London Stock Exchange: Decline in UK Funds

Lord Howell of Guildford Excerpts

Thursday 13th February 2025 Lords Chamber

[Lord Livermore (Lab)]

I am grateful to the noble Baroness for her question, and she knows I agree with her analysis of the effects of Brexit. Firms may, of course, choose to list in other countries for a variety of reasons, and the Government appreciate that there is a perception that firms, especially tech firms, will have larger valuations in the US. We are determined to change that perception, which is why the Government are taking forward an ambitious programme of reforms to boost the attractiveness of UK markets and to support firms to start, scale, list and, importantly, stay here. As she knows, through the Government’s work on the EU reset, we will absolutely strengthen our relationship with the European Union.

[Lord Howell of Guildford (Con)]

Does the Minister know that Australian pension funds invest 80% in Australia? Thirty years ago in this country, it was 40%, and in earlier years it was 60% and 70%. It seems to me that the situation is rather more serious than just “looking at further ways”. Does the Minister agree that if we really are to attract more FDI and sovereign wealth funds and create an attractive centre for high-innovation investment in this country, we need something a little beefier than what he has indicated so far?

[Lord Livermore (Lab)]

I am grateful to the noble Lord for his question, and I agree with every word he said. We have been very guided by the Australian experience. We have been clear that UK pension funds are investing a lot less in the domestic economy than overseas counterparts. Australia and Canada are two that have been spoken about. He talks about beefier measures, but the pensions review is the most fundamental review of pensions for a generation, and it is actively considering what further interventions may be needed by the Government to ensure that our reforms to the UK pension system benefit UK growth.

US Steel Import Tariffs

Lord Howell of Guildford Excerpts

Thursday 13th February 2025 Lords Chamber

[Baroness Gustafsson (Lab)]

Forgive me. I cannot comment further on the specifics of the Windsor arrangement in absence of the facts, but on the relationship with the EU, this Government were elected with a strong mandate to reset that and make sure that we build on the relationship we have, both with Europe and the US—I do not think this is necessarily a binary choice between the two. I suspect that when we think about the strategy particular to the steel industry, understanding what those relationships look like with the EU but also with the US, and the specifics of any tariff arrangements in place, will be a key factor of those considerations and the strategy at large. We will not be afraid to make sure that we are representing UK industries in supporting the steel industry to the best of our ability.

[Lord Howell of Guildford (Con)]

My Lords, the steel industry is paying much the highest electricity costs in the world, and unless we can get around that problem, we are not going to be selling steel anywhere. The Minister did not mention that. Could she say what is being done to address that part of the problem, which would not solve all the difficulties but would certainly make things less difficult than they are now?

[Baroness Gustafsson (Lab)]

I acknowledge that electricity and power costs within the UK are higher. In my role, as I think about investment, that is something that we need to make sure we understand and grapple with as we support stronger investment in the UK overall. With regard to the steel industry specifically, there are initiatives and schemes for high-intensity energy consumers within the UK that are valuable assets, such as the steel industry, to support them with those energy costs. However, while I acknowledge that that support is specific to the steel industry, wider UK industry as a whole really needs to understand what we can do to grapple with energy costs. On that, significant investment is under way to increase the supply of energy within the UK and the transition into cleaner energy environments. A lot of work and investment have gone into that as part of the green energy transition.

Pension Fund Reliefs

Lord Howell of Guildford Excerpts

Tuesday 4th February 2025 Lords Chamber

[Lord Livermore (Lab)]

I am grateful to my noble friend for his question. He is correct that the Government spend around £70 billion annually on pension tax reliefs, because we want to encourage pension savings. That is why, for the vast majority of savers, pension contributions made from income during working life are tax free, and it is why, like many other countries, the UK exempts from tax the returns pension funds receive on the investments they make. Tax is not within the scope of the pensions review.

[Lord Howell of Guildford (Con)]

My Lords, one way of making pension funds better able to support British industry would be to amalgamate many of the smaller ones and increase their efficiency. I think this idea has already been mooted and discussed. Is there not a further thought that the large area of public service pensions, which are unfunded—not local government, which is funded—should be considered being made into funded pensions? Would that not also help to reinforce pensions’ contribution to our nation?

[Lord Livermore (Lab)]

I am grateful to the noble Lord for his question. He is absolutely right that consolidation and scale are key to the strategy behind the pensions review. I will certainly pass his ideas back to my honourable friend, the Pensions Minister.

Public Finances: Borrowing Costs

Lord Howell of Guildford Excerpts

Thursday 9th January 2025 Lords Chamber

[Lord Livermore (Lab)]

I absolutely agree with my noble friend. Growth was one of the biggest failures of the previous Government and we are determined to turn that around. The OECD recently upgraded our growth forecast, which means that the UK’s economy is now growing faster than those of Germany, France, Italy and Japan over the next three years. Following the Budget, the OBR increased its forecast for GDP for 2024 and 2025 and, for the first time, it has looked at the growth impact across a decade. It is particularly clear that capital investment, which the party opposite opposes, will lead to a significant increase in growth over the longer term.

[Lord Howell of Guildford (Con)]

My Lords, the Minister will be aware—at least, I hope he is—that global Governments’ debt at present is running at about $95 trillion. That is expected to rise to $130 trillion in three years’ time. He is right that there are some countries where the debt is higher than ours at present, but does he accept that it is about not only the size of the borrowing but the bond markets’ and world opinion about the commitment of a Government to enterprise and growth and to dynamic economic policies, particularly affecting small and medium-sized business, which of course is 99% of all business? Will he therefore have a word with the Chancellor to ensure that she recognises that in her next Budget, as she did not seem to in her last Budget, because it would greatly improve our standing and may save us a few tens of billions in interest on our present enormous debt?

[Lord Livermore (Lab)]

I am happy to say to the noble Lord that the Government are absolutely committed to working in partnership with business to grow the economy and to doing what is required to do so. As he knows, the Government are committed to economic and fiscal stability. We have put in place those robust fiscal rules, and there is a significant fiscal consolidation during the course of this Parliament, taking borrowing as a share of GDP from 4.5% to 2.1%. If achieved, this would be the biggest current budget surplus in over 20 years.

Economic Productivity

Lord Howell of Guildford Excerpts

Thursday 5th December 2024 Lords Chamber

[Lord Livermore (Lab)]

I completely agree with my noble friend on that point. Measuring public sector productivity is very difficult and contradictory measures are involved. My noble friend is right that, obviously, our priority is improving those public services and we will continue to do so.

[Lord Howell of Guildford (Con)]

My Lords, in the 1970s, we attracted enormous increases in productivity by also attracting vast quantities of Japanese inward investment, which saved our motor industry. Now, unfortunately, our motor industry needs saving again. Could we concentrate on attracting FDI by having the kind of Budget that really makes international investors keen to invest here on a scale much larger than anything that has come before?

[Lord Livermore (Lab)]

The noble Lord is absolutely correct to say that investment is one of the key drivers in raising productivity. Obviously, it was a matter of regret that, under the previous Government, the UK was the only G7 country with levels of private sector investment below 20% of GDP. We are absolutely determined to raise that: the recent international investment summit saw £64 billion of investment come into the UK, creating some 40,000 jobs. We are determined to continue that trend.

Autumn Budget 2024

Lord Howell of Guildford Excerpts

Monday 11th November 2024 Lords Chamber

[Lord Howell of Guildford (Con)]

My Lords, like others, I welcome the maiden speech of my noble friend Lord Booth-Smith. It had the additional quality of supreme brevity, which is always welcome in these debates. I had hoped for a moment that we were going to get some extra titbits of life in Downing Street and his role as strategic director, but all we got was common sense. I recommend that he continues with common sense and leaves Downing Street out of it as far as possible.

You would not really sense from this relatively civilised debate that in fact this is a time of enormous danger, for the whole world and for us here. I do not mean danger just of an economic kind but of a physical kind. There is a real threat hanging over the world, vastly amplified by the silicon chip, which has altered and recreated almost every aspect of the modern world. Indeed, some would say that it is the chip and hyperconnectivity that are the major cause of the current tensions, instabilities, violence and evident collapse of the international rule of law.

Some of the most serious minds in today’s world—philosophers and others—tell us that we are on the edge of a precipice, that humankind is looking into the abyss, and many other terms of doom and gloom. This has duly fed through, via a cacophony of populist influences, to the forming of a vast new nexus in world finance, trade and investment, and spending and taxation, which completely changes the axis of political debate and economic policy priorities. That is what we are discussing now: whether this Budget and the thinking behind it responds to and picks up these new, rather frightening realities.

At the centre of it all is the need for a truly enormous increase in investment—both public and private—around the world, and certainly here, while remembering that when it comes to Governments trying to boost investment one needs to recall, as I fear some Ministers do not seem to, that the British economy, like a lot of advanced democratic economies, overwhelmingly, at some 99.2%, consists of small and medium enterprises. If you try to kill them off then the whole economic evolutionary process comes to a sickening halt and withers away. It may be said that small businesses rely on big business, but it is the other way round as well. The big businesses of tomorrow are somewhere in that smaller and medium-sized pattern and its source of innovation. If they are poisoned then the whole of our economic progress is brought to a halt.

This new scene has key components, which I will list not in any order but quickly in my last few minutes. First, the state has most of the infrastructure demands and the private sector has most of the money, so it is perfectly obvious that new ways have to be found for the state and private capital to work together. That is a sort of evolution of what we had at the end of the last century, with the private finance initiative—it failed, but it was the right idea.

Secondly, we need to attract a far bigger flow of foreign direct investment, not least to help with the energy transition which we are embarking on. Thirdly, the sovereign wealth funds long to invest but cannot find the right investment vehicles here in the UK. I declare an interest in that I advise one of them, and I know that that is exactly the position they face at meeting after meeting. Fourthly, there are the pension funds and insurance funds, said to be more than £2.5 trillion, from which the Chancellor says she is seeking to tap surpluses and encourage bolder equity investment. Some 20 years ago, 53% of those enormous funds used to go into the UK and now it is 6%; obviously, that has got to change.

Fifthly, we must greatly widen our own domestic sources of share capital and asset ownership in a way that, crucially, spreads the benefits of capital growth far more than at present to millions of households to enhance their dignity and security. I think that is the next stage in the development of popular liberal capitalism, which we do not seem to be addressing as vigorously as we should. There is certainly not much in the Budget for it.

Finally, there is the overdominance of our national investment allocation and strategy, which must be shifted away from the Treasury. This would not be very popular, certainly not with the Treasury, but it was recommended in the report by the noble Lord, Lord Maude—an excellent document—and in the Harrington report, and by some of us for the last 50 years. Until there is a key shift at the very centre of the government machine, nothing will go quite right on the investment front.

I see all this as common ground for the future. The party to realise that these are the new priorities will be the winner if it gets there first.