Economy: Purchasing Managers’ Index
Lord Davies of Oldham Excerpts(5 years, 7 months ago)
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Lord Bates
Given that it is hard enough to answer for the UK Government in your Lordships’ House, I will not attempt to answer for other Governments. However, I believe that the resilience we are seeing in the British economy is a tribute to a number of factors: the fact that the UK remains a prime location for foreign direct investment—we have the largest stock in Europe and the third largest in the world—and Forbes identified the UK as the number one location to invest and set up a business in 2018 and in 2019. All those factors—low taxation, a competitive economy and great skills—are the reasons why people are backing Britain.
Lord Davies of Oldham (Lab)
My Lords, this Question started on the manufacturing industry, with a reference to the German motor car industry. Is it surprising that Germany is having some problems with its exports, first, in relation to Brexit, and secondly, to standards in the industry, which have caught the Germans out rather badly in recent years? However, four-fifths of the British economy is services, so what is all this jubilation—false jubilation—about manufacturing when in fact our service industries are showing the real pressure at present, and they are not in position to stockpile in quite the way that manufacturing is?
UK Convergence Programme
Lord Davies of Oldham Excerpts(5 years, 7 months ago)
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Lord Gadhia (Non-Afl)
My Lords, I welcome the overall thrust of the statement made by my noble friend. It seeks to demonstrate that our seeming political meltdown over Brexit is not matched by an economic meltdown. This was brought home to me recently when I participated in a panel with the former Italian Prime Minister, Matteo Renzi, and the former Greek Prime Minister, George Papandreou. While they were able to have some fun at our country’s expense because of our Brexit impasse, I was able to take some reassurance from the fact that the UK’s sovereign credit rating is six notches above Italy’s and 11 notches above Greece’s. Does my noble friend agree that we need to do everything in our power to protect and safeguard the benefits of the fiscal consolidation that has been so hard won since the beginning of 2010 and which he referred to earlier in remarks he made in response to a Question from the noble Lord, Lord Hunt of Wirral?
Lord Davies of Oldham (Lab)
My Lords, I was somewhat taken aback by the Minister’s opening statement. I of course recognise that the process we are involved in is a largely technical one with a very short duration so far as the United Kingdom is concerned when we leave the European Union, but the Minister addressed himself to issues as if this extraordinary word “Brexit” had never been coined and the phenomenon had never existed. Every single question that has come subsequently related somewhere to the impact of Brexit. I hope the Minister will reply to these questions in full, because his opening statement dwelled on the sunny uplands and what he regarded as favourable forecasts at present. I do not find the OBR’s forecast on where growth is at present and where it will be in three years’ time as a particularly favourable position. Indeed, it is a lower figure than that which obtained over 30 years or so prior to 2010. I am amazed that the Minister seems to think the Government are on the high road to success with this rather deplorable figure, starting at 1.2%.
The noble Lord, Lord Vaux, indicated that there are real dangers of assets being transferred and the capacity of the British economy reduced during these Brexit developments. There was a great deal of commentary about the fact that that would happen and we should not be at all surprised that we are getting increasing evidence of it happening. Yet the Minister presented this document—this response to Europe—as if we were pretty well in steady state and the economy was easy to analyse and forecast.
In fairness to the OBR, it made it quite clear that this is a notoriously difficult time to present forecasts of any validity. Yet none of this seemed to cloud the Minister’s position in his opening statement. I hope the questions and points that have been made lead him to respond fully to the situation. After all, he knows that we are right at the bottom of the league table on productivity, and have been for most of the Conservative Government’s time in office—since 2010. All sorts of strategies have been presented that would go towards improving our productivity, but we are still doing very poorly. It is therefore no small wonder that we have problems with growth and competition.
We are well aware that big decisions are being taken which threaten our economy. The decline in the German economy may give us some comparative advantage, in that for a short period we have had a slightly more secure position. But its decline is overwhelmingly in the manufacturing industry, where we have the greatest difficulty presenting any real competition, and in the motor industry. What solace is that meant to bring to the Minister, given that he is about to be part of the process whereby we cast ourselves on to the international trade situation, while busy disentangling ourselves from our strongest economy—the European one? The two largest economies are pursuing policies of protection and are concerned about the development of trade. So it will not do.
I understand the Minister’s point that as far as Europe is concerned, in past years this particular requirement has been treated in a fairly light-hearted fashion in this House. So it should be, in normal times. However, we are not in normal times. We are in times of very real strategic threat to our economy. It will not do for the Minister to think that one can ignore the small aberration of Brexit at present because the economy is under good guidance. After all, he knows better than most of us here how crucial the financial services are—to the Treasury in terms of receipts and to our economy in terms of employment. Therefore, when it is identified that there are clear cases of the financial services transferring their assets from the UK elsewhere, we ought to be worried.
I ask that in his summing up, the Minister replies to each contribution that has been made. Each focused on the important dimension of anxiety about the economy, yet the noble Lord was busy glossing over this in an opening statement which looked as if he was more concerned with “The Wizard of Oz” than with the real economy.
Lord Haskel (Lab)
My Lords, the Minister told the House that we are going to have 1.6% growth. I imagine that this is because of lack of investment and low productivity. If we had 2% growth, we would then be faced with inflation, but that word did not appear in the Minister’s statement. If we do do better than 1.6% growth, are we going to have to deal with inflation? What are the Government going to do about that?
Government Debt
Lord Davies of Oldham Excerpts(5 years, 7 months ago)
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Lord Bates
I am very happy to do that, and of course my noble friend will be aware that 32 million people have just enjoyed a tax cut as the tax thresholds were raised. There is a balance; we have seen net borrowing come down from a peak of about 10% in 2010 to under 2%, and overall net debt is beginning to fall after having peaked. However, at the same time, as he rightly says, we have seen half a trillion pounds of investment in infrastructure, and the prioritisation of public services, principally the National Health Service, which has had one of the largest budget increases in its history.
Lord Davies of Oldham (Lab)
My Lords, why does the Minister not confess that the noble Lord, Lord Hunt, got it absolutely right? The only thing is that it is completely contrary to what Conservative Governments over the last decade have pursued. Austerity has been pursued to the extent that people are poorer and our public services are on the point of breaking down in many areas. Even then the Government do not hit their target for reduction of debt, but are falling many years behind the famous promise made way back in 2010 that they would do it in about five years. Is not the Government both incompetent and wrongly focused?
Lord Bates
If the noble Lord is arguing that we should have gone further and faster in reducing the debt, he is somewhat at odds with his leader down the other end of the Corridor, who has come up with a plan to spend another £1 trillion. We are taking a balanced approach, protecting essential public services and delivering tax cuts while investing in infrastructure, and that is how we will go forward.
Retailers: Business Rates
Lord Davies of Oldham Excerpts(5 years, 7 months ago)
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Lord Bates
That is why the Chancellor took the action that he announced in 2018 and why potentially 90% of businesses can claim the retail discount that we announced for the next two years. We have taken 655,000 businesses out of paying business rates altogether through small business rate relief. These are complex problems, but we are mindful of them and are seeking to address them.
Lord Davies of Oldham (Lab)
My Lords, as well as shops being boarded up in high streets, the Minister must be aware that 100,000 jobs have gone in the last three years and that for many retailers the situation is at a crisis. I welcome the support for small businesses, but none of the measures that the noble Lord mentioned would have had any impact at all on House of Fraser, Debenhams or many Marks & Spencer stores. When these have closed, it has had repercussions for the economy of whole neighbourhoods. Why does the noble Lord not accept that online retailing is providing fierce competition for many other stores, which need some kind of support?
Lord Bates
Those businesses to which the noble Lord refers will have benefited from corporation tax falling from 27% to 19%—it is due to go down to 17%. It is also one of the reasons why, notwithstanding all the points highlighted by the noble Lord, levels of employment in this country are at a record high.
Female Entrepreneurship
Lord Davies of Oldham Excerpts(5 years, 7 months ago)
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Lord Bates
Indeed, that was one of the things which Alison Rose brought out, as she is doing in her present role, particularly in the finance sector. I pay tribute to my noble friend for being one of the pioneer female directors along with my noble friend Lady O’Cathain, who was one of the first female directors of a British retail bank. Lots more needs to be done, but we are standing on the shoulders of some very impressive people.
Lord Davies of Oldham (Lab)
My Lords, we are so far behind France, America and Canada in the numbers of women becoming entrepreneurs compared with men. This suggests that there is a rather significant fundamental bias at work in our society. Do we not need to look at the teaching of economics and financial issues in schools for girls, to create some degree of equity and confidence among young women?
Lord Bates
That was a particular focus of a report done by Vince Cable when he was Secretary of State. It was carried out by Lorely Burt MP, now the noble Baroness, Lady Burt. He came out very much on the side of more needing to be done for entrepreneurs. Alison Rose identified that the problems occur at school with not getting more females into STEM subjects. While some progress has been made, with a 25% increase since 2010, the report recognised that significantly more needed to be done to ensure that people had the skills necessary to set up their business and make a success of it.
Access to Cash
Lord Davies of Oldham Excerpts(5 years, 7 months ago)
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Lord Bates
My Lords, I pay tribute to the work of the mutuals. The noble Lord is right that a situation is emerging where people, particularly the most vulnerable, are seeing access to cash beginning to reduce as a payment option. One in six transactions used to be made in cash; at the moment it is one in three, and it will go down to one in 10. This is an inevitable consequence of the movement of technology. We need to adjust, but we are committed to supporting access to cash for the most vulnerable people, to whom he referred.
Lord Davies of Oldham (Lab)
My Lords, times they are a-changing. Tottenham Hotspur is playing its first match on Saturday—tonight, sorry—in its extremely expensive but attractive new stadium, and the stadium is cashless. They must have got their demography right in making that decision, but even if in urban areas there are sufficient cash points and access to cash, in rural areas and small towns there is a developing crisis. A very large number of people, as has already been mentioned, do not have ready access to cash. When will the Government appoint someone to monitor this situation and insist that the banks and other organisations supply cashpoints?
Lord Bates
That is partly within the role of the Payment Systems Regulator, although not entirely. On the point about cash and Link machines, Link is a network of banks that supervise these things. It has increased the intercharge fee between ATMs so that it can meet its obligation to ensure that ATMs are at least 1 kilometre from the next free ATM in rural areas. That is a very important commitment, which the regulator will hold them to account for.
Tax: Short-term Lets
Lord Davies of Oldham Excerpts(5 years, 8 months ago)
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Lord Bates
People already have to make that declaration via tax form SA105. For the latest two years for which numbers are available, the number of people in that position was 2.48 million, and that rose to 2.58 million, reflecting the increase in the number of people earning income from a property, to which my noble friend referred. However, the number of days for such lettings is limited to 90 in London. It is very important that people declare all income, because it is taxable.
Lord Davies of Oldham (Lab)
My Lords, Airbnb, a significant company in this field, is apparently being looked at closely by Her Majesty’s Revenue and Customs, but it seems to be engaging in a practice that we associate all too easily with multinationals: transferring profits outside the UK taxation regime. Are the Government tackling this fully, and do we not need international support in getting control over these companies?
Lord Bates
That is a good question. Whether it is Uber or Amazon, we are genuinely wrestling with how to capture the income due here. We have made some changes to taxing digital companies but, with the spread of technology and the sharing or online economy, all Governments will have to do more in this area.
National Insurance Contributions Holiday
Lord Davies of Oldham Excerpts(5 years, 8 months ago)
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Lord Bates
The noble Baroness has looked at the Conservative Party manifesto, and I encourage her to read it all. On page 54, where this pledge is mentioned, it is under the heading, “More people in work”. Since the general election, 713,000 more people are in work— I call that quite a delivery.
Lord Davies of Oldham (Lab)
My Lords, the noble Lord will have appreciated the rather derisive laughter that greeted his first comment that he was out to fulfil manifesto commitments. Since the general election the Chancellor, who the noble Lord speaks for in this House, has discussed two Budgets and two Spring Statements—the last of which was only a couple of weeks ago—with ne’er a mention of this fundamental commitment in the manifesto. The noble Lord is hoping to escape today without making any precise commitment for the future.
Lord Bates
I thought I said in my Answer that we are committed to delivering the manifesto commitments. The noble Lord talks about manifestos, but I do not want to remind him of his party’s commitments on student debt, which did not seem to survive the election campaign. The reality is that we are significantly increasing employment: employment is at record levels and unemployment is at a historic low; more young people are in work; and the rate of youth unemployment has been halved. These are all steps in the right direction.
Sibling Couples
Lord Davies of Oldham Excerpts(5 years, 8 months ago)
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Lord Bates
My noble friend makes his point. His point on the loan charge was debated here last night, when he and his representations were mentioned in dispatches by my noble friend Lord Wakeham. However, the point remains that we feel that there is a small number of cases. If a property is worth £1 million, and you divide it and take into account the personal thresholds of £325,000 times two, the liability on the death of one sibling will amount to some £70,000 in tax, which can be spread over 10 years.
Lord Davies of Oldham (Lab)
My Lords, I agree with a great deal of what the Minister has said. It is right that the Treasury should be concerned about the protection of inheritance tax. After all, avoidance of inheritance tax is basically a middle-class pastime in this country; any lawyer is likely to recommend that people should think about setting up a trust fund to avoid the consequences of certain aspects of the tax. We all have sympathy for the original Question and problem, but it is now, properly, with the Treasury, and I am glad that the Minister is taking the position that he is.
Spring Statement
Lord Davies of Oldham Excerpts(5 years, 8 months ago)
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Lord Davies of Oldham (Lab)
My Lords, this debate is occasioned by an event called the Spring Statement, which has scarcely been a fiscal event. There were no significant changes to the tax system, and only a small number of spending measures, forming not an economic strategy but almost an emergency response to the failure in government services long experienced by the British people, who are now complaining stridently about it.
Of course, as my noble friend Lord Hain pointed out, the Chancellor’s reasoning is that the Brexit shadow is still as dark as ever over the British economy. That makes economic forecasting exceptionally difficult—a position readily acknowledged by the OBR, which based its forecasts on an orderly Brexit, while warning that a disorderly one would have a severe short-term impact. We are nine days away from decisions on leaving Europe, and we have not heard any announcement this evening about what the Government’s strategy is. We are as much in the dark over Brexit as we have been—and the whole country has been—for months and months. Whether it will be a disorderly Brexit we do not know, but we certainly do not have an indication that the Government are in control of events and their policies.
The tentative forecast put forward by the OBR does not give the Government a great deal of credit. As noble Lords across the House have recognised, growth forecast has been reduced from 1.6% to 1.2% following nearly a decade when growth has been low. That is as good a measure as one can have of the Government’s failings. The OBR continues to stress that weak productivity growth is at the heart of the problem, and noble Lords in this debate have contributed to those considerations.
If, as we have had over the past decade, we have the lowest wage growth for more than a century, when investment has been low compared with other advanced countries—as my noble friend Lord Davies of Stamford emphasised in his speech—and the Government fail to hit their expressed targets, it is not surprising that there is a lack of confidence and an acute problem in the British economy. After all, austerity is an ideological objective rather than an economic necessity, and we have been governed by that for a decade. It has dominated government policy over this period, the consequences being low investment and low growth rates.
The Chancellor makes a tentative prediction that wage growth will at last be above inflation, but we have had a decade in which the growth in wages has been the lowest for more than a century. Is it a surprise therefore that demand in the economy at present is in an unhealthy position? When I say unhealthy, I mean that what demand we have seems to be correlated by the significant growth in household debt. We have been in this situation before and it is not one which encourages stability or any reason for congratulating the Government.
On the Government’s basic competence, the chief financial objective in 2010 of the Conservative Chancellor at that time was to balance the books by 2015. We all remember the long-term economic plan. However, despite all the hardships caused by this policy of austerity, this Chancellor does not expect the objective to be realised until 2025. The decade of austerity has brought havoc in public provision, with the stress so great in some public services that the Chancellor has been obliged at this stage to apply a minor sticking plaster to acute wounds. We see the police budget increased by £100 million—a tiny fraction of the overall police budget—but it is meant to indicate to a disbelieving population that it will address knife crime satisfactorily. The Government continue to deny that there is any significance between the reduction in police numbers and increased crime rates, especially knife crime. They say that it has nothing to do with fewer policemen in action.
The Chancellor managed to conjure together token additional grants for schools to address the school crisis which is causing such discontent among parents and teachers alike. The Chancellor’s phrase was that he was going to apply small remedies to the problem. We all know that the educational system is in crisis. It used to be enough when parents expressed their concern. Then we got accustomed to older students, sixth-formers and so on expressing anxiety. We certainly got very used to the teachers expressing their anxiety about school funding. Now the children are making the argument to the Government. Is that an indication that the policy of austerity has gone too far?
It has not been mentioned much in the House today, so I am grateful to the noble Earl, Lord Listowel, for emphasising the problems where children are concerned. In social policy we have seen the continued erosion in the value of tax credits and social benefits, which is to continue for the foreseeable future. The problems with universal credit remain a major feature in the lives of so many of our less well-off citizens. Furthermore, there has been no mention this evening about the very desperate people—generally young people—who sleep rough.
The noble Baroness, Lady Thornhill, emphasised her anxieties about the services provided by local authorities, and said that the system of financing local government was broken. Did anyone—there are plenty of people from that party in this House—anticipate that it would be Conservative county councils, namely Northamptonshire and Wiltshire, that would complain about their inability to provide basic statutory services? That impacts greatly on those most dependent on such services—often those in our society with fewer resources.
Finally, we have had the signal that the Government are making such a success of increasing employment. What the Government have created is large numbers of workers on low pay and long hours and in precarious employment. That is why productivity is not reflecting the buoyancy of employment. The figures look good from the perspective of the Government and elite staff but, for many, employment is based on severe job insecurity. Nearly 3 million people are working for less than 15 hours per week, and one in nine have insecure jobs.
Our society is evolving the need for a more skilled population. With regard to enhanced skills, whose importance we all recognise, there have been government failures in both education and training. Policies are clear for all to see. The cutbacks in schools and further education have produced protests. Colleges, which traditionally provide a crucial opportunity for young people to gain specific employment skills, have had their budgets cut by almost a quarter since 2010. That is how far-sighted the Government are about our manpower needs.
A future Labour Government will pursue an entirely different strategy from the failed economic policies of this Government. We will end austerity and make the wealthy pay their fair share to strengthen the public services on which we all rely. We will establish a national investment bank and a network of regional development banks to support small and medium-sized enterprises and upgrade Britain’s infrastructure. We will introduce a financial transaction tax, to curb speculative behaviour that threatens economic stability. We will establish a strategic investment board to guide private investment towards productivity-enhancing and green productive lending. We will reform company law to provide worker representatives on boards, and mandate a maximum pay ratio of 20:1 in public companies and companies bidding for public contracts.
We will seek to increase investment in our key industries and will ensure a close relationship between the financial sector and the world of manufacturing and productivity. We will improve our public services, particularly education, which is so crucial to skills enhancement, and guarantee that the health service obtains the resources required. We will create a fairer society where those on lower incomes and welfare share in the increased prosperity of the nation. This Government have a disreputable past based on austerity, a totally incompetent present illustrated by the Brexit fiasco and no vision of a better future for our people, which this inadequate Spring Statement clearly demonstrates.