Covid-19: Businesses and the Private Sector

Baroness Noakes Excerpts

Thursday 21st May 2020 Lords Chamber

[Baroness Noakes (Con)]

My Lords, it is good to have the opportunity to debate Covid-19 in a context wider than health and social care. Sadly, a series of two-minute talking heads on a Zoom screen is very far from being a real debate.

The only economic certainty about Covid-19 is that it is causing massive damage to our economy. The political priority now needs to shift to rebuilding our economy. The Chancellor of the Exchequer has been bold. His job retention scheme and Government-backed loans are delivering on propping up many businesses and jobs for now. However, many will not be viable in the face of debt burdens, higher operating costs and changed demand in a post-Covid-19 world. Businesses and employment will be lost. We will need an economic renaissance with business at its heart. Growth and jobs come from new businesses and new investments in products and markets. I do not doubt that that there will be a role for publicly funded investment in the short term, but the foundation of a successful economy is not a big state; it is a big and effective private sector.

The Government must focus on encouraging small businesses, start-ups and scale-ups. They should listen to organisations representing SMEs and not, for example, the CBI. A holiday for SMEs from all non-essential regulations would be a terrific start. We need to move from risk aversion to sensible risk-taking. Let us have an end to draconian Covid-19 restrictions as soon as possible so that businesses and individuals can return to the normal world of taking responsibility for making informed decisions. Economic recovery cannot begin without that.

Brexit: Competition and State Aid (EUC Report)

Baroness Noakes Excerpts

Thursday 24th May 2018 Lords Chamber

[Baroness Noakes (Con)]

My Lords, when the UK took the momentous decision to leave the EU nearly two years ago, the underlying rationale for the EU committee structure in your Lordships’ House was largely destroyed. This was set up to scrutinise EU proposals that would impact the UK. According to my countdown app, just before I rose to speak, there are only 311 days and 11 hours before we leave the EU. Much of what we are now scrutinising is unlikely to be implemented in the UK, and so scrutiny, at the moment, has little or no meaning. I had expected that the EU Select Committee and its six sub-committees—absorbing the energies of 70 or 80 noble Lords—would, by now, have been reduced and streamlined. But the committees have been busily converting their purpose to scrutinising Brexit. Since the referendum, over 30 reports entitled “Brexit this” or “Brexit that” have been issued. There is a clear role for your Lordships’ House in holding the Government to account in this hugely important policy area, but I query whether we have got the balance right, either in the use of our own resources or—more importantly—in the burden we impose on the Government, given the scale of their task in preparing for Brexit. That both Ministers and officials have dealt with your Lordships’ scrutiny in good heart is a tribute to them. But the question that I pose to the House is whether we should be acting in this way and whether we are being reasonable and proportionate.

The report that we are considering today is from the sub-committee that has the internal market in its title—though it does not deal with goods or financial services and might better be called the “odds and ends” EU sub-committee. I am a member of this odds-and-ends sub-committee and, despite my views on the utility of the EU committee work at the moment, I pay warm tribute to the noble Lord, Lord Whitty, for being an excellent chairman.

[Lord Lea of Crondall (Lab)]

I am grateful to the noble Baroness for giving way. Does she not agree that, on this question of how Brexit would affect state aid, my noble friend Lord Whitty, in his role as chairman, has made a number of observations that show how important and topical it is? I do not understand why the noble Baroness is taking this opportunity to criticise the role of the network of sub-committees. This is a good example of it doing its job very well.

[Baroness Noakes]

My Lords, I was only trying to say that I thought the amount of effort being devoted to this particular aspect of government policy could be regarded as disproportionate, given that the fundamental rationale for the EU Select Committee and sub-committees was to scrutinise the proposals emerging from the EU which would affect the UK. It has stretched its current terms of reference to deal with Brexit matters but, since there is a large number of sub-committees with a large number of noble Lords involved, we tend to produce reports on a very large number of issues, many of which overlap and cover the same underlying issues; for example, mobility of labour. I am merely challenging the proportion; I am not challenging whether any particular aspect of any particular report is or is not interesting or useful.

Perhaps I may continue. I will not deal with the report overall, because the noble Lord, Lord Whitty, has already ably summarised that. The Government have provided a very speedy reply which is comprehensive within the constraints of the current state of negotiations with the EU, which is entirely understandable. The response indicates—although it is too polite to say so in terms—that our report did not identify any new issues beyond those already on the Government’s own list of Brexit things to do. I think that that supports my critique about how well your Lordships’ House is spending its time.

I shall focus on two areas: mergers and state aid. On mergers, one important implication of our leaving the EU is that we will no longer be subject to the decisions of the Commission and the jurisdiction of the European Court of Justice in relation to mergers which affect solely the UK. At the moment, the Commission can and does claim exclusive jurisdiction over mergers which engage no issues whatever outside the UK. These are inevitably the larger transactions affecting the UK. It is right and proper that these cases should return to the exclusive competence of the Competition and Markets Authority.

Of course, mergers that cross the border between the EU and the UK may become a little more complex in future in that both the Commission and the CMA could be involved. The one-stop shop is currently a convenient mechanism for businesses involved in cross-border EU-only mergers. But many mergers engage interests that go beyond the EU and thus may well inevitably involve more than one global competition authority, and the loss of the overall one-stop shop will barely affect those. In my view, the loss of the one-stop shop is therefore a marginal issue.

The report rightly emphasises the desirability of strong co-operation mechanisms going forward, and there need to be mechanisms to allow the sharing of data. But in practice this is unlikely to affect merger cases, because the parties should be happy to agree to data sharing in order to speed up clearance processes. None of our witnesses thought that data sharing and co-operation will in practice be a showstopper.

There was also general agreement that our overall competition policy, for mergers in particular, would not change markedly post Brexit. That is partly because there is a broadly converged global approach to competition and mergers. However, Brexit will allow the UK to develop incrementally; for example, in faster and more responsive processes and in more innovative solutions. We will be free to develop in ways that our own Parliament determines. Our courts can develop their own jurisprudence and, in particular, will not be constrained by the ECJ’s overarching principle of developing the EU internal market. So the general view was that not much is likely to change for now but that we will in future be able to change our policy in ways that suit our economy. That, in my view, is the one big message from this report.

I will turn briefly to state aid. The report is clear, as the noble Lord, Lord Whitty, has already pointed out, that state aid rules are not a major issue for the UK economy at the moment; indeed, the UK is one of the smaller countries in the EU in terms of spend on state aid per head of population. The UK managed perfectly well without a state aid authority before we joined the EU, but it seems that we will not be able to leave without one. There seem to be two reasons for this. First, it is likely that any future free trade agreement will need something to guard against unfair competition due to state aid. Secondly, a bizarre consequence of devolution is that we will apparently need an authority to determine whether there are state aid distortions within what we now have to call the UK’s own internal market.

Since our report was issued, the Government have confirmed what was widely suspected, namely that the CMA will take over the state aid authority role. In that connection, it was good to see that the CMA has received nearly £24 million this year in connection with Brexit preparations and an additional £3 million for additional staffing for the additional caseload. The CMA, in evidence to our committee, was itself relaxed about the adequacy of resources for the task given to it, and I see that one of its executive directors, Dr Michael Grenfell, reiterated that in a speech this week.

I have a couple of questions for my noble friend the Minister about the Government’s role in relation to the CMA, and these touch on the CMA’s independence. First, at present the Government appoint the board of the CMA. In future, the CMA, as the state aid authority, will be sitting in judgment on the Government’s actions from a state aid perspective. This is quite unlike other public sector bodies. Does my noble friend agree that the independence of the CMA, which I know the Government value, needs to be underpinned by appointment processes which are demonstrably independent of the Government? The judicial appointments model offers a useful precedent here.

Secondly, the Government have issued to the CMA what they describe as a “strategic steer”. Do the Government think that that will continue to be appropriate once the CMA has assumed a new role in relation to state aid? It seems to me that a strategic steer comes perilously close to being a direction to the CMA by the back door, and that would clearly be wholly inappropriate in relation to state aid decisions.

Thirdly, within the strategic steer, the Government currently commit to a presumption that they will accept the CMA’s recommendations but allow for policy override. I do not think that that will be good enough for state aid responsibilities. Will my noble friend agree that the Government will need to show a firmer commitment to abide by the CMA’s decisions in relation to state aid?

Those are points of detail. The main message is that no burning issues arise from this report, and certainly none that the Government are not already fully engaged on.

Queen’s Speech

Baroness Noakes Excerpts

Monday 26th June 2017 Lords Chamber

[Baroness Noakes (Con)]

My Lords, we are facing a two-year Parliament dominated by the legislation that will implement the historic decision taken by the British people last summer. This is an awesome task but I hope that this House will stick to its core competence of scrutinising and improving legislation and will not try to change that legislation’s intent.

The task of dealing with the legislation for our exit is so immense that there is not much time left for other legislation. That is a very good thing. Obviously, we have to have the Bills related to exiting the EU. The next priority must be to keep citizens safe from harm and I welcome in particular the proposed legislation on domestic violence and abuse, and on digital safety. However, we should be sceptical about the need for any more laws. It is not clear to me that all the remaining Bills are worth while. I will single out just one. In the previous Session, we had HS2 legislation, and I pay tribute to the noble Lords who did hard labour on the special Bill Committee. Now we are promised another HS2 Bill. I remain unconvinced about the project. It is not clear that its benefits outweigh its massive costs, which are on some estimates up to £200 billion. That is on top of the disruption and destruction that will be part of the project. It is not too late to change course on HS2; there are far more deserving homes for the taxpayers’ billions.

Today’s debate includes economic affairs, and that is the focus for my remaining remarks. If we had believed the forecasts that the Treasury produced as part of “project fear” last year, our economy should now be in recession. Wrong—our economy has continued to grow. Although that growth slowed in the first quarter of this year, the outlook is not gloomy. For example, the CBI reports that the UK’s manufacturing order books are at a 30-year high. The Treasury said that unemployment would jump by half a million. Wrong—unemployment has continued to fall and employment is at a record high. The Treasury said that foreign investment in the UK would fall, but there is no sign of that happening and a number of significant corporations have recommitted to investing in the UK.

Of course there are some issues, and rising inflation is a problem in particular for households that face lower income growth, but the long-term outlook for the UK is still positive, with signs that many non-EU countries are keen to enter into new trade deals that will take effect when we leave the EU. We have always been a great trading nation and I look forward to the Bills on trade and customs that will underpin our ability to forge our own trading destiny in the future.

As other noble Lords have reminded us, we must not forget that a large fiscal challenge faces us. Debt is expected to peak at just short of 90% of GDP, and the previous Budget paved the way for an even longer timeline for removing the deficit. We cannot wish away those facts of life. More than anything else, we need to stimulate economic growth, which is why building the foundations for international trade will be so important for us.

The gracious Speech had little to say on economic growth beyond legislation that relates to electric cars and commercial satellites. That is good; Governments cannot legislate for growth. The most important thing that they can do is create an environment where businesses can prosper. Tax is an important part of that environment. Corporation tax rates are on a path towards 17% and I applaud the Government for that commitment. We need companies to invest and grow, and success should not be penalised. However, we still have tax rates on individuals that are too high at both ends of the spectrum. The top rate of 45% is uncompetitive and is above the EU, OECD and global averages, and some marginal rates are even higher. At the bottom end, the Government rightly claim credit for the basic rate threshold of £11,500, but the ultimate stealth tax of national insurance still kicks in at about £8,000 per annum and at a rate of 12%.

Tax is not just a question of rates; it is also about complexity, and we have one of the most complex systems in the world. Low tax rates have been proven to raise yields, but one does not have to be a devotee of the Laffer curve to believe that pervasive low rates, together with a system that was stripped of complexity, would hugely boost our economic strength. I commend that to the Government as something to complement their huge efforts to promote our nation’s economic good health.