Taxation: Tax Havens

Lord Forsyth of Drumlean Excerpts

Wednesday 9th January 2013 Lords Chamber

[Lord Newby]

My Lords, the accounting rules are internationally based and it makes sense to change them on an international basis. That is why we, France and Germany, between us, have given €450,000 over recent months to the OECD to come forward with proposals to deal with this issue. Those proposals will come forward and there will be a progress report in February. There is a strong head of steam in this country and in France, Germany and the US to tackle this issue.

[Lord Forsyth of Drumlean]

My Lords, could my noble friend just remind us what action was taken by the last Labour Government between 1997 and 2010—over those 13 years—on tax havens? Is it not extraordinary that we now have such enthusiasm from the Benches opposite to do something, when they had that opportunity and, I believe, did nothing?

[Lord Newby]

My Lords, the Government greatly welcome the enthusiasm from the Benches opposite for the initiatives which we are now taking.

Finance: Peer-to-Peer Lending

Lord Forsyth of Drumlean Excerpts

Wednesday 19th December 2012 Lords Chamber

[Lord Sassoon]

As always, I am grateful to the noble Lord, Lord Barnett, who keeps me on my toes until the end. On regulation, we had some interesting debates in the course of the passage of the Financial Services Act but, on balance, I think it is appropriate that p-to-p lending comes within the FCA’s regulatory framework. We also need to look at the experience in places such as the US and ensure that regulation does not kill off what could be a very valuable contribution to lending. There are some issues on tax, which are the subject of ongoing debate between the industry and HMRC. We certainly do not want anything to stand in the way of the growth of industry. I do not believe that tax issues do that. There is a big, ongoing agenda of which the noble Lord, Lord Barnett, identifies some of the key issues.

[Lord Forsyth of Drumlean]

My Lords, I add my thanks to my noble friend for the careful way in which he has dealt with our questions and issues and wish him every success. How do the Government expect the banks to lend more money to small businesses if we are requiring them to hold more capital in the form of government bonds or deposits with the Bank of England and taxing them more by increasing the banking levy? Where are they going to find the money? Is there not a case for relaxing, in a counter-cyclical way, the capital requirements so that the money is there to get growth in our economy?

[Lord Sassoon]

My Lords, these are critical issues. There is a fundamental trade-off between stability in the system, which clearly has to improve over what it was before the financial crisis, and the need to boost growth. The fact that the Financial Policy Committee at the Bank of England is up and running in shadow mode and is identifying the counter-cyclical tools that it will need is a very important new step in this area. The Funding for Lending scheme is, I believe, the most important sign of what can be done with the strength of the Government’s balance sheet. Lower funding costs are already coming in to wholesale bank funding, declining by over 100 basis points since June. One indication of the impact on consumers is that quoted rates on fixed-rate mortgages have declined by 0.3 percentage points since the Funding for Lending scheme has come in. However, I certainly agree that we need to be very attentive to this issue.

Taxation: Avoidance

Lord Forsyth of Drumlean Excerpts

Tuesday 11th December 2012 Lords Chamber

[Lord Newby]

I do not remember the noble Lord quite espousing those lines when he was in my position. The Government are working very hard with low-tax jurisdictions to make sure that we get the tax that is due. This is why the Liechtenstein disclosure facility has been so productive and why the agreement with Switzerland will yield many billions of pounds that we never got before. We also have the newly expanded exchange of information, announced with the Isle of Man, which sets an example that we hope to expand to other tax havens. We are trying to bear down slowly on them so that one after another they become less desirable as places for people to put money to evade taxes.

[Lord Forsyth of Drumlean]

My Lords, on the problem of leakage of tax revenue to tax havens with lower rates, is not the answer to lower the rates of corporate taxation in this country? In answer to a previous question of a similar nature, my noble friend told me that it was an accounting problem. It is not an accounting problem that leads people to base their company headquarters in countries such as Luxembourg—it is because they pay less tax there. If we wish to maximise revenue, should we not cut corporation tax still further in the way that my right honourable friend did in the Autumn Statement?

[Lord Newby]

We are reducing the rate of corporation tax but there is a danger of a race to the bottom. Corporation tax brings in a substantial amount of money and is an important contributor to the Exchequer.

United States Budget: Economic Impact

Lord Forsyth of Drumlean Excerpts

Monday 10th December 2012 Lords Chamber

[Lord Newby]

My Lords, if the Government had not adopted a credible fiscal policy in 2010, it is almost certain that interest rates in the UK would now be significantly higher than they are, as they are in much of the eurozone. Bear in mind that every 1% increase in interest rates means £12 billion extra in mortgage payments. This would have been have been a huge gamble that would almost certainly have failed had we not taken decisive action in 2010.

[Lord Forsyth of Drumlean]

My Lords, is the lesson that we need to learn from both sides of the Atlantic not that if Governments live beyond their means and raise the tax burden too high, growth disappears—a lesson that my noble friend Lord Lawson taught us in the 1980s and which we need to relearn?

[Lord Newby]

My Lords, the key challenge for Governments, either in this country or on the other side of the pond, is to ensure that there is a credible fiscal framework and a competitive economy so that businesses can invest. That is what the Government have been seeking to achieve.

Banking: National Savings & Investments

Lord Forsyth of Drumlean Excerpts

Wednesday 5th December 2012 Lords Chamber

[Lord Sassoon]

My Lords, the Government are very well aware of the needs of savers. Those who have done the right thing in the good times should not be penalised in these difficult times and the Government understand that. Specifically on National Savings & Investments, as I said, it keeps its product range under regular review so, of course, it looks to see when it is appropriate to bring products back in. However, it has to balance the need to deliver finance to the Government at rates that represent value for money for the taxpayer and the need not to compete unfairly in the savings market by offering products that compete with other providers in the market. The noble Baroness may look askance at that but I assure her that I get constant complaints from the retail savings market if it thinks that NS&I is using its power unfairly in the market.

[Lord Forsyth of Drumlean]

My Lords, will my noble friend accept my warmest congratulations on the announcement by the Chancellor today that he will consult on allowing AIM shares to be included in ISAs, following the persistent representations of my noble friend Lord Lee of Trafford?

Autumn Statement

Lord Forsyth of Drumlean Excerpts

Wednesday 5th December 2012 Lords Chamber

[Lord Sassoon]

My Lords, that seemed to be a speech rather than a question. However, I am grateful for some of what the noble Lord, Lord Myners, had to say and I shall miss sparring with him. I remain an optimist. In less than three years since the previous election, the private sector in this country has created 1.8 million new jobs, which is twice what the OBR projected, and the OBR’s projection today for the period up to 2018 is that 2.4 million further new private sector jobs will be created at a time when it estimates that public sector employment will be reduced by 1.1 million. Times are difficult, but I remain optimistic about the underlying strength and vibrancy of the private sector in this economy.

As to the observations of the noble Lord, Lord Myners, about offshore centres, some of the issues that he raises are certainly on the agenda, but it is inappropriate to talk about offshore centres and others. The key thing is to make sure that the so-called offshore centres are brought up to the standards of the best. Some of them have made huge strides; others need to. I take his points.

[Lord Forsyth of Drumlean]

My Lords, does my noble friend not think it remarkable that the Official Opposition have no proposals for reducing the deficit by cutting public expenditure, and that there does not appear to be a scintilla of humility for the fact that they were running a deficit of some £70 billion at the height of the boom times? It was their irresponsible conduct over the economy that has got us into this mess. Should the Chancellor not be congratulated on not being more outraged at the response that he has had from the Opposition, in which former spokesmen are reduced to criticising the grammar of the Statement rather than its content? The truth is that they have nothing to offer the country to get us out of the mess that they created.

[Lord Sassoon]

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

Banking: Offshore Accounts

Lord Forsyth of Drumlean Excerpts

Tuesday 20th November 2012 Lords Chamber

[Lord Newby]

I obviously agree with the noble Lord’s latter statement. Many recent examples clearly are unacceptable, which is why we have taken a great interest in, and are looking forward to hearing more about, the initiative that the EU Commission has taken this week in terms of reformulating what constitutes a tax haven. He is right that we can do a certain amount ourselves but we are going to deal with this international issue only through international co-operation.

[Lord Forsyth of Drumlean]

My Lords, will my noble friend clarify the position, as I genuinely do not know the answer to the question? Are we able to deal with companies such as Google and Starbucks and others which are not paying the tax that they should pay in this country or are we constrained by European law from being prevented from doing so?

[Lord Newby]

I can reassure the noble Lord that we are being constrained not by European Law but by international accounting standards. There is no suggestion that Starbucks and the other companies are breaking the law but the accounting standards allow them to manipulate the point at which they take a tax charge on revenues that they raise.

Taxation: Avoidance

Lord Forsyth of Drumlean Excerpts

Wednesday 25th July 2012 Lords Chamber

[Lord Sassoon]

My Lords, the important broad picture here is that on the latest annual figures, those for 2010-11, HMRC collects approximately £469 billion a year. The estimated tax gap is 7.9%, a percentage that compares favourably with, for example, the USA at 14% and Sweden at 10%. Nevertheless, there is a gap of £35 billion and it is very important that HMRC does all that it can to close it, which is why it is prioritising this area in many respects. I hear what the noble Lord says about a specific issue and I will take his suggestion away, but I can assure the House that HMRC is prioritising it right across the board.

[Lord Forsyth of Drumlean]

My Lords, does my noble friend agree that if Treasury Ministers wish to minimise avoidance and maximise revenue they should leave delivering moral guidance to the church and concentrate on delivering simpler, lower, flatter taxes as our manifesto promised?

[Lord Sassoon]

My Lords, the lowering of the top rate of tax, for example, makes my noble friend’s point very clearly. By putting the top rate of tax at 50%, the previous Government, as the analysis has now shown, delivered absolutely nothing—or very little at best—in terms of revenue, and made this country uncompetitive. So we need wherever possible lower and broader taxes. I agree with my noble friend on that.

Ulster Bank

Lord Forsyth of Drumlean Excerpts

Thursday 5th July 2012 Lords Chamber

[Lord Sassoon]

My Lords, I do not know the cause of this significant failure. The noble Baroness may be right but, as I said, the FSA expects RBS to provide it with a complete account of the issues. I welcome the fact that the chief executive of RBS, Stephen Hester, has made a commitment to a full and detailed investigation overseen by independent experts and publication of those findings. In due course, we will know what the explanation is.

[Lord Forsyth of Drumlean]

My Lords, is my noble friend satisfied with the role of the FSA? Surely it is not enough for the FSA to say, “We want a report”. The FSA is supposed to satisfy itself that people with banking licences have back-up systems to prevent what has happened, which is causing not only distress to families but real damage to commerce in our country. Surely the FSA should be far more active and should be giving an explanation to the Minister for why it has allowed this to happen.

[Lord Sassoon]

My Lords, we delude ourselves if we think that there will ever be a no-failure regime in financial regulation. Regrettably, issues will arise. We want the FSA to do what it is doing: not getting in the way but doing whatever it can to ensure that RBS solves the immediate problems. Then it will get the full explanation and, on the back of that, the lessons for all concerned, including, I am sure, the FSA, will be learnt.

Economic Policies

Lord Forsyth of Drumlean Excerpts

Wednesday 4th July 2012 Lords Chamber

[Lord Sassoon]

I did not bring my IMF quote book today to trade on this one, because the Question is about the Government's assessment of the success of their economic policies, not what the IMF is saying about them. I am sure that we will come back to that on another occasion.

[Lord Forsyth of Drumlean]

My Lords, although reducing the deficit, and even more so the debt, is important, is not relying exclusively on reducing the deficit a bit like playing golf with only one club? Do we not have to have more emphasis on supply-side measures that will encourage the private sector to create the jobs and wealth that the country desperately needs?

[Lord Sassoon]

My noble friend is completely right, and it would be a one-club game if we were not doing all sorts of things on the supply side, such as reducing corporation tax from 28% to 22%, the national loan guarantee scheme of £20 billion, cutting red tape for the first time in living history, enterprise zones, the Regional Growth Fund, the largest number of apprenticeships ever funded by any Government and completely overhauling the planning system, to name a few supply-side reforms.