Spring Statement

Lord Bishop of Chester Excerpts

Wednesday 20th March 2019 Lords Chamber

[The Lord Bishop of Chester]

My Lords, it is a privilege and a challenge to follow such a brilliant speech from someone who knows his way around the subject. If you want to find good things to tax, I always say that you should start with sin: find a new sin and tax it. I rather agree that HS2 is a sin, not for adding capacity, which I am all in favour of, but in doing so in such an unnecessarily expensive way. For me, trains go quite fast enough already and it could have been done far more cheaply without factoring in the speeds in a small country. As I follow the noble Lord’s speech, I think of St Paul, who once began by saying, “I speak as a fool”. I do so too, a little, after that wonderful description of the financial landscape.

Amid the gloom of the general political situation at present, I welcome the Spring Statement and the optimism it contains. I say that in strictly non-political terms. Since I was ordained 40 years ago, I have been careful not to align myself with any political party or indeed to reveal how I have voted in any election in which I have been entitled to vote. My daughters in particular resent that deeply. En passant, that even applies to the EU referendum.

Of course, the Chancellor put the best gloss possible on what he said, but there must be a welcome for the escape from the shadow cast by the banking crisis that took everyone so unawares a dozen years ago. First the Labour Government, then the coalition Government and, more recently, Conservative Governments have wrestled with the aftermath. This has been extraordinarily difficult, but I find it encouraging to see the progress that has been made—although I agree with the noble Lord, Lord Shipley, that it has been made at a price. This is also despite Brexit and the gloomy predictions made in advance of the referendum were there to be a vote to leave.

It seems to me just plain common sense that, in terms of current spending, a country must try to live within its means. This applies to individuals and, in my own sphere, to dioceses and parishes. It is good to see that this country is now on a track to do this at the level of our national life, which is no small achievement.

That said, and meant, there are important questions with which I hope the Government will continue to wrestle. There is little doubt that the improvements in government finances have been made at tremendous cost, and in some cases a very difficult cost: police, social care, welfare, defence, schools up to a point—we will all have our own lists. I am pleased that overseas aid is an honourable and important exception.

I would add to the list university student fees. I have always supported a certain level of fees, but £9,250 a year is way out of line with any other European country; indeed, within the United Kingdom, it is out of line with Scotland and Wales. I hope that the forthcoming review will start to balance student fees and costs towards a more sensible level. Of course, much of the debt will never be repaid, but it must be a huge disincentive to those who have acquired a large debt burden as they seek to make their way in life. I speak as one of the older generation who did not face that challenge. When I went to university, all the fees were paid and I was given a maintenance grant. Those were the days.

Bringing in radical reform to the structure of welfare support through the introduction of universal credit in the midst of the austerity programme was always a recipe for great difficulty, and so it has proved. It has always seemed to me that, from the start, the whole exercise needed much greater bridging financing to be introduced effectively, without shining a light on the very unfortunate losers in the process.

No doubt many other areas could be spoken of, with the NHS looming largest. It is good to know that a sustained programme of real increases is planned. The key test will be whether the money is spent efficiently and effectively, given the size of the operation. The absentee from the Statement was social care. Essentially nothing was said about it. As the noble Lord, Lord Shipley, said, it is hanging over us. The noble Lord asked: what are we going to do?

I should also like to add a word about the section of the Statement on housing. I welcome it as far as it goes, particularly as my own diocese will be included in the additional funding from the Housing Infrastructure Fund. I hope that the annual target of 300,000 new homes by 2025 can be met, but my question is whether market-based solutions alone will achieve this. They must have a major part to play, but is there not a case for more direct government action in partnership with local authorities to help address the chronic lack of low-cost and social housing in particular?

After the Second World War, council house construction was typically between 150,000 and 200,000 units a year until the mid-1950s. Indeed, I was brought up and lived for the first 20 years of my life in one of the houses built in the peak year. Given that real assets are created by house construction, is there not a case for more direct government action to complement the market-based solutions? Looking back over the last 20 or 30 years, it seems to me that the market has failed to deliver. How can we be so confident for the future?

House prices are a major issue in many areas of the country. Market forces have driven them to their current level, and presumably it will not suit the major players in the market to see house prices come down. It would hardly be popular in political terms either to have a large number of people losing nominal wealth or slipping into negative equity. In the past, inflation used to enable Governments to manage this because a static cash value could then be complemented by some drop in real value through inflation. That is just not happening in this extraordinary period of stable inflation. As I look at the housing issues, there seems to be something missing in the analysis to join it all up, putting the market-based solutions together with appropriate government initiatives. We will have to see where we go; if the market delivers 300,000 units by the mid-2020s, I shall eat my cassock.

My final example is spending on children’s and young people’s services. The noble Lord, Lord Shipley, mentioned the figure of 52% in relation to cuts. The real-terms figure I had was more like 25%. One way or another, huge cuts have been made to support services for young people through the decade of austerity. I welcome the extra £100 million for the police specifically to tackle knife crime, but that is for only one year and addresses the problem in only one dimension. We surely need a much more joined-up, multiagency approach. That will require the restoration of some of the funding cut from budgets for children’s and, especially, youth services. It is not just the symptoms of knife crime but its sources that need to be addressed. The fact that so many boys growing up in our society have no male role models to learn from is a feature of our society in terms of family dynamics and breakdown. The state cannot substitute entirely—it is a job for all of us—but it has a role. The cuts to spending on youth services over the past 10 years have been quite myopic in that regard.

An “end to austerity” is linked in the Statement to higher wages, lower taxes and increases in public spending. The balance here in the future is crucial. After a decade of well-nigh unprecedented cuts in public spending, I hope the forthcoming spending review will focus upon what needs to be done to undergird and build a safe and civilised society. Public money must be spent wisely and effectively, but in our complex and pluralist society I suspect we will need even more government action in the future to address the problems that will inevitably emerge to complement the vitality of a market economy based on individual freedom.

I know at first hand, through my family, the example which the Scandinavian countries have set. Scotland, to where I will shortly retire, is currently putting its own toe in the water of somewhat higher taxes to fund even better public services. We will have to see what the outcomes look like in due course, but the principle of tax-funded excellence in public services seems to me a noble aim. While it is there to a degree in the Statement, I wish it were just a bit more prominent.

--- Later in debate ---

[Lord Bates]

Yes, we should thank the noble Lord, Lord Foulkes, in his absence, for making that plea, which the business managers were able to accommodate. I also wish to associate myself with my noble friend Lord Wakeham’s generous tribute to my good friend, colleague and mentor on the Front Bench, my noble friend Lord Young. I had not realised they were celebrating 45 years. I associate myself with my noble friend Lord Wakeham’s generous remarks to my noble friend about his service in both Houses.

I shall try to provide some taxonomy of the contributions, which ranged very widely but more or less settled down in the following areas. The first was, unsurprisingly, Brexit. I began repeating the Spring Statement by referring to what the Chancellor said about Brexit: it is dominating thinking not only in this place but in business. The noble Lords, Lord Tunnicliffe, Lord Davies of Stamford, Lord Davies of Oldham and Lord Bilimoria, the noble Viscount, Lord Chandos, my noble friends Lord Gadhia and Lord Northbrook, and the noble Baroness, Lady Kramer, made points about that headwind. The only area of difference between us is that we say that the opposition parties hold it within their gift to dispel that cloud of uncertainty by backing the deal before us, but matters are unfolding. If there is any news to report I hope that a Box note will make its way along to me.

There was—I shall not overegg it—support for and recognition of the progress which has been made, notwithstanding the uncertainty. We enjoyed the noble Lord, Lord Macpherson, describing Treasury civil servants having to deal with disappointment, and I am sure that was enjoyed within my earshot. The reality is that this Statement was able to unfold some positive news about levels of debt, employment and the general fiscal situation. The noble Lords, Lord Macpherson, Lord Wakeham and Lord Northbrook, referred to the positivity. Even the right reverend Prelate the Bishop of Chester—

[The Lord Bishop of Chester]

Even?

[Lord Bates]

I am sorry—delete “even” from the record. The right reverend Prelate the Bishop of Chester, whose point about housing I will come back to in a minute, referred to it. The noble Lords, Lord Leigh, Lord Gadhia, Lord Bilimoria and Lord Suri, recognised that progress had been made despite the headwinds. It is absolutely right that we recognise that that progress has been made because British business and enterprise up and down the country—and around the world—is making a Herculean effort, creating jobs, wealth and buoyant tax revenues. These revenues are coming into the Exchequer, giving us the opportunity to look at them.

Across most of the contributions, there was a focus on public services and public spending. As I mentioned, the spending review will be in the summer and conclude in time for the Budget for the autumn, which will rely on it. Contributions effectively broke down into four areas. The noble Lords, Lord Macpherson and Lord Hain, and the noble Earl, Lord Listowel, referred to social care. The noble Lords, Lord Tunnicliffe and Lord Bilimoria, referred to policing, and the noble Lord, Lord Scriven, alluded to the tragic knife crime situation in Sheffield. The right reverend Prelate the Bishop of Chester, the noble Lord, Lord Wakeham, and the noble Baroness, Lady Thornhill, referred to housing. The noble Lord, Lord Shipley, and the noble Earl, Lord Lytton, addressed local government finance.

Two other areas, which were grouped together, were the challenges of the changing nature of tax revenue and collection. The attraction of statutory land tax, which the noble Lord, Lord Wakeham, referred to, is that it is very easy to collect. The changing nature of tax is making collecting tax more challenging. The noble Lord, Lord Wakeham, the noble Earl, Lord Lytton, my noble friend Lord Leigh and the noble Viscount, Lord Chandos, referred to that challenge and ways to address it. Coupled with that is business confidence, which the noble Lords, Lord Gadhia, Lord Suri, Lord Northbrook and Lord Davies, referred to.

I will use the bulk of my time to address the questions raised as a result of those contributions. Several noble Lords asked how the Brexit dividend might be funded. The OBR’s Spring Statement forecast that business investment is weak. The noble Baroness, Lady Kramer, referred to that, and we acknowledge that in the near term. However, as uncertainty wanes, it picks up to 2.3% in 2020 and grows stronger at this pace from 2021 onwards. GDP growth is forecast to be 1.2% in 2019 before picking up to 1.4% in 2020 and 1.6% from 2021 onwards.

The noble Lords, Lord Tunnicliffe and Lord Hain, as well as several others, referred to infrastructure. We have increased the National Productivity Investment Fund to £37 billion to support key infrastructure up and down the country. Public investment is at its highest sustained level in 40 years.

The noble Lord, Lord Bilimoria, and the noble Earl, Lord Lytton, referred to Making Tax Digital—indeed, the noble Lord, Lord Wakeham, focused on that and the noble Lord, Lord Hain, touched on it. Research now shows the high level of awareness among business and tax professionals: eight out of 10 businesses were aware at the end of last year and over 80% of those had already started preparing. Of VAT returns, 98% are already done online.

The disguised remuneration loan charge was raised quite extensively, by my noble friend Lord Northbrook; by the noble Lord, Lord Wakeham, on behalf of the noble Lord, Lord Forsyth; and by the noble Baroness, Lady Kramer, with her work on the all-party parliamentary group. Disguised remuneration schemes are and always were contrived tax avoidance. It is not normal or reasonable to be paid loans that are not repaid in practice; my noble friend Lord Wakeham was right in his sage advice on that, as in so much other advice he has given over the years. It is the individual’s responsibility to ensure the accuracy of his or her tax return. HMRC is pursuing the promoters of disguised remuneration schemes and has been investigating over 100 promoters. In the last year, HMRC has taken litigation action against 10 scheme promoters.

I turn to universal credit and welfare, which the right reverend Prelate the Bishop of Chester referred to and the noble Lord, Lord Shipley—