Inequality: Income and Wealth

Debate between Lord Deighton and Lord Peston

Monday 11th March 2013 Lords Chamber

[Lord Deighton]

I thank my noble friend for that question. I am not aware of the initial revenue yields. I asked the department earlier, and it said that it did not break it down that way. My noble friend clearly alludes to the importance in tax management of understanding the ultimate yield on a tax, rather than simply assuming that when tax rates are changed people will continue to behave the same.

[Lord Peston]

My Lords, is the Minister aware that, apart from me, the leading researchers in this subject all agree that there is far more inequality in our society than is required for the efficient working of the economy? Therefore, it follows that the inequality is totally unjustifiable.

[Lord Deighton]

There is clearly a relatively academic debate about the impact of equality and inequality on efficiency. All I can tell noble Lords is that this Government and their policies are focused on ensuring that, at the top end, those in receipt of large incomes and with significant wealth have been by far the major contributors to the consolidation of our deficit.

Economy: Rating Agencies

Debate between Lord Deighton and Lord Peston

Wednesday 27th February 2013 Lords Chamber

[Lord Deighton]

As always, I thank my noble friend for his important observations. There are, again, several issues in there. First, he is absolutely right—Moody’s refers to this—that two things have caused this downgrade. The first is the sluggish growth of the global economy, which has slowed down the British economy; and the second is the very high levels of public and domestic debt, and the difficulty in driving those down.

On the second point, with respect to the credibility of the rating agencies, there are some very important issues surrounding that, particularly when one discusses complex securities such as the ones that we had in the mortgage-backed market. Frankly, with respect to the sovereign market, all the information used to determine credit assessments is perfectly visible to everyone, which is why the markets’ reaction to the downgrade on Friday was so measured.

[Lord Peston]

My Lords, bearing in mind that these agencies give the same grade to an enormous and widely different range of borrowers, leading economists pointed out a long time ago that they cannot be, and should not be, taken seriously. Also, is the Minister aware that all the best economic research shows that one major force exacerbating the economic troubles of the past few years has been the rating agencies? Would he remind the House who is supposed to be regulating these agencies and why they have not intervened? If they have not intervened, is it not about time that someone did something about them? These agencies are a real danger to the survival of the world economy, and I am amazed that the Chancellor himself takes them seriously.

[Lord Deighton]

The noble Lord makes some very important observations. First, as I am sure he knows, one of the rating agencies is being sued by the US Government, reflecting the very concerns that he brings out. With respect to relatively simple credit considerations, and in terms of the UK economy the information is all out there, the Chancellor’s economic policy and the performance of the UK economy is evaluated every second of every day by the financial markets. The verdict of those markets is reflected in our historically low gilt yields. This morning we were trading in the 10-year gilt below 2%, which is the most profound commentary on the success of the UK Government’s current economic policy.

Monetary Policy Committee: Inflation

Debate between Lord Deighton and Lord Peston

Wednesday 13th February 2013 Lords Chamber

[Lord Peston]

Dare I say to the Minister that he is mistaken? The word flexibility does not appear anywhere in the Bank of England Act. He is entirely right that the Monetary Policy Committee behaves as if it does have a flexible inflation target—the trouble is that it does not, and therefore it is acting illegally. For a great many years my noble friend Lord Barnett and I have been trying to get the Bank of England Act modified so that what the MPC is doing—which, as the Minister says, is quite right—turns out also to be legal.

[Lord Deighton]

I do not really want to get into a semantic argument about the definition of flexibility, and I do not know whether it appears in the original Act. However, to my simple understanding, the remit and the MPC’s behaviour clearly demonstrate significant flexibility, which is what you would expect in a policy tool to cope with our difficult and challenging economic circumstances.