Black Lives Matter
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Baroness Sugg [V]
I thank the noble Baroness for that question. At senior levels, our embassy in Washington has raised concerns with the State Department. We have also seen statements from the US ambassador here in the UK. The Prime Minister and the Foreign Secretary, both in the other place and via the media, have been very clear in their stance on this issue.
The Deputy Speaker (Lord Bates) (Con)
My Lords, as there are no more supplementary questions, the House will now adjourn until a convenient point after 4 pm, for the Motion in the name of the noble Lord, Lord Goldsmith of Richmond Park.
Economy: Purchasing Managers’ Index
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Lord Borwick (Con)
My Lords, declaring my interests in the register as a manufacturer, I beg leave to ask the Question standing in my name on the Order Paper.
The Minister of State, Department for International Development (Lord Bates) (Con)
My Lords, the manufacturing purchasing managers’ index stands at 55.1, and has been above 50—indicating an expansion in activity—for 32 consecutive months, supported recently in part by strength in inventory accumulation. Meanwhile, the comparable reading for Germany has fallen into contractionary territory in 2019 at 44.1.
Lord Borwick
I thank my noble friend for his Answer and agree that many small companies are doing very well indeed. The PMI, which is a forward-looking index, backs up the excellent GDP and Treasury figures to suggest that the UK economy is thriving. There are always economists who practise the dismal science and who will predict doom and search for a dark cloud wherever they find a silver lining. Does my noble friend have any other ideas to cheer them up?
Lord Bates
I am sure that those who forecast a figure of zero for GDP in February and then found out it was 0.2% might be a little cheered up this morning. On other reasons to be cheerful, what about the fact that unemployment, debt and taxes are all falling while exports, growth, GDP and real wages are all rising?
Lord Howarth of Newport (Lab)
My Lords, does not the confidence manifested in the purchasing managers’ index, as the Minister has said, continuously over the past 32 months—pretty much the whole period since the referendum—despite the iterations of Project Fear and the lucubrations of the remain establishment, show that the majority of UK manufacturers are undismayed by a post-Brexit future? If their confidence is to be sustained and new investment is to be unleashed, is it not vital that indecisions and uncertainties about Brexit are swiftly brought to an end by our actually leaving the EU and not allowed to persist for up to another six months, or possibly even longer?
Lord Bates
I absolutely agree with the first part of the noble Lord’s question. I am sure it is noted on his Front Bench. We have been clear that we believe the best way forward for manufacturing—in fact, for the whole economy—is to leave the European Union with a deal, and that is what the Prime Minister is working towards.
Baroness Kramer (LD)
My Lords, I fear that some of your Lordships, and perhaps the Minister, must have missed out some of the sentences in Markit’s report on the PMI. It said that, increasingly,
“Companies stepped up production to build-up inventories”,
of,
“both purchases and finished products”,
in advance of Brexit—in other words, stockpiling. It later says that business sentiment “remained subdued” looking ahead, amid persistent Brexit concerns. The CBI this morning confirmed its view that the economy is down 1% to 2% from where it would have been without Brexit. Do the Government believe that underestimating the issues facing industry in any way helps industry to handle this Brexit crisis?
Lord Bates
I do not dispute that there are headwinds and that uncertainty is bad for business, which is why we want to resolve matters and move forward. However, one of the points about the purchasing managers’ index is that it asks people what their future intentions are, so if people had been “stockpiling” from the beginning of the year, that would not explain why they are now saying that they believe that they will buy more goods and are more positive about the future outlook. So that is not necessarily the right way to read the numbers.
Lord Forsyth of Drumlean (Con)
My Lords, given the performance of the German, French and Italian economies, which are all doing considerably worse than our economy, what explanation does the Treasury have for this?
Lord Bates
Given that it is hard enough to answer for the UK Government in your Lordships’ House, I will not attempt to answer for other Governments. However, I believe that the resilience we are seeing in the British economy is a tribute to a number of factors: the fact that the UK remains a prime location for foreign direct investment—we have the largest stock in Europe and the third largest in the world—and Forbes identified the UK as the number one location to invest and set up a business in 2018 and in 2019. All those factors—low taxation, a competitive economy and great skills—are the reasons why people are backing Britain.
Lord Davies of Oldham (Lab)
My Lords, this Question started on the manufacturing industry, with a reference to the German motor car industry. Is it surprising that Germany is having some problems with its exports, first, in relation to Brexit, and secondly, to standards in the industry, which have caught the Germans out rather badly in recent years? However, four-fifths of the British economy is services, so what is all this jubilation—false jubilation—about manufacturing when in fact our service industries are showing the real pressure at present, and they are not in position to stockpile in quite the way that manufacturing is?
Lord Bates
It is absolutely true that there are challenges in the services sector, which is crucially important to us. That is why a lot of the uncertainty that I referred to earlier, in my answer to the noble Baroness, Lady Kramer, needs to be resolved. We believe that there is sufficient capacity and demand within the economy to build that up. We know that people are sitting on a lot of cash at the moment and that there are a lot of vacancies out there at the moment—850,000 of them—which shows that there is a lot of demand waiting to go once we have resolved this matter.
Lord Cormack (Con)
Would my noble friend agree that there is nothing more debilitating and corroding than uncertainty? Would he agree that a deal needs to be reached, but both Houses of Parliament have a deal before them—which is being resisted by the extremes who, in their desire for a Brexit that would ignore the 48%, may lose Brexit altogether?
Lord Bates
I agree that the uncertainty needs to end. However, the message from the numbers, which my noble friend Lord Borwick began by mentioning, is that whatever the difficulties we have as politicians in resolving the matters before us, men and women out there who are setting up and running businesses, and workers in those businesses, are doing an incredible job at building exports to almost record levels. We have a great deal of confidence in them to continue what they are doing; we must do what we should do.
Lord Shipley (LD)
My Lords, the Minister has talked about the resilience of the British economy. Does he accept that that is because we are inside the European Union, its single market and its customs union?
Lord Bates
The people voted to leave in 2016. Since then, we have seen almost 1 million jobs added to the economy. We saw £48 billion of foreign direct investment into the UK last year with investors knowing of our intention to leave. We have a globally competitive economy, which will continue into the future.
Government Debt
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Lord Hunt of Wirral
To ask Her Majesty’s Government what plans they have to ensure that the level of government debt falls.
The Minister of State, Department for International Development (Lord Bates) (Con)
My Lords, as a result of the Government’s balanced approach we have been able to reduce debt while supporting public services, investing in the economy and infrastructure, and keeping taxes low. Debt peaked in 2016-17 at 85.1% of GDP and, due to the actions of this Government to reduce borrowing and support to the economy, debt fell in 2017-18. It is forecast to fall further, all the way up to the end of the forecast period in 2023-24.
Lord Hunt of Wirral (Con)
What action are Her Majesty’s Government taking to ensure a balanced approach to managing the public finances? Does my noble friend agree that it is vital that, while we prudently reduce both borrowing and debt, we invest in public services and keep taxes low for hard-working people?
Lord Bates
I am very happy to do that, and of course my noble friend will be aware that 32 million people have just enjoyed a tax cut as the tax thresholds were raised. There is a balance; we have seen net borrowing come down from a peak of about 10% in 2010 to under 2%, and overall net debt is beginning to fall after having peaked. However, at the same time, as he rightly says, we have seen half a trillion pounds of investment in infrastructure, and the prioritisation of public services, principally the National Health Service, which has had one of the largest budget increases in its history.
Lord Davies of Oldham (Lab)
My Lords, why does the Minister not confess that the noble Lord, Lord Hunt, got it absolutely right? The only thing is that it is completely contrary to what Conservative Governments over the last decade have pursued. Austerity has been pursued to the extent that people are poorer and our public services are on the point of breaking down in many areas. Even then the Government do not hit their target for reduction of debt, but are falling many years behind the famous promise made way back in 2010 that they would do it in about five years. Is not the Government both incompetent and wrongly focused?
Lord Bates
If the noble Lord is arguing that we should have gone further and faster in reducing the debt, he is somewhat at odds with his leader down the other end of the Corridor, who has come up with a plan to spend another £1 trillion. We are taking a balanced approach, protecting essential public services and delivering tax cuts while investing in infrastructure, and that is how we will go forward.
Lord Hamilton of Epsom (Con)
My Lords, at the moment, the Government are spending about 39% of GDP on public services. In my noble friend’s opinion, is that too much, too little or about right, and does he see merit in repaying debt?
Lord Bates
Certainly, the Government see merit in repaying debt; we pay interest rates of about £50 billion a year on debt, so there is a good rationale for trying to do that. However, we need to balance our approach. Primarily, we seek to stop that debt level increasing by bringing it down as a percentage of GDP from around 85% to 73% at the end of the forecast period, but we need to go further on that.
Baroness Kramer (LD)
My Lords, do the Government now understand that including borrowing for investment into infrastructure in the deficit number is not only intellectually flawed but has constrained growth in this country by limiting the number of projects in which we can invest, at a time when interest rates have been exceptionally low and a great deal more could have been done to catch up on the infrastructure backlog?
Lord Bates
I do not see how one can take it out of that figure. If it is public expenditure on infrastructure, it is government debt, so we need to reflect that in the numbers.
Lord Hunt of Kings Heath (Lab)
My Lords, can I bring the noble Lord back to the NHS? He mentioned the NHS five-year spending agreement that has already been announced, but he will know that that does not cover education and training. The key issue facing the NHS is a large workforce problem, and part of the answer will be more training places. Can he assure me that, in the next spending review, the Treasury will not take the view that the NHS has received everything it is going to receive, and that it will look to increase the amount of money going into education and training?
Lord Bates
Obviously, there will be issues, which will be addressed in the spending review. Simon Stevens made that proposal about what is needed for the NHS, £20 billion—I think—was delivered to meet it, and there has been a significant increase with this further amount. However, we are aware of the pressures, which is why we have been clear that, when it comes to public services, the NHS is our priority.
Lord Wigley (PC)
My Lords, is not the key to this the question of labour productivity? The figures for that in the last year were depressing: only 0.2%. What will the Government do to improve labour productivity?
Lord Bates
This is an historic problem that we have debated many times in this House. Because we are a heavily services-oriented economy it is difficult to capture all the value. We set up the national infrastructure investment scheme with £37 billion to help us to tackle those issues.
Lord Hayward (Con)
My noble friend referred to the percentage of GDP in this country. How does that compare with France and Italy? Have we not persistently undershot the OBR forecast for what level of borrowing would be required on a month-by-month basis?
Lord Bates
My noble friend follows these matters very closely. We are currently under 85%, with a target to go down to 73%. France is at 98.7% and I think Italy is at 131.1%, but we still need to go further to ensure that we do not leave a legacy of debt for our children and grandchildren.
UK Convergence Programme
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Lord Bates
That this House approves, for the purposes of section 5 of the European Communities (Amendment) Act 1993, the Government’s assessment of the medium term economic and fiscal position as set out in the latest Budget document and the Office for Budget Responsibility’s most recent Economic and Fiscal Outlook and Fiscal Sustainability Report, which forms the basis of the United Kingdom’s Convergence Programme.
The Minister of State, Department for International Development (Lord Bates) (Con)
My Lords, the Government have a legal requirement to give the European Commission an update of the UK’s economic and budgetary position as part of our convergence programme. Given our decision to leave the European Union, some Members may find it odd that we are debating the UK’s convergence programme here today, but it is right to do so, because we continue to exercise our full membership of the EU until the point of our exit and because doing so is a legal requirement and one that we must therefore take seriously.
The document before us may look familiar. This is because substantial parts of its content are drawn from the Autumn Budget report and the OBR’s most recent economic and fiscal outlook. It is the content, not the convergence programme itself, that requires the approval of the House today.
I remind the House that although the UK participates in the stability and growth pact, which requires convergence programmes to be submitted, by virtue of our protocol to the treaty opting out of the euro we are required only to “endeavour to avoid” excessive deficits. The UK cannot be subject to any action or sanctions as a result of our participation.
Let me provide a brief overview of the information we will set out in the UK’s convergence programme. Noble Lords should note that this does not represent new information; rather, it captures the Government’s assessment of the UK’s medium-term economic and budgetary position, as we set out in the Autumn Budget and again in the Spring Statement.
The UK economy has been growing for nine consecutive years, with the longest unbroken quarterly growth run of any G7 economy. It has added 3.6 million jobs since 2010, has almost halved youth unemployment and has seen female participation in the workforce increase to record levels. The economy is now delivering the fastest rate of regular wage growth in over a decade. Despite the slower global economy, the OBR expects Britain to continue to grow in every year of the forecast period: at 1.2% this year, 1.4% in 2020 and 1.6% in each of the final three years. This represents cumulative nominal growth over the next five years that is slightly higher than the Budget forecast. The OBR forecasts 600,000 more jobs in our economy by 2023. There is positive news on pay too, with the OBR revising wage growth up to 3% or higher in every year.
The Government have made significant progress since 2010 in reducing the deficit, and in 2016-17 reduced the Maastricht treaty-defined deficit below the EU’s 3% limit for the first time since the financial crisis. The OBR forecasts it to fall below 2% of GDP in 2018-19 and below 1% in the final two years of the forecast period. At the Spring Statement, the OBR forecast that public sector net borrowing is expected to be £22.8 billion this year—£3 billion lower than forecast in November and £130 billion lower than in 2009-10.
We remain on track to meet both our fiscal targets early, with the cyclically adjusted deficit at 1.3% next year, falling to just 0.5% by 2023-24, and with headroom against our fiscal mandate in 2020-21 increasing from £15.4 billion at the Autumn Budget to £26.6 billion at the Spring Statement.
Less borrowing means less debt, which is now lower in every year of the forecast period than at the Budget, falling to 82.2% of GDP next year, then 79%, 74.9%, 74% and finally 73% in 2023-24. Our national debt is falling substantially for the first time in a generation.
While committed to getting debt falling, the Budget took a balanced approach to government spending, supporting households and businesses in the near term and investing in the UK’s economic potential in the medium term. We have made over £150 billion of new spending commitments since 2016, and the Chancellor announced in the Budget that the long but necessary squeeze on current public spending would come to an end at the upcoming spending review, setting out an indicative five-year path of 1.2% per annum real-terms increases in day-to-day spending on public services compared with real-terms cuts of 3% per annum at spending review 2010 and planned cuts of 1.3% in real terms per annum at spending review 2015.
We made our biggest choice on public spending to put the NHS first, in line with the Prime Minister’s announcement of £34 billion of additional funding per year by the end of the period—the single largest cash commitment ever made by a peacetime British Government—to support our long-term plan for the NHS. It will deliver improved cancer and mental healthcare, a transformation of GP services, more doctors, more nurses, and better outcomes for patients.
Following the House’s approval of the economic and budgetary assessment that forms the basis of the convergence programme, the Government will submit the convergence programme to the Council of the European Union and the European Commission. The submission of convergence programmes by non-euro area member states and stability programmes by euro area member states also provides a useful framework for co-ordinating fiscal policies. A degree of fiscal policy co-ordination across countries can be beneficial to ensuring a stable global economy, which is in the UK’s national interest. The UK has always taken part in international mechanisms for policy co-ordination, such as the G7, G20 and OECD.
Although we are leaving the EU, we will of course continue to have a deep interest in the economic stability and prosperity of our European friends and neighbours. So we will continue to play our part in this process while we remain subject to the acquis, and in other international policy co-ordination processes once we have left the EU.
The Government are committed to ensuring that we act in full accordance with Section 5 of the European Communities (Amendment) Act 1993, and that this House approves the economic and budgetary assessment that forms the basis of the convergence programme, which I commend to the House.
Baroness Kramer (LD)
My goodness. I thank the Minister for his statement. I think we can all agree that this is a bit of a paper exercise, as the UK is not a member of the euro. Therefore, no matter how we perform on our structural deficit, there are no enforcement measures that the EU or any part of it can take against the UK. He is also absolutely right that there is nothing new in any of these numbers; they are basically a cut and paste from the last Budget and the OBR forecast. The forecast is slightly differently defined from our deficit numbers, but the cyclically adjusted treaty deficit number actually rises slightly this year, so technically we are actually going into the excessive debt procedure, although probably only briefly. Again, that has no particular consequences.
I find this, like many other debates on the economy, to be utterly surreal, because we will have no idea how the economy will look until Brexit is sorted out. That is so fundamental to creating the terms on which we have to look forward. All that we know is that every forecast that HMT has done of the medium term, in any Brexit scenario, shows us to be significantly worse off than if we had remained in the EU. That includes getting absolutely wonderful and amazing free-trade deals all over the place.
Because we have had so many debates on this issue, I am sure that the House will not mind if I am brief and will make just a few points. First, while I share the Government’s pleasure in our good employment numbers, I repeat that it is a lagging indicator, and I wish that HMT would take that on board. But rather more troubling, a recent piece of work by Aston University suggests that established businesses have been shedding employees in significant numbers for some time and that the slack has been taken up by start-ups.
I am delighted with start-ups, but we are all well aware that a start-up is far more volatile, and if we go into any period of recession or rough water it is exactly that start-up arena that will take some of the harshest blows. I had not anticipated that there was a threat to our employment numbers, but it looks to me as if we potentially have something here that the Government should take a very close look at.
Secondly, I want to raise the question of the very sharp drop in business investment. I want to make sure that we do not confuse business investment with oligarchs buying luxury properties in our major urban areas. That pumps the numbers up, but it is not the kind of investment that anybody in this House is particularly keen to see, particularly as it deprives local people of housing opportunities.
Lord Bates
Noble Lords have asked some very specific questions. I will follow the injunction of the noble Lord, Lord Davies, and seek to address them as best I can. If my noble friend Lady McIntosh and the noble Lord, Lord Vaux, would allow me the courtesy of writing to them in more detail on their specific points, I will certainly do so. I accept what the noble Lord, Lord Davies, said: we can all agree that we are not in normal times. My noble friend Lord Gadhia made an insightful point when he talked about the difference between what is happening in the political realm—which is not normal—and in the economic realm, which is really remarkable given the headwinds and uncertainty which the economy is facing at present. That confirms the great strength of our entrepreneurial businesses and enterprises and the incredible work that the people in them are doing. This gives us real hope for the future.
I was invited to address the Brexit issue head on; a convergence debate about the European Union seems a pretty good place to do that but I do not want to spend too much time on this. From the Government’s point of view, it is clear: if we had had our way, the withdrawal agreement would have been agreed by Parliament in December. We would now be into an implementation period where lots of the issues about free movement, to which the noble Lord, Lord Lea, referred, would have been addressed. We would also be working our way through into a deep and meaningful—
Lord Lea of Crondall
The Minister makes a very interesting point. He is confirming that everything is to play for in the discussion in the coming months about the future relationship. By that I mean that nothing is ruled in and nothing is ruled out on all these matters concerning freedom of movement, et cetera. A lot of people are getting concerned that the Government may have lost the plot.
Lord Bates
The accusation was made that the Government were somehow not addressing the issue of Brexit. Responding on behalf of the Government—which I am entitled to do—we believe we have negotiated a good withdrawal agreement. We have a good and fair financial settlement and a political framework which holds out the real possibility of a strong, deep relationship with our European friends and neighbours that can enable our world-class businesses and entrepreneurs to continue to work.
The noble Baroness, Lady Kramer, made a point about business investment. She asked whether the falls in business investment were explainable as purely related to Brexit or whether there was something more structural in the economy. She almost pre-empted my response—perhaps because we have had many of these debates in the past—which is that any decline in business investment in the OBR forecast is of course concerning to the Government: business investment is critical to addressing the types of productivity concerns that were raised earlier. Without investment, we cannot hope to address those concerns, and I take on board all her points, but the forecast period seems to confirm that while we have had two years of a relatively small drop in business investment, that is against the background of businesses currently sitting on historically high cash reserves. Therefore, the OBR forecasts that that will pick up to a stronger growth of plus 2.3% in 2020 and continue to grow at this stronger pace in 2021 and onwards. That seems to suggest that business investment is linked to the political issue of the hour and the uncertainty that stems therefrom.
Lord Bates
I thought it was a J curve; I think the J curve is non-inflationary employment growth, and the Laffer curve might be the other one. However, I will take a break there in case I am completely shot down on that—I am not saying it is one or the other.
It is a point that increasing growth feeds through into inflation, just as the historical view was that if you fell below 5% unemployment, the tightening of the labour market would feed through into wage inflation. That we have not seen. Although it is now below 4%, CPI inflation is still at about 1.9%. We are within that constraint. If I can get the exact model from our wizards in the Treasury, I will write in answer to that and other points, and reassure the noble Lord. Perhaps he is about to give me the answer to his own question.
Lord Haskel
Why does the Minister not write to me? It is very difficult. Statements such as the one he just made compartmentalise the economy. Inflation takes it all into account. That is why I raised the point, because the Minister did not mention it in his first statement.
Lord Bates
I am very happy to put it in writing. Also, should the noble Lord be familiar with anyone serving on the Monetary Policy Committee of the Bank of England, I am quite sure they would have the answer completely to hand.
I thank noble Lords for the debate. I am sorry I was not able to answer some of their detailed points; I will put them in a letter, copy it to noble Lords who took part in the debate and place a copy in the Library.
Retailers: Business Rates
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Baroness Neville-Rolfe
To ask Her Majesty’s Government what steps they are taking to reduce business rates on retailers with physical premises so that they are charged less than those which trade online.
The Minister of State, Department for International Development (Lord Bates) (Con)
My Lords, business rates are an annual tax on non-domestic property. Bills are based on rateable value, which represents the annual rent the property would achieve if let on the open market, at a set valuation date, as assessed by the Valuation Office Agency.
Baroness Neville-Rolfe (Con)
I refer to my entry in the register of interests. Although anomalies remain, I am grateful for what the Government have done on small business rate relief, but it is not enough given the scale of the challenge in our towns and high streets. Because of the requirement to raise over £30 billion from business rates and the decline in the number of physical shops, the burden of rates is increasing for many retailers. Does the Minister accept that this is no longer appropriate, and that changes in taxation on business property should be carefully considered, perhaps with a freeze on the pernicious multiplier and a move to a framework that is more fit for the 21st century?
Lord Bates
My noble friend looked at this area when she was Commercial Secretary to the Treasury. As a result of that review in 2016, a number of changes were made that had a significant impact, such as doubling small business relief from 50% to 100% for those with a value less than £12,000, moving to more frequent revaluations, which were asked for, and moving the multiplier in inflation rates from the RPI to the CPI. All these things are making a difference. It is not that we cannot see the big problems on the high street at the moment, which is why the Chancellor announced his £1.6 billion package in the Budget of 2018.
Lord Bird (CB)
Can we accept the fact that a bookshop on a high street has such an enormous social echo that it actually makes the high street a lot better? Can we start seeing our bookshops in a different way and not simply as traders in the marketplace?
Lord Bates
There is a social value there, and significant steps are being taken on the purely financial side—the retail discount and the small business rate relief apply to eligible bookshops—to protect that vital form of social and intellectual capital on our high streets.
Lord Dubs (Lab)
Does the Minister agree that it is becoming depressing that there are so many empty shops, not just in poor parts of the country but even in affluent areas? Is not the problem that there is no level playing field between shops and the online people, either in business rates or in tax dodging? Do we not have to tighten up both those areas and give our high streets a chance?
Lord Bates
We have looked at that area, and the Select Committee on Housing, Communities and Local Government is looking at this precise time to see what can be done. We have to remember that options such as an online sales tax would hit many high street stores, because they are hybrid business models that have a physical presence but also an online business.
Baroness Kramer (LD)
My Lords, does the Minister accept that taxing just the land value of commercial sites would achieve many of the goals that other questioners have put forward? It would encourage small firms to take on new technology and to expand, and would reduce the business rates for many, with the consequence that they would face a more level playing field with the online players.
Lord Bates
The land value option was looked at in the review in 2016, which I talked about earlier. The review concluded that a land value tax would also result in anomalies and problems. Under the business rates system that we have at the moment, it is easy to collect and easy to understand the calculation, which is why we are sticking with it at the moment.
Lord Naseby (Con)
Do Her Majesty’s Government recognise that the high street is still suffering and has been suffering for well over six years now? Against that background, should we not segment off the independent retailers? I am not talking about small retailers: there are independent retailers up and down this country who need help. With business rates at nearly 50% of rateable value, that is a huge fixed cost on any business. Surely we should look at segmenting the high street and finding answers to this problem; otherwise, we will have no high street before long.
Lord Bates
That is why the Chancellor took the action that he announced in 2018 and why potentially 90% of businesses can claim the retail discount that we announced for the next two years. We have taken 655,000 businesses out of paying business rates altogether through small business rate relief. These are complex problems, but we are mindful of them and are seeking to address them.
Lord Davies of Oldham (Lab)
My Lords, as well as shops being boarded up in high streets, the Minister must be aware that 100,000 jobs have gone in the last three years and that for many retailers the situation is at a crisis. I welcome the support for small businesses, but none of the measures that the noble Lord mentioned would have had any impact at all on House of Fraser, Debenhams or many Marks & Spencer stores. When these have closed, it has had repercussions for the economy of whole neighbourhoods. Why does the noble Lord not accept that online retailing is providing fierce competition for many other stores, which need some kind of support?
Lord Bates
Those businesses to which the noble Lord refers will have benefited from corporation tax falling from 27% to 19%—it is due to go down to 17%. It is also one of the reasons why, notwithstanding all the points highlighted by the noble Lord, levels of employment in this country are at a record high.
Lord Campbell-Savours (Lab)
My Lords, does the Minister believe that the relationship between the high street and online retailers is fair in terms of competition? This is a very simple question; it is either fair or not fair.
Lord Bates
Let me refer to a quote from the British Retail Consortium. It looked at this situation, and said:
“We fail to see how adding additional new taxes to the industry is really going to resolve the challenges we currently face”.
John Lewis said,
“this would actually have a detrimental effect … high streets need successful retailers with both a physical and online presence”.
I am not saying that this is easy and straightforward. It is complex, but the Government are seeking to come up with flexible solutions that address the concerns.
Lord Kennedy of Southwark (Lab Co-op)
My Lords, in addition to the measures outlined by the noble Lord, what is the overall government strategy to deal with these matters?
Lord Bates
The overall strategy, if the question is about business rates, is pretty straightforward: we collect about £25 billion in business rates, about 25% of which comes from the retail market and the remaining 75% from offices and industrial premises. At the moment, we are seeing the business rate book, if you like, increasing in value. Through the retention scheme, local authorities will get an extra £2.5 billion as a result of the growth of businesses in this country. At the same time, we are looking at how we deal with online businesses to ensure that there is fair taxation. That was the purpose behind the digital services tax.
Female Entrepreneurship
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Lord Harrison
To ask Her Majesty’s Government how they intend to implement the recommendations of The Alison Rose Review of Female Entrepreneurship, published on 8 March.
The Minister of State, Department for International Development (Lord Bates) (Con)
My Lords, the Government responded to the Rose review by immediately setting out a new, ambitious target to increase female entrepreneurship by half by 2030, and making new commitments to help drive more funding to women starting and growing businesses. Alison Rose is working with private sector partners to take forward the recommendations of the review, and will update all in due course.
Lord Harrison (Lab)
My Lords, women run businesses better than men. The Rose report, in which that is mentioned, shows that some £250 billion would be added to the UK Exchequer were it to be followed rigorously. Given that, what is being done to help women with childcare, and with increasing business networks? Finally, given that women have extreme prowess in speaking languages, what is being done in this post-Brexit world to ensure maximum use of women in speaking languages to feed and help British business?
Lord Bates
I am certainly happy to go with the noble Lord on that. He points out, rightly, that the report says that there are 1.1 million fewer women setting up their own businesses compared to the proportion of men doing so in the country. The ambition to change that would therefore result in a boost of some £250 billion to the economy. The report makes interesting reading on the barriers to employment: childcare is certainly a major one. That is why the 30 hours of free childcare for parents of three to four year-olds is such an important contribution, but we are aware that much more needs to be done. The report has given the Government a clear working strategy going forward.
Baroness Burt of Solihull (LD)
My Lords, if we want,
“to strengthen the UK’s position as one of the best places in the world for women to start and grow a business”,
as the report says, then no one can be left behind. The Government’s response to the Rose report refers to:
“Easing the financial costs of family care with new banking products”.
Will the Minister outline the government thinking about what these products could be and how they will help the estimated 1.1 million women entrepreneur start-ups that the report estimates are missing from the economic life of this country? If he does not have the facts right at his fingertips, perhaps he would undertake to write to me.
Lord Bates
I would be happy to do that to expand but, briefly, the thought was that one of the barriers was in female access to venture capital. An interesting study on that identified bias in the system against female entrepreneurs. It therefore came up with some ideas, along with the British Private Equity & Venture Capital Association and Diversity VC, on how that could be addressed. I think we all recognise that the great research and data that we have seen in the report has given us the ideas to think about policy solutions for the future.
Baroness Neville-Rolfe (Con)
I would welcome my noble friend’s views on how we could use networking better. I found this enormously helpful in my own business career. For example, there were female mentors telling me what to do, and what not to do. In leading a female executive network across the world, when I was at Tesco, we used to discuss everything from childcare and juggling it, to how to get pay rises. Also, there is Cancer Research UK’s Race for Life each year; it was in running that that I first met the late Lady Jowell and many other noble Baronesses. These networking occasions really help to build confidence and we should do more for female entrepreneurs.
Lord Bates
Indeed, that was one of the things which Alison Rose brought out, as she is doing in her present role, particularly in the finance sector. I pay tribute to my noble friend for being one of the pioneer female directors along with my noble friend Lady O’Cathain, who was one of the first female directors of a British retail bank. Lots more needs to be done, but we are standing on the shoulders of some very impressive people.
Lord Davies of Oldham (Lab)
My Lords, we are so far behind France, America and Canada in the numbers of women becoming entrepreneurs compared with men. This suggests that there is a rather significant fundamental bias at work in our society. Do we not need to look at the teaching of economics and financial issues in schools for girls, to create some degree of equity and confidence among young women?
Lord Bates
That was a particular focus of a report done by Vince Cable when he was Secretary of State. It was carried out by Lorely Burt MP, now the noble Baroness, Lady Burt. He came out very much on the side of more needing to be done for entrepreneurs. Alison Rose identified that the problems occur at school with not getting more females into STEM subjects. While some progress has been made, with a 25% increase since 2010, the report recognised that significantly more needed to be done to ensure that people had the skills necessary to set up their business and make a success of it.
The Earl of Listowel (CB)
My Lords, while I warmly welcome the investment that the Government have made in childcare, is the Minister concerned that childcare work, done principally by women, is still very low status and low paid? Will he talk with his colleagues about investing more in continuous professional development for early-years workers so that they start their own businesses and develop themselves?
Lord Bates
Many of them have done that. As well as skills strategies, developments such as the national living wage have made a significant difference to people in those professions. We need to look at all those issues.
Access to Cash
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Lord Naseby
To ask Her Majesty’s Government how they intend to ensure that the public have access to cash throughout the United Kingdom.
The Minister of State, Department for International Development (Lord Bates) (Con)
My Lords, the Government are committed to safeguarding access to cash while supporting digital payments. Last year, we launched a call for evidence on cash and digital payments in the new economy. We will publish a summary of responses in due course. We will continue to work with regulators and banks to ensure that people continue to have real choice over how they spend their money.
Lord Naseby (Con)
My Lords, is my noble friend aware of the great worry experienced by 17% of our citizens about their virtually permanent need for access to cash? Against that background, has my noble friend found time to see and read the Which? report, the submissions made by Age UK and the rather heavy tome produced by Access to Cash Review? If he has, that is a happy coincidence. If not, will he please make sure he does so? Is he also aware—
Lord Naseby
My Lords, 17% of our citizens are suffering. Against that worry, is he aware that, while the Post Office and Nationwide are helping, the rest of the mutuals movement is handicapped by the Government’s failure to implement fully the Mutuals’ Deferred Shares Act 2015?
Lord Bates
My Lords, I pay tribute to the work of the mutuals. The noble Lord is right that a situation is emerging where people, particularly the most vulnerable, are seeing access to cash beginning to reduce as a payment option. One in six transactions used to be made in cash; at the moment it is one in three, and it will go down to one in 10. This is an inevitable consequence of the movement of technology. We need to adjust, but we are committed to supporting access to cash for the most vulnerable people, to whom he referred.
Lord Davies of Oldham (Lab)
My Lords, times they are a-changing. Tottenham Hotspur is playing its first match on Saturday—tonight, sorry—in its extremely expensive but attractive new stadium, and the stadium is cashless. They must have got their demography right in making that decision, but even if in urban areas there are sufficient cash points and access to cash, in rural areas and small towns there is a developing crisis. A very large number of people, as has already been mentioned, do not have ready access to cash. When will the Government appoint someone to monitor this situation and insist that the banks and other organisations supply cashpoints?
Lord Bates
That is partly within the role of the Payment Systems Regulator, although not entirely. On the point about cash and Link machines, Link is a network of banks that supervise these things. It has increased the intercharge fee between ATMs so that it can meet its obligation to ensure that ATMs are at least 1 kilometre from the next free ATM in rural areas. That is a very important commitment, which the regulator will hold them to account for.
Lord Wigley (PC)
Does the Minister accept that in those scattered rural areas there is the very real problem that it is impossible to get good broadband connectivity, and therefore internet banking is not possible? That is not just an inconvenience; it means it is very difficult to get economic development of the sort that is needed.
Lord Bates
I am aware of that. There is obviously the universal service obligation. This year for the first time telephone banking apps will overtake digital online as the way in which most people access their banking services, so that is another factor. However, I am aware of the concern.
Lord Low of Dalston (CB)
My Lords, Barclays and HSBC have ATMs with an audio output, which enables blind people to access their cash independently. What will the Minister do to encourage the remaining banks to increase the independence of blind people in accessing their cash independently by ensuring that all cash machines have an audio output, such as those of Barclays and HSBC? Would he be willing to write to the CEOs of the remaining banks to find out how many of their ATMs have an audio output and what plans they have to ensure that all their machines have this vital facility?
Lord Bates
I am happy to undertake to take that up with the Economic Secretary to the Treasury, who is responsible for retail banking, as well as the Financial Conduct Authority. I know that significant progress has been made on that, and I will write to the noble Lord.
Baroness Kramer (LD)
My Lords, nearly 40% of payments are still in cash. Does the Minister recognise that although the payments regulator cites post offices as places where one can get cash, they tend to close at 4 pm or 5 pm? People need access, and 1 kilometre is far too far away to keep any local community functional in the way that it needs to be.
Lord Bates
There are limitations that arise from the changes in the way that people access their financial services and cash. We are seeing contactless overtaking debit cards as a way of payment. These changes are happening, but it is important that the regulator and the Government work together with the industry to ensure that people continue to have the access they need to these important cash services.
Lord Blunkett (Lab)
My Lords, in fully supporting the point made by the noble Lord, Lord Low, I draw attention to the corollary, which is the denial of choice as the financial institutions gradually seek to eliminate the use of cheques. I believe it is important for the Minister to take this issue alongside the cash issue so that people have genuine choice in the way that they pay their bills.
Lord Bates
I am happy to undertake to do that. At the same time as I write the noble Lord, Lord Low, I will write to the noble Lord, Lord Blunkett.
Lord Hunt of Wirral (Con)
My Lords, I declare my interest as a non-executive director of Link. Will the Minister recognise that in the review Natalie Ceeney has set out very clearly the way ahead for Link to work with the regulator in making cash available in line with the recommendations of the Ceeney report? Will he ensure that that is now implemented?
Lord Bates
We are still studying the report, which came out fairly recently and contains a lot of data and material. The Link network went to countries such as Sweden, where the proportion of transactions in cash is now only 10%, and asked what could be learned from that situation, which is where we are going to be in five to 10 years’ time, to ensure that people in this country have protection and choice available to them.
Baroness Tonge (Non-Afl)
My Lords, as the more affluent members of our society no longer carry cash, will the Government consider giving bank accounts and card readers to the destitute and homeless on our streets?
Lord Bates
I do not want to make any value judgments about people carrying cash. Cash continues to be carried by the vast majority of the population—I think the report mentions a figure of about 95%. One of the things we have advanced is fee-free banking, which revolutionised the approach for many people in precisely the situations the noble Baroness refers to.
Aid: Anti-Corruption Measures
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The Minister of State, Department for International Development (Lord Bates) (Con)
My Lords, I congratulate my noble friend Lord McInnes on securing this debate. I thank him and all noble Lords for their contributions during this short debate, which has gone impeccably to time, urged on no doubt by the gentle interruption at the outset from my noble friend Lady Stedman-Scott.
It has been a wide-ranging debate. My noble friend Lord McInnes began by talking about how corruption can sometimes be used by those who would seek to undermine the value of overseas development assistance. The noble Lord, Lord Anderson, talked about transparency, particularly in the banking system. The right reverend Prelate the Bishop of Peterborough talked particularly about the pressures on small charities. The noble Baroness, Lady Anelay, spoke about some specific examples of work done in South Sudan and the DRC, particularly around gender. The noble Lord, Lord Alton, talked about the importance of monitoring and the inclusive approach. My noble friend Lady Stroud powerfully drew a direct link between institutions, governance and economic prosperity. My noble friend Lord Robathan talked about the importance of Governments’ responsibility to their own people and ensuring that that is the prime responsibility. The noble Lord, Lord Purvis, highlighted excellent third- party sources of data, such as the International Aid Transparency Initiative and Transparency International’s corruption index, and how important it is that they can be used in this area. The noble Lord, Lord Collins, concluded by pointing to the link between corruption and organised crime and the role which civil society can play.
Let me put on record what DfID is doing in this area and then I will turn briefly to the questions that have been addressed to me. The noble Lord, Lord McInnes, rightly began by talking about the importance of tackling corruption, not only as a priority for DfID but as part of our commitment to sustainable development goal 16. Corruption impoverishes developing countries. It diverts public resources from productive use and deters business investment. It hurts the poor the most, a phrase repeated by many of your Lordships.
Tackling corruption and illicit finance is not only essential for development but is firmly in the UK’s national interest. Fighting corruption helps keep the UK secure and opens up new business opportunities and trading partners for the UK. DfID operates in a diverse range of difficult and fragile environments such as Iraq, Afghanistan, South Sudan, and in areas recovering from natural disasters and conflict, many of which have been mentioned today.
The UK is a world leader in humanitarian response and the noble Lord, Lord McInnes, urged us, in the words of my right honourable friend Andrew Mitchell, to be a development superpower. That is already there if one looks at the response of the British public and DfID to the events in Mozambique, Malawi and Zimbabwe.
We have robust measures in place to reduce the risk of aid diversion. We conduct regular assessments of our partners’ financial capability systems and processes, including those of partners further down the delivery chain. This gives us confidence that our partners are well prepared to deliver aid in emergencies and that the aid will go to those in need.
The UK has led global efforts to tackle corruption. Effective measures against corruption require action at three levels: with our partners in developing countries to tackle corruption in their systems; internationally to stop the flow of corrupt money across borders, as the noble Lord, Lord Anderson, mentioned; and, in rich countries also, to show that we are not a haven for corrupt money, a point to which the noble Lord, Lord Collins, also referred.
We can be proud of our achievements working with partners in developing countries. Due to our work, corrupt officials in Sierra Leone have been sanctioned as a direct result of data produced by the DfID-funded Pay No Bribe digital platform, which maps real-time anonymous reports of bribes. Helping countries to address corruption after conflict is vital, because if a country has been destabilised, there are new and greater opportunities for corruption to occur. DfID expertise helped in Afghanistan to establish the flagship Anti-Corruption Justice Centre, which brings together law enforcement and justice institutions to investigate, prosecute and adjudicate high-level corruption cases. My noble friend Lady Anelay talked about DfID’s work in Sudan. She has been a distinguished Minister in these roles and I pay tribute to the DfID staff who work in that difficult posting. It has been a testing time and we appreciate what they do in respect of the girls’ educational challenge and many of the other things happening there.
In addition to supporting change in developing countries, the UK must also ensure that we have our own house in order and that we are not a safe haven for corrupt money. We have a good story to tell here, although we should not be complacent. DfID funding has enabled the National Crime Agency to investigate and prosecute money laundering and bribery overseas where there is a UK link. Since the programme began, 30 people and companies have been convicted of corruption offences and almost £800 million of assets stolen from developing countries have been restrained, confiscated or returned to the developing countries.
I turn briefly to the questions that were raised during the course of the debate. I should say at the outset that if time does not permit for me to give all of the responses, of course I will write to follow up on them. My noble friend Lord McInnes asked whether regular interaction takes place between the FCO and Human Rights Watch. DfID continues to work closely with the FCO on anti-corruption and human rights issues, including with the main human rights organisations such as Human Rights Watch and the anti-corruption organisation, Transparency International. He asked what support we are giving in terms of country strategies. DfID country teams are working closely with HMG colleagues to implement country anti-corruption strategies. They are updating those strategies at the most appropriate time for the country context—for example, after elections—rather than in line with a UK publication timetable.
The UK is seeking to develop more cross-HMG country anti-corruption strategies as set out in the UK anti-corruption strategy published in December 2017. My noble friend asked about the anti-corruption strategy specifically for Iraq, an issue also raised by my noble friend Lord Robathan and the noble Lords, Lord Purvis and Lord Alton. DfID country teams work closely with HMG colleagues on anti-corruption strategies in Iraq and I will write with further information on those.
The noble Lord, Lord Anderson of Swansea, talked about the role of overseas territories and the Crown dependencies as financial centres and asked what is being done in that area. They are committed to global transparency standards such as the provision of information to law enforcement and for the automatic exchange of tax information. We expect the overseas territories to have fully functioning public registers by 2023.
My noble friend Lady Anelay raised the issue of anti-corruption measures in DRC. DfID’s public financial management accountability programme supports the use of public resources to enable better service delivery and more accountable government in DRC.
The noble Lord, Lord Alton, asked about Pakistan. He has been in regular contact about this issue and I know of his concerns. We are certainly not complacent and want to look into the situation carefully. DfID Pakistan takes a holistic approach to addressing corruption through various programmes including on education, health, taxation and economic growth. It addresses corruption by delivering programmes to engage citizens to demand better services in order to create more transparent, effective and accountable institutions. However, I am in the process of writing further on that particular issue.
My noble friend Lady Anelay also asked about aid for DRC. A robust planning process involving the relevant partners has been undertaken to determine the activities required to end Ebola. These activities have been worked into a single strategic plan that the UK and other donors are working on.
My noble friend Lord Robathan asked how we can ensure that overseas aid is being spent effectively. He made the point that Governments have prime responsibility for this. I commend the speech of the Secretary of State to the Wellcome Foundation last year. She pointed out that in future, one test we should have is that the UK Government should not step in where the domestic Government can and should be doing things themselves, such as providing clean water.
My noble friend Lady Stroud asked what steps we have taken to build anti-corruption institutions and e-systems in fragile states. Where possible, we work with Governments. DfID has programmes such as the Afghanistan Anti-Corruption Justice Centre, which I have already mentioned. The corruption centre helps to achieve our targets under sustainable development goal 16 on reducing corruption and illicit flows. Helping to reduce threats to our security is firmly in the UK’s national interest. The UK is proud of the global momentum we have built up to fight corruption, but we cannot be complacent. We will continue to work with our partners around the world to reduce corruption. This will build a fairer future for people in developing countries and a better future for the people of the UK.
Brexit: The Customs Challenge (European Union Committee Report)
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The Minister of State, Department for International Development (Lord Bates) (Con)
My Lords, I begin with one or two points on which we can all agree. The noble Lord, Lord Stevenson, mentioned the work of the committees in your Lordships’ House, how outstanding it is and thorough they are. Nowhere is that more the case than in the European Union Committee, its six sub-committees and the External Affairs Sub-Committee—chaired by my noble friend Lady Verma—whose report we are discussing today. They do an incredible amount of work. I commend Appendix 2 to anyone who has not had the opportunity to study the full report, where they will see the list of people who gave oral evidence. The quality and range of people from whom evidence was taken have contributed significantly to the strength of the report, if not also to the difficulty of the Government being able to respond—a theme to which I will return shortly.
It has been good to have this debate. Although narrowly focused, it has managed to touch on all the key points that needed to be raised, in a systematic way. My noble friend Lady Verma, began the debate with an excellent speech, in which she set out the terms and focused particularly on tariff policy. My noble friend Lord Horam spoke about the challenges of Northern Ireland; the noble Baroness, Lady Suttie, about the implications and risks of no deal; the noble Lord, Lord Triesman, about the impact on business; the noble Lord, Lord Dykes, about standards; the noble Baroness, Lady Randerson, about technology at the border; the noble Lord, Lord Bilimoria, about the importance of supply chains; the noble Lord, Lord Kerr, about the common customs policy; and the noble Lord, Lord Stevenson, about the facilitated customs arrangement.
Rather than using the set response that I have, I will zero in with a short update on where Her Majesty’s Government are at present with a statement of policy. Then I will respond to as many of the questions that have been asked as possible. I also give notice that it would be good for the committee and the House to have a written response to this high-quality debate, and I will ensure that that happens in a timely way.
The Government always seek to provide the committee with the latest and most comprehensive information possible. The ongoing negotiations with the EU and recent developments within Parliament can sometimes make providing the most up-to-date information difficult. My colleagues in the Department for Exiting the European Union regret the lengthy delay in responding to this report, but I assure noble Lords that a response will be sent to the committee as quickly as possible.
Before discussing the detail of this report, I will touch briefly on the broader context for this debate. The Government’s clear preference is to leave the EU with a deal and we remain committed to doing so. We were disappointed at the result of last week’s vote on the withdrawal agreement. Nevertheless, our priority is to press the case for an orderly Brexit that delivers on the result of the referendum.
In addition, while a no-deal scenario, mentioned several times in the report, is not the Government’s preferred outcome, preparations are continuing for such an outcome. Indeed, in relation to the report, leaving the EU without a negotiated deal would result in customs controls at the UK’s borders and tariffs on our exports to the EU. This is why the Government have been focused on putting a deal in place.
I turn now to questions that were raised and I start with further explanation of the delay in responding. The report, as has been said, was published in September. A response would therefore, in the normal routine, be due sometime in December. Noble Lords will recall that December was a pretty fast-moving time, with discussions taking place, and it was not possible to get clearance between the different departments for the release of the response at that time. We thought that that might ease in January but it did not: it is a story of that nature but I emphasise that this is not normal. I have responded in debates in your Lordships’ House to a number of reports from committees, so this is not normal government practice: we take reports very seriously and this is merely a reflection of the times. I convey again my apologies to my noble friends Lady Verma and Lord Horam, the noble Lord, Lord Triesman, and the noble Baroness, Lady Suttie, who were members of the committee, and to all members of the committee.
My noble friend Lady Verma asked about the impact assessment and tariffs. The impact is summarised in the tax information and impact note published alongside the temporary tariff. Tariffs are a tax and therefore a tax information and impact note is, we believe, the most appropriate document for communicating tax changes. The noble Baroness, Lady Suttie, and others asked about the implications for roll-on roll-off ports. Although it was mentioned in the context of Dover, and I know the committee visited Dover, I take on board the point raised by the noble Lord, Lord Wigley, in an intervention, about the importance of Holyhead. The Government recognise that roll-on roll-off locations depend on a fast flow of traffic, which could be significantly affected if customs controls and regulatory checks were reintroduced for EU trade. Maintaining frictionless trade is therefore a priority for the Government.
In a no-deal scenario the Government have been clear that we will prioritise trade flows at the border, but not at the expense of security. HMRC has continued to carry out targeted checks on goods entering the country, as we do now. In the event of no deal, the Government’s day one roll-on roll-off model aims to move customs formalities away from the border, easing the pressure at the ports and at Eurotunnel, helping to avoid delays. We have published roll-on roll-off bridging guidance, last updated in March, to support businesses to understand fully how to comply with the new model. We will continue to update business on these matters.
My noble friend Lady Verma asked about the facilitated customs agreement. It is still the preferred outcome. The political declaration on the framework for the future relationship between the UK and the EU, agreed with the EU, set out a plan for a free-trade area for goods, including no tariffs or quotas, with ambitious customs arrangements. The Government recognise the need to discuss the future customs model in detail with the EU in the next phase of discussions, in line with the commitment set out in the political declaration. The Government are aware that there is currently a live debate in the House over the future relationship and we will contribute to that ongoing debate.
My noble friend Lady Verma and the noble Baroness, Lady Randerson, talked about the need for technology and asked whether such technology is currently available. The Government will continue to consider the potential application of technological solutions to streamline customs processes. There is a range of technologies that could help facilitate trade over the Northern Ireland/Ireland border—for example, by streamlining any requirements that may emerge after the UK leaves the EU.
Lord Kilclooney (CB)
As one living near the Irish border, I realise that it has two sides. Sometimes I get the impression that people in London do not realise this. Can the Minister confirm that Her Majesty’s Government have decided that there will not be any infrastructure on the United Kingdom side of the border? On the Irish side, it is a matter for the European Commission. Has the Commission yet confirmed that it will have no infrastructure on the Irish side of the border?
Lord Bates
The noble Lord will be aware that this is a fast-moving situation. There have been some statements by the Taoiseach on this in relation to the Republic of Ireland. The Good Friday/Belfast agreement states that there will be no hard border on the island of Ireland. I know that that does not answer the noble Lord’s question; he asked in particular about the differences in how tariffs might be collected between Northern Ireland and the rest of the United Kingdom. We have made some statements on that; given that it is such a delicate matter, I will cover that point in my written response at the end of the debate. The Government continue to be committed to developing alternative relations to replace the backstop, and we have agreed a specific negotiating track with the EU which will form part of the next phase of negotiations.
The noble Lord, Lord Dykes, asked whether the Government’s estimate that 96% of UK goods will be able to pay the correct tariff up front has been challenged. The Government published further detail on this calculation on 21 December 2018 in response to the request of the UK Statistics Authority. The publication set out:
“Up to 96% of UK goods trade would be likely to be able to pay the correct or no tariff upfront under the FCA”.
These goods would be:
“Trade (imports and exports) with the EU or exports to non-EU countries”.
I think the question put by the noble Lord, Lord Stevenson, was discussed during one of the regulations on the EORI registrations. At that point it was 52,000; I can report that it had risen to 67,000 as of the week ending 22 March—so we are making some progress.
This has been an excellent debate, in response to a very thorough report with some 31 recommendations. I reiterate to the committee and to those Members who have been party to the report’s production that our delay in response is due to what are the hopefully understandable challenges of the present time, and in no way takes away from how valued this is.
Finally, I will respond to two comments from the noble Baroness, Lady Suttie, and the noble Lord, Lord Triesman. The noble Baroness said that our discussion on this topic resembled a fundamentalist debate, with no ground being given and an absence of facts. The noble Lord, Lord Triesman, was fair-minded in recognising that none of us can say that we have distinguished ourselves in this very difficult situation in which the nation finds itself. I am sure that I speak for the whole House in saying that past performance does not necessarily guarantee future performance. I remember that my father often used to say to me as I left the house, “Remember, this is the first day of the rest of your life. Treat it as such”.
This is an opportunity for us to look forward and do something different. This debate on Brexit has descended into a bitter courtroom divorce battle in which the parents’ hatred of each other has meant that they have forgotten their shared love and responsibility for their children. We hope that now is the time to seek selfless solutions that will put the well-being of all the people of this great country at the centre of our deliberations. We hope that that starts today, and continues tomorrow. I thank my noble friend for her debate.
Tax: Short-term Lets
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Baroness Gardner of Parkes (Con)
My Lords, I beg leave to ask the Question standing in my name on the Order Paper, and I remind the House of my interests as declared in the register.
The Minister of State, Department for International Development (Lord Bates) (Con)
My Lords, the Government seek to prevent non-compliance with tax through targeted education and support, and by responding strongly to those who break the rules. HM Revenue and Customs has dedicated teams looking into those who have not voluntarily made themselves known—known as the hidden economy—including those who let property on either a short-term or a long-term basis.
Baroness Gardner of Parkes
I thank the Minister for that Answer. However, will HMRC be persuaded to introduce an express declaration on all tax returns, with short-term let property addressees and income having to be disclosed in full, and will it provide that information to local councils? That will then help to enforce the 90-day limit. That is important following the “Inside Out” programme on BBC1, which identified how you could go way beyond 90 days with impunity if you followed its advice.
Lord Bates
People already have to make that declaration via tax form SA105. For the latest two years for which numbers are available, the number of people in that position was 2.48 million, and that rose to 2.58 million, reflecting the increase in the number of people earning income from a property, to which my noble friend referred. However, the number of days for such lettings is limited to 90 in London. It is very important that people declare all income, because it is taxable.
Lord Davies of Oldham (Lab)
My Lords, Airbnb, a significant company in this field, is apparently being looked at closely by Her Majesty’s Revenue and Customs, but it seems to be engaging in a practice that we associate all too easily with multinationals: transferring profits outside the UK taxation regime. Are the Government tackling this fully, and do we not need international support in getting control over these companies?
Lord Bates
That is a good question. Whether it is Uber or Amazon, we are genuinely wrestling with how to capture the income due here. We have made some changes to taxing digital companies but, with the spread of technology and the sharing or online economy, all Governments will have to do more in this area.
Lord Palmer of Childs Hill (LD)
My Lords, the Minister talked about people making these declarations as part of their tax return. However, if people do not complete a self-assessment tax return while still letting property, they do not fill in such a form. That is one weakness in the Minister’s answer. The response to a freedom of information request said that HMRC’s Let Property campaign produced just a fraction of the number of disclosures that HMRC was expecting. The Government estimated that up to 1.5 million landlords had underpaid or failed to pay up to £500 million in tax in 2010. At the same time, people on low incomes cannot find a place to live.
Lord Bates
We have done some work on that. The tax return I referred to is SA105, which is the self-assessment tax form. The HMRC Let Property campaign, to which the noble Lord referred, has encouraged 35,000 more landlords to register and yielded an additional £150 million for the Exchequer. It is not quite the full extent, but it is a step in the right direction.
Lord Campbell-Savours (Lab)
We have a long-term rental licensing scheme whereby landlords have to register long-term lets. Why can the Government not devise a scheme for short-term lets on the same basis? That would help HMRC to gather the money due to it.
Lord Bates
It is an interesting idea. There is a scheme in Newham and there was one in Westminster. We are open to looking at whether more needs to be done. We also recognise however, that short-term letting—the Airbnb-type sharing economy—is filling a useful gap in the market. Schemes such as property allowances and Rent a Room exist to help people take advantage of it.
Baroness Gardner of Parkes
Did the Minister see in the Times last week—the story was also broadcast—that the Hilton hotel chain claims it has been so undermined by Airbnb that it is killing the tourist industry in New York? That chain is about the biggest there is. Does the Minister agree that it is important to keep a watching eye on this? Local authorities would seem the best people for the job.
Lord Bates
Local authorities have responsibility for enforcement if they feel the schemes are being abused, but it is not our responsibility to defend large international hotel chains. We should look after people who may be able to get valuable extra income into their homes as a result of a legitimate activity.
Lord Foulkes of Cumnock (Lab Co-op)
My Lords, will the Minister confirm that anyone who evades, rather than avoids, paying United Kingdom tax would not be permitted to sit as a Member of the House of Lords?
Lord Bates
The noble Lord asks a leading question. I would worry about giving a precise answer, but tax evasion is wrong and it is against the law. All Members, who are responsible for legislating, must be held accountable to a higher standard for upholding the laws that they pass.