Ministerial Code

Lord Forsyth of Drumlean Excerpts

Tuesday 24th November 2020 Lords Chamber

[Lord True (Con)]

I am afraid that I cannot follow the noble and right reverend Lord. I have answered that the Prime Minister did not consider that the Home Secretary was a bully, and the noble and right reverend Lord referred to the Prime Minister’s views on the matter. I learned in Sunday school that forgiveness is a Christian quality, and I believe that we should accept the apology and move on.

[Lord Forsyth of Drumlean (Con) [V]]

My Lords, given that four senior civil servants who gave evidence under oath to the Salmond inquiry have had to return with corrections to their testimony, is my noble friend sure that the Civil Service Code is fit for purpose? On the enforcement of the Ministerial Code, does he share my concern that, unlike the Prime Minister, Sir Alex Allan was able to reach his conclusions without interviewing the Home Secretary himself?

[Lord True (Con)]

My Lords, as I have said, I cannot comment on the details of the investigation or on who was involved. I think that many would be surprised by my noble friend’s hypothesis. However, I can say again that the Prime Minister has reviewed the matter, including Sir Alex Allan’s report, and does not consider that the code was breached. The Prime Minister and the Cabinet Secretary have issued a letter setting out the joint responsibilities of Ministers and Permanent Secretaries. As my noble friend implies, there is a duty on both sides to work together harmoniously. I believe that we should now all get on with the job of doing good public service.

Covid-19: Economy Update

Lord Forsyth of Drumlean Excerpts

Tuesday 27th October 2020 Lords Chamber

[Lord Forsyth of Drumlean (Con) [V]]

My Lords, does my noble friend not think that perhaps the time has come for us to have a UK-wide plan for education, employment, housing and welfare that will enable us to live with this virus? Should the Government not consider inviting the opposition parties to be part of this plan and involving local authorities in its creation and execution?

[Lord Agnew of Oulton (Con)]

My noble friend raises an important point. This country now has a more devolved structure. We have tried to keep the devolved and mayoral authorities involved in decisions at every point. We have given some £13 billion to the devolved authorities to react to the issues that we are facing. I accept that it might be easier if we could operate on an entirely national basis, but unfortunately that is not the present reality of our constitution. I assure my noble friend that we are doing everything possible to talk to the devolved authorities at all times.

Parliamentary Constituencies Bill

Lord Forsyth of Drumlean Excerpts

Committee stage & Committee: 2nd sitting (Hansard) & Committee: 2nd sitting (Hansard): House of Lords
Thursday 10th September 2020 Grand Committee

[Lord Foulkes of Cumnock (Lab Co-op) [V]]

My Lords, it is a great pleasure to follow the erudition of my noble friend, in every sense of the word, Lord Lipsey, whose amendment I support. He gave us a very good analysis of the Minister’s obsession with equal votes, pointing out that in safe seats, it does not have much of an influence. He also referred to turnouts. There is also the scandal of non-registration of many people who ought to be on the voters’ roll. There is a whole range of issues there and no one knows them better than my noble friend Lord Lipsey.

I did not want to intervene after the speech by the noble Baroness, Lady Scott of Bybrook, but I was a wee bit disappointed by her response to the last debate. I am afraid that she did not seem to understand some of the issues. I hope she will do some homework before we get to Report, because this is a very important matter. As I gather from the conversations that took place while we were adjourned, everyone agrees that this is an important issue.

We will come again to the general issue of flexibility at the next session of the Committee when we deal with my amendment in relation to local ties versus arithmetic, and the constant obsession with getting each constituency arithmetically as near as possible to the others rather than taking account of local ties. This matter and others that we have already debated are all part of the issue of getting some flexibility.

The Government seem to be obsessed with 5%. The Minister needs to explain why 5%. Why have they come across this? Why is 5% particularly the figure that they have arrived upon? I look forward to hearing the explanation. My noble friend Lord Lennie in his introduction argued the case convincingly, using some very powerful arguments, for much greater flexibility.

I look forward with even greater fascination to an explanation by the noble Lord, Lord Forsyth, of why 2.5%. I cannot think of any rational explanation whatever, except that, for once, the noble Lord may want to make the Government appear reasonable by making 5% a good balance between 2.5% and 10% It would be an interesting occasion to see the noble Lord take this opportunity to make the Government seem reasonable. Usually, he is—effectively and correctly—undermining, challenging and questioning of what this awful Government are up to.

I support my noble friend Lord Lipsey’s amendment. I want more flexibility so that council boundaries can be taken account of in Scotland, as well as Scottish Parliament boundaries, natural boundaries such as rivers, estuaries, lakes and mountains, and community ties as well.

When I was thinking about arbitrary lines, I remembered how the British imperialists in Africa drew straight lines and said, “This side is Uganda and this side is Kenya”, or whatever it was, not taking any account of community or historical connections whatever. It was just appropriate so that the British masters went in and ran their parts of the Empire, and they were arbitrarily drawn. Maybe this is not quite as arbitrary as that situation, but it reminded me of it. We must take account of local interests and community, of where people shop and where their schools are; all these kinds of ties need to be taken account of.

That is why I think 10% is the right figure. It does not mean that there has to be a variation of 10%; it just gives the Boundary Commissions flexibility. The commissions need to look at the constituencies carefully, and if they do not think there needs to be a big variation then they will take account of that.

I strongly support my noble friend Lord Lipsey’s amendment, and I am looking forward with real excitement to the following speaker, my “noble friend”—I use inverted commas because he is not my noble friend politically but he is in other senses of the word—Lord Forsyth explaining how 2.5% can be in any way be sensible.

[Lord Forsyth of Drumlean (Con) [V]]

I am very happy to follow the noble Lord, Lord Foulkes. I am not sure he is right about me not being supportive of the Government. I am very supportive of the Government, but it is our role in this House to hold the Government to account.

I did not speak at Second Reading. I thought it was a perfectly sensible Bill implementing a pledge from a manifesto on which the Government obtained a substantial majority, and that pledge was to update and create equal parliamentary boundaries. The Bill has been supported by the House of Commons, whose main concern this is, so I am very surprised that so many colleagues in the House of Lords want to second-guess the electorate and indeed the Commons by seeking to amend it in the way that I have listened to today and that I have read in previous debates. I am delighted that the Government have abandoned the coalition idea of reducing the number of constituencies from 650 to 600, and I very much support the Bill.

I have to say that I was hugely amused by the speeches from the noble Lords, Lord Lennie and Lord McNicol, on an earlier set of amendments, passionately arguing against what is intended here, which is to create equal constituencies. This is a measure that people have argued for since the last century; indeed, it was a central plank of the Chartist movement that they wanted 300 electoral districts consisting of equal numbers of inhabitants. I take the point that we have not yet got to the stage where the electoral roll includes all the inhabitants, but we can and should work towards that as part of a good democracy. However, for people whose heritage in the Labour Party is the Chartist movement to argue that we need something different from that when the Bill seeks to achieve it, and when the voters in the general election endorsed it so strongly, was, shall we say, interesting. The Bill seeks to introduce those equivalent constituencies.

The noble Lord, Lord Foulkes, said that he thought 10% was the right figure. I have to tell him that plus or minus 5% is a 10% variation, and plus or minus 10% is a 20% variation. These numbers that appear small are actually very large if they are plus or minus. My amendment would simply recognise that when people talk about 5% they are really talking about plus or minus 5%, and therefore it suggests that the figure should be plus or minus 2.5% to allow for a 5% variation between constituencies. The noble Lord, Lord Lennie, just dismissed that out of hand and said it would not happen. I have news for the noble Lord, Lord Lennie: I do not think any of these amendments are going to happen because this measure is what the Government won an election on proposing.

What has been central to the debate this afternoon, at Second Reading and elsewhere is that you have to choose. Either you have identifiable communities or you have equivalent votes. This Bill is about equality of seats.

Unemployment

Lord Forsyth of Drumlean Excerpts

Thursday 11th June 2020 Lords Chamber

[Lord Agnew of Oulton [V]]

The advice will be taken in the context of our overall economic recovery. Our first priorities have to be keeping this country safe and getting our businesses reopened, and it is only by having a healthy economy that we will be able to become heavily involved in the sustainable issues referred to by the noble Lord.

[Lord Forsyth of Drumlean (Con)]

My Lords, can the Minister indicate what assessment the Government have made of the number of people who will lose their jobs as a direct result of the two-metre rule? If no such assessment has been made, how is it possible for the Government to credibly continue with this policy in the light of the World Health Organization’s advice that one metre is adequate?

[Lord Agnew of Oulton [V]]

My Lords, I think that the scientific evidence is relatively clear that the risk of transmission of the disease declines exponentially with the distance between people who are interacting with one another. The argument, of course, is about the level of risk that we are prepared to take—the shorter the distance, the greater the risk; it is relatively simple. However, I support my noble friend’s concerns and I hope that the debate will continue.

House of Lords: Membership

Lord Forsyth of Drumlean Excerpts

Tuesday 5th May 2020 Lords Chamber

Asked by

[Lord Forsyth of Drumlean]

To ask Her Majesty’s Government, in the light of recent press reports, whether they are considering proposals for reform of the House of Lords based on the exclusion of those over the age of 65.

The Question was considered in a Virtual Proceeding via video call.

[The Minister of State, Cabinet Office (Lord True) (Con)]

My Lords, no.

[Lord Forsyth of Drumlean (Con)]

With respect and admiration for my noble friend the Minister, I ask: as this Question is about the future of this House, why is the Leader of the House not answering it? What have the Government done to rebut the Sunday Times report that Ministers are examining whether they could retire every Member of this House who is over the age of 65 and that we are all so old that there is no prospect of us doing our job? Will the Government name the Whitehall source responsible for this false and malicious briefing? If this is not known, will they invite the Cabinet Secretary to investigate and, if the source is identified by him, ensure that they are summarily dismissed?

[Lord True]

My Lords, there are a number of questions there which I am sure have been noted. I am sorry if my noble friend thinks it is only the second division that has come out to answer the Question, but I think the second division is adequate to put paid to a third-rate story. There is no substance in it. It is not the intention of the Government to introduce such a policy.

Economy: Update

Lord Forsyth of Drumlean Excerpts

Tuesday 28th April 2020 Lords Chamber

[Lord Agnew of Oulton]

I will try to offer some reassurance to the noble Lord. The most important thing to say is that the Chancellor has demonstrated enormous flexibility and dexterity over the weeks of the crisis. As the saying goes, if the facts change, he will change his mind to deal with the emerging situation. I am perhaps a little more optimistic than the noble Lord on the current position; even in the last 10 days we have seen increasing numbers of people going back to work as businesses have responded to social distancing and worked out simple things, such as how to rearrange offices. We are seeing this in the traffic stats of the volumes of people commuting. While I accept that there could be something of a big bang, I am hopeful that it will be more of a gradual return to work. If the noble Lord is right and we see that as an approaching problem, I am confident that the Government will react accordingly.

[Lord Forsyth of Drumlean (Con)]

My Lords, I draw attention to my interests in the register. I congratulate the Chancellor and Treasury Ministers on the welcome bounce-back scheme, which is a lifeboat to many small enterprises. It shows that we have indeed got a listening Chancellor, in that he has moved very quickly to the representations which have been made. Could my noble friend say what estimate the Government are working on in terms of the numbers of unemployed people they expect to see in the third quarter of this year and how that is related to the length of the lockdown?

[Lord Agnew of Oulton]

My Lords, I do not have that figure as I do not believe that that calculation has been made yet. It will depend very much on the timing and speed of exiting lockdown. The sooner we can exit, the less damage will be done, but we must balance against that the Prime Minister’s overriding concern for the health of the nation, not overwhelming the NHS and the nation’s morale if we were to get a bad second spike of the disease. It is a bit too early, but we will of course keep noble Lords informed of our thinking as it develops.

EU: Negotiations

Lord Forsyth of Drumlean Excerpts

Tuesday 17th March 2020 Lords Chamber

[Lord Forsyth of Drumlean (Con)]

My Lords, is more uncertainty not the last thing that business needs at the moment? For the Government to sound an uncertain note on our determination to leave the European Union, as has been agreed, would be a great mistake. When the noble Baroness, Lady Hayter, talks about the right Brexit, we all know that she thinks that the right Brexit is no Brexit at all.

[Lord True]

My Lords, I have a good deal of sympathy with what my noble friend said.

Ministers: Training

Lord Forsyth of Drumlean Excerpts

Thursday 27th February 2020 Lords Chamber

[Lord True]

The noble Lord is wise and knows very well that whether people remain in office is a matter not for me or him but for the Prime Minister. In fact, this Prime Minister updated the advice around the code last August, to include greater clarity on how investigations into alleged breaches will take place. It made it very clear that if there is an allegation of a breach, the Prime Minister will consult the Cabinet Secretary. If he feels that it warrants further investigation, he may ask the Cabinet Office to investigate the facts of the case and refer the matter to the Independent Adviser on Ministers’ Interests, Sir Alex Allan.

[Lord Forsyth of Drumlean (Con)]

My Lords does the Ministerial Code apply to special advisers?

[Lord True]

My Lords, there is a code for special advisers.

Councils: Funding

Lord Forsyth of Drumlean Excerpts

Thursday 4th July 2019 Lords Chamber

[Lord Young of Cookham]

The Government have not imposed mayors on parts of the country; they have elected to have mayors. There has been no imposition. In all the cases involving combined authorities and local mayors, local government has come to the Government and asked that these powers be given to them. I think the noble Lord will find that he is misinformed that we have imposed this structure on local government.

[Lord Forsyth of Drumlean (Con)]

My Lords, has my noble friend had an opportunity to read the report today on social care from the Economic Affairs Committee? Will he note that social care and local authorities have seen a real-terms cut in resources and that 1.4 million elderly people are not receiving the care they need? Does he not recognise that shifting the burden on to local government and relying on business rates results in postcode inequality, as different local authorities have different demands and different abilities to raise resources? Should this not be funded centrally, and done urgently?

[Lord Young of Cookham]

I took the precaution of getting a copy of my noble friend’s report, which was published this morning. For the last 30 or 40 years, Governments have been trying to bring together health and social care. If you are an elderly person in need, you are not interested in a bureaucratic argument as to whether yours is a health or a social care problem; you want the support that you need. The dilemma my noble friend’s report addresses is that health is provided by national government and is free at the point of use, while social care is provided by local government and is means-tested. He addresses that problem by suggesting that local government should provide social care but it should be free and be funded by central government—that is the nub of the report. It is a hard-hitting report that expresses noble Lords’ frustration at the delay to the publication of the social care Green Paper. I very much hope that his report will accelerate a solution to this long-standing problem.

Inflation

Lord Forsyth of Drumlean Excerpts

Monday 1st July 2019 Lords Chamber

Moved by

[Lord Forsyth of Drumlean]

That this House takes note of the Report from the Economic Affairs Committee Measuring Inflation (5th Report, HL Paper 246).

[Lord Forsyth of Drumlean (Con)]

My Lords, I can see by the size of the exodus from the Chamber that many may regard this as a dry, technical report, but it is in fact a revealing tale of how complacency on the part of the statistics authorities and opportunism on the part of Governments have led to the use of inflation statistics leaving many people worse off. I asked my noble friend the Minister about this at Question Time and he assured me that he would deal with it comprehensively. I look forward to hearing his response.

The committee’s attention was drawn to the problems with the calculation of the retail price index through a series of articles by Chris Giles in the Financial Times, a long-time campaigner on these issues. We asked the Governor of the Bank of England about these problems during his annual evidence session with the committee last year. He told us that the RPI had “known errors”, should not be further embedded in government contracts, and that if there was anything the committee could do to advance this process, we would be providing “a real service”. I hope that we have risen to the Governor’s challenge.

We began our inquiry a year ago in June 2018 and reported in January of this year. Before I discuss the findings, I would like to thank the committee staff who produced the report: Luke Hussey, Ben McNamee and Lucy Molloy. Ben McNamee is leaving the committee after five years to go to work for the National Infrastructure Commission, following our report on HS2. He is the original gamekeeper turned poacher, and we wish him well.

Chapter 1 of the report describes the history of consumer price inflation. There are two main measures of consumer price inflation in use in the United Kingdom: the retail price index, which was introduced in the 1950s, and the consumer price index, which was introduced in the 1990s following the Maastricht treaty. Both indices are based on the changes in price of a fixed basket of goods and services, but there are a number of differences between what the indices cover and how the price changes are calculated. One of the main differences is how the two indices calculate the average price change for unweighted items in the basket: that is, items on which a proportion of household spending is not available for the level at which prices are collected. It may help to give an example to illustrate this point.

The survey used to calculate the indices will reveal the proportion of household spending on potatoes as a class of goods, but it will not reveal the spending split between the different varieties of potatoes—say, King Edward or Maris Piper. This means that the price changes of different varieties of potato—the price of King Edwards may rise by more than Maris Pipers, for example—cannot be weighted according to household spending. A method is therefore required to calculate the average price change when expenditure weights are not available—I hope your Lordships are following me so far. The RPI does this for some items through the Carli formula, which uses the arithmetic mean. The CPI, however, largely relies on the Jevons formula, which uses the geometric mean. Statisticians have been debating which is the preferred formula since the 19th century. We set out the arguments in chapter 2 but decided, probably wisely, not to enter into that debate.

This difference in how to calculate price changes for unweighted items leads to a difference in the inflation rate which each index produces. The gap between the CPI and the RPI-recorded inflation rate, which is attributable to this methodological difference, is referred to as the “formula effect”. In December 2009, the ONS estimated that the formula effect was responsible for RPI recording the rate of inflation as 0.54 percentage points above the rate recorded by CPI. However, by December 2010, the difference had increased to 0.86 percentage points—a 0.32 increase. What caused this substantial change? In 2010, the ONS changed the way it collected prices for clothing. It increased the sample size of clothing it recorded prices for, relaxed the rules on what types of clothing were considered comparable, and began collecting prices during the January sales. This is colloquially known as the strappy tops problem.

This was believed to be a routine methodological change, but it had a strange effect on the recorded price change of clothing in the RPI. From 1987 to 2009, the average annual price change in women’s clothing as measured by the RPI was a 2.5% decrease, but from 2010 to 2017, the average annual price change was an 11.1% increase. Something had clearly gone amiss. The ONS held up its hands and admitted that it had made an error. Witnesses were generally agreed that the interaction of the Carli formula with the new method of price collection was to blame for the overestimation of price rises. Although the error also affected CPI, it affected RPI more, and the ONS said that the change was responsible for 0.3 percentage points of the 0.32 increase in the formula effect.

That may sound very technical so far, but that error created real-life winners and losers. Who won? Holders of index-linked gilts. These gilts are linked to RPI, and the resulting 0.3 percentage point increase in the index led to an undeserved windfall. Chris Giles has estimated that the value of interest payments received by index-linked gilt holders was increased by about £1 billion a year. Who lost? Commuters, because rail fare increases are linked to RPI, and students, because the interest on student loans is linked to RPI. The increased difference between inflation as recorded by RPI and CPI also encouraged Governments to engage in the practice known as index shopping. Benefits, tax thresholds and public sector and state pensions were all switched from being uprated by the higher RPI to the lower CPI.

This brings us to the most surprising part of the story, with which my noble friend refused to engage at Question Time. The UK Statistics Authority, of which the ONS is the executive arm, has refused to correct the error, despite admitting that it had made a mistake. Why? As the correction of the error would be likely to reduce the rate of RPI inflation, it would adversely affect holders of index-linked gilts.

The 2007 Act requires the authority to obtain the consent of the Chancellor of the Exchequer to such a change. Sir David Norgrove, the authority’s chairman, told us that the 2007 Act meant that there was no point in requesting the change, as the Chancellor would just say no. Last week, he wrote to me to say that he was unable to reply to our report after all this time as discussions with the Government continue. In my mind, this undermines the independence of that body. The National Statistician, John Pullinger, who retired last week, suggested to the committee that Section 7 of the 2007 Act required him to take into account the interest of those who would be affected negatively by any such change, such as index-linked gilt holders.

This is not the committee’s interpretation of Section 7. Section 7(1) gives the authority the objective of,

“promoting and safeguarding the production and publication of official statistics that serve the public good”.

Section 7(3) states that the authority should,

“promote and safeguard … the quality of official statistics … good practice in relation to official statistics, and … the comprehensiveness of official statistics”.

Section 7(4) states that,

“references to the quality of any official statistics includes … their impartiality, accuracy and relevance, and … their coherence with other official statistics”.

The committee’s reading of this is that the authority is, to put it mildly, at risk of failing in its statutory duties by its refusal to attempt to correct the clothing error in RPI, which it openly admits. It is not for the authority to pre-empt the decision of the Chancellor, as its chairman suggested. The Chief Secretary to the Treasury told us that it was difficult for the Chancellor to say yes or no to a proposal he had not received. The Chancellor told us that he was happy to hear from the authority. The committee was unconvinced by the National Statistician’s suggestion that he should take into account the interests of index-linked gilt-holders when deciding whether to make a change. It is not clear from section 7 that this is a relevant consideration to be taken into account. We believe that the authority is required, by its statutory duties, to attempt to fix the issue with clothing prices.

The decision not to correct the error is part of a wider neglect of RPI by the statistical authorities. Following a review of inflation indices, the authority removed national statistics status from RPI in 2013 and now treats RPI as a “legacy measure”. Following the recommendations of a 2015 review by Paul Johnson, it has resolved to make no further methodological improvements to the RPI. However, that is a very surprising stance, given that RPI remains in widespread use. Paul Johnson told us that he had changed his mind since his 2015 review. He said that his recommendation to make no further improvements to RPI was predicated on RPI being phased out. He said that given this has not happened, the committee should ask the authority to correct the RPI. We therefore called for the UK Statistics Authority to resume its programme of periodic methodological improvements to RPI.

When the Governor of the Bank of England asked us to look into this, he suggested that with three official measures of inflation—RPI, CPI and CPIH—it would be good to consolidate the focus into one. We agree, and believe that in the future there should be one measure of general inflation that is used by the Government for all purposes. To achieve that, work is required on how best to capture owner-occupied housing costs in inflation indices. Witnesses criticised the approach of the RPI which uses mortgage interest costs, and the approach of CPIH, which uses rental evidence. CPI does not account for owner-occupied housing costs, save for minor repairs.

We said that the UK Statistics Authority, together with its stakeholder and technical advisory panels and a consultation of a wide range of interested parties, should agree on a best method of capturing owner-occupied costs. Once a method has been agreed, the authority—again, after consultation—should decide which index to recommend as the Government’s single general measure of inflation. We would like to see that adopted within five years.

Sir David Norgrove told us that RPI is not a good measure of inflation and does not have the potential to become one. We disagree, and believe that an improved RPI would be a viable candidate for the single general measure. A single general measure of inflation would prevent governments from index-shopping. Table 2 on page 39 of the report shows that when the Government are making payments to the public, CPI is the index used to uprate payments; but when the public are making payments, it is RPI that is used. The Government say that they are changing that. However, in May this year, the latest example was when National Savings and Investments index-linked savings certificates were switched from RPI to CPI. In other words, pensioners and savers around the country are being cheated. It appeared to be a switch motivated by its favourability towards the Government, rather than a principled approach to uprating.

The present Government, however, have taken some steps to address the imbalance. Business rates were changed to be uprated by CPI rather than RPI, and discussions have taken place around uprating rail fares by CPI rather than RPI.

A single general measure would remove the temptation to index-shop. As the single general measure of inflation will take time to be implemented, the Government need to take interim action to stop this unfair practice. They should switch to CPI for uprating purposes in all areas where they are not bound by contracts to use RPI. The exception to this recommendation is the interest rate on student loans. As recommended in our report, Treating Students Fairly, this should be reduced to the 10-year gilt rate—something that the Augar review, which we will debate tomorrow, was not able to recommend because, I am told, the Treasury leaned on committee members to say that they should not make any recommendations that would result in increased public expenditure.

This interim switch to CPI should also apply to new issuances of index-linked gilts. We heard evidence that there was sufficient demand for CPI-linked gilts. Ben Broadbent from the Bank of England dismissed concerns from the Debt Management Office that the existence of CPI and RPI-linked gilts would lead to market fragmentation. Anyone who knows anything about the gilts market knows that an argument about market fragmentation lacks some credibility. We heard concerns about the effect that the change to the calculation of RPI would have on existing index-linked gilts, the last of which is due to mature in 2068 for private sector bonds and pension schemes. As some witnesses discussed, a sudden change, such as redefining RPI, CPI or CPIH, would be inappropriate, but once the single general measure of inflation is in place, the Government and the UK Statistics Authority should decide whether RPI, if it is not the chosen measure, should continue to be published in its existing form or whether a programme of adjustment should be made to RPI so that it converges on the single general measure.

To avoid disruption, any programme should take place gradually over a sufficiently long period to a plan that was clearly communicated at the outset. That includes our recommendations. The Spring Statement said that the Government would respond to a report by the end of April. The Chancellor wrote to me on 30 April to say that the issues raised in the report are “complex and wide-ranging”—a bit like social care, which we will report on next. He said that the “breadth, complexity and importance” of the issues meant that the report requires further education. Sorry, I mean further consideration—a Freudian slip. He said that the Government would respond to the committee’s report as soon as is practicable to do so, but wrote to me last week to say that the issues are so complex that the report requires further consideration.

The report cannot remain unanswered. It raises serious questions about decision-making by the statistics authorities. The Government and the UK Statistics Authority need to address the challenges highlighted by our report. I beg to move.

--- Later in debate ---

[Baroness Browning (Con)]

My Lords, I support this report from my noble friend Lord Forsyth and his committee. There is very little that my noble friend and I disagree on. He trained me well when I was his PPS many years ago and I fully support the thrust of this report. The governance and probity of the UK Statistics Authority has quite rightly been called into question. The parts of the report that go into the legal basis for it leaving in place what is clearly an error as far in the RPI calculations must be addressed quickly.

As someone who takes a particular interest in disability benefits, over the years it has been a matter of great irritation to me—I put it no stronger than that—that there are winners and losers. As my noble friend described, the Government’s index-shopping is a sleight of hand; unless one is engaged every day in studying these types of statistics, the average person in receipt of this increase or decrease is probably not going to notice it in actuarial terms, but will certainly notice it in their pocket. Therefore, I support what the report is suggesting.

In Box 1.A of last year’s Budget report, it seemed that the Government recognised only too well that there is a fundamental problem here. They said that,

“the government will not introduce new uses of RPI”,

which makes me think that they are more aware of what needs to be done than they have indicated to my noble friend in correspondence.

[Lord Forsyth of Drumlean]

I am grateful to my noble friend. That may well be the case, but they did introduce a new use of CPI with National Savings.

[Baroness Browning]

Indeed. I used the phrase “sleight of hand” quite deliberately. Clearly, there needs to be some fundamental change here. The legal basis for the change is well set out in my noble friend’s report. I find it rather strange to be debating whether something that has been proven in law to be wrong should or should not be changed, and why there are so many reasons against changing it. A can-do approach by the Treasury is needed to bring about the committee’s recommendations.

I am not going to speak for long, although I should declare that I am one of those elderly pensioners in receipt of some government index-linked investments—a very modest holding. I do not know whether that will be good or bad. I think it has been bad already, but never mind—I have declared it to the House.

My noble friend said that at some point in the evidence session to the committee, somebody—I have forgotten who—said that they should be cautioned against market fragmentation of the gilts market, and my noble friend said that that was most unlikely. I share that view. However, in the two areas of gilts that are addressed in the report, one of those organisations already holds gilts with the dates as set out by previous speakers, and that particular group needs to be addressed. With the future issuance of gilts, if there is just one rate it also means that anybody looking at it to decide whether it is a good investment would at least know where they stood.

I would also like my noble friend to bear in mind that, for investments and savings generally, we are in an age of trading by algorithms. Huge sums of money are moved around in nanoseconds. Whether it is the manager of a corporate pension fund or the individual being given financial advice about quite a modest investment, gilts have for many years been the foundation of good advice. The fewer assets people have, the more they are recommended to have a higher holding of government-based investments rather than the equity-based ones which have the higher risk, which we would all be familiar with.

The way in which the changes to gilts are brought about, as outlined in this report, needs some careful handling. It would be detrimental to best advice and best interests, for the corporate and individual investor and the reputation of gilts, if the changes that are clearly necessary resulted in people becoming nervous or not feeling it worth while to have at least a floor of that type of investment, particularly when it is a mixed investment. Over the years, we have seen fewer people prepared to take smaller returns on investments; they have what is almost a cavalier approach to savings and investments. Gilts have played a very big part in securing what most people would recognise as best advice. The changes are necessary for those who already hold gilts and those who will consider newly issued gilts. I hope it will be understood that the security of gilt-edged investments is an important part of that good advice, which our financial services market has relied on for many years.

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[Lord Young of Cookham]

I said, “to name but a few”, but I will gladly add the issue raised by the noble Lord to the list. Some, but not all, wage increases are linked to RPI.

Some uses of the measures are interlinked; for example, for pension schemes whose members, many of whom are in private sector defined benefit schemes, have pension payments that increase by RPI. This means that, in turn, those schemes seek RPI-linked assets to hedge those liabilities. As a result, a large share of the Government’s outstanding RPI-linked debt is held by those pension schemes. The Pension Protection Fund estimates that almost 90% of outstanding index-linked gilts are held by UK defined benefit pension schemes and UK insurance companies.

The breadth, complexity, and importance of these issues mean that the committee’s report requires further careful consideration. Given the complexities of the issue, it is sensible that the Government and the UKSA produce a well-considered response—while respecting the UKSA’s independence, of course.

[Lord Forsyth of Drumlean]

A very kind and polite person from the Chancellor’s office rang me to say that there would not be a response. I said that I was not sure that the House would like that very much, but he said, “Don’t worry, Lord Young will be able to deal with the debate”. The Minister gave a reason for the complexities of the system: that so many things rely on the RPI. If that is so, is that not a reason to make sure that the RPI is accurate? I cannot get my head around it.

[Lord Young of Cookham]

That goes to one recommendation directed at the UKSA. That issue will be addressed directly in the government response to the recommendations. I cannot give my noble friend an answer today; I hope that he understands why.

In introducing the debate, my noble friend wondered whether the Government discussing this issue with the UKSA somehow compromised the UKSA’s independence. It is perfectly legitimate for the Government to discuss matters with the UKSA without interfering with its independence in decision-making. We discuss a wide range of issues with it—as we should, given that the ONS is the producer of economic statistics. One can have that dialogue without encroaching in any way on the UKSA’s independence. The Government continue to discuss the relevant issues raised by the report; the Chancellor wrote to my noble friend last week, outlining that point. I stress to my noble friend, the noble Lord, Lord Sharkey, and other noble Lords that we are working hard to respond to the committee’s report as quickly as possible. We will communicate a date for this response in due course and will provide sufficient notice for the markets.

Let me move on to the central focus of the inquiry, namely the RPI. As the Government have stated before, we recognise that there are flaws in the way that RPI is measured and that, as a result, its rate of inflation is higher than that of other measures, such as the CPI and CPIH, which is the CPI including owner-occupiers’ housing costs.

The report from the committee is the latest in a series of reports on this intractable issue. I highlight this to stress how complex it is. In 2012, the then National Statistician launched a consultation on potential changes to the RPI following concerns about the increased wedge between RPI and CPI, which had been driven primarily by the 2010 change in the collection of clothing prices. There was then a considerable response, both on matters statistical and non-statistical, and in 2013 the then National Statistician responded, arguing that the RPI did not meet the highest standards expected for a national statistic. That answers the question of the noble Lord, Lord Lea, as to why it was regarded as discredited: the UKSA stripped the RPI of its national statistic status.

However, given its widespread use in the economy, the National Statistician argued that the RPI should remain unchanged. In 2015 a review into consumer price statistics, which had been led by Paul Johnson of the Institute for Fiscal Studies, was published. This also criticised the RPI and recommended that it should be classed as a legacy measure and that its use should be actively discouraged.

Let me explain the Government’s use of inflation statistics and highlight how they have not ignored the criticisms of RPI. Since 2010 the Government have reduced their use of RPI. They have moved the indexation of direct taxes, benefits, public sector pensions and the state pension from RPI to CPI. More recently—this addresses the accusation of index shopping made by a number of noble Lords—in April 2018 the Government brought forward switching the indexation of business rates from RPI to CPI.

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[Lord Forsyth of Drumlean]

My Lords, I thank everyone who took part in the debate, and my noble friend for that excellent reply. He is a sort of Kate Adie of the Treasury at the moment, deployed in difficult circumstances to report on what is going on at the front. It is the second occasion on which he has responded to an Economic Affairs Committee report—the previous one was on digital tax—where every speech has been in support of the committee’s report and he has had to explain why the Treasury is not responding in the way we would like. On this occasion he has not actually ruled out doing something and we await a response with bated breath.

It is a complex matter—we in the committee had to put some hot towels on our heads. But members of the committee are reasonably bright and we were able to come up with some clear recommendations. We look forward to when the Chancellor of the Exchequer is before the committee later this year and hope that by then there will be a response. This is a complex subject, but the ordinary layman might find it very difficult to understand why, as my noble friend said, RPI is important in a range of areas in our economy and therefore it is necessary for us to continue with an RPI that everybody accepts is flawed. That is a very difficult proposition to accept.

The other matter that is very clear is that the debate has focused, quite rightly, on the degree of independence of the statistical authorities. Perhaps it is really for another place to consider whether it is right that the appointments to that body are made by the Government rather than by the House of Commons or by Parliament as a whole—but here I am broadening the debate.

I shall say a couple of words about the excellent speeches that have been made. I thank the noble Lord, Lord Turnbull, for his speech and for his enormous contribution to the Economic Affairs Committee, not least in persuading me that we need to build more social housing and to remove the cap on local authority borrowing. I am delighted to say that on that occasion the Treasury accepted our recommendation.

We are also losing the noble Lord, Lord Sharkey, from the committee. He has made a formidable contribution. It has been a great pleasure for me to chair the committee with such fine brains, including those who spoke on behalf of the committee in this debate—that is, my noble friend Lord Tugendhat and the noble Lord, Lord Burns. I am very disappointed that we have not been able to recruit the noble Lord, Lord Macpherson, to the committee, because having such experienced Treasury people endorsing our reports must make it extremely difficult for people such as my noble friend to respond to them.

Having taken my noble friend’s assurances that he will have a word with the Chancellor, that the Treasury will get on with responding and that the statistics authorities will read this debate and see the strength of feeling that has been expressed on all sides, I beg to move.

Motion agreed.