Scotland Bill

Debate between Lord Lang of Monkton and Lord Forsyth of Drumlean

Tuesday 8th December 2015 Lords Chamber

[Lord Forsyth of Drumlean]

I am most grateful to the right reverend Prelate, but the vow is something that was dreamed up, as I said at Second Reading, by the editor of a tabloid newspaper, the Daily Record. The party leaders, some of whom are no longer with us as party leaders, who signed up to it were unaware that it would be presented on the front page of that newspaper as a vow. It is the old story. When you complain to an editor about a newspaper story, they always say, “I am terribly sorry. It was the subeditors who wrote the headlines and they did not really read the text”. In this case, that is the status of the vow. I hesitate to intrude on the right reverend Prelate’s territory, but I certainly would not confuse it with the marriage vows, which, in my own case, I took as being absolutely permanent and for life. My worry about the Bill is that this marriage of the United Kingdom is being turned into a system where we appear to be living apart from each other, in houses next door to each other with different regimes operating in those houses, but that is for another day. I beg to move.

[Lord Lang of Monkton]

My Lords, I rise briefly to support my noble friend Lord Forsyth, who is absolutely right. The fact that the Government had the wording as per his amendment in the original Bill represents what must have been their best thought, after careful preparation, on what should be in the Bill. They have succumbed unnecessarily to pressure in another place and now we are faced, as in a number of other areas in the Bill, with what they must consider second best. I do not think that is good enough for an important Bill of this type, and I urge my noble and learned friend to accept the amendment.

Scotland Act 1998 (Modification of Schedules 4 and 5 and Transfer of Functions to the Scottish Ministers etc.) Order 2015

Debate between Lord Lang of Monkton and Lord Forsyth of Drumlean

Thursday 26th February 2015 Lords Chamber

[Lord Lang of Monkton]

My responsibility is not to explain the Government’s position; my responsibility is to hold the Government to account. I am grateful for the noble Lord’s contribution, which does a great deal in that direction, and I am sure that my noble and learned friend will wish to return to this matter in his reply to the debate.

Another issue on which your Lordships are expected to be swept along is the important one of data protection, to which my noble and learned friend referred, and the implications of including details of minors in a public document such as the electoral register. I heard what my noble and learned friend said, and I accept that attempts are being made to take this matter seriously and reduce the risk that might arise. But again, that is a matter that should have parliamentary scrutiny.

Individual electoral registration means that more personal data will be collected and held by registration officers than happened under the old household registration system. Most young people about to turn 16 will probably apply for registration as attainers, at which time they probably will not yet have received their national insurance number, which is the primary means of verification. The examination, acceptance and storage of alternative proofs of identity will need the most careful thought and reassurance. None of this has had the kind of parliamentary scrutiny that the Committee stage of a Bill would provide—although I do welcome what my noble and learned friend said about the attention being given to the matter.

There have been many false dawns with earlier consultations on a reduction in the voting age. None has led to a firm conclusion in support of it. In 1998 the House of Commons Home Affairs Committee decided not to recommend a change. In 1999 the Howarth working party on electoral procedures reached the same conclusion. In December that year, in proceedings on what was to become the Representation of the People Act 2000, an amendment to reduce the age from 18 to 16 was rejected by an overwhelming majority.

As for the merits of the case for younger voting, of course we want young people to take an interest in our democratic process and in the issues of the day, and to start to develop their political beliefs. But if giving them the vote at 16 would achieve that, why does the 18 to 21 age group have the lowest turnout rate of all at general elections? It is not getting the vote earlier that matters, but attaining sufficient intellectual maturity and involvement in the issues that will affect their lives which will begin to engage them. Then, when they do get the vote, they will value it and be more likely to use it.

I mentioned the number of reports that came out in the early years of this century. People addressed the issue, and some of them left the door open. But broadly they all agreed, as successive Governments have done, that the present position should remain in place. In 2003 the Electoral Commission reached that conclusion as well.

[Lord Forsyth of Drumlean]

I am most grateful to my noble friend for the excellent report his committee has produced. Did the committee consider why, if it was proposed to reduce the age of the franchise and give the right to vote at 16, it was not also proposed that people should be able to stand as candidates at 16?

[Lord Lang of Monkton]

Again, my noble friend makes an extremely relevant point. The relationship between voting age and the age of majority has not been adequately considered, either. I hope that this will emerge in the course of the debate. I do not wish to take up too much of the House’s time, so I will bring my remarks to a conclusion. I am sure that other noble Lords will wish to explore further the pros and cons of that change. The burden of my message to your Lordships today is simply to state that the appropriate parliamentary processes for a constitutional change of this kind have not been properly observed—and that is something that should not pass without comment.

Economy: Growth

Debate between Lord Lang of Monkton and Lord Forsyth of Drumlean

Tuesday 29th January 2013 Lords Chamber

[Lord Lang of Monkton]

My Lords, it is a pleasure to follow the noble Lord, Lord Barnett, who has often been a distinguished participant in these economic debates, even though I certainly disagree with what seemed to be the central thrust of his argument today, as so often in the past. Like other noble friends, I welcome my noble friend Lord Deighton to the Front Bench and wish him all success. I thought his opening speech was crisp and lucid with a number of very good fours to the boundary.

Before I go further I should like to declare my interests as per the register, with particular reference to Marsh & McLennan Companies Inc, which has a subsidiary by the name of Mercer. Mercer is heavily involved in pensions and I hope to say a word about pensions in the course of my remarks. However, I have had no input from Mercer over this speech and indeed, it does not know that I am making it, which may cause it some concern.

My first point is that the whole debate of austerity versus growth is completely facile and futile. It is totally misguided. The distinction is spurious because austerity is fundamentally a growth policy. It is at the core of our economic management. Unless we reduce the deficit and tackle the debt, confidence will fall, interest rates will rise and the crisis that we have inherited and are emerging from will return.

Like my noble friend Lord Howell, I will not enter into the sterile argument on which the Opposition seem to be salivating about one quarter’s provisional figures on the deficit. For the past year we have been flat-lining—the figures add up to zero. They may be adjusted more favourably once the fourth quarter is studied further. However, it is perfectly normal, after a serious recession, that there is an early bounce back and then a period of flat-lining or even a further fall. It has gone on longer in this case because we inherited a bigger crisis. Our banks are constipated. The continuing euro crisis all last year affected both confidence and our markets. In passing, oil accounted for 0.2% of the deficit in the fourth quarter because production has been substantially lowered, mainly as a result of maintenance programmes which are now being completed. Therefore we may feel a compensating bounce back in the next and subsequent quarters.

I think that GDP is really only one measure of performance and not a particularly reliable one. Here I again agree with my noble friend Lord Howell. However, it is one on which there are grounds for cautious optimism. Some City forecasts expect growth of 1% this year, rising possibly to 1.5% towards the end of the year. That is slower than the United States but faster and higher than the eurozone. Employment, not much mentioned from the Benches opposite today, already gives grounds to support that theory. Indeed, even between September and November, in the fourth quarter, there was an increase of 113,000 jobs. Another indicator, the savings ratio, is now around 7.5% which is higher than at any time since 1997, so the private sector seems to support a tight fiscal policy, although ironically that may in fact slow growth a bit when coming from the private sector. However, with real disposable incomes up by more than 2%, there is now the beginning of empowerment of the housing sector and the private sector generally. The Funding for Lending scheme is widely supported by the banking sector. It is helping to reduce banks’ funding costs and in the past two or three months there has generally been a sharp rise in credit availability, not least with £50 billion worth of guarantees for infrastructure projects.

Standing firm on our deficit reduction targets is absolutely vital but as progress is made—it is already being made with the deficit down from more than 11% to less than 8%—gradually some leeway will emerge and gradually new policies will be developed. That is as it should be. It does not undermine plan A. It simply builds on the progress that plan A will be delivering. I particularly welcome the way in which my right honourable friend the Chancellor has advanced his policies in reducing corporation tax. At long last we are becoming competitive there and I think that will reap dramatic and relatively early benefits to us —the Laffer curve will kick in. There has been a massive rise in the tax threshold for the low-paid, taking 24 million people out of tax. That is a very valuable growth policy because the money released back into the private sector recycles very quickly.

The focus by many commentators on our austerity programme is actually somewhat misplaced. There is a view among commentators, including those of the IMF, that the impact of tax rises and spending cuts, necessary for other obvious reasons, does not impose a major drag on growth. Other factors do come into play. I believe that lack of credit and liquidity are very serious ones. They are the real problem. Banks, to a unique degree in the United Kingdom, were massively overleveraged and underregulated for the first decade of this century. That was the distinguishing feature of the United Kingdom’s crisis. As they struggle to retrench, their lending is paralysed. They have also neutralised any benefit that quantitative easing might have delivered because they hoard the resources that it has delivered to them instead of getting them out into the economy.

The World Economic Forum competitiveness table shows the United Kingdom climbing to eighth position from the 13th that it occupied under the previous Government. However, overall productivity has still not recovered fully from the decline of those years. In part, I think this is caused by the chilling effect of banks not feeling able to force the issue on their huge portfolios of exposed loans because to crystallise them would severely affect their own balance sheets, as my noble friend Lord Forsyth said. Therefore, those loans are stuck in damaged and unproductive companies instead of being directed to new, more viable growth opportunities. Lack of credit is still a huge brake on growth.

There is another serious problem that many companies face. Quantitative easing has driven down yields on gilts which company pension schemes are obliged to hold in substantial quantities. As a result, the Pension Insurance Corporation tells us that since quantitative easing began British companies have had to pump an extra £150 billion into their pension schemes, denying themselves the use of that money and, incidentally, denying the Treasury some £30 billion in lost taxes.

My noble friend spoke of the need for structural change to rebalance our economy and revive the manufacturing sector. I welcome that very much and have a suggestion to make in the field of pensions. I was glad to hear my right honourable friend the Chancellor say in the Autumn Statement that the Government are determined to ensure that defined pensions regulation does not act as a brake on investment and growth. That is a very welcome chink of light but I would like to hear what action is contemplated and when it may happen. I hope that, in winding up, my noble friend may be able to enlighten me.

While quantitative easing is one factor, and a significant one—I hope it will not be resumed—I believe that at the root of the problem was the stealth tax of 1997 that withdrew tax credits from pension schemes, estimated then at around £5 billion per annum. Just as sustained deficits lead to accumulating debt, this revenue raid has by now deprived the trustees of such schemes of some £100 billion of capital. Further imposts have resulted from the levies to the Pension Protection Fund and the introduction of more demanding projected solvency requirements in 2004. Pensions regulators have often obliged trustees against their better judgment to forgo equities in favour of bonds. This toxic cocktail was completed by the credit crunch recession, the lengthening of life expectancy and, as I have mentioned, the impact of quantitative easing on gilt yields, with all the implications for the discount factor in calculating future liabilities.

Most of the burden of meeting the funding demands has fallen on employers dealing with a legacy of departed former employees. If and when interest rates rise, part of those deficits will bounce back. However, at present, many companies, mainly SMEs in manufacturing, are being starved of working capital and the ability to invest by the overhanging shadow of inherited liabilities to their pension schemes. It is no wonder that so many defined benefit schemes have been closed to new entrants. With the dramatic decline in the manufacturing sector in past years, many firms have contracted and have often diversified into specialist sectors with smaller workforces. They have closed their pension schemes but still have the bloated burden of the past and face regulation and enforcement powers that are volatile, onerous and sometimes very damaging.

I do not have time to elaborate more fully on this problem or to list some of the possible measures needed to mitigate this blight, but blight it is. I hope that the point has registered with my noble friend, and I am sure that it has. I am sure that he is already well aware of it and of the fact that things can be done. I hope at least that he may be able to assure the House that relief is at hand.

[Lord Forsyth of Drumlean]

I am most grateful to my noble friend for giving way. I wonder whether I might tempt him on this very important point concerning how quantitative easing has artificially lowered gilt yields, which are used to calculate the liabilities, and therefore businesses are having to contribute money. Would a simple change not be to take the yields on corporate bonds as the measure instead of gilt yields?

[Lord Lang of Monkton]

My noble friend is absolutely right. That is one of the possible solutions and I hope that it is being considered. Indeed, there are others as well. This blight engulfs companies large and small, damaging—even destroying—their balance sheets. However, the SMEs that form the core and future of our manufacturing industry are the least able to cope with it. Their working capital is diverted, new investment is forgone, innovation and new technology are unaffordable, productivity suffers, credit worthiness is damaged, jobs go and companies subside.

In my past ministerial career, I have always sought to attract inward investment to this country, which is still very important indeed for the future. However, to focus effort and resources on that, while failing at the same time to bring justified and much needed succour to our home-grown existing companies, is surely most unwise. Therefore, I welcome the chink of light that the Chancellor has given us. I hope that the door will be flung open wide and the light will shine more brightly very soon. To relieve the problem would be to reawaken an engine of growth.

Scotland Bill

Debate between Lord Lang of Monkton and Lord Forsyth of Drumlean

Wednesday 28th March 2012 Lords Chamber

[Lord Forsyth of Drumlean]

My Lords, the noble Lord, Lord Browne, can probably rest easy as far as Amendment 16 is concerned. We have been around this course a number of times. I find it very difficult to understand, especially given the announcement just made by my noble and learned friend. He has just told us that there is a recommendation for legislative consent. We have heard repeatedly during the course of the deliberations on this Bill that it implements the recommendations of the Calman commission. Nowhere does the Calman report suggest that there should be an open-ended power to create new taxes of any kind, to be introduced by order in both Houses.

I have two objections to that. First, the taxes which are intended to be given to the Scottish Parliament, like the aggregates tax—we have a later amendment on that, which I do not propose to move because I know that the Government will say, “We are not ready to do that”—are not in the Bill. We have this open-ended power. My objection to this open-ended power is constitutional. It cannot be right that we have an order-making power for the imposition of taxes through the House of Commons and the House of Lords. I know that the Minister will say, “Oh, but this will be discussed in the Scottish Parliament”. This is the sovereign Parliament and the House of Commons is the sovereign body. Its history is one of voting means of supply. To create a procedure that enables taxes to be imposed without going through the requisite finance Bill and Committee stages in the House of Commons is a huge step which is in no way justified by the manifesto commitment or by anything that the Calman commission said.

I urge my noble friend to think again about this. It is an enormous change to our constitutional processes. I cannot think of any example where it has been possible to impose a tax by Order in Council. The very early history, with the arguments over ship money and everything else—I do want to repeat arguments that I used in Committee—was about this very principle. It is a dangerous precedent to create. One of the things that worries me about this Government and the previous Government is that there does not seem to be an understanding that we have no written constitution in our country. Our constitution, in so far as it exists, exists in the procedures and conventions of the House of Commons and of this place. To ride roughshod over them in this way for the sake of convenience is a very retrograde step, which has certainly not sprung from any commitments or recommendations that have been made externally. I can see how it is for the convenience of Ministers and the Executive, but it is utterly wrong in principle. Even at this stage, I ask my noble friend to think again and find some other method of achieving his objectives which does not ride across the very nature and existence of our parliamentary procedures. I beg to move.

[Lord Lang of Monkton]

My Lords, I support the amendment of my noble friend Lord Forsyth. Like him, I am concerned about the constitutional aspect of it. Here is part of a structure to set out a tax-levying power within the Scotland Bill which represents an abrogation by the United Kingdom Government of their obligation to promote financial stability, efficiency and good government across the whole of the United Kingdom.

Of course, it is one thing to devolve a tax-raising power to a specific area, as is contained in the Bill; I have my own views about that, which I will say a little about in this context. However, it is also the duty of the United Kingdom Government to ensure that the policies which they espouse and the priorities that they hold for the good financial and economic government of the kingdom should be as capable of implementation in Scotland as in the rest of the United Kingdom. The capacity of any Government of any complexion to fulfil other, broader financial and economic obligations against the background of the impact of the tax provisions specifically contained in the Bill is seriously jeopardised.

I see the whole Bill as a Trojan horse. I think that the commission and those who prepared the Bill and brought it forward were, perhaps, not fully aware of the potential damaging impact on the Scottish economy. It will create major challenges. I raised a couple earlier in the passage of the Bill, at Second Reading and again in Committee. The first is the situation affecting the tax base. The Scottish tax base will be smaller and weaker than the tax base on which provision for Scottish expenditure is currently based. Scotland’s economy has a higher proportion of company failures and a lower proportion of company formation. It has a smaller and weaker entrepreneurial class. It has a higher proportion of public sector employment. All these points have been made already, but they have to be made again because they feed into this problem of lower growth and expansion and a weakening private sector. However, it is on that weakening and small private sector, relative to the rest of the United Kingdom, that the impost of the 10 per cent tax rises will fall.

The study to which I referred earlier showed that the United Kingdom public expenditure base had expanded by 94 per cent in the previous 10 years, while the Scottish tax base, which will form the basis of this 10 per cent tax, had expanded by only 48 per cent. That may not be continued at the present time when the Government’s public expenditure programme is much more disciplined, but what will happen in a future Parliament, in future circumstances, when the economy nationally—by which I mean across the United Kingdom and, indeed, in the world at large—is expanding and once more on an efficient growth track? That is when the divergence will reappear. At that stage, of course, if Scotland were separate from the United Kingdom, the added burdens of dependency on a volatile oil price and reducing oil production, which are now generally agreed to be likely for the next few years, would come to bear.

The 10 per cent tax rate would have to take a massive degree of strain. This is where the gearing feature comes into it, just as we have seen with local government taxation where the bulk of funding comes from the United Kingdom Exchequer and only a small proportion is raised locally by local councils. So, if a local council wants to make a 2 per cent increase in spending, it would have to increase taxation by a multiple of that, perhaps a large multiple.

I remember the referendum that took place in Quebec about 10 years ago. When I was in Toronto last year, it was pointed out to me that, although the referendum to separate Quebec from the rest of Canada failed, the economy of Quebec went into a grey, dismal period from which it has not yet emerged. I was even told that the Bank of Montreal had moved its headquarters to Toronto in Ontario. That is an example of the kind of problem that we may face.

We talk about the importance of inward investment but, against this kind of background, in the future we will have to talk about the loss of existing companies from Scotland—outward investment. Where will the major Scottish companies choose to locate against the background of the economic troubles that will develop within Scotland? Where will the Royal Bank of Scotland choose to locate? Where will Standard Life go? These companies have 95 per cent or 98 per cent of their business outside Scotland, and they will be thinking very carefully about their future taxation residence.

Corporation tax, which the Scottish Administration at present claim they want to reduce, is already coming down very sharply. It is 24 per cent now and there is a plan to reduce it further. If the Scottish economy in a separate Scotland were to try not only to keep up with but to exceed that, it would find that the Laffer curve does not work as efficiently as might be hoped in an economy that is otherwise deeply strained, and that it faced a race to the bottom. It would be extremely difficult and very serious.

The danger there is that, against the background of this Bill and these tax provisions within it, people in Scotland would demand further taxation concessions, and so one more step down what we used to call the slippery slope but is now called the continuing process of devolution would take place. It is not devolution that is a continuing process—it is separation. The salami slicing of Scotland’s place as an equal partner in the United Kingdom is taking place.

The Government should give an answer as to why, against that background, they have put these tax provisions in the Bill without contemplating the effect they will have in reality. I have not had an answer to the questions I raised earlier; my noble friend Lord Forsyth also raised them. I see that we are privileged to have my noble friend Lord Sassoon from the Treasury in his place. I hope that he may be able to enlighten us or, if nothing else, admit that there is a problem and say, “We accept it and we regret it but we have abrogated our position as Her Majesty’s Treasury for the United Kingdom”. I support the amendment.