Supermarkets: Voluntary Price Caps
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Lord Livermore (Lab)
I am grateful to the noble Lord for his questions. I agree with his last point, if not all of what he said. I understand exactly what he set out, which is why we are not doing what he suggests we are doing. We are of course having discussions with supermarkets—that is the right thing to do—as we have with all sectors. The Chancellor has held round tables with fuel retailers, supermarkets and high street banks, among other industries. It is right that we discuss ways we can work together to ease the cost of living for households. This is not about price caps, as some speculation has suggested. We will never advocate for that, as it is not for the Government to tell supermarkets how to do their jobs. We are taking action across the board, with rail fare freezes, prescription fee freezes and £150 off energy bills. These are the driving factors behind today’s bigger than expected fall in inflation. Further, today, the Chancellor extended the 5p cut on fuel duty and introduced further new fuel duty support for HGVs and farmers.
Lord Fox (LD)
My Lords, I am pleased to hear that the Government are talking to supermarkets about the role they might have in prices, because prices are an important worry for people right across the country—they really are going up. In the course of those discussions, did the Government talk about their role in bringing down prices and with supermarkets? The input costs that supermarkets face have gone up dramatically; some of those things a Government cannot control, but some of those things they can. They can control employer contributions for NICs and the level of business rates—so ask not what the supermarkets can do for you but what you can do for the supermarkets to bring down the cost.
Lord Livermore (Lab)
There is definitely something in what the noble Lord says, although I am not sure that I quite agree with where his question ended up. He is right to say that families are struggling with the cost of living, and they will be worried about the prospect of food prices rising again following the conflict in the Middle East. That is why, in April, major food and farming trade bodies came together with the Government to share intelligence, assess emerging pressures and agree on how we can keep our food sector resilient and stable. As I say, the Chancellor held a round table with supermarkets to discuss the role that retailers can play in bearing down on food prices, and, as the noble Lord asked, additional steps that the Government can take.
Defence, Security and Resilience Bank
Lord Fox Excerpts(3 weeks, 2 days ago)
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The Financial Secretary to the Treasury (Lord Livermore) (Lab)
My Lords, while we are of course interested in working with NATO allies such as Canada, we have no current plans to join the defence, security and resilience bank. Our priority is to progress the proposed multilateral defence mechanism with a core group of EU and NATO allies and partners, including Denmark, Finland, Poland and the Netherlands. This mechanism will aim to aggregate demand, drive joint procurement, accelerate defence investment and increase the availability of critical capabilities such as munitions as we step up shared defence and security commitments.
Lord Fox (LD)
My Lords, as the Minister knows, financing rearmament is a challenge for all NATO countries, which is why I am a bit puzzled by the Government’s response. A viable defence, security and resilience bank would tick a number of important boxes: it would be multilateral; it would work with a greater number of allies; it would help project finance span election cycles; and it would cost-effectively pull in private finance. Yet last September the British Government ruled out joining the scheme, and this year when Canadian Prime Minister Mark Carney made a direct request, the British Prime Minister gave only a lukewarm response. Why is it not in the interests of this country to pursue the creation of this scheme, which could go alongside all other schemes?
Middle East: Economic Update
Lord Fox Excerpts(1 month, 2 weeks ago)
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Lord Livermore (Lab)
I am grateful to the noble Lord for his question. We are repairing the public finances. At the time of the spring forecast, borrowing was set to fall more over this Parliament than in any other G7 economy. We are now borrowing below the G7 average, something that was not achieved in any of the 14 years of the previous Government. Just last week, we saw borrowing in the year to February fall by £20 billion compared with the previous year.
The noble Lord is absolutely right, of course, that the welfare system requires reforming. In the last five years of the previous Government, spending on welfare increased by £88 billion so, clearly, reform is necessary. There might not be consensus on what to do about it, but no one would believe that the system we inherited is working. It abandoned too many people to a life on benefits, wrote off too many people as too sick to work and condemned too many children to be too poor to eat. That is not a system that does not require reform, and reforming it we are.
To tackle fraud and error, we are increasing the proportion of face-to-face assessments for PIP from 6% in 2024 to 30%, saving £4.6 billion. We are rebalancing universal credit to incentivise people to work, rather than encouraging inactivity. We are redeploying 1,000 work coaches to support sick and disabled people who were previously left without contact. We are also supporting people to move into work, with £3 billion of investment into the pathways to work employment support and a £1.5 billion investment in the youth guarantee and the growth and skills levy.
Lord Fox (LD)
My Lords, returning to defence spending, the Minister referred to the biggest sustained increase in that spending. If it happens, we will welcome it, but it does not happen until the defence investment plan is published. I noted the slight smile on his face when he said, “in due course”, but if that money is not forthcoming then the GCAP project will not have its next stage payment. If it is not forthcoming, there will be SMEs across the country waiting for contracts to go but will not be able to fulfil them, because they will be out of business. Last week, the noble Lord, Lord Dodds, and I heard the Estonian Defence Minister specifically call out the United Kingdom for being slow to come up with the money. When will the Treasury release the defence investment plan, because, if it does not, there will be consequences?
Lord Livermore (Lab)
Of course there are consequences; I agree completely with the noble Lord. He talks of a hypothetical of the defence investment plan not happening. It will happen and, as I have said already, it will be published in due course.
Small Businesses: VAT Threshold
Lord Fox Excerpts(3 months ago)
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Lord Livermore (Lab)
I am grateful to the noble Lord for his question. It is neither of the things that he set out. As I have said, the data cited by the noble Lord relates only to VAT-registered businesses and does not include unregistered businesses, so I do not think it shows what the noble Lord claims that it shows. If a business is already registered for VAT, it has no incentive to suppress turnover to avoid VAT, because it is already charging VAT and would need to continue to do so even below the threshold. Why would they do what the noble Lord suggested? That would not make any sense. If he looks at a longer time series of this data, he will clearly see that it moves around significantly, so the conclusions he is trying to draw are very difficult to sustain.
Lord Fox (LD)
My Lords, if the Minister could open his mind beyond the data of the Question, there is no shortage of studies from very reputable organisations—the IMF, the OECD and others—that there is significant bunching around a threshold, and that is not a surprise. Where they do not agree is whether the brake on growth would be improved by raising or lowering the threshold. Can the Minister tell your Lordships’ House that the Treasury will not succumb to a Goldilocks effect and conclude that, because some say it should be higher and others say it should be lower, it is happy to leave it where it is? Can he assure us that sensitivity studies are being run to look at where the threshold should be? Getting it right will open up more growth.
Lord Livermore (Lab)
I am very happy to open my mind in response to the noble Lord’s question. The existence of bunching around the VAT threshold is well established and has been analysed by the Office for Budget Responsibility. The OBR has explained that, where a registration threshold exists, some firms will cluster just below it to avoid the administrative and pricing consequences of entering the VAT system. That is an inevitable consequence and recognised feature of a threshold-based tax system. He will know that decisions on tax and thresholds are taken only at fiscal events. Raising the threshold further would reduce burdens for some firms, but it would also carry significant fiscal cost. The UK threshold is already high by international standards. The UK threshold of £90,000 compares to an average in OECD economies of £30,000. It could be argued, as I think the noble Lord is doing, that lowering the threshold could support growth by reducing the distortions created by the cliff edge of the threshold, but the Government are also mindful of the impact this could have on small businesses.
Duty Relief Exemption: Small Parcels
Lord Fox Excerpts(3 months, 2 weeks ago)
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Lord Fox (LD)
My Lords, the Minister has already agreed with our view that this situation is really caused by the appalling nature of the deal that the Conservative Party negotiated on Brexit. Does he also agree that it demonstrates that the rapid agreement of a customs union and other alignments with the EU would not only have huge financial benefits to the United Kingdom but smooth out issues like this that were caused by those in Northern Ireland who advocated for Brexit in the first place?
Lord Livermore (Lab)
The noble Lord knows that I absolutely agree with his analysis of the problem, and I greatly admire the consistency with which he has pursued his policy for a customs union. The points he makes are obviously factually correct. This Government are pursuing an EU reset. The UK and the EU have agreed to negotiate an SPS agreement, which aims to significantly reduce barriers to trade in agri-food goods, support simplified movements between Great Britain and Northern Ireland and the EU, and boost our exports. Negotiations that we are taking forward on electricity and emissions trading will have a similar effect on businesses trading with Northern Ireland and the EU.
Business Rates
Lord Fox Excerpts(4 months, 1 week ago)
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Lord Livermore (Lab)
I respectfully say to the noble Baroness that she must take what has been announced this week in the round with what was announced in the Budget. We spent £4.3 billion supporting exactly the type of businesses the noble Baroness mentions. We have expanded the supporting small business scheme to provide specific support to those who are currently eligible for the 40% RHL relief. Around one in three businesses continues to benefit from small business rates relief and does not pay anything at all. We have extended the second property grace period to support small businesses as they grow. So, I do not accept that we are not supporting those businesses. But equally, I absolutely understand the challenges that many retail, hospitality and leisure businesses are facing, which is exactly why, later this year, the Government will bring forward a high street strategy and work with businesses and representative bodies, looking at what more the Government can do to support our high streets.
Lord Fox (LD)
My Lords, I am sure the Minister will agree that one of the things that will drive growth is consumer confidence. It is very hard for consumers to be confident when they see their high streets putting up shutters and “closed” signs. The Minister also talked about changed behaviour and the driving of online sales. Beneath that is a real inequity, in that the out-of-town warehouses which have been driving those digital sales have a rates square foot rate about a tenth, if not less, of that of the high street stores with which they compete. When the Minister is having this review, can he review not only the high streets but how the out-of-town warehouses are eroding those high streets?
Lord Livermore (Lab)
I agree with the noble Lord on the importance of consumer confidence—and six interest rate cuts since the election is very important to bolstering that consumer confidence. It is the fastest pace of interest rate cuts for 17 years, and the action we took in the Budget to further cut inflation and bear down on borrowing will support the Bank of England in the work it is doing to reduce interest rates. I also agree with what the noble Lord says about out-of-town online giants, and that is why we are reforming the business rates system. As I said, we are introducing permanently lower tax rates for over 750,000 retail, hospitality and leisure properties, and we are funding that with higher rates on the most valuable properties, including the warehouses used by online giants. But I absolutely understand what the noble Lord is saying, and I am more than happy to look at that as part of the work to develop the high street strategy.
Lord Livermore (Lab)
I agree with the first thing the noble Baroness said, on the importance of the sector and jobs; I did not agree with anything else she said. She said that we have a lack of understanding: I just wonder what she would have done. We spent £4.3 billion in the Budget supporting these businesses: she did not acknowledge that. She did not acknowledge that the previous Government, whom she presumably supported, would have ended Covid relief overnight and had absolutely no plans to extend it, as we have. She said she would abolish business rates. Well, she had 14usb years to do that, and she did not. I wonder how she would now fund the abolition of business rates, and what other services she would cut to do that.
The noble Baroness mentioned airlines. The Government have redesigned the 2023 transitional relief scheme to provide generous support for large properties such as airports and those in other industrial strategy sectors. That is extremely important. She mentioned hotels, and I have answered that question already. As I say, I fundamentally disagree with her. The Government she supported would have ended this relief overnight; we have extended it.
Lord Fox (LD)
My Lords, following the moderately good reception to my last question, I am going to push my luck. Following on from the from the noble Lord, Lord Forbes, when this review is under way, can the Treasury review a commercial landowner levy rather than a straight business rate? That does not penalise investment, and it puts the onus on the people who actually own the land. If the Minister is not 100% au fait with the Liberal Democrat policy on this, I would be very happy to arrange a briefing for him and colleagues.
Lord Livermore (Lab)
I may not have read all the Liberal Democrat policy documents as thoroughly as perhaps I should have. I cannot commit the review to considering specific things right now, but I am more than happy to take those thoughts back to the Treasury.
Agricultural Property Relief and Business Property Relief
Lord Fox Excerpts(5 months ago)
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Lord Fox (LD)
My Lords, further to the question from the Cross Benches, does the Minister accept that some family farms, frightened as they were by the original plan, have taken irrevocable actions in terms of assets and how they run their businesses? Does the Treasury accept any responsibility for scaring those people into business threatening decisions—unnecessarily, as it turns out?
Lord Livermore (Lab)
As I said in answer to previous questions, it was right that we consulted with the farming community and family businesses about these reforms, that we listened to the feedback that we received, and that we acted to protect more family farms and family-owned businesses while maintaining the core principle that more valuable agriculture and business assets should make a greater contribution.
Budget: Small and Medium-sized Businesses
Lord Fox Excerpts(6 months, 2 weeks ago)
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Lord Livermore (Lab)
I am very grateful to my noble friend for what he says about the action we took to help scale-up businesses in the UK. As many noble Lords will know, the UK is already a great place to start a business, but our companies are not scaling at the same rate as their US peers and raising less at later-stage investment. As a result, UK companies are either acquired, fail, or choose to go abroad to raise that investment. We will change that and make the UK the best place to start, scale and stay, because today’s fast-growing firms are tomorrow’s engine of jobs and growth. We are doubling the eligibility of our enterprise tax incentives, investing billions of pounds in public capital and delivering reforms to boost the attractiveness of the UK markets, making sure that those companies can access the capital and the talent that they need to succeed in the long term.
Lord Fox (LD)
My Lords, I am sure the Minister and I will agree that the best way of helping businesses of all sizes is for there to be growth—meaningful growth—over the period. Given the words of the OBR boss, Richard Hughes, this morning on the “Today” programme that none of the measures in this Budget will lead to growth, it is very clear that the OBR does not rate the trade deals, investments in Heathrow or any of the measures as delivering growth over the period covered by the Budget. Where will the growth come from?
Lord Livermore (Lab)
I am grateful to the noble Lord for his question. The OBR has upgraded Britain’s growth forecast for this year from 1% to 1.5%, reaching the same conclusion as the IMF, the OECD and the Bank of England, which have already upgraded their growth forecasts. We were the fastest-growing economy in the G7 for the first half of this year, and we are on course to be the second fastest for the year as a whole. He is right that the OBR has looked back at the previous decade and concluded that policies such as austerity and Brexit have weakened the economy more than previously thought, and that assessment then directly impacts its view of GDP for the remainder of the forecast period, but the past does not have to determine the future, and we will go further and faster with our growth mission. We are cutting inflation and cutting borrowing every year of the forecast so that interest rates can keep falling, giving businesses the confidence to invest; we are maintaining public investment to build critical infrastructure; and we are backing our fastest-growing companies. We beat the growth forecasts this year, and we will beat them again.
Forthcoming Fiscal Changes
Lord Fox Excerpts(6 months, 2 weeks ago)
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Lord Livermore (Lab)
I 100% agree with my noble friend. Defence spending and growth go hand in hand. We will see far higher levels of growth in our economy as a result of the investment we are putting into our defence industry and increasing the security of our country.
Lord Fox (LD)
My Lords, looking back rather than forward, it is quite clear that UK business cannot take another Budget like the last one. I was reminded by the introduction of our new and very welcome Peer of the apocryphal medical ethical oath. Could the Minister please carry back to the Chancellor one thing: do no harm?
Lord Livermore (Lab)
I am grateful to the noble Lord for that. As he knows, I am not going to comment on specific measures or any speculation ahead of the Budget. I have set out clearly what our priorities are for tomorrow’s Budget; he will just have to wait a few more hours until he finds out for himself.
Cryptocurrencies: US Regulation
Lord Fox Excerpts(6 months, 4 weeks ago)
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Lord Livermore (Lab)
I am grateful to the noble Baroness for her question. As she knows, the Bank of England is the independent regulator for systemic stablecoin and will design its regime as necessary to manage the associated risks. On 10 November, just earlier this week, the Bank of England launched a consultation to seek industry feedback on its systemic stablecoin regime, building on the initial proposals set out in its 2023 discussion paper. This includes up to 60% of backing assets to be held in short-term sterling-denominated UK Government debt securities, consistent with emerging regulatory regimes internationally, and the proposed cap of between £10,000 to £20,000 for individuals and £10 million for businesses applying for systemic stablecoins and only after consultation. The Treasury and the Bank of England are maintaining a close and ongoing dialogue on the legal and regulatory treatment of stablecoins in support of the Government’s objective to make the UK a global destination for digital assets. In terms of any wider discussion paper, I am very happy to continue discussing that point.
Lord Fox (LD)
My Lords, my question concerns the Bank of England’s control over money supply. At what point, when the public are adopting cryptocurrencies, does the Bank lose control of the money supply? What calculation has the Treasury done, or has the Treasury done in conjunction with the Bank of England, to maintain national control over our money supply?
Lord Livermore (Lab)
I am grateful to the noble Lord for his question. The Bank of England’s Financial Policy Committee and the multilateral Financial Stability Board currently agree that crypto asset markets do not currently pose material risk to financial stability in the way the noble Lord describes but that stability risk may grow as connections between the traditional financial services sector and crypto markets increase. International and UK financial authorities have been working through the Financial Stability Board to assess and develop supervisory and regulatory approaches to address global financial stability risks posed by crypto assets and global stablecoins.