Budget Statement

Lord Bilimoria Excerpts

Wednesday 23rd March 2016 Grand Committee

[Lord Bilimoria (CB)]

My Lords, it is wonderful to follow the noble Lord, Lord Darling; this is the first time I have taken part in a debate with the noble Lord since he joined us. I remember very clearly leading a delegation to India as the chairman of the UK India Business Council, accompanying Gordon Brown, who was then Chancellor, and the noble Lord, Lord Darling, who was then Secretary of State for what is now BIS. I remember saying at one of the speeches I made there, “We have with us possibly—probably—the next Prime Minister and the next Chancellor”. Of course, on 27 June 2007 that came true. It is wonderful to have the noble Lord with us as well as the noble Lord, Lord Price, whom we welcome. I say this not just because Waitrose is a very good customer of Cobra beer. The noble Lord is a hugely respected established figure in the food and drink and retail industry—that feeling is unanimous; I have never heard a bad word said about him—and we are very lucky to have him with us.

Looking ahead, there is huge uncertainty. We have the election for the Mayor of London, the EU referendum, the Iraq inquiry report, the decision on Heathrow and Gatwick, which the noble Lord, Lord Darling, mentioned, which has been delayed until after the mayoral election, the American elections, and the Middle East situation and Daesh-IS. There is wretched, awful terrorism in places such as Paris and Brussels. What a backdrop for a Chancellor to produce a Budget against. Just look back to November, when the Chancellor was riding high—there was £27 billion extra and a rosy outlook—then within weeks he was backtracking because the outlook for the global economy was weaker, and the UK is not immune to slow-downs elsewhere.

This Budget has some excellent measures in it. Capital gains tax, which I have talked about time and again—which used to be 18% under the old Labour Government, increased to 28% and should go back to 18%—is down to 20%. That is wonderful news, and with the basic rate going down from 18% to 10%, that will help wealth creation, which I will come back to later. Entrepreneurs’ relief has also been extended, which is also fantastic. On business rate relief, 630,000 small businesses will pay no business rates at all next year, and reforms to national insurance will abolish class 2 contributions. That is all good news.

Cutting corporation tax down to 17% is absolutely tremendous and I will come to that later. Improved loans for doctoral students and loan systems for postgraduate students are also great. They are not quite where they should be but it is great progress. I declare my interest when I say that beer duty being frozen is very good. On a serious note, it is good for the pub industry, jobs and the consumer. There is investment in infrastructure—whether you agree with it or not—such as Crossrail 2 and HS3. I think that is terrific. There is also investment in roads.

However, the Government have made serious mistakes in the Budget, for example with the PIP. The IFS calculated that 370,000 people were affected by the change to the PIP criteria, and that it worked out to an average loss of £3,500 per person per year. The comments of my noble friend Lord Low on this issue have been vindicated as the public have agreed with them and the Chancellor has had to backtrack. As regards our complicated tax system, as a member of the Economic Affairs Finance Bill Sub-Committee, I know that a huge overhaul is needed vis-à-vis tax simplification, and I will come to that later.

The most important point concerns the uninspiring efforts to improve productivity, which was referred to by the noble Lord, Lord Eatwell. The OBR pointed out that productivity will be a serious issue. Chris Giles of the Financial Times said that the OBR had “flip-flopped” by giving the Chancellor,

“a £27bn windfall to play with over five years in the Autumn Statement”,

but that the OBR,

“has now removed £56bn in these Budget forecasts”.

Does the Minister agree with that?

The director-general of the Institute of Economic Affairs, Mark Littlewood, described the Budget as “slow, steady” and “rather unimaginative”. I think that is rather unfair. However, he went on to say that,

“at least the Chancellor hasn’t thrown out his target of a Budget surplus for 2020, even if he has almost no margin for error in hitting that target”.

What he said about the increase in the 40% threshold is very good. However, on the capital gains tax, he says:

“The old top rate of 28% was actually losing the government income—high CGT rates damage economic growth by encouraging individuals to hold on to assets that would be better off under different ownership”.

Therefore, I congratulate the Government on that once again.

KPMG’s chairman referred to,

“a variety of measures aimed at the more traditional butcher, baker and candlestick-maker across the country but also the digital age ‘kitchen table’ entrepreneurs”.

Robert Chote, head of the OBR, says that the OBR has revised down productivity growth, meaning that,

“the cash size of the economy is about 3 per cent smaller … than we predicted in November”.

I ask noble Lords to keep that figure in mind—3% smaller than a few months ago. Robert Chote also said that the public sector net borrowing situation was £11 billion worse than previously forecast, and that weaker GDP growth means that debt to GDP ratio would rise, rather than fall, this year. Does the Minister accept that?

The Institute of Directors—not surprisingly—welcomed the measures that will help SMEs but also questioned how the Chancellor aimed to achieve the budget surplus he has promised by 2019-20 given the downgrade in the economic forecast. Simon Walker, the director-general, said:

“The UK faces risks on many fronts, and much heavy lifting will still be required to get rid of the deficit by the end of the Parliament”.

Does the Minister think that there is a realistic chance of doing this?

The Government have had the guts to do a lot but they have not had the guts to reduce the top rate of income tax down from 45% to 40%. That is what it was under a Labour Government for many years. They have reduced CGT; they should reduce the top rate of income tax down to 40%. That would make us more competitive. Does the Minister agree?

Government spending as a share of GDP touched nearly 50% under the Labour Government. It was at 45% of GDP by 2010. The Government want this to go down to 36.9% of GDP by 2020. Is that realistic? Given that the NHS and so many other areas are ring-fenced, does the Minister really think that we can get government spending down to 36.9% of GDP? The OBR forecasts are changing all the time. The Government are relying on them when it suits them. Now it does not suit them. It is like the Governor of the Bank of England bringing in forward guidance. What a ridiculously ludicrous idea. Of course, he has had to backtrack on that completely.

The Office of Tax Simplification is an oxymoron. The Government should be simplifying tax, not complicating it, but the Office of Tax Simplification does not have the powers it needs. I would ask the Government to look into giving it more powers and consulting it more, which they are not doing at the moment.

I congratulate the Government on security, about which the Minister spoke in his remarks. We have now finally agreed to the 2% defence spending, which is the NATO commitment and is wonderful, particularly given the environment we are in. Also, the SDSR 2015 is a huge improvement on the SDSR 2010.

We should keep things in perspective. This little country comprises less than 1% of the world’s population yet we have 4% of the world’s economy and 7% of the world’s welfare spending. That cannot really go on. We have seen welfare reform that was desperately needed, but on the other hand the reforms need to be fair or we will see headlines like that in the Sun, “Beware the IDS of March”. The disability benefit proposals were a huge mistake on the part of the Government and I think that the Chancellor now regrets that. Reducing corporation tax is great, but capital allowances are not as attractive as they should be. Does the Minister agree that they also need to be more attractive?

I turn to productivity. We are caught up in a short-term, five-year election cycle when what we really need more than anything else to improve our productivity is to invest in our universities. As a percentage of GDP our spend on universities is way below that of the United States, way below the EU average, way below the OECD average, and yet along with the United States we still have the best universities in the world. Cambridge University with its 92 Nobel Prize winners has won more than any other university in the world. Just imagine how much better we could do if we were to spend the equivalent in proportion to our competitors.

Linked to that is investment in R&D and innovation. We have great research papers and amazing fundamental research, and yet as a percentage of GDP we underinvest on R&D and innovation compared with the EU and the OECD average and are way below the United States; even South Korea invests more as a percentage of GDP on R&D and innovation than we do.

I think that the noble Lord, Lord O’Neill, said that when the forecasts change, our plans have to change with them. Perhaps we should rename the noble Lord as John Maynard Keynes:

“When the facts change, I change my mind”.

The facts have changed and they are going to continue to change, but will the Government be able to adapt quickly enough to be able to cope with that? The Minister also mentioned the Oxford-Cambridge corridor. That is brilliant news. The corridor will create a golden triangle between London, Oxford and Cambridge that will help with R&D and innovation and the university excellence that we have.

I conclude by saying that last week I was in Delhi in my new role as a food champion for Britain, having been appointed by Defra. We went to launch a food festival in Delhi. It was a curry festival—taking coals to Newcastle. British curry chefs were flown out to the ITC Maurya, one of the finest hotels in India, to serve British curry—chicken tikka masala and Balti, dishes that do not exist in India—to Indians. In my speech at the opening of the festival I said that we should just look back to the 1980s. Britain was the laughing stock of the world when it came to food. British food was sneered at. Today, this country has some of the finest cuisine in the world, and indeed London is the restaurant capital of the world. In the 1980s, this country was looked upon as the sick man of Europe, but today we are the envy of Europe. In the 1980s, this country looked down on entrepreneurship—Del Boys and second-hand car salesmen—but today we celebrate it because we are one of the centres of the world. We have the best of the best capabilities in every field that can be imagined, whether it be architecture, entrepreneurship, universities, the City of London, the creative industries, or culture and sport, we are the best of the best.

The Budget is there to help us, but Governments make mistakes. I think that the Chancellor has lived up to one of my favourite sayings: good judgment comes from experience and experience comes from bad judgment. So, a fair and competitive Budget.

Autumn Statement

Lord Bilimoria Excerpts

Thursday 3rd December 2015 Lords Chamber

[Lord Bilimoria (CB)]

My Lords, Britain has less than 1% of the world’s population and represents just 4% of the world’s GDP, and yet it makes up 7% of the world’s welfare spending. There is no question that the Budget deficit needs to be cut and that the Chancellor needs to balance the books, even if this has meant cuts of well over 20% in some departments, as we saw in the Statement. Yet now the British economy is growing faster than any other G7 economy, with low rates of unemployment and high employment, and projections which show that the growing economy will produce more tax receipts, allowing the Government to invest in the crucial means to make us more productive and innovative. I thank the noble Lord, Lord Carrington, for initiating this debate, and I could not agree with him more about tax simplification—in fact, I often say that the Office of Tax Simplification is an oxymoron.

I turn first to higher education, which is one of the jewels in this nation’s crown. The decision to allow part-time students to access maintenance, as well as the protection of science budgets in real terms, is an excellent one. The Government are finally moving in the right direction with regard to our universities. For decades we have underinvested in R&D, well below the OECD, EU and United States averages, but now there is a financial boost going towards Innovate UK and the UK’s network of world-leading Catapult centres. Investment is being made into promoting exports through UKTI. We see investment in our aerospace industries and other advanced manufacturing industries. Here I applaud the Chancellor’s decision to provide extra support for postgraduate students, who are a vital part of boosting productivity in this country.

As we have heard from the noble Baroness, Lady Noakes, by maintaining a historically low rate of corporation tax, the Chancellor has supported a business-friendly Britain, but as an entrepreneur and businessman of course I think that the top rate of income tax should fall back from 45% to 40%. If it did so, that would make us more competitive. Also, capital gains tax should be reduced from 28% to 18%, which is where it was. This week I spoke at the launch of ResPublica’s excellent report, Make or Break. It is all about encouraging manufacturing in the UK. During his visit to the UK in November the Indian Prime Minister, Narendra Modi, spoke of his “Make in India” initiative. India has a target to increase manufacturing as a percentage of GDP from 16% to 25%. Does the noble Lord, Lord O’Neill, agree that we in Britain should have a target to increase manufacturing from 10% of GDP, where it is today?

Furthermore, and more important, the Chancellor has understood our recommendations on military and defence spending. The warnings have been there since SDSR 2010, in which the scaling back of spending on defence and security, I believe, damaged our capabilities in those areas. On top of that, when it comes to security in the dangerous world we are living in, dismissing the idea of cuts to police forces is excellent news.

In full, this is an excellent review of the public finances. While it is right to continue to make the cuts that will make us more efficient as an economy, it is also essential to use the UK’s advantageous position to invest in helping the economy to grow. No business can grow by cutting alone; businesses can become more efficient by making cuts, but they also have to invest to grow. These are all steps in the right direction. However, this is dependent on a continuing increase in tax receipts and on net interest payments being low. If interest rates go up, it will be more difficult for the Chancellor to continue down this path.

Moreover, let us not forget that this was made possible by the Chancellor finding an extra £27 billion. The noble Lord, Lord Horam, talked about luck. Well, my best definition of luck is when determination meets opportunity. What is brilliant is that we must not forget that forecasts can be very badly wrong. Robert Chote, the director of the OBR, said that his organisation had predicted growth to be six times stronger between 2010 and 2012 than the official figures suggested was the real case.

I would like to conclude by saying that I am so glad that the Chancellor has made the decision to reverse his planned cuts on tax credits. While the media and the noble Lord, Lord McFall, may have branded the Chancellor as having committed a dreaded U-turn, let us not forget, with all due respect to the noble Lord, Lord Wakeham, that without the actions of this House, the mistakes the Chancellor would have made would now be mistakes enshrined in law. That is no better reminder of the importance of this House when carefully considering legislation, and as the check and balance and guardian of the nation. Steve Jobs, the founder of Apple, said that,

“changing your mind is a sign of intelligence”.

Clearly, we have a very intelligent Chancellor. I now also name him as “the listening Chancellor”. Thank you, Chancellor.

United Kingdom: Productivity

Lord Bilimoria Excerpts

Tuesday 8th September 2015 Lords Chamber

[Lord Bilimoria (CB)]

My Lords, matching UK productivity to United States levels would raise GDP by 31%. The graph in the Government’s report clearly shows that the United States has high living standards and high productivity. In Britain we have a lot going for us: we have less than 1% of the world’s population but have the fifth largest economy in the world. However, if our GDP was 31% higher, it would allow us to leapfrog Germany as the biggest economy in Europe and the fourth largest economy in the world.

The Government’s report very clearly outlines several factors that increase productivity, and as a happy businessman—to quote the noble Lord, Lord Desai—I commend the Government’s decision to reduce corporation tax to 18% by 2020. I am proud to be chancellor of the University of Birmingham, one of the top 100 universities in the world. The UK has more universities in the top 100 in the world than any other country except the United States. We have phenomenal capabilities in a variety of sectors. We also have one of the most open economies in the world and are a true trading nation. In fact, most people do not realise that we are the second largest inward investment destination in the world. Yet when it comes to productivity, as the Minister acknowledged, we have lagged behind other economies. We are ranked 18th out of 34 OECD countries, in the bottom half of the list.

The Government’s report talks about school reforms. Again, there have been good initiatives on this front, with the Labour Government’s introduction of academies, which the coalition continued and which this Government continue to promote, and the Government’s promotion of free schools. However, I believe that the biggest mistake that this country made was to close grammar schools, of which only 164 are now left. To think that at their peak in the 1960s there were 1,300. These grammar schools gave the opportunity to a bright child, regardless of background, to get to the very top, and no one—including Margaret Thatcher, herself a grammar school product—has had the guts to reintroduce them. Why cannot the Government promote academies and free schools but also support the reintroduction of grammar schools? That would definitely provide a huge fillip and have a direct impact on our productivity.

Where our universities are concerned, Universities UK states that the higher education sector generated £73 billion of output, both directly and indirectly, for the British economy. In Britain, government expenditure on higher education is 0.88% of GDP, which is lower than that of other OECD countries. In Finland, 1.87% of GDP is spent on higher education, in Germany the figure is 1.12%, and even in the United States more public expenditure goes on higher education, at 0.94% of GDP. In fact, universities in the United States go further. They receive a significant amount of private funding. I am an alumnus of Harvard University through its executive education, and Harvard has an endowment of more than $36 billion. The philanthropy at Harvard is extraordinary. Last year one alumnus contributed $350 million for the Harvard TH Chan School of Public Health, and this year an alumnus donated $400 million for the John A Paulson School of Engineering and Applied Sciences.

Universities in the United States boost their revenues through not only private benefaction but corporate partnerships—something that we should emulate here. The University of Cambridge has made a great start, raising £1 billion for its 800th anniversary. That was excellent, with the money being raised ahead of time. And I am proud to say that the University of Birmingham has raised £160 million in its latest fundraising campaign. Looking at combined public and private expenditure on higher education, the UK spends 1.2% of GDP; the OECD average is 1.6% of GDP and in the United States it is 2.7% of GDP—more than double that of the United Kingdom.

The Minister spoke about encouraging innovation. When it comes to R&D, the Royal Society has produced some interesting figures. My noble fried Lord Rees was an eminent president of the Royal Society, and the next president, for the first time ever, is going to be an Indian. Sir Venki Ramakrishnan is a Nobel laureate and a fellow at Trinity College, Cambridge, where my noble friend Lord Rees was master. Cambridge University has produced more Nobel prize-winners—90—than any other university in the world. Within Cambridge University, Trinity College alone has produced 32 Nobel prize-winners. According to the Royal Society, 51% of productivity between 2000 and 2008 was due to innovation. The Royal Society has also noted that firms that invest consistently in R&D are 13% more productive than those that do not.

Today I had a meeting with the Secretary of State for Defra, Elizabeth Truss. I was informed that Britain’s food and drink industry is bringing 16,000 new products to markets per year. That is brilliant; it is more than the figure for France and Germany combined. This is extraordinary and very exciting, and there is a new initiative being promoted which I am delighted to be supporting.

The UK is great at research. Figures from the Royal Society show that, with less than 1% of the world’s population, we achieve 3.2% of global R&D expenditure. We have 4.1% of researchers globally and we produce almost 16% of the world’s most cited academic articles. This is in spite of the UK Government hugely underinvesting in research and development as a percentage of GDP. They invest 0.49% of GDP in R&D compared with 0.67% invested by OECD countries and 0.76% invested by the US. The figure for Germany is 0.85%. Does the Minister accept that we should increase government expenditure on both higher education and R&D and innovation? The Government talk about the science budget being ring-fenced. As it stands, it is not protected from inflation and is going to go down in real terms. Does the Minister accept that?

Our universities are also being stifled by the Home Office and, in particular, by the Home Secretary’s economically illiterate policies on immigration, removing the two-year post-study work visa for foreign students—75% of the population think that they should be allowed to stay on and work if they want to—having a target to reduce net immigration to the tens of thousands and continuing to include students in the immigration figures. Does the Minister agree that foreign students should be removed from the Government’s immigration statistics and targets? Is it any wonder that the number of students from India has declined by 50% in the last five years?

I was recently appointed as a president of the UK Council for International Student Affairs. ·Is it any wonder that 51% of foreign students feel unwelcome? Is it any wonder that, when the Home Secretary makes statements saying that foreign students should leave the day they graduate, headlines from India read: “Graduate, then get the hell out!”. Foreign students are one of our greatest forms of soft power, with the vast majority returning to their country of origin as ambassadors for Britain for years—for generations—to come. I am the third generation of my family, from both sides, to have been educated in this country. One in seven world leaders has been educated at British universities, including Greece’s current and former Finance Ministers. Dr Manmohan Singh, the former Prime Minister of India, was a graduate of Oxford and Cambridge. Foreign academics make up 30% of academics at our top universities, including Oxford, Cambridge and the University of Birmingham. These Immigration Rules and negative perceptions are damaging our universities and directly damaging our productivity. Does the Minister agree? We should be attracting foreign graduate entrepreneurs, for example by using the Sirius scheme of UKTI, which is brilliant.

We should of course invest more in infrastructure. As regards the airports report that has just come out, we should expand both Heathrow and Gatwick. The noble Lord, Lord Desai, spoke about investment. I am proud to say that private industry is doing its job. My joint venture partner Molson-Coors has invested £80 million in the biggest brewery in the country, in Burton-on-Trent, where we brew Cobra beer, by upgrading our bottling and packaging to make it world class, and improve our quality and productivity. I recently chaired an event in Parliament for entrepreneur-to-entrepreneur exchange, at which Sherry Coutu spoke about her scale-up report. If we close the scale-up gap, the estimate is that it will be worth an extra £225 billion and 150,000 jobs in the next 20 years. Does the Minister agree that we should have a Minister responsible for reversing the UK’s scale-up gap?

In conclusion, we have a lot going for us in this country. We have world-class capabilities and institutions —whether they are the Royal Society, institutes of engineering, livery companies, high-end aerospace, lawyers, accountants, beer, cars, JLR or Tata. They are shining examples. Just imagine how much better we would be if we invested more in higher education, better schooling, R&D and innovation, and had a sensible policy on immigration. We are great; but in the words of Saint Jerome:

“Good, better, best. Never let it rest. ‘Til your good is better and your better is best”.

Queen’s Speech

Lord Bilimoria Excerpts

Thursday 4th June 2015 Lords Chamber

[Lord Bilimoria (CB)]

My Lords, with just 1% of the world’s population today, the UK is the fifth largest economy in the world. Having endured the worst recession in a century, we have recovered remarkably well. We have low inflation, low interest rates, high employment rates and a growing economy. We are the envy of Europe. But as so many noble Lords, including our maiden speakers the noble Lords, Lord O’Neill of Gatley and Lord King of Lothbury, have said, raising productivity is a serious challenge. As the noble Lord, Lord Leigh of Hurley, said, we are very lucky to have Jim O’Neill in the House of Lords. I have known him for many years. He was very helpful to me when I was the founding chair of the UK India Business Council, and we both served together for many years on the UK-India Round Table, where he was instrumental in getting Teach For India off the ground. It is now hugely popular, as our very own Teach First is here. He has been tasked by the Government to create the northern powerhouse. Well, in the noble Lord, Lord O’Neill, we have a northern powerhouse in our midst, and we welcome him to the House.

Where is Britain going to be in 2020? Our productivity must improve, because we lag way behind others. We may be the fifth largest economy in the world, but in purchasing-power parity terms—in per capita GDP—we are 27th in the world. How do we address this? Wearing my hat as the proud chancellor of the University of Birmingham and my various roles at the University of Cambridge, I was surprised to see no mention of higher education in the gracious Speech. We have the best universities in the world, along with the United States, and we are in danger of taking this for granted, because we way underinvest in higher education compared with the US, OECD and EU averages. The Minister, the noble Baroness, Lady Neville-Rolfe, who I congratulate on her reappointment—and I look forward to working with her—was on the board of the UK India Business Council when I was the chair, and a great board member she was too. Can she please explain the glaring omission of higher education? Can she reassure us that universities are going to be a top priority and that this Government will increase funding for universities to increase our competitiveness and productivity?

The noble Lord, Lord King, is a great West Ham supporter. I am sorry, it is not the Prime Minister speaking; I meant Aston Villa supporter. We are so fortunate to have him in the House because he will add huge value. He talked in his great speech about innovation being one of Britain’s greatest strengths, yet when it comes to innovation and research and development, as other noble Lords have said, we invest way below the US, EU and OECD average as a percentage of GDP, and indeed way below South Korea. The coalition Government’s patent box initiative is tinkering around the edges. We need to encourage far more serious investment through our universities and business to really increase our productivity and competitiveness through innovation and R&D. Does the Minister agree?

We also need to encourage entrepreneurship. In India, Prime Minister Narendra Modi now has a Minister for Entrepreneurship in his Government. That is how important it is. As Secretary of State Sajid Javid has said, SMEs are the engine of our economy, and we need to have that focus on entrepreneurship, creativity and innovation. One of the reasons why the United States constantly bounces back so rapidly from any crisis is its huge strength in productivity, higher education, research and development, and innovation.

The Government are rightly targeting full employment as a goal. One way in which this could be achieved is by having a more balanced economy, where manufacturing is a priority. In my own business, Cobra Beer, I am first and foremost proud to be a British manufacturer. In India, Prime Minister Modi has his Make in India campaign, and has set an aim to increase the manufacturing share of GDP from 16% to 22% by 2022. Does the Minister agree that we also should set a specific target to increase manufacturing as a percentage of GDP?

It is not necessary for the Government to legislate that they are not going to increase certain taxes; the noble Baroness, Lady Kramer, made valid points about that. However, surely the Government should also be articulating that they will reduce certain taxes? The most important one is the 45% top rate of income tax, which should be brought down to 40%, which is where it was under both a Brown and a Blair Labour Government. Does the Minister agree?

One area where I fundamentally disagree with the Government is immigration. The gracious Speech mentions that immigration will be a priority to be controlled, and we all know that illegal immigration needs to be controlled and bogus colleges shut down. On the other hand, the Prime Minister, the Home Secretary and the Government continue to stick to their target of reducing immigration to the tens of thousands. However, by having no control over EU immigration this will not be possible, and continuing to include international students in net immigration figures is absolutely foolish and illogical. Even our new Universities Minister, Jo Johnson, with whom I look forward to working, has acknowledged the drastic drop in the number of students from India.

The negative immigration rhetoric is hampering our universities and our businesses. Sir Venki Ramakrishnan, the president-elect of the Royal Society, the pre-eminent institution for scientists in the world, is a Nobel laureate from Trinity College Cambridge and of Indian origin. The City of London would not be the number one financial centre in the world were it not for immigration. People and capital in business vote with their feet in our global world. Britain would be insignificant without immigration.

In terms of priorities, the Government should commit to spending 2% of our GDP on defence in this dangerous world, and it is negligent even to think of cuts to our defence or our Armed Forces today. Does the Minister agree?

Today, Britain is a remarkable nation, with the best of the best capabilities in every field you can imagine, whether it is advanced manufacturing, aerospace, financial services, beer, our lawyers, our accountants, our creative industries, our Oscar-winning film industry, designers and architects—I could go on. I spoke at the Milan expo recently and saw our brilliant GREAT Britain campaign in action. Our pavilion at the expo, the beehive, is by far the most impressive and creative of all pavilions from all over the world.

To conclude, the Government speak of aspiration. We need to be much bolder. The 200th anniversary of the Battle of Waterloo will be on 18 June. The Duke of Wellington’s motto could not be more appropriate: Virtutis Fortuna Comes—fortune favours the brave. If we as a country aspire by 2020 to be far more productive and competitive than we are today, we need that aspiration, which will lead to achievement, which will lead to inspiration, which in turn will lead to aspiration: a virtuous circle.

Budget Statement

Lord Bilimoria Excerpts

Wednesday 25th March 2015 Lords Chamber

[Lord Bilimoria (CB)]

My Lords, the Government are very proud of the good things in the economy at the moment. As the Minister said in opening the debate, we have low inflation, low interest rates, high employment and growth figures et cetera, but, as he said, it is austerity to prosperity, and he admitted frankly that productivity is too low and the deficit too high.

Earlier this month, my noble friend Lord Low held a debate which I chaired. The motion was:

“This house believes that the Government’s deficit reduction plan involves cutting the deficit too far and too fast”.

The noble Lord, Lord Skidelsky, was present as well. We had Jonathan Portes, the well known economist, Simon Wren-Lewis, professor of economics at Oxford University, Roger Bootle and Doug McWilliams—all very well known economists. When the motion was put to the vote at the insistence of the noble Lord, Lord Skidelsky, it was carried quite comfortably. The point was made, as the noble Lord, Lord Skidelsky, has mentioned in the debate, that the calculations are that if austerity had not been as severe as it was, the growth rate could have been 5% to 10% higher over the five-year period. One needs just to do the sums to see the difference that that would have made. On the other hand, austerity has created confidence in the global financial markets and we have the security of a lender of last resort in the form of the Bank of England.

The Chancellor has, on the one hand, shown his commitment to long-term prosperity for the economy by sticking to the austerity agenda, but, on the other, he has not had the guts to invest in what will make this country truly competitive and increase the productivity that so many noble Lords have spoken about. For example, where in the Budget is an increase in investment in higher education? We invest less by far as a proportion of GDP than the United States, the EU average and the OECD average. This Labour proposal to reduce tuition fees to £6,000 is a red herring. What we need is more investment in higher education. What about investment in innovation? Where in the Budget is the major investment in R&D and innovation? Once again, we as a country invest way below the United States, the EU and the OECD average as a proportion of GDP. The patent box is tinkering at the edges. How can we get businesses and universities to invest more in innovation? Will the Minister tell us about that?

What about tax rates being competitive? A brilliant thing the Government have done is to bring corporation tax down to 20%. It is one of the best things they have done, attracting inward investment and making our companies more competitive. On the other hand, the Government do not have the guts to bring the income tax rate down to 40%. In his enthusiastic speech, the noble Lord, Lord Rooker, spoke about the catalogue of achievements of the Blair Government. It was the Blair Government who carried on with 40% rate of tax, until it was increased to 50%. It was the Blair Government who reduced capital gains tax to 18%, which was hugely competitive, while entrepreneurs’ relief was 10%, encouraging wealth creation, prosperity and tax competitiveness. On the other hand, the Labour Government’s mistake was to increase public spending to nearly 50% of GDP. This Government want to reduce it to 36% of GDP. I still believe that will require unrealistic and drastic cuts in the welfare state and the NHS, which make up a huge proportion of our public spending. Will the Minister explain how the Government are going to achieve that drastic cut? As the Chancellor said, the EU has 7% of the world’s population, 25% of its economy and 50% of its welfare spending. In the Chancellor’s words, we cannot go on like this. Will the Minister explain what he is going to do?

When it comes to defence, the Government refuse to commit to the 2% of GDP NATO commitment. Will the Minister commit to it? The SDSR was negligent. We do not have our Nimrods, which we now need with Russian submarine incursions. We have no aircraft carrier capability for Harriers, which we have needed several times over the past five years, let alone now with the threat in the Falklands. For one of the strongest defence countries in the world to have no carrier capability for a decade is negligent. The Army cannot even fill Wembley, which is negligent. The security of our country is our number one priority. We have physically destroyed the Nimrods and depend for carriers on the French—on the 200th anniversary of the Battle of Waterloo. Will the Minister tell us whether the back-up from the French has been effective?

When he speaks, will the noble Lord, Lord Davies, speak about Labour’s policies? We hear about the dangerous policies: the mansion tax; raising income tax to 50p; increasing corporation tax by perhaps up to 6%; employees sitting on boards of companies’ remuneration committees; employees being given first refusal when a company is sold; and employees being given a share of companies’ profits. To an entrepreneur and a businessman, these sound like real communist measures, and we know how successful communism has been. The business community has genuine concern about the leader of the Opposition and his care for, knowledge of and familiarity with business. He has missed out business in many major speeches. Will the noble Lord on the Front Bench confirm that these Labour measures will be implemented?

What about the SNP? The leader of the Opposition says he will not go into coalition with the SNP, but what if the SNP props up a Labour Government? It wants to get rid of Trident, our nuclear deterrent. Would the noble Lord, Lord Davies, agree with that? Increase public expenditure and you have the nightmare scenario of Labour being propped up by the SNP. It reminds me that in the middle of the financial crisis, my fellow Fellow of Sidney Sussex College, Cambridge, Desmond Tutu, looked up and said, “Oh God, we know you’re up there, but can you make it a little more obvious?”.

It is a question of balance. Britain is number two in the world in inward investment. We have to protect that, and Governments have not been able to. If you look at the graphs in the Budget reports, Governments have not been able to balance their books. Public spending at 40% is the best a Government can achieve. That is what we should target, and getting a 40% tax take. With regard to debt interest, servicing it alone takes 2.5% of GDP. Will the Minister tell us what the plan is when debt interest goes up? How will the Government deal with that amount of more than £50 billion?

The Office of Tax Simplification is an oxymoron. Simplification of tax collection is in this Budget, but the tax code is still 11,000 pages long. There are huge issues here. As chancellor of the University of Birmingham, I chaired for the first time the university court and the university annual meeting. I was able proudly to say that it is a billion-dollar institution. It has revenue of more than £500 million, a healthy surplus, a healthy cash position and, most importantly, a £300 million infrastructure investment programme over the next five years, with a state-of-the-art swimming pool, libraries, a dental centre, new student accommodation and all the things that make it attractive to inward investment in terms of students and academics from around the world. If only our country could balance its books in that way and have an investment programme in the future, we would be able to get high productivity, get the deficit down and get our debt down.

--- Later in debate ---

[Lord Davies of Oldham (Lab)]

My Lords, I begin by craving the indulgence of the House. My noble friend Lord Stevenson caught my ear; I was present at the memorial service, and the defence of the arts by Lord Attenborough was a brilliant speech, reprinted in the programme. On either side of it were sayings from Mahatma Gandhi and a Shakespeare sonnet. As far as I was concerned, the service was a work of art in itself on paper before we actually heard the words being read. It was a great occasion.

I would also like to comment on my noble friend Lord Graham. He and I won adjoining seats in Enfield in 1974 and served together there for a number of years. I was delighted that he spoke this evening. I know that it was a limited area on which he spoke and probably pretty marginal to the Budget, but I think it gave cheer to us all that he puts a very high priority on service in this House in difficult times.

This has been an excellent Budget debate—but so was the debate in the House of Commons, which of course went over several days, in which many of the contributions were extremely thoughtful and well worked-through. That suggests that the debate we will have in the country in the general election may reach rather greater heights than some people suggest our political culture is now capable of. It did not start off too well because, as my noble friend Lord Lea indicated, there was pretty well nothing in the Chancellor’s speech about the macroeconomy. It is not long before the election so he indulged in a political speech, but he said little about the macroeconomy.

We had nothing on the question of our balance of payments problem. We had nothing on productivity. In fact, those issues seem to be suffused in the general aura of success, which the noble Lord, Lord Deighton, succeeded in imitating, to a degree, in his opening contribution this evening. What success? The success of the economic plan—but that economic plan became long term when it failed because the Chancellor could not deliver an end to the budget deficit in 2015. So, we have an extended plan, and that plan has some very dire implications indeed.

It is quite clear—it is all in the Red Book—that, as my noble friend Lord Stevenson and many other speakers in the debate said, we have not seen anything yet. The cuts of the past five years are going to be exceeded in three years, which will have a dramatic effect upon our economy and our society. And for why? As the noble Lord, Lord Skidelsky, identified, the Government’s original position way back in 2010 was a false analysis of the crisis leading to some pretty awful solutions to it. My noble friend Lord Layard identified very clearly the basis of the false analysis: that it was all down to excessive spending by the past Labour Government. No, it was not. This country was the second lowest in debt of the advanced countries when we left office and it was not the case that our expenditure had run out of control. What happened was that the global financial crisis, which started in the United States, as described most excellently by my noble friend Lord Rooker, reduced the receipts of government to a calamitous extent.

Of course it needed a significant response, but the idea that it called for a Government imbued with a philosophy of reducing the size of the state and doing everything that they can to get public expenditure down, irrespective of the impact upon our economy and society, it did not need and has not needed but has unfortunately received thus far under this Administration. The task of noble Lords on my side of the House is to make sure that this Government get no opportunity to extend their ill thought-through plans based upon a completely false premise.

We have to recognise that the expenditure cuts that are coming are coming against a base where cuts have been so sharp already that we are getting right to the bone. How can the police meet their obligations with the kinds of cuts that are likely to face them? What about defence? After all, that has, on the whole, been an issue that has concerned the Conservative Party in particular over the years. What does it think about this debate about the 2% figure if defence is to bear its share of the cuts? As defence is an unprotected sector, it is going to, if this Government were returned to power.

What about other areas of expenditure? Local government spends a very great deal of its expenditure on social support and welfare for children and the aged. It is going to get a massive cut in those resources if this Government continue in office.

The challenge is clear. We need to establish that this Government have presided over failure and the slowest recovery for over a century, with a desperate price being exacted from ordinary people.

What about the bedroom tax? The Government recoil at Labour’s proposal on the mansion tax directed towards the wealthy in our society and those who take advantage of the London housing position, to which the noble Baroness, Lady Valentine, referred. Housing in London is critical. We cannot keep the economy of London running if there is a flight of large numbers of people from the city because housing is too expensive because of foreign investment. That is so obvious, but what did the Government say about housing in the Chancellor’s Budget speech? Nothing of any significance.

We have a major task to tackle after what has been a desperate decline in growth, lost revenues, as the noble Lord, Lord Skidelsky, identified so very clearly, and then a little bit of a spurt before the general election, which is about to be put at enormous risk if the Government carry on with their existing policies. It is quite clear that we have a low-wage, low-productivity economy in which people get poor returns for their work and, as the right reverend Prelate the Bishop of Portsmouth, identified, many of them are still subject to a marginal rate of taxation—if you take taxation plus national insurance—which renders it difficult for them to sustain their living standards.

We know that the success of an economy cannot be based on low wages and low productivity, not least because the only way in which it has been continued thus far is because migration figures are so high and large numbers of our labour force are earning low wages and doing jobs in circumstances where wider society is more reluctant to respond.

We have 1.8 million zero-hours contracts in this country at present. The tax and national insurance combination has extended to considerable levels. We have a £300 billion deficit on our balance of payments. I will just mention the success story of 2011-12: we lost our triple A credit status. This Chancellor dares to come before the country to say, “Give me a renewal of the mandate because I am doing so well”. In fact, what is reflected is a colossal failure.

That means that we need to take different measures. Labour is quite clear what we are going to do. We intend to raise living standards by increasing the minimum wage, because we do not think that a low-wage economy makes any sense. We intend to safeguard the National Health Service, because we are terrified that such is the level of cuts promised in this Budget, they are bound to impact on the health service. They do in any case, because cuts in social welfare thrust people into the health service through the accident and emergency service. The leakage is already there, but it is due to get a great deal worse if this Government are able to follow through on their plans.

We intend to cut business rates for 1.5 million small business properties by not reducing corporation tax—with a slight increase to corporation tax. We also intend to deal with housing in the only way that one can, which is to build houses. It is not a problem of illegitimate demand—it is a problem of supply. I should have thought that the party of Macmillan in the 1950s would recognise that Governments can put their back into creating supply of houses if they are prepared to do it and it is defined as a priority. By heavens, it ought to be a priority in our country at present.

We are also going to balance the budget and the books in a fair way. That means we shall take a slightly different view on the bedroom tax, which we intend to scrap, and on tax cuts for the very wealthy in our society—the millionaires.

[Lord Bilimoria]

I thank the noble Lord for giving way. Did he just say that there would be a slight increase in corporation tax?

[Lord Davies of Oldham]

My Lords, the Government are promising a reduction. We are not going to carry out that reduction. That is putting it as fairly as I possibly can in comparison between the parties. We will keep it where it is. The Government intend, for reasons best known to themselves, to cut it.

That means that a change of government is absolutely essential. The greatest need is the one that was expressed by my noble friends Lord McFall and Lord Layard, by the right reverend Prelate the Bishop of Portsmouth and by my noble friend Lady Thornton, who talked about the position of women in society. It is that we need an improved public morality. We need to recognise that there is more to life than just the economy of getting and spending. Life for people, when it is enriched, is about relationships, fairness and degrees of co-operation to help those who have greater needs—to have some degree of common endeavour. Those are the values of my party, and we intend to carry them out in government.

Economy: Public Finances

Lord Bilimoria Excerpts

Tuesday 24th March 2015 Lords Chamber

[Lord Newby]

My Lords, any commitment by the Labour Party would have a lot more credibility if we had even the vaguest clue as to how it was going to get the deficit down.

[Lord Bilimoria (CB)]

Would the Minister agree that one reason for the credit crunch and the financial crisis seven years ago was the prolonged low rate of interest of 5% a year? Now that the Government have extortionate debt servicing costs at a 0.5% base rate, what plans do they have when interest rates go up, as they will? How will they service those costs, and at what rate are they borrowing for long-term debt at the moment?

[Lord Newby]

My Lords, one of the main reasons why we need to get debt under control is that the long-term borrowing costs are very significant. Whatever the interest rate, even with current low rates of interest, we are spending 2.5% of GDP per annum on servicing it, significantly more than we spend on the aid budget. Because interest rates are low and because we have a very credible economic policy, we have been able to borrow long term at low interest rates—but none the less we need to get the debt down because we want to get the borrowing costs down.

Autumn Statement

Lord Bilimoria Excerpts

Thursday 4th December 2014 Lords Chamber

[Lord Bilimoria (CB)]

My Lords, in his first Budget in 2010, the Chancellor said that the Government would,

“have debt falling and a balanced structural”,

budget deficit,

“by the end of this Parliament”.—[Official Report, Commons, 22/6/10; col. 168.]

Despite the Chancellor’s tough talk about austerity and cutting public expenditure, the reality is that public expenditure as a percentage of GDP has continued to increase. I thank the noble Viscount, Lord Younger, for leading this debate.

Yesterday, it was announced that the Government will spend £746 billion in 2015-16, rising to £765 billion in 2018-19, compared with £692 billion in 2010. Government spending is increasing and, as a percentage of GDP, our national debt is rising. According to the OBR, it will now peak at 81% of GDP in 2015-16. This means that the Chancellor will completely miss his target to ensure that net debt is falling relative to GDP by 2015-16.

We have a perception of austerity that has simply not been matched by reality. Yesterday, the Chancellor acknowledged that we are at least another four years away from that target. To build on what the noble Lord, Lord Skidelsky, said, if we are borrowing £300 billion more than the Chancellor said he would in 2010, why should anyone believe him this time around? The OBR has predicted that public expenditure is going to have to fall to 35.2% of GDP by 2019-20—the lowest level since the 1930s. Let us remember that the 1930s were pre-welfare state days. Can the Minister confirm that that is really achievable?

In order to achieve those cuts, it is predicted by the OBR that the defence budget, which is already negligently too low, will have to be cut by 60%. Can the Minister confirm that that might have to happen, although it is hoped that it never will? However, I was delighted to hear that the Government will be giving money to veterans, including £2 million for the Gurkhas. I was privileged to have been brought up with the Gurkhas. My late father, Lieutenant-General Bilimoria, was commissioned to the 2nd Battalion, Fifth Gurkha Rifles (Frontier Force), and was president of the Gurkha Brigade when he was commander-in-chief of the Central Indian Army. I was privileged to have been brought up with two Victoria Cross holders from birth—they were living legends. Therefore, I thank the Government for doing that.

However, it is the low level of interest rates for a prolonged period, at the level of 5% that led to the financial crisis from which we suffered. Yet today we are being propped up by interest rates that are 10 times lower—at 0.5%. Government borrowing has been increasing year on year and expenditure on debt interest has contributed to it. It is more than £1.27 trillion and is costing us £1 billion a week—more than the entire defence budget.

Does the Minister agree that interest rates might have to rise? The Governor of the Bank of England made a ridiculous statement that he would start increasing interest rates when unemployment fell below 7%. Unemployment is at 6% now and interest rates have not gone up, but they will go up at some stage, and if they do the debt interest levels will go up. The SNP made the mistake in its budgets with the oil price and its budgets are shot to tatters at the moment. Will the Minister give his views on future interest rates?

Wearing my hat as chancellor of the University of Birmingham I have seen that our higher education sector is one of the jewels in our crown. I am delighted that the Government are about to announce loans for postgraduate studies. On the other hand, we highly underinvest in higher education as a proportion of GDP compared with the OECD, the EU and America. On R&D and innovation, the patent box is all very well—it is stored—but if we invested the same proportion of GDP as countries such as America, the OECD and the EU, we would help our productivity hugely. Our current account deficit has reached 5.2% of GDP, which is worse than Italy and France. Our fiscal deficit of 5% is almost double that of the United States, let alone Germany which has just 0.2%.

As the noble Lord, Lord Adonis, said, skills are so essential. I am proud to be an ambassador for Studio Schools. Last month I opened the Vision Studio School in Mansfield. That is the sort of initiative that I am glad the Government are backing. Tax breaks to apprentices are excellent but, on the other hand, the word “entrepreneurship” was completely missing from the SME Bill. Entrepreneurship should be the cornerstone of our future growth. I launched the 10th anniversary of the Cambridge University Centre for Entrepreneurial Learning this week. That is what we should be backing. The Sirius campaign, backed by UKTI, bringing young entrepreneurs to Britain to develop their businesses, is a great initiative that the Government should be doing.

The Government are doing a lot, but are they doing enough on the big things? We have a tax system that is so complicated that the tax code is now 17,000 pages long. The Office of Tax Simplification is an oxymoron. Our corporation tax rate is low but our income tax rate is too high. Capital gains tax is too high. The Indian restaurant industry which we supply and the Bangladesh Caterers Association UK are constantly complaining about VAT and asking for it to be reduced. Our hospitality and tourism industries say that VAT is far too high. We do not have a competitive tax system.

The noble Lord, Lord Rose, in his excellent speech, spoke about confidence. We need confidence, productivity, and a better educated and more entrepreneurial workforce who think globally. Government expenditure should be at a believable rate: 35% is unachievable; 40% would be a realistic rate. We could then balance our books and have an educated, productive, confident and enterprise-based economy so that, even as 1% of the world’s population—that is all we are—we can continue to punch above our weight.

Income and Wealth Inequality

Lord Bilimoria Excerpts

Wednesday 26th November 2014 Lords Chamber

[Lord Newby]

My Lords, I just think that the noble Lord’s figures are wrong. On inequality, I would like to quote Chris Giles from last week’s Financial Times, since noble Lords opposite clearly find it difficult to accept what I am saying about it.

“Since 2008, the earnings distribution has been flat as a pancake. And because the coalition government has protected people dependent on social security more than the working population, inequality of net incomes has edged down”.

[Lord Bilimoria (CB)]

My Lords, does the Minister agree, following the noble Lord, Lord Stern, that the Gini coefficient has gone up significantly over the last three decades? There is no question about that, regardless of who has been in government. Does he agree that the living standards of people in this country are far higher than three decades ago, when Britain was the sick man of Europe?

[Lord Newby]

My Lords, I absolutely agree with the noble Lord. Noble Lords will be aware that real incomes are starting to rise again and are projected to do so over the next three or four years by all reputable forecasters.

Defence: Budget

Lord Bilimoria Excerpts

Tuesday 11th November 2014 Lords Chamber

[Lord Bilimoria (CB)]

My Lords, following on from the remarks of the noble Lord, Lord West, does the Minister agree that the SDSR in 2010 was means before ends? It was negligent in that we had unpredicted events, one after the other—Libya, Iraq, Syria, Ukraine—and our Armed Forces cannot even fill Wembley Stadium. Will the Minister assure us that we will stick to the 2% spending commitment to NATO and that we will not cut our Armed Forces any more?

[Lord Newby]

My Lords, the Government are committed to that 2% for the remainder of this Parliament and into the next Parliament and to keeping the defence equipment budget growing. Any commitments in the medium term beyond that are commitments that the parties will be making in their manifestos.

Tackling Corporate Tax Avoidance: EAC Report

Lord Bilimoria Excerpts

Wednesday 30th October 2013 Lords Chamber

[Lord Bilimoria (CB)]

My Lords, I declare my various interests in this area. I congratulate the noble Lord, Lord MacGregor, on initiating the debate. I also congratulate my friend the noble Lord, Lord Leigh of Hurley, on his excellent maiden speech. He is a fellow chartered accountant and we have known each other for many years. As he humbly said in his speech, he is also a fellow entrepreneur and a successful one at that. I read a book by a Wharton professor about givers and takers: in life you have givers, takers and matchers. It is not necessarily the case that the givers will get further in life, but when they do get there they always get there in a much better way and have a more sustainable, happier future. The noble Lord, Lord Leigh, is a giver. He has given to this House today his expertise as an entrepreneur, as an expert in corporate finance and as a chartered accountant. We welcome him here.

The noble Lord, Lord MacGregor started with the complexity of the UK tax regime. He spoke about multinationals and the infamous example of Starbucks which, from 2006 to 2011, had UK revenues of $18 billion yet paid UK corporation tax of only $16 million. As the noble Lord said, there is a serious issue of avoidance. The Select Committee on Economic Affairs—I am proud to have been a member of the Finance Bill sub-committee every year—has produced a thorough report, Tackling Corporate Tax Avoidance in a Global Economy: Is a New Approach Needed? The report says right up front that the present system is not working and urgently needs reform. It says that it is confident that the Treasury will bear this in mind as it conducts its proposed review. However, we have heard that the Government have not really listened to the report, and will not be taking much of it into account.

The report highlights that UK corporation tax, having come down to 20%, is the lowest in the G20. The German rate is 29%, France’s is 33% and the United States’s is 40%. This is wonderful news. On the other hand, the report also highlights something which is not understood by the public: a significant feature of the UK’s corporation tax regime is the low rate of allowances for capital spending. Our regime does not encourage investment. In fact, within the OECD and the G20 countries, only one country, Chile, has a less generous allowance than the UK. We must look at this as a whole.

The other major point which has not yet been highlighted in today’s debate is how much corporation tax yields as a percentage of GDP. Again, the report lays this out clearly in a table comparing us with other countries such as France, Germany and the United States. Our UK share of corporation tax receipts has held up pretty well in spite of falling headline rates. As a percentage of GDP, in 2005 corporation tax was 3.2%; today it is 2.7% in spite of rates having fallen. The nub of it all is that, of the contribution by tax to total HMRC receipts, corporation tax stands out in that it is only 8.7%. It is dwarfed by income tax at 32.2%. National insurance contributions constitute 21.8% and VAT constitutes 21.4%. This clearly shows that, yes, everyone is getting upset about corporation tax not being paid by certain companies, but are people talking about all the other taxes that these companies are generating, predominantly through creating employment? Employment generates a far greater proportion of taxes than corporation tax. We are not quite getting the context of and perspective on this. I will come back to that point at the end of my speech.

In fact, 81% of UK corporation tax is paid by the top 1% of companies. Here we are getting upset about 1% of companies; 99%—SMEs have been mentioned—are paying the full rate of corporation tax in many cases. We are losing a sense of perspective. The report says:

“In total, PwC say that Hundred Group members contributed around £8 billion in corporation tax in 2012 and a further £16.8 billion in other taxes borne”.

A multinational company is not taxed as a single entity but as a number of legally distinct, individual companies all over the world. The present tax system around the world encourages multinationals to move their profits around the world. That is the reality. We are trying to stop that. The report recommends ways of stopping it. When I was on the sub-committee for the previous Finance Bill, we focused on the GAAR. As the noble Lord, Lord Hollick, said, when he came up in the business world he was taught the distinction between evasion and avoidance. To a chartered accountant it is very simple: evasion is illegal; avoidance is allowed. Now we are going one step further and saying “abuse” as well. However, it is clear that the GAAR will not catch everything. It is narrowly focused. It will not, for example, catch the Starbucks situation at all. That needs to be communicated. I am glad that the Government have listened and that the GAAR will be communicated to the public.

I am proud to be a fellow of the Institute of Chartered Accountants in England and Wales. The report says:

“The ICAEW offers advice to its members that appears to go well beyond the Code of Conduct. It states, for example, that ‘Although tax avoidance may be legal, whether something is within the law isn’t the only thing that matters. You are under a duty to take into consideration the public interest and at all times to comply with ICAEW’s Code of Ethics … The boundary between legal tax avoidance and illegal tax evasion is not always clear and there’s a danger that what starts out as legal tax avoidance may slip into illegal tax evasion’”.

Who is competent to catch all of this? The noble Lord, Lord Lawson, raised the point of the structure of HMRC, this merged entity. Is it fit to deal with this? What about the relationship between the Treasury and HMRC? A lot of the policy is formed in the Treasury and HMRC is meant to execute it. Can the Treasury make this policy properly?

Then there is the question of reputation. In my business, our most valuable asset is our brand. The threat of naming and shaming companies is serious. We, as companies, are all very concerned about our brands. Much more can be done in this area by naming and shaming companies.

The Government actively promoting the implementation of the G8 proposals on the movement of funds between companies is very good. We need to continue to do this. Again, however, it will not solve everything. A unitary tax system, treating multinational companies as single entities in the global economy, is attractive in theory, as the report says, but is quite frankly utopian. In practice, we cannot even get the EU to agree on corporation tax rates. How on earth are we going to get the whole world to agree on something? We have to realistic and practical about this.

The setting up of a Joint Committee to supervise and oversee this matter is a great idea. The expertise of the House of Lords in this area is far greater than the expertise in the other place. This expertise is used in the Finance Bill sub-committee. If it could be used on a permanent basis, that would be great. Will the Minister consider forming such a committee to oversee the issue on a general basis? I think that the confidentiality argument is absolute nonsense, as was said by noble Lords earlier.

I now come to the points made by the noble Lord, Lord Lawson, which I thought were excellent. He hit the nail on the head. He said that corporation tax in the modern world is inequitable between multinationals and SMEs and that, in the way it is structured at the moment, it has had its day. He has summed it up. The noble Lord, Lord Browne, talked about a tax gap of £32 billion and said that the tax gap is going up. I want to refer to a friend of mine, Vindi Banga, who is a former head of Unilever in India and was then on the main board of Unilever here in the UK—companies do not get more multinational than Unilever. He wrote an excellent article earlier this year in the Telegraph, headed, “Tax compliance should be judged by rules and not morals”. This was when the Starbucks issue was at its height, when it was being bashed by politicians—the noble Lord, Lord Hollick, referred to this. The Prime Minister, David Cameron, at the World Economic Forum in Davos, said:

“Companies must wake up and smell the coffee”.

One cannot get more specific than that. Vindi Banga then talked about IP royalties; the way companies move profits around the world, perfectly legally. One way, of course, is to charge royalties from where the IP is headquartered. Let us say that the IP is headquartered in a country outside the UK; royalties are charged and paid, reducing the tax here in the UK. However, what we overlook is that the UK is also a recipient of royalties and we encourage IP. We encourage the innovation of IP, the generating of IP and the holding of IP. In net receipt terms, the UK receives more royalty income than we pay out. So it will go against us if we stop that in trying to address tax evasion.

The other point that Vindi Banga made—this is my main point—is that our tax system has to be competitive because we, as companies, operate in a really competitive environment. In fact, while evasion is immoral, avoidance, if it is legal, is a duty: companies almost have a duty to try to pay as little tax as possible in order to be as competitive as possible and to survive and compete in the global environment. However, there is something that could and should be done. Could the Government bring in even more regulation for companies to disclose all the tax that they are paying in one simple table? Every company would disclose how much it generates as a result of its operations in terms of PAYE paid, employer national insurance paid, employee national insurance paid, VAT collected as a result of sales, and corporation tax. In my company’s case, there would also be the excise duty generated as a result of the company’s existence. That would put into perspective how much tax a company is generating.

The noble Lord, Lord Leigh of Hurley, made a very valid point about the legislation that exists because our tax code is so complex. In spite of all the efforts of the noble Lord, Lord Lawson, we still have such a complex tax system and legislation is constantly plugging holes. The noble Lord, Lord Leigh, said, very correctly, that it is not fit for purpose and that we must continue to try for a global solution. He spoke very clearly about SMEs, which are paying too much tax, in relative terms, unfairly. As a country, we do not have a competitive tax regime overall. Our corporation tax rate may be one of the lowest, but our capital allowances, on the other hand, are not good enough and our top rate of income tax, at 45%, is still very high. The overall tax burden on the consumer and on companies is actually very high. Do the Government have the guts to address the overall situation?

I conclude by getting to the crux of all this, which is that we should not really be focusing on corporation tax, although we must address that. My dream is for us to have a simpler, fairer tax system that is competitive, attracts investment and promotes spending, saving and growth.