Finance Bill

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Lord Hain Portrait Lord Hain (Lab)
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My Lords, I too congratulate my new noble friend Lady Caine on her excellent speech, which suggests that her husband was lucky to catch her, not the other way round.

The Conservatives have been parroting the preposterous claim that last July they bequeathed our Labour Government a fast-growing, resilient economy, despite their 14 disastrous years in government, seeing abysmally low, slow economic growth; falling productivity; falling real living standards for the first time since the 1950s; UK investment as a share of GDP the lowest in the G7 between 2010 and 2022; key public services savaged by austerity; and a cavalier indifference to rising inequality and to communities collapsed by deindustrialisation.

The shockingly poor performance of the UK economy in the 14 years after the 2008 financial crisis, almost all under the Tories, stands in marked contrast to the success of the 14 years before the global financial crisis, almost all under Labour. Tory austerity was worse than in any of the advanced economies, and over 80% of cuts were to public service budgets, equivalent to £180 billion in today’s terms, which is more than we spend on health and social care in England. It is why NHS waiting lists are so long, why GP appointments are so difficult to get, why our prisons are full to overcrowding and so on.

The Tories’ addiction to public spending cuts was driven by a misplaced faith in neoliberalism, an obsession with cutting the size of the state, reducing the role of government in running the economy or in promoting the common good, relying instead on free market forces and rewarding winners, slashing top rates of income tax on the fortunate few while more than doubling the standard rate of VAT paid by the many.

However, the election of Donald Trump has transformed everything. As well as facing the biggest military threat to peace in Europe since the Cold War—and without, it seems, US backing—we are now in the opening stages of a trade war that could cause a global slide into slump. In the face of huge global security threats and geopolitical turmoil, Germany has dramatically changed its fiscal rules and committed to radically higher defence spending, paid for by increased borrowing along with a €500 billion 10-year fund to boost infrastructure investment. EU leaders have recently pledged €800 billion extra to radically increase military spending by allowing member states to take out loans and increase national debt without incurring the usual penalties under the bloc’s strict fiscal rules.

Our UK Government are rightly also increasing defence spending, albeit financed by a humongous cut in overseas aid. But nobody seriously thinks we can leave it at that, nor that we can cut front-line services such as health, education or policing. We must therefore make sure that extra defence spending delivers faster domestic growth too, so that a bigger GDP funds our other pressing priorities.

The financial markets will have to grasp why today’s new security threats warrant increased defence spending financed by extra borrowing, as all our European partners are doing. Our Labour Government’s duty, together with our partners, is to do whatever it takes to make Britain and Europe safe again. If that means modifying our fiscal rules for these exceptional and exceptionally dangerous times, that is what we have to do. If we had not done something like this in the Second World War, Hitler would have won. Britain rearmed in 1938 by raising defence spending to £400 million, of which £272 million was financed from taxation and £128 million by extra borrowing under the Defence Loans Act 1937.

Extra borrowing for defence purposes only could be made possible by issuing special purpose financial vehicles such as defence bonds up to set limits, as some of our European allies already have in mind. The key will be a steady expansion of defence procurement, not a sudden splurge which could benefit US defence contractors but leave British suppliers out in the cold. I very much hope that the Chancellor will break free from Treasury orthodoxy and do this.

Covid Counter-Fraud Commissioner

Lord Hain Excerpts
Wednesday 5th February 2025

(1 month, 4 weeks ago)

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Lord Livermore Portrait Lord Livermore (Lab)
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I am very grateful to the noble Baroness for her question, and I absolutely agree with the underlying point she is making. I met Tom Hayhoe, the Covid Counter-Fraud Commissioner, last Friday, to make sure that I was fully prepared for this Question. I discussed his work with him, and he told me that he is considering a whistleblowing mechanism to enable the public to draw attention to abuses they are aware of. The work he is doing is absolutely in line with what the noble Baroness is asking for.

Lord Hain Portrait Lord Hain (Lab)
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My Lords, can my noble friend ask the commissioner—and maybe take an interest in this himself—about the shortage of yachts for sale at the end of Covid? I was told by one of these yacht owners—this is not something I have ever indulged in—that he could not buy one for love or money. The reason was that people had been given, in his words, “a lot of money” by the Chancellor, particularly if they were running businesses, and were then able to indulge in buying yachts, to the point where they ran out of opportunities to do so. There was clearly something going on there.

Lord Livermore Portrait Lord Livermore (Lab)
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My noble friend clearly knows more yacht owners than I do—I have not discussed this matter with any yacht owners—but I absolutely understand the point he is making about the amount of fraud and abuse that was rampant in the system. The fact that the previous Government decided not to pursue so many of those contracts is not acceptable, which is exactly why we have set up these systems.

Lord Wigley Portrait Lord Wigley (PC)
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My Lords, I will move Amendment 1 and speak to Amendment 23, both of which are in my name. I am grateful to the noble Baroness, Lady Humphreys, for adding her name to the amendment, and of course to my noble friend Lady Smith of Llanfaes, who no doubt will wish to address Amendment 21 in her name, which I support. I also support Amendment 26 in the name of the noble Baroness, Lady Humphreys, which we will come to later.

At Second Reading, I outlined the case for the Crown Estate in Wales to be devolved as it is in Scotland. That is the subject of a Private Member’s Bill that I have awaiting a Second Reading debate. Although many of these amendments overlap with that fundamental approach, there are other amendments not going quite as far as full devolution proposals which, none the less, could help meet Welsh grievances regarding how it is widely seen that the Crown Estate, as currently administered, does not address Welsh needs or concerns, and, indeed, sucks valuable resources out of Wales.

This issue has boiled up further since Second Reading, with a number of local authorities in Wales that are really strapped for cash, as indeed local authorities are in England, protesting at the bill demands which the Crown Estate makes of them. Let us take as an example the position of my own local authority, Gwynedd Council. This year it is being asked to pay a staggering bill of £160,000 to the Crown Estate to permit access to and full use of its own land and facilities within its own territory. The council has to pay the Crown Estate an annual rent for access to the beach in Bangor, Barmouth and Llanaber and a staggering £144,000 a year in rent relating to the marina in Pwllheli. Access to beaches touches a raw nerve in Wales; when private citizens have tried to close a footpath access, they have triggered massive protest and have had to back down. Yet the Crown is allowed to tell us that we have to pay for use of our own land and our own coast in our own country and can charge for the use of that privilege with impunity.

Gwynedd Council now faces cutting back on other services to pay the Crown Estate. A motion was moved by councillor Dewi Llewelyn in full council meeting on 3 October, and the council resolved to refuse to pay this charge. The motion also called for the control of Crown Estate land and profits in Wales to be devolved to the Welsh Government. We await developments, but other councils in Wales are also now considering similar steps. No one can say that there has not been adequate warning that the Crown Estate issue in Wales is flaring up in the direction of taking the form of a Boston Tea Party.

Conservative Governments over the past 10 years have known that this issue has been festering, but while they accepted the need to make adjustments in Scotland, which led to the devolving of the Crown Estate through the Scotland Act 2016, the situation in Wales was left to fester. This situation has been strenuously criticised by the Labour Government in the Senedd. I will not repeat the lengthy quotation which I presented to the House at Second Reading, when I drew attention to the words of the then Labour Climate Change Minister, Julie James, who, in a nutshell, said that the Crown Estate in Wales should be devolved, as in Scotland, and that the current situation is “outrageous”. Both the former First Minister, Mark Drakeford, and our erstwhile colleague, the current First Minister, the noble Baroness, Lady Morgan of Ely, have also called for the Crown Estate to be devolved in Wales.

In moving the first amendment, we are offering the Committee, and indeed the new Labour Government, an opportunity to take a small step towards redressing the balance. This does not provide for the full devolution of the Crown Estate in Wales, but it gives the Welsh Government a veto grip over the Crown Estate by way of the words which appear in the amendment:

“The functions of the Crown Estate in Wales may not be exercised without the consent of the Welsh Government”.


The mechanisms for granting that consent—indeed, for pinpointing the issues that would need to be addressed to secure that consent—can be open to negotiation between the Welsh Government and the Crown Estate. What this does is to establish beyond doubt that our Government in Wales will have the final word on such matters.

I will briefly mention Amendment 23, standing in my name and supported by the noble Baronesses, Lady Smith of Llanfaes and Lady Humphreys, and by the noble and learned Lord, Lord Thomas of Cwmgiedd. It also provides a mechanism, short of devolving the full Crown Estate to Wales, to require the Crown Estate to pass to the Welsh Government all the net profit that it has generated from Wales; and thereby to enable the Welsh Government to pass an appropriate part of such funds to the local authorities that I mentioned to ensure that they are not out of pocket from the bills that they have to pay to the Crown Estate.

The Labour Government at Westminster should be delighted to facilitate developments provided by the amendment, which I have highlighted. If they are not, they will need to make a very persuasive case because, if these modest proposals are not acceptable, the only answer might be for the devolution—lock, stock and barrel—of the Crown Estate in Wales to Wales, as has been the case in Scotland. I welcome support for these proposals from all quarters of the Committee and I await the Minister’s response with fascination. I beg to move.

Lord Hain Portrait Lord Hain (Lab)
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My Lords, I support Amendment 21 in the name of the noble Baroness, Lady Smith. I do so as a former Labour Secretary of State for Wales who was responsible for the 2006 devolution Act. Before that, as a Welsh Minister, I, alongside the noble Lord, Lord Wigley, and others, was closely involved in winning the 1997 referendum, which brought in the 1998 devolution Act to establish the Welsh Assembly, now Senedd. I have also lived in Wales for 34 years now.

Welsh Labour’s programme for government in the Senedd includes a commitment to pursue the devolution of powers needed to help reach net zero, including management of the Crown Estate in Wales. The Crown Estate is devolved in Scotland; surely there is no reason why the same powers should not be devolved to Wales, especially by a new Westminster Labour Government committed to partnership rather than confrontation with the devolved Administrations. That was the essence of the Prime Minister’s message to the special summit of the nations and regions last Friday, and in visiting Scotland, Wales and Northern Ireland in July within days of moving into Downing Street.

The Independent Commission on the Constitutional Future of Wales recommended that the Crown Estate be devolved, and Welsh Labour is committed to working with UK Labour in government to implement the recommendations from that commission.

Taking control of the management of Crown Estate assets in Wales would allow the Welsh Government greater autonomy over the speed and direction of the development of Welsh-sited Crown Estate property. The Welsh Government would have the opportunity to better align the management of Crown assets in Wales with the needs of Welsh citizens. The management of Crown assets also generates significant revenue to the UK Exchequer. Devolution of the Crown Estate would better align revenues from Wales with the income available for the Welsh Government to deliver on their priorities for Welsh citizens.

Marine planning is a holistic, statutory process for managing the UK’s seas including the seabed. Aligning Welsh marine planning with seabed leasing rounds for new developments, such as renewable energy, would help to ensure joined-up and plan-led decision-making.

Currently, there are stand-alone leasing rounds for certain types of activity, such as offshore wind or marine aggregates extraction. These leasing rounds, which occur from time to time, take account of relevant government policy, but devolution of the Crown Estate to Scotland has allowed a reshaping of the process, whereby the marine planning process sets the overall policy direction with leasing rounds only progressed after it has set national strategic policy. This ensures that marine management is better joined up and delivered. Taking control of the management of the seabed would allow Welsh Government Ministers both to better implement their policy decisions and priorities for the marine area and to ensure that all relevant interests can be reflected in a way that is simply not as possible with a top-heavy, centralised and London-centric agenda.

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I hope that these explanations have been helpful and that I have provided some clarity on these points. I hope that the noble Lords, Lord Wigley and Lord Hain, and the noble Baronesses, Lady Smith and Lady Humphreys, will not press their amendments as a result.
Lord Hain Portrait Lord Hain (Lab)
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My Lords, before my noble friend sits down, I want to ask him specifically about what he said in relation to Welsh Government Ministers. I pressed him hard to talk to Welsh Government Ministers and consult on this matter. Nobody expects this to be done overnight or, indeed, relatively soon, given everything else and what he has said, but that seems to me the crucial thing which would release me from an obligation at least to press this on Report.

Lord Livermore Portrait Lord Livermore (Lab)
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I am very happy to reiterate what I said: I will, of course, discuss these issues with the First Minister and the Secretary of State for Wales to ensure that Wales sees the full benefits of the Crown Estate and other forms of investment.

Budget Responsibility Bill

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Lord Hain Portrait Lord Hain (Lab)
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My Lords, two years ago the Tory faithful showed that they had no firmer grip on reality than Liz Truss by choosing a Prime Minister who engineered her own downfall and now blames absolutely everybody else. The infamous Truss mini-Budget provoked a crisis of confidence in Britain’s public finances by sidestepping the Office for Budget Responsibility, and this Bill will ensure that cannot happen again. The financial turmoil around the Truss mini-Budget, with its reckless £46 billion package of unfunded tax cuts and cavalier attitude to government borrowing, added to the economic chaos that seven successive Tory Chancellors caused over 14 years in office since 2010, dumping an appalling legacy in Labour’s lap.

First, they left office with real household incomes lower than when they came into government and working people with the highest tax burden for 70 years. The main reason was appallingly slow economic growth, due in large part to investment being significantly lower than in other G7 economies. Had the UK economy grown as fast as the OECD average over the past 13 years, UK GDP would have been more than £140 billion bigger, providing some £50 billion of extra tax revenue for public services and lower borrowing.

Secondly, the Tories gave up their seals of office on the 76th anniversary of the NHS’s launch with more than 7.6 million patients waiting for hospital treatment in England.

Thirdly, national debt, which stood at 65% of GDP in 2010 even after the financial crisis, is now touching 100%. The Tories have also bequeathed to Labour a huge £22 billion budgetary black hole about which Tory Ministers deliberately kept quiet and with which the Chancellor is now having to wrestle. She is right to stress that 14 years of damage cannot be reversed in one Budget. The OBR estimates that the decade of fiscal austerity imposed by George Osborne and Philip Hammond added up to nearly 9% of GDP—82% by cuts to public spending and 18% cent by tax increases—equivalent in today’s terms to some £200 billion of public spending cuts.

Do not forget that things could have been even worse. The noble Lord, Lord Cameron, admitted in his memoirs that, had he stayed in office after 2016, he would have pursued even more public spending cuts. George Osborne’s last Budget in March 2016 revealed plans for another £60 billion of public spending cuts, which would have brought total Tory cuts to £260 billion. Fortunately, Liz Truss lost office before she could attempt similar economic and social vandalism—but then, in this summer’s election, Rishi Sunak’s dishonest promise of national insurance cuts of £13 billion and defence spending rises of £7 billion per year would have doubled the black hole that the Chancellor discovered.

When critics claim that the Chancellor has embarked on George Osborne-type austerity, she is absolutely right to insist that giving public sector workers their first real-terms pay increase in 10 years is certainly not that. Osborne’s first Budget announced a two-year public sector pay freeze. Jeremy Hunt now claims:

“Labour have inherited a growing and resilient economy”.


He says that because UK GDP grew in the first half of this year, yet GDP shrank in the second half of last year as the economy sank into recession. We may have stopped going backwards but we are not yet any further forward than we were an economically destructive and financially irresponsible Conservative year ago. The Bank of England now expects growth to slow, not speed up, in the third and fourth quarters of this year—another sign of Tory failure and nothing like the rapid turnaround that we experienced under the last Labour Chancellor in 2009 as the economy recovered from the terrible global financial crisis.

This Bill is designed to block any repeat of such Tory antics and to establish a future under Labour of economic growth and stability. It will not be easy, but thank goodness we have grown-ups running the country again.

Public Spending: Inheritance

Lord Hain Excerpts
Tuesday 30th July 2024

(8 months ago)

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Lord Livermore Portrait Lord Livermore (Lab)
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I am grateful to the noble Earl for his question. He is absolutely right that the origins of many of the shocks that the British economy experienced were global; however, the UK suffered worse and for longer than many comparative countries. Inflation stayed higher for longer in this country than I think in any other comparative country. The reason for that is the decisions taken by the previous Government, and there were three in particular: austerity, which choked off investment; a badly handled Brexit deal; and the Liz Truss Budget, which crashed the economy and sent mortgage rates spiralling.

Lord Hain Portrait Lord Hain (Lab)
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My Lords, I too congratulate my noble friend the Minister on his appointment, and his performance this afternoon has shown what authority he has in that post. Does he agree that capable Minister though the noble Baroness was, and respected in this House, she cannot possibly believe the guff that she has just read out, sent to her from down the Corridor, no doubt? The truth is, as the letter from the chair of the OBR confirms, they were not told the full information. There was a monumental mess left by the previous Government, who were not straight with the electorate during the election campaign, promising massive tax cuts and huge increases in defence spending which they could not possibly finance.

However, can the Minister confirm that the payments given to doctors and others in the public sector are merited? They are vital public sector workers who have been treated miserably by the previous Government, and justice is at last being done.

King’s Speech

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Monday 13th November 2023

(1 year, 4 months ago)

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Lord Hain Portrait Lord Hain (Lab)
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My Lords, it is always a pleasure to follow the noble Baroness, especially on climate change and environmental issues. In October, the Institute for Fiscal Studies summed up the UK’s prospects as “darkening” and the growth outlook as “poor”. IMF data shows that in the 14 years before the 2008 global financial crisis, most of which was under Labour, UK productivity rose at an average annual rate of well over 2%. However, in the 14 years following the financial crisis—and most of that was under the Tories—productivity only improved at a measly average annual rate of less than 0.5%.

The stand-out factor for this worsening economic performance is our pathetically poor rates of investment, both public and private. According to the IMF, between 2010 and 2022, UK investment as a share of GDP was the lowest in the G7, and UK savings were far below even that, leaving the UK highly dependent on foreign capital. A Resolution Foundation study in March 2023 found that Britain’s public investment is in the weakest third of OECD countries. Had Britain matched the average OECD rate of public investment over the past 20 years, it would have been a massive £500 billion higher. This long-term failure to invest in our healthcare, housing and transport services is the reason why Britain has fewer hospital beds per person than all bar one OECD economy, and why the British spend more time commuting to work than all bar two other OECD countries. That is a pathetic record.

Andy Haldane, former chief economist at the Bank of England and now the director of the Royal Society of Arts, has noted that as well as being too low, UK public investment levels are far too volatile—witness the Government’s HS2 shambles. The planned increase in public investment announced by the Boris Johnson Government in 2020 was later cut following the Liz Truss disastrous mini-Budget. Rishi Sunak’s Administration is now planning for public investment to fall as a share of GDP in each of the next four years, reversing most of the increases announced three years ago.

Resolution Foundation economists calculate that setting public investment at a stable 3% of GDP—about £75 billion—would boost UK economic growth by nearly 1% per year over five years and stay within the debt rules accepted by both Front Benches. The Government’s present plans, however, envisage public investment dropping from £74 billion this year to only £62 billion in four years’ time.

The independent National Infrastructure Commission agrees that decades of inadequate infrastructure investment have held UK productivity back, singling out public transport, home heating and insulation, and water networks as all being in urgent need of renewal. It recommends extra public investment of £30 billion per year, plus at least £40 billion per year from the private sector. More than an extra £30 billion per year of public investment might have been recommended, but for the restrictive remit set by George Osborne when he created the commission in 2015.

I am afraid that everywhere we find evidence of Tory economic failure, we also find George Osborne’s fingerprints. His austerity policy, continued under Philip Hammond, drastically curtailed UK economic growth, triggering a severe slowdown in the rate of increase in British productivity and a standstill in real household living standards. Over 80% of the Tory spending cuts fell on public sector budgets, equivalent today to slashing public spending by a colossal £180 billion—more than the total of NHS spending in England this year.

A decade of Tory austerity has inflicted huge self-harm on Britain’s public services, with the Institute for Government finding eight of nine public services performing worse now than before Covid. Hospitals and courts stand out, with waiting lists for hospital treatment at 10 million and a backlog of nearly 90,000 court cases. The Government’s spending plans mean that however bad the plight facing Britain today, the outlook after 2025 is even worse—unless, of course, Britain is saved by a Labour Government, which we all should hope for.

Gross Domestic Product: Wales and the UK

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Thursday 6th July 2023

(1 year, 8 months ago)

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Baroness Penn Portrait Baroness Penn (Con)
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My Lords, I agree with the noble Lord about the importance of investing in prevention. That is why we have invested in our education system, and we have seen our educational outputs improve under this Government. It is why we are investing in prevention in our NHS. We also need to capture the importance of other aspects that contribute to our country when we look at these matters. That is why we are looking at incorporating measures when it comes to well-being, for example, and not just looking at the narrow measures of GDP.

Lord Hain Portrait Lord Hain (Lab)
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My Lords, if the positive economic figures that the Minister cited for Wales are correct, is that because we have a Welsh Labour Government?

Baroness Penn Portrait Baroness Penn (Con)
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It is hard to tell from the other side whether there is a success story or not when it comes to Wales. I think that the best success comes when the UK and Welsh Governments work together in the interests of the people of Wales, and the record that we can see is testament to that.

Autumn Statement 2022

Lord Hain Excerpts
Tuesday 29th November 2022

(2 years, 4 months ago)

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Lord Hain Portrait Lord Hain (Lab)
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My Lords, in both cheering on Wales tonight and praising everything that my noble friend Lord Eatwell said, I remind the House of some famous first words from the Prime Minister and some lesser-spotted last words from one of his predecessors as Chancellor—words that clarify both the ruinous fiscal policy the Tories have pursued since 2010 and the dreadful prospects set out in this year’s Autumn Statement, and which expose the true source and full extent of the real, gaping hole at the heart of Britain’s public finances.

Rishi Sunak concluded his first Budget speech in March 2020 with the breathtaking claim that

“the Conservatives are the party of public services.”—[Official Report, Commons, 11/3/20; col. 292.]

Their record since 2010 and their plans in the Autumn Statement tell a totally different story. Rishi Sunak and Jeremy Hunt are said to be the “numbers men”, so let us look at the numbers, courtesy of the Office for Budget Responsibility.

Last October, the OBR confirmed that nearly a decade of Tory austerity from Chancellors George Osborne and Philip Hammond had seen cuts in public spending amounting to more than 7% of GDP—savage cuts equivalent to £180 billion in today’s terms, which is almost as much as we spend each year on health and social care in England. Those public spending cuts made up 82% of the total Tory fiscal consolidation; tax increases made up 18%. Here lies the origin of the chronic and mounting staff shortages, industrial unrest, deteriorating standards and lengthening response times that are now only too typical of Britain’s struggling public services, especially in health.

This is why even Tory councils are warning that they face possible bankruptcy after enduring funding cuts for over a decade. George Osborne, once again welcome at Downing Street in advising the Chancellor and the Prime Minister, boasted of having squeezed the UK economy tighter than any of the advanced economies. He was more reticent about the plans in his final Budget in March 2016 for a further five-year fiscal squeeze—plans that would have added another £60 billion of public spending cuts to those actually made by Philip Hammond. David Cameron has confirmed that, had he stayed in office after 2016, he would have gone for even more spending cuts. The Government have now embarked on the kinds of cuts that Cameron and Osborne were exploring when they left office. They may differ in detail but it is a familiar formula, with the biggest spending cuts put off until three to five years’ time, conveniently after the election.

We can usually sum up a year’s key events with a simple phrase. In 1992, it was “Black Wednesday”, when the Tories lost whatever reputation they had for sound economic management in one turbulent day. This year, it has been “disastrous mini-Budget”, when they lost it again. Now, they are scrambling to undo the damage, but they are swimming against the tide of events. Their long record of miserably slow growth is well entrenched; their so-called plans for growth have always lacked potency and credibility. Today, Britain is the only G7 economy whose GDP is still below its pre-Covid level, and we are fast heading into recession. Slow growth is why the Government have missed all their targets for balancing the budget and bringing down Britain’s debt-to-GDP ratio since 2010. In March 2022, the OBR projected the debt ratio to fall below 80% in 2026-27, but the mini-budget and the energy crisis blew that off course. The OBR now expects it to fall in 2027-28, but to 97% this time. The Tories are going the wrong way: from bad to worse.

It is the same old story. Beyond the blue horizon waits a beautiful day but, like the horizon, Tory success is always out of reach. Fate has cast Rishi Sunak and Jeremy Hunt as the George Osborne understudies, called upon to take centre stage and share the leading role—a double act in a Whitehall revue, but not one that will run and run. This Autumn Statement will prove to be another Tory fiscal flop at the expense of the country. It is going to bomb at the box office, mercifully opening the door to a Labour Government delivering public investment, kick-started growth, business success and sound public finances, because these all go hand in hand.

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Baroness Penn Portrait Baroness Penn (Con)
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My Lords, the statistics that I gave referred to overall levels of investment, not expressed as a percentage of GDP. I stand by the figures that I gave to the House.

Lord Hain Portrait Lord Hain (Lab)
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I am very grateful to the Minister, but can I ask her to correct her statement about the last Labour Government’s record? We had 10 years of consistent economic growth, never surpassed in Britain’s economic history, with low inflation, high employment and massive investment in public services, prior to the global banking crisis, for which we were culpable only to the extent that every Government in the world were culpable. Surely, she should correct what she has said in argument to me.

Baroness Penn Portrait Baroness Penn (Con)
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I am not sure exactly which bit of what I said the noble Lord wants me to correct. I stated the Government’s record on economic growth since 2010, and I simply referred to the comments of the noble Baroness, Lady Kramer, on the recession that was also experienced under the previous Labour Government.

I return to the subject of energy. The noble Baroness, Lady Hayman, asked about energy efficiency. Warmer homes and buildings are key to reducing bills, creating jobs along the way and meeting our targets on climate change. That is why we are committed to driving improvements in energy efficiency, with a new ambition to reduce the UK’s final energy consumption from buildings and industry by 15% by 2030. A new ECO+ installation scheme was announced earlier this week.

I disagree with the analysis that this is jam tomorrow; we have £6 billion of new government capital funding that will be made available from 2025 to2028, but that is in addition to the £6.6 billion allocated in this Parliament. The aim of that kind of longer-term projection of funding is to create consistency and allow businesses and the supply chain to build up and plan for the future, which can be something that we struggle with in the provision of energy efficiency measures. We are also launching the energy efficiency task force and expanding our public awareness campaign to help reduce bills for households and protect vulnerable people over the winter and beyond.

In response to my noble friend Lord Leigh of Hurley, on other tax measures and the taxation of US groups trading in the UK, the UK has long been committed to tackling base erosion and profit-shifting, which is why we introduced the diverted profits tax in 2015 and the corporation interest restriction rules in 2017. I am glad that he welcomed progress on Pillar 2, which we will legislate for in the spring 2023 Finance Bill, but I agree with him that we need to make further progress on Pillar 1. That is why we continue to work internationally on finalising Pillar 1, so that the corresponding multilateral convention can be ready for signature in the first half of 2023, allowing for implementation in 2024.

Other noble Lords noted some strange political alliances that seemingly might have formed in the course of this debate. The noble Lords, Lord Sikka and Lord Howarth of Newport, but also my noble friends Lord Bridges and Lady Noakes raised concerns around the Government’s decision to freeze the personal allowance and other tax thresholds. I say to noble Lords that despite the need to increase taxes—I fully acknowledge that freezing thresholds is a tax increase, I am not trying to hide it in any way—given that the personal allowance nearly doubled across the last decade, it will still be £2,150 higher by April 2028 than it would have been had it been uprated by inflation each year since 2010. The noble Lord, Lord Sikka, also asked about the distributional impacts of tax. I cannot answer his specific point, but on average it is households in the poorest income deciles that are gaining the most next year as a result of decisions taken in the Autumn Statement.

I take seriously the concerns expressed by my noble friends Lady Noakes and Lord Bridges. The Government have had to take difficult decisions and we are being honest about that. We want a low-tax economy, but first must come economic stability, and we need everyone to contribute a little towards sustainable public finances. I know it will be little comfort to them to be reminded that the UK tax system remains competitive, with the tax-to-GDP ratio meaning that we are still in the middle of the pack within the G7 and lower than such countries as France, Germany and Italy. As I say, the Government take their challenge on growth seriously and we have taken some tax decisions to prioritise this; for example, keeping the annual investment allowance level that was set in the growth plan permanently at £1 million, rather than reverting to £200,000 from 1 April 2023.

My noble friend Lord Bridges rightly identified a greater range of actions that we must take to set the conditions of growth beyond tax policy. A key area and opportunity post Brexit is regulation, and I hope he will welcome the action on Solvency II that we have announced and the measures in the forthcoming Financial Services Bill, which we will seek to replicate across other growth sectors across the UK economy, such as life sciences, as spoken about passionately by my noble friend Lady Blackwood. Many noble Lords, including the noble Lord, Lord Shipley, and my noble friend Lord Tugendhat, raised the issue of housing. The noble Lord, Lord Shipley, spoke about the need to build more houses for social rent: that is exactly what the Government are doing, through such measures as removing the cap on councils borrowing against their housing revenue account. I reassure him also that we are still committed to ending no-fault evictions.

My noble friend Lady Cumberlege asked about our commitment to community pharmacists and the issue of funding there. The plan for patients set out the further expanded role of pharmacies agreed in the community pharmacy contractual framework for the next two years, as well as an additional £100 million investment to recognise the pressures facing the sector. The Government have also committed to look further by enabling pharmacists with more prescribing powers and making more simple diagnostic tests available in community pharmacies.

In response to the noble Lord, Lord Rogan, I welcome the 25th anniversary of the Belfast agreement and I am extremely pleased that we confirmed in the Autumn Statement that we are funding the planned trade and investment event in Northern Ireland. DIT will work with local partners as this is taken forward, including with Invest NI.

The noble Lord, Lord Bilimoria, asked about defence spending. As I said in my opening speech, we recognise the need to increase defence spending, but before we make announcements on that, we need to refresh the integrated review, which was drafted before Russia’s invasion of Ukraine.

The right reverend Prelate the Bishop of Gloucester referred to the benefit of women’s programmes for preventing female offending and the savings to the Ministry of Justice as a result. In September, the Ministry of Justice announced that almost £21 million will be invested in women’s services to tackle the causes of female offending and cut crime.

The noble Lord, Lord Livingston of Parkhead, asked an interesting question about the difference between the Bank of England and OBR forecasts. Given the number of recent changes in fiscal policy and the volatility in financial and energy markets, the range of external forecasts is wide. Differences will partly reflect when each forecast was produced and the differences in assumptions about government policy, interest rates and energy prices, but I take his wider point.

I congratulate my noble friend Lady Lea on her excellent maiden speech. I know she brings a wealth of economic experience, not least from her own time working in the Treasury. I look forward to working with her in the future.

We have faced two enormous shocks in the last three years. The pandemic has caused supply chain disruption, slowed growth and increased debt levels, and Putin’s war in Ukraine has caused energy prices to spike. This has added up to inflation at levels not seen in a generation, hitting the pockets of families across the country. That is why tackling inflation is our priority. It makes everyone worse off, especially the most vulnerable, so we have taken difficult decisions that will mean taxes go up and spending will not rise by as much as previously planned. When we take into account the need to invest more in areas such as our NHS, it means hard choices to be made elsewhere.

However, I remind noble Lords that we fight these economic challenges from a position of relative strength. Unemployment is close to the lowest level it has been in nearly 50 years, and the UK is forecast to have had the fastest growth in the G7 in 2022. We also have incredible strengths within our country that aid our mission: our teachers, our NHS workforce, our armed services, and everyone who works in our public sector—day in, day out—to deliver the services upon which we rely.

We are inventive and resourceful, and the innovative, intuitive and ambitious people who make up our private sector will drive our growth. Combine this with the decisions taken over the last 12 years and the results are clear to see: employment is up by millions compared to 2010; we have had the third highest real GDP growth rate in the G7 since 2010; renewable energy production is growing faster than in any other large country in Europe since 2010; thousands more children are in good and outstanding schools compared to 2010; and we have record numbers of doctors in the NHS. Now, because of the difficult decisions we take in our plan, we are strengthening our public finances, bearing down on inflation and supporting jobs—all while protecting public services.

The Autumn Statement is a plan that provides stability. It is a plan for growth and a plan for public services. I beg to move.

Budget Statement

Lord Hain Excerpts
Tuesday 14th March 2017

(8 years ago)

Lords Chamber
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Lord Hain Portrait Lord Hain (Lab)
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My Lords, it is no slight on the Chancellor to say that the web of deception that he tried to weave in his Budget Statement fell short of the standard set by Britain’s foremost author of spy thrillers, John le Carré. He contrived to create the impression of an economy that is coming in from the cold, one that is enjoying robust growth.

Robust is hardly the word that I would choose to describe economic growth in 2016 that was slower than that expected 12 months ago: a miserly 1.8% compared with the 2% forecast by the Office for Budget Responsibility last March. It is surely misleading for the Chancellor to claim that the economy is expanding at a brisk pace when, as my noble friend Lord Livermore pointed out in his excellent speech, the OBR has downgraded its forecasts for growth in each of the next four years compared to what it expected one year ago. Growth will be slower next year than it was last year, or the year before, or the year before that. The OBR expects unemployment will be higher in each of the next four years than it is today. In the next couple of years it expects pay to go up more slowly and, thanks to Brexit, prices to rise more quickly than it thought last year. If this is the Chancellor’s idea of economic vigour, what on earth is his idea of economic sclerosis? Real recovery and rapid economic growth seem as far off as ever.

UK GDP grew more slowly in 2015 than in 2014, and more slowly still in 2016. The OBR expects it to grow no faster in each of the next four years than this year. These are all signs of an economy that is losing momentum, not gaining it; an economy that is stuck in the slow lane, not one that is picking up speed; an economy still mired in austerity. The Institute for Fiscal Studies expects the marginal improvement in the public finances that has emerged over the past few months to be short-lived and to make no difference to the prospects for public borrowing three years down the road. The OBR also expects the economy to be in the same sad place in 2020 that it thought in its November report.

The Chancellor announced a string of minor measures, which have been referred to already, such as rate relief for pubs and free season tickets for some kids at selective schools. He tweaked a few schemes such as technical training and gratuitously hit the self-employed. However, he did not cancel any spending cuts that were already in the pipeline; nor did he explain why he plans to spend only a fraction of the proceeds from the new apprenticeship levy on extra training. He left investment in public infrastructure stuck below 2% of GDP, miserably less than half the share it was between 1948 and 1983. Does he really think we have enough social housing, care homes, hospital beds and classrooms? Are there enough Sure Start children’s centres? What he did do is quietly tighten still more the fiscal squeeze that he has planned for 2017-19, as the figures for cyclically adjusted public borrowing show.

It will mean austerity, still more austerity, and more failure. Not only are local government services being decimated; not only is the NHS tottering underneath the strain; not only are head teachers at their wits’ end; not only is social care almost collapsing, with the Chancellor’s extra funding risibly and insultingly inadequate, as the noble Baroness, Lady Altmann, an expert on elderly policy, has pointed out. Not only is there all this colossal social failure, but there is massive economic failure created by the Tories’ own self-imposed obsessions, with their borrowing and debt targets still wildly out. Having missed them by a mile in the last Parliament, they will miss them again in this Parliament, he now admits, so he has shifted their achievement to the next Parliament. It is austerity for ever, and that is without the crushing self-inflicted economic damage of Brexit.

Will the Tories never learn that it is growth, not austerity, that brings borrowing and debt down? After the sky-high debt and borrowing bequeathed by the Second World War, both Labour and Tory Governments invested, not cut—achieving much higher growth than the pitiful levels achieved under Tory Chancellors since 2010—and simultaneously cut borrowing and debt. British productivity is pathetically pitiful; our skills are painfully poor; our trade deficit is historically huge; our infrastructure is embarrassingly inadequate. We have mammoth personal debt, a sinking savings ratio, and in real terms pay is about to plummet: real average earnings will be stagnant for 15 years, no higher in 2022 than they were in 2007—the longest squeeze on real wages since the Battle of Trafalgar.

All this and Brexit broods ominously ahead, with this Government having not the slightest notion of where they are taking the country or the economic damage that will result. Yet the Chancellor tinkers here and there. The story of this budget is simple, and le Carré provides the clue: tinker tailor wonder why.

Finance Bill

Lord Hain Excerpts
Tuesday 13th September 2016

(8 years, 6 months ago)

Lords Chamber
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Lord Hain Portrait Lord Hain (Lab)
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My Lords, I continue with the theme excellently elaborated by my noble friend. Treasury Ministers are often said to be like drivers who have to steer the economy by looking in the rear-view mirror, reacting after the event to data that are slow to emerge, to developments that take time to assess and signals that are difficult to distinguish. Those data are contradictory, developments are inconsistent and signals blend in with the background, like closet speed cameras set up to catch unwary motorists. Some say that the situation today is made doubly difficult by the fog of uncertainty in which we are shrouded by the result of the European Union referendum. They say that Britain’s new Prime Minister is not only First Lord of the Treasury, she is also a lady in waiting—waiting for the smoke to clear from the Brexit battlefield. Only then, they argue, will the Government be able to judge just how much damage the referendum result has done to Britain’s economic prospects and how Ministers should respond.

Yes, we face unusual uncertainty today because of Brexit, and many people warned about that; but we are far from flying blind. After all, it was the Prime Minister who was the first to acknowledge that the economy was in trouble and way off the course charted for it by the outgoing Chancellor. Even before taking over at No. 10, she declared that the Government’s target of a budget surplus in 2020 was a dead duck. When talking about the Cameron Government’s budget strategy, she sounded like Cinderella’s stepmother contemplating a child to whom she feels no commitment and for whom she feels no affection. She was clearly fed up with failure.

The reason why the Government have had to abandon their 2020 budget surplus is obvious. It is the same thing that has made them miss every such target since 2010—poor economic growth brought on by the tightest fiscal squeeze among the advanced economies. It is a budget squeeze that the former Chancellor used to boast about and that he planned to continue for the next four years. That was in the days before he swapped the hard hat and high-visibility jacket for a Harry Potter invisibility cloak—presumably it was either that or “Strictly” for him. His squeeze is one that means you fall short of your growth targets causing tax revenue to drop and your debt and deficit targets to go for a burton. Then you demand more spending cuts to reduce the role of the state and bring down government borrowing, so the downward spiral continues on and on. Surely, it was completely clear well before the referendum result that the UK economy was running out of steam. It grew slower last year in 2015 than the year before. It is growing slower still this year and the referendum result means even slower growth next year. The economy has become like the farmer who is always doing worse than last year but better than next year.

Last November, the Bank of England expected the economy to grow by 2.6% in 2017. In February, it cut that forecast to 2.3% and in August, it was cut again to only 0.8%. Independent economists agree that the Treasury’s most recent survey of independent forecasts for GDP growth showed an average forecast for 2017 of only 0.7%. Most of those forecasts were made after the EU referendum. The National Institute for Economic and Social Research reckons there is a 50:50 chance of recession and that Britain is,

“in the midst of a slowdown”.

The Bank of England Monetary Policy Committee was admirably quick to take action to forestall such a slowdown from turning into a slump, but as my noble friend Lord Darling said, there are limits to the effectiveness of monetary action alone when interest rates are already so close to zero. What is needed is complementary action on the fiscal front to give the economy a sharp boost, ratchet up Britain’s growth rate, and bring the public finances back into balance by doing so.

The IMF is calling on Governments to use fiscal policy to stimulate their economies and not rely on monetary measures alone, and so is the US Treasury. Japan has shown the way. The Japanese Government have launched a £33 billion fiscal boost that includes extra infrastructure investment, help for small and medium-sized businesses hit by uncertainty due to Brexit, and higher welfare spending, notably childcare subsidies and cash payments to 22 million low-income households. That is the kind of action that this Government need to take for Britain too. The need is pressing, yet we are not even half way from the EU referendum in June to the new Chancellor’s Autumn Statement when he says he may reset fiscal policy. His decision to delay that Statement until 23 November shows what I think is a reckless lack of urgency in tackling the slowdown.

Abandoning the budget surplus target for 2020 says nothing about easing the squeeze between 2017 and 2019. Paul Johnson of the Institute for Fiscal Studies has pointed out that simply dropping the 2020 surplus target will not mean the end of austerity. It just means that it will go on for longer, potentially until well into the 2020s. The economy is running out of momentum now. Productivity gains have come close to a dead stop. The longer the Chancellor waits, the harder it will become to break out of the vicious circle and breathe fresh life back into an economy that is in dire need of the help that only he can provide.

Britain urgently needs a public investment boost from the Government, otherwise the UK economy will remain trapped in a slow growth/no growth equilibrium that could last for years. The truth is that far from being a successful Chancellor, George Osborne fell behind schedule on his debt targets and went significantly over budget on borrowing, where he became a serial offender. In this past financial year, 2015-16, he delivered a £76 billion borrowing figure, exceeding the figure forecast by my noble friend Lord Darling in his final Labour Budget in March 2010 when he planned to bring down Britain’s budget deficit over the following Parliament to £74 billion in 2014-15.

Yet it was precisely Labour’s £74 billion level of planned borrowing that the new Tory Chancellor condemned when he took over at the Treasury. It would take Britain close to “the brink of bankruptcy”, he fulminated, insisting that Labour could not be trusted. Instead he replaced it in June 2010 with new, tougher targets, halving Labour’s planned borrowing in 2014-15 from £74 billion to £37 billion and setting himself a tight borrowing target of £20 billion for 2015-16. Both of those targets were missed by a mile. By March 2016, debt was £275 billion above George Osborne’s target and the 2015-16 budget deficit was £56 billion higher than he had planned in 2010. So much for the credibility of his “long-term economic plan”.

All his scaremongering about Britain becoming another Greece also proved to be nonsense. Just like under the last Labour Chancellor, my noble friend Lord Darling, even during the banking crisis Britain had no problem financing its budget deficit and the yield on UK government debt dropped to an all-time low of 1.22% in February this year. The Chancellor kept crying wolf while the bond market kept behaving more like Britain’s best friend.

The rate of deficit reduction should be linked to the pace of economic recovery and the Government need to take vigorous fiscal action to promote faster growth with an immediate boost to public investment aimed at housebuilding, infrastructure, education and skills, and low-carbon investment. Looking further ahead, longer life expectancy and increasing demand for what the American management writer Peter Drucker termed “knowledge workers” mean an expanding role for the state in education, pensions and health services, especially elderly care. The Government’s determination to shrink the role of the state is taking our society in entirely the wrong direction. We need to renew the case for a balance between private enterprise and public provision. Jacob Hacker and Paul Pierson say in their 2016 study of the part played by government in helping advanced societies to flourish that:

“The mixed economy remains a spectacular achievement … By combining the power of markets with a strong dose of public authority, we achieved unprecedented prosperity”.

Growing inequality must also be reversed because the real incomes of not only working-class but also middle-class Britons have fallen badly behind, with only the top 10% benefiting from the neoliberal economic era.

Centrist US economic commentator Rana Foroohar’s 2016 book, Makers and Takers, argued that Adam Smith’s vision of market capitalism had broken. Markets, she showed, no longer supported the economy and had delivered only divisive and slower than normal growth, where the very rich got richer and the rest trailed behind. She said:

“Market capitalism was set up to funnel worker savings into new businesses via the financial system. But only 15 per cent of the capital in financial institutions today goes toward that goal—the rest exists in a closed loop of trading and speculation … In the US, finance doubled in size since the 1970s, and now makes up 7 per cent of the economy and takes a quarter of all corporate profits, more than double what it did back then. Yet it creates only 4 per cent of all jobs. Similar figures hold true for the UK”.

Where both a fast-ageing society and a chronic housing shortage demand more not less government, the British state continues to be shrunk by this dogmatic Government’s policy. Our public services are being cut and outsourced. Job insecurity, zero-hours contracts and low pay are rife. Occupational pensions are expiring. Skills lag abysmally. Productivity is embarrassingly low and the trade deficit both embarrassingly and historically high. Frankly, this Finance Bill is at best irrelevant and at worst totally counterproductive to addressing Britain’s deep-seated problems. The Government must radically change course and offer an alternative to such systemic failure.