Economic Prosperity and Employment

Lord Bates Excerpts

Thursday 18th July 2013 Lords Chamber

[Lord Bates]

My Lords, I, too, pay tribute to the noble Lord, Lord Haskel. He has a well deserved reputation for, over many years, seeking to improve the understanding, particularly in the Labour Party, of the role of management of the private sector. Having listened to the speech of the noble Lord, Lord Monks, I suggest that his work is yet undone; he still has much to do in that important area.

The noble Lord, Lord Haskel, sets an important task for us, which is to take,

“note of the role of government in generating economic prosperity and employment”.

That begs the question, “Does it have one?”. Of course, the answer to that is yes. The role of government is to generate economic prosperity through untying the wealth-creation potential of enterprises and allowing them to flourish; to maintain a tight fiscal control on the costs and operations of government, through the avoidance of waste and unnecessary regulation; to construct the tax and benefits system in a way that rewards those who work, cares for those who cannot and incentivises the risk-takers while protecting consumers and upholding fair competition; to provide a stable monetary policy which creates the right balance between borrowers and savers in the economy; to provide the investment in the physical and intellectual infrastructure that we will need for the future; and to maintain and develop strong international trading relationships. In short, the role of government is to prepare the ground and regulate the climate for economic prosperity and employment while recognising that, ultimately, it is enterprises which will actually build and maintain it. That would be my definition of an enabling or entrepreneurial state.

If this is the description, how have the current Government performed? I do not think that many in this House would argue against the proposition that no post-war incoming Government have had a more favourable economic legacy than that which fell into the lap of the Labour Government in 1997; I declare no interest as a Treasury Minister at the time. At the same time, there would not be many who would argue that any incoming Government have had a less favourable economic inheritance from their predecessors than that which befell the current coalition in 2010.

The coalition arrived in office to face a debt that was unsustainable, government spending that was out of control, and a public sector that was too strong, and a private sector too weak, to sustain it. We had grown too dependent on financial services and lost our competitive advantage in manufacturing. We had become obsessed with the old, established markets and trading relationships of Europe, and paid insufficient attention to the rising new markets of Asia and Latin America. We had taken no note of the fact that the tax and benefit system could provide perverse incentives that made not working more attractive than working. Wealth creators and risk takers were insufficiently rewarded. Our education was failing generations of young people through its lack of rigour, and vocational training was not delivering the skills that industry needed.

Three years on, what has been the result? Well, we have seen a reduction in the deficit; it is down by a third. We have seen sustained cuts in corporation tax which will mean that we will have the lowest corporation tax rates in the G20 by 2015. We have seen businesses create 1.3 million new private sector jobs, which is close to three jobs created in the private sector for every one lost in the public sector. This week, we have seen unemployment fall further, by 57,000, and the claimant count fall below the level of May 2010. The reform of the benefits system will ensure that people are always better off in work. Through raising personal tax allowances, people working full time on the minimum wage will have had their income tax bill halved during the time of this Government. We have seen investment in infrastructure. Danny Alexander, the Chief Secretary, announced £100 billion of investment in infrastructure between now and 2020. There were 520,000 apprenticeship starts in the last academic year, up 80% on the last academic year under the previous Government.

We are seeing the evidence for this in increased economic indicators showing, for example, that exports are at records levels according to the British Chamber of Commerce and the purchasing managers’ index. We even see this morning an announcement that retail sales have gone up by 2% in the past year. We see that our exports, particularly to those new, dynamic markets such as Brazil are up 25%, with China up 40% and Russia up 80%. That is extremely welcome.

The culmination of this is that the predictions for a double-dip or triple-dip recession that were so frequently made from the opposition Dispatch Box turn out to have been wrong. There has been a reassessment which shows that we are now into growth, and the IMF has reassessed its forecast to show that it expects this economy to grow strongly. I urge those on the Benches opposite to recognise that it is time for them to reassess the record of this Government and their own policies in the light of that performance.

Finance Bill

Lord Bates Excerpts

Monday 15th July 2013 Lords Chamber

[Lord Bates]

My Lords, I, too, pay tribute to the Select Committee on Economic Affairs for its excellent report. I did not serve on that committee, and I speak in the debate not because I want to speak about the report but to clarify Her Majesty’s Government’s position on another matter, which relates to hard-working families and specifically has to do with the position of the married couple’s tax allowance.

Page 41 of the Conservative Party manifesto, way back in 2010, states a desire to,

“make Britain the most family-friendly country in Europe”—

and specifically said that it would,

“end the couple penalty in the tax credit system”,

which it has largely done through the introduction of universal credit. Next, it said that it would,

“recognise marriage and civil partnerships in the tax system”.

This is a day when we have been celebrating marriage and its role in society. I welcome the Bill that has passed today for keeping marriage relevant and updated by reflecting the way in which some tax-paying citizens choose to live their lives in this country. That is a good thing. When my noble friend Lady Stowell introduced this important Bill at Second Reading, she set out clearly Her Majesty’s Government’s position, when she said:

“Marriage remains, as it has for centuries, the way in which most people choose to declare their commitment publicly and permanently to the person they love. When we hear two people exchange their marriage vows, whether in a place of worship or at a registry office, we know that we are witnessing a couple commit to the kind of values that we associate with the special enterprise of shared endeavour—loyalty, trust, honesty and forgiveness. We know that through marriage existing families are extended, as is their commitment and support to new family members. We think that it is a good thing”.—[Official Report, 3/6/13; col. 938.]

The tax system is a very useful tool for Governments to recognise things which they regard as a good thing. Twelve million people, or perhaps more, as a result of today’s legislation are part of that good thing—giving strength to their families, their communities and society.

Where are we vis-à-vis that commitment made in the manifesto? We had an unexpected turn last week. Following what was described as a lunch,

“with political reporters at Westminster”,

a report appeared on 11 July in the Daily Telegraph. It reported the Chancellor as saying:

“I have always been committed to introducing a married couples’ tax break ... David Cameron campaigned to be leader on that promise and I was his campaign manager”.

It went on to report the Chancellor as saying:

“I am absolutely committed to introducing it … and I think you can expect to see it in the Autumn Statement”.

That is all very encouraging. Some of us who have experienced the way politics works will perhaps be forgiven if we seek further general reassurance from the Minister, as it is possible that many a word of truth has slipped between the dining table of Westminster and the front-page splash of a national newspaper.

Can my noble friend clarify the position of Her Majesty’s Government in relation to the proposed married couples’ tax allowance in the Autumn Statement later this year? I particularly want clarification because we know that this was in the Conservative Party manifesto. We know that it did not make it through the negotiations with our Liberal Democrat coalition partners into the coalition agreement. In the same report of 11 July in the Daily Telegraph, there was a quote in response to this conversation at lunch from the Deputy Prime Minister, who ridiculed the proposals as,

“patronising drivel that belong in the Edwardian age”.

Later on in the report, clarification was sought from Downing Street—a great exercise in journalistic reporting; there was triangulation going on at a great level. The Prime Minister’s official spokesman said that the Prime Minister is a “big believer in marriage” and,

“That is why he thinks it is important to recognise the family—

and marriage—“in the tax system”.

There is a clear position there, perhaps a shift. I would very much appreciate if the Minister could help clarify and enlighten us.

Economy: Growth

Lord Bates Excerpts

Thursday 16th May 2013 Lords Chamber

[Lord Bates]

My Lords, it is always a privilege to follow the noble Lord, Lord Bhattacharyya, who has done so much to promote Britain at home and abroad in terms of economic growth. I listened very carefully to what he said and I think a lot of his remarks will probably be more warmly received on this side of the House than his own Front Bench, particularly when it comes to identifying the importance of tax reductions and controlling public expenditure, as well as the focus on enterprise.

As the noble Lord was talking, particularly about developing IT, I should have been paying more attention but I was flicking through pages 4 and 5 of the excellent House of Lords Library briefing that has been prepared for this debate. I found a lot of very encouraging things. Some things, I have to say, had passed me by, such as the tenfold increase in the annual investment allowance for small enterprises; the introduction of a seed enterprise investment scheme offering investors 50% income tax relief to encourage investment in early-stage companies; doubling the lifetime limit on gains for eligible entrepreneurs’ relief to £10 million; providing 100% business rate relief for small businesses seeking to get going; a £200 million growth accelerator scheme designed to provide business coaching for high-potential firms, which 4,000 SMEs have signed up with; start-up loans and, of course, the Funding for Lending scheme. I commend those pages to the noble Lord but I very much appreciated his contribution, and his record.

Of course, I also pay tribute to the noble Lord, Lord Soley, for securing this debate and the measured way in which he introduced it. My only disappointment is that more colleagues from the Back Benches did not want to take part in it. I know that we have just had the debates on the gracious Speech but this really is the most important issue for our country at the present time—because everything else flows from it. If growth gets under way and strengthens, revenue yields will grow and therefore we will have more to fund the public services that we talk about. That would have been good but I thank him for securing this time.

In his opening remarks, the noble Lord made mention of the farewell comments of Mervyn King as he presented his final quarterly review of economic outlook as Governor of the Bank of England yesterday. I thought that it was cause for encouragement. Certainly, the front page of the Financial Times today was very positive—you do not often see there reasons to be cheerful, and nobody could necessarily accuse Mervyn King of being an unbridled optimist. When he says:

“There is a welcome change in the economic outlook … and growth is likely to strengthen over the course of the year … That’s the first time that I’ve been able to say that since the start of the financial crisis”,

it should give us some cause for optimism. Of course, everybody immediately then rushes to say, “Well, we don’t want to be overoptimistic; we’ve got to be cautious”—my noble friend Lady Kramer reminded us of the “green shoots” of recovery described by my noble friend Lord Lamont—but there is a balance here, because part of what leadership and government are about is creating confidence in the economy. Confidence is hugely important, whether you are a Premier League football team, a small business or a Government. It is hugely important that people have confidence in our economy. We are led to believe that corporations are currently sitting on a mountain of some £750 billion of cash which could be invested to drive forward the economy. While we all need to be cautious, we need also to talk up our economy and the fact that Britain is becoming internationally more competitive, having fallen substantially down the competitiveness league tables produced by the World Economic Forum. We are now steadily climbing back up and re-entering the top 10.

Many noble Lords travel extensively around the world—the noble Lord, Lord Marland, referred to the excellent work of the trade envoys. I was in Kuala Lumpur last weekend and met SP Setia, which is investing in the Battersea power station redevelopment. It has £600 million of investments. I met there our tremendous team of UK Trade & Investment representatives, including Tony Collingridge, which had been instrumental in bringing that investment to the UK. I met many other people there who thought that SP Setia from Malaysia had got a cracking deal and wanted to know whether there were any more going in Britain, because they regarded Britain as the most favourable destination for foreign direct investment in Europe. That is a great thing. I sometimes wish that we could spend more time overseas seeing ourselves as other people see us, as Robert Burns chided us to do, because we might then be very encouraged.

A few weeks earlier, I was in Shanghai with the McLaren motor racing company, which is undertaking significant investments. The Chinese appetite for British advanced manufacturing technologies is incredible. We should take pride in British engineering, manufacturing output and in the way we are moving forward, albeit slowly, to a projected 1.2% growth in the current year and a return to pre-recession, pre-crisis levels in about 12 months’ time and about six months ahead of normal.

This will come in sharp contrast to other parts of the world; for example, in Europe. The same newspaper has heralded the encouraging performance of British business in terms not just of growth figures but of greater confidence, as evidenced by the Purchasing Managers’ Index report on new export growth, which had gone from expansion from contraction, tipping over the 50-point threshold for the first time in recent years. It pointed to the fact that 500,000 vacancies were being advertised in jobcentres, which was their highest level since 2008. Let us contrast that with the eurozone. We do not want to point to other people’s suffering, although, sometimes, when I hear the policy prescriptions put forward by the party opposite, they remind me of something that you can point to as if they were on “Blue Peter” and say, “Here’s one where we can actually see it being road-tested”. You have only to go across the Channel to see President Hollande putting forward his solutions for the economy. They are having a disastrous effect. His wealth tax of 75% is driving people through the Channel Tunnel to London to build up our economy rather than build up their own at a rapid rate. We need to remember that, in an age of intellectual capital, intellectual businesses are highly mobile and pay attention to tax rates, as the noble Lord, Lord Bhattacharyya, reminded us. At a time when we are reporting that we have perhaps come out of that phase of the recession, that is why the French economy has gone back into it. The unemployment rates are another indicator here that we have to look at. According to the Economist this week, the unemployment rate in France is 11% and rising; the UK’s is 7.9% and stable or falling. That is a very important indicator along with GDP.

The other thing that we need to look at is the number of new jobs being created in the economy. One and a quarter million jobs have been created in the economy since 2010, which is the fastest rate of job creation that we have witnessed since 2000. Moreover, for every one job lost in the public sector, six jobs are being created in the private sector. That addresses one of the points made earlier about one of the objectives that we set out with being to rebalance the economy away from relying just on financial services towards relying on manufacturing—we are seeing a growth in exports. We need to move away also from overdependence on the public sector to a more balanced economy. We are seeing a rate of growth in new enterprise that is almost unprecedented, with 471,466 new businesses, new enterprises, established in the past year. Anyone who has ever set up a business will know that the first year is incredibly tough, and the number of start-ups which go out of business in their first year is tragically high, but the ones which stay the course are where the growth will come from—in employment, in revenues and in taxes. Therefore, the fact that we have an enterprise-friendly culture in this country is important.

Perhaps I may offer a note of caution about the growth figures for an unusual reason. Understanding national accounts is something which I never really got to grips with—even when I was a Treasury Minister, I have to confess; understanding corporate accounts comes a little bit more naturally. National accounts are incredibly complex and faceted. We chase after this half-time score of the GDP growth rate every quarter, and sometimes we are happy and sometimes we are sad. Knowing what goes into a lot of indicators is a bit like the old argument about pasties: if you knew what went into them, you perhaps would not eat them quite so readily. We have to get better at measuring what is happening and following the right KPIs for the growth of our economy.

The GDP figures are collected by way of a survey, as those who have worked in that area will know. The mix of the survey, which is organised by the Office for National Statistics, includes 6,000 manufacturing companies, 25,000 service sector companies, 5,000 retail companies and 10,000 companies in the construction sector. I am always suspicious of round numbers. We should look into this and ask why we define progress and growth in our country by that mix of samples. How often is that looked at? I encourage my noble friend, who I know takes these matters seriously and perhaps understands them much better than I ever did, to undertake a review of what goes into the GDP statistics. That in itself would make for an interesting debate. At the time that the first data are released, only 40% of the information is in and available. That is why we constantly get revisions and it comes down. At the end of the day, it is only a survey.

In business, the only thing that people watch when they are in charge of the finances is cash. You can waffle your way through a P&L account or set of accounts but you cannot waffle your way through the cash you have in the bank. That is one of the things that we should benchmark ourselves against. There are some better indicators. VAT receipts would be a very good indicator to use to track the health of the economy: they are reported quarterly and are one of the highest levels of adhered-to taxes. We have to look again at the basket of what we are measuring to ensure that we make the right judgments and policy prescriptions for the economy.

When we talk about cash at the bank, the reality is that we seem to be doing a little better. We have not paid down any of the debt and our overdraft currently stands at £111 billion but that is down from £159 billion three or four years ago. The deficit is down by a third but there is still a very long way to go before we ever get to the point we need to reach of paying down some of the debt as well. That has now been moved to 2017-18. It is encouraging that that cash element in the transaction between what is going out of the government bank account and what is coming in seems to be heading in the right direction and confirms the optimism of the Governor of the Bank of England.

--- Later in debate ---

[Lord Newby]

My Lords, I thank the noble Lord, Lord Soley, for initiating this debate because he asks the single most important question facing the country: how do we get more growth? He and the noble Lord, Lord Davies, have a relatively straightforward answer. Sadly, we believe that it is the wrong answer. Their answer is to borrow more. It was not the answer of the previous Labour Government. The Fiscal Responsibility Act required the Government to have halved the deficit by the financial year 2013-14. I am not sure whether the Labour Party has finally and formally renounced that legislation, but that was the course that it set.

The noble Lord, Lord Soley, points out that we had 225% of GDP borrowing after the Second World War, but I should have thought that he could see that the circumstances at the end of the Second World War were so fundamentally different in almost every respect from those of today that that is not a useful analogy.

There are a number of reasons for getting the deficit down. In my view, the most clearly demonstrable one is that a higher deficit and an incredible fiscal consolidation programme would undoubtedly lead to higher interest rates. Why is it that at the end of last week the UK was paying 1.84% on its debt, the US was paying 1.86%, Italy was paying 3.89%, and Spain 4.25%? The answer is: because this country has a credible economic policy in which the markets believe. Without that, there is no reason why our interest rates could not rise by 1% or 2%. Bear in mind that a 1% increase in interest rates means that a mortgage payer with a £100,000 mortgage is paying out an extra £1,000 per year, leaving aside the additional costs to industry and the additional billions of pounds extra that the Government will be paying to service their debts.

When the Government came in, national debt was running at 11.2% of GDP. That was possible in a crisis. I do not think anybody believes that such a level of national debt, which seems to be the level that the Opposition are talking about—we still have national debt running at more than 7%—is sustainable. The noble Lord, Lord Soley, talked about Keynes. People disagree about Keynes, but I am pretty certain that he never advocated sustained levels of borrowing over a long period. He knew, as everyone else knows, that although such a thing is possible, and desirable, over a short period, it is not possible in the long term.

Today, in part, we have been discussing another of Keynes’s aphorisms, which is hugely important at the point at which we find ourselves in the economic cycle: his emphasis on the role played by “animal spirits”, to use his phrase, on investment decisions and a whole raft of economic decisions. Indeed, that was the burden of the speech by my noble friend Lord Bates. At this juncture, the turn in the cycle that we are clearly seeing will accelerate because the view of people in the markets—“animal spirits”: what people are saying to each other—is changing positively.

I would like to address specifically several of the points made by the noble Lord, Lord Soley, about the components of growth. Indeed, most of these features have been about one or more components of the growth picture. I start with infrastructure, where there was widespread agreement that more needed to be done. Last year, according to the World Economic Forum, the overall quality of our infrastructure was 24th in the world. We do not believe that this is good enough, which is why we are investing more in transport infrastructure in this Parliament than was the case under the previous one. Our railways are seeing the largest programme of investment since the Victorian era. Incidentally, I am pleased to see, as I am sure the noble Lord, Lord Soley, is, that the amount of freight carried on the railways is going up significantly, which reverses a very long-term trend and is very welcome.

Total public and private investment in infrastructure between 2010 and 2012, at £33 billion per year, is higher than that of the final five years of the previous Government. At Budget 2013, the Chancellor unveiled an increase in capital spending plans by £3 billion per year from 2015-16. That is in addition to the £5.5 billion of investment in infrastructure announced in last year’s Autumn Statement. This included £1.5 billion for the road network.

The noble Lord, Lord Soley, and my noble colleague Lady Kramer talked about airports, which is clearly a significant component of the nation’s infrastructure. I do not believe that there is total agreement that we need to have a major national airport hub in this country, but the Government believe that it is a requirement. As noble Lords know, the Airports Commission, headed by Sir Howard Davies, is looking at airport capacity in the short and the long term. We are looking forward to seeing his interim report later in the year. In the mean time, Heathrow has spent £1 billion upgrading and Gatwick is spending £1.2 billion, so it is not as though our airports are atrophying. We know that it is a long-term issue and has been a long-term problem with no consensus within or between parties, but that is what the Davies commission is looking at.

The noble Lord, Lord Soley, talked about housing, which again is a long-term challenge. All parties have taken their eye off that issue over the past decade as house prices have risen inexorably and the proportion of the population owning their own homes has risen. There are three components to improving the stock and appropriateness of housebuilding. First, we have to make it easier to build houses. Secondly, we have to help to supply more houses. Thirdly, we have to make sure that there are no artificial restraints on demand for housing.

We believe that the National Planning Policy Framework, which we published in March 2010, has had some effect in a positive direction. The proportion of planning applications being approved is at a 10-year high, a significant proportion of which are around housing. As for building more houses, we already have an £11 billion commitment in the spending review. The Budget 2013 announced a housing package totalling £5.4 billion, including the Help to Buy and mortgage guarantee schemes. There is a lot of activity on that front. However, I agree with most noble Lords that we have to do more, and we are actively attempting to do so in three strands: to make it easier to get planning, to help have more finance to build houses, and to make it easier for people to afford a mortgage.

The international component of our economic activity is clearly crucial. To rebalance the economy, we need to export more. Last week’s evidence of a narrowing of our trade deficit is a positive sign that UK exporters have faced significant challenges in recent years. Yesterday’s data confirmed that the recession in the euro area, which is our most important export market, continued in the first quarter of this year. Therefore, as the noble Lord, Lord Marland, explained, we are right to be looking more widely.

In the period 2009-12, our goods exports to China increased by 96%, to Brazil by 49%, to Russia by 133% and to India by 59%. Last year, while our exports to the rest of the EU fell by 2.5%, our exports to the rest of the world rose by 1.2%. While we look elsewhere, we should not forget that we are still exporting 42% of our goods and services to the eurozone. As we try to get more SMEs involved in exporting, many will go to the eurozone because it is so much easier for a whole raft of reasons. Getting on a plane or a train to get to a potential export market in an hour is very different from going to Brazil or China.

I have seen that with a small manufacturing company in West Yorkshire which exports mainly to Europe. Through its website, out of the blue it has had a couple of orders from Brazil for £25,000, which is pretty good for this company. The question is what it will do to capitalise on it. It has no idea who the people are who have asked for this export. The directors have had a long discussion about whether they should go to Brazil. Eventually, they decided that they would go but the cost, in time and money, meant that that was a very difficult decision. If that order had come in from Spain, they would have been off straightaway. Therefore, as we rightly put more emphasis on the rest of the world, we must not ignore the fact that the bulk of our exports are to the EU and will remain to the EU. The EU is where people dipping their toe in the export market will start.

Over the past year, we have increased UKTI’s budget by £70 million to help to deliver world-class services to move SMEs into exports and to focus our activities on the high-growth market. I hope noble Lords will feel that we are making a real impact in that crucial area.

My noble colleague Lady Kramer discussed the challenge of corporates paying the right amount of tax, an area on which we the Government have put a lot of additional emphasis. At the G8 meeting, we made clear that international tax avoidance and rebalancing the rules around taxation are our top priority. At the recent meeting of G8 Finance Ministers, which included George Osborne, it became clear that we had the support of all the leading countries to look at this. It is not something that we can do unilaterally. It has to be done on a global basis. I think that for the first time ever there is a global consensus that we have to do more around corporate tax avoidance.

In that respect, I should like briefly to mention the personal and corporate tax avoidance in tax havens where up to now there has been a huge degree of secrecy. There is a growing momentum of considerable proportions to open up data about people and companies that have set up entities, which until now have been secret, in the principal tax havens of the world. It is worth while looking at what has happened in the past year. Having signed an agreement on the automatic exchange of information with the US in September, we have done the same with the Isle of Man. In March, we reached agreement with Jersey and Guernsey. In April, France, Germany, Italy, Spain and the UK agreed to develop and pilot multilateral tax information exchanges. Also in April, we set out our priorities around tax transparencies for the May European Council. Most significantly of all, perhaps, within the past month the overseas territories have agreed to greater automatic information exchange with the UK. Here, we are talking about the Cayman Islands, the BVI and other places that have had a degree of secrecy which we believe is simply no longer acceptable.

The noble Lord, Lord Bhattacharyya, spoke with his unrivalled knowledge about the constraints on innovation and investment. I had a great deal of sympathy with much of what he said, particularly about supporting reshoring, which to a certain extent is happening anyway. However, as he suggested, I am sure that the Government should look at ways of doing more. I am particularly aware of an initiative that my noble friend Lord Alliance is heading up on the textile industry and which is bearing considerable fruit. His view is that the potential from reshoring textile manufacture, so that we can have the just-in-time manufacture of textiles in the UK, could be as much as 250,000 jobs in the north-west. This is potentially a huge thing.

I agree with the noble Lord, Lord Bhattacharyya, that we could be doing more. I was particularly interested in his suggestion of how we might use public procurement to help. We should look at that further, and I will discuss it with my colleague Vince Cable, because it seems an interesting idea. I say in passing that the suggestion that we should be emulating the Americans to increase car manufacturing here seems to ignore the fact that car manufacturing has increased here substantially, without government bailouts but with government support. That is because we have had fantastic investment by companies such as Tata, which have completely turned around iconic British brands by investing more than £100 million of their own money in innovation and investment. They are working very closely with the universities, possibly including the university of the noble Lord, Lord Bhattacharyya, and are placing their own research people in those universities. That has happened without direct government subsidy, on the American model, but because this is a good environment for that kind of activity.

We have a raft of initiatives on the table. There are the Catapult centres, whose work includes high-value manufacturing, initiatives on science and innovation and capital projects from the research partnerships fund. We have done a raft of things to help small businesses to generate capital and have access to it, from abolishing stamp duty on shares and expanding the small business research initiative to £100 million and having further funding committed via the new investment bank, which we are in the process of establishing.

For three-quarters of his speech, the noble Lord, Lord Bates, did a tremendous job in helping the movement of animal spirits in a positive direction. Then he slightly undermined that by saying that the figures on which we are placing a certain amount of hope are perhaps not worth the paper they are written on. I paraphrase slightly. However, I think we will have in the UK what has just happened in the US, where the basis of the GDP figures is being looked at. I believe this is the case, although it may not be on exactly the same basis as he wants. The sad thing is that if the consequence of that rebasing of GDP leads to GDP figures going down, everybody will say that this is the Government’s fault for being completely incompetent, while if it shows them going up, that will lead to everybody saying that they have been fiddled, so I do not place too much hope on that. A consistent series of figures is probably the best that can be done. Although it does not necessarily reach an absolutely precise representation of the truth, that is good enough.

[Lord Bates]

If the noble Lord will allow me, I just need to correct for the record that I did not say that the GDP figures were worthless. I never used that term. I simply queried the mix between the construction and service sectors—be it 5,000, 10,000 or 12,000—and whether that mix was under review in order to ensure that we are accurately reflecting the performance of the economy.

[Lord Newby]

I apologise to the noble Lord. As I was saying, I believe that the ONS is doing a pretty fundamental review of that at the moment.

The Government are under no illusions at all about the challenges ahead in respect of growth. Implementing our ambitious programme of reform and securing strong, sustainable growth will not be easy, but the Government will not deviate from their course. The prizes in the global economic race are great and we are determined to win more of them.

Welfare Benefits Up-rating Bill

Lord Bates Excerpts

Tuesday 19th March 2013 Lords Chamber

[Lord German]

My Lords, in his speech moving the amendment, the noble Lord, Lord McKenzie, made it perfectly clear that it would break the Government’s policy proposal. There was no indication given of how much the benefit bill should rise, though the noble Lord, Lord McKenzie, indicated his preference. However, that is not what is in front of the House. If the amendment were to be passed there would be no proposal as to how much it should rise: 0.5%, 1.5%, 2%, 3% or whatever. Neither does the amendment offer any solutions: it does not offer any ameliorations, it does not seek any exemptions. However, Her Majesty’s Opposition say no to a 1% cap on working-age benefits, yet support a 1% cap on public sector workers’ pay. It is quite strange. I sometimes wonder whether we are living in a parallel universe where the economy is healthy, where there have not been any fundamental economic shocks and where Cypriots can get all their money out of their banks.

However, it is not like that and the Bill is not set in the sort of financial vacuum that some Members seem to think it is. I accept that borrowing is higher than it ought to be, though I wish it were less. I know that we have had to borrow in order to maintain the essence of our welfare state and I agree that growth is critical. However, in these tough times the Government have to take difficult decisions. These decisions are, no doubt, uncomfortable but it could have been worse. As I said at Second Reading, there were lots of things on the table for discussion which could have made this a much tougher prospect for us. As it stands, this is our biggest budget—the budget where we spend £1 in every £4 of government money—and, despite all previous efforts, it is still growing as a proportion of total government spend. Therefore, no matter what we may think, this budget has to make its contribution to helping to put our finances back on a sound footing.

Yesterday, there was a debate in the Moses Room in which the Government proposed a £2.545 billion reduction in the overall welfare spend for 2013-14. Her Majesty’s Opposition rejected this as “vicious” and “contemptible”. Today, we have before us in this Bill a budget proposal of £3.7 billion for the two years following, and that is also rejected by Her Majesty’s Opposition. Therefore, £6.245 billion of savings have been rejected in two days. Yesterday—I have not heard it yet today—I heard a vague assertion about tax avoidance, but it is my understanding that this Government are spending far more on tax avoidance than the previous Government did and putting far more effort into it. When she replies, perhaps the Minister can tell us how much success the Government have had compared with the previous Government.

However, we are talking about £6.245 billion of savings and, in return, the Opposition are offering a tax rise. I refer to the issue of the 50% or 45% rate, which at Second Reading the Minister stated the OBR said would raise £100 million. If you slice that £100 million per annum off the total in cuts which have been rejected over the past two days, that means that there is still £6 billion to find, just to round up the figures. Therefore, we should reject these amendments because they offer no solutions beyond borrowing even more, raising taxes significantly or making deep cuts elsewhere in government expenditure, putting the burden of raising the money to repay it on my children and grandchildren.

This Bill would, in the end, save more than £3 billion a year. In their final year, the previous Government were spending £4 for every £3 they raised from the people of this country in tax. In comparison, this Bill saves £3 billion, but that should be compared with the last year of the Labour Government, when they were borrowing £3 billion a week. This is not a comfortable position in which we find ourselves and I would prefer it not to be happening. I share the aspiration for growth and I want to see our country back on track again. However, as the International Monetary Fund said in its World Economic Outlook last October, Governments need to create the right conditions for growth. It said:

“To anchor market expectations, policymakers need to specify adequately detailed medium-term plans for lowering debt ratios, which must be backed by binding legislation”.

That is what the Bill proposes today and that is what the amendment just does not do. As we cannot get an answer to whether higher taxes, lower spending or borrowing alternatives—or a combination of the three—is being proposed, I have no hesitation whatever in recommending to my noble friends on the Liberal Democrat Benches that these amendments, should the Opposition put them to a vote, should be rejected.

[Lord Bates]

My Lords, the noble Lord, Lord German, referred to the Opposition’s support for the cap on salary increases at 1%. I rise because I came across an interview that the shadow Chancellor, Ed Balls, gave when that policy was announced. This policy will impact on people with a salary above £21,000, below the benefit cap. When pressed on the “Today” programme about how he could justify limiting salary increases in the public sector to 1%, he said:

“And if people expect the Labour Party to say ‘We’ll just oppose’, we can’t do that. [It] would be irresponsible because the priority has got to be getting people into jobs rather than people being paid more”.

That is quite an interesting statement for the shadow Chancellor to make because, in my view, it very much reflects the purpose of this Bill and this amendment.

I do not think that my noble friends on the Front Bench have made life easy for themselves by making this a stand-alone Bill. It certainly should not be viewed that way. It needs to be viewed in the context of the introduction of universal credit, which will bring about benefits of £168 a month to 3 million families. That, because of the wage incentives and the attractiveness of work, will lead to an estimated 300,000 more people finding their way into employment. We need to be very clear that, in all of these measures, whether it be raising tax thresholds, universal credit or this Bill today, we are saying that the best route out of poverty is undoubtedly work.

The scale of the challenge we have in doing that is quite immense. Prior to the recession, unemployment in this country was around 1.62 million. It rose very sharply and when the party opposite left office the rate was 2.49 million. It continued on a trajectory up to 2.68 million. However, it has started to fall and has been coming down quite steadily for a few months and is now down to 2.5 million. The figures show that there are 1 million extra private sector jobs, and that is to be welcomed. Benefit changes that encourage growth and help people find their way into employment are surely things we ought to support.

It would also be nice to ask some of those who supported this amendment where they were last year when benefits were increased by 5.2% and salaries for the lowest paid went up by 1.7%. Where were their voices then? What is so compassionate about paying child benefit to people earning more than £50,000 or letting people earning up to £70,000 receive tax credits? We need to change the configuration so it is always in the interests of people to work and then we need to work to ensure that the jobs are there.

How do we create the jobs for that to happen? Clearly we need to get public spending under control so we can raise tax thresholds for individual workers and reduce corporation tax thresholds. We know that that creates employment the world over. That is why unemployment in this country is falling while in so many other countries it is rising. I understand the points that have been made quite seriously and the concerns that have been raised, but they are looking at this in isolation and, placed in context, this is undoubtedly a measure that in the years to come will reduce the levels of poverty in this country.

--- Later in debate ---

[Lord Forsyth of Drumlean]

My Lords, I am grateful to the noble Lord, Lord Griffiths of Burry Port. I did not think that he was a bishop and I was addressing my remarks to the Bishops’ Bench, but I say to him that the burden of tax has gone up substantially, and the reductions in government expenditure have so far been quite limited. We are discussing not a cut in government expenditure but limiting the increase in government expenditure to 1%.

I have had several goes at persuading the right reverend Prelate to indicate where the money for his proposal might come from. One possibility might be for people to put wages up. If the Church of England were to put up its clergy’s wages, less would be claimed in benefits and more would be available for others, but that is not a practical proposition for the church because the church, like the Government, is faced with a financial crisis and has to live within its means. What is good for the church is good for the Government and is good for particular families.

The most irresponsible part of the arguments that have come from the Bishops’ Bench this afternoon is about what happens if inflation is allowed to let rip. I fear that that may be about to happen as we continue to print money and borrow. As the noble Lord, Lord McKenzie, pointed out, we are borrowing far more than we planned to meet our commitments and to be fair to the most vulnerable. What happens when inflation takes off? I remember the 1970s, when inflation was running at very high levels, at 20% and more, and interest rates were at 15% and more. Who suffered? Children, the poorest and families suffered. There is nothing Governments can do to protect them once inflation takes off.

We do not want to go back to that kind of society. It tried to cope with inflation by protecting people through indexation, but it was unable to keep up with it and the result was, as the then Labour Prime Minister put it so eloquently:

“Inflation is the father and mother of unemployment”.

Jim Callaghan said:

“We used to think that you could spend your way out of a recession, and now we know that you cannot”.

Those words were said as the Labour Government left in 1979, leaving another Tory Government to clean up the mess, just as we are doing now.

The right reverend Prelate’s amendment of course carries great emotional impact. We would all like to see working families with children have a higher standard of living, but the way to do that is to create the wealth that enables us to support those families and enables them to get the levels of income and employment that they need. You do not do it by shaving the edges of the currency, allowing inflation to take off and committing those families’ children as adults to a debt burden that, frankly, will be impossible to pay off. They would be paying the interest for the rest of their lives, and that would disadvantage their children. In rejecting this amendment, as I hope she will, my noble friend is speaking not just for our children but for our grandchildren, who are entitled to expect responsible government in these straitened times.

[Lord Bates]

My Lords, I support what my noble friend Lord Forsyth said. When the right reverend Prelate comes to respond to the debate, I would be grateful if he would comment on the following point. He made great play, and I do not underestimate this, of the effect and impact of limiting the uprating of child benefit and child benefits generally to 1%. According to Appendix 3 of the helpful Library note on the Bill, regarding the child tax credit element, in 2011-12 the child element of child tax credit increased by 11.1%, a significant sum. That followed significant increases of 13% in 2008-09 and 12.5% in 2004-05. If one is to argue that limiting that increase now to 1% would have a significant effect, if you take it as a snapshot, that may be the case, but if one looks over time, one has to factor in those significantly higher-than-inflation increases that have occurred in the child tax credit element in the past.

One of the problems with trading figures with regard to child poverty is that you get some curious results. One of the most notable is that in 2010 there were 300,000 fewer people in poverty because the recession had caused the median income to drop—in other words, children were said to have been pulled out of poverty not because anything had changed in their lives but because the rest of society had got poorer. We have to be clear about what we are arguing for when we talk about the interests of children, which of course should be paramount.

I turn again to a theme in the debate on the previous amendment: one cannot just take this in isolation. One needs to look at what the Prime Minister has announced today on childcare, for example, which will make a significant difference to people by enabling them to move into employment. One needs to look at the pupil premium or the raising of tax thresholds, which means that someone on the minimum wage has seen their tax bill halved under this Government. One has to look at these things in the round. Unlike the Opposition, we have ring-fenced the budget for the National Health Service, on which people significantly depend. Again, in the round, we need to get this absolutely correct.

I will react to the charge that somehow there is an easy pot at the other end of the income scale to be tapped into. As a result of this Government’s actions, the richest pay more tax on capital gains, more stamp duty on their homes and more tax on their pensions and are less able to evade tax than was the case before. These factors need to be borne in mind in the broad reach of these changes that I know when taken in cold, clinical isolation, one year at a time, without reference to trends over time, may allow one to draw one conclusion but should be placed in the proper context. I seem to recall from my youth the good theological concept of placing individual verses in context in order to understand their meaning, and one might think it was a good idea to place this one measure in the broader context in order to understand what the Government are doing to bring people out of child poverty, which we accept is significant. Other measures, such as limiting the proposed increases in fuel duty—another factor that has a big impact on the poorest in society, particularly those with families—and caps on rail fares and on council tax, all seek to address the issues.

We also need to recognise that child poverty has a wider set of causes than cash payment alone, and in many ways, we are focusing here on cash payment on its own. We need to place in context the fact that the children’s opportunities and their likelihood of being in poverty are affected primarily by the extent to which they live in a workless household. Therefore, all our efforts to get people into work should be welcome.

--- Later in debate ---

[Lord Forsyth of Drumlean]

I have the highest regard and respect for the noble Baroness, Lady Hollis. She knows more about social security and understands the issues better than anyone else. I wish that she was on the Front Bench. If she was, she would be putting forward alternative proposals that might be more attractive and meet some of the points that are being considered, but she is not on the Front Bench and there are no alternative proposals.

We have to contain public expenditure not to within our means, because we are spending more than our means; the noble Lord, Lord McKenzie, pointed out that the Government are already borrowing and spending £200 billion more than was planned. I am simply arguing that if we continue like this the pound will continue to sink. The cost of energy, which, as the noble Lord, Lord Kirkwood pointed out, is a major cost for families, will go up. He supports windmills and other forms of energy generation that are the most expensive known to the planet and which are put on people’s bills without their knowledge as a tax and add to the pressure on these families. That is another example of where, if he is worried about poor households, he should abandon his attachment to windmills and other things that are raising energy costs and adding to inflation. The name of the game is to contain inflation by not having daft policies such as windmills and other energy policies. It is to act in a responsible way so that people will not decide that they do not wish to buy government debt, which is already a problem, and will not result in further pressure on the exchange rates.

I am sympathetic to the points that the noble Lord, Lord Kirkwood, has made and with which the noble Baronesses, Lady Morgan and Lady Masham, are concerned in respect of the people who are affected. The problem is that the remedy that they propose would make things much worse. It is not a good place to be. We would prefer not to have started from here, but it was Mr Gordon Brown who put us in this position, ably assisted by the noble Baroness, and we must sort this mess out. Clever as it is, this amendment is a smart attempt to get round the basic purpose of the Bill, which is fundamental to protecting people on low incomes.

[Lord Bates]

I support the noble Lord, Lord Forsyth, but I want to go one step further. He has dealt incredibly effectively with the measured arguments put forward by my noble friend Lord Kirkwood in Amendment 9, but it does not quite hit the interesting amendment in the names of the noble Baronesses, Lady Morgan and Lady Masham. I want to make a couple of points drawn from the Office for Budget Responsibility report looking at this Bill and the impact assessment.

Front and foremost are two things. The first is the control of inflation and the second is the creation of employment. They will help the poor more than anything else. If we fail to tackle the debt, the cost of borrowing will rise, as my noble friend Lord Forsyth has said. If the cost of borrowing rises, inflation will rise on the back of it. Therefore it follows that tackling the deficit is the best thing that can be done to help the poor. In table 2 on page 6 of its forecast, the OBR estimates that inflation will be: 2.6% in 2013-14; 2.2% in 2014-15; 2% in 2015-16; and 2% in 2016-17 and thereafter. It is clearly assessing that the culmination of the effect of these and other measures being taken is to move us towards a situation in which inflation is on a steadily downward course. That is the OBR’s assessment, which was used as the basis of the 2012 Autumn Budget Statement. As noble Lords have said, we will find out tomorrow where we stand vis-à-vis that.

Other elements need to be taken into account. We have the Low Pay Commission’s report coming up shortly. The Low Pay Commission provides a report that influences the minimum wage. The report was submitted at the end of February. I do not know whether my noble friends on the Front Bench have had sight of that recommendation, but it, too, provides a lock. Despite in previous incarnations being against the minimum wage, the Government have said that they support the minimum wage and have always accepted the recommendations of the Low Pay Commission to increase income as a result. Taking that together with the changes to universal credit that are deemed to be providing additional benefits to people estimated at £168 a month for 3 million families and the likely increase in tax thresholds and their impact on the salaries and incomes of the poorest in our society, it seems fair and reasonable, as the noble Baronesses, Lady Morgan and Lady Masham, have suggested, periodically to undertake a review. Post-implementation reviews normally take place three to five years after implementation.

We are talking about some of the most vulnerable. I believe that the position affecting the poorest in our society will not be as great as some people anticipate and that the situation with the combination of policies that I have outlined will lead to an increase, but as we are not having the annual uprating review, some periodic review of how this is working against projections of inflation and of the impact on the poorest in society would be sensible. I encourage my noble friends on the Front Bench to support it if possible. Should such a review take place, it should not need focus on the one narrow measure that has been the theme of this debate but should assess the wider impact on the poorest in society, taking into account the other measures—the pupil premium, NHS, the lid on fuel increases, the increase in personal allowances, the increase in the national minimum wage et cetera—which we are talking about. With that, I support the noble Baroness, but I am afraid not my noble friend Lord Kirkwood.

Regional Development

Lord Bates Excerpts

Tuesday 12th March 2013 Lords Chamber

[Lord Newby]

My Lords, as the noble Lord will be aware, we have had active regional policies to a greater or lesser extent in the United Kingdom since the 1960s. When I studied this at university, the figures were very much in my mind. The reason it is such a difficult issue to deal with is that, for example, in the north-east the proportion of people employed in the basic industries—mining, steel, shipbuilding and engineering—fell from something like 33% to well under 10% in a couple of decades. The challenge for government in trying to reduce regional disparities is how to put in place the kinds of long-term policies, such as infrastructure apprenticeships, that can begin to redress these wider economic forces. However, I do not think that government can reverse them, certainly not in the short term.

[Lord Bates]

My Lords, I welcome my noble friend’s recollection of the north-east of England and some of the history there. Did he have an opportunity to see the recent study in the Economist magazine about the north-south divide, which looked at the data between 1997 and 2010, pointing out that during that time in the north-east of England GVA grew by 41% and yet in the south-east of England it grew by 187%? Is that not part of the origin of the divide and is it not part of the correction to get good, well paid jobs in the private sector? If so, will he welcome the fact that employment in the north-east of England is at record levels, as are exports?

[Lord Newby]

My Lords, I very much welcome that, but I revert to my earlier answer. The north-east has in effect had to reinvent itself in terms of the balance of employment, which it has done reasonably well. However, it has been comparing itself, as my noble friend did, with the City, which has had an existing strength in financial services—one which grew almost exponentially during the period that he is talking about.

Welfare Benefits Up-rating Bill

Lord Bates Excerpts

Monday 25th February 2013 Lords Chamber

[Baroness Lister of Burtersett]

I do not want to get into a great debate about the economics of this, but are people in low-paid work who are getting tax credits not contributing to the wealth of the country in the same way? They are affected just as much as people on so-called welfare, which I prefer to call social security. The economic case was made by the noble Lord, Lord Low, and the noble Baroness, Lady Meacher. This is not about the state taking money out of the productive economy and somehow filing it away somewhere; this is about the state redistributing money to people who are more likely to spend it and to spend it in local communities, thereby helping to boost economic growth at the time we need it. I do not believe there is an economic case. I do not accept the crocodile tears that are being shed by someone who is prepared to support a Bill that will hurt people in poverty the most.

[Lord Bates]

I, too, was not intending to speak on this amendment, but I was spurred to by my noble friend Lord Forsyth of Drumlean. I rise to add to some of the points and to reinforce some of the questions that he has about this. I followed this debate quite closely at Second Reading, and I thought that the position then argued by the noble Lord, Lord McKenzie of Luton, was that the Opposition opposed the 2013-14 and 2014-15 limits but had not yet reached a position on 2015-16. Presumably by supporting this amendment, they are now making the position that they do not agree and would therefore reverse the policy as it affects 2015-16, which is £1.9 billion. I may have got that wrong, and I am very happy to sit down if the noble Lord wants to intervene to correct me.

[Lord McKenzie of Luton]

I shall clarify for the noble Lord that we made our position clear in respect of 2013-14, which is not in the Bill but is dealt with by regulations in the normal way. We made it clear that we will make no tax or spending commitments in respect of the next Parliament, which would include the latter part of 2015-16. As for 2014-15, we think that removing this cap would enable the normal process to take place so that there can be an assessment in the normal course about what is happening to inflation and the state of the economy in that year. I hope that has clarified the position. That has not changed since we debated this at Second Reading.

[Lord Bates]

The noble Lord is saying that the Official Opposition do not intend to make any pledges, which is interesting because I thought I heard last week that there was a proposal for a mansion tax and that that would be funded by other means. I thought that was a specific spending commitment beyond 2015-16.

My second point picks up on one from the noble Baroness, Lady Meacher, who made a thoughtful contribution. We overwhelmingly agree that the most effective way to alleviate poverty and raise standards is to create jobs. I would have thought that there would be some recognition that the Government’s record on that has been quite reasonable. We would of course like it to be very much better, but contrary to some other countries that are wrestling with the same problems our unemployment rate continues to fall. We now have the highest level of private sector employment in our history and a million new private sector jobs since the last election. That suggests that moves to reform taxation and stimulate the economy are beginning to have some effect, and that they are the best way of tackling this.

We have an Urgent Question coming up on the rating agency decision: the noble Lord, Lord McKenzie, and the noble Baroness, Lady Meacher, referred to this. I was reading through the decision and thinking of making a contribution to the Urgent Question, which I will not now do having secured the Floor in this debate. Moody’s statement,

“explains that the UK’s creditworthiness remains extremely high … because of the country’s significant credit strengths”,

chief among which are,

“a strong track record of fiscal consolidation and a robust institutional structure”.

That is quite interesting. In fact, going beyond that, we are again warned about what could happen to the country’s inflation and the cost of borrowing if the country were to be downgraded again.

Further down, on what could move the rating up or down, Moody’s statement says that,

“downward pressure on the rating could arise if government policies were unable to stabilise and begin to ease the UK’s debt burden during the multi-year fiscal consolidation programme”.

So there is a case for fiscal consolidation. There needs to be a recognition that the Government’s policies of raising tax thresholds and increasing employment are beginning to have some effect.

Notwithstanding that, I come to a point of agreement, which I made at Second Reading: no one on any side of the House is cheering on this measure. It is an economic necessity. It is certainly not something that anyone takes pleasure in.

[Lord Bach]

My Lords, although I am delighted to support these amendments, believing the Bill to be yet another attack by the coalition on the poorest and those in the squeezed middle, I confess to feeling more than a little hard done by being obliged to speak at all to the amendments in this group. The reason for this is that a draft amendment in my name was refused as not being in scope. The draft amendment was to the commencement part of the Bill, on page 2 at line 38, and says:

“Except that no commencement shall take effect until the Secretary of State is satisfied that legal help is available for all claimants who seek legal advice on the validity of the decision on their benefit entitlement”.

At first sight, it sounds as relevant to the Bill as other amendments that grace this Marshalled List, but there it is. My amendment has for some reason ended up on the wrong side of the line. It is not for me to speculate on whether any part of government was asked its view as to the status of my amendment, but I venture the opinion that it may be something of a relief to the Government that my amendment does not stand to be debated or to be voted on at a later stage.

However, I would argue that the principle behind it clearly is relevant to this group of amendments. It could be called a pursuit of justice or, to put it the other way around, the avoidance of unfairness. Because the concentration is rightly on the measures themselves, what is so often left out of the arguments about welfare reform, whether in relation to this Bill or the regulations that we were debating before our half-term break—in this case, the 1% uprating—is what potential real remedy the citizen will be left with if the department’s decision is wrong. Surely the fact that it is wrong in many cases is not in question. We all know that, with the best will in the world, decisions made by the department are often wrong and very much to the disadvantage of those who want to claim them.

For a long time, this has not been a pressing problem. For those requiring legal advice on their benefit entitlements, legal aid has been available—if, of course, these people came within the criteria for legal aid, and many did. For a small amount of legal aid, quality advice has been available, having the effect of both stopping—this is important in cost terms—hopeless claims and establishing good claims where appropriate. It is a system that worked. Putting it at its highest, it has allowed access to justice for all. At a slightly lower level, it has meant that tribunals have not been faced with an impossibly large number of cases, many of which should never have been brought in the first place. It has cost a fraction of the total legal aid budget and is paid to lawyers who are not by any standards well paid. Yet from 1 April, as a deliberate act of government policy, this legal help will no longer be available for anyone in cases relating to welfare benefit entitlements, whether under this Bill or under the regulations and the larger Act passed by Parliament last year.

Thus, people will not be able to get the advice to which they are entitled. Their access to justice will be gone. The department will get away with wrong decisions and tribunals will be overburdened with what I can only describe as rubbish cases—all to save £25 million per year on welfare benefit advice. Perhaps I may remind the House and this Committee that that is one-tenth—I repeat, one-tenth—of the amount set aside by the Department for Communities and Local Government so that there can be weekly rather than fortnightly collections of rubbish. Is this really a proper sense of priorities for a time of austerity?

Further, everyone who knows anything about this agrees that this is not likely to be a saving at all in the end. The state—I fear that it will be the department as much as any other department and perhaps the Treasury—will eventually have to pick up the pieces when things get much worse than they need to. What does the Minister, for whom I have a high regard, have to say about this? What does he say to those who under this Act will not be able to query a wrong decision about their entitlement? They will not be able to do that because they will not be entitled to legal aid for legal advice as to whether a mistake has been made. How can the Minister or any Government justify this either in terms of common decency, which should appeal to this House and normally does, or even under the rule of law?

--- Later in debate ---

[Lord McKenzie of Luton]

My Lords, perhaps I may wind up on behalf of my noble friend, who moved Amendment 1 on my behalf. I thank the Minister for his range of responses. I emphasise that, yes, we believe the amendment would negate the Bill, but it would not prevent the Government doing what they wanted to, given a chance, over a three-year period. However, we believe that it is wrong to lock in a real-terms cut for three years. Effectively, it is for two years, given that the first year is by way of regulation.

On issues of tax, the Minister, in response to the Second Reading debate, said that a 50% tax rate would not garner the revenue we believed because people would order their affairs. Ordering their affairs, as set out in some detail in the HMRC publication that looked at this issue, would involve switching income from one year to another. It is quite possible that, as we speak and draw to the end of the current tax year and move towards, possibly, a 45% tax year, a great deal of income will shift from this year into next year. Will the Minister say whether he thinks this is okay and acquiesces with it, or whether it is a matter that the Government should address in some form? If you simply sit back, clever and well resourced people will reduce their tax liabilities as fully as they can. However, it does not inevitably have to be that way, particularly when the people who will pick up the burden of that avoidance are at the very low end of the income scale.

[Lord Bates]

I take the argument that the noble Lord is making about 50p down to 45p. I am puzzled therefore as to why, during the entire period of the previous Government, who were in power from May 1997 until April 2010, the top rate was 50p. It reduced to 45p only on 6 April 2010. If it was an overriding cause of concern and a belief of the Government of that time, in which he served as a distinguished Minister, surely they would have kept the rate at that level and not proposed reducing it.

[Lord McKenzie of Luton]

We are addressing the policies of this Government. We can spend all our time debating what previous Governments have done but we are addressing this Government’s determination to raise the revenue that they can from a 50% rate, rather than give what is a huge tax cut to a minority of people in our country at a time when people at the other end of the income scale are being asked to bear a real additional burden. That is what we are complaining about and we believe that the Government can and should do something about it.

There have been a range of powerful contributions to this debate. I agree entirely with my noble friends Lord Bach and Lady Hollis about this collection of things that are going on, particularly at the moment. New benefits, new structures and new payment details are being introduced in circumstances in which it is difficult for people to access good advice, to get justice when they wish to challenge, or even to understand the system with which they are faced.

The noble Lord, Lord Bates, referred to fiscal consolidation. Yes, we all agree about fiscal consolidation: the issue is how you go about it. We all agree about the importance of work and getting people into work, but it is how you go about it. The problem is that the Government have not produced the goods. Every time George Osborne presents a Budget or an Autumn Statement, the OBR revises growth downwards. Indeed, the latest GDP figures show that there has been no growth this year. The issue is not about whether we believe growth is the right way forward; it is about how you get it—and this Government have not delivered on that.

As to their impact on benefit spending, the Government’s failure to get Britain back to work is sending the social security bill up by something like £13.6 billion more than expected. Long-term unemployment is up by 55.7% this year. That is a manifestation of government failure in getting people into work and on growth in the economy. Borrowing has risen by 10% so far this year and it looks as though the Chancellor will miss his target to get the national debt falling by 2015.

On our record on benefits, I would say to the noble Lord, Lord Forsyth, that real-terms expenditure on out-of-work benefits fell by £7.45 billion under the previous Labour Government between 1996-97 and 2009-10, while real spending on out-of-work benefits in 2006, at something like £38 billion, was at its lowest point in 15 years. You do not have to take my word for Labour’s record on benefits. An analysis was made of the Labour Government’s record on welfare reform and it was found that they had made “strong progress” in their welfare-to-work agenda. Policies such as Welfare to Work, the New Deal and Jobcentre Plus were all a success. It was the noble Lord, Lord Freud, who came to that judgment.

Banking: LIBOR and EURIBOR

Lord Bates Excerpts

Tuesday 12th February 2013 Lords Chamber

Asked By

[Lord Bates]

To ask Her Majesty’s Government what plans they have to review the working of the Financial Services Authority’s executive settlement procedures in the light of discounts applied to fines levied as a result of misconduct in relation to the setting of the London Interbank Offered Rate (LIBOR) and the Euro Interbank Offered Rate (EURIBOR).

[The Commercial Secretary to the Treasury (Lord Deighton)]

My Lords, the Financial Services Authority awards discounts for early settlement of cases involving financial penalties, as it considers early settlement to be in the public interest. The Government take the manipulation of LIBOR and EURIBOR very seriously. We accepted the weekly review recommendations on LIBOR, and are implementing them in full. Furthermore, we are ensuring that the money raised from these fines will go to specific causes which demonstrate the best of British values.

[Lord Bates]

I am grateful to my noble friend for that Answer. Does he agree with me that the manipulation of these rates by some banks was a deeply cynical fraud against borrowers in times when they could least afford it, and that while the fines levied by the FSA on those responsible may be at record levels they were a small fraction of the profits made by those institutions? The fines were substantially less than those imposed by the US regulator. Due to the FSA’s executive settlement procedures, those responsible received over £100 million in discounts on the fines levied so far. Would it not be more in keeping with the way in which banks treat their own customers if the FSA was now to scrap early-settlement discounts and replace them with a system of late-settlement penalties?

[Lord Deighton]

My Lords, my noble friend makes an important point about the seriousness with which we are addressing this attempted manipulation of LIBOR rates. On the specific question of the penalties, the Financial Services Authority is the independent regulator. It is mandated to set all the rules on regulatory matters. That includes decisions about using early-settlement discounts as a way of managing the process. It considers it in the public interest to settle matters in cases involving financial penalties as early as possible and to provide incentives. There are many advantages in early settlement. It helps consumers to get compensation earlier than would otherwise be the case and prevents cases being contested at the regulatory decisions committee, which could cost a lot of time and money.

Banking Reform

Lord Bates Excerpts

Thursday 14th June 2012 Lords Chamber

[Lord Sassoon]

The noble Lord, Lord Desai, as always, brings up important points. Of course, living wills are an integral part of the whole construct for better resolution of banks than we had before. Indeed, the FSA has been leading the project for a couple of years or more to make sure that all the arrangements are in place. The noble Lord draws attention to another important part of the construct.

[Lord Bates]

But can my noble friend confirm that the banking crisis actually cost the taxpayer, in direct cash, loans and guarantees, close to £500 billion—£465 billion pounds? Therefore, it behoves the Government to take some action to protect savers and the interests of the taxpayer in this regard. The introduction of the leveraging ratio is therefore welcome, particularly as it follows international norms rather than putting our industry at a competitive disadvantage.

I have one small, technical point. The Minister has an incredible grasp of the detail, but does my noble friend have understanding of whether there will be any implications of introducing that leverage ratio for the Government’s holdings in Lloyds Banking Group and RBS?

[Lord Sassoon]

I am grateful to my noble friend for pointing out the extraordinary cost of the banking crisis. He cites one figure; I think that the estimates ranged from £140 billion upwards. They are extraordinary figures, which, as I said at the outset, the then Government did not seem to think required any response. I completely agree with my noble friend Lord Bates that something needed to be done, and that is what we have brought forward.

As for the effect on the Government’s holdings in RBS and Lloyds, I am sure that your Lordships like reading, as I do, the fine detail of impact assessments. At the back of the White Paper, the impact assessment contains several paragraphs analysing the effect. It gives a number on a rather theoretical comparison of what the effect might be, but then points out that this is probably already priced into the market so that the price of the holdings today takes account of what is proposed.

Queen’s Speech

Lord Bates Excerpts

Wednesday 16th May 2012 Lords Chamber

[Lord Bates]

My Lords, I rise to attempt to give an optimistic speech, in the present environment, on the economy. In doing so, I feel a little bit like my comic hero and fellow north-easterner, Rowan Atkinson. He used to do a sketch where he came on stage dressed in a track suit and would play the part of a Geordie football manager. He would walk on clasping a football and, looking at the assembled dejected faces in his dressing room, would say, “37-0—but don’t worry, lads, we’ve got everything to play for in the second half. But before we do that, we have got to get back to some basics”. Holding up the ball he would say, “Kev, what’s this? And where’s it meant to go?”. The answer was, “The goal”. Then Rowan Atkinson, the Geordie football manager, would say, “But whose goal?”. That experience of trying to get back to the basics of what we are about seems pretty fundamental.

In that element of grasping for the basics, I thought about what we should be saying about the economy. What is the role of government in the present environment? There are four points on which I want to focus. First, we need to be quite frank about the limits of government. What can we actually do?

The amendment presented to this debate refers to,

“the failure of Your Majesty’s Government properly to address economic recovery”.

Yet, on looking at the gracious Speech, the whole first page is packed full of references. It states that,

“my Government’s legislative programme will focus on economic growth”.

The next sentence refers to measures to “restore economic stability”. That is followed by references,

“to reduce burdens on business …. to promote enterprise … to establish a Green Investment Bank”,

for fair energy markets, and so on.

There is a profound misunderstanding in some parts of the House as to the role of government. We hear a clarion cry for there to be a greater increase in public expenditure. What do they think is going on? We inherited a situation in 2010 when public expenditure was £669 billion; the figure last year was £730 billion in absolute terms, and it will go on rising year on year for as far as the forecasts go out. Added to that, they speak almost as if we were having a slash and burn austerity drive whereby we reduce every penny of borrowing. Yet we inherited a deficit and a level of government borrowing which was just a shade over £1 trillion and over the next four years we will not repay one penny of that. In fact, we will add 40% to that Bill, which people will have to address in future generations. So the notion that somehow this Government are embarking on some one-sided approach to attempt to lift us out of this present situation is fanciful and misleading. It discourages the many people in this country who are working hard in public service jobs and who fail to understand that the Government are taking their position very seriously and value the contribution that they make to the economy. We are taking a balanced approach between different types of investment and efficiency savings in other parts, as we should.

The point that we need to realise is that Governments do not create jobs. They create the environment in which jobs can be created by entrepreneurs and businesses and their employees. That is what we are trying to do, just as in an Olympic year our responsibility is to put on the Games to make sure that they are safe and secure and that the rules and infrastructure are in place. But the real show is what the individual athletes and Olympians actually do with that opportunity, and that requires some encouragement and inspiration. So telling things as they are in terms of what is actually happening in the economy and what the Government are actually doing, which is being passionate about economic growth and trying to delicately lift ourselves out of the situation, is something that is very important to communicate.

There is quite a big trend at present in banker-bashing and attacking the City of London in every way. Banks played a major part in getting us into this problem by irresponsible lending, but Governments undertook irresponsible borrowing and consumers undertook irresponsible borrowing. In that sense, we all have a part in this. Bankers may have got us into this problem, but they must also be the people who help us get out of this problem, so we have to look to restoring health in that environment.

Then there is the importance of Europe. We sometimes sit on the sidelines and look smugly at what is happening there, without realising that it is our biggest customer. Two-thirds of our exports go to Europe. No wonder that the Foreign Secretary, speaking today, said:

“No single event would provide a bigger boost to the British economy in the short term than the resolution of the eurozone crisis”.

It is absolutely fundamental to our success that we see Europe advance.

Over the past year, having travelled extensively through Europe, I have had the opportunity to meet on many occasions the diplomats and officials who are out there selling Britain. They are absolutely passionate about selling Britain; UKTI does an outstanding job. I have seen the passion that they have for the greatness of this country and our educational institutions and businesses. This is a fantastic country; it is a competitive international country; it is the sixth-largest country in the world. When the Chinese are looking to place their Renminbi fund somewhere in the world—and they have the choice of everywhere—they have come to the City of London. When the Japanese want to develop a new motor vehicle, they come to Sunderland and the north-east. That is something that we ought to be proud of. Therefore, I urge noble Lords and my noble friends to remember that and get out there and sell what this country is doing, recognising that the Government are doing as much as they can.

Sunday Trading (London Olympic Games and Paralympic Games) Bill [HL]

Lord Bates Excerpts

Thursday 26th April 2012 Lords Chamber

[Lord Sassoon]

My Lords, that makes the point that Germany had a much more restrictive regime than the UK, and that country freed it up much more significantly compared with the normal regime for the 2006 World Cup to give everyone the sort of experience that we want for the Olympics here. Then it reverted to what it was before. I am grateful to the noble Lord for bringing up that point.

[Lord Bates]

In the debate at Second Reading views were expressed on the broader issue of Sunday trading. The position that I stated in that debate was that I did not think that the economic case was at all convincing and that it did not manage to clear the retail growth review from the Treasury or clear the recent red tape review. A number of respondents did not say that this was something that they wanted to go ahead. The noble Lord, Lord Myners, who has very significant experience in this whole area, looked at the case and said that it was at least questionable, certainly ordinarily. I agree that we are talking about exceptional times. Normally the restriction on larger stores is not just a restriction on them but is to protect the smaller stores.

The noble Lord, Lord Myners, referred to Justin King from Sainsbury’s serving on LOCOG and asked whether the position was different given that Mayor Boris Johnson had put him forward. Like others on this side of the House, I am spending a fair bit of time campaigning for Boris Johnson at the moment. He has made a great priority of strengthening the high streets and supporting small business. That is essentially what this measure is about.

That point made, I turn to the amendment, which I welcome. Let us be clear what we are talking about on the date, which as it stood in the Bill was at 24 April. We were effectively going to say that the minimum notice period that had to be given under the Bill was that, two days ago, before this legislation had been passed, somebody would have had to give notice to their employer that they did not want to work on 22 July. On that point it is obvious and the Minister, who is wise in these things, has brought forward this amendment, which is very simple in its present form. I do not buy in any sense the idea that Amendment 1E, tabled by the noble Lord, Lord Davies, simplifies the thing. If anything, it makes it more complicated because you almost go back to the potential for three months, with a two-month notice period then a one-month response period to come back in. You are potentially going back into this very difficult situation.

It is also worth noting a little more about which Sundays we are talking about, because we know where this argument is coming from. It is from the big stores, particularly the London-based stores and development companies that sponsored the research pointing to the benefit, to which my noble friend Lady Browning referred. In fairness, I did not mean that as a jibe. We are in a recession and we want to make money. When we have people actually coming here, we want jobs so they absolutely ought to try to make the case. I am simply pointing to the fact that there is an element of that. The impact assessment refers to the fact that there will be 450,000 visitors, but they are not going to stay for the whole period. They will predominantly be clustered around the summer Olympics rather than the Paralympics. I would wish it to be the other way round, because the Paralympics espouse to me more of what the Olympic spirit is all about, but the reality is that most of the attention will come from 27 July, when the opening ceremony takes place. Therefore, the first Sunday on which there will be the desire to celebrate sporting achievements by visiting shops for more hours, for which we accept the case because the cake will be larger, will be 29 July and not 22 July. Moreover, the Games will be going on until 12 August, which happens to be a Sunday in my diary, while on Sunday 19 August, for which liberalisation is being made, nothing will be taking place—other than a lot of people working very hard to get the site ready for the Paralympic Games to start. However, those Games do not start on 26 August; they actually start on 29 August. To add insult to injury, the dates finish on the closing date of the Paralympics themselves, 9 September. That part is absolutely right.

This is a simple adjustment. The opposition amendment makes this not simpler but more complex. Most of the visitors and the economic activity will be early on, which again is the reason for giving maximum notice to people. If they have problems, we need to make sure that that happens as quickly as possible and therefore the adjustment to two months, as proposed in my noble friend’s amendment, would seem sensible in this case.

[Lord Elton]

My Lords, the noble Lord, Lord Myners, greatly underestimates my noble friend Lord Sassoon’s ability if he thinks that my noble friend’s excellent speech—I agree about that—at Second Reading is anything like the high point of his parliamentary career, as the noble Lord said it would be. My noble friend has a long way to go. Now he is looking at me as if he is wondering what is coming next, which is quite right.

I simply want assurance on what I think are called Pepper v Hart terms—in other words, for the guidance of people trying to work out what this law is meant to mean when they come to examine it in court. I am concerned rather along the lines that the noble Lord, Lord Graham of Edmonton, put forward. I am an inveterate opponent of Sunday opening in principle, but the House has given a Second Reading to the Bill. I accept that so what we are discussing are the means of exempting on grounds of conscience those who do not wish to be ruled by it—and of course I am in favour of that. However, throughout the Second Reading debate and in conversations thereafter, everybody has been seeking reassurance that this is not to be used as a precedent. The phrase actually used was “stalking horse”; I take it that that means a precedent. When the noble Lord, Lord Graham, made that point forcefully he got a reply from my noble friend with some information in it, but not an avowal again that this is not to be used as a precedent or that that is not the Government’s intention. All I ask is that my noble friend reiterates that assurance, so that it will be on the record in this debate as well as at Second Reading.