Finance (No. 2) Bill

Lord Davies of Oldham Excerpts

Thursday 26th March 2015 Lords Chamber

[Lord Davies of Oldham (Lab)]

My Lords, we live in a strangely surreal world with regard to this Finance Bill. My noble friends and noble Lords on the government side will recall when they were in the other place long days and nights spent on Finance Bills, watching dawn break across the river as we struggled with the issues presented by their depth and significance. This Finance Bill went through the Commons in one day. The Budget was debated. There was a very good debate in the other place over several days. Of course, yesterday in this House we had four hours of excellent contributions to the general issue of the economy and what the Budget represented in relation to that economy. But I can scarcely for the life of me engender the same degree of intense scrutiny of this one little Bill. Even the Minister was able to dispatch it in 20 minutes or so.

In any case, this Finance Bill is a pretty mean-spirited effort. The Chancellor tried to boast and establish the fact that living standards were not lower than they had been in 2010. It is a strange thing to boast about—that there has been no growth in living standards since that time. In the area where he suggested that there had been some progress, others, such as the Resolution Foundation think tank, challenged his figures and indicated that far from there being income growth for people, incomes had fallen.

We know who has been hardest hit over these past five years—young people, in particular, and middle-aged people with low-paid jobs. There are plenty of those about. We know that there are 1.8 million zero-hours contract jobs at present. I do not know how the Government can be proud of a low-wage economy that has slumped to that level but that is what faces us. When the Minister blithely says that the Government are increasing the personal allowance, he ignores the fact that for 5 million people that is utterly and totally irrelevant as they do not earn enough to pay tax. The changes in the allowance are of absolutely no relevance to them at all. However, the more you earn, of course, the more relevant the changes become. It is typical of the Government to look after the better-off while doing very little to help the less well-off.

What does this mean-spirited little Bill mean? We had the Chancellor trying to talk about success in a land where food banks proliferate. In my old stomping ground of Oldham, rickets has emerged in recent months. Is that the society over which this Government wish to preside? Are the Government content that the pay of chief executives of FTSE companies and of some people in the public sector has increased to the extent that it has while those at the other end of the spectrum experience the difficulties that I have mentioned? We know of chief executives in local authorities who earn considerably more than the Prime Minister. We are also well aware that high salaries are paid to some officeholders whose posts were never distinguished by high earnings in the past. For example, a university vice-chancellor can earn £640,000 a year. I have great respect for British universities. They have done tremendously good work. However, one has to ask questions about the relationship between vice-chancellors and the rest of the scholastic community when their incomes almost equal those of FTSE chief executives. One also has to ask questions about the differential between vice-chancellors’ pay and the average pay of university staff. We hoped that the Government would address some of these issues. When they did address them, on the whole they rewarded the very rich with further tax cuts.

I am grateful for the fact that three of my noble friends have spoken in this debate. I note that no one from the government Back-Benches thinks that it is worth speaking in support of this Bill, although their presence may be an enthusiastic endorsement of what the Government are doing. However, it is a pretty limited endorsement. At least, three of my noble friends have sought to address the Bill. In all honesty, their talents would have been better deployed yesterday because my noble friend Lord Haskel, who spoke so eloquently about the fundamental issue of productivity, a phrase which I do not think passed the Chancellor’s lips at all—

[Lord Forsyth of Drumlean (Con)]

I am most grateful to the noble Lord. If this is such a bad Bill, which parts of it would he reverse if his party were to win the next election?

[Lord Davies of Oldham]

Not a great deal. I am not arguing that it is such a bad Bill but that it is such an irrelevant Bill. It contains absolutely nothing of any significance. As I said, my noble friend Lord Haskel alighted on productivity, but that was not mentioned at all in the Chancellor’s speech. However, as my noble friend clearly identified, we have to see improvement in that area if Britain is to earn its way in the world. We cannot be ignorant of our current balance of trade problems.

I listened carefully to what my noble friend Lord Desai argued. He put his case with considerable force and I hope it will get a sympathetic response from those who will lead the next Labour Government after the general election and that they will acknowledge some of the cogent points he made.

My noble friend Lord Soley is absolutely right to say that we need to concentrate on growth. However, as we established yesterday, the Government spent the first three years in office dissipating any potential for growth, and we even dropped back from the growth levels obtained by the Labour Government in their last year in office. There is, of course, growth this year, just before the general election. It is just like the Government’s public expenditure plans: there will be three years of vicious cuts—greater cuts in three years than the country has suffered in five—but there will be a certain easing back by 2018-19 in preparation for the next general election.

The Chancellor has a reputation for being political. He has certainly earned it in this tawdry little Bill.

--- Later in debate ---

[Lord Newby]

As my noble friend said, a nice try. The big theme of several speakers related to productivity, and I will deal with that as best I can. I should like again to correct the noble Lord, Lord Haskel, about GDP per capita. This year, 2015, it will in fact be 5% higher than it was in 2010, so it is simply not the case that while GDP overall has risen, GDP per capita has fallen.

There is, I think, widespread acceptance that we need to increase productivity. As the noble Lord, Lord Haskel, is aware, there has been a productivity gap between this country and some of our competitors in Europe and the States for a long time. It fell and has risen slightly again. There is an interesting argument to be had about whether, particularly in times of austerity, it is better to have rapid employment growth, even if productivity does not increase as quickly, than to have higher unemployment and higher productivity. Personally, I think that over the last five years the fact that there has been rapid employment growth has been of crucial importance. We are now beginning to see some increase in productivity, and I obviously share his view that we wish this to accelerate.

I should like, though, to tackle head-on the assertion of the noble Lord, Lord Haskel, that the Government have no view or strategy on improving productivity. How do we do it? One of the key points is that we have to improve the qualification and skill levels of the workforce. Everybody agrees on that. We accept that there are far too many people who have far too few skills. That is why, for example, we have accelerated the academies programme to improve teaching in schools.

[Lord Davies of Oldham]

Does the noble Lord recall the figures of the projected cuts in the further education budget for the trainers of a great number of these people without skills?

[Lord Newby]

Given the policy of the noble Lord’s party on further education, and given that if you talk to anybody in a university about their absolute fears about what will happen if a Labour Government comes in, with their policies to cut grants, and their views on what that does to university funding, I would have thought that the best thing for the Labour Party to do for the future of universities is to pursue a policy of as much silence as it can manage. In this Parliament we have seen record numbers of young people going to university, including record numbers of girls and of young people from poorer backgrounds. That is exactly the sort of change and development that I thought the Labour Party supported. We have recognised that there is a need to improve skills below university level. As I was saying, we have supported the creation of university technology colleges and overseen the increase in the number of apprentices to 2 million, which is vastly more than obtained during the previous Government.

The noble Lord, Lord Soley, quite rightly talked about the absolute importance of science and technology and the transfer of basic research into business success. We have maintained resource funding and increased capital for science in real terms during the lifetime of this Parliament. Over the period ahead, we are planning some £5.9 billion of investment in the science infrastructure. On how we get that science applied, we have consistently put money into the catapults, the purpose of which is to act as a bridge between universities and firms. These have been extremely successful: the high-end engineering ones have been very successful. I saw the National Composites Centre in Bristol, which is doing tremendous work. It is possible to do that work only because it is a partnership between government, the universities and business. This concept began under the last Government, but we have strongly supported it. We need to do more, first, because it is successful and, secondly, because all our competitors are doing something like it.

Furthermore, in science we have initiated a grand challenge fund, which will deliver some £400 million of funding on a competitive basis for new, world-leading scientific infrastructure. Within the overall area of science and technology, we have put a £100 million investment, for example, into the research and development of intelligent mobility, which is one of the leading potential growth areas on which this country wishes to be, and remain, in the lead.

The noble Lord, Lord Desai, reminded us that the Labour Party legislated to halve the deficit over a four-year period, which is almost precisely what has happened under this Government. On his radical plans for changing the basis of corporate taxes and taxation more generally, this Government increased indirect taxation on consumption by increasing VAT and they have reduced taxation on income by putting up the personal allowance. Clearly that process, at least as far as indirect taxation is concerned, will not be pursued by any party in the next Government, as we heard yesterday.

On the noble Lord’s more radical ideas on taxing consumption, I am not a tax radical, I am afraid, partly because I started my working life as a tax man. I think that grand taxation schemes often have a whole raft of unanticipated consequences. Of course, those who suffer from any tax change make about 100 times as much noise as those who benefit, so politically I wish the noble Lord luck with the sort of grand scheme that he has in mind, but I hope that I am never called upon to try to do something equally ambitious.

The noble Lord, Lord Soley, made a number of interesting and useful points. I am pleased that he welcomed the changes to gift aid, and I wish him well in finishing the funding for the Mary Seacole statue. Having been in charge of fundraising for the Lloyd George statue in Parliament Square, I know just how stressful the process is, and I hope very much that it is quickly brought to a successful conclusion.

I will pass back to my colleagues in the Treasury and the Department for Transport the point that the noble Lord made about subsidising the establishment of charging points for electric vehicles. I have considerable sympathy with what he said about the power of attorney. I have power of attorney for my mother, and trying to work out how to exercise it is really quite difficult. Having gone through the whole process, I found that it was remarkably anachronistic. As we are moving into a period where power of attorney will be required by more and more families, there is an argument for looking a bit more fundamentally at the whole thing and not just at the way in which it can be used once it has been granted.