Bank of England (Economic Affairs Committee Report)

Lord Hannan of Kingsclere Excerpts

Thursday 2nd May 2024 Lords Chamber

[Lord Hannan of Kingsclere (Con)]

My Lords, I think we just heard a flavour of why at least one former Prime Minister was in the habit of publicly saying that my noble friend Lord Moynihan was a far more reliable forecaster than the Treasury. It is a great privilege and pleasure to follow his maiden speech.

I hope I can say this as an ex-politician among other ex-politicians: if you have been close to government, you can see how far a politician can go by just saying the right things and voting the right way but making barely a dent on the real world. That option is not open to the entrepreneur. My noble friend has gone through life making a tangible and benign difference in field after field. Most obviously, in business he has turned around hundreds of companies, perhaps most spectacularly the firm PA. I speak not of the wire service, I should say in this place, but of the technological and scientific consultancy, which was effectively bankrupt when he took it over and which he left with a valuation of $2.5 billion.

He has done the same thing as president of the Albert Hall. Look at the outside next time you are there and see the transformation made possible by the £11 million surplus that my noble friend created as president. He did the same—I am conscious that I may be queering his pitch with a great many of those in the Chamber now—as the chairman of the committee of Vote Leave, taking over with a deficit and leaving with a victorious outcome.

He is very hands-on. He has most recently been not just purchasing and supplying ambulances for Ukraine but driving them across the border himself in quite difficult conditions. As much for his cheerful and infectious optimism as for his keen intellect and focused pragmatism, we are very fortunate to have him alongside us in this place.

We are living through an unprecedented and uncontrolled monetary experiment. Starting in March 2009, the Bank of England began a programme of money printing that would have put to shame a 1970s Latin American junta. Since then we have increased the amount of money in circulation by an almost unbelievable 50%. Nearly half of that increase has been since 2020 as a consequence of the pandemic.

You cannot magic up that amount of currency without deleterious impacts on people’s lives, although people do not always join the dots. A number of the things that people complain about in this country have their root cause in excessively loose monetary policy—most obviously the squeeze on living standards, but also the rise in house prices, the divergence between haves and have-nots in terms of assets, and the public sector strikes that continue to plague us, as noble Lords will know if they travel here by train. They all have their roots in excessive inflation.

We heard about the malign consequences of inflation from the noble Lord, Lord Macpherson of Earl’s Court. I think I would go further than he did. He said that QE exacerbated but did not cause inflation. What else will cause inflation if not such a massive expansion of the money supply? Milton Friedman said that inflation is always and everywhere a monetary phenomenon; it is caused by too much money chasing too few goods—“Milton! thou shouldst be living at this hour: the Bank of England hath need of thee”.

It was quite extraordinary to hear Gertjan Vlieghe, then a member of the Monetary Policy Committee, say in April 2020 that the balance sheet of the Bank would be comparable to those of the central banks of the Weimar Republic or Zimbabwe—his words, not mine. How can we look at that and not consider the consequential impact on people’s lives in the real world?

I have little to add to the brilliant analyses of my noble friends Lord Bridges and Lord Lamont, but let me make a point about accountability. When people complain about rising prices, rising asset values and the difficulties of having to run to stand still, to whom should they direct their complaints if the root causes are independent authorities, which have been put deliberately beyond the reach of elected Ministers? If the vast majority of the decisions that impact on our lives are taken not just by the Bank of England but by a series of other quangos and agencies, from the Climate Change Committee to the European Court of Human Rights and the Office for Budget Responsibility, the act of casting a ballot is devalued.

That is something that this report takes some steps towards addressing. My noble friend Lord Bridges hinted at this, but he could have gone a little further. He talked about the mandates and appointment processes for governors and other senior staff at the Bank of England. If you are in for a couple of terms and then no one will bother you again, that strikes me as a fairly weak form of accountability.

I would also like to see Parliament taking some responsibility for the mandate of the Bank. Specifically, I would like to see its terms of reference tweaked so that this kind of unprecedented monetary expansion cannot happen without approval. I would like to see the terms of the Bank of England changed so that the maintenance of the value of the currency, sound money, is expressly recognised as one of its goals. Whether or not you agree with me, and whether or not you think that is a proportionate policy, surely we need stronger mechanisms of oversight.

Today is local election day. It is one of the few elections that your Lordships are allowed to participate in. The polls are still open, but I will go out on a limb here and say that the election result will be a massive win for the “Can’t be bothered” party. The number of people who took the trouble to register to vote but did not bother to cast a ballot today will be greater than the votes cast for all the other parties put together. Why is that? Is it sheer cynicism or apathy? Is it not that the decisions that most directly touch on people’s lives have been lifted out of the democratic process and placed in the hands of bodies that are invulnerable to public opinion? Changing the mandate of the Bank of England will not solve that problem on its own, but it is part of a process of restoring the supremacy of the elected representative and thereby restoring honour, meaning and purpose to the act of casting a ballot.

Alternative Investment Fund Designation Bill [HL]

Lord Hannan of Kingsclere Excerpts

2nd reading
Friday 1st March 2024 Lords Chamber

[Lord Hannan of Kingsclere (Con)]

My Lords, I congratulate my noble friend Lady Altmann on introducing this proportionate, timely and sensible measure. I also congratulate the noble Baroness, Lady Bowles, on setting out clearly where the existing legislation is going wrong. Some 11 years after the event, I belatedly offer an apology to the noble Baroness and some of her colleagues in the European Parliament. We served there together, representing the same region. In common with a number of Conservative MEPs, I used to tease our Lib Dem colleagues by saying, “They will sign anything that is put in front of them from Brussels. They never read it; they unambiguously support it”. But that was not really true—and it was not true on this occasion.

For all the reasons we have heard, this legislation was using a sledgehammer to miss a nut. This was legislation intended as a response to the financial crisis, but, as somebody put it, when there was a general melee in the bar brawl, instead of looking for the person who started it, they just hit the nearest person.

I remember the unanimity in this country against the AIFMD in 2013, in the industry itself, in the City more widely and among all the political parties. I remember one of the fund managers saying, “This is such a needless and costly measure that we are exploring whether just to break it and pay the fine and call that a fee. We think that that may be less intrusive than having to assimilate the compliance costs”.

I assumed that, the day after Brexit, this would be at the top of the list of the measures to be axed, since it had literally no support. In fact, I had assumed—rather innocently and naively, I now see—that the first response of the Government after Brexit would be to go back and look at all the measures that the UK had opposed and voted against in council, and at the departmental arguments raised against them, and then see whether those still applied. I am afraid that that has not happened. I had underestimated what Milton Friedman called the tyranny of the status quo: the way in which, however irrational and arbitrary your arrangements, some people have found a way of making a living out of them and become opponents of change.

I am afraid that this is one of the dynamics that makes deregulation very difficult. AIFMD is maybe not the best example, but it is an example none the less of the entire industry opposing something, yet, once people have assimilated the compliance costs themselves, they lose interest in repeal. Indeed, in some cases it is not just that they lose interest in repeal; they do not want the next guy to come in and undercut them, so they sometimes perversely become advocates for the thing they used to oppose, because they now see it as a barrier to entry.

By the way, this goes way beyond the field of financial services. It applies to some of the more bizarre SPS and food safety things we have inherited, right the way through to the REACH directive. People say, “Well, the industry is now in favour of it”. Of course they are—once they have taken on the compliance costs. However, the role of a Minister and of a Government is not just to act as the agent, tool or mechanism of the existing producer interest, but to think about the companies that do not yet exist and about the consumers, the start-ups and the entrepreneurs.

As some of your Lordships know, I was quite wet about Brexit: I wanted a Swiss-type deal all the way through, and I argued that we should have maintained a lot of the accumulated single market measures, which would have solved a lot of problems. We did not do that. The Theresa May Administration took a different attitude, and we paid a fairly high price in the disengagement talks for the right to regulatory autonomy. Okay; I am on board with that if that is the policy. However, surely we can all agree that the worst of all worlds is to pay that price in the talks and then not use the regulatory autonomy. It is bizarre to insist on the ability to have these freedoms and then, even in a case like this, where all sides agree that we are doing something costly and needless, we do not use them.

I get that there will be probably a majority in this House who, in other areas, want a much closer deal now with the EU and to go back into some kind of customs union arrangement. Fine; but I think we are all agreed that we are now autonomous and competing globally in financial services, and we need to make the City of London a place where people want to invest.

I close by saying to my noble friend the Minister that when she sees my noble friends Lady Altmann and Lady McIntosh of Pickering, and the noble Baroness, Lady Bowles—and indeed, I assume, the noble Baroness, Lady Kramer, although she has yet to speak—all effectively lining up and saying, “We need to be doing more to take advantage of our Brexit freedoms”, perhaps something has gone wrong and this is the time to act.

Overseas Territories: Tax Haven Status

Lord Hannan of Kingsclere Excerpts

Monday 26th February 2024 Lords Chamber

[Baroness Vere of Norbiton (Con)]

Obviously, I cannot comment on any individual’s tax affairs, but it is the case that overseas territories are non-sovereign jurisdictions. They have a unique relationship as part of the British family, but they set out their own tax legislation within their own legal structures and it is certainly not for the UK Government or Parliament to drive a coach and horses through that.

[Lord Hannan of Kingsclere (Con)]

My Lords, has the Minister’s department carried out any assessment of how much higher tax rates would be in the rest of the world if there were not competition from these lower-tax jurisdictions to keep us in check?

[Baroness Vere of Norbiton (Con)]

I am afraid I have to say to the noble Lord that we have not carried out that assessment.

Alternative Investment Fund Managers Regulations 2013

Lord Hannan of Kingsclere Excerpts

Monday 13th November 2023 Lords Chamber

[Baroness Penn (Con)]

My noble friend is absolutely right about ensuring that pension funds are invested in the future of British industry. In fact, this was the theme of my right honourable friend the Chancellor’s Mansion House speech this year. He set out a number of reforms that the Government are taking forward to support this. There was rapid consultation on a number of those areas, and we expect further updates at the Autumn Statement.

[Lord Hannan of Kingsclere (Con)]

My Lords, repeal of the AIFMD should have been straightforward. When it was brought in some 16 years ago, it was opposed by every party. It was opposed by Labour and the Conservatives, the industry and financial services more widely. What we are seeing here is the way in which, once a sector absorbs the administrative costs of doing something, however much it opposed it coming in, it then becomes an opponent of repeal. Is it not the role of Ministers to look beyond producer capture and look at the interests of the companies that do not yet exist and, above all, at the interests of consumers?

[Baroness Penn (Con)]

My noble friend is absolutely right. The Government consulted extensively when the Alternative Investment Fund Managers Regulations were introduced. That was some time ago but, as part of the smarter regulatory framework, we are working closely with the FCA to explore what changes can be made to AIFMD to make it more streamlined and tailored to UK markets. I assure all noble Lords that that work is being taken forward with urgency.

Local Authorities: Budgets

Lord Hannan of Kingsclere Excerpts

Tuesday 19th September 2023 Lords Chamber

[Baroness Penn (Con)]

I do not agree with the noble Lord’s analysis but, as I said to the noble Baroness in my Answer, our approach takes councils’ relative needs into account. We recognise that this may need to be looked at again but, to provide councils with certainty, that will not be done during this spending review period; it will be looked at after the next Parliament.

[Lord Hannan of Kingsclere (Con)]

My Lords, we currently give three-quarters of local councils their grants from the centre. It is a higher figure than for anywhere in Europe, except tiny Malta, hence the assumption on all sides is that the solvency of local authorities is ultimately for central government. Does the Minister not agree that it would be healthier for democracy if local councils raised a higher proportion of their own budgets, so that there was a proper link between taxation, representation and expenditure?

[Baroness Penn (Con)]

My Lords, the Government are moving towards such steps—for example, through mayoral combined authorities and other areas where we are devolving both greater control of funding and powers to those areas to act. With that comes greater accountability.

UK Economy: Growth, Inflation and Productivity

Lord Hannan of Kingsclere Excerpts

Thursday 29th June 2023 Lords Chamber

[Lord Hannan of Kingsclere (Con)]

My Lords, when the Government announced a windfall tax on energy companies, the Treasury said it would bring in £42 billion. That sounded great. In March this year, the OBR revised that figure down to £26 billion, and now the first independent study, by Wood Mackenzie, says it will be £16 billion. These are not small figures, but it is a small example of what I think is going wrong with our economy. There is a repeated readiness to do something that is popular in the short term rather than something that is in the interests of our long-term prosperity.

To some degree, this is, if you like, the institutional view of a lot of our economic bodies. I have spoken many times here about the reluctance of the Treasury to take into account the secondary or dynamic effects of tax: in other words, how cutting tax rates can generate more economic activity. We saw it with the 45p rate and with corporation tax. One reads that the plan the Chancellor has for a big bang 2.0 in the City is being held up by the Financial Conduct Authority, which is now against reversing the EU ban on short selling and all the rest of it. One reads that proposed tax cuts would fall short of the OBR, although I have a feeling that if the Government change at the next election, the OBR will suddenly have no problem at all with borrowing the £28 billion for green investment. We will see whether that comes about; but that, of course, is under a different sort of moral category.

The real point is that we are reluctant to do things that challenge people’s intuitions and this leads us into bad policy decisions. People are always in favour of windfall taxes because they think that somebody else is going to pay. They do not really understand that, as Ronald Reagan said, businesses cannot pay taxes; they can only collect them. In other words, all taxes are passed on to consumers, customers, shareholders and so on. They are always a popular idea, in the same way that a wealth tax is: people think somebody else will pay it. The idea that the wealthy will not sit around waiting to pay tax but may move jurisdictions or retire earlier is a counter-intuitive and difficult one.

The real problem of our modern economy is the failure to take on some of the false intuitions caused by our maladaptations. Brian Caplan of George Mason University did a survey in which he looked at stuff that is consensual among all economists, left and right, and at how that diverges from the general view of things. He found that there were three particular areas of widespread public bias, the first of which is a general reluctance to understand how prices and competition work. Most people intuitively think that prices go up because of what the seller feels like charging. The noble Lord, Lord Whitty, just referred to that as greedflation, but of course, that is not the reality of how markets work. I am struck that the people who blame inflation on excess profits never make the converse argument: that when prices fall it is presumably, by their own logic, because of the generosity of these big corporations. That is a huge rift between how things work and how most people see them working.

The second area is what Caplan calls the make-work fallacy. Most people insist on seeing jobs as a benefit rather than a cost, or rather, they do not understand that jobs are a means to an end, the end being greater prosperity, hence the constant pressure on Governments to create jobs, as though that is a good thing in itself. We could create jobs if we banned mechanical diggers and had hundreds of men with shovels taking their places. That would create jobs in one sense but it would make everybody poor. It is a very difficult argument to get across that if we are able to exploit technology, we should be able to work shorter hours while living better, and that that is not a bad thing.

Then there is what Caplan calls the anti-foreign bias. People are irrationally suspicious of imports and always tempted into the argument that security depends on producing everything yourself, when of course real security depends on sourcing from as wide a variety of producers as possible, so that you are not subject to a local shock which might as easily happen on your own territory as anywhere else. All these things are counterintuitive and have to be learned. That is why economists are ahead of the people who have not looked at them.

One of the oddities in this whole debate is people talking about free-market dogma. Free markets are the least dogmatic thing because they run up against all these intuitions. It seems completely plausible that a planned economy would work much better than one where things are left higgledy-piggledy to arrange themselves, or that if you have two factories doing the same thing, a wise and disinterested committee of government experts would say, “Why don’t you carry on with factory A, but factory B can be reclassified to something else?” All these things sound plausible. It is just that they lead to absolutely catastrophic outcomes.

The understanding of how markets work is the opposite of a dogma; it is a pragma—an application of observed experience against intuitions. But most people will stick with their gut and then reason backwards, which is why rent, price and wage controls and all the rest of it are perennially popular. The challenge for a Government in the age of instant media is to be able to have the patience to look beyond the immediate headline and do what is right in the long run. My noble friend Lord Griffiths quoted all those old Chancellors—Barber, Healey, Howe and so on—but none of them was in an age of Twitter. They were able to think in terms of an electoral cycle and say, “Judge us at the end of four or five years on the overall package”. Every one of Margaret Thatcher’s privatisations was unpopular when it happened. Even the lifting of exchange controls was unpopular when it was polled in advance. However, she understood that the important thing was to look not at the popularity of a policy when polled in isolation, but rather at its overall effect.

I hope that, if indeed there is a change of Government, there may be some longer-term thinking. The Labour Party could get away with things where it would be a little more trusted than this Government—on NHS reform, building more houses, and maybe on allowing the pension age to rise in line with longevity—but only if it is prepared to look beyond the immediate headlines. Is that possible in this day and age? Well, as the poet said:

“An’ forward, tho’ I cannot see,


I guess an’ fear!”

Tourist Spending: VAT

Lord Hannan of Kingsclere Excerpts

Wednesday 24th May 2023 Lords Chamber

[Baroness Penn (Con)]

I am not sure that the reversal of the VAT refund scheme would encourage more schoolchildren to visit the Science Museum. But I will certainly take back the noble Lord’s point about visas to the Home Office.

[Lord Hannan of Kingsclere (Con)]

My Lords, there seems to be a discrepancy between the Treasury figures quoted by my noble friend the Minister and almost every independent survey, including the one referred to by the noble Earl, Lord Clancarty. There is a persistent pattern of the Treasury refusing to take into account the secondary, more dynamic impact of taxes—the way in which lower rates can generate more economic activity. Does my noble friend the Minister think that it might be time to revise the way in which the Treasury does these forecasts, to take account of our observed experience?

[Baroness Penn (Con)]

As I have said to noble Lords, the Treasury took into account a wide range of information when reaching its decision. Indeed, the Treasury was judicially reviewed on the decision to withdraw the VAT RES scheme in Great Britain and successfully defended it, with the judge noting the thorough government analysis. As more evidence and data emerge in this area, we will of course keep it all under review.

UK-EU Relationship in Financial Services (European Affairs Committee Report)

Lord Hannan of Kingsclere Excerpts

Wednesday 17th May 2023 Grand Committee

[Lord Hannan of Kingsclere (Con)]

My Lords, I hope noble Lords will forgive this intrusion into their counsels; I am not a full member of the European Affairs Committee, although I have read this excellent report cover to cover. I am a member only of one its sub-committees—a lowly member of the Sub-Committee on the Protocol on Ireland/Northern Ireland—so I feel rather like a fourth-former who has wandered into the prefects’ lounge. I will try to squeak out my message as briefly as possible. I have just three points to make.

The first is a warm endorsement of what the noble Lord, Lord Bilimoria, just said about visas, and specifically work-related visas—the ability for people to come and do business. It is a completely separate issue from inward migration, and I would very much like Ministers to consider a Commonwealth business visa. By all means, make it difficult to qualify, have a high threshold for the turnover of a company and so on, but once you have qualified and get it, you should be allowed to travel to all participating Commonwealth states that have opted into the scheme.

My second point follows on from what my noble friend Lord Trenchard said about the alternative investment fund managers directive. I was a Member of the European Parliament when the AIFMD was produced, and it was one of those occasions when the UK was strongly against. The noble Lord, Lord Liddle, pointed out that we often supported these regulations; not on this occasion. There was almost unanimous opposition to it, not only across the industry but across the City more widely. It was seen as a needless burden. Why has it not been repealed?

Here we come across an interesting dynamic in the nature of regulation, which is that once companies have assimilated the compliance costs, they lose all interest in repeal. In fact, it is worse than that: they see no reason why a competitor company should come and outcompete them by not having to jump through all the hoops that they did. The field of the AIFMD is good example: the people most strongly against the regulation when it was proposed have now become its advocates and defenders, because they see it as a way of raising barriers to entry.

Those of us in this House, or in government in any sense, should not be thinking only of the established producers; we need to think about the start-ups, the companies that do not exist yet and the consumers. We need to think about the overall competitiveness of the City, rather than the convenience of some established players. I pick AIFMD simply because my noble friend Lord Trenchard mentioned it but this pertains in a number of areas, not least in the field of financial services. We are having a lengthy debate in another part of our building about the retained EU law legislation, but we will have a real problem repealing anything—never mind the source—if we begin from the point of view that if the industry is in favour of a regulation, that is the beginning and end of the argument. We need to raise our eyes to more distant horizons.

My third and main point is about chapter 2 of the committee’s excellent report. I add my congratulations to those of the noble Lord, Lord Liddle, to the chairman, the noble Earl, Lord Kinnoull, who has done an extraordinarily good job as far as I can see, albeit from the outside. On equivalence, the EU has every right to behave as a sovereign entity and choose to prioritise politics over economics. In other words—to put this at its most brutal—if it chooses to make itself slightly poorer in order to teach us a lesson, and to inconvenience its own companies and deny them unfettered access to the world’s deepest and cheapest money markets to make a point, that is absolutely its right. It is not for us to cavil or quarrel, but it is vital that we do not fall into the trap of thinking the same way. The prosperity of the City of London survived the decline of sterling as an international currency in the early 20th century because it remained open, we had a light-touch attitude to regulation and we did not discriminate on grounds of nationality against companies from other countries and, indeed, continents.

By the way, I would extend this argument about non-retaliation to almost all the fields where we see some asymmetry between EU and UK policy. For example, as I am sure most of us have noticed by now, EU citizens are free to use our e-gates when they enter the United Kingdom but the EU has chosen not to return the favour, so we have to queue up and get our passports stamped. That is fine; that is the EU’s right. If it wants to make things more difficult for every other non-EU national—Indians, Americans and so on—that is, in the end, its own loss and will be at its own expense. It would be crazy for us not to remain open and welcoming, including to our friends from Europe.

I make the same point about goods traffic. The sub-committee of which I am a member has spent a lot of time looking at the EU’s claim that it has to have these checks in Ireland. It is striking that there has never been an equivalent argument from the UK. At no stage have the British Government said, “We need checks in Northern Ireland in order the preserve the integrity of our market”. By the way, we have not even imposed such checks on EU goods coming in through other routes—quite rightly, because we should trust EU regulators. We have been importing stuff from our European allies and neighbours for decades; it would be crazy for us to have a panoply of expensive regulation purely with the effect of slowing things down and making things harder for our importers of, especially, component parts. Take the great argument used by an economist in this country 100 years ago: if others choose to put rocks in their harbours, we should not retaliate by putting rocks in ours.

The asymmetry on equivalence discussed in this report is based on a widespread fallacy; let us call it the mercantilist fallacy. An awful lot of people—including, I have to say, a lot of my former colleagues in the European Parliament—believe that the strength of an economy depends on exports and that there is some virility in having a big trade surplus. This argument was debunked by Adam Smith two and a half centuries ago. There is no point in amassing a big surplus for no reason; the real drive to economic growth comes from cheaper imports that both free up people’s time and resources to do other things and drive domestic growth.

However, it is always difficult to make that argument as an elected politician because it is counterintuitive and people tend to think that the success of another is at their own expense. In fact, the great 18th-century philosopher David Hume put it beautifully, if noble Lords will allow me to quote him, when he said:

“Nothing is more usual, among states which have made some advances in commerce, than to look on the progress of their neighbours with a suspicious eye, to consider all trading states as their rivals, and to suppose that it is impossible for any of them to flourish, but at their expence. In opposition to this narrow and malignant opinion, I will venture to assert, that the encrease of riches and commerce in any one nation, instead of hurting, commonly promotes the riches and commerce of all its neighbours”.


That is why we should want the EU to flourish and should never make the mistake of raising barriers, whether in financial services or in other forms of trade. We have an obligation to the EU as our long-standing friend and ally, of course, but even if we were to look at this issue in a narrow, selfish way and be without a drop of altruism it would be crazy for us to impoverish our neighbours. We want our neighbours to be as rich as possible because that makes them better customers, which then spills over into our own prosperity. If they cannot see that, we can only lead by example and hope that they eventually understand what is to their own advantage. However, as I say, the EU is a sovereign union.

Our country was raised to the highest opulence simply by the expediency of dropping its barriers, from the 1830s and 1840s onwards, and inviting the traffic and commerce of the world without obstacles. It led to an improvement in living standards, especially for the poorest people, which every foreign visitor to Victorian Britain was struck by. Now, we again live in a world that is turning towards protectionism—in the United States, in the European Union, in China and almost everywhere else. Once again, I think that it falls to this country to be the apostle of unrestricted commerce and to tell the story of free trade as the great liberator and the most effective means there is for conflict resolution, social justice and poverty alleviation.

European Structural and Investment Funds and the European Agricultural Guarantee Fund

Lord Hannan of Kingsclere Excerpts

Tuesday 21st March 2023 Lords Chamber

[Baroness Penn (Con)]

My Lords, we had a discussion last week about the needs of Wales when it came to government funding. I told noble Lords then that we took into account the greater needs of Wales as calculated by the Holtham commission. Indeed, the funding that goes to Wales is over and above the assessed needs of Wales at the present time.

[Lord Hannan of Kingsclere (Con)]

My Lords, will my noble friend the Minister confirm that we now have the advantage of being able to start with an identified need and then look for how to fund it rather than, as necessarily happened under the European funds, to start with a figure of money and then cast around for ways to spend it?

[Baroness Penn (Con)]

My noble friend is right that one of the opportunities that we have, having left the EU, is to look at programmes and make sure that they deliver against our policy priorities in the UK. That is exactly what we are seeking to do with our agricultural support schemes, for example, and we will continue to look for opportunities to do that.

Devolved Budget for Wales: Inflation

Lord Hannan of Kingsclere Excerpts

Wednesday 15th March 2023 Lords Chamber

[Baroness Penn (Con)]

Instead of removing the Barnett formula, we have amended it to include that needs-based factor. The Barnett formula is simple and efficient and provides a clear and certain outcome. With the addition of the needs-based factor, the people of Wales have the guarantee that funding based on their own needs will not fall below the assessment of where those needs are.

[Lord Hannan of Kingsclere (Con)]

My Lords, inflation did not come as some act of God; it was caused by paying people for two years to stay home and printing money to cover the difference. Is it not odd that those who called for the longest and strictest lockdown, including not least Labour’s Administration in Wales, now complain about it and demand more of the medicine that sickened the patient? Will my noble friend the Minister confirm that no one ever tamed inflation by spending more money?

[Baroness Penn (Con)]

My noble friend is absolutely right about the importance of reducing inflation. That is why it is so important that the measures we have taken in the Autumn Statement and today’s Budget mean that, when we get to the end of this year, inflation is more than halved, meeting one of the Prime Minister’s five pledges to the United Kingdom.