Finance: Loan Guarantee Scheme

Lord Davies of Oldham Excerpts

Tuesday 24th July 2012 Lords Chamber

[Lord Sassoon]

My Lords, we have come forward with a very positive financing package to help our infrastructure providers and our exporters. I believe that that will be welcomed very widely, as it has been, by business organisations. I hope that it will be welcomed by the devolved Administrations; as I have said, it extends to them.

[Lord Davies of Oldham]

My Lords, of course we welcome this scheme but, as my noble friend Lord Barnett indicated, this is in the context of the UK being in a double-dip or, as he suggested, triple-dip recession. We certainly are the only country in the G20 apart from Italy that is in recession. This modest scheme is welcome. Will the Minister explain, therefore, why the Government axed the similar scheme to support public/private partnerships put forward by the Labour Administration in 2009?

[Lord Sassoon]

My Lords, again, I am happy to put the record straight. The noble Lord, Lord Davies of Oldham, may not have noticed that this package includes £6 billion worth of facility available to public/private partnership projects that are ready to start in the next 12 months.

Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2012

Lord Davies of Oldham Excerpts

Tuesday 17th July 2012 Grand Committee

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, these regulations were laid before the House on 14 June and implement changes to legislation, now required under EU law, to ensure that UK financial services and commodity trading firms are able to bid in auctions of emissions allowances in the UK and across Europe. It is important that the UK allows these firms to bid in auctions of emissions allowances to maintain London’s position at the heart of the carbon market, of which it currently enjoys an 80% global share.

The EU Emissions Trading Scheme was the world’s first and largest international scheme for the trading of greenhouse gas emissions and is at the heart of the UK Government’s policy to tackle climate change cost-effectively. It is estimated that the EU Emissions Trading Scheme will deliver emissions reductions of 3,100 metric tonnes of CO₂, relative to 2005 levels, between 2013 and 2020. Across the EU, it is predicted to deliver emissions savings of 21% below 2005’s verified emissions by 2020. There will also be a dramatic rise in the level of auctioning. This is in line with the market-based approach of the scheme and best ensures the efficiency of the system.

As the system moves to a greater level of auctioning, it is important to ensure confidence and integrity in it and in the way that auctions are run, so the EU regulatory framework for auctions has been strengthened and introduces common EU standards for regulating certain bidders in the auctioning of emissions allowances. It is up to each member state to implement this framework in accordance with its own national laws. This includes requiring certain bidders in the auctions to be authorised by national authorities: for the UK, that is the Financial Services Authority. To minimise administrative burdens, these regulations apply only to banks, investment banks and credit institutions when wishing to bid in auctions on behalf of others, and to commodity traders when bidding in their own right or on behalf of others. Under the EU rules, eligible participants in the EU ETS will be able to bid directly, subject to meeting certain admission requirements, without FSA authorisation. However, it is likely that financial institutions will provide an important means for operators to enter the market where direct bidding is not practical or desirable.

Implementing these changes will result in the Financial Services Authority gaining powers to authorise those financial services to bid in auctions of emissions allowances across Europe. To achieve this, the regulations amend secondary legislation relating to FiSMA, the Financial Services and Markets Act, and make minor amendments to the Act itself. Minor amendments to domestic anti- money laundering legislation are also required. We have considered the impacts of these regulations on business and have minimised costs to UK financial institutions by ensuring that, for such firms, we meet our obligations and no more. We consulted on our approach in the usual way and received no substantive responses. In addition, the regulatory policy committee has scrutinised and approved these changes. The FSA has also consulted on its regulatory approach, including any fees and compliance costs applying to those wishing to bid. Again, it received no substantive responses.

It is important to note that only those financial services firms wishing to bid in auctions of emissions allowances will be subject to these regulations and need to be authorised by the FSA. Firms will therefore seek authorisation to bid only if they consider that it will provide a financial return to them.

It is important that we make these legislative changes now, before the first auctions of phase 3 and aviation emissions allowances begin. The first UK auctions will take place in November this year, subject to EU approval. Germany and the European Commission have also indicated that they will begin auctioning allowances after the summer on their own platforms.

In summary, these legislative changes are required by EU law so that UK-based firms can participate in auctions of emissions allowances across Europe and provide services to others wishing to buy allowances. The changes are necessary to preserve London’s position at the heart of, and leading, the developing carbon market.

[Lord Davies of Oldham]

My Lords, what a joy it is to discuss with the Minister, after a fairly contentious issue last night—namely, the Government’s Finance Bill—this instrument, a measure that is not only uncontentious but is in fact welcomed by the Opposition. I agree with the rationale that he has given both for the necessity of the measure and the benefits that it will bring regarding access to the auctioning of greenhouse gas emission allowances.

We have one or two questions that I am sure that the Minister will be more than ready to answer. Is he as surprised as I am that, from what one can gather, the consultation, which, admittedly, ran for a very limited period, heard from only one respondent? This must surely be some kind of record. It indicates either that the measure is beyond reproach in every way—the answer that the Minister will certainly favour—or that it presents a limited opportunity. Small and medium-sized enterprises do not appear to think that they have much opportunity under the order. Does he have any comments to make on that?

I would be interested to see just how the Minister evaluates the significance of the measure in the Government’s overall objectives regarding climate change. Not only do we share those objectives but we are keen that the Government continue to sustain the policy to hit the targets that have been established for a considerable time now. I note the urgency of the situation, given that European auctions are taking place in the fairly near future. That is required under EU law and it is only right that the measure is before us. We give it our fullest support.

[Lord Sassoon]

My Lords, I am grateful to the noble Lord, Lord Davies of Oldham, for making sure that our afternoon is not quite as exciting as the close of business last night. I thank him for his support for the measure, which is, rightly, seen not only as uncontentious but as supportive of this important area of policy development. In response to his question about the consultation, I can tell him that it lasted for eight weeks. I believe the lack of substantive responses is a reflection that this is a very simple measure, which simply extends the requirement of authorisation to firms if they want to continue to operate in the EU auction process as it moves into this new phase 3. I am not at all surprised or in any way concerned by the lack of substantive responses. As the noble Lord says, there was one, but I believe that it was pointing out something in the grammar or the spelling of the rules, which it is important to get right—I know that your Lordships’ are always very keen, as respondents to consultations are, to make sure we get the grammar right.

[Lord Davies of Oldham]

Is the Minister confessing that the Government were wrong and the respondent got it right?

[Lord Sassoon]

I do not actually know whether the respondent got it right; all I know is that that was the issue that came up.

On the noble Lord’s point about SMEs, I do not see it in the way that he sees it. Principally, this is a sophisticated market—trading in emissions is not something that the man or woman on the street would do. We are talking about, on the whole, sophisticated commodity trading firms or large financial intermediaries, so the measure is not targeted at SMEs directly. They will be the ultimate users and beneficiaries of the broad emissions system being put in place, but they are not likely to be players. On the other hand, if they want to be players, as the impact assessment set out, the costs of going through the registration authorisation process are not onerous.

On the noble Lord’s last point about how the order fits within the objective of meeting the climate change targets, I confirm what I said in opening. This Government, like the previous Government, are keen to see a market-based solution as far as possible to meeting the targets—the emissions trading system and auctioning very much underpin the market-based approach. In that context, this is a small additional measure to make sure that the auctioning element of this construct is properly regulated. I hope that that answers the noble Lord’s questions.

Finance Bill

Lord Davies of Oldham Excerpts

Monday 16th July 2012 Lords Chamber

[Lord Davies of Oldham]

My Lords, the noble Baroness, Lady Kramer, probably expressed what we are all likely to feel about this debate. We have had in the House a series of economic debates and questions and many opportunities to consider the Budget and its ramifications over quite a considerable period. That may just account for tonight’s fairly limited attendance in consideration of the Finance Bill. Of course, we all recognise the limitations of this House in considering the Bill, but there is no doubt that in the context of the developing economic situation and the Government’s actions over the past few months, it feels as though it has been with us for a very long time indeed. This is not, however, the Bill which the Chancellor introduced. The outstanding feature of this Finance Bill is that it was trailed from the Treasury before the speech was made; the kind of approach which back in 1946 caused a Chancellor to be dismissed for speaking out of turn. These days, of course, trailing things is looked upon as a high political art form, though a great deal of what was trailed then did not turn out to be reality.

We had not been very long into discussions on the Finance Bill before the Government began to exercise a dizzying series of U-turns, whether it was on hot food, static caravans, improvements to listed buildings or charitable donations. All were changes which the Government then dressed up as the result of consultation, when in fact the proposals in the Budget were repudiated by a Chancellor who was fast losing confidence in his own decision taking. The result is that we will have from the Minister a paean of praise to the wisdom of the Government for the way they have handled the economy, with ne’er a mention in his speech of where the resources are meant to come from to fill the gaps which these subsequent concessions have caused in the revenue. We thought many of these original measures were misconceived; the Government have merely spread consternation by their rethinking of the position. The other characteristic of all Treasury Ministers—and the noble Lord, Lord Sassoon, enjoys his part in that role—is that they appear to address everything to deal with the nation in terms of the Finance Bill being concerned with business, taxation and how the country pays its way.

Those are important considerations. They ought to be a substantial part, and inevitably are, of every Budget. But where is the concern about the society that the Bill will impact upon? Where is the concern about social justice? Apart from the phrases about us being “all in this together”, where is the evidence? The Minister indicates that giving a substantial tax concession to millionaires—not mentioning, of course, that the Cabinet consists largely of millionaires—is merely a reflection of the fact that the tax does not raise too much. Of course, there is no consideration at all of the impact upon the nation of a Government asking it to take the deprivations that occur in this Budget: the loss of benefits and the onslaught on vulnerable people in our society. There is no consideration at all that giving a concession to millionaires creates a symbol of a totally unfair approach to government. Is it therefore not surprising that the Government are losing their credibility among the nation, as is clearly evidenced every time the Prime Minister loses control of his arguments at Question Time in the other place?

I understand what the noble Baroness, Lady Kramer, says about taking low-paid people out of income tax. Of course that is to be welcomed. However, she must also recognise that the major priority enjoined by all those who are concerned about the state of British society—and a number of other western societies as well—is that some tackling was necessary during the years when we were in Government of the excessive degree of child poverty, which was a stain upon our society and measure of the unfairnesses which our society metes out. Children, after all, are not responsible for the state they are in, but everybody recognises the crippling disadvantages of being born and trapped in poverty. The Government, of course, are ensuring that that trap becomes even more vicelike in its control through the significant reductions in benefits. We know what that means for children in poverty.

Of course, it may be that some concession was made to lower-paid workers, but it certainly was not made to pensioners. The Government have abandoned their commitment to the age-related allowance for pensioners in line with inflation, and introduced their granny tax.

We have argued that this Budget is so manifestly unfair and inappropriate that the unfairness is being felt throughout society. It is also utterly and totally ineffective. I do not have detailed questions to ask the noble Lord; that is just as well, as I hope that he would be able to restrain his winding-up speech to reasonable limits and he has a great deal to respond to from the noble Lord, Lord Flight—and, indeed, from the noble Lord, Lord Browne of Belmont.

However, I add one caveat to the noble Lord, Lord Browne: we have got to be somewhat judicious in this House when we are commenting on and playing our part in making laws which apply to those who are a generation or two behind us. Their mores are different. That is not to say that we do not recognise that so many value marriage; that is why weddings take place with great panache all the time. I imagine that many noble Lords in this House enjoy, as I do myself, a situation where my marriage is reaching almost 50 years; so I am certainly not going to be against marriage. But I am counselling against giving advice to a generation which has got a different approach to the way in which it expresses its commitments between man and woman. We would all recognise that a decade or so ago expression particularly on the Conservative Benches of this House on issues of equality for homosexuals was totally different from the perspective with which the Conservative Party responds today. I am not so sure about its entire membership in this House but certainly its agreed policy as regards its Members of Parliament. I have slight anxiety about dictating to a younger generation what the incentives should be with regard to their social relationships.

I have one question for the Minister: what is his response to the International Monetary Fund’s announcement today that growth will be 0.6% lower than the Government and the OBR have forecast for this year and will be 0.6% lower next year? The Government are left with the prospect of 0.2% growth this year. What an emergence from a double-dip recession that represents. Even the following year, only 1.6% growth is forecast. Therefore, both years will be manifestly below the average for advanced countries of 1.9% growth.

We are falling further behind in terms of growth and there will be a reduction in our resources. That is why the Government are in such difficulty with regard to their Budget, and why there are such privations on the least well off in our society. Ordinary people are feeling the pinch. There was not a word from the Minister or a single word in this Finance Bill about anything to do with unemployment and scarcely anything to do with employment. One million young people are unemployed. Is the Minister suggesting that they are responsible for that? Have the Government not got some responsibility for tackling those issues? I ask: what in this Bill relates to those issues? There is nothing. After all, if there had been anything, I am sure that the noble Lord would have referred to the issue but, of course, he did not.

We have a Finance Bill which partially reflects the total incompetence of this Government and their dizzying U-turns over the Budget proposals. The Budget is inherently and manifestly unfair, which leads to the nation rejecting and being critical of those who introduced it.

This recession was made in Downing Street. If the Chancellor concentrated rather less on his main bête noir—the Shadow Chancellor, Ed Balls—and a little more on the real economy, we might see a rather better approach to the crisis that this nation is in. It is absolutely clear that part of this is driven by the fundamental beliefs of the Chancellor and those who support him. They are using what is undoubtedly a crisis with regard to public finances to indulge in their commitment to create the smaller state—to reduce welfare and care for those in need. They did it in the 1930s and they are doing it in the second decade of the 21st century. It did not get us out of recession in the 1930s and will not now. The proof is already there. Meanwhile, it is the ordinary citizen of this country who pays the price.

[Lord Sassoon]

My Lords, as I respond to this debate on the Finance Bill, I thank the dedicated band of noble Lords for contributing to this short and, what was until the last intervention, rather focused debate, before the noble Lord, Lord Davies of Oldham, went off in many different directions. This year’s Finance Bill follows an unprecedented degree of consultation and engagement, and implements many of the changes announced at the Budget. I say to the noble Lord, Lord Davies of Oldham, that there were some 200 measures in the Budget and on three of them, after consultation, we made appropriate changes. Therefore, I think that his characterisation of the Budget-making process, and the changes since, is way off the mark.

First, I will address one or two of the specific points raised before returning to the bigger picture. I start by thanking my noble friend Lady Kramer for pointing out what the noble Lord, Lord Davies of Oldham, seems not to recognise—that we are now engaged in the most progressive tax strategy of any Government in recent years. I completely agree with her. Not only is that the case but it is demonstrably the case. No previous Government have put distributional tables into the Budget document so that it is completely clear where the majority of the pain is falling, which is on those with the broadest shoulders in the top percentiles of the income distribution. I can assure my noble friend that as we carry on the progress on these many issues, we will make sure that we are very alive to loopholes. On stamp duty, for example, there are clearly questions, with possible ways of doing sub-sales avoidance and so on.

My noble friend mentions one offshore financial centre. I think that the agreement with Switzerland, which I referred to in my opening speech, shows that we will work tirelessly to take all appropriate action on that front. The noble Lord, Lord Browne of Belmont, makes a powerful case in relation to marriage. I would not go as far as the noble Lord, Lord Davies of Oldham, in rebutting that case. The coalition agreement commitment remains in place. We keep that commitment, as we do all taxes, under review. The noble Lord would not expect me to say any more this evening, but he has put on the record very clearly his feelings on this matter.

As to the IT systems of HMRC for transferable allowances, again it is an area of questioning that has been raised in another place. There is nothing I can usefully add. We do not tend to give a running commentary on HMRC operational matters. If there is anything more I can do to shed light on the specific questions that the noble Lord, Lord Browne, raises, of course I will write. However, my strong feeling is—as I suspect he realises—that I will not be able to give him anything more on that, but he makes his points very clearly.

My noble friend Lord Flight made some very technical but important points around EIS and VCT schemes in particular. He made the important point that some £12 billion of equity has been raised. These schemes have been extremely successful. As I outlined in my opening speech, we want to expand them. At one point my noble friend characterised them as giving with one hand and taking with the other. We do not see it like that. We have consulted extensively on detailed rules. Many industry groups contributed to the consultation and strongly supported the complete package of changes. However, my noble friend made his point very clearly. We keep these matters under continual review and if there are ways of making the guidance clearer and more helpful, I am sure that his thoughts will be taken on board. I will draw them to the attention of relevant officials. I also take the general point about clearer English, which is something of which we need to be reminded on a regular basis.

The noble Lord, Lord Davies of Oldham, launched a quite extraordinary attack—with which I agreed on a number of matters. My principal point of agreement was with the statement at the end of his speech that this is a recession made in Downing Street. I completely agree. The structural deficit that caused the recession to be as deep and severe as it is came from the overspending in the six years up to the financial crisis of 2008, when the previous Government diverted from the plans they had been left by my right honourable friend the previous Chancellor but three, Kenneth Clarke, who left the nation’s finances in a fine state. If the previous Government had carried on with his plans for a few years more, things would not be in the state that they are.

[Lord Davies of Oldham]

Would the noble Lord extend the same criticism to all the other advanced countries that face exactly the same issues?

[Lord Sassoon]

My Lords, we were left with the largest structural deficit in the G20. We have brought it down from more than 11% to 8%, so we are making good progress—but the size of the task was bigger than in any other major economy.

Without rebutting the full litany and charge sheet—noble Lords would not thank me for keeping them much longer tonight—I absolutely rebut suggestions that we are insensitive to the societal and distributional effects of our measures. I explained the transparency with which we set out the effects of the Budget. It is those on the highest incomes who will pay most. The real results of what we are doing are the 800,000 new jobs that the private sector has created in the past two years. It is only by the private sector creating new jobs that we will be able to afford the better public services that the country needs and the lower taxes that we deserve. New jobs, falling unemployment and falling inflation are the things that the Government are concentrating on, and which the Budget continues to underpin.

Finally, the noble Lord, Lord Davies of Oldham, referred to today’s announcement by the IMF that downgraded global growth prospects. He was right to draw attention to it. The IMF forecast minus 0.3% growth for the eurozone this year. It forecast that the Italian economy will contract by 1.9% and the Spanish economy by 1.5%. It forecast that US growth would be only 2%, and it downgraded forecasts for emerging economy growth. It is in the face of those very strong headwinds that we have to carry on with our deficit reduction programme of tight fiscal discipline and loose money. I am very happy to talk about the 1930s. We do not have time to do it in detail, but tight fiscal discipline and loose money is precisely the prescription that caused a significant increase in growth through the 1930s.

In conclusion, this Government have taken difficult decisions to eliminate our structural current deficit over the coming four years and stimulate a private sector recovery. This strategy has been endorsed by the IMF, the OECD, the European Commission, ratings agencies and UK business organisations. We have always said that recovery would be choppy and our plans would necessarily incorporate a degree of flexibility. This Bill further delivers our commitment to improve our competitiveness, encourage investment and support our businesses, large and small. At the same time, it removes hundreds of thousands of individuals from income tax and helps reduce the cost of living for families across the country, and makes these changes in a way that is fairer and more consultative than any Finance Bill before. I commend this Bill to the House.

Eurozone

Lord Davies of Oldham Excerpts

Monday 9th July 2012 Lords Chamber

[Lord Davies of Oldham]

My Lords, does the LIBOR scandal and other financial scandals strengthen or weaken Her Majesty’s Government’s plans for exceptional treatment in Brussels? Do we not have a common interest in a properly regulated single market? Would not Her Majesty’s Government, particularly the Prime Minister, be better involved in discussing these matters rather than sulking on the sidelines?

[Lord Sassoon]

My Lords, the UK is very much involved in the discussions in Brussels. That is why, as I have already said, we secured important parts of the EU patent court coming to London. That is why we recently secured a new British head for the European Bank for Reconstruction and Development. We are at the table and that is where we intend to stay.

Economy: Deficit Reduction

Lord Davies of Oldham Excerpts

Thursday 28th June 2012 Lords Chamber

[Lord Sassoon]

No, my Lords, that is not correct. Last year, Government departments came in with underspends of some £6 billion—and that was certainly not all capital spending. What my right honourable friend the Chancellor was able to do this week by cutting fuel duty, putting £550 million back into the pockets of hard-working families, illustrates how we are able to use underspends and put them to very good use where they are most valuable to our people.

[Lord Davies of Oldham]

My Lords, can the Minister explain why the Prime Minister was the only leader of a nation attending the G20 whose country was in recession? If he is talking about inheritance, does he recall the fact that, in 2010, this Government inherited a 2 per cent growth rate and now it is nought?

[Lord Sassoon]

My Lords, we face very difficult challenges. For all the deficit reduction that we have done, this country still has a budget deficit higher than Greece, Portugal and Spain. Yet we have interest rates that are very much lower and the confidence of the markets, and it is off that base that sustainable growth will come.

Taxation: Avoidance

Lord Davies of Oldham Excerpts

Thursday 28th June 2012 Lords Chamber

[Lord Sassoon]

My Lords, I do think that we are comparing apples and pears. We will be vigorous on both fronts. In relation to tax avoidance, HMRC has reassigned some £900 million of its expenditure within the spending round to tackle this issue. We should also remember that while the tax gap in the UK is £35 billion—about 8% of liabilities—it compares well on an international comparison. For example, the equivalent in the US is 14% and in Sweden 10%. So, yes, there are big numbers to be played for, but good progress is being made.

[Lord Davies of Oldham]

The House may have been encouraged by the Minister’s initial constructive response but past practice does not seem to quite measure up to his optimism. He commended the legislation passed by the Labour Government in 2004 under which accountants have to submit to Her Majesty’s Revenue and Customs any scheme which leads to tax avoidance. Was this implemented in the famous case of the comedian Jimmy Carr? Did his accountant inform HMRC? If so, what was done about it? If he did not, when are the Government going to act?

[Lord Sassoon]

My Lords, individual taxpayer confidentiality is very important. It is the prime reason why we are certainly not going to see individual tax returns published and, therefore, I am not going to comment on an individual case. That particular case has had a great deal of airing in the past couple of weeks.

Euro Area Crisis: EUC Report

Lord Davies of Oldham Excerpts

Monday 21st May 2012 Lords Chamber

[Lord Davies of Oldham]

My Lords, this has been a fascinating debate. I am sure that when the noble Lord, Lord Harrison, began his work with the committee on this report he scarcely anticipated that we would have quite such a wide-ranging debate. It has ranged from practical solutions for how we might emerge from the difficulties to the cataclysmic perspective that the game is up and we may as well fold up our tents and go home.

There are two dimensions to this debate to which I have the greatest difficulty in responding. I have great difficulty in responding to my noble friend Lord Giddens, not because I do not respect his analysis but because I cannot cope with the situation. He says that we, as politicians, do not have the intellectual machinery or concepts to get ourselves out of these difficulties. That may be so but I assure my noble friend that that will not stop politicians trying.

[Lord Giddens]

I did not mention politicians once. I was talking about intellectuals, saying that we do not have the capability to resolve the issues that face us at the moment. Therefore, it is not surprising that politicians are struggling, too.

--- Later in debate ---

[Lord Davies of Oldham]

I was not going to be excessively critical of intellectuals. I accept what my noble friend said but I translated it to the political because that is what this House is here to do. We are not a debating Chamber; we are the second House of a very significant Parliament in a Europe that is faced with the most colossal difficulties. That is why we have to address ourselves to the issues.

I greatly applaud the work of my noble friend Lord Harrison. When the report was being drafted, things were not quite as critical as they have developed to be over the past two to three months. Nevertheless, my noble friend and his report clearly reflect the difficulties and tensions faced by the committee in producing a response to the great challenge of the crisis in the eurozone.

Let us get one thing absolutely clear. The reason we cannot walk away is that Britain has nowhere else to walk. Robert Chote is the chair of the OBR, in the work of which not just the Chancellor but the Minister in this House invest so much credence. What does he say? He says that we face a catastrophic situation if Greece moves out of the euro; we face catastrophe as far as the eurozone is concerned. The recession will go on for several more years. There will be deflation. Unemployment will rise from 8% to 11%. Therefore, we will be in a situation in which our own people will suffer severely because of this development. That is why the one thing that the British people will not accept—nor do I see any reason why other Europeans should accept it either—is politicians throwing up their hands and saying, “This is beyond us”. We may have limited intellectual concepts to get beyond Keynesianism or monetarism as an economic theory for the future, but we must put together some kind of strategy for improvement. Without that, we renege on our obligations to people.

The noble Lord, Lord Dobbs, says that the people will decide. Let me say that people who have lost trust in their politicians can reach some very dramatic decisions. We possibly see it in Greece at present. What if the British political community also began to reflect that we have no means of protecting our people in this crisis? A total calamity would be visited upon us and we would deserve it. Of course, I respect how difficult these issues are. I know that the Minister will be challenged in his response to this report. However, it is essential that we recognise that we must look for some steps forward.

[Lord Dobbs]

Is it now the policy of the noble Lord’s party to support a referendum at some point on Europe? The other day, I heard an interview with his noble friend Lord Mandelson who said that a referendum might be a good idea, although another of his colleagues said, “I wonder what he meant by that”. At the end of the day, does the noble Lord want the people to decide our fate and the direction of Europe, or should this still be simply a matter for the political elites?

[Lord Davies of Oldham]

I would say, not at the end of this day. We have so much to do before we could even begin to prepare a referendum and the question that that would represent in realistic and proper terms to the British people. I will not rule it out altogether. We are accustomed to referenda in certain circumstances. You cannot talk to the people in terms of “We are giving all power to you for you to take this decision because we as politicians have not got the faintest idea what the question should be or how it should be answered”. That is what I am arguing against.

I am confident of the fact that European politicians will take important steps to make progress out of this situation. What will they do first? Let me be clear, we should not visit upon the Greeks the well constructed animosity that infects all our right-wing press at the present time. The Greeks are such a small fraction of the European economy that they are not a threat to anyone. Their loss is marginal. It is certainly a marginal aspect as far as our exports are concerned. But the Greek withdrawal from the euro would represent not one country having left the euro, it would be a recasting of the nature of the euro. The euro would come rather more closely to some kind of a currency regime from which some could defect at a time. But as to the consequences, Greece would be just the first of the victims. Then the pressures would inevitably be presented on the next weakest currency. We have already got pretty well a checklist of how that succession of activity would take place. It is certainly the case that the Greeks did not create this situation. We should have some respect for a nation which has such a significance in its past for European society. But the Greek withdrawal from the eurozone would create enormous difficulties for all. The contagion would merely spread.

What is to be done in these circumstances? It is clear that we have to play our small part. Because we are not part of the eurozone, we are on the margins of this exercise. We are even more on the margins because the Prime Minister walks out in a huff or presents a veto whenever things do not go right. We are not quite sure what has gone wrong. As the noble Baroness, Lady Williams, indicated, we never got the facts of the basis of such a decision. But the Prime Minister is good at chiding nations from the sidelines, giving good advice and lecturing others while not being conspicuous by his success at home. If these countries are being told to pursue a strategy in which they have to improve their growth prospects, by heavens, the Prime Minister should examine more closely the growth position of the UK economy in its double-dip recession through his and his Chancellor’s actions since they have been in government.

So it is quite clear that we will look to others in Europe to present some dimension of the solution to this position. Does it mean that the Germans will have to make additional sacrifices, which it is quite clear that their chancellor is not prepared at present? That will happen only if the consequences of doing nothing are far worse. That is exactly how they are beginning to look. When this report was drafted only three months ago, this discussion could be conducted in fairly normal political language, but we are close to talking the language of cataclysm at present—and of course it changes the perspective of the Germans on this, not least because, after all, the Germans also need friends. In fact, they need the French, their direct allies who have helped to build the European project, who under Monsieur Hollande are taking a somewhat different view on the next stages.

It is quite clear that the eurozone has to take actions itself. We cannot play a major part. But it is the case that 40% of our exports go to Europe. It establishes the British economy in a weak position, because we are related to the euro countries in those terms; there is no ready alternative. If you ask any of our major companies or anyone else concerned with export trade, they do not turn round and say, “Because the eurozone’s in such trouble, we’re looking forward to such wonderful opportunities to challenge the Chinese and the Indians and others elsewhere in the world”. They do not say that at all. They say that we should do something about sustaining the most crucial market that we have—the eurozone countries.

I am quite sure that the Minister’s response to this debate will be expressed in very different terms to mine, but I hope that at least what I have done for him is to help to disperse the rhetoric so that we can concentrate on what practical politicians will have to do to get us out of this situation.

Environment: Green Growth

Lord Davies of Oldham Excerpts

Wednesday 16th May 2012 Lords Chamber

[Lord Sassoon]

First, it is important to recognise that there are at least 16 funds that I have been able to identify in the ISA space that are already green or ethical in their scope and branding. More generally, there have been lots of proposals for tailor-made ISAs, such as big society ISAs, small company ISAs, corporate bond ISAs, social investment ISAs and early intervention ISAs. There are a lot of worthy ideas around, all of which have their merits, but on the ISA brand we intend to keep it as simple and broad as it has always been. As for the green investment bank, as my noble friend knows, at the moment it has its initial capital for the next four years and is actively looking at its 21st project. In time it will be able to borrow, but not for the first four years.

[Lord Davies of Oldham]

My Lords, my noble friend Lady Worthington asked an extremely significant question—although she should note, in referring to this “greenest Government”, that irony is wasted upon them, particularly upon their Treasury Ministers. Why are the Government not investigating these matters with greater urgency? Why, for instance, is the relief on capital gains with regard to housing not tied to the energy efficiency of the house being sold? Why are the Government not pursuing strategies like that which would give reality to their somewhat disputed claim?

[Lord Sassoon]

My Lords, the private residence capital gains tax relief means that most people are not liable for capital gains tax on their main residences. If access to that relief were linked to energy efficiency improvements, not only would it override the broad policy aim of that relief—that people are encouraged to save for their house—but what about the large number of people who do not necessarily have the funds to be able to improve the efficiency of their homes? Is it really the position of the Opposition that capital gains tax relief on people’s main residences would be taken away if they were not able to afford efficiency improvements? That is certainly not the policy of this Government.

Queen’s Speech

Lord Davies of Oldham Excerpts

Wednesday 16th May 2012 Lords Chamber

[Lord Davies of Oldham]

My Lords, this has been a fascinating debate which has been hampered by the fact that although it began with a concentration on the economy—the House will not be surprised that I intend to direct a great deal of my remarks to the advocacy of the amendment moved by my noble friend—and although the economy was bound to dominate the debate, we had six other subjects to consider. Although they were somewhat late in getting under way on the agenda, they did not in any way receive short shrift once addressed by the noble Lords who were concerned with those issues. In response to the debate, therefore, the great danger is that I could make a speech which would take us well past midnight, whereas the Minister is aiming to finish well before.

I must first congratulate the two maiden speakers. The noble Lord, Lord Ashton of Hyde, had to withstand a most stimulating introduction from my noble friend Lord Myners concerning who he was. When he began his maiden speech, his response was of sufficient vigour to show that he is going to enjoy himself in his contributions in this House in the future. We particularly appreciated the points that he had to make about regulatory regimes.

The right reverend Prelate the Bishop of Durham made a most impressive speech. Of course, we all envy him for both the city in which he lives and the cathedral which he has as his major location, but what we admired today was the seriousness of the contribution that he made on the economy. How welcome that was. If there is one obvious criticism of this place which gives rise to the demands for an elected House, it is inevitably that we are geographically limited. We have an overwhelming south-east concentration: a mere smattering of voices is heard from across the United Kingdom as a whole, and the north-east is not excessively represented in our contributions. The noble Lord, Lord Bates, will jump up and correct me in a moment but he knows what I mean when, at times, even he has been a lone voice. It is very welcome therefore that the right reverend Prelate can make a contribution from that dimension.

If the House will forgive me, I will address one or two of the other issues next. My main role for the Opposition is in transport and this debate says that it is about transport. Several contributions were made that were of particular and striking interest on those issues—not least, the significance of transport as the basis for the important infrastructure of the economy. It is also an area in which we could accelerate investment. The case which the Opposition are putting is the necessity for getting people back to work on infrastructure projects, and where those can be accelerated and brought forward, they ought to be. That is an important dimension, which is why I was grateful to the noble Lord, Lord Bradshaw, for his argument about increasing electrification for freight travel. I was grateful to the noble Baroness, Lady Scott of Needham Market, who talked about investment in roads. She is on pretty thin ice—not that the ice is always thin on roads—when she raises the subject of road charging. I see no indication from the Government that their radical thoughts have gone that far as yet. However, she is of course right that we need to look at investment in roads, not least at just keeping the present road structure maintained satisfactorily after the ravages of recent months.

The noble Lord, Lord Patten, said that we should bring forward the HS2 rail project as rapidly as we can. I say to the Government—this is not the first time that I have done so—that we in the Opposition are concerned about aviation policy. With every month that goes by we are losing out on international competitiveness because of our lack of airport capacity. We have said to the Government that we are quite prepared to discuss with them ways in which we can have a joint approach to a solution to this issue because of its great significance to the nation. All I say is that we are now faced with an exceptional degree of prevarication. I am grateful to those voices which have today emphasised that the Government should get a move on. As those voices have come from the Government’s side, that has given me even greater encouragement.

The enormously important issue of energy also had a fair airing in this debate. We have got to get our energy policy right. Of course, there were the inevitable collisions. The noble Lord, Lord Crickhowell, talked about nuclear energy. My noble friend Lady Worthington of course has a great deal to say about nuclear power and how we must ensure that we reduce carbon emissions from our energy sources. However, there are enormous costs involved in nuclear power. We all know that. There have been heavy costs in the past, and we are almost starting from scratch on the next stage.

I was grateful to the noble Lord, Lord Rowe-Beddoe, who introduced the issue of the Severn barrage. He knows that the issue has been tested and costed. That is a real problem, but I am grateful to him for highlighting that we need to look at green energy. It is quite clear that we cannot rely on fossil fuels for the future and then meet our emissions targets.

The main subject of the debate was inevitably the economy. My noble friend Lady Royall, in moving the amendment, indentified what we regard as a clear record of the failure of this Government. The noble Lord, Lord Higgins, even indicated that he did not think much of the process by which crucial Budget decisions had been taken, particularly the extent to which Parliament had not been treated with the respect that it ought to have been in the Budget’s presentation. I agree with him entirely on that. The leaking prior to the Queen’s Speech itself was similarly unfortunate. I hope that we will not have those difficulties again.

Of course the noble Lord, Lord Higgins, did not associate himself with the more fundamental point that we are concerned with. Two years ago the Government set themselves a series of targets that they set out to achieve through various strategies such as Project Merlin and the banks’ position, about which we hear very little these days, and the whole question of being able to reduce the debt within a set period of time, a target from which they are already resiling.

Crucially, the price of the policy that the Government are inflicting on the nation is clearly unacceptable. Austerity is proving to be unacceptable in a range of countries that have given people a chance to have a voice in elections, such as Greece and France. With regard to local government in the UK—the noble Lord, Lord Tope, made a rather late entry into the debate—one aspect is that the cuts already enforced on local authorities have certainly produced a reaction from the electorate.

A short while ago, we ought to have set storm signals for the Government about the programme and policy that they are pursuing. One of the indicators of that in this debate is that, in addition to the trenchant criticism that the Government will have expected from my noble friends Lord Myners, Lord Haskel, Lord Whitty and Lord Hanworth, it came from the Cross Benches too. It was from the noble Lord, Lord Bilimoria, that the first onslaught came, and an extremely cogent and straightforward attack followed from the noble Lord, Lord Low. The analysis of the noble Lord, Lord Skidelsky, identified for the Government the fact that their position is untenable.

I noticed that reference was made to the British motor car industry and how we should be delighted at its recent figures. I take delight in those figures but I have a little difficulty with it being called the “British” motor car industry. I understand that it is a car industry that is in Britain, but of course the industry itself is Japanese. I make this obvious point. In another society, the car industry was saved by government action. If you go anywhere near Detroit or Michigan, you will know that the state can act effectively to safeguard even an industry in the most parlous position. That industry is now making profits and has made a significant recovery. I would be glad if the Minister indicated that the same degree of recovery has been occasioned through successful government support in our society.

The noble Baroness, Lady Noakes, with whom from time to time I crossed swords in our previous incarnations in this House, asked me whether I had addressed myself to the question of the additional borrowing that would be implicit in the strategy that we advocate. The additional borrowing that we would be involved with would be quite limited in comparison to the significant losses of productive capacity represented by the policy pursued by this Government. The fact that we have so many assets underemployed and so many people unemployed is a massive loss. It will take us years to recover. The Government’s own projection—or, more accurately, that of the OBR—indicates that it will be many years before we recover the productive capacity that we had in 2008.

There is one change in the tenor of the Government’s argument now. When they are in difficulty, they are prone now to putting British economic policy in the context of the wider economies. We are faced with the fact that we are not completely in control of our own destinies and we have to take account of the pressures and weaknesses in the eurozone. We all recognise the validity of that argument. It does not quite address with the same force the international context. When the tsunami of the collapse of the international financial system occurred five years ago, according to them, our problems were entirely due to the mismanagement of the British economy and there was no issue of context there.

We are quite confident that all sides except those entirely devoted to the Government’s cause—and there are signs of dissent within their ranks too—and independent opinion, particularly independent opinion as represented in this House by the Cross Benches, are indicating that the terms of trade have turned significantly against this Government. Certainly the wider nation outside these walls has already given a preliminary verdict on just what austerity represents. This debate, if it does nothing else, ought to call out to the Government at least to admit that there are aspects of the promises that they made only two short years ago that they will be totally unable to fulfil.

Tobacco: Smuggling

Lord Davies of Oldham Excerpts

Thursday 26th April 2012 Lords Chamber

[Lord Sassoon]

Again I thank my noble friend and my answer is the same as I gave previously.

[Lord Davies of Oldham]

My Lords, in tackling the illegal sale and smuggling of cigarettes and some other commodities, do the Government make any assessment of the potential reduction in their capacity to tackle these issues by the loss of staff in crucial government departments?

[Lord Sassoon]

I know that the noble Lord, Lord Davies of Oldham, is an expert on the subject because I think that he had exactly the same Question from the noble Lord, Lord Dubs, about two years ago. He will know about the considerable efforts that his Government made. As I have already said, very specifically within the overall reduction that government departments are facing, HMRC has allocated £917 million to deal with revenue avoidance issues in the spending review period, of which £25 million is targeted at the area about which we are talking today. His concerns are fully recognised and have been met.