Budget Statement

Lord Higgins Excerpts

Tuesday 14th March 2017 Lords Chamber

[Lord Higgins (Con)]

My Lords, it is a pleasure to follow the noble Lord, Lord Macpherson, not least because he started his speech on exactly the same point I was going to make, referring to Iain Macleod’s famous dictum that a Budget that looks good on Budget day may look a lot less good a few weeks later. It has never been clearly established whether the reverse of that is true: that a Budget which is unpopular on Budget day turns out to be a lot better on reflection.

In any event, the issue that caused the most controversy the day after Budget day—NICs—needs to be considered very carefully, not least because the Chancellor got support from both the Institute for Fiscal Studies and the FT leader on the subject. I think there is some justification for what he did. Some little while ago I had the honour and pleasure of serving on your Lordships’ Select Committee on Personal Service Companies. We came to the clear view that there was a strong case for integrating national insurance and taxation altogether. Alas, that is very complicated and not something we can do at present.

I will make one other point on the controversy over national insurance contributions. It is unfortunate that the Prime Minister intervened in this matter because it is very important indeed that in the present circumstances and against the background of Brexit, we should give the Chancellor every possible support we can.

I am worried that there is insufficient integration between fiscal policy and monetary policy at the moment. The Governor of the Bank of England has been very good in responding to the position as far as Brexit is concerned. He thought there was a danger of a decline in activity and adjusted interest rates accordingly. His problem, of course, is that the effect of Brexit has been to lower substantially the rate of exchange. This is bound to have an inflationary effect and he may have to put up interest rates in the opposite direction.

The same situation is broadly true as far as fiscal policy is concerned. But, to my surprise, in the Budget the Chancellor did not really outline what he thought the challenges of Brexit were. In fact, very little reference was made to Brexit in the speech and clearly there is going to be a very real problem. It would have been helpful if the Treasury and Chancellor had spelled out the real dangers. I believe they are very profound.

The noble Lord who spoke immediately after the Minister said that in the referendum people did not vote to be poorer. Regrettably, that is probably precisely what they have done. Therefore, getting the right balance and the right Budget judgment at the present time presents a very real challenge for the Chancellor. I hope that he can subsequently spell out these issues in more detail, and integrate them more with monetary and fiscal policy.

Other points can be argued both ways. I find it rather strange to change the dividend allowance so soon after the proposals in last year’s Budget. On the other hand, I particularly welcome the proposals on social care: this will be the greatest challenge—other than Brexit—we face in the future.

Overall, therefore, this is very much a neutral, standstill Budget. We shall have to see how things develop in the background. However, it is clear from the excellent recent report from the European Union Committee, Brexit and the EU Budget, that as a result of Brexit, a lot of costs will not have been adequately analysed. We are going to go through a very difficult period as a result.

I am running out of time. I thought that today I was going to make a speech on what the Chancellor has rightly described as his last spring Budget. It will indeed be the last spring Budget. I discovered that I had spoken on not a mere 50 spring Budgets but 53, other than this one. We must wish the Chancellor well. I hope that he succeeds, not least on the very important matter—also raised by others—of reducing the deficit. When the Chancellor of the day first tried to cut the deficit, I said that it was going to be immensely difficult. I have been through that experience at the Treasury. None the less, the deadline for getting things in balance is moving ever further forward. It is essential, despite the unpopularity of austerity, for the Chancellor to continue that line of attack.

Surplus Target: Corporation Tax

Lord Higgins Excerpts

Monday 4th July 2016 Lords Chamber

[Lord O'Neill of Gatley]

My Lords, in repeating the Chancellor’s Statement I clearly said that tomorrow the Financial Policy Committee will report on its recommendations and the Treasury remains in a position to act on whatever advice is given with respect to support for whatever area of business—small, large or otherwise—that may or may not require additional help. On corporation tax, as I also said, that is a recommendation of an appropriate policy response in the event of the decision we have made to send a message to the world that Britain remains open for business. I imagine that a specific policy will be put in place in line with the Autumn Statement plan as envisaged previously, once we have a new Prime Minister in place.

[Lord Higgins (Con)]

My Lords, it is fortunate that the Chancellor has remained in post, since it would have created enormous trauma in financial markets if not only the Prime Minister but the Chancellor had decided that he would not continue to deal with the immense problems we face. Can I ask two simple questions? First, as far as the corporation tax cut is concerned, will my noble friend tell us—I am sure he ought to do so—whether the Treasury estimates that this will increase or decrease revenue in the immediate future? Secondly, as far as the abandonment—I think that is the right word—of the target on the deficit reduction is concerned, that is clearly necessary to have greater flexibility in fiscal policy, but does he agree that it is essential that none the less the long-term objective of reducing the deficit is maintained?

[Lord O'Neill of Gatley]

My Lords, in response to my noble friend’s question, let me repeat that the fiscal charter, including all its rules, allowed specifically that if an external shock—in this case one that we essentially brought upon ourselves—would result in a four-quarter basis GDP forecast of less than 1% the framework could be adjusted. That is the environment in which the Chancellor made his comments in the other place, and that is what I am repeating here. With respect to the comments on corporation tax that are receiving so much attention, the Treasury will—as it always does—indicate what any cost or benefits revenue-wise or otherwise might be as and when a specific policy proposal is brought to Parliament.

Budget Statement

Lord Higgins Excerpts

Wednesday 23rd March 2016 Grand Committee

[Lord Higgins (Con)]

My Lords, my noble friend Lady Knight of Collingtree and I have been working in this building for 50 years and therefore I regard it as a great privilege to be able to congratulate her on her valedictory speech. But of course, much more than that, I congratulate her on a lifetime of public service both in the House of Commons and in the House of Lords. My noble friend mentioned that people are anxious to get away for the recess. I think that she should look behind her because it is standing room only. Noble Lords have come here to express how very much they honour the way in which my noble friend has behaved as a parliamentarian over many years during a career that has extended across both Houses. My noble friend has played an important role. She referred to a number of events when we were together in the House of Commons. We both served for many years on the executive of the 1922 Committee and I can remember a number of occasions when her point about the importance of being together rather than divided was very relevant—certainly at that time in relation to Europe and now perhaps again.

Having said that, my noble friend has, in some ways, a unique achievement. I did not realise until the other day that she had succeeded in getting through no fewer than four private Bills. All of us know how very difficult it is even to get one through. To get through four, on a range of issues from nationality to copyright and child welfare, is something of which my noble friend can be justifiably proud.

A few days ago, I had the good fortune to meet a number of my noble friend’s former constituents. There is no doubt that they hold her in great affection. It is also the case—as we see by everyone assembled here today—that she is held in very great affection in this House as well. All her friends will miss her very much, but we also wish her a very happy retirement. It could not be better deserved and we therefore join together, I think, in saying that my noble friend should be congratulated and we wish her every success and happiness in the future.

I come now to the Budget. My noble friend and I have survived more than 50 Budgets and a great many of them turned out to be rather controversial. However, it is quite difficult to remember a Budget quite like this one. The late Iain Macleod used to say that a Budget looked good on Budget day but it very rarely looked good by the end of the week. That has certainly proved to be case as far as this Budget is concerned.

I am rather puzzled by the resignation of the former Secretary of State for Work and Pensions. When I first heard about it, I came to the view that he must have resigned because the proposals which he was in favour of were being watered down. I remain unclear as to whether he is in favour of those proposals or not. In all events, it raises a number of difficult issues—referred to by the spokesman from the Labour Party and others—as clearly in the light of these changes we are left with a rather large black hole. Something needs to be done to fill that hole but my understanding is that the Chancellor will contemplate on what has happened and then make decisions in the Autumn Statement.

I want to take up a point made by the noble Lord, Lord Darling. It is important to have targets for deficit reduction because, as he well knows from trying to cut public expenditure in the Treasury, if one does not have a fairly clear view of what one needs to do and achieve, then one will run into real problems in getting anywhere near the target. On a 50:50 basis of being likely to achieve the present target, I think the Chancellor should stick to his guns, but it is going to require a number of very difficult decisions.

In that context, I make just one point. There has been some question lately of whether one should look at the ring-fencing of pensions. It is very important that that framework should be maintained. For many years I represented the constituency of Worthing, where it is said people come to die and forget what they came for. There is a very large number of pensioners there. They have suffered very badly in recent years because of what has happened to interest rates. They have all saved carefully throughout their lives and hoped to have a happy retirement, and then they find that the return they are now getting on their savings is absolutely minimal. Therefore that needs to be taken into account in any question of whether anything should be done on pensions to offset the hole which has been left by the change in policy on welfare payments generally.

I very much agree with what the noble Lord, Lord Darling, said about the general approach to taxation and public expenditure. It is certainly the case that those who lose shout a great deal louder than those who benefit from any change cheer, and that needs to be taken into account. However, we also need to consider not just the fiscal framework but the monetary framework. I am glad to see the noble Lord, Lord Skidelsky, in his place, with all his knowledge of Keynes; for some years we have gone along with the combination of Keynesian views and those of Milton Friedman, or what Paul Samuelson used to call the neoclassical synthesis. We do not have any theory now to deal with a situation where there are negative interest rates. We need some theory for that because the effect of the negative interest rates will be very important. I therefore hope that we will succeed in thinking that through collectively.

The overall situation is very difficult. We will have to contend with a situation where we have to maintain our determination to cut the deficit, otherwise we can never get back to a situation of normal demand management where we run a deficit if the economy is depressed and a surplus if it is overheating. Therefore we have to take a general view on that. Overall, however, as a number of noble Lords have pointed out, the Budget includes a number of very good proposals with regard to reducing taxation. We will need to look at this matter again to see where we go from here. However, the overall approach is right, and the Government should stick to their policy. We should continue to aim at the present target, otherwise we will find ourselves in a situation where the overall balance of the economy has still not been put right. We have a long way to go.

I conclude by quoting from one of my successors as chairman of the Treasury Committee, Andrew Tyrie, who on the question of whether the Chancellor should resign said very clearly that we should be grateful to him for leading us out of the worst economic crisis we have had in modern history. He has done that; he is the right person to continue to manage our economic affairs. While the situation is clearly very difficult, none the less we have achieved a great deal since he became Chancellor and we must continue to pursue the policy he has maintained throughout that time.

Spending Review and Autumn Statement

Lord Higgins Excerpts

Wednesday 25th November 2015 Lords Chamber

[Lord O'Neill of Gatley]

My Lords, as I think was touched on in part of the question asked by the noble Baroness, Lady Kramer, the cuts are in the Department for Transport’s operational budget. There is a significant increase in capital spending. With respect to a number of our investment challenges, I would also highlight that some of the additional £12 billion capital investment is specifically for transport. Tangential to that, I also highlight the more specific commitment to HS2, as well as—very importantly for the northern powerhouse project—a significant allocation of money for the rollout of Transport for the North, particularly the state-of-the-art ticketing proposals that we hope will come to the fore.

[Lord Higgins (Con)]

My Lords, the Chancellor is determined to eliminate the deficit, but the results so far show very clearly that this is entirely consistent with having a rate of economic growth that compares very favourably with those of other countries around the world. To add one particular point, the Chancellor was clearly frustrated at being unable to zero-rate VAT on certain items because of the European regulations. When negotiating with the European Community, would it not be a good idea to include negotiations on this particular point, which inhibits us from taking the tax decisions that we wish to take?

[Lord O'Neill of Gatley]

My Lords, on the second question, which I assume specifically refers to the so-called tampon tax, the Chancellor took great delight in announcing to the other place that a number of women’s charities would be direct beneficiaries of the money we accrued from the imposed tax from the EU. In the mean time, the Government will continue to debate the merits of that tax with the EU.

On the first question, as I touched on, the basis for the OBR’s improved forecast is of course the circular connection between the improvement in the economy—which I repeat that the OBR has become slightly more optimistic about—and the improved nominal GDP outlook for the rest of this Parliament, as well as tax revenues. That has given the flexibility for the Chancellor to commit—or recommit—to the mandate that the Government successfully achieved from the electorate to reduce the level of debt and to move towards a fiscal surplus, while choosing various priorities in domestic spending. Indeed, it is that economic success that has been so helpful in giving the flexibility highlighted in today’s policies.

Budget Statement

Lord Higgins Excerpts

Tuesday 21st July 2015 Lords Chamber

[Lord Higgins (Con)]

My Lords, in general over the past 50 years, it has been true that incoming Labour Governments have had a good economic inheritance and Conservative Governments have had a bad economic inheritance. Certainly, the incoming coalition Government had a quite appalling economic inheritance—so it is something of a relief to find ourselves now in a situation where we have an incoming Conservative Government and a reasonable inheritance. Of course, it is true that there is an enormous amount still to be done. None the less, employment is at record levels, and we are in a situation where there are higher wage settlements, but they are not yet inflationary. As my noble friend pointed out, business investment is rising, and so on. So we still have a very big job to do.

As has been pointed out repeatedly, this is the first Budget from a Conservative Government for a long while. In some respects, it is not entirely a Conservative Government, which was reflected in the remarks of the noble Lord, Lord McFall, who succeeded me as chairman of the Treasury Committee in another place. If there is one piece of Conservative economic dogma that has been as clear as anything it is that there is a danger that setting a minimum wage is likely to reduce employment. Therefore, it is a bit of a surprise suddenly to find that we are not in favour of a minimum wage but we are now in favour of a living wage, and so on—and that is the centrepiece of the Chancellor’s proposals. None the less, we must recognise that, given the problem on the other side of the equation with welfare cuts, this was probably necessary for balance. We must hope that it works out; there are clearly some timing problems, but it is an interesting development.

The thing that is clearly Conservative is to say that we must live within our means and we must go on reducing the deficit. It is of course the case that the date by which we are supposed to be back in the black has moved back a year from 2018-19 to 2019-20. But there is still a massive amount to do. If one looks at the publication by the Treasury today on public expenditure and so on, we are going to borrow this year an extra £50 billion. We talk too readily about billions or even trillions. If we are talking of billions, it is in this case 75 followed by nine zeros. It is a very big increase in borrowing. None the less, it is hoped that we will reduce the borrowing over this Parliament, which is tremendously important for two reasons. First, we really cannot go on lumbering future generations with the kind of level of debt reflected by the trillions of pounds that we now have. Secondly, ever since we ran into the deficit problem as a result of overspending by the previous Government, we have been in the situation whereby the normal basis of economic management—if you are in a boom you increase the surplus and if you are in a recession you run a deficit—has simply not been possible. We have been concentrating on reducing the deficit, so the normal balance has not been a feasible means of managing fiscal policy. Consequently, a huge weight has been put on monetary policy. On the whole, while initially the MPC tended to concentrate on interest rates rather than on the quantity of money, the subsequent increase in quantitative easing and so on has saved us from the disaster that would otherwise have resulted, given that we could not use fiscal policy to balance the economy.

I say in passing that I hope the Governor of the Bank of England will be a bit more restrained in his forward guidance. The first two or three examples had to be changed in a very short period. Surely we would do better to leave it to the analysis across the board by all the experts in the matter so that we can take a balanced view.

Interest rates are going to go up and in my view, though the Bank of England apparently disputes this, there is a very real danger that people have taken on mortgages that they are not going to be able to finance once interest rates go up significantly. As a Member of Parliament I lived through a period when people would come in on a Friday night saying they were in negative equity. I dare say that the right reverend Prelates may also have experienced this, and it is not something that we want to see again. None the less, the approach that we are adopting at the moment is the right one.

I had the privilege of serving on an ad hoc Select Committee on Personal Service Companies. There was some dispute because the Treasury refused to send as a witness either the Treasury Minister or any officials. None the less we produced a report, and it is somewhat gratifying to find that in this Budget the proposals we made, without Treasury advice, seem almost entirely to have been accepted.

The other aspect that is somewhat worrying is the way in which so many areas are being ring-fenced with regard to future economic management. Saying that we are not going to change income tax, value added tax or national insurance and so on is probably going to be a serious problem by the end of the Parliament, and I think that in the event it will be recognised that it is not a realistic way of proceeding. It may be a reasonable way of going into an election, but when we come to the end of the Parliament it may well have to be changed.

Generally speaking, though, the outlook is good. My noble friend has rightly stressed that we have more to do, but we have more opportunities ahead of us than we have had for some time.

Greece

Lord Higgins Excerpts

Monday 6th July 2015 Lords Chamber

[Lord Higgins (Con)]

My Lords, I understand the point made by my noble friend, but none the less, it is very important that the Chancellor’s expertise and our own in this matter should be fed in, at any rate behind the scenes, perhaps to try to pour oil on troubled waters, which up to now has been very difficult. I previously expressed in your Lordships’ House a view similar to that of my noble friend Lord Lawson. The economic reality which Greece is facing is that it is locked into an uncompetitive exchange rate, and it is not going to become competitive. No amount of bailing out or assistance otherwise will prevent that happening. If it is patched up now, we will be back in the same situation in a comparatively short time.

None the less, I urge my noble friend to make two points in these discussions, if need be behind the scenes. First, it is very important to make clear to Greece, and for our European partners to do so, that leaving the eurozone does not mean that it has to leave the European Union, the political implications of which would be very serious indeed. Secondly, if we get to a situation where Greece leaves the eurozone, it will be tremendously difficult to sustain the new exchange rate, and it would be advisable for the financial assistance that would otherwise be given in the form of bailout to be given to sustain Greece so that after leaving the eurozone it did not end up in a constant cycle of inflation and devaluation. Such a situation would have to be stabilised, and we should do all we can to ensure that it would be. Will my noble friend seek to ensure that that would happen?

[Lord O'Neill of Gatley]

My Lords, my noble friend raises some very interesting ideas and suggestions, and in the course of our ongoing discussions with our friends in all parts of the eurozone, which I am sure will continue through the rest of today and tomorrow, we will pass those ideas on. I thank him.

Queen’s Speech

Lord Higgins Excerpts

Thursday 4th June 2015 Lords Chamber

[Lord Higgins (Con)]

My Lords, it is a great pleasure to welcome the noble Lord, Lord O’Neill of Gatley, to the House and congratulate him on his maiden speech. It is not an easy thing to make a maiden speech from the Front Bench and to combine those things adequately. I had the same experience when I entered the House but I had the disadvantage of doing so in opposition. I am delighted that the noble Lord has the chance to do so in government.

One looks forward with great pleasure to the maiden speech of the noble Lord, Lord King of Lothbury, who will certainly make a major contribution to our debates, not least, of course, as far as banking is concerned. I also look forward to hearing the maiden speech of the noble Baroness, Lady Altmann, in due course, although she is not down to speak today. When I served for a decade or so on the Front Bench as the main spokesman on pensions, I benefited enormously from her comments outside the House. It is very good indeed that we shall have the opportunity to hear her views first-hand rather than from the sidelines.

We are lucky to have those who are now joining us at a time which I think is more difficult than any I can remember in the last 50 years or so as regards both the mass of difficult problems at home and impending dangers—the well-known expression—abroad. I benefited greatly from a very good article by Professor Vernon Bogdanor, The Crisis of the Constitution, in which he analyses the way in which we have a whole series of interlocking crises. We have a Scottish problem following in the aftermath of the referendum, a European problem with the anticipated referendum, a human rights problem, an English problem in terms of English votes and so on and a crisis of representation in a multi-party system. This is all extremely difficult and the problem arises from the way in which each of these crises interlock. As I say, this is well analysed in the article to which I referred.

In the short time I have I want to concentrate on two things: the deficit on the one hand and the European referendum and our lead in Europe on the other. I am afraid that there is still enormous confusion in the press between the deficit and debt. The two are not the same. The extraordinary thing about the deficit is that it has been overwhelmingly at the centre of our economic problems for the last five years, and will continue to be so for the next five years, but there is no mention of it in the gracious Speech. That is curious. What the Government are planning to do will be immensely difficult to achieve over the next five years, not least because so many areas have been ruled out as far as making economies is concerned. I do not know whether legislating at this stage in the proceedings to make that a solid situation we cannot go back on is very helpful.

Having said that, we need to stress that the deficit is a UK problem. Remarks by leaders in the Scottish nationalist field both during the campaign and since seem to indicate that Scotland will be exempt from the cuts that will be necessary if we are to cure this United Kingdom problem. Indeed, one gets the impression that it will be a case of having austerity in England but not in Scotland. We must face up to the fact that Scotland is already in a privileged position. The Smith commission report would seek to maintain the present balance. We have to look again at the Barnett formula and we should not rule that out. Indeed, the great Lord Barnett himself—greatly missed—felt that it needed to be changed. Therefore, I hope that we can take some action as far as that is concerned.

Finally, I turn to the question of the European referendum and the remarks made in the Queen’s Speech, which says that the Government will,

“pursue reform of the European Union for the benefit of all member states”.

There is a whole series of issues, not least freedom of movement, on which clearly the Prime Minister will need to negotiate. The crucial thing is that we must take a lead, as the Queen’s Speech says, in the interests of Europe. We must face the fact that the present structure of Europe, dependent as it is on the eurozone, is fundamentally flawed.

We should be taking a lead in planning for a situation where if a country has to leave the eurozone, it can still remain in Europe—that is very important—but also that there is a planned process of exit. I believe fundamentally that there is no prospect of the Greek economy becoming competitive at the present exchange rate. Indeed, this view is shared by a number of others, including Alan Greenspan in the United States. We ought to press the European Union to make sure that there is an escape mechanism for countries that are not going to be competitive. We cannot have a situation where they go on being bailed out for ever and the European economy as a whole, and particularly our own, is adversely affected as a result.

Budget Statement

Lord Higgins Excerpts

Wednesday 25th March 2015 Lords Chamber

[Lord Higgins (Con)]

My Lords, since the last general election, the Chancellor has succeeded in transforming the disastrous situation that he inherited into one in which recovery is well under way. He has done so to the extent that the Economist headlines its article on the Budget “Bust to boom”. I think that is something of an exaggeration. Indeed, we must always be aware of creating yet another unsustainable boom. What we need is a sustainable rate of growth, and I shall come to the problems of achieving that in the middle part of what I have to say.

The Chancellor also gave a warning at the beginning of his Budget by saying that,

“the OBR has once again revised down the growth of the world economy … the growth of world trade and … the prospects for the eurozone. It warns us that the current stand-off with Greece could be very damaging to the British economy”.—[Official Report, Commons, 18/3/15; col. 766.]

I believe that that is profoundly true. Perhaps the biggest danger that we now face is another total disruption of the international economic situation. I therefore believe that, as we clearly have an interest in it, we should take a leading role as far as the Greek crisis is concerned. The reality is that it is inconceivable that Greece will become competitive at the present exchange rates. It will do so only if it leaves the euro. Therefore, it is desperately necessary for us to help the rest of the eurozone and overcome some of its inhibitions on this issue by having a plan to ensure that Greece can leave in an orderly way.

In that context, it is important to realise that one reason the Greeks are so keen not to leave the euro is that they do not want to go back to an undemocratic regime, which they had under the colonels. Having said that, they need to be able to sustain their growth. That means that not only do we have to arrange an orderly withdrawal but Greece will need a great deal of financial assistance then, ahead of a crisis arising. Otherwise, the danger is that it will get a competitive exchange rate, having left the euro, and then find itself being financed by Russia, which would be very dangerous. Therefore, the incoming Government should give great priority to persuading the members of the eurozone that the approach they are adopting at the moment is not the right one. We must have proper contingency plans to deal with that problem if our own economy is not to be damaged in the way that the OBR suggests it might be.

I turn, secondly, to the deficit. I understand the various thoughts that the noble Lord, Lord Skidelsky, has just voiced—it is always a pleasure to follow him in these debates—but, despite what he said, it is crucial that we continue to get the deficit down. It is of course true that the Government failed to achieve the objective announced at the last general election. I said at the time that all my experience at the Treasury with previous cuts made me extremely sceptical that they would ever be able to do so, but it is still vital that we should get it down: first, because we cannot leave our children with the kind of debt that we would otherwise have and, secondly—the point made from the Liberal Democrat Benches a moment or two ago—we have to avoid the amount of interest that the Government pay on the debt becoming a bigger and bigger burden compared with other items of public expenditure. Therefore, we must remain on course. I believe that the Government are right to have changed the date but we should still try to achieve a surplus within the period that the Chancellor has now specified. That is crucial if we are to continue the process.

I should say in passing that it is quite extraordinary for Mr Miliband or Mr Balls to shout loudly that the Government have failed in their deficit objective when they have opposed every proposal that might have enabled the Government to achieve it more rapidly. That is a very cynical, but not surprising, approach for them to have adopted.

Turning to the boom, we should be grateful to the OBR for an extremely interesting forecast and analysis of where we are in the so-called gap between productive output and the level of demand. In that situation, I am rather surprised because it seems to suggest that if we continue to mop up such excess capacity as now exists, we can grow at 2.5%, which is a noticeably lower level than almost 40 years ago when we normally assumed that the growth in productive potential would be 3%.

None the less, to my surprise, the OBR is indicating that we are getting closer to that productive ceiling than was previously thought. Clearly, we probably lost more capacity in the recent crisis than we originally thought. Therefore, while we can grow at 2.5% for the immediate period, we will then be in a situation where we can grow only at the rate of productive potential, which must require more investment. I certainly agree with the noble Lord, Lord Skidelsky, on the importance of investment. We need to make sure that that happens.

In passing, there is a continual danger that we may confuse investment from overseas with simply buying up property in England from overseas. If there is to be investment from overseas, it is essential that it should be investment in real productive resources.

Having said all that, with a supportive monetary policy, which has been very much a feature of the past five years, we can make progress. I am more sceptical about whether the governor’s forward guidance on interest rates is a good idea. At all events, the two must go together. The monetary policy has to be combined with the policy of deficit reduction. If that is so, we can have sustainable growth under a Conservative Government in the next five years.

Childcare Payments Bill

Lord Higgins Excerpts

Wednesday 17th December 2014 Lords Chamber

[Lord Newby]

My Lords, the Government are doing a whole raft of things to help the working poor. One of the main reasons why the working poor are quite so poor is that they are not working as many hours as they would like to work. One of the interesting findings from recent survey evidence is that nearly a quarter of employed mothers said that they would increase their working hours if they could arrange reliable, convenient, affordable and good-quality childcare. Many of those are exactly the kind of parents to whom the noble Lord referred.

[Lord Higgins (Con)]

My Lords, my noble friend will be aware that Treasury Ministers also refused to appear in front of the ad hoc Select Committee on Personal Service Companies, even though that was clearly a Treasury responsibility, and officials were not allowed to appear either. Is this not clearly, whatever the previous precedents might have been, a totally unsatisfactory situation if we are to hold the Government to account? Therefore, if my noble friend cannot persuade Treasury Ministers, should we not have a meeting between the Liaison Committee or the Leader of the House and the Chancellor of the Exchequer? We really cannot go on having matters that we are investigating, which are Treasury matters, with Treasury Ministers refusing to appear or allowing their officials to do so.

[Lord Newby]

My Lords, I would personally welcome any measures that would put more pressure on my Treasury colleagues to appear before your Lordships’ House.

Autumn Statement

Lord Higgins Excerpts

Thursday 4th December 2014 Lords Chamber

[Lord Higgins (Con)]

My Lords, somewhat to my surprise, I find that I have been making speeches in Parliament on Budgets and Autumn Statements for 50 years. Over that time, things have changed quite a lot. On the one hand, the Autumn Statement has been made increasingly close to Christmas, while, on the other, it has become more like a Budget. In that context, this Autumn Statement therefore contains two elements: specific proposals and economic management.

As to the first, this is one of the most imaginative autumn “Budgets” that we have ever had. It is extraordinary to cover everything from stamp duty to international tax avoidance, and from Select Committees on apprenticeships and so on to umbrella companies. Noble Lords may well ask what umbrella companies are. This is precisely the question that a Select Committee was set up in your Lordships’ House—for one of these rapid, six-month reviews—to deal with. It is gratifying to find that, apparently, the Chancellor is proposing to act on the problems that that Select Committee identified.

There were a great many proposals in the Statement and, as I said yesterday, I particularly welcome the VAT relief on hospices. I was wondering why I did not include that when I was steering the original VAT legislation through the House of Commons. The answer was that there were very few hospices. At that time, I had been involved in founding the second of them. That perhaps explains why that was so, but I am slightly surprised that the Chancellor thinks he can do that, because the Treasury has been assiduous in preventing the extension of VAT reliefs to anyone. Perhaps my noble friend can confirm the answer: that the relief will be given in the form of a refund, rather than zero-rating. If that is the case, it will be still be just as welcome and help hospices considerably.

I turn to the question of economic management and, of course, the deficit. We must recognise, and the Government recognise, that the Chancellor failed to hit his targets. I am not surprised by that. In the first speech I gave when the coalition came into operation, I pointed out the immense difficulties of cutting public expenditure. I have been through that set of problems myself but, none the less, we have reached a stage where it has been halved, and that is most certainly to be welcomed. However, crucially, the Chancellor has made it absolutely clear that he is going to persist with carrying through in his determination to eliminate the deficit and move us into surplus. The fact that Gordon Brown allowed himself to go on increasing the deficit, rather than running a surplus, when things were going well is much of the cause of our present problems. I therefore very much hope that the Chancellor will persist with reducing the deficit.

None the less, the economy is growing at 3%. That is nearly—in fact, I think it is—the fastest rate we have ever achieved. The difficulty now is to judge at what stage we run into the limit on productive potential. We need to ensure in the end that capacity, the productive potential and the level of demand are increasing at the same speed. The difficulty is that we do not really know how much of our productive potential was destroyed in the crisis. None the less, it is right to see how we go on that. It is crucial to increase the productive potential, and I therefore welcome the paper published the day before the Autumn Statement on the need to improve our infrastructure. A measure of how behind we have fallen on this is the road programme. As someone who has been advocating a bypass for Worthing for 33 years in the Commons and for another 17 here, what I do not understand is why now it is said that there will be some improvements to the A27 but the bypass will be at Arundel. My noble friend Lord Eden, from the south coast, may laugh but there is no main north-south route running to Arundel, whereas there is to Worthing. At all events, my noble friend the Minister who is to reply is involved in the infrastructure programme and I very much welcome what he is proposing.