Environment: Green Growth

Baroness Kramer Excerpts

Wednesday 16th May 2012 Lords Chamber

[Lord Sassoon]

I am grateful to the noble Baroness for confirming the green credentials of this Government. She raises an interesting point because, on the question of transparency, the Green Alliance report refers to all ISAs—so to a broader suite of savings products than merely green products. Any contribution to the debate about increasing transparency is to be welcomed. Other reports have been written recently about transparency around fees in particular, while this one is more about the transparency of the investments in the portfolio. I note that a number of green ISAs already on the market make a virtue out of the transparency that they offer. Generally this is an important debate but one in which the voluntary approach, backed up by the code that the noble Baroness refers to, is right.

[Baroness Kramer]

Would your Lordships agree that many individuals would like the opportunity to put their ISAs into sustainable investments? Is that not an argument for looking at the green investment bank as an opportunity? Are the Government considering opening up the possibility of investment into the green investment bank for institutions and individuals who could then use their ISAs in this way?

[Lord Sassoon]

First, it is important to recognise that there are at least 16 funds that I have been able to identify in the ISA space that are already green or ethical in their scope and branding. More generally, there have been lots of proposals for tailor-made ISAs, such as big society ISAs, small company ISAs, corporate bond ISAs, social investment ISAs and early intervention ISAs. There are a lot of worthy ideas around, all of which have their merits, but on the ISA brand we intend to keep it as simple and broad as it has always been. As for the green investment bank, as my noble friend knows, at the moment it has its initial capital for the next four years and is actively looking at its 21st project. In time it will be able to borrow, but not for the first four years.

Queen’s Speech

Baroness Kramer Excerpts

Wednesday 16th May 2012 Lords Chamber

[Baroness Kramer]

My Lords, I also congratulate the right reverend Prelate the Bishop of Durham on his maiden speech. It was genuinely a very powerful speech on the issues that we are addressing today. I do not want to put words in his mouth but I would like to make a couple of comments that essentially spring out of the remarks that he made, because I think they are very important.

The right reverend Prelate’s speech seemed to underscore the need for the rebalancing of our economy, both by region so that the north of England has the opportunity to thrive after so much historically has been concentrated in the south and south-east, and to diversify away from the dependence that we have had for several decades now on the financial services industry, to rebuild other services and our manufacturing base. This Government should take credit for picking up and working with this issue and with the regional development fund, enterprise zones and centres of excellence, and for the stimulus and tax breaks they have given to those investing in new enterprises, in order to begin to achieve that kind of change. This has become a cornerstone of government policy, one that was utterly neglected by the previous Government, and that is crucial.

The right reverend Prelate also talked about the skills gap. I think it is commonly recognised across this House that jobs are available but that youngsters are without the skills to take them, and that is an extraordinary situation. Again, this Government, particularly my colleague and friend Vince Cable, have pushed ahead with apprenticeship schemes, which had been nowhere on the agenda for at least a couple of decades, and with the youth contract, which is a fundamental change in the attitude towards upskilling our young people so that we can build the industries of the future. It is so important that enterprise and manufacturing have long-term, sustainable potential, whereas for years—and I understand that Labour did this partly because it did not see what was going on—we had an economy that was built on very large, growing public debt, on individual and consumer debt growing at an extraordinary rate, and on debt within our banking system, which was taking down and knocking up false profits to expand balance sheets. Instead of an economy based on burgeoning debt in various key sectors, one hopes that we are now moving into an economy that is sustainable because it is based on genuine contribution, creativity and production.

The right reverend Prelate talked about the cash surplus being hoarded by many of our leading companies. That is a crucial issue. This cash surplus is down to confidence, but it is also a result of many of our major companies having failed to take the opportunity to build their export markets. We are in the most extraordinary situation where Belgium sells more to China than we do. Sir Roger Carr has spoken today about business leaders having to earn their way in the world. He regretted our failure to exploit and to do business with emerging markets and said that we were still not punching at our weight, never mind above our weight. We had similar comments from the City of London last night. There is a real recognition that British business has failed to build its trade and business and to take opportunities in the emerging markets. I fear that part of the reason for hoarding this cash is the bad habit of many of our corporations of simply thinking that they are looking for an opportunity for acquisitions rather than building new product lines and expanding into new markets.

I want to raise with the Government the issue of infrastructure. I am a great supporter, as I suspect are many in this House, of the green investment bank. It was extraordinary to hear the noble Baroness, Lady Royall, say that no investment was being made in infrastructure because the green investment bank is an important breakthrough. However, will the Government confirm in relation to the £3 billion that will be used to capitalise the bank that their goal is to get that money out into investment by 2015 and not just to have the money committed? The two things are very different. Commitments can stretch over a far longer period. For economic growth, it will be important to be on a trajectory of getting £3 billion out of the door.

Others will know that I have been disappointed by the tax incremental financing proposals in the Local Government Finance Bill, because this is another opportunity for infrastructure investment. TIF 1 will encompass only very small projects—it is welcome, but it will not change the world. TIF 2, which has the potential to revolutionise and expand our infrastructure and is driven by local recognition of local needs, is capped at £160 million for the period. I hope that the Government will look at that again. Infrastructural investment in affordable housing surely has to be one of the opportunities that we seize. It seems amiss that credit easing has not encompassed housing associations as one of the areas where it can provide some additional stimulus.

I would be very interested in talking about finance for SMEs, but the Government have allocated time for a debate on those issues next week, for which I thank them. However, we must recognise that our high street banks are not in the business of lending to small and micro businesses and that we must build alternatives to that, whether they be some or all of local and community banking structures on the German or US models. We have to start looking at how we credibly expand and take from fringe to mainstream the various online lenders, and we have to look at the innovative bond markets, particularly social impact bonds and social impact financing.

I see that I am running into my seven minutes, so I shall choose to sit down. Before I do so, perhaps I may say that the Government deserve more congratulation than stick on their plans for economic growth.

Working Tax Credits

Baroness Kramer Excerpts

Monday 14th May 2012 Lords Chamber

[Lord Sassoon]

My Lords, I did not hear that particular case and it is very difficult to comment on individual cases, particularly when one has not heard the details. I appreciate that many of the changes we are making across the tax and spending playing field are painful for very many people in this country. I do not minimise the effect on the 200,000 or so, including couples with children, who we are asking to find another eight hours on top of what they may do otherwise.

We should not play down the prospects for finding employment in this country. Nearly 1.1 million people found a job in the fourth quarter of 2011. Some 600,000 of those had been unemployed and had got into employment, and 459,000 were previously inactive. At the moment, the number of job vacancies is rising. At the last count, it was 464,000. I do not underestimate at all the effect on individual cases but there are jobs out there and more than 1 million people in one quarter found employment.

[Baroness Kramer]

My Lords, I think that a significant number of companies are somewhat fixated around the idea that 16 hours is the gold standard for part-time work. Given that for many people affected by this change, 24 hours becomes the standard number of hours they would wish to be in employment, are there means by which the Government could communicate, through the trade associations and others, to try to change some of the cultural attitudes towards the various shift structures and others that set part-time hours?

[Lord Sassoon]

First, I congratulate my noble friend on her new responsibilities as her party’s spokesman on the economy. I can see that she is not going to give me an easy time. It is an important question. First of all, there are important elements of the present tax credits system, such as the child tax credit, which do not relate to hours worked. Of course, when universal credit comes in, the link to hours worked will go altogether. As my noble friend knows, that change will start with natural migration, coming in from October 2013. Then managed migration will take place from August 2014 in a way that means that nobody loses out in cash terms. So it is a transition that has been carefully thought about by my noble friend Lord Freud.

Economy: Credit Easing Policy

Baroness Kramer Excerpts

Thursday 26th April 2012 Lords Chamber

[Lord Myners]

My Lords—

[Baroness Kramer]

My Lords—

[Noble Lords]

This side!

[Baroness Kramer]

My Lords, the noble Lord very kindly gave way and I appreciate it.

Perhaps I may suggest to the Government that they missed an opportunity in this round of credit easing by not including community development financial institutions, which, after all, serve micro and small businesses considered unbankable by the big five. Will the Government reconsider and see if a tranche could be made available under this round, or certainly under future rounds?

[Lord Sassoon]

I am grateful to my noble friend, who rightly comes back to this issue, which is important. We have certainly extended the reach of the present scheme beyond previous comparable schemes. For example, the NLGS includes asset-backed finance, which other schemes have not in the past; we have the non-bank finance schemes, through the business finance partnership; and we have one non-traditional big bank—Aldermore—which is in principle committed to the NLGS. So we are pushing out the boundaries. As to the specific question about CDFIs, as my noble friend may be aware, the banks, under the BBA’s better finance initiative, are putting in place procedures to make sure that banks formally pass customers whom they think appropriate towards CDFIs. That is an important step which the BBA has initiated.

Economy: Budget Statement

Baroness Kramer Excerpts

Thursday 22nd March 2012 Lords Chamber

[Baroness Kramer]

My Lords, I find a great deal to welcome in this Budget, not the least of it being the clarity of the Red Book. It is the first time that I have not needed six hands and a book of Post-its to work out exactly what was going on. That has been extremely helpful.

Noble Lords will not be surprised that, like most Liberal Democrats, to me the most important measure in the whole Budget is the raising of the starting tax threshold, which is going up to £9,205, with 20 million basic-rate taxpayers being £220 better off. That consolidates one of my goals, shared by many of my colleagues, to see at the end of this long process—and it may have to go on into the next Government—an alignment between the minimum wage and the starting point of paying tax. The kind of impact that has on the incentive to work is utterly fundamental. It is a matter not just of the numbers but of capturing that principle.

Like many of my colleagues I would not particularly have chosen to take the 50p rate off at this point in time, but it has always been a temporary measure—and the Opposition have always signed up to it as a temporary measure. What interests me is that some of the offsetting measures are permanent; because they are important offsetting measures, that permanence is something that we have to applaud. I never understood why Labour so valiantly refused to put a cap on tax reliefs. That is absolutely critical—and now it has been done. That principle is one that will stay with us and fundamentally change things, building in a degree of fairness to our tax system that had not been there previously.

Noble Lords will exclude me if I find some personal pleasure in seeing a Government tackle the problem of stamp duty avoidance. It made so many people in my local area furious to see how easy it was for people to avoid paying stamp duty through the use of corporations or trusts based in offshore areas to own property and avoid in effect paying any capital gains. The 2010 general election campaign against me was effectively funded, you could say, by avoidance of stamp duty on a major purchase of a property. Local Conservatives argued that it was a tax break that all the rich definitely deserved. So I am very glad to see a change by the Chancellor on the grounds that a sinner who repenteth should be welcomed. I never understood why the Labour Party refused to go in and close that egregious loophole.

I welcome this Budget, although as in all Budgets there will be one or two issues that one would wish to raise—and I have a couple. As people know, I am a strong supporter of tax increment financing as a mechanism for local government to go around and tap new, private sources of financing for infrastructure and regeneration—and the need, as we all know, is huge right across the country. So I am rather disappointed by the announcement in the Budget that the Government will support only £150 million in TIF; that is quite a bitter disappointment. If you spread it around the country, it comes to very little. I am concerned that that has the potential to undermine some confidence in the new localism agenda. This is a time when the market for TIF-type financing should be built up and focused on; it is the time to go out and develop that marketplace. I am concerned that the Treasury’s desire always to hang on to the strings counters what could have been a very significant opportunity. Local authorities up and down the country will be disappointed.

On what the Government are doing to provide access to credit for small business, I would never for a moment argue against the national loan guarantee scheme, which is very welcome. Business has welcomed it, but with some reserve, because its effect is to reduce the cost of loans, which the four major banks plus Aldermore would have done anyway.

The underlying problem with credit for small business is captured again in the Breedon report, which was launched last week and which underscored again the fact that the UK has one of the highest SME loan rejection rates in Europe at about 33 per cent. The decrease in the supply of loans to SMEs has been much sharper in the UK than elsewhere. Our problem is that we have a banking group that is not on the whole interested in the SME market, and certainly not in the micro market that lies within that. Some have said that it is because of balance-sheet pressures on the banks but, if you look at banks’ behaviour, you can see that they long ago retired or fired the people who understood small business lending. When they lend to small businesses now, it is typically based on the value of commercial or residential real estate and very rarely against the capacity or potential of a business plan, which is the hallmark of lending to the small and micro sector.

In this country, we lack a whole layer of banking. The local savings banks that are the backbone of small business in Germany and Switzerland, and the community banks that play the same role in the United States are frankly only in their infancy here in the UK. The advantage of those banks is that they stick with small and micro businesses through thick and thin because only if those businesses thrive do the banks thrive too. I know that the community development finance institutions in the UK benefited from the regional growth fund to the tune of £30 million, but that really was small potatoes. I am so sad that in this Budget the Government lost the opportunity to boost the whole sector by bringing it into the credit easing arrangements. I hope very much that over the year there might be some attempt to look at that and to see how to wrap the CDFIs and possibly credit unions as well into credit easing. That is a strategy that has worked very successfully in the United States, where the Obama Administration pump money into small business through that route. Frankly, if the Government do not take by the scruff of the neck the problem of that missing layer of the banking sector, in 10 years’ time we will still be moaning that we cannot get credit into small and micro business.

Finally, I know that the Breedon report and the Government are looking with some enthusiasm at online innovative financing as an alternative to the banks. The idea is difficult to describe. I have said this before in the House and everyone broke out with laughter, but the umbrella term—although it is often not accurate—is peer-to-peer lending, and the text version is P2P, which leaves my five year-old granddaughter on the floor with laughter. This is a world where the online technology is now making it possible for players to set up a whole variety of different platforms, some of which let ordinary people become lenders to businesses, while others are invoice discounters. It is also a mechanism for social enterprise bonds. There are a whole lot of different areas. The Government have looked to participate and support this sector through the Business Finance Partnership, and are adding a welcome 20 per cent increase to the £1 billion that they originally committed in this Budget. However, the Government’s commitment to cofinancing will be only for mid-sized businesses with a turnover of £500 million or so. These platforms are perfect for microbusiness and small business, so this really is another lost opportunity and an area where, frankly, I hope that the Government will look again.

These are, in a sense, relatively small comments on what has been overall a fairly masterful budget. I remind the Labour Party, when it sits down with its criticism, that it oversaw an economy with tax revenues that were pumped up by the false profits of the banks; they were not real profits, and they collapsed. It was pumped up by an asset bubble in house prices, which again has collapsed, and it was pumped up, in a sense, by a consumer demand which was fuelled by absolutely excessive consumer credit, which was going to be unsustainable. I congratulate the Chancellor on recognising that sustainability has to be at the core of economic growth and fiscal sensibility.

Finance: Credit Rating Agencies

Baroness Kramer Excerpts

Wednesday 14th March 2012 Lords Chamber

[Lord Sassoon]

I am certainly very happy to commend again the report, Sovereign Credit Ratings: Shooting the Messenger?, to which the noble Lord, Lord Harrison, referred. It is an excellent report, which said among other things:

“The criticism that credit rating agencies precipitated the euro area crisis is largely unjustified”—

so it offered a very proportionate and measured response to the criticism. I do not think that we should mind the nationality of the rating agencies; it is the competition that we want. In that connection, the Government believe that it would be wrong to create a public European credit rating agency because that would just serve, among other things, to crowd out the competition.

[Baroness Kramer]

My Lords, until the mid-1970s, investors paid the credit rating agencies, not the issuers. The change was driven very much by the awareness of credit rating agencies that they could gouge more money from issuers. Does the Minister agree that there is no evidence that the so-called private conversations that now take place between the credit rating agencies and the issuers because of their relationship have in any way improved the quality of credit rating? Does he further agree that returning to an investor-paid system would take out the key conflict of interest?

[Lord Sassoon]

My Lords, I agree that the conflict of interest question is important. I draw my noble friend’s attention to the fact that in the two rounds of legislation to date since the crisis, one of the things that has been done is to ban credit rating agencies from providing a paid advisory service. So some attention has already been given to this issue by Europe.

EU: Fiscal Compact Treaty

Baroness Kramer Excerpts

Tuesday 7th February 2012 Lords Chamber

[Lord Sassoon]

My Lords, the first thing is to be clear that the intergovernmental agreement is explicit that it cannot encroach on the competences of the EU and that the signatories to the intergovernmental agreement must not take measures that in any way undermine the single market. That is set out in the preliminary recitals and in Article 2 of the treaty. It is principally a matter for the signatories to the treaty. We have made it clear that the Government have a number of concerns about elements of this inter- governmental agreement, one of which is the use of EU institutions. Some of the proposed uses of EU institutions in this intergovernmental agreement are already in the EU treaties and others are not. The Government will watch very carefully how this develops.

[Baroness Kramer]

My Lords, in an earlier answer the Minister referred to the recapitalisation of the banks in the eurozone as a necessary step. What action does he think is available if those banks fall short of successful voluntary recapitalisation and is further action necessary at the EU level?

[Lord Sassoon]

My Lords, now that there is a realistic assessment of what capital is required, there is a clear agreement on the timetables and methods for doing that and it is well within the capacity of the eurozone to do it. I do not think we should speculate on what happens if they fail to do it. The eurozone, its Governments and the European Central Bank have all the firepower necessary.

Shipping: Tax Revenue

Baroness Kramer Excerpts

Wednesday 18th January 2012 Lords Chamber

[Lord Sassoon]

My Lords, I am not sure how I interpret that question, but I think the relevant bit relates to the original Question, which is to do with the numbers that I gave the noble Lord, Lord Prescott, in my Written Answer. I can assure him that it is standard practice to give numbers based on the liability in respect of years. That is done in innumerable Answers to Questions. The numbers in this case, as is normally the case, will be broadly reflective and close to the actual tax paid. It is simply that the tax paid gets paid at different times according to the individual circumstances of the company.

I am happy to recognise that the noble Lord, Lord Prescott, was Secretary of State for Transport and many other important things at the time that this important tax was introduced. Just to correct his figures, the gross tonnage of British shipping in 2000 was 5.8 million tonnes and, indeed, it has increased to 18.2 million tonnes since then.

[Baroness Kramer]

My Lords, perhaps I can help. One of the motivations for providing the option of a tonnage tax was significantly to enhance the training and safety of the shipping fleet. Has the tax achieved that purpose and are any records kept and tracking done on those issues?

[Lord Sassoon]

My Lords, the tax has achieved an estimated reduction of £45 million of tax which the shipping industry in this country would otherwise pay under conventional corporation tax. It means that we have a more vibrant and healthy shipping industry in this country. Of course there are many other associated issues that my colleagues in government keep under review and discuss with the industry.

Economy: Private Capital Investment

Baroness Kramer Excerpts

Tuesday 20th December 2011 Lords Chamber

[Lord Sassoon]

My Lords, the enterprise zones are not limited to any particular sector.

[Baroness Kramer]

My Lords, the Minister will be aware that the banking industry is not serving this aspect of investment particularly well and that barriers to entry are limiting new banks. Is he therefore observing the growth of peer-to-peer lending and will he give us some assurance that those new lenders entering the market will be appropriately regulated but not to the point of being stifled?

[Lord Sassoon]

My Lords, we are very interested in anything that keeps credit flowing. However, although my noble friend is very good at reminding us of that issue, we are getting a bit far away from fiscal measures.

Public Service Pensions

Baroness Kramer Excerpts

Tuesday 20th December 2011 Lords Chamber

[Lord Sassoon]

My Lords, I am happy to try to clear up any misunderstandings on this. As the DCLG has made clear this afternoon, it is in discussion with the unions to resolve any misunderstanding and reassure them that the intentions of the department and of the Government have not changed. It would seem that the unions have read more into the letter that was issued today than was intended by the DCLG. No new conditions are being imposed by the department. In order to iron out any ambiguity, the department will be issuing a new letter to make clear that there is no ambiguity, there is only one deal and there are no conditions. Therefore, I am confident that this can be resolved quickly, but as noble Lords will understand, there have been many deals with a lot of unions and several departments. We must clear up this ambiguity that has slipped in on one particular aspect.

[Baroness Kramer]

My Lords, the Government and the unions that have signed the heads of agreement deserve congratulations on having achieved this in this day and age, given the immediate financial pressures and the reality that we will all live much longer and therefore need pensions for a much longer period in our lives. They have achieved an agreement that retains defined benefit schemes—when the private sector has essentially abandoned that and gone on to defined contribution schemes—and have provided protection for those approaching retirement and for those on the lowest incomes. That is a real achievement by both sides and we ought to acknowledge it.

However, I wish to ask the Minister two questions. Can he clarify for us where the negotiations now stand with the PCS? The experience that has been described tonight demonstrates that negotiation has to be the way forward, not strikes. The Minister said that the PCS had walked away. The newspapers used the phrase, “not invited to future talks”. Can he clarify what he sees as the progress that can be made in that regard—preferably progress which does not inflict any more strikes on the long-suffering British public?

Secondly, can the Minister expand a little on an area I find most intriguing: namely, the position of staff transferring from the public service to the voluntary or private sectors or to social enterprises who will retain access to a public service pension? I cite the example of the NHS in that regard. Should we see that in narrow terms, or are we moving towards an arrangement which will allow a much more flexible structure for future public services as technology and demand change, creating the opportunity for movement in and out of different organisational arrangements? Is this the first building block of something larger, or is it just something to be seen narrowly within the terms of this negotiation?

[Lord Sassoon]

My Lords, I am grateful to my noble friend for welcoming this deal. She rightly points out that it means that public sector workers have among the best pensions available in this country, including defined benefit schemes which are not now generally available to people entering private sector schemes. Therefore, I endorse entirely her comments in that respect.

The PCS has not agreed to put the final design of the Civil Service scheme to its executives. It is important to remember that the PCS represents fewer than 5 per cent of the members of the public service schemes and discussions will continue without it. We believe that the final deal—it is a final deal—is a good one and that the remaining unions will recommend it to their members. We are clear that what has been set out today is the Government’s final position.

My noble friend asked about the ability of members exiting a public sector employer to remain in the pension scheme under the “Fair Deal” provision. Implicit in her question was the notion that this may have wider implications. I certainly think that this opens up all sorts of possibilities, whether in relation to the mutualisation of services or the ability of people to come in and out of the public sector.