UK Convergence Programme

Lord Gadhia Excerpts

Tuesday 9th April 2019 Lords Chamber

[Lord Gadhia (Non-Afl)]

My Lords, I welcome the overall thrust of the statement made by my noble friend. It seeks to demonstrate that our seeming political meltdown over Brexit is not matched by an economic meltdown. This was brought home to me recently when I participated in a panel with the former Italian Prime Minister, Matteo Renzi, and the former Greek Prime Minister, George Papandreou. While they were able to have some fun at our country’s expense because of our Brexit impasse, I was able to take some reassurance from the fact that the UK’s sovereign credit rating is six notches above Italy’s and 11 notches above Greece’s. Does my noble friend agree that we need to do everything in our power to protect and safeguard the benefits of the fiscal consolidation that has been so hard won since the beginning of 2010 and which he referred to earlier in remarks he made in response to a Question from the noble Lord, Lord Hunt of Wirral?

[Lord Davies of Oldham (Lab)]

My Lords, I was somewhat taken aback by the Minister’s opening statement. I of course recognise that the process we are involved in is a largely technical one with a very short duration so far as the United Kingdom is concerned when we leave the European Union, but the Minister addressed himself to issues as if this extraordinary word “Brexit” had never been coined and the phenomenon had never existed. Every single question that has come subsequently related somewhere to the impact of Brexit. I hope the Minister will reply to these questions in full, because his opening statement dwelled on the sunny uplands and what he regarded as favourable forecasts at present. I do not find the OBR’s forecast on where growth is at present and where it will be in three years’ time as a particularly favourable position. Indeed, it is a lower figure than that which obtained over 30 years or so prior to 2010. I am amazed that the Minister seems to think the Government are on the high road to success with this rather deplorable figure, starting at 1.2%.

The noble Lord, Lord Vaux, indicated that there are real dangers of assets being transferred and the capacity of the British economy reduced during these Brexit developments. There was a great deal of commentary about the fact that that would happen and we should not be at all surprised that we are getting increasing evidence of it happening. Yet the Minister presented this document—this response to Europe—as if we were pretty well in steady state and the economy was easy to analyse and forecast.

In fairness to the OBR, it made it quite clear that this is a notoriously difficult time to present forecasts of any validity. Yet none of this seemed to cloud the Minister’s position in his opening statement. I hope the questions and points that have been made lead him to respond fully to the situation. After all, he knows that we are right at the bottom of the league table on productivity, and have been for most of the Conservative Government’s time in office—since 2010. All sorts of strategies have been presented that would go towards improving our productivity, but we are still doing very poorly. It is therefore no small wonder that we have problems with growth and competition.

We are well aware that big decisions are being taken which threaten our economy. The decline in the German economy may give us some comparative advantage, in that for a short period we have had a slightly more secure position. But its decline is overwhelmingly in the manufacturing industry, where we have the greatest difficulty presenting any real competition, and in the motor industry. What solace is that meant to bring to the Minister, given that he is about to be part of the process whereby we cast ourselves on to the international trade situation, while busy disentangling ourselves from our strongest economy—the European one? The two largest economies are pursuing policies of protection and are concerned about the development of trade. So it will not do.

I understand the Minister’s point that as far as Europe is concerned, in past years this particular requirement has been treated in a fairly light-hearted fashion in this House. So it should be, in normal times. However, we are not in normal times. We are in times of very real strategic threat to our economy. It will not do for the Minister to think that one can ignore the small aberration of Brexit at present because the economy is under good guidance. After all, he knows better than most of us here how crucial the financial services are—to the Treasury in terms of receipts and to our economy in terms of employment. Therefore, when it is identified that there are clear cases of the financial services transferring their assets from the UK elsewhere, we ought to be worried.

I ask that in his summing up, the Minister replies to each contribution that has been made. Each focused on the important dimension of anxiety about the economy, yet the noble Lord was busy glossing over this in an opening statement which looked as if he was more concerned with “The Wizard of Oz” than with the real economy.

Spring Statement

Lord Gadhia Excerpts

Wednesday 20th March 2019 Lords Chamber

[Lord Gadhia (Non-Afl)]

My Lords, Napoleon once said, “I do not want a good general, I want a lucky one”. The same logic surely applies to Chancellors and their stewardship of the economy. Faced with headwinds in the global economy and a downturn in business investment from Brexit uncertainty, the Spring Statement could easily have been a more testing experience for Mr Hammond. Instead, the Chancellor has continued to enjoy buoyant tax receipts, despite softening economic growth, enabling him to stay well within the Government’s fiscal targets and providing further headroom going into the next spending review.

The economy has maintained record employment levels and is expected to generate sustained real wage growth, especially from higher-income earners, providing what has been described as “tax-rich economic growth”. However, I note that my noble friend Lord Macpherson cast doubt on these tax projections based on his long experience at the Treasury.

The Chancellor is also lucky because he has been able to sidestep taking tough decisions while Brexit negotiations are ongoing. He is quite right to retain as much dry powder as possible to respond to the different scenarios, but at some point soon the difficult choices will need to be made and the pressures to spend more will become irresistible.

Having reduced the deficit from almost 10% of GDP at the beginning of this decade to barely 1% now; with debt to GDP declining to well below 80%; and with the debt service ratio helpfully remaining steady at around 2% of GDP, the temptation to loosen the purse strings will seduce even the most prudent of Chancellors. Hence the 2019 Spring Statement probably contains the best set of fiscal projections we will see from the UK Government for a long time.

Having harvested his good fortune and preserved his optionality, what should the Chancellor and Government do next to maximise the UK economy’s potential? As with much else in our country right now, the answer depends partly on the Brexit outcome. Until today’s latest developments, it appeared that the risk of a disorderly exit had been mitigated by last week’s votes in the House of Commons rejecting no deal and seeking an extension to Article 50. That is certainly what the strengthening value of sterling indicated at the time. It now looks like the Prime Minister is backsliding on her position—along with the value of the pound—so we remain in Brexit limbo. Faced with this continued uncertainty, our only option is to try to look through Brexit and ask what is required for the economy to prosper, regardless of the final outcome.

I would like to highlight four priorities covering points of economic policy as well as philosophy. The first is something we should not do, namely to go on a spending splurge. Restoring our fiscal credibility has been hard won, and retaining sufficient fiscal flexibility is an essential part of the macro-policy armoury. A long-standing member of the Bank of England’s Financial Policy Committee, Richard Sharp, set out this case very lucidly in a speech he delivered in November 2017 titled, “It pays to be paranoid: the importance of fiscal space”, in which he argued that,

“a highly indebted government has less capacity to react to crises: we cannot assume that further shocks do not materialise; and, evidence demonstrates that fiscal space is a vital national resource to have available to counteract such a shock. Reducing fiscal space, therefore, means financial stability is harder to achieve”.

We should take heed of this wise counsel, especially at a time when history shows us that another crisis is overdue.

Secondly, we need to re-articulate the importance of wealth creation. Some might view this as a strange and unnecessary point to highlight: surely the merits of expanding the size of the pie are self-evident. Yet whenever I travel around the world and come back to the UK, I cannot help but observe that British politics is focusing either on the zero-sum game of redistribution or reconciling itself to below-trend growth of 1% to 1.5%.

We simply cannot meet the British people’s aspirations for higher living standards and better public services without raising our sights and becoming much more ambitious about promoting prosperity. We should not be content with mediocrity and need to guard against reacquiring the British disease that became a leitmotif of this country’s stagnation in the 1970s. If the United States, an economy more than seven times the size of our own, can still grow at 3%—adding the equivalent of Sweden in a single year—then we must and can do better.

This leads me to my third and most important point: at the heart of rediscovering the art of wealth creation must be addressing our productivity gap. We need to fix the fundamentals which have left our nation’s productivity around 20 per cent lower than the trend it followed before the financial crisis.

To the Chancellor’s credit, boosting productivity has been the key underlying mission guiding many of his priorities and decisions during the last six fiscal events that he has presided over. This year’s Spring Statement contains welcome measures to underpin investment in infrastructure and housing—representing the biggest public capital investment programme for 40 years—and the funding of several new science and technology projects spanning photonics, bioinformatics, supercomputers and nuclear fusion. All these support the Government’s ambition to raise R&D investment to 2.4% of GDP by 2027. We should also welcome the exemption of PhD-level roles from the visa cap, although I hope that this will not be undermined by restrictive rules applied to the family members of such applicants.

While these and other measures are all welcome, Andy Haldane, chief economist at the Bank of England and chair of the Industrial Strategy Council, recently made the following important observation:

“The raw ingredients of improved productivity—skills, experience, infrastructure, investment—take time to build. The time lag between sowing the seeds of structural policy and harvesting its fruit in higher productivity and pay is measured in decades not months or even years”.


With our normal political cycle overlaid by polarised politics, there is an urgent need to forge a new political consensus on the basics of enhancing productivity. Such an approach would allow us to stay the course and provide longevity for the strategy without chopping and changing course every few years. For example, we now have a 10-year plan for the NHS. As Robert Halfon MP asked in the other place last week, why can we not have a 10-year plan for schools and education? We cannot solve our intractable productivity puzzle without anchoring the solutions in long-term thinking.

My fourth and final point is about our engagement with the rest of the world. As the HSBC economist Stephen King reminded us in an article earlier this week:

“Westminster is not the centre of the world—and Brexit is not the only topic of conversation. There is a world beyond our borders”.


That world is changing fast and we are off the pitch. People the world over are looking at us agog with bemusement and bewilderment as we chase our tails on Brexit. We should not underestimate the opportunity cost of the current impasse.

I started by quoting Napoleon’s remarks about lucky generals. He also had some wise words about decision-making, saying:

“Nothing is more difficult, and therefore more precious, than to be able to decide”.


It is something that I hope the House of Commons can reflect upon. To govern is to choose. If we fail to take timely decisions now about Brexit it will hold back the economic aspirations and prospects for our country for much longer than necessary and, potentially, with irreversible consequences.

Economy: Budget Statement

Lord Gadhia Excerpts

Tuesday 13th November 2018 Lords Chamber

[Lord Gadhia (Non-Afl)]

My Lords, the adage that one should never drive a car simply by observing the rear-view mirror applies equally, if not more so, to the stewardship of the economy. The Chancellor’s room for manoeuvre in his 2018 Budget benefited significantly from the hard decisions taken over the past eight years, especially the buoyancy of current and projected tax receipts. It has also been underpinned by a relatively resilient UK economy, supported by continued global expansion, fuelled by the sugar rush from US tax cuts.

However, it is all too easy to fall victim to lazy economics by using models based on extrapolating past trends—something which even the OBR has previously experienced. Witness the way in which it badly overestimated the recovery in UK productivity. During the late stages of a business cycle, the disclaimer that the past is not a reliable guide to the future applies more than ever.

Despite our 43-year record-low unemployment levels, and accelerating real-wage growth, the economy is showing signs of softening. One of the most reliable lead indicators, the PMI, is already on a declining trajectory and business investment is anaemic. It is possible that lifting the Brexit uncertainty could produce what the Chancellor describes as a “deal dividend” but it is equally possible that the perpetuation of uncertainty through a fudged Brexit deal could tip the economy into a more aggressive down cycle as businesses and consumers lose patience and confidence.

The world economy is undoubtedly more vulnerable to shocks as the interest rate cycle turns, trade disputes intensify and the oil price advances. Our own Brexit-related issues could amplify the domestic impact yet further. The most likely source of economic shocks will come from the global tightening of monetary policy now under way. The effect of cheap money is like morphine—the pain comes back when it is no longer there.

As we mark a full decade since the financial crisis, the biggest piece of unfinished business is how central banks should unwind their use of unconventional monetary policy, as referenced by my noble friend Lord Macpherson. Quantitative easing, or QE, in the form of large-scale asset purchases by major central banks, has swelled their combined balance sheets almost fourfold to $16 trillion. In the UK, the Bank of England has purchased £445 billion of assets, predominantly gilts, from the private sector, with the aim of stimulating the economy at a time when interest rates were already low. It created a breathing space for macroeconomic adjustment during a period when fiscal policy was severely constrained by high deficits and debt. It is welcome that the deficit is now comfortably below 2% and debt is falling.

Although the path to recovery for western economies has been slow and erratic, the original purpose of QE has been accomplished and it is now facing diminishing returns. The Bank of England has gradually tightened monetary policy, with two interest rate rises in the past year and more on the horizon as the Financial Policy Committee seeks to bring inflation back to the 2% target. However, there has been very little public discussion about how and when QE will be unwound. The Bank of England’s own website simply says: “If inflation looks like it is becoming too high, we can sell the assets we have purchased to reduce the amount of money and spending in the economy”. In effect, this is a straightforward reversal through quantitative tightening, or QT.

Behind the scenes, the Bank of England will undoubtedly have developed more detailed plans for QT. In the near term, the official position is that interest rates will remain the primary instrument of policy. Unwinding the holding in gilts, which represents 25% of all government debt, through market sales, is not a straightforward process. If executed poorly, the disposals could create a significant dislocation for financial markets with unintended real economy effects. It is also plausible that we will never completely unwind QE and there will be a permanent increase in the monetary base. That is why the Government cannot just sit back and hide behind Bank of England independence.

Rising interest rates and the implementation of QT will arguably be more important than the Budget in determining our economic prospects and the Government’s political fortunes. I have therefore suggested a more radical option for unwinding QE through transferring some of the assets—say, £100 billion—into a UK sovereign fund, mandated to liquidate the gilts gradually, over time, and reinvest into real assets, focused on infrastructure. This would expand the productive capacity of the economy in a non-inflationary way. It might also provide a more permanent structure for the national productivity investment fund—first announced by the Chancellor in his 2016 Autumn Statement and expanded further at successive fiscal events—now standing at over £38 billion. The first national infrastructure assessment, published in July, recommends the creation of a dedicated UK infrastructure finance institution, particularly if we cannot retain access to the European Investment Bank after Brexit. Coupled with the Chancellor’s block on any new PFI projects, we urgently need a coherent alternative strategy for funding UK infrastructure.

However, my proposal would blur the distinction between monetary and fiscal policy, which is seen as heresy by most central bankers, who fear the inflationary consequences. Increasingly, though, economists are revisiting this orthodoxy. Researchers at UCL have highlighted several cases where fiscal-monetary co-ordination proved useful, such as the Reconstruction Finance Corporation used to implement President Roosevelt’s New Deal after the great depression, and Canada’s Industrial Development Bank, which was created to support SMEs. QE is openly described as unconventional monetary policy. In unwinding this unprecedented intervention, it is equally appropriate that the Government and Bank of England should consider alternatives that run against convention. The idea of a UK sovereign fund is not new, but the circumstances for its creation might now be ripe as policymakers grapple with the dilemma of how to unwind QE in the most orderly way and find a sustainable vehicle for funding long-term infrastructure.

If the chain of events triggered by the collapse of Lehman Brothers 10 years ago ultimately leads to the creation of a UK sovereign fund, mandated to invest in our country’s long-term productivity and prosperity, that would be an altogether more positive legacy from the turmoil of the financial crisis, and something that I hope the Government will consider seriously.

Green Finance

Lord Gadhia Excerpts

Wednesday 31st October 2018 Lords Chamber

[Lord Bates]

I get the question, but I do not necessarily agree with it. Green finance is exciting and is growing, and the City of London is at the forefront internationally. We are ranked third in the league table that the noble Lord mentioned, but first for the quality of the green finance. Our approach is that where the private sector—the City—provides leadership in developing these investments, that is the best outcome and the Government should support it through our strategy but should not necessarily participate and potentially crowd it out.

[Lord Gadhia (Non-Afl)]

My Lords, having dinner yesterday evening with the CEO of the London Stock Exchange, Nikhil Rathi, made me aware that green finance is one of its big priorities, including the establishment of a green sustainable investment centre. Will my noble friend join me in welcoming the development of green indices which can prompt institutional investors to shift their asset allocation to sustainable investments?

Economy: Productivity

Lord Gadhia Excerpts

Thursday 28th June 2018 Lords Chamber

[Lord Gadhia (Non-Afl)]

My Lords, the chairman of John Lewis, Sir Charlie Mayfield, has also examined the UK’s productivity puzzle and he found there is significant variability in productivity for SMEs. Can my noble friend say what support we are giving SMEs to improve their batting average?

[Lord Bates]

There are incentives for R&D spend. We know that things such as infrastructure and capital investment—we have had a patient capital review—contribute to improvements in productivity. We know that education and skills are a key part, and that is why we have T-levels and the apprenticeship levy. We also know that investment is very important, and that is why the capital breaks we have for R&D, particularly in small firms, are very important. But this is a whole-economy effort in which small and medium-sized enterprises, as well as the large companies, need to play their part.

Overseas Development Assistance: Fossil Fuel Subsidies

Lord Gadhia Excerpts

Tuesday 15th May 2018 Lords Chamber

[Lord Bates]

The right reverend Prelate is absolutely right. A lot of the power stations we are talking about are of no benefit to the rural areas in which most of the poor people live because they cannot be cost-effectively connected to the grid. Therefore, solutions have to be off-grid. Energy Africa is a key part of what we are doing but, as well as that, we are launching some exciting programmes for the rural economy in Sierra Leone and there are the CDC investments in off-grid. Off-grid offers tremendous opportunities in getting power to poor people in rural areas and we will continue to invest heavily in it.

[Lord Gadhia (Non-Afl)]

Will my noble friend join me in welcoming the UK’s membership of the International Solar Alliance, which was initiated by Prime Minister Narendra Modi and announced during his recent visit to the UK? Will he also welcome the joint infrastructure fund we have created with India with the help of his department?

[Lord Bates]

I will absolutely do that. Solar offers enormous potential. Not only is it a clean energy but, as technology advances, we see the cost of solar tumbling compared to other fuel supplies. The opportunity to achieve economic growth and development and to meet our climate change obligations is immense, and we are delighted to be able to partner other countries in delivering that.

Budget Statement

Lord Gadhia Excerpts

Monday 4th December 2017 Lords Chamber

[Lord Gadhia (Non-Afl)]

My Lords, I have always thought that the annual Budget Statement brings out some of the very best and worst of punditry and pontification among the commentariat in our country. This year’s Budget was no exception. My nomination for best contribution goes to Paul Johnson of the Institute for Fiscal Studies who captured perfectly the constant deferral in achieving a balanced budget, when he noted that,

“there is an Augustinian tinge to these plans: ‘Lord make me pure, but not yet’”.

The worst contribution, I fear, has to be the Daily Mail headline that described our Chancellor as: “Eeyore no more!”. It was an amusing quip, but it missed the important distinction that AA Milne’s character is pessimistic by nature. In contrast, the Chancellor is forced to be cautious by circumstance.

The brutal truth is that in recent times, central bankers rather than Finance Ministers have been more important in determining the future of western economies through unprecedented quantitative easing, more than trebling central bank balance sheets from $4 trillion to $14 trillion over the past decade. Lack of fiscal room for manoeuvre has rendered the Treasury relatively impotent but, as Mark Carney reminds us, Bank of England independence should not be confused with omnipotence. Its mandate can deliver price and financial stability and provide a breathing space for adjustment, but cannot secure lasting prosperity, solve broader societal challenges or address intractable issues such as housing affordability or poor productivity.

It is only now, with the deficit reduction process more advanced and declining towards 1% of GDP by the end of the Parliament, that the baton is passing back from monetary to fiscal policy. This is the first Budget since the financial crisis where we have seen a modest loosening of the purse strings, amounting to almost £18 billion over the course of the Parliament, providing some hope for a future beyond austerity. I anticipate further modest rebalancing in future Budgets under the envelope of a gradually declining debt-to-GDP ratio from this year’s peak of 86.5%. This is the new compass guiding policy, rather than the elusive balanced budget, which I doubt will ever be achieved in our lifetimes.

The respected market economist, Mohamed El-Erian, eloquently described this transition as an important crossroads for the world economy, but it feels more like a tightrope than a smooth tarmac road. With our continuing twin deficits, the current account tracking between 4% and 6% of GDP in the red—by far the largest in the G7—coupled with high household debt, now running at 150% of disposable income, we remain beholden to the kindness of strangers for our funding. Any spare debt capacity and fiscal space that the Chancellor has drawn on has been painfully created, and those who believe that we can somehow let rip and borrow significantly more are being naive, reckless or both.

The other big news of the Budget was, of course, the revision to productivity and the knock-on impact on growth forecasts, resulting in an economy that will be about £42 billion smaller by 2022 than previously expected in March—a number that is, incidentally, almost identical to our annual net interest cost for servicing the national debt. The reality is that Britain’s productivity puzzle is not news. The most salutary lesson is: do not extrapolate from the past. The previous OBR forecasts assumed that productivity growth would continue at levels experienced before the financial crash, but that has proved wishful thinking.

However, a “slower for longer” growth trajectory is clearly unsatisfactory in meeting expectations of higher living standards and better public services. The disturbing talk of a Japanese-style lost decade—or longer—will, I hope, concentrate minds on addressing the fundamentals. It is therefore welcome to see the industrial strategy co-ordinated closely with the Budget.

The two biggest influences for improving productivity are skills and investment levels and, in my remaining time, I shall make a few remarks about the latter. The most notable outcome of the Budget is that public sector investment is due to rise to 2.4% of national income, which, if sustained, would be the highest level in 40 years. It seems as though 2.4% is becoming an auspicious number for the Government, because it is, by coincidence, the target set for total R&D investment as a proportion of GDP by 2027. These twin investment goals are important stakes in the ground. As we seek to finance more innovation, which is intrinsically more risky, it requires more equity rather than debt. Start-ups are well aware of this, but our SMEs and scale-ups, in particular, need greater access to risk capital.

The Government’s Patient Capital Review did excellent work in identifying this funding gap, and estimates that we could easily double, and perhaps even treble, the current £3 billion deployed in scale-up businesses annually. The Budget contained a range of measures to crowd in private sector equity investment with the aim of unlocking more than £20 billion of new capital for innovative firms over the next 10 years. This is much needed rocket fuel for scale-up Britain, with its associated multiplier effects on jobs and livelihoods.

I end with some brief comments about the current market environment. Against a background of unusually synchronised global economic growth, to which my noble friend Lord O’Neill of Gatley referred, financial markets are enjoying a period of exceptionally benign conditions. The VIX index, which measures market volatility and is popularly known as the fear gauge, has been trading at about half its long-term average during much of this year but is now ticking back up again. Valuation levels across virtually all asset classes are at relative highs. In view of this, a market correction is more likely than not in 2018, which could lead to real economy effects. We should recognise that any impact on the UK economy could be disproportionate, as animal spirits are already sedated by Brexit uncertainty.

We must also recognise that Brexit remains an experiment. We simply do not know what happens to an economy when it unwinds a close integration with its nearest neighbours and, at least in the short term, becomes less globalised, but in 10 or 15 years’ time it is more likely that the effects of the so-called fourth industrial revolution will heavily outweigh those nearer-term impacts.

The Chancellor did not have a particularly high bar to meet for this Budget. His task was essentially to deliver a set of measures that did not unravel in short order. Spending a little more in a targeted way and avoiding significant or contentious tax rises has allowed him to meet this narrow objective, but he should be congratulated on having one eye on the future and using whatever limited wiggle room he had to invest in our future prosperity.

Kashmir

Lord Gadhia Excerpts

Tuesday 21st November 2017 Lords Chamber

[Lord Bates]

The situation that the noble Lord refers to is highly complex and dynamic, and we are very sensitive to it. It has been the long-standing position of the UK that it can neither prescribe a solution to the situation in Kashmir nor act as a mediator; it is for the Governments of India and Pakistan to find a lasting solution, taking into account the wishes of the Kashmiri people.

[Lord Gadhia (Non-Afl)]

My Lords, does the Minister agree that we should be cautious in lecturing the world’s largest democracy on human rights, which are enshrined in its constitution, protected by a well-established legal system and accountable to an independent judiciary—not to mention a large and vibrant investigative media and an active civil society? In the meantime, we should support our ally, India, to combat cross-border terrorism sponsored by Pakistan and Pakistani infiltrators, who are the real threat to peace, stability and human rights in that region.

[Lord Bates]

Both Pakistan and India are close friends of the United Kingdom and we want to maintain that strong relationship. Of course, we wish for a peaceful outcome to negotiations. We welcome the fact that the Government of India have recently appointed an interlocutor but we feel that, as in all conflicts, the countries themselves—the parties to the conflict—must be the parties to the peace.

Paradise Papers

Lord Gadhia Excerpts

Monday 6th November 2017 Lords Chamber

[Lord Bates]

I will have to check on the practices. However, my recollection is that Sir Patrick McLoughlin responds in his capacity as part of Cabinet Office Questions during regular Oral Questions. Members of all sides of the House and in both Houses are at liberty to table Questions for Oral Answer or debate at any point, and people will have to respond according to their responsibilities.

[Lord Gadhia (Non-Afl)]

My Lords, I declare my interests as an investor in a wide range of assets, including offshore investments. Will my noble friend agree that millions of UK savers and pensions, let alone Her Majesty, benefit directly or indirectly from investments held offshore, and to suggest that they are avoiding tax is simply fake and false news? Those who take the time to properly understand offshore investment vehicles will realise that their underlying purpose is to provide an efficient and predictable umbrella structure to attract the widest possible range of investors from around the world. They are in fact set up to minimise the amount of tax paid within the offshore entity and consequently to maximise the returns flowing back to investors, allowing them to pay tax directly in their own countries.

[Noble Lords]

Order!

[Lord Gadhia]

The use of these investment vehicles therefore maximises the eligible tax take for the UK Exchequer, and to suggest otherwise is either financial illiteracy, political populism or lazy journalism. Will my noble friend agree that we need to collect the tax and that, if it is not paid, that is tax evasion not avoidance?

[Lord Bates]

The key point that must be remembered here is that, if funds are for legitimate reasons allowed to be placed offshore in order to purchase assets, and if the people concerned are domiciled in the UK, the funds need to be repatriated to the UK and full tax needs to be paid on the profits, income and revenue gained.