Infrastructure Bill [HL]

Lord Forsyth of Drumlean Excerpts

Monday 10th November 2014 Lords Chamber

[Lord Hodgson of Astley Abbotts (Con)]

My Lords, the purpose of the amendment is simple, although the policy implications are perhaps more complex. It is to insert a new clause that will provide a statutory framework for the establishment of a UK sovereign wealth fund to receive a proportion of the Government’s revenues from fracking and shale gas.

I tabled a similar amendment in Committee on 14 October and I hope that my noble friend will forgive me if I say that I did not find her response entirely convincing. I have therefore retabled the amendment. It is primarily a Treasury matter, of course, and I am therefore pleased and grateful to see that my noble friend Lord Deighton has taken up the cudgels and will reply to this debate. I am grateful also to my noble friends Lord Jenkin and Lord Teverson, and the noble Lord, Lord Whitty, for adding their names in support.

The background to and reasons for my amendment are as follows. This country has been blessed with a wide range of natural assets. These can be divided into two parts, the finite and the infinite. The infinite includes the sun, rain and wind—all of which we can harness in various ways. However, there are finite resources. For example, our huge reserves of coal that powered the industrial revolution for a time made this country the workshop of the world. In the 1970s, we discovered another great gift from nature—North Sea oil. At the time of the original discovery, it was expected that by now it would all have run out. In the event, because of improved technology and higher oil prices, despite our having extracted some 40 billion barrels of oil, it is estimated that at least some 16 billion barrels remain recoverable. But—and this is the important but—one day the oil will inevitably run out and this gift from nature will have been entirely consumed.

Successive Governments and the country have benefited hugely from this oil. Estimates of the overall revenue run as high as £400 billion, but every penny of that revenue has been spent. A debate on whether it has been wisely or foolishly spent would occupy your Lordships’ House for many a long day. That is not the point this evening. The point this evening is that the revenue has all been spent and nothing has been put aside for the future.

On the other side of the North Sea, Norway, which has also benefited from North Sea oil, had an extremely fierce political debate about how to use its proceeds. In the end, it was decided that it should establish a sovereign wealth fund. Norway has a much smaller population than we do—about 10% of that of the United Kingdom—and its oil and gas reserves are commensurately larger. Therefore, I do not wish to push the metrics too far. The fact is that in the 20 short years since revenue started to flow to the Norwegian sovereign wealth fund, it has grown to $800 billion—£500 billion. At this point, I should apologise to Members of your Lordships’ House because when trying to send a letter to you from Chicago I mixed up my “millions” and “billions”. The figure is, in fact, £500 billion, not £500 million, as in my original letter. That is not the end of it. It is confidently expected that the $800 billion will reach $1 trillion in the next few years. The fund generates between £20 billion and £25 billion every year. That is a lot of money. It is roughly two-thirds of our annual defence expenditure or what we expect to spend on our nuclear deterrent over its life. It is roughly 10 times what the Leader of the Opposition thought was necessary to save the National Health Service. He referred to £2.4 billion in his speech at his party conference.

In this country, we took a different approach, and the decision is irrevocable. Every penny that we receive in future will be spent until the oil finally runs out. But we now appear to have received another potential gift from nature: natural gas extracted as a result of the development of the new fracking process. I argue that we should learn from the decisions of the past, as well as from the example set by Norway, and provide for the establishment of a sovereign wealth fund to receive at least part of the proceeds from shale gas exploration and development. I do so on three principal grounds. First, the costs of infrastructure projects, which are so essential to this country’s long-term prosperity, are notoriously difficult to forecast. The returns from a sovereign wealth fund would help to plug some of these overs and unders.

Secondly, a sovereign wealth fund would provide some insurance against future uncertainties. Governments are constantly urging us as private citizens to save more to guard against the rising costs of our increasingly long lives. We are told that we must forgo current consumption individually for our long-term benefit. It would surely be no bad thing if the Government occasionally practised what they so assiduously preach.

Thirdly, and most importantly, it is about intergenerational fairness and equity. These gas reserves have built up over millions of years. Are they properly ours to plunder and spend in a couple of generations? Should we not ensure that some parts of the proceeds are left for those who come after us?

[Lord Forsyth of Drumlean (Con)]

In his amendment, my noble friend says that no less than 50% of any revenue received should go into the fund. Can he indicate what he expects that revenue to be and why he chose 50%?

[Lord Hodgson of Astley Abbotts]

If my noble friend waits for one minute, I shall explain the detail of the amendment. That will take care of the 50% point. Since I think there is possibly an indication that other uses should be made for this revenue, I will come to that immediately after that point. If I have not answered those questions in a couple of minutes I invite him to intervene again.

I turn to the details of my amendment. As I have said, it is an enabling amendment. It does not require the Government to do anything now, but it does indicate a direction of travel. The enabling provision is subject to five provisos. The first, as my noble friend Lord Forsyth has just pointed out, is that the Government should get 50% of the revenue from shale gas. That is part of the fairness argument: 50% for us, knowing that at least some of it will be spent on projects that will benefit future generations, and 50% put aside for those generations directly.

Secondly, the fund should support long-term public policy objectives. That underpins the philosophy and approach behind it.

Thirdly, the fund may invest overseas, as well as in the United Kingdom. That is necessary to ensure that the fund obtains the best returns. In that context, it is worth noting that the Norwegian sovereign wealth fund now owns more than 1% of the entire world’s quoted equities.

Fourthly, no more than 4% of the fund may be paid out in any one year. The need for a limit is obvious. Without one the fund would almost certainly be drained very quickly indeed. My proposed maximum level of withdrawal, 4%, is calculated based on a 2% long-term rate of real return and a 2% allowance for inflation. That level should mean that a well managed fund should be able to operate long into the future.

Finally and most importantly, proposed subsection 2(e) provides that the operation and activities of the fund must be transparent and open to public scrutiny. If noble Lords read the literature, it is clear that transparency has been a vital part of creating trust and confidence among the Norwegian public in the operation of their fund.

So much for the reasons for the fund and the detail of my amendment. Before I conclude, let me briefly address the reasons given for not having a fund, which I think underlie the intervention from my noble friend Lord Forsyth. There are essentially three of them: first, this is not the right time to do it because we do not yet know how large and profitable the shale gas development will be. That is absolutely true. My answer is that the amendment is permissive—it requires only an indication of the direction of travel. I hope the House will not think me unduly cynical if I say that, in the absence of any specific prior commitment, I believe the chances of establishing a sovereign wealth fund once the revenues are beginning to flow are even closer to zero than the chances of the Government accepting my amendment tonight.

The second reason is that any revenue from shale gas should be used to reduce the deficit. Again, that is a perfectly understandable argument, but one that undermines the concept of intergenerational fairness. In any case, under my amendment, half the proceeds are available to reduce the deficit. However, to suggest that all should be used for that purpose is akin to me saying to my children, “I was going to leave you a decent sum of money, but I’m afraid I’ve been living beyond my means and I’ve run up debts. I don’t wish to take difficult decisions to reduce my standard of living, so I’m afraid that if you want your inheritance, you’ll have to take all my debts with it—or, of course, I could use your inheritance to pay off my debts”. We need to face the consequences of our own actions and not slide them on to a future generation.

The third and last reason revolves around the most feared word in Treasury-speak—hypothecation, the sin that dare not speak its name. If one consults the Oxford English Dictionary, hypothecate is defined as:

“Pledge … by law to a specific purpose”.

I argue that the establishment of a sovereign wealth fund which has no specific purpose would require an unusually broad interpretation of the concept of hypothecation. Of course, in reality, this is all a smokescreen. The real reason for Treasury opposition is that it always opposes policies that in any way diminish its direct day-to-day control over every aspect of our national life.

To conclude, this enabling amendment is designed to balance the long-term national interest against short-term political expediencies, to enable future generations to share in this potential windfall and to encourage Governments to follow the saving practices they so urgently suggest we individually adopt.

[Lord Forsyth of Drumlean]

My noble friend has not answered my question on what he anticipates the revenue to be.

[Lord Hodgson of Astley Abbotts]

I think I answered it by saying that the reason given for opposing a fund at this stage is that nobody knows quite how much money is going to flow. No one can know. I pointed out that if you do not get something in principle in place now, once the revenue starts to flow, the chances of having a sovereign wealth fund are very low. If we do not get a peg in the board now, when revenue starts to flow there will be a million reasons as to why it should not be put in place at that stage.

I was most encouraged by the remarks of the Chancellor of the Exchequer over the weekend about the advantages that a sovereign wealth fund would bring. I hope that my noble friend will put some flesh on these bones when he winds up. The very last word must rest with Jens Stoltenberg, the then Prime Minister of Norway. In September 2013, at the John F Kennedy School of Government, he said:

“The problem in Europe with the deficits and the debt crisis is that many European countries have spent money they don’t have. The problem in Norway is that we don’t spend money we do have”.

He went on to say that to achieve this happy state of affairs needs actions to be taken that require “political courage”. It is that political courage that I am looking for from the Minister tonight. I beg to move.

--- Later in debate ---

[Lord Teverson]

My Lords, I welcome this amendment and I was pleased to add my name to it both in Committee and now on Report. The important point to make is that my noble friend Lord Hodgson is absolutely right: if we do not put this on to the statute book as something that can happen, the temptation will pass and it will be as if it never happened. That is why I am keen that it should be done now.

I should say just as an observer, if you like, that it is very easy to expand government expenditure and very difficult to pull it back. It is easy to find uses for income if it is there, but perhaps those uses are not always the best for our long-term future. It is easy when there are financial and fiscal constraints of the kind the country is confronting at the moment, but that is not always the case. It is hoped that we will get over the current deficit at some point in the not too distant future. That is why it is important to prepare for a sovereign wealth fund so that we can build it up in an intergenerational way, as has been advocated already.

The other aspect is completely different and not at all the most important. In the last parliamentary Session this House set up a Select Committee to investigate the nature of soft power. I was not a member of the committee, but it seems to me that countries with sovereign wealth funds exercise considerably more soft power in global affairs. That is not surprising because money talks—not just within the family or in business, but across nations as well. Why does Norway enjoy its stature? It is in part because of its sovereign wealth fund. The same can be said for a number of Gulf states and for China. In terms of Britain’s status in the future, we would gain quite considerably if we were seen to be a country that is able to save, invest and exert influence financially beyond our borders in this way rather than one that just keeps its current account going through non-renewable resources that cannot be brought back. That is why I feel strongly that we should at least take the step of this enabling legislation and then let future Governments decide how it should be used.

[Lord Forsyth of Drumlean]

My Lords, I did serve on the soft power committee and I have to say that the countries with sovereign wealth funds are not exercising soft power; they are exercising hard power because they are lending us money to keep going. Every year we are spending roughly £100 billion more than we have income. The leader of the Opposition forgot about the deficit in his speech at his party’s conference. I have to say that I have very considerable respect for my noble friend, but he seems to have forgotten about it too. He did mention at the end of his speech that there is the issue of debt, which might be a reason why people would oppose this policy. It is certainly why I would oppose it.

The national debt will have doubled during this Parliament. The coalition Government are absolutely determined to reduce it, but it is still growing. We are not meeting our targets in terms of bringing the deficit under control. The idea that we should pre-empt resources that may or may not come from shale gas is like going along to the bank manager and saying, “I would like to borrow £1.4 trillion and, by the way, I would also like to open a savings account into which I shall put the proceeds from shale gas”. This is a noble thought. It would be great to have a sovereign wealth fund, but it would perhaps be a first step to live within our means and pay back the debt that we have accumulated.

--- Later in debate ---

[Lord Forsyth of Drumlean]

Given what my noble friend has said, what answer would my right honourable friend the Chancellor give if Alex Salmond suggested that we should set up a sovereign wealth fund now using the proceeds from North Sea oil so that Scotland would benefit from it? Where does this hypothecation end?

[Lord Deighton]

I think the difference between the two opportunities is that, in one case, we are right at the beginning and, in the other, we are right at the end. Now is the time to explore the opportunity with respect to shale gas.

My noble friend Lord Hodgson pointed out that a sovereign wealth fund was implemented successfully in Norway, but that fund was established in 1990, which was nearly 20 years after oil was first produced. The fund was set up when the levels of revenue were already well known—this was a point that my noble friend Lord Forsyth was also getting at. The UK shale gas industry is still in the exploration phase. We will not be able accurately to forecast the scale or timing of shale revenues until more work is done to determine the extent of gas that can be technically and commercially recovered. Therefore, coming up today with a clear plan for how this might fit into issues related to determining how we reduce the deficit and how we invest in the long term is extremely difficult without understanding what the revenues will be—I fully take on the point made there by my noble friend Lord Forsyth.

It should therefore be for future Governments to think about how such a fund could be designed, but we commit to the principle. The Chancellor will demonstrate his commitment to bring forward a proposal in the next Parliament in his Autumn Statement. With respect to the request made by my noble friend Lord Hodgson for a peg in the board now, and for those others who support this idea, I think that the right timing is when we have better information and are able to look at this matter properly. On that basis, I trust that the noble Lords, Lord Hodgson, Lord Whitty, Lord Teverson and Lord Jenkin, will agree not to press their amendment.

[Lord Forsyth of Drumlean]

Perhaps I might follow up on my noble friend’s point about the Scottish position. He said that we were right at the end and not at the beginning. What would his response be to a proposition that said, “Well, for new fields that are discovered, we should have a sovereign wealth fund”? Let us bear in mind that there are considerable potential resources to the west of the Shetland Islands and so on. Surely this is a very dangerous argument given the delicate situation that we are in, where we appear to be saying that, for some parts of the country and for some energy resources, a different view will be taken of the long-term future. Is this not a very dangerous proposition which could unravel rather badly?

[Lord Deighton]

That is one of the reasons for our anticipating that this subject would be explored in the next Parliament rather than this one.

Barnett Formula

Lord Forsyth of Drumlean Excerpts

Monday 3rd November 2014 Lords Chamber

[Lord Newby]

My Lords, I absolutely agree with the noble Lord that Lord Barnett was a formidable parliamentarian across a range of subjects.

[Lord Forsyth of Drumlean (Con)]

My Lords, I associate myself with the remarks about Lord Barnett, who was a good friend and a great person in this House.

Can my noble friend explain to me how the vow made by all three party leaders in the concluding days of the Scottish referendum, which states that they are committed to,

“sharing our resources equitably across all four nations”,

is consistent with keeping the Barnett formula?

Bank of England

Lord Forsyth of Drumlean Excerpts

Thursday 30th October 2014 Lords Chamber

[Lord Newby]

A notable feature of the referendum campaign was that Alex Salmond was desperately keen to keep the comfort blanket of the Bank of England. As far as I am aware, he never suggested that its name should change.

[Lord Forsyth of Drumlean (Con)]

My Lords, given that the Bank of England has responsibility for ensuring that other banks and financial institutions have proper systems and back-up systems in place, what action has been taken following the failure of the CHAPS system—for which the Bank of England is responsible—that resulted in many people being unable to buy their houses on the day concerned; quis custodiet ipsos custodes?

[Lord Newby]

Quite, my Lords. The Financial Services Act gave the Bank of England new powers in this area. It is conducting an investigation to see what happened in that unfortunate case and what lessons can be learned for the future.

Income Tax: Top Rate

Lord Forsyth of Drumlean Excerpts

Tuesday 15th July 2014 Lords Chamber

Asked by

[Lord Forsyth of Drumlean]

To ask Her Majesty’s Government what effect the reduction in the top rate of income tax has had on revenue received by HM Treasury.

[Lord Newby (LD)]

My Lords, the forecast Exchequer revenue effect of reducing the additional rate of income tax to 45% is estimated at around £110 million per year. This is set out in table 2.2 of Budget 2013.

[Lord Forsyth of Drumlean (Con)]

My Lords, I am astonished that my noble friend is not prepared to take more credit for the success of the Government’s policy. Is it not the case that the reduction in the top rate of tax from 50% to 45% has resulted in a record level of 28% of all tax revenue being paid by the top 1% of taxpayers? Is that not more than twice the level that was paid by the top 1% of taxpayers when the Labour Government under James Callaghan had a marginal tax rate of 98%? Is not the lesson that lower taxes and fairer taxes are needed in order to cut the deficit and preserve public services?

[Lord Newby]

My Lords, the noble Lord has a better memory than I have. I am very happy to take credit for the Government’s achievements. The proportion of income tax collected from the top 1% has gone up from about 26% to 28% during the lifetime of this Government. Certainly, income tax take from high earners is extremely resilient because they are prepared to pay it at the levels we now have.

Payday Loans: Advertisements

Lord Forsyth of Drumlean Excerpts

Thursday 3rd April 2014 Lords Chamber

[Lord Newby]

My Lords, I do not have that figure. I will write to the noble Baroness.

[Lord Forsyth of Drumlean (Con)]

My Lords, is there not a case for looking at daytime advertising? On the one hand, you have ads that are encouraging people to take out loans at very high interest rates and on the other you have people being encouraged to go on gaming sites. With hindsight, was it not a great mistake for the previous Government to abandon the principle with respect to gambling and advertising that we should not take any measures that stimulate demand?

[Lord Newby]

My Lords, it is a highly contentious issue and there are simply different views on it. As I said, personally I find those adverts distasteful, but that is not to say that I necessarily want to ban them all. One problem with a lot of adverts is that they encourage behaviour that might be thought to be irresponsible. There are a lot of ads on children’s TV for expensive toys and games that encourage children to say to their parents, “Can I have that toy and that game?”, which the parent cannot necessarily afford.

Budget Statement

Lord Forsyth of Drumlean Excerpts

Thursday 27th March 2014 Lords Chamber

[Lord Hollick (Lab)]

My Lords, I want to start with Tommy Cooper. When he was asked to explain how he did his sleight of hand magic, he said, “Watch my hands and ignore what I say”. Of course, that was easier said than done, because Cooper’s patter was utterly hilarious and compelling. Our Chancellor has a well practised line in patter, but if you watch his hands—in other words, what he actually does—you quickly detect the difference between what he says and what he does. He is adept at saying one thing while doing another.

Over the past few years, the Chancellor’s constant refrain in response to those calling for a Keynesian boost to get the economy moving has been, “You can’t cure debt with more debt”, but this is precisely what he has done—though not directly of course, although public debt has in fact significantly gone over his forecast. He has not overtly adopted a plan B; rather, he has resorted to off-balance-sheet measures to boost the economy. By making £120 billion in government guarantees available for additional mortgage borrowing, he has provided the private sector with a massive incentive to ignite the housing market and with it the feel-good factor.

That was last year. In this year’s Budget, the Chancellor tells us we are not saving enough, but in the next breath he announces that pensioners can now access their pension pots to finance consumption. The OBR forecasts that the savings ratio will fall from 7.2% in 2012 to 3.2% by 2018. That is before taking into account early pension fund withdrawals.

Anatole Kaletsky has rather colourfully dubbed the Chancellor a stealth convert to Keynesian Thatcherism. The Chancellor has arranged for the private sector to take the strain and privatise the borrowing that the economy needs to get us out of recession—all helped along, of course, by quantitative easing and ultra-low interest rates. This treatment has worked. As the Minister said, the UK’s growth rates have exceeded expectation and are ahead of all other major advanced economies. However, it could have worked earlier and the UK could have avoided three years of damaging economic underperformance if the Chancellor had adopted policies to boost borrowing earlier in the Parliament.

The IFS has spotted another important gap between words and actions. Despite the Chancellor’s protestations that he is ruthlessly holding the line on fiscal discipline, he has introduced permanent tax giveaways paid for by unspecified spending cuts and temporary tax increases, thus weakening long-term public finances. He has yet to spell out how he will achieve his target of cutting public expenditure by 2018 to the lowest share of national income since 1948.

GDP growth is being fuelled by a borrowing binge and house price inflation. We all know how that story ends. Will the Minister please explain why the Government expect the outturn will be different this time round? The long delayed recovery we are seeing is welcome but it is the worst—that is to say, taking the longest to get back to the previous peak in output—in our history. Output remains 15% below what might have been expected absent the financial crisis. The OBR forecasts that the output gap will close by 2018, with the prospect that there will be a permanent hole in UK output. If this forecast is correct, improved productivity is the only way to achieve above-trend growth and recover the lost ground, as the Minister said. The OBR notes that our productivity is exceptionally weak.

The substantial increase in employment is welcome, but it has led to a reduction in real wages and, therefore I presume, productivity. This may be explained by the move from good full-time jobs to a mix of part-time, sole trading, temporary contract and zero-hours contracts, and with many graduates and professionals now working in jobs for which they are well overqualified. The data on pay tell a grim story. Real average earnings have fallen by nearly 10% since 2008 and, measured by RPI, will show no recovery by 2018. Low pay and low productivity are no recipe for sustained growth or, indeed, for fairness.

The Chancellor flirted last autumn with the idea of a large increase in the minimum wage, but that came to nought. He could have been bolder and adopted a policy of requiring the public sector and those companies that hold government outsourcing contracts to pay the living wage. This would lift many working families off benefits and out of the clutches of payday lenders. Economic growth built on decent pay is more sustainable, let alone fairer, than growth based on excessive personal credit.

As the Minister said, increasing capital investment is essential to improving productivity. After four years of declining capital investment by both government and the private sector, there are welcome signs of a pick-up, with the OBR now forecasting 8% growth in business investment and 4.5% growth in government investment. The changes in the Budget to encourage business investment are also welcome. Now that increased funding is being promised, will the Minister tell the House what other barriers need to be removed if he is to achieve his ambitious infrastructure plan?

Investment in the energy sector is essential to getting prices down and to keeping the lights on, as the margin of electricity generating capacity over peak demand shrinks over the next few years. The shortcomings of energy policy have been laid bare by the Government’s dramatic intervention to introduce a £7 billion package to cut energy bills, secure investment in nuclear power and bring mothballed gas generating plants back into service as standby capacity.

But all that comes at a very high cost. The nuclear investment is predicated upon a gas price set at twice the current level and inflation linked for 35 years, all of which will give the investors—EDF—a very handsome 30%-plus return. The standby gas generation arrangements that the Government put in place will have to be underpinned by very expensive back-up contracts to provide gas. New offshore wind will, DECC calculates, be some 30% more expensive than the cost of new nuclear power—all this in a world in which energy prices are falling. The Chancellor promises a shale gas revolution but, to date, only one shale gas well has been fracked in the UK and, assuming that further drilling proves the reserves to be commercially viable, production will come on stream in volume only in the next decade.

The failure of energy policy to create a competitive, functioning energy market that is attractive to investors has forced the Government, in effect, to renationalise the energy sector by taking direct control of pricing and investment. This policy of intervention is not working on any level. Emissions are up because of the increased coal use, supply is less secure because of inadequate investment, and costs are up because of the high cost of new low-carbon supplies and the intermittent nature of the source of energy.

[Lord Forsyth of Drumlean (Con)]

I find myself agreeing with much of what the noble Lord is saying on energy policy, but how does he reconcile what he is saying with the Official Opposition’s policy to introduce price controls on the energy companies?

[Lord Hollick]

As the noble Lord can see, I am speaking from the Back Benches. The wide-ranging competition policy announced today is welcome, but there is a need for a root-and-branch review of our energy policy.

The Chancellor’s measures to boost saving and to stop pensioners being forced to buy annuities from a cartel that gives poor value for money are bold and welcome. When he announced the decision to allow pensioners to access their pension savings, the Chancellor acknowledged that pensioners would need free, impartial advice if they are to get the best out of the choices they now have. The promise to provide that advice must be met in full if pensioners’ interests are to be protected in what is a fiendishly complex and, frankly, rather rapacious industry.

I end on a note of caution. I was a director of the National Bus Company when it was privatised by the then Conservative Government in 1987 into more than 80 separate companies. By the way, it was not my policy but that of Nicholas Ridley. Employees were given the option of staying in the indexed final salary scheme, which had government backing, or taking their chances in a deferred contribution scheme. The pension salesmen’s seductive patter and the promise of a share of the commission generated by the transfer to a defined contribution scheme proved irresistible to many, who then saw their pensions fall short of their expectations, let alone the guaranteed level of the NBC scheme that they had left. This House has an opportunity to make sure that that sort of thing does not happen again by providing proper information and making truly independent advice available to people who are making a decision that is irreversible at an important time in their lives.

Scottish Independence: Currency Union

Lord Forsyth of Drumlean Excerpts

Wednesday 12th March 2014 Lords Chamber

[Lord Newby]

My Lords, I completely agree with my noble friend. It is highly irresponsible of the Scottish Government to have no plan B, when it has been made absolutely clear that the kind of currency union that they want is simply not on the cards. They have other interesting questions to answer in this respect. As the Governor of the Bank of England pointed out yesterday, Scotland, as a new EU applicant, would have to agree at some point to join the euro. I think at one point Mr Salmond was in favour of that; I am not so sure what his policy is on it now.

[Lord Forsyth of Drumlean (Con)]

My Lords, does my noble friend not think it extraordinary that Alex Salmond has had 40 years to think about how to answer this question and is unable to do so? Furthermore, does my noble friend not think that this is the height of irresponsibility, given that we are not discussing some abstract economic concept here, we are talking about the amount that people will have to pay on their mortgages and the future of Scotland’s families? What advice would he give to the leader of the Scottish separatists at this point?

[Lord Newby]

My Lords, I have many burdens in your Lordships’ House but, fortunately, advising the leader of the Scottish National Party is not one of them. I will point out, however, that on all the available analysis, the likelihood is that were Scotland to adopt the pound, the interest rates that would be payable in Scotland would be significantly higher than they are here—possibly up to 1.65% higher. For an average Scottish mortgage holder, that works out as an extra £1,700 to pay.

Economy

Lord Forsyth of Drumlean Excerpts

Tuesday 28th January 2014 Lords Chamber

[Lord Newby]

My Lords, the important thing about output is that it is rapidly approaching the previous peak. With every passing set of statistics, we find that output is growing more quickly than we thought. It is interesting to note that the figure today of 1.9% growth in output for the past year is significantly higher than the figure that the ONS thought even in December, when it suggested 1.4%. The message from today's figures is that growth is accelerating quicker than most forecasters thought, and all forward indicators suggest that that trend will continue.

[Lord Forsyth of Drumlean (Con)]

Does my noble friend agree that the reason we have successful growth is because of the enterprise policies of this Government? Did he note the remarks made over the weekend by the noble Lord, Lord Myners, who was a Treasury Minister at the time that the 50p tax was introduced, that the reintroduction of a 50p tax would be a return to the bad old days of old Labour and the politics of envy? Does he acknowledge that there is no greater joy in heaven than over a sinner who repenteth?

Taxation: Personal Thresholds

Lord Forsyth of Drumlean Excerpts

Monday 20th January 2014 Lords Chamber

[Lord Newby]

My Lords, the most important thing the Government can do as the economy grows is to ensure that the macroeconomic framework is conducive to greater growth. There has been a 300,000 fall in the claimant count within the past year, so that is the single biggest thing that the Government can do to promote the continued reduction in unemployment and long-term unemployment. Youth unemployment has been falling now for five quarters. It is not falling fast enough but a raft of measures, including improved vocational education and an expansion of the apprenticeship scheme, have been designed specifically to tackle that long-standing issue.

[Lord Forsyth of Drumlean (Con)]

My Lords, does my noble friend agree that one of the best ways of helping people on the minimum wage to improve their income would be to raise the threshold for national insurance and consider merging national insurance and income tax? That would help employers and those on the lowest pay.

[Lord Newby]

My Lords, the Government have looked at merging national insurance and income tax. It is one of those ideas that is perennially discussed but every time the Government look at it they back off because it is extremely difficult to achieve. The problem with what the noble Lord’s suggests is principally the cost. However, I would remind him that the Government are introducing in the National Insurance Contributions Bill a tax-free national insurance allowance of £2,000 which will benefit every firm but particularly small firms. The Federation of Small Businesses has said that the single biggest consequence of that change will be increased employment.

National Savings and Investments

Lord Forsyth of Drumlean Excerpts

Tuesday 14th January 2014 Lords Chamber

[Lord Newby]

My Lords, NS&I needs to be able to compete effectively with best practice across the financial services sector. The truth is that NS&I has been behind the curve. It is undertaking a major programme to get all its customers online. Bear in mind that NS&I has 25 million customers in this country. That is a massive operation. When it is finished, it will be able to give information to the standard that people expect from the best of the other high street brands.

[Lord Forsyth of Drumlean (Con)]

Did my noble friend really say that it was the role of National Savings to get the best return for the Government? Surely its role is to provide a safe haven—as it advertises— for savers. Are not the savers getting a poor return because the Government are indulging in quantitative easing, which is a transfer of money from those who have done the right thing to those who have borrowed?

[Lord Newby]

My Lords, the Government are not doing quantitative easing, the Bank of England is. On the rate payable on National Savings, as the noble Lord will know, the role of National Savings is to contribute to the Government’s funding requirements. In doing that it has to operate in line with market rates because otherwise the Government are paying more for their money via National Savings than through the gilts market.