Budget Statement

Debate between Lord Agnew of Oulton and Lord Faulkner of Worcester

Friday 12th March 2021 Lords Chamber

[Lord Agnew of Oulton (Con)]

My Lords, it is a privilege to close this debate on behalf of the Government. I thank noble Lords for their many insightful and considered contributions. In particular, I welcome the maiden speeches of the noble Lords, Lord Bellingham, Lord Benyon, Lord Cruddas and Lord Khan, and the noble Baroness, Lady Foster.

Given the number of speakers and the limited time I have available, I hope noble Lords will forgive me if I am not able to address all the points raised. Perhaps noble Lords would like to write to me if they do not feel that the issues have been addressed satisfactorily.

I start with the noble Lords, Lord Eatwell and Lord Risby, on overall spending, borrowing and debt. In 2020-21, this Government increased day-to-day departmental spending by £20 billion, with a 6% increase in nominal terms. In 2021-22, excluding Covid, there was a further increase of £22 billion, or 6% nominal. In addition to substantial near-term support, the Budget supports an investment-led economic recovery to level up across the UK while trying to be honest about the need also to repair the public finances in the medium term. Without corrective action, borrowing would rise to unsustainable levels, leaving underlying debt rising indefinitely. Although borrowing costs are affordable now, interest rates and inflation may not stay low for ever. Indeed, a 1% increase in inflation and interest rates would cost us more than £25 billion a year.

My noble friend Lord Hunt asked about jobs and full employment. The Budget sits alongside a comprehensive package to support people into jobs, as announced in the plan for jobs. The 2020 spending review built on previous commitments to provide £3.6 billion of additional funding in 2021-22 for the DWP to deliver employment support to those who need it most. This includes £1.4 billion of additional funding to sustain the doubling of the number of work coaches to 27,000, the £2 billion kick-start scheme to help young people at risk of long-term unemployment and the £2.9 billion restart programme to help those who have been unemployed for more than a year.

The right reverend Prelate the Bishop of Portsmouth and the noble Lord, Lord Watson, asked about early years and children. The Government recognise the acute impact of the pandemic on children’s lives—particularly the impact from lost learning. That is why, following the £1 billion education catch-up package announced last year, the Government are making available £700 million of further funding to help young people in England catch up on lost learning as a result of Covid.

The noble Baroness, Lady Goudie, asked about the effect of the pandemic on women’s careers. It is no doubt that many women have borne the brunt of this crisis, particularly mothers. Since March, we have provided unprecedented levels of support to businesses and individuals; cumulatively, 11 million jobs have been supported by the Coronavirus Job Retention Scheme. Provisional estimates show that the number of females furloughed increased to 2.3 million as at 31 January and the number of males to 2.2 million. Temporary measures have been put in place to restore entitlement to parents in receipt of government coronavirus support schemes who would normally be eligible for tax-free childcare and/or 30 hours of free childcare but, due to the consequences of Covid, are not able to receive it. Households with anyone aged under 14 can form a childcare bubble, which allows friends or family from one other household to provide informal childcare.

The noble Lord, Lord Eatwell, asked about stamp duty relief. Extending the stamp duty holiday will reduce the risk of a fall in house prices in the short term, which is building momentum and encouraging confidence in the housing market. The housing market drives the wider construction industry; by helping maintain momentum in the market, the extension of the stamp duty holiday will protect hundreds of thousands of jobs that rely on it.

The noble Lord, Lord Fox, asked about council tax. The Government are providing local authorities with additional funding for Covid-related pressures and giving local authorities the flexibility to raise council tax bills across their budgets. These increases are in line with similar flexibilities in previous years. To give local authorities additional flexibility in making these decisions, we will allow them to defer up to their full 3% adult social care precept in 2022-23.

My noble friend Lord Forsyth is worried about tax rises. We continue to provide substantial economic support to people in need and have committed an additional £65 billion in this Budget across 2020-21 and 2021-22. We are trying to be honest about the steps that will be taken following the record-breaking levels of borrowing and higher debt. Announcing a credible plan to repair the public finances over the medium term supports the Government to continue to have the space to borrow in the short term to support the economy. The OBR forecast is that, under the Government’s plans, the economy will rebound strongly next year.

The noble Lord, Lord Palmer, asked about the freezing of personal allowances. The decisions that we have made to increase the personal allowance over the last few years mean that fewer people than ever are paying income tax. Freezing the personal allowance and HRT is progressive and fair. The highest-earning households will contribute more of the revenue: the 20% highest-income households will contribute 15 times that of the 20% lowest-income households. Nobody’s take-home pay will be less than it is now. Anyone earning £12,570 or less in 2025-26 will still not pay income tax.

The noble Lord, Lord Bilimoria, asked about business rates. The Government have provided over £16 billion of support for businesses affected by Covid with their rates bill since March last year. This measure builds on the full business rates holiday for eligible properties in retail, hospitality, leisure and nurseries in 2021, worth over £10 billion. The Government have also decided to freeze the business rates multiplier in 2021-22, saving businesses in England an estimated £575 billion over the next five years.

The noble Lord, Lord Campbell-Savours, asked about inheritance tax. The Government are aware of recent reports, including from the Office of Tax Simplification, and will respond in due course. Inheritance tax makes an important contribution to the Exchequer of some £5 billion a year, so we need to consider carefully any wide changes to it.

My noble friend Lord Caithness asked about productivity. Building on industry best practice and our international peers, we will launch a new world-leading management skills training programme to upskill 30,000 SMEs across the UK over the next three years.

My noble friend Lady McIntosh asked about the failure to provide support to aviation. The Government recognise the challenging circumstances facing the aviation industry. We will publish a consultation on aviation tax reform in the spring. The aerospace sector and its aviation customers are being supported with almost £11 billion made available through loan guarantees, support for exporters and the Bank of England’s Covid Corporate Financing Facility, together with grants for research and development. This includes £8 billion of UK export guarantees. The Budget built on this, renewing support for airports and ground handlers through first six months of 2021-22 to help meet their fixed costs, such as business rates.

The right reverend prelate the Bishop of Portsmouth worries about social care. Throughout the pandemic we have continued to support social care providers to manage the impact of Covid. This includes over £4.6 billion in grant funding for local authorities to address Covid pressures across all their services, including adult social care; over £1.9 billion of enhanced discharge to accelerate discharge from hospital; over £1.1 billion for the infection control fund to support care providers in stopping the spread of the virus; free Covid-related PPE through the Department of Health’s PPE portal until the end of June; and £120 million for the workforce capacity fund to ease workforce pressures in adult social care. The Government remain committed to sustainable improvement of the social care system and will bring forward proposals this year.

My noble friend Lord Young of Cookham asked about council tax. We are providing £670 million of grant funding to help local authorities in 2021-2 to continue to support more than 4 million households least able to afford their council tax bills.

The noble Lords, Lord Gadhia, Lord St John of Bletso and Lord Bruce, raised apprenticeships, skills and training. The Government are making significant investment as part of our plan for growth. Apprentices of all ages will support our economic recovery and the payments to employers will be increased so that they receive £3,000 for each new apprentice hired between 1 April and 30 September of this year, regardless of the apprentice’s age. We are also investing £126 million to triple the number of traineeships next year. The Government have invested significantly in further education, including £1.5 billion of capital funding to bring the entire college estate up to a better condition.

My noble friend Lady Gardner asked about rebalancing the tax burden to help the high street. Retail is changing dramatically and the high street is too. We want to help business manage this transition. The Government published a call for evidence for the fundamental review of business rates in July 2020, which includes questions on this topic, and we will respond in due course.

The noble Lords, Lord Eatwell, Lord Hunt and Lord Fox, are concerned that the Government do not have a proper plan for growth. Build Back Better: Our Plan for Growth was published under the Covid recovery, post-Brexit transition and our longer-term economic growth strategy. The plan tackles long-term problems and helps to deliver growth that creates high-quality jobs across the UK. It strengthens the union as well as achieving the people’s priorities, levelling up the whole of the UK, supporting our transition to net zero and supporting our vision for a global Britain.

The noble Lord, Lord Hain, worries that we are cutting fiscal support too soon. We have always said that we want to protect lives and livelihoods and be guided by the best scientific advice available. This is why we have provided an unprecedented package, with a cumulative cost of some £350 billion, to protect people’s jobs and livelihoods and to support businesses and public services. The package set out by the Chancellor in this Budget allows people in businesses to plan and prepare in line with the expected easing of restrictions announced last month in the Prime Minister’s road map. Schemes such as the CJRS and SEISS and support for businesses are continuing beyond the end of the road map.

The noble Lord, Lord Bilimoria, worries about excluded groups. The Government have acknowledged that we have not been able to support everyone in the way that we might have wanted. The CJRS and SEISS are designed to target support to those who need it most and to protect taxpayers against error, fraud and abuse, while also trying to reach as many people as possible. Individuals will be able to qualify for the new SEISS grants based on their 2019-20 tax returns, with around 600,000 self-employed individuals being newly eligible. This brings the total eligibility for SEISS 4 and 5 to 3.7 million people. The furlough scheme has helped pay the wages of some 11 million jobs, with £53 billion having been claimed. Local authorities in England will receive a top-up worth a further £425 million to their allocation from the ARG, which has already provided local authorities with £1.6 billion.

The noble Baroness, Lady Bowles, my noble friend Lady Gardner and the noble Lords, Lord Monks, Lord Hain and Lord Dodds, asked about universal credit. The Government have always been clear that the £20 increase was a temporary measure. We are now shifting our focus to supporting people back into work and we have a comprehensive plan for jobs, which this Budget builds on.

The Government will spend over £55 billion in 2021 on benefits to support disabled people and those with health conditions. The Government have implemented a range of measures to make accessing disability benefits easier and to protect existing claimants during the current situation. This includes temporarily suspending face-to-face assessments.

My noble friend Lord Forsyth asked about the under-25s, who of course have particularly suffered in this pandemic. The measures in the Budget seek to address this, alongside promoting the Government’s belief in fairness and the aim to promote equality of opportunity.

My noble friend Lord Lamont and the noble Lords, Lord Macpherson and Lord Bilimoria, are worried about the rise in corporation tax. The Government are providing businesses with over £100 billion of support to get through the pandemic, so it seems fair that we ask them to contribute to the recovery. At 25%, the headline rate will remain one of the lowest—or the lowest—in the G7, and the full rate will be paid by around only 10% of companies. A small profits rate of 19% for businesses with profits of £50,000 or less means that around 70% of actively trading companies will be protected from the rate increase.

The noble Lord, Lord Eatwell, asked about the super-deduction. Many world economists are big advocates of full expensing as a tool to boost investment alongside a low corporation tax rate. With the super-deduction and one of the lowest rates of corporation tax, the UK’s business tax regime will be among the most competitive in the world. The super-deduction will help firms to become more productive, safeguarding and creating new jobs.

The noble Lord, Lord Palmer, is worried about incentives for avoidance or evasion. There are anti-avoidance provisions that apply to counteract arrangements that are contrived or abnormal or that lack a genuine commercial purpose. There are also existing capital allowance rules that apply, including the exclusion of connected party transactions from first-year allowances.

My noble friend Lord Caine worries about the differential between corporation tax in Northern Ireland and the Republic of Ireland. Despite the change, companies operating in Northern Ireland will continue to benefit from a headline rate that is competitive in the G7, and this will be payable by only a minority of corporate taxpayers in Northern Ireland.

My noble friends Lord Caithness and Lady McIntosh and the noble Lords, Lord Haskel and Lord Rooker, asked about freeports. Leaving the EU means that we have the opportunity to do these things differently. We have developed an ambitious new freeport model to ensure that towns and cities across the UK will benefit from new trade opportunities, attracting new investment and employment. In addition to a simplified customs process, our freeports will offer measures to incentivise private businesses, carefully considered planning reforms to facilitate much-needed construction and additional targeted funding for infrastructure improvements in these freeport areas to level up communities and increase employment opportunities.

On displacement, our focus is on encouraging new investment to create new businesses and new economic activity, which will create jobs in deprived communities. Specifically, bidders have had to explain how their choice of tax sites minimises the displacement of economic activity from wider local areas, especially other economically disadvantaged ones. This has been rigorously assessed as part of the assessment process, and we are confident that the risk of harmful displacement will be minimised.

The noble Lords, Lord Fox, Lord Oates and Lord Haskel, my noble friend Lord Lansley and the noble Baronesses, Lady Jones and Lady Hayman, asked about our commitment to climate change and net zero. The spending review committed to spend £12 billion on green measures to support the Prime Minister’s 10-point plan and boost the UK’s global leadership on green infrastructure and technologies, ahead of COP 26 next year.

This Budget builds on this by encouraging private investment, using the tax system and continuing with the direct government support announced at the spending review. This is supported by Budget measures that continue to lay the foundations for the transition to net zero—for example, the green gilts and plans for a linked green retail product to be offered by NS&I and the UK infrastructure bank.

A number of noble Lords asked about the NHS. The Government are completely committed to the long-term plan, which provides a cash increase of £33.9 billion a year by 2023-24, with a £6.3 billion uplift in the next financial year. Those plans have not changed. The spending review 2020 announced a further £3 billion for the NHS next year to support its recovery from the impact of Covid and confirmed our commitment to ensuring that the NHS has the certainty it needs to plan. We continue to be committed to ensuring that the NHS gets the support it needs for the pandemic, as evidenced by some £58.9 billion of resource spending that we have committed this year, with £18 billion for the NHS.

The allocation of any funding beyond 2021-22 will be a matter for the spending review later this year. We have already announced in the last spending review in 2020 a £1.5 billion injection to improve NHS waiting lists, for mental health and for the workforce. This funding will help to tackle backlogs in the 2021-22 year as part of the £55 billion to support public services.

On NHS pay specifically, no pay award has yet been announced for NHS staff for 2021-22. As is normal practice, the Department of Health and Social Care has published evidence setting out what figure is affordable within its budgets. The independent NHS Pay Review Body and Doctors and Dentists Remuneration Review Body will report on pay for 2021-22 later this year. The pay review bodies will consider the unique circumstances that NHS staff are working in and the need to recruit, train and motivate suitably able and qualified people, as well as the Government’s financial circumstances.

The noble Lord, Lord Rooker, asked about the levelling-up fund and is worried about pork-barrel politics. The methodology note for the levelling-up fund index was published yesterday. The £4.8 billion levelling-up fund will prioritise bids from places in England, Scotland and Wales with the most significant need.

Deputy Speaker, might I indulge in a couple more minutes?

[The Deputy Speaker (Lord Faulkner of Worcester) (Lab)]

You should ask your Whip that question.

Customs Safety and Security Procedures (EU Exit) Regulations 2020

Debate between Lord Agnew of Oulton and Lord Faulkner of Worcester

Thursday 10th December 2020 Grand Committee

[Lord Agnew of Oulton (Con)]

I thank noble Lords for their contributions. I am grateful for the chance to respond to the points raised.

The noble Lord, Lord Bradshaw, asked about the impact on the country’s security of this statutory instrument which, to reassure the noble Lord, is for the export of goods, and so, in that direct context, is not of concern. However, the powers contained within SIs can be limited to apply only to certain types of goods. This has been provided for to allow targeted mitigation and to minimise security risks by providing a waiver only where necessary. Movements of prohibited and restricted goods are controlled by information contained in the customs export declaration and other licences, and the powers in this SI relate only to the safety and security declaration requirements. Even if a waiver were put in place that covered all goods, Border Force would continue to have access to additional intelligence to control border risks. It is also worth noting that we do not currently collect any safety and security data on exports to the EU, so any waiver here would not result in an increase in risks.

The noble Lord also spoke about this being a cut-and-paste solution. Safety and security declaration data is not currently gathered on all exports to the EU, so a waiver of these movements would retain the status quo. These powers could also be used to waive requirements for exports for the rest of the world if needed, but associated safety and security risks are minimal, since these goods are leaving Great Britain.

The Government intend to use these powers only where absolutely necessary to mitigate border disruption. Any waiver would be limited—for example, by time, location, sector of trade or type of goods—allowing targeted mitigation. Prior to any use of the power, the Government would consider the safety and security risks and manage them against the risks posed by the border disruption.

The noble Lord, Lord Moynihan, asked specifically about the movement of horses. The use of a public notice is the only method that would allow the Government to react as swiftly as may be needed to any disruption at the border after the end of the transition period. Without these powers, traders may be left in an unacceptable situation, where they are unable to compliantly export goods from Great Britain. The tripartite agreement to which the noble Lord referred is a specific agreement and, as I understand it, discussions are ongoing, but I will write with further information.

The noble Baroness, Lady Ritchie, asked about security and the risks of enabling increased criminality. I reassure the noble Baroness that the Government take border security extremely seriously and would use these powers only where absolutely necessary and within limits to alleviate border disruption. The Home Office would be consulted and would continue to be involved in the event that the powers were used to ensure that risks were kept to a minimum. Border Force would also continue to have access to other intelligence. The noble Baroness asked about the application to the whole of the UK. Just to be specific: while this is UK legislation, these powers could be used only to apply to goods moving out of Great Britain.

On publicising the use of the powers, this would be published as an online notice in the first instance, and Parliament would be updated as appropriate. We would also support the introduction of any measures with other methods of communication to ensure that traders were made aware as quickly as possible. The noble Baroness asked about causes of disruption. A waiver could be for exports to any country or any cause of disruption. This is necessary to be able to manage different scenarios. Equally, the powers allow for a waiver to apply only to certain exports. In the event of any use of these powers, we would need to weigh up the associated risks and take the appropriate action. The powers are restricted to the first six months of next year, since they are intended specifically to tackle border disruption as a result of the new safety and security requirements.

As to the question of how quickly it would take us to issue the notice, powers allow for a public notice to be published implementing a change in less than two days. A notice would last for a maximum of six months, for the first half of next year. However, the powers would also allow for the notice to be put in place for a shorter period of time within that to ensure that we have the maximum flexibility to manage these risks appropriately.

The noble Lord, Lord Tunnicliffe, asked how HMRC will use this contingency measure. We have established a process to ensure that we are able to assess any need for this contingency and balance risks. The process includes evidence-gathering and consultation with other departments, including the Home Office. We have been clear that these powers will be used only where absolutely necessary to avoid border disruption, and the Government will update Parliament in the event that we use the powers.

The noble Lord asked about any extension to the sunset clause. I reassure him that the powers can be used only within the first six months of next year and only to mitigate disruption. The Government have no plans to extend this contingency beyond the first six months of next year, as we do not anticipate that there will be any risk of disruption, as a result of the safety and security requirements on exports after that period. The Government could consider extending these powers further, but this would require a further statutory instrument which would be subject, as this one has been, to the appropriate parliamentary scrutiny.

I hear and understand the noble Lord’s concerns about the cliff-edge nature of the negotiations. I would like to offer a little more optimism in that, behind the scenes, a great deal of agreement has been achieved. There are some outstanding issues, but I remain confident that we will secure a deal with the EU in the next few days.

The Government are introducing this SI as a step towards being as prepared as we can be for all possible scenarios at the end of the transition period. We have been clear that these powers will be used only with due consideration of the risks, and only as is necessary to ease potential disruption at the border within the first six months of next year. I commend these regulations to the Committee.

Motion agreed.

[The Deputy Chairman of Committees (Lord Faulkner of Worcester) (Lab)]

That completes the business before the Grand Committee this afternoon. I remind Members to sanitise their desks and chairs before leaving the Room. The Committee is adjourned, and I wish you all a nice weekend.

Committee adjourned at 4.25 pm.

Future of Financial Services

Debate between Lord Agnew of Oulton and Lord Faulkner of Worcester

Wednesday 11th November 2020 Lords Chamber

[The Minister of State, Cabinet Office and the Treasury (Lord Agnew of Oulton) (Con)]

I thank the noble Lord, Lord Tunnicliffe, and the noble Baroness, Lady Kramer, for their thoughtful contributions. I will try to answer the questions as fully as I can.

Unlike the EU, the UK’s equivalence assessment of the EU’s regime was conducted on a proportionate basis, recognising that the UK and EU have the same rulebook. The EU sent us over 1,000 pages of questionnaires—not in a timely manner, with the last 248 pages arriving by 25 May, which is why we were not able to return them within a week, as I think the noble Lord, Lord Tunnicliffe, mentioned. We responded to the questions fully and comprehensively, with over 2,500 pages of response going back at the beginning of July. The EU has not come back with any questions on these responses.

In the absence of clarity from the EU, the Chancellor announced the package of decisions on Monday, which are in the UK’s interest and seek to support UK firms and ongoing cross-border activity with the EU. I assure both the noble Lord and the noble Baroness that we remain open and committed to a continuing dialogue with the EU about their intentions. The Government have taken all reasonable steps to co-operate in good faith with the EU throughout the equivalence process.

The noble Lord asks whether we feel that the EU is holding back, pending the progress of the Financial Services Bill. The measures in the Bill are consistent with a mutual equivalence outcome, and a number of cases actively support it. The UK played an instrumental role in the introduction of a lot of the EU’s regulation, particularly the investment firm regulation and directive, for example, so it is very supportive of the intended outcomes.

The noble Lord asked about TCFD. The UK is the first major country to go beyond comply or explain, or as far as able requirements, and our proposals contain a requisite level of prescription, supervision and enforcement mechanisms to mandate meaningful disclosure. The approach confirms the UK’s position as a global leader on robust climate-related financial disclosures that help investors to make informed decisions. We believe that the timelines set out in the road map provide the right balance between showing ambition and allowing businesses, investors and asset owners enough time to prepare to disclose meaningful information. Initial steps towards introducing TCFD-aligned disclosures have already been taken in respect of certain listed companies, banks and building societies. The FCA consulted in March on comply or explain rules for premium listed companies.

The noble Lord asked about green gilts. The UK’s sovereign green bond will identify specific government green projects that its proceeds will be used to finance, as per the International Capital Market Association green bond principles. These proceeds will then be tracked and reported in a regular and transparent manner to provide clarity to the public and investors.

The UK Government have always remained open to the introduction of new debt-financing instruments but needed to be satisfied that any new instrument would represent good value for money to the taxpayer. We have been regularly reviewing the case for introducing a sovereign green bond, as well as closely monitoring how the green and other ESG bond markets have developed over recent years. The noble Lord asked why we were slow. We have been watching the evolution of this market; indeed, Germany issued its first equivalent only in September this year.

The noble Lord and the noble Baroness asked about a Green Investment Bank mark 2. The Government are committed to ensuring that businesses and infrastructure projects continue to have access to the finance that they need. The UK has a number of existing tools available and we committed, in March last year, to an infrastructure finance review. We still intend to respond to that within the next few weeks.

The noble Baroness asked about asset transfers and the future role of the City. One of the advantages of leaving the EU’s regulation is that it gives us the opportunity to launch a number of initiatives. For example, we will review Solvency II. We will have a call for evidence on the overseas regime, some parts of which have not been reviewed since 1986. We are carrying out a task force on future listings given that there is, for example, quite a big discrepancy between the minimum size of a prospectus in this country and in the US. We are carrying out a consultation on the UK funds review to look at ways of making this country more attractive for international funds.

I remain more optimistic than the noble Baroness that there is a good future. She also asked about fintech and its role. We are a major player in the fintech market. We are developing an ecosystem that supports fintech firms to grow and reach scale. We are fostering partnerships between fintechs and incumbents to enable mainstream adoption of innovation. Being a large economy, we provide the opportunity for high levels of domestic demand; the British public tend to be early adopters of the opportunities that fintech throws up. We have the third-largest number of tech unicorns in the world, with 77 companies valued at over $1 billion. We are absolutely committed to supporting the growth of that market.

[The Deputy Speaker (Lord Faulkner of Worcester) (Lab)]

We now come to the 20 minutes allocated for Back-Bench questions. I ask that questions and answers be brief so that I can call the maximum number of speakers. The first speaker is the noble Baroness, Lady Hayman.