(4 months, 3 weeks ago)
Lords ChamberMy noble friend clearly knows more yacht owners than I do—I have not discussed this matter with any yacht owners—but I absolutely understand the point he is making about the amount of fraud and abuse that was rampant in the system. The fact that the previous Government decided not to pursue so many of those contracts is not acceptable, which is exactly why we have set up these systems.
My Lords, more seriously, wherever there is fraud in public life, it should be rooted out and punished. Does the Minister agree, therefore, that the best and wisest course is to wait for the outcome of the commissioner’s report, including any recommendations on whistleblowing? A lot was done in a hurry during Covid—some good, some less good. But the worst thing would have been to extend the lockdown for months, as favoured by Sir Keir Starmer.
The commissioner has clearly set out his programme of work. He will work in three phases: first, an assessment of the recovery efforts to date; secondly, a plan for further activity to drive additional recoveries; and thirdly, a consideration of lessons learned and recommendations for future government schemes. The noble Baroness says that we should wait for the outcome of his report; that is perfectly fair, but what I do not understand is why we inherited a recommendation from the previous Government that any attempt to reclaim money should be abandoned. That is surely unacceptable.
(4 months, 3 weeks ago)
Lords ChamberThe Government are committed to attracting investment into the UK to support our world-leading energy ambitions. Investment in the energy sector is subject to the highest levels of national security scrutiny, and we will not hesitate to use our powers to protect national security wherever we identify concerns.
My Lords, did His Majesty’s Government discuss with the Chinese authorities the imposition of 10% tariffs on Chinese exports by the United States?
It is not for the UK to comment on US-China relations.
(4 months, 3 weeks ago)
Lords ChamberI am aware of the issue that the noble Baroness raises, mainly because of her campaigning on it. I pay tribute to her and to the noble Baroness, Lady Altmann, for their campaigning on this issue and for their Private Members’ Bills when we were in opposition, which I found extremely persuasive. I think we have made some progress since we have been in government. I regret that we are not able to go as far as the noble Baroness set out in her recent Private Member’s Bill right now, but we continue to review these issues and I thank her again for her campaigning.
My Lords, it is all very well to talk and review, but we face problems now. Do the Government intend to introduce extra incentives to encourage pension funds to invest in UK-listed shares and in domestic infrastructure?
The noble Baroness talks of a sense of urgency, but, of course, she had 14 years to do something about this and did not. The previous Government never legislated for the reforms they brought forward. We are legislating for them. As I said, we are absolutely concerned that UK pension funds are investing less in the domestic economy, which is exactly why the pensions review is looking at the issue.
(4 months, 4 weeks ago)
Lords ChamberMy Lords, the Government have told us that growth is their number one mission. That is the promise they have repeated again and again, and, given the difficult circumstances the country faces, that is sensible. That being the case, I am afraid that the Government’s statements—both that of the Chief Secretary to the Treasury to Parliament and the speech given by the Chancellor—do not measure up to the scale of what is required.
Above all, we need a recognition that the first steps of this Government—spreading pessimism; rewarding recalcitrant unions with large pay increases without them being tied to productivity increases; increasing stifling regulation, particularly on employment and renting; and increasing taxes—are precisely what should be avoided. Instead, we need an optimistic mindset—seizing the issue, and shaking up those who are not contributing and could do more—and a determination to make real progress, not a flabby wish list with no indication of how it will be achieved in practice.
Last week, Lloyds Bank announced 1,600 job cuts after the CBI warned of a “significant fall” in business activity in the private sector, and the normally robust supermarkets announced large job losses. This is before we start to feel the effects of the Government’s most burdensome measures, which come into force in April. Businesses are fearful, and consumers are showing caution in case they lose their jobs or face price rises that affect their families.
That does not mean to say the Government’s proposals are not welcome, up to a point, if they contribute to stability and growth as we hope. The expansion of Heathrow seems to be central to the Government’s plans to “unlock further growth”, but this will take well over a decade to come to fruition and seems to be highly contentious in the Cabinet. Will the present proposal outlive the Chancellor? It seems doubtful.
The Chancellor highlighted the importance of the life sciences sector and referenced AstraZeneca. It must have been embarrassing for the Government to hear of its decision not to go ahead with the much-needed new vaccine manufacturing plant in Speke—a £450 billion investment. I know that the value for money rules are not straightforward, but could matters not have been managed to secure a better outcome?
Having studied the discussion in the other place, I would be interested to know more about how the growth package will help Northern Ireland and how the Office for Investment will provide a line of sight to opportunities across the country.
We agree with the Chancellor that we must focus on removing barriers to growth, and that that means cutting regulation. It also means reversing the way in which the public sector has started to crowd out the more productive private sector since its necessary expansion to a wartime footing during Covid, yet the Government seem determined to do the opposite. Can the Minister explain what assessment the Government have made of the impact of their extra regulations on economic growth?
I am particularly concerned about energy. History shows that cheap energy is vital to growth. Our businesses in the UK already have to cope with the highest energy prices in the developed world, and that is set to get only worse. That is terrible news for industries such as steel, cement and ceramics. I am sure the Government will come to regret their decision not to support the Rosebank field and the punitive tax on oil and gas, alongside the delays in nuclear rollout and grid connections. I would not want to be the Energy Minister when the lights start to go out.
This is not a debate about welfare, but it is clear that more needs to be done to get people off welfare and into work as part of the growth mission.
Perhaps I could end on some positives. I am glad to see the plans for new investment in reservoirs. Successive Governments have been slow to meet that need. The Thames Tideway tunnel has been an early success in the water area, on time and largely on budget, in an impressive partnership with the private sector.
The Government are right to press ahead with more housing and to lift some of the regulatory constraints, although they should be doing more in the London area, where the pressure of population is worst. I am particularly pleased to see the new focus on building around railway stations, a recommendation of the Meeting Housing Demand report by the Lords Built Environment Committee, which I chaired at the time. How do the Government propose to report progress in this area?
My Lords, I thank the Minister for sharing the Statement.
In a Janus-like switch from the gloomiest person in Whitehall, the Chancellor was all smiles last week. To cap that change in mood, she gave her much-heralded growth speech. The most notable feature, as far as I was concerned, was what was not in the speech.
We all know that committing the UK to a genuinely closer and more efficient trading relationship with the EU would be the quickest and most effective way of driving growth. That is why the Liberal Democrats have suggested a customs union as the most significant route to growth. If the Government do not believe us, they should commission the Office for Budget Responsibility to analyse the impact that a customs union with the EU would have on the economy and public finances, and then we could discuss the numbers.
Instead, the Statement was, in essence, a list of projects—some of them interesting, some of them less so. I believe they were intended to communicate as much a mood as actual projects. To cap the message was an exclamation mark: the announcement on Heathrow. I suppose the point of that was to suggest that the Chancellor and the PM were such growth ultras that they would even allow Heathrow an extra runway. Even though that is patently the wrong thing to do, seemingly the Chancellor was using Heathrow as a badge of her serious intent on growth. However, as we discussed just now in the previous Question, it is so far into the distance that it is growth window dressing. The numbers that are used are highly selective, and the estimated timings hopelessly defy reality when it comes to projects of that scale.
I think it was the former Chancellor George Osborne who coined the phrase “shovel-ready”, implying that some projects could start immediately. This is rarely the case, so it would be good to get an idea of the start time for some of the projects that the Chancellor listed. For example, when will we get the announcements on Gatwick and Luton, and how shovel-ready are they? When does the Minister expect those expansions to have any effect on our economy? Similarly, the suggestions that talks may be reopened regarding Doncaster Sheffield Airport are welcome, but is that idea backed by any central government investment or is it just talks with cash-strapped local authorities?
With such a heavy emphasis on air travel in the Statement, it was inevitable that, by way of some sort of offset, the Chancellor would talk about sustainable aviation fuel. Can the Minister tell your Lordships’ House the Treasury’s estimate for what the percentage and volume of SAF used for air travel departing the UK will be by 2030? How effective will its implementation be?
Finally, on the Oxford-Cambridge growth corridor, I can understand how some would see this as a great idea, but how will the idea be made flesh? The noble Lord, Lord Vallance, is to be the champion, but what is he championing? Your Lordships will be aware that the journey between the two university sites passes through many local authorities. Each, I am sure, will have their own idea and vision of what this corridor would or could be. Will the ministerial champion have any powers to compel a joined-up plan? Will he have any money to cajole authorities to bend to his will, or is this corridor a possible railway link for some time in the future, with a few road works?
Meanwhile, the bird has flown. As we just heard, AstraZeneca, Britain’s biggest public company, has pulled out of its proposed £450 million investment in a new vaccines plant, reportedly after “protracted discussions” with the Government. It is now no longer pursuing its plan for Speke. The implication is that the Government not only reduced the money on the table but did so very slowly. I do not want to hear from the Minister that the previous Government had not funded the offer. We know that they did not fund the offer; they funded virtually none of it. What I want to know is what thinking in the Treasury stopped the present Government funding this project? While having a Chancellor announcing airport expansions might make the odd headline, what delivers an effective message to future investors in this country is an announcement of the start-up of a project such as that.
As a result of this failure, can the Minister tell your Lordships’ House that he now recognises that it is the job of politicians much more positively to drive negotiations such as those? It is politicians who have to step in and remove administrative barriers, and it is up to them to make projects like this happen.
(5 months ago)
Lords ChamberMy Lords, I begin by congratulating my noble friend Lady Coffey on her excellent speech. I eagerly look forward to working with her and taking advantage of both her ministerial and business experience. It is not every day that one speaks after a former Deputy Prime Minister, and I share her love of culture, racing and music. I was pleased to hear her refer to our own noble friend Lady Stedman-Scott and to her time at the DWP, where I undertook a review of the state pension age, which, at the time, was quite widely welcomed. I always wondered who was behind that amusing judgment on Jaffa cakes—now we all know.
I also agree with my noble friend that where companies are headquartered is very important. In my own experience, there are pluses, such as R&D centres and community outreach, which are usually lost when companies move abroad. We need a Government who promote investor confidence and certainty, as my noble friend explained, in order to keep our innovative companies in the UK and attract new ones.
As the noble Baroness, Lady Kramer, did, I thank the noble Lord, Lord Sikka, for initiating this debate. He and I sometimes agree on what the Government are doing wrong, although our philosophies are different. He has set out a coherent set of principles from a left-wing perspective. I think differently, not least because I believe in the importance of the private sector and innovative companies in driving growth, but that does not detract from his consistency and persistence.
For decades, some multinational corporations have funnelled billions of pounds in profits to minimise tax, especially to lower their exposure to corporation tax. This is achieved by various methods. For example, a company may sell intellectual property to a subsidiary in a low-tax country and pay the subsidiary for the use of that intellectual property, or goods and services may be traded between subsidiaries at manipulated prices to allocate profits to the tax haven entity. We have heard examples from the noble Viscount, Lord Hanworth, including the reports this week about the arrangements for the Abramovich yachts. What is the Government’s attitude to that arrangement? That said, it is imperative that businesses and their capital should be able to move freely so that there is international investment and the benefits of comparative advantage are realised.
The previous Government made significant progress in tackling the transfer of businesses’ profits to low-tax and no-tax locations. We constantly stressed our commitment to combating tax avoidance and pledged to raise an additional £6 billion annually. In 2018, we announced a digital services tax to ensure that digital businesses paid tax that reflected the value they derived from UK users, as an interim measure, pending an international agreement to reform the corporate tax framework. I supported it in this House, drawing on my own experience in the retail sector, where the tech giants held an unfair advantage because they did not pay much VAT and had much lower business rates. That reality has not changed. The noble Baroness, Lady Kramer, said that it was the sector of most concern to her.
Then, in 2022, as we have already heard, we confirmed that we would implement the OECD pillar 2 rules for a global minimum corporate tax rate, for accounting periods beginning after 2023. Pillar 2 applies a “global minimum tax” of 15% to the profits of multinational groups whose revenue exceeds €750 million per year. Provision to this effect was included in the Finance Act 2023 and further provisions were included in the Finance Bill 2023-24. As a result, the OBR estimated that the implementation of these reforms could raise £2.8 billion in 2028-29.
Due largely to measures taken by the previous Government, as my noble friend Lord Leigh of Hurley said, the UK has one of the most robust anti-base erosion and profit shifting regimes in the world.
That was the position until very recently. But the US has always been unenthusiastic about this whole process and this attitude is most marked in the Republican Party. The US has very recently withdrawn from the OECD deal in full. This is explosive stuff. US firms are some of the most prominent among those whose activities have caused the problems to which I have referred. The US announcement upends all plans and expectations. There are strong hints that UK interests might be adversely affected as a consequence. For example, our digital services tax and the undertaxed profits rule might be in the present Administration’s sights. The Minister may be able to confirm the sums involved. As I understand it, DST was forecast by the NAO in 2022 to raise £862 million by 2024-25. UTPR is only just beginning to take effect but is due to raise £550 million by 2029-30, according to the HMRC policy paper of last October on multinational top-up tax.
In short, the path along which we were proceeding now looks to be full of problems. An alternative to sticking to these taxes is the risk of costly tariffs if an accommodation cannot be found with the Trump Administration; in other words, the world has changed and we need to reflect how best to respond to this change. What is the Government’s assessment of all this—including my noble friend Lord Leigh’s question about the impact of the future lack of information sharing? How will they respond and, most importantly, how will they protect UK interests? I look forward to hearing the Minister’s thoughts on this extremely important issue.
The disadvantages of corporations shifting profits to low-tax or non-tax jurisdictions are well known; there is no need for me to go on about them, except to say that they represent a serious problem for UK economic interests. These disadvantages apply whatever the US Administration might do, but we now need a fundamental rethink about how we can best deal with these disadvantages in the world as it now is and tackle the problems that we jointly see.
My noble friend Lord Leigh of Hurley has come forward with various alternative proposals on VAT and its enforcement. In 2021, the Conservative Government introduced changes to limit profit shifting, from which the OBR then scored substantial revenue. If there is good reason to believe that these have not been as effective as they should have been, as my noble friend suggested, I would encourage Ministers to look at them again. I believe that his points merit serious consideration.
I had intended to end by outlining how the Government’s recent actions have damaged the economy. It remains true that, by talking the economy down, making large increases in employment taxes and crushing companies under new employment regulations, the Government are making fundamentally wrong and anti-growth choices. The consequence is a flat economy killed stone dead by the Budget—even Tesco followed Sainsbury’s with job cuts this week—and a potentially chilling effect on investment from overseas.
Yet these actions—foolish as they were—are only marginally relevant to today’s subject. It is well-run businesses in a thriving public sector that create jobs and wealth. They rely on the Government of the day to deal with the complexities of international tax and negotiate arrangements that are effective and fair to UK plc. The Trump challenge on tax is serious and I look forward to hearing how the Government plan to address it.
(5 months ago)
Lords ChamberMy Lords, I refer to my register of interests: a third share in two small Wiltshire fields—what is left of the marginal family farm of my childhood.
I am not surprised that the increases in agricultural and business property taxes in the Budget have proved to be friendless, except in some deeply urban areas. This was demonstrated in last week’s debate on this Question about costs in the other place.
The truth is, the Government have miscalculated. They expected a vindictive tax grab on large estates to be welcomed by those of an envious disposition. Instead, the difficulties faced by the working family farms which produce so much of our food have been noticed, even by the supermarkets. Elderly farmers are especially desperate.
The Government have the ghastly choice of brazening the matter out or making some sensible concessions. There are already whisperings about the latter. Will the Minister help to ensure that the Government reduce the harm to agricultural investment and food security of this misguided policy?
My Lords, I am grateful to the noble Baroness for her question. I do, however, totally dispute her characterisation of this policy. At the Budget, we had to take some very difficult decisions on welfare spending and tax that were necessary to fix the public finances and support our public services. We had to do that to address the mess that we inherited from the previous Government. We took those decisions in a way that makes the tax system fairer and more sustainable.
As a result of the measures we are taking, individuals will continue to be able to claim 100% relief for the first £1 million of combined business and agricultural assets, and 50% thereafter. Given the nil-rate bands, that means a couple can pass on up to £3 million between them to a direct descendant inheritance tax-free. In answer to the noble Baroness’s question, the measures will go ahead as planned.
(5 months, 1 week ago)
Grand CommitteeIn that case, I will address that amendment when we come to it.
My Lords, I thank the noble Lord, Lord Scriven, for tabling these amendments and others who have spoken, particularly my noble friend Lord Randall, who supported the amendments highlighting the damage to smaller businesses. I very much share his view.
This has been an interesting discussion and it has brought out how unjust the proposals in the Budget for national insurance were. The amendment rightly draws attention to the problems created across the health sector, all of which we will discuss again in detail on other groups. “Stark” was the rather good word used by the noble Lord, Lord Scriven. As we heard at Second Reading, there are appalling consequences for those dealing with some of the most tragic services, including hospices and the transport of those with special educational needs. There will also be an immense strain on care homes, GPs, dentists and pharmacies—mostly small operations employing a number of part-time and low-paid staff. That will seriously impact on the health of the NHS.
What is so unfair is that the public sector is being compensated for the extra costs. That is in contrast to those carrying out public good in the private sector, which, incidentally, we know is more productive. For example, I have been amazed by the industry of family-run pharmacies, which helped so much during Covid and are asked to do more and more year by year. They are having to deal with the treble whammy of NICs, the national minimum wage rises—especially for the young—and the prospect of the Deputy Prime Minister Angela Rayner’s proposals for new employment legislation.
As I highlighted at Second Reading, many in the health sector say that they will be forced to reduce services and limit headcount. For example, we heard from the noble Lord, Lord Scriven, about the increased cost of social care faced by the independent care providers—I think he talked about £900 million; I had a figure of £940 million—which simply dwarfs the £600 million support rightly included in the Budget to help the sector. If the Government recognise that this tax is not sustainable for the public sector, why are they unable to apply that same logic to sectors that provide public services? These are not big businesses. They provide a critical service for the people and, if they are unable to do so, that will add to the pressure on the NHS. The noble and learned Lord, Lord Hope, gave a good example of the Cyrenians in Scotland and my noble friend Lord Forsyth rightly mentioned hospices, as I think everybody will do throughout this Committee.
Before my noble friend leaves this figure of £940 million for social care, something like one in seven of the beds in the NHS are occupied by people who are well and who could be discharged. If we are going to add a burden to the social care sector, that £940 million does not take account of the cost to the NHS of those beds being occupied by people who would otherwise be able to be in their own homes, not just saving the taxpayer money but also hugely improving their quality of life. So the £940 million —or the £900 million, as mentioned by the noble Lord, Lord Scriven—is a gross underestimate of the real costs that are being imposed by this policy, is it not?
My noble friend makes an excellent point. It is a question of the dynamics. I know, having once been a Treasury Minister, that dynamics always worry it. But the fact of the matter is that, if we can get things done and get people out of hospital quicker, as my noble friend suggests, that would make a real difference.
I feel that the proposals that we are faced with for hard-working businesspeople and for social enterprises are a huge slap in the face. They are being discussed on a day when unemployment is rising and job opportunities are falling. I believe that that reflects the impact of the £23.8 billion hit on employers’ national insurance. It is a veritable jobs tax and the gloom that the Government have admitted for the first six months of their tenure has not helped. That is why my noble friend Lord Forsyth was right to regret that we were debating this not on the Floor of the House but in Grand Committee. I hope that none the less we will attempt to give the Bill proper scrutiny here, because if we do not, that would be a big failing.
In that respect, one of the things that annoys me most is the lack of a proper impact assessment. We have a very inadequate impact note, which was published on 13 November. That gives a run of the yield to the Exchequer year by year but does not break it down into the three categories: the costs of the increase to 15%, the lowering of the threshold, which is extremely regressive, and the welcome benefit from the rise in the employment allowance—and indeed anything else included in the figure of £23.8 billion, which was by far the biggest change in the Budget and which is why so many people are here today worrying about the Bill.
There is also an unexpected dynamic effect highlighted by the OBR, which means that, following the reduction in wages, profits and employment, this tax will raise over £5 billion less than the Treasury forecast, raising £18.3 billion in 2025-26 and nearly £10 billion less than the forecast in 2026-27. So there is a great deal of pain for wealth creators and effective employers, but not a lot of gain.
I cannot see how we can scrutinise the Bill without proper impact information, and I look forward to a proper discussion during the debate on Amendment 13. However, I think the Committee would also like to have authoritative, disaggregated figures on the impact on the health and care sectors under discussion today. That is why I am raising this now, and I hope the Minister will consider what he can do to assist the Committee so that we can have proper understanding and proper scrutiny. We want to do the right thing here.
It is against that sombre background that I shall speak to my Amendments 38 and 42, which have been grouped with this amendment. They seek to increase the employment allowance in the primary care sector. My purpose is to probe the Government’s openness to helping the sector a bit more through an increase. Perhaps the Minister could clarify the facts. The BMA has said that, as public authorities, they are unable to access support via the increased allowance and the noble Lord, Lord Scriven, made a similar point in relation to dentists. The Committee needs to know whether that is true.
Mine is a probing amendment and the first of several relating to Clause 3. To reply to the noble Lord, Lord Eatwell, as someone who has tried to reform taxes in the past, originally with the help of my noble friend Lord Heseltine as part of the deregulation initiative, it is very difficult to get simplification of the tax system. That is one reason why I have tabled an amendment relating to the employment allowance, because it comes at the matter in a different way.
Primary care is vital to the Government’s plans to improve the NHS. My fear is that the NICs changes, especially the lowering of the threshold and with part-time working so common in primary care, will lead to further problems in GP surgeries, increasing chronic conditions and waiting times for appointments across the NHS, and having the perverse effect that I think we will come back to as this Committee progresses.
My Lords, it is a great pleasure to respond to the debate on this first group of amendments, and I thank all noble Lords who have contributed so far. It is also a pleasure to see so many noble Lords in the Grand Committee. I know that some noble Lords are unhappy about being here, but the noble Baronesses, Lady Kramer and Lady Neville-Rolfe, in particular, and I know what it feels like to be in this Grand Committee on our own, so it is, at least, I have to say, nice to be popular.
Before I address each of the amendments in this group, I shall very briefly set out at the outset the context in which the Budget decisions contained in the Bill were taken. I would like to do so since this context is why we are here today and underpins the debates that we will have, not just on this group of amendments, but on all further groups. As noble Lords will know, the Government inherited three distinct challenges: the need to repair the public finances; the need to rebuild public services; and the need to protect working people.
The most pressing of these challenges was the need to repair the £22 billion black hole in the public finances as a result of a series of commitments made by the previous Government which they did not fund. The previous Government also made no provision for costs that they knew would materialise, including £11.8 billion to compensate victims of the infected blood scandal and £1.8 billion to compensate victims of the Post Office Horizon scandal. These pressures have to be funded, and it falls to this Government to do so.
Noble Lords will also know that the country inherited acute problems in public services, with NHS waiting lists at record levels, children in Portakabins as school roofs crumbled around them and rivers filled with polluted waste. Yet since 2021, there had been no spending review and no detailed plans for departmental spending were set out for beyond this year. Working people had also lived through a cost-of-living crisis, with inflation peaking at 11.1% and remaining above target for 33 consecutive months. Combined with the previous Government’s decision to freeze income tax thresholds—
I asked a question which, in relation to dentists, echoed by the noble Lord, Lord Scriven. It was about the definition of “public authorities” and how that affects payment of the employment allowance. I raised it at Second Reading as well. It would be helpful to have a judgment on that point.
The definition is set as it was previously. We have no intention of changing that definition.
To be clear, that means these bodies will not have access to the employment allowance if they are public authorities. It would be helpful to know what the costings of that look like. I know that the Minister does not want to make any changes, but we are trying to understand what the numbers are here and in some minor areas, such as hospices. The Minister says that hospices will have extra money, but they will also have to pay a lot extra in national insurance. We are trying to understand all that to give him helpful feedback on the Bill; obviously, we are as keen as he is for it to succeed.
I would be very happy to look into the specific point made by the noble Baroness. I will feed back in my responses on a subsequent group.
I did not say I wanted the Bill to go through. I agree that that it is a jobs tax, as the noble Baroness said. What I accept is that the Government have a large majority in the other House, and what I am trying to do in this House is to have a proper discussion on the Bill with a view, perhaps, to amending it and persuading the Government that they have made some mistakes and that we can improve the Bill.
The noble Baroness is trying to encourage the Liberal Democrats to be in agreement with the Conservatives, rather as her noble friend Lord Forsyth suggested at one point that he was in favour of the amendment from my noble friend Lord Scriven. We need to be a little bit careful not to agree with each other too often. But she is absolutely right. The Government have a large majority in the other place and it is not the business of this House to go against the Salisbury/Addison convention. However, I do not remember this being a manifesto commitment.
My Lords, I am very grateful to all noble Lords who have spoken in this debate. I will address the amendments tabled by the noble Baronesses, Lady Smith of Newnham and Lady Kramer, and the noble Lord, Lord Randall of Uxbridge, which seek to exempt veteran salaries from the employer national insurance changes. These amendments would create a different employer national insurance rate and threshold set at the current levels for salaries of veterans. The Government of course recognise the huge contributions made by the UK Armed Forces and veterans in this country, and I completely understand the intention behind these amendments.
As some noble Lords have mentioned, there is already an employer national insurance relief available for the earnings of veterans, meaning that employers are not required to pay any national insurance contributions up to £50,270 for the first year of civilian employment. At the Budget, the Government decided to extend the national insurance contributions relief for employers who hire veterans to support veterans in their first year of civilian employment for a further year. Despite the challenging fiscal inheritance this Government face, this means we are maintaining this relief and it is not changing as a result of this Bill.
Further to this, we have more than doubled the employment allowance to £10,500, meaning that more than half of businesses with national insurance liabilities either gain or see no change next year. Businesses and charities will still be able to claim employer national insurance reliefs, including those for under-21s and under-25 apprentices, where eligible.
On veterans more widely, this Government have taken action to demonstrate our commitment to renew this nation’s contract with those who have served. We have awarded £3.7 million in veterans housing grants, veterans will be exempt from the local connection test for social housing in England and veteran cards are now accepted ID for elections. We are progressing veterans support programmes at pace, including a centralised referral pathway designed to support veterans who are homeless or at risk of homelessness, an NHS mental health specialist service designed to help veterans and their families in England and an NHS physical health specialist service designed to help veterans and their families in England.
Before I sit down, I shall also address the questions raised by the noble Baroness, Lady Neville-Rolfe, about dentists, which I was unable to answer during the debate on the previous group. As I said, the criteria have not changed, including the exclusion of those doing 50% of their work in the public sector. The eligibility is down to individual businesses, and the proportion of their work in the public sector may vary year to year. All charities can claim, including hospices.
My point was in relation to the points made by the BMA and the dentists. There are two separate points. It is not in this group, but it might be as well to have a discussion on this so that we can be clear about this and on the impact on these important areas for the future of health in the NHS.
Can the Minister clarify something? I understood that the national insurance contributions relief for veterans had been extended for one year and that this Bill was not going to affect veterans. Surely at some point it cuts out. Is that correct, so that this would be valid only up to 2026?
My Lords, I will try to be extremely brief because no doubt I will be interrupted again. The point I was making was that if you cut tax in one area, you are going to have to raise it somewhere else. That is always problematic.
There are two other reasons why I have some reservations about this amendment. First, it is often thought—the Financial Secretary will remember this because we worked together on measures in the early 2000s—that part-time workers are poor. However, if you look at the poverty statistics, many part-time workers live in quite affluent households. My point is that as a measure to target people on low income, this is a very blunt instrument. It is far better to target them through tax credits, or universal credit as it is now called.
My final points relates to having worked on national insurance over three decades or more and is about the danger of creating steps in the system. I remember large numbers of workers bunching below the lower earnings limit, which was totally understandable as it was in their interest and their employer’s interest. By creating steps in the system, you discourage people from moving up the earnings ladder. In the short term, I could understand that cutting national insurance for the self-employed would genuinely incentivise the employment of part-time workers, but once in place, over time the existence of the step would trap many workers in this part-time zone because their employers would not want them to cross the step that resulted in higher national insurance. I warn against targeted measures such as this as they tend to cause difficulty and disappointment.
My Lords, I thank all noble Lords for their contributions, particularly the noble Baroness, Lady Kramer. I regret that the noble Lord, Lord Bruce, is not in his place and associate myself with the request for some information about Scotland.
The amendments address a matter of real importance, which is the impact of the measures on part-time and seasonal workers, SMEs, hospitality and tourism. The noble Baroness, Lady Kramer, is right about the importance of part-time working in tourism, pubs, restaurants and events. That sector is sometimes neglected in public policy-making, but it is vital to growth.
My Lords, on growth, and indeed on the hospitality industry, it is particularly good to have the practical experience of the noble Lord, Lord Londesborough. I agree with him that it would be helpful to understand today’s employment decline a little better in the Committee.
According to the ONS, there are 8.4 million people working part-time in the UK, which is approximately one-quarter of the workforce. They work in large and small firms and include many young people, students and carers, as well as disproportionate numbers in hospitality, tourism and retail. I know from my days at Tesco how important part-time workers are to big employers as well as small employers, and, in particular, to 24/7 businesses—retail is a 24/7 business. That includes a lot of employment of elderly people. Also, as was said, part-time workers are not only the lowly paid—I had several part-time directors working for me—and good employers offer proper training to their part-time teams. It is an extremely important part of the economy.
While the rise in the national insurance rate to 15% will no doubt hit part-time workers, it is the huge reduction of the threshold to £5,000 from £9,100 that will have the most detrimental consequences for those who work part-time. It is yet another blow to the sector, alongside the increase in the minimum wage that comes into force in April.
As a result, a company that employs a part-time worker over the age of 21 who works just eight hours a week on the minimum wage—I think the noble Baroness, Lady Kramer, said it was down from 14 hours a week —will be hit with this jobs tax for the first time, and the hospitality sector will be disproportionately affected. I think Kate Nicholls used the word “eye-watering”. The industry has warned that the measures announced in the Bill will cost it £1 billion overall. My noble friend Lord Ahmad quoted that figure as well. He is right about the adverse consequences of this and the need for consultation on such changes. How can you adjust your business model and be ready if you do not know what is coming?
It is really difficult for these companies. For the first time, they will have to pay tax on the wages of thousands of part-time hospitality workers. UKHospitality has estimated that a company employing a part-time worker doing 15 hours a week will see a 73% increase in its national insurance bill. It goes without saying that business will have to make tough decisions, as employing part-time workers is soon to become much more expensive. The trouble is that part-time work provides a flexible form of employment for so many—I have mentioned students and carers, but parents are also affected. It can be very useful in juggling what families do. These are people who rely on the flexibility of part-time contracts and might not otherwise be able to work at all.
Can the Minister tell the Committee what assessment the Government have made of the effect of the changes enabled by the Bill on part-time workers? Perhaps he could also comment on the levels of employment within the hospitality sector and how he sees that panning out. How do the Government intend to support industries that will be most impacted by these changes to national insurance contributions? How can he give them hope and how can we be sure that they continue to play their part in growth? It is difficult and we need to try to find some comfort.
My Lords, I apologise for speaking after the Tory Front Bench, but I thought the noble Lord, Lord Londesborough, was continuing after the voting break.
I will speak briefly in favour of Amendments 58 and 59. In doing that, perhaps I should declare an interest. I was on the board of the Fawcett Society in 2010 when it brought a judicial review against the emergency Budget of that year for its failure to honour its legal duty under the Equality Act to do with gender impact assessment. In that case, although Fawcett lost the overall case on legal grounds, it was said that the gender impact assessment requirements applied to the Budget and should have been carried out on a couple of aspects of that Budget.
With that in mind, I draw attention to the final page of the policy paper of 13 November, which I think we are regarding as an impact assessment. Under the heading “Equalities Impacts”, in this five-page document that my sub-editor’s eye tells me is in 16-point, it states:
“Secondary Class 1 NICs are levied on employers rather than individuals. There are therefore no direct equalities impacts”.
I would like to question the Minister on how it can be claimed that there are no equalities impacts. Some figures have already been raised, but I point out that 74% of part-time workers are female, 57% of involuntary part-time workers are female, 6 million women are working part time and 10 million women are working full time. According to the Resolution Foundation’s analysis of ONS data, 63% of UK workers under the £9,100 threshold are female. We are seeing national insurance charges increasing the cost of employment by nearly £700 a year for someone working 15 hours a week on the minimum wage. An additional 600,000 women workers are being brought within scope of national insurance. As others have said, on the minimum wage you need to work fewer than eight hours a week to stay below the new threshold.
Analysis of this has suggested that women workers are particularly affected by this change. Some of them may want to raise their hours, so this might turn out positive. Some of them may have caring responsibilities that mean that they cannot lift their hours and may then have to leave employment because they are being offered more or nothing. It is also worth pointing out that the Women’s Budget Group has highlighted how the overall impacts of the national insurance changes are likely significantly to increase childcare costs. That is of immediate relevance to working women with direct childcare responsibilities, but, as the Women’s Budget Group pointed out, there are also issues around grandparents, very likely grandmothers, who may find themselves being pushed, and feeling obligated, to leave employment so that they can take up childcare responsibilities. I do not think that that equalities impact can be justified and would appreciate the Minister’s comments.
Before the noble Lord sits down, while no impact assessment is perfect, I think it is very difficult to call this note of 13 November detailed. The only numbers it gives are the global numbers, the £23.7 billion et cetera, and the run, and there are a few textual comments about equalities and things. What it does not do is even break down the costings into the different areas where different measures are being taken. It is not a detailed assessment; it is described, rightly, as an impact note. We will return to this, because we think that transparency and understanding the impact of policies is really helpful, including to His Majesty’s Government.
(5 months, 2 weeks ago)
Lords ChamberMy Lords, I thank the Minister for his helpful and descriptive introduction. I will not repeat all the detail he kindly gave us. Like him, I much look forward to the maiden speech of the noble Baroness, Lady Batters. She is a near neighbour of mine in Wiltshire and a trailblazing first female president of the National Farmers’ Union. We worked together professionally, and I know the House will benefit hugely from her talents and energy.
It is clear from discussions in the other place that there is practically universal support for helping Ukraine in its struggles. The United Kingdom was a first mover in supporting Ukraine in 2022. Prime Minister Boris Johnson led the charge and there has been an encouraging consistency in support through the premierships of Liz Truss, Rishi Sunak and, of course, our Prime Minister Sir Keir Starmer. We have pledged over £12 billion since 2022 and sanctioned more than 2,000 entities. Moreover, many people in Britain have generously welcomed displaced Ukrainian families into their homes.
The proposed arrangement is an unusual one, of which the UK was a vociferous advocate. From these Benches we support the UK loan to Ukraine of £2.26 billion, which will be repaid from revenue earned on frozen Russian assets. We also support the decision to earmark the UK contribution towards military expenditure, including on air defence, artillery and other equipment so desperately needed by our Ukrainian allies. This is particularly important as the £20 billion coming from the United States is being handled by the World Bank, which I believe means that it cannot be used for military purposes.
We therefore support the Bill. We would, however, need convincing if the Government were minded to contemplate seizing Russian assets themselves. That would be a large step with wider ramifications and would need detailed scrutiny.
I should add that I have some professional experience of dealing with Ukraine and, to speak frankly, there were issues with the siphoning off of expenditure in the health area, which the not-for-profit development body I chaired helped to end—with the support of some brave reformers in the Ukraine Government. This was before the accession of Mr Zelensky, and I know that his leadership is determined to avoid a return of this kind of practice. However, it means that the detailed arrangements for the loans need to be clear and transparent, so I have some questions to ask the Minister about the practical application of the Bill.
First, can he outline for the House the specific mechanisms by which our UK loans will be distributed and managed? Ensuring that this significant financial commitment is deployed in a timely way will be critical to achieving the desired impact.
Secondly, what parties will be involved in the transfer of these loans? Will the money be transferred directly by HM Treasury to the Government of Ukraine, will it be added to a shared pot with the G7 or will the Government use a third party, as the US is doing, which in our case might be a law firm, a specialist bank or some other body?
Thirdly, I have a novel point since we will have a new United States President in a matter of days. He has expressed a determination to bring the war in Ukraine to an end, so we need to reflect on the ramifications for this Bill. Any Trump deal might contain financial provisions. The Government need to be vigilant in ensuring that any terms ensure that the repayment of the sums provided by the Treasury continues—otherwise, there will be a substantial and unplanned cost to the UK taxpayer. The Minister will wish to comment and let us know whether the arrangements planned make that a needless concern, as I very much hope.
As we provide financial aid, we must also remain vigilant about the broader security implications of this conflict. The war in Ukraine is a stark reminder that the peace and stability we often take for granted are not guaranteed but must be actively defended. The international situation is more concerning by the day, whether in the Middle East, North Korea or the South China Sea. In recent weeks, NATO chiefs have issued warnings that the alliance must increase defence budgets to match the levels of threat we face. The new US President has called for a major increase in spending by European states, so this is a matter of key concern. The Government are yet to announce when they will reach the target of 2.5% of GDP on defence spending, a figure that many influential observers now consider to be too low. There is a strong case for speeding up this announcement. Perhaps the Minister will be kind enough to update us on the Government’s plans.
Furthermore, it is vital that we take a long-term view on this issue. Have the weapons that we have sent Ukraine been replaced? While immediate military aid to Ukraine is crucial, we must also ensure that our own Armed Forces are adequately equipped, trained and funded to address a broad spectrum of potential threats. This includes not only conventional military readiness but investments in emerging domains, such as cyber defence, where adversaries are increasingly active.
Although the moneys under discussion today do not come out of the defence budget, it is important, in an increasingly dangerous world, to focus on our defence. Can the Minister reassure the House that the Government remain fully committed to raising defence spending to 2.5% of GDP as soon as possible?
In conclusion, supporting Ukraine is not only a moral imperative but a strategic necessity. This Bill, which we support, represents a new step in reinforcing our commitment to Ukraine’s sovereignty and independence. However, it is incumbent upon us, as legislators, to ensure that this financial assistance is delivered effectively and transparently. I look forward to hearing from all noble Lords and to receiving answers to my questions from the Minister. Let us together send a clear and united message that the United Kingdom stands firmly with Ukraine.
I do not have that information to hand, but I will happily check for the noble Lord.
The noble Baroness, Lady Neville-Rolfe, asked whether the UK’s contribution to the scheme would increase if the United States or another participant chose to withdraw. I can confirm to noble Lords that this would not affect the UK’s contribution, which will remain at £2.26 billion. We are clear that that is the right and balanced approach, reflecting our fiscal pressures and Ukraine’s needs. The £2.26 billion figure is also proportionate to our GDP share within the G7 and the EU. We will of course continue to co-ordinate with G7 partners on the scheme going forward.
The noble Baroness, Lady Anelay of St Johns, asked for an update on the proceeds from the sale of Chelsea Football Club. The Government are working hard to ensure the proceeds from the sale reach humanitarian causes in Ukraine as quickly as possible. The proceeds are currently frozen in a UK bank account while a new independent foundation is established to manage and distribute the money. Creating an organisation of this scale is complex and officials continue to hold discussions with relevant parties to reach a resolution. As you would expect, we must review the details of any such arrangement to maintain the integrity of our sanctions regime.
In conclusion, we must ensure that Putin has no path to military victory in Ukraine. That means continuing to provide military and economic support to enable Ukraine to defeat Putin’s war machine. The combined $50 billion of new funding, delivered together with our allies in the G7 and backed by profits from immobilised Russian assets, will provide a crucial boost to Ukraine as it continues its third winter at war. It represents an investment not only in Ukraine’s future but in the security and prosperity of Europe more widely, and it demonstrates the shared resolve of the international community in the face of ongoing Russian aggression. I welcome the fact that noble Lords from all sides of the House have been united in saying that we must stand with Ukraine for as long as it takes. This Bill will allow us to honour that commitment.
Before the noble Lord sits down, there was one question about the announcement on the 2.5% of GDP. The noble Lord helpfully clarified that the money in this Bill was extra, which is good news, but I think several of us were concerned to know when decisions would be taken on the timing of the 2.5%.
I answered that exact question from the noble Baroness. As we have said all along, we will set out a path to 2.5% at a future fiscal event.
(5 months, 2 weeks ago)
Lords ChamberMy Lords, I thank the Minister for repeating the Statement. Instead of focusing only on the economic difficulties, I thought I would start by welcoming the improvement in the terms of our exports to China, which helps, in a small way, to redress the huge imbalance in trade that we have with China. The Chancellor has announced £600 million-worth of opportunities secured in Beijing. She states that barriers that restrict our exports to China in the agricultural sector—that would be pork and poultry, vaccines and fertilisers—will be lifted in an attempt to boost trade. I recall exporting chickens’ feet to China when I worked in the food industry. Will the Minister explain what exactly the real change is here?
Similarly, on financial services, can the Minister explain the improvements apparently being made? The green bond is welcome—I remember helping to launch other green bonds at the Stock Exchange—but can we have more chapter and verse on the other financial services gains? I mean gains to UK plc as opposed just to China—concrete changes that are not just warm words from bankers and legal firms, who obviously find the market difficult. We need to know more about the tangible benefits that the Minister outlined.
More broadly, of course, we are very concerned about the deterioration in the economic position back here at home in terms of debt, interest, rates of inflation and economic growth. In the Chancellor’s absence, the value of the pound plummeted and government borrowing costs rose to a 27-year high.
Let us consider growth. The Government inherited the fastest-growing economy in the G7, yet growth is now non-existent, and that means less money for public services. The Government are rightly exploring some obvious opportunities for growth: planning reform, the use of AI and improvement in skills. However, the fact is that businesses are vital to growth, and they have been dealt a triple whammy of costs.
The recent Budget broke election promises, introduced significant tax hikes and has been detrimental to British businesses and business confidence more broadly. Frankly, confidence is tanking, as many surveys and announcements show. This, combined with an increase in borrowing by an extra £30 billion a year, has inevitably caused international markets to question the future of the UK economy.
Instead of looking forward, there is much talk on the Benches opposite about the mythical black hole, but much of this is of the Government’s own making: over £8 billion on a public energy company, over £7 billion on a National Wealth Fund and nearly £10 billion of taxpayers’ money on public sector pay settlements without—this is so important—any requirement for a productivity return, at the very moment when it is right to extract one.
While many on the Government Benches may point to an international trend of rising borrowing costs, it should be noted that the gap between our bond yields and those of similar economies is growing. We now find ourselves in a position in which the UK’s long-term borrowing costs have risen to the highest level in nearly 30 years, and the pound has been at a 14-month low.
Can the Minister tell the House how the Government intend to address and restore stability in international markets? The increase in our borrowing costs is believed to have added roughly £12 billion to the UK’s annual spending in debt interest; that is 100 times what the Chancellor claims she accrued from her trip to Beijing. This £12 billion could have covered the costs of the winter fuel payment cut for eight and a half years or funded 300,000 nurses. According to the OBR forecast, two-thirds of the money raised from the Government’s jobs tax will have to be used to finance additional debt interest. As a consequence of the Chancellor’s policies, borrowing by the final year of the forecast will be doubled.
I repeat the question I posed to the Minister earlier today and encourage him to be more forthcoming. Will the Government do a U-turn on the spending increases that the Chancellor promised in the Budget? Will they borrow more or will they increase taxes further? One of these will have to give if the OBR’s update in March determines that the Chancellor is in breach of her own fiscal rules.
I am afraid that it is working people who will pay the price of the unfortunate decisions made by this Government in their Budget.
My Lords, we must not allow anxiety about America under Trump and Musk, particularly on tariffs and climate change, to drive us into an unhealthy economic relationship with China. China is, of course, an economic powerhouse and our fourth-biggest trading partner, and there is more trade to be had, especially in financial services, to benefit both parties—but China is a very mixed blessing. It remains a cyber threat. Without greater transparency and safeguards, it is a potential threat to the integrity of our national security. It does not challenge the Russian invasion of Ukraine. It does not share our commitment to human rights and to democracy in Taiwan and Hong Kong. The imprisonment of Jimmy Lai is both a tragedy and a warning that our values are not respected. We on these Benches wish that the Chancellor had held firm and refused to go to China unless Jimmy Lai is released. China is a country that exploits weakness.
In light of these concerns, will the Government strengthen foreign direct investment screening and cyber defences, including increased data transparency requirements? Will they cease research co-operation on technology with China, its companies and researchers if adequate reciprocity and transparency cannot be achieved? Will they enact Magnitsky legislation to hold Hong Kong and Chinese officials responsible following gross breaches of human rights in Hong Kong and Xinjiang province? Given the recent discovery of Chinese spying across several senior levels of the British establishment, do the Government agree that China should be placed in the enhanced tier for the foreign influence registration scheme?
I commend the noble Earl for his efforts to try to portray the previous Government’s record on the economy as some kind of success, whereas everyone listening both in the Chamber and outside knows that it was 14 years of total catastrophe. He mentioned inflation as if 33 months in a row above the Government’s target was something to be proud of, when we know that it hurt family finances dramatically over that time. He tried to say that the previous Government did well on growth, when we know that growth was one of their biggest failures. They took investment out of the economy at a vital moment with their austerity programme. They reduced GDP by 4% as a result of their Brexit deal, and then the Liz Truss mini-Budget crashed the economy, sending mortgage rates soaring by £300 a month, for which ordinary working people are still paying the price. I really reject the fundamental basis of the noble Earl’s question. He asked about timing. He knows very well that it is very difficult to turn around 14 years of failure. We cannot do that in six months, but we are determined to do it and will do whatever it takes to turn around the British economy.
I am not sure I am supposed to speak, but I would just say that there was also something called Covid and an energy crisis and Ukraine. It would be good if the Minister sometimes mentioned those as well as some of the other factors.
I know the noble Baroness is desperate to find any scapegoat or excuse for her party’s total failure on the economy. Of course, there are international factors at play, but perhaps she could tell us why the UK was worse affected than any other country in the G7 and any other European country as a result of those things. It is because their austerity and their Brexit left this country more exposed and we therefore suffered far worse than any other country.
(5 months, 2 weeks ago)
Lords ChamberTo ask His Majesty’s Government what assessment they have made of the impact of the rise in the yields on 30-year gilts to 5.37 per cent, the highest level since 1998, and the effect of this on sterling.
My Lords, the Government do not comment on specific financial market movements. Gilt yields are determined by a wide range of international and domestic factors and it is normal for the price and yields of gilts to vary when there are wider movements in global financial markets. The Government are committed to economic stability and sound public finances. Meeting the fiscal rules is non-negotiable and growth is our number one mission.
My Lords, the annual cost of servicing the national debt is now over £100 billion and is estimated to have grown by £12 billion since the Budget. Gilt yields have leaped up, with the critical 10-year rate now at 4.88%—the highest since 2008. The Government need to grasp the seriousness of the situation and the concern that the OBR report is more than two months away. Their own fiscal rules are in jeopardy. Which of their commitments do they propose to break—not cutting expenditure or not raising taxes? Can the Minister rule out an emergency Budget?
As the noble Baroness knows, financial markets are always evolving so it is a long-standing convention that the Government do not comment on specific financial market movements. She will also know that the Chancellor has commissioned the Office for Budget Responsibility to carry out an updated economic and fiscal forecast for 26 March, which will incorporate the latest data. Only the OBR’s forecast can accurately predict the effect on the public finances of any changes in financial markets or the economy, and I will not pre-empt it. However, there should be absolutely no doubt of our commitment to economic stability and sound public finances. That is why meeting the fiscal rules is non-negotiable.