International Banking: Payments

Baroness Wheatcroft Excerpts

Thursday 28th November 2024 Lords Chamber

[Lord Livermore (Lab)]

The answer to the noble Lord’s first question, in terms of whether we consider them effective, is yes. In the case of Russia’s invasion of Ukraine, these measures have dramatically reduced Russia’s access to global financial markets and weakened its ability to finance its illegal invasion of Ukraine. Russia’s increasing reliance on North Korean and Iranian weapons highlights the impact these sanctions have had. We will pursue any necessary steps with our allies to maintain and reduce opportunities for the circumvention or evasion of international sanctions.

[Baroness Wheatcroft (CB)]

My Lords, does the Minister agree that a sensible use of the sanctions now might be to seize the money that has been taken and sanctioned from the Russian regime and give it to the Ukrainians now, while they can use it?

[Lord Livermore (Lab)]

That is very much the spirit that lies behind the Financial Assistance to Ukraine Bill, which will shortly be before your Lordships’ House. The Financial Assistance to Ukraine Bill provides spending authority for the UK to implement our commitment to the G7 Extraordinary Revenue Acceleration Loans to Ukraine scheme, a landmark agreement which provides a collective £50 billion to Ukraine.

Autumn Budget 2024

Baroness Wheatcroft Excerpts

Monday 11th November 2024 Lords Chamber

[Baroness Wheatcroft (CB)]

My Lords, the UK economy has been in structural decline for many years; that analysis is absolutely true. My only surprise on hearing it delivered during this debate was that it came from a leading economist sitting on the Conservative Benches. The noble Baroness, Lady Moyo, at least had the decency to acknowledge the state of this economy—an economy that has been run for 14 years in a way that has left it, as she said, in structural decline. So it is very difficult for anybody to come up with a Budget that will put things right overnight.

Things were made worse, of course, by Liz Truss. Just two years ago, inflation in this country was running at more than 11%. We have not heard much about that from the Benches opposite this evening. Nevertheless, the ramifications of that continue to be felt by people up and down this country. The Resolution Foundation reckons that Liz Truss alone cost the country £30 billion. That is a significant contribution to anybody’s black hole. No Chancellor would want to start from here—but Rachel Reeves had no choice.

She made things even harder for herself by making a series of promises that I am sure she has already come to regret. As an editor, I would have had some difficulty justifying them as having been kept, in the light of what she has done during the Budget. National insurance by any other name is a tax, and increasing employers’ national insurance ends up being a tax on working people—and let us not get into a semantics debate about what constitutes a working person. I think it is probably rather wider than the definition Ms Reeves has ended up with. Nevertheless, this is where she had to start from. It was not a great hand and it could probably have been better addressed.

But there are some things in this Budget which I really do applaud, including the change in the fiscal rules. Despite what we just heard from the noble Lord, Lord Borwick, it is sensible to borrow for investment. It is what households do and it is what a Government could and should do. We need investment, we need big projects—but we do not need to overspend, so the monitoring of those projects has to be absolutely watertight. It has to be constant and it has to be totally transparent. We cannot find ourselves in the sort of mess that HS2 has got into, where nobody really seemed to have a handle on what was being committed. So let us invest, but invest carefully.

Let us not go anywhere near PFI, which was disastrous. As others have said, we are still paying the price. I would like to see the Government look at what is left of those PFI contracts and, if they cannot renegotiate—in most cases, they cannot—they need to find a way to simply break the contract. There are PFI hospitals which have to spend ludicrous amounts on changing a lightbulb, when what they need to do is spend money on patients. So, if you cannot renegotiate, find a means of either putting the health authority into bankruptcy or walking away from the contract. We cannot afford them any longer.

I was pleased to hear, in the Budget, that we are going to spend more on trying to find the tax that people should have paid. An estimated £5 billion a year goes on tax evasion—let us have some, or all, of that back in the Government’s coffers. Investing in more inspectors will be a great way of making a start on that, but we also need much more investment in technology and we need to be tougher on finding where this money is.

We need to make sure that we actually tax what needs taxing, and we need to simplify the tax system. It is crazy having a tax guide that now runs to more than 1,000 pages—the last Tolley’s guide was 1,020. But we have done away with the Office of Tax Simplification. So let us see the Government pledge to simplify the tax system and begin looking at how to do that. It is crazy: people do not understand it and those who do, pay expensive advisers to avoid or evade tax. We need to change it.

The main thing we need to—in the short term, and easily—is simplify the system of property tax. I urge the Government to do that.

United Kingdom Declining Birth Rate

Baroness Wheatcroft Excerpts

Wednesday 6th November 2024 Lords Chamber

[Lord Livermore (Lab)]

To clarify, the OBR is very clear that, over the next five years, employment will grow by 1.2 million people.

[Baroness Wheatcroft (CB)]

The Joseph Rowntree Foundation calculates that 30% of children are living in poverty. Does the Minister have access to any information on what that might mean for long-term fertility prospects in this country?

[Lord Livermore (Lab)]

The noble Baroness makes a very important point, which is why reducing child poverty is central to this Government’s objectives. The previous Labour Government made massive strides towards reducing child poverty and, unfortunately, we had to sit and watch while it rose under the party opposite over 14 years. We have established the Child Poverty Taskforce to ensure it falls. It is a contributing factor, but so are affordable housing and affordable childcare, as I have said, and we are prioritising all those things.

Fiscal Rules

Baroness Wheatcroft Excerpts

Tuesday 29th October 2024 Lords Chamber

[Lord Livermore (Lab)]

It may surprise the noble Lord but, yes, I absolutely agree with what he says. That will be a vital part of the guard-rails we set out in the Budget tomorrow.

[Baroness Wheatcroft (CB)]

My Lords, borrowing to invest in genuine projects that will improve the productivity of the country obviously makes sense, but if the Government are going to look at the fiscal rules again, will they consider when and how they will account for unfunded public sector pensions? At some stage, the country needs to know about those obligations too.

[Lord Livermore (Lab)]

I hear what the noble Baroness says. As I have said already, the Chancellor will set out the Government’s full fiscal plan, including the precise details of our fiscal rules, in tomorrow’s Budget.

Budget Responsibility Bill

Baroness Wheatcroft Excerpts

2nd reading & Committee negatived & 3rd reading
Monday 9th September 2024 Lords Chamber

[Baroness Wheatcroft (CB)]

My Lords, I welcome this Bill, short though it may be. We have already heard different views of the Liz Truss mini-Budget. I would merely say that it does seem advisable to try to thwart cavalier, determined efforts to avoid scrutiny by the OBR; it makes one slightly suspicious. However, the OBR can only be as effective as the information with which it is provided. It should be a cause of concern that the OBR chairman, Richard Hughes, has intimated that he was not kept fully in the picture towards the end of the previous Administration. We need to be very wary about a repeat of that.

I believe the whole basis of government accounting is flawed. It focuses solely on the short term, to the detriment of the country’s longer-term interests. Take the current controversy over the winter fuel payment. I will not enter into the rights and wrongs of that decision—we have already heard about those today, and will hear a lot more—although it seems to be a very costly exercise in terms of political capital, for very little financial gain.

However, the £22 billion black hole that we keep hearing about that the Government intend to fill, in part with the proceeds of cutting the winter fuel allowance, is actually more of a bottomless pit, for a major contributor to that £22 billion is the pay rise for public sector workers. That pay rise brings with it huge ongoing costs that do not feature because public sector pensions are not provided for. That is a massive obligation which is simply swept under government carpets. According to the whole of government accounts, public service pensions are the largest single liability on the Government’s balance sheet. In 2021-22 they were calculated at £2.6 trillion—greater than the national debt.

The idiocy of this system of accounting was highlighted in a recent article by John Crompton, a former investment banker who has also done three stints at the Treasury. He suggests that the latest public sector pay awards, cited as contributing £9.4 billion to that black hole, could also bring unfunded liabilities of between £3.5 billion and £4 billion every year. Crompton calls this treatment of government liabilities “downright misleading”, and I am afraid it is. The short-term saving from cuts such as the winter fuel allowance will be wiped out year after year by numbers that do not appear in the accounting at superficial levels.

So, while I welcome the Bill as a minor improvement, I ask the Minister whether he agrees that the time has come for a much more radical rethink of government accounting. Yes, cash flow is important, but, as every household knows, concentrating solely on income and expenditure is not the way to build a healthy economy. Major infrastructure projects, such as those cited by the noble Lord, Lord Eatwell, are essential. Cancelling them because of a short-term need to cut expenditure, as this Government have done, may be foolhardy. A proper net worth finances method of accounting, dealing with government expenditure over the longer term, would enable a much more effective long-term view to be taken of the costs and benefits of investment. A change to a more sensible fiscal framework would make for much healthier, better management of public finances, and it would contribute to the growth that we absolutely need.

The Minister explained that the Government have three aims as far as the Bill and the economy are concerned: stability, investment and reform. I ask him to really be serious about reform.

Public Spending: Inheritance

Baroness Wheatcroft Excerpts

Tuesday 30th July 2024 Lords Chamber

[Lord Livermore (Lab)]

I am extremely grateful to my noble friend for his kind words. He is quite right: not only are the previous Government guilty of what we are discussing today, of running up an enormous overspend and of hiding that from Parliament, the public and the Opposition at the time, but they left us with possibly the worst economic inheritance since the Second World War. That contrasts sharply with the performance of the economy under the last Labour Government. Of course, growth is absolutely our priority. That growth will take time, but we are absolutely committed to doing what it takes to return this economy to a sustainable level of growth.

[Baroness Wheatcroft (CB)]

My Lords, I welcome the Minister to his position on the Front Bench. As we listen to this tale of consistent overspend and budget failures being swept under the carpet, it is very hard to imagine that civil servants in several departments were not increasingly unhappy about what was going on, including a lack of a spending review since 2021—extraordinary really. Can the Minister assure those civil servants that they will not be guilty if they come forward and talk of any pressures that have been applied to them? The previous Government had form on that, and I think that there should be an amnesty for any civil servant who was put in a deeply uncomfortable position by, in effect, telling untruths to the country.

[Lord Livermore (Lab)]

I am grateful to the noble Baroness for her question. Of course, at the end of the day, civil servants advise and Ministers decide. We have full confidence in the Treasury and all civil servants in the way that they do their jobs. She is absolutely right that part of the problem was the continual delay to hold a spending review; the last spending review was in 2021. That sits behind so many of these problems: that budgets were never adjusted to account for any of the decisions that were taken subsequent to that spending review.

The Chancellor announced yesterday that she has commissioned the OBR to deliver a full economic and fiscal forecast, which will be presented alongside a Budget on 30 October. She also announced that the Government have launched a multi-year spending review to conclude in spring 2025, setting budgets for at least three years of the five-year forecast period. As part of this, final budgets for this year and next year will be set alongside the Budget on 30 October. The Government are also committed to holding a spending review every two years, which will set departmental expenditure limits for three years, to avoid uncertainty for departments and bring stability back to our public finances.

European Investment Bank

Baroness Wheatcroft Excerpts

Wednesday 24th July 2024 Lords Chamber

[Baroness Wheatcroft (CB)]

If the Government are to set a good example about investing in the UK, should they not perhaps start at home and invest a little more of the MPs’ pension fund?

[Lord Livermore (Lab)]

I think that is a question for Parliament rather than the Government.