Corporation Tax (Northern Ireland) Bill

Lord Empey Excerpts

Tuesday 17th March 2015 Lords Chamber

[Lord Empey (UUP)]

My Lords, I, too, congratulate the noble Lord, Lord Hay of Ballyore, on his maiden speech. As a speaker, he was followed by his predecessor as Speaker, the noble Lord, Lord Alderdice. Both of them exude an air of bonhomie and so on in this Chamber, but do not be fooled: I have seen them in action in the big chair and have often been at the receiving end of a tongue-lashing.

The earliest request that I can recall for corporation tax-varying powers to be transferred to Stormont was, I believe, made in 1983, when the late Ulster Unionist Assembly Member for South Belfast, Edgar Graham, believed that it would be a tool to help the Northern Ireland economy. Sadly, Edgar was assassinated later that year in the grounds of Queen’s University Belfast by the IRA. In those days, the rate of corporation tax levied was 38%, having fallen from a peak of 52%.

Since the early 1980s, there have been repeated calls for the rate to become a devolved matter, and the request has appeared in a number of election manifestos in recent years, including some of those presented to the electorate in 2010. Following the 2013 economic pact between the Northern Ireland Executive and Her Majesty’s Government, a timeline was established for reaching a decision. The Chancellor’s Autumn Statement in 2014 signalled the Government’s intention to proceed with devolution subject to Stormont agreeing a budget for 2015-16 and settling the welfare reform issue—and hasn’t that gone well?

There is widespread, but not universal, support for this measure. In addition to the five executive parties in Northern Ireland, Her Majesty’s Government and the Opposition, the consultation conducted in 2011 produced 700 responses, which were overwhelmingly in favour. At 87 pages, the Bill is a very complicated and technical measure, as the noble Baroness, Lady Blood, pointed out. It has to be to avoid the trap of brass-plating and other avoidance measures which all Members in this House wish to guard against, quite rightly.

The devolution of the rate-setting powers is controversial in the wider UK context, however, as has already been referred to. Both the Calman commission and the Holtham commission, looking at Scotland and Wales respectively, came up with slightly different approaches. Calman said it would not be appropriate for Scotland, while in the Welsh case, by recommending discussions with Westminster, the commission felt that its devolution in Wales could introduce budget volatility—I think we understand that.

The case in Northern Ireland has always been different, as the noble Lord, Lord Shipley, has just pointed out. The existence of the land border with the Irish Republic, which has the lowest corporation tax rate in Europe, differentiates the Province from the rest of the United Kingdom. That said, things are changing. First, the national rate has changed, as mentioned, from 28% at the beginning of this Parliament to 20% next year. This alone makes this measure less significant than it once might have been, but of course, what rate this Government might set could be raised by subsequent Governments over time.

Superimposed over all this is the wider question of where power actually resides in the United Kingdom as a whole. This measure is inevitably going to be seen in this context. In mitigation, it is a proposal that has been on the table for many years and was not dreamed up overnight like some of the other constitutional changes that have been brought before your Lordships’ House in recent weeks. I think this is either the fourth or the fifth legislative proposal to come before us in the last 12 months that devolves more power to the home nations. We really do need a joined-up approach to these matters, but that is an argument I suspect we will return to in the new Parliament.

The whole objective of seeking this power is to try and make Northern Ireland a more attractive place to do business and make it more attractive for foreign direct, as well as indigenous, investment. We all know, however, that tax rates, as the noble Lord, Lord Trimble, has said, are but one of a number of conditions that investors examine when making their decisions. Labour supply and skill levels in particular rate even more highly than tax rates, and other factors such as language, lifestyle, transport, broadband and proximity to markets are frequently seen as more significant.

That said, my view is that everything that can be done to help should be done, and even if this is merely a marginal consideration, it is worth trying. We know there will be a consequential reduction in available funds from London, but the tax can be varied in different ways and not necessarily all at once, thus easing the burden in the reduction of public spending. It also has to be said that, with uncertainty surrounding the situation in Scotland—who knows what might happen there in the future—we could be faced with lower corporation tax rates to our east as well as to our south.

The noble Baroness the Minister has confirmed the Statement made by the Government after the Stormont House agreement that devolution of the tax would happen only in the event of agreement being reached on a balanced budget and the Welfare Reform Bill, and that is very welcome. I sincerely hope that that is the Government’s position, because if it is not and it is going to move and vary, we are in for a very rough ride.

These are important considerations, but while I support this Bill and am a strong supporter of devolution, I regret to say that I do not believe that the current leadership in the Northern Ireland Executive is capable of dealing effectively with these powers at present. For the first time since 1921, the Stormont Assembly has failed to balance its budget and was only saved from default by the offer of a Wonga-style loan of £100 million from the DEL reserve to be repaid in the following year. How could this be?

Sinn Fein and others say that the problems have been caused by Tory cuts. There is an argument about public expenditure levels, but a devolved Administration have to live within their own means, and policies pursued by Stormont have to be adjusted according to the amount they raise and spend themselves, augmented very substantially by the Barnett formula and consequential in-year adjustments. The NI Executive were informed of their budget allocations for the four years to 2014-15 in October 2010. When Barnett consequentials are taken into account, Northern Ireland did better than anywhere else in the UK. Reductions of 2.1%, 0.7%, 0.7% and 2% respectively were imposed over the four-year period. This did not include the additional £200 million which was provided to assist the PSNI.

Given the huge national deficit and the fact that the UK continues to borrow nearly £2 billion per week, the reductions to Stormont’s budget have to be seen in the context of the reductions imposed on Whitehall departments. The Department for Communities and Local Government has suffered a reduction of 25%, for example, and this has had a huge effect on local government services. Stormont has, fortunately, not been exposed to such cuts. I know that the Labour Party has indicated a commitment to reduce the deficit, albeit at a different rate, and I hope that the noble Lord, Lord McAvoy, on behalf of the Opposition, will state that it is their policy to continue to follow that path but that there will not be a buy-out policy to help Stormont every time it runs into difficulties. I hope that that will be the Opposition’s position.

Stormont was informed of its budget allocation for 2015-16 in June 2013. In other words, the Executive have had full knowledge of their available budget for almost five years. What happened? Did the Executive cut their coat according to their cloth? No, they did not. No meaningful action was taken until a crisis budget was mooted last year. All of a sudden, departments were asked to make in-year cuts, which are the least effective, most difficult and wasteful. Then a political crisis was manufactured over the welfare issue, even though it had been known about for four years.

Instead of planning gradual reductions in personnel in the Civil Service and other public bodies, things were left to the last minute and a crash-landing proposal to reduce the public sector by thousands was produced as a result of the Stormont House process. Many civil servants will leave in the next financial year, not on a planned and carefully prepared basis, but in a panic with expensive pay-offs, the funds for which will have to be borrowed and repaid over subsequent years. At the beginning of the financial year, Stormont’s borrowing was £200 million, but if the Stormont House process is fully implemented that will rise to £1.8 billion. Not only that, but a much overdue reduction in departments is being planned in parallel with this process. Can you imagine the utter chaos that these measures will create? Having amalgamated public bodies myself, I am sure it will take three years until departments settle down and rebalance the skill levels.

The finances of the Northern Ireland Executive have been disastrously mismanaged. The Executive have been seen to be incapable of operating within their means, and they have failed to plan ahead despite knowing their financial envelope for years in advance. It is a mystery to me that any Minister of Finance and Personnel who has presided over such chaos and mayhem can still remain in office. The antics leading up to the Stormont House process resulted in the humiliation of the people of Northern Ireland in front of not only the rest of the UK but the wider world as well. The begging-bowl strategy has sent a terrible message to investors at home and abroad alike.

As things stand today, devolution under the existing leadership is not working properly. Financial mismanagement, the squandering of millions of pounds on failed initiatives, such as the Education and Skills Authority, and enormous delays in implementing reforms are a sad testimony to the way things have gone. From being a major success story for Northern Ireland, we are now disinvesting in higher education. Only this week, it was announced that the primary modern language programme, introduced in 2007 to support primary schools to teach another language, was being scrapped. Two weeks ago, the same Minister announced £l million for an Irish-medium school for 14 pupils when all advice, even from that sector, advised against it. The continuing domination of our politics by arguments over flags, parades and the Irish language is deeply depressing.

The vision I and many noble Lords had for Stormont when we sought to restore devolution has not been realised. My noble friend Lord Trimble famously said that because one had a past did not mean that one could not have a future. That was in the context of being prepared to share power with republicans and others. We foresaw Stormont moving to a place where the political landscape would be dominated by how we would use our new powers to develop and grow our economy after years of terrorism, where we would tailor policies to the specific needs of our local community and not rely on hand-me-downs from Whitehall, which were largely London-centric under direct rule, where we could develop the accountable partnership-led Administration envisaged in the Belfast agreement and ratified in the referendum of 1998, where working with our partners in the rest of the United Kingdom and the Republic of Ireland would give us the opportunity to concentrate on making things better for the post-Troubles generations and remove the deprivation in those areas which had suffered most from the trauma of 30 years of conflict, and where we could try to bring some solace and support to the many victims of terror.

That vision has not been realised, but that does not mean that we should not persevere until it is. This Bill could make a marginal but, I believe, positive contribution to the Northern Ireland economy in the long term, and on that basis I support it, but I must say to the Government that if they continue to buy off Sinn Fein threats, either with money or by turning a blind eye to their related activities, no amount of tinkering will do any good. I urge Ministers to back those who are genuinely prepared to work for the good of all our citizens, who want real partnership working in Belfast, and stop rewarding those whose long-term intentions are inconsistent with a strong, peaceful and prosperous future for the people of Northern Ireland within the United Kingdom.

[Lord Forsyth of Drumlean]

My Lords, I hesitate to intervene in a debate on a Bill which is exclusively concerned with Northern Ireland. I do so because I am opposed to the Bill because I do not believe that it is a unionist measure. Indeed, in the Second Reading debate in the other place on 27 January, the Secretary of State, Theresa Villiers, in describing the proposed regime, which is different for small businesses and large businesses, said:

“Larger businesses will need to divide their profits between Northern Ireland and Great Britain, as they do now between the UK and other countries”.—[Official Report, Commons, 27/1/15; col. 744.]

The very fact that she should use phraseology like that goes to the heart of this Bill and to why it is thoroughly undesirable.

I realise that it is perhaps a little rude to be critical of a legislative provision for Northern Ireland on St Patrick’s Day, but on St Andrew’s Day we had the policy of further, not-thought-through devolution to Scotland, on Burns Night, we got the draft clauses which were subsequently amended and which do not work and on St David’s Day, we got votes for 16 year-olds as part of this continuing package of piecemeal dismantling of our constitution and our United Kingdom. All I can say is: thank goodness St George’s Day will be during the election campaign and there will be no opportunity to come along with further measures that relate to England.

Obviously there is great support from people who have a distinguished record of representing Northern Irish interests but I am genuinely puzzled as to what the point of this Bill is. Apart from it being called the Corporation Tax (Northern Ireland) Bill and the Speaker of the House of Commons having certified it as a money Bill, I can think of no reason why it should be a money Bill other than it enables the Government to rush it through Parliament as part of the deal they made for a balanced budget in Northern Ireland and for agreement to welfare reforms which are now being reneged on. Indeed, my noble friend said from the Dispatch Box in introducing this Bill that the Government have no intention of implementing it unless the deal they agreed, which is the reason this Bill is being rushed through the House, is actually met. This is a very shoddy way in which to go about major constitutional reform.

A number of things are being said, such as the Republic of Ireland benefiting because of its lower corporation tax regime. It is true that the corporation tax regime for some revenues is 12.5% but it is 25% for revenue that is not allowed. The reason this Bill takes 87 pages to allow Stormont to set the rate of corporation tax and prevent it from setting or changing any of the allowances is because it adds huge complexity to the tax system. Back in 2005 the then shadow Chancellor asked me to do a tax commission report. We laboured for a year and were charged with having a simpler, flatter, fairer, lower tax system. This is the antithesis of that. There are pages and pages explaining how dredging, films or a whole range of other activities will be affected and how large companies have to decide which of their profits have been earned as a direct result of Northern Ireland. I declare an interest as a director of a bank and an insurance company. Financial services are not allowed to take advantage of this although I think that if you can certify that 70% of the back-office activity is in Northern Ireland it is allowed, but only as a one-off option. What about call centres and things of that kind? The Bill creates huge complexity, which may very well tempt people to go to Scotland where they do not have to have two sets of accounts rather than Northern Ireland. All of this is being done in order to give Stormont the opportunity to set a different corporation tax rate. We assume, if it is about tax competition, that that rate would be set closer to the level of the Republic of Ireland for trading activities at 12.5%. According to the Government the cost of that will be £325 million. My noble friend Lord Shipley talked about distortions in air passenger duty. I think I am right in saying that Stormont already has the power to set air passenger duty but does not because it would cost £50 million to do so. Yet here we have something that could cost—

[Lord Empey]

The air passenger duty issue was designed to enable the link between Belfast International Airport and New York to survive. It has been applied only to that route because it is the only direct route from Northern Ireland to the United States. No attempt has been made to alter domestic air passenger duty.

[Lord Forsyth of Drumlean]

I understand that. I was making the point, perhaps wrongly, that one reason why it has not been done is that it would result in a reduction in the block grant—the point made so eloquently by the noble Baroness, Lady Blood. I think that my noble friend Lord Alderdice earlier referred to the position in Scotland, where the Scottish Parliament allowed its income tax raising powers to desist. They were never used. The reason they were never used was that using them would have resulted in a corresponding reduction in the block grant. It is not terribly electorally smart to tell people that you are going to put their income tax rate up by 3p and, in return, you are going to have the block grant—which is already very generous because of the Barnett formula—reduced by exactly the same amount, so you ask people to pay more tax in order to stay where they are. Exactly the same applies here, unless you believe that a reduction in corporation tax will result in more revenue. I do believe that that is the case, but I would prefer to see this Government, who have made fantastic progress in reducing the rate of corporation tax for the United Kingdom as a whole down to 20p for the next financial year, continue in that way. If we think that there is such a huge problem in tax competition from the Republic of Ireland, the answer to that is to reduce our corporation tax rates nearer those of the Republic of Ireland. But we do not do that because the cost would mean that we would have to make cuts in other public services, such as health and education. Exactly the same applies to Stormont.

--- Later in debate ---

[Lord Empey]

My Lords, I am sorry to have to interrupt this job interview for the best anti-capitalist speaker in the House, but will the noble Lord, Lord Davies, clarify one thing? I am assuming that the Opposition support the Stormont House agreement. That agreement has subsequently been ratted on by one of the parties to the it. It appears to some of us that the reason they are doing that is the hope that, after the election, were there to be a change of Government, the noble Lord’s party would be more readily prepared to put more money into the Stormont House process. Therefore, they are holding out in the hope that that might happen. Will the noble Lord clarify that that is not the Opposition’s position and that the Labour Party stands over the Stormont House agreement as it was dealt with at the end of December?

[Lord Davies of Oldham]

Is the noble Lord seriously asking me to clarify conjecture about why people have acted as they have done in Northern Ireland thus far? The Government have said that this will need to be resolved because the reason for delaying implementation of this measure is to give us time for that to be done. We will obviously take considerable advantage of such time when we come to power.

Assisted Dying Bill [HL]

Lord Empey Excerpts

Friday 7th November 2014 Lords Chamber

[Baroness Finlay of Llandaff]

Would the noble Lord accept the premise that we are trying to provide the evidence based on what we know happens elsewhere? My noble friend Lady Grey-Thompson outlined a reality—that we know reports come from those countries that have changed the law about patients whose symptoms are not being addressed in the days between the time that it has been agreed and when they have their lethal overdose. That is a reality that we abhor.

I would like to correct the perception about palliative sedation to which the noble Lord referred, as it is important that people out there do not have the misconception that patients are either not consulted about treatment decisions or that they are put into some kind of coma by those who are looking after them.

The evidence from Holland was presented at the international conference on clinical ethics in Paris in April this year. In Holland, about 2.7% of all deaths are from euthanasia or physician-assisted suicide. Their regime of palliative sedation is used in between 12% and 16% of cases. That is completely different from what we do here. In this country we may use sedation, titrating the drugs up temporarily to get on top of symptoms but then lowering the dose again and adjusting it to meet the patient’s needs. That is quite different from deliberately using a dose of drugs to induce coma and using uncontrolled escalations of opioids and benzodiazepine cocktails to produce absolute loss of awareness as a therapeutic goal. There is concern among those of us who are operating in palliative care in this country about that way of managing patients at the end of life. That is not standard practice here.

If the noble Lord would like to look at the recommendations on the use of sedative drugs at the end of life, I would be happy to take him through them. They are on various therapeutic websites. However, I hope he will accept that what may be said casually by people and propaganda is not necessarily what should happen, and that nobody condones the withdrawal of fluids and dehydrating people until they die. That was exactly why the noble Baroness, Lady Neuberger, undertook an inquiry into the Liverpool care pathway. It was misused because that was not what the relevant document said should happen. That was abuse, not treatment.

[Lord Empey (UUP)]

My Lords, I wish to speak on Amendment 67 in the name of the noble Lord, Lord Carlile, but, before doing so, I want to say how much I regret the direction of travel of our Committee stage today. I should have thought it would be more profitable to debate all the amendments in Committee and make decisions on Report. However, noble Lords have decided to take the proceedings in a different direction and we will have to deal with that.

There is no perfection to be found with this Bill or without it. As we have said many times, the Second Reading debate gave an opportunity for a large number of noble Lords to express their views and the compassionate arguments that were expressed throughout that debate were very moving. Indeed, there have been similar contributions today.

I have no complaint about the way that the amendments have been grouped today, but that does mean that certain amendments are more relevant to certain issues than others. That is inevitable. My anxiety, as I expressed at Second Reading, concerns the position of the medical profession. I am not a doctor but a close relative is starting out on that road. We have given insufficient consideration to the impact that the Bill, if it is enacted, will have on the profession. As I see it, it would completely change the status of a doctor and the doctor-patient relationship.

How often have we said that, in order to provide a lethal dose or drug, the best medical person to judge that is somebody who knows the patient because no two patients are the same? Even then, that is no guarantee because you have to have some people who are specialists in the delivery of certain substances. Even then, as we have heard from the noble Baroness, Lady Masham, when people deliberately set out judicially to end a life, it turns out to be a mess. By introducing an independent element, the amendment at least separates out from this process the role of the carer and the medical profession up to that point. That is extremely advantageous. Simply to assume that we can subcontract to a profession that does not want this, against its will and without even having a discussion on it, is presumptuous, to say the least.

Queen’s Speech

Lord Empey Excerpts

Wednesday 11th June 2014 Lords Chamber

[Lord Empey (UUP)]

My Lords, I want to pick up on a point made by the noble Baroness, Lady Morgan of Ely. Talks are resuming in Northern Ireland following the Haass process to try to resolve contentious issues on flags, parades and the past. I am sure many Members of your Lordships’ House will have hoped that by now we would not need to keep going back to deal with these issues. Sadly, we are not in that happy position.

The Haass process ended at the beginning of January, without agreement. There have been party leader meetings on and off ever since, but after the elections a brief window of opportunity has arisen and the leaders will be having a couple of two or three-day sessions between now and the end of June. While the Haass process dealt with those issues, it was not done on the basis that nothing is agreed until everything is agreed. Unfortunately, Sinn Fein has introduced a new precondition that all these issues must be dealt with or none of them will be dealt with. That is a mistake. We have the potential for an agreement on the parades issue. We are relatively close to one. Given the time of year and the backdrop, I would have thought that we should bank whatever agreement we can get and move on to try to solve something else, rather than leaving everything frozen until you get agreement across the board, which will be very difficult.

It is to that issue that I want to turn. Had we had an agreement at the beginning of January on issues pertaining to the past, what would we have looked like a few weeks later when the on-the-runs issue, of which people were unaware, emerged? It emerged that 350 people had been given royal pardons under the royal prerogative of mercy but, even worse, that 10 years of records of that royal prerogative of mercy have disappeared. How on earth can a record of the royal prerogative of mercy given between 1987 and 1997 have disappeared? Surely, it must be possible to reconstruct a record. I ask the Minister to respond on this. There must still be people serving in departments who were part of it. The office of the Attorney-General must have been involved along with the court office and, of course, the Royal Household itself because Her Majesty has to sign these pardons. Are we to believe that for 10 years Her Majesty’s Government have no record whatever of a royal prerogative of mercy? I am not trying just to make a cheap point. This issue is undermining confidence. People assume that some other dirty deal has been done under the table of which we are unaware. Those are not the circumstances in which positive negotiations can take place to solve our outstanding problems.

I appeal to the Government to address this matter. I have no doubt that they would get whatever help they needed from the previous Government. There must be a way to solve this problem and produce the records. If there is nothing to hide, that is fine; that is one less obstacle. Will the Minister assure us that there are no further deals or understandings with the IRA, Sinn Fein, loyalist paramilitaries or anybody else on issues of justice and matters pertaining to who has been sought and who has not? Such issues are corrosive given the two years of unending elections that we are facing—we have had elections this year, we will have the election next year and there will be Assembly elections in 2016. We have obtained agreement in the past only in circumstances where we have built up confidence. Such agreement is vital for our long-term peace and stability. I appeal to Her Majesty’s Government to tell the House how 10 years of records on such a sensitive issue have disappeared. Will they assure the House that we are in possession of all the information on any understandings that were reached with paramilitary organisations or others so that we can move into the talks with a genuine prospect of reaching a peaceful and successful outcome?

Taxation: VAT on Retrofitting Buildings

Lord Empey Excerpts

Thursday 25th July 2013 Lords Chamber

Asked By

[Lord Empey]

To ask Her Majesty’s Government whether they have plans to reduce VAT on the retrofitting of existing buildings to encourage energy saving and job creation.

[Lord Newby]

My Lords, a reduced VAT rate of 5% already applies to the installation of various energy-saving materials, including insulation materials, in residential properties. There are many instances where people incur expenditure in a way that helps to reduce energy use, but given the current fiscal pressures, it is not possible to relieve such expenditure from tax.

[Lord Empey]

My Lords, as suppressing the demand for energy and encouraging job creation are two of the Government’s key objectives, is there not a strong case for reducing VAT more generally on the retrofitting of buildings as a simple and quick way of ensuring that both these objectives are achieved at minimal cost to the Treasury? Will the Minister not take a leaf out of the Americans’ book and look at this again, as it has been a successful policy across the Atlantic?

[Lord Newby]

My Lords, the Government recognise that energy efficiency has a major role to play in meeting carbon reduction objectives while reducing energy costs for consumers, and the process of doing that can and does generate jobs. That is why we have introduced the Green Deal, which, as noble Lords will be aware, encourages home energy-efficiency improvements, paid for by savings on energy bills. The energy company obligation will work alongside the Green Deal, focusing on hard-to-treat homes and low-income households.

Government Spending Review 2013

Lord Empey Excerpts

Wednesday 3rd July 2013 Grand Committee

[Lord Empey]

My Lords, I should like to make a few comments in the gap. Like many people in this country, I am disappointed and to a certain degree angry that the United Kingdom finds itself in its current economic powerlessness around the world. This has major implications for our foreign policy, our defence policy, and for a number of other matters. While a number of noble Lords have pointed at former Prime Minister Gordon Brown and others, this situation has been developing over a substantial period of time. It did not happen overnight. I think that the rock we perished on really goes back to the 1960s and 1970s when we turned our back on manufacturing, thinking it was old hat. It was about dirty, smelly factories, and the new way to do things was in the service sector, with finance and so on. We moved away from a broad-based and balanced economy with a portfolio spread across a range of areas. Indeed, our outward-looking expertise and our contacts throughout the world were not exploited to the extent that they might have been.

I want to make a point about the rhetoric that we are currently using, which other noble Lords have referred to in the debate. We have been talking about “savage cuts” of this, that and the other. The arithmetic disproves that. Spending and borrowing are going up. I did a brief calculation and worked out that as a country we have borrowed around another £80 million since the debate this afternoon began. Anyone who suggests that we are in the throes of brutal cutbacks is simply not being realistic. There are many things that we would like to spend money on and there are many groups in our communities that we would wish to help, but unless we as a nation can make the money to pay for those benefits, clearly they are not possible. Everyone will suffer if we lose that capability.

I have one question in particular for the Minister on pension funds. I asked his colleague, the noble Lord, Lord Freud, about this and received a Written Answer the other day. Pension funds in other parts of the world can buy into our electricity and water sectors, transport, airports, all sorts of things. Why are our own pension funds not doing the same thing? The answer is that there are too many of them and they are too small, so they do not have the capability to do so. An example of this is the Ontario public sector workers’ fund. It has 400,000 members and a huge balance sheet. We now describe a large fund as one with over 1,000 members. That is just not competitive. I know that the Government are looking at this, but there needs to be a radical step change so that the pension funds in this country have enough firepower to make the purchases that will bring revenue into this country instead of being broken up into tiny funds that are of no significance whatever.

I want also to ask about our exchange rates, a subject on which I tabled an Oral Question last week. I know that the lowering of exchange rates can have inflationary implications, but we are not playing on a level field. Other countries are flagrantly manipulating their exchange rates. China has been doing it for years, and Japan is doing it at the moment. Its exchange rate with the dollar has dropped by 15% since the new Prime Minister was elected a few months ago. There is no point in playing by the Queensberry rules while someone is taking the very bread out of your mouth, and that is what is happening. Will the Minister tell us, if he can, whether the Government are looking closely at the issue?

My final point is this. If we are trying to stimulate the economy and achieve some of our objectives in an atmosphere of reduced spending, will the Minister consider how VAT is applied to things such as the retrofitting of buildings? Such activity achieves the Government’s energy objectives by suppressing demand while at the same time increasing employment. We have to be more imaginative in how we use fiscal measures to achieve our objectives and generate further employment.

Sterling: Exchange Rate

Lord Empey Excerpts

Tuesday 25th June 2013 Lords Chamber

Asked By

[Lord Empey]

To ask Her Majesty’s Government what steps they are taking to bring about a lower exchange rate for sterling.

[Lord Newby]

My Lords, the UK does not have an exchange rate target. The Government’s macroeconomic framework includes an independent Monetary Policy Committee responsible for monetary policy that seeks to deliver price stability through an inflation target of 2% as measured by the 12-month increase in the consumer prices index. Under this framework the exchange rate is allowed to adjust flexibly.

[Lord Empey]

It is a great source of disappointment to me, and I am sure to many in your Lordships’ House, that the export-led recovery which we had all hoped for has not yet occurred. Does the Minister agree that while we take no action with our exchange rates and play by the Queensbury rules, our principal trading competitors in China and Japan are not so constrained as they deliberately manipulate the value of their currencies to the grave disadvantage of our exporters? Will he join with US President Obama, who in the past few weeks has expressed similar concerns?

[Lord Newby]

The UK exchange rate has fallen by about 20% since 2007. It was hoped that that would give a big stimulus to exports; it has given some, but not as much as we would have liked. On China, our trade to China over the past three years has increased by 76%. In April, for the first time, trade in goods to China reached £1 billion in a month. The access to China is proving rather better than the access to some other countries.

Queen’s Speech

Lord Empey Excerpts

Monday 13th May 2013 Lords Chamber

[Lord Empey]

My Lords, every time the economy and public spending are mentioned, the word “growth” usually accompanies them. Today is no exception. People say that what we need are policies for growth, as this is the only way to close the deficit and reduce our borrowing. It is easy to see why this is a popular idea. When one looks at the graph of spending to borrowing, a rise in tax revenues brought about by an increase in economic activity would, over time, solve our problems—or would it? When we were enjoying economic growth, we increased our spending. We did not use the increased tax revenues to pay down our debt, so when the crisis of 2007-08 occurred, we were caught in a trap from which we have not escaped. Who said we are entitled to expect ongoing growth in our economy? Growth will occur only if we remain competitive. We no longer provide sufficient goods and services at prices that the world wants to pay. This is not surprising, for a number of reasons.

There is a deep-seated culture in this country that has not given a parity of esteem to those in business who have led the way in innovation and exports. In competitor countries such as Germany, those who decide to become engineers, for example, are highly regarded and respected. Vocational education in Germany is also regarded with higher esteem than it is in this country and not seen as what a student does if they have failed in the academic pathway, as is often the case here. This is unfortunate, because it permeates our education and governmental apparatus from top to bottom. There is a form of snobbery which perversely values those professions and skill sets that spend taxpayers’ money over those professions and skill sets that create it.

I had the privilege of being a member of the ad hoc Select Committee of your Lordships’ House which looked at SMEs and exports. We found a large number of potentially highly successful small businesses out there which are really trying—some are succeeding—to grow the export potential of this country. There is no lack of potential but there are failings which frustrated those of us on the committee and which we want to air when the report is debated later in this Session.

However, it is clear that businesses in this country are having to pass on to customers the overwhelming cost burden of a welfare state that we simply cannot sustain at present levels unless we have a larger economy. I come from a region which benefits greatly from the welfare state and the financial transfers from Westminster. As an elected representative there for more than 25 years, I know something of the plight and the dependence of many constituents who rely on having access to various benefits. To be blunt, this situation cannot go on as it is. When we were discussing the Welfare Reform Bill and the health legislation, many of your Lordships pointed to the hardship some of these changes would cause for individuals in the community. There is no doubt that this is true. What was lacking from these sincere expressions of concern was any apparent grasp of the dire long-term consequences of the UK’s continuing economic weakness for the future of the welfare state. Little emphasis was placed on how the wealth is to be created to produce the revenues to spend on so many deserving cases.

I will suggest a few steps we might take, to which the Minister, in winding up, will perhaps respond. I feel that the time has come to place a general duty on all departments to have regard to the economic well-being of this country. I also feel that all civil servants, irrespective of which department they currently serve in, should, as part of their terms and conditions, be required to have a general duty to look at the consequences of their actions on the economy. We need to review the priority given to wealth creation in our education system, which needs to run right through from primary to tertiary education. It is simply not happening on a large enough scale.

Turning to the Treasury estimates, there seems to be a muddled message in some of these decisions. In recent years, Governments of all parties have recognised the valuable role of our foreign service in promoting exports and trade abroad. With a meagre budget of £2 billion, the FCO is expected to promote our diplomatic and commercial interests around the world, yet the Department for International Development will have £10.7 billion to spend next year. Given recent diplomatic fallout from the decision to cut £19 million of aid to South Africa and a similar row last year over aid to India, who looks at the downstream commercial consequences of these decisions? Is there no way of handling things to avoid such bad publicity and possible damage to our long-term commercial interests?

This is one reason why I repeat my call for all departments to have to look at the economic fallout of their decisions. Perhaps there needs to be a form of economic proofing of departmental decisions. It will not be lost on many that with the international development budget growing while the defence budget is falling, there is a need for a review of how best to ensure that priority is given to the UK’s long-term national interests in these spending areas.

Since I came to your Lordships’ House, I have been struck by the division that still exists between those of your Lordships who can be regarded as Europhiles and many who are seen as Eurosceptics. Perhaps I will add another category: Eurorealists. The arguments of the 1970s are over. The UK took a decision to join the then EEC and we have seen that economic community change into a rival to nation states. I have no doubt that this was always the intention of the EU founding fathers, but it was most certainly not the intention of the British people. Ironically, many of those who are now sounding alarm bells about the growing appetite of Brussels for its own statehood supported the necessary legislative and treaty changes that have brought about the present situation.

As we are talking about the g-word—growth—today, it is obvious that significant business growth is currently available outside the EU. Indeed, parts of the EU face years of contraction and not a small risk of political instability as a result of the politics—rather than the economics—of Europe. The euro has been a disaster for southern Europe: there is 64% youth unemployment in Greece and 57% in Spain. For how long can this go on?

The EU is still a huge consumer market, to which the UK sends 40% of its exports, but it is not sufficient to generate the growth that we need. While there is no incompatibility between trading with the EU and with the rest of the world—including, I hope, a growth in our trade with the Commonwealth—the fact remains that Europe is making itself progressively less competitive with the rest of the world and we are powerless to stop this on our own.

I do not relish another four years—or maybe more—of these pro- and anti-European arguments. While at all times acting in our own interests, we must strive to shorten this period of uncertainty. I am not sure that a referendum or referenda can wait until 2017. I support the concept of a last-ditch attempt to renegotiate the terms of our membership of the EU. But we must remember that Brussels has only done and is only doing what we, as an independent nation state, through this Parliament, agreed that it should do. There is no point is blaming Brussels or the Commission for their actions; the blame lies in this House and the other place. We agreed to the free movement of labour within and between member states; that means that we agreed that the workforce in a country such as Bulgaria, with a minimum wage of 83p per hour, was free to seek work in this country. While it was never envisaged that the diversity of economies in Europe would be so wide, we had the opportunity to negotiate at the time of the various treaties, but we failed to do so.

We are in a pickle of our own making and it is in the interests of our future economic well-being to ensure as speedy a resolution to the Europe question as possible. No good will come of endless delay and procrastination.

Taxation: Avoidance

Lord Empey Excerpts

Wednesday 6th February 2013 Lords Chamber

[Lord Deighton]

I thank my noble friend for that important addition to the debate. I was not aware of that but I am delighted that he has been able to share it with the House.

[Lord Empey]

What is the role of the Charity Commission in this? If an organisation pays out to good causes only less than 1% of its revenue, does an alarm bell ring somewhere?

[Lord Deighton]

In this particular case, as I understand it, the Charity Commission, which works closely with HMRC, investigated the trust but found that it did not have the legal basis to make a challenge. In that context, I refer to the review of the noble Lord, Lord Hodgson, the follow-up from the Government and the announcement made in the other House this morning that the focus of the new chairman, Mr Shawcross, should be on its role as a regulator.

Autumn Statement

Lord Empey Excerpts

Wednesday 5th December 2012 Lords Chamber

[Lord Sassoon]

My Lords, I am very grateful to my noble friend and agree with every word that he uttered.

[Lord Empey]

My Lords, I thank the Minister for his personal courtesies to me since I have been a Member of your Lordships’ House.

I welcome the increased allowances for small businesses and the reductions in corporation tax. Will the further reductions in corporation tax dissuade the Minister’s right honourable friend the Prime Minister from considering devolving corporation tax-setting powers to the Northern Ireland Assembly? Secondly, will he consider once more a reduction of VAT to encourage the retrofitting of buildings so that they can not only be improved from an energy-efficiency point of view but benefit from a tax holiday on VAT for a small period of time, which would have limited dead-weight potential but would stimulate the construction sector? Will he give further consideration to those two points?

[Lord Sassoon]

My Lords, the question of corporation tax in Northern Ireland continues to be considered. The key thing is that we are making the United Kingdom as a whole a more competitive place and in corporate tax terms the most competitive place to do business among our major competitors. Of course, the position in Northern Ireland will continue to be debated.

As far as the reduction in VAT is concerned, this is a case that is made regularly. We believe that what we have announced today—the two-year increase in the investment allowance—is a better way of targeting the limited resources that we have, in addition to what we have done on the basic rate of corporation tax.

Northern Ireland: Corporation Tax

Lord Empey Excerpts

Monday 15th October 2012 Lords Chamber

[Lord Newby]

My Lords, I can confirm that the Government are committed to rebalancing the Northern Ireland economy. The remaining issues, not surprisingly, are financial, and essentially there are two. The first relates to the initial reduction of the block grant, which follows from any devolution of corporation tax to Northern Ireland. There is something called the Azores criteria, which means that if a devolved Administration take full fiscal responsibility for a tax change, they must face a reduction in their block grant equivalent to the current corporation tax take from firms based in Northern Ireland. The second point is about how you deal with the ongoing adjustment over time to take account of inflation. At this point, it is far too early to say what will happen if the working group does not reach a positive conclusion.

[Lord Empey]

My Lords, first, will the Minister confirm that in the event of the devolution of corporation tax-setting powers to Northern Ireland, the Assembly could set different rates of tax for larger and smaller businesses? Secondly, will the Minister agree that the case for the devolution of these powers is stronger than equivalent demands from the Scottish Government and that Her Majesty’s Government will not be influenced by the campaign for Scottish independence when reaching their decision?

[Lord Newby]

My Lords, I can confirm that, as the current UK corporation tax system has different rates for smaller and larger businesses, it would be possible in principle if corporation tax were devolved to the Northern Ireland Assembly for two rates to obtain in Northern Ireland. I agree that the argument in favour of the devolution of corporation tax to Northern Ireland is of a different nature to the devolution of corporation tax to Scotland because of the proximity of the Republic of Ireland, which of course has a significantly lower corporation tax rate.