from in the longer term.

The right reverend Prelate, the Bishop of Ripon and Leeds, asked me for an assurance or statement that the vast majority of benefits claimants were not skivers. I am extremely happy to give such an assurance. Nobody in your Lordships’ House believes that to be the case; all of us know only too many people who are working extremely hard to make ends meet. I particularly acknowledge the point made by the noble Baroness, Lady Donaghy, about people on low incomes often having several jobs and still struggling to make ends meet. I acknowledge that that is the reality for many people in Britain today.

We have to return to the main point. If the savings from this Bill were not delivered here, they would have to be found somewhere else. That would mean additional pressure on other public services. To put this figure into context: £1.9 billion is equivalent to the salaries of about 45,000 nurses or around 40,000 teachers. To put it another way: it is equivalent to 500,000 primary school places. Anybody opposing the Bill needs to explain where the money is coming from.

[Baroness Hollis of Heigham]

My Lords, did the Minister and his colleagues make the same consideration when they decided to take £3 billion in tax relief and give it back to millionaires? Will that money not also have to be found for the 40,000 nurses and so on? Is he about to tell us?

[Lord Newby]

Do not worry, my Lords, I am coming to that. The implications of some of the speeches we have heard today are that we should not be making cuts at all, that no civilised society would, even in today’s circumstances, reduce public expenditure. For those who take that view, all I can say is that we simply cannot possibly agree. For those who accept that we should be reducing the deficit but disagree with these changes, my challenge is and remains this: what would they cut instead? The noble Baroness, Lady Hollis, was clear that she would reduce payments to pensioners—

[Baroness Hollis of Heigham]

My Lords, what I said was that I would scrutinise the tax relief available for the building up of pensions which costs £32 billion, of which at least £8 billion comes from the fact that people on higher rate incomes get higher rate tax relief. That is what I said I would scrutinise: not money from pensioners, but from the way that pension savings are artificially supported by tax relief, two-thirds of which goes to the better off.

[Lord Newby]

My Lords, I am extremely grateful to the noble Baroness for correcting me. In that case, and in view of her earlier intervention, I think that what she and the noble Baroness, Lady Sherlock, are saying is that the money will be raised from the millionaires who, in their view, are getting a windfall benefit of £3 billion. I believe that that is what both noble Baronesses have said. But it is clear that either they have not read or they do not believe the report from the Office for Budget Responsibility which suggests that the impact of reducing the higher rate of tax from 50% to 40% is probably £100 million and may be negative. The Government therefore simply do not accept the figures which have been quoted against us. The figure of £1 billion a year to which I think the noble Baronesses have referred was based on an HMRC static comparison. What we know only too well is that given the chance of paying 40% or 50%, the rich—surprise, surprise—change the way in which they order their affairs. There is no pot of gold through a 50% tax rate. My view is that, frankly, the Opposition are all confusion about this.

In the Second Reading debate on the Bill in another place, the right honourable David Miliband was widely praised for saying:

“The Government have projected the cost of all benefits, all tax credits and all tax relief for the next few years, and I am happy to debate priorities within that envelope. I will take the envelope that they have set, but let us have a proper debate about choices, not the total sum—a priorities debate, not an affordability debate”.—[Official Report, Commons, 8/1/13; col. 217.]

The Government have set out their priorities, but frankly, Labour has not begun to set its out. I do not know whether the Opposition agree with David Miliband. I certainly do not know, within the context of overall expenditure cuts, what their priorities will be. We have decided to protect pensioners as a top priority; does Labour agree? We have decided to take millions of people out of income tax as an incentive to work; does Labour agree? We have decided that people on high earnings should no longer get child benefit; does Labour agree? If it does not—and on some of those points, I simply do not know whether it does or not—what other cuts is it proposing in order to keep within the Government’s spending envelope, or within the terms of its own Fiscal Responsibility Act 2010 which committed the Government to halving government borrowing by the 2013-14 financial year. We look forward to hearing the answers, but it is clear that we are not going to hear them today.

Child Benefit

Baroness Hollis of Heigham Excerpts

Tuesday 30th October 2012 Lords Chamber

[Lord Sassoon]

My Lords, this idea, which is one of a number of ideas to meet the very big affordability and fairness challenge that we have, responds to concerns that, while working families have to consider affordability before having another child, those who are out of work do not, for the reason that I have already given—that their benefits will increase. My right honourable friends, the Chancellor and the Work and Pensions Secretary, are working together on ideas, of which this is but one.

[Baroness Hollis of Heigham]

Leaving aside issues of decency—and there are real questions behind that—how does the Minister reconcile two apparently conflicting government views? The first will come from his department; no doubt, with the arrival of the Pensions Bill in this place, he will say that we need more, younger workers to help to support an increasingly elderly population. But he will also say, no doubt, in support of his right honourable friend Iain Duncan Smith, that extra children are for the poor a luxury while for the rest of us they are a burden. How does he reconcile these two statements—that we need more young people to support pensioners but we cannot afford to have them as taxpayers?

[Lord Sassoon]

My Lords, that is a complete misrepresentation of the position of my right honourable friend the Work and Pensions Secretary, so the question becomes completely redundant.

Wales: Barnett Formula

Baroness Hollis of Heigham Excerpts

Wednesday 20th June 2012 Lords Chamber

[Lord Sassoon]

Yes, indeed, I would agree with my noble friend that that should be the objective of any replacement for the formula.

[Baroness Hollis of Heigham]

My Lords, the Minister said that his priority was to seek to reduce the deficit. Given that under the Barnett formula, which has not stood the test of time, Scotland is over-funded by £4 billion at the expense of English taxpayers, would that £4 billion not be a useful contribution to the deficit—or is the Minister so casual about our finances?

[Lord Sassoon]

No, my Lords, the Treasury is not remotely casual about the national finances, and what the noble Baroness says about the Scottish funding situation might well be challenged by others in other devolved parts of the nation.

Devolved Administrations: Financial Flexibility

Baroness Hollis of Heigham Excerpts

Tuesday 8th November 2011 Lords Chamber

[Lord Sassoon]

My Lords, would I ever be so bold as to criticise the Barnett formula? The Barnett formula has been widely questioned, not least by the noble Lord, Lord Barnett, himself. However, the Government’s priority has to be stabilising the public finances. If, in due course, the formula is to be superseded, the challenge is that there is no consensus on how to measure needs, which would be required to bring in some needs-based formula.

[Baroness Hollis of Heigham]

My Lords, on the contrary, I would suggest to the noble Lord that there is plenty of research on how to bring in a needs-assessed formula, given that both devolved Administrations distribute their money down to local authorities on precisely that basis. Would the noble Lord therefore accept that Wales is indeed underfunded, that the Barnett formula effectively misspends and overspends by £4 billion and that a rectification of that would surely help the Minister to address the deficit?

[Lord Sassoon]

My Lords, what I said was that there was no consensus. Of course there is plenty of research but there is no consensus, and that is what is needed in this area.

Savings Accounts and Health in Pregnancy Grant Bill

Baroness Hollis of Heigham Excerpts

Tuesday 7th December 2010 Lords Chamber

[Baroness Hollis of Heigham]

My Lords, this Bill will impact hardest on the poorest in society and on disabled children who at some time between the ages of 14 and 24 move from better funded children's services to more Spartan adult services and who might have used this premium, this sum of money, either to go to college or to buy equipment for their disability. As the noble Baroness, Lady Howe, said, it will impact on children coming out of care who often have no family support. The £8,000 a year might have been used, for example, to take driving lessons to improve their work prospects. Ministers talk blandly about corporate parents—local authorities—at the very same time as Mr Pickles is cutting local authority money by 30 per cent and local authorities cannot even protect statutory services. It is complacency gone mad.

The Saving Gateway would especially have benefited women and people from BME communities, most of whom have negligible assets and no ability to aid their children. Also, the Government said—and this was repeated by the noble Baroness, Lady Noakes—that the health and pregnancy grants were unfocused, rather like the winter fuel payments to pensioners, perhaps. Why do so many people believe that pregnant women cannot be trusted to spend a grant wisely, but there is no attempt to supervise pensioners in southern Spain enjoying the winter fuel allowance?

As Katherine Rake said in her expert evidence, for low-income women pregnancy is the route into poverty, yet the Government are removing a useful resource. Why does the Bill and so much of the Government’s strategy fall on the weakest and the poorest rather than on those who have broader shoulders? The Government have abandoned their manifesto promise to target these policies on the more vulnerable and have provided no equality impact analysis, no doubt because it would make deeply uncomfortable reading. Why exactly do the Government need to incentivise the better-off like me with 40 per cent tax relief on savings, worth up to £11,000 a year, even under the current regime? Why do I need incentivising, yet the poorest among us do not, even though the sums expended will be modest by comparison and their incomes infinitely lower?

I think the junior ISA is remarkably silly. All the evidence shows that people are putting more money into ISAs and pensions at the moment because of ease of access, yet the junior ISA will lock money away for 18 years with limited tax relief because it is designed to help the poorest. So it will combine the worst effects of ISAs with the worst effects of pensions. If there is any spare money, it should go into an adult ISA instead. As I say, it is a remarkably foolish idea.

In debates in the other place, the committee on the Bill took several days of expert evidence—a practice followed in the Commons since 2006 and much to be welcomed—from the IFS, the IPPR, the Family and Parenting Institute, credit unions, Scope, 4Children, the Royal College of Midwives, the National Childbirth Trust and so on. They and the committee discussed, for example, the need for more health visitors, the high risk of miscarriage in the first trimester, which is why the health in pregnancy grant did not come early enough, Gypsies, credit unions, the cost of second-hand buggies, disability needs, the Child Support Agency, folic acid, free prescriptions, financial education, Sure Start, the collapse of Farepak, tuition fees and the pupil premium. All this expert policy discussion was around a so-called money Bill. If it was a money Bill, why on earth take evidence from expert witnesses on its policy implications? No previous money Bill has.

No one at any stage, including the Minister in his evidence, suggested that this was a money matter. Indeed, reference was made to further consideration and report back from the Lords in the normal way. As my right honourable friend Mr Hanson said, this is a deeply political Bill. Committee members fully understood the policy significance of these measures. It was treated throughout as a social policy Bill as, indeed, I believe it to be. If so, why is this social policy Bill coming to us as a money Bill, which means today that we are all in effect wasting our time?

I went back to the 1910 debates to seek to understand how the Speaker on advice could have made the ruling he did. The Lords in 1909 had rejected the Lloyd George Budget and the Commons discussed whether it was entitled to do so. A route out was suggested by Mr Asquith, leader of the Liberals, that the Speaker should rule on what was a money Bill. Balfour, the Conservative leader, had some prescient words to say. He argued that the Liberals were making,

“Mr. Speaker into an arbiter … it will rest with the Speaker of one House of Parliament not merely to say what the duties of that House are, but to say whether a particular Bill shall become law or shall not become law. He becomes not merely the guardian of our rights, but, in a certain sense, the author of our legislation. He is to say whether or not a certain Bill is one that this House can pass over the heads of another place. I do not know whether that is a wise addition to Mr. Speaker's powers”.—[Official Report, Commons, 29/3/1910; col. 1189.].

Why did Mr Balfour hesitate? He hesitated because of the fears expressed all around the Commons of what was then called “tacking”: that is, adding on to Finance Bills or money Bills matters of policy extraneous to them in order to bypass the Lords. As Balfour put it,

“bringing forward Bills which are in form purely Money Bills for objects which are not purely money objects”.—[Official Report, Commons, 29/3/1910; col. 1190.].

That concern was shared by the Liberal Herbert Gladstone.

From reading those debates and the Parliament Act, either this Bill is not a money Bill or almost all Bills, from social security to defence, are money Bills. I have taken two Tax Credits Bills through your Lordships' House and was much aided by opposition contributions and some of their amendments. In my view, those Bills had as much or as little claim to be regarded as money Bills as this Bill.

Speaker Lowther in 1914 seemed to put the matter to rest when he said:

“It is desirable ... to keep the Bill which imposes taxes upon the people separate from the Bill which proposes to expend the money derived from the imposition of those taxes”.

His assumption was that the first was a money Bill, but the second was not. Finance Bills he went on, should be confined,

“to the imposition of taxes, and arrangements for dealing with the National Debt, and so forth”.—[Official Report, Commons, 22/6/1914; col. 1509.]

I turned to Erskine May to see how the debate had moved on. It had not. Essentially it follows Speaker Lowther's ruling. It states:

“No serious practical difficulty normally arises in deciding whether a particular bill is or is not a ‘money bill’”,

and that,

“even if the main object of a bill is to create a new charge on the Consolidated Fund or on money provided by Parliament, the bill will not be certified if it is apparent that the primary concern of the charge is not purely financial”—

a point that was established by my noble friend Lady Thornton.

Over the years, fewer and fewer Bills have been designated as money Bills. All the constitutional experts I have consulted in the past week or two do not believe this to be a money Bill. We are not talking about papal infallibility; we are talking about judgment, and I believe that a wrong call was made. During the past three years, three Bills have been certified as money Bills by the Speaker, over and beyond conventional Finance Bills: that is, the Equitable Life (Payments) Bill 2010, the Fiscal Responsibility Bill 2009 and the Industry and Exports (Financial Support) Bill 2008-09.

There was some debate as to whether today’s Superannuation Bill was a money Bill. It, too, took witnesses, and the Commons and the Speaker decided that it was not. We had its Third Reading just minutes ago. I believe that all those decisions were correct. They followed Speaker Lowther and Erskine May. I do not believe that this Bill does. Surely no one would argue that setting up, say, a child trust fund is not a money Bill when it is introduced, but is a money Bill when it is altered or scrapped. If there is social policy behind its introduction, there are social policy consequences for its abolition.

Why does it matter? Let us take child and maternal welfare, disability, foetal health and nutrition, mental health and depression, and debt and credit unions. Almost all those topics, which were explored in the Commons committee on this Bill, have been debated by your Lordships in the past. I hope that the other House would agree that this House, especially its Cross-Benchers, has expertise, experience, knowledge and practice that are unrivalled in the other place. Why is that? Because in the other place, Members represent communities of locality: their constituencies. We do not, but most of us have come from, or represent or speak for, communities of interest: that is, disabled people, pensioners, asylum seekers or perhaps, as today, children in care.

Most of us are presidents, patrons or chairs of major voluntary organisations and charities, which look to us, in a way that no MP properly can, to speak for communities of interest that are based not on place but on people perhaps scattered across the land and often barely visible or heard. That, together with the careful way in which we revise and suggest amendments, seems to me to be why this House is so valuable. Yet your Lordships have no power whatever to amend this Bill or to influence its outcome in any way. In no way can we ask the Commons to think again about the impact of this Bill on communities of interest, of which many of us may have considerable knowledge.

Of course the Commons has the final word, but surely it should not exclude from consideration our words and views on matters of such social policy. I repeat; if this ruling becomes a precedent, some of us might as well go home. If in this House we cannot affect policy on social welfare, poverty, child and maternal health, tax credits and benefits, and ask the Commons to think again, what exactly are we here for? We are redundant. We will not need Lords reform. Our purpose will have been severely curtailed ahead even of possible reforms to our membership. Surely that is not wise—that is, if we believe in a two-Chamber Parliament. More importantly, perhaps, surely it is not decent that our ability in this House to speak out for—and, I hope, to defend— some of the most voiceless and powerless in the land should be curtailed in this way. It is wrong, profoundly wrong.

--- Later in debate ---

[Lord Sassoon]

My Lords, we have had an interesting debate. I am grateful to all noble Lords who have contributed to it. We have covered a range of topics. I shall start with one or two of the wider points raised and then move on to some of the important questions of detail in the Bill.

I start where I started in opening this debate; that is, by saying that this action is necessary. We have had to make some tough choices. I am grateful to my noble friend Lady Noakes for pointing that out and to my noble friend Lord Newby who pointed out that the Opposition had come forward with no alternative policies for cutting the deficit. I had rather hoped from the build-up from the noble Baroness, Lady Hughes of Stretford, that we would get some ideas, but there was nothing. We then had a very long build-up and an economic essay on the story of the previous Government seen from one perspective—that of the noble Lord, Lord McKenzie of Luton. Even though he and I would disagree about the path that got us to the present predicament, he seemed to acknowledge the need for dealing with the economic situation. I hoped that we would get some alternative ideas, but sadly not. Of the other speeches that touched on this point, the speech of the noble Earl, Lord Listowel, put the context of this Bill in a sensitive and well considered way. I did not get any of that from the Opposition Benches. We need to acknowledge that the deficit has to be reduced and that that requires difficult choices.

I stress again that in the overall process of deficit reduction we are, as a Government, prioritising groups that need the most support. Disadvantaged children will benefit from our pupil premium and in the spending review we made sure that there will be no measurable impact on child poverty in the next two years. At the other end of income and wealth distribution, we are making sure that everybody makes a fair contribution. Those on the highest incomes will contribute more towards the entire fiscal consolidation. We are making sure that we get more tax revenue in. We are providing additional resources to combat tax avoidance to raise an estimated additional £7 billion of revenue annually by 2014. Of course, we have also introduced a bank levy that will generate £2.5 billion a year. We are making sure that we raise revenue from every source and that the pain is shared equitably.

Before I turn to some specific points on the Bill, I should say something about the question of the money Bill status of this Bill. I was somewhat surprised not by the relatively measured terms in which the noble Lord, Lord McKenzie, talked about this, but by one or two of his colleagues who surprised me very much, particularly former Ministers both here and in another place. They probably know the processes for money Bills: they would certainly know them better than I do. First of all, it is a certification of the Speaker that cannot be challenged. Even if football managers are getting into the habit of questioning the judgments of referees, which is not entirely a desirable thing, there are limits. I am not sure that it is appropriate for noble Lords to challenge the judgment of Mr Speaker. He is under a statutory duty to certify a Bill as a money Bill if in his view it falls within Section 1 of the Parliament Act 1911. In answer to these extraordinary suggestions that he might have been given advice or been leant on—I do not know what the suggestion is—by the Government, he takes advice from the Clerks in another place and not from the Government. The Government do not offer him any advice.

In respect of mischievous suggestions that somehow the process was different on this Bill from previous money Bills, all of the previous money Bills were certified at the end of their Commons stages. Certification cannot happen until the Bill has completed all of its stages in another place.

[Baroness Hollis of Heigham]

To go back to the process on the money Bill, chapter 33 of Erskine May does not refer to the Clerks but says that the Speaker should call on the advice of at least two chairmen from the panel of committee chairmen in the House of Commons, and that on their advice also he should respond. There is no reference to the Clerks in Erskine May. Was that procedure followed in this case?

[Lord Sassoon]

I can give noble Lords my understanding of what the procedure is, but I certainly cannot and would not presume in any way to go into what process Mr Speaker went through. That is a matter entirely for Mr Speaker and not a matter for us in this House to question.

--- Later in debate ---

[Lord Sassoon]

My Lords, I cannot promise today that all looked-after children will have a junior ISA opened for them and I certainly cannot provide any assurance about government funding. I have said that my honourable friend is looking into all this and, if and when there are proposals, the Government will indeed come forward with them.

I turn to some other important points on child trust funds and their effects on savings. A number of points were made by the noble Baroness, Lady Drake, and the noble Lord, Lord McKenzie of Luton. Have child trust funds had a positive effect on savings? There is currently no robust evidence about whether the child trust fund has increased savings for children. While some parents are using child trust funds, not all are. I have it that 22 per cent of child trust funds received contributions in 2009-10, marginally down on the 24 per cent in the previous year. In any case, we do not yet know whether any of that saving is additional or would have happened anyway. For lower-income families, only 12 per cent of CTF accounts received contributions. I take my noble friend Lord Newby’s points to heart about the untargeted and, certainly, the unproven nature of the effect of child trust funds.

Several noble Lords, including the noble Baroness, Lady Thornton, and the noble Lord, Lord McKenzie, raised the question of the gap before the introduction of junior ISAs. I must go back to the need for us to move quickly to tackle the budget deficit. I realise that this will leave a gap before the junior ISAs are available. However, we are working hard with the industry and other stakeholders to make sure that the gap is as short as possible. We intend to publish draft secondary legislation, setting out full details of the new accounts, in the spring and for them to be up and running in the second half of 2011. We will ensure that eligibility for the new account is backdated to ensure that no child born after the end of the CTF will miss out on the chance of having one of these accounts.

Concerns were raised by the noble Baroness, Lady Hollis of Heigham, and others about the suitability of junior ISAs for children from families on lower incomes, and whether they would benefit only the rich. I certainly do not believe that this will be the case. These accounts are not just about offering people a tax-free option for children’s savings; they will also offer a clear and simple way of saving for children and of ensuring that the money is locked up until the child reaches adulthood. This will prove attractive to many families on lower incomes. Of course, saving issues are difficult for us all, particularly those on lower incomes, but I remind the noble Baroness and the noble Baroness, Lady Drake, that already more than 12 million people with incomes below £20,000 have an ISA. It is penetrating lower-income groups.

I am grateful to the noble Lord, Lord McKenzie of Luton, for drawing attention to the annual financial health check. That was also welcomed by the noble Baroness, Lady Drake. There are questions about advice turning into action but we should start somewhere. I am grateful to noble Lords for drawing attention to that important initiative.

On the question of the Bill’s equality impacts, an initial assessment of these was published on 15 September, when the Bill was introduced. Although we do not say that there are no impacts, the impact assessment shows that those that have been identified are proportionate, given the need to reduce the UK’s budget deficit.

I should say a little about the health in pregnancy grant, which the noble Lord, Lord Northbourne, raised first. I assure him that we have another scheme, the Healthy Start scheme, which targets and supports pregnant women on lower incomes, providing vouchers for fruit, vegetables and milk from the 10th week of pregnancy. This very much goes to the heart of the point that my noble friend Lady Browning made from an expert perspective. It did not look as though the health in pregnancy grant was achieving its original target of reducing the incidence of low birth weights. The Healthy Start scheme is much better targeted towards that.

[Baroness Hollis of Heigham]

Does the Minister agree that the Healthy Start scheme gives something like £3 a week for, at best, around 30 weeks, which is a smaller sum than is being lost?

Housing: Mortgages

Baroness Hollis of Heigham Excerpts

Wednesday 10th November 2010 Lords Chamber

[Lord Sassoon]

My Lords, it is certainly not for government to make judgments about the right terms on which mortgages should be advanced by individual banks. There is a rebalancing going on from an excessive household leverage which built up in the past decade. There is also a necessity for the banks to price all their products, including mortgage products, at an appropriate margin, because it was quite clear that they were extending a whole range of credit products, including mortgages, at submarket rates before the crisis. The Government’s interest is to make sure that we have a sustainable balance, which means that people, including first-time buyers, can get mortgages on appropriate terms, but also that it is sustainable and does not lead to another bubble. We are following very keenly the work of the FSA in this regard.

[Baroness Hollis of Heigham]

My Lords, as the noble Lord, Lord Naseby, said, many prospective owner-occupiers are unable to afford a deposit and will therefore linger for a decade or more in the private rented sector, therefore increasing the demand and rents in that sector. The Government’s policy is to cut housing benefit to reduce private sector rents, but that cannot and will not happen. Instead, will it not increase the misery for thousands of people?

[Lord Sassoon]

My Lords, I do not accept the premise that there will be a raft of people somehow prevented from getting on the mortgage ladder for a decade. I have no idea what the basis is for that rather broad and sweeping assumption. The Government are ensuring that we keep interest rates low and that the banks can access the funds they need to underpin a good flow of mortgage lending, as well as other lending, particularly to SMEs. It is for the FSA in that context to ensure that the affordability criteria are appropriate. In particular, we have extended the support for mortgage interest by a further year to January 2012.

Comprehensive Spending Review

Baroness Hollis of Heigham Excerpts

Monday 1st November 2010 Lords Chamber

[Baroness Hollis of Heigham]

My Lords, the Minister has insisted today that the CSR cuts are fair and that they support the DWP’s 21st Century Welfare paper for a universal credit to bring people back into the labour market, mainly through making work pay. Really?

On fairness, the Budget cuts and the CSR, as the IFS and some of my noble friends have said, have hit the poor more than all but the wealthiest 2 per cent. But there are other forms of redistribution—horizontal, if you like. This hurts women more than men. The analysis of Yvette Cooper shows that three-quarters of the Budget cuts and two-thirds of the CSR cuts fall on women, as well as the fact that 40 per cent of women work in the public sector. So they are hit through their wage, their job, their tax, their benefits, and public services. It also takes from children rather than the childless. The Government say they want to end child poverty by 2020. The JR Foundation believes that there will be 3 million more children below the poverty line by 2020. Instead of redistributing from the healthy to those who are not, as the noble Baroness, Lady Campbell, said, disability benefits will be threatened, frozen or cut. As for geographical distribution, the cities in the north which depend on public sector jobs and social housing are savaged while prosperous suburbs remain unaffected. Yet generations of Government have deliberately relocated Civil Service agencies and bodies out of high-rent and high-employment London and the south-east to the more depressed north. The CSA went to Dudley, the Patent Office to Newport, the Inland Revenue office to Nottingham, and the NHS executive and the DSS to Leeds. It is profoundly unfair for a Prime Minister representing wealthy Witney to talk about the north’s unhealthy dependence on public sector jobs when that relocation was supported by all parties as part of sensible regional economic policy. So the CSR hurts women, children, disabled people, the inner cities, and the north disproportionately. In all of these dimensions it is unfair.

The one redistribution I have not mentioned is between those who are in work and those who are not. The Minister made much of this, as though the CSR would encourage people into the labour market, given the jobs economy. Like many noble Lords on both the opposition Benches and the government Benches, I welcome the 21st Century Welfare paper of Mr Duncan Smith and the noble Lord, Lord Freud, for a universal credit underpinned by ensuring that work always pays and that mini and part-time jobs are supported to keep a toehold in an increasingly difficult labour market until those jobs can gradually become full time. What is bizarre—I hope that the noble Lord, Lord Freud, is aware of this—is that the CSR actively discourages entry into work, and if you are in work, it caps any aspirations you may have to seek better prospects. In my view, it is goodbye to this Green Paper, which we all know, given that the Treasury is extending its implementation time to two Parliaments, is loathed by the Treasury.

Increase your pay by £1,000 into the higher rate tax category and you lose twice as much in child benefit as you gain in pay. If you create cliff edges, do not be surprised if people are not too keen on walking over them. The father on £42,000 will not take that pay rise. Supporting work incentives by punishing improved work prospects—brilliant social policy. It is perverse. Similarly in social housing, increase your pay and risk losing your home as an insecure tenancy. Social housing is for the down and out; if you climb the work ladder you will be up and out. Of course you will not work those extra hours or take that pay rise if it costs you your home. It is perverse—brilliant social policy again. Staying with housing and non-dependent adult deductions, the adult son, we will assume, is living at home and in low-paid work. The parents will now lose almost their whole housing benefit as his notional contribution to their rent increases by a third or more. What will happen? Either, he will leave, the parents will get full housing benefit again, and he will get housing benefit on his new place, in which case the housing benefit bills will rise and more housing will be needed. But the parents will now be under-occupying and therefore they may be evicted, even though there are no small properties available around them. So the result will be higher housing benefit, more housing used up and insecurity all round. Or he can stay at home, save his parents’ housing benefit, and stop work—the intelligent, rational strategy. It is brilliant social policy again. It is perverse. I will say more on housing on Thursday because carnage awaits us there.

The employment and support allowance has been mentioned already. After one year, it is to be means-tested. Who will it means-test? It will not just be him and any savings, but his wife. If she holds down a part-time job as well as caring for him, she may find that his ESA is withdrawn. What would you do in her situation? Either you reduce your hours right down to the minimum or you probably stop work altogether. Well done: the CSR has ensured that they enter retirement much poorer than they are now. She as a part-time carer has lost her place in the world of work. If in a few years she is unfortunately on her own, she will not be able to regain it. She will remain poor, workless and isolated into retirement. We have all spent the past decade trying to help parents stay in work as far as they can. The CSR may now destroy that. It is brilliant social policy again.

The same goes for the move from 16 to 24 hours’ work for a couple with children, of which one job has to be at least 16 hours, before they can get tax credits. That is not just cruel, it is perverse. It will affect more than 200,000 families. Many men are now accepting substantially reduced hours at work, but, without working tax credit, which is worth up to £70 a week on top, that work may not pay. Yet if they stop working, it will be very hard to regain a full-time job. If he loses his full-time job, she will give up her part-time job because the tax credits are not there to make that work pay. Neither of them will have a foothold in the labour market to keep them in the knowledge economy of work and, as the economy, we hope, strengthens, to work full time. Brilliant social policy, pulling them both out of the labour market. It is perverse.

The child care element of working tax credit will go down from covering 80 per cent of costs to 70 per cent and affect half a million poor families, who will lose up to £30 a week. At the very same time as the Government are seeking to propel lone parents of five year-old children back into work, they are ensuring that, for many, with the increased cost of child care and transport, work will not pay. Brilliant social policy.

The Minister and the noble Lord, Lord Freud, want a single universal benefit, incorporating housing benefit and council tax benefit, to make work pay. I support that. But the Government intend to localise—balkanise—council tax to 500 local authorities, which will make that universal credit impossible to deliver. It is brilliant and unbelievably stupid. I could cite another dozen examples from the CSR, each one of which undermines 21st Century Welfare, which I am sure all your Lordships welcome. I respect the efforts of Iain Duncan Smith, the noble Lord, Lord Freud, and Steve Webb, and I want to support them, but what on earth are they doing allowing the CSR to destroy those proposals detail by detail, forensic cut by forensic cut, before the DWP has even published the results of its consultation paper? The best way of getting fairness between poor families out of work and other hard working families is to help the workless into work, provided we can create the growth economy. That is what the consultation paper seeks to do; that is what the CSR will destroy.

I did not expect the CSR to be fair, not from this Government—and the IFS has shown how unfair it is—but I expected the policies of the DWP, the DCLG and the Treasury to be coherent and consistent. Not on your life. The CSR has made a shambles of future welfare reform and, as always, it will be the poor who pay the bill.

--- Later in debate ---

[Lord James of Blackheath]

My Lords, I do not know what you have done to deserve me this late in the evening but I am afraid that is where it is. It has been a fascinating day. I particularly enjoyed the comments of the noble Baroness, Lady Browning, on the subject of “Brigadoon”, which was the first play I ever saw in the West End. I do not think she delivered the punchline. The whole point about “Brigadoon” was that it came out of the mist for only one day in every 100 years. That is a lovely idea for the Opposition.

We have heard today a great many tales of woe and dismay about the future, and some of optimism from this side. I am concerned about where the common ground is in that. One of the lessons of what is now quite a long life is that nothing is ever quite as bad or quite as good as you expect. It is probable that there will be a little more common ground between us than we might foresee at the moment. We might assist that process because growth will be what brings the two sides together. The more growth we can achieve, the more scope there will be to deal with some of the greater calamities that might occur unforeseen—since everything is unforeseen in politics.

I will talk a little about some of the growth opportunities that we might be able to harness and what we can do. As I have mentioned before, one of my great messages is a lesson from Sir Kenneth Cork, who taught me most of what I know about corporate rescue. It is that you cannot rescue a business that does not have a successful past. Anything that does not have a successful past is a failed start-up. Get rid of it and concentrate on the businesses that have a successful past. Where, today, are the businesses with a successful past? They are languishing in the intensive care units of the banks. They cannot get out because most of them have been the victims of expanding their capacity beyond the demands of the marketplace. That is a very expensive situation to get out of once you are in it. It was done with some dexterity and considerable success in the early 1970s through the initiatives that were forthcoming from three Is: investment in industry. One of the great tragedies of our economy at present is that we do not have three Is functioning in that form today. Boy, do we need them.

I am very much a believer in the principle of the collective collapse of generic groups of businesses as entities. Let me give some examples. At the present moment this year, we have probably lost half a million cars in our British export market. They would have been a very big additional factor to the economy, both in production—the wages that would have gone to the people who built them—and in the export value they would have had. Why? It is because the banks played their usual dirty trick a year or two ago: they saw that there were big markets outside—big back-orders—so they let the businesses have the money that they needed to fund the delivery of the order books that they had. The orders came in; they took the cash, reduced the facilities and the automotive component industry did not have the working capital to gear up for the massive turn to the diesel engines, which were demanded, and the British export market could not maintain the export requirement necessary to maintain its position on the international scene.

That has largely been corrected now but a similar problem may well happen. The next big crisis is going to come in the second week of February next year when the huge crisis that comes cyclically every year afflicts the retail sector worse than ever. It is already bereft on the high street—with shuttered shops and redundant staff, and a very dismal sight it is. What happens in the banking industry is that it knows that in the first two weeks of February every year, all the credit cards that have been used to buy goods going into Christmas pay, and the retail industry has the lowest borrowings of the year. The banks lie in wait and they grab them. Remember Woolworths? Who is coming next?

So we need someone who can take a grip on a general strategy to save the retail industry from another calamity. One of the great regrets I have at the moment is that the person who would best be able to do that is Sir Philip Green, and he is doing something else. I hope that the Government will hold on to him, and once he has actually finished his present task, he will be told to go and cherry pick the entire retail industry languishing in the hands of the banks, and put together the next version of British Home Stores as a government subsidiary which needs funding and which can be imposed on the banking industry by grabbing each bit, despite the fact that there will be minority bank interests that will not want to sell out for the benefit of the major bank interest, which will get the cream of the equity conversion. That is what three Is should exist to do, and what it did so brilliantly before, and that is why we need it back now.

Another element of the world out there at the moment which is potentially waiting for the pratfall of a massive collective bankruptcy is the food processing industry. The more the accent is moved from the small corner shop to the big grocers, the more production has been stepped up by the food producers to satisfy the ever-increasing demands for cheap food coming through the grocery chains. Of course, they have fallen into the trap again of funding themselves to too high a capacity for the market demand with the result that the grocers can rub their hands with glee and say, “We can screw the margins down so tight you won’t be able to breathe” and the suppliers are going to go collectively “pop” at some point in the next few months, because they will not be able to keep up and there is a big social factor coming. We will have the present dependence on cheap food to keep some sort of society structure fed, but we will actually end up being forced up on prices as the industry goes out of business in terms of its ability to keep supply going and prices are forced up in the grocery chains. This is going to be another calamity coming, and we need to have a top-down view as to what to do with it.

I have given your Lordships three examples of why I think we need something, but the creation of the three Is along the lines that I have been talking about would be of the order of a £5 billion cheque required to do it. However, we do not have £5 billion; we do not have half of £5 billion to put in to the creation of this at the moment, so what do we do about it? At this point, I am going to have to make a very big apology to my noble friend Lord Sassoon, because I am about to raise a subject that I should not raise and which is going to be one which I think is now time to put on a higher awareness, and to explain to the House as a whole, as I do not think your Lordships have any knowledge of it. I am sorry my noble friend Lord Strathclyde is not with us at the moment, because this deeply concerns him also.

For the past 20 weeks I have been engaged in a very strange dialogue with the two noble Lords, in the course of which I have been trying to bring to their attention the willing availability of a strange organisation which wishes to make a great deal of money available to assist the recovery of the economy in this country. For want of a better name, I shall call it foundation X. That is not its real name, but it will do for the moment. Foundation X was introduced to me 20 weeks ago last week by an eminent City firm, which is FSA controlled. Its chairman came to me and said, “We have this extraordinary request to assist in a major financial reconstruction. It is megabucks, but we need your help to assist us in understanding whether this business is legitimate”. I had the biggest put down of my life from my noble friend Lord Strathclyde when I told him this story. He said, “Why you? You’re not important enough to have the answer to a question like that”. He is quite right, I am not important enough, but the answer to the next question was, “You haven’t got the experience for it”. Yes I do. I have had one of the biggest experiences in the laundering of terrorist money and funny money that anyone has had in the City. I have handled billions of pounds of terrorist money.

[Baroness Hollis of Heigham]

Where did it go to?

[Lord James of Blackheath]

Not into my pocket. My biggest terrorist client was the IRA and I am pleased to say that I managed to write off more than £1 billion of its money. I have also had extensive connections with north African terrorists, but that was of a far nastier nature, and I do not want to talk about that because it is still a security issue. I hasten to add that it is no good getting the police in, because I shall immediately call the Bank of England as my defence witness, given that it put me in to deal with these problems.

The point is that when I was in the course of doing this strange activity, I had an interesting set of phone numbers and references that I could go to for help when I needed it. So people in the City have known that if they want to check out anything that looks at all odd, they can come to me and I can press a few phone numbers to obtain a reference. The City firm came to me and asked whether I could get a reference and a clearance on foundation X. For 20 weeks, I have been endeavouring to do that. I have come to the absolute conclusion that foundation X is completely genuine and sincere and that it directly wishes to make the United Kingdom one of the principal points that it will use to disseminate its extraordinarily great wealth into the world at this present moment, as part of an attempt to seek the recovery of the global economy.

I made the phone call to my noble friend Lord Strathclyde on a Sunday afternoon—I think he was sitting on his lawn, poor man—and he did the quickest ball pass that I have ever witnessed. If England can do anything like it at Twickenham on Saturday, we will have a chance against the All Blacks. The next think I knew, I had my noble friend Lord Sassoon on the phone. From the outset, he took the proper defensive attitude of total scepticism, and said, “This cannot possibly be right”. During the following weeks, my noble friend said, “Go and talk to the Bank of England”. So I phoned the governor and asked whether he could check this out for me. After about three days, he came back and said, “You can get lost. I’m not touching this with a bargepole; it is far too difficult. Take it back to the Treasury”. So I did. Within another day, my noble friend Lord Sassoon had come back and said, “This is rubbish. It can’t possibly be right”. I said, “I am going to work more on it”. Then I brought one of the senior executives from foundation X to meet my noble friend Lord Strathclyde. I have to say that, as first dates go, it was not a great success. Neither of them ended up by inviting the other out for a coffee or drink at the end of the evening, and they did not exchange telephone numbers in order to follow up the meeting.

I found myself between a rock and a hard place that were totally paranoid about each other, because the foundation X people have an amazing obsession with their own security. They expect to be contacted only by someone equal to head of state status or someone with an international security rating equal to the top six people in the world. This is a strange situation. My noble friends Lord Sassoon and Lord Strathclyde both came up with what should have been an absolute killer argument as to why this could not be true and that we should forget it. My noble friend Lord Sassoon’s argument was that these people claimed to have evidence that last year they had lodged £5 billion with British banks. They gave transfer dates and the details of these transfers. As my noble friend Lord Sassoon, said, if that were true it would stick out like a sore thumb. You could not have £5 billion popping out of a bank account without it disrupting the balance sheet completely. But I remember that at about the same time as those transfers were being made the noble Lord, Lord Myners, was indulging in his game of rearranging the deckchairs on the Titanic of the British banking community. If he had three banks at that time, which had had, say, a deficiency of £1.5 billion each, then you would pretty well have absorbed the entire £5 billion, and you would not have had the sore thumb stick out at that time; you would have taken £1.5 billion into each of three banks and you would have absorbed the lot. That would be a logical explanation—I do not know.

My noble friend Lord Strathclyde came up with a very different argument. He said that this cannot be right because these people said at the meeting with him that they were still effectively on the gold standard from back in the 1920s and that their entire currency holdings throughout the world, which were very large, were backed by bullion. My noble friend Lord Strathclyde came back and said to me that he had an analyst working on it and that this had to be stuff and nonsense. He said that they had come up with a figure for the amount of bullion that would be needed to cover their currency reserves, as claimed, which would be more than the entire value of bullion that had ever been mined in the history of the world. I am sorry but my noble friend Lord Strathclyde is wrong; his analysts are wrong. He had tapped into the sources that are available and there is only one definitive source for the amount of bullion that has ever been taken from the earth’s crust. That was a National Geographic magazine article 12 years ago. Whatever figure it was that was quoted was then quoted again on six other sites on the internet—on Google. Everyone is quoting one original source; there is no other confirming authority. But if you tap into the Vatican accounts—of the Vatican bank—you come up with a claim of total bullion—

Comprehensive Spending Review

Baroness Hollis of Heigham Excerpts

Wednesday 20th October 2010 Lords Chamber

[Lord Sassoon]

My Lords, I am grateful to the right reverend Prelate for drawing our attention to the question of children, which I shall come back to. In respect of his question about poorer families, I draw the House’s attention to the new section at the back of the document, which for the first time lays out the effect on the deciles and quintiles of the population of all the measures that we have taken in the spending review and the Budget. It confirms the fairness of the overall construct—namely, that those who can afford to pay more will do so and that the poorest in society are protected.

The spending review will provide additional support to the most disadvantaged children at every stage, particularly in education, and will support social mobility. As I said when repeating the Statement, free early years education will be extended to 15 hours and care will be given to the most disadvantaged two year-olds. Critically, we will introduce a £2.5 billion pupil premium. There will be more generous maintenance provision and a scholarship fund of £150 million to underpin higher education funding for disadvantaged children. The entire spending review has taken fully into account the needs of children, particularly in education. The coalition Government have taken action to protect families. Overall, there is no measurable impact on child poverty from all the model changes for the next two years.

[Baroness Hollis of Heigham]

My Lords—

[Lord Bilimoria]

My Lords, the Minister has confirmed that public expenditure will go up in actual terms. Historically, 40 per cent was deemed to be the sensible level of public spending expressed as a percentage of GDP and a sensible balance between the private sector and the public sector. Is the Government’s aim to get back to that 40 per cent figure on a regular basis? In this environment, one would need to do that anyway regardless of the budget deficit. In that sense, I welcome the reductions in the welfare budget, which were badly overdue. Although spending on the National Health Service has been ring-fenced, the efficiency savings there are also very welcome and I think that the whole public would agree with them. However, in the coalition Government’s spirit of the transparency, the Chief Secretary revealed to us yesterday that 500,000 jobs would be lost in the public sector, a figure that the Minister has confirmed today. How confident are the Government of those jobs being replaced in the private sector? How confident are they that they have done enough to stimulate growth in the private sector, particularly against a backdrop of increased capital gains tax and higher rates of tax in every area? How difficult will it be?

[Lord Sassoon]

My Lords, I am grateful to the noble Lord, Lord Bilimoria, for drawing our attention to the important question of the balance between the public and the private sectors, which had got completely out of kilter under the previous Government. I repeat that this is not just an exercise in cutting back expenditure, necessary and unavoidable though that is; it also entails a critical rebalancing of the public and the private parts of the economy. What we have announced today will take the public sector part of the economy back towards that 40 per cent figure. In answer to the question about the absorption of the inevitable job losses in the public sector, I draw the noble Lord’s attention to the fact that, in the past quarter alone, the private sector generated 178,000 new jobs. That was in one quarter, so we should be confident, when the Office for Budget Responsibility believes that overall employment in the economy will rise year by year, that that indeed will be the case and that the inevitable reduction in public sector jobs will be more than absorbed.

[Baroness Hollis of Heigham]

My Lords—

[Lord Newby]

My Lords—

--- Later in debate ---

[Lord Sassoon]

My Lords, I am grateful to my noble friend Lord Higgins. I will relay to my right honourable friend the Chancellor and to all the very hard-working officials in the Treasury his generous words, which confirm that this is indeed a radical, fair and comprehensive spending review. In answer to his question about demand, clearly, with the independent projections from the Office for Budget Responsibility and all the other commentators of consistent growth going forward, demand will indeed increase. The question of what role the aggregate increase in the money supply plays is one on which, as we know, the Governor of the Bank of England continues to be very much focused as he leads on the conduct of monetary policy.

[Baroness Hollis of Heigham]

My Lords, the devil is in the detail, as has been said before. The Statement says that pension savings credit will be frozen for four years, saving in total—on page 11 of the Red Book—£1 billion from pensioners. The state pension will rise with earnings, so that pensioners not in need of pension credit will be better off, which is good, but poorer pensioners dependent on pension savings credit will find that the income and the increase in state pension will be offset by the freeze in the savings guarantee and they will be worse off. Better-off pensioners will be better off, while poorer pensioners will be worse off. Is that fair?

[Lord Sassoon]

I understand that the amount affected by the freezing of the credit approximates to £1.50. I think that it is important to consider this in the context of everything else that we have done for pensioners and elderly people in this spending review—