Economy: Budget Statement

Baroness Randerson Excerpts

Thursday 22nd March 2012 Lords Chamber

[Baroness Randerson]

My Lords, this was a highly intelligent Budget. At a time of economic austerity, it was highly intelligent to produce a Budget that has been received so positively. I have felt rather sorry for the Labour Party over the past 24 hours. It has been living in a parallel universe, responding to a Budget that it thought the Chancellor would make but which he did not. It has cast around for any stone to throw when, across the piece, there has been a very warm welcome for a very large part of the Budget.

I will concentrate my remarks on two key issues. The first is fairness and the second is economic growth. The concept of fairness is very complex. It is not just a question of tax rates. In our modern society, it has become an issue of the tax that is actually paid. The UK has a very complex tax system, which became even more complex under the Labour Government. With complexity you get a lack of transparency, inbuilt unfairness when one tax rate does not fit with another, and loopholes. Therefore, I welcome the variety of measures in the Budget to close loopholes, in order to establish the principle that the rich should not pay a lower rate of tax than the poor.

The vast majority of people regard aggressive tax avoidance as unfair if not downright immoral. I welcome the move from taxing income to taxing wealth, because it is much less likely to deter investment and entrepreneurship in this country. A property tax is ideal. Put simply, you can move your money to Belize but not your house. However, people have been moving their company to Belize—and their company, in essence, is their house. The Chancellor’s announcements on higher rates of stamp duty are therefore particularly welcome.

The exploitation of the loophole that allowed the richest people to buy properties in company names has meant that there are now thousands of companies, the majority offshore, which consist entirely of one house. I do not accept the noble Lord’s assertion that this is an unusual arrangement. Unfortunately, it has become all too common. I will give the example of One Hyde Park—not a building that I have ever visited—which is known as the world’s most expensive apartment block. It has 62 apartments. Only nine pay council tax—and five of those get a single-person discount as they are second homes. This is not a fair result from the financial arrangements of the people who own the apartments. It is the kind of tax avoidance that makes ordinary people on PAYE very angry; and it is being stopped as a result of the Budget.

The consultation on an annual charge on residences valued at more than £2 million that were purchased by companies, to begin in April next year, is also very good news—as is the extension of the capital gains tax regime, to capture gains on the sale of UK residential property, or the sale of shares in property, by non-UK companies. Finally on this issue, I welcome the proposals on the general anti-avoidance rule, following the Aaronson report, which proposed a moderate rule, targeted at abusive tax avoidance arrangements. This will enable us to tackle tax avoidance without damaging competitiveness.

I turn now to the second issue: economic growth. The Budget does not just help ordinary families, but ordinary businesses. The cut in corporation tax—24 per cent this year, going down to 22 per cent in 2014—means that we will have the lowest rate of corporation tax in the G7. The increase in the bank levy, which will raise £2.5 billion, will ensure that the banks continue to pay their share. That harks back to the public view of fairness. Measures on credit easing will help keep money flowing to businesses.

Although it is obvious that the biggest ever increase in the personal tax allowance will inevitably and rightly be seen as assistance for ordinary families, it is important to look at it also from the perspective of business, because £220 a year left in the pockets of 21 million working people will be a major stimulus to the economy. By definition, these are largely people who spend their money—and spend most of it in the UK.

We judge Budgets by how they deal with people, but this Budget should also be judged by how it dealt with the nations and regions of Britain. This coalition Government have consistently sought to rebalance the economy, which was left by Labour to rely much too heavily on the overheated financial sector concentrated in the City, with disastrous results when the bubble burst. This coalition Government have tailored their policies to assist those parts of the UK that got left behind in the scramble of the financial sector under Labour. My country of Wales gained significant benefits from this Budget, and it needs them because under the Labour Government the GDP of west Wales and the valleys declined from 79 per cent of EU average to 68 per cent of EU average, despite receiving £6 billion of EU aid. Most parts of Greece have been doing rather better than most parts of Wales, so Wales needs the economic stimulus that was in this Budget. As a low-pay economy, it will gain particularly from the increase in personal allowances—an additional 42,000 will pay no income tax at all as a result of this Budget, and there are specific measures, such as the £12 million confirmed for ultrafast broadband in Cardiff and the agreement to make 100 per cent capital allowances available for plant and machinery for designated areas in enterprise zones, most of them in Deeside, which will create 5,000 jobs. Wales’s economy has suffered, at least in part, as a result of infrastructure problems, so commitments on the consideration of the creation of an electrified valleys metro are also very welcome. I believe that the key thing in this respect is that the Budget has laid firm foundations.

Finally, I wish to refer very briefly to the creative industries, which have long been a particular interest of mine. I greatly welcome the measures in this Budget to assist them. The introduction of corporation tax reliefs for the video games, animation and high-end television industries is very welcome. It will incentivise investment, both from within the UK and from abroad. A number of competitor countries already have such incentives: France, Canada, some states of the United States, Ireland and Hungary. Those industries in Britain employ 15,000-plus people. They are mainly based in SMEs, and they have huge potential to offer our economy. These incentives go along with the Government’s policy of backing British success stories—car manufacturing and marine technology, to name but two—and they are part of laying the foundations for a successful, broadly based economy in future.

Devolved Administrations: Financial Flexibility

Baroness Randerson Excerpts

Tuesday 8th November 2011 Lords Chamber

[Lord Sassoon]

My Lords, sadly, the previous Government left us with a pot of money of some £20 billion which had been unspent by departments, which, if now spent, would simply increase our deficit; it would increase the stock of debt by £20 billion. It was necessary for the Government, as part of our deficit reduction strategy, to cancel that EYF, but the stock of cancelled underspends in the devolved Administrations was 8.4 per cent of the total, compared with 15 per cent of expenditure, which the devolved Administrations represent, so what they were prevented from spending was rather less proportionately than applied to the United Kingdom as a whole.

[Baroness Randerson]

My Lords, the decision not to allow the EYF for Wales was something which took many people there by surprise. Can the Minister tell us whether it took the Government of Wales by surprise or were there discussions with the Government prior to the decision by the Treasury at the time of the Budget?

[Lord Sassoon]

My Lords, as I have already explained, the Government inherited an extremely difficult deficit position. We took decisions that affected the whole of the United Kingdom and this one was consequential on decisions that needed to be taken to bring the deficit position under some sort of control so that departments were not completely without controls on their expenditure. After that, there were detailed discussions led by my right honourable friend the Chief Secretary, which led to the proposals which are the subject of this Question.