Autumn Statement

Debate between Lord Deighton and Lord Myners

Wednesday 3rd December 2014 Lords Chamber

[Lord Myners (Non-Afl)]

I think I am actually described as non-aligned, which means that I am sort of drifting in a certain direction.

I first congratulate the Government on not achieving their deficit reduction target because, in so doing, they have played their part in contributing to a recovery in economic activity. That has allowed greater prosperity eventually to reach broader sections of society, and a fairer society that is based on a growing economy.

I have two questions. The first relates to the taxation of the profits of the likes of Google. That strikes me as rather like the game of whack-a-mole that we play at summer fairs. Whatever they do, they find another way to get round it—often with the help of the noble Lord’s previous employer, Goldman Sachs. Would it not be more sensible for us to support a global initiative to tax the owners of companies rather than the companies? Frankly, the taxation of companies is a futile game because they are getting better and better at finding ways of avoiding it.

Secondly, there is little in the Statement about monetary policy, although an accommodating monetary policy has undoubtedly helped over the last five years. If the noble Lord was still an investment banker and he had a company as a client with a large debt on one side of the balance sheet and a large asset, in the form of cash, on the other, he would advise the company to cancel them out. Why do we not do that with the gilts that have been bought through QE and at a stroke reduce borrowing as a percentage of GDP? No harm would be done; there would be no fascist printing of money because these gilts were bought for fair value in the open market. I urge the Minister to go back to the Treasury and say that the moves it has introduced are just tinkering. That is what Governments do. It is not a row of beans when these Statements come. There is no real impact on the economy. The two moves I have suggested could have a material effect.

[Lord Deighton]

I will be delighted to use my expertise as a poacher turned gamekeeper to help structure the profits diversion tax in a way that actually works. The noble Lord is quite right; it will only work ultimately if we capture this on a global basis. That, of course, is the work that is going on. The noble Lord will not be surprised to know that I will not be making any comments on monetary policy, which is a matter for the Bank.

Spending Review

Debate between Lord Deighton and Lord Myners

Wednesday 26th June 2013 Lords Chamber

[Lord Deighton]

We do not have any proposals to adjust the Barnett formula in this Parliament. As I understand it, the Welsh resource budget will be approximately £13.6 billion, and we will publish our response shortly to the Silk commission on the further devolution of taxation and borrowing.

[Lord Myners]

My Lords, the Minister has said a number of things that I think are significantly challengeable. First, his maths in response to the noble Lord, Lord Forsyth, are clearly substantially deficient and lead one to ask how much a Treasury Minister really knows about the state of government finances.

Secondly, the Minister said that debt as a percentage of GDP will be below pre-crisis levels by the end of this Parliament. I would like to see the evidence on which the Minister makes that statement. Clearly, it is not consistent with the OBR’s forecast.

My question, however, is about the relationship between monetary policy and fiscal policy. The Government have consistently talked about an accommodative monetary policy linked to a tighter fiscal policy. They now own £325 billion of their own debt through the QE programme. Why do they not simply cancel the debt that they have bought for fair value in the markets from banks and pension funds with the proceeds that they have in the QE portfolio on the asset purchase scheme?

Why do the Government not recognise that they can manage a pretty low inflation risk through using sterilisation techniques in the money markets and adjusting reserve ratios, and acknowledge that, despite QE, monetary growth is not increasing and inflation risk is low? That would be a simple answer that would at a stroke reduce debt as a percentage of GDP by 30%.

[Lord Deighton]

The question of how we unwind QE is a matter for the Monetary Policy Committee. It is not for me to give advice here.