Budget: Press Briefings
Baroness Kramer Excerpts(6 days, 15 hours ago)
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The Financial Secretary to the Treasury (Lord Livermore) (Lab)
I am grateful to the noble Baroness for her question. She claims that it is unprecedented for a Chancellor to comment on the economic situation ahead of a Budget. I do not think it is in any way unusual; there is always speculation ahead of it. As she knows, I am not going to speculate on the next Budget now or comment on any individual tax measure, nor will I comment on the ongoing Budget process. The Chancellor has asked the OBR to produce a new forecast. The OBR and the Treasury exchange information throughout the forecast process, which is usual practice, established over many years. The Chancellor will then take decisions based on that forecast and set out our fiscal plans in the Budget. She has been very clear that the Budget will protect the NHS, reduce the cost of living and reduce the national debt. We will continue to rebuild the economy after 14 years of failure from the party opposite.
Baroness Kramer (LD)
My Lords, the country was led up the hill and then marched right back down again. Does the Minister recognise that this sort of kite-flying is really undermining confidence in the comments that anybody now makes from the Treasury Benches? Does he accept that, although bond yields steadied a few days after flurrying, with that flip-flop and change in policy, we still find ourselves paying over the odds for issuing gilts, largely because markets are so uncertain about the direction of public finances? Steadying and calming surely ought to be the order of the day.
Lord Livermore (Lab)
The noble Baroness says that comments from the Treasury Benches create uncertainty and then invites me to comment, so I shall not do that. I shall not comment on bond yields as she asks me to do; as she knows, I never do. I will not comment on the ongoing Budget process or on speculation on individual tax measures.
Inheritance Tax: Pensions
Baroness Kramer Excerpts(1 week ago)
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Lord Livermore (Lab)
I do agree with everything the noble Lord said. I enjoyed discussing these matters with him when he was a Treasury official and I was a special adviser. I probably learned a lot of this from him then, so I completely agree with what he said. To repeat, the purpose of pension savings is to fund retirement. If taxpayers are spending £78 billion a year on that, it is very important that it is used for its intended purposes rather than for estate planning, as the noble Lord says.
Baroness Kramer (LD)
My Lords, does the Minister agree that in real life, many people restricted their lifestyles, spending and gifting in order to build a sufficient defined contribution pension that could pay, if needed, for years in a care home—not knowing how long they would live or their health condition—and because they did not want to burden the state or their children? They now see that they were being gullible in believing the assurances that anything unused could go to their loved ones free of inheritance tax, and that the Government simply regard their sense of responsibility as rather stupid. What would the Minister say to those people?
Lord Livermore (Lab)
More importantly, what would I say to the noble Baroness? I would say that she is saying things that are completely misleading. As I have said already, estates will continue to benefit from all the normal nil-rate bands, reliefs and exemptions available, so an estate can pass on up to £1 million with no inheritance tax, and spouses are fully exempt from inheritance tax. It is also important to say that we have equal treatment here. There is equal treatment for inheritance tax purposes between pension and non-pension assets, and I think that is perfectly fair within the system.
Economic and Taxation Policies: Jobs, Growth and Prosperity
Baroness Kramer Excerpts(1 week, 4 days ago)
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Baroness Kramer (LD)
My Lords, the Budget is only days away. I believe that the noble Lord, Lord Liddle, may be the only person who can say that he is looking forward to it. Last week, the Chancellor made a paving speech which made it clear that huge tax rises are coming. Most of us expect to see higher income tax—that would be no surprise. However, we have none of the details, and that is where the devil lies, so this debate is in some ways only part of a prologue.
Although I congratulate the noble Lord, Lord Elliott, on obtaining this debate, it was rather curious that, in his litany of causes of the current economic condition in which we find ourselves, he overlooked mentioning Brexit, which was, in fact, the deepest blow by far. The Government finally have the guts to say that out loud, but they have not turned towards pushing for a customs union, which is the obvious cure. Using figures from Frontier Economics on the GDP uptick that would come, and from the Commons Library on tax yield, rejoining the customs union could be expected to provide an additional £25 billion a year in tax revenue to the UK Treasury. The economic benefit that arises from that change completely exceeds the impact of any proposal we have heard from any Bench today. That is important and we need to recognise it.
Meanwhile, I do not doubt the £22 billion legacy black hole that the Minister often talks about; it was echoed by the noble Viscount, Lord Chandos, the noble Lord, Lord Davies, and others. Public services are on their knees and the need to invest in infrastructure after years of neglect is surely a given. Perhaps most dangerously of all, people are feeling the cost of living pain, many to the point of breaking. Living standards matter.
Clearly, we need growth and productivity, and I was glad that the noble Baroness, Lady Fall, focused on scale-up in part of her discussion. However, I am expecting a horrible forecast from the OBR because although some monthly figures show productivity growth, it is off such a low base that the benefit is marginal. In that vein, I warn the Government against looking to small businesses to fill the Budget hole. This is exactly the sector that needs to be investing to get productivity going. We heard concerns about that from quite a number of speakers, including the noble Lords, Lord Leigh and Lord Kempsell.
The self-employed should not be targeted either. That includes small LLPs, which are often just two people and simply a variant on self-employment, with similarly precarious income, limited benefits and no employment protection.
It is important to recognise, particularly in this discussion on levels of economic inactivity—referred to by the noble Baroness, Lady Stedman-Scott, and the noble Lords, Lord Petitgas and Lord Skidelsky, most extensively—that, in today’s economy, this sector, the self-employed and small business sector, has the most promise to get disengaged people of working age either back into work or into work for the first time. We have to look to that and support that group.
Whatever the Government choose to do, they also need to calm the gilts markets. We are paying a significant premium, even over France with all of its woes. According to CBRE Investment Management, a 1% reduction in gilt yields reduces the UK’s borrowing levels by a cumulative £21 billion over five years. Part of that calming is achieved by creating credible fiscal headroom, which has not happened in previous Budgets. I say to the Minister that it will have to be a really important feature of the Budget.
In this situation, where are the greatest emergencies? My party has identified two. The first is the fragile state of the hospitality industry, mentioned by the noble Lord, Lord Risby. It is the backbone of so many high streets and communities. We call on the Government to slash VAT by 5% for pubs, restaurants and entertainment and accommodation venues with immediate effect and until April 2027. Ordinary folk looking for small pleasures will benefit too.
The other and perhaps even more urgent need is to provide relief to ordinary people by removing the main renewable levy from people’s energy bills, not discarding the funding for tackling climate change but replacing it with Treasury funding until April 2027, by which time a new renewables obligation scheme should have been developed and should be in place. This would slash a typical energy bill by £90 a year, bringing it to its lowest level since the energy crisis began in 2022. The two measures would cost through to April 2027 a total of £12 billion and save a typical family £270 over the next 18 months.
However, we in my party are responsible. The Government have scoffed in the past when we have argued for a windfall tax on the banks, which are still benefiting from high interest rates. The IPPR has proposed a scheme that targets the windfall interest payments received by commercial banks as a result of the QE-related reserves they hold at the Bank of England. The tax would expire when the base rate returns to 2% or when quantitative tightening concludes, anticipated to be after 2030. It could raise £30 billion in total between now and 2030. That is less than half of what is needed for the two proposals I have just outlined, which would cost £7.5 billion and £4.5 billion respectively.
In the past, I have proposed taxes that could raise significant money for the Exchequer in a way that is fair, increasing from 2% to 10% the digital services tax on global tech companies—who are, frankly, absolute masters at tax avoidance—and doubling the remote gaming duty on online gambling. Those two together would raise almost £3 billion a year.
I will return to my opening comments. Because of the scale of the issues we face, the biggest increase in tax revenue could come from renegotiating and rejoining a customs union with the EU. Frankly, the only pain that would be experienced would be a pain to the pride of the Brexiteers. We would all be benefiting in our pockets.
Cryptocurrencies: US Regulation
Baroness Kramer Excerpts(1 week, 5 days ago)
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Lord Livermore (Lab)
I am grateful to the noble Lord for his question and pay tribute to his considerable expertise in this matter. I agree with what he said. Crypto assets have the potential to play a significant role in the financial services sector, and the economy more broadly, including through greater transparency, efficiency and security. We are already seeing the benefits that stablecoin can provide in cross-border payments by reducing costs and improving efficiency. Unlocking the full potential for digital assets and blockchain technologies requires payments that interact with them directly, and stablecoins can play an important role in achieving that. It is therefore important for the UK to harness those opportunities and—I agree with him on this—to bring forward legislation, and we will do so.
Baroness Kramer (LD)
My Lords, my concern is about the geopolitics. Much of the UK’s trade today is conducted in offshore dollars, which sit beyond the reach of the US Government. As dollar stablecoin replaces traditional dollars, the US Government will get their hands on levers to pressure us and others by threatening to curtail access. Are the Government looking at the key issues of monetary sovereignty? The regulators clearly are not.
Lord Livermore (Lab)
I am grateful to the noble Baroness for her question. She is not correct to say that the regulators are not looking at that; of course they are taking it into account. She is absolutely right that the US is taking forward US-denominated stablecoin. It is very important that the UK does the same. The Government see stablecoin playing an important role in the diverse and competitive UK payments landscape. We hope that firms will see the advantages of being regulated as stablecoin issuers in the UK and will seek permissions under the new regime for that.
National Insurance: Partnerships
Baroness Kramer Excerpts(2 weeks ago)
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Lord Livermore (Lab)
The Chancellor is entirely at liberty to set out what she wants to set out at any given point. As I said, there has much speculation ahead of the Budget. I am not going to comment on the Budget. We will do things in the usual way. She has asked the OBR to produce a new forecast for the Budget. She will take decisions based on that forecast and set them out at the forthcoming Budget.
Baroness Kramer (LD)
My Lords, will the Minister advise his colleagues that any new partnership NICs applied to LLPs will exclude small entities that genuinely are a variant on self-employed organisations, with similar risks, precarious income, limited benefits and lack of employment opportunity, and are, indeed, a very important path for a lot of people returning to employment or getting into employment for the first time?
Lord Livermore (Lab)
I am grateful to the noble Baroness for her question. I am not quite sure how many more ways I can say this: she is inviting me to comment on tax speculation, and I think I have made it clear that I am not going to do that.
Public and Private Sector Productivity Trends
Baroness Kramer Excerpts(3 weeks, 4 days ago)
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Lord Livermore (Lab)
On the noble Lord’s first point, I am very aware of some issues around the data, and I believe the ONS has been reviewing it along the lines he suggests. On the Employment Rights Bill, he will know that labour supply is also a fundamental component of driving productivity, and that a more motivated and more secure workforce is a more productive workforce. I hope he will take that into account.
Baroness Kramer (LD)
My Lords, we hear this week that only 11% of UK SMEs say they use technology to a great extent to automate or streamline operations. Do the Government understand that the slow pace of adoption of new technology by SMEs—many of which have not even adopted first-generation technology—lies at the heart of our productivity problem, which is why it remains incomprehensible that the Government keep adding burdens on SMEs? I know the Minister cannot tell us what is in the Budget, but can he at least tell the House that he recognises the problem?
Lord Livermore (Lab)
Yes, I absolutely recognise the problem and I agree with 90% of what the noble Baroness said. The only part I disagreed with was when she criticised the Government. I agree: digital adoption and AI adoption will be central to solving the productivity problem. SMEs are vital to that. It is why digital adoption was a key part of our small business strategy. I hope we can work together on this important issue.
Rules on Duty-Free Goods
Baroness Kramer Excerpts(1 month ago)
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Lord Livermore (Lab)
I am grateful to the noble Baroness for her question and insight. I will say up front, as I have said before, that we are committed to implementing the Windsor Framework in good faith and to protecting the UK internal market. We will work constructively with all stakeholders—the EU, the Northern Ireland Executive, businesses, and political parties and civic society in Northern Ireland—to achieve that aim, taking into account the implementation deadlines. As the noble Baroness said, the Windsor Framework agreement secured substantial legally binding changes and flexibilities that do improve things. I hope that the EU reset will further improve things, and I therefore urge all noble Lords to support it.
Captain of the Honourable Corps of Gentlemen-at-Arms and Chief Whip (Lord Kennedy of Southwark) (Lab Co-op)
We will hear from the Lib Dems next and then my noble friend Lord Grocott.
Baroness Kramer (LD)
My Lords, will the Government please start to renegotiate our entry into the customs union? It would eliminate the issues raised by the noble Baroness, Lady Hoey, and many others and increase prosperity for us. There is a very simple and direct set of answers.
Lord Livermore (Lab)
I am grateful to the noble Baroness for her question and I pay tribute to her consistency on this matter. We share many similarities in our observations and analysis of the impact of Brexit. She will know that we are engaged in the EU reset, which will achieve substantial benefits for growth in the UK and for British citizens travelling around the European Union. I urge her to support the reset.
GDP Per Capita
Baroness Kramer Excerpts(1 month ago)
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Baroness Kramer (LD)
My Lords, the UK is the sixth-largest economy, measured by GDP. But, on the measure of GDP per capita, it is only the 18th largest. Our demographic profile, with a heavily aging population, is a key reason for this. This year, we expect to reach the scary benchmark of having more deaths than births. Of course, we need to upskill our population in advancing technology. Do the Government accept that we rely on net immigration to sustain the economy in the public sector and that there is no way out of that?
Lord Livermore (Lab)
I hear what the noble Baroness says. The OBR is currently considering the economic and fiscal impacts of the immigration White Paper published in May and will report back in its forecast in the autumn. Of course, she is right that we are in a global race for talent, with many countries seeking to improve the attractiveness of their immigration systems for highly talented individuals. The immigration White Paper announced that the Government will review the visa offer for highly talented individuals by expanding the high potential individual visa and reforming the global talent and innovator founder visas. We have also agreed that we will work towards an ambitious youth mobility scheme with the EU, creating maximum economic and cultural opportunities between the UK and the EU. Any scheme would give young Brits the opportunity to travel, to experience other cultures and to work and study abroad.
Stablecoin Ownership
Baroness Kramer Excerpts(1 month, 1 week ago)
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Lord Livermore (Lab)
I am grateful to the noble Lord for his question. Before I answer him directly, perhaps I may also pay tribute to the Lord Speaker. He has been a friend to me since I first joined this House when he was an MP. I pay tribute to his outstanding service as Speaker of this House.
The noble Lord is correct to say that stablecoins have huge potential to play a significant role in both retail and wholesale payments. We are already seeing the benefits that stablecoin can provide in cross-border payments; for example, by reducing costs and improving efficiencies. He is absolutely right that it is important for the UK to harness these opportunities for the ongoing competitiveness of the UK financial services sector.
However, I do not think it is fair to say that the US is going any faster than the UK. Reading media coverage, we may conclude that, but the reality is that the US passed legislation for the regulation of stablecoin in the summer. US regulators will publish their regulatory rules in mid-2026, with a backstop date of January 2027 for the US regime to go live. In the UK, the Government published draft legislation in April, with final legislation due before the end of the year. Alongside this, the FCA is at an advanced stage in its consultation on the details of its regime, with a view to finalising its detailed rules and requirements in 2026. This will allow firms to be authorised and running in the UK regime by 2027.
Baroness Kramer (LD)
My Lords, let me join in paying tribute to the Lord Speaker. I do not know whether to congratulate him, or say it is with great regret that he is in a situation in which he needs to stand down. We have all appreciated his service so much. A great deal more will be said on future occasions.
Stablecoin is not just an issue of digital payments and the efficiency of the pipeline, although you might think that from listening to the conversation. The move towards a global rollout of dollar and renminbi stablecoins has huge implications for monetary sovereignty. A sterling stablecoin has implications for the gilt markets and, hence, the public finances. Does the Minister begin to understand my concern that neither the Government nor the regulators have a grip on this and are considering the issues only narrowly—frankly, at a snail’s pace; I am astonished at the comments that he made just now—which means that we risk acting too late to protect our own national interest?
Lord Livermore (Lab)
I do not accept what the noble Baroness says. There are, of course, financial stability and other considerations associated with stablecoin, but these need to be balanced against supporting innovation and ensuring the UK positions itself as a competitive global destination for digital assets. As I set out in my Answer to the original Question, I do not accept that the UK is in any way moving too slowly. The Government will bring forward final legislation to create a financial services regulatory regime for crypto assets this year, which will include issuing qualifying stablecoin in the UK. This will provide crypto asset firms the regulatory certainty needed to invest and help drive innovation in our financial services sector, and at the same time ensure that customers are protected from the worst harms when they make use of crypto asset services.
School Fees: VAT
Baroness Kramer Excerpts(1 month, 1 week ago)
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Lord Livermore (Lab)
I absolutely agree with my noble friend on that point. This is a necessary decision that will generate additional funding to help improve public services, including the Government’s commitments relating to education and young people. This Government are committed to breaking down barriers to opportunity and are determined to drive up standards in those schools serving the overwhelming majority of children in this country so that they may receive the opportunities they deserve.
Baroness Kramer (LD)
My Lords, one of our greatest concerns is that SEN pupils without an EHCP are forced from private schools that have the capacity to support them to state schools without the resources to do the same. Have the Government been tracking how many of those SEN pupils without an EHCP have moved, and are they looking at the impact on both children and schools, including school finances?
Lord Livermore (Lab)
I am grateful to the noble Baroness for her question. I know that this is an issue that she cares deeply about; we have had discussions on this point in the past. We recognise that the current SEN system is not delivering the outcomes that pupils and parents rightly expect and is placing unsustainable burdens upon schools, local authorities and taxpayers. The Government will set out the detail of our reform plans in the context of the wider schools strategy later this year. In terms of specific pupil movements, as I say, those movements are in line with the estimates that we set out at the time of the last Budget. Those estimates were assessed by the OBR and we remain confident in them. It is worth noting that so far this year 49 private schools have closed but 70 private schools have opened, and of those 70 private schools, 59 are special educational schools.