Prudential Regulation Authority: Equity Release Sector

Lord Davies of Oldham Excerpts

Wednesday 5th September 2018 Lords Chamber

[Lord Bates]

What it reflects better is an issue of pricing, which is a fair debate. The no negative equity guarantee, which is very important to lots of consumers, because they do not want to leave their families with the potential liability, is a key part of the offer. The pricing of that, depending on which measure you take, says either that we assume there will be house price growth over the next 15 to 25 years, or that there will be no growth at all, or that interest rates will accrue at 5% to 6% or at 1% to 2%. The variance that the noble Baroness has identified lies in whether you apply the effective value test at a different point between those two extremes to come up with a different number. The purpose of the consultation paper is to get clarity so that all interests are protected.

[Lord Davies of Oldham (Lab)]

My Lords, the rate of increase in the market has been exceptional over the past five years, and there are clear indications that this will carry on at a rate not dissimilar for the immediate future, so I do not know the extent to which the regulators are being effective in this respect. It is obvious that home owners will be eager to borrow in circumstances where incomes can scarcely keep up with inflation, but we have to guard against things going badly wrong. What if house prices shudder to a halt or even fall? There are reasons to think that such issues could arise in the economy and we would be back to Equitable Life, which caused such tremendous damage to people 20 years ago.

[Lord Bates]

That is of course why within the industry itself—and indeed with the regulator—the normal level at which borrowing is taken from the home is between 30% and 40%, to allow for that cushion. We have to recognise also that this has two benefits: to individuals as, for most people, their home is their largest asset and being able to release some capital to enhance their quality of life in later life is good; and to the annuity holders on the other side of the balance sheet from the equity release, who have been suffering badly as a result of gilt yields being around 1.5%. The ability of life insurance companies to match these two needs and to offer a better deal to both is something to welcome. The noble Lord is absolutely spot on when he says that we need to watch it; we need to watch it very carefully and what I have outlined is what the regulator is doing already and the rules that it has applied, and also the consultation that is open at this moment to see whether more needs to be done.

Taxation (Cross-border Trade) Bill

Lord Davies of Oldham Excerpts

2nd reading (Hansard): House of Lords & 3rd reading (Hansard): House of Lords & Committee: 1st sitting (Hansard): House of Lords
Tuesday 4th September 2018 Lords Chamber

[Lord Davies of Oldham (Lab)]

My Lords, summing up a debate of this quality and range is the stuff of nightmares for me at the Dispatch Box because every single point that I put together prior to the debate has been more than adequately covered by the speakers, to whom, of course, the Government need to respond. Therefore, I have one consolation: however challenging the position in which I find myself, the Minister, after this debate, will find himself in an extremely challenging position. A series of questions have been asked to which it is entirely right that the Government should address themselves.

This is all the product of the collapse, effectively, of the Chequers agreement. The discussion in the Commons on this Bill, leading to the Government’s collapse in the face of the European Research Group’s onslaught, put the Government in the impossible position to which so many noble Lords have referred. The noble Lord, Lord Kerr, regretted the fact that this Bill has no Committee stage, so we are unable to bring a degree of detailed consideration subsequently, which we are used to doing. Given the fundamental problems with this Bill, I am not so sure that this general debate is not in itself sufficient for the Government to be obliged to think very hard and to think again. They need to deal with the obvious absurdity, to which the noble Baroness, Lady Altmann, referred: the trade remedies aspect of the Government’s proposals is in the next Bill, but this Bill has all the detail. We cannot discuss that detail because this is a supply Bill. The Government really do need to take these issues seriously and I think the debate next week on the Trade Bill will be a fundamental challenge to the Government’s position, which is woeful.

I, too, admire the noble Viscount, Lord Trenchard, in his support of the Government. He may not have anticipated being in such solitary isolation, but nevertheless, a look at the speakers’ list would show that not too many would be buttressing his argument. We are nevertheless grateful to him for presenting the argument to which the Government seem, at present, to have largely succumbed.

However, this means trouble for our negotiating position in Europe. In general terms, the questions raised on every aspect of the Bill present fundamental difficulties for the Minister in replying. In particular, we can sense—and have sensed for a year—that the problem of Northern Ireland will loom large for the Government as trade negotiations take place. My noble friend Lord Whitty, buttressed by my noble friend Lord Adonis, identified with great accuracy the implications of how critical that position is. I do not think the Government can finesse their way past that. I remember that, prior to Christmas, the Government were pleased that Monsieur Barnier and the negotiators on the other side announced that progress could be made because there had been some understanding of our position on Northern Ireland. It was never very convincing just what that understanding was. As soon as we get near legislation and look at the detail of what the Government’s policy on trade might be, we find that there is still an overwhelmingly difficult problem with Northern Ireland.

The Government cannot carry on with optimistic fudging. They have got to reach something definitive. They may not have announced, prior to the discussions on this Bill, that they would concede to the challenges put down by the European Research Group, but they have done. In consequence, there are crucial problems with our negotiating position, as identified by so many noble Lords including the noble Lord, Lord Hannay, who spent a considerable amount of time on this point. None of us can pretend that there have been many positive responses to the position the Government have adopted from Monsieur Barnier and those who represent the 27 other nations. Time moves on. We have very few months in which to avoid the position which some may regard as the proper outcome of these negotiations but which the Government have never said they contemplated and which the British people certainly never expected: that the only outcome is a hard Brexit and a fall back on the World Trade Organization. Noble Lords in this debate have identified the potential difficulties for the nation if we fall into that position.

I will keep my contribution short because I want to give the Minister the maximum amount of time to respond. He will recognise that there have been really substantial questions from every quarter of the House about the Government’s policies, particularly with regard to trade. The Commons largely called them out on this. We regret that we are not able to deal with it in significant detail, but we can all take some sustenance from the fact that, although today’s debate may not have dealt with all the issues in detail, it has identified the critical facts that the Government face as they develop their negotiating position. The Minister has got a pretty tough case to answer.

Investment Banks: Client Protection

Lord Davies of Oldham Excerpts

Wednesday 13th June 2018 Lords Chamber

[Lord Bates]

There is a complex process involving the courts, the Financial Services Conduct Authority and the creditors’ committee. The amount of the fees of the administrator must be agreed and presented. There must be a timely distribution plan for the proceeds, and this must be announced. Also, these are all matters that can be challenged through the courts by relevant parties, and the Financial Services Compensation Scheme has already indicated that it will be looking for an independent assessor to be appointed to look at the level of fees being charged by the administrator in this case.

[Lord Davies of Oldham (Lab)]

My Lords, I thought the Minister did rather well on this Question. Of course, it is the case that only 10 of the investors had to pay, because everyone else was covered by the scheme. But I hope he will put some pressure on and look again at the totality of the scheme, because it is the case that one category is effectively picking up the losses that have been partly incurred by the other category.

[Lord Bates]

I am slightly stunned by the noble Lord’s generous praise. It is very welcome, especially coming from him. As I say, the whole process of regulation in the City includes constant lesson learning. It is a fast-moving environment, and I am sure that lessons will be learned from this process. We will, of course, convey the lessons and the suggestions made by noble Lords back to the FCA for it to take into account.

Royal Bank of Scotland

Lord Davies of Oldham Excerpts

Wednesday 13th June 2018 Lords Chamber

[Lord Bates]

The point that the noble Baroness makes is right in terms of this particular focus. The FCA identified that there had been widespread inappropriate treatment of firms by RBS. We know that small and medium-sized enterprises are the backbone of the economy, therefore mistreatment of that type is taken extremely seriously. As the noble Baroness knows, the FCA has an ongoing inquiry, and is currently assessing what enforcement actions may be taken in the future, so I will be restricted in what I can say. The fact that the Royal Bank of Scotland has come forward and issued a profound apology, and has established a fund to start the process of providing compensation to the 12,000 firms affected, is a step in the right direction. However, we deplore the actions taken which led to that being necessary.

[Lord Davies of Oldham (Lab)]

But, my Lords, in addition to the appalling treatment by RBS of small and medium-sized enterprises, and the fact that of course the FCA report on what it did pointed out the appalling behaviour of the board, will the Minister also recognise that the Government chose to sell additional shares, not just after this development but as soon as the fine levied by the United States Department of Justice had been paid by RBS? Is it not quite clear, also given the incentive of reducing aspects of the share price, that the Government are out to reward those who could afford to purchase shares, while the taxpayer loses £3 billion on the transactions carried out by a bank which has let the nation down?

[Lord Bates]

First, on the share price, the noble Lord will be aware—he was on this side of the House at the time it happened—that the shares were purchased for £5 per share. Within three months they were worth £2.20 per share, and we sold them at £2.71. They flatlined for about nine years. Rightly, because of the instruments that were set up by the previous Labour Government, these sales are done by arms-length bodies, so UK Government Investments takes independent advice. They are strictly governed as regards when disposals can take place, to ensure, quite rightly, that we are not in possession of any information which the market is not aware of. Those are established practices; therefore, it was right that actions did not take place while the decision by the US Department of Justice about the scale of the fine was not in the public domain. They have followed those procedures, and we follow them independently, but we are dealing with the legacy issues of some very concerning behaviour.

Brexit: The Future of Financial Regulation and Supervision (European Union Committee Report)

Lord Davies of Oldham Excerpts

Wednesday 6th June 2018 Lords Chamber

[Lord Davies of Oldham (Lab)]

My Lords, I, too, congratulate the committee on its report, under the obviously effective chairmanship of the noble Baroness, Lady Falkner. I congratulate her on her speech, too, because she spent a great deal of time accurately depicting what the report contained but also added some reservations of her own, which might just have passed us all by, had not some of those themes been developed later in the debate. For instance, she emphasised the problems with the insurance industry and the limited progress that has been made. She also mentioned the concept of equivalence, which, as we all recognise, is an easy term to use but a very difficult one to realise when making decisions.

No one doubts the significance of securing the right framework for the crucial sector of financial services. The opening paragraph of the report emphasises the level of interdependence that must not be lost as the UK leaves the EU. The problem, of course, as identified in the report, is the range of issues where it is so easy to lose that concept of interdependence. My noble friend Lord Liddle indicated that, when we are talking about technical issues, we also have to work out who is in fact taking the decisions. It is a great weakness for the UK if, instead of being the rule-maker—which we have been used to in so many areas of financial services—we become a rule-taker. Yet, as the report indicates, the UK has so much to offer, as well as to benefit from, the European Union, particularly in the field of financial services, where we have considerable expertise. My admiration for the report lies in the clarity with which it identifies areas of real difficulty that the Government need to address—the difficult negotiations, and the difficult decisions to be taken. We cannot be too optimistic about progress so far.

Of course, my party made some progress in this debate only yesterday in tabling a fresh amendment to the withdrawal Bill, seeking for us to continue in the single market. That will not please many Members on the other side of the House. They should not worry: it will not please my noble friend Lord Liddle either, because he wants full membership of the EEA, and what was offered yesterday is much more marginal than that. But such developments as this are bound to put this report into a developing context; that is the problem. The committee had to report as it saw things at that time. We are all too well aware of the march of time and of crucial periods ending. The report certainly succeeds in identifying the key issues that require resolution, and we should greatly appreciate the work of the committee for that clarity. But how often does the report refer to difficult issues? How often does it present the challenge of what is to be done, rather than the solution?

I am not critical of the report for that; we live in an age of great uncertainty. It is clear that the Government contribute to that uncertainty by not contributing much at all in the way of substantial advance. Quite a long time ago, we thought that certain crucial, fundamental blocks had been agreed by the Government. Can one recall how many months ago it was that the Irish border issue was “under control” and had been resolved? And what have we had subsequently? Almost continuous anxiety about the Irish border issue— it colours a great deal of the whole debate. The Government’s record is therefore somewhat less than encouraging when it comes to negotiations.

The report warns of the fragmentation that would result from ending passporting, which would clearly increase costs for companies and firms and reduce financial stability. The relocation of clearing activities to the EU would increase those risks. The report sees no reason why they should diverge from EU standards; the answer should be regulatory alignment. How far have we got with any fulfilment of that objective? I do not blame the report for analysing a problem and saying what the solution should be; it is in the hands of others to make progress towards a solution, but progress seems to be very limited indeed. There is clearly a need for international standards to be enhanced, and the UK can make a substantial contribution to that. However, that means that the UK has to stay in a significant position with regard to these issues.

The report emphasises the significance of the financial services industry, which makes up 7.2% of our economy, the jobs involved and its contribution to the Exchequer, which is not likely to be ignored by the government Front Bench. But the great danger is the prolonged uncertainty. Almost every speech this evening indicated less than certainty about where we are going—not defining what is going to happen, but expressing what needs to happen against a background where nothing is certain. The great danger is that this prolonged uncertainty will cause firms to take the only action they can. They will take decisions to relocate within the European Union—not with bombast, advertising the fact, but quietly going about the process of safeguarding their interests as they see power drift away from London towards other parts of the present European Union.

No one has mentioned this in the debate, but we should all have responded to the fact that the report spends quite a bit of time talking about the burdens Parliament will carry and the challenges it will face. The report does not pull any punches on this. It describes the legislative load upon Parliament to transpose the European Union body of law—the acquis communautaire—into British law. Clearly, that is an absolutely massive task that will fall upon this Parliament. In addition, the powers of British institutions are bound to increase, because they will no longer be part of the more general regulatory framework but will be the sole regulatory framework in crucial areas. That means that Parliament will have to take a much keener interest in the key regulatory bodies in this country. I will come on to the reason why that is necessary in just a moment.

I am glad that the noble Baroness, Lady Neville-Rolfe, referred to fintech. After all, that is a crucial success story for the UK financial services. The report pays particular attention to the fintech industry, in which the UK has played such a leading role. The report says that those concerned with the development of fintech must be in crucial positions to ensure that international standards are of the highest as it develops. But how? In which capacity will they be able to fulfil that role? The report is optimistic about certain opportunities, although it goes on to identify the difficulties facing the Government.

There have been several contributions in this debate with undertones of anxieties and reservations about our position, and concern about the limited progress we have made so far—from my noble friends Lord Davies and Lord Desai but also from other speakers, and certainly from the noble Baroness who spoke just before me. Are British regulatory systems fit for the situation we face, with its fresh challenges? I have heard today, and in this report too, many congratulations on certain aspects of our regulatory control. However, can we just recognise that we have 29 overlapping regulatory authorities at present? There are doubts about all of the four big accountancy firms because of the role they played in the colossal financial crash of 2008, or in more recent debacles; one thinks only of Carillion, for example, and the role the accountants played in that. How good will our institutions be at fulfilling this role, when they are going to take on so much more? It is clear that public institutions such as the Bank of England and the PRA will need extra resources to carry out the significant roles that will be imposed on them.

We have one success from the Government—I may be able to think of two if I try hard, but one will do for the moment. They have succeeded in negotiating a transition period, which gives a little more breathing space—but not much. We have no time to waste. The successful negotiation to create a transition period takes us only to December 2020 to resolve many of these issues. What is more, the reason why we need to resolve them as quickly as possible is that those outside, whose interests are affected, are bound to act from their perspective. If the Government do not achieve solutions to these problems, they will have to make the judgment that they will not succeed and will have such a limited relationship with the European Union that everything will fall upon the commercial and economic interests involved.

There is still time for the Government perhaps even to produce a White Paper, but we may be beyond the White Paper stage. We need a pretty clear indication—I am sure that the Minister is bound to give it—of just how much progress has been made in meeting the issues that have been raised in this report and by almost everyone who has spoken in the debate this evening, and we need him to reassure us that great progress has been made.

Royal Bank of Scotland

Lord Davies of Oldham Excerpts

Tuesday 5th June 2018 Lords Chamber

[Lord Bates]

I thank the noble Baroness for her questions. In response to the first one, it must be remembered that when the Government paid £5.02 per share for RBS in 2008 it was an essential injection of capital at a time of financial crisis. The bank whose shares we sold yesterday is a very different organisation. Its balance sheet is £1.5 trillion less. It is operating in nine countries instead of 38. Because we have changed the rules, its capital buffer is now 15.1%, which is greater than it was and well above the threshold required. The noble Baroness also touches on some other important factors. These had a bearing on UK Government Investments, which advised the Government about when to sell—we act on advice in these things. It pointed to the fact that, because a settlement of £3.6 billion with the Department of Justice in the United States, announced in early May, had now happened, it judged this to be a good time to exercise this sale. The Financial Conduct Authority rightly looked into the global restructuring group, where the circumstances are very concerning for the businesses affected. Its report recognised that a number of that group’s customers had been mistreated.

[Lord Davies of Oldham (Lab)]

My Lords, the Minister has made a good fist of a very poor case indeed. He must recognise that the bank is, in fact, being sold at a level massively below its value when it was bailed out in 2008. It is, therefore, the taxpayer who is bearing the cost of this situation. It will not do for the Government to say: “We now have a bank which can pay a dividend and which has made progress. We are therefore delighted to be able to sell it into private ownership, while the public which bailed it out loses significantly on the deal”.

[Lord Bates]

The noble Lord may say that we sold it too cheaply; I might say that he bought it too high, which is another way of looking at the £5.02. It is a fundamentally different bank to the one which was acquired then. The price which we sold at yesterday—271p—was near the top end of the present yearly average. We have signalled that we do not believe that a Government should be in the business of running these banks. The Chancellor announced in last year’s Autumn Budget that we would gradually dispose of our interest in the bank over the next five years, and that is what we are doing.

Creditworthiness Assessment Bill [HL]

Lord Davies of Oldham Excerpts

Committee: 1st sitting (Hansard): House of Lords
Friday 11th May 2018 Lords Chamber

[Lord Best (CB)]

My Lords, from the Cross Benches, I support the noble Lord, Lord Bird, and oppose the amendment. I know that the motivations of the noble Lord concern mostly poorer people who need credit to buy white goods and the rest—we have known for many years that the slogan, “The poor pay more”, has been more than true—but I want to refer to those members of Generation Rent who have a chance, albeit a sometimes slim one, of being homeowners and need every help in getting their creditworthiness to the highest-possible status to move from being a tenant to a homeowner, and who are held back by the way in which credit agencies operate. It may be said that the people in Generation Rent do not wish to be homeowners —that they live an “Uber lifestyle” in which you do not own a car; you call Uber. That can apply to many aspects of life. However, surveys continue to show that people wish to be homeowners and for very good reason: home ownership brings with it security, which you do not get in the private rented sector. Even if your tenancy is for a full year, a lot of people find that it is hardly enough to enable you to settle down and, certainly, to bring up a family—we are now seeing ever more families in the rented market.

Home ownership remains an aspiration. Although you might be paying more for a mortgage on day one—if the mortgage company can provide a loan for you—rents will rise roughly at the level of earnings, which is RPI or CPI plus 1% or so, year after year and, in 25 or 30 years, those rents will be enormous. When you come to retire as a tenant, a lifetime of tenancy means having to move home on retirement because your income will drop but your rent will keep rising. Home ownership gives you not just the security of tenure but the financial security of knowing that, although it may take 25 or 35 years, eventually you will be free of debt. Anything that inhibits people from breaking into home ownership, which is what people aspire to, is extremely important.

People say, “Nowadays in London and the south-east, what is the point of talking about home ownership? Prices are so far beyond the reach of those on ordinary incomes this will never happen”. We now have planning consents across London for an enormous number of new apartment blocks. We are seeing come out of the ground 520 apartment blocks of more than 20 storeys for residential use. A massive housebuilding programme is coming down the line. Those who have built those apartment blocks, some of them overseas investors, believe that the starting price will be about £500,000 for the majority of the flats. Someone who is on £50,000 a year—there are not that many people on such a salary—will be able to get a mortgage of £250,000 and not £500,000. The trouble is that we are running out of Russians; we are running out of overseas buyers who are prepared to pay £500,000. I predict that home ownership, which has been in sharp decline, will come back into fashion. The opportunities will recur; prices will have to come down to meet the incomes of those who aspire to own. We should ensure that the credit lines for them are as clear as possible, which is what the noble Lord, Lord Bird, would do.

[Lord Davies of Oldham (Lab)]

My Lords, I indicated at Second Reading that Her Majesty’s Opposition were very much in favour of this Bill. In a debate in Westminster Hall, the shadow Finance Minister made it clear that he too was in favour of it.

I appreciated the way in which the noble Lord, Lord Blencathra, introduced the amendments—it was more probing than assertive. He will have recognised that representatives of almost every part of the Chamber have been against the amendments and said that the Bill should stay as it is in this crucial provision. The noble Lord, Lord Bird, is more qualified than me to respond to all these points and I shall therefore defer to him, but he must have been encouraged by the enormous support across the Chamber for his Bill as it stands.

[Lord Kennedy of Southwark (Lab Co-op)]

My Lords, I strongly support the Bill in its unamended form and do not support the amendments proposed by the noble Lord, Lord Blencathra. When the noble Lord responds to the debate, can he tell the Committee a little bit more about who the members of the Consumer Credit Association are? I do not know whether BrightHouse is a member of the CCA, but if he could tell us it would be helpful.

I grew up on a council estate in the 1960s and 1970s. Both my parents worked and made sure that they paid their rent—it was the first thing they ever did. My dad had two jobs to ensure that our rent and rates were paid. It is important that people who meet their financial obligations week in, week out have that taken into account when they seek credit. As the noble Lord, Lord Best, said, it is always the poor who pay more, and that is totally unfair—of course, that goes for many things in life. When I go into my local newsagent, I see people queueing up with their little fobs to get their electricity; they pay more. And there are other things—it is just unfair. What the Bill does, on which I congratulate the noble Lord, Lord Bird, is begin to make sure that, if you have a good credit record, that is taken into account properly, so that when you seek credit you can get a fair price and will not always have to pay the most.

Economy: Spring Statement

Lord Davies of Oldham Excerpts

Thursday 15th March 2018 Lords Chamber

[Lord Davies of Oldham (Lab)]

My Lords, this has been an interesting debate, distinguished by the contribution of the right reverend Prelate the Bishop of Lincoln, in his maiden speech, and we look forward to him continuing to contribute to our deliberations often in the future. My only link with Lincoln was when I was concerned 20-odd years ago with my party’s higher education policy. I must say that you cannot go to Lincoln without seeing the majestic cathedral and think that it is the only structure worth concentrating on. What was being proposed in Lincoln then was the university, in what seemed to be a green and muddy flatland down by the river. Lincoln University developed with extraordinary rapidity. It is an enormous tribute to the people of Lincoln that they developed their university to real status in a very short time. I, for one, visit the cathedral when I am there, but I always go to have a look at the university as well.

The Minister introduced the debate in his usual equable and optimistic manner. He treated the House in his opening speech to a description of the economy, but I am afraid that it reinforced the theme of several speeches in this debate: the Government seem to be guilty of the most extraordinary complacency. He suggested that the recovery is in fact at hand. Let me say that, if it is, it will still be the longest recovery from recession since the 1920s—so not a great deal to boast about there. Also, as several noble Lords who contributed to the debate indicated, we are by no means sure that the problem is over. After all, we all remember that the previous Chancellor expected to create a surplus by 2020. We do not get too much talk now from the Government about surpluses, as far as the financial position is concerned. Further, as has been emphasised by so many speakers, growth last year still kept us firmly in the relegation zone, at the bottom of the G7. Last year was the lowest since 2012, and the OBR has of course forecast that, in 2020 and 2022, the situation will deteriorate. So that is some recovery for the economy.

The Government have missed every target that they have set themselves in the last decade for the rate of reduction of the deficit and we are all aware of the consequences of that. Behind it all, of course, this gave the justification for austerity. The consequences of austerity have been disastrous for our people and also for our economy. The austerity programme, forged over these last seven or eight years, has only begun the question of clearing the deficit, but it has created so many problems in our public services. In a real sense, our society has seen the transfer of the problems of indebtedness from the Exchequer to our public services. The difference between the two is that the impact of public services upon ordinary people is so much greater.

The National Health Service will end this year £16 billion in deficit. There are 100,000 jobs in the National Health Service that are not being filled because there are not the resources to do so. The crime rate increases, yet the number of police officers is cut by 21,500. The number of firefighters has been cut by 850. Our Prison and Probation Service is on the brink of crisis. I should think that there is not a single Member of this House who does not shudder when we learn of what is going wrong in our prisons. The mark of a civilised society is surely that it ensures that prisons are a place for the rehabilitation of people, rather than a deterioration in their perspective on society.

In education, we have had the first cut of the per capita payment to schools ever. That is a very drastic thing. It makes the position almost unmanageable for the heads and other figures in schools. In addition to that, of course, we understand that, under social welfare, there are now proposals to end free dinners for tens of thousands of children from poor families. Surely at times the Government must wonder whether they look vindictive towards poor families who are dependent on society. These poor families are often wage earners who, in the jobs they do, do not earn enough—or earn regularly enough—to sustain the family budget.

Of course, local government is in crisis. Most of us know our own local authorities quite well, but I have to say, my ears were pinned back when the television announced that the local authority causing the greatest upset to the Government is Northamptonshire, followed not long afterwards by Surrey—authorities we automatically assume have a massive Conservative influence and a great commitment to loyalty to the Government. Yet Northamptonshire is saying, “We cannot continue with the resources made available to us by the Government”.

It is quite clear that this crisis is due to spread. We have not had the full range of social security cuts yet. Universal credit has already cut social security provision significantly but we all know that there is a great deal more to come in terms of the impoverishment of certain sections of our community. As far as adult social care is concerned, can anybody be unaware of the problems facing the elderly as they near the time when they cannot look after themselves? People have no obvious recourse to any support that will ensure that their last days are passed in some degree of comfort.

I want to say something about housing. I know the Minister has said, “We don’t have to look at the Spring Statement on housing because the Government will move smoothly into action shortly afterwards”. My heavens, the Government have a lot of movement to make. We have rising homelessness in our society. We are one of the richest countries in Europe. One of the richest cities in Europe—London—has seen significant increases in people sleeping rough. Of course, what has been brought out in this debate so strongly is that living standards have fallen over this period. Real wages have fallen by 0.5% since the end of 2017 and are lower now than in 2010.

Can anyone conceive of a Government being buoyant about their position when the broad mass of the wage-earning public are seeing their standards of living fall? Surely the Government have to respond to these very acute problems. I appreciated the speech of the noble Lord, Lord Mawson, when he talked about the digital economy and the problems facing small entrepreneurs. There is no doubt that we need to see small entrepreneurs flourish. They are an extremely important part of the economy. However, if the challenges being presented to them are not just those of developing their business but challenges posed by the Exchequer and Her Majesty’s Revenue and Customs, we have worries ahead of us.

I am grateful to my noble friend Lord Young for his comments on training and apprentices. He did not bring in the broader issue that an important part of training—and of the relationship between the education system and the training provided by employers—is the role of further education. But this Government have slashed the provision of further education in this country and are now apparently reliant on employers to provide the necessary breadth and skills to the apprenticeships they develop.

I have no doubt that the Minister will meet many of the challenges presented by this debate and that he will do his very best to give a response to all the issues raised. I have left out Brexit; I am not at all sure that we can at this stage address to the Government the challenge on the position of Brexit in circumstances where so much is so totally uncertain. We all know the hesitations of the OBR in producing forecasts on Brexit. However, the Minister has to face the facts: no one in this debate today who expressed a position on Brexit has said, “Let’s go and make this situation more difficult”.

National Debt

Lord Davies of Oldham Excerpts

Wednesday 14th March 2018 Lords Chamber

[Lord Bates]

My noble friend, who comes to this with immense experience, makes an interesting point. Even if the element of total debt covered by the quantitative easing programme initiated by the Bank of England—about £120 billion—is taken out, the debt figure is still continuing to fall. That is the point we are trying to emphasise: debt is beginning to fall and we are beginning to live within our means, which is the right thing to do.

[Lord Davies of Oldham (Lab)]

My Lords, the greatest asset which any country has is the capacity and willingness of the people to work. Construction workers have been waiting for this Government to recognise and act on the housing crisis for several years. Does the Minister agree?

[Lord Bates]

I wonder whether the noble Lord heard last week when we discussed the national infrastructure plan and announced the initiatives that we were taking to boost the housing market—some £43 billion over the spending period. We recognise that housing is a huge issue, not only of intergenerational fairness but also in terms of driving forward the economy. That is why we have announced the very substantial initiatives that we have to get that sector moving, including from the National Productivity Investment Fund, a large chunk of which is dedicated to housing.

Finance (No. 2) Bill

Lord Davies of Oldham Excerpts

2nd reading (Hansard): House of Lords & 3rd reading (Hansard): House of Lords & Committee: 1st sitting (Hansard): House of Lords & Report stage (Hansard): House of Lords
Thursday 8th March 2018 Lords Chamber

[Lord Davies of Oldham (Lab)]

My Lords, Lloyd George should be living at this hour. Here we have a Finance Bill introduced by the Minister where the only contributors are the Opposition Front Bench spokesmen. This is an indication of how limited the House’s role is in relation to Finance Bills, and justifiably so. As the noble Baroness, Lady Kramer, pointed out, we will have the opportunity to have a serious debate about the economy next week, when I anticipate there will be greater participation from all parts of the House.

The Minister put an extraordinarily optimistic gloss on the state of the economy at the present time, as the noble Baroness, Lady Kramer, also pointed out. In circumstances where so many countries are showing real and rapid growth and the world economy is benefiting from that, this Government are still watching their levels of economic growth bounce along at the bottom of the OECD countries. What this low level of economic growth indicates is that there are limited resources for the wider society and also for the Government to meet their obligations.

In the other place, Ministers were so concerned about the possibility of penetrating opposition amendments to this Bill that they introduced a procedural Motion restricting opportunities for critical amendments—a procedure which we have normally only seen either in the exciting times immediately before a general election when the decks are cleared or when warfare is approaching. What is the crisis on this limited and pathetic little Bill that causes Ministers to run for cover under a procedural Motion? The only crisis is the obvious one that this Government lack confidence in handling the other place.

The Government’s lack of confidence, of course, derives from their exiguous majority, which is dependent on another small party. That underpins so many of the Government’s actions. It certainly underpins their whole approach to Brexit, and that is why we fear that the negotiations will not produce the effective Brexit that we all want. The Government are in hock partly to the fact that they do not have a majority in the House of Commons and partly to the fact that a determined section on the right wing of the party do not really care about the terms of Brexit—in fact, they seem to exalt in the possibility of our having the hardest of hard Brexits, and the economy is meant to cope with that. We shall see.

Let me be absolutely clear about this Bill: it does not in any way, shape or form measure up to the significant needs of the economy or do anything to repair the damage done to the economy by the actions of previous Conservative-led Governments. As we all know, their record on economic growth is poor and their record on productivity is almost negligible. I have seen the noble Lord join the considerable list of Treasury Ministers since 2010 who have taken up their post expressing considerable optimism about the role that they can play in this regard. Yet even the noble Lord, Lord O’Neill, who we all know has vast experience of productivity issues, was still trapped by the fact that productivity under this Government is showing no significant improvement at all. What the Minister referred to as an encouraging development is just a marginal movement which we can scarcely credit.

We also recognise, of course, that the Minister slides very carefully past the targets which the preceding Chancellor used to have for clearing the deficit in 2015. That has long since been buried as a potential successful objective, and we are now in a miasma of somewhat changed definitions of the deficit we are tackling. We all know that the Government, because of their limited progress on the economy, are struggling to meet targets on reducing the deficit.

The Bill’s failure to address any real issues relating to the economy and society means that crucial issues remain completely unaddressed. How can the Minister talk optimistically about a society in which the average basic pay is below the level it was in 2010? That means there has been no pay rise for large numbers of working people since 2010, and yet the Government have the arrogance to suggest that things are showing considerable improvement. It is quite clear that we have had decades of lost earnings growth. We have not had an issue with regard to wages for 200 years that matches the record of this Government in that respect over the last few years.

That is how serious the situation is, but you would not have detected that from the Minister’s gloss on what this Bill is meant to represent. As the noble Baroness, Lady Kramer, mentioned earlier, no attempt has been made to address—what everybody recognises in our society—the crisis facing the National Health Service. Look at the limited amount that the Government set free for the health service when informed opinion was quite clear just what was necessary. The Government did not meet even half that.

Related to the National Health Service is the great problem of social care for the elderly. We all recognise that the changing demographic of our society is putting greater weight on the health service and on care for the elderly. Yet the Government seem quite incapable of addressing these issues. What greatly upset my colleagues in the other place was that, when a clause was tabled there for the Bill to contain an equality impact assessment, because the Government need to carry out a thorough analysis of the nature of the challenges faced by so many people in our society, the Government made sure that that was not passed. Therefore, an essential building block for the analysis of the problems in our society was not even contained in this Bill. At least if that assessment of the nature of the problem had been there, it would have been something to save the Minister’s face in introducing such a forlorn exercise. But it was turned down and rejected in the other place.

When it comes to productivity, I recognise certain aspects of where the Government are making some progress. We recognise the value of developing apprenticeships, although it is quite clear that we have got to be very encouraging towards that development. It is still the case that the vast majority of young people in education who are aspiring and have good results think overwhelmingly of university and in academic terms rather than of the needs of our economy for skilled manpower.

Alongside that, the Government have produced a devastating onslaught on the further education colleges that provide training. In addition, opportunities for part-time education have fallen almost completely by the wayside. One thinks back to the days when institutions such as the Open University were at their prime. Part-time education is now unsupported by public resources and, consequently, the opportunities have declined. A vigorous economy would keep open opportunities for people as they mature, irrespective of their achievements at any one level. People can change both in their aspirations and their abilities, and it is important to have systems that are open and flexible. With regard to education, I am afraid the Government have done exactly the opposite.

We may not have had the full equality impact assessment, but we all know the nature of our society. Even the Government are beginning to recognise that women come out of this Finance Bill more poorly than men. It is part of the pattern of our society. We have had a great deal of publicity about the issues of discrimination against women by the BBC, and we all recognise the challenge with institutions like that, but the whole question of equality for women needs to be addressed at a much more basic level. On this International Women’s Day, it is only right that we should have a debate—as will take place after this one—on the issues confronting women. It is important that the Government recognise that so much needs to be done to change the levels of discrimination that are plain at the present time.

It is not just about women: young people also feel heavily discriminated against. You cannot talk to those between the ages of 18 and 25 without recognising that the possibilities for them in our society are, in so many respects, inferior to those which their parents faced. If ever there was one clear objective that the vast majority of parents have always had, it is to try to make sure that their children have greater opportunities than they had—to improve society and the economy in such a way that their children’s opportunities are greater. We are now facing a situation where exactly the opposite is occurring. That is why this Bill should have paid some attention to tackling that crisis.

I welcome the fact that on Thursday next week we will have an opportunity to debate the economy and our society, and I am sure there will be a large number of participants. This miserable little Bill scarcely gives us any opportunity for that, but what it did do was crush opportunities that could have been taken under a more confident Government with clear objectives in pursuing their policies in the country. This Bill does not look like that to the average citizen or to the vast majority of our people. That is why the Government need to address themselves more satisfactorily to the economic situation than they do in this rather miserable little Bill.